SF 1683

2nd Engrossment - 84th Legislature (2005 - 2006) Posted on 12/15/2009 12:00am

A bill for an act
relating to financing and operation of state and local government; making policy,
technical, administrative, enforcement, collection, refund, and other changes
to income, franchise, property, sales and use, health care provider, cigarette
and tobacco products, insurance premiums, aggregate removal, occupation, net
proceeds, and production taxes, and other taxes and tax-related provisions;
establishing a regional investment credit; establishing credits for carsharing and
historic preservation; providing an income tax checkoff; providing a refund for
transit passes; authorizing sales tax exemptions; authorizing local government
sales taxes; authorizing distributions of tax proceeds; changing provisions
relating to fiscal disparities, education financing, state debt collection procedures,
sustainable forest incentives programs, and business subsidy provisions;
conforming provisions to certain changes in federal law; changing powers and
duties of certain local governments and authorities and state departments or
agencies; providing for payments of certain aids to local units of government;
providing for certain school levies; providing for issuance of obligations by
local governments, and use of the proceeds of the debt; requiring transfer of a
parking facility; changing tax increment financing and abatement provisions,
and providing authorities to certain districts; changing provisions relating to
tax preparers and providing for exchange of data; providing for publication of
tax preparers subject to penalties; changing provisions relating to certificates
of title of motor vehicles and manufactured homes; changing electronic filing
provisions; prohibiting misrepresentation of employment; imposing requirements
related to JOBZ; providing for studies and reports; providing penalties; creating
an education reserve account; providing for allocation and transfers of funds;
appropriating money; amending Minnesota Statutes 2004, sections 4A.02; 15.06,
subdivision 6; 16D.10; 103C.331, subdivision 16; 116J.993, subdivision 3, by
adding a subdivision; 116J.994, subdivisions 4, 5, 9, by adding a subdivision;
118A.05, subdivision 5; 123B.53, subdivision 4, by adding a subdivision;
123B.55; 123B.71, subdivision 9; 126C.17, subdivisions 6, 7, 9, by adding
subdivisions; 161.1231, by adding a subdivision; 168A.05, subdivisions 1a,
1b; 270.11, subdivision 2; 270.16, subdivision 2; 270.30, subdivisions 1, 5, 6,
8, by adding subdivisions; 270.65; 270.67, subdivision 4; 270.69, subdivision
4; 270A.03, subdivision 5; 272.01, subdivision 2; 272.02, subdivisions 1a,
7, 22, 47, 56, by adding subdivisions; 272.0212, subdivisions 1, 2; 272.029,
subdivisions 4, 6; 273.11, subdivisions 1a, 8, by adding subdivisions; 273.112,
subdivision 3; 273.123, by adding a subdivision; 273.124, subdivisions 1, 3, 6, 8,
13, 14, 21; 273.13, subdivisions 22, 23, 25; 273.1315; 273.1384, subdivision 3;
273.19, subdivision 1a; 273.372; 274.014, subdivisions 2, 3; 274.14; 275.065,
subdivisions 1a, 3, by adding subdivisions; 275.066; 275.07, subdivisions 1, 4;
275.70, subdivision 5; 276.04, subdivision 2; 276.112; 276A.01, subdivision 7;
278.03, subdivision 1; 279.01, subdivision 1, by adding a subdivision; 282.016;
282.08; 282.15; 282.21; 282.224; 282.301; 287.04; 289A.02, subdivision 7;
289A.08, subdivisions 3, 7, 16; 289A.11, subdivision 1; 289A.18, subdivisions 1,
4, by adding a subdivision; 289A.19, subdivision 4; 289A.20, subdivisions 2, 4;
289A.31, subdivision 2; 289A.37, subdivision 5; 289A.38, subdivisions 6, 7, by
adding a subdivision; 289A.39, subdivision 1; 289A.40, subdivision 2, by adding
subdivisions; 289A.50, subdivision 1a; 289A.60, subdivisions 2a, 6, 11, 12, 13;
290.01, subdivisions 7, 19, 19a, 19b, 19c, 19d, 31; 290.032, subdivisions 1, 2;
290.05, subdivision 1; 290.06, subdivisions 2c, 22, 28, by adding subdivisions;
290.067, subdivisions 1, 2a; 290.0671, subdivision 1; 290.0674, subdivisions 1,
2; 290.0675, subdivision 1; 290.091, subdivisions 2, 3; 290.0922, subdivision
2; 290.10; 290.17, subdivision 4; 290.191, subdivision 1; 290.92, subdivisions
1, 4b; 290A.03, subdivisions 3, 15; 290A.07, by adding a subdivision;
290A.19; 290B.05, subdivision 3; 290C.05; 290C.10; 291.005, subdivision
1; 291.03, subdivision 1; 295.50, subdivision 3, by adding a subdivision;
295.53, subdivision 1; 295.60, subdivision 3; 296A.09, by adding a subdivision;
296A.22, by adding a subdivision; 297A.61, subdivisions 3, 4, by adding a
subdivision; 297A.64, subdivision 4; 297A.668, subdivisions 1, 5; 297A.67,
subdivision 2, by adding subdivisions; 297A.68, subdivisions 2, 4, 5, 19, 35,
39, by adding subdivisions; 297A.70, subdivision 8, by adding a subdivision;
297A.71, by adding subdivisions; 297A.75, subdivisions 1, 2, 3; 297A.83,
subdivision 1; 297A.87, subdivisions 2, 3; 297A.99, subdivisions 4, 7; 297B.03;
297E.01, subdivisions 5, 7, by adding subdivisions; 297E.02, subdivision 4;
297E.06, subdivision 2; 297E.07; 297F.01, by adding a subdivision; 297F.08,
subdivision 12, by adding a subdivision; 297F.09, subdivisions 1, 2, by adding a
subdivision; 297F.14, subdivision 4; 297G.09, by adding a subdivision; 297I.01,
by adding a subdivision; 297I.05, subdivisions 4, 5, by adding a subdivision;
298.001, by adding subdivisions; 298.01, subdivisions 3, 3a, 4; 298.015,
subdivisions 1, 2; 298.016, subdivision 4; 298.018; 298.223, subdivision 1;
298.24, subdivision 1; 298.28, subdivisions 9b, 10; 298.2961, by adding a
subdivision; 298.75, subdivisions 1, 2; 325D.33, subdivision 6; 343.11; 366.011;
366.012; 373.01, subdivision 3; 373.40, subdivision 1; 373.45, subdivision
7; 400.04, by adding a subdivision; 410.32; 412.301; 428A.101; 428A.21;
429.031, by adding a subdivision; 429.051; 469.034, subdivision 2; 469.158;
469.169, by adding a subdivision; 469.1735, subdivision 3; 469.174, by adding a
subdivision; 469.175, subdivisions 1, 4, 6; 469.176, subdivision 1c, by adding
subdivisions; 469.1761, by adding a subdivision; 469.1763, subdivision 2;
469.1792; 469.310, subdivision 11; 473.39, by adding a subdivision; 473.843,
subdivisions 3, 5; 473F.02, subdivision 7; 473F.08, by adding subdivisions;
474A.061, subdivision 2c; 474A.131, subdivision 1; 475.51, subdivision 4;
475.52, subdivisions 1, 3, 4; 475.521, subdivisions 1, 2, 3, 4; 475.58, subdivision
3b; 477A.011, subdivisions 3, 36, 38; 477A.0124, subdivision 2; 477A.11,
subdivision 4, by adding a subdivision; 477A.12, subdivisions 1, 2; 477A.14,
subdivision 1; Laws 1991, chapter 291, article 8, section 27, subdivision 4; Laws
1994, chapter 587, article 9, section 20, subdivision 1; Laws 1994, chapter 587,
article 9, section 20, subdivision 2; Laws 1996, chapter 471, article 2, section 29;
Laws 1998, chapter 389, article 3, section 41; Laws 1998, chapter 389, article 3,
section 42, subdivision 2, as amended; Laws 1998, chapter 389, article 8, section
43, subdivision 3; Laws 1998, chapter 389, article 8, section 43, subdivision
4; Laws 1998, chapter 389, article 11, section 19, subdivision 3; Laws 1999,
chapter 243, article 4, section 18, subdivision 1; Laws 1999, chapter 243, article
4, section 18, subdivision 3; Laws 1999, chapter 243, article 4, section 18,
subdivision 4; Laws 2001, First Special Session chapter 5, article 3, section 8;
Laws 2001, First Special Session chapter 5, article 12, section 67; Laws 2001,
First Special Session chapter 5, article 12, section 82, as amended; Laws 2002,
chapter 377, article 3, section 4; Laws 2002, chapter 377, article 12, section
16, subdivision 1; Laws 2003, chapter 127, article 5, section 27; Laws 2003,
chapter 127, article 5, section 28; Laws 2003, chapter 127, article 12, section 38;
Laws 2003, First Special Session chapter 21, article 4, section 12, subdivision
11; Laws 2003, First Special Session chapter 21, article 5, section 13; Laws
2003, First Special Session chapter 21, article 6, section 9; proposing coding
for new law in Minnesota Statutes, chapters 103C; 174; 270; 273; 278; 290;
290C; 297A; 297F; 298; 325D; 325F; 462A; 473; repealing Minnesota Statutes
2004, sections 273.19, subdivision 5; 274.05; 275.15; 275.61, subdivision 2;
283.07; 289A.26, subdivision 2a; 289A.60, subdivision 21; 295.55, subdivision
4; 295.60, subdivision 4; 297A.99, subdivision 13; 297E.12, subdivision
10; 297F.09, subdivision 7; 297G.09, subdivision 6; 297I.35, subdivision 2;
297I.85, subdivision 7; 298.01, subdivisions 3c, 3d, 4d, 4e; 298.017; 473.39,
subdivision 1f; Laws 1975, chapter 287, section 5; Laws 1994, chapter 587,
article 9, section 20, subdivision 4; Laws 2003, chapter 127, article 9, section
9, subdivision 4; Minnesota Rules, parts 8093.2000; 8093.3000; 8130.0110,
subpart 4; 8130.0200, subparts 5, 6; 8130.0400, subpart 9; 8130.1200, subparts
5, 6; 8130.2900; 8130.3100, subpart 1; 8130.4000, subparts 1, 2; 8130.4200,
subpart 1; 8130.4400, subpart 3; 8130.5200; 8130.5600, subpart 3; 8130.5800,
subpart 5; 8130.7300, subpart 5; 8130.8800, subpart 4.

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

ARTICLE 1

INCOME TAX

Section 1.

Minnesota Statutes 2004, section 289A.39, subdivision 1, is amended to
read:

Subdivision 1.

Extensions for service members.

(a) The limitations of time
provided by this chapter, chapter 290 relating to income taxes, chapter 271 relating
to the Tax Court for filing returns, paying taxes, claiming refunds, commencing action
thereon, appealing to the Tax Court from orders relating to income taxes, and the filing of
petitions under chapter 278 that would otherwise be due deleted text begin May 15, 1996 deleted text end new text begin May 1, 2004 new text end , and
appealing to the Supreme Court from decisions of the Tax Court relating to income taxes
are extended, as provided in section 7508 of the Internal Revenue Code.

(b) If a member of the National Guard or reserves is called to active duty in the
armed forces, the limitations of time provided by this chapter and chapters 290 and
290A relating to income taxes and claims for property tax refunds are extended by the
following period of time:

(1) in the case of an individual whose active service is in the United States, six
months; or

(2) in the case of an individual whose active service includes service abroad, the
period of initial service plus six months.

Nothing in this paragraph reduces the time within which an act is required or
permitted under paragraph (a).

(c) If an individual entitled to the benefit of paragraph (a) files a return during
the period disregarded under paragraph (a), interest must be paid on an overpayment
or refundable credit from the due date of the return, notwithstanding section 289A.56,
subdivision 2.

(d) The provisions of this subdivision apply to the spouse of an individual entitled to
the benefits of this subdivision with respect to a joint return filed by the spouses.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2002, and for property taxes payable after 2003.
new text end

Sec. 2.

Minnesota Statutes 2004, section 290.01, subdivision 7, is amended to read:

Subd. 7.

Resident.

(a) The term "resident" means any individual domiciled in
Minnesota, except that an individual is not a "resident" for the period of time that the
individual is deleted text begin either:
deleted text end

deleted text begin (1) on active duty stationed outside of Minnesota while in the armed forces of the
United States or the United Nations; or
deleted text end

deleted text begin (2) deleted text end a "qualified individual" as defined in section 911(d)(1) of the Internal Revenue
Code, if the qualified individual notifies the county within three months of moving out of
the country that homestead status be revoked for the Minnesota residence of the qualified
individual, and the property is not classified as a homestead while the individual remains a
qualified individual.

(b) "Resident" also means any individual domiciled outside the state who maintains
a place of abode in the state and spends in the aggregate more than one-half of the tax
year in Minnesota, unless:

(1) the individual or the spouse of the individual is in the armed forces of the United
States; or

(2) the individual is covered under the reciprocity provisions in section 290.081.

For purposes of this subdivision, presence within the state for any part of a calendar
day constitutes a day spent in the state. Individuals shall keep adequate records to
substantiate the days spent outside the state.

The term "abode" means a dwelling maintained by an individual, whether or not
owned by the individual and whether or not occupied by the individual, and includes a
dwelling place owned or leased by the individual's spouse.

(c) Neither the commissioner nor any court shall consider charitable contributions
made by an individual within or without the state in determining if the individual is
domiciled in Minnesota.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2004.
new text end

Sec. 3.

Minnesota Statutes 2004, section 290.01, subdivision 19a, is amended to read:

Subd. 19a.

Additions to federal taxable income.

For individuals, estates, and
trusts, there shall be added to federal taxable income:

(1)(i) interest income on obligations of any state other than Minnesota or a political
or governmental subdivision, municipality, or governmental agency or instrumentality
of any state other than Minnesota exempt from federal income taxes under the Internal
Revenue Code or any other federal statute; and

(ii) exempt-interest dividends as defined in section 852(b)(5) of the Internal Revenue
Code, except the portion of the exempt-interest dividends derived from interest income
on obligations of the state of Minnesota or its political or governmental subdivisions,
municipalities, governmental agencies or instrumentalities, but only if the portion of the
exempt-interest dividends from such Minnesota sources paid to all shareholders represents
95 percent or more of the exempt-interest dividends that are paid by the regulated
investment company as defined in section 851(a) of the Internal Revenue Code, or the
fund of the regulated investment company as defined in section 851(g) of the Internal
Revenue Code, making the payment; and

(iii) for the purposes of items (i) and (ii), interest on obligations of an Indian tribal
government described in section 7871(c) of the Internal Revenue Code shall be treated as
interest income on obligations of the state in which the tribe is located;

(2) the amount of income taxes paid or accrued within the taxable year under this
chapter and income taxes paid to any other state or to any province or territory of Canada,
to the extent allowed as a deduction under section 63(d) of the Internal Revenue Code,
but the addition may not be more than the amount by which the itemized deductions as
allowed under section 63(d) of the Internal Revenue Code exceeds the amount of the
standard deduction as defined in section 63(c) of the Internal Revenue Code. For the
purpose of this paragraph, the disallowance of itemized deductions under section 68 of the
Internal Revenue Code of 1986, income tax is the last itemized deduction disallowed;

(3) the capital gain amount of a lump sum distribution to which the special tax under
section 1122(h)(3)(B)(ii) of the Tax Reform Act of 1986, Public Law 99-514, applies;

(4) the amount of income taxes paid or accrued within the taxable year under this
chapter and income taxes paid to any other state or any province or territory of Canada,
to the extent allowed as a deduction in determining federal adjusted gross income. For
the purpose of this paragraph, income taxes do not include the taxes imposed by sections
290.0922, subdivision 1, paragraph (b), 290.9727, 290.9728, and 290.9729;

(5) the amount of expense, interest, or taxes disallowed pursuant to section 290.10;

(6) the amount of a partner's pro rata share of net income which does not flow
through to the partner because the partnership elected to pay the tax on the income under
section 6242(a)(2) of the Internal Revenue Code; deleted text begin and
deleted text end

(7) 80 percent of the depreciation deduction allowed under section 168(k) of the
Internal Revenue Code. For purposes of this clause, if the taxpayer has an activity that
in the taxable year generates a deduction for depreciation under section 168(k) and the
activity generates a loss for the taxable year that the taxpayer is not allowed to claim for
the taxable year, "the depreciation allowed under section 168(k)" for the taxable year is
limited to excess of the depreciation claimed by the activity under section 168(k) over the
amount of the loss from the activity that is not allowed in the taxable year. In succeeding
taxable years when the losses not allowed in the taxable year are allowed, the depreciation
under section 168(k) is allowed new text begin ; and
new text end

new text begin (8) the amount of expenses disallowed under section 290.10, subdivision 2 new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2004.
new text end

Sec. 4.

Minnesota Statutes 2004, section 290.01, subdivision 19b, is amended to read:

Subd. 19b.

Subtractions from federal taxable income.

For individuals, estates,
and trusts, there shall be subtracted from federal taxable income:

(1) interest income on obligations of any authority, commission, or instrumentality
of the United States to the extent includable in taxable income for federal income tax
purposes but exempt from state income tax under the laws of the United States;

(2) if included in federal taxable income, the amount of any overpayment of income
tax to Minnesota or to any other state, for any previous taxable year, whether the amount
is received as a refund or as a credit to another taxable year's income tax liability;

(3) the amount paid to others, less the amount used to claim the credit allowed under
section 290.0674, not to exceed $1,625 for each qualifying child in grades kindergarten
to 6 and $2,500 for each qualifying child in grades 7 to 12, for tuition, textbooks, and
transportation of each qualifying child in attending an elementary or secondary school
situated in Minnesota, North Dakota, South Dakota, Iowa, or Wisconsin, wherein a
resident of this state may legally fulfill the state's compulsory attendance laws, which
is not operated for profit, and which adheres to the provisions of the Civil Rights Act
of 1964 and chapter 363A. For the purposes of this clause, "tuition" includes fees or
tuition as defined in section 290.0674, subdivision 1, clause (1). As used in this clause,
"textbooks" includes books and other instructional materials and equipment purchased
or leased for use in elementary and secondary schools in teaching only those subjects
legally and commonly taught in public elementary and secondary schools in this state.
Equipment expenses qualifying for deduction includes expenses as defined and limited in
section 290.0674, subdivision 1, clause (3). "Textbooks" does not include instructional
books and materials used in the teaching of religious tenets, doctrines, or worship, the
purpose of which is to instill such tenets, doctrines, or worship, nor does it include books
or materials for, or transportation to, extracurricular activities including sporting events,
musical or dramatic events, speech activities, driver's education, or similar programs. For
purposes of the subtraction provided by this clause, "qualifying child" has the meaning
given in section 32(c)(3) of the Internal Revenue Code;

(4) income as provided under section 290.0802;

(5) to the extent included in federal adjusted gross income, income realized on
disposition of property exempt from tax under section 290.491;

(6) to the extent included in federal taxable income, postservice benefits for youth
community service under section 124D.42 for volunteer service under United States
Code, title 42, sections 12601 to 12604;

(7) to the extent not deducted in determining federal taxable income by an individual
who does not itemize deductions for federal income tax purposes for the taxable year,
an amount equal to 50 percent of the excess of charitable contributions allowable as a
deduction for the taxable year under section 170(a) of the Internal Revenue Code over
$500;

(8) for taxable years beginning before January 1, 2008, the amount of the federal
small ethanol producer credit allowed under section 40(a)(3) of the Internal Revenue Code
which is included in gross income under section 87 of the Internal Revenue Code;

(9) for individuals who are allowed a federal foreign tax credit for taxes that do not
qualify for a credit under section 290.06, subdivision 22, an amount equal to the carryover
of subnational foreign taxes for the taxable year, but not to exceed the total subnational
foreign taxes reported in claiming the foreign tax credit. For purposes of this clause,
"federal foreign tax credit" means the credit allowed under section 27 of the Internal
Revenue Code, and "carryover of subnational foreign taxes" equals the carryover allowed
under section 904(c) of the Internal Revenue Code minus national level foreign taxes to
the extent they exceed the federal foreign tax credit;

(10) in each of the five tax years immediately following the tax year in which an
addition is required under subdivision 19a, clause (7), an amount equal to one-fifth of
the delayed depreciation. For purposes of this clause, "delayed depreciation" means the
amount of the addition made by the taxpayer under subdivision 19a, clause (7), minus the
positive value of any net operating loss under section 172 of the Internal Revenue Code
generated for the tax year of the addition. The resulting delayed depreciation cannot be
less than zero; deleted text begin and
deleted text end

(11) job opportunity building zone income as provided under section 469.316 new text begin ;
new text end

new text begin (12) to the extent included in federal taxable income, an amount, not to exceed
$10,000, equal to an individual's unreimbursed expenses for travel, lodging, and lost
wages net of sick pay related to the individual's donation of one or more of the individual's
organs to another person for human organ transplantation. For purposes of determining
the extent to which expenses are included in federal taxable income, expenses qualifying
under this paragraph are the first expenses considered in determining the medical expense
deduction allowed under section 213 of the Internal Revenue Code. For purposes of this
clause, "organ" means all or part of an individual's liver, pancreas, kidney, intestine,
lung, or bone marrow, and "human organ transplantation" means the medical procedure
by which transfer of a human organ is made from the body of one person to the body of
another person. An individual may claim the subtraction in this clause for each instance of
organ donation for transplantation, during the taxable year in which the expenses or lost
wages occur;
new text end

new text begin (13) the amount of compensation paid to members of the Minnesota National Guard
or other reserve components of the United States military for active service performed
in Minnesota, excluding compensation for services performed under the Active Guard
Reserve (AGR) program. For purposes of this clause, "active service" means (i) state
active service as defined in section 190.05, subdivision 5a, clause (1); (ii) federally
funded state active service as defined in section 190.05, subdivision 5b; or (iii) federal
active service as defined in section 190.05, subdivision 5c, but "active service" excludes
services performed exclusively for purposes of basic combat training, advanced individual
training, annual training, and periodic inactive duty training; special training periodically
made available to reserve members; and service performed in accordance with section
190.08, subdivision 3; and
new text end

new text begin (14) the amount of compensation paid to members of the armed forces of the United
States or United Nations for active duty performed outside Minnesota new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2004.
new text end

Sec. 5.

Minnesota Statutes 2004, section 290.01, subdivision 19c, is amended to read:

Subd. 19c.

Corporations; additions to federal taxable income.

For corporations,
there shall be added to federal taxable income:

(1) the amount of any deduction taken for federal income tax purposes for income,
excise, or franchise taxes based on net income or related minimum taxes, including but not
limited to the tax imposed under section 290.0922, paid by the corporation to Minnesota,
another state, a political subdivision of another state, the District of Columbia, or any
foreign country or possession of the United States;

(2) interest not subject to federal tax upon obligations of: the United States, its
possessions, its agencies, or its instrumentalities; the state of Minnesota or any other
state, any of its political or governmental subdivisions, any of its municipalities, or any
of its governmental agencies or instrumentalities; the District of Columbia; or Indian
tribal governments;

(3) exempt-interest dividends received as defined in section 852(b)(5) of the Internal
Revenue Code;

(4) the amount of any net operating loss deduction taken for federal income tax
purposes under section 172 or 832(c)(10) of the Internal Revenue Code or operations loss
deduction under section 810 of the Internal Revenue Code;

(5) the amount of any special deductions taken for federal income tax purposes
under sections 241 to 247 of the Internal Revenue Code;

(6) losses from the business of mining, as defined in section 290.05, subdivision 1,
clause (a), that are not subject to Minnesota income tax;

(7) the amount of any capital losses deducted for federal income tax purposes under
sections 1211 and 1212 of the Internal Revenue Code;

(8) the exempt foreign trade income of a foreign sales corporation under sections
921(a) and 291 of the Internal Revenue Code;

(9) the amount of percentage depletion deducted under sections 611 through 614 and
291 of the Internal Revenue Code;

(10) for certified pollution control facilities placed in service in a taxable year
beginning before December 31, 1986, and for which amortization deductions were elected
under section 169 of the Internal Revenue Code of 1954, as amended through December
31, 1985, the amount of the amortization deduction allowed in computing federal taxable
income for those facilities;

(11) the amount of any deemed dividend from a foreign operating corporation
determined pursuant to section 290.17, subdivision 4, paragraph (g);

(12) the amount of any environmental tax paid under section 59(a) of the Internal
Revenue Code;

(13) the amount of a partner's pro rata share of net income which does not flow
through to the partner because the partnership elected to pay the tax on the income under
section 6242(a)(2) of the Internal Revenue Code;

(14) the amount of net income excluded under section 114 of the Internal Revenue
Code;

(15) any increase in subpart F income, as defined in section 952(a) of the Internal
Revenue Code, for the taxable year when subpart F income is calculated without regard to
the provisions of section 614 of Public Law 107-147; deleted text begin and
deleted text end

(16) 80 percent of the depreciation deduction allowed under section 168(k) of the
Internal Revenue Code. For purposes of this clause, if the taxpayer has an activity that
in the taxable year generates a deduction for depreciation under section 168(k) and the
activity generates a loss for the taxable year that the taxpayer is not allowed to claim for
the taxable year, "the depreciation allowed under section 168(k)" for the taxable year is
limited to excess of the depreciation claimed by the activity under section 168(k) over the
amount of the loss from the activity that is not allowed in the taxable year. In succeeding
taxable years when the losses not allowed in the taxable year are allowed, the depreciation
under section 168(k) is allowed new text begin ; and
new text end

new text begin (17) the amount of expenses disallowed under section 290.10, subdivision 2 new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2004.
new text end

Sec. 6.

Minnesota Statutes 2004, section 290.05, subdivision 1, is amended to read:

Subdivision 1.

Exempt entities.

The following corporations, individuals, estates,
trusts, and organizations shall be exempted from taxation under this chapter, provided
that every such person or corporation claiming exemption under this chapter, in whole
or in part, must establish to the satisfaction of the commissioner the taxable status of
any income or activity:

(a) corporations, individuals, estates, and trusts engaged in the business of mining
or producing iron ore and other ores the mining or production of which is subject to
the occupation tax imposed by section 298.01; but if any such corporation, individual,
estate, or trust engages in any other business or activity or has income from any property
not used in such business it shall be subject to this tax computed on the net income from
such property or such other business or activity. Royalty shall not be considered as income
from the business of mining or producing iron ore within the meaning of this section;

(b) the United States of America, the state of Minnesota or any political subdivision
of either agencies or instrumentalities, whether engaged in the discharge of governmental
or proprietary functions; deleted text begin and
deleted text end

(c) any insurance company new text begin ; and
new text end

new text begin (d) a corporation engaged in the business of operating a personal rapid transit system,
as defined in section 297A.61, subdivision 37, in this state, independent of any government
subsidies, but if the corporation engages in any other business or activity or has income
from any property not used in the business of operating a personal rapid transit system, it
is subject to this tax computed on the net income from the property or business or activity new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2008.
new text end

Sec. 7.

Minnesota Statutes 2004, section 290.06, subdivision 2c, is amended to read:

Subd. 2c.

Schedules of rates for individuals, estates, and trusts.

(a) The income
taxes imposed by this chapter upon married individuals filing joint returns and surviving
spouses as defined in section 2(a) of the Internal Revenue Code must be computed by
applying to their taxable net income the following schedule of rates:

(1) On the first $25,680, 5.35 percent;

(2) On all over $25,680, but not over $102,030, 7.05 percent;

(3) On all over $102,030, deleted text begin 7.85 deleted text end new text begin 8.0 new text end percent.

Married individuals filing separate returns, estates, and trusts must compute their
income tax by applying the above rates to their taxable income, except that the income
brackets will be one-half of the above amounts.

(b) The income taxes imposed by this chapter upon unmarried individuals must be
computed by applying to taxable net income the following schedule of rates:

(1) On the first $17,570, 5.35 percent;

(2) On all over $17,570, but not over $57,710, 7.05 percent;

(3) On all over $57,710, deleted text begin 7.85 deleted text end new text begin 8.0 new text end percent.

(c) The income taxes imposed by this chapter upon unmarried individuals qualifying
as a head of household as defined in section 2(b) of the Internal Revenue Code must be
computed by applying to taxable net income the following schedule of rates:

(1) On the first $21,630, 5.35 percent;

(2) On all over $21,630, but not over $86,910, 7.05 percent;

(3) On all over $86,910, deleted text begin 7.85 deleted text end new text begin 8.0 new text end percent.

(d) In lieu of a tax computed according to the rates set forth in this subdivision, the
tax of any individual taxpayer whose taxable net income for the taxable year is less than
an amount determined by the commissioner must be computed in accordance with tables
prepared and issued by the commissioner of revenue based on income brackets of not
more than $100. The amount of tax for each bracket shall be computed at the rates set
forth in this subdivision, provided that the commissioner may disregard a fractional part of
a dollar unless it amounts to 50 cents or more, in which case it may be increased to $1.

(e) An individual who is not a Minnesota resident for the entire year must compute
the individual's Minnesota income tax as provided in this subdivision. After the
application of the nonrefundable credits provided in this chapter, the tax liability must
then be multiplied by a fraction in which:

(1) the numerator is the individual's Minnesota source federal adjusted gross income
as defined in section 62 of the Internal Revenue Code and increased by the additions
required under section 290.01, subdivision 19a, clauses (1), (5), and (6), and reduced by
the subtraction under section 290.01, subdivision 19b, clause (11), and the Minnesota
assignable portion of the subtraction for United States government interest under section
290.01, subdivision 19b, clause (1), after applying the allocation and assignability
provisions of section 290.081, clause (a), or 290.17; and

(2) the denominator is the individual's federal adjusted gross income as defined in
section 62 of the Internal Revenue Code of 1986, increased by the amounts specified in
section 290.01, subdivision 19a, clauses (1), (5), and (6), and reduced by the amounts
specified in section 290.01, subdivision 19b, clauses (1) and (11).

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective only if sections 13 and 14 of this
article are enacted for taxable years beginning after December 31, 2004.
new text end

Sec. 8.

Minnesota Statutes 2004, section 290.06, subdivision 28, is amended to read:

Subd. 28.

deleted text begin credit deleted text end new text begin refunds new text end for transit passes.

deleted text begin A taxpayer deleted text end new text begin (a) An employer new text end may deleted text begin take
a credit against the tax due under this chapter deleted text end new text begin claim a refund new text end equal to 30 percent of the
expense incurred by the deleted text begin taxpayer deleted text end new text begin employer new text end to provide transit passes, for use in Minnesota,
to employees of the taxpayer.

new text begin (b) new text end As used in this subdivision, new text begin the following terms have the meanings given:
new text end

new text begin (1) "employer" means an individual or entity subject to tax under this chapter
or an entity that is exempt from taxation under section 290.05, but excluding entities
enumerated in section 290.05, subdivision 1, paragraph (b); and
new text end

new text begin (2) new text end "transit pass" has the meaning given in section 132(f)(5)(A) of the Internal
Revenue Code.

new text begin (c) new text end If the deleted text begin taxpayer deleted text end new text begin employer new text end purchases the transit passes from the transit system
operator, and resells them to the employees, the deleted text begin credit deleted text end new text begin refund new text end is based on the amount of
the difference between the price paid for the passes by the employer and the amount
charged to employees.

new text begin (d) The commissioner shall prescribe the forms for and the manner in which the
refund may be claimed. The commissioner must provide for paying refunds at least
quarterly. The commissioner may set a minimum amount of qualifying expenses that must
be incurred before a refund may be claimed.
new text end

new text begin (e) An amount sufficient to pay the refunds required by this subdivision is
appropriated to the commissioner of revenue.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for transit passes purchased after
December 31, 2005.
new text end

Sec. 9.

Minnesota Statutes 2004, section 290.06, is amended by adding a subdivision
to read:

new text begin Subd. 32. new text end

new text begin Carsharing credit. new text end

new text begin (a) For purposes of this subdivision, a "carsharing
organization" means an organization that:
new text end

new text begin (1) is described in section 501(c) of the Internal Revenue Code;
new text end

new text begin (2) is comprised of members who purchase the use of a motor vehicle from the
organization;
new text end

new text begin (3) owns or leases a fleet of motor vehicles that are available to members of the
organization to pay for the use of a vehicle on an hourly or per trip basis; and
new text end

new text begin (4) does not assign exclusive rights of use of specific vehicles to individual members
or allow individual members to keep a vehicle in the member's sole possession.
new text end

new text begin (b) A taxpayer may take a credit against the tax due under this chapter for the
expenses incurred by the taxpayer to purchase a membership and pay monthly dues to a
carsharing organization or to provide memberships and pay monthly dues to a carsharing
organization for employees of the taxpayer. The amount of the credit is equal to the
lesser of the actual cost of the membership fee and the monthly dues, or $390. If an
employer purchases the membership or pays the monthly dues to the nonprofit carsharing
organization and resells the membership to its employees or charges the monthly dues to
its employees, the credit allowed to the employer is the amount of the difference between
the amount paid by the employer and the amount charged to the employee.
new text end

new text begin (c) A taxpayer who owns a parking facility that charges customers an amount to park
vehicles at the facility and provides dedicated parking space at no charge to a nonprofit
carsharing organization to park the motor vehicles that are used by the members of the
organization on an hourly or per-trip basis, may take a credit against the tax due under this
chapter for the value of the dedicated parking space provided to the nonprofit carsharing
organization. The value of the dedicated parking space is equal to the lowest amount
charged to customers who pay to park at the facility calculated on an hourly, daily, or other
long-term rate that results in the lowest total cost.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2005.
new text end

Sec. 10.

Minnesota Statutes 2004, section 290.06, is amended by adding a subdivision
to read:

new text begin Subd. 33. new text end

new text begin Regional investment credit. new text end

new text begin (a) A credit is allowed against the tax
imposed by this chapter for investment in a qualifying regional angel investment network
fund. The credit equals 25 percent of the taxpayer's investment made in the fund for the
taxable year, but not to exceed the lesser of:
new text end

new text begin (1) the liability for tax under this chapter; or
new text end

new text begin (2) the amount of the certificate under paragraph (c) provided to the taxpayer by
the fund. The taxpayer must claim the credit the same tax year in which the investment
to the fund is made. The credit is allowed only for investments made to a fund that are
made after the fund has been certified by the commissioner of employment and economic
development under paragraph (c).
new text end

new text begin (b) For purposes of this subdivision, a regional angel investment network fund
means a pool investment fund that:
new text end

new text begin (1) is organized as a limited liability company and consists of members who are
accredited investors within the meaning of Regulation D of the Securities and Exchange
Commission, Code of Federal Regulations, title 17, section 230.501(a), or consists of
members that are not accredited investors that make equity investments or investments in
notes that pay interest or other fixed amounts or any combination of both;
new text end

new text begin (2) primarily makes equity investments in emerging and expanding small businesses
as defined by the Small Business Administration, or cooperative associations as defined
in chapter 308B, that are located in local communities in Minnesota outside of the
metropolitan area as defined in section 473.121, subdivision 2, and does not make
investments in residential real estate; and
new text end

new text begin (3) has no fewer than five individual investors who are not affiliates with no single
investor and affiliates of that investor together owning a total of more than 25 percent
ownership interests outstanding in the fund. For purposes of this subdivision, "affiliate"
means a spouse, child, or sibling of an investor or a corporation, partnership, or trust
in which an investor has a controlling equity interest or in which an investor exercises
management control.
new text end

new text begin (c) Regional angel investment network funds may apply to the commissioner
of employment and economic development for certification as a qualifying regional
angel investment network fund. The application must be in the form and made under
procedures specified by the commissioner of employment and economic development.
The commissioner of employment and economic development may certify up to 20
qualifying funds and provide certificates entitling investors in the funds to credits under
this subdivision of up to $500,000 for each fund. The commissioner of employment
and economic development must not issue a total amount of certificates for all funds of
more than $10,000,000. In awarding certificates under this paragraph, the commissioner
of employment and economic development shall generally award them to qualified
applicants in the order in which the applications are received, but shall also seek to certify
funds that are broadly dispersed across the entire state outside of the metropolitan area,
as defined in section 473.121, subdivision 2. The commissioner of employment and
economic development must award three certificates to a pooled investment fund that
invests in qualifying small businesses located in the region of the state that is the focus of
the fund and allocates at least 20 percent of its investments to qualified small businesses
that meet local community needs. To be a qualifying small business, a business must
satisfy the following requirements:
new text end

new text begin (1) 51 percent of the ownership interests in the business, excluding any equity
interest of the fund, must be held by residents of the region; and
new text end

new text begin (2) the business must pay wages and benefits, measured on a full-time equivalent
basis, to 75 percent or more of its employees equal to 175 percent of the federal poverty
level for a family of four. This requirement does not apply if fewer than three pooled
investment funds that would otherwise qualify under this subdivision apply for a
certificate.
new text end

new text begin (d) Each fund must provide each investor a statement indicating the investor's share
of the credit amount certified to the fund under paragraph (c) based on the order in which
their investment is made in the fund.
new text end

new text begin (e) If the amount of the credit under this subdivision for any taxable year exceeds
the limitation under paragraph (a), clause (1), the excess is a credit carryover to each of
the 15 succeeding taxable years. The entire amount of the excess unused credit for the
taxable year must be carried first to the earliest of the taxable years to which the credit
may be carried and then to each successive year to which the credit may be carried. The
amount of the unused credit which may be added under this paragraph may not exceed the
taxpayer's liability for tax for the taxable year.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment, for
taxable years beginning after December 31, 2005. It applies to investments made after the
fund has been certified by the commissioner of employment and economic development.
new text end

Sec. 11.

Minnesota Statutes 2004, section 290.0674, subdivision 2, is amended to read:

Subd. 2.

Limitations.

(a) For claimants with income not greater than $33,500, the
maximum credit allowed is $1,000 deleted text begin per deleted text end new text begin multiplied by the number of claimant's new text end qualifying
deleted text begin child and $2,000 per family deleted text end new text begin children in grades kindergarten through grade 12 new text end . No credit is
allowed for education-related expenses for claimants with income greater than $37,500.
The maximum credit per deleted text begin child deleted text end new text begin claimant new text end is reduced by $1 for each $4 of household income
over $33,500, deleted text begin and the maximum credit per family is reduced by $2 for each $4 of
household income over $33,500, deleted text end but in no case is the credit less than zero.

For purposes of this section "income" has the meaning given in section 290.067,
subdivision 2a. In the case of a married claimant, a credit is not allowed unless a joint
income tax return is filed.

(b) For a nonresident or part-year resident, the credit determined under subdivision 1
and the maximum credit amount in paragraph (a) must be allocated using the percentage
calculated in section 290.06, subdivision 2c, paragraph (e).

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for tax years beginning after
December 31, 2005.
new text end

Sec. 12.

new text begin [290.0676] CREDIT FOR HISTORIC STRUCTURE
REHABILITATION.
new text end

new text begin Subdivision 1. new text end

new text begin Definitions. new text end

new text begin (a) As used in this section, the terms defined in this
subdivision have the meanings given.
new text end

new text begin (b) "Certified historic structure" means a property located in Minnesota and listed
individually on the National Register of Historic Places or a historic property designated
by either a certified local government or a heritage preservation commission created
under the National Historic Preservation Act of 1966 and whose designation is approved
by the state historic preservation officer.
new text end

new text begin (c) "Eligible property" means a certified historic structure or a structure in a certified
historic district that is offered or used for residential or business purposes.
new text end

new text begin (d) "Structure in a certified historic district" means a structure located in Minnesota
that is certified by the State Historic Preservation Office as contributing to the historic
significance of a certified historic district listed on the National Register of Historic Places
or a local district that has been certified by the United States Department of the Interior.
new text end

new text begin Subd. 2. new text end

new text begin Credit allowed. new text end

new text begin A taxpayer who incurs costs for the rehabilitation of
eligible property may take a credit against the tax imposed under this chapter in an amount
equal to ten percent of the total costs of rehabilitation. Costs of rehabilitation include,
but are not limited to, qualified rehabilitation expenditures as defined under section
47(c)(2)(A) of the Internal Revenue Code, provided that the costs of rehabilitation must
exceed 50 percent of the total basis in the property at the time the rehabilitation activity
begins and the rehabilitation must meet standards consistent with the standards of the
Secretary of the Interior for rehabilitation as determined by the State Historic Preservation
Office of the Minnesota Historical Society.
new text end

new text begin Subd. 3. new text end

new text begin Carryback and carryforward. new text end

new text begin If the amount of the credit under
subdivision 2 exceeds the tax liability under this chapter for the year in which the cost is
incurred, the amount that exceeds the tax liability may be carried back to any of the three
preceding taxable years or carried forward to each of the ten taxable years succeeding the
taxable year in which the expense was incurred. The entire amount of the credit must
be carried to the earliest taxable year to which the amount may be carried. The unused
portion of the credit must be carried to the following taxable year.
new text end

new text begin Subd. 4. new text end

new text begin Partnerships; multiple owners; transfers. new text end

new text begin (a) Credits granted to a
partnership, a limited liability company taxed as a partnership, or multiple owners of
property shall be passed through to the partners, members, or owners, respectively, pro
rata or pursuant to an executed agreement among the partners, members, or owners
documenting an alternate distribution method.
new text end

new text begin (b) Taxpayers eligible for credits may transfer, sell, or assign the credits in whole
or part. Any assignee may use acquired credits to offset up to 100 percent of the taxes
otherwise imposed by this chapter. The assignee shall perfect such transfer by notifying
the Department of Revenue in writing within 30 calendar days following the effective
date of the transfer in such form and manner as shall be prescribed by the Department
of Revenue. The proceeds of any sale or assignment of a credit shall be exempt from
taxation under this chapter.
new text end

new text begin Subd. 5. new text end

new text begin Process. new text end

new text begin To claim the credit, the taxpayer must apply to the State Historic
Preservation Office of the Minnesota Historical Society before a historic rehabilitation
project begins. The State Historic Preservation Office shall determine the amount of
eligible rehabilitation costs and whether the rehabilitation meets the standards of the
United States Department of the Interior. The State Historic Preservation Office shall issue
certificates verifying eligibility for and the amount of credit. The taxpayer shall attach
the certificate to any income tax return on which the credit is claimed. The State Historic
Preservation Office of the Minnesota Historical Society may collect fees for applications
for the historic preservation tax credit. Fees shall be set at an amount that does not exceed
the costs of administering the tax credit program.
new text end

new text begin Subd. 6. new text end

new text begin Mortgage certificates; credit for lending institutions. new text end

new text begin (a) The taxpayer
may elect, in lieu of the credit otherwise allowed under this section, to receive a historic
rehabilitation mortgage credit certificate.
new text end

new text begin (b) For purposes of this subdivision, a historic rehabilitation mortgage credit is a
certificate that is issued to the taxpayer according to procedures prescribed by the State
Historic Preservation Office with respect to the certified rehabilitation and which meets
the requirements of this paragraph. The face amount of the certificate must be equal to
the credit that would be allowable under subdivision 2 to the taxpayer with respect to
the rehabilitation. The certificate may only be transferred by the taxpayer to a lending
institution, including a nondepository home mortgage lending institution, in connection
with a loan:
new text end

new text begin (1) that is secured by the building with respect to which the credit is issued; and
new text end

new text begin (2) the proceeds of which may not be used for any purpose other than the acquisition
or rehabilitation of the building.
new text end

new text begin (c) In exchange for the certificate, the lending institution must provide to the
taxpayer an amount equal to the face amount of the certificate discounted by the amount
by which the federal income tax liability of the lending institution is increased due to its
use of the certificate in the manner provided in this section. That amount must be applied,
as directed by the taxpayer, in whole or in part, to reduce:
new text end

new text begin (1) the principal amount of the loan;
new text end

new text begin (2) the rate of interest on the loan; or
new text end

new text begin (3) the taxpayer's cost of purchasing the building, but only in the case of a qualified
historic home that is located in a poverty-impacted area as designated by the State Historic
Preservation Office.
new text end

new text begin The lending institution may take as a credit against the tax due under this chapter
an amount equal to the amount specified in the certificate. If the amount of the discount
retained by the lender exceeds the amount by which the lending institution's federal
income tax liability is increased due to the use of a mortgage credit certificate, the excess
shall be refunded to the borrower with interest at the rate prescribed by the State Historic
Preservation Office. The lending institution may carry forward all unused credits under
this subdivision until exhausted. Nothing in this subdivision requires a lending institution
to accept a historic rehabilitation certificate from any person.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2004.
new text end

Sec. 13.

Minnesota Statutes 2004, section 290.091, subdivision 2, is amended to read:

Subd. 2.

Definitions.

For purposes of the tax imposed by this section, the following
terms have the meanings given:

(a) "Alternative minimum taxable income" means the sum of the following for
the taxable year:

(1) the taxpayer's federal alternative minimum taxable income as defined in section
55(b)(2) of the Internal Revenue Code;

(2) the taxpayer's itemized deductions allowed in computing federal alternative
minimum taxable income, but excluding:

(i) the charitable contribution deduction under section 170 of the Internal Revenue
Code deleted text begin to the extent that the deduction exceeds 1.0 percent of adjusted gross income, as
defined in section 62 of the Internal Revenue Code deleted text end ;

(ii) the medical expense deduction;

(iii) the casualty, theft, and disaster loss deduction; deleted text begin and
deleted text end

(iv) the impairment-related work expenses of a disabled person; new text begin and
new text end

new text begin (v) the amount of the exemption allowed the taxpayer under section 151(c) of the
Internal Revenue Code;
new text end

(3) for depletion allowances computed under section 613A(c) of the Internal
Revenue Code, with respect to each property (as defined in section 614 of the Internal
Revenue Code), to the extent not included in federal alternative minimum taxable income,
the excess of the deduction for depletion allowable under section 611 of the Internal
Revenue Code for the taxable year over the adjusted basis of the property at the end of the
taxable year (determined without regard to the depletion deduction for the taxable year);

(4) to the extent not included in federal alternative minimum taxable income, the
amount of the tax preference for intangible drilling cost under section 57(a)(2) of the
Internal Revenue Code determined without regard to subparagraph (E);

(5) to the extent not included in federal alternative minimum taxable income, the
amount of interest income as provided by section 290.01, subdivision 19a, clause (1); and

(6) the amount of addition required by section 290.01, subdivision 19a, clause (7);

less the sum of the amounts determined under the following:

(1) interest income as defined in section 290.01, subdivision 19b, clause (1);

(2) an overpayment of state income tax as provided by section 290.01, subdivision
19b, clause (2), to the extent included in federal alternative minimum taxable income;

(3) the amount of investment interest paid or accrued within the taxable year on
indebtedness to the extent that the amount does not exceed net investment income, as
defined in section 163(d)(4) of the Internal Revenue Code. Interest does not include
amounts deducted in computing federal adjusted gross income; and

(4) amounts subtracted from federal taxable income as provided by section 290.01,
subdivision 19b, clauses (10) deleted text begin and (11) deleted text end new text begin to (12) new text end .

In the case of an estate or trust, alternative minimum taxable income must be
computed as provided in section 59(c) of the Internal Revenue Code.

(b) "Investment interest" means investment interest as defined in section 163(d)(3)
of the Internal Revenue Code.

(c) "Tentative minimum tax" equals 6.4 percent of alternative minimum taxable
income after subtracting the exemption amount determined under subdivision 3.

(d) "Regular tax" means the tax that would be imposed under this chapter (without
regard to this section and section 290.032), reduced by the sum of the nonrefundable
credits allowed under this chapter.

(e) "Net minimum tax" means the minimum tax imposed by this section.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective only if section 7 of this article is
enacted for taxable years beginning after December 31, 2004.
new text end

Sec. 14.

Minnesota Statutes 2004, section 290.091, subdivision 3, is amended to read:

Subd. 3.

Exemption amount.

new text begin (a) new text end For purposes of computing the alternative
minimum tax, the exemption amount is deleted text begin the exemption determined under section 55(d)
of the Internal Revenue Code, as amended through December 31, 1992, except that
alternative minimum taxable income as determined under this section must be substituted
in the computation of the phase out under section 55(d)(3) deleted text end new text begin $66,300 for married individuals
filing joint returns; and $33,150 for married individuals filing separate returns, single
individuals, and head of household filers new text end .

new text begin (b) The exemption amount determined under this subdivision is reduced by an
amount equal to 25 percent of the amount by which the alternative minimum income
exceeds $248,600 for married individuals filing joint returns; and $124,300 for married
individuals filing separate returns, single individuals, and head of household filers.
new text end

new text begin (c) For taxable years beginning after December 31, 2006, the exemption amounts
under paragraph (a), and the income amounts in paragraph (b), must be adjusted for
inflation. The commissioner shall make the inflation adjustments in accordance with
section 1(f) of the Internal Revenue Code except that for the purposes of this subdivision
the percentage increase must be determined from the year starting September 1, 2005,
and ending August 31, 2006, as the base year for adjusting for inflation for the tax year
beginning after December 31, 2006. The determination of the commissioner under this
subdivision is not a rule under the Administrative Procedure Act.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective only if section 7 of this article is
enacted for taxable years beginning after December 31, 2004.
new text end

Sec. 15.

Minnesota Statutes 2004, section 290.10, is amended to read:

290.10 NONDEDUCTIBLE ITEMS.

new text begin Subdivision 1. new text end

new text begin Expenses, interest, and taxes. new text end

Except as provided in section 290.17,
subdivision 4, paragraph (i), in computing the net income of a taxpayer no deduction shall
in any case be allowed for expenses, interest and taxes connected with or allocable against
the production or receipt of all income not included in the measure of the tax imposed by
this chapter, except that for corporations engaged in the business of mining or producing
iron ore, the mining of which is subject to the occupation tax imposed by section 298.01,
subdivision 4, this shall not prevent the deduction of expenses and other items to the extent
that the expenses and other items are allowable under this chapter and are not deductible,
capitalizable, retainable in basis, or taken into account by allowance or otherwise in
computing the occupation tax and do not exceed the amounts taken for federal income
tax purposes for that year. Occupation taxes imposed under chapter 298, royalty taxes
imposed under chapter 299, or depletion expenses may not be deducted under this clause.

new text begin Subd. 2. new text end

new text begin Fines, penalties, damages, and expenses. new text end

new text begin (a) No deduction from taxable
income for a trade or business expense under section 162(a) of the Internal Revenue Code
shall be allowed for any fine, penalty, damages, or expenses paid to:
new text end

new text begin (1) the government of the United States, a state, a territory or possession of the
United States, the District of Columbia, or the Commonwealth of Puerto Rico;
new text end

new text begin (2) the government of a foreign country; or
new text end

new text begin (3) a political subdivision of, or corporation or other entity serving as an agency or
instrumentality of, any government described in clause (1) or (2).
new text end

new text begin (b) For purposes of this subdivision, "fine, penalty, damages, or expenses" include,
but are not limited to, any amount:
new text end

new text begin (1) paid pursuant to a conviction or a plea of guilty or nolo contendere for any
crime in a criminal proceeding;
new text end

new text begin (2) paid as a civil penalty imposed by federal, state, or local law, including tax
penalties and interest;
new text end

new text begin (3) paid in settlement of the taxpayer's actual or potential liability for a civil or
criminal fine or penalty;
new text end

new text begin (4) forfeited as collateral posted in connection with a proceeding that could result in
imposition of a fine or penalty; or
new text end

new text begin (5) legal fees and related expenses paid or incurred in the prosecution or civil action
arising from a violation of the law imposing the fine or civil penalty, court costs assessed
against the taxpayer, or stenographic and printing charges, compensatory damages,
punitive damages, or restitution.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2004.
new text end

Sec. 16.

new text begin [290.433] GLOBAL WAR ON TERRORISM CHECKOFF.
new text end

new text begin Every individual who files an income tax return or property tax refund claim, and
every corporation that files an income tax return, may designate on their return that $1
or more shall be added to the tax or deducted from the refund that would otherwise be
payable by or to that individual or corporation and paid into an account to be established
for the purpose of paying bonuses to residents of this state who are veterans of the global
war on terrorism. The commissioner shall, on the income tax returns and the property
tax refund claim form, notify filers of their right to designate that a portion of their tax
or refund shall be paid into the account for veterans of the global war on terrorism. The
amounts designated under this section shall be annually appropriated to the commissioner
of the Department of Veterans Affairs to pay bonuses to veterans of the global war on
terrorism as determined by law. All interest earned on money accrued shall be credited to
the account by the commissioner of finance.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2004, and for property tax refund claims for property taxes payable after
December 31, 2004.
new text end

Sec. 17.

Minnesota Statutes 2004, section 290.92, subdivision 4b, is amended to read:

Subd. 4b.

Withholding by partnerships.

(a) A partnership shall deduct and
withhold a tax as provided in paragraph (b) for nonresident individual partners based on
their distributive shares of partnership income for a taxable year of the partnership.

(b) The amount of tax withheld is determined by multiplying the partner's
distributive share allocable to Minnesota under section 290.17, paid or credited during
the taxable year by the highest rate used to determine the income tax liability for an
individual under section 290.06, subdivision 2c, except that the amount of tax withheld
may be determined by the commissioner if the partner submits a withholding exemption
certificate under subdivision 5.

(c) The commissioner may reduce or abate the tax withheld under this subdivision if
the partnership had reasonable cause to believe that no tax was due under this section.

(d) Notwithstanding paragraph (a), a partnership is not required to deduct and
withhold tax for a nonresident partner if:

(1) the partner elects to have the tax due paid as part of the partnership's composite
return under section 289A.08, subdivision 7;

(2) the partner has Minnesota assignable federal adjusted gross income from the
partnership of less than $1,000; or

(3) the partnership is liquidated or terminated, the income was generated by a
transaction related to the termination or liquidation, and no cash or other property was
distributed in the current or prior taxable year; deleted text begin or
deleted text end

(4) the distributive shares of partnership income are attributable to:

(i) income required to be recognized because of discharge of indebtedness;

(ii) income recognized because of a sale, exchange, or other disposition of real estate,
depreciable property, or property described in section 179 of the Internal Revenue Code; or

(iii) income recognized on the sale, exchange, or other disposition of any property
that has been the subject of a basis reduction pursuant to section 108, 734, 743, 754, or
1017 of the Internal Revenue Code

to the extent that the income does not include cash received or receivable or, if there
is cash received or receivable, to the extent that the cash is required to be used to pay
indebtedness by the partnership or a secured debt on partnership property new text begin ; or
new text end

new text begin (5) the partnership is a publicly traded partnership, as defined in section 7704(b) of
the Internal Revenue Code new text end .

(e) For purposes of subdivision 6a, and sections 289A.09, subdivision 2, 289A.20,
subdivision 2, paragraph (c), 289A.50, 289A.56, 289A.60, and 289A.63, a partnership is
considered an employer.

(f) To the extent that income is exempt from withholding under paragraph (d), clause
(4), the commissioner has a lien in an amount up to the amount that would be required
to be withheld with respect to the income of the partner attributable to the partnership
interest, but for the application of paragraph (d), clause (4). The lien arises under section
270.69 from the date of assessment of the tax against the partner, and attaches to that
partner's share of the profits and any other money due or to become due to that partner
in respect of the partnership. Notice of the lien may be sent by mail to the partnership,
without the necessity for recording the lien. The notice has the force and effect of a levy
under section 270.70, and is enforceable against the partnership in the manner provided
by that section. Upon payment in full of the liability subsequent to the notice of lien, the
partnership must be notified that the lien has been satisfied.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2004.
new text end

Sec. 18. new text begin DETERMINATION OF ECONOMIC IMPACT.
new text end

new text begin The Minnesota Historical Society shall annually determine the economic impact
to the state from the rehabilitation of eligible property for which credits are provided
under section 12 and report on the impact to the committees on taxes of the senate and
house of representatives.
new text end

Sec. 19. new text begin STUDY; CORPORATE FRANCHISE TAX.
new text end

new text begin The commissioners of the Departments of Finance and Revenue shall conduct a
comprehensive study to identify the reasons for the decline in corporate tax receipts. The
study shall include an analysis of the current and future effect of existing corporate tax
provisions, both independently and interactively with other provisions; how tax provisions
are changing business practices; and the impact of outsourcing or relocation of business
operations and jobs. On or before February 1, 2006, the commissioners shall report to
the chairpersons of the house and senate tax committees the results of the study and shall
include recommendations for changes to the tax laws that would reduce tax incentives for
businesses to outsource or relocate business operations or jobs.
new text end

ARTICLE 2

FEDERAL UPDATE

Section 1.

Minnesota Statutes 2004, section 289A.02, subdivision 7, is amended to
read:

Subd. 7.

Internal revenue code.

Unless specifically defined otherwise, "Internal
Revenue Code" means the Internal Revenue Code of 1986, as amended through deleted text begin June 15,
2003 deleted text end new text begin December 31, 2004 new text end .

new text begin EFFECTIVE DATE. new text end

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

Sec. 2.

Minnesota Statutes 2004, section 290.01, subdivision 19, is amended to read:

Subd. 19.

Net income.

The term "net income" means the federal taxable income,
as defined in section 63 of the Internal Revenue Code of 1986, as amended through the
date named in this subdivision, incorporating new text begin the federal effective dates of changes to the
Internal Revenue Code and new text end any elections made by the taxpayer in accordance with the
Internal Revenue Code in determining federal taxable income for federal income tax
purposes, and with the modifications provided in subdivisions 19a to 19f.

In the case of a regulated investment company or a fund thereof, as defined in section
851(a) or 851(g) of the Internal Revenue Code, federal taxable income means investment
company taxable income as defined in section 852(b)(2) of the Internal Revenue Code,
except that:

(1) the exclusion of net capital gain provided in section 852(b)(2)(A) of the Internal
Revenue Code does not apply;

(2) the deduction for dividends paid under section 852(b)(2)(D) of the Internal
Revenue Code must be applied by allowing a deduction for capital gain dividends and
exempt-interest dividends as defined in sections 852(b)(3)(C) and 852(b)(5) of the Internal
Revenue Code; and

(3) the deduction for dividends paid must also be applied in the amount of any
undistributed capital gains which the regulated investment company elects to have treated
as provided in section 852(b)(3)(D) of the Internal Revenue Code.

The net income of a real estate investment trust as defined and limited by section
856(a), (b), and (c) of the Internal Revenue Code means the real estate investment trust
taxable income as defined in section 857(b)(2) of the Internal Revenue Code.

The net income of a designated settlement fund as defined in section 468B(d) of
the Internal Revenue Code means the gross income as defined in section 468B(b) of the
Internal Revenue Code.

deleted text begin The provisions of sections 1113(a), 1117, 1206(a), 1313(a), 1402(a), 1403(a), 1443,
1450, 1501(a), 1605, 1611(a), 1612, 1616, 1617, 1704(l), and 1704(m) of the Small
Business Job Protection Act, Public Law 104-188, the provisions of Public Law 104-117,
the provisions of sections 313(a) and (b)(1), 602(a), 913(b), 941, 961, 971, 1001(a) and
(b), 1002, 1003, 1012, 1013, 1014, 1061, 1062, 1081, 1084(b), 1086, 1087, 1111(a),
1131(b) and (c), 1211(b), 1213, 1530(c)(2), 1601(f)(5) and (h), and 1604(d)(1) of the
Taxpayer Relief Act of 1997, Public Law 105-34, the provisions of section 6010 of the
Internal Revenue Service Restructuring and Reform Act of 1998, Public Law 105-206, the
provisions of section 4003 of the Omnibus Consolidated and Emergency Supplemental
Appropriations Act, 1999, Public Law 105-277, and the provisions of section 318 of the
Consolidated Appropriation Act of 2001, Public Law 106-554, shall become effective at
the time they become effective for federal purposes.
deleted text end

The Internal Revenue Code of 1986, as amended through December 31, deleted text begin 1996 deleted text end new text begin 2004 new text end ,
shall be in effect for taxable years beginning after December 31, 1996. new text begin The provisions of
Public Law 109-1, shall be effective for tax years beginning after December 31, 2003.
new text end

deleted text begin The provisions of sections 202(a) and (b), 221(a), 225, 312, 313, 913(a), 934, 962,
1004, 1005, 1052, 1063, 1084(a) and (c), 1089, 1112, 1171, 1204, 1271(a) and (b), 1305(a),
1306, 1307, 1308, 1309, 1501(b), 1502(b), 1504(a), 1505, 1527, 1528, 1530, 1601(d), (e),
(f), and (i) and 1602(a), (b), (c), and (e) of the Taxpayer Relief Act of 1997, Public Law
105-34, the provisions of sections 6004, 6005, 6012, 6013, 6015, 6016, 7002, and 7003 of
the Internal Revenue Service Restructuring and Reform Act of 1998, Public Law 105-206,
the provisions of section 3001 of the Omnibus Consolidated and Emergency Supplemental
Appropriations Act, 1999, Public Law 105-277, the provisions of section 3001 of the
Miscellaneous Trade and Technical Corrections Act of 1999, Public Law 106-36, and the
provisions of section 316 of the Consolidated Appropriation Act of 2001, Public Law
106-554, shall become effective at the time they become effective for federal purposes.
deleted text end

deleted text begin The Internal Revenue Code of 1986, as amended through December 31, 1997, shall
be in effect for taxable years beginning after December 31, 1997.
deleted text end

deleted text begin The provisions of sections 5002, 6009, 6011, and 7001 of the Internal Revenue
Service Restructuring and Reform Act of 1998, Public Law 105-206, the provisions of
section 9010 of the Transportation Equity Act for the 21st Century, Public Law 105-178,
the provisions of sections 1004, 4002, and 5301 of the Omnibus Consolidation and
Emergency Supplemental Appropriations Act, 1999, Public Law 105-277, the provision
of section 303 of the Ricky Ray Hemophilia Relief Fund Act of 1998, Public Law
105-369, the provisions of sections 532, 534, 536, 537, and 538 of the Ticket to Work
and Work Incentives Improvement Act of 1999, Public Law 106-170, the provisions of
the Installment Tax Correction Act of 2000, Public Law 106-573, and the provisions of
section 309 of the Consolidated Appropriation Act of 2001, Public Law 106-554, shall
become effective at the time they become effective for federal purposes.
deleted text end

deleted text begin The Internal Revenue Code of 1986, as amended through December 31, 1998, shall
be in effect for taxable years beginning after December 31, 1998.
deleted text end

deleted text begin The provisions of the FSC Repeal and Extraterritorial Income Exclusion Act of
2000, Public Law 106-519, and the provision of section 412 of the Job Creation and
Worker Assistance Act of 2002, Public Law 107-147, shall become effective at the time
it became effective for federal purposes.
deleted text end

deleted text begin The Internal Revenue Code of 1986, as amended through December 31, 1999,
shall be in effect for taxable years beginning after December 31, 1999. The provisions
of sections 306 and 401 of the Consolidated Appropriation Act of 2001, Public Law
106-554, and the provision of section 632(b)(2)(A) of the Economic Growth and Tax
Relief Reconciliation Act of 2001, Public Law 107-16, and provisions of sections 101 and
402 of the Job Creation and Worker Assistance Act of 2002, Public Law 107-147, shall
become effective at the same time it became effective for federal purposes.
deleted text end

deleted text begin The Internal Revenue Code of 1986, as amended through December 31, 2000,
shall be in effect for taxable years beginning after December 31, 2000. The provisions
of sections 659a and 671 of the Economic Growth and Tax Relief Reconciliation Act of
2001, Public Law 107-16, the provisions of sections 104, 105, and 111 of the Victims of
Terrorism Tax Relief Act of 2001, Public Law 107-134, and the provisions of sections 201,
403, 413, and 606 of the Job Creation and Worker Assistance Act of 2002, Public Law
107-147, shall become effective at the same time it became effective for federal purposes.
deleted text end

deleted text begin The Internal Revenue Code of 1986, as amended through March 15, 2002, shall be
in effect for taxable years beginning after December 31, 2001.
deleted text end

deleted text begin The provisions of sections 101 and 102 of the Victims of Terrorism Tax Relief Act
of 2001, Public Law 107-134, shall become effective at the same time it becomes effective
for federal purposes.
deleted text end

deleted text begin The Internal Revenue Code of 1986, as amended through June 15, 2003, shall be in
effect for taxable years beginning after December 31, 2002. The provisions of section 201
of the Jobs and Growth Tax Relief and Reconciliation Act of 2003, H.R. 2, if it is enacted
into law, are effective at the same time it became effective for federal purposes.
deleted text end

Except as otherwise provided, references to the Internal Revenue Code in
subdivisions deleted text begin 19a deleted text end new text begin 19 new text end to deleted text begin 19g deleted text end new text begin 19f new text end mean the code in effect for purposes of determining net
income for the applicable year.

new text begin EFFECTIVE DATE. new text end

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

Sec. 3.

Minnesota Statutes 2004, section 290.01, subdivision 19a, is amended to read:

Subd. 19a.

Additions to federal taxable income.

For individuals, estates, and
trusts, there shall be added to federal taxable income:

(1)(i) interest income on obligations of any state other than Minnesota or a political
or governmental subdivision, municipality, or governmental agency or instrumentality
of any state other than Minnesota exempt from federal income taxes under the Internal
Revenue Code or any other federal statute; and

(ii) exempt-interest dividends as defined in section 852(b)(5) of the Internal Revenue
Code, except the portion of the exempt-interest dividends derived from interest income
on obligations of the state of Minnesota or its political or governmental subdivisions,
municipalities, governmental agencies or instrumentalities, but only if the portion of the
exempt-interest dividends from such Minnesota sources paid to all shareholders represents
95 percent or more of the exempt-interest dividends that are paid by the regulated
investment company as defined in section 851(a) of the Internal Revenue Code, or the
fund of the regulated investment company as defined in section 851(g) of the Internal
Revenue Code, making the payment; and

(iii) for the purposes of items (i) and (ii), interest on obligations of an Indian tribal
government described in section 7871(c) of the Internal Revenue Code shall be treated as
interest income on obligations of the state in which the tribe is located;

(2) the amount of income new text begin or sales and use new text end taxes paid or accrued within the taxable
year under this chapter and income new text begin or sales and use new text end taxes paid to any other state or to any
province or territory of Canada, to the extent allowed as a deduction under section 63(d) of
the Internal Revenue Code, but the addition may not be more than the amount by which the
itemized deductions as allowed under section 63(d) of the Internal Revenue Code exceeds
the amount of the standard deduction as defined in section 63(c) of the Internal Revenue
Code new text begin of 1986, as amended through June 15, 2003 new text end . For the purpose of this paragraph, the
disallowance of itemized deductions under section 68 of the Internal Revenue Code of
1986, income new text begin or sales and use new text end tax is the last itemized deduction disallowed;

(3) the capital gain amount of a lump sum distribution to which the special tax under
section 1122(h)(3)(B)(ii) of the Tax Reform Act of 1986, Public Law 99-514, applies;

(4) the amount of income taxes paid or accrued within the taxable year under this
chapter and income taxes paid to any other state or any province or territory of Canada,
to the extent allowed as a deduction in determining federal adjusted gross income. For
the purpose of this paragraph, income taxes do not include the taxes imposed by sections
290.0922, subdivision 1, paragraph (b), 290.9727, 290.9728, and 290.9729;

(5) the amount of expense, interest, or taxes disallowed pursuant to section 290.10;

(6) the amount of a partner's pro rata share of net income which does not flow
through to the partner because the partnership elected to pay the tax on the income under
section 6242(a)(2) of the Internal Revenue Code; deleted text begin and
deleted text end

(7) 80 percent of the depreciation deduction allowed under section 168(k) of the
Internal Revenue Code. For purposes of this clause, if the taxpayer has an activity that
in the taxable year generates a deduction for depreciation under section 168(k) and the
activity generates a loss for the taxable year that the taxpayer is not allowed to claim for
the taxable year, "the depreciation allowed under section 168(k)" for the taxable year is
limited to excess of the depreciation claimed by the activity under section 168(k) over the
amount of the loss from the activity that is not allowed in the taxable year. In succeeding
taxable years when the losses not allowed in the taxable year are allowed, the depreciation
under section 168(k) is allowed new text begin ;
new text end

new text begin (8) 80 percent of the amount by which the deduction allowed by section 179 of the
Internal Revenue Code exceeds the deduction allowable by section 179 of the Internal
Revenue Code of 1986, as amended through December 31, 2003;
new text end

new text begin (9) to the extent deducted in computing federal taxable income, the amount of the
deduction allowable under section 199 of the Internal Revenue Code;
new text end

new text begin (10) to the extent deducted in computing federal taxable income, the amount by
which the standard deduction allowed under section 63(c) of the Internal Revenue Code
exceeds the standard deduction allowable under section 63(c) of the Internal Revenue
Code of 1986, as amended through December 31, 2003;
new text end

new text begin (11) the exclusion allowed under section 139A of the Internal Revenue Code for
federal subsidies for prescription drug plans; and
new text end

new text begin (12) the deduction or exclusion allowed under section 223 of the Internal Revenue
Code for contributions to health savings accounts new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for tax years beginning after
December 31, 2004, except the changes in clause (2) are effective for tax years beginning
after December 31, 2003.
new text end

Sec. 4.

Minnesota Statutes 2004, section 290.01, subdivision 19b, is amended to read:

Subd. 19b.

Subtractions from federal taxable income.

For individuals, estates,
and trusts, there shall be subtracted from federal taxable income:

(1) interest income on obligations of any authority, commission, or instrumentality
of the United States to the extent includable in taxable income for federal income tax
purposes but exempt from state income tax under the laws of the United States;

(2) if included in federal taxable income, the amount of any overpayment of income
tax to Minnesota or to any other state, for any previous taxable year, whether the amount
is received as a refund or as a credit to another taxable year's income tax liability;

(3) the amount paid to others, less the amount used to claim the credit allowed under
section 290.0674, not to exceed $1,625 for each qualifying child in grades kindergarten
to 6 and $2,500 for each qualifying child in grades 7 to 12, for tuition, textbooks, and
transportation of each qualifying child in attending an elementary or secondary school
situated in Minnesota, North Dakota, South Dakota, Iowa, or Wisconsin, wherein a
resident of this state may legally fulfill the state's compulsory attendance laws, which
is not operated for profit, and which adheres to the provisions of the Civil Rights Act
of 1964 and chapter 363A. For the purposes of this clause, "tuition" includes fees or
tuition as defined in section 290.0674, subdivision 1, clause (1). As used in this clause,
"textbooks" includes books and other instructional materials and equipment purchased
or leased for use in elementary and secondary schools in teaching only those subjects
legally and commonly taught in public elementary and secondary schools in this state.
Equipment expenses qualifying for deduction includes expenses as defined and limited in
section 290.0674, subdivision 1, clause (3). "Textbooks" does not include instructional
books and materials used in the teaching of religious tenets, doctrines, or worship, the
purpose of which is to instill such tenets, doctrines, or worship, nor does it include books
or materials for, or transportation to, extracurricular activities including sporting events,
musical or dramatic events, speech activities, driver's education, or similar programs. For
purposes of the subtraction provided by this clause, "qualifying child" has the meaning
given in section 32(c)(3) of the Internal Revenue Code;

(4) income as provided under section 290.0802;

(5) to the extent included in federal adjusted gross income, income realized on
disposition of property exempt from tax under section 290.491;

(6) to the extent included in federal taxable income, postservice benefits for youth
community service under section 124D.42 for volunteer service under United States
Code, title 42, sections 12601 to 12604;

(7) to the extent not deducted in determining federal taxable income by an individual
who does not itemize deductions for federal income tax purposes for the taxable year, an
amount equal to 50 percent of the excess of charitable contributions new text begin over $500 new text end allowable
as a deduction for the taxable year under section 170(a) of the Internal Revenue Code
deleted text begin over $500 deleted text end new text begin and under the provisions of Public Law 109-1 new text end ;

(8) for taxable years beginning before January 1, 2008, the amount of the federal
small ethanol producer credit allowed under section 40(a)(3) of the Internal Revenue Code
which is included in gross income under section 87 of the Internal Revenue Code;

(9) for individuals who are allowed a federal foreign tax credit for taxes that do not
qualify for a credit under section 290.06, subdivision 22, an amount equal to the carryover
of subnational foreign taxes for the taxable year, but not to exceed the total subnational
foreign taxes reported in claiming the foreign tax credit. For purposes of this clause,
"federal foreign tax credit" means the credit allowed under section 27 of the Internal
Revenue Code, and "carryover of subnational foreign taxes" equals the carryover allowed
under section 904(c) of the Internal Revenue Code minus national level foreign taxes to
the extent they exceed the federal foreign tax credit;

(10) in each of the five tax years immediately following the tax year in which an
addition is required under subdivision 19a, clause (7), an amount equal to one-fifth of
the delayed depreciation. For purposes of this clause, "delayed depreciation" means the
amount of the addition made by the taxpayer under subdivision 19a, clause (7), minus the
positive value of any net operating loss under section 172 of the Internal Revenue Code
generated for the tax year of the addition. The resulting delayed depreciation cannot be
less than zero; deleted text begin and
deleted text end

(11) job opportunity building zone income as provided under section 469.316 deleted text begin . deleted text end new text begin ;
new text end

new text begin (12) in each of the five tax years immediately following the tax year in which an
addition is required under subdivision 19a, clause (8), or 19c, clause (17), in the case of a
shareholder of a corporation that is an S corporation, an amount equal to one-fifth of the
addition made by the taxpayer under subdivision 19a, clause (8), or 19c, clause (17), in the
case of a shareholder of a corporation that is an S corporation, minus the positive value of
any net operating loss under section 172 of the Internal Revenue Code generated for the
tax year of the addition. If the net operating loss exceeds the addition for the tax year, a
subtraction is not allowed under this clause;
new text end

new text begin (13) to the extent included in federal taxable income, compensation paid to a service
member as defined in United States Code, title 10, section 101(a)(5), for military service
as defined in the Service Member Civil Relief Act, Public Law 108-189, section 101(2),
and compensation paid for state active service as defined in section 190.05, subdivision 5a,
clauses (1) and (3), or federally funded state active service as defined in section 190.05,
subdivision 5b. This subtraction does not apply to retirement income as defined in section
290.17, subdivision 2, paragraph (a), clause (3); and
new text end

new text begin (14) distributions from a health savings account to the extent the distributions are for
the return of amounts added back under subdivision 19a, clause (12), but only to the extent
that the amount of the distribution would have been deductible under section 213 of the
Internal Revenue Code for that taxable year. For the purposes of this clause, distributions
are considered to be made from contributions subject to the add-back new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for tax years beginning after
December 31, 2004, except the change to clause (7) is effective for tax years beginning
after December 31, 2003.
new text end

Sec. 5.

Minnesota Statutes 2004, section 290.01, subdivision 19c, is amended to read:

Subd. 19c.

Corporations; additions to federal taxable income.

For corporations,
there shall be added to federal taxable income:

(1) the amount of any deduction taken for federal income tax purposes for income,
excise, or franchise taxes based on net income or related minimum taxes, including but not
limited to the tax imposed under section 290.0922, paid by the corporation to Minnesota,
another state, a political subdivision of another state, the District of Columbia, or any
foreign country or possession of the United States;

(2) interest not subject to federal tax upon obligations of: the United States, its
possessions, its agencies, or its instrumentalities; the state of Minnesota or any other
state, any of its political or governmental subdivisions, any of its municipalities, or any
of its governmental agencies or instrumentalities; the District of Columbia; or Indian
tribal governments;

(3) exempt-interest dividends received as defined in section 852(b)(5) of the Internal
Revenue Code;

(4) the amount of any net operating loss deduction taken for federal income tax
purposes under section 172 or 832(c)(10) of the Internal Revenue Code or operations loss
deduction under section 810 of the Internal Revenue Code;

(5) the amount of any special deductions taken for federal income tax purposes
under sections 241 to 247 of the Internal Revenue Code;

(6) losses from the business of mining, as defined in section 290.05, subdivision 1,
clause (a), that are not subject to Minnesota income tax;

(7) the amount of any capital losses deducted for federal income tax purposes under
sections 1211 and 1212 of the Internal Revenue Code;

(8) the exempt foreign trade income of a foreign sales corporation under sections
921(a) and 291 of the Internal Revenue Code;

(9) the amount of percentage depletion deducted under sections 611 through 614 and
291 of the Internal Revenue Code;

(10) for certified pollution control facilities placed in service in a taxable year
beginning before December 31, 1986, and for which amortization deductions were elected
under section 169 of the Internal Revenue Code of 1954, as amended through December
31, 1985, the amount of the amortization deduction allowed in computing federal taxable
income for those facilities;

(11) the amount of any deemed dividend from a foreign operating corporation
determined pursuant to section 290.17, subdivision 4, paragraph (g);

(12) the amount of any environmental tax paid under section 59(a) of the Internal
Revenue Code;

(13) the amount of a partner's pro rata share of net income which does not flow
through to the partner because the partnership elected to pay the tax on the income under
section 6242(a)(2) of the Internal Revenue Code;

(14) the amount of net income excluded under section 114 of the Internal Revenue
Code;

(15) any increase in subpart F income, as defined in section 952(a) of the Internal
Revenue Code, for the taxable year when subpart F income is calculated without regard to
the provisions of section 614 of Public Law 107-147; deleted text begin and
deleted text end

(16) 80 percent of the depreciation deduction allowed under section 168(k) of the
Internal Revenue Code. For purposes of this clause, if the taxpayer has an activity that
in the taxable year generates a deduction for depreciation under section 168(k) and the
activity generates a loss for the taxable year that the taxpayer is not allowed to claim for
the taxable year, "the depreciation allowed under section 168(k)" for the taxable year is
limited to excess of the depreciation claimed by the activity under section 168(k) over the
amount of the loss from the activity that is not allowed in the taxable year. In succeeding
taxable years when the losses not allowed in the taxable year are allowed, the depreciation
under section 168(k) is allowed new text begin ;
new text end

new text begin (17) 80 percent of the amount by which the deduction allowed by section 179 of the
Internal Revenue Code exceeds the deduction allowable by section 179 of the Internal
Revenue Code of 1986, as amended through December 31, 2003; and
new text end

new text begin (18) to the extent deducted in computing federal taxable income, the amount of the
deduction allowable under section 199 of the Internal Revenue Code new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for tax years beginning after
December 31, 2004.
new text end

Sec. 6.

Minnesota Statutes 2004, section 290.01, subdivision 19d, is amended to read:

Subd. 19d.

Corporations; modifications decreasing federal taxable income.

For
corporations, there shall be subtracted from federal taxable income after the increases
provided in subdivision 19c:

(1) the amount of foreign dividend gross-up added to gross income for federal
income tax purposes under section 78 of the Internal Revenue Code;

(2) the amount of salary expense not allowed for federal income tax purposes due to
claiming the federal jobs credit under section 51 of the Internal Revenue Code;

(3) any dividend (not including any distribution in liquidation) paid within the
taxable year by a national or state bank to the United States, or to any instrumentality of
the United States exempt from federal income taxes, on the preferred stock of the bank
owned by the United States or the instrumentality;

(4) amounts disallowed for intangible drilling costs due to differences between
this chapter and the Internal Revenue Code in taxable years beginning before January
1, 1987, as follows:

(i) to the extent the disallowed costs are represented by physical property, an amount
equal to the allowance for depreciation under Minnesota Statutes 1986, section 290.09,
subdivision 7, subject to the modifications contained in subdivision 19e; and

(ii) to the extent the disallowed costs are not represented by physical property, an
amount equal to the allowance for cost depletion under Minnesota Statutes 1986, section
290.09, subdivision 8;

(5) the deduction for capital losses pursuant to sections 1211 and 1212 of the
Internal Revenue Code, except that:

(i) for capital losses incurred in taxable years beginning after December 31, 1986,
capital loss carrybacks shall not be allowed;

(ii) for capital losses incurred in taxable years beginning after December 31, 1986,
a capital loss carryover to each of the 15 taxable years succeeding the loss year shall be
allowed;

(iii) for capital losses incurred in taxable years beginning before January 1, 1987, a
capital loss carryback to each of the three taxable years preceding the loss year, subject to
the provisions of Minnesota Statutes 1986, section 290.16, shall be allowed; and

(iv) for capital losses incurred in taxable years beginning before January 1, 1987,
a capital loss carryover to each of the five taxable years succeeding the loss year to the
extent such loss was not used in a prior taxable year and subject to the provisions of
Minnesota Statutes 1986, section 290.16, shall be allowed;

(6) an amount for interest and expenses relating to income not taxable for federal
income tax purposes, if (i) the income is taxable under this chapter and (ii) the interest and
expenses were disallowed as deductions under the provisions of section 171(a)(2), 265 or
291 of the Internal Revenue Code in computing federal taxable income;

(7) in the case of mines, oil and gas wells, other natural deposits, and timber for
which percentage depletion was disallowed pursuant to subdivision 19c, clause (11), a
reasonable allowance for depletion based on actual cost. In the case of leases the deduction
must be apportioned between the lessor and lessee in accordance with rules prescribed
by the commissioner. In the case of property held in trust, the allowable deduction must
be apportioned between the income beneficiaries and the trustee in accordance with the
pertinent provisions of the trust, or if there is no provision in the instrument, on the basis
of the trust's income allocable to each;

(8) for certified pollution control facilities placed in service in a taxable year
beginning before December 31, 1986, and for which amortization deductions were elected
under section 169 of the Internal Revenue Code of 1954, as amended through December
31, 1985, an amount equal to the allowance for depreciation under Minnesota Statutes
1986, section 290.09, subdivision 7;

(9) amounts included in federal taxable income that are due to refunds of income,
excise, or franchise taxes based on net income or related minimum taxes paid by the
corporation to Minnesota, another state, a political subdivision of another state, the
District of Columbia, or a foreign country or possession of the United States to the extent
that the taxes were added to federal taxable income under section 290.01, subdivision 19c,
clause (1), in a prior taxable year;

(10) 80 percent of royalties, fees, or other like income accrued or received from a
foreign operating corporation or a foreign corporation which is part of the same unitary
business as the receiving corporation;

(11) income or gains from the business of mining as defined in section 290.05,
subdivision 1, clause (a), that are not subject to Minnesota franchise tax;

(12) the amount of handicap access expenditures in the taxable year which are not
allowed to be deducted or capitalized under section 44(d)(7) of the Internal Revenue Code;

(13) the amount of qualified research expenses not allowed for federal income tax
purposes under section 280C(c) of the Internal Revenue Code, but only to the extent that
the amount exceeds the amount of the credit allowed under section 290.068;

(14) the amount of salary expenses not allowed for federal income tax purposes due
to claiming the Indian employment credit under section 45A(a) of the Internal Revenue
Code;

(15) the amount of any refund of environmental taxes paid under section 59A of the
Internal Revenue Code;

(16) for taxable years beginning before January 1, 2008, the amount of the federal
small ethanol producer credit allowed under section 40(a)(3) of the Internal Revenue Code
which is included in gross income under section 87 of the Internal Revenue Code;

(17) for a corporation whose foreign sales corporation, as defined in section 922
of the Internal Revenue Code, constituted a foreign operating corporation during any
taxable year ending before January 1, 1995, and a return was filed by August 15, 1996,
claiming the deduction under section 290.21, subdivision 4, for income received from
the foreign operating corporation, an amount equal to 1.23 multiplied by the amount of
income excluded under section 114 of the Internal Revenue Code, provided the income is
not income of a foreign operating company;

(18) any decrease in subpart F income, as defined in section 952(a) of the Internal
Revenue Code, for the taxable year when subpart F income is calculated without regard to
the provisions of section 614 of Public Law 107-147; deleted text begin and
deleted text end

(19) in each of the five tax years immediately following the tax year in which an
addition is required under subdivision 19c, clause (16), an amount equal to one-fifth of
the delayed depreciation. For purposes of this clause, "delayed depreciation" means the
amount of the addition made by the taxpayer under subdivision 19c, clause (16). The
resulting delayed depreciation cannot be less than zero new text begin ; and
new text end

new text begin (20) in each of the five tax years immediately following the tax year in which an
addition is required under subdivision 19c, clause (17), an amount equal to one-fifth of the
amount of the addition new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for tax years beginning after
December 31, 2004.
new text end

Sec. 7.

Minnesota Statutes 2004, section 290.01, subdivision 31, is amended to read:

Subd. 31.

Internal revenue code.

Unless specifically defined otherwise, "Internal
Revenue Code" means the Internal Revenue Code of 1986, as amended through deleted text begin June 15,
2003 deleted text end new text begin December 31, 2004 new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment
except the changes incorporated by federal changes are effective at the same times as the
changes were effective for federal purposes.
new text end

Sec. 8.

Minnesota Statutes 2004, section 290.032, subdivision 1, is amended to read:

Subdivision 1.

Imposition.

There is hereby imposed as an addition to the annual
income tax for a taxable year of a taxpayer in the classes described in section 290.03 a
tax with respect to any distribution received by such taxpayer that is treated as a lump
sum distribution under section deleted text begin 402(d) of the Internal Revenue Code deleted text end new text begin 1401(c)(2) of the
Small Business Job Protection Act, Public Law 104-188 new text end and that is subject to tax for such
taxable year under section deleted text begin 402(d) of the Internal Revenue Code deleted text end new text begin 1401(c)(2) of the Small
Business Job Protection Act, Public Law 104-188 new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for tax years beginning after
December 31, 1999.
new text end

Sec. 9.

Minnesota Statutes 2004, section 290.032, subdivision 2, is amended to read:

Subd. 2.

Computation.

The amount of tax imposed by subdivision 1 shall be
computed in the same way as the tax imposed under section 402(d) of the Internal Revenue
Code new text begin of 1986, as amended through December 31, 1995 new text end , except that the initial separate tax
shall be an amount equal to five times the tax which would be imposed by section 290.06,
subdivision 2c, if the recipient was an unmarried individual, and the taxable net income
was an amount equal to one-fifth of the excess of

(i) the total taxable amount of the lump sum distribution for the year, over

(ii) the minimum distribution allowance, and except that references in section
402(d) of the Internal Revenue Code new text begin of 1986, as amended through December 31, 1995, new text end to
paragraph (1)(A) thereof shall instead be references to subdivision 1, and the excess, if
any, of the subtraction base amount over federal taxable income for a qualified individual
as provided under section 290.0802, subdivision 2.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for tax years beginning after
December 31, 1999.
new text end

Sec. 10.

Minnesota Statutes 2004, section 290.06, subdivision 2c, is amended to read:

Subd. 2c.

Schedules of rates for individuals, estates, and trusts.

(a) The income
taxes imposed by this chapter upon married individuals filing joint returns and surviving
spouses as defined in section 2(a) of the Internal Revenue Code must be computed by
applying to their taxable net income the following schedule of rates:

(1) On the first $25,680, 5.35 percent;

(2) On all over $25,680, but not over $102,030, 7.05 percent;

(3) On all over $102,030, 7.85 percent.

Married individuals filing separate returns, estates, and trusts must compute their
income tax by applying the above rates to their taxable income, except that the income
brackets will be one-half of the above amounts.

(b) The income taxes imposed by this chapter upon unmarried individuals must be
computed by applying to taxable net income the following schedule of rates:

(1) On the first $17,570, 5.35 percent;

(2) On all over $17,570, but not over $57,710, 7.05 percent;

(3) On all over $57,710, 7.85 percent.

(c) The income taxes imposed by this chapter upon unmarried individuals qualifying
as a head of household as defined in section 2(b) of the Internal Revenue Code must be
computed by applying to taxable net income the following schedule of rates:

(1) On the first $21,630, 5.35 percent;

(2) On all over $21,630, but not over $86,910, 7.05 percent;

(3) On all over $86,910, 7.85 percent.

(d) In lieu of a tax computed according to the rates set forth in this subdivision, the
tax of any individual taxpayer whose taxable net income for the taxable year is less than
an amount determined by the commissioner must be computed in accordance with tables
prepared and issued by the commissioner of revenue based on income brackets of not
more than $100. The amount of tax for each bracket shall be computed at the rates set
forth in this subdivision, provided that the commissioner may disregard a fractional part of
a dollar unless it amounts to 50 cents or more, in which case it may be increased to $1.

(e) An individual who is not a Minnesota resident for the entire year must compute
the individual's Minnesota income tax as provided in this subdivision. After the
application of the nonrefundable credits provided in this chapter, the tax liability must
then be multiplied by a fraction in which:

(1) the numerator is the individual's Minnesota source federal adjusted gross income
as defined in section 62 of the Internal Revenue Code and increased by the additions
required under section 290.01, subdivision 19a, clauses (1), (5), deleted text begin and deleted text end (6), new text begin (7), (8), and
(9), new text end and reduced by the subtraction under section 290.01, subdivision 19b, clause (11), and
the Minnesota assignable portion of the subtraction for United States government interest
under section 290.01, subdivision 19b, clause (1), new text begin and the subtractions under clauses (10),
(11), (12), and (13), new text end after applying the allocation and assignability provisions of section
290.081, clause (a), or 290.17; and

(2) the denominator is the individual's federal adjusted gross income as defined in
section 62 of the Internal Revenue Code of 1986, increased by the amounts specified in
section 290.01, subdivision 19a, clauses (1), (5), deleted text begin and deleted text end (6), new text begin (7), (8), and (9), new text end and reduced by
the amounts specified in section 290.01, subdivision 19b, clauses (1) deleted text begin and deleted text end new text begin , (10), new text end (11) new text begin ,
(12), and (13) new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for tax years beginning after
December 31, 2004.
new text end

Sec. 11.

Minnesota Statutes 2004, section 290.067, subdivision 1, is amended to read:

Subdivision 1.

Amount of credit.

(a) A taxpayer may take as a credit against the
tax due from the taxpayer and a spouse, if any, under this chapter an amount equal to the
dependent care credit for which the taxpayer is eligible pursuant to the provisions of
section 21 of the Internal Revenue Code subject to the limitations provided in subdivision
2 except that in determining whether the child qualified as a dependent, income received
as a Minnesota family investment program grant or allowance to or on behalf of the child
must not be taken into account in determining whether the child received more than half
of the child's support from the taxpayer, and the provisions of section 32(b)(1)(D) of
the Internal Revenue Code do not apply.

(b) If a child who has not attained the age of six years at the close of the taxable year
is cared for at a licensed family day care home operated by the child's parent, the taxpayer
is deemed to have paid employment-related expenses. If the child is 16 months old or
younger at the close of the taxable year, the amount of expenses deemed to have been paid
equals the maximum limit for one qualified individual under section 21(c) and (d) of the
Internal Revenue Code. If the child is older than 16 months of age but has not attained the
age of six years at the close of the taxable year, the amount of expenses deemed to have
been paid equals the amount the licensee would charge for the care of a child of the same
age for the same number of hours of care.

(c) If a married couple:

(1) has a child who has not attained the age of one year at the close of the taxable
year;

(2) files a joint tax return for the taxable year; and

(3) does not participate in a dependent care assistance program as defined in section
129 of the Internal Revenue Code, in lieu of the actual employment related expenses paid
for that child under paragraph (a) or the deemed amount under paragraph (b), the lesser of
(i) the combined earned income of the couple or (ii) the amount of the maximum limit for
one qualified individual under section 21(c) and (d) of the Internal Revenue Code will
be deemed to be the employment related expense paid for that child. The earned income
limitation of section 21(d) of the Internal Revenue Code shall not apply to this deemed
amount. These deemed amounts apply regardless of whether any employment-related
expenses have been paid.

(d) If the taxpayer is not required and does not file a federal individual income tax
return for the tax year, no credit is allowed for any amount paid to any person unless:

(1) the name, address, and taxpayer identification number of the person are included
on the return claiming the credit; or

(2) if the person is an organization described in section 501(c)(3) of the Internal
Revenue Code and exempt from tax under section 501(a) of the Internal Revenue Code,
the name and address of the person are included on the return claiming the credit.

In the case of a failure to provide the information required under the preceding sentence,
the preceding sentence does not apply if it is shown that the taxpayer exercised due
diligence in attempting to provide the information required.

In the case of a nonresident, part-year resident, or a person who has earned income
not subject to tax under this chapter including earned income excluded pursuant to section
290.01, subdivision 19b, clause (11), the credit determined under section 21 of the Internal
Revenue Code must be allocated based on the ratio by which the earned income of the
claimant and the claimant's spouse from Minnesota sources bears to the total earned
income of the claimant and the claimant's spouse.

new text begin For residents of Minnesota, the exclusion of combat pay under section 112 of
the Internal Revenue Code and the subtraction for military pay under section 290.01,
subdivision 19b, clause (13), are not considered "earned income not subject to tax under
this chapter."
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for tax years beginning after
December 31, 2004.
new text end

Sec. 12.

Minnesota Statutes 2004, section 290.067, subdivision 2a, is amended to read:

Subd. 2a.

Income.

(a) For purposes of this section, "income" means the sum of
the following:

(1) federal adjusted gross income as defined in section 62 of the Internal Revenue
Code; and

(2) the sum of the following amounts to the extent not included in clause (1):

(i) all nontaxable income;

(ii) the amount of a passive activity loss that is not disallowed as a result of section
469, paragraph (i) or (m) of the Internal Revenue Code and the amount of passive activity
loss carryover allowed under section 469(b) of the Internal Revenue Code;

(iii) an amount equal to the total of any discharge of qualified farm indebtedness
of a solvent individual excluded from gross income under section 108(g) of the Internal
Revenue Code;

(iv) cash public assistance and relief;

(v) any pension or annuity (including railroad retirement benefits, all payments
received under the federal Social Security Act, supplemental security income, and veterans
benefits), which was not exclusively funded by the claimant or spouse, or which was
funded exclusively by the claimant or spouse and which funding payments were excluded
from federal adjusted gross income in the years when the payments were made;

(vi) interest received from the federal or a state government or any instrumentality
or political subdivision thereof;

(vii) workers' compensation;

(viii) nontaxable strike benefits;

(ix) the gross amounts of payments received in the nature of disability income or
sick pay as a result of accident, sickness, or other disability, whether funded through
insurance or otherwise;

(x) a lump sum distribution under section 402(e)(3) of the Internal Revenue Code
new text begin of 1986, as amended through December 31, 1995 new text end ;

(xi) contributions made by the claimant to an individual retirement account,
including a qualified voluntary employee contribution; simplified employee pension plan;
self-employed retirement plan; cash or deferred arrangement plan under section 401(k)
of the Internal Revenue Code; or deferred compensation plan under section 457 of the
Internal Revenue Code; deleted text begin and
deleted text end

(xii) nontaxable scholarship or fellowship grants new text begin ;
new text end

new text begin (xiii) the amount of deduction allowed under section 199 of the Internal Revenue
Code; and
new text end

new text begin (xiv) the amount of deduction allowed under section 220 or 223 of the Internal
Revenue Code new text end .

In the case of an individual who files an income tax return on a fiscal year basis, the
term "federal adjusted gross income" means federal adjusted gross income reflected in the
fiscal year ending in the next calendar year. Federal adjusted gross income may not be
reduced by the amount of a net operating loss carryback or carryforward or a capital loss
carryback or carryforward allowed for the year.

(b) "Income" does not include:

(1) amounts excluded pursuant to the Internal Revenue Code, sections 101(a) and
102;

(2) amounts of any pension or annuity that were exclusively funded by the claimant
or spouse if the funding payments were not excluded from federal adjusted gross income
in the years when the payments were made;

(3) surplus food or other relief in kind supplied by a governmental agency;

(4) relief granted under chapter 290A;

(5) child support payments received under a temporary or final decree of dissolution
or legal separation; and

(6) restitution payments received by eligible individuals and excludable interest as
defined in section 803 of the Economic Growth and Tax Relief Reconciliation Act of
2001, Public Law 107-16.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for tax years beginning after
December 31, 2003.
new text end

Sec. 13.

Minnesota Statutes 2004, section 290.0671, subdivision 1, is amended to read:

Subdivision 1.

Credit allowed.

(a) An individual is allowed a credit against the tax
imposed by this chapter equal to a percentage of earned income. To receive a credit, a
taxpayer must be eligible for a credit under section 32 of the Internal Revenue Code.

(b) For individuals with no qualifying children, the credit equals 1.9125 percent of
the first $4,620 of earned income. The credit is reduced by 1.9125 percent of earned
income or modified adjusted gross income, whichever is greater, in excess of $5,770,
but in no case is the credit less than zero.

(c) For individuals with one qualifying child, the credit equals 8.5 percent of the first
$6,920 of earned income and 8.5 percent of earned income over $12,080 but less than
$13,450. The credit is reduced by 5.73 percent of earned income or modified adjusted
gross income, whichever is greater, in excess of $15,080, but in no case is the credit
less than zero.

(d) For individuals with two or more qualifying children, the credit equals ten
percent of the first $9,720 of earned income and 20 percent of earned income over
$14,860 but less than $16,800. The credit is reduced by 10.3 percent of earned income
or modified adjusted gross income, whichever is greater, in excess of $17,890, but in no
case is the credit less than zero.

(e) For a nonresident or part-year resident, the credit must be allocated based on the
percentage calculated under section 290.06, subdivision 2c, paragraph (e).

(f) For a person who was a resident for the entire tax year and has earned income
not subject to tax under this chapter, including income excluded under section 290.01,
subdivision 19b, clause (11), the credit must be allocated based on the ratio of federal
adjusted gross income reduced by the earned income not subject to tax under this chapter
over federal adjusted gross income. new text begin For the purposes of this paragraph, the exclusion
of combat pay under section 112 of the Internal Revenue Code and the subtraction for
military pay under section 290.01, subdivision 19b, clause (13), are not considered "earned
income not subject to tax under this chapter."
new text end

(g) For tax years beginning after December 31, 2001, and before December 31,
2004, the $5,770 in paragraph (b), the $15,080 in paragraph (c), and the $17,890 in
paragraph (d), after being adjusted for inflation under subdivision 7, are each increased by
$1,000 for married taxpayers filing joint returns.

(h) For tax years beginning after December 31, 2004, and before December 31,
2007, the $5,770 in paragraph (b), the $15,080 in paragraph (c), and the $17,890 in
paragraph (d), after being adjusted for inflation under subdivision 7, are each increased by
$2,000 for married taxpayers filing joint returns.

(i) For tax years beginning after December 31, 2007, and before December 31, 2010,
the $5,770 in paragraph (b), the $15,080 in paragraph (c), and the $17,890 in paragraph
(d), after being adjusted for inflation under subdivision 7, are each increased by $3,000 for
married taxpayers filing joint returns. For tax years beginning after December 31, 2008,
the $3,000 is adjusted annually for inflation under subdivision 7.

(j) The commissioner shall construct tables showing the amount of the credit at
various income levels and make them available to taxpayers. The tables shall follow
the schedule contained in this subdivision, except that the commissioner may graduate
the transition between income brackets.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for tax years beginning after
December 31, 2004.
new text end

Sec. 14.

Minnesota Statutes 2004, section 290.0675, subdivision 1, is amended to read:

Subdivision 1.

Definitions.

(a) For purposes of this section the following terms
have the meanings given.

(b) "Earned income" means the sum of the following, to the extent included in
Minnesota taxable income:

(1) earned income as defined in section 32(c)(2) of the Internal Revenue Code;

(2) income received from a retirement pension, profit-sharing, stock bonus, or
annuity plan; and

(3) Social Security benefits as defined in section 86(d)(1) of the Internal Revenue
Code.

(c) "Taxable income" means net income as defined in section 290.01, subdivision 19.

(d) "Earned income of lesser-earning spouse" means the earned income of the
spouse with the lesser amount of earned income as defined in paragraph (b) for the taxable
year minus the sum of (i) the amount for one exemption under section 151(d) of the
Internal Revenue Code and (ii) one-half the amount of the standard deduction under
section 63(c)(2)(A) and (4) of the Internal Revenue Code new text begin of 1986, as amended through
December 31, 2003 new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for tax years beginning after
December 31, 2004.
new text end

Sec. 15.

Minnesota Statutes 2004, section 290.091, subdivision 2, is amended to read:

Subd. 2.

Definitions.

For purposes of the tax imposed by this section, the following
terms have the meanings given:

(a) "Alternative minimum taxable income" means the sum of the following for
the taxable year:

(1) the taxpayer's federal alternative minimum taxable income as defined in section
55(b)(2) of the Internal Revenue Code;

(2) the taxpayer's itemized deductions allowed in computing federal alternative
minimum taxable income, but excluding:

(i) the charitable contribution deduction under section 170 of the Internal Revenue
Code to the extent that the deduction exceeds 1.0 percent of adjusted gross income, as
defined in section 62 of the Internal Revenue Code;

(ii) the medical expense deduction;

(iii) the casualty, theft, and disaster loss deduction; and

(iv) the impairment-related work expenses of a disabled person;

(3) for depletion allowances computed under section 613A(c) of the Internal
Revenue Code, with respect to each property (as defined in section 614 of the Internal
Revenue Code), to the extent not included in federal alternative minimum taxable income,
the excess of the deduction for depletion allowable under section 611 of the Internal
Revenue Code for the taxable year over the adjusted basis of the property at the end of the
taxable year (determined without regard to the depletion deduction for the taxable year);

(4) to the extent not included in federal alternative minimum taxable income, the
amount of the tax preference for intangible drilling cost under section 57(a)(2) of the
Internal Revenue Code determined without regard to subparagraph (E);

(5) to the extent not included in federal alternative minimum taxable income, the
amount of interest income as provided by section 290.01, subdivision 19a, clause (1); and

(6) the amount of addition required by section 290.01, subdivision 19a, deleted text begin clause
deleted text end new text begin clauses new text end (7) new text begin , (8), and (9) new text end ;

less the sum of the amounts determined under the following:

(1) interest income as defined in section 290.01, subdivision 19b, clause (1);

(2) an overpayment of state income tax as provided by section 290.01, subdivision
19b, clause (2), to the extent included in federal alternative minimum taxable income;

(3) the amount of investment interest paid or accrued within the taxable year on
indebtedness to the extent that the amount does not exceed net investment income, as
defined in section 163(d)(4) of the Internal Revenue Code. Interest does not include
amounts deducted in computing federal adjusted gross income; and

(4) amounts subtracted from federal taxable income as provided by section 290.01,
subdivision 19b, clauses (10) deleted text begin and deleted text end new text begin , new text end (11) new text begin , (12), and (13) new text end .

In the case of an estate or trust, alternative minimum taxable income must be
computed as provided in section 59(c) of the Internal Revenue Code.

(b) "Investment interest" means investment interest as defined in section 163(d)(3)
of the Internal Revenue Code.

(c) "Tentative minimum tax" equals 6.4 percent of alternative minimum taxable
income after subtracting the exemption amount determined under subdivision 3.

(d) "Regular tax" means the tax that would be imposed under this chapter (without
regard to this section and section 290.032), reduced by the sum of the nonrefundable
credits allowed under this chapter.

(e) "Net minimum tax" means the minimum tax imposed by this section.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for tax years beginning after
December 31, 2004.
new text end

Sec. 16.

Minnesota Statutes 2004, section 290A.03, subdivision 3, is amended to read:

Subd. 3.

Income.

(1) "Income" means the sum of the following:

(a) federal adjusted gross income as defined in the Internal Revenue Code; and

(b) the sum of the following amounts to the extent not included in clause (a):

(i) all nontaxable income;

(ii) the amount of a passive activity loss that is not disallowed as a result of section
469, paragraph (i) or (m) of the Internal Revenue Code and the amount of passive activity
loss carryover allowed under section 469(b) of the Internal Revenue Code;

(iii) an amount equal to the total of any discharge of qualified farm indebtedness
of a solvent individual excluded from gross income under section 108(g) of the Internal
Revenue Code;

(iv) cash public assistance and relief;

(v) any pension or annuity (including railroad retirement benefits, all payments
received under the federal Social Security Act, supplemental security income, and veterans
benefits), which was not exclusively funded by the claimant or spouse, or which was
funded exclusively by the claimant or spouse and which funding payments were excluded
from federal adjusted gross income in the years when the payments were made;

(vi) interest received from the federal or a state government or any instrumentality
or political subdivision thereof;

(vii) workers' compensation;

(viii) nontaxable strike benefits;

(ix) the gross amounts of payments received in the nature of disability income or
sick pay as a result of accident, sickness, or other disability, whether funded through
insurance or otherwise;

(x) a lump sum distribution under section 402(e)(3) of the Internal Revenue Code
new text begin of 1986, as amended through December 31, 1995 new text end ;

(xi) contributions made by the claimant to an individual retirement account,
including a qualified voluntary employee contribution; simplified employee pension plan;
self-employed retirement plan; cash or deferred arrangement plan under section 401(k)
of the Internal Revenue Code; or deferred compensation plan under section 457 of the
Internal Revenue Code; deleted text begin and
deleted text end

(xii) nontaxable scholarship or fellowship grants new text begin ;
new text end

new text begin (xiii) the amount of deduction allowed under section 199 of the Internal Revenue
Code; and
new text end

new text begin (xiv) the amount of deduction allowed under section 220 or 223 of the Internal
Revenue Code new text end .

In the case of an individual who files an income tax return on a fiscal year basis, the
term "federal adjusted gross income" shall mean federal adjusted gross income reflected
in the fiscal year ending in the calendar year. Federal adjusted gross income shall not be
reduced by the amount of a net operating loss carryback or carryforward or a capital loss
carryback or carryforward allowed for the year.

(2) "Income" does not include:

(a) amounts excluded pursuant to the Internal Revenue Code, sections 101(a) and
102;

(b) amounts of any pension or annuity which was exclusively funded by the claimant
or spouse and which funding payments were not excluded from federal adjusted gross
income in the years when the payments were made;

(c) surplus food or other relief in kind supplied by a governmental agency;

(d) relief granted under this chapter;

(e) child support payments received under a temporary or final decree of dissolution
or legal separation; or

(f) restitution payments received by eligible individuals and excludable interest as
defined in section 803 of the Economic Growth and Tax Relief Reconciliation Act of
2001, Public Law 107-16.

(3) The sum of the following amounts may be subtracted from income:

(a) for the claimant's first dependent, the exemption amount multiplied by 1.4;

(b) for the claimant's second dependent, the exemption amount multiplied by 1.3;

(c) for the claimant's third dependent, the exemption amount multiplied by 1.2;

(d) for the claimant's fourth dependent, the exemption amount multiplied by 1.1;

(e) for the claimant's fifth dependent, the exemption amount; and

(f) if the claimant or claimant's spouse was disabled or attained the age of 65 on
or before December 31 of the year for which the taxes were levied or rent paid, the
exemption amount.

For purposes of this subdivision, the "exemption amount" means the exemption
amount under section 151(d) of the Internal Revenue Code for the taxable year for which
the income is reported.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for property tax refunds based on
household income for 2004 and thereafter.
new text end

Sec. 17.

Minnesota Statutes 2004, section 290A.03, subdivision 15, is amended to read:

Subd. 15.

Internal revenue code.

"Internal Revenue Code" means the Internal
Revenue Code of 1986, as amended through deleted text begin June 15, 2003 deleted text end new text begin December 31, 2004 new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for property tax refunds based on
property taxes payable on or after December 31, 2004, and rent paid on or after December
31, 2003.
new text end

Sec. 18. new text begin PREEMPTION.
new text end

new text begin If a bill styled as S.F. No. 1209 is enacted during the 2005 legislative session, and
includes federal update provisions, the provisions of that act relating to federal updates are
repealed.
new text end

ARTICLE 3

SALES TAX

Section 1.

Minnesota Statutes 2004, section 289A.11, subdivision 1, is amended to read:

Subdivision 1.

Return required.

Except as provided in section 289A.18,
deleted text begin subdivision deleted text end new text begin subdivisions new text end 4 new text begin and 4a new text end , for the month in which taxes imposed by chapter
297A are payable, or for which a return is due, a return for the preceding reporting
period must be filed with the commissioner in the form and manner the commissioner
prescribes. A person making sales at retail at two or more places of business may file a
consolidated return subject to rules prescribed by the commissioner. In computing the
dollar amount of items on the return, the amounts are rounded off to the nearest whole
dollar, disregarding amounts less than 50 cents and increasing amounts of 50 cents to 99
cents to the next highest dollar.

deleted text begin Notwithstanding this subdivision, a person who is not required to hold a sales tax
permit under chapter 297A and who makes annual purchases of less than $18,500 that
are subject to the use tax imposed by section 297A.63, may file an annual use tax return
on a form prescribed by the commissioner. If a person who qualifies for an annual use
tax reporting period is required to obtain a sales tax permit or makes use tax purchases
in excess of $18,500 during the calendar year, the reporting period must be considered
ended at the end of the month in which the permit is applied for or the purchase in excess
of $18,500 is made and a return must be filed for the preceding reporting period.
deleted text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for purchases made on and after
July 1, 2005.
new text end

Sec. 2.

Minnesota Statutes 2004, section 289A.18, subdivision 4, is amended to read:

Subd. 4.

Sales and use tax returns.

(a) Sales and use tax returns must be filed on or
before the 20th day of the month following the close of the preceding reporting period,
except deleted text begin that annual use tax deleted text end returns provided for under deleted text begin section 289A.11, subdivision 1, must
be filed by April 15 following the close of the calendar year deleted text end new text begin subdivision 4a new text end , in the case
of individuals. Annual use tax returns of businesses, including sole proprietorships, and
annual sales tax returns must be filed by February 5 following the close of the calendar
year.

(b) Returns for the June reporting period filed by retailers required to remit their
June liability under section 289A.20, subdivision 4, paragraph (b), are due on or before
August 20.

(c) If a retailer has an average sales and use tax liability, including local sales and
use taxes administered by the commissioner, equal to or less than $500 per month in any
quarter of a calendar year, and has substantially complied with the tax laws during the
preceding four calendar quarters, the retailer may request authorization to file and pay the
taxes quarterly in subsequent calendar quarters. The authorization remains in effect during
the period in which the retailer's quarterly returns reflect sales and use tax liabilities of
less than $1,500 and there is continued compliance with state tax laws.

(d) If a retailer has an average sales and use tax liability, including local sales and
use taxes administered by the commissioner, equal to or less than $100 per month during a
calendar year, and has substantially complied with the tax laws during that period, the
retailer may request authorization to file and pay the taxes annually in subsequent years.
The authorization remains in effect during the period in which the retailer's annual returns
reflect sales and use tax liabilities of less than $1,200 and there is continued compliance
with state tax laws.

(e) The commissioner may also grant quarterly or annual filing and payment
authorizations to retailers if the commissioner concludes that the retailers' future tax
liabilities will be less than the monthly totals identified in paragraphs (c) and (d). An
authorization granted under this paragraph is subject to the same conditions as an
authorization granted under paragraphs (c) and (d).

(f) A taxpayer who is a materials supplier may report gross receipts either on:

(1) the cash basis as the consideration is received; or

(2) the accrual basis as sales are made.

As used in this paragraph, "materials supplier" means a person who provides materials
for the improvement of real property; who is primarily engaged in the sale of lumber and
building materials-related products to owners, contractors, subcontractors, repairers,
or consumers; who is authorized to file a mechanics lien upon real property and
improvements under chapter 514; and who files with the commissioner an election to file
sales and use tax returns on the basis of this paragraph.

(g) Notwithstanding paragraphs (a) to (f), a seller that is not a Model 1, 2, or 3
seller, as those terms are used in the Streamlined Sales and Use Tax Agreement, that does
not have a legal requirement to register in Minnesota, and that is registered under the
agreement, must file a return by February 5 following the close of the calendar year in
which the seller initially registers, and must file subsequent returns on February 5 on an
annual basis in succeeding years. Additionally, a return must be submitted on or before
the 20th day of the month following any month by which sellers have accumulated state
and local tax funds for the state in the amount of $1,000 or more.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for purchases on and after July
1, 2005.
new text end

Sec. 3.

Minnesota Statutes 2004, section 289A.18, is amended by adding a subdivision
to read:

new text begin Subd. 4a. new text end

new text begin Use tax returns for individuals. new text end

new text begin Individuals who are subject to the
use tax imposed under section 297A.63 may file and pay use tax owed on purchases for
personal use under their Social Security number as follows:
new text end

new text begin (1) on the individual income tax return for the calendar year in which the purchases
are made;
new text end

new text begin (2) on the form for making payments of the individual income tax estimated
payments under section 289A.25 for the calendar quarter in which the purchases are
made; or
new text end

new text begin (3) on the individual use tax return, in the form prescribed by the commissioner, for
purchases made in a calendar quarter, to be filed on or before the 20th day of the month
following the close of the preceding quarter.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for purchases made on and after July
1, 2005, and for income tax returns required to be filed for tax years beginning after
December 31, 2004.
new text end

Sec. 4.

Minnesota Statutes 2004, section 297A.61, is amended by adding a subdivision
to read:

new text begin Subd. 37. new text end

new text begin Personal rapid transit system. new text end

new text begin "Personal rapid transit system" means a
transportation system of small, computer-controlled vehicles, transporting one to three
passengers on elevated guideways in a transportation network operating on demand and
nonstop directly to any stations in the network. The system shall provide service on a
regular and continuing basis and operate independent of any government subsidies.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made after
June 30, 2008.
new text end

Sec. 5.

Minnesota Statutes 2004, section 297A.67, is amended by adding a subdivision
to read:

new text begin Subd. 32. new text end

new text begin Geothermal equipment. new text end

new text begin The loop field collection system and the heat
pump of a geothermal heating and cooling system is exempt.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases occurring
after June 30, 2005.
new text end

Sec. 6.

Minnesota Statutes 2004, section 297A.67, is amended by adding a subdivision
to read:

new text begin Subd. 33. new text end

new text begin Biomass fuel stoves. new text end

new text begin Stoves designed to burn fuel pellets made from
biomass materials are exempt.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made after
June 30, 2005.
new text end

Sec. 7.

Minnesota Statutes 2004, section 297A.68, subdivision 5, is amended to read:

Subd. 5.

Capital equipment.

(a) Capital equipment is exempt. The tax must be
imposed and collected as if the rate under section 297A.62, subdivision 1, applied, and
then refunded in the manner provided in section 297A.75.

"Capital equipment" means machinery and equipment purchased or leased, and used
in this state by the purchaser or lessee primarily for manufacturing, fabricating, mining,
or refining tangible personal property to be sold ultimately at retail if the machinery and
equipment are essential to the integrated production process of manufacturing, fabricating,
mining, or refining. Capital equipment also includes machinery and equipment used to
electronically transmit results retrieved by a customer of an on-line computerized data
retrieval system.

(b) Capital equipment includes, but is not limited to:

(1) machinery and equipment used to operate, control, or regulate the production
equipment;

(2) machinery and equipment used for research and development, design, quality
control, and testing activities;

(3) environmental control devices that are used to maintain conditions such as
temperature, humidity, light, or air pressure when those conditions are essential to and are
part of the production process;

(4) materials and supplies used to construct and install machinery or equipment;

(5) repair and replacement parts, including accessories, whether purchased as spare
parts, repair parts, or as upgrades or modifications to machinery or equipment;

(6) materials used for foundations that support machinery or equipment;

(7) materials used to construct and install special purpose buildings used in the
production process;

(8) ready-mixed concrete equipment in which the ready-mixed concrete is mixed as
part of the delivery process regardless if mounted on a chassis and leases of ready-mixed
concrete trucks; and

(9) machinery or equipment used for research, development, design, or production
of computer software.

(c) Capital equipment does not include the following:

(1) motor vehicles taxed under chapter 297B;

(2) machinery or equipment used to receive or store raw materials;

(3) building materials, except for materials included in paragraph (b), clauses (6)
and (7);

(4) machinery or equipment used for nonproduction purposes, including, but not
limited to, the following: plant security, fire prevention, first aid, and hospital stations;
support operations or administration; pollution control; and plant cleaning, disposal of
scrap and waste, plant communications, space heating, cooling, lighting, or safety;

(5) farm machinery and aquaculture production equipment as defined by section
297A.61, subdivisions 12 and 13;

(6) machinery or equipment purchased and installed by a contractor as part of an
improvement to real property; or

(7) any other item that is not essential to the integrated process of manufacturing,
fabricating, mining, or refining.

(d) For purposes of this subdivision:

(1) "Equipment" means independent devices or tools separate from machinery but
essential to an integrated production process, including computers and computer software,
used in operating, controlling, or regulating machinery and equipment; and any subunit or
assembly comprising a component of any machinery or accessory or attachment parts of
machinery, such as tools, dies, jigs, patterns, and molds.

(2) "Fabricating" means to make, build, create, produce, or assemble components or
property to work in a new or different manner.

(3) "Integrated production process" means a process or series of operations through
which tangible personal property is manufactured, fabricated, mined, or refined. For
purposes of this clause, (i) manufacturing begins with the removal of raw materials
from inventory and ends when the last process prior to loading for shipment has been
completed; (ii) fabricating begins with the removal from storage or inventory of the
property to be assembled, processed, altered, or modified and ends with the creation
or production of the new or changed product; (iii) mining begins with the removal of
overburden from the site of the ores, minerals, stone, peat deposit, or surface materials and
ends when the last process before stockpiling is completed; and (iv) refining begins with
the removal from inventory or storage of a natural resource and ends with the conversion
of the item to its completed form.

(4) "Machinery" means mechanical, electronic, or electrical devices, including
computers and computer software, that are purchased or constructed to be used for the
activities set forth in paragraph (a), beginning with the removal of raw materials from
inventory through completion of the product, including packaging of the product.

(5) "Machinery and equipment used for pollution control" means machinery and
equipment used solely to eliminate, prevent, or reduce pollution resulting from an activity
described in paragraph (a).

(6) "Manufacturing" means an operation or series of operations where raw materials
are changed in form, composition, or condition by machinery and equipment and which
results in the production of a new article of tangible personal property. For purposes of
this subdivision, "manufacturing" includes the generation of electricity or steam to be
sold at retail.

(7) "Mining" means the extraction of minerals, ores, stone, or peat.

(8) "On-line data retrieval system" means a system whose cumulation of information
is equally available and accessible to all its customers.

(9) "Primarily" means machinery and equipment used 50 percent or more of the time
in an activity described in paragraph (a).

(10) "Refining" means the process of converting a natural resource to an intermediate
or finished product, including the treatment of water to be sold at retail.

new text begin (11) This subdivision does not apply to telecommunications equipment as
provided in subdivision 35, and does not apply to wire, cable, fiber, poles, or conduit
for telecommunications services.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for purchases made after July 31,
2005, and before July 1, 2008.
new text end

Sec. 8.

Minnesota Statutes 2004, section 297A.68, subdivision 19, is amended to read:

Subd. 19.

Petroleum products.

The following petroleum products are exempt:

(1) products upon which a tax has been imposed and paid under chapter 296A,
and for which no refund has been or will be allowed because the buyer used the fuel
for nonhighway use;

(2) products that are used in the improvement of agricultural land by constructing,
maintaining, and repairing drainage ditches, tile drainage systems, grass waterways, water
impoundment, and other erosion control structures;

(3) products purchased by a transit system receiving financial assistance under
section 174.24, 256B.0625, subdivision 17, or 473.384;

(4) products purchased by an ambulance service licensed under chapter 144E;

(5) products used in a passenger snowmobile, as defined in section 296A.01,
subdivision 39, for off-highway business use as part of the operations of a resort as
provided under section 296A.16, subdivision 2, clause (2); deleted text begin or
deleted text end

(6) products purchased by a state or a political subdivision of a state for use in motor
vehicles exempt from registration under section 168.012, subdivision 1, paragraph (b) new text begin ; or
new text end

new text begin (7) products purchased for use as fuel for a commuter rail system operating under
sections 174.80 to 174.90. The tax must be imposed and collected as if the rate under
section 297A.62, subdivision 1, applied, and then refunded in the manner provided
in section 297A.75 new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for purchases made after June 30,
2005, and terminates when the commissioner of revenue determines that the cost of the
exemption under this subdivision to that point in time totals $20,000.
new text end

Sec. 9.

Minnesota Statutes 2004, section 297A.68, is amended by adding a subdivision
to read:

new text begin Subd. 40. new text end

new text begin Movies and television; inputs to production. new text end

new text begin The sale of tangible
personal property primarily used or consumed directly in the preproduction, production,
and postproduction of movies and television shows that are produced for domestic and
international commercial distribution are exempt. "Preproduction" and "production"
include all the activities related to the preparation of shooting and the shooting of movies
and television shows, including film processing. Equipment rented for preproduction and
production activities are exempt. "Postproduction" includes all activities related to editing
and finishing of the movie or television show. This exemption does not apply to tangible
personal property or services used primarily in administration, general management,
or marketing. Machinery and equipment purchased for use in producing movies and
television shows, fuel, electricity, gas, or steam used for space heating and lighting,
food, lodging, and any property or service for the personal use of any individual are not
exempt under this subdivision.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made after
June 30, 2005.
new text end

Sec. 10.

Minnesota Statutes 2004, section 297A.68, is amended by adding a
subdivision to read:

new text begin Subd. 41. new text end

new text begin Personal rapid transit system. new text end

new text begin (a) Machinery, equipment, and supplies
purchased or leased, and used by the purchaser or lessee in this state directly in the
provision of a personal rapid transit system as defined in section 297A.61, subdivision 37,
are exempt. Machinery, equipment, and supplies that qualify for this exemption include,
but are not limited to, the following:
new text end

new text begin (1) vehicles, guideways, and related parts used directly in the transit system;
new text end

new text begin (2) computers and equipment used primarily for operating, controlling, and
regulating the system;
new text end

new text begin (3) machinery, equipment, furniture, and fixtures necessary for the functioning
of system stations;
new text end

new text begin (4) machinery, equipment, implements, tools, and supplies used to maintain vehicles,
guideways, and stations; and
new text end

new text begin (5) electricity and other fuels used in the provision of the transit service, including
heating, cooling, and lighting of system stations.
new text end

new text begin (b) This exemption does not include machinery, equipment, and supplies used for
support and administration operations.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made after
June 30, 2008.
new text end

Sec. 11.

Minnesota Statutes 2004, section 297A.70, subdivision 8, is amended to read:

Subd. 8.

Regionwide public safety radio communication system; products and
services.

Products and services including, but not limited to, end user equipment used
for construction, ownership, operation, maintenance, and enhancement of the backbone
system of the regionwide public safety radio communication system established under
sections 403.21 to 403.34, are exempt. For purposes of this subdivision, backbone system
is defined in section 403.21, subdivision 9. This subdivision is effective for purchases,
sales, storage, use, or consumption deleted text begin occurring before August 1, 2005, in the counties of
Anoka, Carver, Dakota, Hennepin, Ramsey, Scott, and Washington deleted text end new text begin for use in the first and
second phases of the system, as defined in section 403.21, subdivisions 3, 10, and 11, and
that portion of the third phase of the system that is located in the southeast district of the
State Patrol and the counties of Benton, Sherburne, Stearns, and Wright new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales after April 30, 2005, and
terminates when the commissioner of revenue determines that the cost of the exemption
under this subdivision to that point in time totals $4,800,000.
new text end

Sec. 12.

Minnesota Statutes 2004, section 297A.70, is amended by adding a
subdivision to read:

new text begin Subd. 17. new text end

new text begin Donated meals. new text end

new text begin Meals that are normally sold at retail in the ordinary
business activities of the taxpayer are exempt if the meals are donated to a nonprofit group
as defined in subdivision 4 for fund-raising purposes.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for donations made after June 30,
2005.
new text end

Sec. 13.

Minnesota Statutes 2004, section 297A.71, is amended by adding a
subdivision to read:

new text begin Subd. 33. new text end

new text begin Commuter rail material, supplies, and equipment. new text end

new text begin Materials and
supplies consumed in, and equipment incorporated in the construction, equipment, or
improvement of a commuter rail transportation system operated under sections 174.80
and 174.90 are exempt. This exemption includes railroad cars and engines and related
equipment.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for purchases made after June 30,
2005, and terminates when the commissioner of revenue determines that the cost of the
exemption for sales to that point in time totals $8,600,000.
new text end

Sec. 14.

Minnesota Statutes 2004, section 297A.71, is amended by adding a
subdivision to read:

new text begin Subd. 34. new text end

new text begin Waste recovery facility. new text end

new text begin Materials and supplies used or consumed in,
and equipment incorporated into, the construction, improvement, or expansion of a
waste-to-energy resource recovery facility are exempt if the facility uses biomass or mixed
municipal solid waste as a primary fuel to generate steam or electricity.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made after
June 30, 2005.
new text end

Sec. 15.

Minnesota Statutes 2004, section 297A.71, is amended by adding a
subdivision to read:

new text begin Subd. 35. new text end

new text begin Personal rapid transit system. new text end

new text begin Materials and supplies used or consumed
in, and equipment incorporated into the construction, expansion, or improvement of a
personal rapid transit system as defined in section 297A.61, subdivision 37, are exempt.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made after
June 30, 2005, and terminates when the commissioner of revenue determines that the cost
of the exemption under this subdivision to that point in time totals $200,000.
new text end

Sec. 16.

Minnesota Statutes 2004, section 297A.71, is amended by adding a
subdivision to read:

new text begin Subd. 36. new text end

new text begin St. mary's duluth clinic health system. new text end

new text begin Materials and supplies used or
consumed in and equipment incorporated into the construction of the hospital portion of
the St. Mary's Duluth Clinic Health System are exempt.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for purchases made on or after March
1, 2004, and on or before December 31, 2006. For purchases made on or after March 1,
2004, and before the day following final enactment of this act, for which the sales tax was
paid, the commissioner of revenue shall refund the tax. Except as otherwise provided in
this paragraph, the provisions of section 297A.75, subdivisions 2, 3, 4, and 5, apply to a
refund under this paragraph. The applicant must be the owner of the St. Mary's Duluth
Clinic Health System. If the tax was paid by the contractor, subcontractor, or builder, the
contractor, subcontractor, or builder must furnish to the owner a statement indicating the
cost of the exempt items and the taxes paid on the items.
new text end

Sec. 17.

Minnesota Statutes 2004, section 297A.71, is amended by adding a
subdivision to read:

new text begin Subd. 37. new text end

new text begin Municipal utilities. new text end

new text begin Materials and supplies used or consumed in, and
equipment incorporated into, the construction, improvement, or expansion of electric
generation and related facilities used pursuant to a joint power purchase agreement to
meet the biomass energy mandate in section 216B.2424 are exempt if the owner or owners
of the facilities are a municipal electric utility or utilities or a joint venture of municipal
electric utilities. The tax must be imposed and collected as if the rate under section
297A.62, subdivision 1, applied and then refunded under section 297A.75.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made after
January 1, 2005.
new text end

Sec. 18.

Minnesota Statutes 2004, section 297A.71, is amended by adding a
subdivision to read:

new text begin Subd. 38. new text end

new text begin Chatfield wastewater treatment facility. new text end

new text begin Materials and supplies used
in and equipment incorporated into the construction, improvement, or expansion of a
wastewater treatment facility owned by the city of Chatfield are exempt. This exemption
is effective for purchases made before December 31, 2007.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made on or
after June 1, 2005.
new text end

Sec. 19.

Minnesota Statutes 2004, section 297A.75, subdivision 1, is amended to read:

Subdivision 1.

Tax collected.

The tax on the gross receipts from the sale of the
following exempt items must be imposed and collected as if the sale were taxable and the
rate under section 297A.62, subdivision 1, applied. The exempt items include:

(1) capital equipment exempt under section 297A.68, subdivision 5;

(2) building materials for an agricultural processing facility exempt under section
297A.71, subdivision 13;

(3) building materials for mineral production facilities exempt under section
297A.71, subdivision 14;

(4) building materials for correctional facilities under section 297A.71, subdivision
3;

(5) building materials used in a residence for disabled veterans exempt under section
297A.71, subdivision 11;

(6) chair lifts, ramps, elevators, and associated building materials exempt under
section 297A.71, subdivision 12;

(7) building materials for the Long Lake Conservation Center exempt under section
297A.71, subdivision 17;

(8) materials, supplies, fixtures, furnishings, and equipment for a county law
enforcement and family service center under section 297A.71, subdivision 26; deleted text begin and
deleted text end

(9) materials and supplies for qualified low-income housing under section 297A.71,
subdivision 23 new text begin ;
new text end

new text begin (10) fuel purchased for commuter rail systems under section 297A.68, subdivision
19, clause (7); and
new text end

new text begin (11) materials, supplies, and equipment for municipal electric utility facilities under
section 297A.71, subdivision 37 new text end .

new text begin EFFECTIVE DATE. new text end

new text begin Clause (10) is effective for purchases made after June 30,
2005, and clause (11) is effective for purchases made after December 31, 2004.
new text end

Sec. 20.

Minnesota Statutes 2004, section 297A.75, subdivision 2, is amended to read:

Subd. 2.

Refund; eligible persons.

Upon application on forms prescribed by the
commissioner, a refund equal to the tax paid on the gross receipts of the exempt items
must be paid to the applicant. Only the following persons may apply for the refund:

(1) for subdivision 1, clauses (1) to (3), the applicant must be the purchaser;

(2) for subdivision 1, clauses (4), (7), and (8), the applicant must be the governmental
subdivision;

(3) for subdivision 1, clause (5), the applicant must be the recipient of the benefits
provided in United States Code, title 38, chapter 21;

(4) for subdivision 1, clause (6), the applicant must be the owner of the homestead
property; deleted text begin and
deleted text end

(5) for subdivision 1, clause (9), the owner of the qualified low-income housing
project new text begin ;
new text end

new text begin (6) for subdivision 1, clause (10), the operator of the commuter rail system; and
new text end

new text begin (7) for subdivision 1, clause (11), the applicant must be a municipal electric utility or
a joint venture of municipal electric utilities new text end .

new text begin EFFECTIVE DATE. new text end

new text begin Clause (6) is effective for purchases made after June 30,
2005. Clause (7) is effective for purchases made after December 31, 2004.
new text end

Sec. 21.

Minnesota Statutes 2004, section 297A.75, subdivision 3, is amended to read:

Subd. 3.

Application.

(a) The application must include sufficient information
to permit the commissioner to verify the tax paid. If the tax was paid by a contractor,
subcontractor, or builder, under subdivision 1, clause (4), (5), (6), (7), (8), deleted text begin or deleted text end (9), new text begin or
(11), new text end the contractor, subcontractor, or builder must furnish to the refund applicant a
statement including the cost of the exempt items and the taxes paid on the items unless
otherwise specifically provided by this subdivision. The provisions of sections 289A.40
and 289A.50 apply to refunds under this section.

(b) An applicant may not file more than two applications per calendar year for
refunds for taxes paid on capital equipment exempt under section 297A.68, subdivision 5.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made after
December 31, 2004.
new text end

Sec. 22.

Minnesota Statutes 2004, section 297A.83, subdivision 1, is amended to read:

Subdivision 1.

Persons applying.

(a) A retailer required to collect and remit sales
taxes under section 297A.66 shall file with the commissioner an application for a permit.

(b) A retailer making retail sales from outside this state to a destination within
this state who is not required to obtain a permit under paragraph (a) may nevertheless
voluntarily file an application for a permit.

(c) The commissioner may require any person or class of persons obligated to file a
use tax return under section 289A.11, subdivision 3, to file an application for a permit new text begin ,
except an individual allowed to file and pay use tax under section 289A.18, subdivision
4a, is not required to obtain a permit new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for purchases on and after July
1, 2005.
new text end

Sec. 23.

Minnesota Statutes 2004, section 297A.87, subdivision 2, is amended to read:

Subd. 2.

Seller's permit or alternate statement.

(a) The operator of an event
under subdivision 1 shall obtain one of the following from a person who wishes to do
business as a seller at the event:

(1) evidence that the person holds a valid seller's permit under section 297A.84; deleted text begin or
deleted text end

(2) a written statement that the person is not offering for sale any item that is taxable
under this chapter new text begin ; or
new text end

new text begin (3) a written statement that this is the only selling event that the person will be
participating in for that calendar year, that the person will be participating for three or
fewer days, and that the person will make $500 or less in total sales in the calendar year.
The written statement shall include the person's name, address, and telephone number new text end .

(b) The operator shall require the evidence or statement as a prerequisite to
participating in the event as a seller.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for selling events occurring after
June 30, 2005.
new text end

Sec. 24.

Minnesota Statutes 2004, section 297A.87, subdivision 3, is amended to read:

Subd. 3.

Occasional sale provisions deleted text begin not deleted text end applicable new text begin under limited circumstances new text end .

The isolated and occasional sale deleted text begin provisions deleted text end new text begin provision new text end under section 297A.67, subdivision
23, deleted text begin or deleted text end new text begin applies, provided that the seller only participates for three or fewer days in one
event per calendar year, makes $500 or less in sales in the calendar year, and provides
the written statement required in subdivision 2, paragraph (a), clause (3). The isolated
and occasional sales provision new text end under section 297A.68, subdivision 25, deleted text begin do deleted text end new text begin does new text end not apply
to a seller at an event under this section.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for selling events occurring after
June 30, 2005.
new text end

Sec. 25.

Minnesota Statutes 2004, section 297B.03, is amended to read:

297B.03 EXEMPTIONS.

There is specifically exempted from the provisions of this chapter and from
computation of the amount of tax imposed by it the following:

(1) purchase or use, including use under a lease purchase agreement or installment
sales contract made pursuant to section 465.71, of any motor vehicle by the United States
and its agencies and instrumentalities and by any person described in and subject to the
conditions provided in section 297A.67, subdivision 11;

(2) purchase or use of any motor vehicle by any person who was a resident of
another state or country at the time of the purchase and who subsequently becomes a
resident of Minnesota, provided the purchase occurred more than 60 days prior to the date
such person began residing in the state of Minnesota and the motor vehicle was registered
in the person's name in the other state or country;

(3) purchase or use of any motor vehicle by any person making a valid election to be
taxed under the provisions of section 297A.90;

(4) purchase or use of any motor vehicle previously registered in the state of
Minnesota when such transfer constitutes a transfer within the meaning of section 118,
331, 332, 336, 337, 338, 351, 355, 368, 721, 731, 1031, 1033, or 1563(a) of the Internal
Revenue Code of 1986, as amended through December 31, 1999;

(5) purchase or use of any vehicle owned by a resident of another state and leased
to a Minnesota-based private or for-hire carrier for regular use in the transportation of
persons or property in interstate commerce provided the vehicle is titled in the state of
the owner or secured party, and that state does not impose a sales tax or sales tax on
motor vehicles used in interstate commerce;

(6) purchase or use of a motor vehicle by a private nonprofit or public educational
institution for use as an instructional aid in automotive training programs operated by the
institution. "Automotive training programs" includes motor vehicle body and mechanical
repair courses but does not include driver education programs;

(7) purchase of a motor vehicle for use as an ambulance by an ambulance service
licensed under section 144E.10;

(8) purchase of a motor vehicle by or for a public library, as defined in section
134.001, subdivision 2, as a bookmobile or library delivery vehicle;

(9) purchase of a ready-mixed concrete truck;

(10) purchase or use of a motor vehicle by a town for use exclusively for road
maintenance, including snowplows and dump trucks, but not including automobiles,
vans, or pickup trucks;

(11) purchase or use of a motor vehicle by a corporation, society, association,
foundation, or institution organized and operated exclusively for charitable, religious,
or educational purposes, except a public school, university, or library, but only if the
vehicle is:

(i) a truck, as defined in section 168.011, a bus, as defined in section 168.011, or a
passenger automobile, as defined in section 168.011, if the automobile is designed and
used for carrying more than nine persons including the driver; and

(ii) intended to be used primarily to transport tangible personal property or
individuals, other than employees, to whom the organization provides service in
performing its charitable, religious, or educational purpose;

(12) purchase of a motor vehicle for use by a transit provider exclusively to provide
transit service is exempt if the transit provider is either (i) receiving financial assistance or
reimbursement under section 174.24 or 473.384, or (ii) operating under section 174.29,
473.388, or 473.405;

(13) purchase or use of a motor vehicle by a qualified business, as defined in section
469.310, located in a job opportunity building zone, if the motor vehicle is principally
garaged in the job opportunity building zone and is primarily used as part of or in direct
support of the person's operations carried on in the job opportunity building zone. The
exemption under this clause applies to sales, if the purchase was made and delivery
received during the duration of the job opportunity building zone. The exemption under
this clause also applies to any local sales and use tax new text begin ;
new text end

new text begin (14) purchase or use after June 30, 2005, and before July 1, 2008, of a motor vehicle
by a state agency or political subdivision, provided that the motor vehicle has a fuel
efficiency greater than 45 miles per gallon in highway use, and greater than 35 miles per
gallon in city use, as certified by the United States Environmental Protection Agency new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and transfers made after
June 30, 2005, and before July 1, 2008.
new text end

Sec. 26.

Laws 1991, chapter 291, article 8, section 27, subdivision 4, is amended to
read:

Subd. 4.

Expiration of taxing authority and expenditure limitation.

The
authority granted by subdivisions 1 and 2 to the city to impose a sales tax and an excise tax
shall expire new text begin on the earlier of (1) December 31, 2018; (2) new text end when the principal and interest on
any bonds or obligations issued to finance construction of Riverfront 2000 and related
facilities have been paid new text begin ; new text end or new text begin (3) new text end at an earlier time as the city shall, by ordinance, determine.
deleted text begin The total capital, administrative, and operating expenditures payable from bond proceeds
and revenues received from the taxes authorized by subdivisions 1 and 2, excluding
investment earnings on bond proceeds and revenues, shall not exceed $25,000,000 for
Riverfront 2000 and related facilities.
deleted text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective upon compliance by the Mankato
City Council with the provisions in section 43 and, if required under section 43, approval
of the voters at a general or special election.
new text end

Sec. 27.

Laws 1996, chapter 471, article 2, section 29, is amended to read:

Sec. 29. new text begin CITY OF HERMANTOWN; SALES AND USE TAX.
new text end

Subdivision 1.

Sales new text begin and use new text end tax authorized.

new text begin (a) new text end Notwithstanding Minnesota
Statutes, section 477A.016, or any other contrary provision of law, ordinance, or city
charter, the city of Hermantown may, by ordinance, impose an additional sales new text begin and use new text end tax
of up to one percent on sales deleted text begin transactions deleted text end new text begin , storage, and use new text end taxable pursuant to Minnesota
Statutes, chapter 297A, that occur within the city.

new text begin (b) new text end The proceeds of the new text begin first one-half of one percent of new text end tax imposed under this section
must be used deleted text begin to meet the costs of deleted text end new text begin by the city for the following projects new text end :

(1) extending a sewer interceptor line;

(2) construction of a booster pump station, reservoirs, and related improvements
to the water system; and

(3) construction of a police and fire station.

new text begin (c) Revenues received from the remaining one-half of one percent of the tax
authorized under this section must be used by the city to pay all or part of the capital
and administrative costs of developing, acquiring, constructing, and initially furnishing
and equipping for the following projects:
new text end

new text begin (1) construction of a city hall to be connected to the existing public safety facility;
new text end

new text begin (2) construction of a new facility or purchase of an existing facility to be used as
a public works facility;
new text end

new text begin (3) construction, signalization, and rehabilitation of primary collector roads and
commercial frontage roads, within the city; and
new text end

new text begin (4) extension of a sewer interceptor line.
new text end

new text begin (d) Authorized expenses include, but are not limited to, acquiring property; paying
construction, administrative, and operating expenses related to the development of the
projects listed in paragraph (c); paying debt service on bonds or other obligations,
including lease obligations, issued to finance construction, expansion, or improvement of
the projects listed in paragraph (c); and other compatible uses, including but not limited to,
parking, lighting, and landscaping.
new text end

Subd. 2.

Referendum.

new text begin (a) new text end If the Hermantown city council proposes to impose the
sales tax authorized by this section, it shall conduct a referendum on the issue.

new text begin (b) If the Hermantown city council initially imposes the tax at a rate that is less than
one percent and proposes increasing the tax rate at a later date up to the full one percent, it
shall conduct a referendum on the increase.
new text end

new text begin (c) new text end The question of imposing new text begin or increasing new text end the tax must be submitted to the voters at
a special or general election. The tax may not be imposed unless a majority of votes cast
on the question of imposing the tax are in the affirmative. The commissioner of revenue
shall prepare a suggested form of question to be presented at the election. This subdivision
applies notwithstanding any city charter provision to the contrary.

Subd. 3.

Enforcement; collection; and administration of taxes.

A sales tax
imposed under this section must be reported and paid to the commissioner of revenue
with the state sales taxes, and be subject to the same penalties, interest, and enforcement
provisions. The proceeds of the tax, less refunds and a proportionate share of the cost of
collection, shall be remitted at least quarterly to the city. The commissioner shall deduct
from the proceeds remitted an amount that equals the indirect statewide cost as well as the
direct and indirect department costs necessary to administer, audit, and collect the tax.
The amount deducted shall be deposited in the state general fund.

new text begin Subd. 3a. new text end

new text begin Bonding authority. new text end

new text begin (a) The city may issue general obligation bonds
under Minnesota Statutes, chapter 475, to finance the costs in subdivision 1, paragraph (c).
The total amount of bonds issued for the projects under subdivision 1, paragraph (c), may
not exceed $13,000,000 in the aggregate. An election to approve the bonds is not required.
new text end

new text begin (b) The bonds are not included in computing any debt limitation applicable to the
city and the levy of taxes under Minnesota Statutes, section 475.61, to pay principal of and
interest on the bonds is not subject to any levy limitation.
new text end

new text begin (c) The taxes authorized under this section may be pledged to and used for the
payment of the bonds and any bonds issued to refund them.
new text end

Subd. 4.

Termination.

The new text begin portion of the new text end tax authorized deleted text begin under this section deleted text end new text begin to
finance the improvements described in subdivision 1, paragraph (b), new text end terminates at the
later of (1) ten years after the date of initial imposition of the tax, or (2) on the first
day of the second month next succeeding a determination by the city council that
sufficient funds have been received from new text begin that portion of new text end the tax new text begin dedicated new text end to finance deleted text begin the
deleted text end new text begin those new text end improvements deleted text begin described in subdivision 1, clauses (1) to (3), deleted text end and to prepay or
retire at maturity the principal, interest, and premium due on any bonds issued for the
improvements. new text begin The portion of the tax authorized to finance the improvements described in
subdivision 1, paragraph (c), terminates when the revenues raised are sufficient to finance
those improvements, up to an amount equal to $13,000,000 plus any interest, premium,
and other costs associated with the bonds issued under subdivision 3a. The city council
may terminate this portion of the tax earlier. new text end Any funds remaining after completion of the
improvements and retirement or redemption of the bonds may be placed in the general
fund of the city.

deleted text begin Subd. 5. deleted text end

deleted text begin Local approval; effective date. deleted text end

deleted text begin This section is effective the day after final
enactment, upon compliance with Minnesota Statutes, section 645.021, subdivision 3, by
the city of Hermantown.
deleted text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day after the governing body of
the city of Hermantown and its chief clerical officer comply with Minnesota Statutes,
section 645.021, subdivisions 2 and 3.
new text end

Sec. 28.

Laws 1998, chapter 389, article 8, section 43, subdivision 3, is amended to
read:

Subd. 3.

Use of revenues.

Revenues received from the taxes authorized by
subdivisions 1 and 2 must be used by the city to pay for the cost of collecting and
administering the taxes and to pay for the following projects:

(1) transportation infrastructure improvements including deleted text begin both deleted text end new text begin regional new text end highway
and airport improvements;

(2) improvements to the civic center complex;

(3) a municipal water, sewer, and storm sewer project necessary to improve regional
ground water quality; and

(4) construction of a regional recreation and sports center and deleted text begin associated deleted text end new text begin other
higher education new text end facilities available for both community and student use deleted text begin , located at or
adjacent to the Rochester center deleted text end .

The total amount of capital expenditures or bonds for these projects that may be paid from
the revenues raised from the taxes authorized in this section may not exceed deleted text begin $71,500,000
deleted text end new text begin $111,500,000 new text end . The total amount of capital expenditures or bonds for the project in clause
(4) that may be paid from the revenues raised from the taxes authorized in this section
may not exceed deleted text begin $20,000,000 deleted text end new text begin $28,000,000 new text end .

new text begin EFFECTIVE DATE. new text end

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

Sec. 29.

Laws 1998, chapter 389, article 8, section 43, subdivision 4, is amended to
read:

Subd. 4.

Bonding authority.

(a) The city may issue bonds under Minnesota
Statutes, chapter 475, to finance the capital expenditure and improvement projects. An
election to approve the bonds under Minnesota Statutes, section 475.58, may be held in
combination with the election to authorize imposition of the tax under subdivision 1.
Whether to permit imposition of the tax and issuance of bonds may be posed to the voters
as a single question. The question must state that the sales tax revenues are pledged to pay
the bonds, but that the bonds are general obligations and will be guaranteed by the city's
property taxes. new text begin No election is required for the issuance of bonds under this subdivision,
other than the election held by the city on June 23, 1998.
new text end

new text begin The city may enter into an agreement with Olmsted County under which the city
and the county agree to jointly undertake and finance certain roadway infrastructure
improvements. The agreement may provide that the city will make available to the
county a portion of the sales tax revenues collected pursuant to the authority granted in
this section and the bonding authority provided in this subdivision. The county may,
pursuant to the agreement, issue its general obligation bonds in a principal amount not
exceeding the amount authorized by its agreement with the city payable primarily from
the sales tax revenues from the city under the agreement. The county's bonds must be
issued in accordance with the provisions of Minnesota Statutes, chapter 475, except that
no election is required for the issuance of the bonds and the bonds shall not be included in
the net debt of the county.
new text end

(b) The issuance of bonds under this subdivision is not subject to Minnesota
Statutes, section 275.60.

(c) The bonds are not included in computing any debt limitation applicable to the
city, and the levy of taxes under Minnesota Statutes, section 475.61, to pay principal of
and interest on the bonds is not subject to any levy limitation.

The aggregate principal amount of bonds, plus the aggregate of the taxes used directly
to pay eligible capital expenditures and improvements may not exceed deleted text begin $71,500,000
deleted text end new text begin $111,500,000 new text end , plus an amount equal to the costs related to issuance of the bonds.

(d) The taxes may be pledged to and used for the payment of the bonds and any
bonds issued to refund them, only if the bonds and any refunding bonds are general
obligations of the city.

new text begin EFFECTIVE DATE. new text end

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

Sec. 30.

Laws 1999, chapter 243, article 4, section 18, subdivision 1, is amended to
read:

Subdivision 1.

Sales and use tax.

new text begin (a) new text end Notwithstanding Minnesota Statutes, section
deleted text begin 297A.48, subdivision 1a, deleted text end 477A.016, or any other provision of law, ordinance, or city
charter, if approved by the city voters at the first municipal general election held after the
date of final enactment of this act or at a special election held November 2, 1999, the city
of Proctor may impose by ordinance a sales and use tax of up to one-half of one percent
for the purposes specified in subdivision 3 new text begin , paragraph (a) new text end . The provisions of Minnesota
Statutes, section deleted text begin 297A.48 deleted text end new text begin 297A.99 new text end , govern the imposition, administration, collection, and
enforcement of the tax authorized under this subdivision.

new text begin (b) The city of Proctor may impose by ordinance an additional sales and use tax of
up to one-half of one percent if approved by the city voters at a general election or at a
special election held for this purpose. The revenues received from this additional tax must
be used for the purposes specified in subdivision 3, paragraph (b).
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment,
upon compliance by the city of Proctor with Minnesota Statutes, section 645.021,
subdivision 3.
new text end

Sec. 31.

Laws 1999, chapter 243, article 4, section 18, subdivision 3, is amended to
read:

Subd. 3.

Use of revenues.

new text begin (a) new text end Revenues received from taxes authorized by
subdivisions 1 new text begin , paragraph (a), new text end and 2 must be used by the city to pay the cost of collecting
the taxes and to pay for construction and improvement of the following city facilities:

(1) streets; and

(2) constructing and equipping the Proctor community activity center.

Authorized expenses include, but are not limited to, acquiring property, paying
construction and operating expenses related to the development of an authorized facility,
and paying debt service on bonds or other obligations, including lease obligations, issued
to finance the construction, expansion, or improvement of an authorized facility. The
capital expenses for all projects authorized under this paragraph that may be paid with
these taxes is limited to $3,600,000, plus an amount equal to the costs related to issuance
of the bonds.

new text begin (b) Revenues received from taxes authorized by subdivision 1, paragraph (b),
must be used by the city to pay the cost of collecting the taxes and for construction and
improvements of city streets, public utilities, sidewalks, bikeways, and trails.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment,
upon compliance by the city of Proctor with Minnesota Statutes, section 645.021,
subdivision 3.
new text end

Sec. 32.

Laws 1999, chapter 243, article 4, section 18, subdivision 4, is amended to
read:

Subd. 4.

Bonding authority.

(a) The city may issue bonds under Minnesota
Statutes, chapter 475, to finance the capital expenditure and improvement projects
described in subdivision 3. An election to approve the bonds under Minnesota Statutes,
section 475.58, is not required.

(b) The issuance of bonds under this subdivision is not subject to Minnesota Statutes,
sections 275.60 and deleted text begin 279.61 deleted text end new text begin 275.61 new text end .

(c) The bonds are not included in computing any debt limitation applicable to the
city, and the levy of taxes under Minnesota Statutes, section 475.61, to pay principal of
and interest on the bonds is not subject to any levy limitation.

(d) new text begin For projects described in subdivision 3, paragraph (a), new text end the aggregate principal
amount of bonds, plus the aggregate of the taxes used directly to pay eligible capital
expenditures and improvements, may not exceed $3,600,000, plus an amount equal to
the costs related to issuance of the bonds, including interest on the bonds. new text begin For projects
described in subdivision 3, paragraph (b), the aggregate principal amount of bonds may
not exceed $7,200,000, plus an amount equal to the costs related to issuance of the bonds,
including interest on the bonds.
new text end

(e) The sales and use and excise taxes authorized in this section may be pledged to
and used for the payment of the bonds and any bonds issued to refund them only if the
bonds and any refunding bonds are general obligations of the city.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment,
upon compliance by the city of Proctor with Minnesota Statutes, section 645.021,
subdivision 3.
new text end

Sec. 33.

Laws 2001, First Special Session chapter 5, article 12, section 67, the effective
date, is amended to read:

new text begin EFFECTIVE DATE. new text end

This section is effective for purchases and sales made after
June 30, 2001, and before deleted text begin January 1, 2003 deleted text end new text begin July 1, 2007 new text end .

new text begin EFFECTIVE DATE.
new text end

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

Sec. 34.

Laws 2001, First Special Session chapter 5, article 12, section 82, the effective
date, as amended by Laws 2002, chapter 377, article 3, section 23, is amended to read:

new text begin EFFECTIVE DATE. new text end

This section is effective for sales and purchases made after
December 31, deleted text begin 2005 deleted text end new text begin 2007, or until the State of Minnesota is found to be out of compliance
with the streamlined sales tax project only to the extent of the change in this act and for no
other reason, if that finding is made before December 31, 2007 new text end .

Sec. 35.

Laws 2002, chapter 377, article 3, section 4, the effective date, is amended to
read:

new text begin EFFECTIVE DATE. new text end

deleted text begin With the exception of clause (2), item (ii), deleted text end This section is
effective for sales and purchases made after June 30, 2002. deleted text begin Clause (2), item (ii), is
effective for sales and purchases made after June 30, 2002, and before January 1, 2006.
deleted text end

Sec. 36.

Laws 2002, chapter 377, article 12, section 16, subdivision 1, is amended to
read:

Subdivision 1.

Nonprofit corporation may be established.

The city of Thief River
Falls may incorporate or authorize the incorporation of a nonprofit corporation to operate
a community or regional center in the city. new text begin A nonprofit corporation incorporated under
this section is exempt from payment of sales and use tax on materials, equipment, and
supplies consumed or incorporated into the construction of the community or regional
center. The exemption under this section applies to purchases by the nonprofit corporation,
a contractor, subcontractor, or builder. A contractor, subcontractor, or builder that does not
pay sales tax on purchases for construction of the community or regional center shall not
charge sales or use tax to the nonprofit corporation. The nonprofit corporation may file a
claim for refund for any sales taxes paid on the construction costs of the community or
regional center, and the commissioner of revenue shall pay the refunded amount directly
to the nonprofit corporation.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for purchases made
on and after July 1, 2002.
new text end

Sec. 37. new text begin CITY OF ALBERT LEA; SALES AND USE TAX.
new text end

new text begin Subdivision 1. new text end

new text begin Sales and use tax authorized. new text end

new text begin Notwithstanding Minnesota Statutes,
section 477A.016, or any other provision of law, ordinance, or city charter, the city of
Albert Lea may, by ordinance, impose a sales and use tax of one-half of one percent for
the purposes specified in subdivision 2. The provisions of Minnesota Statutes, section
297A.99, govern the imposition, administration, collection, and enforcement of the tax
authorized under this subdivision.
new text end

new text begin Subd. 2. new text end

new text begin Use of revenues. new text end

new text begin The proceeds of the tax imposed under this section
shall be used to pay for lake improvement projects as detailed in the Shell Rock River
watershed plan.
new text end

new text begin Subd. 3. new text end

new text begin Referendum. new text end

new text begin If the Albert Lea City Council proposes to impose the tax
authorized by this section, the question of imposing the tax must be submitted to the
voters at the next general election.
new text end

new text begin Subd. 4. new text end

new text begin Termination of taxes. new text end

new text begin The taxes imposed under this section expire at the
earlier of (1) ten years after the taxes are first imposed, or (2) when the city council first
determines that the amount of revenues raised to pay for the projects under subdivision 2,
shall meet or exceed the sum of $15,000,000. Any funds remaining after completion of
the projects may be placed in the general fund of the city.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day after compliance by the
governing body of the city of Albert Lea with Minnesota Statutes, section 645.021,
subdivision 3.
new text end

Sec. 38. new text begin CITY OF BAXTER; TAXES AUTHORIZED.
new text end

new text begin Subdivision 1. new text end

new text begin Sales and use tax authorized. new text end

new text begin Notwithstanding Minnesota Statutes,
section 477A.016, or any other provision of law, ordinance, or city charter, pursuant to
the approval of the voters on November 2, 2004, and pursuant to Minnesota Statutes,
section 297A.99, the city of Baxter may impose by ordinance a sales and use tax of
one-half of one percent for the purposes specified in subdivision 3. The provisions of
Minnesota Statutes, section 297A.99, govern the imposition, administration, collection,
and enforcement of the tax authorized under this subdivision.
new text end

new text begin Subd. 2. new text end

new text begin Excise tax authorized. new text end

new text begin Notwithstanding Minnesota Statutes, section
477A.016, or any other contrary provision of law, ordinance, or city charter, the city of
Baxter may impose by ordinance, for the purposes specified in subdivision 3, an excise tax
of up to $20 per motor vehicle, as defined by ordinance, purchased or acquired from any
person engaged within the city in the business of selling motor vehicles at retail.
new text end

new text begin Subd. 3. new text end

new text begin Use of revenues. new text end

new text begin Revenues received from the taxes authorized by
subdivisions 1 and 2 must be used to pay the cost of collecting and administering the tax
and to finance the acquisition and betterment of water and waste water facilities, a fire
substation, and the Paul Bunyan Bridge over Excelsior Road, as approved by the voters
at the referendum authorizing the tax. Authorized costs include, but are not limited to,
acquiring property and paying construction, legal, and engineering costs related to the
projects.
new text end

new text begin Subd. 4. new text end

new text begin Bonds. new text end

new text begin The city of Baxter, pursuant to the approval of the voters at the
referendum authorizing the imposition of the taxes in this section, may issue general
obligation bonds of the city, in one or more series, in the aggregate principal amount not to
exceed $15,000,000 to finance the projects listed in subdivision 3. The debt represented
by the bonds is not included in computing any debt limitations applicable to the city, and
the levy of taxes required by Minnesota Statutes, section 475.61, to pay the principal of
and interest on the bonds is not subject to any levy limitation or included in computing or
applying any levy limitation applicable to the city.
new text end

new text begin Subd. 5. new text end

new text begin Termination of taxes. new text end

new text begin The taxes imposed under subdivisions 1 and 2
expire at the earlier of 12 years after the imposition of the tax or when the city council
first determines that the amount of revenues raised from the taxes to pay for the projects
equals or exceeds $15,000,000 plus any interest on bonds issued for the projects under
subdivision 4. Any funds remaining after expiration of the taxes and retirement of the
bonds shall be placed in a capital project fund of the city. The taxes imposed under
subdivisions 1 and 2 may expire at an earlier time if the city so determines by ordinance.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day after compliance by
the governing body of the city of Baxter with Minnesota Statutes, section 645.021,
subdivision 3.
new text end

Sec. 39. new text begin CITY OF BEAVER BAY; TAXES AUTHORIZED.
new text end

new text begin Subdivision 1. new text end

new text begin Sales and use taxes. new text end

new text begin Notwithstanding Minnesota Statutes, section
477A.016, or any other provision of law or ordinance, if approved by the voters of the city
at the next general election held after the date of final enactment of this act, the city of
Beaver Bay may impose by ordinance a sales and use tax at a rate of up to one percent for
the purposes specified in subdivision 2. The provisions of Minnesota Statutes, section
297A.99, govern the imposition, administration, collection, and enforcement of the tax
authorized under this subdivision.
new text end

new text begin Subd. 2. new text end

new text begin Use of revenues. new text end

new text begin The revenues received from taxes authorized by
subdivision 1 must be used to pay the bonded indebtedness on the city community building
and to provide funding for recreational facilities, the upgrading of the water and sewer
system, upgrading and replacement of fire equipment, and improvement of streets.
new text end

new text begin Subd. 3. new text end

new text begin Termination of taxes. new text end

new text begin The authority granted under subdivision 1 to the city
of Beaver Bay to impose sales and use taxes expires when the city council determines that
the amount of revenue received to pay the costs of the projects described in subdivision 2
shall meet or exceed $1,500,000. Any funds remaining after completion of the projects
may be placed in the general fund of the city. The tax imposed under subdivision 1 may
expire at an earlier time if the city so determines by ordinance.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day after the governing body
of the city of Beaver Bay and its chief clerical officer timely comply with Minnesota
Statutes, section 645.021, subdivisions 2 and 3.
new text end

Sec. 40. new text begin CITY OF BEMIDJI.
new text end

new text begin Subdivision 1. new text end

new text begin Sales and use tax authorized. new text end

new text begin Notwithstanding Minnesota Statutes,
section 477A.016, or any other provision of law, ordinance, or city charter, pursuant to
the approval of the city voters at the general election held on November 5, 2002, the city
of Bemidji may impose by ordinance a sales and use tax of one-half of one percent for
the purposes specified in subdivision 2. The provisions of Minnesota Statutes, section
297A.99, govern the imposition, administration, collection, and enforcement of the tax
authorized under this subdivision.
new text end

new text begin Subd. 2. new text end

new text begin Use of revenues. new text end

new text begin Revenues received from the tax authorized by
subdivision 1 must be used for the cost of collecting and administering the tax and to
pay all or part of the capital or administrative costs of the acquisition, construction, and
improvement of parks and trails within the city, as provided for in the city of Bemidji's
parks, open space, and trail system plan, adopted by the Bemidji City Council on
November 21, 2001. Authorized expenses include, but are not limited to, acquiring
property, paying construction expenses related to the development of these facilities
and improvements, and securing and paying debt service on bonds or other obligations
issued to finance acquisition, construction, improvement, or development of parks and
trails within the city of Bemidji.
new text end

new text begin Subd. 3. new text end

new text begin Bonds. new text end

new text begin Pursuant to the approval of the city voters at the general election
held on November 5, 2002, the city of Bemidji may issue, without an additional election,
general obligation bonds of the city in an amount not to exceed $9,826,000 to pay
capital and administrative expenses for the acquisition, construction, improvement, and
development of parks and trails as specified in subdivision 2. The debt represented by
the bonds must not be included in computing any debt limitations applicable to the city,
and the levy of taxes required by Minnesota Statutes, section 475.61, to pay the principal
of any interest on the bonds must not be subject to any levy limitations or be included in
computing or applying any levy limitation applicable to the city.
new text end

new text begin Subd. 4. new text end

new text begin Termination of tax. new text end

new text begin The tax imposed under subdivision 1 expires when
the Bemidji City Council determines that the amount described in subdivision 3 has been
received from the tax to finance the capital and administrative costs for acquisition,
construction, improvement, and development of parks and trails and to repay or retire at
maturity the principal, interest, and premium due on any bonds issued for the park and
trail improvements under subdivision 3. Any funds remaining after completion of the park
and trail improvements and retirement or redemption of the bonds may be placed in the
general fund of the city. The tax imposed under subdivision 1 may expire at an earlier
time if the city so determines by ordinance.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day after compliance by
the governing body of the city of Bemidji with Minnesota Statutes, section 645.021,
subdivision 3.
new text end

Sec. 41. new text begin CITY OF CLOQUET; TAXES AUTHORIZED.
new text end

new text begin Subdivision 1. new text end

new text begin Sales and use tax. new text end

new text begin Notwithstanding Minnesota Statutes, section
477A.016, or any other provision of law, ordinance, or city charter, if approved by the
voters pursuant to Minnesota Statutes, section 297A.99, the city of Cloquet may impose
by ordinance a sales and use tax of up to one-half of one percent for the purpose specified
in subdivision 3. The provisions of Minnesota Statutes, section 297A.99, govern the
imposition, administration, collection, and enforcement of the tax authorized under this
subdivision.
new text end

new text begin Subd. 2. new text end

new text begin Excise tax authorized. new text end

new text begin Notwithstanding Minnesota Statutes, section
477A.016, or any other provision of law, ordinance, or city charter, the city of Cloquet
may impose by ordinance, for the purposes specified in subdivision 3, an excise tax of up
to $20 per motor vehicle, as defined by ordinance, purchased or acquired from any person
engaged within the city in the business of selling motor vehicles at retail.
new text end

new text begin Subd. 3. new text end

new text begin Use of revenues. new text end

new text begin Revenues received from taxes authorized by subdivisions
1 and 2 must be used by the city to pay the cost of collecting the taxes and to pay for the
following projects:
new text end

new text begin (1) construction and implementation of riverfront task force park improvements
including Veteran's Park;
new text end

new text begin (2) extension of water and sewer lines and other improvements to city infrastructure
necessary for construction of a city industrial park; and
new text end

new text begin (3) costs associated with the closure of the Cloquet Municipal Landfill.
new text end

new text begin Authorized expenses include, but are not limited to, acquiring property and paying
construction expenses related to these improvements, and paying debt service on bonds or
other obligations issued to finance acquisition and construction of these improvements.
new text end

new text begin Subd. 4. new text end

new text begin Bonding authority. new text end

new text begin (a) The city may issue bonds under Minnesota
Statutes, chapter 475, to pay capital and administrative expenses for the improvements
described in subdivision 3 in an amount that does not exceed $7,000,000. An election to
approve the bonds under Minnesota Statutes, section 475.58, is not required.
new text end

new text begin (b) The issuance of bonds under this subdivision is not subject to Minnesota Statutes,
sections 275.60 and 275.61.
new text end

new text begin (c) The debt represented by the bonds is not included in computing any debt
limitation applicable to the city, and any levy of taxes under Minnesota Statutes, section
475.61, to pay principal of and interest on the bonds is not subject to any levy limitation.
new text end

new text begin Subd. 5. new text end

new text begin Termination of taxes. new text end

new text begin The taxes imposed under subdivisions 1 and 2
expire at the earlier of (1) 14 years, or (2) when the city council determines that sufficient
funds have been received from the taxes to finance the capital and administrative costs of
the improvements described in subdivision 3, plus the additional amount needed to pay
the costs related to issuance of bonds under subdivision 4, including interest on the bonds.
Any funds remaining after completion of the project and retirement or redemption of the
bonds may be placed in the general fund of the city. The taxes imposed under subdivisions
1 and 2 may expire at an earlier time if the city so determines by ordinance.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day after the governing body of
the city of Cloquet and its chief clerical officer timely comply with Minnesota Statutes,
section 645.021, subdivisions 2 and 3.
new text end

Sec. 42. new text begin CITY OF CLEARWATER.
new text end

new text begin Subdivision 1. new text end

new text begin Sales and use tax authorized. new text end

new text begin Notwithstanding Minnesota Statutes,
section 477A.016, or any other provision of law, ordinance, or city charter, pursuant to
the approval of the city voters at the next general election or at a special election held
for this purpose, the city of Clearwater may impose by ordinance a sales and use tax of
one-half of one percent for the purposes specified in subdivision 2. The provisions of
Minnesota Statutes, section 297A.99, govern the imposition, administration, collection,
and enforcement of the tax authorized under this subdivision.
new text end

new text begin Subd. 2. new text end

new text begin Use of revenues. new text end

new text begin Revenues received from the tax authorized by subdivision
1 must be used for the cost of collecting and administering the tax and to pay all or part
of the capital or administrative costs of the development, acquisition, construction, and
improvement of parks, trails, parkland, open space, and land and buildings for a regional
community and recreation center. Authorized expenses include, but are not limited to,
acquiring property, paying construction expenses related to the development of these
facilities and improvements, and securing and paying debt service on bonds or other
obligations issued to finance acquisition, construction, improvement, or development.
new text end

new text begin Subd. 3. new text end

new text begin Bonds. new text end

new text begin Pursuant to the approval of the city voters to impose the tax
authorized in subdivision 1, the city of Clearwater may issue without an additional
election general obligation bonds of the city in an amount not to exceed $3,000,000 to
pay capital and administrative expenses for the acquisition, construction, improvement,
and development of the projects specified in subdivision 2. The debt represented by the
bonds must not be included in computing any debt limitations applicable to the city, and
the levy of taxes required by Minnesota Statutes, section 475.61, to pay the principal or
any interest on the bonds must not be subject to any levy limitations or be included in
computing or applying any levy limitation applicable to the city.
new text end

new text begin Subd. 4. new text end

new text begin Termination of tax. new text end

new text begin The tax imposed under subdivision 1 expires when
the Clearwater City Council determines that the amount described in subdivision 3 has
been received from the tax to finance the capital and administrative costs for acquisition,
construction, improvement, and development of the projects specified in subdivision 2 and
to repay or retire at maturity the principal, interest, and premium due on any bonds issued
for the projects under subdivision 3. Any funds remaining after completion of the projects
specified in subdivision 2 and retirement or redemption of the bonds may be placed in the
general fund of the city. The tax imposed under subdivision 1 may expire at an earlier
time if the city so determines by ordinance.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day after compliance by the
governing body of the city of Clearwater with Minnesota Statutes, section 645.021,
subdivision 3.
new text end

Sec. 43. new text begin REVERSE REFERENDUM; CHANGE IN MANKATO SALES TAX
EXPIRATION DATE.
new text end

new text begin For the change in section 26 to be effective, the Mankato City Council must pass a
resolution stating that they intend to implement the change in the expiration date of the
local sales tax authorized under section 26. The resolution must indicate when the sales
tax would expire under the law before any change, and when it will expire under the
authorized change in the law. The resolution must be published for two successive weeks
in the official newspaper of the city or, if there is no official newspaper, in a newspaper
of general circulation in the city, together with a notice fixing a date for a public hearing
on the matter. The hearing must be held at least two weeks but no more than four weeks
after the first publication of the resolution. Following the public hearing, the city may
determine to take no further action or adopt a resolution confirming its intention to extend
the expiration date of the sales tax. That resolution must also be published in the official
newspaper of the city or, if there is no official newspaper, in a newspaper of general
circulation in the city. If within 30 days of publication of the resolution a petition signed
by voters equal in number to at least ten percent of the votes cast in the city in the last
general election requesting a vote on the resolution is filed with the county, the resolution
is not effective until it has been submitted to the voters at a general or special election and
a majority of votes cast on the question of approving the resolution are in the affirmative.
The commissioner of revenue shall prepare a suggested form of question to be presented
at the election. The notices, hearing, and any required referendum must be held before
December 31, 2005.
new text end

new text begin Notwithstanding any other law or charter provision, the taxes imposed under Laws
1991, chapter 291, article 8, section 27, shall not expire before December 31, 2005.
However, if the city has not met the requirements in this section for adopting the change in
the effective date allowed in section 26, the tax shall expire after December 31, 2005, as
soon as is feasible under Minnesota Statutes, section 297A.99, subdivision 12.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day after compliance by the city
of Mankato with Minnesota Statutes, section 645.021, subdivision 3.
new text end

Sec. 44. new text begin CITY OF MEDFORD; SALES AND USE TAX.
new text end

new text begin Subdivision 1. new text end

new text begin Sales and use tax authorized. new text end

new text begin Notwithstanding Minnesota Statutes,
section 477A.016, or any other provision of law, ordinance, or city charter, the city of
Medford may, by ordinance, impose a sales and use tax of one-half of one percent for
the purposes specified in subdivision 2. Except as otherwise specifically provided, the
provisions of Minnesota Statutes, section 297A.99, govern the imposition, administration,
collection, and enforcement of the tax authorized under this subdivision.
new text end

new text begin Subd. 2. new text end

new text begin Use of revenues. new text end

new text begin The proceeds of the tax imposed under this section must
be used to pay up to $5,000,000 in costs related to improving the city's wastewater system
and wastewater treatment plant.
new text end

new text begin Subd. 3. new text end

new text begin Referendum. new text end

new text begin If the Medford City Council proposes to impose the tax
authorized by this section, the question of imposing the tax must be submitted to the
voters at the next general election. The tax may not be imposed unless the majority of
votes cast on the question of imposing the tax are in the affirmative. The commissioner of
revenue shall prepare a suggested form of the question to be presented at the election. The
question must state that the sales tax revenues would be pledged to pay any bonds issued
under subdivision 4 and that these bonds are guaranteed by the city's property taxes.
new text end

new text begin Subd. 4. new text end

new text begin Bonding authority. new text end

new text begin (a) The city may issue bonds under Minnesota
Statutes, chapter 475, to finance the capital expenditure and improvement projects
authorized under subdivision 2. The total amount of bonds issued for the projects listed in
subdivision 2 may not exceed $5,000,000 in aggregate. An election to approve the bonds,
as required under Minnesota Statutes, section 475.58, is not required.
new text end

new text begin (b) The issuance of the bonds under this subdivision is not subject to Minnesota
Statutes, sections 275.60 and 275.61.
new text end

new text begin (c) The bonds are not included in computing any debt limitation applicable to the
city, and the levy of taxes under Minnesota Statutes, section 475.61, to pay the principal of
and interest on the bonds is not subject to any levy limitation.
new text end

new text begin (d) The taxes authorized under this section may be pledged to and used for the
payment of the bonds and any bonds issued to refund them only if the bonds and any
refunding bonds are general obligations of the city.
new text end

new text begin Subd. 5. new text end

new text begin Termination of taxes. new text end

new text begin The taxes imposed under this section expire at the
earlier of (1) 20 years after the taxes are first imposed, or (2) when the city council first
determines that the amount of revenues raised to pay for the projects under subdivision
2 shall meet or exceed the sum of $5,000,000, plus an amount equal to the costs related
to the issuance of bonds under subdivision 4. Any funds remaining after completion of
the projects and retirement or redemption of the bonds may be placed in the general
funds of the city.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day after compliance with
the governing body of the city of Medford with Minnesota Statutes, section 645.021,
subdivision 3.
new text end

Sec. 45. new text begin CITY OF PARK RAPIDS.
new text end

new text begin Subdivision 1. new text end

new text begin Sales and use tax authorized. new text end

new text begin Notwithstanding Minnesota Statutes,
section 477A.016, or any other provision of law, ordinance, or city charter, pursuant to
the approval of the city voters at the next general election or at a special election held for
this purpose, the city of Park Rapids may impose by ordinance a sales and use tax of one
percent for the purposes specified in subdivision 2. The provisions of Minnesota Statutes,
section 297A.99, govern the imposition, administration, collection, and enforcement of
the tax authorized under this subdivision.
new text end

new text begin Subd. 2. new text end

new text begin Use of revenues. new text end

new text begin Revenues received from the tax authorized by
subdivision 1 must be used for the cost of collecting and administering the tax and to
pay all or part of the capital or administrative costs of the development, acquisition,
construction, and improvement of the following projects:
new text end

new text begin (1) two-thirds of the cost of construction and operation of a community center that
may include a senior citizen center, fitness center, swimming pool, meeting rooms, indoor
track, and racquetball, basketball, and tennis courts, provided that an amount equal to
one-third of the cost of construction is received from private sources;
new text end

new text begin (2) capital improvement projects including, but not limited to, installation of water,
sewer, storm sewer, street improvements, new city water tower and well, costs related to
improvements to marked trunk highway 34; and
new text end

new text begin (3) park improvements.
new text end

new text begin Authorized expenses include, but are not limited to, acquiring property, paying
construction expenses related to the development of these facilities and improvements,
and securing and paying debt service on bonds or other obligations issued to finance
acquisition, construction, improvement, or development.
new text end

new text begin Subd. 3. new text end

new text begin Bonds. new text end

new text begin Pursuant to the approval of the city voters to impose the tax
authorized in subdivision 1, the city of Park Rapids may issue without an additional
election general obligation bonds of the city to pay capital and administrative expenses
for the acquisition, construction, improvement, and development of the projects specified
in subdivision 2. The debt represented by the bonds must not be included in computing
any debt limitations applicable to the city, and the levy of taxes required by Minnesota
Statutes, section 475.61, to pay the principal or any interest on the bonds must not be
subject to any levy limitations or be included in computing or applying any levy limitation
applicable to the city.
new text end

new text begin Subd. 4. new text end

new text begin Termination of tax. new text end

new text begin The tax imposed under subdivision 1 expires the
earlier of July 1, 2023, or when the city council determines that sufficient revenues have
been received to retire the bonds in subdivision 3. Any funds remaining after completion
of the projects specified in subdivision 2 and retirement or redemption of the bonds may
be placed in the general fund of the city. The tax imposed under subdivision 1 may expire
at an earlier time if the city so determines by ordinance.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day after compliance by the
governing body of the city of Park Rapids with Minnesota Statutes, section 645.021,
subdivision 3.
new text end

Sec. 46. new text begin CITY OF PROCTOR; LODGING TAX.
new text end

new text begin The city of Proctor may use up to ten percent of the revenues received from
the lodging tax imposed by the city under Minnesota Statutes, section 469.190, for
preservation of the Caboose and the Baldwin Locomotive, Class M3 Mallet, Number
225, donated to the city by the Duluth, Missabe and Iron Range Railway Company, and
the F-101F aircraft, serial number 59-0407, donated to the city by the Department of
the Air Force.
new text end

new text begin EFFECTIVE DATE. new text end

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

Sec. 47. new text begin ST. CLOUD AREA CITIES; SALES AND USE TAX AUTHORIZED.
new text end

new text begin Subdivision 1. new text end

new text begin Sales and use tax authorized. new text end

new text begin (a) Notwithstanding Minnesota
Statutes, sections 297A.99, subdivision 3, paragraph (d), and 477A.016, or any other
provision of law, ordinance, or city charter, the following cities may, by ordinance, impose
a sales and use tax of one half of one percent for the purposes specified in subdivision 2:
new text end

new text begin (1) the city of St. Cloud, pursuant to the approval of the city voters at the general
election held on November 2, 2004:
new text end

new text begin (2) the city of St. Joseph, pursuant to the approval of the city voters at the general
election on November 2, 2004;
new text end

new text begin (3) the city of Waite Park, pursuant to the approval of the city voters at the general
election held on November 4, 2003, and any additional approval by the voters of that
city at the next general election;
new text end

new text begin (4) the city of Sartell, pursuant to the approval of the city voters at the general
election held on November 2, 1999, and any additional approval at the next general
election; and
new text end

new text begin (5) the cities of Sauk Rapids and St. Augusta, pursuant to the approval of the voters
of that city at the next general election.
new text end

new text begin (b) The provisions of Minnesota Statutes, section 297A.99, except subdivision 3,
paragraph (d), govern the imposition, administration, collection, and enforcement of
the tax authorized under this subdivision.
new text end

new text begin Subd. 2. new text end

new text begin Use of revenues. new text end

new text begin (a) Revenues received from the tax authorized under
subdivision 1 must be used for collecting and administering the taxes and to pay all or part
of the capital and administrative costs of the acquisition, construction, and improvement
of a new regional library located in the city of St. Cloud. Authorized expenses include,
but are not limited to, acquiring property, paying construction expenses related to the
development of the library, and securing and paying debt service issued to finance
construction or improvement of the authorized facility. The total amount that may be spent
on this project may not exceed $30,000,000 plus any debt service costs.
new text end

new text begin (b) If revenues collected from the taxes imposed under subdivision 1 are greater than
the amount needed to meet obligations under paragraph (a) in any year, the surplus may
be returned to the cities in a manner agreed upon by the participating cities under an
applicable joint powers agreement. Cities must use revenues received under this paragraph
to fund projects that have been approved by the voters at the referendum authorizing
the tax. Authorized expenses include, but are not limited to, acquiring property, paying
construction expenses related to the development of the authorized facility, and securing
and paying debt service issued to finance construction or improvement of the authorized
facility.
new text end

new text begin (c) Notwithstanding any provisions to the contrary contained in a referendum
authorizing the imposition of the tax, projects that may be funded from revenues
distributed under paragraph (b) are limited to the following:
new text end

new text begin (1) the St. Cloud Regional Airport;
new text end

new text begin (2) regional transportation improvements;
new text end

new text begin (3) community and aquatics centers;
new text end

new text begin (4) regional public libraries; and
new text end

new text begin (5) acquisition and improvement of regional park land, trails, and open space.
new text end

new text begin (d) The cities of Waite Park and Sartell may use revenues from the tax imposed in
subdivision 1 to fund the library under paragraph (a) without additional approval by city
voters; however, each city must seek approval of its voters to fund any other project not
approved by the voters at the referendum held on November 4, 2003, and November 2,
1999, respectively.
new text end

new text begin Subd. 3. new text end

new text begin Allocation of sales and use tax revenues to cities. new text end

new text begin Revenues collected
from the taxes authorized by subdivision 1, after paying the cost of collecting and
administering the tax, shall be allocated to cities imposing the tax as follows:
new text end

new text begin (1) the first $900,000 of revenues collected annually, indexed annually to the
Consumer Price Index, to the city of St. Cloud for the construction and relocation of
a regional library located in the city; and
new text end

new text begin (2) the revenues collected from the taxes imposed under subdivision 1 that exceed the
amount needed to meet the obligations under clause (1) in any year shall be returned to the
cities pursuant to a joint powers agreement allocating sales tax revenues among the cities.
new text end

new text begin Subd. 4. new text end

new text begin City bonding authorized. new text end

new text begin The city imposing a tax under subdivision 1
may issue general obligation bonds to pay the costs of the projects specified in subdivision
2, pursuant to the approval of the projects by the city voters at the election authorizing
the imposition of the tax. The bonds issued for each project are limited to the amount
authorized to be spent on the project in the referendum. The debt represented by the bonds
must not be included in computing any debt limitations applicable to the city, and the levy
of taxes required by Minnesota Statutes, section 475.61, to pay the principal or any interest
on the bonds must not be subject to any levy limitations or be included in computing or
applying any levy limitation applicable to the city.
new text end

new text begin Subd. 5. new text end

new text begin Termination of tax. new text end

new text begin The tax imposed in a city under subdivision 1 expires
when the city council determines that sufficient funds have been collected from the tax to
retire or redeem the bonds and obligations authorized under subdivision 2, but no later
than 17 years after the date the tax is first imposed. Any funds remaining after completion
of the projects specified in subdivision 2 and retirement or redemption of the bonds may
be placed in the general fund of the city. The tax imposed under subdivision 1 may expire
at an earlier time if the city so determines by ordinance.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day after compliance by the
governing body of the city with Minnesota Statutes, section 645.021, subdivision 3, for
sales and purchases made on and after January 1, 2006.
new text end

Sec. 48. new text begin SALES AND USE TAX COMPLIANCE GAP.
new text end

new text begin The commissioner must reduce the amount of the compliance gap in the payment
of sales and use tax by 25 percent before December 31, 2007; and must reduce the
compliance gap in the payment of sales and use tax by an additional 25 percent before
December 31, 2009. The commissioner must establish an effective method to allow
individuals who purchase taxable products or services and have not paid the tax at the
time of the purchase to pay the tax. The commissioner must advise residents of this state
how to pay sales and use tax.
new text end

new text begin EFFECTIVE DATE. new text end

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

Sec. 49. new text begin CITY OF WASECA; SALES AND USE TAX.
new text end

new text begin Subdivision 1. new text end

new text begin Sales and use tax authorized. new text end

new text begin Notwithstanding Minnesota Statutes,
section 477A.016, or any other provision of law, ordinance, or city charter, the city of
Waseca may, by ordinance, impose a sales and use tax of one-half of one percent for
the purposes specified in subdivision 2. The provisions of Minnesota Statutes, section
297A.99, govern the imposition, administration, collection, and enforcement of the tax
authorized under this subdivision.
new text end

new text begin Subd. 2. new text end

new text begin Use of revenues. new text end

new text begin The proceeds of the tax imposed under this section must
be used to pay for up to $1,820,000 in costs related to one or more of the following capital
projects as described in the referendum in subdivision 3:
new text end

new text begin (1) water quality and lake improvements;
new text end

new text begin (2) community center improvements;
new text end

new text begin (3) an industrial incubator; and
new text end

new text begin (4) downtown improvements, including a theatre and blighted property acquisition.
new text end

new text begin Subd. 3. new text end

new text begin Referendum. new text end

new text begin If the Waseca city council proposes to impose the tax
authorized by this section, the question of imposing the tax must be submitted to the
voters at the next general election. The tax may not be imposed unless the majority of
votes cast on the question of imposing the tax are in the affirmative. The specific projects
to be funded by the tax must be identified at least 90 days before the referendum is held
and included in the question presented at the election. The question must state that the
sales tax revenues would be pledged to pay any bonds issued under subdivision 4 and that
these bonds are guaranteed by the city's property taxes.
new text end

new text begin Subd. 4. new text end

new text begin Bonding authority. new text end

new text begin The city may issue bonds under Minnesota Statutes,
chapter 475, to finance the capital expenditure and improvement projects authorized under
subdivision 2 and approved under subdivision 3. The total amount of bonds issued for the
projects approved in subdivision 3 may not exceed $1,820,000 in aggregate. An election to
approve the bonds, as required under Minnesota Statutes, section 475.58, is not required.
new text end

new text begin Subd. 5. new text end

new text begin Termination of taxes. new text end

new text begin The taxes imposed under this section expire at the
earlier of (1) ten years after the taxes are first imposed, or (2) when the city council first
determines that the amount of revenues raised is sufficient to finance the capital projects
approved under subdivision 3 and to prepay or retire at maturity the principal, interest,
and premium due on any bonds issued under subdivision 4. Any funds remaining after
completion of the projects may be placed in the general funds of the city.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day after compliance with
the governing body of the city of Waseca with Minnesota Statutes, section 645.021,
subdivision 3.
new text end

Sec. 50. new text begin CITY OF WILLMAR.
new text end

new text begin Subdivision 1. new text end

new text begin Sales and use tax authorized. new text end

new text begin Notwithstanding Minnesota Statutes,
section 477A.016, or any other provision of law, ordinance, or city charter, pursuant to
the approval of the city voters at the general election held on November 2, 2004, the city
of Willmar may impose by ordinance a sales and use tax of one-half of one percent for
the purposes specified in subdivision 2. The provisions of Minnesota Statutes, section
297A.99, govern the imposition, administration, collection, and enforcement of the tax
authorized under this subdivision.
new text end

new text begin Subd. 2. new text end

new text begin Use of revenues. new text end

new text begin Revenues received from the tax authorized by
subdivision 1 must be used for the cost of collecting and administering the tax and to
pay all or part of the capital or administrative costs of the development, acquisition,
construction, and improvement of the following projects:
new text end

new text begin (1) completion and expansion of the airport/industrial park;
new text end

new text begin (2) hiking and biking trails;
new text end

new text begin (3) connection of the Blue Line and Civic Center buildings; and
new text end

new text begin (4) purchase of that portion of the Willmar Regional Treatment Center campus
located west of Marked Trunk Highway 71.
new text end

new text begin Authorized expenses include, but are not limited to, acquiring property, paying
construction expenses related to the development of these facilities and improvements,
and securing and paying debt service on bonds or other obligations issued to finance
acquisition, construction, improvement, or development of these projects.
new text end

new text begin Subd. 3. new text end

new text begin Bonds. new text end

new text begin The city of Willmar may issue without an additional election
general obligation bonds of the city in an amount not to exceed $8,000,000 to pay
capital and administrative expenses for the acquisition, construction, improvement, and
development of the projects listed in subdivision 2. The debt represented by the bonds
must not be included in computing any debt limitations applicable to the city, and the
levy of taxes required by Minnesota Statutes, section 475.61, to pay the principal or any
interest on the bonds, and must not be subject to any levy limitations or be included in
computing or applying any levy limitation applicable to the city.
new text end

new text begin Subd. 4. new text end

new text begin Termination of tax. new text end

new text begin The tax imposed under subdivision 1 expires at the
later of (1) seven years after the date the tax is first imposed, or (2) when the Willmar City
Council determines that the amount described in subdivision 3 has been received from
the tax to finance the capital and administrative costs, and to repay or retire at maturity
the principal, interest, and premium due on any bonds issued under subdivision 3. Any
funds remaining after completion of the projects listed in subdivision 2 and retirement or
redemption of the bonds may be placed in the general fund of the city. The tax imposed
under subdivision 1 may expire at an earlier time if the city so determines by ordinance.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day after compliance by the
governing body of the city of Willmar with Minnesota Statutes, section 645.021,
subdivision 3.
new text end

Sec. 51. new text begin CITY OF WINONA; TAXES AUTHORIZED.
new text end

new text begin Subdivision 1. new text end

new text begin Sales and use tax authorized. new text end

new text begin Notwithstanding Minnesota Statutes,
section 477A.016, or any other provision of law, ordinance, or city charter, if approved
by the voters pursuant to Minnesota Statutes, section 297A.99, the city of Winona may
impose by ordinance a sales and use tax of one-half of one percent for the purposes
specified in subdivision 3. The provisions of Minnesota Statutes, section 297A.99, govern
the imposition, administration, collection, and enforcement of the tax authorized under
this subdivision.
new text end

new text begin Subd. 2. new text end

new text begin Excise tax authorized. new text end

new text begin Notwithstanding Minnesota Statutes, section
477A.016, or any other contrary provision of law, ordinance, or city charter, the city of
Winona may impose by ordinance, for the purposes specified in subdivision 3, an excise
tax of up to $20 per motor vehicle, as defined by ordinance, purchased or acquired from
any person engaged within the city in the business of selling motor vehicles at retail.
new text end

new text begin Subd. 3. new text end

new text begin Use of revenues. new text end

new text begin Revenues received from the taxes authorized by
subdivisions 1 and 2 must be used to pay all or part of the capital costs of transportation,
cultural, or library projects located within the city, including securing or paying debt
service on bonds issued under subdivision 4, for the transportation, cultural, or library
projects and to pay the cost of collecting and administering the tax. Authorized costs
include, but are not limited to, acquiring property and paying construction and engineering
costs related to the projects.
new text end

new text begin Subd. 4. new text end

new text begin Bonds. new text end

new text begin The city of Winona, if approved by voters pursuant to Minnesota
Statutes, section 297A.99, may issue general obligation bonds of the city, in one or
more series, in the aggregate principal amount not to exceed $20,000,000 to pay capital
and administrative costs of the transportation, cultural, or library projects. The debt
represented by the bonds is not included in computing any debt limitations applicable to
the city, and the levy of taxes required by Minnesota Statutes, section 475.61, to pay the
principal of and interest on the bonds is not subject to any levy limitation or included in
computing or applying any levy limitation applicable to the city.
new text end

new text begin Subd. 5. new text end

new text begin Termination of taxes. new text end

new text begin The taxes imposed under subdivisions 1 and 2
expire at the later of 15 years after the imposition of the tax or when the Winona city
council determines that sufficient funds have been received from the taxes to prepay
or retire at maturity the principal, interest, and premium due on any bonds issued for
the projects under subdivision 4. Any funds remaining after expiration of the taxes and
retirement of the bonds may be placed in a capital project fund of the city. The taxes
imposed under subdivisions 1 and 2 may expire at an earlier time if the city so determines
by ordinance.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day after compliance by
the governing body of the city of Winona with Minnesota Statutes, section 645.021,
subdivision 3.
new text end

Sec. 52. new text begin LODGING TAX; HUBBARD COUNTY AUTHORITY.
new text end

new text begin Notwithstanding Minnesota Statutes, section 469.190, subdivisions 1 and 4,
Hubbard County may impose the local lodging tax authorized in that section in all towns
and unorganized territories within the county, and no town located in the county may
impose the local lodging tax. Any local lodging tax imposed by a town in Hubbard County
prior to the effective date of this section expires the day that a county tax is imposed
under this section.
new text end

new text begin If the county board exercises the authority under this section, it must determine by
resolution that imposition of the tax is in the county's interest. The resolution is subject
to the notice and reverse referendum requirements that would apply under Minnesota
Statutes, section 469.190, subdivision 5, if the county was imposing the tax in an
unorganized territory. The provisions of Minnesota Statutes, section 469.190, subdivisions
2, 3, 6, and 7, apply to a tax imposed under this section.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day after the governing body of
Hubbard County and its chief clerical officer comply with Minnesota Statutes, section
645.021, subdivisions 2 and 3.
new text end

Sec. 53. new text begin USE TAX ENFORCEMENT.
new text end

new text begin The commissioner shall establish a use tax enforcement unit within the Department
of Revenue to conduct direct compliance activities that will increase payment of use tax.
The commissioner shall inform and educate taxpayers about the requirement to pay use
tax. The commissioner shall also conduct an information campaign targeted to higher
income individuals, attorneys, accountants, and tax preparers to advise individuals and tax
professionals of the obligation to report and pay use tax.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2005.
new text end

Sec. 54. new text begin REPEALER.
new text end

new text begin Minnesota Statutes 2004, section 297A.99, subdivision 13, is repealed effective
July 1, 2005.
new text end

ARTICLE 4

PROPERTY TAXES

Section 1.

Minnesota Statutes 2004, section 103C.331, subdivision 16, is amended to
read:

Subd. 16.

Budget.

The district board shall annually present a budget consisting of
an itemized statement of district expenses for the ensuing calendar year to the boards of
county commissioners of the counties in which the district is located. The county boards
may levy an annual tax on all taxable real property in the district new text begin or annually authorize
district levies, as provided in section 103C.332, new text end for the amount that the boards determine is
necessary to meet the requirements of the district. The amount levied shall be collected
and distributed to the district as prescribed by chapter 276. The amount may be spent by
the district board for a district purpose authorized by law.

Sec. 2.

new text begin [103C.332] DISTRICT FUNDS AND LEVIES.
new text end

new text begin Subdivision 1. new text end

new text begin General fund. new text end

new text begin (a) A district shall create a general fund consisting of:
new text end

new text begin (1) an ad valorem tax levy, authorized by a county board under section 103C.331,
subdivision 16, that may not exceed 0.048 percent of taxable market value, or $750,000,
whichever is less; and
new text end

new text begin (2) revenue received from the county for administration of the district under section
103C.331, subdivision 16.
new text end

new text begin (b) The money in the fund shall be used for general administrative expenses. The
supervisors may make an annual levy for the general fund as provided in subdivision 6.
new text end

new text begin Subd. 2. new text end

new text begin Implementation and project match fund. new text end

new text begin A district shall create an
implementation fund to supply funds for the implementation of the projects of the district
or to match grants from outside sources consisting of:
new text end

new text begin (1) ad valorem tax levies or fees levied or to be levied for the implementation of
projects of the district or to match grants, authorized by the county board under section
103C.331, subdivision 16; and
new text end

new text begin (2) revenue received from the county under section 103C.331, subdivision 16, for
the implementation of projects of the district or to match grants.
new text end

new text begin Subd. 3. new text end

new text begin Budget hearing. new text end

new text begin (a) Before adopting a budget when levies are authorized
by the county board under section 103C.331, subdivision 16, the supervisors shall hold
a public hearing on the proposed budget.
new text end

new text begin (b) The supervisors shall publish a notice of the hearing with a summary of the
proposed budget in one or more newspapers of general circulation in each county
consisting of part of the district. The notice and summary shall be published once each
week for two successive weeks before the hearing. The last publication shall be at least
two days before the hearing.
new text end

new text begin Subd. 4. new text end

new text begin Budget adoption. new text end

new text begin On or before September 1 of each year, the supervisors
shall adopt a budget for the next year and decide on the total amount necessary to be raised
from ad valorem tax levies to meet the district's budget.
new text end

new text begin Subd. 5. new text end

new text begin Certification to auditor. new text end

new text begin After adoption of the budget and no later than
September 1, the district shall certify to the auditor of each county within the district, the
county's share of an authorized tax, which shall be an amount bearing the same proportion
to the total levy as the net tax capacity of the area of the county within the district bears to
the net tax capacity of the entire district. The maximum amount of a levy may not exceed
the amount provided in subdivisions 1 and 2.
new text end

new text begin Subd. 6. new text end

new text begin Levy. new text end

new text begin The auditor of each county in the district shall add the amount of
an authorized levy made by the supervisors to the other tax levies on the property of the
county within the district for collection by the county treasurer with other taxes. The
county treasurer shall make settlement of the taxes collected with the treasurer of the
district in the same manner as other taxes are distributed to the other political subdivisions.
The levy authorized by this section is in addition to other county taxes authorized by law.
new text end

Sec. 3.

Minnesota Statutes 2004, section 123B.53, is amended by adding a subdivision
to read:

new text begin Subd. 1a. new text end

new text begin Debt service levies; choice of tax base. new text end

new text begin A school board may by
resolution elect to levy the debt service for a bond issued after July 1, 2005, against the
referendum market value of the district, as defined under section 126C.01, subdivision 3,
rather than the net tax capacity of the district, except that for purposes of this subdivision,
noncommercial 4c(1) property under section 273.13 is valued at its market value. A
resolution to levy against referendum market value must be passed at an open meeting of
the board, at least 60 days prior to the referendum election.
new text end

new text begin EFFECTIVE DATE. new text end

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

Sec. 4.

Minnesota Statutes 2004, section 123B.53, subdivision 4, is amended to read:

Subd. 4.

Debt service equalization revenue.

(a) The debt service equalization
revenue of a district equals the sum of the first tier debt service equalization revenue and
the second tier debt service equalization revenue.

(b) The first tier debt service equalization revenue of a district equals the greater of
zero or the eligible debt service revenue minus the amount raised by a levy of 15 percent
times the adjusted net tax capacity of the district minus the second tier debt service
equalization revenue of the district.

(c) The second tier debt service equalization revenue of a district equals the greater
of zero or the eligible debt service revenue, excluding alternative facilities levies under
section 123B.59, subdivision 5, minus the amount raised by a levy of 25 percent times the
adjusted net tax capacity of the district.

new text begin (d) Debt service equalization revenue is determined as provided under this
subdivision regardless of whether the debt service is being levied against net tax capacity
or referendum market value.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2005.
new text end

Sec. 5.

Minnesota Statutes 2004, section 123B.55, is amended to read:

123B.55 DEBT SERVICE LEVY.

new text begin Subdivision 1. new text end

new text begin Levy amount. new text end

A district may levy the amounts necessary to make
payments for bonds issued and for interest on them, including the bonds and interest on
them, issued as authorized by Minnesota Statutes 1974, section 275.125, subdivision 3,
clause (7)(C); and the amounts necessary for repayment of debt service loans and capital
loans, minus the amount of debt service equalization revenue of the district.

new text begin Subd. 2. new text end

new text begin Aid apportionment. new text end

new text begin A district's debt service equalization aid shall be
apportioned between the net tax capacity debt service levy and the referendum market
value debt service levy in the same proportions as eligible debt service revenues resulting
from bonds issued against net tax capacity are to eligible debt service revenues resulting
from bonds issued against referendum market value.
new text end

new text begin Subd. 3. new text end

new text begin Net tax capacity debt service levy. new text end

new text begin The levy amount determined under
subdivision 1, plus the eligible debt service revenues resulting from bonds issued against
net tax capacity, minus the debt service equalization aid apportioned to the net tax capacity
debt service levy, must be levied against the net tax capacity of the district as determined
under section 273.13 and must be included with the other net tax capacity levies certified
to the county auditor under section 275.07.
new text end

new text begin Subd. 4. new text end

new text begin Referendum market value debt service levy. new text end

new text begin The eligible debt service
revenues resulting from bonds issued against referendum market value, minus the debt
service equalization aid apportioned to the referendum market value debt service levy,
must be levied against the referendum market value of the district as defined in section
126C.01, subdivision 3, and must be separately certified to the county auditor under
section 275.07.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning with taxes payable in 2006.
new text end

Sec. 6.

Minnesota Statutes 2004, section 123B.71, subdivision 9, is amended to read:

Subd. 9.

Information required.

A school board proposing to construct a facility
described in subdivision 8 shall submit to the commissioner a proposal containing
information including at least the following:

(1) the geographic area and population to be served, preschool through grade 12
student enrollments for the past five years, and student enrollment projections for the
next five years;

(2) a list of existing facilities by year constructed, their uses, and an assessment of
the extent to which alternate facilities are available within the school district boundaries
and in adjacent school districts;

(3) a list of the specific deficiencies of the facility that demonstrate the need for a
new or renovated facility to be provided, and a list of the specific benefits that the new
or renovated facility will provide to the students, teachers, and community users served
by the facility;

(4) the relationship of the project to any priorities established by the school district,
educational cooperatives that provide support services, or other public bodies in the
service area;

(5) a specification of how the project will increase community use of the facility
and whether and how the project will increase collaboration with other governmental or
nonprofit entities;

(6) a description of the project, including the specification of site and outdoor space
acreage and square footage allocations for classrooms, laboratories, and support spaces;
estimated expenditures for the major portions of the project; and the dates the project will
begin and be completed;

(7) a specification of the source of financing the project; the scheduled date for
a bond issue or school board action; a schedule of payments, including debt service
equalization aid; new text begin whether the debt service will be levied against net tax capacity or
referendum market value; new text end and the effect of a bond issue on local property taxes by the
property class and valuation;

(8) an analysis of how the proposed new or remodeled facility will affect school
district operational or administrative staffing costs, and how the district's operating budget
will cover any increased operational or administrative staffing costs;

(9) a description of the consultation with local or state road and transportation
officials on school site access and safety issues, and the ways that the project will address
those issues;

(10) a description of how indoor air quality issues have been considered and a
certification that the architects and engineers designing the facility will have professional
liability insurance;

(11) as required under section 123B.72, for buildings coming into service after
July 1, 2002, a certification that the plans and designs for the extensively renovated or
new facility's heating, ventilation, and air conditioning systems will meet or exceed
code standards; will provide for the monitoring of outdoor airflow and total airflow of
ventilation systems; and will provide an indoor air quality filtration system that meets
ASHRAE standard 52.1;

(12) a specification of any desegregation requirements that cannot be met by any
other reasonable means; and

(13) a specification, if applicable, of how the facility will utilize environmentally
sustainable school facility design concepts.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2005.
new text end

Sec. 7.

Minnesota Statutes 2004, section 126C.17, subdivision 6, is amended to read:

Subd. 6.

Referendum equalization levy.

(a) For fiscal year 2003 deleted text begin and later deleted text end new text begin through
2007 new text end , a district's referendum equalization levy equals the sum of the first tier referendum
equalization levy and the second tier referendum equalization levy.

(b) A district's first tier referendum equalization levy equals the district's first tier
referendum equalization revenue times the lesser of one or the ratio of the district's
referendum market value per resident marginal cost pupil unit to $476,000.

(c) A district's second tier referendum equalization levy equals the district's second
tier referendum equalization revenue times the lesser of one or the ratio of the district's
referendum market value per resident marginal cost pupil unit to $270,000.

Sec. 8.

Minnesota Statutes 2004, section 126C.17, is amended by adding a subdivision
to read:

new text begin Subd. 6a. new text end

new text begin Local effort level. new text end

new text begin (a) For fiscal year 2008 and later, a district's local
effort level equals the sum of the first tier referendum equalization level and the second
tier referendum local effort level.
new text end

new text begin (b) A district's first tier referendum local effort level equals the district's first tier
referendum equalization revenue times the lesser of one or the ratio of the district's
referendum market value per resident marginal cost pupil unit to $476,000.
new text end

new text begin (c) A district's second tier referendum local effort level equals the district's second
tier referendum equalization revenue times the lesser of one or the ratio of the district's
referendum market value per resident marginal cost pupil unit to $270,000.
new text end

Sec. 9.

Minnesota Statutes 2004, section 126C.17, is amended by adding a subdivision
to read:

new text begin Subd. 6b. new text end

new text begin Local effort revenue. new text end

new text begin (a) For fiscal years 2008 and later, a school
district's local effort revenue is equal to its local effort level for that year.
new text end

new text begin (b) For referenda authorized under subdivision 9 prior to June 30, 2006, a school
district's local effort revenue must be levied against the district's referendum market
value according to subdivision 10.
new text end

new text begin (c) For referenda authorized or renewed under subdivision 9 after June 30, 2006, that
have been approved to be levied against referendum market value, the local effort revenue
must be levied against the district's referendum market value according to subdivision 10.
new text end

new text begin (d) For referenda authorized or renewed under subdivision 9 after June 30, 2006,
that have been approved to be imposed as a school referendum tax according to section
290.0621, the local effort revenue must be raised as a tax against income liability
according to section 290.0621.
new text end

Sec. 10.

Minnesota Statutes 2004, section 126C.17, subdivision 7, is amended to read:

Subd. 7.

Referendum equalization aid.

(a) new text begin For fiscal years 2005 through 2007, new text end a
district's referendum equalization aid equals the difference between its referendum
equalization revenue and levy. new text begin For fiscal years 2008 and later, a district's referendum
equalization aid equals the difference between its referendum equalization revenue and
its local effort revenue.
new text end

(b) If a district's actual levy for first or second tier referendum equalization revenue
new text begin in fiscal years 2005 through 2007 new text end is less than its maximum levy limit for that tier, aid shall
be proportionately reduced. new text begin If a district's actual local effort revenue for first or second tier
referendum equalization revenue in fiscal years 2008 and later is less than its maximum
local effort revenue limit for that tier, aid shall be proportionately reduced.
new text end

(c) Notwithstanding paragraph (a), the referendum equalization aid for a district,
where the referendum equalization aid under paragraph (a) exceeds 90 percent of the
referendum revenue, must not exceed 18.6 percent of the formula allowance times the
district's resident marginal cost pupil units. new text begin For fiscal years 2005 through 2007, new text end a district's
referendum levy is increased by the amount of any reduction in referendum aid under this
paragraph. new text begin For fiscal years 2008 and later, a district's local effort level is increased by the
amount of any reduction in referendum aid under this paragraph.
new text end

Sec. 11.

Minnesota Statutes 2004, section 126C.17, subdivision 9, is amended to read:

Subd. 9.

Referendum revenue.

(a) The revenue authorized by section 126C.10,
subdivision 1, may be increased in the amount approved by the voters of the district at a
referendum called for the purpose. The referendum may be called by the board or shall be
called by the board upon written petition of qualified voters of the district. The referendum
must be conducted one or two calendar years before the increased levy authority, if
approved, first becomes payable. Only one election to approve an increase may be held
in a calendar year. Unless the referendum is conducted by mail under paragraph (g), the
referendum must be held on the first Tuesday after the first Monday in November. The
ballot must state the maximum amount of the increased revenue per resident marginal cost
pupil unit deleted text begin , the estimated referendum tax rate as a percentage of referendum market value
in the first year it is to be levied, and that the revenue must be used to finance school
operations deleted text end . The ballot may state a schedule, determined by the board, of increased revenue
per resident marginal cost pupil unit that differs from year to year over the number of
years for which the increased revenue is authorized. deleted text begin If the ballot contains a schedule
showing different amounts, it must also indicate the estimated referendum tax rate as a
percent of referendum market value for the amount specified for the first year and for the
maximum amount specified in the schedule. deleted text end new text begin The ballot, including a ballot on the question
to revoke or reduce the increased revenue amount under paragraph (c), must abbreviate
the term "per resident marginal cost pupil unit" as "per pupil unit." new text end The ballot may state
that existing referendum deleted text begin levy deleted text end new text begin taxing new text end authority is expiring. In this case, new text begin if the referendum
authority is based on a property tax levy, new text end the ballot may also compare the proposed levy
authority to the existing expiring levy authority, and express the proposed increase as the
amount, if any, over the expiring referendum levy authority. The ballot must designate
the specific number of years, not to exceed ten, for which the referendum authorization
applies. The notice required under section 275.60 may be modified to read, in cases of
renewing existing levies:

"BY VOTING "YES" ON THIS BALLOT QUESTION, YOU MAY BE VOTING
FOR A PROPERTY TAX INCREASE."

new text begin If the referendum is on a proposed income tax under section 290.0621, the notice
must read:
new text end

new text begin "BY VOTING "YES" ON THIS BALLOT QUESTION, YOU MAY BE VOTING
FOR AN INCOME TAX INCREASE."
new text end

The ballot may contain a textual portion with the information required in this
subdivision and a question stating substantially the following:

"Shall the increase in the revenue proposed by (petition to) the board of .........,
School District No. .., be approved?"

If approved, an amount equal to the approved revenue per resident marginal cost
pupil unit times the resident marginal cost pupil units for the school year beginning in
the year after the levy is certified new text begin or the income tax is imposed new text end shall be authorized for
certification for the number of years approved, if applicable, or until revoked or reduced
by the voters of the district at a subsequent referendum. new text begin A referendum may be conducted
on the question of converting an existing referendum property tax levy to a school
referendum income tax to be imposed under section 290.0621.
new text end

(b) The board must prepare and deliver by first class mail at least 15 days but no
more than 30 days before the day of the referendum to each taxpayer a notice of the
referendum and the proposed revenue increase. The board need not mail more than one
notice to any taxpayer. For the purpose of giving mailed notice under this subdivision
new text begin for a referendum based on a property tax levy new text end , owners must be those shown to be owners
on the records of the county auditor or, in any county where tax statements are mailed
by the county treasurer, on the records of the county treasurer. Every property owner
whose name does not appear on the records of the county auditor or the county treasurer is
deemed to have waived this mailed notice unless the owner has requested in writing that
the county auditor or county treasurer, as the case may be, include the name on the records
for this purpose. The notice new text begin for a referendum based on a property tax levy new text end must project
the anticipated amount of tax increase in annual dollars deleted text begin and annual percentage deleted text end for typical
residential homesteads, agricultural homesteads, apartments, and commercial-industrial
property within the school district. new text begin For the purpose of giving mailed notice under this
subdivision, for a referendum based on an income tax under section 290.0621, taxpayers
must be those shown to be domiciled in the school district as indicated on the space which
must be provided for this information on the Minnesota individual income tax form for the
taxable year ending before the calendar year when the referendum is conducted. Every
individual whose domicile is in the school district whose name does not appear on the
income tax return as having a domicile in the district is deemed to have waived this mailed
notice unless the individual has requested in writing that the county auditor or county
treasurer, as the case may be, include the individual's name on the records for this purpose.
The notice must project the anticipated amount of tax increase in annual dollars and
annual percentage for typical family incomes within the school district.
new text end

The notice for a referendum new text begin based on a property tax levy new text end may state that an
existing referendum levy is expiring and project the anticipated amount of increase
over the existing referendum levy in the first year, if any, in annual dollars deleted text begin and annual
percentage deleted text end for typical residential homesteads, agricultural homesteads, apartments, and
commercial-industrial property within the district.

The notice must include the following statement: "Passage of this referendum will
result in an increase in your property taxes." However, in cases of renewing existing
levies, the notice may include the following statement: "Passage of this referendum may
result in an increase in your property taxes."

new text begin The notice for a referendum based on income tax may state that an existing income
tax referendum authority is expiring and project the anticipated amount of increase
over the existing referendum levy in the first year, if any, in annual dollars and annual
percentage for typical family incomes within the district.
new text end

new text begin The notice must include the following statement: "Passage of this referendum will
result in an increase in your personal income taxes." However, in cases of renewing
existing income tax referendum authorities, the notice may include the following
statement: "Passage of this referendum may result in an increase in your personal income
taxes."
new text end

(c) A referendum on the question of revoking or reducing the increased revenue
amount authorized pursuant to paragraph (a) may be called by the board and shall be called
by the board upon the written petition of qualified voters of the district. A referendum to
revoke or reduce the revenue amount must state the amount per resident marginal cost
pupil unit by which the authority is to be reduced. Revenue authority approved by the
voters of the district pursuant to paragraph (a) must be available to the school district at
least once before it is subject to a referendum on its revocation or reduction for subsequent
years. Only one revocation or reduction referendum may be held to revoke or reduce
referendum revenue for any specific year and for years thereafter.

(d) A petition authorized by paragraph (a) or (c) is effective if signed by a number of
qualified voters in excess of 15 percent of the registered voters of the district on the day
the petition is filed with the board. A referendum invoked by petition must be held on the
date specified in paragraph (a).

(e) The approval of 50 percent plus one of those voting on the question is required to
pass a referendum authorized by this subdivision.

(f) At least 15 days before the day of the referendum, the district must submit a
copy of the notice required under paragraph (b) to the commissioner and to the county
auditor of each county in which the district is located. Within 15 days after the results
of the referendum have been certified by the board, or in the case of a recount, the
certification of the results of the recount by the canvassing board, the district must notify
the commissioner of the results of the referendum.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for referenda conducted on or after
July 1, 2005.
new text end

Sec. 12.

Minnesota Statutes 2004, section 168A.05, subdivision 1b, is amended to read:

Subd. 1b.

Manufactured home; exemption.

The provisions of subdivision 1a shall
not apply to (1) a manufactured home which is sold or otherwise disposed of pursuant to
section 504B.271 by the owner of a manufactured home park as defined in section 327.14,
subdivision 3, or (2) a manufactured home which is sold pursuant to section 504B.265 by
the owner of a manufactured home park. new text begin The department shall not require a manufactured
home park owner to satisfy the delinquent or current year's personal property taxes owed
as condition of the title transfer to the park owner.
new text end

new text begin EFFECTIVE DATE. new text end

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

Sec. 13.

new text begin [174.11] COMMISSIONER TO NOTIFY COUNTY AUDITOR OF
PROPERTY ACQUISITIONS.
new text end

new text begin Upon acquisition of any taxable real property, the commissioner must notify the
county auditor of the county where the property is located that the property has been
acquired.
new text end

Sec. 14.

Minnesota Statutes 2004, section 272.02, subdivision 22, is amended to read:

Subd. 22.

Wind energy conversion systems.

All real and personal property of a
wind energy conversion system as defined in section 272.029, subdivision 2, is exempt
from property tax except that the land on which the property is located remains taxable.
new text begin If approved by the county where the property is located, the value of the land on which the
wind energy conversion system is located shall not be increased or decreased, but shall be
valued in the same manner as similar land that has not been improved with a wind energy
conversion system. The land shall be classified based on the most probable use of the
property if it were not improved with a wind energy conversion system.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for assessment year 2005 and
thereafter, for taxes payable in 2006 and thereafter.
new text end

Sec. 15.

Minnesota Statutes 2004, section 272.02, subdivision 47, is amended to read:

Subd. 47.

Poultry litter biomass generation facility; personal property.

Notwithstanding subdivision 9, clause (a), attached machinery and other personal property
which is part of an electrical generating facility that meets the requirements of this
subdivision is exempt. At the time of construction, the facility must:

(1) be designed to utilize poultry litter as a primary fuel source; and

(2) be constructed for the purpose of generating power at the facility that will be sold
pursuant to a contract approved by the Public Utilities Commission in accordance with
the biomass mandate imposed under section 216B.2424.

Construction of the facility must be commenced after January 1, 2003, and before
December 31, deleted text begin 2003 deleted text end new text begin 2005 new text end . Property eligible for this exemption does not include electric
transmission lines and interconnections or gas pipelines and interconnections appurtenant
to the property or the facility.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes levied in 2005, payable
in 2006, and thereafter.
new text end

Sec. 16.

Minnesota Statutes 2004, section 272.02, subdivision 56, is amended to read:

Subd. 56.

Electric generation facility; personal property.

(a) Notwithstanding
subdivision 9, clause (a), attached machinery and other personal property which is part
of a combined-cycle combustion-turbine electric generation facility that exceeds deleted text begin 550
deleted text end new text begin 300 new text end megawatts of installed capacity and that meets the requirements of this subdivision
is exempt. At the time of construction, the facility must:

(1) be designed to utilize natural gas as a primary fuel;

(2) not be owned by a public utility as defined in section 216B.02, subdivision 4;

(3) be located within five miles of an existing natural gas pipeline and within four
miles of an existing electrical transmission substation;

(4) be located outside the metropolitan area as defined under section 473.121,
subdivision 2; and

(5) be designed to provide energy and ancillary services and have received a
certificate of need under section 216B.243.

(b) Construction of the facility must be commenced after January 1, 2004, and before
January 1, 2007 new text begin , except that property eligible for this exemption includes any expansion
of the facility that also meets the requirements of paragraph (a), clauses (1) to (5), without
regard to the date that construction of the expansion commences new text end . Property eligible for
this exemption does not include electric transmission lines and interconnections or gas
pipelines and interconnections appurtenant to the property or the facility.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes levied in 2005, payable
in 2006, and thereafter.
new text end

Sec. 17.

Minnesota Statutes 2004, section 272.02, is amended by adding a subdivision
to read:

new text begin Subd. 68. new text end

new text begin Electric generation facility; personal property. new text end

new text begin (a) Notwithstanding
subdivision 9, clause (a), attached machinery and other personal property which is part of
a simple-cycle combustion-turbine electric generation facility that exceeds 290 megawatts
of installed capacity and that meets the requirements of this subdivision is exempt. At
the time of construction, the facility must:
new text end

new text begin (1) be designed to utilize natural gas as a primary fuel;
new text end

new text begin (2) not be owned by a public utility as defined in section 216B.02, subdivision 4;
new text end

new text begin (3) be located within five miles of an existing natural gas pipeline and within five
miles of an existing electrical transmission substation;
new text end

new text begin (4) be located outside the metropolitan area as defined under section 473.121,
subdivision 2;
new text end

new text begin (5) be designed to provide peaking capacity energy and ancillary services and have
satisfied all of the requirements under section 216B.243; and
new text end

new text begin (6) have received, by resolution, the approval from the governing body of the county,
city, and school district in which the proposed facility is to be located for the exemption of
personal property under this subdivision.
new text end

new text begin (b) Construction of the facility must be commenced after January 1, 2005, and
before January 1, 2009. Property eligible for this exemption does not include electric
transmission lines and interconnections or gas pipelines and interconnections appurtenant
to the property or the facility.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for assessment year 2006, taxes
payable in 2007, and thereafter.
new text end

Sec. 18.

Minnesota Statutes 2004, section 272.02, is amended by adding a subdivision
to read:

new text begin Subd. 69. new text end

new text begin Electric generation facility personal property. new text end

new text begin (a) Notwithstanding
subdivision 9, clause (a), and section 453.54, subdivision 20, attached machinery and
other personal property which is part of an electric generation facility that exceeds 150
megawatts of installed capacity and meets the requirements of this subdivision is exempt.
At the time of construction, the facility must:
new text end

new text begin (1) be designed to utilize natural gas as a primary fuel;
new text end

new text begin (2) be owned and operated by a municipal power agency as defined in section
453.52, subdivision 8;
new text end

new text begin (3) have received the certificate of need under section 216B.243;
new text end

new text begin (4) be located outside the metropolitan area as defined under section 473.121,
subdivision 2; and
new text end

new text begin (5) be designed to be a combined-cycle facility, although initially the facility will be
operated as a simple-cycle combustion turbine.
new text end

new text begin (b) To qualify under this subdivision, an agreement must be negotiated between the
municipal power agency and the host city, for a payment in lieu of property taxes to the
host city.
new text end

new text begin (c) Construction of the facility must be commenced after January 1, 2004, and
before January 1, 2006. Property eligible for this exemption does not include electric
transmission lines and interconnections or gas pipelines and interconnections appurtenant
to the property or the facility.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for assessment year 2005, taxes
payable in 2006, and thereafter.
new text end

Sec. 19.

Minnesota Statutes 2004, section 272.02, is amended by adding a subdivision
to read:

new text begin Subd. 70. new text end

new text begin Biomass electric generation facility; personal property. new text end

new text begin (a)
Notwithstanding subdivision 9, clause (a), attached machinery and other personal property
which is a part of an electric generation facility, including remote boilers that comprise
part of the district heating system, generating up to 30 megawatts of installed capacity and
that meets the requirements of this subdivision is exempt. At the time of construction, the
facility must:
new text end

new text begin (1) be designed to utilize a minimum 90 percent waste biomass as a fuel;
new text end

new text begin (2) not be owned by a public utility as defined in section 216B.02, subdivision 4;
new text end

new text begin (3) be located within a city of the first class and have its primary location at a former
garbage transfer station; and
new text end

new text begin (4) be designed to have capability to provide baseload energy and district heating.
new text end

new text begin (b) Construction of the facility must be commenced after January 1, 2004, and
before January 1, 2008. Property eligible for this exemption does not include electric
transmission lines and interconnections or gas pipelines and interconnections appurtenant
to the property or the facility.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for assessment year 2005, taxes
payable in 2006, and thereafter.
new text end

Sec. 20.

Minnesota Statutes 2004, section 272.02, is amended by adding a subdivision
to read:

new text begin Subd. 71. new text end

new text begin Electric generation facility; personal property. new text end

new text begin (a) Notwithstanding
subdivision 9, clause (a), attached machinery and other personal property that is part
of either a simple-cycle, combustion-turbine electric generation facility that equals or
exceeds 150 megawatts of installed capacity, or a combined-cycle, combustion-turbine
electric generation facility that equals or exceeds 225 megawatts of installed capacity, and
that in either case meets the requirements of this subdivision, is exempt. At the time of
construction, the facility must:
new text end

new text begin (1) be designed to utilize natural gas as a primary fuel;
new text end

new text begin (2) not be owned by a public utility as defined in section 216B.02, subdivision 4;
new text end

new text begin (3) be located in a metropolitan county defined in section 473.121, subdivision 4,
that has a population greater than 190,000 and less than 225,000 in the most recent federal
decennial census, within one mile of an existing natural gas pipeline, and within one mile
of an existing electrical transmission substation; and
new text end

new text begin (4) be designed to provide energy and ancillary services and have received a
certificate of need under section 216B.243.
new text end

new text begin (b) Construction of the facility must be commenced after January 1, 2005, and
before January 1, 2008. Property eligible for this exemption does not include electric
transmission lines and interconnections or gas pipelines and interconnections appurtenant
to the property or the facility.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes levied in 2005, payable
in 2006, and thereafter.
new text end

Sec. 21.

Minnesota Statutes 2004, section 272.02, is amended by adding a subdivision
to read:

new text begin Subd. 72. new text end

new text begin Personal rapid transit system. new text end

new text begin All property used in the operation and
support of a personal rapid transit system as defined in section 297A.61, subdivision 37,
that provides service to the public on a regular and continuing basis, is exempt, provided
that it is operated independent of any government subsidies.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes levied in 2005, payable
in 2006, and thereafter.
new text end

Sec. 22.

Minnesota Statutes 2004, section 272.02, is amended by adding a subdivision
to read:

new text begin Subd. 73. new text end

new text begin Qualified elderly living facility. new text end

new text begin An elderly living facility is exempt from
taxation if it meets all of the following requirements:
new text end

new text begin (1) the facility is located in a city of the first class with a population of more than
350,000;
new text end

new text begin (2) the facility is owned and operated by a nonprofit corporation organized under
chapter 317A or by a limited liability company formed under chapter 322B, the sole
member of which is a nonprofit corporation organized under chapter 317A;
new text end

new text begin (3) the facility consists of no more than 60 living units;
new text end

new text begin (4) the owner of the facility is an affiliate of entities that own and operate assisted
living and skilled nursing facilities that:
new text end

new text begin (i) are located across a street from the facility;
new text end

new text begin (ii) are adjacent to a church that is exempt from taxation under subdivision 6;
new text end

new text begin (iii) include a congregate dining program; and
new text end

new text begin (iv) provide assisted living or similar social and physical support;
new text end

new text begin (5) the residents of the facility must be:
new text end

new text begin (i) at least 62 years of age; or
new text end

new text begin (ii) handicapped; and
new text end

new text begin (6) at least 20 percent of the units in the facility are occupied by persons whose
annual income does not exceed 50 percent of median family income for the area or, in the
alternative, 40 percent of the units in the facility are occupied by persons whose annual
income does not exceed 60 percent of median family income for the area.
new text end

new text begin For purposes of this subdivision, "affiliate" means any entity directly or indirectly
controlling or controlled by or under direct or indirect common control with an entity.
For this purpose, "control" means the power to direct management and policies through
membership or ownership of voting securities.
new text end

new text begin The property is exempt under this subdivision for taxes levied in each year or partial
year of the term of the facility's initial permanent financing or 25 years, whichever is later.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes levied in 2005, payable
in 2006, and thereafter.
new text end

Sec. 23.

Minnesota Statutes 2004, section 272.02, is amended by adding a subdivision
to read:

new text begin Subd. 74. new text end

new text begin Electric generation facility; personal property. new text end

new text begin (a) Notwithstanding
subdivision 9, clause (a), attached machinery and other personal property which is part of
a simple-cycle combustion-turbine electric generation facility that exceeds 150 megawatts
of installed capacity and that meets the requirements of this subdivision is exempt. At
the time of construction, the facility must:
new text end

new text begin (1) utilize natural gas as a primary fuel;
new text end

new text begin (2) be owned by an electric generation and transmission cooperative;
new text end

new text begin (3) be located within five miles of parallel existing 12-inch and 16-inch natural gas
pipelines and a 69-kilovolt high-voltage electric transmission line;
new text end

new text begin (4) be designed to provide peaking, emergency backup, or contingency services;
new text end

new text begin (5) have received a certificate of need under section 216B.243 demonstrating
demand for its capacity; and
new text end

new text begin (6) have received by resolution the approval from the governing body of the county
and township in which the proposed facility is to be located for the exemption of personal
property under this subdivision.
new text end

new text begin (b) Construction of the facility must be commenced after July 1, 2005, and
before January 1, 2009. Property eligible for this exemption does not include electric
transmission lines and interconnections or gas pipelines and interconnections appurtenant
to the property or the facility.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for assessment year 2006 and
thereafter, for taxes payable in 2007 and thereafter.
new text end

Sec. 24.

Minnesota Statutes 2004, section 272.02, is amended by adding a subdivision
to read:

new text begin Subd. 75. new text end

new text begin Electric generation facility; personal property. new text end

new text begin Notwithstanding
subdivision 9, clause (a), attached machinery and other personal property which is part
of an existing simple-cycle, combustion-turbine electric generation facility that exceeds
300 megawatts of installed capacity and that meets the requirements of this subdivision is
exempt. At the time of the construction, the facility must:
new text end

new text begin (1) be designed to utilize natural gas as a primary fuel;
new text end

new text begin (2) be owned by a public utility as defined in section 216B.02, subdivision 4, and be
located at or interconnected with an existing generating plant of the utility;
new text end

new text begin (3) be designed to provide peaking, emergency backup, or contingency services;
new text end

new text begin (4) satisfy a resource need identified in an approved integrated resource plan filed
under section 216B.2422; and
new text end

new text begin (5) have received, by resolution, the approval from the governing body of the county
and the city for the exemption of personal property under this subdivision.
new text end

new text begin Construction of the facility expansion must be commenced after January 1, 2004,
and before January 1, 2005. Property eligible for this exemption does not include electric
transmission lines and interconnections or gas pipelines and interconnections appurtenant
to the property or the facility.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning with assessment year
2005, for taxes payable in 2006 and thereafter.
new text end

Sec. 25.

Minnesota Statutes 2004, section 272.02, is amended by adding a subdivision
to read:

new text begin Subd. 76. new text end

new text begin Electric generation facility; personal property. new text end

new text begin (a) Notwithstanding
subdivision 9, clause (a), attached machinery and other personal property which is part of
a simple-cycle combustion-turbine electric generation facility that exceeds 290 megawatts
of installed capacity and that meets the requirements of this subdivision is exempt. At
the time of construction, the facility must:
new text end

new text begin (1) be designed to utilize natural gas as a primary fuel;
new text end

new text begin (2) not be owned by a public utility as defined in section 216B.02, subdivision 4;
new text end

new text begin (3) be located within 15 miles of the mainline existing interstate natural gas pipeline
and within five miles of an existing electrical transmission substation;
new text end

new text begin (4) be located outside the metropolitan area as defined under section 473.121,
subdivision 2; and
new text end

new text begin (5) be designed to provide peaking capacity energy and ancillary services and have
satisfied all of the requirements under section 216B.243.
new text end

new text begin (b) Construction of the facility must be commenced after January 1, 2005, and
before January 1, 2009. Property eligible for this exemption does not include electric
transmission lines and interconnections or gas pipelines and interconnections appurtenant
to the property or the facility.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes levied in 2006, payable
in 2007, and thereafter.
new text end

Sec. 26.

Minnesota Statutes 2004, section 272.029, subdivision 4, is amended to read:

Subd. 4.

Reports.

(a) An owner of a wind energy conversion system subject to
tax under subdivision 3 shall file a report with the commissioner of revenue annually
on or before deleted text begin March 1 deleted text end new text begin February 1 new text end detailing the amount of electricity in kilowatt-hours
that was produced by the wind energy conversion system for the previous calendar year.
The commissioner shall prescribe the form of the report. The report must contain the
information required by the commissioner to determine the tax due to each county under
this section for the current year. If an owner of a wind energy conversion system subject
to taxation under this section fails to file the report by the due date, the commissioner
of revenue shall determine the tax based upon the nameplate capacity of the system
multiplied by a capacity factor of 40 percent.

(b) On or before deleted text begin March 31 deleted text end new text begin February 28 new text end , the commissioner of revenue shall notify
the owner of the wind energy conversion systems of the tax due to each county for the
current year and shall certify to the county auditor of each county in which the systems are
located the tax due from each owner for the current year.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes payable in 2006 and
thereafter.
new text end

Sec. 27.

Minnesota Statutes 2004, section 272.029, subdivision 6, is amended to read:

Subd. 6.

Distribution of revenues.

Revenues from the taxes imposed under
subdivision 5 must be part of the settlement between the county treasurer and the county
auditor under section 276.09. The revenue must be distributed by the county auditor or
the county treasurer to all new text begin local new text end taxing jurisdictions in which the wind energy conversion
system is located, in the same proportion that each of the taxing jurisdiction's deleted text begin current
deleted text end new text begin previous new text end year's net tax capacity based tax rate is to the deleted text begin current deleted text end new text begin previous new text end year's total new text begin local
new text end net tax capacity based rate.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes payable in 2005 and
thereafter.
new text end

Sec. 28.

Minnesota Statutes 2004, section 273.11, subdivision 1a, is amended to read:

Subd. 1a.

Limited market value.

In the case of all property classified as
agricultural homestead or nonhomestead, residential homestead or nonhomestead, timber,
deleted text begin or deleted text end noncommercial seasonal residential recreational, new text begin or class 1c resort property, new text end the assessor
shall compare the value with the taxable portion of the value determined in the preceding
assessment new text begin except that for class 1c resort property for assessment year 2005, the assessor
shall determine the limited market value as provided in subdivision 1b new text end .

deleted text begin For assessment year 2002, the amount of the increase shall not exceed the greater of
(1) ten percent of the value in the preceding assessment, or (2) 15 percent of the difference
between the current assessment and the preceding assessment.
deleted text end

deleted text begin For assessment year 2003, the amount of the increase shall not exceed the greater of
(1) 12 percent of the value in the preceding assessment, or (2) 20 percent of the difference
between the current assessment and the preceding assessment.
deleted text end

For assessment year 2004 new text begin and thereafter new text end , the amount of the increase shall not exceed
the greater of (1) 15 percent of the value in the preceding assessment, or (2) 25 percent of
the difference between the current assessment and the preceding assessment.

deleted text begin For assessment year 2005, the amount of the increase shall not exceed the greater of
(1) 15 percent of the value in the preceding assessment, or (2) 33 percent of the difference
between the current assessment and the preceding assessment.
deleted text end

deleted text begin For assessment year 2006, the amount of the increase shall not exceed the greater of
(1) 15 percent of the value in the preceding assessment, or (2) 50 percent of the difference
between the current assessment and the preceding assessment.
deleted text end

This limitation shall not apply to increases in value due to improvements. For
purposes of this subdivision, the term "assessment" means the value prior to any exclusion
under subdivision 16.

deleted text begin The provisions of this subdivision shall be in effect through assessment year 2006
as provided in this subdivision.
deleted text end

new text begin For purposes of this subdivision and subdivision 1b, "class 1c resort property"
includes the portion of the property classified class 1a or 1b homestead, the portion of the
property classified 1c, plus any remaining portion of the resort that is classified 4c under
section 273.13, subdivision 25, paragraph (d), clause (1).
new text end

For purposes of the assessment/sales ratio study conducted under section 127A.48,
and the computation of state aids paid under chapters 122A, 123A, 123B, 124D, 125A,
126C, 127A, and 477A, market values and net tax capacities determined under this
subdivision and subdivision 16, shall be used.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment
for assessment year 2005, and thereafter.
new text end

Sec. 29.

Minnesota Statutes 2004, section 273.11, is amended by adding a subdivision
to read:

new text begin Subd. 1b. new text end

new text begin Class 1c resorts; 2005 assessment only. new text end

new text begin For assessment year 2005, the
valuation increase on class 1c resort property shall not exceed the greater of (1) 15 percent
of the value of its 2003 assessment, or (2) 25 percent of the difference in value between
its 2005 assessment and its 2003 assessment. The valuation increase on class 1c resort
property for the 2006 and subsequent assessment years shall be determined based upon
the schedule contained in subdivision 1a.
new text end

new text begin EFFECTIVE DATE. new text end

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

Sec. 30.

Minnesota Statutes 2004, section 273.11, is amended by adding a subdivision
to read:

new text begin Subd. 21. new text end

new text begin Valuation exclusion for sewage treatment system improvements.
new text end

new text begin Owners of property classified as class 1a, 1b, 1c, 2a, 4b, 4bb, or noncommercial 4c under
section 273.13 may apply for a valuation exclusion under this subdivision, provided that
the property is located in a county which has authorized valuation exclusions under this
subdivision, and provided that the following conditions are met:
new text end

new text begin (1) a notice of noncompliance has been issued by a licensed compliance inspector
with regard to the individual sewage treatment system serving the property under section
115.55, subdivision 5b;
new text end

new text begin (2) the owner of the property furnishes documentation to the satisfaction of the
assessor that the property's individual sewage treatment system has been replaced or
refurbished, including replacement of the individual system with a community or cluster
system, between May 1, 2005, and December 31, 2007; and
new text end

new text begin (3) a certificate of compliance has been issued for the new or refurbished system
under section 115.55, subdivision 5.
new text end

new text begin Application must be made to the assessor on a form prescribed by the commissioner
of revenue. Property meeting the requirements of this subdivision is eligible for a
valuation exclusion equal to 50 percent of the actual costs incurred, to a maximum
exclusion of $7,500, for a period of five years, after which the amount of the exclusion
will be added to the estimated market value of the property. The valuation exclusion
terminates upon the sale of the property. If a property owner applies for exclusion under
this subdivision between January 1 and June 30 of any year, the exclusion first applies for
taxes payable in the following year. If a property owner applies for exclusion under this
subdivision between July 1 and December 31 of any year, the exclusion first applies for
taxes payable in the second following year.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes payable in 2006 and
subsequent years.
new text end

Sec. 31.

Minnesota Statutes 2004, section 273.11, is amended by adding a subdivision
to read:

new text begin Subd. 22. new text end

new text begin Valuation exclusion for lead hazard reduction. new text end

new text begin Owners of property
classified as class 1a, 1b, 1c, 2a, 4b, or 4bb under section 273.13 may apply for a valuation
exclusion for lead hazard reduction, provided that the property is located in a city which
has authorized valuation exclusions under this subdivision. A city which authorizes
valuation exclusions under this subdivision must establish guidelines for qualifying lead
hazard reduction projects and must designate an agency within the city to issue certificates
of completion of qualifying projects. For purposes of this subdivision, "lead hazard
reduction" has the same meaning as in section 144.9501, subdivision 17.
new text end

new text begin The property owner must obtain a certificate from the city stating that the project
has been completed and stating the cost incurred by the owner in completing the project.
Only projects originating after April 30, 2005, may qualify for exclusion under this
subdivision. The property owner shall apply for a valuation exclusion to the assessor on a
form prescribed by the commissioner of revenue.
new text end

new text begin A qualifying property is eligible for a valuation exclusion equal to 50 percent of
the actual costs incurred, to a maximum exclusion of $15,000, for a period of five years,
after which the amount of the exclusion will be added to the estimated market value of
the property. The valuation exclusion shall terminate upon the sale of the property. If a
property owner applies for exclusion under this subdivision between January 1 and June
30 of any year, the exclusion shall first apply for taxes payable in the following year. If a
property owner applies for exclusion under this subdivision between July 1 and December
31 of any year, the exclusion shall first apply for taxes payable in the second following
year.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes payable in 2006 and
subsequent years.
new text end

Sec. 32.

Minnesota Statutes 2004, section 273.11, is amended by adding a subdivision
to read:

new text begin Subd. 23. new text end

new text begin Valuation of energy-efficient commercial properties. new text end

new text begin (a) The market
value of certain energy-efficient property classified under section 273.13, subdivision 24,
that is used for commercial purposes, is reduced as provided in this subdivision.
new text end

new text begin (b) To be eligible for a valuation reduction under this subdivision, property must be
certified by a qualified inspector as having been constructed in a manner that will achieve
a level of energy consumption that is at least 20 percent lower than the standard set in
the state energy code rules. The percentage reduction in the market value of a qualifying
property is determined as follows:
new text end

new text begin percentage of energy consumption new text end new text begin percentage of below energy code requirement
new text end new text begin market value reduction
new text end

new text begin 20-30 new text end new text begin 5
new text end

new text begin 31-50 new text end new text begin 10
new text end

new text begin over 50 new text end new text begin 15
new text end

new text begin The reductions will remain in effect for the first ten assessment years after the property has
been certified as qualifying under this subdivision.
new text end

new text begin (c) The Department of Commerce must establish a process for determining eligibility
for the valuation reduction under this subdivision, including certification of persons who
are qualified to perform this function.
new text end

new text begin (d) To claim a valuation reduction under this subdivision, the owner of the
commercial property must obtain a certification of the level of qualification determined
under paragraph (b), which must be prepared by a person certified as provided in
paragraph (c). The property owner must furnish this certification to the assessor by May 1
of the assessment year in order to qualify for the valuation reduction for taxes payable in
the following year.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for assessments in 2006, taxes
payable in 2007, and thereafter.
new text end

Sec. 33.

new text begin [273.1115] AGGREGATE RESOURCE PRESERVATION PROPERTY
TAX LAW.
new text end

new text begin Subdivision 1. new text end

new text begin Requirements. new text end

new text begin Real estate is entitled to valuation under this section
only if all of the following requirements are met:
new text end

new text begin (1) the property is classified 1a, 1b, 2a, or 2b property under section 273.13,
subdivisions 22 and 23;
new text end

new text begin (2) the property is at least ten contiguous acres, when the application is filed under
subdivision 2;
new text end

new text begin (3) the owner has filed a completed application for deferment as specified in
subdivision 2 with the county assessor in the county in which the property is located;
new text end

new text begin (4) there are no delinquent taxes on the property; and
new text end

new text begin (5) a covenant on the land restricts its use as provided in subdivision 2, clause (4).
new text end

new text begin Subd. 2. new text end

new text begin Application. new text end

new text begin Application for valuation deferment under this section
must be filed by May 1 of the assessment year. Any application filed and granted
continues in effect for subsequent years until the property no longer qualifies, provided
that supplemental affidavits under subdivision 6 are timely filed. The application must
be filed with the assessor of the county in which the real property is located on such
form as may be prescribed by the commissioner of revenue. The application must be
executed and acknowledged in the manner required by law to execute and acknowledge a
deed and must contain at least the following information and any other information the
commissioner deems necessary:
new text end

new text begin (1) the legal description of the area;
new text end

new text begin (2) the name and address of owner;
new text end

new text begin (3) a copy of the affidavit filed under section 273.13, subdivision 23, paragraph (h),
in the case of property classified class 2b, clause (5); or in the case of property classified
1a, 1b, 2a, and 2b, clauses (1) to (3), the application must include a similar document with
the same information as contained in the affidavit under section 273.13, subdivision 23,
paragraph (h); and
new text end

new text begin (4) a statement of proof from the owner that the land contains a restrictive covenant
limiting its use for the property's surface to that which exists on the date of the application
and limiting its future use to the preparation and removal of the aggregate commercial
deposit under its surface.
new text end

new text begin To qualify under this clause, the covenant must be binding on the owner or the
owner's successor or assignee, and run with the land, except as provided in subdivision 4
allowing for the cancellation of the covenant under certain conditions.
new text end

new text begin Subd. 3. new text end

new text begin Determination of value. new text end

new text begin Upon timely application by the owner as
provided in subdivision 2, notwithstanding sections 272.03, subdivision 8, and 273.11,
the value of any qualifying land described in subdivision 2 must be valued as if it were
agricultural property, using a per acre valuation equal to the current year's per acre
valuation of agricultural land in the county. The assessor shall not consider any additional
value resulting from potential alternative and future uses of the property. The buildings
located on the land shall be valued by the assessor in the normal manner.
new text end

new text begin Subd. 4. new text end

new text begin Cancellation of covenant. new text end

new text begin The covenant required under subdivision
2 may be canceled in two ways:
new text end

new text begin (1) by the owner beginning with the next subsequent assessment year provided
that the additional taxes as determined under subdivision 5 are paid by the owner at the
time of cancellation; and
new text end

new text begin (2) by the city or town in which the property is located beginning with the next
subsequent assessment year, if the city council or town board:
new text end

new text begin (i) changes the conditional use of the property;
new text end

new text begin (ii) revokes the mining permit; or
new text end

new text begin (iii) changes the zoning to disallow mining.
new text end

new text begin No additional taxes are imposed on the property under this clause.
new text end

new text begin Subd. 4a. new text end

new text begin County termination. new text end

new text begin Within two years of the effective date of this
section, a county may, following notice and public hearing, terminate application of this
section in the county. The termination is effective upon adoption of a resolution of the
county board. A termination applies prospectively and does not affect property enrolled
under this section prior to the termination date. A county may reauthorize application of
this section by a resolution of the county board revoking the termination.
new text end

new text begin Subd. 5. new text end

new text begin Additional taxes. new text end

new text begin When real property which has been valued and assessed
under this section no longer qualifies, the portion of the land classified under subdivision
1, clause (1), is subject to additional taxes. The additional tax amount is determined by:
new text end

new text begin (1) computing the difference between (i) the current year's taxes determined in
accordance with subdivision 5, and (ii) an amount as determined by the assessor based
upon the property's current year's estimated market value of like real estate at its highest
and best use and the appropriate local tax rate; and
new text end

new text begin (2) multiplying the amount determined in clause (1) by the number of years the
land was in the program under this section.
new text end

new text begin The current year's estimated market value as determined by the assessor must not
exceed the market value that would result if the property was sold in an arms-length
transaction and must not be greater than it would have been had the actual bona fide sale
price of the property been used in lieu of that market value. The additional taxes must be
extended against the property on the tax list for the current year, except that interest or
penalties must not be levied on such additional taxes if timely paid.
new text end

new text begin The additional tax under this subdivision must not be imposed on that portion of the
property which has actively been mined and has been removed from the program based
upon the supplemental affidavits filed under subdivision 6.
new text end

new text begin Subd. 6. new text end

new text begin Supplemental affidavits; mining activity on land. new text end

new text begin When any portion
of the property begins to be actively mined, the owner must file a supplemental affidavit
within 60 days from the day any aggregate is removed stating the number of acres of the
property that is actively being mined. The acres actively being mined shall be (1) valued
and classified under section 273.13, subdivision 24, in the next subsequent assessment
year, and (2) removed from the aggregate resource preservation property tax program
under this section. The additional taxes under subdivision 5 must not be imposed on
the acres that are actively being mined and have been removed from the program under
this section.
new text end

new text begin Copies of the original affidavit and all supplemental affidavits must be filed with the
county assessor, the local zoning administrator, and the Department of Natural Resources,
Division of Land and Minerals. A supplemental affidavit must be filed each time a
subsequent portion of the property is actively mined, provided that the minimum acreage
change is five acres, even if the actual mining activity constitutes less than five acres.
Failure to file the affidavits timely shall result in the property losing its valuation deferment
under this section, and additional taxes must be imposed as calculated under subdivision 5.
new text end

new text begin Subd. 7. new text end

new text begin Lien. new text end

new text begin The additional tax imposed by this section is a lien upon the property
assessed to the same extent and for the same duration as other taxes imposed upon
property within this state and, when collected, must be distributed in the manner provided
by law for the collection and distribution of other property taxes.
new text end

new text begin Subd. 8. new text end

new text begin Continuation of tax treatment upon sale. new text end

new text begin When real property qualifying
under subdivision 1 is sold, additional taxes must not be extended against the property
if the property continues to qualify under subdivision 1, and the new owner files an
application with the assessor for continued deferment within 30 days after the sale.
new text end

new text begin Subd. 9. new text end

new text begin Definitions. new text end

new text begin For purposes of this section, "commercial aggregate deposit"
and "actively mined" have the meanings given them in section 273.13, subdivision 23,
paragraph (h).
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes levied in 2005, payable
in 2006, and thereafter, except that for the 2005 assessment year, the application date
under subdivision 4 shall be September 1, 2005, and subdivision 4a is effective the day
following final enactment.
new text end

Sec. 34.

new text begin [273.1116] HOMESTEAD RESORTS; VALUATION AND DEFERMENT.
new text end

new text begin Subdivision 1. new text end

new text begin Requirements. new text end

new text begin Real property qualifying for classification as class
1c under section 273.13, subdivision 22, paragraph (c), is entitled to valuation and tax
deferment under this section, provided that if part of a resort is not classified as class 1c,
only that portion of the value of the property that is classified as class 1c property qualifies
under this section.
new text end

new text begin Subd. 2. new text end

new text begin Determination of value. new text end

new text begin Upon timely application by the owner, as
provided in subdivision 4, the value of real property described in subdivision 1 must
be determined by the assessor solely with reference to its classification value as class
1c property, notwithstanding sections 272.03, subdivision 8, and 273.11. The owner
must furnish information on the income generated by the property and other information
required by the assessor to determine the value of the property. The assessor shall not
consider any added values resulting from other factors.
new text end

new text begin Subd. 3. new text end

new text begin Separate determination of market value and tax. new text end

new text begin The assessor shall,
however, make a separate determination of the market value of the real estate. The
assessor shall record on the property assessment records the tax based upon the appropriate
local tax rate applicable to the property in the taxing district.
new text end

new text begin Subd. 4. new text end

new text begin Application. new text end

new text begin Application for deferment of taxes and assessment under
this section must be filed by May 1 of the year prior to the year in which the taxes are
payable. The application must be filed with the assessor of the taxing district in which
the real property is located on a form prescribed by the commissioner of revenue. The
assessor may require proof by affidavit or otherwise that the property qualifies under
subdivision 1. An application approved by the assessor continues in effect for subsequent
years until the property no longer qualifies under subdivision 1.
new text end

new text begin Subd. 5. new text end

new text begin Additional taxes. new text end

new text begin When real property valued and assessed under this
section no longer qualifies under subdivision 1, the portion no longer qualifying is subject
to additional taxes, in the amount equal to the difference between the taxes determined in
accordance with subdivision 2, and the amount determined under subdivision 3, provided,
however, that the amount determined under subdivision 3 must not be greater than it
would have been had the actual bona fide sale price of the real property at an arms-length
transaction been used in lieu of the market value determined under subdivision 3. The
additional taxes must be extended against the property on the tax list for the current year,
except that no interest or penalties may be levied on the additional taxes if timely paid,
and except that the additional taxes must only be levied with respect to the last seven years
that the property has been valued and assessed under this section.
new text end

new text begin Subd. 6. new text end

new text begin Lien. new text end

new text begin The tax imposed by this section is a lien on the property assessed
to the same extent and for the same duration as other taxes imposed on property within
this state. The tax must be annually extended by the county auditor and when payable
must be collected and distributed in the manner provided by law for the collection and
distribution of other property taxes.
new text end

new text begin Subd. 7. new text end

new text begin Special local assessments. new text end

new text begin The payment of special local assessments
levied after June 30, 2005, for improvements made to any real property described in
subdivision 2, together with the interest thereon must, on timely application under
subdivision 4, be deferred as long as the property qualifies under subdivision 1. If
special assessments against the property have been deferred under this subdivision, the
governmental unit shall file with the county recorder in the county in which the property is
located a certificate containing the legal description of the affected property and of the
amount deferred. When the property no longer qualifies under subdivision 1, all deferred
special assessments plus interest are payable in equal installments spread over the time
remaining until the last maturity date of the bonds issued to finance the improvement
for which the assessments were levied. If the bonds have matured, the deferred special
assessments plus interest are payable within 90 days. The provisions of section 429.061,
subdivision 2, apply to the collection of these installments. Penalty must not be levied
on the special assessments if timely paid.
new text end

new text begin Subd. 8. new text end

new text begin Continuation of tax treatment upon sale. new text end

new text begin When real property qualifying
under subdivision 1 is sold, no additional taxes or deferred special assessments plus
interest may be extended against the property if:
new text end

new text begin (1) the property continues to qualify pursuant to subdivision 1; and
new text end

new text begin (2) the new owner files an application for continued deferment within 30 days after
the sale.
new text end

new text begin Subd. 9. new text end

new text begin Applicability of special assessment provisions. new text end

new text begin This section applies to
special local assessments levied after June 30, 2005, and payable in the years thereafter,
but shall not apply to any special assessments levied at any time by a county or district
court under the provisions of chapter 116A.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes levied in 2005, payable in
2006, and thereafter. For applications for taxes payable in 2006 only, the application
deadline in subdivision 4 is extended to August 1, 2005.
new text end

Sec. 35.

Minnesota Statutes 2004, section 273.112, subdivision 3, is amended to read:

Subd. 3.

Requirements.

Real estate shall be entitled to valuation and tax deferment
under this section only if it is:

(a) actively and exclusively devoted to golf, skiing, lawn bowling, croquet, new text begin polo, new text end or
archery or firearms range recreational use or other recreational uses carried on at the
establishment;

(b) five acres in size or more, except in the case of a lawn bowling or croquet green
or an archery or firearms range;

(c)(1) operated by private individuals or, in the case of a lawn bowling or croquet
green, by private individuals or corporations, and open to the public; or

(2) operated by firms or corporations for the benefit of employees or guests; or

(3) operated by private clubs having a membership of 50 or more or open to the
public, provided that the club does not discriminate in membership requirements or
selection on the basis of sex or marital status; and

(d) made available for use in the case of real estate devoted to golf without
discrimination on the basis of sex during the time when the facility is open to use by the
public or by members, except that use for golf may be restricted on the basis of sex no
more frequently than one, or part of one, weekend each calendar month for each sex and
no more than two, or part of two, weekdays each week for each sex.

If a golf club membership allows use of golf course facilities by more than one adult
per membership, the use must be equally available to all adults entitled to use of the golf
course under the membership, except that use may be restricted on the basis of sex as
permitted in this section. Memberships that permit play during restricted times may be
allowed only if the restricted times apply to all adults using the membership. A golf club
may not offer a membership or golfing privileges to a spouse of a member that provides
greater or less access to the golf course than is provided to that person's spouse under the
same or a separate membership in that club, except that the terms of a membership may
provide that one spouse may have no right to use the golf course at any time while the
other spouse may have either limited or unlimited access to the golf course.

A golf club may have or create an individual membership category which entitles a
member for a reduced rate to play during restricted hours as established by the club. The
club must have on record a written request by the member for such membership.

A golf club that has food or beverage facilities or services must allow equal access
to those facilities and services for both men and women members in all membership
categories at all times. Nothing in this paragraph shall be construed to require service or
access to facilities to persons under the age of 21 years or require any act that would
violate law or ordinance regarding sale, consumption, or regulation of alcoholic beverages.

For purposes of this subdivision and subdivision 7a, discrimination means a pattern
or course of conduct and not linked to an isolated incident.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes levied in 2005, payable
in 2006, and thereafter.
new text end

Sec. 36.

Minnesota Statutes 2004, section 273.123, is amended by adding a subdivision
to read:

new text begin Subd. 8. new text end

new text begin Homestead property damaged by mold. new text end

new text begin (a) The owner of homestead
property not qualifying for an adjustment in valuation under subdivisions 1 to 5 must
receive a reduction in the amount of taxes payable on the property if all of the following
conditions are met:
new text end

new text begin (1) the owner of the property makes written application to the county assessor for
tax treatment under this subdivision;
new text end

new text begin (2) the county assessor determines that the homestead dwelling is uninhabitable
because all or part of it has been contaminated by mold; and
new text end

new text begin (3) the owner of the property makes written application to the county board.
new text end

new text begin (b) If all of the conditions in paragraph (a) are met, the county board must grant
a reduction in the amount of property tax payable on the homestead dwelling. The
reduction must be made for taxes payable in the year that the assessor determines that the
requirements in paragraph (a), clause (2), have been met and in the following year.
new text end

new text begin (c) The reduction in the amount of tax payable must be calculated based upon the
number of months that the homestead is uninhabitable. The amount of net tax due from
the taxpayer shall be multiplied by a fraction, the numerator of which is the number of
months the dwelling was occupied by that taxpayer, and the denominator of which is 12.
For purposes of this subdivision, if a homestead dwelling is occupied or used for a fraction
of a month, it is considered a month. "Net tax" is defined as the amount of tax after the
subtraction of all of the state paid property tax credits. If the reduction is granted after
all property taxes due for the year have been paid, the amount of the reduction must be
refunded to the taxpayer by the county treasurer as soon as practical.
new text end

new text begin (d) Any reductions or refunds under this section are not subject to approval by the
commissioner of revenue.
new text end

new text begin (e) A denial of a reduction or refund under this section by the county board may be
appealed to the tax court. If the county board takes no action on the application within 60
days after its receipt, it is considered a denial.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for property taxes payable in 2005
and thereafter.
new text end

Sec. 37.

Minnesota Statutes 2004, section 273.124, subdivision 1, is amended to read:

Subdivision 1.

General rule.

(a) Residential real estate that is occupied and used
for the purposes of a homestead by its owner, who must be a Minnesota resident, is
a residential homestead.

Agricultural land, as defined in section 273.13, subdivision 23, that is occupied and
used as a homestead by its owner, who must be a Minnesota resident, is an agricultural
homestead.

Dates for establishment of a homestead and homestead treatment provided to
particular types of property are as provided in this section.

Property held by a trustee under a trust is eligible for homestead classification if the
requirements under this chapter are satisfied.

The assessor shall require proof, as provided in subdivision 13, of the facts upon
which classification as a homestead may be determined. Notwithstanding any other law,
the assessor may at any time require a homestead application to be filed in order to verify
that any property classified as a homestead continues to be eligible for homestead status.
Notwithstanding any other law to the contrary, the Department of Revenue may, upon
request from an assessor, verify whether an individual who is requesting or receiving
homestead classification has filed a Minnesota income tax return as a resident for the most
recent taxable year for which the information is available.

When there is a name change or a transfer of homestead property, the assessor may
reclassify the property in the next assessment unless a homestead application is filed to
verify that the property continues to qualify for homestead classification.

(b) For purposes of this section, homestead property shall include property which
is used for purposes of the homestead but is separated from the homestead by a road,
street, lot, waterway, or other similar intervening property. The term "used for purposes
of the homestead" shall include but not be limited to uses for gardens, garages, or other
outbuildings commonly associated with a homestead, but shall not include vacant land
held primarily for future development. In order to receive homestead treatment for
the noncontiguous property, the owner must use the property for the purposes of the
homestead, and must apply to the assessor, both by the deadlines given in subdivision
9. After initial qualification for the homestead treatment, additional applications for
subsequent years are not required.

(c) Residential real estate that is occupied and used for purposes of a homestead by a
relative of the owner is a homestead but only to the extent of the homestead treatment
that would be provided if the related owner occupied the property. For purposes of this
paragraph and paragraph (g), "relative" means a parent, stepparent, child, stepchild,
grandparent, grandchild, brother, sister, uncle, aunt, nephew, or niece. This relationship
may be by blood or marriage. Property that has been classified as seasonal residential
recreational property at any time during which it has been owned by the current owner or
spouse of the current owner will not be reclassified as a homestead unless it is occupied as
a homestead by the owner; this prohibition also applies to property that, in the absence of
this paragraph, would have been classified as seasonal residential recreational property at
the time when the residence was constructed. Neither the related occupant nor the owner
of the property may claim a property tax refund under chapter 290A for a homestead
occupied by a relative. In the case of a residence located on agricultural land, only the
house, garage, and immediately surrounding one acre of land shall be classified as a
homestead under this paragraph, except as provided in paragraph (d).

(d) Agricultural property that is occupied and used for purposes of a homestead by
a relative of the owner, is a homestead, only to the extent of the homestead treatment
that would be provided if the related owner occupied the property, and only if all of the
following criteria are met:

(1) the relative who is occupying the agricultural property is a son, daughter,
grandson, granddaughter, father, or mother of the owner of the agricultural property or a
son, daughter, grandson, or granddaughter of the spouse of the owner of the agricultural
property;

(2) the owner of the agricultural property must be a Minnesota resident;

(3) the owner of the agricultural property must not receive homestead treatment on
any other agricultural property in Minnesota; and

(4) the owner of the agricultural property is limited to only one agricultural
homestead per family under this paragraph.

Neither the related occupant nor the owner of the property may claim a property
tax refund under chapter 290A for a homestead occupied by a relative qualifying under
this paragraph. For purposes of this paragraph, "agricultural property" means the house,
garage, other farm buildings and structures, and agricultural land.

Application must be made to the assessor by the owner of the agricultural property to
receive homestead benefits under this paragraph. The assessor may require the necessary
proof that the requirements under this paragraph have been met.

(e) In the case of property owned by a property owner who is married, the assessor
must not deny homestead treatment in whole or in part if only one of the spouses occupies
the property and the other spouse is absent due to: (1) marriage dissolution proceedings,
(2) legal separation, (3) employment or self-employment in another location, or (4) other
personal circumstances causing the spouses to live separately, not including an intent to
obtain two homestead classifications for property tax purposes. To qualify under clause
(3), the spouse's place of employment or self-employment must be at least 50 miles
distant from the other spouse's place of employment, and the homesteads must be at least
50 miles distant from each other. Homestead treatment, in whole or in part, shall not be
denied to the owner's spouse who previously occupied the residence with the owner if the
absence of the owner is due to one of the exceptions provided in this paragraph.

(f) The assessor must not deny homestead treatment in whole or in part if:

(1) in the case of a property owner who is not married, the owner is absent due to
residence in a nursing home, boarding care facility, or an elderly assisted living facility
property as defined in section 273.13, subdivision 25a, and the property is not otherwise
occupied; or

(2) in the case of a property owner who is married, the owner or the owner's spouse
or both are absent due to residence in a nursing home, boarding care facility, or an elderly
assisted living facility property as defined in section 273.13, subdivision 25a, and the
property is not occupied or is occupied only by the owner's spouse.

(g) If an individual is purchasing property with the intent of claiming it as a
homestead and is required by the terms of the financing agreement to have a relative
shown on the deed as a co-owner, the assessor shall allow a full homestead classification.
This provision only applies to first-time purchasers, whether married or single, or to a
person who had previously been married and is purchasing as a single individual for the
first time. The application for homestead benefits must be on a form prescribed by the
commissioner and must contain the data necessary for the assessor to determine if full
homestead benefits are warranted.

(h) If residential or agricultural real estate is occupied and used for purposes of a
homestead by a child of a deceased owner and the property is subject to jurisdiction of
probate court, the child shall receive relative homestead classification under paragraph (c)
or (d) to the same extent they would be entitled to it if the owner was still living, until
the probate is completed. For purposes of this paragraph, "child" includes a relationship
by blood or by marriage.

new text begin (i) If a single family home, duplex, or triplex classified as either residential
homestead or agricultural homestead is also used to provide licensed child care, the portion
of the property used for licensed child care must be classified as homestead property.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective in assessment year 2005 and
thereafter, for taxes payable in 2006, and thereafter.
new text end

Sec. 38.

Minnesota Statutes 2004, section 273.124, subdivision 14, is amended to read:

Subd. 14.

Agricultural homesteads; special provisions.

(a) Real estate of less than
ten acres that is the homestead of its owner must be classified as class 2a under section
273.13, subdivision 23, paragraph (a), if:

(1) the parcel on which the house is located is contiguous on at least two sides to (i)
agricultural land, (ii) land owned or administered by the United States Fish and Wildlife
Service, or (iii) land administered by the Department of Natural Resources on which in
lieu taxes are paid under sections 477A.11 to 477A.14;

(2) its owner also owns a noncontiguous parcel of agricultural land that is at least
20 acres;

(3) the noncontiguous land is located not farther than four townships or cities, or a
combination of townships or cities from the homestead; and

(4) the agricultural use value of the noncontiguous land and farm buildings is equal
to at least 50 percent of the market value of the house, garage, and one acre of land.

Homesteads initially classified as class 2a under the provisions of this paragraph shall
remain classified as class 2a, irrespective of subsequent changes in the use of adjoining
properties, as long as the homestead remains under the same ownership, the owner owns a
noncontiguous parcel of agricultural land that is at least 20 acres, and the agricultural use
value qualifies under clause (4). Homestead classification under this paragraph is limited
to property that qualified under this paragraph for the 1998 assessment.

(b)(i) Agricultural property consisting of at least 40 acres shall be classified as the
owner's homestead, to the same extent as other agricultural homestead property, if all
of the following criteria are met:

(1) the owner, the owner's spouse, deleted text begin or deleted text end the son or daughter of the owner or owner's
spouse, new text begin or the grandson or granddaughter of the owner or the owner's spouse, new text end is actively
farming the agricultural property, either on the person's own behalf as an individual or
on behalf of a partnership operating a family farm, family farm corporation, joint family
farm venture, or limited liability company of which the person is a partner, shareholder, or
member;

(2) both the owner of the agricultural property and the person who is actively
farming the agricultural property under clause (1), are Minnesota residents;

(3) neither the owner nor the spouse of the owner claims another agricultural
homestead in Minnesota; and

(4) neither the owner nor the person actively farming the property lives farther
than four townships or cities, or a combination of four townships or cities, from the
agricultural property, except that if the owner or the owner's spouse is required to live in
employer-provided housing, the owner or owner's spouse, whichever is actively farming
the agricultural property, may live more than four townships or cities, or combination of
four townships or cities from the agricultural property.

The relationship under this paragraph may be either by blood or marriage.

(ii) Real property held by a trustee under a trust is eligible for agricultural homestead
classification under this paragraph if the qualifications in clause (i) are met, except that
"owner" means the grantor of the trust.

(iii) Property containing the residence of an owner who owns qualified property
under clause (i) shall be classified as part of the owner's agricultural homestead, if that
property is also used for noncommercial storage or drying of agricultural crops.

(c) Noncontiguous land shall be included as part of a homestead under section
273.13, subdivision 23, paragraph (a), only if the homestead is classified as class 2a
and the detached land is located in the same township or city, or not farther than four
townships or cities or combination thereof from the homestead. Any taxpayer of these
noncontiguous lands must notify the county assessor that the noncontiguous land is part of
the taxpayer's homestead, and, if the homestead is located in another county, the taxpayer
must also notify the assessor of the other county.

(d) Agricultural land used for purposes of a homestead and actively farmed by a
person holding a vested remainder interest in it must be classified as a homestead under
section 273.13, subdivision 23, paragraph (a). If agricultural land is classified class 2a,
any other dwellings on the land used for purposes of a homestead by persons holding
vested remainder interests who are actively engaged in farming the property, and up to
one acre of the land surrounding each homestead and reasonably necessary for the use of
the dwelling as a home, must also be assessed class 2a.

(e) Agricultural land and buildings that were class 2a homestead property under
section 273.13, subdivision 23, paragraph (a), for the 1997 assessment shall remain
classified as agricultural homesteads for subsequent assessments if:

(1) the property owner abandoned the homestead dwelling located on the agricultural
homestead as a result of the April 1997 floods;

(2) the property is located in the county of Polk, Clay, Kittson, Marshall, Norman,
or Wilkin;

(3) the agricultural land and buildings remain under the same ownership for the
current assessment year as existed for the 1997 assessment year and continue to be used
for agricultural purposes;

(4) the dwelling occupied by the owner is located in Minnesota and is within 30
miles of one of the parcels of agricultural land that is owned by the taxpayer; and

(5) the owner notifies the county assessor that the relocation was due to the 1997
floods, and the owner furnishes the assessor any information deemed necessary by the
assessor in verifying the change in dwelling. Further notifications to the assessor are not
required if the property continues to meet all the requirements in this paragraph and any
dwellings on the agricultural land remain uninhabited.

(f) Agricultural land and buildings that were class 2a homestead property under
section 273.13, subdivision 23, paragraph (a), for the 1998 assessment shall remain
classified agricultural homesteads for subsequent assessments if:

(1) the property owner abandoned the homestead dwelling located on the agricultural
homestead as a result of damage caused by a March 29, 1998, tornado;

(2) the property is located in the county of Blue Earth, Brown, Cottonwood,
LeSueur, Nicollet, Nobles, or Rice;

(3) the agricultural land and buildings remain under the same ownership for the
current assessment year as existed for the 1998 assessment year;

(4) the dwelling occupied by the owner is located in this state and is within 50 miles
of one of the parcels of agricultural land that is owned by the taxpayer; and

(5) the owner notifies the county assessor that the relocation was due to a March 29,
1998, tornado, and the owner furnishes the assessor any information deemed necessary by
the assessor in verifying the change in homestead dwelling. For taxes payable in 1999, the
owner must notify the assessor by December 1, 1998. Further notifications to the assessor
are not required if the property continues to meet all the requirements in this paragraph
and any dwellings on the agricultural land remain uninhabited.

(g) Agricultural property consisting of at least 40 acres of a family farm corporation,
joint family farm venture, family farm limited liability company, or partnership operating
a family farm as described under subdivision 8 shall be classified homestead, to the same
extent as other agricultural homestead property, if all of the following criteria are met:

(1) a shareholder, member, or partner of that entity is actively farming the
agricultural property;

(2) that shareholder, member, or partner who is actively farming the agricultural
property is a Minnesota resident;

(3) neither that shareholder, member, or partner, nor the spouse of that shareholder,
member, or partner claims another agricultural homestead in Minnesota; and

(4) that shareholder, member, or partner does not live farther than four townships or
cities, or a combination of four townships or cities, from the agricultural property.

Homestead treatment applies under this paragraph for property leased to a family
farm corporation, joint farm venture, limited liability company, or partnership operating a
family farm if legal title to the property is in the name of an individual who is a member,
shareholder, or partner in the entity.

(h) To be eligible for the special agricultural homestead under this subdivision, an
initial full application must be submitted to the county assessor where the property is
located. Owners and the persons who are actively farming the property shall be required
to complete only a one-page abbreviated version of the application in each subsequent
year provided that none of the following items have changed since the initial application:

(1) the day-to-day operation, administration, and financial risks remain the same;

(2) the owners and the persons actively farming the property continue to live within
the four townships or city criteria and are Minnesota residents;

(3) the same operator of the agricultural property is listed with the Farm Service
Agency;

(4) a Schedule F or equivalent income tax form was filed for the most recent year;

(5) the property's acreage is unchanged; and

(6) none of the property's acres have been enrolled in a federal or state farm program
since the initial application.

The owners and any persons who are actively farming the property must include
the appropriate Social Security numbers, and sign and date the application. If any of the
specified information has changed since the full application was filed, the owner must
notify the assessor, and must complete a new application to determine if the property
continues to qualify for the special agricultural homestead. The commissioner of revenue
shall prepare a standard reapplication form for use by the assessors.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for assessment year 2004 and
thereafter, for taxes payable in 2005 and thereafter.
new text end

Sec. 39.

Minnesota Statutes 2004, section 273.13, subdivision 22, is amended to read:

Subd. 22.

Class 1.

(a) Except as provided in subdivision 23 and in paragraphs (b)
and (c), real estate which is residential and used for homestead purposes is class 1a. In the
case of a duplex or triplex in which one of the units is used for homestead purposes, the
entire property is deemed to be used for homestead purposes. The market value of class 1a
property must be determined based upon the value of the house, garage, and land.

The first $500,000 of market value of class 1a property has a net class rate of
one percent of its market value; and the market value of class 1a property that exceeds
$500,000 has a class rate of 1.25 percent of its market value.

(b) Class 1b property includes homestead real estate or homestead manufactured
homes used for the purposes of a homestead by

(1) any person who is blind as defined in section 256D.35, or the blind person and
the blind person's spouse; or

(2) any person, hereinafter referred to as "veteran," who:

(i) served in the active military or naval service of the United States; and

(ii) is entitled to compensation under the laws and regulations of the United States
for permanent and total service-connected disability due to the loss, or loss of use, by
reason of amputation, ankylosis, progressive muscular dystrophies, or paralysis, of both
lower extremities, such as to preclude motion without the aid of braces, crutches, canes, or
a wheelchair; and

(iii) has acquired a special housing unit with special fixtures or movable facilities
made necessary by the nature of the veteran's disability, or the surviving spouse of the
deceased veteran for as long as the surviving spouse retains the special housing unit
as a homestead; or

(3) any person who is permanently and totally disabled.

Property is classified and assessed under clause (3) only if the government agency or
income-providing source certifies, upon the request of the homestead occupant, that the
homestead occupant satisfies the disability requirements of this paragraph.

Property is classified and assessed pursuant to clause (1) only if the commissioner of
revenue certifies to the assessor that the homestead occupant satisfies the requirements of
this paragraph.

Permanently and totally disabled for the purpose of this subdivision means a
condition which is permanent in nature and totally incapacitates the person from working
at an occupation which brings the person an income. The first $32,000 market value of
class 1b property has a net class rate of .45 percent of its market value. The remaining
market value of class 1b property has a class rate using the rates for class 1a or class 2a
property, whichever is appropriate, of similar market value.

(c) Class 1c property is commercial use real property that abuts a lakeshore line and
is devoted to temporary and seasonal residential occupancy for recreational purposes but
not devoted to commercial purposes for more than 250 days in the year preceding the
year of assessment, and that includes a portion used as a homestead by the owner, which
includes a dwelling occupied as a homestead by a shareholder of a corporation that owns
the resort, a partner in a partnership that owns the resort, or a member of a limited liability
company that owns the resort even if the title to the homestead is held by the corporation,
partnership, or limited liability company. For purposes of this clause, property is devoted
to a commercial purpose on a specific day if any portion of the property, excluding
the portion used exclusively as a homestead, is used for residential occupancy and a
fee is charged for residential occupancy. The first deleted text begin $500,000 deleted text end new text begin $600,000 new text end of market value
of class 1c property has a class rate of deleted text begin one deleted text end new text begin 0.55 new text end percent, new text begin the market value that exceeds
$600,000 but does not exceed $1,600,000 has a class rate of one percent, new text end and the remaining
market value of deleted text begin class 1c deleted text end new text begin the new text end property deleted text begin has a class rate of one percent, with the following
limitation: the area of the property must not exceed 100 feet of lakeshore footage for
each cabin or campsite located on the property up to a total of 800 feet and 500 feet in
depth, measured away from the lakeshore deleted text end new text begin is classified as class 4c new text end . If any portion of the
class 1c resort property is classified as class 4c under subdivision 25, the entire property
must meet the requirements of subdivision 25, paragraph (d), clause (1), to qualify for
class 1c treatment under this paragraph.

(d) Class 1d property includes structures that meet all of the following criteria:

(1) the structure is located on property that is classified as agricultural property under
section 273.13, subdivision 23;

(2) the structure is occupied exclusively by seasonal farm workers during the time
when they work on that farm, and the occupants are not charged rent for the privilege of
occupying the property, provided that use of the structure for storage of farm equipment
and produce does not disqualify the property from classification under this paragraph;

(3) the structure meets all applicable health and safety requirements for the
appropriate season; and

(4) the structure is not salable as residential property because it does not comply
with local ordinances relating to location in relation to streets or roads.

The market value of class 1d property has the same class rates as class 1a property
under paragraph (a).

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes levied in 2005, payable
in 2006, and thereafter.
new text end

Sec. 40.

Minnesota Statutes 2004, section 273.13, subdivision 23, is amended to read:

Subd. 23.

Class 2.

(a) Class 2a property is agricultural land including any
improvements that is homesteaded. The market value of the house and garage and
immediately surrounding one acre of land has the same class rates as class 1a property
under subdivision 22. The value of the remaining land including improvements up to and
including $600,000 market value has a net class rate of 0.55 percent of market value.
The remaining property over $600,000 market value has a class rate of one percent of
market value.

(b) Class 2b property is (1) real estate, rural in character and used exclusively for
growing trees for timber, lumber, and wood and wood products; (2) real estate that is not
improved with a structure and is used exclusively for growing trees for timber, lumber, and
wood and wood products, if the owner has participated or is participating in a cost-sharing
program for afforestation, reforestation, or timber stand improvement on that particular
property, administered or coordinated by the commissioner of natural resources; (3) real
estate that is nonhomestead agricultural land; deleted text begin or deleted text end (4) a landing area or public access area of
a privately owned public use airport new text begin ; or (5) land with a commercial aggregate deposit that
is not actively being mined and is not otherwise classified as class 2a or 2b, clauses (1) to
(3) new text end . Class 2b property has a net class rate of one percent of market value.

(c) Agricultural land as used in this section means contiguous acreage of ten acres or
more, used during the preceding year for agricultural purposes. "Agricultural purposes" as
used in this section means the raising or cultivation of agricultural products. "Agricultural
purposes" also includes enrollment in the Reinvest in Minnesota program under sections
103F.501 to 103F.535 or the federal Conservation Reserve Program as contained in Public
Law 99-198 if the property was classified as agricultural (i) under this subdivision for
the assessment year 2002 or (ii) in the year prior to its enrollment. Contiguous acreage
on the same parcel, or contiguous acreage on an immediately adjacent parcel under the
same ownership, may also qualify as agricultural land, but only if it is pasture, timber,
waste, unusable wild land, or land included in state or federal farm programs. Agricultural
classification for property shall be determined excluding the house, garage, and
immediately surrounding one acre of land, and shall not be based upon the market value of
any residential structures on the parcel or contiguous parcels under the same ownership.

(d) Real estate, excluding the house, garage, and immediately surrounding one acre
of land, of less than ten acres which is exclusively and intensively used for raising or
cultivating agricultural products, shall be considered as agricultural land.

Land shall be classified as agricultural even if all or a portion of the agricultural use
of that property is the leasing to, or use by another person for agricultural purposes.

Classification under this subdivision is not determinative for qualifying under
section 273.111.

The property classification under this section supersedes, for property tax purposes
only, any locally administered agricultural policies or land use restrictions that define
minimum or maximum farm acreage.

(e) The term "agricultural products" as used in this subdivision includes production
for sale of:

(1) livestock, dairy animals, dairy products, poultry and poultry products, fur-bearing
animals, horticultural and nursery stock, fruit of all kinds, vegetables, forage, grains,
bees, and apiary products by the owner;

(2) fish bred for sale and consumption if the fish breeding occurs on land zoned
for agricultural use;

(3) the commercial boarding of horses if the boarding is done in conjunction with
raising or cultivating agricultural products as defined in clause (1);

(4) property which is owned and operated by nonprofit organizations used for
equestrian activities, excluding racing;

(5) game birds and waterfowl bred and raised for use on a shooting preserve licensed
under section 97A.115;

(6) insects primarily bred to be used as food for animals;

(7) trees, grown for sale as a crop, and not sold for timber, lumber, wood, or wood
products new text begin , except that short rotation woody crops that are cultivated using agricultural
practices on land that had previously been assessed as agricultural land to produce timber
or forest products are agricultural products new text end ; and

(8) maple syrup taken from trees grown by a person licensed by the Minnesota
Department of Agriculture under chapter 28A as a food processor.

(f) If a parcel used for agricultural purposes is also used for commercial or industrial
purposes, including but not limited to:

(1) wholesale and retail sales;

(2) processing of raw agricultural products or other goods;

(3) warehousing or storage of processed goods; and

(4) office facilities for the support of the activities enumerated in clauses (1), (2),
and (3),

the assessor shall classify the part of the parcel used for agricultural purposes as class
1b, 2a, or 2b, whichever is appropriate, and the remainder in the class appropriate to its
use. The grading, sorting, and packaging of raw agricultural products for first sale is
considered an agricultural purpose. A greenhouse or other building where horticultural
or nursery products are grown that is also used for the conduct of retail sales must be
classified as agricultural if it is primarily used for the growing of horticultural or nursery
products from seed, cuttings, or roots and occasionally as a showroom for the retail sale of
those products. Use of a greenhouse or building only for the display of already grown
horticultural or nursery products does not qualify as an agricultural purpose.

The assessor shall determine and list separately on the records the market value of
the homestead dwelling and the one acre of land on which that dwelling is located. If any
farm buildings or structures are located on this homesteaded acre of land, their market
value shall not be included in this separate determination.

(g) To qualify for classification under paragraph (b), clause (4), a privately owned
public use airport must be licensed as a public airport under section 360.018. For purposes
of paragraph (b), clause (4), "landing area" means that part of a privately owned public use
airport properly cleared, regularly maintained, and made available to the public for use by
aircraft and includes runways, taxiways, aprons, and sites upon which are situated landing
or navigational aids. A landing area also includes land underlying both the primary surface
and the approach surfaces that comply with all of the following:

(i) the land is properly cleared and regularly maintained for the primary purposes of
the landing, taking off, and taxiing of aircraft; but that portion of the land that contains
facilities for servicing, repair, or maintenance of aircraft is not included as a landing area;

(ii) the land is part of the airport property; and

(iii) the land is not used for commercial or residential purposes.

The land contained in a landing area under paragraph (b), clause (4), must be described
and certified by the commissioner of transportation. The certification is effective until
it is modified, or until the airport or landing area no longer meets the requirements of
paragraph (b), clause (4). For purposes of paragraph (b), clause (4), "public access area"
means property used as an aircraft parking ramp, apron, or storage hangar, or an arrival
and departure building in connection with the airport.

new text begin (h) To qualify for classification under paragraph (b), clause (5), the property must be
at least ten contiguous acres in size and the owner of the property must record with the
county recorder of the county in which the property is located an affidavit containing:
new text end

new text begin (1) a legal description of the property;
new text end

new text begin (2) a disclosure that the property contains a commercial aggregate deposit that is
not actively being mined;
new text end

new text begin (3) documentation that the conditional use under the county or local zoning
ordinance of this property is for mining; and
new text end

new text begin (4) documentation that a permit has been issued by the local unit of government
or the mining activity is allowed under local ordinance. The disclosure must include a
statement from a registered professional geologist, engineer, or soil scientist delineating
the deposit and certifying that it is a commercial aggregate deposit.
new text end

new text begin For purposes of this section and section 273.1115, "commercial aggregate deposit"
means a deposit that will yield crushed stone or sand and gravel that is suitable for use
as a construction aggregate; and "actively mined" means the removal of top soil and
overburden in preparation for excavation or excavation of a commercial deposit.
new text end

new text begin (i) When any portion of the property under this subdivision or section 273.13,
subdivision 22, begins to be actively mined, the owner must file a supplemental affidavit
within 60 days from the day any aggregate is removed stating the number of acres of the
property that is actively being mined. The acres actively being mined must be (1) valued
and classified under section 273.13, subdivision 24, in the next subsequent assessment
year, and (2) removed from the aggregate resource preservation property tax program
under section 273.1115, if the land was enrolled in that program. Copies of the original
affidavit and all supplemental affidavits must be filed with the county assessor, the local
zoning administrator, and the Department of Natural Resources, Division of Land and
Minerals. A supplemental affidavit must be filed each time a subsequent portion of the
property is actively mined, provided that the minimum acreage change is five acres, even
if the actual mining activity constitutes less than five acres.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes levied in 2005, payable
in 2006, and thereafter.
new text end

Sec. 41.

Minnesota Statutes 2004, section 273.13, subdivision 25, is amended to read:

Subd. 25.

Class 4.

(a) Class 4a is residential real estate containing four or more
units and used or held for use by the owner or by the tenants or lessees of the owner as a
residence for rental periods of 30 days or more. Class 4a also includes hospitals licensed
under sections 144.50 to 144.56, other than hospitals exempt under section 272.02, and
contiguous property used for hospital purposes, without regard to whether the property has
been platted or subdivided. The market value of class 4a property has a class rate of 1.8
percent for taxes payable in 2002, 1.5 percent for taxes payable in 2003, and 1.25 percent
for taxes payable in 2004 and thereafter, except that class 4a property consisting of a
structure for which construction commenced after June 30, 2001, has a class rate of 1.25
percent of market value for taxes payable in 2003 and subsequent years.

(b) Class 4b includes:

(1) residential real estate containing less than four units that does not qualify as class
4bb, other than seasonal residential recreational property;

(2) manufactured homes not classified under any other provision;

(3) a dwelling, garage, and surrounding one acre of property on a nonhomestead
farm classified under subdivision 23, paragraph (b) containing two or three units; and

(4) unimproved property that is classified residential as determined under subdivision
33.

The market value of class 4b property has a class rate of 1.5 percent for taxes
payable in 2002, and 1.25 percent for taxes payable in 2003 and thereafter.

(c) Class 4bb includes:

(1) nonhomestead residential real estate containing one unit, other than seasonal
residential recreational property; and

(2) a single family dwelling, garage, and surrounding one acre of property on a
nonhomestead farm classified under subdivision 23, paragraph (b).

Class 4bb property has the same class rates as class 1a property under subdivision 22.

Property that has been classified as seasonal residential recreational property at
any time during which it has been owned by the current owner or spouse of the current
owner does not qualify for class 4bb.

(d) Class 4c property includes:

(1) except as provided in subdivision 22, paragraph (c), real property devoted to
temporary and seasonal residential occupancy for recreation purposes, including real
property devoted to temporary and seasonal residential occupancy for recreation purposes
and not devoted to commercial purposes for more than 250 days in the year preceding
the year of assessment. For purposes of this clause, property is devoted to a commercial
purpose on a specific day if any portion of the property is used for residential occupancy,
and a fee is charged for residential occupancy. In order for a property to be classified as
class 4c, seasonal residential recreational for commercial purposes, at least 40 percent of
the annual gross lodging receipts related to the property must be from business conducted
during 90 consecutive days and either (i) at least 60 percent of all paid bookings by
lodging guests during the year must be for periods of at least two consecutive nights; or
(ii) at least 20 percent of the annual gross receipts must be from charges for rental of fish
houses, boats and motors, snowmobiles, downhill or cross-country ski equipment, or
charges for marina services, launch services, and guide services, or the sale of bait and
fishing tackle. For purposes of this determination, a paid booking of five or more nights
shall be counted as two bookings. Class 4c also includes commercial use real property
used exclusively for recreational purposes in conjunction with class 4c property devoted
to temporary and seasonal residential occupancy for recreational purposes, up to a total
of two acres, provided the property is not devoted to commercial recreational use for
more than 250 days in the year preceding the year of assessment and is located within
two miles of the class 4c property with which it is used. Class 4c property classified in
this clause also includes the remainder of class 1c resorts provided that the entire property
including that portion of the property classified as class 1c also meets the requirements for
class 4c under this clause; otherwise the entire property is classified as class 3. Owners
of real property devoted to temporary and seasonal residential occupancy for recreation
purposes and all or a portion of which was devoted to commercial purposes for not more
than 250 days in the year preceding the year of assessment desiring classification as class
1c or 4c, must submit a declaration to the assessor designating the cabins or units occupied
for 250 days or less in the year preceding the year of assessment by January 15 of the
assessment year. Those cabins or units and a proportionate share of the land on which
they are located will be designated class 1c or 4c as otherwise provided. The remainder of
the cabins or units and a proportionate share of the land on which they are located will
be designated as class 3a. The owner of property desiring designation as class 1c or 4c
property must provide guest registers or other records demonstrating that the units for
which class 1c or 4c designation is sought were not occupied for more than 250 days in
the year preceding the assessment if so requested. The portion of a property operated as
a (1) restaurant, (2) bar, (3) gift shop, and (4) other nonresidential facility operated on a
commercial basis not directly related to temporary and seasonal residential occupancy
for recreation purposes shall not qualify for class 1c or 4c;

(2) qualified property used as a golf course if:

(i) it is open to the public on a daily fee basis. It may charge membership fees or
dues, but a membership fee may not be required in order to use the property for golfing,
and its green fees for golfing must be comparable to green fees typically charged by
municipal courses; and

(ii) it meets the requirements of section 273.112, subdivision 3, paragraph (d).

A structure used as a clubhouse, restaurant, or place of refreshment in conjunction
with the golf course is classified as class 3a property;

(3) real property up to a maximum of one acre of land owned by a nonprofit
community service oriented organization; provided that the property is not used for a
revenue-producing activity for more than six days in the calendar year preceding the year
of assessment and the property is not used for residential purposes on either a temporary
or permanent basis. For purposes of this clause, a "nonprofit community service oriented
organization" means any corporation, society, association, foundation, or institution
organized and operated exclusively for charitable, religious, fraternal, civic, or educational
purposes, and which is exempt from federal income taxation pursuant to section 501(c)(3),
(10), or (19) of the Internal Revenue Code of 1986, as amended through December 31,
1990. For purposes of this clause, "revenue-producing activities" shall include but not be
limited to property or that portion of the property that is used as an on-sale intoxicating
liquor or 3.2 percent malt liquor establishment licensed under chapter 340A, a restaurant
open to the public, bowling alley, a retail store, gambling conducted by organizations
licensed under chapter 349, an insurance business, or office or other space leased or
rented to a lessee who conducts a for-profit enterprise on the premises. Any portion of
the property which is used for revenue-producing activities for more than six days in the
calendar year preceding the year of assessment shall be assessed as class 3a. The use of
the property for social events open exclusively to members and their guests for periods of
less than 24 hours, when an admission is not charged nor any revenues are received by the
organization shall not be considered a revenue-producing activity;

(4) postsecondary student housing of not more than one acre of land that is owned by
a nonprofit corporation organized under chapter 317A and is used exclusively by a student
cooperative, sorority, or fraternity for on-campus housing or housing located within two
miles of the border of a college campus;

(5) manufactured home parks as defined in section 327.14, subdivision 3;

(6) real property that is actively and exclusively devoted to indoor fitness, health,
social, recreational, and related uses, is owned and operated by a not-for-profit corporation,
and is located within the metropolitan area as defined in section 473.121, subdivision 2;

(7) a leased or privately owned noncommercial aircraft storage hangar not exempt
under section 272.01, subdivision 2, and the land on which it is located, provided that:

(i) the land is on an airport owned or operated by a city, town, county, Metropolitan
Airports Commission, or group thereof; and

(ii) the land lease, or any ordinance or signed agreement restricting the use of the
leased premise, prohibits commercial activity performed at the hangar.

If a hangar classified under this clause is sold after June 30, 2000, a bill of sale must
be filed by the new owner with the assessor of the county where the property is located
within 60 days of the sale; deleted text begin and
deleted text end

(8) new text begin a privately owned noncommercial aircraft storage hangar not exempt under
section 272.01, subdivision 2, and the land on which it is located, provided that:
new text end

new text begin (i) the land abuts a public airport; and
new text end

new text begin (ii) the owner of the aircraft storage hangar provides the assessor with a signed
agreement restricting the use of the premises, prohibiting commercial use or activity
performed at the hangar; and
new text end

new text begin (9) new text end residential real estate, a portion of which is used by the owner for homestead
purposes, and that is also a place of lodging, if all of the following criteria are met:

(i) rooms are provided for rent to transient guests that generally stay for periods
of 14 or fewer days;

(ii) meals are provided to persons who rent rooms, the cost of which is incorporated
in the basic room rate;

(iii) meals are not provided to the general public except for special events on fewer
than seven days in the calendar year preceding the year of the assessment; and

(iv) the owner is the operator of the property.

The market value subject to the 4c classification under this clause is limited to five rental
units. Any rental units on the property in excess of five, must be valued and assessed as
class 3a. The portion of the property used for purposes of a homestead by the owner must
be classified as class 1a property under subdivision 22.

Class 4c property has a class rate of 1.5 percent of market value, except that (i) each
parcel of seasonal residential recreational property not used for commercial purposes has
the same class rates as class 4bb property, (ii) manufactured home parks assessed under
clause (5) have the same class rate as class 4b property, (iii) commercial-use seasonal
residential recreational property has a class rate of one percent for the first $500,000 of
market value, which includes any market value receiving the new text begin 0.55 or new text end one percent rate
under subdivision 22, and 1.25 percent for the remaining market value, (iv) the market
value of property described in clause (4) has a class rate of one percent, (v) the market
value of property described in clauses (2) and (6) has a class rate of 1.25 percent, and (vi)
that portion of the market value of property in clause (8) qualifying for class 4c property
has a class rate of 1.25 percent.

new text begin (e) Class 4d property is qualifying low-income rental housing certified to the
assessor by the Housing Finance Agency under section 273.1321. Class 4d includes
land in proportion to the total market value of the building that is qualifying low-income
rental housing.
new text end

new text begin Class 4d property has a class rate of 0.55 percent for taxes payable in 2007 and
thereafter.
new text end

Sec. 42.

new text begin [273.1321] VALUATION OF LOW-INCOME RENTAL PROPERTY;
CAPITALIZED VALUE OF NET OPERATING INCOME.
new text end

new text begin Subdivision 1. new text end

new text begin Requirement. new text end

new text begin Low-income rental property classified as class 4d
under section 273.13, subdivision 25, is entitled to valuation under this section if at least 75
percent of the units in the rental housing property meet any of the following qualifications:
new text end

new text begin (1) the units are subject to a housing assistance payments contract under section 8
of the United States Housing Act of 1937, as amended;
new text end

new text begin (2) the units are rent-restricted and income-restricted units of a qualified low-income
housing project receiving tax credits under section 42(g) of the Internal Revenue Code of
1986, as amended;
new text end

new text begin (3) the units are financed by the Rural Housing Service of the United States
Department of Agriculture and receive payments under the rental assistance program
pursuant to section 521(a) of the Housing Act of 1949, as amended; or
new text end

new text begin (4) the units are subject to rent and income restrictions under the terms of financial
assistance provided to the rental housing property by a federal, state, or local unit of
government as evidenced by a document recorded against the property.
new text end

new text begin The restrictions must require assisted units to be occupied by residents whose
household income at the time of initial occupancy does not exceed 60 percent of the
greater of area or state median income, adjusted for family size, as determined by the
United States Department of Housing and Urban Development. The restriction must also
require the rents for assisted units to not exceed 30 percent of 60 percent of the greater of
area or state median income, adjusted for family size, as determined by the United States
Department of Housing and Urban Development.
new text end

new text begin Subd. 2. new text end

new text begin Determination of value. new text end

new text begin (a) The value of any rental housing property
meeting the qualifications of subdivision 1 shall be determined, upon timely application
by the owner in the manner provided in subdivision 3, on the basis of the restricted use of
the property, notwithstanding sections 272.03, subdivision 8, and 273.11, by capitalizing
the net operating income prior to the payment of debt service.
new text end

new text begin (b) Net operating income prior to payment of debt service must be the amounts
shown in a financial statement prepared by an independent certified public accountant
or firm. The financial statement must show the revenues, expenses, cash flows, assets,
liabilities, and net assets for the property for which an application is made under this
section.
new text end

new text begin (c) The capitalization rate applied to net operating income shall be established
jointly by the commissioner and the Housing Finance Agency based on market data and
industry standards. The commissioner and the Housing Finance Agency shall jointly
establish separate rates based on types of rental housing properties and their locations.
new text end

new text begin Subd. 3. new text end

new text begin Application. new text end

new text begin (a) Application for assessment under this section must be
filed by February 28 of the levy year, or at a later date the Housing Finance Agency
deems practicable. The application must be filed with the Housing Finance Agency,
on a form prescribed by the agency, and must contain the information required by the
Housing Finance Agency.
new text end

new text begin (b) Each application must include:
new text end

new text begin (1) the property tax identification number;
new text end

new text begin (2) evidence that the property meets the requirements of subdivision 1; and
new text end

new text begin (3) a true and correct copy of the financial statement related to the property.
new text end

new text begin (c) The applicant must pay an application fee to be set by the Housing Finance
Agency. The application fee charged by the agency must approximately equal the costs
of processing and reviewing the applications. The fee must be deposited in the housing
development fund.
new text end

new text begin Subd. 4. new text end

new text begin Certification. new text end

new text begin By June 1 of each levy year, the Housing Finance Agency
must certify to local assessors the valuation, as determined under this section, of rental
properties that apply and are qualified for valuation under this section. In making the
certification, the Housing Finance Agency may rely on the application and supporting
information supplied by the property owner.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes levied in 2006, payable
in 2007, and thereafter.
new text end

Sec. 43.

new text begin [273.1322] VACANT COMMERCIAL-INDUSTRIAL PROPERTIES.
new text end

new text begin Subdivision 1. new text end

new text begin Authority. new text end

new text begin A city may establish, by ordinance, a program to
encourage redevelopment, provide for better utilization of commercial-industrial
property, and eliminate blighting influences by revoking the eligibility of individual
commercial-industrial properties to receive the credit authorized under section 273.1398,
subdivision 4. The program may revoke eligibility only if the property has been vacant, as
defined in subdivision 3, clauses (1) to (3), for three or more consecutive years prior to the
current assessment year, or under subdivision 3, clause (4), for five or more consecutive
years prior to the current assessment year.
new text end

new text begin Subd. 2. new text end

new text begin Minimum requirements. new text end

new text begin The program must provide:
new text end

new text begin (1) standards for determining whether a property is vacant;
new text end

new text begin (2) written assessment notice by the city or county to the property owner informing
the owner that the property's eligibility will be revoked;
new text end

new text begin (3) opportunity for the property owner to appeal the revocation at the board of
equalization;
new text end

new text begin (4) timely notice to the county assessor of the property's eligibility revocation, if the
city has a city assessor and the city assessor has revoked the property's eligibility; and
new text end

new text begin (5) any other provisions the city determines are necessary or appropriate to the
operation of the program to achieve its purposes.
new text end

new text begin Subd. 3. new text end

new text begin Definition of vacant. new text end

new text begin A program established under this section may
provide that a property is vacant if the property is:
new text end

new text begin (1) condemned, dangerous, or having multiple building code violations;
new text end

new text begin (2) condemned and illegally occupied;
new text end

new text begin (3) either occupied or unoccupied, during which time the enforcement officer for the
municipality has issued multiple orders to correct nuisance conditions; or
new text end

new text begin (4) unoccupied and not utilized for a commercial or industrial purpose.
new text end

new text begin Subd. 4. new text end

new text begin Notice to property owner. new text end

new text begin The municipality shall give notice to the
property owner requiring that any conditions in subdivision 3, clauses (1) to (3), be
remedied, and that the property be occupied and used for a commercial or industrial
purpose for at least 180 days during the next 12-month period, or else the property may
cease to be eligible for the credit under section 273.1398, subdivision 4.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes payable in 2007 and
thereafter.
new text end

Sec. 44.

Minnesota Statutes 2004, section 273.1384, subdivision 3, is amended to read:

Subd. 3.

Credit reimbursements.

new text begin (a) new text end The county auditor shall determine the tax
reductions allowed under this section within the county for each taxes payable year and
shall certify that amount to the commissioner of revenue as a part of the abstracts of tax
lists submitted by the county auditors under section 275.29.

new text begin (b) In the case of class 1a, class lc, or class 2a homestead property which is located
within a city, the county auditor shall determine whether the net tax on each parcel is less
than the applicable percentage of its taxable market value provided in this paragraph for
the year. For taxes payable in 2007 and 2008, if the net tax on the property is less than 0.7
percent of its taxable market value, the county auditor shall reduce the reimbursement to
the county and the city for the credit allowed under subdivision 1 by the amount of the
difference. For taxes payable in 2009 and 2010, if the net tax on the property is less than
0.8 percent of its taxable market value, the county auditor shall reduce the reimbursement
to the county and the city for the credit allowed under subdivision 1 by the amount of the
difference. For taxes payable in 2011 and 2012, if the net tax on the property is less than
0.9 percent of its taxable market value, the county auditor shall reduce the reimbursement
to the county and the city for the credit allowed under subdivision 1 by the amount of the
difference. For taxes payable in 2013 and thereafter, if the net tax on the property is
less than one percent of its taxable market value, the county auditor shall reduce the
reimbursement to the county and the city for the credit allowed under subdivision 1 by the
amount of the difference. The market value credit reimbursement cannot be less than zero.
new text end

new text begin (c) new text end Any prior year adjustments shall also be certified on the abstracts of tax lists. The
commissioner shall review the certifications for accuracy, and may make such changes
as are deemed necessary, or return the certification to the county auditor for correction.
new text begin If there is no reduction of the reimbursements under paragraph (b), new text end the credits under this
section must be used to proportionately reduce the net tax capacity-based property tax
payable to each local taxing jurisdiction as provided in section 273.1393. new text begin If there is a
reduction under paragraph (b), the reimbursements paid to the city and county must be
reduced in proportion to the amount of their levies.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes levied in 2006, payable
in 2007, and thereafter.
new text end

Sec. 45.

new text begin [273.323] EFFECTIVE DATE FOR RULES FOR VALUATION OF
ELECTRIC AND TRANSMISSION PIPELINE UTILITY PROPERTY.
new text end

new text begin Rules adopted by the commissioner that prescribe the method of valuing property of
electric and transmission pipeline utilities may not take effect before the end of the regular
legislative session in the calendar year following adoption of the rules.
new text end

new text begin EFFECTIVE DATE. new text end

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

Sec. 46.

Minnesota Statutes 2004, section 275.065, subdivision 3, is amended to read:

Subd. 3.

Notice of proposed property taxes.

(a) The county auditor shall prepare
and the county treasurer shall deliver after November 10 and on or before November 24
each year, by first class mail to each taxpayer at the address listed on the county's current
year's assessment roll, a notice of proposed property taxes.

(b) The commissioner of revenue shall prescribe the form of the notice.

(c) The notice must inform taxpayers that it contains the amount of property taxes
each taxing authority proposes to collect for taxes payable the following year. In the case
of a town, or in the case of the state general tax, the final tax amount will be its proposed
tax. In the case of taxing authorities required to hold a public meeting under subdivision 6,
the notice must clearly state that each taxing authority, including regional library districts
established under section 134.201, and including the metropolitan taxing districts as
defined in paragraph (i), but excluding all other special taxing districts and towns, will
hold a public meeting to receive public testimony on the proposed budget and proposed or
final property tax levy, or, in case of a school district, on the current budget and proposed
property tax levy. It must clearly state the time and place of each taxing authority's
meeting, a telephone number for the taxing authority that taxpayers may call if they have
questions related to the notice, and an address where comments will be received by mail.

(d) The notice must state for each parcel:

(1) the market value of the property as determined under section 273.11, and used
for computing property taxes payable in the following year and for taxes payable in the
current year as each appears in the records of the county assessor on November 1 of the
current year; and, in the case of residential property, whether the property is classified as
homestead or nonhomestead. The notice must clearly inform taxpayers of the years to
which the market values apply and that the values are final values;

(2) the items listed below, shown separately by county, city or town, and state general
tax, net of the residential and agricultural homestead credit under section 273.1384, voter
approved school levy, other local school levy, and the sum of the special taxing districts,
and as a total of all taxing authorities:

(i) the actual tax for taxes payable in the current year; and

(ii) the proposed tax amount.

If the county levy under clause (2) includes an amount for a lake improvement
district as defined under sections 103B.501 to 103B.581, the amount attributable for that
purpose must be separately stated from the remaining county levy amount.

In the case of a town or the state general tax, the final tax shall also be its proposed
tax unless the town changes its levy at a special town meeting under section 365.52. If a
school district has certified under section 126C.17, subdivision 9, that a referendum will
be held in the school district at the November general election, the county auditor must
note next to the school district's proposed amount that a referendum is pending and that,
if approved by the voters, the tax amount may be higher than shown on the notice. In
the case of the city of Minneapolis, the levy for the Minneapolis Library Board and the
levy for Minneapolis Park and Recreation shall be listed separately from the remaining
amount of the city's levy. In the case of the city of St. Paul, the levy for the St. Paul
Library Agency must be listed separately from the remaining amount of the city's levy.
new text begin In the case of Ramsey County, any amount levied under section 134.07 may be listed
separately from the remaining amount of the county's levy. new text end In the case of a parcel where
tax increment or the fiscal disparities areawide tax under chapter 276A or 473F applies,
the proposed tax levy on the captured value or the proposed tax levy on the tax capacity
subject to the areawide tax must each be stated separately and not included in the sum of
the special taxing districts; and

(3) the increase or decrease between the total taxes payable in the current year and
the total proposed taxes, expressed as a percentage.

For purposes of this section, the amount of the tax on homesteads qualifying under
the senior citizens' property tax deferral program under chapter 290B is the total amount
of property tax before subtraction of the deferred property tax amount.

(e) The notice must clearly state that the proposed or final taxes do not include
the following:

(1) special assessments;

(2) levies approved by the voters after the date the proposed taxes are certified,
including bond referenda and school district levy referenda;

(3) a levy limit increase approved by the voters by the first Tuesday after the first
Monday in November of the levy year as provided under section 275.73;

(4) amounts necessary to pay cleanup or other costs due to a natural disaster
occurring after the date the proposed taxes are certified;

(5) amounts necessary to pay tort judgments against the taxing authority that become
final after the date the proposed taxes are certified; and

(6) the contamination tax imposed on properties which received market value
reductions for contamination.

(f) Except as provided in subdivision 7, failure of the county auditor to prepare or
the county treasurer to deliver the notice as required in this section does not invalidate the
proposed or final tax levy or the taxes payable pursuant to the tax levy.

(g) If the notice the taxpayer receives under this section lists the property as
nonhomestead, and satisfactory documentation is provided to the county assessor by the
applicable deadline, and the property qualifies for the homestead classification in that
assessment year, the assessor shall reclassify the property to homestead for taxes payable
in the following year.

(h) In the case of class 4 residential property used as a residence for lease or rental
periods of 30 days or more, the taxpayer must either:

(1) mail or deliver a copy of the notice of proposed property taxes to each tenant,
renter, or lessee; or

(2) post a copy of the notice in a conspicuous place on the premises of the property.

The notice must be mailed or posted by the taxpayer by November 27 or within
three days of receipt of the notice, whichever is later. A taxpayer may notify the county
treasurer of the address of the taxpayer, agent, caretaker, or manager of the premises to
which the notice must be mailed in order to fulfill the requirements of this paragraph.

(i) For purposes of this subdivision, subdivisions 5a and 6, "metropolitan special
taxing districts" means the following taxing districts in the seven-county metropolitan area
that levy a property tax for any of the specified purposes listed below:

(1) Metropolitan Council under section 473.132, 473.167, 473.249, 473.325,
473.446, 473.521, 473.547, or 473.834;

(2) Metropolitan Airports Commission under section 473.667, 473.671, or 473.672;
and

(3) Metropolitan Mosquito Control Commission under section 473.711.

For purposes of this section, any levies made by the regional rail authorities in the
county of Anoka, Carver, Dakota, Hennepin, Ramsey, Scott, or Washington under chapter
398A shall be included with the appropriate county's levy and shall be discussed at that
county's public hearing.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for notices for property taxes levied
in 2005, payable in 2006, and thereafter.
new text end

Sec. 47.

Minnesota Statutes 2004, section 275.065, is amended by adding a subdivision
to read:

new text begin Subd. 9. new text end

new text begin Aitkin county and school district hearing. new text end

new text begin Notwithstanding any other
law, Aitkin County and Independent School District No. 1, and the city of Aitkin, or any
two of them, may hold their initial public hearing jointly. The hearing must be held on
the second Tuesday of December each year. The advertisement required in subdivision
5a may be a joint advertisement. The hearing is otherwise subject to the requirements
of this section.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for hearings conducted in 2005
and subsequent years.
new text end

Sec. 48.

Minnesota Statutes 2004, section 275.065, is amended by adding a subdivision
to read:

new text begin Subd. 10. new text end

new text begin Nobles county; joint initial public hearing. new text end

new text begin Notwithstanding any other
law, Nobles County, the city of Worthington, and Independent School District No. 518,
Worthington, or any two of them, may hold their initial public hearing jointly. The hearing
must be held on the second Tuesday of December each year. The advertisement required
in subdivision 5a may be a joint advertisement. The hearing is otherwise subject to the
requirements of this section.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for hearings conducted in 2005
and subsequent years.
new text end

Sec. 49.

Minnesota Statutes 2004, section 275.066, is amended to read:

275.066 SPECIAL TAXING DISTRICTS; DEFINITION.

For the purposes of property taxation and property tax state aids, the term "special
taxing districts" includes the following entities:

(1) watershed districts under chapter 103D;

(2) sanitary districts under sections 115.18 to 115.37;

(3) regional sanitary sewer districts under sections 115.61 to 115.67;

(4) regional public library districts under section 134.201;

(5) park districts under chapter 398;

(6) regional railroad authorities under chapter 398A;

(7) hospital districts under sections 447.31 to 447.38;

(8) St. Cloud Metropolitan Transit Commission under sections 458A.01 to 458A.15;

(9) Duluth Transit Authority under sections 458A.21 to 458A.37;

(10) regional development commissions under sections 462.381 to 462.398;

(11) housing and redevelopment authorities under sections 469.001 to 469.047;

(12) port authorities under sections 469.048 to 469.068;

(13) economic development authorities under sections 469.090 to 469.1081;

(14) Metropolitan Council under sections 473.123 to 473.549;

(15) Metropolitan Airports Commission under sections 473.601 to 473.680;

(16) Metropolitan Mosquito Control Commission under sections 473.701 to 473.716;

(17) Morrison County Rural Development Financing Authority under Laws 1982,
chapter 437, section 1;

(18) Croft Historical Park District under Laws 1984, chapter 502, article 13, section
6;

(19) East Lake County Medical Clinic District under Laws 1989, chapter 211,
sections 1 to 6;

(20) Floodwood Area Ambulance District under Laws 1993, chapter 375, article
5, section 39;

(21) Middle Mississippi River Watershed Management Organization under sections
103B.211 and 103B.241;

(22) emergency medical services special taxing districts under section 144F.01;

(23) a county levying under the authority of section 103B.241, 103B.245, or
103B.251;

(24) Southern St. Louis County Special Taxing District; Chris Jensen Nursing Home
under Laws 2003, First Special Session chapter 21, article 4, section 12; deleted text begin and
deleted text end

(25) new text begin soil and water conservation districts under chapter 103C; and
new text end

new text begin (26) new text end any other political subdivision of the state of Minnesota, excluding counties,
school districts, cities, and towns, that has the power to adopt and certify a property tax
levy to the county auditor, as determined by the commissioner of revenue.

Sec. 50.

Minnesota Statutes 2004, section 275.70, subdivision 5, is amended to read:

Subd. 5.

Special levies.

"Special levies" means those portions of ad valorem taxes
levied by a local governmental unit for the following purposes or in the following manner:

(1) to pay the costs of the principal and interest on bonded indebtedness or to
reimburse for the amount of liquor store revenues used to pay the principal and interest
due on municipal liquor store bonds in the year preceding the year for which the levy
limit is calculated;

(2) to pay the costs of principal and interest on certificates of indebtedness issued for
any corporate purpose except for the following:

(i) tax anticipation or aid anticipation certificates of indebtedness;

(ii) certificates of indebtedness issued under sections 298.28 and 298.282;

(iii) certificates of indebtedness used to fund current expenses or to pay the costs of
extraordinary expenditures that result from a public emergency; or

(iv) certificates of indebtedness used to fund an insufficiency in tax receipts or
an insufficiency in other revenue sources;

(3) to provide for the bonded indebtedness portion of payments made to another
political subdivision of the state of Minnesota;

(4) to fund payments made to the Minnesota State Armory Building Commission
under section 193.145, subdivision 2, to retire the principal and interest on armory
construction bonds;

(5) property taxes approved by voters which are levied against the referendum
market value as provided under section 275.61;

(6) to fund matching requirements needed to qualify for federal or state grants or
programs to the extent that either (i) the matching requirement exceeds the matching
requirement in calendar year 2001, or (ii) it is a new matching requirement that did not
exist prior to 2002;

(7) to pay the expenses reasonably and necessarily incurred in preparing for or
repairing the effects of natural disaster including the occurrence or threat of widespread
or severe damage, injury, or loss of life or property resulting from natural causes, in
accordance with standards formulated by the Emergency Services Division of the state
Department of Public Safety, as allowed by the commissioner of revenue under section
275.74, subdivision 2;

(8) pay amounts required to correct an error in the levy certified to the county
auditor by a city or county in a levy year, but only to the extent that when added to the
preceding year's levy it is not in excess of an applicable statutory, special law or charter
limitation, or the limitation imposed on the governmental subdivision by sections 275.70
to 275.74 in the preceding levy year;

(9) to pay an abatement under section 469.1815;

(10) to pay any costs attributable to increases in the employer contribution rates
under chapter 353 that are effective after June 30, 2001;

(11) to pay the operating or maintenance costs of a county jail as authorized in
section 641.01 or 641.262, or of a correctional facility as defined in section 241.021,
subdivision 1, paragraph (f), to the extent that the county can demonstrate to the
commissioner of revenue that the amount has been included in the county budget as
a direct result of a rule, minimum requirement, minimum standard, or directive of the
Department of Corrections, or to pay the operating or maintenance costs of a regional jail
as authorized in section 641.262. For purposes of this clause, a district court order is
not a rule, minimum requirement, minimum standard, or directive of the Department of
Corrections. If the county utilizes this special levy, except to pay operating or maintenance
costs of a new regional jail facility under sections 641.262 to 641.264 which will not
replace an existing jail facility, any amount levied by the county in the previous levy year
for the purposes specified under this clause and included in the county's previous year's
levy limitation computed under section 275.71, shall be deducted from the levy limit
base under section 275.71, subdivision 2, when determining the county's current year
levy limitation. The county shall provide the necessary information to the commissioner
of revenue for making this determination;

(12) to pay for operation of a lake improvement district, as authorized under section
103B.555. If the county utilizes this special levy, any amount levied by the county in the
previous levy year for the purposes specified under this clause and included in the county's
previous year's levy limitation computed under section 275.71 shall be deducted from
the levy limit base under section 275.71, subdivision 2, when determining the county's
current year levy limitation. The county shall provide the necessary information to the
commissioner of revenue for making this determination;

(13) to repay a state or federal loan used to fund the direct or indirect required
spending by the local government due to a state or federal transportation project or other
state or federal capital project. This authority may only be used if the project is not a
local government initiative;

(14) to pay for court administration costs as required under section 273.1398,
subdivision 4b, less the (i) county's share of transferred fines and fees collected by the
district courts in the county for calendar year 2001 and (ii) the aid amount certified to be
paid to the county in 2004 under section 273.1398, subdivision 4c; however, for taxes
levied to pay for these costs in the year in which the court financing is transferred to the
state, the amount under this clause is limited to the amount of aid the county is certified to
receive under section 273.1398, subdivision 4a; deleted text begin and
deleted text end

(15) to fund a police or firefighters relief association as required under section 69.77
to the extent that the required amount exceeds the amount levied for this purpose in
2001 new text begin ; and
new text end

new text begin (16) to pay for the maintenance and support of a city or county society for the
prevention of cruelty to animals under section 343.11. If the city or county uses this
special levy, any amount levied by the city or county in the previous levy year for the
purposes specified in this clause and included in the city's or county's previous year's levy
limit computed under section 275.71, must be deducted from the levy limit base under
section 275.71, subdivision 2, in determining the city's or county's current year levy limit new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes levied in 2005, payable
in 2006, and thereafter.
new text end

Sec. 51.

Minnesota Statutes 2004, section 276.04, subdivision 2, is amended to read:

Subd. 2.

Contents of tax statements.

(a) The treasurer shall provide for the printing
of the tax statements. The commissioner of revenue shall prescribe the form of the
property tax statement and its contents. The statement must contain a tabulated statement
of the dollar amount due to each taxing authority and the amount of the state tax from the
parcel of real property for which a particular tax statement is prepared. The dollar amounts
attributable to the county, the state tax, the voter approved school tax, the other local
school tax, the township or municipality, and the total of the metropolitan special taxing
districts as defined in section 275.065, subdivision 3, paragraph (i), must be separately
stated. The amounts due all other special taxing districts, if any, may be aggregated. If the
county levy under this paragraph includes an amount for a lake improvement district as
defined under sections 103B.501 to 103B.581, the amount attributable for that purpose
must be separately stated from the remaining county levy amount. new text begin In the case of Ramsey
County, if the county levy under this paragraph includes an amount for public library
service under section 134.07, the amount attributable for that purpose may be separately
stated from the remaining county levy amount. new text end The amount of the tax on homesteads
qualifying under the senior citizens' property tax deferral program under chapter 290B is
the total amount of property tax before subtraction of the deferred property tax amount.
The amount of the tax on contamination value imposed under sections 270.91 to 270.98, if
any, must also be separately stated. The dollar amounts, including the dollar amount of any
special assessments, may be rounded to the nearest even whole dollar. For purposes of this
section whole odd-numbered dollars may be adjusted to the next higher even-numbered
dollar. The amount of market value excluded under section 273.11, subdivision 16, if any,
must also be listed on the tax statement.

(b) The property tax statements for manufactured homes and sectional structures
taxed as personal property shall contain the same information that is required on the
tax statements for real property.

(c) Real and personal property tax statements must contain the following information
in the order given in this paragraph. The information must contain the current year tax
information in the right column with the corresponding information for the previous year
in a column on the left:

(1) the property's estimated market value under section 273.11, subdivision 1;

(2) the property's taxable market value after reductions under section 273.11,
subdivisions 1a and 16;

(3) the property's gross tax, calculated by adding the property's total property tax to
the sum of the aids enumerated in clause (4);

(4) a total of the following aids:

(i) education aids payable under chapters 122A, 123A, 123B, 124D, 125A, 126C,
and 127A;

(ii) local government aids for cities, towns, and counties under chapter 477A; and

(iii) disparity reduction aid under section 273.1398;

(5) for homestead residential and agricultural properties, the credits under section
273.1384;

(6) any credits received under sections 273.119; 273.123; 273.135; 273.1391;
273.1398, subdivision 4; 469.171; and 473H.10, except that the amount of credit received
under section 273.135 must be separately stated and identified as "taconite tax relief"; and

(7) the net tax payable in the manner required in paragraph (a).

(d) If the county uses envelopes for mailing property tax statements and if the county
agrees, a taxing district may include a notice with the property tax statement notifying
taxpayers when the taxing district will begin its budget deliberations for the current
year, and encouraging taxpayers to attend the hearings. If the county allows notices to
be included in the envelope containing the property tax statement, and if more than
one taxing district relative to a given property decides to include a notice with the tax
statement, the county treasurer or auditor must coordinate the process and may combine
the information on a single announcement.

The commissioner of revenue shall certify to the county auditor the actual or
estimated aids enumerated in clause (4) that local governments will receive in the
following year. The commissioner must certify this amount by January 1 of each year.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for property tax statements for taxes
payable in 2006 and thereafter.
new text end

Sec. 52.

new text begin [278.021] PETITIONS INVOLVING LOW-INCOME RENTAL
HOUSING PROPERTY.
new text end

new text begin Notwithstanding section 278.02, in the case of real property that meets the definition
of qualifying low-income housing rental property established in Minnesota Statutes 2000,
section 273.126, the petition may include any and all such parcels of real property in
which the petitioner has an estate, right, title, interest, or lien, except that all such parcels
included in the petition must be located in the same county. Contiguous qualifying
low-income rental housing property overlapping county boundaries may be included in
the same petition.
new text end

Sec. 53.

Minnesota Statutes 2004, section 278.03, subdivision 1, is amended to read:

Subdivision 1.

Real property.

deleted text begin In the case of real property, deleted text end If the proceedings
instituted by the filing of the petition have not been completed before the 16th day of May
next following the filing new text begin or, in the case of class 1c property or class 4c resort property
before the 16th day of June for taxes payable in 2006 and 2007 only new text end , the petitioner shall
pay to the county treasurer 50 percent of the tax levied for such year against the property
involved, unless permission to continue prosecution of the petition without such payment
is obtained as herein provided. If the proceedings instituted by the filing of the petition
have not been completed by the next October 16, or, in the case of class 1b agricultural
homestead, class 2a agricultural homestead, and class 2b(2) agricultural nonhomestead
property, November 16, the petitioner shall pay to the county treasurer 50 percent of the
unpaid balance of the taxes levied for the year against the property involved if the unpaid
balance is $2,000 or less and 80 percent of the unpaid balance if the unpaid balance is
over $2,000, unless permission to continue prosecution of the petition without payment is
obtained as herein provided. The petitioner, upon ten days' notice to the county attorney
and to the county auditor, given at least ten days prior to the 16th day of May new text begin or, in the
case of class 1c or class 4c resort property, the 16th day of June for taxes payable in
2006 and 2007 only, new text end or the 16th day of October, or, in the case of class 1b agricultural
homestead, class 2a agricultural homestead, and class 2b(2) agricultural nonhomestead
property, the 16th day of November, may apply to the court for permission to continue
prosecution of the petition without payment; and, if it is made to appear

(1) that the proposed review is to be taken in good faith;

(2) that there is probable cause to believe that the property may be held exempt
from the tax levied or that the tax may be determined to be less than 50 percent of the
amount levied; and

(3) that it would work a hardship upon petitioner to pay the taxes due,

the court may permit the petitioner to continue prosecution of the petition without
payment, or may fix a lesser amount to be paid as a condition of continuing the prosecution
of the petition.

Failure to make payment of the amount required when due shall operate
automatically to dismiss the petition and all proceedings thereunder unless the payment is
waived by an order of the court permitting the petitioner to continue prosecution of the
petition without payment. The petition shall be automatically reinstated upon payment
of the entire tax plus interest and penalty if the payment is made within one year of the
dismissal. The county treasurer shall, upon request of the petitioner, issue duplicate
receipts for the tax payment, one of which shall be filed by the petitioner in the proceeding.

Sec. 54.

Minnesota Statutes 2004, section 279.01, subdivision 1, is amended to read:

Subdivision 1.

Due dates; penalties.

Except as provided in deleted text begin subdivision 3 or 4
deleted text end new text begin this section new text end , on May 16 or 21 days after the postmark date on the envelope containing
the property tax statement, whichever is later, a penalty shall accrue and thereafter be
charged upon all unpaid taxes on real estate on the current lists in the hands of the county
treasurer. The penalty shall be at a rate of two percent on homestead property until May
31 and four percent on June 1. The penalty on nonhomestead property shall be at a rate
of four percent until May 31 and eight percent on June 1. This penalty shall not accrue
until June 1 of each year, or 21 days after the postmark date on the envelope containing
the property tax statements, whichever is later, on commercial use real property used for
seasonal residential recreational purposes and classified as class 1c or 4c, and on other
commercial use real property classified as class 3a, provided that over 60 percent of the
gross income earned by the enterprise on the class 3a property is earned during the months
of May, June, July, and August. Any property owner of such class 3a property who pays
the first half of the tax due on the property after May 15 and before June 1, or 21 days
after the postmark date on the envelope containing the property tax statement, whichever
is later, shall attach an affidavit to the payment attesting to compliance with the income
provision of this subdivision. Thereafter, for both homestead and nonhomestead property,
on the first day of each month beginning July 1, up to and including October 1 following,
an additional penalty of one percent for each month shall accrue and be charged on all
such unpaid taxes provided that if the due date was extended beyond May 15 as the result
of any delay in mailing property tax statements no additional penalty shall accrue if the
tax is paid by the extended due date. If the tax is not paid by the extended due date, then
all penalties that would have accrued if the due date had been May 15 shall be charged.
When the taxes against any tract or lot exceed $50, one-half thereof may be paid prior
to May 16 or 21 days after the postmark date on the envelope containing the property
tax statement, whichever is later; and, if so paid, no penalty shall attach; the remaining
one-half shall be paid at any time prior to October 16 following, without penalty; but, if
not so paid, then a penalty of two percent shall accrue thereon for homestead property and
a penalty of four percent on nonhomestead property. Thereafter, for homestead property,
on the first day of November an additional penalty of four percent shall accrue and on the
first day of December following, an additional penalty of two percent shall accrue and
be charged on all such unpaid taxes. Thereafter, for nonhomestead property, on the first
day of November and December following, an additional penalty of four percent for each
month shall accrue and be charged on all such unpaid taxes. If one-half of such taxes shall
not be paid prior to May 16 or 21 days after the postmark date on the envelope containing
the property tax statement, whichever is later, the same may be paid at any time prior to
October 16, with accrued penalties to the date of payment added, and thereupon no penalty
shall attach to the remaining one-half until October 16 following.

This section applies to payment of personal property taxes assessed against
improvements to leased property, except as provided by section 277.01, subdivision 3.

A county may provide by resolution that in the case of a property owner that has
multiple tracts or parcels with aggregate taxes exceeding $50, payments may be made in
installments as provided in this subdivision.

The county treasurer may accept payments of more or less than the exact amount of
a tax installment due. If the accepted payment is less than the amount due, payments must
be applied first to the penalty accrued for the year the payment is made. Acceptance of
partial payment of tax does not constitute a waiver of the minimum payment required as a
condition for filing an appeal under section 278.03 or any other law, nor does it affect the
order of payment of delinquent taxes under section 280.39.

Sec. 55.

Minnesota Statutes 2004, section 279.01, is amended by adding a subdivision
to read:

new text begin Subd. 5. new text end

new text begin Seasonal residential recreational property used for commercial
purposes. new text end

new text begin For taxes payable in 2006 and 2007 only, in the case of class 1c property and
class 4c seasonal residential recreational property used for commercial purposes, no
penalties shall accrue to the first one-half property tax payment as provided in this section
if paid by June 15. On June 16, a penalty shall accrue and thereafter be charged upon all
unpaid taxes. On class 1c property the penalty is at a rate of two percent until June 31,
and four percent on July 1. On class 4c seasonal residential recreational property used for
commercial purposes, the penalty is four percent until June 31 and eight percent on July 1.
Thereafter, for both class 1c and class 4c seasonal residential recreational property used
for commercial purposes, on the first day of September and on the first day of October,
an additional penalty of one percent shall accrue and be charged on unpaid taxes. The
remaining one-half property taxes must be paid and penalties accrue as provided in
subdivision 1.
new text end

Sec. 56.

new text begin [290.0621] SCHOOL REFERENDUM TAX.
new text end

new text begin Subdivision 1. new text end

new text begin Imposition. new text end

new text begin In addition to all other taxes imposed by this chapter, a
tax is imposed on individuals who are domiciled on the last day of the taxable year within
the territory of a school district in which the voters approved an income tax increase at a
referendum conducted under section 126C.17, subdivision 9, for that purpose in 2006 or
a subsequent year. This tax does not apply to referendums on bond issues. Individuals
domiciled in the district on the last day of the taxable year are subject to the tax.
new text end

new text begin Subd. 2. new text end

new text begin Rate. new text end

new text begin The commissioner of revenue shall annually determine the rate of
the tax imposed under this section as a percentage of the state income tax liability of
individuals subject to the tax by each district. The school referendum tax rate is equal to
the ratio of (i) the district's local effort revenue under section 126C.17, subdivision 6b,
to (ii) the state income tax liability of all individuals domiciled in the district on the last
day of the previous taxable year.
new text end

new text begin Subd. 3. new text end

new text begin Revenue distribution. new text end

new text begin Revenue raised in subdivision 1 must be placed
in a special account in the general fund. The amount necessary to make payments to
school districts under this section is annually appropriated from the general fund to the
commissioner of education and must be paid to school districts according to section
127A.45.
new text end

Sec. 57.

Minnesota Statutes 2004, section 343.11, is amended to read:

343.11 ACQUISITION OF PROPERTY, APPROPRIATIONS.

Every county and district society for the prevention of cruelty to animals may
acquire, by purchase, gift, grant, or devise, and hold, use, or convey, real estate and
personal property, and lease, mortgage, sell, or use the same in any manner conducive to
its interest, to the same extent as natural persons. The county board of any county, or the
council of any city, in which such societies exist, may, in its discretion, appropriate for
the maintenance and support of such societies in the transaction of the work for which
they are organized, any sums of money not otherwise appropriated, not to exceed in any
one year the sum of $4,800 or the sum of deleted text begin 50 cents deleted text end new text begin $1 new text end per capita based upon the county's
or city's population as of the most recent federal census, whichever is greater; provided,
that no part of the appropriation shall be expended for the payment of the salary of any
officer of the society.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective January 1, 2006.
new text end

Sec. 58.

new text begin [462A.0715] SECTION 8, TAX CREDIT, AND RURAL HOUSING
SERVICE UNITS.
new text end

new text begin (a) The agency may deem units as meeting the requirements of section 273.126 and
this section, if the units meet the requirements provided in section 273.1321, subdivision 1.
new text end

new text begin (b) The agency may certify these deemed units under subdivision 1 based on a
simplified application procedure that verifies the unit's qualifications under paragraph (a).
new text end

Sec. 59.

Minnesota Statutes 2004, section 473F.08, is amended by adding a subdivision
to read:

new text begin Subd. 3c. new text end

new text begin Uncompensated care reimbursement. new text end

new text begin (a) As used in this subdivision,
the following terms have the meanings given in this paragraph.
new text end

new text begin (1) "Uncompensated care" means the sum of (i) the amount that would have been
charged by a facility for rendering free or discounted care to persons who cannot afford to
pay and for which the facility did not expect payment and (ii) the amount that had been
charged by a facility for rendering care to persons and billed to that person or a third-party
payer for which the facility expected but did not receive payment. Uncompensated care
does not include contractual write-offs.
new text end

new text begin (2) A "qualifying hospital" means a hospital in the area that is:
new text end

new text begin (i) owned or operated by a local unit of government, or formerly owned by a
university or is a private nonprofit hospital that leases its building from the county in
which it is located; and
new text end

new text begin (ii) has a licensed bed capacity greater than 400.
new text end

new text begin (b) A county that contains a qualifying hospital is eligible for reimbursement of that
portion of gross charges for uncompensated care determined by multiplying the hospital's
gross charges during the base year by the percentage of uncompensated care provided by
the hospital during the base year minus one-half of one percent of those gross charges,
dividing the result by two, and adjusting to cost by multiplying that result by the hospital's
cost-to-charge ratio during the base year. By July 15, 2006, and each subsequent year,
the county shall notify its county auditor, as well as the administrative auditor, of the
amount of qualifying uncompensated care provided, adjusted to cost using the hospital's
cost-to-charge ratio, during the 12-month period ending on June 30 of the current year.
new text end

new text begin (c) The amount certified under paragraph (b) shall be certified annually by the
county auditor to the administrative auditor as an addition to the county's areawide levy
under subdivision 5.
new text end

new text begin (d) The administrative auditor shall pay one-half of the reimbursement to the county
auditor of the county that contains the qualifying hospital on or before June 15 and the
remaining one-half of the reimbursement on or before November 15. The county auditor
receiving the payment shall disburse the reimbursement to the qualifying hospital within
15 days of receipt of the reimbursement.
new text end

new text begin (e) Prior to the reporting specified in paragraph (b) above, all qualifying hospitals
that participate in this program shall agree upon and implement a common standard for
reporting uncompensated care, and a common standard for determining eligibility for
uncompensated care for all participating hospitals.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for fiscal disparities contribution and
distribution tax capacities for taxes payable in 2007 and 2008 only.
new text end

Sec. 60.

Minnesota Statutes 2004, section 473F.08, is amended by adding a subdivision
to read:

new text begin Subd. 3d. new text end

new text begin Hennepin county public defender cost reimbursement. new text end

new text begin (a) Hennepin
County is eligible for reimbursement of costs incurred by the county under section 611.26,
subdivision 3a, paragraph (c). By July 15, 2006, and each subsequent year, the county
shall notify the county auditor and the administrative auditor, of the amount of that cost
incurred by the county during the 12-month period ending on June 30 of the current year.
new text end

new text begin (b) The reimbursement under this subdivision for costs incurred during the 12-month
period ending June 30, 2006, is equal to 25 percent of those costs. The reimbursement
under this subdivision for costs incurred during the 12-month period ending June 30,
2007, is equal to 50 percent of those costs.
new text end

new text begin (c) The amount certified under paragraph (b) shall be certified annually by the
Hennepin County auditor to the administrative auditor as an addition to the county's
areawide levy under subdivision 5.
new text end

new text begin (d) The administrative auditor shall pay one-half of the reimbursement to the
Hennepin County auditor on or before June 15 and the remaining one-half of the
reimbursement on or before November 15.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for fiscal disparities contribution and
distribution tax capacities for taxes payable in 2007 and 2008 only.
new text end

Sec. 61.

Minnesota Statutes 2004, section 477A.011, subdivision 36, is amended to
read:

Subd. 36.

City aid base.

(a) Except as otherwise provided in this subdivision,
"city aid base" is zero.

(b) The city aid base for any city with a population less than 500 is increased by
$40,000 for aids payable in calendar year 1995 and thereafter, and the maximum amount
of total aid it may receive under section 477A.013, subdivision 9, paragraph (c), is also
increased by $40,000 for aids payable in calendar year 1995 only, provided that:

(i) the average total tax capacity rate for taxes payable in 1995 exceeds 200 percent;

(ii) the city portion of the tax capacity rate exceeds 100 percent; and

(iii) its city aid base is less than $60 per capita.

(c) The city aid base for a city is increased by $20,000 in 1998 and thereafter and
the maximum amount of total aid it may receive under section 477A.013, subdivision 9,
paragraph (c), is also increased by $20,000 in calendar year 1998 only, provided that:

(i) the city has a population in 1994 of 2,500 or more;

(ii) the city is located in a county, outside of the metropolitan area, which contains a
city of the first class;

(iii) the city's net tax capacity used in calculating its 1996 aid under section
477A.013 is less than $400 per capita; and

(iv) at least four percent of the total net tax capacity, for taxes payable in 1996, of
property located in the city is classified as railroad property.

(d) The city aid base for a city is increased by $200,000 in 1999 and thereafter and
the maximum amount of total aid it may receive under section 477A.013, subdivision 9,
paragraph (c), is also increased by $200,000 in calendar year 1999 only, provided that:

(i) the city was incorporated as a statutory city after December 1, 1993;

(ii) its city aid base does not exceed $5,600; and

(iii) the city had a population in 1996 of 5,000 or more.

(e) The city aid base for a city is increased by $450,000 in 1999 to 2008 and the
maximum amount of total aid it may receive under section 477A.013, subdivision 9,
paragraph (c), is also increased by $450,000 in calendar year 1999 only, provided that:

(i) the city had a population in 1996 of at least 50,000;

(ii) its population had increased by at least 40 percent in the ten-year period ending
in 1996; and

(iii) its city's net tax capacity for aids payable in 1998 is less than $700 per capita.

(f) Beginning in 2004, the city aid base for a city is equal to the sum of its city aid
base in 2003 and the amount of additional aid it was certified to receive under section
477A.06 in 2003. For 2004 only, the maximum amount of total aid a city may receive
under section 477A.013, subdivision 9, paragraph (c), is also increased by the amount it
was certified to receive under section 477A.06 in 2003.

(g) The city aid base for a city is increased by $150,000 for aids payable in 2000 and
thereafter, and the maximum amount of total aid it may receive under section 477A.013,
subdivision 9, paragraph (c), is also increased by $150,000 in calendar year 2000 only,
provided that:

(1) the city has a population that is greater than 1,000 and less than 2,500;

(2) its commercial and industrial percentage for aids payable in 1999 is greater
than 45 percent; and

(3) the total market value of all commercial and industrial property in the city
for assessment year 1999 is at least 15 percent less than the total market value of all
commercial and industrial property in the city for assessment year 1998.

(h) The city aid base for a city is increased by $200,000 in 2000 and thereafter, and
the maximum amount of total aid it may receive under section 477A.013, subdivision 9,
paragraph (c), is also increased by $200,000 in calendar year 2000 only, provided that:

(1) the city had a population in 1997 of 2,500 or more;

(2) the net tax capacity of the city used in calculating its 1999 aid under section
477A.013 is less than $650 per capita;

(3) the pre-1940 housing percentage of the city used in calculating 1999 aid under
section 477A.013 is greater than 12 percent;

(4) the 1999 local government aid of the city under section 477A.013 is less than
20 percent of the amount that the formula aid of the city would have been if the need
increase percentage was 100 percent; and

(5) the city aid base of the city used in calculating aid under section 477A.013
is less than $7 per capita.

(i) The city aid base for a city is increased by $102,000 in 2000 and thereafter, and
the maximum amount of total aid it may receive under section 477A.013, subdivision 9,
paragraph (c), is also increased by $102,000 in calendar year 2000 only, provided that:

(1) the city has a population in 1997 of 2,000 or more;

(2) the net tax capacity of the city used in calculating its 1999 aid under section
477A.013 is less than $455 per capita;

(3) the net levy of the city used in calculating 1999 aid under section 477A.013 is
greater than $195 per capita; and

(4) the 1999 local government aid of the city under section 477A.013 is less than
38 percent of the amount that the formula aid of the city would have been if the need
increase percentage was 100 percent.

(j) The city aid base for a city is increased by $32,000 in 2001 and thereafter, and
the maximum amount of total aid it may receive under section 477A.013, subdivision 9,
paragraph (c), is also increased by $32,000 in calendar year 2001 only, provided that:

(1) the city has a population in 1998 that is greater than 200 but less than 500;

(2) the city's revenue need used in calculating aids payable in 2000 was greater
than $200 per capita;

(3) the city net tax capacity for the city used in calculating aids available in 2000
was equal to or less than $200 per capita;

(4) the city aid base of the city used in calculating aid under section 477A.013
is less than $65 per capita; and

(5) the city's formula aid for aids payable in 2000 was greater than zero.

(k) The city aid base for a city is increased by $7,200 in 2001 and thereafter, and
the maximum amount of total aid it may receive under section 477A.013, subdivision 9,
paragraph (c), is also increased by $7,200 in calendar year 2001 only, provided that:

(1) the city had a population in 1998 that is greater than 200 but less than 500;

(2) the city's commercial industrial percentage used in calculating aids payable in
2000 was less than ten percent;

(3) more than 25 percent of the city's population was 60 years old or older according
to the 1990 census;

(4) the city aid base of the city used in calculating aid under section 477A.013
is less than $15 per capita; and

(5) the city's formula aid for aids payable in 2000 was greater than zero.

(l) The city aid base for a city is increased by $45,000 in 2001 and thereafter and
by an additional $50,000 in calendar years 2002 to 2011, and the maximum amount of
total aid it may receive under section 477A.013, subdivision 9, paragraph (c), is also
increased by $45,000 in calendar year 2001 only, and by $50,000 in calendar year 2002
only, provided that:

(1) the net tax capacity of the city used in calculating its 2000 aid under section
477A.013 is less than $810 per capita;

(2) the population of the city declined more than two percent between 1988 and 1998;

(3) the net levy of the city used in calculating 2000 aid under section 477A.013 is
greater than $240 per capita; and

(4) the city received less than $36 per capita in aid under section 477A.013,
subdivision 9, for aids payable in 2000.

new text begin The city aid base for a city described in this paragraph is also increased by $250,000
in calendar years 2006 to 2015, and the maximum amount of total aid it may receive
under section 477A.013, subdivision 9, paragraph (c), is also increased by $250,000 in
calendar year 2006 only.
new text end

(m) The city aid base for a city with a population of 10,000 or more which is located
outside of the seven-county metropolitan area is increased in 2002 and thereafter, and the
maximum amount of total aid it may receive under section 477A.013, subdivision 9,
paragraph (b) or (c), is also increased in calendar year 2002 only, by an amount equal to
the lesser of:

(1)(i) the total population of the city, as determined by the United States Bureau of
the Census, in the 2000 census, (ii) minus 5,000, (iii) times 60; or

(2) $2,500,000.

(n) The city aid base is increased by $50,000 in 2002 and thereafter, and the
maximum amount of total aid it may receive under section 477A.013, subdivision 9,
paragraph (c), is also increased by $50,000 in calendar year 2002 only, provided that:

(1) the city is located in the seven-county metropolitan area;

(2) its population in 2000 is between 10,000 and 20,000; and

(3) its commercial industrial percentage, as calculated for city aid payable in 2001,
was greater than 25 percent.

(o) The city aid base for a city is increased by $150,000 in calendar years 2002
to 2011 and the maximum amount of total aid it may receive under section 477A.013,
subdivision 9, paragraph (c), is also increased by $150,000 in calendar year 2002 only,
provided that:

(1) the city had a population of at least 3,000 but no more than 4,000 in 1999;

(2) its home county is located within the seven-county metropolitan area;

(3) its pre-1940 housing percentage is less than 15 percent; and

(4) its city net tax capacity per capita for taxes payable in 2000 is less than $900
per capita.

(p) The city aid base for a city is increased by $200,000 beginning in calendar
year 2003 and the maximum amount of total aid it may receive under section 477A.013,
subdivision 9, paragraph (c), is also increased by $200,000 in calendar year 2003 only,
provided that the city qualified for an increase in homestead and agricultural credit aid
under Laws 1995, chapter 264, article 8, section 18.

(q) The city aid base for a city is increased by $200,000 in 2004 only and the
maximum amount of total aid it may receive under section 477A.013, subdivision 9, is
also increased by $200,000 in calendar year 2004 only, if the city is the site of a nuclear
dry cask storage facility.

(r) The city aid base for a city is increased by $10,000 in 2004 and thereafter and the
maximum total aid it may receive under section 477A.013, subdivision 9, is also increased
by $10,000 in calendar year 2004 only, if the city was included in a federal major disaster
designation issued on April 1, 1998, and its pre-1940 housing stock was decreased by
more than 40 percent between 1990 and 2000.

Sec. 62.

Minnesota Statutes 2004, section 477A.11, subdivision 4, is amended to read:

Subd. 4.

Other natural resources land.

"Other natural resources land" means deleted text begin :
deleted text end

deleted text begin (1) deleted text end any other land presently owned in fee title by the state and administered by the
commissioner, or any tax-forfeited land, other than platted lots within a city or those lands
described under subdivision 3, clause (2), which is owned by the state and administered by
the commissioner or by the county in which it is located deleted text begin ; and
deleted text end

deleted text begin (2) land leased by the state from the United States of America through the United
States Secretary of Agriculture pursuant to Title III of the Bankhead Jones Farm
Tenant Act, which land is commonly referred to as land utilization project land that is
administered by the commissioner deleted text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for aids payable in 2006 and
thereafter.
new text end

Sec. 63.

Minnesota Statutes 2004, section 477A.11, is amended by adding a
subdivision to read:

new text begin Subd. 5. new text end

new text begin Land utilization project land. new text end

new text begin "Land utilization project land" means land
that is leased by the state from the United States through the United States Secretary of
Agriculture according to Title III of the Bankhead Jones Farm Tenant Act and that is
administered by the commissioner.
new text end

Sec. 64.

Minnesota Statutes 2004, section 477A.12, subdivision 1, is amended to read:

Subdivision 1.

Types of land; payments.

(a) As an offset for expenses incurred
by counties and towns in support of natural resources lands, the following amounts are
annually appropriated to the commissioner of natural resources from the general fund for
transfer to the commissioner of revenue. The commissioner of revenue shall pay the
transferred funds to counties as required by sections 477A.11 to 477A.145. The amounts
are:

(1) for acquired natural resources land, $3, as adjusted for inflation under section
477A.145, multiplied by the total number of acres of acquired natural resources land or,
at the county's option three-fourths of one percent of the appraised value of all acquired
natural resources land in the county, whichever is greater;

(2) new text begin $3, as adjusted for inflation under section 477A.145, multiplied by the total
number of acres of land utilization project land;
new text end

new text begin (3) new text end 75 cents, as adjusted for inflation under section 477A.145, multiplied by the
number of acres of county-administered other natural resources land; and

deleted text begin (3) deleted text end new text begin (4) new text end 37.5 cents, as adjusted for inflation under section 477A.145, multiplied by
the number of acres of commissioner-administered other natural resources land located in
each county as of July 1 of each year prior to the payment year.

(b) The amount determined under paragraph (a), clause (1), is payable for land
that is acquired from a private owner and owned by the Department of Transportation
for the purpose of replacing wetland losses caused by transportation projects, but only
if the county contains more than 500 acres of such land at the time the certification is
made under subdivision 2.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for aids payable in 2006 and
thereafter.
new text end

Sec. 65.

Minnesota Statutes 2004, section 477A.12, subdivision 2, is amended to read:

Subd. 2.

Procedure.

Lands for which payments in lieu are made pursuant to
section 97A.061, subdivision 3, and Laws 1973, chapter 567, shall not be eligible for
payments under this section. Each county auditor shall certify to the Department of
Natural Resources during July of each year prior to the payment year the number of acres
of county-administered other natural resources land within the county. The Department of
Natural resources may, in addition to the certification of acreage, require descriptive lists
of land so certified. The commissioner of natural resources shall determine and certify to
the commissioner of revenue by March 1 of the payment year:

(1) the number of acres and most recent appraised value of acquired natural
resources land within each county;

(2) the number of acres of commissioner-administered natural resources land within
each county; deleted text begin and
deleted text end

(3) the number of acres of county-administered other natural resources land within
each county, based on the reports filed by each county auditor with the commissioner
of natural resources new text begin ; and
new text end

new text begin (4) the number of acres of land utilization project land within each county and the
net proceeds from timber sales on land utilization project lands in each county new text end .

The commissioner of transportation shall determine and certify to the commissioner
of revenue by March 1 of the payment year the number of acres of land and the appraised
value of the land described in subdivision 1, paragraph (b), but only if it exceeds 500 acres.

The commissioner of revenue shall determine the distributions provided for in this
section using the number of acres and appraised values certified by the commissioner of
natural resources and the commissioner of transportation by March 1 of the payment year.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for aids payable in 2006 and
thereafter.
new text end

Sec. 66.

Minnesota Statutes 2004, section 477A.14, subdivision 1, is amended to read:

Subdivision 1.

General distribution.

Except as provided in subdivision 2 or in
section 97A.061, subdivision 5, 40 percent of the total payment to the county shall be
deposited in the county general revenue fund to be used to provide property tax levy
reduction. The remainder shall be distributed by the county in the following priority:

(a) 37.5 cents, as adjusted for inflation under section 477A.145, for each acre
of county-administered other natural resources land shall be deposited in a resource
development fund to be created within the county treasury for use in resource
development, forest management, game and fish habitat improvement, and recreational
development and maintenance of county-administered other natural resources land. Any
county receiving less than $5,000 annually for the resource development fund may elect to
deposit that amount in the county general revenue fund;

(b) From the funds remaining, within 30 days of receipt of the payment to the county,
the county treasurer shall pay each organized township 30 cents, as adjusted for inflation
under section 477A.145, for each acre of acquired natural resources land new text begin , each acre of land
utilization project land, new text end and each acre of land described in section 477A.12, subdivision 1,
paragraph (b), and 7.5 cents, as adjusted for inflation under section 477A.145, for each
acre of other natural resources land located within its boundaries. Payments for natural
resources lands not located in an organized township shall be deposited in the county
general revenue fund. Payments to counties and townships pursuant to this paragraph shall
be used to provide property tax levy reduction, except that of the payments for natural
resources lands not located in an organized township, the county may allocate the amount
determined to be necessary for maintenance of roads in unorganized townships. Provided
that, if the total payment to the county pursuant to section 477A.12 is not sufficient to fully
fund the distribution provided for in this clause, the amount available shall be distributed
to each township and the county general revenue fund on a pro rata basis; and

(c) Any remaining funds shall be deposited in the county general revenue fund.
Provided that, if the distribution to the county general revenue fund exceeds $35,000, the
excess shall be used to provide property tax levy reduction.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for aids payable in 2006 and
thereafter.
new text end

Sec. 67.

Laws 1998, chapter 389, article 3, section 41, is amended to read:

Sec. 41 new text begin SPECIAL ASSESSMENT DEFERRAL AUTHORIZED.
new text end

Notwithstanding Minnesota Statutes, chapter 429, a city may defer the payment of
any special assessment levied against a property qualifying under section 38 as determined
by the city. new text begin Any special assessment, the payment of which has been deferred by the city,
must be paid in full or a payment agreement may be approved by the city if the ownership
of property is transferred to anyone or any entity. Payment or a payment agreement must
be made within 60 days of the transfer of ownership.
new text end

new text begin EFFECTIVE DATE. new text end

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

Sec. 68.

Laws 1998, chapter 389, article 3, section 42, subdivision 2, as amended by
Laws 2002, chapter 377, article 4, section 24, is amended to read:

Subd. 2.

Recapture.

(a) Property or any portion thereof qualifying under section 38
is subject to additional taxes if:

(1) ownership of the property is transferred to anyone other than the spouse or
child of the current owner;

(2) the current owner or the spouse or child of the current owner has not conveyed or
entered into a contract before July 1, 2007, to convey new text begin for ownership or public easement
rights, (i) a portion of new text end the property to deleted text begin a deleted text end new text begin one or more new text end nonprofit deleted text begin foundation deleted text end new text begin foundations new text end or
deleted text begin corporation operating deleted text end new text begin corporations; and (ii) a portion of the property to one or more local
governments; and those entities shall separately or jointly operate new text end the property as an art
park providing the services included in section 38, clauses (2) to (5) new text begin , and may also use
some of the property for other public purposes as determined by the local governments new text end ; or

(3) the nonprofit foundation or corporation to which new text begin a portion of new text end the property was
transferred ceases to provide the services included in section 38, clauses (2) to (5), earlier
than ten years following the effective date of the deleted text begin conveyance deleted text end new text begin conveyances new text end or of the
execution of the deleted text begin contract deleted text end new text begin contracts new text end to convey.

(b) The additional taxes are imposed at the earlier of (1) the year following transfer
of ownership to anyone other than the spouse or child of the current owner or a nonprofit
foundation or corporation new text begin or local government new text end operating the property as an art park new text begin and
used for other public purposes new text end , or (2) for taxes payable in 2008, or new text begin (3) new text end in the event the
nonprofit foundation or corporation to which new text begin a portion of new text end the property was conveyed
ceases to provide the required services within ten years after the conveyance, for taxes
payable in the year following the year when it ceased to do so.

new text begin The county board, with the approval of the city council, shall determine the amount
of the additional taxes due on the portion of property which is no longer utilized as an art
park; provided, however, that new text end the additional taxes deleted text begin are equal to deleted text end new text begin must not be greater than
new text end the difference between the taxes determined new text begin on that portion of the property utilized as an
art park new text end under sections 39 and 40 and the amount determined under subdivision 1 for all
years that the property qualified under section 38. deleted text begin The additional taxes must be extended
against the property on the tax list for the current year; provided, however, that deleted text end No interest
or penalties may be levied on the additional deleted text begin taxes if timely paid deleted text end new text begin amount provided that it is
paid within 30 days of the county's notice new text end .

new text begin EFFECTIVE DATE. new text end

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

Sec. 69.

Laws 2001, First Special Session chapter 5, article 3, section 8, the effective
date, is amended to read:

new text begin EFFECTIVE DATE. new text end

This section is effective for taxes levied in 2002, payable in
2003, through taxes levied in deleted text begin 2007 deleted text end new text begin 2009 new text end , payable in deleted text begin 2008 deleted text end new text begin 2010 new text end .

Sec. 70.

Laws 2003, chapter 127, article 12, section 38, is amended to read:

Sec. 38. deleted text begin MEMBERS MUST deleted text end new text begin AUTHORITY TO LEVY TAXES new text end deleted text begin FOR
AUTHORITY deleted text end new text begin .
new text end

deleted text begin (a) A member shall, at the request of the authority, levy a tax in any year for the
benefit of the authority. deleted text end new text begin The authority is a special taxing district as defined in Minnesota
Statutes, section 275.066, clause (13), with the power to adopt and certify a property
tax levy to the county auditor. The authority may levy a tax in any year for the benefit
of the authority. new text end The tax deleted text begin is, deleted text end for each member deleted text begin , deleted text end new text begin is new text end a pro rata portion of the total amount of
tax requested by the authority based on the taxable market value within deleted text begin a deleted text end new text begin the new text end member's
jurisdiction, but in no event may the tax in any year exceed 0.01813 percent of taxable
market value. For purposes of this section, "taxable market value" has the meaning as
given in Minnesota Statutes, section 273.032.

deleted text begin (b) The treasurer of each member city or town shall, within 15 days after receiving
the property tax settlements from the county treasurer, pay to the treasurer of the authority
the amount collected for this purpose. The money must be used by the authority for the
purposes provided by sections 35 to 41.
deleted text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes levied in 2005, payable
in 2006, and thereafter.
new text end

Sec. 71.

Laws 2003, First Special Session chapter 21, article 4, section 12, subdivision
11, is amended to read:

Subd. 11.

Effective date; local approval.

This section is effective the day after the
governing body of St. Louis county and its chief clerical officer timely complete their
compliance with Minnesota Statutes, section 645.021, subdivisions 2 and 3 new text begin , provided that
the certificate of approval is filed with the secretary of state before January 1, 2006 new text end .

deleted text begin If effective before September 1, 2003, the first levy is the payable 2004 levy; If
effective between September 1, 2003, and September 1, 2004, the first levy is the payable
2005 levy; deleted text end If effective deleted text begin after August 31, 2004, deleted text end new text begin before September 1, 2005, new text end the first levy is
the payable 2006 levy new text begin ; and if effective after August 31, 2005, the first levy is the payable
2007 levy new text end .

Sec. 72. new text begin PROPERTY USED FOR EDUCATIONAL INSTRUCTION.
new text end

new text begin Notwithstanding Minnesota Statutes, section 272.02, subdivision 38, paragraph
(b), the following property is exempt from taxation for assessment year 2004, for taxes
payable in 2005, if it meets all the following criteria:
new text end

new text begin (1) is used to provide direct educational instruction for grades 7 through 10;
new text end

new text begin (2) is located in a city of the first class that has a population greater than 250,000 and
less than 350,000;
new text end

new text begin (3) was purchased after July 1, 2004, by a nonprofit that is exempt from federal
income tax under section 501(c)(3) of the Internal Revenue Code; and
new text end

new text begin (4) is leased and operated by two nonprofit corporations organized under Minnesota
Statutes, chapter 317A.
new text end

new text begin EFFECTIVE DATE. new text end

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

Sec. 73. new text begin EDUCATION RESERVE ACCOUNT; APPROPRIATION.
new text end

new text begin (a) There is created in the state treasury an education reserve account as a special
revenue fund for deposit of appropriations and other receipts as provided by law.
new text end

new text begin (b) $24,961,000 is appropriated from the general fund to the education reserve
account in fiscal year 2006. Beginning with taxes payable in 2008, the commissioner of
finance shall deposit in the education reserve account the increased amount of the state
general levy for that year over the state general levy base amount for taxes payable in
2002, under Minnesota Statutes, section 275.025.
new text end

new text begin (c) Each year, one-half of the annual amount will be deposited in the education
reserve account in the state fiscal year corresponding to the first six months of the calendar
year, and the other half will be deposited in the state fiscal year corresponding to the
last six months of the calendar year. The amounts in the education reserve account do
not lapse or cancel each year, but remain until appropriated by law for E-12 education or
higher education funding.
new text end

Sec. 74. new text begin STUDY OF POLLUTION CONTROL EXEMPTION.
new text end

new text begin The commissioner of revenue must study the application of the property tax
exemption provided under Minnesota Statutes, section 272.02, subdivision 10, to
personal property used for pollution control as part of an electric generation system. The
commissioner must present a recommendation to the legislature by January 15, 2006, that
would limit the exemption to property that is directly and exclusively used for pollution
control purposes.
new text end

Sec. 75. new text begin SAUK RIVER WATERSHED DISTRICT.
new text end

new text begin Notwithstanding Minnesota Statutes, section 103D.905, subdivision 3, the Sauk
River Watershed District may annually levy up to 0.01 percent of taxable market value for
its administrative fund.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective, without local approval, for taxes
levied in 2005, payable in 2006, and thereafter.
new text end

Sec. 76. new text begin COMMERCIAL-INDUSTRIAL LAND VALUE TAXATION; LOCAL
OPTION.
new text end

new text begin The governing body of any municipality that has a population in excess of 70,000,
or any municipality located in the taconite tax relief area defined in Minnesota Statutes,
section 273.134, may by resolution adopt a system of valuing commercial-industrial
property in its jurisdiction that is based on the value of the land, not including
improvements. The governing body may make the election under this section if it finds
that implementation of the land value system will enhance economic development in
the city. An election under this section must be made by December 31, 2005. If any
municipality makes the election, it must notify the commissioner of revenue of the election
and the legislature must enact during the 2006 legislative session the legislation necessary
to implement the system for taxes levied in 2006, payable in 2007, and thereafter.
new text end

Sec. 77. new text begin STUDY REQUIRED.
new text end

new text begin By February 1, 2006, the fiscal staff of the house of representatives and senate shall
conduct a study of the metropolitan revenue distribution program contained in Minnesota
Statutes, chapter 473F, commonly known as the fiscal disparities program, and shall make
a report by March 1, 2006, to the chairs of the house and senate tax committees consisting
of the findings of the study and any recommendations resulting from the study.
new text end

new text begin The study shall primarily address the question of whether the program is achieving
the purposes for which it was created. Additionally, the study shall address the following
questions:
new text end

new text begin (1) How has the program affected property tax disparities across the Twin Cities
metropolitan area?
new text end

new text begin (2) Is the formula for contributing tax base to the areawide pool reasonable? Should
certain commercial-industrial tax base continue to be exempt from contribution to the
areawide pool, such as tax base in existence prior to 1979, tax base in tax increment
financing districts established before 1979, and tax base located at the Minneapolis-St.
Paul International Airport? Should contribution amounts be adjusted for differences in
sales ratios between communities?
new text end

new text begin (3) Is the formula for distributing tax base from the areawide pool reasonable?
Should the formula reflect measures of need in addition to population? Should the
distribution formula be based on tax capacity rather than market value?
new text end

new text begin (4) Does the program help promote orderly growth and encourage environmentally
sound land use?
new text end

new text begin (5) Does the program reduce competition for commercial-industrial tax base between
communities? Is reduced competition for commercial-industrial tax base desirable?
new text end

new text begin (6) Do local governments derive sufficient tax revenues from commercial-industrial
property to cover the costs of providing services to the property, considering the tax base
that must be contributed to the areawide pool?
new text end

new text begin (7) Could improvements be made in the administration of the program?
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2005.
new text end

Sec. 78. new text begin FEE STUDIES.
new text end

new text begin Subdivision 1. new text end

new text begin State agency fees. new text end

new text begin The commissioner of each state agency that
imposes any fee on individuals or businesses in this state must report to the commissioner
of revenue by January 15, 2006, on the type and amount of fees imposed, amount and type
of fee increases since January 1, 2003, the revenues derived from each fee for each of the
most recent four fiscal years, and the use of the revenues from the fees. The commissioner
of revenue shall compile this information and provide a comprehensive report on all state
agency fees to the finance and tax committees of the senate and the appropriations and tax
committees of the house of representatives by February 15, 2006.
new text end

new text begin Subd. 2. new text end

new text begin School fees. new text end

new text begin By January 15, 2006, the Department of Education shall
provide the house and senate education finance divisions and tax committees with a report
that examines the total annual fees collected under Minnesota Public School Fee Law,
Minnesota Statutes, sections 123B.34 to 123B.39, in fiscal years 2002 to 2005. The report
must detail all different types of fees charged to Minnesota students under the law. The
report must report total fees statewide as well as by school district and charter school.
new text end

new text begin Subd. 3. new text end

new text begin City fees. new text end

new text begin Each home rule charter or statutory city must report to the
commissioner of revenue by January 15, 2006, on the type and amount of fees it imposes,
amount and type of fee increases since January 1, 2003, the revenues derived from each fee
for each of the most recent four calendar years, and the use of the revenues from the fees.
The commissioner of revenue shall compile this information and provide a comprehensive
report on all city fees to the finance and tax committees of the senate and the appropriations
and tax committees of the house of representatives by February 15, 2006.
new text end

ARTICLE 5

LOCAL DEVELOPMENT

Section 1.

Minnesota Statutes 2004, section 116J.993, subdivision 3, is amended to
read:

Subd. 3.

Business subsidy.

"Business subsidy" or "subsidy" means a state or local
government agency grant, contribution of personal property, real property, infrastructure,
the principal amount of a loan at rates below those commercially available to the recipient,
any reduction or deferral of any tax or any fee, any guarantee of any payment under any
loan, lease, or other obligation, or any preferential use of government facilities given
to a business.

The following forms of financial assistance are not a business subsidy:

(1) a business subsidy of less than $25,000;

(2) assistance that is generally available to all businesses or to a general class of
similar businesses, such as a line of business, size, location, or similar general criteria;

(3) public improvements to buildings or lands owned by the state or local
government that serve a public purpose and do not principally benefit a single business or
defined group of businesses at the time the improvements are made;

(4) redevelopment property polluted by contaminants as defined in section 116J.552,
subdivision 3;

(5) assistance provided for the sole purpose of renovating old or decaying building
stock or bringing it up to code and assistance provided for designated historic preservation
districts, provided that the assistance is equal to or less than 50 percent of the total cost;

(6) assistance to provide job readiness and training services if the sole purpose of
the assistance is to provide those services new text begin , except when such assistance is paid for by
expenditures of tax increments under section 469.176, subdivision 4m new text end ;

(7) assistance for housing;

(8) assistance for pollution control or abatement, including assistance for a tax
increment financing hazardous substance subdistrict as defined under section 469.174,
subdivision 23;

(9) assistance for energy conservation;

(10) tax reductions resulting from conformity with federal tax law;

(11) workers' compensation and unemployment insurance;

(12) benefits derived from regulation;

(13) indirect benefits derived from assistance to educational institutions;

(14) funds from bonds allocated under chapter 474A, bonds issued to refund
outstanding bonds, and bonds issued for the benefit of an organization described in section
501(c)(3) of the Internal Revenue Code of 1986, as amended through December 31, 1999;

(15) assistance for a collaboration between a Minnesota higher education institution
and a business;

(16) assistance for a tax increment financing soils condition district as defined under
section 469.174, subdivision 19;

(17) redevelopment when the recipient's investment in the purchase of the site
and in site preparation is 70 percent or more of the assessor's current year's estimated
market value;

(18) general changes in tax increment financing law and other general tax law
changes of a principally technical nature;

(19) federal assistance until the assistance has been repaid to, and reinvested by, the
state or local government agency;

(20) funds from dock and wharf bonds issued by a seaway port authority;

(21) business loans and loan guarantees of $75,000 or less; and

(22) federal loan funds provided through the United States Department of
Commerce, Economic Development Administration.

Sec. 2.

Minnesota Statutes 2004, section 116J.993, is amended by adding a subdivision
to read:

new text begin Subd. 8. new text end

new text begin Residence. new text end

new text begin "Residence" means the place where an individual has
established a permanent home from which the individual has no present intention of
moving.
new text end

Sec. 3.

Minnesota Statutes 2004, section 116J.994, subdivision 4, is amended to read:

Subd. 4.

Wage and job goals.

The subsidy agreement, in addition to any other
goals, must include: (1) goals for the number of jobs created, which may include separate
goals for the number of part-time or full-time jobs, or, in cases where job loss is specific
and demonstrable, goals for the number of jobs retained; (2) wage goals for any jobs
created or retained; and (3) wage goals for any jobs to be enhanced through increased
wages. After a public hearing, if the creation or retention of jobs is determined not to be
a goal, the wage and job goals may be set at zero. new text begin The goals for the number of jobs to
be created or retained must result in job creation or retention by the recipient within
the granting jurisdiction overall.
new text end

In addition to other specific goal time frames, the wage and job goals must contain
specific goals to be attained within two years of the benefit date.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective August 1, 2005, and applies to
subsidy agreements entered into on or after that date.
new text end

Sec. 4.

Minnesota Statutes 2004, section 116J.994, subdivision 5, is amended to read:

Subd. 5.

Public notice and hearing.

(a) Before granting a business subsidy that
exceeds $500,000 for a state government grantor and $100,000 for a local government
grantor, the grantor must provide public notice and a hearing on the subsidy. A public
hearing and notice under this subdivision is not required if a hearing and notice on the
subsidy is otherwise required by law.

(b) Public notice of a proposed business subsidy under this subdivision by a state
government grantor, other than the Iron Range Resources and Rehabilitation Board, must
be published in the State Register. Public notice of a proposed business subsidy under this
subdivision by a local government grantor or the Iron Range Resources and Rehabilitation
Board must be published in a local newspaper of general circulation. The public notice
must identify the location at which information about the business subsidy, including a
summary of the terms of the subsidy, is available. Published notice should be sufficiently
conspicuous in size and placement to distinguish the notice from the surrounding text.
The grantor must make the information available in printed paper copies and, if possible,
on the Internet. The government agency must provide at least a ten-day notice for the
public hearing.

(c) The public notice must include the date, time, and place of the hearing.

(d) The public hearing by a state government grantor other than the Iron Range
Resources and Rehabilitation Board must be held in St. Paul.

(e) If more than one nonstate grantor provides a business subsidy to the same
recipient, the nonstate grantors may designate one nonstate grantor to hold a single
public hearing regarding the business subsidies provided by all nonstate grantors. For
the purposes of this paragraph, "nonstate grantor" includes the iron range resources and
rehabilitation board.

new text begin (f) The public notice of any public meeting about a business subsidy agreement,
including those required by this subdivision and by subdivision 4, must include notice that
a person with residence in or the owner of taxable property in the granting jurisdiction
may file a written complaint with the grantor if the grantor fails to comply with sections
116J.993 to 116J.995, and that no action may be filed against the grantor for such failure
to comply unless a written complaint is filed.
new text end

Sec. 5.

Minnesota Statutes 2004, section 116J.994, subdivision 9, is amended to read:

Subd. 9.

Compilation and summary report.

The Department of Employment
and Economic Development must publish a compilation and summary of the results
of the reports for the previous two calendar years by December 1 of 2004 and every
other year thereafter. The reports of the government agencies to the department and the
compilation and summary report of the department must be made available to the public.
new text begin The commissioner must make copies of all business subsidy reports submitted by local
and state granting agencies available on the department's Web site by October 1 of the
year in which they were submitted.
new text end

The commissioner must coordinate the production of reports so that useful
comparisons across time periods and across grantors can be made. The commissioner may
add other information to the report as the commissioner deems necessary to evaluate
business subsidies. Among the information in the summary and compilation report, the
commissioner must include:

(1) total amount of subsidies awarded in each development region of the state;

(2) distribution of business subsidy amounts by size of the business subsidy;

(3) distribution of business subsidy amounts by time category;

(4) distribution of subsidies by type and by public purpose;

(5) percent of all business subsidies that reached their goals;

(6) percent of business subsidies that did not reach their goals by two years from
the benefit date;

(7) total dollar amount of business subsidies that did not meet their goals after
two years from the benefit date;

(8) percent of subsidies that did not meet their goals and that did not receive
repayment;

(9) list of recipients that have failed to meet the terms of a subsidy agreement in the
past five years and have not satisfied their repayment obligations;

(10) number of part-time and full-time jobs within separate bands of wages; and

(11) benefits paid within separate bands of wages.

Sec. 6.

Minnesota Statutes 2004, section 116J.994, is amended by adding a subdivision
to read:

new text begin Subd. 11. new text end

new text begin Enforcement. new text end

new text begin (a) A person with residence in or an owner of taxable
property located in the jurisdiction of the grantor may bring an action for equitable relief
arising out of the failure of the grantor to comply with sections 116J.993 to 116J.995.
The court may award a prevailing party in an action under this subdivision costs and
reasonable attorney fees.
new text end

new text begin (b) Prior to bringing an action, the party must file a written complaint with the
grantor stating the alleged violation and proposing a remedy. The grantor has up to 30
days to reply to the complaint in writing and may take action to comply with sections
116J.993 to 116J.995.
new text end

new text begin (c) The written complaint under this subdivision for failure to comply with
subdivisions 1 to 5, must be filed with the grantor within 180 days after approval of the
subsidy agreement under subdivision 3, paragraph (d). An action under this subdivision
must be commenced within 30 days following receipt of the grantor's reply, or within
180 days after approval of the subsidy agreement under subdivision 3, paragraph (d),
whichever is later.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective August 1, 2005, and applies to
subsidy agreements entered into on or after that date.
new text end

Sec. 7.

Minnesota Statutes 2004, section 161.1231, is amended by adding a subdivision
to read:

new text begin Subd. 11. new text end

new text begin Transfer of ownership. new text end

new text begin The commissioner shall, at the earliest feasible
date after receiving payment, transfer ownership of the parking facilities to the city
of Minneapolis. The payment must be equal to the amount of state funds spent by
the commissioner for construction of the facilities. Upon assuming ownership of the
facilities, the city shall operate the facilities in accordance with the rules adopted by
the commissioner under subdivision 2. Upon assumption of ownership, the city shall
assume the authority to collect fees for use of the facilities under subdivision 5. The
commissioner shall take no action under this section that would result in federal sanctions
against Minnesota or require the repayment of any state funds to the federal government.
The commissioner shall deposit all money received under this subdivision in the trunk
highway fund.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day after the governing body of
the city of Minneapolis and its chief clerical officer comply with Minnesota Statutes,
section 645.021, subdivisions 2 and 3.
new text end

Sec. 8.

Minnesota Statutes 2004, section 272.0212, subdivision 1, is amended to read:

Subdivision 1.

Exemption.

All qualified property in a zone is exempt to the extent
and for new text begin a period up to new text end the duration provided by the zone designation and under sections
469.1731 to 469.1735.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for development agreements
approved after the day following final enactment and beginning for property taxes payable
in 2006.
new text end

Sec. 9.

Minnesota Statutes 2004, section 272.0212, subdivision 2, is amended to read:

Subd. 2.

Limits on exemption.

new text begin (a) new text end Property in a zone is not exempt under this
section from the following:

(1) special assessments;

(2) ad valorem property taxes specifically levied for the payment of principal and
interest on debt obligations; and

(3) all taxes levied by a school district, except school referendum levies as defined
in section 126C.17.

new text begin (b) The city may limit the property tax exemption to a shorter period than the
duration of the zone or to a percentage of the property taxes payable or both.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for development agreements
approved after the day following final enactment and beginning for property taxes payable
in 2006.
new text end

Sec. 10.

Minnesota Statutes 2004, section 469.034, subdivision 2, is amended to read:

Subd. 2.

General obligation revenue bonds.

(a) An authority may pledge the
general obligation of the general jurisdiction governmental unit as additional security for
bonds payable from income or revenues of the project or the authority. The authority
must find that the pledged revenues will equal or exceed 110 percent of the principal and
interest due on the bonds for each year. The proceeds of the bonds must be used for a
qualified housing development project or projects. The obligations must be issued and
sold in the manner and following the procedures provided by chapter 475, except the
obligations are not subject to approval by the electors and the maturities may extend to not
more than 30 years from the estimated date of completion of the project. The authority is
the municipality for purposes of chapter 475.

(b) The principal amount of the issue must be approved by the governing body of
the general jurisdiction governmental unit whose general obligation is pledged. Public
hearings must be held on issuance of the obligations by both the authority and the general
jurisdiction governmental unit. The hearings must be held at least 15 days, but not more
than 120 days, before the sale of the obligations.

(c) The maximum amount of general obligation bonds that may be issued and
outstanding under this section equals the greater of (1) one-half of one percent of
the taxable market value of the general jurisdiction governmental unit whose general
obligation which includes a tax on property is pledged, or (2) $3,000,000. In the case
of county or multicounty general obligation bonds, the outstanding general obligation
bonds of all cities in the county or counties issued under this subdivision must be added
in calculating the limit under clause (1).

(d) "General jurisdiction governmental unit" means the city in which the housing
development project is located. In the case of a county or multicounty authority, the
county or counties may act as the general jurisdiction governmental unit. In the case of
a multicounty authority, the pledge of the general obligation is a pledge of a tax on the
taxable property in each of the counties.

(e) "Qualified housing development project" means a housing development project
providing housing either for the elderly or for individuals and families with incomes not
greater than 80 percent of the median family income as estimated by the United States
Department of Housing and Urban Development for the standard metropolitan statistical
area or the nonmetropolitan county in which the project is located deleted text begin , and will deleted text end new text begin . The project
must new text end be owned new text begin for the term of the bonds either new text end by the authority deleted text begin for the term of the bonds
deleted text end new text begin or by a limited partnership or other entity in which the authority or another entity under the
sole control of the authority is the sole general partner. The partnership or other entity must
receive either: (1) an allocation from the Department of Finance or an entitlement issuer
of tax-exempt bonding authority for the project and a preliminary determination by the
Minnesota Housing Finance Agency or the applicable suballocator of tax credits that the
project will qualify for four percent low-income housing tax credits; or (2) a reservation of
nine percent low-income housing tax credits from the Minnesota Housing Finance Agency
or a suballocator of tax credits for the project new text end . A qualified housing development project
may admit nonelderly individuals and families with higher incomes if:

(1) three years have passed since initial occupancy;

(2) the authority finds the project is experiencing unanticipated vacancies resulting in
insufficient revenues, because of changes in population or other unforeseen circumstances
that occurred after the initial finding of adequate revenues; and

(3) the authority finds a tax levy or payment from general assets of the general
jurisdiction governmental unit will be necessary to pay debt service on the bonds if higher
income individuals or families are not admitted.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for bonds issued after the day
following final enactment.
new text end

Sec. 11.

Minnesota Statutes 2004, section 469.169, is amended by adding a subdivision
to read:

new text begin Subd. 17. new text end

new text begin Additional border city allocations. new text end

new text begin (a) In addition to tax reductions
authorized in subdivisions 7 to 16, the commissioner shall allocate $750,000 for tax
reductions to border city enterprise zones in cities located on the western border of the
state. The commissioner shall make allocations to zones in cities on the western border on
a per capita basis. Allocations made under this subdivision may be used for tax reductions
as provided in section 469.171, or for other offsets of taxes imposed on or remitted by
businesses located in the enterprise zone, but only if the municipality determines that the
granting of the tax reduction or offset is necessary in order to retain a business within or
attract a business to the zone. Any portion of the allocation provided in this paragraph
may alternatively be used for tax reductions under section 469.1732 or 469.1734.
new text end

new text begin (b) The commissioner shall allocate $750,000 for tax reductions under section
469.1732 or 469.1734 to cities with border city enterprise zones located on the western
border of the state. The commissioner shall allocate this amount among the cities on a per
capita basis. Any portion of the allocation provided in this paragraph may alternatively
be used for tax reductions as provided in section 469.171.
new text end

new text begin EFFECTIVE DATE. new text end

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

Sec. 12.

Minnesota Statutes 2004, section 469.174, is amended by adding a subdivision
to read:

new text begin Subd. 30. new text end

new text begin Urban renewal area. new text end

new text begin "Urban renewal area" means a contiguous
geographic area designated within a project and within which all parcels must be eligible
for inclusion in a redevelopment, renewal and renovation, or soils condition district or
are currently located within a redevelopment, renewal and renovation, or soils condition
district certified within ten years before or after the date of approval of the urban renewal
area by the city or county, whichever is later. In determining eligibility for inclusion in a
district, each parcel may only be considered as a part of one district.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for urban renewal areas established
on or after the date of final enactment.
new text end

Sec. 13.

Minnesota Statutes 2004, section 469.175, subdivision 1, is amended to read:

Subdivision 1.

Tax increment financing plan.

A tax increment financing plan
shall contain:

(1) a statement of objectives of an authority for the improvement of a project;

(2) a statement as to the development program for the project, including the property
within the project, if any, that the authority intends to acquire;

(3) a list of any development activities that the plan proposes to take place within
the project, for which contracts have been entered into at the time of the preparation of
the plan, including the names of the parties to the contract, the activity governed by the
contract, the cost stated in the contract, and the expected date of completion of that activity;

(4) identification or description of the type of any other specific development
reasonably expected to take place within the project, and the date when the development is
likely to occur;

(5) estimates of the following:

(i) cost of the project, including administrative expenses, except that if part of the
cost of the project is paid or financed with increment from the tax increment financing
district, the tax increment financing plan for the district must contain an estimate of the
amount of the cost of the project, including administrative expenses, that will be paid or
financed with tax increments from the district;

(ii) amount of bonded indebtedness to be incurred;

(iii) sources of revenue to finance or otherwise pay public costs;

(iv) the most recent net tax capacity of taxable real property within the tax increment
financing district and within any subdistrict;

(v) the estimated captured net tax capacity of the tax increment financing district
at completion; and

(vi) the duration of the tax increment financing district's and any subdistrict's
existence;

(6) statements of the authority's alternate estimates of the impact of tax increment
financing on the net tax capacities of all taxing jurisdictions in which the tax increment
financing district is located in whole or in part. For purposes of one statement, the
authority shall assume that the estimated captured net tax capacity would be available to
the taxing jurisdictions without creation of the district, and for purposes of the second
statement, the authority shall assume that none of the estimated captured net tax capacity
would be available to the taxing jurisdictions without creation of the district or subdistrict;

(7) identification and description of studies and analyses used to make the
determination set forth in subdivision 3, clause (2); deleted text begin and
deleted text end

(8) identification of all parcels to be included in the district or any subdistrict new text begin ; and
new text end

new text begin (9) identification of any job training costs intended to be paid by use of tax
increments, including the name of the employer whose employees will be trained and the
nature and cost of the training. The plan is not required to identify the provider of the job
training new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section applies to districts for which the request for
certification was made after July 31, 1979, and is effective for tax increment financing
plans approved after June 30, 2005.
new text end

Sec. 14.

Minnesota Statutes 2004, section 469.175, subdivision 4, is amended to read:

Subd. 4.

Modification of plan.

(a) A tax increment financing plan may be modified
by an authority.

(b) The authority may make the following modifications only upon the notice and
after the discussion, public hearing, and findings required for approval of the original plan:

(1) any reduction or enlargement of geographic area of the project or tax increment
financing district that does not meet the requirements of paragraph (e);

(2) increase in amount of bonded indebtedness to be incurred;

(3) a determination to capitalize interest on the debt if that determination was not a
part of the original plan, or to increase or decrease the amount of interest on the debt to
be capitalized;

(4) increase in the portion of the captured net tax capacity to be retained by the
authority;

(5) increase in the estimate of the cost of the project, including administrative
expenses, that will be paid or financed with tax increment from the district; deleted text begin or
deleted text end

(6) designation of additional property to be acquired by the authority new text begin ; or
new text end

new text begin (7) a decision to pay for job training for employees of a business located in the
district that was not a part of the original plan new text end .

(c) If an authority changes the type of district to another type of district, this change
is not a modification but requires the authority to follow the procedure set forth in sections
469.174 to 469.179 for adoption of a new plan, including certification of the net tax
capacity of the district by the county auditor.

(d) If a redevelopment district or a renewal and renovation district is enlarged,
the reasons and supporting facts for the determination that the addition to the district
meets the criteria of section 469.174, subdivision 10, paragraph (a), clauses (1) and (2),
or subdivision 10a, must be documented.

(e) The requirements of paragraph (b) do not apply if (1) the only modification is
elimination of parcels from the project or district and (2)(A) the current net tax capacity
of the parcels eliminated from the district equals or exceeds the net tax capacity of
those parcels in the district's original net tax capacity or (B) the authority agrees that,
notwithstanding section 469.177, subdivision 1, the original net tax capacity will be
reduced by no more than the current net tax capacity of the parcels eliminated from the
district. The authority must notify the county auditor of any modification that reduces or
enlarges the geographic area of a district or a project area.

(f) The geographic area of a tax increment financing district may be reduced, but
shall not be enlarged after five years following the date of certification of the original net
tax capacity by the county auditor or after August 1, 1984, for tax increment financing
districts authorized prior to August 1, 1979.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for districts for which the request
for certification was made after July 31, 1979, and is effective for modifications made
after June 30, 2005.
new text end

Sec. 15.

Minnesota Statutes 2004, section 469.175, subdivision 6, is amended to read:

Subd. 6.

Annual financial reporting.

(a) The state auditor shall develop a uniform
system of accounting and financial reporting for tax increment financing districts. The
system of accounting and financial reporting shall, as nearly as possible:

(1) provide for full disclosure of the sources and uses of public funds in the district;

(2) permit comparison and reconciliation with the affected local government's
accounts and financial reports;

(3) permit auditing of the funds expended on behalf of a district, including a single
district that is part of a multidistrict project or that is funded in part or whole through
the use of a development account funded with tax increments from other districts or
with other public money;

(4) be consistent with generally accepted accounting principles.

(b) The authority must annually submit to the state auditor a financial report
in compliance with paragraph (a). Copies of the report must also be provided to the
county auditor and to the governing body of the municipality, if the authority is not
the municipality. To the extent necessary to permit compliance with the requirement
of financial reporting, the county and any other appropriate local government unit or
private entity must provide the necessary records or information to the authority or the
state auditor as provided by the system of accounting and financial reporting developed
pursuant to paragraph (a). The authority must submit the annual report for a year on or
before August 1 of the next year.

(c) The annual financial report must also include the following items:

(1) the original net tax capacity of the district and any subdistrict under section
469.177, subdivision 1;

(2) the net tax capacity for the reporting period of the district and any subdistrict;

(3) the captured net tax capacity of the district;

(4) any fiscal disparity deduction from the captured net tax capacity under section
469.177, subdivision 3;

(5) the captured net tax capacity retained for tax increment financing under section
469.177, subdivision 2, paragraph (a), clause (1);

(6) any captured net tax capacity distributed among affected taxing districts under
section 469.177, subdivision 2, paragraph (a), clause (2);

(7) the type of district;

(8) the date the municipality approved the tax increment financing plan and the
date of approval of any modification of the tax increment financing plan, the approval of
which requires notice, discussion, a public hearing, and findings under subdivision 4,
paragraph (a);

(9) the date the authority first requested certification of the original net tax capacity
of the district and the date of the request for certification regarding any parcel added
to the district;

(10) the date the county auditor first certified the original net tax capacity of the
district and the date of certification of the original net tax capacity of any parcel added
to the district;

(11) the month and year in which the authority has received or anticipates it will
receive the first increment from the district;

(12) the date the district must be decertified;

(13) for the reporting period and prior years of the district, the actual amount
received from, at least, the following categories:

(i) tax increments paid by the captured net tax capacity retained for tax increment
financing under section 469.177, subdivision 2, paragraph (a), clause (1), but excluding
any excess taxes;

(ii) tax increments that are interest or other investment earnings on or from tax
increments;

(iii) tax increments that are proceeds from the sale or lease of property, tangible or
intangible, purchased by the authority with tax increments;

(iv) tax increments that are repayments of loans or other advances made by the
authority with tax increments;

(v) bond or loan proceeds;

(vi) special assessments;

(vii) grants; and

(viii) transfers from funds not exclusively associated with the district;

(14) for the reporting period and for the prior years of the district, the actual amount
expended for, at least, the following categories:

(i) acquisition of land and buildings through condemnation or purchase;

(ii) site improvements or preparation costs;

(iii) installation of public utilities, parking facilities, streets, roads, sidewalks, or
other similar public improvements;

(iv) administrative costs, including the allocated cost of the authority;

(v) public park facilities, facilities for social, recreational, or conference purposes, or
other similar public improvements; deleted text begin and
deleted text end

(vi) transfers to funds not exclusively associated with the district; new text begin and
new text end

new text begin (vii) job training as permitted under section 469.176, subdivision 4m;
new text end

(15) for properties sold to developers, the total cost of the property to the authority
and the price paid by the developer;

(16) the amount of any payments and the value of any in-kind benefits, such as
physical improvements and the use of building space, that are paid or financed with tax
increments and are provided to another governmental unit other than the municipality
during the reporting period;

(17) the amount of any payments for activities and improvements located outside of
the district that are paid for or financed with tax increments;

(18) the amount of payments of principal and interest that are made during the
reporting period on any nondefeased:

(i) general obligation tax increment financing bonds;

(ii) other tax increment financing bonds; and

(iii) notes and pay-as-you-go contracts;

(19) the principal amount, at the end of the reporting period, of any nondefeased:

(i) general obligation tax increment financing bonds;

(ii) other tax increment financing bonds; and

(iii) notes and pay-as-you-go contracts;

(20) the amount of principal and interest payments that are due for the current
calendar year on any nondefeased:

(i) general obligation tax increment financing bonds;

(ii) other tax increment financing bonds; and

(iii) notes and pay-as-you-go contracts;

(21) if the fiscal disparities contribution under chapter 276A or 473F for the district
is computed under section 469.177, subdivision 3, paragraph (a), the amount of increased
property taxes imposed on other properties in the municipality that approved the tax
increment financing plan as a result of the fiscal disparities contribution;

(22) whether the tax increment financing plan or other governing document permits
increment revenues to be expended:

(i) to pay bonds, the proceeds of which were or may be expended on activities
outside of the district;

(ii) for deposit into a common bond fund from which money may be expended on
activities located outside of the district; or

(iii) to otherwise finance activities located outside of the tax increment financing
district;

(23) the estimate, if any, contained in the tax increment financing plan of the amount
of the cost of the project, including administrative expenses, that will be paid or financed
with tax increment; and

(24) any additional information the state auditor may require.

(d) The commissioner of revenue shall prescribe the method of calculating the
increased property taxes under paragraph (c), clause (21), and the form of the statement
disclosing this information on the annual statement under subdivision 5.

(e) The reporting requirements imposed by this subdivision apply to districts
certified before, on, and after August 1, 1979.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for reports filed in 2006 and
thereafter.
new text end

Sec. 16.

Minnesota Statutes 2004, section 469.176, subdivision 1c, is amended to read:

Subd. 1c.

Duration limits; pre-1979 districts.

(a) For tax increment financing
districts created prior to August 1, 1979, no tax increment shall be paid to the authority
after April 1, 2001, or the term of a nondefeased bond or obligation outstanding on April
1, 1990, secured by increments from the district or project area, whichever time is greater,
provided that in no case will a tax increment be paid to an authority after August 1, 2009,
from such a district. If a district's termination date is extended beyond April 1, 2001,
because bonds were outstanding on April 1, 1990, with maturities extending beyond April
1, 2001, the following restrictions apply. No increment collected from the district may
be expended after April 1, 2001, except to pay or repay:

(1) bonds issued before April 1, 1990;

(2) bonds issued to refund the principal of the outstanding bonds and pay associated
issuance costs;

(3) administrative expenses of the district required to be paid under section 469.176,
subdivision 4h, paragraph (a);

(4) transfers of increment permitted under section 469.1763, subdivision 6; deleted text begin and
deleted text end

(5) any advance or payment made by the municipality or the authority after June
1, 2002, to pay any bonds listed in clause (1) or (2) new text begin ; and
new text end

new text begin (6) amounts authorized under paragraph (d) new text end .

(b) Each year, any increments from a district subject to this subdivision must
be first applied to pay obligations listed under paragraph (a), clauses (1) and (2), and
administrative expenses under paragraph (a), clause (3). Any remaining increments may
be used for transfers of increments permitted under section 469.1763, subdivision 6, and
to make payments under deleted text begin paragraph deleted text end new text begin paragraphs new text end (a), clause (5) new text begin , and (d) new text end .

(c) When sufficient money has been received to pay in full or defease obligations
under paragraph (a), clauses (1), (2), and (5), new text begin and no spending is permitted by paragraph
(d) for the year, new text end the tax increment project or district must be decertified.

new text begin (d) In addition to the expenditures authorized under paragraph (a), clauses (1) to
(5), a city may expend increments from a tax increment financing district subject to this
subdivision after April 1, 2001, if all of the following conditions are met:
new text end

new text begin (1) the captured tax capacity for all tax increment financing districts constituted less
than six percent of the city's total tax capacity for taxes payable in 2003; and
new text end

new text begin (2) the population of the city exceeds 50,000.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for tax increment financing districts
for which the request for certification was made before August 1, 1979.
new text end

Sec. 17.

Minnesota Statutes 2004, section 469.176, is amended by adding a subdivision
to read:

new text begin Subd. 4m. new text end

new text begin Use of increments for job training. new text end

new text begin Notwithstanding the limits on use
of increments in subdivision 4, 4b, 4c, or 4j, increments may be expended for job training
that is intended to result in new job growth within a tax increment financing district. The
authority may expend increments directly for the cost of the job training or may reimburse
an employer located within the district or a municipality in which the district is located for
job training expenditures. Increments may be expended only for job training programs
that are approved for this purpose by the local workforce council established under
section 116L.666 that has jurisdiction over the workforce service area that includes the
tax increment financing district. For purposes of section 469.1763, increments expended
under this subdivision are considered to be expended on activities in the district.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for districts for which the request for
certification was made after July 31, 1979, provided that districts for which the request
for certification was made before the effective date of this act must modify their plans
to provide for this expenditure.
new text end

Sec. 18.

Minnesota Statutes 2004, section 469.176, is amended by adding a subdivision
to read:

new text begin Subd. 8. new text end

new text begin Urban renewal area. new text end

new text begin (a) An authority may create an urban renewal area
only upon the notice and after the discussion, public hearing, and findings required for
approval of the original project. In addition, the authority must obtain written approval
from the county in which the urban renewal area is to be located. After approval by the
city and county, the authority shall notify the commissioner of revenue of the approved
urban renewal area.
new text end

new text begin (b) All provisions of sections 469.174 through 469.1799 apply except:
new text end

new text begin (1) the five-year rule under section 469.1763, subdivision 3, is extended to ten years;
new text end

new text begin (2) the limitation on spending increment outside of the district under section
469.1763, subdivision 2, does not apply, provided that increments may only be expended
on improvements or activities within the urban renewal area, and increments from a soils
condition district must be expended as provided under subdivision 4b; and
new text end

new text begin (3) the local tax rate certification required under section 469.177, subdivision 1a,
does not apply.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for urban renewal areas established
on or after the date of final enactment.
new text end

Sec. 19.

Minnesota Statutes 2004, section 469.1761, is amended by adding a
subdivision to read:

new text begin Subd. 3a. new text end

new text begin Mixed-income occupancy projects. new text end

new text begin (a) Notwithstanding the income
requirements in subdivisions 2 and 3, or section 469.174, subdivision 11, an authority may
create housing districts for developments that contain both owner-occupied and residential
rental units for mixed-income occupancy. Such a district consists of a project, or a portion
of a project, intended for occupancy, in part, by persons of low and moderate income
as defined in chapter 462A, title II, of the National Housing Act of 1934; the National
Housing Act of 1959; the United States Housing Act of 1937, as amended; title V of the
Housing Act of 1949, as amended; any other similar present or future federal, state, or
municipal legislation, or the regulations promulgated under any of those acts, as further
specified in this section. Twenty percent of the units in the development in the housing
district must be occupied by individuals whose family income is equal to or less than
50 percent of area median gross income, and an additional 60 percent of the units in
the development in the housing district must be occupied by individuals whose family
income is equal to or less than 115 percent of area median gross income. Twenty percent
of the units in the development in the housing district are not required to be subject to
any income limitations.
new text end

new text begin (b) For purposes of this subdivision, "family income" means the median gross
income for the area as determined under section 42 of the Internal Revenue Code of 1986,
as amended. The income requirements of this subdivision are satisfied if the sum of
qualified owner-occupied units and qualified residential rental units equals the required
total number of qualified units. Owner-occupied units must be initially purchased and
occupied by individuals whose family income satisfies the income requirements of this
subdivision. For residential rental property, the income requirements of this subdivision
apply for the duration of the tax increment district.
new text end

new text begin (c) The development in the housing district, but not the project, does not qualify
under this subdivision if the fair market value of the improvements that are constructed
for commercial uses or for uses other than owner-occupied and rental mixed-income
housing consists of more than 20 percent of the total fair market value of the planned
improvements in the development plan or agreement. The fair market value of the
improvements may be determined using the cost of construction, capitalized income, or
other appropriate method of estimating market value.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for districts for which certification
is requested after July 31, 2005.
new text end

Sec. 20.

Minnesota Statutes 2004, section 469.1763, subdivision 2, is amended to read:

Subd. 2.

Expenditures outside district.

(a) For each tax increment financing
district, an amount equal to at least 75 percent of the total revenue derived from tax
increments paid by properties in the district must be expended on activities in the district
or to pay bonds, to the extent that the proceeds of the bonds were used to finance activities
in the district or to pay, or secure payment of, debt service on credit enhanced bonds.
For districts, other than redevelopment districts for which the request for certification
was made after June 30, 1995, the in-district percentage for purposes of the preceding
sentence is 80 percent. Not more than 25 percent of the total revenue derived from tax
increments paid by properties in the district may be expended, through a development fund
or otherwise, on activities outside of the district but within the defined geographic area of
the project except to pay, or secure payment of, debt service on credit enhanced bonds.
For districts, other than redevelopment districts for which the request for certification was
made after June 30, 1995, the pooling percentage for purposes of the preceding sentence is
20 percent. The revenue derived from tax increments for the district that are expended on
costs under section 469.176, subdivision 4h, paragraph (b), may be deducted first before
calculating the percentages that must be expended within and without the district.

(b) In the case of a housing district, a housing project, as defined in section 469.174,
subdivision 11, is an activity in the district.

(c) All administrative expenses are for activities outside of the district, except that
if the only expenses for activities outside of the district under this subdivision are for
the purposes described in paragraph (d), administrative expenses will be considered as
expenditures for activities in the district.

(d) The authority may elect, in the tax increment financing plan for the district,
to increase by up to ten percentage points the permitted amount of expenditures for
activities located outside the geographic area of the district under paragraph (a). As
permitted by section 469.176, subdivision 4k, the expenditures, including the permitted
expenditures under paragraph (a), need not be made within the geographic area of the
project. Expenditures that meet the requirements of this paragraph are legally permitted
expenditures of the district, notwithstanding section 469.176, subdivisions 4b, 4c, and 4j.
To qualify for the increase under this paragraph, the expenditures must:

(1) be used exclusively to assist housing that meets the requirement for a qualified
low-income building, as that term is used in section 42 of the Internal Revenue Code;

(2) not exceed the qualified basis of the housing, as defined under section 42(c) of
the Internal Revenue Code, less the amount of any credit allowed under section 42 of
the Internal Revenue Code; and

(3) be used to:

(i) acquire and prepare the site of the housing;

(ii) acquire, construct, or rehabilitate the housing; or

(iii) make public improvements directly related to the housing.

new text begin (e) For a district created within a biotechnology and health sciences industry zone as
defined in section 469.330, subdivision 6, tax increment derived from such a district may
be expended outside of the district but within the zone only for expenditures required for
the construction of public infrastructure necessary to support the activities of the zone.
new text end

Sec. 21.

Minnesota Statutes 2004, section 469.1792, is amended to read:

469.1792 SPECIAL DEFICIT AUTHORITY.

Subdivision 1.

Scope.

This section applies only to an authority with a preexisting
district for which:

(1) the increments from the district were insufficient to pay preexisting obligations
as a result of the class rate changes or the elimination of the state-determined general
education property tax levy under this act, or both; deleted text begin or
deleted text end

(2)(i) the development authority has a binding contract, entered into before August
1, 2001, with a person requiring the authority to pay to the person an amount that may not
exceed the increment from the district or a specific development within the district; and

(ii) the authority is unable to pay the full amount under the contract from the pledged
increments or other increments from the district that would have been due if the class rate
changes or elimination of the state-determined general education property tax levy or both
had not been made under Laws 2001, First Special Session chapter 5 new text begin ;
new text end

new text begin (3) the authority amends its tax increment financing plan to establish an affordable
housing account to which increments are pledged; or
new text end

new text begin (4) the authority amends its tax increment financing plan to establish a hazardous
substance, pollutant, or contaminant remediation account to which increments are pledged new text end .

Subd. 2.

Definitions.

(a) For purposes of this section, the following terms have
the meanings given.

(b) new text begin "Affordable housing account" means an account in which increment is deposited
solely for affordable housing activities as defined in section 469.174, subdivision 11.
new text end

new text begin (c) "Hazardous substance, pollutant, or contaminant remediation account" means
an account in which increment is deposited solely for removal or remediation activities
described in section 469.174, subdivisions 16 to 19.
new text end

new text begin (d) new text end "Preexisting district" means a tax increment financing district for which the
request for certification was made before August 1, 2001.

deleted text begin (c) deleted text end new text begin (e) new text end "Preexisting obligation" means a bond or binding contract that:

(1)(i) was issued or approved before August 1, 2001, or was issued pursuant to a
binding contract entered into before July 1, 2001; or

(ii) was issued to refinance an obligation under item (i), if the refinancing does not
increase the present value of the debt service; and

(2) is secured by increments from a preexisting district.

Subd. 3.

Actions authorized.

(a) An authority with a district qualifying under this
section may take either or both of the following actions for any or all of its preexisting
districts:

(1) the authority may elect that the original local tax rate under section 469.177,
subdivision 1a, does not apply to the district; and

(2) the authority may elect the fiscal disparities contribution will be computed under
section 469.177, subdivision 3, paragraph (a), regardless of the election that was made for
the district or if the district is an economic development district for which the request for
certification was made after June 30, 1997.

(b) The authority may take action under this subdivision only after the municipality
approves the action, by resolution, after notice and public hearing in the manner provided
under section 469.175, subdivision 3. To be effective for taxes payable in the following
year, the resolution must be adopted and the county auditor must be notified of the
adoption on or before July 1.

new text begin Subd. 4. new text end

new text begin Expenditures from affordable housing accounts. new text end

new text begin Increment from an
affordable housing account may be spent by an authority anywhere within its area of
operation. Notwithstanding the definition of a project under section 469.174, increments
may be spent to assist housing that meets the requirements under section 469.1761. The
limitation imposed by section 469.1763, subdivision 2, does not apply to any transfers
of increment to the affordable housing account to the extent that the amount transferred
to the account under this subdivision does not exceed ten percent of the revenue derived
from tax increments paid by properties in the district in the year.
new text end

new text begin Subd. 5. new text end

new text begin Expenditures from hazardous substance, pollutant, or contaminant
remediation account. new text end

new text begin Increment from a hazardous substance, pollutant, or contaminant
remediation account may be spent by an authority anywhere within its area of operation.
Notwithstanding the definition of a project under section 469.174, increments may be
expended to remediation and removal activities that meet the requirements of section
469.176, subdivision 4b or 4e. The limitation imposed by section 469.1763, subdivision
2, does not apply to any transfers of increment to the hazardous substance, pollutant, or
contaminant remediation account to the extent that the amount transferred to the account
under this subdivision does not exceed ten percent of the revenue derived from tax
increments paid by properties in the district in the year.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for actions taken and resolutions
approved after June 30, 2005.
new text end

Sec. 22.

Minnesota Statutes 2004, section 469.310, subdivision 11, is amended to read:

Subd. 11.

Qualified business.

(a) "Qualified business" means a person carrying on
a trade or business at a place of business located within a job opportunity building zone.

(b) A person that relocates a trade or business from outside a job opportunity
building zone into a zone is not a qualified business, unless the business:

(1)(i) increases full-time employment in the first full year of operation within the
job opportunity building zone by at least 20 percent measured relative to the operations
that were relocated and maintains the required level of employment for each year the
zone designation applies; or

(ii) makes a capital investment in the property located within a zone equivalent to
ten percent of the gross revenues of operation that were relocated in the immediately
preceding taxable year; and

(2) enters a binding written agreement with the commissioner that:

(i) pledges the business will meet the requirements of clause (1);

(ii) provides for repayment of all tax benefits enumerated under section 469.315 to
the business under the procedures in section 469.319, if the requirements of clause (1) are
not met for the taxable year or for taxes payable during the year in which the requirements
were not met; and

(iii) contains any other terms the commissioner determines appropriate.

new text begin (c) A business is not a qualified business if at its location or locations in the zone,
the business is primarily engaged in making retail sales to purchasers who are physically
present at the business's zone location.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment
and applies to any business entering a business subsidy agreement for a job opportunity
development zone after that date.
new text end

Sec. 23.

Laws 1994, chapter 587, article 9, section 20, subdivision 1, is amended to
read:

Subdivision 1.

Establishment.

The city of Brooklyn Park may establish an
economic development tax increment financing district in which deleted text begin 15 percent deleted text end new text begin all new text end of the
revenue generated from tax increment in any year new text begin that is not expended pursuant to a
pledge given or encumbrance created before January 1, 2005, new text end is deposited in the housing
development account of the authority and expended according to the tax increment
financing plan.

Sec. 24.

Laws 1994, chapter 587, article 9, section 20, subdivision 2, is amended to
read:

Subd. 2.

Eligible activities.

The authority must identify in the plan the housing
activities that will be assisted by the housing development account. Housing activities
may include rehabilitation, acquisition, demolition, and financing of new or existing
single family or multifamily housing. Housing activities listed in the plan need not be
located within the district or project area but must be activities that meet the requirements
of a qualified housing district under Minnesota Statutes, section deleted text begin 273.1399 or deleted text end 469.1761,
subdivision 2 new text begin , for owner-occupied housing or section 469.174, subdivision 29, clause (1),
for rental housing new text end .

Sec. 25.

Laws 1998, chapter 389, article 11, section 19, subdivision 3, is amended to
read:

Subd. 3.

Duration of district.

Notwithstanding the provisions of Minnesota
Statutes, section 469.176, subdivision 1b, no tax increment may be paid to the authority
new text begin or the city new text end after deleted text begin 18 years from the date of receipt by the authority of the first increment
generated from the final phase of redevelopment. In no case may increments be paid
to the authority after deleted text end 30 years from approval of the tax increment plan. deleted text begin "Final phase
of redevelopment" means that phase of redevelopment activity which completes the
rehabilitation of the Lake Street site.
deleted text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective upon compliance with Minnesota
Statutes, sections 469.1782, subdivision 2, and 645.021, subdivision 2.
new text end

Sec. 26. new text begin ANOKA COUNTY REGIONAL RAILROAD AUTHORITY POWERS.
new text end

new text begin Subdivision 1. new text end

new text begin Economic development powers and duties. new text end

new text begin The Anoka County
Regional Railroad Authority may exercise any of the powers and duties of an economic
development authority under Minnesota Statutes, sections 469.090, 469.098, and 469.101
to 469.106. The Anoka County Regional Railroad Authority may exercise the powers
under Minnesota Statutes, sections 469.001 to 469.047, for the purpose of transit-oriented
development, except that the Anoka County Regional Railroad Authority must not
exercise the power to tax under Minnesota Statutes, section 469.033, subdivision 6. In
applying Minnesota Statutes, sections 469.001 to 469.047, 469.090, 469.098, and 469.101
to 469.106, to the Anoka County Regional Railroad Authority, the county is considered to
be the city and the county board is considered to be the city council.
new text end

new text begin Subd. 2. new text end

new text begin Relation to local authorities. new text end

new text begin Nothing in subdivision 1 shall change
or impair the powers or duties of a city, town, municipal housing and redevelopment
authority, or municipal economic development authority.
new text end

new text begin Subd. 3. new text end

new text begin Local approval. new text end

new text begin If any economic development project is constructed in
the county pursuant to the authorization in this section, the project must be approved by
the governing body of each city or town within which the project will be constructed.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day after the governing body
of the Anoka County Regional Railroad Authority and its chief clerical officer timely
complete their compliance with Minnesota Statutes, section 645.021, subdivisions 2 and 3.
new text end

Sec. 27. new text begin CITY OF BEMIDJI; DURATION EXTENSION FOR TAX
ABATEMENT.
new text end

new text begin Notwithstanding the limitation in Minnesota Statutes, section 469.1813, subdivision
6, the city of Bemidji may extend the duration of the tax abatement given to support
development within the fairgrounds district of the city for an additional four years beyond
the duration permitted under that section.
new text end

Sec. 28. new text begin CITY OF BROOKLYN CENTER; EXTENSION OF TIME TO EXPEND
TAX INCREMENT.
new text end

new text begin For tax increment financing district number 3, established on December 19, 1994,
by Brooklyn Center Resolution No. 94-273, Minnesota Statutes, section 469.1763,
subdivision 3, applies to the district by permitting a period of 13 years for commencement
of activities within the district.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective upon approval by the governing
body of the city of Brooklyn Center and compliance with Minnesota Statutes, section
645.021, subdivision 3.
new text end

Sec. 29. new text begin CITY OF BROOKLYN PARK TAX INCREMENT FINANCING
DISTRICT EXTENSION.
new text end

new text begin Notwithstanding Minnesota Statutes, section 469.176, subdivision 1b, or any other
law to the contrary, the duration limit that applies to the economic development tax
increment financing district established under Laws 1994, chapter 587, article 9, section
20, is extended to December 31, 2020.
new text end

Sec. 30. new text begin CITY OF DETROIT LAKES; REDEVELOPMENT TAX INCREMENT
FINANCING DISTRICT.
new text end

new text begin Subdivision 1. new text end

new text begin Authorization. new text end

new text begin At the election of the governing body of the city of
Detroit Lakes, upon adoption of the tax increment financing plan for the district described
in this section, the rules provided under this section apply to each such district.
new text end

new text begin Subd. 2. new text end

new text begin Definition. new text end

new text begin In this section, "district" means a redevelopment district
established by the city of Detroit Lakes or the Detroit Lakes Development Authority
within the following area:
new text end

new text begin Beginning at the intersection of Washington Avenue and the Burlington Northern Santa Fe
Railroad then east to the intersection of Roosevelt Avenue then south to the intersection of
Highway 10/Frazee Street then west to the intersection of Frazee Street and the alley that
parallels Washington Avenue then north to the point of beginning.
new text end

new text begin More than one district may be created under this act.
new text end

new text begin Subd. 3. new text end

new text begin Qualification as redevelopment district; special rules. new text end

new text begin The district shall
be a redevelopment district under Minnesota Statutes, section 469.174, subdivision 10. All
buildings that are removed to facilitate the Highway 10 Realignment Project are deemed
to be "structurally substandard." The three-year limit after demolition of the buildings to
request tax increment financing certification provided in Minnesota Statutes, section
469.174, subdivision 10, paragraph (d), clause (1), does not apply.
new text end

new text begin Subd. 4. new text end

new text begin Expiration. new text end

new text begin The authority to approve tax increment financing plans to
establish a tax increment financing redevelopment district subject to this section expires
on December 31, 2014.
new text end

new text begin Subd. 5. new text end

new text begin Effective date. new text end

new text begin This section is effective upon approval of the governing
body of the city of Detroit Lakes and compliance with Minnesota Statutes, section
645.021, subdivision 3.
new text end

Sec. 31. new text begin CITIES OF ELGIN, EYOTA, BYRON, AND ORONOCO; TAX
INCREMENT FINANCING DISTRICTS.
new text end

new text begin Subdivision 1. new text end

new text begin Authorization. new text end

new text begin Notwithstanding the mileage limitation in Minnesota
Statutes, section 469.174, subdivision 27, the cities of Elgin, Eyota, Byron, and Oronoco
are deemed to be small cities for purposes of Minnesota Statutes, sections 469.174 to
469.1799, as long as they do not exceed the population limit in that section.
new text end

new text begin Subd. 2. new text end

new text begin Local approval. new text end

new text begin This section is effective for each of the cities of Elgin,
Eyota, Byron, and Oronoco upon approval of that city's governing body and compliance
with Minnesota Statutes, section 645.021, subdivisions 2 and 3.
new text end

Sec. 32. new text begin CITY OF FAIRMONT; TAX INCREMENT FINANCING DISTRICT.
new text end

new text begin Subdivision 1. new text end

new text begin Authority to reduce original value. new text end

new text begin The city of Fairmont may
elect to reduce the original tax capacity of a previously tax-exempt parcel, consisting of
property formerly owned by the United States Post Office, in tax increment financing
district No. 20, to the value of the land.
new text end

new text begin Subd. 2. new text end

new text begin Effective date. new text end

new text begin This section is effective upon compliance by the city of
Fairmont with the requirements of Minnesota Statutes, section 645.021.
new text end

Sec. 33. new text begin CITY OF FERGUS FALLS; ECONOMIC DEVELOPMENT
PROPERTY.
new text end

new text begin The provisions of Minnesota Statutes, section 272.02, subdivision 39, apply to
property located in the city of Fergus Falls as if the city had a population of 5,000 or less.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes levied in 2005, payable
in 2006, and thereafter.
new text end

Sec. 34. new text begin CITY OF RAMSEY; HOUSING TAX INCREMENT DISTRICT.
new text end

new text begin Subdivision 1. new text end

new text begin Authorization. new text end

new text begin The governing body of the city of Ramsey may
create a housing tax increment financing district as provided in this section. The city or its
economic development authority may be the "authority" for the purposes of Minnesota
Statutes, sections 469.174 to 469.179.
new text end

new text begin Subd. 2. new text end

new text begin Definitions. new text end

new text begin (a) For the purposes of this section, the terms defined in this
subdivision have the meanings given them.
new text end

new text begin (b) "Development parcel" means the property in the city of Ramsey generally
described as the easterly 4.1 acres of Outlot AA, Ramsey Town Center Addition.
new text end

new text begin (c) "Low and moderate income persons" means:
new text end

new text begin (1) persons or families of low and moderate income, as defined in Minnesota
Statutes, chapter 462A, Title II of the National Housing Act of 1934, the National Housing
Act of 1959, the United States Housing Act of 1937, as amended, Title V of the Housing
Act of 1949, as amended, any other similar present or future federal, state, or municipal
legislation, or the regulations promulgated under any of those acts;
new text end

new text begin (2) disabled persons; and
new text end

new text begin (3) persons over the age of 55 years.
new text end

new text begin Subd. 3. new text end

new text begin Special rules. new text end

new text begin (a) The district established under this section is subject to
the provisions of Minnesota Statutes, sections 469.174 to 469.179, except as provided
in this subdivision.
new text end

new text begin (b) The district may consist of all or a portion of the development parcel.
new text end

new text begin (c) The housing district shall be as described in Minnesota Statutes, section 469.174,
subdivision 11, provided that the definition in subdivision 2, paragraph (c), applies to all
references to "low and moderate income persons" in that provision. All improvements
constructed within the district will be considered to be made for the benefit of low and
moderate income persons.
new text end

new text begin (d) Minnesota Statutes, section 469.176, subdivision 7, does not apply to the housing
district authorized in this section.
new text end

new text begin (e) The income limitations in Minnesota Statutes, section 469.1761, shall not apply
to persons meeting the requirements of clauses (2) and (3) of subdivision 2, paragraph (c).
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment,
upon compliance with Minnesota Statutes, section 645.021.
new text end

Sec. 35. new text begin CITY OF RICHFIELD; TAX INCREMENT FINANCING DISTRICT.
new text end

new text begin Subdivision 1. new text end

new text begin Authorization. new text end

new text begin The city of Richfield may create a tax increment
financing district consisting of an area lying west of Trunk Highway 77 extending: to 16th
Avenue between Crosstown Highway 62 and 66th Street; to 17th Avenue between 66th
and 69th Streets; and to 18th Avenue between 69th and 72nd Streets. The city or its
housing and redevelopment authority may be the authority for the purposes of Minnesota
Statutes, sections 469.174 to 469.179.
new text end

new text begin Subd. 2. new text end

new text begin District is redevelopment district. new text end

new text begin The redevelopment tax increment
district created pursuant to subdivision 1, within which housing is not a compatible use
due to the presence of extraordinary low frequency noise and vibration impacts, is deemed
to be a redevelopment district and is subject to Minnesota Statutes, sections 469.174
to 469.179, except that:
new text end

new text begin (1) expenditures for activities as defined in Minnesota Statutes, section 469.1763,
subdivision 1, paragraph (b), anywhere in the district are deemed to be the costs of
correcting conditions that allow the designation of redevelopment districts pursuant to
Minnesota Statutes, section 469.174, subdivision 10; and
new text end

new text begin (2) the five-year rule under Minnesota Statutes, section 469.1763, subdivision 3,
does not apply.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective upon local approval by the city of
Richfield in compliance with Minnesota Statutes, section 645.021.
new text end

Sec. 36. new text begin CITY OF ST. MICHAEL; TAX INCREMENT FINANCING DISTRICT.
new text end

new text begin Subdivision 1. new text end

new text begin Establishment of district. new text end

new text begin The city of St. Michael may establish
a redevelopment tax increment financing district subject to Minnesota Statutes, sections
469.174 to 469.179, except as provided in this section. The district must be established
within an area that includes the downtown and town center areas as designated by the city
as well as all parcels adjacent to marked Trunk Highway 241 within the city.
new text end

new text begin Subd. 2. new text end

new text begin Special rules. new text end

new text begin (a) Notwithstanding the requirements of Minnesota
Statutes, section 469.174, subdivision 10, the district may be established and operated as
a redevelopment district.
new text end

new text begin (b) Notwithstanding the restrictions of Minnesota Statutes, sections 469.176,
subdivisions 4 and 4j, and 469.1763, subdivision 2, revenues derived from tax increments
from the district created under this section may be used to meet the cost of land
acquisition, removal of buildings in the right-of-way acquisition area, and other costs
incurred by the city of St. Michael in the expansion and improvement of marked Trunk
Highway 241 within the city.
new text end

new text begin (c) Minnesota Statutes, section 469.176, subdivision 5, does not apply to the district.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day after the governing body of
the city of St. Michael complies with Minnesota Statutes, section 645.021, subdivision 3.
new text end

Sec. 37. new text begin ST. PAUL; HOUSING AND REDEVELOPMENT AUTHORITY.
new text end

new text begin Subdivision 1. new text end

new text begin Housing and redevelopment subdistricts. new text end

new text begin For its tax increment
financing districts identified in subdivision 2, the Housing and Redevelopment Authority
of the city of St. Paul may establish subdistricts up to the number set forth for each tax
increment financing district in subdivision 2. The subdistricts shall be treated as set forth
in subdivision 3, notwithstanding the provisions of any other law to the contrary.
new text end

new text begin Subd. 2. new text end

new text begin Division into subdistricts; authority. new text end

new text begin The tax increment financing districts
with the following Ramsey County identification numbers may be divided into a number
of subdistricts not to exceed the number set forth as follows: No. 224/233, six subdistricts;
No. 225, six subdistricts; No. 228, three subdistricts; and No. 234, two subdistricts.
new text end

new text begin Subd. 3. new text end

new text begin Designation of parcels. new text end

new text begin All parcels in a tax increment financing district
listed in subdivision 2 must be assigned to a subdistrict. Each subdistrict established
pursuant to this section shall consist of those parcels in the tax increment financing district
which are designated by the commissioners of the Housing and Redevelopment Authority
of the city of St. Paul by resolution, which parcels need not be contiguous. For purposes
of determining tax increments and the parcels treated as paying tax increments, each
subdistrict shall be treated as a separate tax increment district.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day after the governing body of
St. Paul and its chief clerical officer comply with Minnesota Statutes, section 645.021,
subdivisions 2 and 3.
new text end

Sec. 38. new text begin WABASHA TAX INCREMENT FINANCING DISTRICT.
new text end

new text begin Subdivision 1. new text end

new text begin District extension. new text end

new text begin The governing body of the city of Wabasha may
elect to extend the duration of its redevelopment tax increment financing district number
3 by up to five additional years.
new text end

new text begin Subd. 2. new text end

new text begin Five-year rule. new text end

new text begin The requirements of Minnesota Statutes, section 469.1763,
subdivision 3, that activities must be undertaken within a five-year period from the date of
certification of a tax increment financing district must be considered to be met for the city
of Wabasha redevelopment tax increment district number 3, if the activities are undertaken
within ten years from the date of certification of the district.
new text end

new text begin Subd. 3. new text end

new text begin National eagle center. new text end

new text begin Notwithstanding the provisions of Minnesota
Statutes, section 469.176, subdivision 4l, or any other law, the city of Wabasha may spend
the proceeds of tax increment bonds issued prior to January 1, 2000, to pay the costs of
acquiring and constructing a National Eagle Center in the city. The city of Wabasha
may also use tax increment from its tax increment districts to pay the debt service on
such bonds, or any bonds issued to refund such bonds, subject to legal restrictions on the
pooling of tax increment.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin Subdivision 1 is effective upon compliance with the
provisions of Minnesota Statutes, sections 469.1782, subdivision 2, and 645.021.
Subdivisions 2 and 3 are effective upon compliance by the governing body of the city of
Wabasha with the provisions of Minnesota Statutes, section 645.021.
new text end

Sec. 39. new text begin WINONA; EXTENSION OF DURATION OF TAX INCREMENT
DISTRICT.
new text end

new text begin Subdivision 1. new text end

new text begin Duration. new text end

new text begin Notwithstanding the provisions of Minnesota Statutes,
section 469.176, subdivision 1b, the duration of riverfront tax increment financing district
number 2, approved by the port authority of Winona on July 15, 1980, is extended to
December 31, 2020. Any tax increment received after December 31, 2005, must be used
solely to pay capital and administrative costs of transportation improvements related to
the Pelzer Street project.
new text end

new text begin Subd. 2. new text end

new text begin Exception. new text end

new text begin The provisions of Minnesota Statutes, section 469.1782,
subdivision 2, do not apply to this section.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective upon approval by the governing body
of the port authority of Winona and compliance with Minnesota Statutes, section 645.021.
new text end

Sec. 40. new text begin JOBZ EXPENDITURE LIMITATIONS; AUDITS.
new text end

new text begin Subdivision 1. new text end

new text begin Determination of tax expenditures. new text end

new text begin By September 1, 2005, the
commissioner of revenue, with the assistance of the commissioner of employment and
economic development, must estimate the total amount of tax expenditures projected to
have been obligated for all job opportunity building zone projects that have been approved
before June 1, 2005. If the commissioner of revenue determines that the estimated amount
of tax expenditures for fiscal years 2005-2007 exceeds $13,780,000, the commissioner of
revenue must inform the chairs of the house of representatives and senate tax committees.
new text end

new text begin Subd. 2. new text end

new text begin Audits. new text end

new text begin The Tax Increment Financing, Investment and Finance Division of
the Office of the State Auditor must annually audit the creation and operation of all job
opportunity building zones and business subsidy agreements entered into under Minnesota
Statutes, sections 469.310 to 469.320.
new text end

Sec. 41. new text begin REPEALER.
new text end

new text begin Laws 1994, chapter 587, article 9, section 20, subdivision 4, is repealed.
new text end

ARTICLE 6

PUBLIC FINANCE

Section 1.

Minnesota Statutes 2004, section 118A.05, subdivision 5, is amended to read:

Subd. 5.

Guaranteed investment contracts.

Agreements or contracts for
guaranteed investment contracts may be entered into if they are issued or guaranteed
by United States commercial banks, domestic branches of foreign banks, United States
insurance companies, or their Canadian subsidiaries new text begin , or the domestic affiliates of any of the
foregoing new text end . The credit quality of the issuer's or guarantor's short- and long-term unsecured
debt must be rated in one of the two highest categories by a nationally recognized rating
agency. Should the issuer's or guarantor's credit quality be downgraded below "A", the
government entity must have withdrawal rights.

Sec. 2.

Minnesota Statutes 2004, section 275.70, subdivision 5, is amended to read:

Subd. 5.

Special levies.

"Special levies" means those portions of ad valorem taxes
levied by a local governmental unit for the following purposes or in the following manner:

(1) to pay the costs of the principal and interest on bonded indebtedness or to
reimburse for the amount of liquor store revenues used to pay the principal and interest
due on municipal liquor store bonds in the year preceding the year for which the levy
limit is calculated;

(2) to pay the costs of principal and interest on certificates of indebtedness issued for
any corporate purpose except for the following:

(i) tax anticipation or aid anticipation certificates of indebtedness;

(ii) certificates of indebtedness issued under sections 298.28 and 298.282;

(iii) certificates of indebtedness used to fund current expenses or to pay the costs of
extraordinary expenditures that result from a public emergency; or

(iv) certificates of indebtedness used to fund an insufficiency in tax receipts or
an insufficiency in other revenue sources;

(3) to provide for the bonded indebtedness portion of payments made to another
political subdivision of the state of Minnesota;

(4) to fund payments made to the Minnesota State Armory Building Commission
under section 193.145, subdivision 2, to retire the principal and interest on armory
construction bonds;

(5) property taxes approved by voters which are levied against the referendum
market value as provided under section 275.61;

(6) to fund matching requirements needed to qualify for federal or state grants or
programs to the extent that either (i) the matching requirement exceeds the matching
requirement in calendar year 2001, or (ii) it is a new matching requirement that did not
exist prior to 2002;

(7) to pay the expenses reasonably and necessarily incurred in preparing for or
repairing the effects of natural disaster including the occurrence or threat of widespread
or severe damage, injury, or loss of life or property resulting from natural causes, in
accordance with standards formulated by the Emergency Services Division of the state
Department of Public Safety, as allowed by the commissioner of revenue under section
275.74, subdivision 2;

(8) pay amounts required to correct an error in the levy certified to the county
auditor by a city or county in a levy year, but only to the extent that when added to the
preceding year's levy it is not in excess of an applicable statutory, special law or charter
limitation, or the limitation imposed on the governmental subdivision by sections 275.70
to 275.74 in the preceding levy year;

(9) to pay an abatement under section 469.1815;

(10) to pay any costs attributable to increases in the employer contribution rates
under chapter 353 that are effective after June 30, 2001;

(11) to pay the operating or maintenance costs of a county jail as authorized in
section 641.01 or 641.262, or of a correctional facility as defined in section 241.021,
subdivision 1, paragraph (f), to the extent that the county can demonstrate to the
commissioner of revenue that the amount has been included in the county budget as
a direct result of a rule, minimum requirement, minimum standard, or directive of the
Department of Corrections, or to pay the operating or maintenance costs of a regional jail
as authorized in section 641.262. For purposes of this clause, a district court order is
not a rule, minimum requirement, minimum standard, or directive of the Department of
Corrections. If the county utilizes this special levy, except to pay operating or maintenance
costs of a new regional jail facility under sections 641.262 to 641.264 which will not
replace an existing jail facility, any amount levied by the county in the previous levy year
for the purposes specified under this clause and included in the county's previous year's
levy limitation computed under section 275.71, shall be deducted from the levy limit
base under section 275.71, subdivision 2, when determining the county's current year
levy limitation. The county shall provide the necessary information to the commissioner
of revenue for making this determination;

(12) to pay for operation of a lake improvement district, as authorized under section
103B.555. If the county utilizes this special levy, any amount levied by the county in the
previous levy year for the purposes specified under this clause and included in the county's
previous year's levy limitation computed under section 275.71 shall be deducted from
the levy limit base under section 275.71, subdivision 2, when determining the county's
current year levy limitation. The county shall provide the necessary information to the
commissioner of revenue for making this determination;

(13) to repay a state or federal loan used to fund the direct or indirect required
spending by the local government due to a state or federal transportation project or other
state or federal capital project. This authority may only be used if the project is not a
local government initiative;

(14) to pay for court administration costs as required under section 273.1398,
subdivision 4b, less the (i) county's share of transferred fines and fees collected by the
district courts in the county for calendar year 2001 and (ii) the aid amount certified to be
paid to the county in 2004 under section 273.1398, subdivision 4c; however, for taxes
levied to pay for these costs in the year in which the court financing is transferred to the
state, the amount under this clause is limited to the amount of aid the county is certified to
receive under section 273.1398, subdivision 4a; deleted text begin and
deleted text end

(15) to fund a police or firefighters relief association as required under section 69.77
to the extent that the required amount exceeds the amount levied for this purpose in
2001 new text begin ; and
new text end

new text begin (16) for purposes of a storm sewer improvement district, pursuant to section 444.20 new text end .

Sec. 3.

Minnesota Statutes 2004, section 373.01, subdivision 3, is amended to read:

Subd. 3.

Capital notes.

new text begin (a) new text end A county board may, by resolution and without
referendum, issue capital notes subject to the county debt limit to purchase capital
equipment useful for county purposes that has an expected useful life at least equal to the
term of the notes. The notes shall be payable in not more than deleted text begin five deleted text end new text begin ten new text end years and shall
be issued on terms and in a manner the board determines. A tax levy shall be made for
payment of the principal and interest on the notes, in accordance with section 475.61,
as in the case of bonds.

new text begin (b) new text end For purposes of this subdivision, "capital equipment" means new text begin :
new text end

new text begin (1) new text end public safety, ambulance, road construction or maintenance, and medical
equipment deleted text begin , deleted text end new text begin ; new text end and

new text begin (2) new text end computer hardware and deleted text begin original operating system deleted text end software new text begin , whether bundled
with machinery or equipment or unbundled, together with application development
services and training related to the use of the computer or software new text end . The authority to
issue capital notes for deleted text begin original operating systems deleted text end new text begin computer new text end software new text begin and related services
new text end expires on July 1, deleted text begin 2005 deleted text end new text begin 2007 new text end .

Sec. 4.

Minnesota Statutes 2004, section 373.40, subdivision 1, is amended to read:

Subdivision 1.

Definitions.

For purposes of this section, the following terms have
the meanings given.

(a) "Bonds" means an obligation as defined under section 475.51.

(b) "Capital improvement" means acquisition or betterment of public lands,
deleted text begin development rights in the form of conservation easements under chapter 84C, deleted text end buildings,
or other improvements within the county for the purpose of a county courthouse,
administrative building, health or social service facility, correctional facility, jail, law
enforcement center, hospital, morgue, library, park, qualified indoor ice arena, deleted text begin and deleted text end roads
and bridges new text begin , and the acquisition of development rights in the form of conservation
easements under chapter 84C new text end . An improvement must have an expected useful life of
five years or more to qualify. "Capital improvement" does not include light rail transit
or any activity related to it or a recreation or sports facility building (such as, but not
limited to, a gymnasium, ice arena, racquet sports facility, swimming pool, exercise room
or health spa), unless the building is part of an outdoor park facility and is incidental to
the primary purpose of outdoor recreation.

(c) "Commissioner" means the commissioner of employment and economic
development.

(d) "Metropolitan county" means a county located in the seven-county metropolitan
area as defined in section 473.121 or a county with a population of 90,000 or more.

(e) "Population" means the population established by the most recent of the
following (determined as of the date the resolution authorizing the bonds was adopted):

(1) the federal decennial census,

(2) a special census conducted under contract by the United States Bureau of the
Census, or

(3) a population estimate made either by the Metropolitan Council or by the state
demographer under section 4A.02.

(f) "Qualified indoor ice arena" means a facility that meets the requirements of
section 373.43.

(g) "Tax capacity" means total taxable market value, but does not include captured
market value.

Sec. 5.

Minnesota Statutes 2004, section 400.04, is amended by adding a subdivision
to read:

new text begin Subd. 4a. new text end

new text begin Performance bond waiver or alternative. new text end

new text begin Notwithstanding the
requirements of section 574.26 or any other public works bond requirements for a solid
waste facilities project established under an agreement authorized under chapter 115A
or chapter 400, the county may waive the requirement for performance bonds or accept
another form of financial guarantee in any amount acceptable to the county, if the project
is partially or fully funded by a county, and the county is not liable for financial acceptance
until performance guarantees or other standards established under the agreement have
been satisfied.
new text end

Sec. 6.

Minnesota Statutes 2004, section 410.32, is amended to read:

410.32 CITIES MAY ISSUE CAPITAL NOTES FOR CAPITAL EQUIPMENT.

new text begin (a) new text end Notwithstanding any contrary provision of other law or charter, a home rule
charter city may, by resolution and without public referendum, issue capital notes subject
to the city debt limit to purchase new text begin capital equipment.
new text end

new text begin (b) For purposes of this section, "capital equipment" means:
new text end

new text begin (1) new text end public safety equipment, ambulance and other medical equipment, road
construction and maintenance equipment, and other capital equipment new text begin ; new text end and

new text begin (2) new text end computer hardware and deleted text begin original operating system deleted text end software, deleted text begin provided deleted text end new text begin whether
bundled with machinery or equipment or unbundled, together with application
development services and training related to the use of the computer or software.
new text end

new text begin (c) new text end The equipment or software deleted text begin has deleted text end new text begin must have new text end an expected useful life at least as long
as the term of the notes. The authority to issue capital notes for deleted text begin original operating system
deleted text end new text begin computer new text end software new text begin and related services new text end expires on July 1, deleted text begin 2005 deleted text end new text begin 2007 new text end .

new text begin (d) new text end The notes shall be payable in not more than deleted text begin five deleted text end new text begin ten new text end years and be issued on
terms and in the manner the city determines. The total principal amount of the capital
notes issued in a fiscal year shall not exceed 0.03 percent of the market value of taxable
property in the city for that year.

new text begin (e) new text end A tax levy shall be made for the payment of the principal and interest on the
notes, in accordance with section 475.61, as in the case of bonds.

new text begin (f) new text end Notes issued under this section shall require an affirmative vote of two-thirds of
the governing body of the city.

new text begin (g) new text end Notwithstanding a contrary provision of other law or charter, a home rule charter
city may also issue capital notes subject to its debt limit in the manner and subject to the
limitations applicable to statutory cities pursuant to section 412.301.

Sec. 7.

Minnesota Statutes 2004, section 412.301, is amended to read:

412.301 FINANCING PURCHASE OF CERTAIN EQUIPMENT.

new text begin (a) new text end The council may issue certificates of indebtedness or capital notes subject to the
city debt limits to purchase new text begin capital equipment.
new text end

new text begin (b) For purposes of this section, "capital equipment" means:
new text end

new text begin (1) new text end public safety equipment, ambulance new text begin and other medical new text end equipment, road
construction deleted text begin or deleted text end new text begin and new text end maintenance equipment, and other capital equipment new text begin ; new text end and

new text begin (2) new text end computer hardware and deleted text begin original operating system deleted text end software, deleted text begin provided deleted text end new text begin whether
bundled with machinery or equipment or unbundled, together with application
development services and training related to the use of the computer or software.
new text end

new text begin (c) new text end The equipment or software deleted text begin has deleted text end new text begin must have new text end an expected useful life at least as long
as the terms of the certificates or notes. The authority to issue capital notes for original
operating system software expires on July 1, deleted text begin 2005 deleted text end new text begin 2007 new text end .

new text begin (d) new text end Such certificates or notes shall be payable in not more than deleted text begin five deleted text end new text begin ten new text end years and
shall be issued on such terms and in such manner as the council may determine.

new text begin (e) new text end If the amount of the certificates or notes to be issued to finance any such purchase
exceeds 0.25 percent of the market value of taxable property in the city, they shall not
be issued for at least ten days after publication in the official newspaper of a council
resolution determining to issue them; and if before the end of that time, a petition asking
for an election on the proposition signed by voters equal to ten percent of the number of
voters at the last regular municipal election is filed with the clerk, such certificates or notes
shall not be issued until the proposition of their issuance has been approved by a majority
of the votes cast on the question at a regular or special election.

new text begin (f) new text end A tax levy shall be made for the payment of the principal and interest on such
certificates or notes, in accordance with section 475.61, as in the case of bonds.

Sec. 8.

Minnesota Statutes 2004, section 428A.101, is amended to read:

428A.101 DEADLINE FOR SPECIAL SERVICE deleted text begin DISTRICT deleted text end new text begin DISTRICTS
new text end UNDER GENERAL LAW.

The establishment of a new special service district after June 30, deleted text begin 2005 deleted text end new text begin 2009 new text end , requires
enactment of a special law authorizing the establishment new text begin of the area new text end .

Sec. 9.

Minnesota Statutes 2004, section 428A.21, is amended to read:

428A.21 deleted text begin SUNSET deleted text end new text begin DEADLINE FOR HOUSING IMPROVEMENT
DISTRICTS UNDER GENERAL LAW new text end .

deleted text begin No deleted text end new text begin The establishment of a new text end new housing improvement deleted text begin areas may be established
under sections 428A.11 to 428A.20 deleted text end new text begin area new text end after June 30, deleted text begin 2005. After June 30, 2005, a city
may establish a housing improvement area, provided that it receives enabling legislation
deleted text end new text begin 2009, requires enactment of a special law new text end authorizing the establishment of the area.

Sec. 10.

Minnesota Statutes 2004, section 429.031, is amended by adding a subdivision
to read:

new text begin Subd. 4. new text end

new text begin Improvements; orderly annexation. new text end

new text begin An improvement may be made
by a municipality in an area that is the subject of an orderly annexation agreement
under section 414.0325 to which the municipality is a party. The municipality may
subsequently reimburse itself for all or any part of the cost of such an improvement by
levying assessments on the property subject to the orderly annexation agreement, when
annexed, in the manner provided in section 429.051, but only if the orderly annexation
agreement includes a statement that the municipality intends to do so and notice has been
provided to the property owner as provided in subdivision 1.
new text end

Sec. 11.

Minnesota Statutes 2004, section 429.051, is amended to read:

429.051 APPORTIONMENT OF COST.

The cost of any improvement, or any part thereof, may be assessed upon property
benefited by the improvement, based upon the benefits received, whether or not the
property abuts on the improvement and whether or not any part of the cost of the
improvement is paid from the county state-aid highway fund, the municipal state-aid street
fund, or the trunk highway fund. The area assessed may be less than but may not exceed
the area proposed to be assessed as stated in the notice of hearing on the improvement,
except as provided below. The municipality may pay such portion of the cost of the
improvement as the council may determine from general ad valorem tax levies or from
other revenues or funds of the municipality available for the purpose. The municipality
may subsequently reimburse itself for all or any of the portion of the cost of deleted text begin a water, storm
sewer, or sanitary sewer deleted text end new text begin an new text end improvement so paid by levying additional assessments upon
any properties abutting on but not previously assessed for the improvement, on notice
and hearing as provided for the assessments initially made. To the extent that such an
improvement benefits nonabutting properties which may be served by the improvement
when one or more later extensions or improvements are made but which are not initially
assessed therefor, the municipality may also reimburse itself by adding all or any of the
portion of the cost so paid to the assessments levied for any of such later extensions
or improvements, provided that notice that such additional amount will be assessed is
included in the notice of hearing on the making of such extensions or improvements. The
additional assessments herein authorized may be made whether or not the properties
assessed were included in the area described in the notice of hearing on the making of
the original improvement.

In any city of the fourth class electing to proceed under a home rule charter as
provided in this chapter, which charter provides for a board of water commissioners and
authorizes such board to assess a water frontage tax to defray the cost of construction of
water mains, such board may assess the tax based upon the benefits received and without
regard to any charter limitation on the amount that may be assessed for each lineal foot of
property abutting on the water main. The water frontage tax shall be imposed according
to the procedure and, except as herein provided, subject to the limitations of the charter
of the city.

Sec. 12.

Minnesota Statutes 2004, section 469.034, subdivision 2, is amended to read:

Subd. 2.

General obligation revenue bonds.

(a) An authority may pledge the
general obligation of the general jurisdiction governmental unit as additional security for
bonds payable from income or revenues of the project or the authority. The authority
must find that the pledged revenues will equal or exceed 110 percent of the principal and
interest due on the bonds for each year. The proceeds of the bonds must be used for a
qualified housing development project or projects. The obligations must be issued and
sold in the manner and following the procedures provided by chapter 475, except the
obligations are not subject to approval by the electors new text begin , new text end and the maturities may extend to not
more than deleted text begin 30 deleted text end new text begin 35 new text end years deleted text begin from the estimated date of completion of the project deleted text end new text begin for obligations
sold to finance housing for the elderly and 40 years for other obligations issued under this
subdivision new text end . The authority is the municipality for purposes of chapter 475.

(b) The principal amount of the issue must be approved by the governing body of
the general jurisdiction governmental unit whose general obligation is pledged. Public
hearings must be held on issuance of the obligations by both the authority and the general
jurisdiction governmental unit. The hearings must be held at least 15 days, but not more
than 120 days, before the sale of the obligations.

(c) The maximum amount of general obligation bonds that may be issued and
outstanding under this section equals the greater of (1) one-half of one percent of
the taxable market value of the general jurisdiction governmental unit whose general
obligation deleted text begin which includes a tax on property deleted text end is pledged, or (2) $3,000,000. In the case
of county or multicounty general obligation bonds, the outstanding general obligation
bonds of all cities in the county or counties issued under this subdivision must be added
in calculating the limit under clause (1).

(d) "General jurisdiction governmental unit" means the city in which the housing
development project is located. In the case of a county or multicounty authority, the
county or counties may act as the general jurisdiction governmental unit. In the case of
a multicounty authority, the pledge of the general obligation is a pledge of a tax on the
taxable property in each of the counties.

(e) "Qualified housing development project" means a housing development project
providing housing either for the elderly or for individuals and families with incomes not
greater than 80 percent of the median family income as estimated by the United States
Department of Housing and Urban Development for the standard metropolitan statistical
area or the nonmetropolitan county in which the project is located, and will be owned by
the authority for the term of the bonds. A qualified housing development project may
admit nonelderly individuals and families with higher incomes if:

(1) three years have passed since initial occupancy;

(2) the authority finds the project is experiencing unanticipated vacancies resulting in
insufficient revenues, because of changes in population or other unforeseen circumstances
that occurred after the initial finding of adequate revenues; and

(3) the authority finds a tax levy or payment from general assets of the general
jurisdiction governmental unit will be necessary to pay debt service on the bonds if higher
income individuals or families are not admitted.

Sec. 13.

Minnesota Statutes 2004, section 469.158, is amended to read:

469.158 MANNER OF ISSUANCE OF BONDS; INTEREST RATE.

Bonds authorized under sections 469.152 to 469.165 must be issued in accordance
with the provisions of chapter 475 relating to bonds payable from income of revenue
producing conveniences, except that public sale is not required, the provisions of sections
475.62 and 475.63 do not apply, and the bonds may mature at the time or times, in the
amount or amounts, within 30 years new text begin , or in the case of bonds issued to finance dormitories
or other types of student housing, 40 years new text end from date of issue, and may be sold at a price
equal to the percentage of the par value thereof, plus accrued interest, and bearing interest
at the rate or rates agreed by the contracting party, the purchaser, and the municipality or
redevelopment agency, notwithstanding any limitation of interest rate or cost or of the
amounts of annual maturities contained in any other law. Bonds issued to refund bonds
previously issued pursuant to sections 469.152 to 469.165 may be issued in amounts
determined by the municipality or redevelopment agency notwithstanding the provisions
of section 475.67, subdivision 3.

Sec. 14.

Minnesota Statutes 2004, section 473.39, is amended by adding a subdivision
to read:

new text begin Subd. 1k. new text end

new text begin Obligations. new text end

new text begin After July 1, 2005, in addition to the authority in
subdivisions 1a, 1b, 1c, 1d, 1e, 1g, 1h, 1i, and 1j, the council may issue certificates of
indebtedness, bonds, or other obligations under this section in an amount not exceeding
$64,000,000 for capital expenditures as prescribed in the council's regional transit master
plan and transit capital improvement program and for related costs, including the costs of
issuance and sale of the obligations.
new text end

Sec. 15.

Minnesota Statutes 2004, section 474A.061, subdivision 2c, is amended to
read:

Subd. 2c.

Public facilities pool allocation.

From the beginning of the calendar
year and continuing for a period of 120 days, the commissioner shall reserve deleted text begin $3,000,000
deleted text end new text begin $5,000,000 new text end of the available bonding authority from the public facilities pool for
applications for public facilities projects to be financed by the Western Lake Superior
Sanitary District. Commencing on the second Tuesday in January and continuing on
each Monday through the last Monday in July, the commissioner shall allocate available
bonding authority from the public facilities pool to applications for eligible public
facilities projects received on or before the Monday of the preceding week. If there
are two or more applications for public facilities projects from the pool and there is
insufficient available bonding authority to provide allocations for all projects in any one
week, the available bonding authority shall be awarded by lot unless otherwise agreed to
by the respective issuers.

Sec. 16.

Minnesota Statutes 2004, section 474A.131, subdivision 1, is amended to read:

Subdivision 1.

Notice of issue.

Each issuer that issues bonds with an allocation
received under this chapter shall provide a notice of issue to the department on forms
provided by the department stating:

(1) the date of issuance of the bonds;

(2) the title of the issue;

(3) the principal amount of the bonds;

(4) the type of qualified bonds under federal tax law;

(5) the dollar amount of the bonds issued that were subject to the annual volume
cap; and

(6) for entitlement issuers, whether the allocation is from current year entitlement
authority or is from carryforward authority.

For obligations that are issued as a part of a series of obligations, a notice must be
provided for each series. A penalty of one-half of the amount of the application deposit
not to exceed $5,000 shall apply to any issue of obligations for which a notice of issue
is not provided to the department within five business days after issuance or before deleted text begin the
last Monday deleted text end new text begin 4:30 p.m. on the last business day new text end in December, whichever occurs first.
Within 30 days after receipt of a notice of issue the department shall refund a portion
of the application deposit equal to one percent of the amount of the bonding authority
actually issued if a one percent application deposit was made, or equal to two percent of
the amount of the bonding authority actually issued if a two percent application deposit
was made, less any penalty amount.

Sec. 17.

Minnesota Statutes 2004, section 475.51, subdivision 4, is amended to read:

Subd. 4.

Net debt.

"Net debt" means the amount remaining after deducting from its
gross debt the amount of current revenues which are applicable within the current fiscal
year to the payment of any debt and the aggregate of the principal of the following:

(1) Obligations issued for improvements which are payable wholly or partly from the
proceeds of special assessments levied upon property specially benefited thereby, including
those which are general obligations of the municipality issuing them, if the municipality is
entitled to reimbursement in whole or in part from the proceeds of the special assessments.

(2) Warrants or orders having no definite or fixed maturity.

(3) Obligations payable wholly from the income from revenue producing
conveniences.

(4) Obligations issued to create or maintain a permanent improvement revolving
fund.

(5) Obligations issued for the acquisition, and betterment of public waterworks
systems, and public lighting, heating or power systems, and of any combination thereof or
for any other public convenience from which a revenue is or may be derived.

(6) Debt service loans and capital loans made to a school district under the provisions
of sections 126C.68 and 126C.69.

(7) Amount of all money and the face value of all securities held as a debt service
fund for the extinguishment of obligations other than those deductible under this
subdivision.

(8) Obligations to repay loans made under section 216C.37.

(9) Obligations to repay loans made from money received from litigation or
settlement of alleged violations of federal petroleum pricing regulations.

(10) Obligations issued to pay pension fund liabilities under section 475.52,
subdivision 6, or any charter authority.

(11) new text begin Obligations issued to pay judgments against the municipality under section
475.52, subdivision 6, or any charter authority.
new text end

new text begin (12) new text end All other obligations which under the provisions of law authorizing their
issuance are not to be included in computing the net debt of the municipality.

Sec. 18.

Minnesota Statutes 2004, section 475.52, subdivision 1, is amended to read:

Subdivision 1.

Statutory cities.

Any statutory city may issue bonds or other
obligations for the acquisition or betterment of public buildings, means of garbage
disposal, hospitals, nursing homes, homes for the aged, schools, libraries, museums, art
galleries, parks, playgrounds, stadia, sewers, sewage disposal plants, subways, streets,
sidewalks, warning systems; for any utility or other public convenience from which a
revenue is or may be derived; for a permanent improvement revolving fund; for changing,
controlling or bridging streams and other waterways; for the acquisition and betterment
of bridges and roads within two miles of the corporate limits new text begin ; new text end for the acquisition of
development rights in the form of conservation easements under chapter 84C; and for
acquisition of equipment for snow removal, street construction and maintenance, or fire
fighting. Without limitation by the foregoing the city may issue bonds to provide money
for any authorized corporate purpose except current expenses.

Sec. 19.

Minnesota Statutes 2004, section 475.52, subdivision 3, is amended to read:

Subd. 3.

Counties.

Any county may issue bonds for the acquisition or betterment
of courthouses, county administrative buildings, health or social service facilities,
correctional facilities, law enforcement centers, jails, morgues, libraries, parks, and
hospitals, for roads and bridges within the county or bordering thereon and for road
equipment and machinery and for ambulances and related equipment new text begin ; new text end for the acquisition
of development rights in the form of conservation easements under chapter 84C, and for
capital equipment for the administration and conduct of elections providing the equipment
is uniform countywide, except that the power of counties to issue bonds in connection
with a library shall not exist in Hennepin County.

Sec. 20.

Minnesota Statutes 2004, section 475.52, subdivision 4, is amended to read:

Subd. 4.

Towns.

Any town may issue bonds for the acquisition and betterment
of town halls, town roads and bridges, nursing homes and homes for the aged, and for
acquisition of equipment for snow removal, road construction or maintenance, and fire
fighting new text begin ; new text end for the acquisition of development rights in the form of conservation easements
under chapter 84C new text begin ; new text end and for the acquisition and betterment of any buildings to house and
maintain town equipment.

Sec. 21.

Minnesota Statutes 2004, section 475.521, subdivision 1, is amended to read:

Subdivision 1.

Definitions.

For purposes of this section, the following terms have
the meanings given.

(a) "Bonds" mean an obligation defined under section 475.51.

(b) "Capital improvement" means acquisition or betterment of public lands,
buildings or other improvements for the purpose of a city hall, new text begin town hall, library, new text end public
safety facility, and public works facility. An improvement must have an expected useful
life of five years or more to qualify. Capital improvement does not include light rail transit
or any activity related to it, or a park, deleted text begin library, deleted text end road, bridge, administrative building other
than a city new text begin or town new text end hall, or land for any of those facilities.

(c) deleted text begin "City" deleted text end new text begin "Municipality" new text end means a home rule charter or statutory city new text begin or a town new text end .

Sec. 22.

Minnesota Statutes 2004, section 475.521, subdivision 2, is amended to read:

Subd. 2.

Election requirement.

(a) Bonds issued by a deleted text begin city deleted text end new text begin municipality new text end to finance
capital improvements under an approved capital improvements plan are not subject to the
election requirements of section 475.58. deleted text begin The bonds are subject to the net debt limits under
section 475.53. deleted text end The bonds must be approved by an affirmative vote of three-fifths of the
members of a five-member deleted text begin city council deleted text end new text begin governing body new text end . In the case of a deleted text begin city council
deleted text end new text begin governing body new text end having more new text begin or less new text end than five members, the bonds must be approved by a
vote of at least two-thirds of the deleted text begin city council deleted text end new text begin members of the governing body new text end .

(b) Before the issuance of bonds qualifying under this section, the deleted text begin city deleted text end new text begin municipality
new text end must publish a notice of its intention to issue the bonds and the date and time of the
hearing to obtain public comment on the matter. The notice must be published in the
official newspaper of the deleted text begin city deleted text end new text begin municipality new text end or in a newspaper of general circulation in the
deleted text begin city deleted text end new text begin municipality new text end . Additionally, the notice may be posted on the official Web site, if any,
of the deleted text begin city deleted text end new text begin municipality new text end . The notice must be published at least 14 but not more than 28
days before the date of the hearing.

(c) A deleted text begin city deleted text end new text begin municipality new text end may issue the bonds only after obtaining the approval of
a majority of the voters voting on the question of issuing the obligations, if a petition
requesting a vote on the issuance is signed by voters equal to five percent of the votes cast
in the deleted text begin city deleted text end new text begin municipality new text end in the last general election and is filed with the deleted text begin city deleted text end clerk within
30 days after the public hearing. The commissioner of revenue shall prepare a suggested
form of the question to be presented at the election.

Sec. 23.

Minnesota Statutes 2004, section 475.521, subdivision 3, is amended to read:

Subd. 3.

Capital improvement plan.

(a) A deleted text begin city deleted text end new text begin municipality new text end may adopt a capital
improvement plan. The plan must cover at least a five-year period beginning with the
date of its adoption. The plan must set forth the estimated schedule, timing, and details
of specific capital improvements by year, together with the estimated cost, the need for
the improvement, and sources of revenue to pay for the improvement. In preparing the
capital improvement plan, the deleted text begin city council deleted text end new text begin governing body new text end must consider for each project
and for the overall plan:

(1) the condition of the deleted text begin city's deleted text end new text begin municipality's new text end existing infrastructure, including the
projected need for repair or replacement;

(2) the likely demand for the improvement;

(3) the estimated cost of the improvement;

(4) the available public resources;

(5) the level of overlapping debt in the deleted text begin city deleted text end new text begin municipality new text end ;

(6) the relative benefits and costs of alternative uses of the funds;

(7) operating costs of the proposed improvements; and

(8) alternatives for providing services most efficiently through shared facilities with
other deleted text begin cities deleted text end new text begin municipalities new text end or local government units.

(b) The capital improvement plan and annual amendments to it must be approved
by the deleted text begin city council deleted text end new text begin governing body new text end after public hearing.

Sec. 24.

Minnesota Statutes 2004, section 475.521, subdivision 4, is amended to read:

Subd. 4.

Limitations on amount.

A deleted text begin city deleted text end new text begin municipality new text end may not issue bonds under
this section if the maximum amount of principal and interest to become due in any year
on all the outstanding bonds issued under this section, including the bonds to be issued,
will equal or exceed deleted text begin 0.05367 deleted text end new text begin 0.16 new text end percent of new text begin the new text end taxable market value of property in the
deleted text begin county deleted text end new text begin municipality new text end . Calculation of the limit must be made using the taxable market
value for the taxes payable year in which the obligations are issued and sold. new text begin In the case
of a municipality with a population of 2,500 or more, the bonds are subject to the net
debt limits under section 475.53. In the case of a shared facility in which more than
one municipality participates, upon compliance by each participating municipality with
the requirements of subdivision 2, the limitations in this subdivision and the net debt
represented by the bonds shall be allocated to each participating municipality in proportion
to its required financial contribution to the financing of the shared facility, as set forth in
the joint powers agreement relating to the shared facility. new text end This section does not limit the
authority to issue bonds under any other special or general law.

Sec. 25.

Minnesota Statutes 2004, section 475.58, subdivision 3b, is amended to read:

Subd. 3b.

Street reconstruction.

(a) A municipality may, without regard to
the election requirement under subdivision 1, issue and sell obligations for street
reconstruction, if the following conditions are met:

(1) the streets are reconstructed under a street reconstruction plan that describes
the streets to be reconstructed, the estimated costs, and any planned reconstruction of
other streets in the municipality over the next five years, and the plan and issuance of the
obligations has been approved by a vote of all of the members of the governing body
following a public hearing for which notice has been published in the official newspaper at
least ten days but not more than 28 days prior to the hearing; and

(2) if a petition requesting a vote on the issuance is signed by voters equal to
five percent of the votes cast in the last municipal general election and is filed with the
municipal clerk within 30 days of the public hearing, the municipality may issue the bonds
only after obtaining the approval of a majority of the voters voting on the question of
the issuance of the obligations.

(b) Obligations issued under this subdivision are subject to the debt limit of the
municipality and are not excluded from net debt under section 475.51, subdivision 4.

(c) For purposes of this subdivision, street reconstruction includes utility replacement
and relocation and other activities incidental to the street reconstruction, deleted text begin but deleted text end new text begin turn lanes
and other improvements having a substantial public safety function, realignments, other
modifications to intersect with state and county roads, and the local share of state and
county road projects.
new text end

new text begin (d) Except in the case of turn lanes, safety improvements, realignments, intersection
modifications, and the local share of state and county road projects, street reconstruction
new text end does not include the portion of project cost allocable to widening a street or adding curbs
and gutters where none previously existed.

Sec. 26. new text begin CITY OF ST. PAUL; RIVERCENTRE COMPLEX OPERATION.
new text end

new text begin Subdivision 1. new text end

new text begin Definitions. new text end

new text begin (a) For the purposes of this section, the terms defined in
this subdivision have the meanings given them.
new text end

new text begin (b) "City" means the city of St. Paul, its mayor, city council, and any other board,
authority, commission, or officer authorized by law, charter, or ordinance to exercise city
powers of the nature referred to in this section.
new text end

new text begin (c) "RiverCentre complex" means collectively the auditorium, convention,
conference and education center, arena, and parking ramp facilities presently and
commonly known as the Roy Wilkins Auditorium, St. Paul RiverCentre, Xcel Energy
Center, and RiverCentre Parking Ramp, including all property, real or personal, tangible
or intangible, located in the city, intended to be used as part of the RiverCentre complex or
additions to or extensions of it.
new text end

new text begin Subd. 2. new text end

new text begin Creation of nonprofit organization. new text end

new text begin As required under Minnesota
Statutes, section 465.717, and notwithstanding any other law, city charter provision, or
ordinance to the contrary, the city of St. Paul may participate in the creation of a nonprofit
organization for the purposes provided in this section.
new text end

new text begin Subd. 3. new text end

new text begin Governing board. new text end

new text begin (a) The mayor of the city, subject to approval by
the city council, shall appoint a majority of the members of the governing board of the
nonprofit organization performing all or a part of the activities necessary to carry out the
purposes specified in this section. The mayor may designate any officer or employee of
the city to serve as a member of the governing board of any nonprofit organization.
new text end

new text begin (b) In addition to the appointments made by the mayor under paragraph (a), the
mayor shall designate three members of the city council to serve on the governing board
of the nonprofit organization.
new text end

new text begin (c) Notwithstanding any provision contained in the articles of incorporation and
bylaws of the nonprofit organization, any member of the governing board appointed by
the mayor may be removed only by the mayor for cause.
new text end

new text begin (d) The governing board of the nonprofit organization shall select, subject to the
approval of the mayor, a president to serve as chief executive officer and general manager
of the nonprofit organization.
new text end

new text begin (e) The procedures in Minnesota Statutes, section 317A.255, subdivision 1,
paragraph (b), relating to director conflicts of interest, are not required if the contract or
other transaction is between the city and the nonprofit organization.
new text end

new text begin Subd. 4. new text end

new text begin Rivercentre management; authority to contract with nonprofit
organization. new text end

new text begin The city may enter into an agreement with the nonprofit organization
created in subdivision 2 to equip, maintain, manage, and operate all or a portion of the
RiverCentre complex and to manage and operate a convention bureau to market and
promote the city as a tourist or convention center. Except as otherwise provided in this
section, the nonprofit organization may only contract and utilize and expend funds for these
purposes under the direction of its governing board, subject to the accounting, financial
reporting, and other conditions that the city may prescribe in a contract made under this
section between the city and the nonprofit organization. The nonprofit organization may
use the services of the office of the city attorney and the city's purchasing department. All
activities performed to carry out these purposes are deemed to be for a public purpose.
new text end

new text begin Subd. 5. new text end [BONDHOLDERS' RIGHTS AND RIVERCENTRE COMPLEX TAX
EXEMPTIONS PRESERVED.] new text begin (a) The city must protect the rights of holders of bonds
issued for the RiverCentre complex, including preserving the tax-exempt status of the
bonds.
new text end

new text begin (b) The use and operation of the RiverCentre complex by the nonprofit organization
with which the city contracts under this act is a use, lease, or occupancy for public,
governmental, and municipal purposes, and the complex is exempt from taxation by the
state or any political subdivision of the state during such use, to the extent it would be
exempt if the complex was equipped, maintained, managed, and operated by the city.
new text end

new text begin (c) Gross receipts of tickets and admissions to events at the RiverCentre complex
sponsored by the nonprofit organization created in this section do not qualify for the sales
tax exemption under Minnesota Statutes, section 297A.70, subdivision 10.
new text end

new text begin Subd. 6. new text end

new text begin Applicable general laws. new text end

new text begin The following statutes apply to the nonprofit
organization with which the city contracts under this section the same as they apply to
the city, to the extent practicable:
new text end

new text begin (1) Minnesota Statutes, chapter 13D, the Minnesota Open Meeting Law; and
new text end

new text begin (2) Minnesota Statutes, chapter 13, the Government Data Practices Act.
new text end

new text begin Subd. 7. new text end

new text begin Succession. new text end

new text begin The nonprofit organization with which the city contracts under
this section is the successor to all powers, rights, assets, privileges, and interests held and
enjoyed by the RiverCentre authority on the effective date of this section, and established
by the provisions of Laws 1967, chapter 459, sections 1, 2, 4, and 8, subdivisions 2 and 3,
clause (3), as amended; Laws 1982, chapter 523, article 25, sections 4 and 5, as amended;
Laws 1998, chapter 404, sections 81 and 82; and Minnesota Statutes, section 297A.98.
On the effective date of the contract between the city and the nonprofit organization
authorized by this section, the RiverCentre authority ceases to exist for only so long
as the contract is in effect, and all other laws or provisions specifically relating to the
RiverCentre authority and the RiverCentre complex that are not otherwise referenced in
this section, do not apply to the nonprofit organization.
new text end

new text begin Subd. 8. new text end

new text begin Liability. new text end

new text begin The nonprofit organization with which the city contracts under
this section is a "municipality," and the officers, directors, employees, and agents of the
nonprofit organization are "employees, officers, or agents," under Minnesota Statutes,
chapter 466, relating to tort liability. The city must defend, save harmless, and indemnify
the nonprofit organization, including the nonprofit's officers, directors, employees,
and agents, against any claim or demand arising out of the nonprofit organization's
performance under the contract.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day after the city council and the
chief clerical officer of the city of St. Paul have timely completed their compliance with
Minnesota Statutes, section 645.023, subdivisions 2 and 3.
new text end

Sec. 27. new text begin TRANSFER OF MHFA BONDING AUTHORITY TO HESO.
new text end

new text begin Notwithstanding Minnesota Statutes, section 474A.03, subdivision 2a, clause (b),
the Minnesota Housing Finance Agency may enter into an agreement with the Higher
Education Services Office under which the Higher Education Services Office issues
qualified student loan bonds, up to $50,000,000 of which are issued pursuant to bonding
authority allocated to the Minnesota Housing Finance Agency in 2004 under Minnesota
Statutes, section 474A.03, subdivision 2a, clause (a). This amount is in addition to
the bonding authority otherwise allocated to the Higher Education Services Office
under Minnesota Statutes, chapter 474A. Notwithstanding Minnesota Statutes, section
474A.04, subdivision 1a, 474A.061, or 474A.091, subdivision 2, bonding authority
carried forward by the Minnesota Housing Financing Agency from its allocation for 2004
under Minnesota Statutes, section 474A.03, subdivision 2a, clause (b), are exempt from
the requirement that the bonding authority be permanently issued by December 31 of the
next succeeding calendar year.
new text end

Sec. 28. new text begin APPLICATION.
new text end

new text begin Section 14 applies in the counties of Anoka, Carver, Dakota, Hennepin, Ramsey,
Scott, and Washington.
new text end

Sec. 29. new text begin REPEALER.
new text end

new text begin Minnesota Statutes 2004, section 473.39, subdivision 1f, is repealed.
new text end

Sec. 30. new text begin EFFECTIVE DATE.
new text end

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

ARTICLE 7

MINERALS; AGGREGATE

Section 1.

Minnesota Statutes 2004, section 272.02, is amended by adding a
subdivision to read:

new text begin Subd. 68. new text end

new text begin Property used in the business of mining subject to the net proceeds
tax. new text end

new text begin The following property used in the business of mining subject to the net proceeds tax
under section 298.015 is exempt:
new text end

new text begin (1) deposits of ores, metals, and minerals and the lands in which they are contained;
new text end

new text begin (2) all real and personal property used in mining, quarrying, producing, or refining
ores, minerals, or metals, including lands occupied by or used in connection with the
mining, quarrying, production, or refining facilities; and
new text end

new text begin (3) concentrate or direct reduced ore.
new text end

new text begin This exemption applies for each year that a person subject to tax under section 298.015
uses the property for mining, quarrying, producing, or refining ores, metals, or minerals.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes payable in 2006 and
thereafter.
new text end

Sec. 2.

Minnesota Statutes 2004, section 290.05, subdivision 1, is amended to read:

Subdivision 1.

Exempt entities.

The following corporations, individuals, estates,
trusts, and organizations shall be exempted from taxation under this chapter, provided
that every such person or corporation claiming exemption under this chapter, in whole
or in part, must establish to the satisfaction of the commissioner the taxable status of
any income or activity:

(a) corporations, individuals, estates, and trusts engaged in the business of mining or
producing iron ore and new text begin mining, producing, or refining new text end other ores new text begin , metals, and minerals, new text end the
mining deleted text begin or deleted text end new text begin , new text end production new text begin , or refining new text end of which is subject to the occupation tax imposed by
section 298.01; but if any such corporation, individual, estate, or trust engages in any
other business or activity or has income from any property not used in such business it
shall be subject to this tax computed on the net income from such property or such other
business or activity. Royalty shall not be considered as income from the business of
mining or producing iron ore within the meaning of this section;

(b) the United States of America, the state of Minnesota or any political subdivision
of either agencies or instrumentalities, whether engaged in the discharge of governmental
or proprietary functions; and

(c) any insurance company.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2004.
new text end

Sec. 3.

Minnesota Statutes 2004, section 290.17, subdivision 4, is amended to read:

Subd. 4.

Unitary business principle.

(a) If a trade or business conducted wholly
within this state or partly within and partly without this state is part of a unitary business,
the entire income of the unitary business is subject to apportionment pursuant to section
290.191. Notwithstanding subdivision 2, paragraph (c), none of the income of a unitary
business is considered to be derived from any particular source and none may be allocated
to a particular place except as provided by the applicable apportionment formula. The
provisions of this subdivision do not apply to business income subject to subdivision 5,
income of an insurance company, deleted text begin or deleted text end income of an investment company determined under
section 290.36 new text begin , or income of a mine or mineral processing facility subject to tax under
section 298.01 new text end .

(b) The term "unitary business" means business activities or operations which
result in a flow of value between them. The term may be applied within a single legal
entity or between multiple entities and without regard to whether each entity is a sole
proprietorship, a corporation, a partnership or a trust.

(c) Unity is presumed whenever there is unity of ownership, operation, and use,
evidenced by centralized management or executive force, centralized purchasing,
advertising, accounting, or other controlled interaction, but the absence of these
centralized activities will not necessarily evidence a nonunitary business. Unity is also
presumed when business activities or operations are of mutual benefit, dependent upon or
contributory to one another, either individually or as a group.

(d) Where a business operation conducted in Minnesota is owned by a business
entity that carries on business activity outside the state different in kind from that
conducted within this state, and the other business is conducted entirely outside the state, it
is presumed that the two business operations are unitary in nature, interrelated, connected,
and interdependent unless it can be shown to the contrary.

(e) Unity of ownership is not deemed to exist when a corporation is involved unless
that corporation is a member of a group of two or more business entities and more than 50
percent of the voting stock of each member of the group is directly or indirectly owned
by a common owner or by common owners, either corporate or noncorporate, or by one
or more of the member corporations of the group. For this purpose, the term "voting
stock" shall include membership interests of mutual insurance holding companies formed
under section 60A.077.

(f) The net income and apportionment factors under section 290.191 or 290.20 of
foreign corporations and other foreign entities which are part of a unitary business shall
not be included in the net income or the apportionment factors of the unitary business.
A foreign corporation or other foreign entity which is required to file a return under this
chapter shall file on a separate return basis. The net income and apportionment factors
under section 290.191 or 290.20 of foreign operating corporations shall not be included in
the net income or the apportionment factors of the unitary business except as provided in
paragraph (g).

(g) The adjusted net income of a foreign operating corporation shall be deemed to
be paid as a dividend on the last day of its taxable year to each shareholder thereof, in
proportion to each shareholder's ownership, with which such corporation is engaged in
a unitary business. Such deemed dividend shall be treated as a dividend under section
290.21, subdivision 4.

Dividends actually paid by a foreign operating corporation to a corporate shareholder
which is a member of the same unitary business as the foreign operating corporation shall
be eliminated from the net income of the unitary business in preparing a combined report
for the unitary business. The adjusted net income of a foreign operating corporation
shall be its net income adjusted as follows:

(1) any taxes paid or accrued to a foreign country, the commonwealth of Puerto
Rico, or a United States possession or political subdivision of any of the foregoing shall
be a deduction; and

(2) the subtraction from federal taxable income for payments received from foreign
corporations or foreign operating corporations under section 290.01, subdivision 19d,
clause (10), shall not be allowed.

If a foreign operating corporation incurs a net loss, neither income nor deduction
from that corporation shall be included in determining the net income of the unitary
business.

(h) For purposes of determining the net income of a unitary business and the factors
to be used in the apportionment of net income pursuant to section 290.191 or 290.20, there
must be included only the income and apportionment factors of domestic corporations or
other domestic entities other than foreign operating corporations that are determined to
be part of the unitary business pursuant to this subdivision, notwithstanding that foreign
corporations or other foreign entities might be included in the unitary business.

(i) Deductions for expenses, interest, or taxes otherwise allowable under this chapter
that are connected with or allocable against dividends, deemed dividends described
in paragraph (g), or royalties, fees, or other like income described in section 290.01,
subdivision 19d, clause (10), shall not be disallowed.

(j) Each corporation or other entity, except a sole proprietorship, that is part of a
unitary business must file combined reports as the commissioner determines. On the
reports, all intercompany transactions between entities included pursuant to paragraph
(h) must be eliminated and the entire net income of the unitary business determined in
accordance with this subdivision is apportioned among the entities by using each entity's
Minnesota factors for apportionment purposes in the numerators of the apportionment
formula and the total factors for apportionment purposes of all entities included pursuant
to paragraph (h) in the denominators of the apportionment formula.

(k) If a corporation has been divested from a unitary business and is included in a
combined report for a fractional part of the common accounting period of the combined
report:

(1) its income includable in the combined report is its income incurred for that part
of the year determined by proration or separate accounting; and

(2) its sales, property, and payroll included in the apportionment formula must
be prorated or accounted for separately.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2004.
new text end

Sec. 4.

Minnesota Statutes 2004, section 290.191, subdivision 1, is amended to read:

Subdivision 1.

General rule.

(a) Except as otherwise provided in section 290.17,
subdivision 5, the net income from a trade or business carried on partly within and partly
without this state must be apportioned to this state as provided in this section. new text begin To the extent
that an entity is exempt from taxation under this chapter as provided in section 290.05, the
apportionment factors associated with the entity's exempt activities are excluded from the
apportionment formula under this section.
new text end

(b) For purposes of this section, "state" means a state of the United States, the
District of Columbia, the commonwealth of Puerto Rico, or any territory or possession of
the United States or any foreign country.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2004.
new text end

Sec. 5.

Minnesota Statutes 2004, section 297A.68, subdivision 4, is amended to read:

Subd. 4.

Taconite new text begin , other ores, metals, or minerals; new text end production materials.

Mill
liners, grinding rods, and grinding balls that are substantially consumed in the production
of taconite new text begin or other ores, metals, or minerals new text end are exempt when sold to or stored, used, or
consumed by persons taxed under the in-lieu provisions of chapter 298.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made after
June 30, 2005.
new text end

Sec. 6.

Minnesota Statutes 2004, section 298.001, is amended by adding a subdivision
to read:

new text begin Subd. 9. new text end

new text begin Refining. new text end

new text begin "Refining" means and is limited to refining:
new text end

new text begin (1) of ores, metals, or mineral products, the mining, extraction, or quarrying of
which were subject to tax under section 298.015; and
new text end

new text begin (2) carried on by the entity, or an affiliated entity, that mined, extracted, or quarried
the metal or mineral products.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2004.
new text end

Sec. 7.

Minnesota Statutes 2004, section 298.001, is amended by adding a subdivision
to read:

new text begin Subd. 10. new text end

new text begin Precious minerals tax relief area. new text end

new text begin The "precious minerals tax relief area"
means the area of the following Independent School Districts:
new text end

new text begin (1) No. 166, Cook County;
new text end

new text begin (2) No. 316, Coleraine;
new text end

new text begin (3) No. 318, Grand Rapids;
new text end

new text begin (4) No. 319, Nashwauk-Keewatin;
new text end

new text begin (5) No. 381, Lake Superior;
new text end

new text begin (6) No. 695, Chisholm;
new text end

new text begin (7) No. 696, Ely;
new text end

new text begin (8) No. 701, Hibbing;
new text end

new text begin (9) No. 706, Virginia;
new text end

new text begin (10) No. 712, Mountain Iron-Buhl;
new text end

new text begin (11) No. 2711, Mesabi East;
new text end

new text begin (12) No. 2142, St. Louis County; and
new text end

new text begin (13) No. 2154, Eveleth-Gilbert.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2004.
new text end

Sec. 8.

Minnesota Statutes 2004, section 298.01, subdivision 3, is amended to read:

Subd. 3.

Occupation tax; other ores.

Every person engaged in the business of
mining new text begin , refining, new text end or producing ores new text begin , metals, or minerals new text end in this state, except iron ore or
taconite concentrates, shall pay an occupation tax to the state of Minnesota as provided
in this subdivision. new text begin For purposes of this subdivision, mining includes the application of
hydrometallurgical processes. new text end The tax is determined in the same manner as the tax imposed
by section 290.02, except that sections 290.05, subdivision 1, clause (a), new text begin 290.0921, new text end and
290.17, subdivision 4, do not apply. new text begin Except as provided in section 290.05, subdivision 1,
paragraph (a), new text end the tax is in addition to all other taxes.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2004.
new text end

Sec. 9.

Minnesota Statutes 2004, section 298.01, subdivision 3a, is amended to read:

Subd. 3a.

Gross income.

(a) For purposes of determining a person's taxable income
under subdivision 3, gross income is determined by the amount of gross proceeds from
mining in this state under section 298.016 and includes any gain or loss recognized from
the sale or disposition of assets used in the business in this state.

(b) In applying section 290.191, subdivision 5, transfers of ores new text begin , metals, or minerals
that are subject to tax under this chapter new text end are deemed to be sales outside this state if the
ores new text begin , metals, or minerals new text end are transported out of this state new text begin for further processing or refining
by the person engaged in mining new text end after the ores new text begin , metals, or minerals new text end have been converted
to a marketable quality.

new text begin (c) In applying section 290.191, subdivision 5, transfers of ores, metals, or minerals
that are subject to tax under this chapter are deemed to be sales within this state if the
ores, metals, or minerals are received by a purchaser at a point within this state, and the
taxpayer is taxable in this state, regardless of the f.o.b. point, or other conditions of the
sale, or the ultimate destination of the property.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2004.
new text end

Sec. 10.

Minnesota Statutes 2004, section 298.01, subdivision 4, is amended to read:

Subd. 4.

Occupation tax; iron ore; taconite concentrates.

A person engaged in
the business of mining or producing of iron ore, taconite concentrates or direct reduced ore
in this state shall pay an occupation tax to the state of Minnesota. The tax is determined
in the same manner as the tax imposed by section 290.02, except that sections 290.05,
subdivision 1, clause (a), new text begin 290.0921, new text end and 290.17, subdivision 4, do not apply. The tax
is in addition to all other taxes.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2004.
new text end

Sec. 11.

Minnesota Statutes 2004, section 298.015, subdivision 1, is amended to read:

Subdivision 1.

Tax imposed.

A person engaged in the business of mining shall pay
to the state of Minnesota for distribution as provided in section 298.018 a net proceeds tax
equal to deleted text begin two deleted text end new text begin four new text end percent of the net proceeds from mining in Minnesota. The tax applies to
all deleted text begin mineral and energy resources deleted text end new text begin ores, metals, and minerals new text end mined deleted text begin or deleted text end new text begin , new text end extracted new text begin , produced,
or refined new text end within the state of Minnesota except for sand, silica sand, gravel, building
stone, crushed rock, limestone, granite, dimension granite, dimension stone, horticultural
peat, clay, soil, iron ore, and taconite concentrates. new text begin Except as provided in section 272.02,
subdivision 68, new text end the tax is in addition to all other taxes provided for by law.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes payable in 2006 and
thereafter.
new text end

Sec. 12.

Minnesota Statutes 2004, section 298.015, subdivision 2, is amended to read:

Subd. 2.

Net proceeds.

For purposes of this section, the term "net proceeds" means
the gross proceeds from mining, as defined in section 298.016, less the new text begin same new text end deductions
allowed deleted text begin in section 298.017 deleted text end new text begin for purposes of determining taxable income under section
298.01, subdivision 3b new text end . No other credits or deductions shall apply to this tax deleted text begin except for
those provided in section 298.017 deleted text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes payable in 2006 and
thereafter.
new text end

Sec. 13.

Minnesota Statutes 2004, section 298.016, subdivision 4, is amended to read:

Subd. 4.

Definitions.

For the purposes of sections 298.015 and 298.017, the
terms defined in this subdivision have the meaning given them unless the context clearly
indicates otherwise.

(a) "Metal or mineral products" means all those deleted text begin mineral and energy resources deleted text end new text begin ores,
metals, and minerals new text end subject to the tax provided in section 298.015.

(b) "Exploration" means activities designed and engaged in to ascertain the
existence, location, extent, or quality of any deposit of metal or mineral products prior to
the development of a mining site.

(c) "Development" means activities designed and engaged in to prepare or develop
a potential mining site for mining after the existence of metal or mineral products in
commercially marketable quantities has been disclosed including, but not limited to,
the clearing of forestation, the building of roads, removal of overburden, or the sinking
of shafts.

(d) "Research" means activities designed and engaged in to create new or improved
methods of mining, producing, processing, beneficiating, smelting, or refining metal
or mineral products.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2005.
new text end

Sec. 14.

Minnesota Statutes 2004, section 298.018, is amended to read:

298.018 DISTRIBUTION OF PROCEEDS.

Subdivision 1.

Within the deleted text begin taconite deleted text end new text begin precious minerals new text end assistance area.

The
proceeds of the tax paid under sections 298.015 to 298.017 on new text begin ores, metals, and new text end minerals
deleted text begin and energy resources deleted text end mined or extracted within the deleted text begin taconite deleted text end new text begin precious minerals new text end assistance
area deleted text begin defined in section 273.1341 deleted text end , shall be allocated as follows:

(1) five percent to the city or town within which the new text begin ores, metals, or new text end minerals deleted text begin or
energy resources deleted text end are mined or extracted;

(2) ten percent to the taconite municipal aid account to be distributed deleted text begin as provided in
section 298.282 deleted text end new text begin to qualifying municipalities, as defined in section 298.282 and located
in the precious minerals assistance area new text end ;

(3) ten percent to the school district within which the new text begin ores, metals, or new text end minerals deleted text begin or
energy resources deleted text end are mined or extracted;

(4) deleted text begin 20 deleted text end new text begin 30 new text end percent to deleted text begin a group of school districts comprised of those school districts
wherein the mineral or energy resource was mined or extracted or in which there is a
qualifying municipality as defined by section 273.134, paragraph (b), in direct proportion
to school district indexes as follows: for each school district, its pupil units determined
under section 126C.05 for the prior school year shall be multiplied by the ratio of the
average adjusted net tax capacity per pupil unit for school districts receiving aid under
this clause as calculated pursuant to chapters 122A, 126C, and 127A for the school year
ending prior to distribution to the adjusted net tax capacity per pupil unit of the district.
Each district shall receive that portion of the distribution which its index bears to the sum
of the indices for all school districts that receive the distributions deleted text end new text begin the state general fund to
represent the portion of the tax that is in lieu of the state general tax under section 275.025 new text end ;

(5) 20 percent to the county within which the new text begin ores, metals, or new text end minerals deleted text begin or energy
resources deleted text end are mined or extracted;

(6) deleted text begin 20 percent to St. Louis County acting as the counties' fiscal agent to be
distributed as provided in sections 273.134 to 273.136;
deleted text end

deleted text begin (7) deleted text end five percent to the Iron Range Resources and Rehabilitation Board for the
purposes of section 298.22;

deleted text begin (8) five deleted text end new text begin (7) ten new text end percent to the Douglas J. Johnson economic protection trust fund; and

deleted text begin (9) five deleted text end new text begin (8) ten new text end percent to the taconite environmental protection fund.

The proceeds of the tax shall be distributed on July 15 each year.

Subd. 2.

Outside the deleted text begin taconite deleted text end new text begin precious minerals new text end assistance area.

The proceeds of
the tax paid under sections 298.015 to 298.017 on new text begin ores, metals, or new text end minerals deleted text begin and energy
resources deleted text end mined or extracted outside of the deleted text begin taconite deleted text end new text begin precious minerals new text end assistance area
deleted text begin defined in section 273.1341 deleted text end , shall be deposited in the general fund.

new text begin Subd. 3. new text end

new text begin Segregation of funds. new text end

new text begin The proceeds of the tax allocated under subdivision
1, clauses (2), (6), (7), and (8), including any investment earnings on them, must be
segregated and separately accounted for in the respective funds or account to which
they are allocated. These amounts must only be distributed to municipalities within the
precious minerals assistance area or used for projects located in the precious minerals
assistance area.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for distribution of net proceeds tax
revenues made after July 1, 2005.
new text end

Sec. 15.

new text begin [298.021] ROYALTY TAX.
new text end

new text begin In addition to any other taxes imposed by law, a tax is imposed on a royalty, as
defined in section 290.923, subdivision 1, paid on ore, other than iron ore, taconite,
iron sulphides, or semitaconite. The tax equals 12 percent of the amount of the royalty
paid. The person paying the royalty shall withhold the tax from the payment and remit
the payment to the commissioner at the times and under the procedures provided under
section 290.923. The commissioner shall deposit proceeds in the general fund and allocate
the proceeds as provided under section 298.018, subdivision 1.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for royalties paid after June 30, 2005.
new text end

Sec. 16.

Minnesota Statutes 2004, section 298.223, subdivision 1, is amended to read:

Subdivision 1.

Creation; purposes.

A fund called the taconite environmental
protection fund is created for the purpose of reclaiming, restoring and enhancing those
areas of northeast Minnesota located within the taconite assistance area defined in section
273.1341, that are adversely affected by the environmentally damaging operations
involved in mining taconite and iron ore and producing iron ore concentrate and for the
purpose of promoting the economic development of northeast Minnesota. The taconite
environmental protection fund shall be used for the following purposes:

(a) to initiate investigations into matters the Iron Range Resources and Rehabilitation
Board determines are in need of study and which will determine the environmental
problems requiring remedial action;

(b) reclamation, restoration, or reforestation of minelands not otherwise provided
for by state law;

(c) local economic development projects deleted text begin including construction of sewer and water
systems, and other deleted text end new text begin but only if those projects are approved by the board, and new text end public works new text begin ,
including construction of sewer and water systems new text end located within the taconite assistance
area defined in section 273.1341;

(d) monitoring of mineral industry related health problems among mining employees.

new text begin EFFECTIVE DATE. new text end

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

Sec. 17.

Minnesota Statutes 2004, section 298.24, subdivision 1, is amended to read:

Subdivision 1.

Effective date.

new text begin This section is effective for direct reduced ore
produced after the date of final enactment.
new text end

Sec. 18. Minnesota Statutes 2004, section 298.28, subdivision 9b, is amended
to read:

Subd. 9b.

Taconite environmental fund.

Five cents per ton deleted text begin for distributions in
1999, 2000, 2001, 2002, and 2003 deleted text end must be paid to the taconite environmental fund for
use under section 298.2961 new text begin , subdivision 4 new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for distributions in 2005 and later
years.
new text end

Sec. 19. Minnesota Statutes 2004, section 298.28, subdivision 10, is amended
to read:

Subd. 10.

Increase.

new text begin (a) Except as provided in paragraph (b), new text end beginning with
distributions in 2000, the amount determined under subdivision 9 shall be increased in
the same proportion as the increase in the implicit price deflator as provided in section
298.24, subdivision 1. Beginning with distributions in 2003, the amount determined under
subdivision 6, paragraph (a), shall be increased in the same proportion as the increase in
the implicit price deflator as provided in section 298.24, subdivision 1.

new text begin (b) For distributions in 2005 and subsequent years, an amount equal to the increased
tax proceeds attributable to the increase in the implicit price deflator as provided in
section 298.24, subdivision 1, for taxes paid in 2005, except for the amount of revenue
increases provided in subdivision 4, paragraph (d), is distributed to the grant and loan fund
established in section 298.2961, subdivision 4.
new text end

Sec. 20. Minnesota Statutes 2004, section 298.2961, is amended by adding a
subdivision to read:

new text begin Subd. 4. new text end

new text begin Grant and loan fund. new text end

new text begin (a) A fund is established to receive distributions
under section 298.28, subdivision 9b, and to make grants or loans as provided in this
subdivision. Any grant or loan made under this subdivision must be approved by
a majority of the members of the Iron Range Resources and Rehabilitation Board,
established under section 298.22.
new text end

new text begin (b) Distributions received in calendar year 2005 are allocated to the city of Virginia
for improvements and repairs to the city's steam heating system.
new text end

new text begin (c) Distributions received in calendar year 2006 are allocated to a project of the
public utilities commissions of the cities of Hibbing and Virginia to convert their electrical
generating plants to the use of biomass products, such as wood.
new text end

new text begin (d) Distributions received in calendar year 2007 must be paid to the city of Tower to
be used for the East Two Rivers project in or near the city of Tower, including replacement
of the Marked Trunk Highway 169 bridge over East Two Rivers, demolition of the present
Marked Trunk Highway 135 bridge over East Two Rivers, and rerouting of Marked Trunk
Highway 135, associated trunk highway construction and reconstruction, and associated
marina development.
new text end

new text begin (e) For distributions received in 2008 and later, amounts may be allocated to joint
ventures with mining companies for reclamation of lands containing abandoned or worked
out mines to convert these lands to marketable properties for residential, recreational,
commercial, or other valuable uses.
new text end

new text begin EFFECTIVE DATE. new text end

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

Sec. 21. Minnesota Statutes 2004, section 298.75, subdivision 1, is amended
to read:

Subdivision 1.

Definitions.

Except as may otherwise be provided, the following
words, when used in this section, shall have the meanings herein ascribed to them.

(1) "Aggregate material" shall mean nonmetallic natural mineral aggregate including,
but not limited to sand, silica sand, gravel, crushed rock, limestone, granite, and borrow,
but only if the borrow is transported on a public road, street, or highway. Aggregate
material shall not include dimension stone and dimension granite. Aggregate material
must be measured or weighed after it has been extracted from the pit, quarry, or deposit.

(2) "Person" shall mean any individual, firm, partnership, corporation, organization,
trustee, association, or other entity.

(3) "Operator" shall mean any person engaged in the business of removing aggregate
material from the surface or subsurface of the soil, for the purpose of sale, either directly
or indirectly, through the use of the aggregate material in a marketable product or service new text begin ;
except that operator does not include persons engaged in a transaction in which the
aggregate is moved within a project's construction limits to other locations within that
same project's construction limits new text end .

(4) "Extraction site" shall mean a pit, quarry, or deposit containing aggregate
material and any contiguous property to the pit, quarry, or deposit which is used by the
operator for stockpiling the aggregate material.

(5) "Importer" shall mean any person who buys aggregate material produced from a
county not listed in paragraph (6) or another state and causes the aggregate material to be
imported into a county in this state which imposes a tax on aggregate material.

(6) "County" shall mean the counties of Pope, Stearns, Benton, Sherburne, Carver,
Scott, Dakota, Le Sueur, Kittson, Marshall, Pennington, Red Lake, Polk, Norman,
Mahnomen, Clay, Becker, Carlton, St. Louis, Rock, Murray, Wilkin, Big Stone, Sibley,
Hennepin, Washington, Chisago, and Ramsey. County also means any other county whose
board has voted after a public hearing to impose the tax under this section and has notified
the commissioner of revenue of the imposition of the tax.

(7) "Borrow" shall mean granular borrow, consisting of durable particles of gravel
and sand, crushed quarry or mine rock, crushed gravel or stone, or any combination
thereof, the ratio of the portion passing the (#200) sieve divided by the portion passing the
(1 inch) sieve may not exceed 20 percent by mass.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for aggregate sold, imported,
transported, or used from a stockpile after June 30, 2005.
new text end

Sec. 22.

Minnesota Statutes 2004, section 298.75, subdivision 2, is amended to read:

Subd. 2.

Tax imposed.

A county shall impose upon every importer and operator a
production tax up to ten cents per cubic yard or up to seven cents per ton of aggregate
material removed except that the county board may decide not to impose this tax if it
determines that in the previous year operators removed less than 20,000 tons or 14,000
cubic yards of aggregate material from that county. new text begin A county or town may exempt an
operator from the tax if the operator has removed less than 2,500 tons or 1,750 yards from
the county in the year that the tax is due and no other aggregate operator has removed
material from the same site in the same year. new text end The tax shall be imposed on aggregate
material produced in the county when the aggregate material is transported from the
extraction site or sold. When aggregate material is stored in a stockpile within the state of
Minnesota and a public highway, road or street is not used for transporting the aggregate
material, the tax shall be imposed either when the aggregate material is sold, or when it
is transported from the stockpile site, or when it is used from the stockpile, whichever
occurs first. The tax shall be imposed on an importer when the aggregate material is
imported into the county that imposes the tax.

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

new text begin EFFECTIVE DATE. new text end

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

Sec. 23. new text begin IRON RANGE RESOURCES AND REHABILITATION
COMMISSIONER; BONDS AUTHORIZED.
new text end

new text begin Subdivision 1. new text end

new text begin Issuance; purpose. new text end

new text begin Notwithstanding any provision of Minnesota
Statutes, chapter 298, to the contrary, the commissioner of Iron Range resources and
rehabilitation may issue revenue bonds in a principal amount of $15,000,000 in one
or more series, and bonds to refund those bonds. The proceeds of the bonds must be
used to make grants to school districts located in the taconite tax relief area defined in
Minnesota Statutes, section 273.134, or the taconite assistance area defined in Minnesota
Statutes, section 273.1341, to be used by the school districts to pay for health, safety, and
maintenance improvements but only if the school district has levied the maximum amount
allowable under law for those purposes.
new text end

new text begin Subd. 2. new text end

new text begin Appropriation. new text end

new text begin There is annually appropriated from the distribution of
taconite production tax revenues to the taconite environmental protection fund pursuant
to Minnesota Statutes, section 298.28, subdivision 11, and to the Douglas J. Johnson
economic protection trust pursuant to Minnesota Statutes, section 298.28, subdivisions 9
and 11, in equal shares, an amount sufficient to pay when due the principal and interest
on the bonds issued pursuant to subdivision 1. If the annual distribution to the Douglas
J. Johnson economic protection trust is insufficient to pay its share after fulfilling any
obligations of the trust under Minnesota Statutes, section 298.225 or 298.293, the
deficiency shall be appropriated from the taconite environmental protection fund. The
appropriation under this subdivision terminates upon payment or maturity of the last of the
bonds issued under this section.
new text end

new text begin Subd. 3. new text end

new text begin Credit enhancement. new text end

new text begin The bonds issued under this section shall be "debt
obligations" and the commissioner of Iron Range resources and rehabilitation shall be a
"district" for purposes of Minnesota Statutes, section 126C.55, provided that advances
made under subdivision 2 of Minnesota Statutes, section 126C.55, shall not be subject to
subdivisions 4 to 7 of Minnesota Statutes, section 126C.55.
new text end

Sec. 24. new text begin TRANSITION PROVISION.
new text end

new text begin Each person with an alternative minimum tax credit on December 31, 2004, pursuant
to Minnesota Statutes 2004, section 298.01, may take that credit against occupation tax
under the provisions of Minnesota Statutes 2004, section 298.01, subdivision 3d or 4e.
new text end

new text begin EFFECTIVE DATE. new text end

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

Sec. 25. new text begin REPEALER.
new text end

new text begin (a) Minnesota Statutes 2004, section 298.01, subdivisions 3c, 3d, 4d, and 4e, are
repealed effective for taxable years beginning after December 31, 2004.
new text end

new text begin (b) Minnesota Statutes 2004, section 298.017, is repealed effective for taxes payable
in 2006 and thereafter.
new text end

ARTICLE 8

MISCELLANEOUS

Section 1.

Minnesota Statutes 2004, section 270.30, subdivision 1, is amended to read:

Subdivision 1.

Scope.

deleted text begin (a) deleted text end This section applies to a person who deleted text begin offers, deleted text end provides deleted text begin , or
facilitates the provision of refund anticipation loans, as part of or in connection with
the provision of deleted text end tax preparation services.

deleted text begin (b) This section does not apply to:
deleted text end

deleted text begin (1) a tax preparer who provides tax preparation services for fewer than six clients
in a calendar year;
deleted text end

deleted text begin (2) the provision by a person of tax preparation services to a spouse, parent,
grandparent, child, or sibling; and
deleted text end

deleted text begin (3) the provision of services by an employee for an employer.
deleted text end

Sec. 2.

Minnesota Statutes 2004, section 270.30, subdivision 5, is amended to read:

Subd. 5.

Itemized bill required.

A tax preparer new text begin who provides services for a fee
or other consideration new text end must provide an itemized statement of the charges for services,
at least separately stating the charges for:

(1) return preparation; new text begin and
new text end

(2) deleted text begin electronic filing; and
deleted text end

deleted text begin (3) deleted text end providing or facilitating a refund anticipation loan.

Sec. 3.

Minnesota Statutes 2004, section 270.30, subdivision 6, is amended to read:

Subd. 6.

Enforcement; penalties.

The commissioner may impose an administrative
penalty of not more than $1,000 per violation of subdivision 3, 4, or 5. The commissioner
may terminate a tax preparer's authority to transmit returns electronically to the state, if the
commissioner determines the tax preparer engaged in a pattern and practice of violating
this section. Imposition of a penalty under this subdivision is subject to the contested case
procedure under chapter 14. The commissioner shall collect the penalty in the same
manner as the income tax. new text begin Penalties imposed under this subdivision are public data.
new text end

Sec. 4.

Minnesota Statutes 2004, section 270.30, is amended by adding a subdivision
to read:

new text begin Subd. 6a. new text end

new text begin Exchange of data; state board of accountancy. new text end

new text begin The State Board of
Accountancy shall refer to the commissioner complaints it receives about tax preparers
who are not subject to the jurisdiction of the State Board of Accountancy and who are
alleged to have violated the provisions of subdivisions 3 to 5.
new text end

Sec. 5.

Minnesota Statutes 2004, section 270.30, is amended by adding a subdivision
to read:

new text begin Subd. 6b. new text end

new text begin Exchange of data; lawyers board of professional responsibility. new text end

new text begin The
Lawyers Board of Professional Responsibility may refer to the commissioner complaints
it receives about tax preparers who are not subject to its jurisdiction and who are alleged
to have violated the provisions of subdivisions 3 to 5.
new text end

Sec. 6.

Minnesota Statutes 2004, section 270.30, is amended by adding a subdivision
to read:

new text begin Subd. 6c. new text end

new text begin Exchange of data; commissioner. new text end

new text begin The commissioner shall refer
complaints about tax preparers who are alleged to have violated the provisions of
subdivisions 3 to 5 to:
new text end

new text begin (1) the State Board of Accountancy, if the tax preparer is under its jurisdiction; and
new text end

new text begin (2) the Lawyers Board of Professional Responsibility, if the tax preparer is under
its jurisdiction.
new text end

Sec. 7.

Minnesota Statutes 2004, section 270.30, is amended by adding a subdivision
to read:

new text begin Subd. 6d. new text end

new text begin Data private. new text end

new text begin Information exchanged on individuals under subdivisions
6a to 6c are private data under section 13.02, subdivision 12, until such time as a penalty
is imposed as provided in section 326A.08 or by the Lawyers Board of Professional
Responsibility.
new text end

Sec. 8.

Minnesota Statutes 2004, section 270.30, subdivision 8, is amended to read:

Subd. 8.

Exemptions; enforcement provisions.

new text begin (a) new text end The provisions of deleted text begin subdivisions
6 and 7 deleted text end new text begin this section, except for subdivision 4, new text end do not apply to:

(1) an attorney admitted to practice under section 481.01;

(2) a certified public accountant deleted text begin holding a certificate under section 326A.04 or a
person issued a permit to practice under section 326A.05 deleted text end new text begin or other person who is subject to
the jurisdiction of the State Board of Accountancy new text end ; new text begin and
new text end

(3) deleted text begin a person designated as a registered accounting practitioner under Minnesota
Rules, part 1105.6600, or a registered accounting practitioner firm issued a permit under
Minnesota Rules, part 1105.7100;
deleted text end

deleted text begin (4) deleted text end an enrolled agent who has passed the special enrollment examination
administered by the Internal Revenue Service deleted text begin ; and deleted text end new text begin .
new text end

new text begin (b) The provisions of this section do not apply to:
new text end

deleted text begin (5) deleted text end new text begin (1) new text end any fiduciary, or the regular employees of a fiduciary, while acting on behalf
of the fiduciary estate, the testator, trustor, grantor, or beneficiaries of them new text begin ;
new text end

new text begin (2) a tax preparer who provides tax preparation services for fewer than six clients
in a calendar year;
new text end

new text begin (3) tax preparation services to a spouse, parent, grandparent, child, or sibling of
the tax preparer; and
new text end

new text begin (4) the preparation by an employee of the tax return of the employee's employer new text end .

Sec. 9.

new text begin [270.301] PUBLICATION OF NAMES OF TAX PREPARERS SUBJECT
TO PENALTIES.
new text end

new text begin Subdivision 1. new text end

new text begin Publication of list. new text end

new text begin Notwithstanding any other law, the commissioner
must publish as provided in this section a list or lists of tax preparers subject to penalties.
new text end

new text begin Subd. 2. new text end

new text begin Required and excluded tax preparers. new text end

new text begin (a) Subject to the limitations of
paragraphs (b) and (c), the commissioner must publish lists of the tax preparers described
in subdivision 1. The list must include:
new text end

new text begin (1) the tax preparers who have been assessed penalties under section 289A.60,
subdivision 13, or who have been convicted under section 289A.63;
new text end

new text begin (2) tax preparers against whom cumulative penalties of $1,000 or more have been
assessed under section 270.30, subdivision 6; and
new text end

new text begin (3) tax preparers whose authority to transmit returns electronically has been
terminated under section 270.30, subdivision 6, or under section 289A.60, subdivision 13.
new text end

new text begin The list may include tax preparers against whom cumulative penalties of less than $1,000
have been assessed.
new text end

new text begin (b) For the purposes of this section, a penalty was not assessed if:
new text end

new text begin (1) an administrative or court action contesting the penalty has been filed or served
and is unresolved at the time when notice would be given under subdivision 3; or
new text end

new text begin (2) an appeal period to contest the penalty has not expired.
new text end

new text begin (c) Penalties are not subject to publication if:
new text end

new text begin (1) the commissioner is in the process of reviewing or adjusting the penalty; or
new text end

new text begin (2) the commissioner has been notified that the tax preparer is deceased.
new text end

new text begin Subd. 3. new text end

new text begin Notice to tax preparer. new text end

new text begin (a) At least 30 days before publishing the
name of a tax preparer subject to penalty, the commissioner shall mail a written notice
to the tax preparer, detailing the amount and nature of each penalty and the intended
publication of the information listed in subdivision 4 related to the penalty. The notice
must be mailed by first class and certified mail addressed to the last known address of
the tax preparer. The notice must include information regarding the exceptions listed in
subdivision 2 and must state that the tax preparer's information will not be published if the
tax preparer provides information establishing that subdivision 2 prohibits publication of
the tax preparer's name.
new text end

new text begin (b) After at least 30 days has elapsed since the notice was mailed and the tax
preparer has not proved to the commissioner that subdivision 2 prohibits publication, the
commissioner may publish in a list of tax preparers subject to penalty the information
about the tax preparer that is listed in subdivision 4.
new text end

new text begin Subd. 4. new text end

new text begin Form of list. new text end

new text begin The list may be published by any medium or method. The
list must contain the name, associated business name or names, address or addresses, and
violation or violations for which a penalty was imposed of each tax preparer subject
to administrative penalty.
new text end

new text begin Subd. 5. new text end

new text begin Removal from list. new text end

new text begin The commissioner shall remove the name of a tax
preparer from the list of tax preparers published under this section when:
new text end

new text begin (1) the commissioner determines that the name was included on the list in error;
new text end

new text begin (2) 90 days have elapsed since the preparer has fully paid all fines imposed, served
any suspension, and demonstrated to the satisfaction of the commissioner that the preparer
has successfully completed any remedial actions required by the commissioner, the State
Board of Accountancy, or the Lawyers Board of Professional Responsibility; or
new text end

new text begin (3) the commissioner has been notified that the tax preparer is deceased.
new text end

new text begin Subd. 6. new text end

new text begin Names published in error. new text end

new text begin If the commissioner publishes a name under
subdivision 1 in error, the tax preparer whose name was erroneously published has a right
to request a retraction and apology. If the tax preparer so requests, the commissioner
shall publish a retraction and apology acknowledging that the tax preparer's name was
published in error. The retraction and apology must appear in the same medium and the
same format as the original list that contained the name listed in error.
new text end

new text begin Subd. 7. new text end

new text begin Payment of damages. new text end

new text begin Actions against the commissioner of revenue or
the state of Minnesota arising out of the implementation of this program must be brought
under section 270.276.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin The requirement of subdivision 2, paragraph (a), clause (2), is
effective for crimes committed on or after August 1, 2005. The remainder of subdivision 2
is effective for tax preparers engaging in conduct described in subdivision 2, paragraph
(a), clause (1) or (3), on or after August 1, 2005.
new text end

Sec. 10.

Minnesota Statutes 2004, section 270A.03, subdivision 5, is amended to read:

Subd. 5.

Debt.

"Debt" means a legal obligation of a natural person to pay a fixed
and certain amount of money, which equals or exceeds $25 and which is due and payable
to a claimant agency. The term includes criminal fines imposed under section 609.10 or
609.125 new text begin , fines imposed for petty misdemeanors as defined in section 609.02, subdivision
4a, new text end and restitution. The term also includes the co-payment for the appointment of a district
public defender imposed under section 611.17, paragraph (c). A debt may arise under a
contractual or statutory obligation, a court order, or other legal obligation, but need not
have been reduced to judgment.

A debt includes any legal obligation of a current recipient of assistance which is
based on overpayment of an assistance grant where that payment is based on a client
waiver or an administrative or judicial finding of an intentional program violation;
or where the debt is owed to a program wherein the debtor is not a client at the time
notification is provided to initiate recovery under this chapter and the debtor is not a
current recipient of food support, transitional child care, or transitional medical assistance.

A debt does not include any legal obligation to pay a claimant agency for medical
care, including hospitalization if the income of the debtor at the time when the medical
care was rendered does not exceed the following amount:

(1) for an unmarried debtor, an income of $8,800 or less;

(2) for a debtor with one dependent, an income of $11,270 or less;

(3) for a debtor with two dependents, an income of $13,330 or less;

(4) for a debtor with three dependents, an income of $15,120 or less;

(5) for a debtor with four dependents, an income of $15,950 or less; and

(6) for a debtor with five or more dependents, an income of $16,630 or less.

The income amounts in this subdivision shall be adjusted for inflation for debts
incurred in calendar years 2001 and thereafter. The dollar amount of each income level
that applied to debts incurred in the prior year shall be increased in the same manner
as provided in section 1(f) of the Internal Revenue Code of 1986, as amended through
December 31, 2000, except that for the purposes of this subdivision the percentage increase
shall be determined from the year starting September 1, 1999, and ending August 31, 2000,
as the base year for adjusting for inflation for debts incurred after December 31, 2000.

Debt also includes an agreement to pay a MinnesotaCare premium, regardless of the
dollar amount of the premium authorized under section 256L.15, subdivision 1a.

Sec. 11.

Minnesota Statutes 2004, section 289A.08, subdivision 16, is amended to read:

Subd. 16.

Tax refund or return preparers; electronic filing; paper filing fee
imposed.

(a) A "tax refund or return preparer," as defined in section 289A.60, subdivision
13, paragraph deleted text begin (g) deleted text end new text begin (h) new text end , who prepared more than deleted text begin 500 deleted text end new text begin 100 new text end Minnesota individual income tax
returns for the prior calendar year must file all Minnesota individual income tax returns
prepared for the current calendar year by electronic means.

(b) deleted text begin For tax returns prepared for the tax year beginning in 2001, the "500" in
paragraph (a) is reduced to 250.
deleted text end

deleted text begin (c) For tax returns prepared for tax years beginning after December 31, 2001, the
"500" in paragraph (a) is reduced to 100.
deleted text end

deleted text begin (d) deleted text end Paragraph (a) does not apply to a return if the taxpayer has indicated on the return
that the taxpayer did not want the return filed by electronic means.

deleted text begin (e) deleted text end new text begin (c) new text end For each return that is not filed electronically by a tax refund or return
preparer under this subdivision, including returns filed under paragraph (d), a paper filing
fee of $5 is imposed upon the preparer. The fee is collected from the preparer in the same
manner as income tax. The fee does not apply to returns that the commissioner requires
to be filed in paper form.

Sec. 12.

Minnesota Statutes 2004, section 289A.60, subdivision 13, is amended to read:

Subd. 13.

Penalties for tax return preparers.

(a) If an understatement of liability
with respect to a return or claim for refund is due to a willful attempt in any manner to
understate the liability for a tax by a person who is a tax return preparer with respect to the
return or claim, the person shall pay to the commissioner a penalty of $500. If a part of a
property tax refund claim is excessive due to a willful attempt in any manner to overstate
the claim for relief allowed under chapter 290A by a person who is a tax refund or return
preparer, the person shall pay to the commissioner a penalty of $500 with respect to the
claim. These penalties may not be assessed against the employer of a tax return preparer
unless the employer was actively involved in the willful attempt to understate the liability
for a tax or to overstate the claim for refund. These penalties are income tax liabilities and
may be assessed at any time as provided in section 289A.38, subdivision 5.

(b) A civil action in the name of the state of Minnesota may be commenced to
enjoin any person who is a tax return preparer doing business in this state from further
engaging in any conduct described in paragraph (c). An action under this paragraph
must be brought by the attorney general in the district court for the judicial district of the
tax return preparer's residence or principal place of business, or in which the taxpayer
with respect to whose tax return the action is brought resides. The court may exercise its
jurisdiction over the action separate and apart from any other action brought by the state
of Minnesota against the tax return preparer or any taxpayer.

(c) In an action under paragraph (b), if the court finds that a tax return preparer has:

(1) engaged in any conduct subject to a civil penalty under section 289A.60 or a
criminal penalty under section 289A.63;

(2) misrepresented the preparer's eligibility to practice before the Department of
Revenue, or otherwise misrepresented the preparer's experience or education as a tax
return preparer;

(3) guaranteed the payment of any tax refund or the allowance of any tax credit; or

(4) engaged in any other fraudulent or deceptive conduct that substantially interferes
with the proper administration of state tax law, and injunctive relief is appropriate to
prevent the recurrence of that conduct,

the court may enjoin the person from further engaging in that conduct.

(d) If the court finds that a tax return preparer has continually or repeatedly engaged
in conduct described in paragraph (c), and that an injunction prohibiting that conduct
would not be sufficient to prevent the person's interference with the proper administration
of state tax laws, the court may enjoin the person from acting as a tax return preparer.
The court may not enjoin the employer of a tax return preparer for conduct described in
paragraph (c) engaged in by one or more of the employer's employees unless the employer
was also actively involved in that conduct.

(e) new text begin The commissioner may terminate or suspend a tax preparer's authority to
transmit returns electronically to the state, if the commissioner determines that the tax
preparer has engaged in a pattern and practice of conduct in violation of this subdivision
or of section 289A.63.
new text end

new text begin (f) new text end For purposes of this subdivision, the term "understatement of liability" means
an understatement of the net amount payable with respect to a tax imposed by state tax
law, or an overstatement of the net amount creditable or refundable with respect to a
tax. The determination of whether or not there is an understatement of liability must be
made without regard to any administrative or judicial action involving the taxpayer. For
purposes of this subdivision, the amount determined for underpayment of estimated tax
under either section 289A.25 or 289A.26 is not considered an understatement of liability.

deleted text begin (f) deleted text end new text begin (g) new text end For purposes of this subdivision, the term "overstatement of claim" means an
overstatement of the net amount refundable with respect to a claim for property tax relief
provided by chapter 290A. The determination of whether or not there is an overstatement
of a claim must be made without regard to administrative or judicial action involving
the claimant.

deleted text begin (g) deleted text end new text begin (h) new text end For purposes of this section, the term "tax refund or return preparer" means
an individual who prepares for compensation, or who employs one or more individuals to
prepare for compensation, a return of tax, or a claim for refund of tax. The preparation of
a substantial part of a return or claim for refund is treated as if it were the preparation of
the entire return or claim for refund. An individual is not considered a tax return preparer
merely because the individual:

(1) gives typing, reproducing, or other mechanical assistance;

(2) prepares a return or claim for refund of the employer, or an officer or employee
of the employer, by whom the individual is regularly and continuously employed;

(3) prepares a return or claim for refund of any person as a fiduciary for that person;
or

(4) prepares a claim for refund for a taxpayer in response to a tax order issued
to the taxpayer.

Sec. 13.

Minnesota Statutes 2004, section 290A.07, is amended by adding a
subdivision to read:

new text begin Subd. 5. new text end

new text begin Early payment; e-file claims. new text end

new text begin The commissioner may pay a claim up
to 30 days earlier than the first permitted date under subdivision 2a or 3 if the claim is
submitted by electronic means.
new text end

new text begin EFFECTIVE DATE. new text end

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

Sec. 14.

Minnesota Statutes 2004, section 297A.61, subdivision 4, is amended to read:

Subd. 4.

Retail sale.

(a) A "retail sale" means any sale, lease, or rental for any
purpose other than resale, sublease, or subrent.

(b) A sale of property used by the owner only by leasing it to others or by holding it
in an effort to lease it, and put to no use by the owner other than resale after the lease or
effort to lease, is a sale of property for resale.

(c) A sale of master computer software that is purchased and used to make copies for
sale or lease is a sale of property for resale.

(d) A sale of building materials, supplies, and equipment to owners, contractors,
subcontractors, or builders for the erection of buildings or the alteration, repair, or
improvement of real property is a retail sale in whatever quantity sold, whether the sale is
for purposes of resale in the form of real property or otherwise.

(e) A sale of carpeting, linoleum, or similar floor covering to a person who provides
for installation of the floor covering is a retail sale and not a sale for resale since a sale
of floor covering which includes installation is a contract for the improvement of real
property.

(f) A sale of shrubbery, plants, sod, trees, and similar items to a person who provides
for installation of the items is a retail sale and not a sale for resale since a sale of
shrubbery, plants, sod, trees, and similar items that includes installation is a contract for
the improvement of real property.

(g) A sale of tangible personal property that is awarded as prizes is a retail sale and
is not considered a sale of property for resale.

(h) A sale of tangible personal property utilized or employed in the furnishing or
providing of services under subdivision 3, paragraph (g), clause (1), including, but not
limited to, property given as promotional items, is a retail sale and is not considered a
sale of property for resale.

(i) A sale of tangible personal property used in conducting lawful gambling under
chapter 349 or the state lottery under chapter 349A, including, but not limited to, property
given as promotional items, is a retail sale and is not considered a sale of property for
resale.

(j) A sale of machines, equipment, or devices that are used to furnish, provide, or
dispense goods or services, including, but not limited to, coin-operated devices, is a retail
sale and is not considered a sale of property for resale.

(k) In the case of a lease, a retail sale occurs new text begin (1) new text end when an obligation to make a lease
payment becomes due under the terms of the agreement or the trade practices of the
lessor new text begin or (2) in the case of a lease of a motor vehicle, as defined in section 297B.01,
subdivision 5, but excluding vehicles with a manufacturer's gross vehicle weight rating
greater than 10,000 pounds and rentals of vehicles for not more than 28 days, at the time
the lease is executed new text end .

(l) In the case of a conditional sales contract, a retail sale occurs upon the transfer of
title or possession of the tangible personal property.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for leases entered into after
September 30, 2005.
new text end

Sec. 15.

Minnesota Statutes 2004, section 297A.67, is amended by adding a
subdivision to read:

new text begin Subd. 32. new text end

new text begin Cigarettes. new text end

new text begin Cigarettes upon which a tax has been imposed under section
297F.25 are exempt.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made after
July 31, 2005.
new text end

Sec. 16.

new text begin [297A.825] MOTOR VEHICLE LEASES.
new text end

new text begin Subdivision 1. new text end

new text begin Motor vehicle lease price; payment. new text end

new text begin (a) In the case of a lease of a
motor vehicle as provided in section 297A.61, subdivision 4, paragraph (k), clause (2), the
tax is imposed on the total amount to be paid by the lessee under the lease agreement. The
lessor shall collect the tax in full at the time the lease is executed or, if the tax is included
in the lease and the lease is assigned, the tax is due from the original lessor at the time the
lease is assigned. The total amount to be paid by the lessee under the lease agreement
equals the agreed-upon value of the vehicle less manufacturer's rebates, the stated residual
value of the leased vehicle, and the total value allowed for a vehicle owned by the lessee
taken in trade by the lessor, plus the price of any taxable goods and services included in
the lease and the rent charge as provided by Code of Federal Regulations, title 12, section
213.4, excluding any rent charge related to the capitalization of the tax.
new text end

new text begin (b) If the total amount paid by the lessee for use of the leased vehicle includes
amounts that are not calculated at the time the lease is executed, the tax is imposed and
must be collected by the lessor at the time the amounts are paid by the lessee. In the case
of a lease which by its terms may be renewed, the sales tax is due and payable on the
total amount to be paid during the initial term of the lease, and then for each subsequent
renewal period on the total amount to be paid during the renewal period.
new text end

new text begin (c) If a lease is canceled or rescinded on or before 90 days of its execution or if a
vehicle is returned to the manufacturer under section 325F.665, the lessor may file a claim
for a refund of the total tax paid minus the amount of tax due for the period the vehicle is
used by the lessee.
new text end

new text begin (d) If a lessee's obligation to make payments on a lease is canceled more than 90 days
after its execution, a credit is allowed against sales tax or motor vehicle sales tax due on a
subsequent lease or purchase of a motor vehicle if that lease or purchase is consummated
within 30 days of the date the prior lease was canceled. The amount of the credit shall be
equal to (1) the sales tax paid at the inception of the lease, multiplied by (2) the ratio of the
number of full months remaining in the lease at the time of termination compared to the
term of the lease used in calculating sales tax paid at the inception of the lease.
new text end

new text begin Subd. 2. new text end

new text begin Lease of motor vehicles. new text end

new text begin When the lease of a motor vehicle as defined in
section 297A.61, subdivision 4, paragraph (k), clause (2), originates in another state, the
sales tax under subdivision 1 shall be calculated by the lessor on the total amount that is
due under the lease agreement after the vehicle is required to be registered in Minnesota.
If the total amount to be paid by the lessee under the lease agreement has already been
subjected to tax by another state, a credit for taxes paid in the other state is allowed as
provided in section 297A.80.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin Subdivision 1 of this section is effective for leases entered
into after September 30, 2005. Subdivision 2 of this section is effective for vehicles
registering in Minnesota after September 30, 2005.
new text end

Sec. 17.

Minnesota Statutes 2004, section 297F.01, is amended by adding a subdivision
to read:

new text begin Subd. 10a. new text end

new text begin Out-of-state retailer. new text end

new text begin "Out-of-state retailer" means a person engaged
outside of this state in the business of selling, or offering to sell, cigarettes or tobacco
products to consumers located in this state.
new text end

new text begin EFFECTIVE DATE. new text end

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

Sec. 18.

new text begin [297F.031] REGISTRATION REQUIREMENT.
new text end

new text begin Prior to making delivery sales or shipping cigarettes or tobacco products in
connection with any sales, an out-of-state retailer shall file with the Department of Revenue
a statement setting forth the out-of-state retailer's name, trade name, and the address of the
out-of-state retailer's principal place of business and any other place of business.
new text end

Sec. 19.

Minnesota Statutes 2004, section 297F.09, is amended by adding a subdivision
to read:

new text begin Subd. 4a. new text end

new text begin Reporting requirements. new text end

new text begin No later than the 18th day of each calendar
month, an out-of-state retailer that has made a delivery of cigarettes or tobacco products
or shipped or delivered cigarettes or tobacco products into the state in a delivery sale
in the previous calendar month shall file with the Department of Revenue reports in
the form and in the manner prescribed by the commissioner of revenue that provides
for each delivery sale, the name and address of the purchaser and the brand or brands
and quantity of cigarettes or tobacco products sold. A tobacco retailer that meets the
requirements of United States Code, title 15, section 375 et seq. satisfies the requirements
of this subdivision.
new text end

Sec. 20.

Minnesota Statutes 2004, section 297F.14, subdivision 4, is amended to read:

Subd. 4.

Bad debt.

deleted text begin The commissioner may adopt rules providing a refund of the
tax paid under this chapter if the tax paid qualifies as a bad debt under section 166(a)
of the Internal Revenue Code. deleted text end new text begin For any reporting period, a taxpayer may offset against
taxes payable under this chapter the amount of taxes previously paid under this chapter
that is attributable to a bad debt. The taxes must have been included in a transaction the
consideration for which was a debt owed to the taxpayer and which became uncollectible,
but only in proportion to the portion of debt that became uncollectible. To qualify for offset
under this subdivision, the debt must have qualified as a bad debt under section 166(a)
of the Internal Revenue Code. The taxpayer may claim the offset within the time period
prescribed in section 297F.17, subdivision 6. If the taxpayer is no longer liable for taxes
imposed under this chapter, the commissioner shall refund to the taxpayer the amount of
the taxes attributable to the bad debt. Any recovery of the tax claimed as a refund or credit
must be reported to the commissioner on the tax return for the month in which the recovery
is made. If the taxpayer is no longer required to file returns under this chapter, the taxpayer
must reimburse the commissioner for tax recovered in the month following the recovery.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for claims filed on or after July
1, 2005.
new text end

Sec. 21.

new text begin [297F.25] CIGARETTE SALES TAX.
new text end

new text begin Subdivision 1. new text end

new text begin Imposition. new text end

new text begin A tax is imposed on distributors on the sale of cigarettes
by a cigarette distributor to a retailer or cigarette subjobber for resale in this state. The tax
is equal to 6.5 percent of the weighted average retail price. The weighted average retail
price must be expressed in cents per pack when rounded to the nearest one-tenth of a cent.
The weighted average retail price must be determined annually, with new rates published
by May 1, and effective for sales on or after July 1. The weighted average retail price must
be established by surveying cigarette retailers statewide in a manner and time determined
by the commissioner. The determination of the commissioner pursuant to this subdivision
is not a "rule" and is not subject to the Administrative Procedure Act contained in chapter
14. As of August 1, 2005, the tax is 21 cents per pack of 20 cigarettes. For packs of
cigarettes with other than 20 cigarettes, the tax must be adjusted proportionally.
new text end

new text begin Subd. 2. new text end

new text begin Payment. new text end

new text begin Each taxpayer must remit payments of the taxes to the
commissioner on the same dates prescribed under section 297F.09, subdivision 1, for
cigarette tax returns, including the accelerated remittance of the June liability.
new text end

new text begin Subd. 3. new text end

new text begin Return. new text end

new text begin A taxpayer must file a return with the commissioner on the
same dates prescribed under section 297F.09, subdivision 1, for cigarette tax returns.
Notwithstanding any other provisions of this chapter, the tax due on the return is based
upon actual stamps purchased during the reporting period.
new text end

new text begin Subd. 4. new text end

new text begin Form of return. new text end

new text begin The return must contain the information and be in the
form prescribed by the commissioner.
new text end

new text begin Subd. 5. new text end

new text begin Tax as debt. new text end

new text begin The tax that is required to be paid by the distributor is a debt
from the retailer or cigarette subjobber to the distributor recoverable at law in the same
manner as other debts. A cigarette retailer or subjobber must pay the tax imposed under
subdivision 1 to the distributor before the 12th day of the month following the month in
which the cigarettes were purchased from the distributor.
new text end

new text begin Subd. 6. new text end

new text begin Sales tax stamp. new text end

new text begin Payment of the tax imposed under section 297F.05 and
by this section must be evidenced by a dual-purpose single stamp affixed to each package.
new text end

new text begin Subd. 7. new text end

new text begin Administration. new text end

new text begin The stamping, audit, assessment, interest, penalty, appeal,
refund, and collection provisions applicable to the taxes imposed under this chapter apply
to taxes imposed under this section.
new text end

new text begin Subd. 8. new text end

new text begin Deposit of revenues. new text end

new text begin Notwithstanding the provisions of section 297F.10,
the commissioner shall deposit all revenues, including penalties and interest, derived from
the tax imposed by this section, in the general fund.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for all sales made on or after August
1, 2005.
new text end

Sec. 22.

Minnesota Statutes 2004, section 297I.05, subdivision 4, is amended to read:

Subd. 4.

Mutual property and casualty companies with total assets less
than $1,600,000,000 on december 31, 1989.

A tax is imposed on mutual new text begin insurance
companies that sell both new text end property and casualty deleted text begin companies deleted text end new text begin insurance new text end that had total assets
greater than $5,000,000 at the end of the calendar year but that had total assets less than
$1,600,000,000 on December 31, 1989. The rate of tax is equal to deleted text begin :
deleted text end

deleted text begin (1) two percent of gross premiums less return premiums on all direct business
received by the insurer or agents of the insurer in Minnesota for life insurance, in cash or
otherwise, during the year; and
deleted text end

deleted text begin (2) deleted text end 1.26 percent of gross premiums less return premiums on all deleted text begin other deleted text end direct business
received by the insurer or agents of the insurer in Minnesota, in cash or otherwise, during
the year new text begin , except for life insurance as provided in subdivision 14 new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for premiums received after
December 31, 2005.
new text end

Sec. 23.

Minnesota Statutes 2004, section 297I.05, is amended by adding a subdivision
to read:

new text begin Subd. 14. new text end

new text begin Life insurance. new text end

new text begin A tax is imposed on life insurance. The rate of tax equals
1.50 percent of gross premiums less return premiums on all direct business received by
the insurer or agents of the insurer in Minnesota for life insurance, in cash or otherwise,
during the year.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for premiums received after
December 31, 2005.
new text end

Sec. 24.

new text begin [325D.125] EMPLOYERS NOT TO MISREPRESENT STATUS OF
EMPLOYEES.
new text end

new text begin Subdivision 1. new text end

new text begin Misrepresentation prohibited. new text end

new text begin No employer shall misrepresent the
nature of its employment relationship with its employees to any federal, state, or local
government unit, to other employers or to its employees. An employer misrepresents
the nature of its employment relationship with its employees if it makes any statement
regarding the nature of the relationship that the employer does not in good faith believe to
be true or if it fails to report individuals as employees when legally required to do so.
new text end

new text begin Subd. 2. new text end

new text begin Employee coercion prohibited. new text end

new text begin No employer shall require or request
any employee to enter into any agreement, or sign any document, that results in
misclassification of the employee as an independent contractor or otherwise does not
accurately reflect the employment relationship with the employer.
new text end

new text begin Subd. 3. new text end

new text begin Violations. new text end

new text begin Any court finding any person guilty of violating this section
shall transmit a copy of the documentation of the finding of guilt to the commissioner of
labor and industry. The commissioner of labor and industry shall report the finding of guilt
to relevant state and federal agencies, including at least the commissioner of commerce,
the commissioner of economic security, the commissioner of revenue, the federal Internal
Revenue Service, and the United States Department of Labor.
new text end

new text begin EFFECTIVE DATE. new text end

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

Sec. 25.

new text begin [325F.781] REQUIREMENTS; TOBACCO PRODUCT DELIVERY
SALES.
new text end

new text begin Subdivision 1. new text end

new text begin Definitions. new text end

new text begin (a) For purposes of this section, the following terms
have the meanings given, unless the language or context clearly provides otherwise.
new text end

new text begin (b) "Consumer" means an individual who purchases, receives, or possesses tobacco
products for personal consumption and not for resale.
new text end

new text begin (c) "Delivery sale" means:
new text end

new text begin (1) a sale of tobacco products to a consumer in this state when:
new text end

new text begin (i) the purchaser submits the order for the sale by means of a telephonic or other
method of voice transmission, the mail or any other delivery service, or the Internet or
other on-line service; or
new text end

new text begin (ii) the tobacco products are delivered by use of the mail or other delivery service; or
new text end

new text begin (2) a sale of tobacco products that satisfies the criteria in clause (1), item (i),
regardless of whether the seller is located inside or outside of the state.
new text end

new text begin A sale of tobacco products to an individual in this state must be treated as a sale to a
consumer, unless the individual is licensed as a distributor or retailer of tobacco products.
new text end

new text begin (d) "Delivery service" means a person, including the United States Postal Service,
that is engaged in the commercial delivery of letters, packages, or other containers.
new text end

new text begin (e) "Distributor" means a person, whether located inside or outside of this state,
other than a retailer, who sells or distributes tobacco products in the state. Distributor does
not include a tobacco products manufacturer, export warehouse proprietor, or importer
with a valid permit under United States Code, title 26, section 5712 (1997), if the person
sells or distributes tobacco products in this state only to distributors who hold valid
and current licenses under the laws of a state, or to an export warehouse proprietor or
another manufacturer. Distributor does not include a common or contract carrier that is
transporting tobacco products under a proper bill of lading or freight bill that states the
quantity, source, and destination of tobacco products, or a person who ships tobacco
products through this state by common or contract carrier under a bill of lading or freight
bill.
new text end

new text begin (f) "Retailer" means a person, whether located inside or outside this state, who sells
or distributes tobacco products to a consumer in this state.
new text end

new text begin (g) "Tobacco products" means:
new text end

new text begin (1) cigarettes, as defined in section 297F.01, subdivision 3; and
new text end

new text begin (2) smokeless tobacco as defined in section 325F.76.
new text end

new text begin Subd. 2. new text end

new text begin Requirements for accepting order for delivery sale. new text end

new text begin (a) This subdivision
applies to acceptance of an order for a delivery sale of tobacco products.
new text end

new text begin (b) When accepting the first order for a delivery sale from a consumer, the tobacco
retailer shall obtain the following information from the person placing the order:
new text end

new text begin (1) a copy of a valid government-issued document that provides the person's name,
current address, photograph, and date of birth; and
new text end

new text begin (2) an original written statement signed by the person documenting that the person:
new text end

new text begin (i) is of legal age to purchase tobacco products in the state;
new text end

new text begin (ii) has made a choice whether to receive mailings from a tobacco retailer;
new text end

new text begin (iii) understands that providing false information may be a violation of law; and
new text end

new text begin (iv) understands that it is a violation of law to purchase tobacco products for
subsequent resale or for delivery to persons who are under the legal age to purchase
tobacco products.
new text end

new text begin (c) If an order is made as a result of advertisement over the Internet, the tobacco
retailer shall request the e-mail address of the purchaser and shall receive payment by
credit card or check prior to shipping.
new text end

new text begin (d) Prior to shipping the tobacco products, the tobacco retailer shall verify the
information provided under paragraph (b) against a commercially available database.
Any such database or databases may also include age and identity information from
other government or validated commercial sources, if that additional information is
regularly used by government and businesses for the purpose of identity verification and
authentication, and if the additional information is used only to supplement and not to
replace the government-issued identification data in the age and identity verification
process.
new text end

new text begin Subd. 3. new text end

new text begin Requirements for shipping a delivery sale. new text end

new text begin (a) This subdivision applies
to a tobacco retailer shipping tobacco products pursuant to a delivery sale.
new text end

new text begin (b) The tobacco retailer shall clearly mark the outside of the package of tobacco
products to be shipped "tobacco products - adult signature required" and to show the
name of the tobacco retailer.
new text end

new text begin (c) The tobacco retailer shall utilize a delivery service that imposes the following
requirements:
new text end

new text begin (1) an adult must sign for the delivery; and
new text end

new text begin (2) the person signing for the delivery must show valid government-issued
identification that contains a photograph of the person signing for the delivery and
indicates that the person signing for the delivery is of legal age to purchase tobacco
products and resides at the delivery address.
new text end

new text begin (d) The retailer must provide delivery instructions that clearly indicate the
requirements of this subdivision and must declare that state law requires compliance
with the requirements.
new text end

new text begin (e) No criminal penalty may be imposed on a person for a violation of this section
other than a violation described in paragraph (f) or (g). Whenever it appears to the
commissioner that any person has engaged in any act or practice constituting a violation
of this section, and the violation is not within two years of any previous violation of
this section, the commissioner shall issue and cause to be served upon the person an
order requiring the person to cease and desist from violating this section. The order must
give reasonable notice of the rights of the person to request a hearing and must state the
reason for the entry of the order. Unless otherwise agreed between the parties, a hearing
shall be held not later than seven days after the request for the hearing is received by the
commissioner after which and within 20 days after the receipt of the administrative law
judge's report and subsequent exceptions and argument, the commissioner shall issue an
order vacating the cease and desist order, modifying it, or making it permanent as the facts
require. If no hearing is requested within 30 days of the service of the order, the order
becomes final and remains in effect until modified or vacated by the commissioner. All
hearings shall be conducted in accordance with the provisions of chapter 14. If the person
to whom a cease and desist order is issued fails to appear at the hearing after being duly
notified, the person shall be deemed in default, and the proceeding may be determined
against the person upon consideration of the cease and desist order, the allegations of
which may be deemed to be true.
new text end

new text begin (f) Any person who violates this section within two years of a violation for which a
cease and desist order was issued under paragraph (e), is guilty of a misdemeanor.
new text end

new text begin (g) Any person who commits a third or subsequent violation of this section,
including a violation for which a cease and desist order was issued under paragraph (c),
within any subsequent two-year period is guilty of a gross misdemeanor.
new text end

new text begin Subd. 4. new text end

new text begin Common carriers. new text end

new text begin This section may not be construed as imposing liability
upon any common carrier, or officers or employees of the common carrier, when acting
within the scope of business of the common carrier.
new text end

new text begin Subd. 5. new text end

new text begin Registration requirement. new text end

new text begin Prior to making delivery sales or shipping
tobacco products in connection with any sales, an out-of-state retailer must meet the
requirements of section 297F.031.
new text end

new text begin Subd. 6. new text end

new text begin Collection of taxes. new text end

new text begin (a) Prior to shipping any tobacco products to a
purchaser in this state, the out-of-state retailer shall comply with all requirements of
chapter 297F and shall ensure that all state excise taxes and fees that apply to such
tobacco products have been collected and paid to the state and that all related state excise
tax stamps or other indicators of state excise tax payment have been properly affixed to
those tobacco products.
new text end

new text begin (b) In addition to any penalties under chapter 297F, a distributor who fails to pay any
tax due according to paragraph (a) shall pay, in addition to any other penalty, a penalty
of 50 percent of the tax due but unpaid.
new text end

new text begin Subd. 7. new text end

new text begin Application of state laws. new text end

new text begin All state laws that apply to in-state tobacco
product retailers shall apply to Internet and mail-order sellers that sell into this state.
new text end

new text begin Subd. 8. new text end

new text begin Forfeiture. new text end

new text begin Any tobacco product sold or attempted to be sold in a delivery
sale that does not meet the requirements of this section is deemed to be contraband and
is subject to forfeiture in the same manner as and in accordance with the provisions of
section 297F.21.
new text end

new text begin Subd. 9. new text end

new text begin Civil penalties. new text end

new text begin A tobacco retailer or distributor who violates this section
or rules adopted under this section is subject to the following fines:
new text end

new text begin (1) for the first violation, a fine of not more than $1,000; and
new text end

new text begin (2) for the second and any subsequent violation, a fine of not more than $5,000.
new text end

new text begin Subd. 10. new text end

new text begin Enforcement. new text end

new text begin The attorney general may bring an action to enforce
this section and may seek injunctive relief, including a preliminary or final injunction,
and fines, penalties, and equitable relief and may seek to prevent or restrain actions in
violation of this section by any person or any person controlling such person. In addition,
a violation of this section is a violation of the Unlawful Trade Practices Act, sections
325D.09 to 325D.16.
new text end

new text begin EFFECTIVE DATE. new text end

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

Sec. 26.

Minnesota Statutes 2004, section 366.011, is amended to read:

366.011 CHARGES FOR EMERGENCY SERVICES; COLLECTION.

A town may impose a reasonable service charge for emergency services, including
fire, rescue, medical, and related services provided by the town or contracted for by the
town. If the service charge remains unpaid 30 days after a notice of delinquency is sent
to the recipient of the service or the recipient's representative or estate, the town or its
contractor on behalf of the town may use any lawful means allowed to a private party for
the collection of an unsecured delinquent debt. The town may also use the authority of
section 366.012 to collect unpaid service charges of this kind from delinquent recipients of
services who are owners of taxable real property in the deleted text begin town deleted text end new text begin state new text end .

The powers conferred by this section are in addition and supplemental to the powers
conferred by any other law for a town to impose a service charge or assessment for a
service provided by the town or contracted for by the town.

Sec. 27.

Minnesota Statutes 2004, section 366.012, is amended to read:

366.012 COLLECTION OF UNPAID SERVICE CHARGES.

If a town is authorized to impose a service charge deleted text begin on the owner, lessee, or occupant
of property, or any of them, deleted text end for a governmental service provided by the town, the town
board may certify to the county auditor new text begin of the county in which the recipient of the services
owns real property new text end , on or before October 15 for each year, any unpaid service charges
which shall then be collected together with property taxes levied against the property. new text begin The
county auditor shall remit to the town all service charges collected by the auditor on behalf
of the town. new text end A charge may be certified to the auditor only if, on or before September 15,
the town has given written notice to the property owner of its intention to certify the
charge to the auditor. The service charges shall be subject to the same penalties, interest,
and other conditions provided for the collection of property taxes. This section is in
addition to other law authorizing the collection of unpaid costs and service charges.

Sec. 28. new text begin COMPACTS; RETALIATORY TAXES.
new text end

new text begin The commissioner of revenue may enter into compact agreements with other states
for the purpose of eliminating retaliatory insurance premiums tax provisions between this
state and other states. The commissioner shall report to the chairpersons of the house and
senate tax committees, on or before February 1, 2006, on the actions the commissioner has
taken to enter into compact agreements with other states.
new text end

Sec. 29. new text begin FLOOR STOCKS TAX.
new text end

new text begin Subdivision 1. new text end

new text begin Cigarettes. new text end

new text begin A floor stocks cigarette sales tax is imposed on every
person engaged in the business in this state as a distributor, retailer, subjobber, vendor,
manufacturer, or manufacturer's representative of cigarettes, on the stamped cigarettes and
unaffixed stamps in the person's possession or under the person's control at 12:01 a.m. on
August 1, 2005. The tax is imposed at the rate of 21 cents per pack of 20 cigarettes. For
packs of cigarettes with other than 20 cigarettes, the tax shall be adjusted proportionally.
new text end

new text begin Each distributor, by August 10, 2005, shall file a return with the commissioner, in the
form the commissioner prescribes, showing the stamped cigarettes and unaffixed stamps
on hand at 12:01 a.m. on August 1, 2005, and the amount of tax due on the cigarettes and
unaffixed stamps. The tax imposed by this section is due and payable by September 7,
2005, and after that date bears interest at the rate of one percent a month.
new text end

new text begin Each retailer, subjobber, vendor, manufacturer, or manufacturer's representative, by
August 10, 2005, shall file a return with the commissioner, in the form the commissioner
prescribes, showing the cigarettes on hand at 12:01 a.m. on August 1, 2005, and the
amount of tax due on the cigarettes. The tax imposed by this section is due and payable by
September 7, 2005, and after that date bears interest at the rate of one percent a month.
new text end

new text begin Subd. 2. new text end

new text begin Audit and enforcement. new text end

new text begin The tax imposed by this section is subject to
the audit, assessment, penalty, and collection provisions applicable to the taxes imposed
under Minnesota Statutes, chapter 297F. The commissioner may require a distributor to
receive and maintain copies of floor stocks tax returns filed by all persons requesting
a credit for returned cigarettes.
new text end

new text begin Subd. 3. new text end

new text begin Deposit of proceeds. new text end

new text begin The revenue from the tax imposed under this
section shall be deposited by the commissioner in the state treasury and credited to the
general fund.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective August 1, 2005.
new text end

ARTICLE 9

DEPARTMENT OF REVENUE INCOME, CORPORATE FRANCHISE,
AND ESTATE TAXES

Section 1.

Minnesota Statutes 2004, section 289A.08, subdivision 3, is amended to
read:

Subd. 3.

Corporations.

A corporation that is subject to the state's jurisdiction to tax
under section 290.014, subdivision 5, must file a return, except that a foreign operating
corporation as defined in section 290.01, subdivision 6b, is not required to file a return.
The commissioner shall adopt rules for the filing of one return on behalf of the members
of an affiliated group of corporations that are required to file a combined report. All
members of an affiliated group that are required to file a combined report must file one
return on behalf of the members of the group under rules adopted by the commissioner.
new text begin If a corporation claims on a return that it has paid tax in excess of the amount of taxes
lawfully due, that corporation may include on that return information necessary for
payment of the tax in excess of the amount lawfully due by electronic means.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for returns filed after December
31, 2005.
new text end

Sec. 2.

Minnesota Statutes 2004, section 289A.08, subdivision 7, is amended to read:

Subd. 7.

Composite income tax returns for nonresident partners, shareholders,
and beneficiaries.

(a) The commissioner may allow a partnership with nonresident
partners to file a composite return and to pay the tax on behalf of nonresident partners who
have no other Minnesota source income. This composite return must include the names,
addresses, Social Security numbers, income allocation, and tax liability for the nonresident
partners electing to be covered by the composite return.

(b) The computation of a partner's tax liability must be determined by multiplying
the income allocated to that partner by the highest rate used to determine the tax liability
for individuals under section 290.06, subdivision 2c. Nonbusiness deductions, standard
deductions, or personal exemptions are not allowed.

(c) The partnership must submit a request to use this composite return filing method
for nonresident partners. The requesting partnership must file a composite return in the
form prescribed by the commissioner of revenue. The filing of a composite return is
considered a request to use the composite return filing method.

(d) The electing partner must not have any Minnesota source income other than
the income from the partnership and other electing partnerships. If it is determined that
the electing partner has other Minnesota source income, the inclusion of the income
and tax liability for that partner under this provision will not constitute a return to
satisfy the requirements of subdivision 1. The tax paid for the individual as part of the
composite return is allowed as a payment of the tax by the individual on the date on
which the composite return payment was made. If the electing nonresident partner has no
other Minnesota source income, filing of the composite return is a return for purposes of
subdivision 1.

(e) This subdivision does not negate the requirement that an individual pay estimated
tax if the individual's liability would exceed the requirements set forth in section 289A.25.
A composite estimate may, however, be filed in a manner similar to and containing the
information required under paragraph (a).

(f) If an electing partner's share of the partnership's gross income from Minnesota
sources is less than the filing requirements for a nonresident under this subdivision, the tax
liability is zero. However, a statement showing the partner's share of gross income must
be included as part of the composite return.

(g) The election provided in this subdivision is deleted text begin not deleted text end new text begin only new text end available to deleted text begin any deleted text end new text begin a new text end partner
deleted text begin other than deleted text end new text begin who has no other Minnesota source income and who is either (1) new text end a full-year
nonresident individual deleted text begin who has no other Minnesota source income deleted text end new text begin or (2) a trust or estate
that does not claim a deduction under either section 651 or 661 of the Internal Revenue
Code new text end .

(h) A corporation defined in section 290.9725 and its nonresident shareholders may
make an election under this paragraph. The provisions covering the partnership apply to
the corporation and the provisions applying to the partner apply to the shareholder.

(i) Estates and trusts distributing current income only and the nonresident individual
beneficiaries of the estates or trusts may make an election under this paragraph. The
provisions covering the partnership apply to the estate or trust. The provisions applying to
the partner apply to the beneficiary.

new text begin (j) For the purposes of this subdivision, "income" means the partner's share of
federal adjusted gross income from the partnership modified by the additions provided
in section 290.01, subdivision 19a, clauses (6) and (7), and the subtractions provided in
section 290.01, subdivision 19b, clause (11), to the extent the amount is assignable or
allocable to Minnesota under section 290.17. The subtraction allowed under section
290.01, subdivision 19b, clause (11), is only allowed on the composite tax computation to
the extent the electing partner would have been allowed the subtraction.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for tax years beginning after
December 31, 2004.
new text end

Sec. 3.

Minnesota Statutes 2004, section 289A.18, subdivision 1, is amended to read:

Subdivision 1.

Individual income, fiduciary income, corporate franchise, and
entertainment taxes; partnership and s corporation returns; information returns;
mining company returns.

The returns required to be made under sections 289A.08 and
289A.12 must be filed at the following times:

(1) returns made on the basis of the calendar year must be filed on April 15 following
the close of the calendar year, except that returns of corporations must be filed on March
15 following the close of the calendar year;

(2) returns made on the basis of the fiscal year must be filed on the 15th day of the
fourth month following the close of the fiscal year, except that returns of corporations
must be filed on the 15th day of the third month following the close of the fiscal year;

(3) returns for a fractional part of a year must be filed on the 15th day of the fourth
month following the end of the month in which falls the last day of the period for which
the return is made, except that the returns of corporations must be filed on the 15th day
of the third month following the end of the deleted text begin month deleted text end new text begin tax year of the unitary group new text end in which
falls the last day of the period for which the return is made;

(4) in the case of a final return of a decedent for a fractional part of a year, the return
must be filed on the 15th day of the fourth month following the close of the 12-month
period that began with the first day of that fractional part of a year;

(5) in the case of the return of a cooperative association, returns must be filed on or
before the 15th day of the ninth month following the close of the taxable year;

(6) if a corporation has been divested from a unitary group and files a return for
a fractional part of a year in which it was a member of a unitary business that files a
combined report under section 290.34, subdivision 2, the divested corporation's return
must be filed on the 15th day of the third month following the close of the common
accounting period that includes the fractional year;

(7) returns of entertainment entities must be filed on April 15 following the close of
the calendar year;

(8) returns required to be filed under section 289A.08, subdivision 4, must be filed
on the 15th day of the fifth month following the close of the taxable year;

(9) returns of mining companies must be filed on May 1 following the close of the
calendar year; and

(10) returns required to be filed with the commissioner under section 289A.12,
subdivision 2, 4 to 10, or 14, must be filed within 30 days after being demanded by the
commissioner.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for fractional years closing after
December 31, 2004.
new text end

Sec. 4.

Minnesota Statutes 2004, section 289A.38, subdivision 7, is amended to read:

Subd. 7.

Federal tax changes.

If the amount of income, items of tax preference,
deductions, or credits for any year of a taxpayer as reported to the Internal Revenue
Service is changed or corrected by the commissioner of Internal Revenue or other officer
of the United States or other competent authority, or where a renegotiation of a contract or
subcontract with the United States results in a change in income, items of tax preference,
deductions, credits, or withholding tax, or, in the case of estate tax, where there are
adjustments to the taxable estate resulting in a change to the credit for state death taxes,
the taxpayer shall report the change or correction or renegotiation results in writing to the
commissioner. The report must be submitted within 180 days after the final determination
and must be in the form of either an amended Minnesota estate, withholding tax, new text begin corporate
franchise tax, new text end or income tax return conceding the accuracy of the federal determination
or a letter detailing how the federal determination is incorrect or does not change the
Minnesota tax. An amended Minnesota income tax return must be accompanied by an
amended property tax refund return, if necessary. A taxpayer filing an amended federal
tax return must also file a copy of the amended return with the commissioner of revenue
within 180 days after filing the amended return.

new text begin EFFECTIVE DATE. new text end

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

Sec. 5.

Minnesota Statutes 2004, section 289A.50, subdivision 1a, is amended to read:

Subd. 1a.

Refund form.

On or before January 1, 2000, the commissioner of
revenue shall prepare and make available to taxpayers a form for filing claims for refund
of taxes paid in excess of the amount due. deleted text begin If the commissioner fails to prepare a form
under this subdivision by January 1, 2000, any claims for refund made after January 1,
2000, and up to ten days after the form is made available to taxpayers are deemed to be
made in compliance with the requirement of the form. deleted text end new text begin The commissioner may request
corporate franchise taxpayers claiming a refund of corporate franchise taxes paid in
excess of the amount lawfully due to include on the claim for refund or amended return
information necessary for payment of the taxes paid in excess of taxes lawfully due by
electronic means.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for claims for refund filed after
December 31, 2005.
new text end

Sec. 6.

Minnesota Statutes 2004, section 289A.60, subdivision 6, is amended to read:

Subd. 6.

Penalty for false or fraudulent return, evasion.

If a person files a false
or fraudulent return, new text begin or claim for refund new text end or attempts in any manner to evade or defeat a tax
or payment of tax, there is imposed on the person a penalty equal to new text begin the sum of (1) new text end 50
percent of the tax, less amounts paid by the person on the basis of the false or fraudulent
return, due for the period to which the return related new text begin and (2) 50 percent of the portion of
any refund claimed that is attributable to fraud new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for returns filed after December
31, 2005.
new text end

Sec. 7.

Minnesota Statutes 2004, section 289A.60, subdivision 12, is amended to read:

Subd. 12.

Penalties relating to property tax refunds.

(a) deleted text begin If the commissioner
determines that a property tax refund claim is or was excessive and was filed with
fraudulent intent, the claim must be disallowed in full. If the claim has been paid, the
amount disallowed may be recovered by assessment and collection.
deleted text end

deleted text begin (b) deleted text end If it is determined that a property tax refund claim is excessive and was
negligently prepared, ten percent of the corrected claim must be disallowed. If the claim
has been paid, the amount disallowed must be recovered by assessment and collection.

deleted text begin (c) deleted text end new text begin (b) new text end An owner who without reasonable cause fails to give a certificate of rent
constituting property tax to a renter, as required by section 290A.19, paragraph (a), is
liable to the commissioner for a penalty of $100 for each failure.

deleted text begin (d) deleted text end new text begin (c) new text end If the owner or managing agent knowingly gives rent certificates that report
total rent constituting property taxes in excess of the amount of actual rent constituting
property taxes paid on the rented part of a property, the owner or managing agent is liable
for a penalty equal to the greater of (1) $100 or (2) 50 percent of the excess that is reported.
An overstatement of rent constituting property taxes is presumed to be knowingly made if
it exceeds by ten percent or more the actual rent constituting property taxes.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for returns filed after December
31, 2005.
new text end

Sec. 8.

Minnesota Statutes 2004, section 290.01, subdivision 19a, is amended to read:

Subd. 19a.

Additions to federal taxable income.

For individuals, estates, and
trusts, there shall be added to federal taxable income:

(1)(i) interest income on obligations of any state other than Minnesota or a political
or governmental subdivision, municipality, or governmental agency or instrumentality
of any state other than Minnesota exempt from federal income taxes under the Internal
Revenue Code or any other federal statute; and

(ii) exempt-interest dividends as defined in section 852(b)(5) of the Internal Revenue
Code, except the portion of the exempt-interest dividends derived from interest income
on obligations of the state of Minnesota or its political or governmental subdivisions,
municipalities, governmental agencies or instrumentalities, but only if the portion of the
exempt-interest dividends from such Minnesota sources paid to all shareholders represents
95 percent or more of the exempt-interest dividends that are paid by the regulated
investment company as defined in section 851(a) of the Internal Revenue Code, or the
fund of the regulated investment company as defined in section 851(g) of the Internal
Revenue Code, making the payment; and

(iii) for the purposes of items (i) and (ii), interest on obligations of an Indian tribal
government described in section 7871(c) of the Internal Revenue Code shall be treated as
interest income on obligations of the state in which the tribe is located;

(2) the amount of income taxes paid or accrued within the taxable year under this
chapter and deleted text begin income deleted text end new text begin the amount of new text end taxes new text begin based on net income new text end paid to any other state or to
any province or territory of Canada, to the extent allowed as a deduction under section
63(d) of the Internal Revenue Code, but the addition may not be more than the amount by
which the itemized deductions as allowed under section 63(d) of the Internal Revenue
Code exceeds the amount of the standard deduction as defined in section 63(c) of the
Internal Revenue Code. For the purpose of this paragraph, the disallowance of itemized
deductions under section 68 of the Internal Revenue Code of 1986, income tax is the last
itemized deduction disallowed;

(3) the capital gain amount of a lump sum distribution to which the special tax under
section 1122(h)(3)(B)(ii) of the Tax Reform Act of 1986, Public Law 99-514, applies;

(4) the amount of income taxes paid or accrued within the taxable year under this
chapter and deleted text begin income deleted text end taxes new text begin based on net income new text end paid to any other state or any province or
territory of Canada, to the extent allowed as a deduction in determining federal adjusted
gross income. For the purpose of this paragraph, income taxes do not include the taxes
imposed by sections 290.0922, subdivision 1, paragraph (b), 290.9727, 290.9728, and
290.9729;

(5) the amount of expense, interest, or taxes disallowed pursuant to section
290.10 new text begin other than expenses or interest used in computing net interest income for the
subtraction allowed under subdivision 19b, clause (1) new text end ;

(6) the amount of a partner's pro rata share of net income which does not flow
through to the partner because the partnership elected to pay the tax on the income under
section 6242(a)(2) of the Internal Revenue Code; and

(7) 80 percent of the depreciation deduction allowed under section 168(k) of the
Internal Revenue Code. For purposes of this clause, if the taxpayer has an activity that
in the taxable year generates a deduction for depreciation under section 168(k) and the
activity generates a loss for the taxable year that the taxpayer is not allowed to claim for
the taxable year, "the depreciation allowed under section 168(k)" for the taxable year is
limited to excess of the depreciation claimed by the activity under section 168(k) over the
amount of the loss from the activity that is not allowed in the taxable year. In succeeding
taxable years when the losses not allowed in the taxable year are allowed, the depreciation
under section 168(k) is allowed.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for tax years beginning after
December 31, 2004.
new text end

Sec. 9.

Minnesota Statutes 2004, section 290.01, subdivision 19b, is amended to read:

Subd. 19b.

Subtractions from federal taxable income.

For individuals, estates,
and trusts, there shall be subtracted from federal taxable income:

(1) new text begin net new text end interest income on obligations of any authority, commission, or
instrumentality of the United States to the extent includable in taxable income for federal
income tax purposes but exempt from state income tax under the laws of the United States;

(2) if included in federal taxable income, the amount of any overpayment of income
tax to Minnesota or to any other state, for any previous taxable year, whether the amount
is received as a refund or as a credit to another taxable year's income tax liability;

(3) the amount paid to others, less the amount used to claim the credit allowed under
section 290.0674, not to exceed $1,625 for each qualifying child in grades kindergarten
to 6 and $2,500 for each qualifying child in grades 7 to 12, for tuition, textbooks, and
transportation of each qualifying child in attending an elementary or secondary school
situated in Minnesota, North Dakota, South Dakota, Iowa, or Wisconsin, wherein a
resident of this state may legally fulfill the state's compulsory attendance laws, which
is not operated for profit, and which adheres to the provisions of the Civil Rights Act
of 1964 and chapter 363A. For the purposes of this clause, "tuition" includes fees or
tuition as defined in section 290.0674, subdivision 1, clause (1). As used in this clause,
"textbooks" includes books and other instructional materials and equipment purchased
or leased for use in elementary and secondary schools in teaching only those subjects
legally and commonly taught in public elementary and secondary schools in this state.
Equipment expenses qualifying for deduction includes expenses as defined and limited in
section 290.0674, subdivision 1, clause (3). "Textbooks" does not include instructional
books and materials used in the teaching of religious tenets, doctrines, or worship, the
purpose of which is to instill such tenets, doctrines, or worship, nor does it include books
or materials for, or transportation to, extracurricular activities including sporting events,
musical or dramatic events, speech activities, driver's education, or similar programs. For
purposes of the subtraction provided by this clause, "qualifying child" has the meaning
given in section 32(c)(3) of the Internal Revenue Code;

(4) income as provided under section 290.0802;

(5) to the extent included in federal adjusted gross income, income realized on
disposition of property exempt from tax under section 290.491;

(6) deleted text begin to the extent included in federal taxable income, postservice benefits for youth
community service under section 124D.42 for volunteer service under United States
Code, title 42, sections 12601 to 12604;
deleted text end

deleted text begin (7) deleted text end to the extent not deducted in determining federal taxable income by an individual
who does not itemize deductions for federal income tax purposes for the taxable year,
an amount equal to 50 percent of the excess of charitable contributions allowable as a
deduction for the taxable year under section 170(a) of the Internal Revenue Code over
$500;

deleted text begin (8) deleted text end new text begin (7) new text end for taxable years beginning before January 1, 2008, the amount of the federal
small ethanol producer credit allowed under section 40(a)(3) of the Internal Revenue Code
which is included in gross income under section 87 of the Internal Revenue Code;

deleted text begin (9) deleted text end new text begin (8) new text end for individuals who are allowed a federal foreign tax credit for taxes that do
not qualify for a credit under section 290.06, subdivision 22, an amount equal to the
carryover of subnational foreign taxes for the taxable year, but not to exceed the total
subnational foreign taxes reported in claiming the foreign tax credit. For purposes of
this clause, "federal foreign tax credit" means the credit allowed under section 27 of the
Internal Revenue Code, and "carryover of subnational foreign taxes" equals the carryover
allowed under section 904(c) of the Internal Revenue Code minus national level foreign
taxes to the extent they exceed the federal foreign tax credit;

deleted text begin (10) deleted text end new text begin (9) new text end in each of the five tax years immediately following the tax year in which
an addition is required under subdivision 19a, clause (7), new text begin or 19c, clause (15), in the case
of a shareholder of a corporation that is an S corporation, new text end an amount equal to one-fifth
of the delayed depreciation. For purposes of this clause, "delayed depreciation" means
the amount of the addition made by the taxpayer under subdivision 19a, clause (7), new text begin or
subdivision 19c, clause (15), in the case of a shareholder of an S corporation, new text end minus the
positive value of any net operating loss under section 172 of the Internal Revenue Code
generated for the tax year of the addition. The resulting delayed depreciation cannot be
less than zero; and

deleted text begin (11) deleted text end new text begin (10) new text end job opportunity building zone income as provided under section 469.316.

new text begin EFFECTIVE DATE. new text end

new text begin The amendment to clause (9) is effective retroactively for tax
years beginning after December 31, 2001. The rest of this section is effective for the tax
years beginning after December 31, 2004.
new text end

Sec. 10.

Minnesota Statutes 2004, section 290.01, subdivision 19c, is amended to read:

Subd. 19c.

Corporations; additions to federal taxable income.

For corporations,
there shall be added to federal taxable income:

(1) the amount of any deduction taken for federal income tax purposes for income,
excise, or franchise taxes based on net income or related minimum taxes, including but not
limited to the tax imposed under section 290.0922, paid by the corporation to Minnesota,
another state, a political subdivision of another state, the District of Columbia, or any
foreign country or possession of the United States;

(2) interest not subject to federal tax upon obligations of: the United States, its
possessions, its agencies, or its instrumentalities; the state of Minnesota or any other
state, any of its political or governmental subdivisions, any of its municipalities, or any
of its governmental agencies or instrumentalities; the District of Columbia; or Indian
tribal governments;

(3) exempt-interest dividends received as defined in section 852(b)(5) of the Internal
Revenue Code;

(4) the amount of any net operating loss deduction taken for federal income tax
purposes under section 172 or 832(c)(10) of the Internal Revenue Code or operations loss
deduction under section 810 of the Internal Revenue Code;

(5) the amount of any special deductions taken for federal income tax purposes
under sections 241 to 247 of the Internal Revenue Code;

(6) losses from the business of mining, as defined in section 290.05, subdivision 1,
clause (a), that are not subject to Minnesota income tax;

(7) the amount of any capital losses deducted for federal income tax purposes under
sections 1211 and 1212 of the Internal Revenue Code;

(8) the exempt foreign trade income of a foreign sales corporation under sections
921(a) and 291 of the Internal Revenue Code;

(9) the amount of percentage depletion deducted under sections 611 through 614 and
291 of the Internal Revenue Code;

(10) for certified pollution control facilities placed in service in a taxable year
beginning before December 31, 1986, and for which amortization deductions were elected
under section 169 of the Internal Revenue Code of 1954, as amended through December
31, 1985, the amount of the amortization deduction allowed in computing federal taxable
income for those facilities;

(11) the amount of any deemed dividend from a foreign operating corporation
determined pursuant to section 290.17, subdivision 4, paragraph (g);

(12) deleted text begin the amount of any environmental tax paid under section 59(a) of the Internal
Revenue Code;
deleted text end

deleted text begin (13) deleted text end the amount of a partner's pro rata share of net income which does not flow
through to the partner because the partnership elected to pay the tax on the income under
section 6242(a)(2) of the Internal Revenue Code;

deleted text begin (14) deleted text end new text begin (13) new text end the amount of net income excluded under section 114 of the Internal
Revenue Code;

deleted text begin (15) deleted text end new text begin (14) new text end any increase in subpart F income, as defined in section 952(a) of the
Internal Revenue Code, for the taxable year when subpart F income is calculated without
regard to the provisions of section 614 of Public Law 107-147; and

deleted text begin (16) deleted text end new text begin (15) new text end 80 percent of the depreciation deduction allowed under section 168(k)
new text begin (1)(A) and (k)(4)(A) new text end of the Internal Revenue Code. For purposes of this clause, if the
taxpayer has an activity that in the taxable year generates a deduction for depreciation
under section 168(k) new text begin (1)(A) and (k)(4)(A) new text end and the activity generates a loss for the taxable
year that the taxpayer is not allowed to claim for the taxable year, "the depreciation
allowed under section 168(k) new text begin (1)(A) and (k)(4)(A) new text end " for the taxable year is limited to
excess of the depreciation claimed by the activity under section 168(k) new text begin (1)(A) and
(k)(4)(A) new text end over the amount of the loss from the activity that is not allowed in the taxable
year. In succeeding taxable years when the losses not allowed in the taxable year are
allowed, the depreciation under section 168(k) new text begin (1)(A) and (k)(4)(A) new text end is allowed.

new text begin EFFECTIVE DATE. new text end

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

Sec. 11.

Minnesota Statutes 2004, section 290.06, subdivision 22, is amended to read:

Subd. 22.

Credit for taxes paid to another state.

(a) A taxpayer who is liable for
taxes new text begin based new text end on deleted text begin or measured by deleted text end net income to another state, as provided in paragraphs (b)
through (f), upon income allocated or apportioned to Minnesota, is entitled to a credit for
the tax paid to another state if the tax is actually paid in the taxable year or a subsequent
taxable year. A taxpayer who is a resident of this state pursuant to section 290.01,
subdivision 7, deleted text begin clause (2) deleted text end new text begin paragraph (b) new text end , and who is subject to income tax as a resident in
the state of the individual's domicile is not allowed this credit unless the state of domicile
does not allow a similar credit.

(b) For an individual, estate, or trust, the credit is determined by multiplying the tax
payable under this chapter by the ratio derived by dividing the income subject to tax in the
other state that is also subject to tax in Minnesota while a resident of Minnesota by the
taxpayer's federal adjusted gross income, as defined in section 62 of the Internal Revenue
Code, modified by the addition required by section 290.01, subdivision 19a, clause (1),
and the subtraction allowed by section 290.01, subdivision 19b, clause (1), to the extent
the income is allocated or assigned to Minnesota under sections 290.081 and 290.17.

(c) If the taxpayer is an athletic team that apportions all of its income under section
290.17, subdivision 5, the credit is determined by multiplying the tax payable under this
chapter by the ratio derived from dividing the total net income subject to tax in the other
state by the taxpayer's Minnesota taxable income.

(d) The credit determined under paragraph (b) or (c) shall not exceed the amount of
tax so paid to the other state on the gross income earned within the other state subject to
tax under this chapter, nor shall the allowance of the credit reduce the taxes paid under
this chapter to an amount less than what would be assessed if such income amount was
excluded from taxable net income.

(e) In the case of the tax assessed on a lump sum distribution under section 290.032,
the credit allowed under paragraph (a) is the tax assessed by the other state on the lump
sum distribution that is also subject to tax under section 290.032, and shall not exceed the
tax assessed under section 290.032. To the extent the total lump sum distribution defined
in section 290.032, subdivision 1, includes lump sum distributions received in prior years
or is all or in part an annuity contract, the reduction to the tax on the lump sum distribution
allowed under section 290.032, subdivision 2, includes tax paid to another state that is
properly apportioned to that distribution.

(f) If a Minnesota resident reported an item of income to Minnesota and is assessed
tax in such other state on that same income after the Minnesota statute of limitations
has expired, the taxpayer shall receive a credit for that year under paragraph (a),
notwithstanding any statute of limitations to the contrary. The claim for the credit must
be submitted within one year from the date the taxes were paid to the other state. The
taxpayer must submit sufficient proof to show entitlement to a credit.

(g) For the purposes of this subdivision, a resident shareholder of a corporation
treated as an "S" corporation under section 290.9725, must be considered to have paid
a tax imposed on the shareholder in an amount equal to the shareholder's pro rata share
of any net income tax paid by the S corporation to another state. For the purposes of the
preceding sentence, the term "net income tax" means any tax imposed on or measured by
a corporation's net income.

(h) For the purposes of this subdivision, a resident partner of an entity taxed as
a partnership under the Internal Revenue Code must be considered to have paid a tax
imposed on the partner in an amount equal to the partner's pro rata share of any net income
tax paid by the partnership to another state. For purposes of the preceding sentence,
the term "net income" tax means any tax imposed on or measured by a partnership's
net income.

(i) For the purposes of this subdivision, "another state":

(1) includes:

(i) the District of Columbia; and

(ii) a province or territory of Canada; but

(2) excludes Puerto Rico and the several territories organized by Congress.

(j) The limitations on the credit in paragraphs (b), (c), and (d), are imposed on a
state by state basis.

(k) For a tax imposed by a province or territory of Canada, the tax for purposes of
this subdivision is the excess of the tax over the amount of the foreign tax credit allowed
under section 27 of the Internal Revenue Code. In determining the amount of the foreign
tax credit allowed, the net income taxes imposed by Canada on the income are deducted
first. Any remaining amount of the allowable foreign tax credit reduces the provincial or
territorial tax that qualifies for the credit under this subdivision.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for tax years beginning after
December 31, 2004.
new text end

Sec. 12.

Minnesota Statutes 2004, section 290.0674, subdivision 1, is amended to read:

Subdivision 1.

Credit allowed.

An individual is allowed a credit against the
tax imposed by this chapter in an amount equal to 75 percent of the amount paid for
education-related expenses for a qualifying child in kindergarten through grade 12. For
purposes of this section, "education-related expenses" means:

(1) fees or tuition for instruction by an instructor under section 120A.22, subdivision
10, clause (1), (2), (3), (4), or (5), or a member of the Minnesota Music Teachers
Association, and who is not a lineal ancestor or sibling of the dependent for instruction
outside the regular school day or school year, including tutoring, driver's education
offered as part of school curriculum, regardless of whether it is taken from a public or
private entity or summer camps, in grade or age appropriate curricula that supplement
curricula and instruction available during the regular school year, that assists a dependent
to improve knowledge of core curriculum areas or to expand knowledge and skills under
the deleted text begin graduation rule under section 120B.02, paragraph (e), clauses (1) to (7), (9), and (10)
deleted text end new text begin required academic standards under section 120B.021, subdivision 1, and the elective
standard under section 120B.022, subdivision 1, clause (2) new text end , and that do not include the
teaching of religious tenets, doctrines, or worship, the purpose of which is to instill such
tenets, doctrines, or worship;

(2) expenses for textbooks, including books and other instructional materials and
equipment purchased or leased for use in elementary and secondary schools in teaching
only those subjects legally and commonly taught in public elementary and secondary
schools in this state. "Textbooks" does not include instructional books and materials
used in the teaching of religious tenets, doctrines, or worship, the purpose of which is
to instill such tenets, doctrines, or worship, nor does it include books or materials for
extracurricular activities including sporting events, musical or dramatic events, speech
activities, driver's education, or similar programs;

(3) a maximum expense of $200 per family for personal computer hardware,
excluding single purpose processors, and educational software that assists a dependent to
improve knowledge of core curriculum areas or to expand knowledge and skills under
the deleted text begin graduation rule under section 120B.02 deleted text end new text begin required academic standards under section
120B.021, subdivision 1, and the elective standard under section 120B.022, subdivision 1,
clause (2), new text end purchased for use in the taxpayer's home and not used in a trade or business
regardless of whether the computer is required by the dependent's school; and

(4) the amount paid to others for transportation of a qualifying child attending an
elementary or secondary school situated in Minnesota, North Dakota, South Dakota, Iowa,
or Wisconsin, wherein a resident of this state may legally fulfill the state's compulsory
attendance laws, which is not operated for profit, and which adheres to the provisions of
the Civil Rights Act of 1964 and chapter 363A.

For purposes of this section, "qualifying child" has the meaning given in section
32(c)(3) of the Internal Revenue Code.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for tax years beginning after
December 31, 2004.
new text end

Sec. 13.

Minnesota Statutes 2004, section 290.0922, subdivision 2, is amended to read:

Subd. 2.

Exemptions.

The following entities are exempt from the tax imposed
by this section:

(1) corporations exempt from tax under section 290.05;

(2) real estate investment trusts;

(3) regulated investment companies or a fund thereof; and

(4) entities having a valid election in effect under section 860D(b) of the Internal
Revenue Code;

(5) town and farmers' mutual insurance companies;

(6) cooperatives organized under chapter 308A new text begin or 308B new text end that provide housing
exclusively to persons age 55 and over and are classified as homesteads under section
273.124, subdivision 3; and

(7) an entity, if for the taxable year all of its property is located in a job opportunity
building zone designated under section 469.314 and all of its payroll is a job opportunity
building zone payroll under section 469.310.

Entities not specifically exempted by this subdivision are subject to tax under this
section, notwithstanding section 290.05.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for tax years beginning after
December 31, 2004.
new text end

Sec. 14.

Minnesota Statutes 2004, section 291.005, subdivision 1, is amended to read:

Subdivision 1.

Scope.

Unless the context otherwise clearly requires, the following
terms used in this chapter shall have the following meanings:

(1) "Federal gross estate" means the gross estate of a decedent as valued and
otherwise determined for federal estate tax purposes by federal taxing authorities pursuant
to the provisions of the Internal Revenue Code.

(2) "Minnesota gross estate" means the federal gross estate of a decedent after (a)
excluding therefrom any property included therein which has its situs outside Minnesota,
and (b) including therein any property omitted from the federal gross estate which is
includable therein, has its situs in Minnesota, and was not disclosed to federal taxing
authorities.

(3) "Personal representative" means the executor, administrator or other person
appointed by the court to administer and dispose of the property of the decedent. If there
is no executor, administrator or other person appointed, qualified, and acting within this
state, then any person in actual or constructive possession of any property having a situs in
this state which is included in the federal gross estate of the decedent shall be deemed
to be a personal representative to the extent of the property and the Minnesota estate tax
due with respect to the property.

(4) "Resident decedent" means an individual whose domicile at the time of death
was in Minnesota.

(5) "Nonresident decedent" means an individual whose domicile at the time of
death was not in Minnesota.

(6) "Situs of property" means, with respect to real property, the state or country in
which it is located; with respect to tangible personal property, the state or country in which
it was normally kept or located at the time of the decedent's death; and with respect to
intangible personal property, the state or country in which the decedent was domiciled
at death.

(7) "Commissioner" means the commissioner of revenue or any person to whom the
commissioner has delegated functions under this chapter.

(8) "Internal Revenue Code" means the United States Internal Revenue Code of
1986, as amended through December 31, deleted text begin 2002 deleted text end new text begin 2004 new text end .

new text begin (9) "Minnesota adjusted taxable estate" means federal adjusted taxable estate as
defined by section 2011(b)(3) of the Internal Revenue Code, increased by the amount of
deduction for state death taxes allowed under section 2058 of the Internal Revenue Code.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for estates of decedents dying after
December 31, 2004.
new text end

Sec. 15.

Minnesota Statutes 2004, section 291.03, subdivision 1, is amended to read:

Subdivision 1.

Tax amount.

The tax imposed shall be an amount equal to the
proportion of the maximum credit new text begin for state death taxes new text end computed under section 2011 of the
Internal Revenue Code, as amended through December 31, 2000, deleted text begin for state death taxes deleted text end new text begin but
using Minnesota adjusted taxable estate instead of federal adjusted taxable estate, new text end as the
Minnesota gross estate bears to the value of the federal gross estate. The tax determined
under this paragraph shall not be greater than the deleted text begin federal estate tax deleted text end new text begin amount new text end computed
new text begin by applying the rates and brackets new text end under section 2001 new text begin (c) new text end of the Internal Revenue Code deleted text begin
after the allowance of deleted text end new text begin to the Minnesota adjusted gross estate and subtracting new text end the federal
deleted text begin credits deleted text end new text begin credit new text end allowed under section 2010 of the Internal Revenue Code of 1986, as
amended through December 31, 2000. For the purposes of this section, expenses which
are deducted for federal income tax purposes under section 642(g) of the Internal Revenue
Code as amended through December 31, 2002, are not allowable in computing the tax
under this chapter.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for estates of decedents dying after
December 31, 2004.
new text end

Sec. 16. new text begin REPEALER.
new text end

new text begin Minnesota Rules, parts 8093.2000 and 8093.3000, are repealed effective the day
following final enactment.
new text end

ARTICLE 10

DEPARTMENT OF REVENUE PROPERTY TAXES

Section 1.

Minnesota Statutes 2004, section 4A.02, is amended to read:

4A.02 STATE DEMOGRAPHER.

(a) The director shall appoint a state demographer. The demographer must be
professionally competent in demography and must possess demonstrated ability based
upon past performance.

(b) The demographer shall:

(1) continuously gather and develop demographic data relevant to the state;

(2) design and test methods of research and data collection;

(3) periodically prepare population projections for the state and designated regions
and periodically prepare projections for each county or other political subdivision of the
state as necessary to carry out the purposes of this section;

(4) review, comment on, and prepare analysis of population estimates and
projections made by state agencies, political subdivisions, other states, federal agencies, or
nongovernmental persons, institutions, or commissions;

(5) serve as the state liaison with the United States Bureau of the Census, coordinate
state and federal demographic activities to the fullest extent possible, and aid the
legislature in preparing a census data plan and form for each decennial census;

(6) compile an annual study of population estimates on the basis of county, regional,
or other political or geographical subdivisions as necessary to carry out the purposes of
this section and section 4A.03;

(7) by January 1 of each year, issue a report to the legislature containing an analysis
of the demographic implications of the annual population study and population projections;

(8) prepare maps for all counties in the state, all municipalities with a population
of 10,000 or more, and other municipalities as needed for census purposes, according to
scale and detail recommended by the United States Bureau of the Census, with the maps
of cities showing precinct boundaries;

(9) prepare an estimate of population and of the number of households for each
governmental subdivision for which the Metropolitan Council does not prepare an annual
estimate, new text begin and an estimate of population over age 65 for each county for which the
Metropolitan Council does not prepare an annual estimate, new text end and convey the estimates to the
governing body of each political subdivision by deleted text begin May deleted text end new text begin June new text end 1 of each year;

(10) direct, under section 414.01, subdivision 14, and certify population and
household estimates of annexed or detached areas of municipalities or towns after being
notified of the order or letter of approval by the director;

(11) prepare, for any purpose for which a population estimate is required by law
or needed to implement a law, a population estimate of a municipality or town whose
population is affected by action under section 379.02 or 414.01, subdivision 14; and

(12) prepare an estimate of average household size for each statutory or home rule
charter city with a population of 2,500 or more new text begin for which the Metropolitan Council does
not prepare an annual estimate, and convey the estimate to the governing body of each
affected city new text end by deleted text begin May deleted text end new text begin June new text end 1 of each year.

(c) A governing body may challenge an estimate made under paragraph (b) by
filing their specific objections in writing with the state demographer by June deleted text begin 10 deleted text end new text begin 24 new text end . If
the challenge does not result in an acceptable estimate deleted text begin by June 24 deleted text end , the governing body
may have a special census conducted by the United States Bureau of the Census. The
political subdivision must notify the state demographer by July 1 of its intent to have the
special census conducted. The political subdivision must bear all costs of the special
census. Results of the special census must be received by the state demographer by the
next April 15 to be used in that year's deleted text begin May deleted text end new text begin June new text end 1 estimate to the political subdivision
under paragraph (b).

new text begin (d) The state demographer shall certify the estimates of population and household
size to the commissioner of revenue by July 15 each year, including any estimates still
under objection.
new text end

new text begin EFFECTIVE DATE. new text end

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

Sec. 2.

Minnesota Statutes 2004, section 168A.05, subdivision 1a, is amended to read:

Subd. 1a.

Manufactured home; statement of property tax payment.

In the case
of a manufactured home as defined in section 327.31, subdivision 6, the department shall
not issue a certificate of title unless the application under section 168A.04 is accompanied
with a statement from the county auditor or county treasurer where the manufactured
home is presently located, stating that all manufactured home personal property taxes
levied on the unit in the name of the current owner at the time of transfer have been
paid. new text begin For this purpose, manufactured home personal property taxes are treated as levied
on January 1 of the payable year.
new text end

new text begin EFFECTIVE DATE. new text end

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

Sec. 3.

Minnesota Statutes 2004, section 270.11, subdivision 2, is amended to read:

Subd. 2.

County assessor's reports of assessment filed with commissioner.

Each
county assessor shall file by April 1 with the commissioner of revenue a copy of the
abstract that will be acted upon by the local and county boards of review. The abstract
must list the real and personal property in the county itemized by assessment districts.
The assessor of each county in the state shall file with the commissioner, within ten
working days following final action of the local board of review or equalization and within
five days following final action of the county board of equalization, any changes made
by the local or county board. The information must be filed in the manner prescribed
by the commissioner. It must be accompanied by a printed or typewritten copy of the
proceedings of the appropriate board.

The final abstract of assessments after adjustments by the State Board of
Equalization and inclusion of any omitted property shall be submitted to the commissioner
of revenue on or before September 1 of each calendar year. The final abstract must
separately report the captured tax capacity of tax increment financing districts under
section 469.177, subdivision 2, the deleted text begin metropolitan revenue deleted text end new text begin areawide net tax capacity
new text end contribution deleted text begin value deleted text end new text begin values determined new text end under deleted text begin section deleted text end new text begin sections 276A.05, subdivision 1, and
new text end 473F.07, new text begin subdivision 1, new text end and the value subject to the power line credit under section 273.42.

new text begin EFFECTIVE DATE. new text end

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

Sec. 4.

Minnesota Statutes 2004, section 270.16, subdivision 2, is amended to read:

Subd. 2.

Failure to appraise.

When an assessor has failed to properly appraise at
least deleted text begin one-quarter deleted text end new text begin one-fifth new text end of the parcels of property in a district or county as provided
in section 273.01, the commissioner of revenue shall appoint a special assessor and
deputy assessor as necessary and cause a reappraisal to be made of the property due
for reassessment in accordance with law.

new text begin EFFECTIVE DATE. new text end

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

Sec. 5.

Minnesota Statutes 2004, section 272.01, subdivision 2, is amended to read:

Subd. 2.

Exempt property used by private entity for profit.

(a) When any real or
personal property which is exempt from ad valorem taxes, and taxes in lieu thereof, is
leased, loaned, or otherwise made available and used by a private individual, association,
or corporation in connection with a business conducted for profit, there shall be imposed a
tax, for the privilege of so using or possessing such real or personal property, in the same
amount and to the same extent as though the lessee or user was the owner of such property.

(b) The tax imposed by this subdivision shall not apply to:

(1) property leased or used as a concession in or relative to the use in whole
or part of a public park, market, fairgrounds, port authority, economic development
authority established under chapter 469, municipal auditorium, municipal parking facility,
municipal museum, or municipal stadium;

(2) property of an airport owned by a city, town, county, or group thereof which is:

(i) leased to or used by any person or entity including a fixed base operator; and

(ii) used as a hangar for the storage or repair of aircraft or to provide aviation goods,
services, or facilities to the airport or general public;

the exception from taxation provided in this clause does not apply to:

(i) property located at an airport owned or operated by the Metropolitan Airports
Commission or by a city of over 50,000 population according to the most recent federal
census or such a city's airport authority;

(ii) hangars leased by a private individual, association, or corporation in connection
with a business conducted for profit other than an aviation-related business; or

(iii) facilities leased by a private individual, association, or corporation in connection
with a business for profit, that consists of a major jet engine repair facility financed, in
whole or part, with the proceeds of state bonds and located in a tax increment financing
district;

(3) property constituting or used as a public pedestrian ramp or concourse in
connection with a public airport; deleted text begin or
deleted text end

(4) property constituting or used as a passenger check-in area or ticket sale counter,
boarding area, or luggage claim area in connection with a public airport but not the
airports owned or operated by the Metropolitan Airports Commission or cities of over
50,000 population or an airport authority therein. Real estate owned by a municipality
in connection with the operation of a public airport and leased or used for agricultural
purposes is not exempt new text begin ;
new text end

new text begin (5) property leased, loaned, or otherwise made available to a private individual,
corporation, or association under a cooperative farming agreement made pursuant to
section 97A.135; or
new text end

new text begin (6) property leased, loaned, or otherwise made available to a private individual,
corporation, or association under section 272.68, subdivision 4 new text end .

(c) Taxes imposed by this subdivision are payable as in the case of personal property
taxes and shall be assessed to the lessees or users of real or personal property in the same
manner as taxes assessed to owners of real or personal property, except that such taxes
shall not become a lien against the property. When due, the taxes shall constitute a debt
due from the lessee or user to the state, township, city, county, and school district for
which the taxes were assessed and shall be collected in the same manner as personal
property taxes. If property subject to the tax imposed by this subdivision is leased or used
jointly by two or more persons, each lessee or user shall be jointly and severally liable for
payment of the tax.

(d) The tax on real property of the state or any of its political subdivisions that is
leased by a private individual, association, or corporation and becomes taxable under
this subdivision or other provision of law must be assessed and collected as a personal
property assessment. The taxes do not become a lien against the real property.

new text begin EFFECTIVE DATE. new text end

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

Sec. 6.

Minnesota Statutes 2004, section 272.02, subdivision 1a, is amended to read:

Subd. 1a.

Limitations on exemptions.

The exemptions granted by subdivision 1
are subject to the limits contained in the other subdivisions of this section, section 272.025,
deleted text begin or 273.13, subdivision 25, paragraph (c), clause (1) or (2), or paragraph (d), clause (2)
deleted text end new text begin and all other provisions of applicable law new text end .

new text begin EFFECTIVE DATE. new text end

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

Sec. 7.

Minnesota Statutes 2004, section 272.02, subdivision 7, is amended to read:

Subd. 7.

Institutions of public charity.

Institutions of purely public charity are
exempt deleted text begin except parcels of property containing structures and the structures described in
section 273.13, subdivision 25, paragraph (e), other than those that qualify for exemption
under subdivision 26 deleted text end . new text begin In determining whether rental housing property qualifies for
exemption under this subdivision, the following are not gifts or donations to the owner of
the rental housing:
new text end

new text begin (1) rent assistance provided by the government to or on behalf of tenants, and
new text end

new text begin (2) financing assistance or tax credits provided by the government to the owner on
condition that specific units or a specific quantity of units be set aside for persons or
families with certain income characteristics.
new text end

new text begin The items described in clauses (1) and (2) may, however, be considered when making
other determinations related to an exemption under this subdivision, including, without
limitation, for the purpose of determining whether the recipient of housing or housing
services is required to pay in whole or in part for the housing.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes payable in 2004 and
thereafter.
new text end

Sec. 8.

Minnesota Statutes 2004, section 272.02, is amended by adding a subdivision
to read:

new text begin Subd. 68. new text end

new text begin Property subject to taconite production tax or net proceeds tax. new text end

new text begin (a)
Real and personal property described in section 298.25 is exempt to the extent the tax on
taconite and iron sulphides under section 298.24 is described in section 298.25 as being in
lieu of other taxes on such property. This exemption applies for taxes payable in each year
that the tax under section 298.24 is payable with respect to such property.
new text end

new text begin (b) Deposits of mineral, metal, or energy resources the mining of which is subject to
taxation under section 298.015 are exempt. This exemption applies for taxes payable in
each year that the tax under section 298.015 is payable with respect to such property.
new text end

new text begin EFFECTIVE DATE. new text end

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

Sec. 9.

Minnesota Statutes 2004, section 272.02, is amended by adding a subdivision
to read:

new text begin Subd. 69. new text end

new text begin Religious corporations. new text end

new text begin Personal and real property that a religious
corporation, formed under section 317A.909, necessarily uses for a religious purpose is
exempt to the extent provided in section 317A.909, subdivision 3.
new text end

new text begin EFFECTIVE DATE. new text end

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

Sec. 10.

Minnesota Statutes 2004, section 272.02, is amended by adding a subdivision
to read:

new text begin Subd. 70. new text end

new text begin Children's homes. new text end

new text begin Personal and real property owned by a corporation
formed under section 317A.907 is exempt to the extent provided in section 317A.907,
subdivision 7.
new text end

new text begin EFFECTIVE DATE. new text end

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

Sec. 11.

Minnesota Statutes 2004, section 272.02, is amended by adding a subdivision
to read:

new text begin Subd. 71. new text end

new text begin Housing and redevelopment authority and tribal housing authority
property. new text end

new text begin Property owned by a housing and redevelopment authority described in chapter
469, or by a designated housing authority described in section 469.040, subdivision 5, is
exempt to the extent provided in chapter 469.
new text end

new text begin EFFECTIVE DATE. new text end

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

Sec. 12.

Minnesota Statutes 2004, section 272.02, is amended by adding a subdivision
to read:

new text begin Subd. 72. new text end

new text begin Property of housing and redevelopment authorities. new text end

new text begin Property of
projects of housing and redevelopment authorities are exempt to the extent permitted by
sections 469.042, subdivision 1, and 469.043, subdivisions 2 and 5.
new text end

new text begin EFFECTIVE DATE. new text end

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

Sec. 13.

Minnesota Statutes 2004, section 272.02, is amended by adding a subdivision
to read:

new text begin Subd. 73. new text end

new text begin Property of regional rail authority. new text end

new text begin Property of a regional rail authority
as defined in chapter 398A is exempt to the extent permitted by section 398A.05.
new text end

new text begin EFFECTIVE DATE. new text end

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

Sec. 14.

Minnesota Statutes 2004, section 272.02, is amended by adding a subdivision
to read:

new text begin Subd. 74. new text end

new text begin Spirit mountain recreation area authority. new text end

new text begin Property owned by the
Spirit Mountain Recreation Area Authority is exempt from taxation to the extent provided
in Laws 1973, chapter 327, section 6.
new text end

Sec. 15.

Minnesota Statutes 2004, section 272.02, is amended by adding a subdivision
to read:

new text begin Subd. 75. new text end

new text begin Installed capacity defined. new text end

new text begin For purposes of this section, the term
"installed capacity" means generator nameplate capacity.
new text end

new text begin EFFECTIVE DATE. new text end

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

Sec. 16.

Minnesota Statutes 2004, section 272.029, subdivision 4, is amended to read:

Subd. 4.

Reports.

(a) An owner of a wind energy conversion system subject to tax
under subdivision 3 shall file a report with the commissioner of revenue annually on
or before deleted text begin March deleted text end new text begin February new text end 1 detailing the amount of electricity in kilowatt-hours that
was produced by the wind energy conversion system for the previous calendar year.
The commissioner shall prescribe the form of the report. The report must contain the
information required by the commissioner to determine the tax due to each county under
this section for the current year. If an owner of a wind energy conversion system subject
to taxation under this section fails to file the report by the due date, the commissioner
of revenue shall determine the tax based upon the nameplate capacity of the system
multiplied by a capacity factor of 40 percent.

(b) On or before deleted text begin March 31 deleted text end new text begin February 28 new text end , the commissioner of revenue shall notify
the owner of the wind energy conversion systems of the tax due to each county for the
current year and shall certify to the county auditor of each county in which the systems are
located the tax due from each owner for the current year.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for reports and certifications due in
2006 and thereafter.
new text end

Sec. 17.

Minnesota Statutes 2004, section 272.029, subdivision 6, is amended to read:

Subd. 6.

Distribution of revenues.

Revenues from the taxes imposed under
subdivision 5 must be part of the settlement between the county treasurer and the
county auditor under section 276.09. The revenue must be distributed by the county
auditor or the county treasurer to deleted text begin all deleted text end new text begin local new text end taxing jurisdictions in which the wind energy
conversion system is located deleted text begin , deleted text end new text begin as follows: beginning with distributions in 2006, 80 percent
to counties; 14 percent to cities and townships; and six percent to school districts; and
for distributions occurring in 2004 and 2005 new text end in the same proportion that each of the new text begin local
new text end taxing jurisdiction's current year's net tax capacity based tax rate is to the current year's
total new text begin local new text end net tax capacity based rate.

new text begin EFFECTIVE DATE. new text end

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

Sec. 18.

Minnesota Statutes 2004, section 273.11, subdivision 8, is amended to read:

Subd. 8.

Limited equity cooperative apartments.

For the purposes of this
subdivision, the terms defined in this subdivision have the meanings given them.

A "limited equity cooperative" is a corporation organized under chapter 308A new text begin or
308B new text end , which has as its primary purpose the provision of housing and related services to
its members which meets one of the following criteria with respect to the income of its
members: (1) a minimum of 75 percent of members must have incomes at or less than
90 percent of area median income, (2) a minimum of 40 percent of members must have
incomes at or less than 60 percent of area median income, or (3) a minimum of 20 percent
of members must have incomes at or less than 50 percent of area median income. For
purposes of this clause, "member income" shall mean the income of a member existing at
the time the member acquires cooperative membership, and median income shall mean
the St. Paul-Minneapolis metropolitan area median income as determined by the United
States Department of Housing and Urban Development. It must also meet the following
requirements:

(a) The articles of incorporation set the sale price of occupancy entitling cooperative
shares or memberships at no more than a transfer value determined as provided in the
articles. That value may not exceed the sum of the following:

(1) the consideration paid for the membership or shares by the first occupant of the
unit, as shown in the records of the corporation;

(2) the fair market value, as shown in the records of the corporation, of any
improvements to the real property that were installed at the sole expense of the member
with the prior approval of the board of directors;

(3) accumulated interest, or an inflation allowance not to exceed the greater of a ten
percent annual noncompounded increase on the consideration paid for the membership or
share by the first occupant of the unit, or the amount that would have been paid on that
consideration if interest had been paid on it at the rate of the percentage increase in the
revised Consumer Price Index for All Urban Consumers for the Minneapolis-St. Paul
metropolitan area prepared by the United States Department of Labor, provided that the
amount determined pursuant to this clause may not exceed $500 for each year or fraction
of a year the membership or share was owned; plus

(4) real property capital contributions shown in the records of the corporation to
have been paid by the transferor member and previous holders of the same membership,
or of separate memberships that had entitled occupancy to the unit of the member
involved. These contributions include contributions to a corporate reserve account the
use of which is restricted to real property improvements or acquisitions, contributions to
the corporation which are used for real property improvements or acquisitions, and the
amount of principal amortized by the corporation on its indebtedness due to the financing
of real property acquisition or improvement or the averaging of principal paid by the
corporation over the term of its real property-related indebtedness.

(b) The articles of incorporation require that the board of directors limit the purchase
price of stock or membership interests for new member-occupants or resident shareholders
to an amount which does not exceed the transfer value for the membership or stock as
defined in clause (a).

(c) The articles of incorporation require that the total distribution out of capital to a
member shall not exceed that transfer value.

(d) The articles of incorporation require that upon liquidation of the corporation any
assets remaining after retirement of corporate debts and distribution to members will
be conveyed to a charitable organization described in section 501(c)(3) of the Internal
Revenue Code of 1986, as amended through December 31, 1992, or a public agency.

A "limited equity cooperative apartment" is a dwelling unit owned by a limited
equity cooperative.

"Occupancy entitling cooperative share or membership" is the ownership interest
in a cooperative organization which entitles the holder to an exclusive right to occupy a
dwelling unit owned or leased by the cooperative.

For purposes of taxation, the assessor shall value a unit owned by a limited equity
cooperative at the lesser of its market value or the value determined by capitalizing the net
operating income of a comparable apartment operated on a rental basis at the capitalization
rate used in valuing comparable buildings that are not limited equity cooperatives. If a
cooperative fails to operate in accordance with the provisions of clauses (a) to (d), the
property shall be subject to additional property taxes in the amount of the difference
between the taxes determined in accordance with this subdivision for the last ten years that
the property had been assessed pursuant to this subdivision and the amount that would
have been paid if the provisions of this subdivision had not applied to it. The additional
taxes, plus interest at the rate specified in section 549.09, shall be extended against the
property on the tax list for the current year.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes payable in 2004 and
thereafter.
new text end

Sec. 19.

Minnesota Statutes 2004, section 273.124, subdivision 3, is amended to read:

Subd. 3.

Cooperatives and charitable corporations; homestead and other
property.

(a) When property is owned by a corporation or association organized under
chapter 308A new text begin or 308B new text end , and each person who owns a share or shares in the corporation or
association is entitled to occupy a building on the property, or a unit within a building
on the property, the corporation or association may claim homestead treatment for each
dwelling, or for each unit in the case of a building containing several dwelling units, or for
the part of the value of the building occupied by a shareholder. Each building or unit must
be designated by legal description or number. The net tax capacity of each building or
unit that qualifies for assessment as a homestead under this subdivision must include not
more than one-half acre of land, if platted, nor more than 80 acres if unplatted. The net
tax capacity of the property is the sum of the net tax capacities of each of the respective
buildings or units comprising the property, including the net tax capacity of each unit's
or building's proportionate share of the land and any common buildings. To qualify for
the treatment provided by this subdivision, the corporation or association must be wholly
owned by persons having a right to occupy a building or unit owned by the corporation
or association. A charitable corporation organized under the laws of Minnesota and not
otherwise exempt thereunder with no outstanding stock qualifies for homestead treatment
with respect to member residents of the dwelling units who have purchased and hold
residential participation warrants entitling them to occupy the units.

(b) To the extent provided in paragraph (a), a cooperative or corporation organized
under chapter 308A may obtain separate assessment and valuation, and separate property
tax statements for each residential homestead, residential nonhomestead, or for each
seasonal residential recreational building or unit not used for commercial purposes. The
appropriate class rates under section 273.13 shall be applicable as if each building or unit
were a separate tax parcel; provided, however, that the tax parcel which exists at the time
the cooperative or corporation makes application under this subdivision shall be a single
parcel for purposes of property taxes or the enforcement and collection thereof, other than
as provided in paragraph (a) or this paragraph.

(c) A member of a corporation or association may initially obtain the separate
assessment and valuation and separate property tax statements, as provided in paragraph
(b), by applying to the assessor by June 30 of the assessment year.

(d) When a building, or dwelling units within a building, no longer qualify under
paragraph (a) or (b), the current owner must notify the assessor within 30 days. Failure to
notify the assessor within 30 days shall result in the loss of benefits under paragraph (a) or
(b) for taxes payable in the year that the failure is discovered. For these purposes, "benefits
under paragraph (a) or (b)" means the difference in the net tax capacity of the building or
units which no longer qualify as computed under paragraph (a) or (b) and as computed
under the otherwise applicable law, times the local tax rate applicable to the building for
that taxes payable year. Upon discovery of a failure to notify, the assessor shall inform the
auditor of the difference in net tax capacity for the building or buildings in which units no
longer qualify, and the auditor shall calculate the benefits under paragraph (a) or (b). Such
amount, plus a penalty equal to 100 percent of that amount, shall then be demanded of the
building's owner. The property owner may appeal the county's determination by serving
copies of a petition for review with county officials as provided in section 278.01 and
filing a proof of service as provided in section 278.01 with the Minnesota Tax Court within
60 days of the date of the notice from the county. The appeal shall be governed by the Tax
Court procedures provided in chapter 271, for cases relating to the tax laws as defined in
section 271.01, subdivision 5; disregarding sections 273.125, subdivision 5, and 278.03,
but including section 278.05, subdivision 2. If the amount of the benefits under paragraph
(a) or (b) and penalty are not paid within 60 days, and if no appeal has been filed, the
county auditor shall certify the amount of the benefit and penalty to the succeeding year's
tax list to be collected as part of the property taxes on the affected property.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes payable in 2004 and
thereafter.
new text end

Sec. 20.

Minnesota Statutes 2004, section 273.124, subdivision 6, is amended to read:

Subd. 6.

Leasehold cooperatives.

When one or more dwellings or one or more
buildings which each contain several dwelling units is owned by a nonprofit corporation
subject to the provisions of chapter 317A and qualifying under section 501(c)(3) or
501(c)(4) of the Internal Revenue Code of 1986, as amended through December 31,
1990, or a limited partnership which corporation or partnership operates the property in
conjunction with a cooperative association, and has received public financing, homestead
treatment may be claimed by the cooperative association on behalf of the members of
the cooperative for each dwelling unit occupied by a member of the cooperative. The
cooperative association must provide the assessor with the Social Security numbers of
those members. To qualify for the treatment provided by this subdivision, the following
conditions must be met:

(a) the cooperative association must be organized under chapter 308A new text begin or 308B new text end and
all voting members of the board of directors must be resident tenants of the cooperative
and must be elected by the resident tenants of the cooperative;

(b) the cooperative association must have a lease for occupancy of the property for a
term of at least 20 years, which permits the cooperative association, while not in default on
the lease, to participate materially in the management of the property, including material
participation in establishing budgets, setting rent levels, and hiring and supervising a
management agent;

(c) to the extent permitted under state or federal law, the cooperative association
must have a right under a written agreement with the owner to purchase the property if the
owner proposes to sell it; if the cooperative association does not purchase the property it is
offered for sale, the owner may not subsequently sell the property to another purchaser at
a price lower than the price at which it was offered for sale to the cooperative association
unless the cooperative association approves the sale;

(d) a minimum of 40 percent of the cooperative association's members must have
incomes at or less than 60 percent of area median gross income as determined by the
United States Secretary of Housing and Urban Development under section 142(d)(2)(B)
of the Internal Revenue Code of 1986, as amended through December 31, 1991. For
purposes of this clause, "member income" means the income of a member existing at the
time the member acquires cooperative membership;

(e) if a limited partnership owns the property, it must include as the managing
general partner a nonprofit organization operating under the provisions of chapter 317A
and qualifying under section 501(c)(3) or 501(c)(4) of the Internal Revenue Code of 1986,
as amended through December 31, 1990, and the limited partnership agreement must
provide that the managing general partner have sufficient powers so that it materially
participates in the management and control of the limited partnership;

(f) prior to becoming a member of a leasehold cooperative described in this
subdivision, a person must have received notice that (1) describes leasehold cooperative
property in plain language, including but not limited to the effects of classification
under this subdivision on rents, property taxes and tax credits or refunds, and operating
expenses, and (2) states that copies of the articles of incorporation and bylaws of the
cooperative association, the lease between the owner and the cooperative association, a
sample sublease between the cooperative association and a tenant, and, if the owner is a
partnership, a copy of the limited partnership agreement, can be obtained upon written
request at no charge from the owner, and the owner must send or deliver the materials
within seven days after receiving any request;

(g) if a dwelling unit of a building was occupied on the 60th day prior to the date on
which the unit became leasehold cooperative property described in this subdivision, the
notice described in paragraph (f) must have been sent by first class mail to the occupant of
the unit at least 60 days prior to the date on which the unit became leasehold cooperative
property. For purposes of the notice under this paragraph, the copies of the documents
referred to in paragraph (f) may be in proposed version, provided that any subsequent
material alteration of those documents made after the occupant has requested a copy
shall be disclosed to any occupant who has requested a copy of the document. Copies of
the articles of incorporation and certificate of limited partnership shall be filed with the
secretary of state after the expiration of the 60-day period unless the change to leasehold
cooperative status does not proceed;

(h) the county attorney of the county in which the property is located must certify to
the assessor that the property meets the requirements of this subdivision;

(i) the public financing received must be from at least one of the following sources:

(1) tax increment financing proceeds used for the acquisition or rehabilitation of the
building or interest rate write-downs relating to the acquisition of the building;

(2) government issued bonds exempt from taxes under section 103 of the Internal
Revenue Code of 1986, as amended through December 31, 1991, the proceeds of which
are used for the acquisition or rehabilitation of the building;

(3) programs under section 221(d)(3), 202, or 236, of Title II of the National
Housing Act;

(4) rental housing program funds under Section 8 of the United States Housing
Act of 1937 or the market rate family graduated payment mortgage program funds
administered by the Minnesota Housing Finance Agency that are used for the acquisition
or rehabilitation of the building;

(5) low-income housing credit under section 42 of the Internal Revenue Code of
1986, as amended through December 31, 1991;

(6) public financing provided by a local government used for the acquisition or
rehabilitation of the building, including grants or loans from (i) federal community
development block grants; (ii) HOME block grants; or (iii) residential rental bonds issued
under chapter 474A; or

(7) other rental housing program funds provided by the Minnesota Housing Finance
Agency for the acquisition or rehabilitation of the building;

(j) at the time of the initial request for homestead classification or of any transfer of
ownership of the property, the governing body of the municipality in which the property is
located must hold a public hearing and make the following findings:

(1) that the granting of the homestead treatment of the apartment's units will
facilitate safe, clean, affordable housing for the cooperative members that would otherwise
not be available absent the homestead designation;

(2) that the owner has presented information satisfactory to the governing body
showing that the savings garnered from the homestead designation of the units will be
used to reduce tenant's rents or provide a level of furnishing or maintenance not possible
absent the designation; and

(3) that the requirements of paragraphs (b), (d), and (i) have been met.

Homestead treatment must be afforded to units occupied by members of the
cooperative association and the units must be assessed as provided in subdivision 3,
provided that any unit not so occupied shall be classified and assessed pursuant to the
appropriate class. No more than three acres of land may, for assessment purposes,
be included with each dwelling unit that qualifies for homestead treatment under this
subdivision.

When dwelling units no longer qualify under this subdivision, the current owner
must notify the assessor within 60 days. Failure to notify the assessor within 60 days shall
result in the loss of benefits under this subdivision for taxes payable in the year that the
failure is discovered. For these purposes, "benefits under this subdivision" means the
difference in the net tax capacity of the units which no longer qualify as computed under
this subdivision and as computed under the otherwise applicable law, times the local tax
rate applicable to the building for that taxes payable year. Upon discovery of a failure to
notify, the assessor shall inform the auditor of the difference in net tax capacity for the
building or buildings in which units no longer qualify, and the auditor shall calculate the
benefits under this subdivision. Such amount, plus a penalty equal to 100 percent of that
amount, shall then be demanded of the building's owner. The property owner may appeal
the county's determination by serving copies of a petition for review with county officials
as provided in section 278.01 and filing a proof of service as provided in section 278.01
with the Minnesota Tax Court within 60 days of the date of the notice from the county.
The appeal shall be governed by the Tax Court procedures provided in chapter 271, for
cases relating to the tax laws as defined in section 271.01, subdivision 5; disregarding
sections 273.125, subdivision 5, and 278.03, but including section 278.05, subdivision 2.
If the amount of the benefits under this subdivision and penalty are not paid within 60
days, and if no appeal has been filed, the county auditor shall certify the amount of the
benefit and penalty to the succeeding year's tax list to be collected as part of the property
taxes on the affected buildings.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes payable in 2004 and
thereafter.
new text end

Sec. 21.

Minnesota Statutes 2004, section 273.124, subdivision 8, is amended to read:

Subd. 8.

Homestead owned by or leased to family farm corporation, joint farm
venture, limited liability company, or partnership.

(a) Each family farm corporation deleted text begin ,
each deleted text end new text begin ; each new text end joint family farm venture deleted text begin , deleted text end new text begin ; and new text end each limited liability company deleted text begin , and each deleted text end new text begin or
new text end partnership deleted text begin operating deleted text end new text begin which operates new text end a family farm new text begin ; new text end is entitled to class 1b under section
273.13, subdivision 22, paragraph (b), or class 2a assessment for one homestead occupied
by a shareholder, member, or partner thereof who is residing on the land, and actively
engaged in farming of the land owned by the family farm corporation, joint family farm
venture, limited liability company, or partnership deleted text begin operating a family farm deleted text end . Homestead
treatment applies even if legal title to the property is in the name of the family farm
corporation, joint family farm venture, limited liability company, or partnership deleted text begin operating
the family farm deleted text end , and not in the name of the person residing on it.

"Family farm corporation," "family farm," and "partnership operating a family
farm" have the meanings given in section 500.24, except that the number of allowable
shareholders, members, or partners under this subdivision shall not exceed 12. "Limited
liability company" has the meaning contained in sections 322B.03, subdivision 28, and
500.24, subdivision 2, paragraphs (l) and (m). "Joint family farm venture" means a
cooperative agreement among two or more farm enterprises authorized to operate a family
farm under section 500.24.

(b) In addition to property specified in paragraph (a), any other residences owned
by family farm corporations, joint family farm ventures, limited liability companies, or
partnerships deleted text begin operating a family farm deleted text end described in paragraph (a) which are located on
agricultural land and occupied as homesteads by its shareholders, members, or partners
who are actively engaged in farming on behalf of that corporation, joint farm venture,
limited liability company, or partnership must also be assessed as class 2a property or
as class 1b property under section 273.13.

(c) Agricultural property that is owned by a member, partner, or shareholder of a
family farm corporation or joint family farm venture, limited liability company new text begin operating
a family farm new text end , or by a partnership operating a family farm and leased to the family farm
corporation, limited liability company, deleted text begin or deleted text end partnership deleted text begin operating a family farm deleted text end , or joint
farm venture, as defined in paragraph (a), is eligible for classification as class 1b or class
2a under section 273.13, if the owner is actually residing on the property, and is actually
engaged in farming the land on behalf of that corporation, joint farm venture, limited
liability company, or partnership. This paragraph applies without regard to any legal
possession rights of the family farm corporation, joint family farm venture, limited
liability company, or partnership deleted text begin operating a family farm deleted text end under the lease.

new text begin EFFECTIVE DATE. new text end

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

Sec. 22.

Minnesota Statutes 2004, section 273.124, subdivision 13, is amended to read:

Subd. 13.

Homestead application.

(a) A person who meets the homestead
requirements under subdivision 1 must file a homestead application with the county
assessor to initially obtain homestead classification.

(b) On or before January 2, 1993, each county assessor shall mail a homestead
application to the owner of each parcel of property within the county which was
classified as homestead for the 1992 assessment year. The format and contents of a
uniform homestead application shall be prescribed by the commissioner of revenue. The
commissioner shall consult with the chairs of the house and senate tax committees on the
contents of the homestead application form. The application must clearly inform the
taxpayer that this application must be signed by all owners who occupy the property or
by the qualifying relative and returned to the county assessor in order for the property
to continue receiving homestead treatment. The envelope containing the homestead
application shall clearly identify its contents and alert the taxpayer of its necessary
immediate response.

(c) Every property owner applying for homestead classification must furnish to the
county assessor the Social Security number of each occupant who is listed as an owner
of the property on the deed of record, the name and address of each owner who does not
occupy the property, and the name and Social Security number of each owner's spouse who
occupies the property. The application must be signed by each owner who occupies the
property and by each owner's spouse who occupies the property, or, in the case of property
that qualifies as a homestead under subdivision 1, paragraph (c), by the qualifying relative.

If a property owner occupies a homestead, the property owner's spouse may not
claim another property as a homestead unless the property owner and the property owner's
spouse file with the assessor an affidavit or other proof required by the assessor stating that
the property qualifies as a homestead under subdivision 1, paragraph (e).

Owners or spouses occupying residences owned by their spouses and previously
occupied with the other spouse, either of whom fail to include the other spouse's name
and Social Security number on the homestead application or provide the affidavits or
other proof requested, will be deemed to have elected to receive only partial homestead
treatment of their residence. The remainder of the residence will be classified as
nonhomestead residential. When an owner or spouse's name and Social Security number
appear on homestead applications for two separate residences and only one application is
signed, the owner or spouse will be deemed to have elected to homestead the residence for
which the application was signed.

The Social Security numbers or affidavits or other proofs of the property owners
and spouses are private data on individuals as defined by section 13.02, subdivision 12,
but, notwithstanding that section, the private data may be disclosed to the commissioner
of revenue, or, for purposes of proceeding under the Revenue Recapture Act to recover
personal property taxes owing, to the county treasurer.

(d) If residential real estate is occupied and used for purposes of a homestead by a
relative of the owner and qualifies for a homestead under subdivision 1, paragraph (c), in
order for the property to receive homestead status, a homestead application must be filed
with the assessor. The Social Security number of each relative occupying the property and
the Social Security number of each owner who is related to an occupant of the property
shall be required on the homestead application filed under this subdivision. If a different
relative of the owner subsequently occupies the property, the owner of the property must
notify the assessor within 30 days of the change in occupancy. The Social Security number
of a relative occupying the property is private data on individuals as defined by section
13.02, subdivision 12, but may be disclosed to the commissioner of revenue.

(e) The homestead application shall also notify the property owners that the
application filed under this section will not be mailed annually and that if the property
is granted homestead status for the 1993 assessment, or any assessment year thereafter,
that same property shall remain classified as homestead until the property is sold or
transferred to another person, or the owners, the spouse of the owner, or the relatives no
longer use the property as their homestead. Upon the sale or transfer of the homestead
property, a certificate of value must be timely filed with the county auditor as provided
under section 272.115. Failure to notify the assessor within 30 days that the property
has been sold, transferred, or that the owner, the spouse of the owner, or the relative is
no longer occupying the property as a homestead, shall result in new text begin (i) a requirement to
repay homestead benefits related to assessment dates after the ownership or occupancy
change, except for years for which a new and valid homestead application was effective,
and limited to benefits for taxes payable in the current year and the five prior years; (ii)
new text end the penalty provided under deleted text begin this subdivision deleted text end new text begin paragraph (h) for each of the same years, if
applicable; new text end and new text begin (iii) new text end the property will lose its deleted text begin current deleted text end homestead status new text begin for the current
assessment year unless a new homestead application is effective for that assessment new text end . new text begin The
provisions of section 273.02 with regard to property erroneously classified as a homestead
do not apply. The person to be notified of the reimbursement requirement and of the
penalty under the procedures in paragraph (h) is the owner who sold or transferred the
property or whose relative is no longer occupying the property as a homestead.
new text end

(f) If the homestead application is not returned within 30 days, the county will send a
second application to the present owners of record. The notice of proposed property taxes
prepared under section 275.065, subdivision 3, shall reflect the property's classification.
Beginning with assessment year 1993 for all properties, if a homestead application has
not been filed with the county by December 15, the assessor shall classify the property
as nonhomestead for the current assessment year for taxes payable in the following year,
provided that the owner may be entitled to receive the homestead classification by proper
application under section 375.192.

(g) At the request of the commissioner, each county must give the commissioner a
list that includes the name and Social Security number of each property owner and the
property owner's spouse occupying the property, or relative of a property owner, applying
for homestead classification under this subdivision. The commissioner shall use the
information provided on the lists as appropriate under the law, including for the detection
of improper claims by owners, or relatives of owners, under chapter 290A.

(h) If deleted text begin the commissioner deleted text end new text begin a city or county assessor new text end finds that a property deleted text begin owner may be
claiming a fraudulent deleted text end new text begin is receiving new text end homestead new text begin benefits that are not allowable under the law new text end ,
the deleted text begin commissioner shall notify the appropriate counties. Within 90 days of the notification,
the county assessor shall investigate to determine if the homestead classification was
properly claimed. If the property owner does not qualify, the county deleted text end assessor shall notify
the county auditor who will determine the amount of homestead benefits that had been
improperly allowed new text begin for taxes payable in the current year and in each of the five prior years new text end .
For the purpose of this section, "homestead benefits" means the tax reduction resulting
from the classification as a homestead under section 273.13, the taconite homestead credit
under section 273.135, the residential homestead and agricultural homestead credits under
section 273.1384, and the supplemental homestead credit under section 273.1391.

The county auditor shall send a notice to the person who owned the affected
property at the time the homestead application related to the improper homestead was
filed, demanding reimbursement of the homestead benefits new text begin not allowable under the law
for taxes payable in the current year and the five prior years. The notice shall demand
reimbursement of those homestead benefits, new text end plus a penalty equal to deleted text begin 100 deleted text end new text begin either:
new text end

new text begin (i) ten percent of the homestead benefits if the owner acted with negligent or
intentional disregard of the applicable tax laws and rules but without intent to defraud; or
new text end

new text begin (ii) 50 new text end percent of the homestead benefits new text begin if the owner fraudulently attempted in any
manner to evade or defeat the proper tax new text end .

new text begin If the penalty provided in this paragraph is imposed and the assessor becomes aware
that the property is improperly classified as a homestead for the current assessment year,
the assessor shall reclassify the property for that assessment, and the provisions of section
273.02 with regard to property erroneously classified as a homestead do not apply.
new text end

new text begin A penalty under this section shall be abated under section 375.192 upon a
determination that the improper classification was due to reasonable cause. new text end The person
notified may appeal the county's determination by serving copies of a petition for review
with county officials as provided in section 278.01 and filing proof of service as provided
in section 278.01 with the Minnesota Tax Court within 60 days of the date of the notice
from the county. Procedurally, the appeal is governed by the provisions in chapter 271
which apply to the appeal of a property tax assessment or levy, but without requiring any
prepayment of the amount in controversy. If the amount of homestead benefits and penalty
is not paid within 60 days, and if no appeal has been filed, the county auditor shall certify
the amount of taxes and penalty to the county treasurer. The county treasurer will add
interest to the unpaid homestead benefits and penalty amounts at the rate provided in
section 279.03 for real property taxes becoming delinquent in the calendar year during
which the amount remains unpaid. Interest may be assessed for the period beginning 60
days after demand for payment was made.

If the person notified is the current owner of the property, the treasurer may add the
total amount of homestead benefits, penalty, interest, and costs to the ad valorem taxes
otherwise payable on the property by including the amounts on the property tax statements
under section 276.04, subdivision 3. The amounts added under this paragraph to the ad
valorem taxes shall include interest accrued through December 31 of the year preceding
the taxes payable year for which the amounts are first added. These amounts, when added
to the property tax statement, become subject to all the laws for the enforcement of real or
personal property taxes for that year, and for any subsequent year.

If the person notified is not the current owner of the property, the treasurer may
collect the amounts due under the Revenue Recapture Act in chapter 270A, or use any of
the powers granted in sections 277.20 and 277.21 without exclusion, to enforce payment
of the homestead benefits, penalty, interest, and costs, as if those amounts were delinquent
tax obligations of the person who owned the property at the time the application related
to the improperly allowed homestead was filed. The treasurer may relieve a prior owner
of personal liability for the homestead benefits, penalty, interest, and costs, and instead
extend those amounts on the tax lists against the property as provided in this paragraph
to the extent that the current owner agrees in writing. On all demands, billings, property
tax statements, and related correspondence, the county must list and state separately the
amounts of homestead benefits, penalty, interest and costs being demanded, billed or
assessed.

(i) Any amount of homestead benefits recovered by the county from the property
owner shall be distributed to the county, city or town, and school district where the
property is located in the same proportion that each taxing district's levy was to the total
of the three taxing districts' levy for the current year. Any amount recovered attributable
to taconite homestead credit shall be transmitted to the St. Louis County auditor to be
deposited in the taconite property tax relief account. Any amount recovered that is
attributable to supplemental homestead credit is to be transmitted to the commissioner of
revenue for deposit in the general fund of the state treasury. The total amount of penalty
collected must be deposited in the county general fund.

(j) If a property owner has applied for more than one homestead and the county
assessors cannot determine which property should be classified as homestead, the county
assessors will refer the information to the commissioner. The commissioner shall make
the determination and notify the counties within 60 days.

(k) In addition to lists of homestead properties, the commissioner may ask the
counties to furnish lists of all properties and the record owners. The Social Security
numbers and federal identification numbers that are maintained by a county or city
assessor for property tax administration purposes, and that may appear on the lists retain
their classification as private or nonpublic data; but may be viewed, accessed, and used by
the county auditor or treasurer of the same county for the limited purpose of assisting the
commissioner in the preparation of microdata samples under section 270.0681.

new text begin (l) On or before April 30 each year, each county must provide the commissioner
with the following data for each parcel of homestead property by electronic means as
defined in section 289A.02, subdivision 8:
new text end

new text begin (i) the property identification number assigned to the parcel for purposes of taxes
payable in the current year;
new text end

new text begin (ii) the name and Social Security number of each property owner and property
owner's spouse, as shown on the tax rolls for the current and the prior assessment year;
new text end

new text begin (iii) the classification of the property under section 273.13 for taxes payable in the
current year and in the prior year;
new text end

new text begin (iv) an indication of whether the property was classified as a homestead for taxes
payable in the current year or for taxes payable in the prior year because of occupancy by
a relative of the owner or by a spouse of a relative;
new text end

new text begin (v) the property taxes payable as defined in section 290A.03, subdivision 13, for the
current year and the prior year;
new text end

new text begin (vi) the market value of improvements to the property first assessed for tax purposes
for taxes payable in the current year;
new text end

new text begin (vii) the assessor's estimated market value assigned to the property for taxes payable
in the current year and the prior year;
new text end

new text begin (viii) the taxable market value assigned to the property for taxes payable in the
current year and the prior year;
new text end

new text begin (ix) whether there are delinquent property taxes owing on the homestead;
new text end

new text begin (x) the unique taxing district in which the property is located; and
new text end

new text begin (xi) such other information as the commissioner decides is necessary.
new text end

new text begin The commissioner shall use the information provided on the lists as appropriate
under the law, including for the detection of improper claims by owners, or relatives
of owners, under chapter 290A.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is generally effective July 1, 2005, and thereafter,
except the changes in paragraphs (e) and (h) are effective only for notices initially sent out
under those paragraphs on or after July 1, 2005.
new text end

Sec. 23.

Minnesota Statutes 2004, section 273.124, subdivision 21, is amended to read:

Subd. 21.

Trust property; homestead.

Real property held by a trustee under a trust
is eligible for classification as homestead property if:

(1) the grantor or surviving spouse of the grantor of the trust occupies and uses the
property as a homestead;

(2) a relative or surviving relative of the grantor who meets the requirements of
subdivision 1, paragraph (c), in the case of residential real estate; or subdivision 1,
paragraph (d), in the case of agricultural property, occupies and uses the property as
a homestead;

(3) a family farm corporation, joint farm venture, limited liability company, or
partnership operating a family farm rents the property held by a trustee under a trust, and
new text begin the grantor, the spouse of the grantor, or the son or daughter of the grantor, who is also new text end a
shareholder, member, or partner of the corporation, joint farm venture, limited liability
company, or partnership occupies and uses the property as a homestead, deleted text begin and deleted text end new text begin or new text end is actively
farming the property on behalf of the corporation, joint farm venture, limited liability
company, or partnership; or

(4) a person who has received homestead classification for property taxes payable in
2000 on the basis of an unqualified legal right under the terms of the trust agreement to
occupy the property as that person's homestead and who continues to use the property as
a homestead new text begin or a person who received the homestead classification for taxes payable in
2005 under clause (3) who does not qualify under clause (3) for taxes payable in 2006
or thereafter but who continues to qualify under clause (3) as it existed for taxes payable
in 2005 new text end .

For purposes of this subdivision, "grantor" is defined as the person creating or
establishing a testamentary, inter Vivos, revocable or irrevocable trust by written
instrument or through the exercise of a power of appointment.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes payable in 2006 and
thereafter.
new text end

Sec. 24.

Minnesota Statutes 2004, section 273.1315, is amended to read:

273.1315 CERTIFICATION OF 1B PROPERTY.

Any property owner seeking classification and assessment of the owner's homestead
as class 1b property pursuant to section 273.13, subdivision 22, paragraph (b), shall file
with the commissioner of revenue a 1b homestead declaration, on a form prescribed by the
commissioner. The declaration shall contain the following information:

(a) the information necessary to verify that new text begin on or before June 30 of the filing year, new text end the
property owner or the owner's spouse satisfies the requirements of section 273.13,
subdivision 22, paragraph (b), for 1b classification; and

(b) any additional information prescribed by the commissioner.

The declaration must be filed on or before October 1 to be effective for property
taxes payable during the succeeding calendar year. The declaration and any supplementary
information received from the property owner pursuant to this section shall be subject to
chapter 270B. If approved by the commissioner, the declaration remains in effect until the
property no longer qualifies under section 273.13, subdivision 22, paragraph (b). Failure
to notify the commissioner within 30 days that the property no longer qualifies under that
paragraph because of a sale, change in occupancy, or change in the status or condition
of an occupant shall result in the penalty provided in section 273.124, subdivision 13,
computed on the basis of the class 1b benefits for the property, and the property shall lose
its current class 1b classification.

The commissioner shall provide to the assessor on or before November 1 a listing
of the parcels of property qualifying for 1b classification.

new text begin EFFECTIVE DATE. new text end

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

Sec. 25.

Minnesota Statutes 2004, section 273.19, subdivision 1a, is amended to read:

Subd. 1a.

Lease described.

For purposes of this section, a lease includes any
agreement new text begin , except a cooperative farming agreement pursuant to section 97A.135,
subdivision 3, or a lease executed pursuant to section 272.68, subdivision 4, new text end permitting a
nonexempt person or entity to use the property, regardless of whether the agreement is
characterized as a lease. A lease has a "term of at least one year" if the term is for a period
of less than one year and the lease permits the parties to renew the lease without requiring
that similar terms for leasing the property will be offered to other applicants or bidders
through a competitive bidding or other form of offer to potential lessees or users.

new text begin EFFECTIVE DATE. new text end

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

Sec. 26.

Minnesota Statutes 2004, section 273.372, is amended to read:

273.372 PROCEEDINGS AND APPEALS; UTILITY OR RAILROAD
VALUATIONS.

deleted text begin An appeal by a utility or railroad company concerning the exemption, valuation, or
classification of property for which the commissioner of revenue has provided the city or
county assessor with valuations by order, or for which the commissioner has recommended
values to the city or county assessor, must be brought against the commissioner in Tax
Court or in district court of the county where the property is located, and not against
the county or taxing district where the property is located. deleted text end new text begin Subdivision 1. new text end [SCOPE.] new text begin This
section governs judicial review of a claim that public utility property or railroad operating
property has been partially, unfairly, or unequally assessed, or assessed at a valuation
greater than its real or actual value, or that the property is exempt. However, this section
applies only to property described in sections 273.33, 273.35, and 273.37, and only if the
net tax capacity has not been changed from that provided to the city or a county by the
commissioner. If the net tax capacity being appealed is not the net tax capacity established
by the commissioner through order or recommendation, or if the petition claims that the
tax levied against the parcel is illegal, in whole or in part, or if the petition claims the tax
has been paid, the action must be brought under chapter 278 without regard to this section
in each county where the property is located and proper service must be made upon the
local officials specified in section 278.01, subdivision 1.
new text end

new text begin Subd. 2. new text end

new text begin Contents and filing of petition. new text end

new text begin In all cases under this section, the
petition must be served on the commissioner and must be filed with the Tax Court in
Ramsey County. In all cases under this section that directly challenge an order of the
commissioner, the petition must include all the parcels encompassed by that order which
the petitioner claims have been partially, unfairly, or unequally assessed, assessed at
a valuation greater than their real or actual value, or are exempt. In all cases under this
section not directly challenging a commissioner's order, the petition must include either
all the utility parcels or all the railroad parcels in the state in which the petitioner claims
an interest and which the petitioner claims have been partially, unfairly, or unequally
assessed, assessed at a valuation greater than their real or actual value, or are exempt.
new text end

new text begin Subd. 3. new text end

new text begin Applicability of other laws. new text end

If the appeal to court deleted text begin is from deleted text end new text begin governed by this
section directly challenges new text end an order of the commissioner, deleted text begin it deleted text end new text begin the appeal new text end must be brought
under chapter 271 new text begin , except that when the provisions of this section conflict with chapter
271, this section prevails new text end . If deleted text begin the deleted text end new text begin an new text end appeal new text begin governed by this section new text end is from the deleted text begin exemption,
valuation, classification, or deleted text end tax that results from implementation of deleted text begin the deleted text end new text begin a new text end commissioner's
order or recommendation, it must be brought under new text begin the provisions of new text end chapter 278, deleted text begin and the
provisions in that chapter apply, deleted text end except that service shall be on the commissioner only and
not on the deleted text begin county deleted text end new text begin local new text end officials specified in section 278.01, subdivision 1 new text begin , and if any other
provision of this section conflicts with chapter 278, this section prevails new text end .

deleted text begin This provision applies to the property described in sections 273.33, 273.35, 273.36,
and 273.37, but only if the appealed values have remained unchanged from those provided
to the city or county by the commissioner. If the exemption, valuation, or classification
being appealed has been changed by the city or county, then the action must be brought
under chapter 278 in the county where the property is located and proper service must be
made upon the county officials as specified in section 278.01, subdivision 1.
deleted text end

new text begin Subd. 4. new text end

new text begin Notice. new text end

Upon filing of any appeal by a utility company or railroad against
the commissioner new text begin under this section new text end , the commissioner shall give notice by first class mail
to each county which would be affected by the appeal.

new text begin Subd. 5. new text end

new text begin Administrative appeals. new text end

Companies that submit the reports under section
270.82 or 273.371 by the date specified in that section, or by the date specified by the
commissioner in an extension, may appeal administratively to the commissioner deleted text begin under
the procedures in section 270.11, subdivision 6 deleted text end , prior to bringing an action in Tax Court
deleted text begin or in district court deleted text end , however, instituting an administrative appeal with the commissioner
does not change or modify the deadline in section 271.06 for appealing an order of the
commissioner deleted text begin in Tax Court deleted text end or the deadline in section 278.01 for filing a property tax claim
or objection deleted text begin in Tax Court or district court deleted text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for petitions served and filed on or
after September 1, 2005.
new text end

Sec. 27.

Minnesota Statutes 2004, section 274.014, subdivision 2, is amended to read:

Subd. 2.

Appeals and equalization course.

deleted text begin By no later than January 1, deleted text end new text begin Beginning
in new text end 2006, and each year thereafter, there must be at least one member at each meeting of
a local board of appeal and equalization who has attended an appeals and equalization
course developed or approved by the commissioner within the last four years, as certified
by the commissioner. The course may be offered in conjunction with a meeting of the
Minnesota League of Cities or the Minnesota Association of Townships. The course
content must include, but need not be limited to, a review of the handbook developed
by the commissioner under subdivision 1.

new text begin EFFECTIVE DATE. new text end

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

Sec. 28.

Minnesota Statutes 2004, section 274.014, subdivision 3, is amended to read:

Subd. 3.

Proof of compliance; transfer of duties.

new text begin (a) new text end Any city or town that deleted text begin does
not deleted text end new text begin conducts local boards of appeal and equalization meetings must new text end provide proof to the
county assessor by December 1, 2006, and each year thereafter, that it is in compliance
with the requirements of subdivision 2 deleted text begin , and that it had deleted text end new text begin . Beginning in 2006, this notice
must also verify that there was new text end a quorum new text begin of voting members new text end at each meeting of the board
of appeal and equalization in the deleted text begin prior deleted text end new text begin current new text end year deleted text begin , deleted text end new text begin . A city or town that does not comply
with these requirements new text end is deemed to have transferred its board of appeal and equalization
powers to the county deleted text begin under section 274.01, subdivision 3, for deleted text end new text begin beginning with new text end the following
year's assessment new text begin and continuing unless the powers are reinstated under paragraph (c) new text end .

new text begin (b) new text end The county shall notify the taxpayers when the board of appeal and equalization
for a city or town has been transferred to the county under this subdivision and, prior to
the meeting time of the county board of equalization, the county shall make available to
those taxpayers a procedure for a review of the assessments, including, but not limited to,
open book meetings. This alternate review process shall take place in April and May.

new text begin (c) new text end A local board whose powers are transferred to the county under this subdivision
may be reinstated by resolution of the governing body of the city or town and upon proof
of compliance with the requirements of subdivision 2. The resolution and proofs must be
provided to the county assessor by December 1 in order to be effective for the following
year's assessment.

new text begin EFFECTIVE DATE. new text end

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

Sec. 29.

Minnesota Statutes 2004, section 274.14, is amended to read:

274.14 LENGTH OF SESSION; RECORD.

deleted text begin The county board of equalization or the special board of equalization appointed
by it shall meet during the last ten meeting days in June. For this purpose, "meeting
days" are defined as any day of the week excluding Saturday and Sunday. deleted text end The board may
meet on any ten consecutive meeting days in June, after the second Friday in June deleted text begin , if
deleted text end new text begin . new text end The actual meeting dates deleted text begin are deleted text end new text begin must be new text end contained on the valuation notices mailed to each
property owner in the county deleted text begin under deleted text end new text begin as provided in new text end section 273.121. new text begin For this purpose,
"meeting days" is defined as any day of the week excluding Saturday and Sunday. new text end No
action taken by the county board of review after June 30 is valid, except for corrections
permitted in sections 273.01 and 274.01. The county auditor shall keep an accurate record
of the proceedings and orders of the board. The record must be published like other
proceedings of county commissioners. A copy of the published record must be sent to the
commissioner of revenue, with the abstract of assessment required by section 274.16.

new text begin EFFECTIVE DATE. new text end

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

Sec. 30.

Minnesota Statutes 2004, section 275.065, subdivision 1a, is amended to read:

Subd. 1a.

Overlapping jurisdictions.

In the case of a taxing authority lying
in two or more counties, the home county auditor shall certify the proposed levy and
the proposed local tax rate to the other county auditor by deleted text begin September 20 deleted text end new text begin October 5 new text end . The
home county auditor must estimate the levy or rate in preparing the notices required
in subdivision 3, if the other county has not certified the appropriate information. If
requested by the home county auditor, the other county auditor must furnish an estimate to
the home county auditor.

new text begin EFFECTIVE DATE. new text end

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

Sec. 31.

Minnesota Statutes 2004, section 275.07, subdivision 1, is amended to read:

Subdivision 1.

Certification of levy.

(a) Except as provided under paragraph (b), the
taxes voted by cities, counties, school districts, and special districts shall be certified by
the proper authorities to the county auditor on or before five working days after December
20 in each year. A town must certify the levy adopted by the town board to the county
auditor by September 15 each year. If the town board modifies the levy at a special town
meeting after September 15, the town board must recertify its levy to the county auditor
on or before five working days after December 20. deleted text begin The taxes certified shall be reduced
by the county auditor by the aid received under section 273.1398, subdivision 3. deleted text end If a city,
town, county, school district, or special district fails to certify its levy by that date, its levy
shall be the amount levied by it for the preceding year.

(b)(i) The taxes voted by counties under sections 103B.241, 103B.245, and 103B.251
shall be separately certified by the county to the county auditor on or before five working
days after December 20 in each year. The taxes certified shall not be reduced by the county
auditor by the aid received under section 273.1398, subdivision 3. If a county fails to
certify its levy by that date, its levy shall be the amount levied by it for the preceding year.

(ii) For purposes of the proposed property tax notice under section 275.065 and
the property tax statement under section 276.04, for the first year in which the county
implements the provisions of this paragraph, the county auditor shall reduce the county's
levy for the preceding year to reflect any amount levied for water management purposes
under clause (i) included in the county's levy.

new text begin EFFECTIVE DATE. new text end

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

Sec. 32.

Minnesota Statutes 2004, section 275.07, subdivision 4, is amended to read:

Subd. 4.

Report to commissioner.

(a) On or before October 8 of each year, the
county auditor shall report to the commissioner of revenue the proposed levy certified by
local units of government under section 275.065, subdivision 1. If any taxing authorities
have notified the county auditor that they are in the process of negotiating an agreement for
sharing, merging, or consolidating services but that when the proposed levy was certified
under section 275.065, subdivision 1c, the agreement was not yet finalized, the county
auditor shall supply that information to the commissioner when filing the report under this
section and shall recertify the affected levies as soon as practical after October 10.

(b) On or before January 15 of each year, the county auditor shall report to the
commissioner of revenue the final levy certified by local units of government under
subdivision 1.

(c) The levies must be reported in the manner prescribed by the commissioner. deleted text begin The
reports must show a total levy and the amount of each special levy.
deleted text end

new text begin EFFECTIVE DATE. new text end

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

Sec. 33.

Minnesota Statutes 2004, section 276.04, subdivision 2, is amended to read:

Subd. 2.

Contents of tax statements.

(a) The treasurer shall provide for the printing
of the tax statements. The commissioner of revenue shall prescribe the form of the
property tax statement and its contents. The statement must contain a tabulated statement
of the dollar amount due to each taxing authority and the amount of the state tax from the
parcel of real property for which a particular tax statement is prepared. The dollar amounts
attributable to the county, the state tax, the voter approved school tax, the other local
school tax, the township or municipality, and the total of the metropolitan special taxing
districts as defined in section 275.065, subdivision 3, paragraph (i), must be separately
stated. The amounts due all other special taxing districts, if any, may be aggregated. If the
county levy under this paragraph includes an amount for a lake improvement district as
defined under sections 103B.501 to 103B.581, the amount attributable for that purpose
must be separately stated from the remaining county levy amount. The amount of the tax
on homesteads qualifying under the senior citizens' property tax deferral program under
chapter 290B is the total amount of property tax before subtraction of the deferred property
tax amount. The amount of the tax on contamination value imposed under sections 270.91
to 270.98, if any, must also be separately stated. The dollar amounts, including the dollar
amount of any special assessments, may be rounded to the nearest even whole dollar.
For purposes of this section whole odd-numbered dollars may be adjusted to the next
higher even-numbered dollar. The amount of market value excluded under section 273.11,
subdivision 16, if any, must also be listed on the tax statement.

(b) The property tax statements for manufactured homes and sectional structures
taxed as personal property shall contain the same information that is required on the
tax statements for real property.

(c) Real and personal property tax statements must contain the following information
in the order given in this paragraph. The information must contain the current year tax
information in the right column with the corresponding information for the previous year
in a column on the left:

(1) the property's estimated market value under section 273.11, subdivision 1;

(2) the property's taxable market value after reductions under section 273.11,
subdivisions 1a and 16;

(3) the property's gross tax, calculated by adding the property's total property tax to
the sum of the aids enumerated in clause (4);

(4) a total of the following aids:

(i) education aids payable under chapters 122A, 123A, 123B, 124D, 125A, 126C,
and 127A;

(ii) local government aids for cities, towns, and counties under deleted text begin chapter 477A
deleted text end new text begin sections 477A.011 to 477A.014 new text end ; and

(iii) disparity reduction aid under section 273.1398;

(5) for homestead residential and agricultural properties, the credits under section
273.1384;

(6) any credits received under sections 273.119; 273.123; 273.135; 273.1391;
273.1398, subdivision 4; 469.171; and 473H.10, except that the amount of credit received
under section 273.135 must be separately stated and identified as "taconite tax relief"; and

(7) the net tax payable in the manner required in paragraph (a).

(d) If the county uses envelopes for mailing property tax statements and if the county
agrees, a taxing district may include a notice with the property tax statement notifying
taxpayers when the taxing district will begin its budget deliberations for the current
year, and encouraging taxpayers to attend the hearings. If the county allows notices to
be included in the envelope containing the property tax statement, and if more than
one taxing district relative to a given property decides to include a notice with the tax
statement, the county treasurer or auditor must coordinate the process and may combine
the information on a single announcement.

The commissioner of revenue shall certify to the county auditor the actual or
estimated aids enumerated in clause (4) that local governments will receive in the
following year. The commissioner must certify this amount by January 1 of each year.

new text begin EFFECTIVE DATE. new text end

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

Sec. 34.

Minnesota Statutes 2004, section 276.112, is amended to read:

276.112 STATE PROPERTY TAXES; COUNTY TREASURER.

On or before January 25 each year, for the period ending December 31 of the prior
year, and on or before June deleted text begin 29 deleted text end new text begin 28 new text end each year, for the period ending on the most recent
settlement day determined in section 276.09, and on or before December 2 each year, for
the period ending November 20, the county treasurer must make full settlement with
the county auditor according to sections 276.09, 276.10, and 276.111 for all receipts of
state property taxes levied under section 275.025, and must transmit those receipts to the
commissioner of revenue by electronic means.

new text begin EFFECTIVE DATE. new text end

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

Sec. 35.

Minnesota Statutes 2004, section 276A.01, subdivision 7, is amended to read:

Subd. 7.

Population.

"Population" means the most recent estimate of the population
of a municipality made by the state demographer and filed with the commissioner of
revenue as of July deleted text begin 1 deleted text end new text begin 15 new text end of the year in which a municipality's distribution net tax capacity
is calculated. The state demographer shall annually estimate the population of each
municipality and, in the case of a municipality which is located partly within and partly
without the area, the proportion of the total which resides within the area, and shall file the
estimates with the commissioner of revenue.

new text begin EFFECTIVE DATE. new text end

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

Sec. 36.

Minnesota Statutes 2004, section 282.016, is amended to read:

282.016 PROHIBITED PURCHASERS.

deleted text begin No deleted text end new text begin (a) A new text end county auditor, county treasurer, new text begin county attorney, new text end court administrator of the
district court, deleted text begin or deleted text end county assessor deleted text begin or deleted text end new text begin , new text end supervisor of assessments, deleted text begin or deleted text end deputy or clerk or new text begin an
new text end employee of such officer, deleted text begin and no deleted text end new text begin a new text end commissioner for tax-forfeited lands or new text begin an new text end assistant to
such commissioner deleted text begin may deleted text end new text begin , must not new text end become a purchaser new text begin , either personally or as an agent
or attorney for another person, new text end of the properties offered for sale under the provisions of
this chapter deleted text begin , either personally, or as agent or attorney for any other person, except that
deleted text end new text begin in the county for which the person performs duties.
new text end

new text begin (b) Notwithstanding paragraph (a), new text end such officer, deputy, deleted text begin court administrator deleted text end new text begin clerk new text end , new text begin or
new text end employee or commissioner for tax-forfeited lands or assistant to such commissioner may
(1) purchase lands owned by that official at the time the state became the absolute owner
thereof or (2) bid upon and purchase forfeited property offered for sale under the alternate
sale procedure described in section 282.01, subdivision 7a.

new text begin EFFECTIVE DATE. new text end

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

Sec. 37.

Minnesota Statutes 2004, section 282.08, is amended to read:

282.08 APPORTIONMENT OF PROCEEDS TO TAXING DISTRICTS.

The net proceeds from the sale or rental of any parcel of forfeited land, or from the
sale of products from the forfeited land, must be apportioned by the county auditor to the
taxing districts interested in the land, as follows:

(1) deleted text begin the amounts necessary to pay the state general tax levy against the parcel for
taxes payable in the year for which the tax judgment was entered, and for each subsequent
payable year up to and including the year of forfeiture, must be apportioned to the state;
deleted text end

deleted text begin (2) deleted text end the portion required to pay any amounts included in the appraised value
under section 282.01, subdivision 3, as representing increased value due to any public
improvement made after forfeiture of the parcel to the state, but not exceeding the amount
certified by the clerk of the municipality must be apportioned to the municipal subdivision
entitled to it;

deleted text begin (3) deleted text end new text begin (2) new text end the portion required to pay any amount included in the appraised value under
section 282.019, subdivision 5, representing increased value due to response actions
taken after forfeiture of the parcel to the state, but not exceeding the amount of expenses
certified by the Pollution Control Agency or the commissioner of agriculture, must be
apportioned to the agency or the commissioner of agriculture and deposited in the fund
from which the expenses were paid;

deleted text begin (4) deleted text end new text begin (3) new text end the portion of the remainder required to discharge any special assessment
chargeable against the parcel for drainage or other purpose whether due or deferred at the
time of forfeiture, must be apportioned to the municipal subdivision entitled to it; and

deleted text begin (5) deleted text end new text begin (4) new text end any balance must be apportioned as follows:

(i) The county board may annually by resolution set aside no more than 30 percent
of the receipts remaining to be used for timber development on tax-forfeited land and
dedicated memorial forests, to be expended under the supervision of the county board. It
must be expended only on projects approved by the commissioner of natural resources.

(ii) The county board may annually by resolution set aside no more than 20 percent
of the receipts remaining to be used for the acquisition and maintenance of county parks
or recreational areas as defined in sections 398.31 to 398.36, to be expended under the
supervision of the county board.

(iii) Any balance remaining must be apportioned as follows: county, 40 percent;
town or city, 20 percent; and school district, 40 percent, provided, however, that in
unorganized territory that portion which would have accrued to the township must be
administered by the county board of commissioners.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment for
state general tax levy amounts payable in 2004 and thereafter.
new text end

Sec. 38.

Minnesota Statutes 2004, section 282.15, is amended to read:

282.15 SALES OF FORFEITED AGRICULTURAL LANDS.

The sale shall be conducted by the auditor of the county in which the parcels lie. The
parcels shall be sold to the highest bidder but not for less than the appraised value. The
sales shall be for cash or on the following terms: The appraised value of all merchantable
timber on agricultural lands shall be paid for in full at the date of sale. At least 15 percent
of the purchase price of the land shall be paid in cash at the time of purchase. The balance
shall be paid in not more than 20 equal annual installments, with interest at a rate equal to
the rate in effect at the time under section 549.09 on the unpaid balance each year. Both
principal and interest are due and payable on December 31 each year following that in
which the purchase was made. The purchaser may pay any number of installments of
principal and interest on or before their due date. When the sale is on terms other than for
cash in full, the purchaser shall receive from the county auditor a contract for deed, in a
form prescribed by the attorney general. The county auditor shall make a report to the
commissioner of natural resources not more than 30 days after each public sale showing
the lands sold at the sales, and submit a copy of each contract of sale.

All lands sold pursuant to this section deleted text begin shall, on the second day of January following
the date of the sale, deleted text end new text begin must new text end be restored to the tax rolls and become subject to taxation in the
same manner as they were assessed and taxed before becoming the absolute property
of the state new text begin for the assessment year determined under section 272.02, subdivision 38,
paragraph (c) new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales occurring on or after July
1, 2005.
new text end

Sec. 39.

Minnesota Statutes 2004, section 282.21, is amended to read:

282.21 FORM OF CONVEYANCE.

new text begin When any sale has been made under sections 282.14 to 282.22, new text end upon payment in full
of the purchase price, appropriate conveyance in fee in such form as may be prescribed
by the attorney general shall be issued by the commissioner of deleted text begin finance deleted text end new text begin natural resources
new text end to the purchaser or the purchaser's assigns and this conveyance shall have the force and
effect of a patent from the state.

new text begin EFFECTIVE DATE. new text end

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

Sec. 40.

Minnesota Statutes 2004, section 282.224, is amended to read:

282.224 FORM OF CONVEYANCE.

new text begin When any sale has been made under sections 282.221 to 282.226, new text end upon payment in
full of the purchase price new text begin , new text end appropriate conveyance in fee, in such form as may be prescribed
by the attorney general, shall be issued by the commissioner of natural resources to the
purchaser or the purchaser's assignee, and the conveyance shall have the force and effect
of a patent from the state.

new text begin EFFECTIVE DATE. new text end

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

Sec. 41.

Minnesota Statutes 2004, section 282.301, is amended to read:

282.301 RECEIPTS FOR PAYMENTS.

new text begin When any sale has been made under sections 282.012 and 282.241 to 282.324, new text end the
purchaser shall receive from the county auditor at the time of repurchase a receipt, in such
form as may be prescribed by the attorney general. When the purchase price of a parcel of
land shall be paid in full, the following facts shall be certified by the county auditor to the
commissioner of revenue of the state of Minnesota: the description of land, the date of
sale, the name of the purchaser or the purchaser's assignee, and the date when the final
installment of the purchase price was paid. Upon payment in full of the purchase price,
the purchaser or the assignee shall receive a quitclaim deed from the state, to be executed
by the commissioner of revenue. The deed must be sent to the county auditor who shall
have it recorded before it is forwarded to the purchaser. Failure to make any payment
herein required shall constitute default and upon such default and cancellation in accord
with section 282.40, the right, title and interest of the purchaser or the purchaser's heirs,
representatives, or assigns in such parcel shall terminate.

new text begin EFFECTIVE DATE. new text end

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

Sec. 42.

Minnesota Statutes 2004, section 290A.19, is amended to read:

290A.19 OWNER OR MANAGING AGENT TO FURNISH RENT
CERTIFICATE.

new text begin (a) new text end The owner or managing agent of any property for which rent is paid for
occupancy as a homestead must furnish a certificate of rent paid to a person who is a
renter on December 31, in the form prescribed by the commissioner. If the renter moves
before December 31, the owner or managing agent may give the certificate to the renter
at the time of moving, or mail the certificate to the forwarding address if an address has
been provided by the renter. The certificate must be made available to the renter before
February 1 of the year following the year in which the rent was paid. The owner or
managing agent must retain a duplicate of each certificate or an equivalent record showing
the same information for a period of three years. The duplicate or other record must
be made available to the commissioner upon request. For the purposes of this section,
"owner" includes a park owner as defined under section 327C.01, subdivision 6, and
"property" includes a lot as defined under section 327C.01, subdivision 3.

new text begin (b) The commissioner may require the owner or managing agent to file a copy of
the certificate of rent paid with the commissioner by April 15 of the year following the
year in which the rent was paid. The copy must be submitted to the commissioner by
electronic means as that term is defined in section 289A.02, subdivision 8. This paragraph
does not apply to any owner or managing agent that is required to issue certificates to
renters of fewer than 100 units.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for certificates of rent paid that are
issued for rent paid after December 31, 2005.
new text end

Sec. 43.

Minnesota Statutes 2004, section 290B.05, subdivision 3, is amended to read:

Subd. 3.

Calculation of deferred property tax amount.

When final property tax
amounts for the following year have been determined, the county auditor shall calculate
the "deferred property tax amount." The deferred property tax amount is equal to the
lesser of (1) the maximum allowable deferral for the year; or (2) the difference between
new text begin (i) new text end the total amount of property taxes new text begin and special assessments new text end levied upon the qualifying
homestead by all taxing jurisdictions and new text begin (ii) new text end the maximum property tax amount. deleted text begin Any
special assessments levied by any local unit of government must not be included in the
total tax used to calculate the deferred tax amount. deleted text end new text begin For this purpose "special assessments"
includes any assessment, fee, or other charge that may by law, and which does, appear on
the property tax statement for the property for collection under the laws applicable to the
enforcement of real estate taxes. new text end Any tax attributable to new improvements made to the
property after the initial application has been approved under section 290B.04, subdivision
2, must be excluded when determining any subsequent deferred property tax amount.
The county auditor shall annually, on or before April 15, certify to the commissioner of
revenue the property tax deferral amounts determined under this subdivision by property
and by owner.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for amounts deferred in 2006 and
thereafter.
new text end

Sec. 44.

Minnesota Statutes 2004, section 373.45, subdivision 7, is amended to read:

Subd. 7.

Aid reduction for repayment.

(a) Except as provided in paragraph (b),
the commissioner may reduce, by the amount paid by the state under this section on behalf
of the county, plus the interest due on the state payments, the deleted text begin following aids payable
to the county:
deleted text end

deleted text begin (1) homestead and agricultural credit aid and disparity reduction aid payable under
section 273.1398;
deleted text end

deleted text begin (2) county criminal justice aid payable under section 477A.0121; and
deleted text end

deleted text begin (3) family preservation aid payable under section 477A.0122 deleted text end new text begin county program aid
under section 477A.0124 new text end .

The amount of any aid reduction reverts from the appropriate account to the state general
fund.

(b) If, after review of the financial situation of the county, the authority advises the
commissioner that a total reduction of the aids would cause an undue hardship on the
county, the authority, with the approval of the commissioner, may establish a different
schedule for reduction of aids to repay the state. The amount of aids to be reduced are
decreased by any amounts repaid to the state by the county from other revenue sources.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for aid payable in 2005 and thereafter.
new text end

Sec. 45.

Minnesota Statutes 2004, section 469.1735, subdivision 3, is amended to read:

Subd. 3.

Transfer authority for property tax.

(a) A city may elect to use all
or part of its allocation under subdivision 2 to reimburse the city or county or both for
property tax reductions under section 272.0212. To elect this option, the city must notify
the commissioner of revenue by October 1 of each calendar year of the amount of the
property tax reductions new text begin for which new text end it seeks reimbursements for taxes payable during the
deleted text begin following deleted text end new text begin current new text end year and the governmental units to which the amounts will be paid. The
commissioner may require the city to provide information substantiating the amount of the
reductions granted or any other information necessary to administer this provision. The
commissioner shall pay the reimbursements by December 26 new text begin of the taxes payable year new text end .
Any amount transferred under this authority reduces the amount of tax credit certificates
available under subdivisions 1 and 2.

(b) The amount elected by the city under paragraph (a) is appropriated to the
commissioner of revenue from the general fund to reimburse the city or county for
tax reductions under section 272.0212. The amount appropriated may not exceed the
maximum amounts allocated to a city under subdivision 2, paragraph (b), less the amount
of certificates issued by the city under subdivision 1, and is available until expended.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for reimbursements of taxes payable
in 2005 and thereafter.
new text end

Sec. 46.

new text begin [473.24] POPULATION ESTIMATES.
new text end

new text begin (a) The Metropolitan Council shall annually prepare an estimate of population
for each county, city, and town in the metropolitan area and an estimate of the number
of households and average household size for each city in the metropolitan area with a
population of 2,500 or more, and an estimate of population over age 65 for each county in
the metropolitan area, and convey the estimates to the governing body of each county,
city, or town by June 1 each year. In the case of a city or town that is located partly within
and partly without the metropolitan area, the Metropolitan Council shall estimate the
proportion of the total population and the average size of households that reside within
the area. The Metropolitan Council may prepare an estimate of the population and of the
average household size for any other political subdivision located in the metropolitan area.
new text end

new text begin (b) A governing body may challenge an estimate made under this section by
filing its specific objections in writing with the Metropolitan Council by June 24. If the
challenge does not result in an acceptable estimate, the governing body may have a special
census conducted by the United States Bureau of the Census. The political subdivision
must notify the Metropolitan Council on or before July 1 of its intent to have the special
census conducted. The political subdivision must bear all costs of the special census.
Results of the special census must be received by the Metropolitan Council by the next
April 15 to be used in that year's June 1 estimate under this section. The Metropolitan
Council shall certify the estimates of population and the average household size to the
state demographer and to the commissioner of revenue by July 15 each year, including any
estimates still under objection.
new text end

new text begin EFFECTIVE DATE. new text end

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

Sec. 47.

Minnesota Statutes 2004, section 473F.02, subdivision 7, is amended to read:

Subd. 7.

Population.

"Population" means the most recent estimate of the population
of a municipality made by the Metropolitan Council new text begin under section 473.24 new text end and filed
with the commissioner of revenue as of July deleted text begin 1 deleted text end new text begin 15 new text end of the year in which a municipality's
distribution net tax capacity is calculated. deleted text begin The council shall annually estimate the
population of each municipality as of a date which it determines and, in the case of a
municipality which is located partly within and partly without the area, the proportion
of the total which resides within the area, and shall promptly thereafter file its estimates
with the commissioner of revenue.
deleted text end

new text begin EFFECTIVE DATE. new text end

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

Sec. 48.

Minnesota Statutes 2004, section 477A.011, subdivision 3, is amended to read:

Subd. 3.

Population.

"Population" means the population new text begin estimated or new text end established
as of July deleted text begin 1 deleted text end new text begin 15 new text end in an aid calculation year by the most recent federal census, by a special
census conducted under contract with the United States Bureau of the Census, by a
population estimate made by the Metropolitan Council new text begin pursuant to section 473.24 new text end , or by a
population estimate of the state demographer made pursuant to section 4A.02, whichever
is the most recent as to the stated date of the count or estimate for the preceding calendar
year new text begin , and which has been certified to the commissioner of revenue on or before July 15
of the aid calculation year new text end . The term "per capita" refers to population as defined by this
subdivision. new text begin A revision of an estimate or count is effective for these purposes only if it is
certified to the commissioner on or before July 15 of the aid calculation year. Clerical
errors in the certification or use of the estimates and counts established as of July 15 in
the aid calculation year are subject to correction within the time periods allowed under
section 477A.014.
new text end

new text begin EFFECTIVE DATE. new text end

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

Sec. 49.

Minnesota Statutes 2004, section 477A.011, subdivision 36, is amended to
read:

Subd. 36.

City aid base.

(a) Except as otherwise provided in this subdivision,
"city aid base" is zero.

(b) The city aid base for any city with a population less than 500 is increased by
$40,000 for aids payable in calendar year 1995 and thereafter, and the maximum amount
of total aid it may receive under section 477A.013, subdivision 9, paragraph (c), is also
increased by $40,000 for aids payable in calendar year 1995 only, provided that:

(i) the average total tax capacity rate for taxes payable in 1995 exceeds 200 percent;

(ii) the city portion of the tax capacity rate exceeds 100 percent; and

(iii) its city aid base is less than $60 per capita.

(c) The city aid base for a city is increased by $20,000 in 1998 and thereafter and
the maximum amount of total aid it may receive under section 477A.013, subdivision 9,
paragraph (c), is also increased by $20,000 in calendar year 1998 only, provided that:

(i) the city has a population in 1994 of 2,500 or more;

(ii) the city is located in a county, outside of the metropolitan area, which contains a
city of the first class;

(iii) the city's net tax capacity used in calculating its 1996 aid under section
477A.013 is less than $400 per capita; and

(iv) at least four percent of the total net tax capacity, for taxes payable in 1996, of
property located in the city is classified as railroad property.

(d) The city aid base for a city is increased by $200,000 in 1999 and thereafter and
the maximum amount of total aid it may receive under section 477A.013, subdivision 9,
paragraph (c), is also increased by $200,000 in calendar year 1999 only, provided that:

(i) the city was incorporated as a statutory city after December 1, 1993;

(ii) its city aid base does not exceed $5,600; and

(iii) the city had a population in 1996 of 5,000 or more.

(e) The city aid base for a city is increased by $450,000 in 1999 to 2008 and the
maximum amount of total aid it may receive under section 477A.013, subdivision 9,
paragraph (c), is also increased by $450,000 in calendar year 1999 only, provided that:

(i) the city had a population in 1996 of at least 50,000;

(ii) its population had increased by at least 40 percent in the ten-year period ending
in 1996; and

(iii) its city's net tax capacity for aids payable in 1998 is less than $700 per capita.

(f) deleted text begin Beginning in 2004, the city aid base for a city is equal to the sum of its city aid
base in 2003 and the amount of additional aid it was certified to receive under section
477A.06 in 2003. For 2004 only, the maximum amount of total aid a city may receive
under section 477A.013, subdivision 9, paragraph (c), is also increased by the amount it
was certified to receive under section 477A.06 in 2003.
deleted text end

deleted text begin (g) deleted text end The city aid base for a city is increased by $150,000 for aids payable in 2000 and
thereafter, and the maximum amount of total aid it may receive under section 477A.013,
subdivision 9, paragraph (c), is also increased by $150,000 in calendar year 2000 only,
provided that:

(1) the city has a population that is greater than 1,000 and less than 2,500;

(2) its commercial and industrial percentage for aids payable in 1999 is greater
than 45 percent; and

(3) the total market value of all commercial and industrial property in the city
for assessment year 1999 is at least 15 percent less than the total market value of all
commercial and industrial property in the city for assessment year 1998.

deleted text begin (h) deleted text end new text begin (g) new text end The city aid base for a city is increased by $200,000 in 2000 and thereafter,
and the maximum amount of total aid it may receive under section 477A.013, subdivision
9, paragraph (c), is also increased by $200,000 in calendar year 2000 only, provided that:

(1) the city had a population in 1997 of 2,500 or more;

(2) the net tax capacity of the city used in calculating its 1999 aid under section
477A.013 is less than $650 per capita;

(3) the pre-1940 housing percentage of the city used in calculating 1999 aid under
section 477A.013 is greater than 12 percent;

(4) the 1999 local government aid of the city under section 477A.013 is less than
20 percent of the amount that the formula aid of the city would have been if the need
increase percentage was 100 percent; and

(5) the city aid base of the city used in calculating aid under section 477A.013
is less than $7 per capita.

deleted text begin (i) deleted text end new text begin (h) new text end The city aid base for a city is increased by $102,000 in 2000 and thereafter,
and the maximum amount of total aid it may receive under section 477A.013, subdivision
9, paragraph (c), is also increased by $102,000 in calendar year 2000 only, provided that:

(1) the city has a population in 1997 of 2,000 or more;

(2) the net tax capacity of the city used in calculating its 1999 aid under section
477A.013 is less than $455 per capita;

(3) the net levy of the city used in calculating 1999 aid under section 477A.013 is
greater than $195 per capita; and

(4) the 1999 local government aid of the city under section 477A.013 is less than
38 percent of the amount that the formula aid of the city would have been if the need
increase percentage was 100 percent.

deleted text begin (j) deleted text end new text begin (i) new text end The city aid base for a city is increased by $32,000 in 2001 and thereafter, and
the maximum amount of total aid it may receive under section 477A.013, subdivision 9,
paragraph (c), is also increased by $32,000 in calendar year 2001 only, provided that:

(1) the city has a population in 1998 that is greater than 200 but less than 500;

(2) the city's revenue need used in calculating aids payable in 2000 was greater
than $200 per capita;

(3) the city net tax capacity for the city used in calculating aids available in 2000
was equal to or less than $200 per capita;

(4) the city aid base of the city used in calculating aid under section 477A.013
is less than $65 per capita; and

(5) the city's formula aid for aids payable in 2000 was greater than zero.

deleted text begin (k) deleted text end new text begin (j) new text end The city aid base for a city is increased by $7,200 in 2001 and thereafter, and
the maximum amount of total aid it may receive under section 477A.013, subdivision 9,
paragraph (c), is also increased by $7,200 in calendar year 2001 only, provided that:

(1) the city had a population in 1998 that is greater than 200 but less than 500;

(2) the city's commercial industrial percentage used in calculating aids payable in
2000 was less than ten percent;

(3) more than 25 percent of the city's population was 60 years old or older according
to the 1990 census;

(4) the city aid base of the city used in calculating aid under section 477A.013
is less than $15 per capita; and

(5) the city's formula aid for aids payable in 2000 was greater than zero.

deleted text begin (l) deleted text end new text begin (k) new text end The city aid base for a city is increased by $45,000 in 2001 and thereafter
and by an additional $50,000 in calendar years 2002 to 2011, and the maximum amount
of total aid it may receive under section 477A.013, subdivision 9, paragraph (c), is also
increased by $45,000 in calendar year 2001 only, and by $50,000 in calendar year 2002
only, provided that:

(1) the net tax capacity of the city used in calculating its 2000 aid under section
477A.013 is less than $810 per capita;

(2) the population of the city declined more than two percent between 1988 and 1998;

(3) the net levy of the city used in calculating 2000 aid under section 477A.013 is
greater than $240 per capita; and

(4) the city received less than $36 per capita in aid under section 477A.013,
subdivision 9, for aids payable in 2000.

deleted text begin (m) deleted text end new text begin (l) new text end The city aid base for a city with a population of 10,000 or more which is
located outside of the seven-county metropolitan area is increased in 2002 and thereafter,
and the maximum amount of total aid it may receive under section 477A.013, subdivision
9, paragraph (b) or (c), is also increased in calendar year 2002 only, by an amount equal to
the lesser of:

(1)(i) the total population of the city, as determined by the United States Bureau of
the Census, in the 2000 census, (ii) minus 5,000, (iii) times 60; or

(2) $2,500,000.

deleted text begin (n) deleted text end new text begin (m) new text end The city aid base is increased by $50,000 in 2002 and thereafter, and the
maximum amount of total aid it may receive under section 477A.013, subdivision 9,
paragraph (c), is also increased by $50,000 in calendar year 2002 only, provided that:

(1) the city is located in the seven-county metropolitan area;

(2) its population in 2000 is between 10,000 and 20,000; and

(3) its commercial industrial percentage, as calculated for city aid payable in 2001,
was greater than 25 percent.

deleted text begin (o) deleted text end new text begin (n) new text end The city aid base for a city is increased by $150,000 in calendar years 2002
to 2011 and the maximum amount of total aid it may receive under section 477A.013,
subdivision 9, paragraph (c), is also increased by $150,000 in calendar year 2002 only,
provided that:

(1) the city had a population of at least 3,000 but no more than 4,000 in 1999;

(2) its home county is located within the seven-county metropolitan area;

(3) its pre-1940 housing percentage is less than 15 percent; and

(4) its city net tax capacity per capita for taxes payable in 2000 is less than $900
per capita.

deleted text begin (p) deleted text end new text begin (o) new text end The city aid base for a city is increased by $200,000 beginning in calendar
year 2003 and the maximum amount of total aid it may receive under section 477A.013,
subdivision 9, paragraph (c), is also increased by $200,000 in calendar year 2003 only,
provided that the city qualified for an increase in homestead and agricultural credit aid
under Laws 1995, chapter 264, article 8, section 18.

deleted text begin (q) deleted text end new text begin (p) new text end The city aid base for a city is increased by $200,000 in 2004 only and the
maximum amount of total aid it may receive under section 477A.013, subdivision 9, is
also increased by $200,000 in calendar year 2004 only, if the city is the site of a nuclear
dry cask storage facility.

deleted text begin (r) deleted text end new text begin (q) new text end The city aid base for a city is increased by $10,000 in 2004 and thereafter
and the maximum total aid it may receive under section 477A.013, subdivision 9, is also
increased by $10,000 in calendar year 2004 only, if the city was included in a federal
major disaster designation issued on April 1, 1998, and its pre-1940 housing stock was
decreased by more than 40 percent between 1990 and 2000.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning with aids payable in 2004.
new text end

Sec. 50.

Minnesota Statutes 2004, section 477A.011, subdivision 38, is amended to
read:

Subd. 38.

Household size.

"Household size" means the average number of persons
per household in the jurisdiction as most recently estimated and reported by the state
demographer new text begin and Metropolitan Council new text end as of July deleted text begin 1 deleted text end new text begin 15 new text end of the aid calculation year. new text begin A
revision to an estimate or enumeration is effective for these purposes only if it is certified
to the commissioner on or before July 15 of the aid calculation year. Clerical errors in the
certification or use of estimates and counts established as of July 15 in the aid calculation
year are subject to correction within the time periods allowed under section 477A.014.
new text end

new text begin EFFECTIVE DATE. new text end

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

Sec. 51.

Minnesota Statutes 2004, section 477A.0124, subdivision 2, is amended to
read:

Subd. 2.

Definitions.

(a) For the purposes of this section, the following terms
have the meanings given them.

(b) "County program aid" means the sum of "county need aid," "county tax base
equalization aid," and "county transition aid."

(c) "Age-adjusted population" means a county's population multiplied by the county
age index.

(d) "County age index" means the percentage of the population over age 65 within
the county divided by the percentage of the population over age 65 within the state, except
that the age index for any county may not be greater than 1.8 nor less than 0.8.

(e) "Population over age 65" means the population over age 65 established as of
July deleted text begin 1 deleted text end new text begin 15 new text end in an aid calculation year by the most recent federal census, by a special census
conducted under contract with the United States Bureau of the Census, by a population
estimate made by the Metropolitan Council, or by a population estimate of the state
demographer made pursuant to section 4A.02, whichever is the most recent as to the stated
date of the count or estimate for the preceding calendar year new text begin and which has been certified
to the commissioner of revenue on or before July 15 of the aid calculation year new text end . new text begin A revision
to an estimate or count is effective for these purposes only if certified to the commissioner
on or before July 15 of the aid calculation year. Clerical errors in the certification or use of
estimates and counts established as of July 15 in the aid calculation year are subject to
correction within the time periods allowed under section 477A.014.
new text end

(f) "Part I crimes" means the three-year average annual number of Part I crimes
reported for each county by the Department of Public Safety for the most recent years
available. By July 1 of each year, the commissioner of public safety shall certify to the
commissioner of revenue the number of Part I crimes reported for each county for the
three most recent calendar years available.

(g) "Households receiving food stamps" means the average monthly number of
households receiving food stamps for the three most recent years for which data is
available. By July 1 of each year, the commissioner of human services must certify to the
commissioner of revenue the average monthly number of households in the state and in
each county that receive food stamps, for the three most recent calendar years available.

(h) "County net tax capacity" means the net tax capacity of the county, computed
analogously to city net tax capacity under section 477A.011, subdivision 20.

new text begin EFFECTIVE DATE. new text end

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

Sec. 52.

Laws 2003, chapter 127, article 5, section 27, the effective date, is amended to
read:

new text begin EFFECTIVE DATE. new text end

This section is effective for deleted text begin taxes payable in 2004 and
thereafter deleted text end new text begin distributions occurring on or after June 10, 2003 new text end .

Sec. 53.

Laws 2003, chapter 127, article 5, section 28, the effective date, is amended to
read:

new text begin EFFECTIVE DATE. new text end

This section is effective for deleted text begin taxes payable in 2004 and
thereafter deleted text end new text begin distributions occurring on or after June 10, 2003 new text end .

Sec. 54.

Laws 2003, First Special Session chapter 21, article 5, section 13, is amended
to read:

Sec. 13. new text begin 2004 CITY AID REDUCTIONS.
new text end

The commissioner of revenue shall compute an aid reduction amount for 2004
for each city as provided in this section.

The initial aid reduction amount for each city is the amount by which the city's aid
distribution under Minnesota Statutes, section 477A.013, and related provisions payable
in 2003 exceeds the city's 2004 distribution under those provisions.

The minimum aid reduction amount for a city is the amount of its reduction in
2003 under section 12. If a city receives an increase to its city aid base under Minnesota
Statutes, section 477A.011, subdivision 36, its minimum aid reduction is reduced by an
equal amount.

The maximum aid reduction amount for a city is an amount equal to 14 percent of
the city's total 2004 levy plus aid revenue base, except that if the city has a city net tax
capacity for aids payable in 2004, as defined in Minnesota Statutes, section 477A.011,
subdivision 20, of $700 per capita or less, the maximum aid reduction shall not exceed an
amount equal to 13 percent of the city's total 2004 levy plus aid revenue base.

If the initial aid reduction amount for a city is less than the minimum aid reduction
amount for that city, the final aid reduction amount for the city is the sum of the initial aid
reduction amount and the lesser of the amount of the city's payable 2004 reimbursement
under Minnesota Statutes, section 273.1384, or the difference between the minimum and
initial aid reduction amounts for the city new text begin , and the amount of the final aid reduction in
excess of the initial aid reduction is deducted from the city's reimbursements pursuant
to Minnesota Statutes, section 273.1384 new text end .

If the initial aid reduction amount for a city is greater than the maximum aid
reduction amount for the city, the city receives an additional distribution under this section
equal to the result of subtracting the maximum aid reduction amount from the initial aid
reduction amount. This distribution shall be paid in equal installments in 2004 on the
dates specified in Minnesota Statutes, section 477A.015. The amount necessary for these
additional distributions is appropriated to the commissioner of revenue from the general
fund in fiscal year 2005.

deleted text begin The initial aid reduction is applied to the city's distribution pursuant to Minnesota
Statutes, section 477A.013, and any aid reduction in excess of the initial aid reduction is
applied to the city's reimbursements pursuant to Minnesota Statutes, section 273.1384.
deleted text end

To the extent that sufficient information is available on each payment date in 2004,
the commissioner of revenue shall pay the reimbursements reduced under this section in
equal installments on the payment dates provided in law.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for aids payable in 2004.
new text end

Sec. 55.

Laws 2003, First Special Session chapter 21, article 6, section 9, is amended
to read:

Sec. 9 new text begin DEFINITIONS.
new text end

(a) For purposes of sections 9 to 15, the following terms have the meanings given
them in this section.

(b) The 2003 and 2004 "levy plus aid revenue base" for a county is the sum of that
county's certified property tax levy for taxes payable in 2003, plus the sum of the amounts
the county was certified to receive in the designated calendar year as:

(1) homestead and agricultural credit aid under Minnesota Statutes, section
273.1398, subdivision 2, plus any additional aid under section 16, minus the amount
calculated under section 273.1398, subdivision 4a, paragraph (b), for counties in judicial
districts one, three, six, and ten, and 25 percent of the amount calculated under section
273.1398, subdivision 4a, paragraph (b), for counties in judicial districts two and four;

(2) the amount of county manufactured home homestead and agricultural credit aid
computed for the county for payment in 2003 under section 273.166;

(3) criminal justice aid under Minnesota Statutes, section 477A.0121;

(4) family preservation aid under Minnesota Statutes, section 477A.0122;

(5) taconite aids under Minnesota Statutes, sections 298.28 and 298.282, including
any aid which was required to be placed in a special fund for expenditure in the next
succeeding year; and

(6) county program aid under section 477A.0124 new text begin , exclusive of the attached
machinery aid component new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for aids payable in 2004.
new text end

Sec. 56. new text begin LINCOLN AND PIPESTONE COUNTIES; TOWN LEVY
ADJUSTMENT FOR WIND ENERGY PRODUCTION TAX.
new text end

new text begin Notwithstanding the deadlines in Minnesota Statutes, section 275.07, towns located
in Lincoln or Pipestone County are authorized to adjust their payable 2004 levy for all or a
portion of their estimated wind energy production tax amounts for 2004, as computed by
the commissioner of revenue from reports filed under Minnesota Statutes, section 272.029,
subdivision 4. The Lincoln and Pipestone County auditors may adjust the payable 2004
levy certifications under Minnesota Statutes, section 275.07, subdivision 1, based upon the
towns that have recertified their levies under this section by March 15, 2004.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes payable in 2004.
new text end

Sec. 57. new text begin REPEALER.
new text end

new text begin (a) Minnesota Statutes 2004, sections 273.19, subdivision 5; 274.05; 275.15; 275.61,
subdivision 2; and 283.07, are repealed effective the day following final enactment.
new text end

new text begin (b) Laws 1975, chapter 287, section 5, and Laws 2003, chapter 127, article 9, section
9, subdivision 4, are repealed effective without local approval for taxes payable in 2006
and thereafter.
new text end

ARTICLE 11

DEPARTMENT OF REVENUE SALES AND USE TAXES

Section 1.

Minnesota Statutes 2004, section 289A.38, subdivision 6, is amended to
read:

Subd. 6.

Omission in excess of 25 percent.

Additional taxes may be assessed
within 6-1/2 years after the due date of the return or the date the return was filed,
whichever is later, if:

(1) the taxpayer omits from gross income an amount properly includable in it that is
in excess of 25 percent of the amount of gross income stated in the return;

(2) the taxpayer omits from a sales new text begin , use, new text end or withholding tax return an amount new text begin of taxes
new text end in excess of 25 percent of the taxes reported in the return; or

(3) the taxpayer omits from the gross estate assets in excess of 25 percent of the
gross estate reported in the return.

new text begin EFFECTIVE DATE. new text end

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

Sec. 2.

Minnesota Statutes 2004, section 289A.38, is amended by adding a subdivision
to read:

new text begin Subd. 15. new text end

new text begin Purchaser filed refund claims. new text end

new text begin If a purchaser refund claim is filed
under section 289A.50, subdivision 2a, and the basis for the claim is that the purchaser
was improperly charged tax on an improvement to real property or on the purchase of
nontaxable services, sales or use tax may be assessed for the cost of materials used to
make the real property improvement or to perform the nontaxable service. The assessment
may be made against the person making the improvement to real property or the sale of
nontaxable services, within the period prescribed in subdivision 1, or within one year after
the date of the refund order, whichever is later.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for purchaser refund claims filed
on or after July 1, 2005.
new text end

Sec. 3.

Minnesota Statutes 2004, section 289A.40, subdivision 2, is amended to read:

Subd. 2.

Bad debt loss.

If a claim relates to an overpayment because of a failure to
deduct a loss due to a bad debt or to a security becoming worthless, the claim is considered
timely if filed within seven years from the date prescribed for the filing of the return. A
claim relating to an overpayment of taxes under chapter 297A must be filed within 3-1/2
years from the date prescribed for filing the return, plus any extensions granted for filing
the return, but only if filed within the extended time. The refund or credit is limited to
the amount of overpayment attributable to the loss. "Bad debt" for purposes of this
subdivision, has the same meaning as that term is used in United States Code, title 26,
section 166, except that new text begin for a claim relating to an overpayment of taxes under chapter
297A new text end the following are excluded from the calculation of bad debt: financing charges
or interest; sales or use taxes charged on the purchase price; uncollectible amounts on
property that remain in the possession of the seller until the full purchase price is paid;
expenses incurred in attempting to collect any debt; and repossessed property.

new text begin EFFECTIVE DATE. new text end

new text begin For claims relating to an overpayment of taxes under chapter
297A, this section is effective for sales and purchases made on or after January 1, 2004;
for all other bad debts or claims, this section is effective on or after July 1, 2003.
new text end

Sec. 4.

Minnesota Statutes 2004, section 289A.40, is amended by adding a subdivision
to read:

new text begin Subd. 5. new text end

new text begin Purchaser filed refund claims. new text end

new text begin A claim for refund of taxes paid on a
transaction not subject to tax under chapter 297A, where the purchaser may apply directly
to the commissioner under section 289A.50, subdivision 2a, must be filed within 3-1/2
years from the 20th day of the month following the month of the invoice date for the
purchase.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for claims filed on or after the day
following final enactment.
new text end

Sec. 5.

Minnesota Statutes 2004, section 289A.40, is amended by adding a subdivision
to read:

new text begin Subd. 6. new text end

new text begin Capital equipment refund claims. new text end

new text begin A claim for refund for taxes paid
under chapter 297A on capital equipment must be filed within 3-1/2 years from the 20th
day of the month following the month of the invoice date for the purchase of the capital
equipment. A claim for refund for taxes imposed on capital equipment under section
297A.63 must be filed within 3-1/2 years from the date prescribed for filing the return,
or one year from the date of an order assessing tax under section 289A.37, subdivision
1, upon payment in full of the tax, penalties, and interest shown on the order, whichever
period expires later.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for claims filed on or after the day
following final enactment.
new text end

Sec. 6.

Minnesota Statutes 2004, section 297A.61, subdivision 3, is amended to read:

Subd. 3.

Sale and purchase.

(a) "Sale" and "purchase" include, but are not limited
to, each of the transactions listed in this subdivision.

(b) Sale and purchase include:

(1) any transfer of title or possession, or both, of tangible personal property, whether
absolutely or conditionally, for a consideration in money or by exchange or barter; and

(2) the leasing of or the granting of a license to use or consume, for a consideration
in money or by exchange or barter, tangible personal property, other than a manufactured
home used for residential purposes for a continuous period of 30 days or more.

(c) Sale and purchase include the production, fabrication, printing, or processing of
tangible personal property for a consideration for consumers who furnish either directly or
indirectly the materials used in the production, fabrication, printing, or processing.

(d) Sale and purchase include the preparing for a consideration of food.
Notwithstanding section 297A.67, subdivision 2, taxable food includes, but is not limited
to, the following:

(1) prepared food sold by the retailer;

(2) soft drinks;

(3) candy; deleted text begin and
deleted text end

(4) new text begin dietary supplements; and
new text end

new text begin (5) new text end all food sold through vending machines.

(e) A sale and a purchase includes the furnishing for a consideration of electricity,
gas, water, or steam for use or consumption within this state.

(f) A sale and a purchase includes the transfer for a consideration of prewritten
computer software whether delivered electronically, by load and leave, or otherwise.

(g) A sale and a purchase includes the furnishing for a consideration of the following
services:

(1) the privilege of admission to places of amusement, recreational areas, or athletic
events, and the making available of amusement devices, tanning facilities, reducing
salons, steam baths, turkish baths, health clubs, and spas or athletic facilities;

(2) lodging and related services by a hotel, rooming house, resort, campground,
motel, or trailer camp and the granting of any similar license to use real property new text begin in a
specific facility, new text end other than the renting or leasing of it for a continuous period of 30 days
or more new text begin under an enforceable written agreement that may not be terminated without
prior notice new text end ;

(3) nonresidential parking services, whether on a contractual, hourly, or other
periodic basis, except for parking at a meter;

(4) the granting of membership in a club, association, or other organization if:

(i) the club, association, or other organization makes available for the use of its
members sports and athletic facilities, without regard to whether a separate charge is
assessed for use of the facilities; and

(ii) use of the sports and athletic facility is not made available to the general public
on the same basis as it is made available to members.

Granting of membership means both onetime initiation fees and periodic membership
dues. Sports and athletic facilities include golf courses; tennis, racquetball, handball, and
squash courts; basketball and volleyball facilities; running tracks; exercise equipment;
swimming pools; and other similar athletic or sports facilities;

(5) delivery of aggregate materials and concrete block by a third party if the delivery
would be subject to the sales tax if provided by the seller of the aggregate material or
concrete block; and

(6) services as provided in this clause:

(i) laundry and dry cleaning services including cleaning, pressing, repairing, altering,
and storing clothes, linen services and supply, cleaning and blocking hats, and carpet,
drapery, upholstery, and industrial cleaning. Laundry and dry cleaning services do not
include services provided by coin operated facilities operated by the customer;

(ii) motor vehicle washing, waxing, and cleaning services, including services
provided by coin operated facilities operated by the customer, and rustproofing,
undercoating, and towing of motor vehicles;

(iii) building and residential cleaning, maintenance, and disinfecting and
exterminating services;

(iv) detective, security, burglar, fire alarm, and armored car services; but not
including services performed within the jurisdiction they serve by off-duty licensed peace
officers as defined in section 626.84, subdivision 1, or services provided by a nonprofit
organization for monitoring and electronic surveillance of persons placed on in-home
detention pursuant to court order or under the direction of the Minnesota Department
of Corrections;

(v) pet grooming services;

(vi) lawn care, fertilizing, mowing, spraying and sprigging services; garden planting
and maintenance; tree, bush, and shrub pruning, bracing, spraying, and surgery; indoor
plant care; tree, bush, shrub, and stump removal; and tree trimming for public utility lines.
Services performed under a construction contract for the installation of shrubbery, plants,
sod, trees, bushes, and similar items are not taxable;

(vii) massages, except when provided by a licensed health care facility or
professional or upon written referral from a licensed health care facility or professional for
treatment of illness, injury, or disease; and

(viii) the furnishing of lodging, board, and care services for animals in kennels and
other similar arrangements, but excluding veterinary and horse boarding services.

In applying the provisions of this chapter, the terms "tangible personal property"
and "sales at retail" include taxable services listed in clause (6), items (i) to (vi) and
(viii), and the provision of these taxable services, unless specifically provided otherwise.
Services performed by an employee for an employer are not taxable. Services performed
by a partnership or association for another partnership or association are not taxable if
one of the entities owns or controls more than 80 percent of the voting power of the
equity interest in the other entity. Services performed between members of an affiliated
group of corporations are not taxable. For purposes of the preceding sentence, "affiliated
group of corporations" includes those entities that would be classified as members of an
affiliated group under United States Code, title 26, section 1504, and that are eligible to
file a consolidated tax return for federal income tax purposes.

(h) A sale and a purchase includes the furnishing for a consideration of tangible
personal property or taxable services by the United States or any of its agencies or
instrumentalities, or the state of Minnesota, its agencies, instrumentalities, or political
subdivisions.

(i) A sale and a purchase includes the furnishing for a consideration of
telecommunications services, including cable television services and direct satellite
services. Telecommunications services are taxed to the extent allowed under federal law.

(j) A sale and a purchase includes the furnishing for a consideration of installation if
the installation charges would be subject to the sales tax if the installation were provided
by the seller of the item being installed.

(k) A sale and a purchase includes the rental of a vehicle by a motor vehicle dealer
to a customer when (1) the vehicle is rented by the customer for a consideration, or (2)
the motor vehicle dealer is reimbursed pursuant to a service contract as defined in section
65B.29, subdivision 1, clause (1).

new text begin EFFECTIVE DATE. new text end

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

Sec. 7.

Minnesota Statutes 2004, section 297A.61, subdivision 4, is amended to read:

Subd. 4.

Retail sale.

(a) A "retail sale" means any sale, lease, or rental for any
purpose new text begin , new text end other than resale, sublease, or subrent new text begin of items by the purchaser in the normal
course of business as defined in subdivision 21 new text end .

(b) A sale of property used by the owner only by leasing it to others or by holding it
in an effort to lease it, and put to no use by the owner other than resale after the lease or
effort to lease, is a sale of property for resale.

(c) A sale of master computer software that is purchased and used to make copies for
sale or lease is a sale of property for resale.

(d) A sale of building materials, supplies, and equipment to owners, contractors,
subcontractors, or builders for the erection of buildings or the alteration, repair, or
improvement of real property is a retail sale in whatever quantity sold, whether the sale is
for purposes of resale in the form of real property or otherwise.

(e) A sale of carpeting, linoleum, or similar floor covering to a person who provides
for installation of the floor covering is a retail sale and not a sale for resale since a sale
of floor covering which includes installation is a contract for the improvement of real
property.

(f) A sale of shrubbery, plants, sod, trees, and similar items to a person who provides
for installation of the items is a retail sale and not a sale for resale since a sale of
shrubbery, plants, sod, trees, and similar items that includes installation is a contract for
the improvement of real property.

(g) A sale of tangible personal property that is awarded as prizes is a retail sale and
is not considered a sale of property for resale.

(h) A sale of tangible personal property utilized or employed in the furnishing or
providing of services under subdivision 3, paragraph (g), clause (1), including, but not
limited to, property given as promotional items, is a retail sale and is not considered a
sale of property for resale.

(i) A sale of tangible personal property used in conducting lawful gambling under
chapter 349 or the state lottery under chapter 349A, including, but not limited to, property
given as promotional items, is a retail sale and is not considered a sale of property for
resale.

(j) A sale of machines, equipment, or devices that are used to furnish, provide, or
dispense goods or services, including, but not limited to, coin-operated devices, is a retail
sale and is not considered a sale of property for resale.

(k) In the case of a lease, a retail sale occurs when an obligation to make a lease
payment becomes due under the terms of the agreement or the trade practices of the lessor.

(l) In the case of a conditional sales contract, a retail sale occurs upon the transfer of
title or possession of the tangible personal property.

new text begin EFFECTIVE DATE. new text end

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

Sec. 8.

Minnesota Statutes 2004, section 297A.64, subdivision 4, is amended to read:

Subd. 4.

Exemptions.

(a) The tax and the fee imposed by this section do not apply
to a lease or rental of (1) a vehicle to be used by the lessee to provide a licensed taxi
service; (2) a hearse or limousine used in connection with a burial or funeral service; or
(3) a van designed or adapted primarily for transporting property rather than passengers.
new text begin The tax and the fee imposed under this section do not apply when the lease or rental of a
vehicle is exempt from the tax imposed under section 297A.62, subdivision 1.
new text end

(b) The lessor may elect not to charge the fee imposed in subdivision 2 if in the
previous calendar year the lessor had no more than 20 vehicles available for lease that
would have been subject to tax under this section, or no more than $50,000 in gross
receipts that would have been subject to tax under this section.

new text begin EFFECTIVE DATE. new text end

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

Sec. 9.

Minnesota Statutes 2004, section 297A.668, subdivision 1, is amended to read:

Subdivision 1.

applicability.

The provisions of this section apply regardless of the
characterization of a product as tangible personal property, a digital good, or a service; but
do not apply to telecommunications services deleted text begin , deleted text end or the sales of motor vehicles deleted text begin , watercraft,
aircraft, modular homes, manufactured homes, or mobile homes deleted text end . These provisions only
apply to determine a seller's obligation to pay or collect and remit a sales or use tax with
respect to the seller's sale of a product. These provisions do not affect the obligation of a
seller as purchaser to remit tax on the use of the product.

new text begin EFFECTIVE DATE. new text end

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

Sec. 10.

Minnesota Statutes 2004, section 297A.668, subdivision 5, is amended to read:

Subd. 5.

Transportation equipment.

(a) The retail sale, including lease or rental,
of transportation equipment shall be sourced the same as a retail sale in accordance
with the provisions of subdivision 2, notwithstanding the exclusion of lease or rental in
subdivision 2.

(b) "Transportation equipment" means any of the following:

(1) locomotives and railcars that are utilized for the carriage of persons or property
in interstate commerce; deleted text begin and/or
deleted text end

(2) trucks and truck-tractors with a gross vehicle weight rating (GVWR) of 10,001
pounds or greater, trailers, semitrailers, or passenger buses that are:

(i) registered through the international registration plan; and

(ii) operated under authority of a carrier authorized and certified by the United States
Department of Transportation or another federal authority to engage in the carriage of
persons or property in interstate commerce new text begin ;
new text end

new text begin (3) aircraft that are operated by air carriers authorized and certificated by the United
States Department of Transportation or another federal or a foreign authority to engage in
the carriage of persons or property in interstate commerce; or
new text end

new text begin (4) containers designed for use on and component parts attached or secured on the
transportation equipment described in items (1) through (3) new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made on
or after January 1, 2004.
new text end

Sec. 11.

Minnesota Statutes 2004, section 297A.67, subdivision 2, is amended to read:

Subd. 2.

Food and food ingredients.

new text begin Except as otherwise provided in this
subdivision, new text end food and food ingredients are exempt. For purposes of this subdivision, "food"
and "food ingredients" mean substances, whether in liquid, concentrated, solid, frozen,
dried, or dehydrated form, that are sold for ingestion or chewing by humans and are
consumed for their taste or nutritional value. Food and food ingredients exempt under this
subdivision do not include candy, soft drinks, food sold through vending machines, new text begin dietary
supplements, new text end and prepared foods. Food and food ingredients do not include alcoholic
beverages deleted text begin , dietary supplements, deleted text end and tobacco. For purposes of this subdivision, "alcoholic
beverages" means beverages that are suitable for human consumption and contain one-half
of one percent or more of alcohol by volume. For purposes of this subdivision, "tobacco"
means cigarettes, cigars, chewing or pipe tobacco, or any other item that contains tobacco.
For purposes of this subdivision, "dietary supplements" means any product, other than
tobacco, intended to supplement the diet that:

(1) contains one or more of the following dietary ingredients:

(i) a vitamin;

(ii) a mineral;

(iii) an herb or other botanical;

(iv) an amino acid;

(v) a dietary substance for use by humans to supplement the diet by increasing the
total dietary intake; and

(vi) a concentrate, metabolite, constituent, extract, or combination of any ingredient
described in items (i) to (v);

(2) is intended for ingestion in tablet, capsule, powder, softgel, gelcap, or liquid
form, or if not intended for ingestion in such form, is not represented as conventional food
and is not represented for use as a sole item of a meal or of the diet; and

(3) is required to be labeled as a dietary supplement, identifiable by the supplement
facts box found on the label and as required pursuant to Code of Federal Regulations,
title 21, section 101.36.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales made on or after the day
following final enactment.
new text end

Sec. 12.

Minnesota Statutes 2004, section 297A.68, subdivision 2, is amended to read:

Subd. 2.

Materials consumed in industrial production.

(a) Materials stored, used,
or consumed in industrial production of personal property intended to be sold ultimately at
retail are exempt, whether or not the item so used becomes an ingredient or constituent
part of the property produced. Materials that qualify for this exemption include, but
are not limited to, the following:

(1) chemicals, including chemicals used for cleaning food processing machinery
and equipment;

(2) materials, including chemicals, fuels, and electricity purchased by persons
engaged in industrial production to treat waste generated as a result of the production
process;

(3) fuels, electricity, gas, and steam used or consumed in the production process,
except that electricity, gas, or steam used for space heating, cooling, or lighting is exempt
if (i) it is in excess of the average climate control or lighting for the production area, and
(ii) it is necessary to produce that particular product;

(4) petroleum products and lubricants;

(5) packaging materials, including returnable containers used in packaging food
and beverage products;

(6) accessory tools, equipment, and other items that are separate detachable units
with an ordinary useful life of less than 12 months used in producing a direct effect upon
the product; and

(7) the following materials, tools, and equipment used in metalcasting: crucibles,
thermocouple protection sheaths and tubes, stalk tubes, refractory materials, molten metal
filters and filter boxes, degassing lances, and base blocks.

(b) This exemption does not include:

(1) machinery, equipment, implements, tools, accessories, appliances, contrivances
and furniture and fixtures, except those listed in paragraph (a), clause (6); and

(2) petroleum and special fuels used in producing or generating power for propelling
ready-mixed concrete trucks on the public highways of this state.

(c) Industrial production includes, but is not limited to, research, development,
design or production of any tangible personal property, manufacturing, processing (other
than by restaurants and consumers) of agricultural products (whether vegetable or animal),
commercial fishing, refining, smelting, reducing, brewing, distilling, printing, mining,
quarrying, lumbering, generating electricity, the production of road building materials,
and the research, development, design, or production of computer software. Industrial
production does not include painting, cleaning, repairing or similar processing of property
except as part of the original manufacturing process. new text begin Industrial production does not
include the furnishing of services listed in section 297A.61, subdivision 3, paragraph
(g), clause (6), items (i) to (vi) and (viii).
new text end

new text begin EFFECTIVE DATE. new text end

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

Sec. 13.

Minnesota Statutes 2004, section 297A.68, subdivision 5, is amended to read:

Subd. 5.

Capital equipment.

(a) Capital equipment is exempt. The tax must be
imposed and collected as if the rate under section 297A.62, subdivision 1, applied, and
then refunded in the manner provided in section 297A.75.

"Capital equipment" means machinery and equipment purchased or leased, and used
in this state by the purchaser or lessee primarily for manufacturing, fabricating, mining,
or refining tangible personal property to be sold ultimately at retail if the machinery and
equipment are essential to the integrated production process of manufacturing, fabricating,
mining, or refining. Capital equipment also includes machinery and equipment used
new text begin primarily new text end to electronically transmit results retrieved by a customer of an on-line
computerized data retrieval system.

(b) Capital equipment includes, but is not limited to:

(1) machinery and equipment used to operate, control, or regulate the production
equipment;

(2) machinery and equipment used for research and development, design, quality
control, and testing activities;

(3) environmental control devices that are used to maintain conditions such as
temperature, humidity, light, or air pressure when those conditions are essential to and are
part of the production process;

(4) materials and supplies used to construct and install machinery or equipment;

(5) repair and replacement parts, including accessories, whether purchased as spare
parts, repair parts, or as upgrades or modifications to machinery or equipment;

(6) materials used for foundations that support machinery or equipment;

(7) materials used to construct and install special purpose buildings used in the
production process;

(8) ready-mixed concrete equipment in which the ready-mixed concrete is mixed
as part of the delivery process regardless if mounted on a chassis new text begin , repair parts for
ready-mixed concrete trucks, new text end and leases of ready-mixed concrete trucks; and

(9) machinery or equipment used for research, development, design, or production
of computer software.

(c) Capital equipment does not include the following:

(1) motor vehicles taxed under chapter 297B;

(2) machinery or equipment used to receive or store raw materials;

(3) building materials, except for materials included in paragraph (b), clauses (6)
and (7);

(4) machinery or equipment used for nonproduction purposes, including, but not
limited to, the following: plant security, fire prevention, first aid, and hospital stations;
support operations or administration; pollution control; and plant cleaning, disposal of
scrap and waste, plant communications, space heating, cooling, lighting, or safety;

(5) farm machinery and aquaculture production equipment as defined by section
297A.61, subdivisions 12 and 13;

(6) machinery or equipment purchased and installed by a contractor as part of an
improvement to real property; deleted text begin or
deleted text end

(7) new text begin machinery and equipment used by restaurants in the furnishing, preparing, or
serving of prepared foods as defined in section 297A.61, subdivision 31;
new text end

new text begin (8) machinery and equipment used to furnish the services listed in section 297A.61,
subdivision 3, paragraph (g), clause (6), items (i) to (vi) and (viii); or
new text end

new text begin (9) new text end any other item that is not essential to the integrated process of manufacturing,
fabricating, mining, or refining.

(d) For purposes of this subdivision:

(1) "Equipment" means independent devices or tools separate from machinery but
essential to an integrated production process, including computers and computer software,
used in operating, controlling, or regulating machinery and equipment; and any subunit or
assembly comprising a component of any machinery or accessory or attachment parts of
machinery, such as tools, dies, jigs, patterns, and molds.

(2) "Fabricating" means to make, build, create, produce, or assemble components or
property to work in a new or different manner.

(3) "Integrated production process" means a process or series of operations through
which tangible personal property is manufactured, fabricated, mined, or refined. For
purposes of this clause, (i) manufacturing begins with the removal of raw materials
from inventory and ends when the last process prior to loading for shipment has been
completed; (ii) fabricating begins with the removal from storage or inventory of the
property to be assembled, processed, altered, or modified and ends with the creation
or production of the new or changed product; (iii) mining begins with the removal of
overburden from the site of the ores, minerals, stone, peat deposit, or surface materials and
ends when the last process before stockpiling is completed; and (iv) refining begins with
the removal from inventory or storage of a natural resource and ends with the conversion
of the item to its completed form.

(4) "Machinery" means mechanical, electronic, or electrical devices, including
computers and computer software, that are purchased or constructed to be used for the
activities set forth in paragraph (a), beginning with the removal of raw materials from
inventory through completion of the product, including packaging of the product.

(5) "Machinery and equipment used for pollution control" means machinery and
equipment used solely to eliminate, prevent, or reduce pollution resulting from an activity
described in paragraph (a).

(6) "Manufacturing" means an operation or series of operations where raw materials
are changed in form, composition, or condition by machinery and equipment and which
results in the production of a new article of tangible personal property. For purposes of
this subdivision, "manufacturing" includes the generation of electricity or steam to be
sold at retail.

(7) "Mining" means the extraction of minerals, ores, stone, or peat.

(8) "On-line data retrieval system" means a system whose cumulation of information
is equally available and accessible to all its customers.

(9) "Primarily" means machinery and equipment used 50 percent or more of the time
in an activity described in paragraph (a).

(10) "Refining" means the process of converting a natural resource to an intermediate
or finished product, including the treatment of water to be sold at retail.

new text begin EFFECTIVE DATE. new text end

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

Sec. 14.

Minnesota Statutes 2004, section 297A.68, subdivision 35, is amended to read:

Subd. 35.

Telecommunications equipment.

(a) Telecommunications machinery
and equipment purchased or leased for use directly by a telecommunications service
provider primarily in the provision of telecommunications services that are ultimately to
be sold at retail are exempt, regardless of whether purchased by the owner, a contractor,
or a subcontractor.

(b) For purposes of this subdivision, "telecommunications machinery and
equipment" includes, but is not limited to:

(1) machinery, equipment, and fixtures utilized in receiving, initiating,
amplifying, processing, transmitting, retransmitting, recording, switching, or monitoring
telecommunications services, such as computers, transformers, amplifiers, routers,
bridges, repeaters, multiplexers, and other items performing comparable functions;

(2) machinery, equipment, and fixtures used in the transportation of
telecommunications services, radio transmitters and receivers, satellite equipment,
microwave equipment, and other transporting media, but not wire, cable, fiber, poles,
or conduit;

(3) ancillary machinery, equipment, and fixtures that regulate, control, protect, or
enable the machinery in clauses (1) and (2) to accomplish its intended function, such as
auxiliary power supply, test equipment, towers, heating, ventilating, and air conditioning
equipment necessary to the operation of the telecommunications equipment; and software
necessary to the operation of the telecommunications equipment; and

(4) repair and replacement parts, including accessories, whether purchased as spare
parts, repair parts, or as upgrades or modifications to qualified machinery or equipment.

(c) For purposes of this subdivision, "telecommunications services" means
telecommunications services as defined in section 297A.61, subdivision 24, deleted text begin paragraph
deleted text end new text begin paragraphs new text end (a), deleted text begin only deleted text end new text begin (c), and (d) new text end .

new text begin EFFECTIVE DATE. new text end

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

Sec. 15.

Minnesota Statutes 2004, section 297A.68, subdivision 39, is amended to read:

Subd. 39.

Preexisting bids or contracts.

(a) The sale of tangible personal property
or services is exempt from tax new text begin or a tax rate increase new text end for a period of six months from
the effective date of the law change that results in the imposition of the tax new text begin or the tax
rate increase new text end under this chapter if:

(1) the act imposing the tax new text begin or increasing the tax rate new text end does not have transitional
effective date language for existing construction contracts and construction bids; and

(2) the requirements of paragraph (b) are met.

(b) A sale is tax exempt under paragraph (a) if it meets the requirements of either
clause (1) or (2):

(1) For a construction contract:

(i) the goods or services sold must be used for the performance of a bona fide written
lump sum or fixed price construction contract;

(ii) the contract must be entered into before the date the goods or services become
subject to the sales tax new text begin or the tax rate was increased new text end ;

(iii) the contract must not provide for allocation of future taxes; and

(iv) for each qualifying contract the contractor must give the seller documentation
of the contract on which an exemption is to be claimed.

(2) For a new text begin construction new text end bid:

(i) the goods or services sold must be used pursuant to an obligation of a bid or bids;

(ii) the bid or bids must be submitted and accepted before the date the goods or
services became subject to the sales tax new text begin or the tax rate was increased new text end ;

(iii) the bid or bids must not be able to be withdrawn, modified, or changed without
forfeiting a bond; and

(iv) for each qualifying bid, the contractor must give the seller documentation of the
bid on which an exemption is to be claimed.

new text begin EFFECTIVE DATE. new text end

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

Sec. 16.

Minnesota Statutes 2004, section 297A.99, subdivision 4, is amended to read:

Subd. 4.

Tax base.

(a) The tax applies to sales taxable under this chapter that occur
within the political subdivision.

(b) Taxable new text begin goods or new text end services are subject to a political subdivision's sales tax, if
they are deleted text begin performed either:
deleted text end

deleted text begin (1) within the political subdivision, or
deleted text end

deleted text begin (2) partly within and partly without the political subdivision and more of the service
is performed within the political subdivision, based on the cost of performance deleted text end new text begin sourced
to the political subdivision pursuant to section 297A.668 new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales made on or after January
1, 2004.
new text end

Sec. 17.

Minnesota Statutes 2004, section 297A.99, subdivision 7, is amended to read:

Subd. 7.

Exemptions.

(a) All goods or services that are otherwise exempt from
taxation under this chapter are exempt from a political subdivision's tax.

(b) The gross receipts from the sale of tangible personal property that meets the
deleted text begin requirement deleted text end new text begin requirements new text end of section 297A.68, deleted text begin subdivision deleted text end new text begin subdivisions 11, new text end 15, new text begin and 16
new text end are exempt, except the qualification test applies based on the boundaries of the political
subdivision instead of the state of Minnesota.

(c) All mobile transportation equipment, and parts and accessories attached to or
to be attached to the equipment are exempt, if purchased by a holder of a motor carrier
direct pay permit under section 297A.90.

new text begin EFFECTIVE DATE. new text end

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

Sec. 18. new text begin REPEALER.
new text end

new text begin Minnesota Rules, parts 8130.0110, subpart 4; 8130.0200, subparts 5 and 6;
8130.0400, subpart 9; 8130.1200, subparts 5 and 6; 8130.2900; 8130.3100, subpart 1;
8130.4000, subparts 1 and 2; 8130.4200, subpart 1; 8130.4400, subpart 3; 8130.5200;
8130.5600, subpart 3; 8130.5800, subpart 5; 8130.7300, subpart 5; and 8130.8800,
subpart 4, are repealed.
new text end

new text begin EFFECTIVE DATE. new text end

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

ARTICLE 12

DEPARTMENT OF REVENUE SPECIAL TAXES

Section 1.

Minnesota Statutes 2004, section 287.04, is amended to read:

287.04 EXEMPTIONS.

The tax imposed by section 287.035 does not apply to:

(a) A decree of marriage dissolution or an instrument made pursuant to it.

(b) A mortgage given to correct a misdescription of the mortgaged property.

(c) A mortgage or other instrument that adds additional security for the same debt
for which mortgage registry tax has been paid.

(d) A contract for the conveyance of any interest in real property, including a
contract for deed.

(e) A mortgage secured by real property subject to the minerals production tax of
sections 298.24 to 298.28.

(f) The principal amount of a mortgage loan made under a low and moderate
income or other affordable housing program, if the mortgagee is a federal, state, or local
government agency.

(g) Mortgages granted by fraternal benefit societies subject to section 64B.24.

(h) A mortgage amendment or extension, as defined in section 287.01.

(i) An agricultural mortgage if the proceeds of the loan secured by the mortgage are
used to acquire or improve real property classified under section 273.13, subdivision 23,
paragraph (a), or (b), clause (1), (2), or (3).

new text begin (j) A mortgage on an armory building as set forth in section 193.147.
new text end

new text begin EFFECTIVE DATE. new text end

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

Sec. 2.

Minnesota Statutes 2004, section 295.50, is amended by adding a subdivision
to read:

new text begin Subd. 1a. new text end

new text begin Blood components. new text end

new text begin "Blood components" means the parts of the blood
that are separated from blood by physical or mechanical means and are intended for
transfusion. Blood components do not include blood derivatives.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for gross revenues received after
December 31, 2004.
new text end

Sec. 3.

Minnesota Statutes 2004, section 295.50, subdivision 3, is amended to read:

Subd. 3.

Gross revenues.

"Gross revenues" are total amounts received in money or
otherwise by:

(1) a hospital for patient services;

(2) a surgical center for patient services;

(3) a health care provider, other than a staff model health carrier, for patient services;

(4) a wholesale drug distributor for sale or distribution of legend drugs that are
delivered in Minnesota by the wholesale drug distributor, by common carrier, or by mail,
unless the legend drugs are delivered to another wholesale drug distributor who sells
legend drugs exclusively at wholesale. Legend drugs do not include nutritional products
as defined in Minnesota Rules, part 9505.0325 new text begin , and blood and blood components new text end ; and

(5) a staff model health plan company as gross premiums for enrollees, co-payments,
deductibles, coinsurance, and fees for patient services.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for gross revenues received after
December 31, 2004.
new text end

Sec. 4.

Minnesota Statutes 2004, section 295.53, subdivision 1, is amended to read:

Subdivision 1.

Exemptions.

(a) The following payments are excluded from the
gross revenues subject to the hospital, surgical center, or health care provider taxes under
sections 295.50 to 295.59:

(1) payments received for services provided under the Medicare program, including
payments received from the government, and organizations governed by sections 1833
and 1876 of title XVIII of the federal Social Security Act, United States Code, title 42,
section 1395, and enrollee deductibles, coinsurance, and co-payments, whether paid by the
Medicare enrollee or by a Medicare supplemental coverage as defined in section 62A.011,
subdivision 3, clause (10), or by Medicaid payments under title XIX of the federal Social
Security Act. Payments for services not covered by Medicare are taxable;

(2) payments received for home health care services;

(3) payments received from hospitals or surgical centers for goods and services on
which liability for tax is imposed under section 295.52 or the source of funds for the
payment is exempt under clause (1), (7), (10), or (14);

(4) payments received from health care providers for goods and services on which
liability for tax is imposed under this chapter or the source of funds for the payment is
exempt under clause (1), (7), (10), or (14);

(5) amounts paid for legend drugs, other than nutritional products new text begin and blood and
blood components new text end , to a wholesale drug distributor who is subject to tax under section
295.52, subdivision 3, reduced by reimbursements received for legend drugs otherwise
exempt under this chapter;

(6) payments received by a health care provider or the wholly owned subsidiary of a
health care provider for care provided outside Minnesota;

(7) payments received from the chemical dependency fund under chapter 254B;

(8) payments received in the nature of charitable donations that are not designated
for providing patient services to a specific individual or group;

(9) payments received for providing patient services incurred through a formal
program of health care research conducted in conformity with federal regulations
governing research on human subjects. Payments received from patients or from other
persons paying on behalf of the patients are subject to tax;

(10) payments received from any governmental agency for services benefiting the
public, not including payments made by the government in its capacity as an employer
or insurer or payments made by the government for services provided under general
assistance medical care, the MinnesotaCare program, or the medical assistance program
governed by title XIX of the federal Social Security Act, United States Code, title 42,
sections 1396 to 1396v;

(11) government payments received by the commissioner of human services for
state-operated services;

(12) payments received by a health care provider for hearing aids and related
equipment or prescription eyewear delivered outside of Minnesota;

(13) payments received by an educational institution from student tuition, student
activity fees, health care service fees, government appropriations, donations, or grants, and
for services identified in and provided under an individualized education plan as defined in
section 256B.0625 or Code of Federal Regulations, chapter 34, section 300.340(a). Fee
for service payments and payments for extended coverage are taxable; and

(14) payments received under the federal Employees Health Benefits Act, United
States Code, title 5, section 8909(f), as amended by the Omnibus Reconciliation Act of
1990. new text begin Enrollee deductibles, coinsurance, and co-payments are subject to tax.
new text end

(b) Payments received by wholesale drug distributors for legend drugs sold directly
to veterinarians or veterinary bulk purchasing organizations are excluded from the gross
revenues subject to the wholesale drug distributor tax under sections 295.50 to 295.59.

new text begin EFFECTIVE DATE. new text end

new text begin The change made to paragraph (a), clause (5), of this section
is effective for amounts paid for blood and blood components after December 31, 2004.
The change made to paragraph (a), clause (14), of this section is effective for enrollee
deductibles, coinsurance, and co-payments received under the federal Employees Health
Benefits Act on or after the day following final enactment.
new text end

Sec. 5.

Minnesota Statutes 2004, section 295.60, subdivision 3, is amended to read:

Subd. 3.

Payment.

(a) Each furrier shall make estimated payments of the taxes for
the calendar year in quarterly installments to the commissioner by April 15, July 15,
October 15, and January 15 of the following calendar year.

(b) Estimated tax payments are not required if:

(1) the tax for the current calendar year is less than $500; or

(2) the tax for the previous calendar year is less than $500, if the taxpayer had a tax
liability and was doing business the entire year.

(c) Underpayment of estimated installments bear interest at the rate specified in
section 270.75, from the due date of the payment until paid or until the due date of the
annual return, whichever comes first. An underpayment of an estimated installment is
the difference between the amount paid and the lesser of (1) deleted text begin 90 percent of one-quarter
of the tax for the calendar year deleted text end new text begin the tax for the actual gross revenues received during the
quarter new text end , or (2) one-quarter of the total tax for the previous calendar year if the taxpayer
had a tax liability and was doing business the entire year.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for gross revenues received after
December 31, 2005.
new text end

Sec. 6.

Minnesota Statutes 2004, section 296A.09, is amended by adding a subdivision
to read:

new text begin Subd. 6. new text end

new text begin Exemptions. new text end

new text begin The provisions of subdivisions 1 and 2 do not apply to
aviation gasoline or jet fuel purchased by an ambulance service licensed under chapter
144E.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for purchases made on or after July
1, 2005.
new text end

Sec. 7.

Minnesota Statutes 2004, section 296A.22, is amended by adding a subdivision
to read:

new text begin Subd. 9. new text end

new text begin Abatement of penalty. new text end

new text begin (a) The commissioner may by written order
abate any penalty imposed under this section, if in the commissioner's opinion there is
reasonable cause to do so.
new text end

new text begin (b) A request for abatement of penalty must be filed with the commissioner within
60 days of the date the notice stating that a penalty has been imposed was mailed to the
taxpayer's last known address.
new text end

new text begin (c) If the commissioner issues an order denying a request for abatement of penalty,
the taxpayer may file an administrative appeal as provided in section 296A.25 or appeal to
Tax Court as provided in section 271.06. If the commissioner does not issue an order on
the abatement request within 60 days from the date the request is received, the taxpayer
may appeal to Tax Court as provided in section 271.06.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for penalties imposed on or after the
day following final enactment.
new text end

Sec. 8.

Minnesota Statutes 2004, section 297E.01, subdivision 5, is amended to read:

Subd. 5.

Distributor.

"Distributor" means a distributor as defined in section 349.12,
subdivision 11, or a person new text begin or linked bingo game provider new text end who markets, sells, or provides
gambling product to a person or entity for resale or use at the retail level.

new text begin EFFECTIVE DATE. new text end

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

Sec. 9.

Minnesota Statutes 2004, section 297E.01, subdivision 7, is amended to read:

Subd. 7.

Gambling product.

"Gambling product" means bingo new text begin hard new text end cards, new text begin bingo
new text end paper deleted text begin , or deleted text end sheets new text begin , or linked bingo paper sheets new text end ; pull-tabs; tipboards; paddletickets and
paddleticket cards; raffle tickets; or any other ticket, card, board, placard, device, or token
that represents a chance, for which consideration is paid, to win a prize.

new text begin EFFECTIVE DATE. new text end

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

Sec. 10.

Minnesota Statutes 2004, section 297E.01, is amended by adding a subdivision
to read:

new text begin Subd. 9a. new text end

new text begin Linked bingo game. new text end

new text begin "Linked bingo game" means a bingo game played at
two or more locations where licensed organizations are authorized to conduct bingo, when
there is a common prize pool and a common selection of numbers or symbols conducted
at one location, and when the results of the selection are transmitted to all participating
locations by satellite, telephone, or other means by a linked bingo game provider.
new text end

new text begin EFFECTIVE DATE. new text end

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

Sec. 11.

Minnesota Statutes 2004, section 297E.01, is amended by adding a subdivision
to read:

new text begin Subd. 9b. new text end

new text begin Linked bingo game provider. new text end

new text begin "Linked bingo game provider" means any
person who provides the means to link bingo prizes in a linked bingo game, who provides
linked bingo paper sheets to the participating organizations, who provides linked bingo
prize management, and who provides the linked bingo game system.
new text end

new text begin EFFECTIVE DATE. new text end

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

Sec. 12.

Minnesota Statutes 2004, section 297E.06, subdivision 2, is amended to read:

Subd. 2.

Business records.

An organization shall maintain records supporting the
gambling activity reported to the commissioner. Records include, but are not limited
to, the following items:

(1) all winning and unsold tickets, cards, or stubs for pull-tab, tipboard, paddlewheel,
and raffle games;

(2) all reports and statements, including checker's records, for each bingo occasion;

(3) all cash journals and ledgers, deposit slips, register tapes, and bank statements
supporting gambling activity receipts;

(4) all invoices that represent purchases of gambling product;

(5) all canceled checks new text begin or copies of substitute checks as defined in Public Law
108-100, section 3 new text end , check recorders, journals and ledgers, vouchers, invoices, bank
statements, and other documents supporting gambling activity expenditures; and

(6) all organizational meeting minutes.

All records required to be kept by this section must be preserved by the organization
for at least 3-1/2 years and may be inspected by the commissioner of revenue at any
reasonable time without notice or a search warrant.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2005.
new text end

Sec. 13.

Minnesota Statutes 2004, section 297E.07, is amended to read:

297E.07 INSPECTION RIGHTS.

At any reasonable time, without notice and without a search warrant, the
commissioner may enter a place of business of a manufacturer, distributor, deleted text begin or deleted text end organization new text begin ,
or linked bingo game provider new text end ; any site from which pull-tabs or tipboards or other
gambling equipment or gambling product are being manufactured, stored, or sold; or
any site at which lawful gambling is being conducted, and inspect the premises, books,
records, and other documents required to be kept under this chapter to determine whether
or not this chapter is being fully complied with. If the commissioner is denied free access
to or is hindered or interfered with in making an inspection of the place of business,
books, or records, the permit of the distributor may be revoked by the commissioner,
and the license of the manufacturer, the distributor, deleted text begin or deleted text end the organization new text begin , or linked bingo
game provider new text end may be revoked by the board.

new text begin EFFECTIVE DATE. new text end

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

Sec. 14.

Minnesota Statutes 2004, section 297F.08, subdivision 12, is amended to read:

Subd. 12.

Cigarettes in interstate commerce.

(a) A person may not transport or
cause to be transported from this state cigarettes for sale in another state without first
affixing to the cigarettes the stamp required by the state in which the cigarettes are to be
sold or paying any other excise tax on the cigarettes imposed by the state in which the
cigarettes are to be sold.

(b) A person may not affix to cigarettes the stamp required by another state or pay
any other excise tax on the cigarettes imposed by another state if the other state prohibits
stamps from being affixed to the cigarettes, prohibits the payment of any other excise tax
on the cigarettes, or prohibits the sale of the cigarettes.

(c) Not later than 15 days after the end of each calendar quarter, a person who
transports or causes to be transported from this state cigarettes for sale in another state
shall submit to the commissioner a report identifying the quantity and style of each brand
of the cigarettes transported or caused to be transported in the preceding calendar quarter,
and the name and address of each recipient of the cigarettes. new text begin This reporting requirement
only applies to cigarettes manufactured by companies that are not original or subsequent
participating manufacturers in the Master Settlement Agreement with other states.
new text end

(d) For purposes of this section, "person" has the meaning given in section 297F.01,
subdivision 12. Person does not include any common or contract carrier, or public
warehouse that is not owned, in whole or in part, directly or indirectly by such person,
and does not include a manufacturer that deleted text begin has entered into deleted text end new text begin is an original or subsequent
participating manufacturer in new text end the Master Settlement Agreement with other states.

new text begin EFFECTIVE DATE. new text end

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

Sec. 15.

Minnesota Statutes 2004, section 297F.08, is amended by adding a subdivision
to read:

new text begin Subd. 13. new text end

new text begin Bond. new text end

new text begin The commissioner may require the furnishing of a corporate
surety bond or a certified check in an amount suitable to guarantee payment of the tax
stamps purchased by a distributor. The bond or certified check may be required when the
commissioner determines that a distributor is (1) delinquent in the filing of any return
required under this chapter, or (2) delinquent in the payment of any uncontested tax
liability under this chapter. The distributor shall furnish the bond or certified check for a
period of two years, after which, if the distributor has not been delinquent in the filing of
any returns required under this chapter, or delinquent in the paying of any tax under this
chapter, a bond or certified check is no longer required. The commissioner at any time
may apply the bond or certified check to any unpaid taxes or fees, including interest and
penalties, owed to the department by the distributor.
new text end

new text begin EFFECTIVE DATE. new text end

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

Sec. 16.

Minnesota Statutes 2004, section 297F.09, subdivision 1, is amended to read:

Subdivision 1.

Monthly return; cigarette distributor.

On or before the 18th day
of each calendar month, a distributor with a place of business in this state shall file a
return with the commissioner showing the quantity of cigarettes manufactured or brought
in from outside the state or purchased during the preceding calendar month and the
quantity of cigarettes sold or otherwise disposed of in this state and outside this state
during that month. A licensed distributor outside this state shall in like manner file a
return showing the quantity of cigarettes shipped or transported into this state during the
preceding calendar month. Returns must be made in the form and manner prescribed by
the commissioner and must contain any other information required by the commissioner.
The return must be accompanied by a remittance for the full unpaid tax liability shown
by it. deleted text begin The return for the May liability and 85 percent of the estimated June liability is
due on the date payment of the tax is due. deleted text end new text begin For distributors subject to the accelerated tax
payment requirements in subdivision 10, the return for the May liability is due two
business days before June 30th of the year and the return for the June liability is due on or
before August 18th of the year.
new text end

new text begin EFFECTIVE DATE. new text end

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

Sec. 17.

Minnesota Statutes 2004, section 297F.09, subdivision 2, is amended to read:

Subd. 2.

Monthly return; tobacco products distributor.

On or before the 18th
day of each calendar month, a distributor with a place of business in this state shall file
a return with the commissioner showing the quantity and wholesale sales price of each
tobacco product:

(1) brought, or caused to be brought, into this state for sale; and

(2) made, manufactured, or fabricated in this state for sale in this state, during the
preceding calendar month.

Every licensed distributor outside this state shall in like manner file a return showing the
quantity and wholesale sales price of each tobacco product shipped or transported to
retailers in this state to be sold by those retailers, during the preceding calendar month.
Returns must be made in the form and manner prescribed by the commissioner and
must contain any other information required by the commissioner. The return must be
accompanied by a remittance for the full tax liability shown. deleted text begin The return for the May
liability and 85 percent of the estimated June liability is due on the date payment of the tax
is due. deleted text end new text begin For distributors subject to the accelerated tax payment requirements in subdivision
10, the return for the May liability is due two business days before June 30th of the year
and the return for the June liability is due on or before August 18th of the year.
new text end

new text begin EFFECTIVE DATE. new text end

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

Sec. 18.

Minnesota Statutes 2004, section 297G.09, is amended by adding a
subdivision to read:

new text begin Subd. 10. new text end

new text begin Quarterly and annual payments and returns. new text end

new text begin (a) If a manufacturer,
wholesaler, brewer, or importer has an average liquor tax liability equal to or less than $500
per month in any quarter of a calendar year, and has substantially complied with the state
tax laws during the preceding four calendar quarters, the manufacturer, wholesaler, brewer,
or importer may request authorization to file and pay the taxes quarterly in subsequent
calendar quarters. The authorization remains in effect during the period in which the
manufacturer's, wholesaler's, brewer's, or importer's quarterly returns reflect liquor tax
liabilities of less than $1,500 and there is continued compliance with state tax laws.
new text end

new text begin (b) If a manufacturer, wholesaler, brewer, or importer has an average liquor tax
liability equal to or less than $100 per month during a calendar year, and has substantially
complied with the state tax laws during that period, the manufacturer, wholesaler, brewer,
or importer may request authorization to file and pay the taxes annually in subsequent
years. The authorization remains in effect during the period in which the manufacturer's,
wholesaler's, brewer's, or importer's annual returns reflect liquor tax liabilities of less
than $1,200 and there is continued compliance with state tax laws.
new text end

new text begin (c) The commissioner may also grant quarterly or annual filing and payment
authorizations to manufacturers, wholesalers, brewers, or importers if the commissioner
concludes that the manufacturer's, wholesaler's, brewer's, or importer's future tax
liabilities will be less than the monthly totals identified in paragraphs (a) and (b). An
authorization granted under this paragraph is subject to the same conditions as an
authorization granted under paragraphs (a) and (b).
new text end

new text begin (d) The annual tax return and payments must be filed and paid on or before the 18th
day of January following the calendar year. The quarterly returns and payments must be
filed and paid on or before April 18 for the quarter ending March 31, on or before July 18
for the quarter ending June 30, on or before October 18 for the quarter ending September
30, and on or before January 18 for the quarter ending December 31.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for tax returns and payments due on
or after January 1, 2006.
new text end

Sec. 19.

Minnesota Statutes 2004, section 297I.01, is amended by adding a subdivision
to read:

new text begin Subd. 13a. new text end

new text begin Reinsurance. new text end

new text begin "Reinsurance" is insurance whereby an insurance
company, for a consideration, agrees to indemnify another insurance company against
all or part of the loss which the latter may sustain under the policy or policies which
it has issued.
new text end

new text begin EFFECTIVE DATE. new text end

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

Sec. 20.

Minnesota Statutes 2004, section 297I.05, subdivision 5, is amended to read:

Subd. 5.

Health maintenance organizations, nonprofit health service plan
corporations, and community integrated service networks.

(a) deleted text begin Health maintenance
organizations, community integrated service networks, and nonprofit health care service
plan corporations are exempt from the tax imposed under this section for premiums
received in calendar years 2001 to 2003.
deleted text end

deleted text begin (b) For calendar years after 2003, deleted text end A tax is imposed on health maintenance
organizations, community integrated service networks, and nonprofit health care service
plan corporations. The rate of tax is equal to one percent of gross premiums less return
premiums new text begin on all direct business new text end received new text begin by the organization, network, or corporation or
its agents in Minnesota, in cash or otherwise, new text end in the calendar year.

deleted text begin (c) In approving the premium rates as required in sections 62L.08, subdivision 8,
and 62A.65, subdivision 3, the commissioners of health and commerce shall ensure that
any exemption from tax as described in paragraph (a) is reflected in the premium rate.
deleted text end

deleted text begin (d) deleted text end new text begin (b) new text end The commissioner shall deposit all revenues, including penalties and interest,
collected under this chapter from health maintenance organizations, community integrated
service networks, and nonprofit health service plan corporations in the health care access
fund. Refunds of overpayments of tax imposed by this subdivision must be paid from
the health care access fund. There is annually appropriated from the health care access
fund to the commissioner the amount necessary to make any refunds of the tax imposed
under this subdivision.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective January 1, 2005.
new text end

Sec. 21. new text begin REPEALER.
new text end

new text begin Minnesota Statutes 2004, section 297E.12, subdivision 10, is repealed effective the
day following final enactment.
new text end

ARTICLE 13

DEPARTMENT OF REVENUE ELECTRONIC PAYMENTS

Section 1.

new text begin [270.772] MINIMUM DOLLAR REQUIREMENT FOR
ELECTRONIC PAYMENT OF TAXES AND FEES.
new text end

new text begin (a) Except as provided in paragraph (b), payments of every tax, fee, or surcharge
administered by and payable to the commissioner in a calendar year, including deposits
and estimated payments, must be remitted electronically if the liability of the taxpayer
or payer for the tax, fee, or surcharge is:
new text end

new text begin (1) $20,000 or more in the preceding fiscal year ending June 30, 2005; and
new text end

new text begin (2) $10,000 or more in the preceding fiscal year ending June 30, 2006, and preceding
fiscal years thereafter.
new text end

new text begin (b) This section does not apply to individual income, estate, fiduciary, and airflight
property taxes, and it does not apply to any law requiring all payments for a specific type
of tax, fee, or surcharge, or from a specific group of taxpayers or payers, to be made
electronically regardless of dollar amount.
new text end

Sec. 2.

Minnesota Statutes 2004, section 289A.20, subdivision 2, is amended to read:

Subd. 2.

Withholding from wages, entertainer withholding, withholding from
payments to out-of-state contractors, and withholding by partnerships and small
business corporations.

(a) A tax required to be deducted and withheld during the
quarterly period must be paid on or before the last day of the month following the close of
the quarterly period, unless an earlier time for payment is provided. A tax required to be
deducted and withheld from compensation of an entertainer and from a payment to an
out-of-state contractor must be paid on or before the date the return for such tax must be
filed under section 289A.18, subdivision 2. Taxes required to be deducted and withheld
by partnerships and S corporations must be paid on or before the date the return must be
filed under section 289A.18, subdivision 2.

(b) An employer who, during the previous quarter, withheld more than $1,500 of
tax under section 290.92, subdivision 2a or 3, or 290.923, subdivision 2, must deposit tax
withheld under those sections with the commissioner within the time allowed to deposit
the employer's federal withheld employment taxes under Code of Federal Regulations,
title 26, section 31.6302-1, as amended through December 31, 2001, without regard to the
safe harbor or de minimis rules in subparagraph (f) or the one-day rule in subsection (c),
clause (3). Taxpayers must submit a copy of their federal notice of deposit status to the
commissioner upon request by the commissioner.

(c) The commissioner may prescribe by rule other return periods or deposit
requirements. In prescribing the reporting period, the commissioner may classify payors
according to the amount of their tax liability and may adopt an appropriate reporting
period for the class that the commissioner judges to be consistent with efficient tax
collection. In no event will the duration of the reporting period be more than one year.

(d) If less than the correct amount of tax is paid to the commissioner, proper
adjustments with respect to both the tax and the amount to be deducted must be made,
without interest, in the manner and at the times the commissioner prescribes. If the
underpayment cannot be adjusted, the amount of the underpayment will be assessed and
collected in the manner and at the times the commissioner prescribes.

(e) deleted text begin If the aggregate amount of the tax withheld during a fiscal year ending June 30
under section 290.92, subdivision 2a or 3, is equal to or exceeds the amounts established
for remitting federal withheld taxes pursuant to the regulations promulgated under section
6302(h) of the Internal Revenue Code, the employer must remit each required deposit for
wages paid in the subsequent calendar year by electronic means.
deleted text end

deleted text begin (f) deleted text end A third-party bulk filer as defined in section 290.92, subdivision 30, paragraph
(a), clause (2), who remits withholding deposits must remit all deposits by electronic
means deleted text begin as provided in paragraph (e) deleted text end , regardless of the aggregate amount of tax withheld
during a fiscal year for all of the employers.

Sec. 3.

Minnesota Statutes 2004, section 289A.20, subdivision 4, is amended to read:

Subd. 4.

Sales and use tax.

(a) The taxes imposed by chapter 297A are due and
payable to the commissioner monthly on or before the 20th day of the month following the
month in which the taxable event occurred, or following another reporting period as the
commissioner prescribes or as allowed under section 289A.18, subdivision 4, paragraph
(f) or (g), except that use taxes due on an annual use tax return as provided under section
289A.11, subdivision 1, are payable by April 15 following the close of the calendar year.

(b) A vendor having a liability of $120,000 or more during a fiscal year ending June
30 must remit the June liability for the next year in the following manner:

(1) Two business days before June 30 of the year, the vendor must remit 85 percent
of the estimated June liability to the commissioner.

(2) On or before August 20 of the year, the vendor must pay any additional amount
of tax not remitted in June.

deleted text begin (c) A vendor having a liability of $120,000 or more during a fiscal year ending
June 30 must remit all liabilities on returns due for periods beginning in the subsequent
calendar year by electronic means on or before the 20th day of the month following the
month in which the taxable event occurred, or on or before the 20th day of the month
following the month in which the sale is reported under section 289A.18, subdivision 4,
except for 85 percent of the estimated June liability, which is due two business days before
June 30. The remaining amount of the June liability is due on August 20.
deleted text end

Sec. 4.

Minnesota Statutes 2004, section 297E.02, subdivision 4, is amended to read:

Subd. 4.

Pull-tab and tipboard tax.

(a) A tax is imposed on the sale of each deal
of pull-tabs and tipboards sold by a distributor. The rate of the tax is 1.7 percent of the
ideal gross of the pull-tab or tipboard deal. The sales tax imposed by chapter 297A on the
sale of the pull-tabs and tipboards by the distributor is imposed on the retail sales price
less the tax imposed by this subdivision. The retail sale of pull-tabs or tipboards by the
organization is exempt from taxes imposed by chapter 297A and is exempt from all local
taxes and license fees except a fee authorized under section 349.16, subdivision 8.

(b) The liability for the tax imposed by this section is incurred when the pull-tabs
and tipboards are delivered by the distributor to the customer or to a common or contract
carrier for delivery to the customer, or when received by the customer's authorized
representative at the distributor's place of business, regardless of the distributor's method
of accounting or the terms of the sale.

The tax imposed by this subdivision is imposed on all sales of pull-tabs and
tipboards, except the following:

(1) sales to the governing body of an Indian tribal organization for use on an Indian
reservation;

(2) sales to distributors licensed under the laws of another state or of a province of
Canada, as long as all statutory and regulatory requirements are met in the other state or
province;

(3) sales of promotional tickets as defined in section 349.12; and

(4) pull-tabs and tipboards sold to an organization that sells pull-tabs and tipboards
under the exemption from licensing in section 349.166, subdivision 2. A distributor shall
require an organization conducting exempt gambling to show proof of its exempt status
before making a tax-exempt sale of pull-tabs or tipboards to the organization. A distributor
shall identify, on all reports submitted to the commissioner, all sales of pull-tabs and
tipboards that are exempt from tax under this subdivision.

(c) deleted text begin A distributor having a liability of $120,000 or more during a fiscal year ending
June 30 must remit all liabilities in the subsequent calendar year by electronic means.
deleted text end

deleted text begin (d) deleted text end Any customer who purchases deals of pull-tabs or tipboards from a distributor
may file an annual claim for a refund or credit of taxes paid pursuant to this subdivision
for unsold pull-tab and tipboard tickets. The claim must be filed with the commissioner on
a form prescribed by the commissioner by March 20 of the year following the calendar
year for which the refund is claimed. The refund must be filed as part of the customer's
February monthly return. The refund or credit is equal to 1.7 percent of the face value
of the unsold pull-tab or tipboard tickets, provided that the refund or credit will be 1.75
percent of the face value of the unsold pull-tab or tipboard tickets for claims for a refund
or credit of taxes filed on the February 2001 monthly return. The refund claimed will be
applied as a credit against tax owing under this chapter on the February monthly return. If
the refund claimed exceeds the tax owing on the February monthly return, that amount
will be refunded. The amount refunded will bear interest pursuant to section 270.76 from
90 days after the claim is filed.

Sec. 5.

Minnesota Statutes 2004, section 473.843, subdivision 3, is amended to read:

Subd. 3.

Payment of fee.

On or before the 20th day of each month each operator
shall pay the fee due under this section for the previous month, using a form provided
by the commissioner of revenue.

deleted text begin An operator having a fee of $120,000 or more during a fiscal year ending June 30
must pay all fees in the subsequent calendar year by electronic means.
deleted text end

Sec. 6. new text begin REPEALER.
new text end

new text begin Minnesota Statutes 2004, sections 289A.26, subdivision 2a; 289A.60, subdivision
21; 295.55, subdivision 4; 295.60, subdivision 4; 297F.09, subdivision 7; 297G.09,
subdivision 6; 297I.35, subdivision 2; and 297I.85, subdivision 7, are repealed.
new text end

Sec. 7. new text begin EFFECTIVE DATE.
new text end

new text begin This article is effective for payments due in calendar year 2006, and in calendar
years thereafter, based upon liabilities incurred in the fiscal year ending June 30, 2005, and
in fiscal years thereafter.
new text end

ARTICLE 14

DEPARTMENT OF REVENUE MISCELLANEOUS

Section 1.

Minnesota Statutes 2004, section 15.06, subdivision 6, is amended to read:

Subd. 6.

General powers of commissioners.

Except as otherwise expressly
provided by law, a commissioner shall have the following powers:

(1) to delegate to any subordinate employee the exercise of specified statutory
powers or duties as the commissioner may deem advisable, subject to the commissioner's
control; provided, that every delegation shall be made by written order, filed with the
secretary of state; and further provided that only a deputy commissioner may have all
the powers or duties of the commissioner new text begin . A commissioner who delegates the exercise
of identical powers or duties to ten or more subordinate employees, may combine the
delegation to these employees in one written order. A delegation of authority granted by a
commissioner remains in effect until revoked by the commissioner, revoked by a successor
commissioner, or termination of the employees' employment. A successor commissioner
may continue to grant the same delegations of authority that were granted by a previous
commissioner, by issuing a written order that is filed with the secretary of state and lists
the names of the subordinate employees that have orders of delegations of authority, the
date the order was signed, and the date the order was filed with the secretary of state new text end ;

(2) to appoint all subordinate employees and to prescribe their duties; provided, that
all departments and agencies shall be subject to the provisions of chapter 43A;

(3) with the approval of the commissioner of administration, to organize the
department or agency as deemed advisable in the interest of economy and efficiency; and

(4) to prescribe procedures for the internal management of the department or agency
to the extent that the procedures do not directly affect the rights of or procedure available
to the public.

new text begin EFFECTIVE DATE. new text end

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

Sec. 2.

Minnesota Statutes 2004, section 16D.10, is amended to read:

16D.10 CASE REVIEWER.

new text begin Subdivision 1. new text end

new text begin Duties. new text end

The commissioner shall make a case reviewer available to
debtors. The reviewer must be available to answer a debtor's questions concerning the
collection process and to review the collection activity taken. If the reviewer reasonably
believes that the particular action being taken is unreasonable or unfair, the reviewer may
make recommendations to the commissioner in regard to the collection action.

new text begin Subd. 2. new text end

new text begin Authority to issue debtor assistance order. new text end

new text begin On application filed by a
debtor with the case reviewer, in the form, manner, and in the time prescribed by the
commissioner, and after thorough investigation, the case reviewer may issue a debtor
assistance order if, in the determination of the case reviewer, the manner in which the
state debt collection laws are being administered is creating or will create an unjust and
inequitable result for the debtor. Debtor assistance orders are governed by the provisions
relating to taxpayer assistance orders under section 270.273.
new text end

new text begin Subd. 3. new text end

new text begin Transfer of duties to taxpayer rights advocate. new text end

new text begin All duties and authority
of the case reviewer under subdivisions 1 and 2 are transferred to the taxpayer rights
advocate.
new text end

new text begin EFFECTIVE DATE. new text end

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

Sec. 3.

Minnesota Statutes 2004, section 270.65, is amended to read:

270.65 DATE OF ASSESSMENT; DEFINITION.

For purposes of taxes administered by the commissioner, the term "date of
assessment" means the date a liability reported on a return was entered into the records of
the commissioner or the date a return should have been filed, whichever is later; or, in the
case of taxes determined by the commissioner, "date of assessment" means the date of the
order assessing taxes or date of the return made by the commissioner; or, in the case of an
amended return filed by the taxpayer, the assessment date is the date additional liability
reported on the return, if any, was entered into the records of the commissioner; new text begin or, in the
case of a consent agreement signed by the taxpayer under section 270.67, subdivision 3,
the assessment date is the notice date shown on the agreement; new text end or, in the case of a check
from a taxpayer that is dishonored and results in an erroneous refund being given to
the taxpayer, remittance of the check is deemed to be an assessment and the "date of
assessment" is the date the check was received by the commissioner.

new text begin EFFECTIVE DATE. new text end

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

Sec. 4.

Minnesota Statutes 2004, section 270.67, subdivision 4, is amended to read:

Subd. 4.

Offer-in-compromise and installment payment program.

(a) In
implementing the authority provided in subdivision 2 or in sections 8.30 and 16D.15
to accept offers of installment payments or offers-in-compromise of tax liabilities, the
commissioner of revenue shall prescribe guidelines for employees of the Department of
Revenue to determine whether an offer-in-compromise or an offer to make installment
payments is adequate and should be accepted to resolve a dispute. In prescribing the
guidelines, the commissioner shall develop and publish schedules of national and local
allowances designed to provide that taxpayers entering into a compromise or payment
agreement have an adequate means to provide for basic living expenses. The guidelines
must provide that the taxpayer's ownership interest in a motor vehicle, to the extent of
the value allowed in section 550.37, will not be considered as an asset; in the case of an
offer related to a joint tax liability of spouses, that value of two motor vehicles must be
excluded. The guidelines must provide that employees of the department shall determine,
on the basis of the facts and circumstances of each taxpayer, whether the use of the
schedules is appropriate and that employees must not use the schedules to the extent the
use would result in the taxpayer not having adequate means to provide for basic living
expenses. The guidelines must provide that:

(1) an employee of the department shall not reject an offer-in-compromise or an
offer to make installment payments from a low-income taxpayer solely on the basis of the
amount of the offer; and

(2) in the case of an offer-in-compromise which relates only to issues of liability of
the taxpayer:

(i) the offer must not be rejected solely because the commissioner is unable to locate
the taxpayer's return or return information for verification of the liability; and

(ii) the taxpayer shall not be required to provide an audited, reviewed, or compiled
financial statement.

(b) The commissioner shall establish procedures:

(1) that require presentation of a counteroffer or a written rejection of the offer by
the commissioner if the amount offered by the taxpayer in an offer-in-compromise or an
offer to make installment payments is not accepted by the commissioner;

(2) for an administrative review of any written rejection of a proposed
offer-in-compromise or installment agreement made by a taxpayer under this section
before the rejection is communicated to the taxpayer;

(3) that allow a taxpayer to request reconsideration of any written rejection of the
offer or agreement to the commissioner of revenue to determine whether the rejection is
reasonable and appropriate under the circumstances; and

(4) that provide for notification to the taxpayer when an offer-in-compromise has
been accepted, and issuance of certificates of release of any liens imposed under section
270.69 related to the liability which is the subject of the compromise.

new text begin (c) Each compromise proposal must be accompanied by a nonrefundable payment
of $250. If the compromise proposal is accepted, the payment must be applied to the
accepted compromise amount. If the compromise is rejected, the payment must be applied
to the outstanding tax debts of the taxpayer pursuant to section 270.652. In cases of
financial hardship, upon presentation of information establishing an inability to make the
$250 payment, the commissioner may waive this requirement.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for offers in compromise submitted
after August 31, 2005.
new text end

Sec. 5.

Minnesota Statutes 2004, section 270.69, subdivision 4, is amended to read:

Subd. 4.

Period of limitations.

The lien imposed by this section shall,
notwithstanding any other provision of law to the contrary, be enforceable from the time
the lien arises and for ten years from the date of filing the notice of lien, which must be
filed by the commissioner within five years after the date of assessment of the tax or final
administrative or judicial determination of the assessment. A notice of lien filed in one
county may be transcribed to new text begin the secretary of state or to new text end any other county within ten years
after the date of its filing, but the transcription shall not extend the period during which
the lien is enforceable. A notice of lien may be renewed by the commissioner before the
expiration of the ten-year period for an additional ten years. The taxpayer must receive
written notice of the renewal.

new text begin EFFECTIVE DATE. new text end

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

Sec. 6.

Minnesota Statutes 2004, section 289A.19, subdivision 4, is amended to read:

Subd. 4.

Estate tax returns.

deleted text begin When in the commissioner's judgment good cause
exists, the commissioner may extend the time for filing an estate tax return for not more
than six months. deleted text end When an extension to file the federal estate tax return has been granted
under section 6081 of the Internal Revenue Code, the time for filing the estate tax return
is extended for that period. new text begin If the estate requests an extension to file an estate tax return
within the time provided in section 289A.18, subdivision 3, the commissioner shall extend
the time for filing the estate tax return for six months.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for estates of decedents dying after
December 31, 2004.
new text end

Sec. 7.

Minnesota Statutes 2004, section 289A.31, subdivision 2, is amended to read:

Subd. 2.

Joint income tax returns.

(a) If a joint income tax return is made by a
husband and wife, the liability for the tax is joint and several. A spouse who qualifies for
relief from a liability attributable to an underpayment under section 6015(b) of the Internal
Revenue Code is relieved of the state income tax liability on the underpayment.

(b) In the case of individuals who were a husband and wife prior to the dissolution of
their marriage or their legal separation, or prior to the death of one of the individuals, for
tax liabilities reported on a joint or combined return, the liability of each person is limited
to the proportion of the tax due on the return that equals that person's proportion of the
total tax due if the husband and wife filed separate returns for the taxable year. This
provision is effective only when the commissioner receives written notice of the marriage
dissolution, legal separation, or death of a spouse from the husband or wife. No refund
may be claimed by an ex-spouse, legally separated or widowed spouse for any taxes paid
more than 60 days before receipt by the commissioner of the written notice.

new text begin (c) A request for calculation of separate liability pursuant to paragraph (b) for taxes
reported on a return must be made within six years after the due date of the return.
For calculation of separate liability for taxes assessed by the commissioner under
section 289A.35 or 289A.37, the request must be made within six years after the date
of assessment. The commissioner is not required to calculate separate liability if the
remaining unpaid liability for which recalculation is requested is $100 or less.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for requests for relief made on or
after the day following final enactment.
new text end

Sec. 8.

Minnesota Statutes 2004, section 289A.37, subdivision 5, is amended to read:

Subd. 5.

Sufficiency of notice.

An order of assessment, sent postage prepaid
by United States mail to the taxpayer at the taxpayer's last known address, new text begin or sent by
electronic mail to the taxpayer's last known electronic mailing address as provided for in
section 325L.08, new text end is sufficient even if the taxpayer is deceased or is under a legal disability,
or, in the case of a corporation, has terminated its existence, unless the department has
been provided with a new address by a party authorized to receive notices of assessment.

new text begin EFFECTIVE DATE. new text end

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

Sec. 9.

Minnesota Statutes 2004, section 289A.60, subdivision 2a, is amended to read:

Subd. 2a.

Penalties for extended delinquency.

(a) If an individual income tax is
not paid within 180 days after the date of filing of a return or, in the case of taxes assessed
by the commissioner, within 180 days after the assessment date or, if appealed, within 180
days after final resolution of the appeal, an extended delinquency penalty of five percent
of the tax remaining unpaid is added to the amount due.

(b) If a deleted text begin corporate franchise, fiduciary income, mining company, estate, partnership, S
corporation, or nonresident entertainer deleted text end tax return is not filed within 30 days after written
demand for the filing of a delinquent return, an extended delinquency penalty of five
percent of the tax not paid prior to the demand deleted text begin is added to the tax, deleted text end or deleted text begin in the case of an
individual income tax return, a minimum penalty of deleted text end $100 deleted text begin or the five percent penalty
deleted text end is imposed, whichever amount is greater.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for returns originally due on or
after August 1, 2005.
new text end

Sec. 10.

Minnesota Statutes 2004, section 289A.60, subdivision 6, is amended to read:

Subd. 6.

Penalty for new text begin failure to file, new text end false or fraudulent return, evasion.

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

new text begin EFFECTIVE DATE. new text end

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

Sec. 11.

Minnesota Statutes 2004, section 289A.60, subdivision 11, is amended to read:

Subd. 11.

Penalties relating to information reports, withholding.

(a) When a
person required under section 289A.09, subdivision 2, to give a statement to an employee
or payee and a duplicate statement to the commissioner, or to give a reconciliation of the
statements and quarterly returns to the commissioner, gives a false or fraudulent statement
to an employee or payee or a false or fraudulent duplicate statement or reconciliation of
statements and quarterly returns to the commissioner, or fails to give a statement or the
reconciliation in the manner, when due, and showing the information required by section
289A.09, subdivision 2, or rules prescribed by the commissioner under that section, that
person is liable for a penalty of $50 for an act or failure to act. The total amount imposed
on the delinquent person for failures during a calendar year must not exceed $25,000.

(b) In addition to any other penalty provided by law, an employee who gives
a withholding exemption certificate or a residency affidavit to an employer that deleted text begin the
employee has reason to know contains a materially incorrect statement deleted text end new text begin decreases the
amount withheld under section 290.92 and as of the time the certificate or affidavit was
given to the employer there was no reasonable basis for the statements in the certificate or
affidavit new text end is liable to the commissioner of revenue for a penalty of $500 for each instance.

(c) In addition to any other penalty provided by law, an employer who fails to
submit a copy of a withholding exemption certificate or a residency affidavit required by
section 290.92, subdivision 5a, clause (1)(a), (1)(b), or (2) is liable to the commissioner of
revenue for a penalty of $50 for each instance.

(d) An employer or payor who fails to file an application for a withholding account
number, as required by section 290.92, subdivision 24, is liable to the commissioner for
a penalty of $100.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for certificates and affidavits given to
employers after December 31, 2005.
new text end

Sec. 12.

Minnesota Statutes 2004, section 290.92, subdivision 1, is amended to read:

Subdivision 1.

Definitions.

(1) [WAGES.] For purposes of this section, the term
"wages" means the same as that term is defined in section 3401(a) and (f) of the Internal
Revenue Code.

(2) [PAYROLL PERIOD.] For purposes of this section the term "payroll period"
means a period for which a payment of wages is ordinarily made to the employee by
the employee's employer, and the term "miscellaneous payroll period" means a payroll
period other than a daily, weekly, biweekly, semimonthly, monthly, quarterly, semiannual,
or annual payroll period.

(3) [EMPLOYEE.] For purposes of this section the term "employee" means any
resident individual performing services for an employer, either within or without, or both
within and without the state of Minnesota, and every nonresident individual performing
services within the state of Minnesota, the performance of which services constitute,
establish, and determine the relationship between the parties as that of employer and
employee. As used in the preceding sentence, the term "employee" includes an officer
of a corporation, and an officer, employee, or elected official of the United States, a
state, or any political subdivision thereof, or the District of Columbia, or any agency or
instrumentality of any one or more of the foregoing.

(4) [EMPLOYER.] For purposes of this section the term "employer" means any
person, including individuals, fiduciaries, estates, trusts, partnerships, limited liability
companies, and corporations transacting business in or deriving any income from sources
within the state of Minnesota for whom an individual performs or performed any service,
of whatever nature, as the employee of such person, except that if the person for whom the
individual performs or performed the services does not have deleted text begin legal deleted text end control of the payment
of the wages for such services, the term "employer," except for purposes of paragraph (1),
means the person having deleted text begin legal deleted text end control of the payment of such wages. As used in the
preceding sentence, the term "employer" includes any corporation, individual, estate, trust,
or organization which is exempt from taxation under section 290.05 and further includes,
but is not limited to, officers of corporations who have deleted text begin legal deleted text end control, either individually or
jointly with another or others, of the payment of the wages.

(5) [NUMBER OF WITHHOLDING EXEMPTIONS CLAIMED.] For purposes of
this section, the term "number of withholding exemptions claimed" means the number of
withholding exemptions claimed in a withholding exemption certificate in effect under
subdivision 5, except that if no such certificate is in effect, the number of withholding
exemptions claimed shall be considered to be zero.

new text begin EFFECTIVE DATE. new text end

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

Sec. 13.

Minnesota Statutes 2004, section 290C.05, is amended to read:

290C.05 ANNUAL CERTIFICATION.

On or before July 1 of each year, beginning with the year after the claimant has
received an approved application, the commissioner shall send each claimant enrolled
under the sustainable forest incentive program a certification form. The claimant must sign
the certification, attesting that the requirements and conditions for continued enrollment in
the program are currently being met, and must return the signed certification form to the
commissioner by August 15 of that same year. deleted text begin Failure to deleted text end new text begin If the claimant does not new text end return
an annual certification form by the due date deleted text begin shall result in removal of the lands from
the provisions of the sustainable forest incentive program, and the imposition of any
applicable removal penalty deleted text end new text begin , the provisions in section 290C.11 apply new text end . deleted text begin The claimant may
appeal the removal and any associated penalty according to the procedures and within the
time allowed under this chapter.
deleted text end

new text begin EFFECTIVE DATE. new text end

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

Sec. 14.

new text begin [290C.055] LENGTH OF COVENANT.
new text end

new text begin The covenant remains in effect for a minimum of eight years. If land is removed
from the program before it has been enrolled for four years, the covenant remains in
effect for eight years from the date recorded.
new text end

new text begin If land that has been enrolled for four years or more is removed from the program
for any reason, there is a waiting period before the covenant terminates. The covenant
terminates on January 1 of the fifth calendar year that begins after the date that:
new text end

new text begin (1) the commissioner receives notification from the claimant that the claimant wishes
to remove the land from the program under section 290C.10; or
new text end

new text begin (2) the date that the land is removed from the program under section 290C.11.
new text end

new text begin Notwithstanding the other provisions of this section, the covenant is terminated at
the same time that the land is removed from the program due to acquisition of title or
possession for a public purpose under section 290C.10.
new text end

new text begin EFFECTIVE DATE. new text end

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

Sec. 15.

Minnesota Statutes 2004, section 290C.10, is amended to read:

290C.10 WITHDRAWAL PROCEDURES.

An approved claimant under the sustainable forest incentive program for a minimum
of four years may notify the commissioner of the intent to terminate enrollment. Within
90 days of receipt of notice to terminate enrollment, the commissioner shall inform the
claimant in writing, acknowledging receipt of this notice and indicating the effective date
of termination from the sustainable forest incentive program. Termination of enrollment
in the sustainable forest incentive program occurs on January 1 of the fifth calendar
year that begins after receipt by the commissioner of the termination notice. After the
commissioner issues an effective date of termination, a claimant wishing to continue the
land's enrollment in the sustainable forest incentive program beyond the termination
date must apply for enrollment as prescribed in section 290C.04. A claimant who
withdraws a parcel of land from this program may not reenroll the parcel for a period of
three years. Within 90 days after the termination date, the commissioner shall execute
and acknowledge a document releasing the land from the covenant required under this
chapter. The document must be mailed to the claimant and is entitled to be recorded.
The commissioner may allow early withdrawal from the Sustainable Forest Incentive
Act without penalty deleted text begin in cases of condemnation deleted text end new text begin when the state of Minnesota, any local
government unit, or any other entity which has the right of eminent domain acquires
title or possession to the land new text end for a public purpose notwithstanding the provisions of this
section. new text begin In the case of such acquisition, the commissioner shall execute and acknowledge
a document releasing the land acquired by the state, local government unit, or other entity
from the covenant. All other enrolled land must remain in the program.
new text end

new text begin EFFECTIVE DATE. new text end

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

Sec. 16.

Minnesota Statutes 2004, section 325D.33, subdivision 6, is amended to read:

Subd. 6.

Violations.

If the commissioner determines that a distributor is violating
any provision of this chapter, the commissioner must give the distributor a written
warning explaining the violation and an explanation of what must be done to comply with
this chapter. Within ten days of issuance of the warning, the distributor must notify the
commissioner that the distributor has complied with the commissioner's recommendation
or request that the commissioner set the issue for a hearing pursuant to chapter 14. If a
hearing is requested, the hearing shall be scheduled within 20 days of the request and the
recommendation of the administrative law judge shall be issued within five working days
of the close of the hearing. The commissioner's final determination shall be issued within
five working days of the receipt of the administrative law judge's recommendation. If the
commissioner's final determination is adverse to the distributor and the distributor does
not comply within ten days of receipt of the commissioner's final determination, the
commissioner may order the distributor to immediately cease the stamping of cigarettes.
As soon as practicable after the order, the commissioner must remove the meter and any
unapplied cigarette stamps from the premises of the distributor.

If within ten days of issuance of the written warning the distributor has not complied
with the commissioner's recommendation or requested a hearing, the commissioner may
order the distributor to immediately cease the stamping of cigarettes and remove the meter
and unapplied stamps from the distributor's premises.

deleted text begin If, within any 12-month period, the commissioner has issued three written warnings
to any distributor, even if the distributor has complied within ten days, the commissioner
shall notify the distributor of the commissioner's intent to revoke the distributor's
license for a continuing course of conduct contrary to this chapter. For purposes of this
paragraph, a written warning that was ultimately resolved by removal of the warning by
the commissioner is not deemed to be a warning. The commissioner must notify the
distributor of the date and time of a hearing pursuant to chapter 14 at least 20 days before
the hearing is held. The hearing must provide an opportunity for the distributor to show
cause why the license should not be revoked. If the commissioner revokes a distributor's
license, the commissioner shall not issue a new license to that distributor for 180 days.
deleted text end

new text begin EFFECTIVE DATE. new text end

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

Sec. 17.

Minnesota Statutes 2004, section 473.843, subdivision 5, is amended to read:

Subd. 5.

Penalties; enforcement.

The audit, penalty, and enforcement provisions
applicable to new text begin corporate franchise new text end taxes imposed under chapter 290 apply to the fees
imposed under this section. The commissioner of revenue shall administer the provisions.

new text begin EFFECTIVE DATE. new text end

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