SF 2837

as introduced - 79th Legislature (1995 - 1996) Posted on 12/15/2009 12:00am

  1.1                          A bill for an act
  1.2             relating to taxation; property; modifying the taxation 
  1.3             of low-income rental housing; changing qualifying 
  1.4             criteria for these properties; reducing class rates 
  1.5             for low-income housing and for apartment properties; 
  1.6             eliminating homestead classification of leasehold 
  1.7             cooperatives; specifying income and rent limits for 
  1.8             tax-exempt public housing projects; appropriating 
  1.9             money; amending Minnesota Statutes 1994, sections 
  1.10            273.124, by adding a subdivision; and 469.040, by 
  1.11            adding a subdivision; Minnesota Statutes 1995 
  1.12            Supplement, sections 273.13, subdivision 25; and 
  1.13            273.1398, subdivision 1; proposing coding for new law 
  1.14            in Minnesota Statutes, chapters 273; and 462A. 
  1.15  BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.16     Section 1.  Minnesota Statutes 1994, section 273.124, is 
  1.17  amended by adding a subdivision to read: 
  1.18     Subd. 19.  [LEASE-PURCHASE PROGRAM.] Qualifying buildings 
  1.19  and appurtenances, together with the land on which they are 
  1.20  located, are classified as homesteads, if the following 
  1.21  qualifications are met: 
  1.22     (1) the property is leased for up to a five-year period by 
  1.23  the occupant under a lease-purchase program administered by the 
  1.24  Minnesota housing finance agency or a housing and redevelopment 
  1.25  authority under sections 469.001 to 469.047; 
  1.26     (2) the occupant's income is no greater than 80 percent of 
  1.27  the county or area median income, adjusted for family size; 
  1.28     (3) the building consists of one or two dwelling units; 
  1.29     (4) the lease agreement provides that part of the lease 
  1.30  payment is escrowed as a nonrefundable down payment on the 
  2.1   housing; 
  2.2      (5) the administering agency verifies the occupant's income 
  2.3   eligibility and certifies to the county assessor that the 
  2.4   occupant meets the income standards; and 
  2.5      (6) the property owner applies to the county assessor by 
  2.6   May 30 of each year. 
  2.7      For purposes of this subdivision, "qualifying buildings and 
  2.8   appurtenances" means a one or two unit residential building 
  2.9   which was unoccupied, abandoned, and boarded for at least six 
  2.10  months.  
  2.11     Sec. 2.  [273.126] [QUALIFYING LOW-INCOME RENTAL HOUSING.] 
  2.12     Subdivision 1.  [QUALIFYING RULES.] The market value of a 
  2.13  rental housing unit qualifies for assessment under class 4d if 
  2.14     (1) it is occupied by individuals meeting the income limits 
  2.15  under subdivision 2; 
  2.16     (2) a rent restriction agreement under subdivision 3 
  2.17  applies; 
  2.18     (3) the unit meets the minimum housing quality standards 
  2.19  under subdivision 4; and 
  2.20     (4) the Minnesota housing finance agency certifies to the 
  2.21  local assessor that the unit qualifies. 
  2.22     Subd. 2.  [INCOME LIMITS.] (a) In order to qualify under 
  2.23  class 4d, a unit must be occupied by an individual or 
  2.24  individuals whose income is less than 60 percent of the median 
  2.25  area gross income.  If the resident's income met the requirement 
  2.26  when the resident first occupied the unit, the income of the 
  2.27  resident continues to qualify unless the income exceeds 85 
  2.28  percent of the median area gross income. 
  2.29     (b) For purposes of this section, "median area gross income"
  2.30  means the greater of (1) the median gross income for the area 
  2.31  determined under section 42 of the Internal Revenue Code of 
  2.32  1986, as amended through December 31, 1995, or (2) the median 
  2.33  gross income for the state.  The median gross income must be 
  2.34  adjusted for family size. 
  2.35     (c) The owner or manager of the property may comply with 
  2.36  this subdivision by obtaining written statements from the 
  3.1   residents, at least annually, that their incomes are at or below 
  3.2   the limit.  If the housing finance agency suspects a building is 
  3.3   not in compliance with this subdivision, it may require the 
  3.4   owner or manager to undertake additional verification, including 
  3.5   verification by a third party, of compliance with the income 
  3.6   limits before certifying compliance with the subdivision. 
  3.7      Subd. 3.  [RENT RESTRICTIONS.] In order to qualify under 
  3.8   class 4d, a unit must be subject to a rent restriction agreement 
  3.9   with the housing finance agency for a period of at least five 
  3.10  years.  The agreement must be in effect and apply to the rents 
  3.11  to be charged for the year in which the property taxes are 
  3.12  payable.  The rent restriction agreement must provide for rents 
  3.13  for the unit to be no higher than the rents permitted under 
  3.14  section 42 of the Internal Revenue Code of 1986, as amended 
  3.15  through December 31, 1995.  In calculating the rent restrictions 
  3.16  under section 42 of the Internal Revenue Code of 1986, an income 
  3.17  limit of 50 percent of the median area gross income must be 
  3.18  used.  The definition of median gross income specified in this 
  3.19  section applies. 
  3.20     Subd. 4.  [MINIMUM HOUSING STANDARDS.] In order to qualify 
  3.21  under class 4d, a unit must be certified by the housing finance 
  3.22  agency to meet the minimum housing standards established under 
  3.23  section 462A.071. 
  3.24     Sec. 3.  Minnesota Statutes 1995 Supplement, section 
  3.25  273.13, subdivision 25, is amended to read: 
  3.26     Subd. 25.  [CLASS 4.] (a) Class 4a is residential real 
  3.27  estate containing four or more units and used or held for use by 
  3.28  the owner or by the tenants or lessees of the owner as a 
  3.29  residence for rental periods of 30 days or more.  Class 4a also 
  3.30  includes hospitals licensed under sections 144.50 to 144.56, 
  3.31  other than hospitals exempt under section 272.02, and contiguous 
  3.32  property used for hospital purposes, without regard to whether 
  3.33  the property has been platted or subdivided.  Class 4a property 
  3.34  in a city with a population of 5,000 or less, that is (1) 
  3.35  located outside of the metropolitan area, as defined in section 
  3.36  473.121, subdivision 2, or outside any county contiguous to the 
  4.1   metropolitan area, and (2) whose city boundary is at least 15 
  4.2   miles from the boundary of any city with a population greater 
  4.3   than 5,000 has a class rate of 2.3 percent of market value for 
  4.4   taxes payable in 1996 and thereafter.  All other class 4a 
  4.5   property has a class rate of 3.4 percent of market value for 
  4.6   taxes payable in 1996, a class rate of 3.2 percent of market 
  4.7   value for taxes payable in 1997, a class rate of three percent 
  4.8   of market value for taxes payable in 1998, and a class rate of 
  4.9   2.8 percent of market value payable in 1999 and thereafter.  For 
  4.10  purposes of this paragraph, population has the same meaning 
  4.11  given in section 477A.011, subdivision 3. 
  4.12     (b) Class 4b includes: 
  4.13     (1) residential real estate containing less than four 
  4.14  units, other than seasonal residential, and recreational; 
  4.15     (2) manufactured homes not classified under any other 
  4.16  provision; 
  4.17     (3) a dwelling, garage, and surrounding one acre of 
  4.18  property on a nonhomestead farm classified under subdivision 23, 
  4.19  paragraph (b).  
  4.20     Class 4b property has a class rate of 2.8 percent of market 
  4.21  value for taxes payable in 1992, 2.5 percent of market value for 
  4.22  taxes payable in 1993, and 2.3 2.2 percent of market value for 
  4.23  taxes payable in 1994 and thereafter 1997, a class rate of 2.1 
  4.24  percent of market value for taxes payable in 1998, and two 
  4.25  percent of market value for taxes payable in 1999 and thereafter.
  4.26     (c) Class 4c property includes: 
  4.27     (1) a structure that is:  
  4.28     (i) situated on real property that is used for housing for 
  4.29  the elderly or for low- and moderate-income families as defined 
  4.30  in Title II, as amended through December 31, 1990, of the 
  4.31  National Housing Act or the Minnesota housing finance agency law 
  4.32  of 1971, as amended, or rules promulgated by the agency and 
  4.33  financed by a direct federal loan or federally insured loan made 
  4.34  pursuant to Title II of the Act; or 
  4.35     (ii) situated on real property that is used for housing the 
  4.36  elderly or for low- and moderate-income families as defined by 
  5.1   the Minnesota housing finance agency law of 1971, as amended, or 
  5.2   rules adopted by the agency pursuant thereto and financed by a 
  5.3   loan made by the Minnesota housing finance agency pursuant to 
  5.4   the provisions of the act.  
  5.5      This clause applies only to property of a nonprofit or 
  5.6   limited dividend entity.  Property is classified as class 4c 
  5.7   under this clause for 15 years from the date of the completion 
  5.8   of the original construction or substantial rehabilitation, or 
  5.9   for the original term of the loan.  
  5.10     (2) a structure that is: 
  5.11     (i) situated upon real property that is used for housing 
  5.12  lower income families or elderly or handicapped persons, as 
  5.13  defined in section 8 of the United States Housing Act of 1937, 
  5.14  as amended; and 
  5.15     (ii) owned by an entity which has entered into a housing 
  5.16  assistance payments contract under section 8 which provides 
  5.17  assistance for 100 percent of the dwelling units in the 
  5.18  structure, other than dwelling units intended for management or 
  5.19  maintenance personnel.  Property is classified as class 4c under 
  5.20  this clause for the term of the housing assistance payments 
  5.21  contract, including all renewals, or for the term of its 
  5.22  permanent financing, whichever is shorter; and 
  5.23     (3) a qualified low-income building as defined in section 
  5.24  42(c)(2) of the Internal Revenue Code of 1986, as amended 
  5.25  through December 31, 1990, that (i) receives a low-income 
  5.26  housing credit under section 42 of the Internal Revenue Code of 
  5.27  1986, as amended through December 31, 1990; or (ii) meets the 
  5.28  requirements of that section and receives public financing, 
  5.29  except financing provided under sections 469.174 to 469.179, 
  5.30  which contains terms restricting the rents; or (iii) meets the 
  5.31  requirements of section 273.1317.  Classification pursuant to 
  5.32  this clause is limited to a term of 15 years.  The public 
  5.33  financing received must be from at least one of the following 
  5.34  sources:  government issued bonds exempt from taxes under 
  5.35  section 103 of the Internal Revenue Code of 1986, as amended 
  5.36  through December 31, 1993, the proceeds of which are used for 
  6.1   the acquisition or rehabilitation of the building; programs 
  6.2   under section 221(d)(3), 202, or 236, of Title II of the 
  6.3   National Housing Act; rental housing program funds under Section 
  6.4   8 of the United States Housing Act of 1937 or the market rate 
  6.5   family graduated payment mortgage program funds administered by 
  6.6   the Minnesota housing finance agency that are used for the 
  6.7   acquisition or rehabilitation of the building; public financing 
  6.8   provided by a local government used for the acquisition or 
  6.9   rehabilitation of the building, including grants or loans from 
  6.10  federal community development block grants, HOME block grants, 
  6.11  or residential rental bonds issued under chapter 474A; or other 
  6.12  rental housing program funds provided by the Minnesota housing 
  6.13  finance agency for the acquisition or rehabilitation of the 
  6.14  building. 
  6.15     For all properties described in clauses (1), (2), and (3) 
  6.16  and in paragraph (d), the market value determined by the 
  6.17  assessor must be based on the normal approach to value using 
  6.18  normal unrestricted rents unless the owner of the property 
  6.19  elects to have the property assessed under Laws 1991, chapter 
  6.20  291, article 1, section 55.  If the owner of the property elects 
  6.21  to have the market value determined on the basis of the actual 
  6.22  restricted rents, as provided in Laws 1991, chapter 291, article 
  6.23  1, section 55, the property will be assessed at the rate 
  6.24  provided for class 4a or class 4b property, as appropriate.  
  6.25  Properties described in clauses (1)(ii), (3), and (4) may apply 
  6.26  to the assessor for valuation under Laws 1991, chapter 291, 
  6.27  article 1, section 55.  The land on which these structures are 
  6.28  situated has the class rate given in paragraph (b) if the 
  6.29  structure contains fewer than four units, and the class rate 
  6.30  given in paragraph (a) if the structure contains four or more 
  6.31  units.  This clause applies only to the property of a nonprofit 
  6.32  or limited dividend entity.  
  6.33     (4) a parcel of land, not to exceed one acre, and its 
  6.34  improvements or a parcel of unimproved land, not to exceed one 
  6.35  acre, if it is owned by a neighborhood real estate trust and at 
  6.36  least 60 percent of the dwelling units, if any, on all land 
  7.1   owned by the trust are leased to or occupied by lower income 
  7.2   families or individuals.  This clause does not apply to any 
  7.3   portion of the land or improvements used for nonresidential 
  7.4   purposes.  For purposes of this clause, a lower income family is 
  7.5   a family with an income that does not exceed 65 percent of the 
  7.6   median family income for the area, and a lower income individual 
  7.7   is an individual whose income does not exceed 65 percent of the 
  7.8   median individual income for the area, as determined by the 
  7.9   United States Secretary of Housing and Urban Development.  For 
  7.10  purposes of this clause, "neighborhood real estate trust" means 
  7.11  an entity which is certified by the governing body of the 
  7.12  municipality in which it is located to have the following 
  7.13  characteristics: 
  7.14     (a) it is a nonprofit corporation organized under chapter 
  7.15  317A; 
  7.16     (b) it has as its principal purpose providing housing for 
  7.17  lower income families in a specific geographic community 
  7.18  designated in its articles or bylaws; 
  7.19     (c) it limits membership with voting rights to residents of 
  7.20  the designated community; and 
  7.21     (d) it has a board of directors consisting of at least 
  7.22  seven directors, 60 percent of whom are members with voting 
  7.23  rights and, to the extent feasible, 25 percent of whom are 
  7.24  elected by resident members of buildings owned by the trust; and 
  7.25     (5) except as provided in subdivision 22, paragraph (c), 
  7.26  real property devoted to temporary and seasonal residential 
  7.27  occupancy for recreation purposes, including real property 
  7.28  devoted to temporary and seasonal residential occupancy for 
  7.29  recreation purposes and not devoted to commercial purposes for 
  7.30  more than 250 days in the year preceding the year of 
  7.31  assessment.  For purposes of this clause, property is devoted to 
  7.32  a commercial purpose on a specific day if any portion of the 
  7.33  property is used for residential occupancy, and a fee is charged 
  7.34  for residential occupancy.  Class 4c also includes commercial 
  7.35  use real property used exclusively for recreational purposes in 
  7.36  conjunction with class 4c property devoted to temporary and 
  8.1   seasonal residential occupancy for recreational purposes, up to 
  8.2   a total of two acres, provided the property is not devoted to 
  8.3   commercial recreational use for more than 250 days in the year 
  8.4   preceding the year of assessment and is located within two miles 
  8.5   of the class 4c property with which it is used.  Class 4c 
  8.6   property classified in this clause also includes the remainder 
  8.7   of class 1c resorts.  Owners of real property devoted to 
  8.8   temporary and seasonal residential occupancy for recreation 
  8.9   purposes and all or a portion of which was devoted to commercial 
  8.10  purposes for not more than 250 days in the year preceding the 
  8.11  year of assessment desiring classification as class 1c or 4c, 
  8.12  must submit a declaration to the assessor designating the cabins 
  8.13  or units occupied for 250 days or less in the year preceding the 
  8.14  year of assessment by January 15 of the assessment year.  Those 
  8.15  cabins or units and a proportionate share of the land on which 
  8.16  they are located will be designated class 1c or 4c as otherwise 
  8.17  provided.  The remainder of the cabins or units and a 
  8.18  proportionate share of the land on which they are located will 
  8.19  be designated as class 3a.  The first $100,000 of the market 
  8.20  value of the remainder of the cabins or units and a 
  8.21  proportionate share of the land on which they are located shall 
  8.22  have a class rate of three percent.  The owner of property 
  8.23  desiring designation as class 1c or 4c property must provide 
  8.24  guest registers or other records demonstrating that the units 
  8.25  for which class 1c or 4c designation is sought were not occupied 
  8.26  for more than 250 days in the year preceding the assessment if 
  8.27  so requested.  The portion of a property operated as a (1) 
  8.28  restaurant, (2) bar, (3) gift shop, and (4) other nonresidential 
  8.29  facility operated on a commercial basis not directly related to 
  8.30  temporary and seasonal residential occupancy for recreation 
  8.31  purposes shall not qualify for class 1c or 4c; 
  8.32     (6) (2) real property up to a maximum of one acre of land 
  8.33  owned by a nonprofit community service oriented organization; 
  8.34  provided that the property is not used for a revenue-producing 
  8.35  activity for more than six days in the calendar year preceding 
  8.36  the year of assessment and the property is not used for 
  9.1   residential purposes on either a temporary or permanent basis.  
  9.2   For purposes of this clause, a "nonprofit community service 
  9.3   oriented organization" means any corporation, society, 
  9.4   association, foundation, or institution organized and operated 
  9.5   exclusively for charitable, religious, fraternal, civic, or 
  9.6   educational purposes, and which is exempt from federal income 
  9.7   taxation pursuant to section 501(c)(3), (10), or (19) of the 
  9.8   Internal Revenue Code of 1986, as amended through December 31, 
  9.9   1990.  For purposes of this clause, "revenue-producing 
  9.10  activities" shall include but not be limited to property or that 
  9.11  portion of the property that is used as an on-sale intoxicating 
  9.12  liquor or 3.2 percent malt liquor establishment licensed under 
  9.13  chapter 340A, a restaurant open to the public, bowling alley, a 
  9.14  retail store, gambling conducted by organizations licensed under 
  9.15  chapter 349, an insurance business, or office or other space 
  9.16  leased or rented to a lessee who conducts a for-profit 
  9.17  enterprise on the premises.  Any portion of the property which 
  9.18  is used for revenue-producing activities for more than six days 
  9.19  in the calendar year preceding the year of assessment shall be 
  9.20  assessed as class 3a.  The use of the property for social events 
  9.21  open exclusively to members and their guests for periods of less 
  9.22  than 24 hours, when an admission is not charged nor any revenues 
  9.23  are received by the organization shall not be considered a 
  9.24  revenue-producing activity; 
  9.25     (7) (3) post-secondary student housing of not more than one 
  9.26  acre of land that is owned by a nonprofit corporation organized 
  9.27  under chapter 317A and is used exclusively by a student 
  9.28  cooperative, sorority, or fraternity for on-campus housing or 
  9.29  housing located within two miles of the border of a college 
  9.30  campus; and 
  9.31     (8) (4) manufactured home parks as defined in section 
  9.32  327.14, subdivision 3. 
  9.33     Class 4c property has a class rate of 2.3 percent of market 
  9.34  value, except that (i) for each parcel of seasonal residential 
  9.35  recreational property not used for commercial purposes under 
  9.36  clause (5) (1) the first $72,000 of market value on each parcel 
 10.1   has a class rate of 1.9 percent for taxes payable in 1997 and 
 10.2   1.8 percent for taxes payable in 1998 and thereafter, and the 
 10.3   market value of each parcel that exceeds $72,000 has a class 
 10.4   rate of 2.5 percent, and (ii) manufactured home parks assessed 
 10.5   under clause (8) (4) have a class rate of two percent for taxes 
 10.6   payable in 1996, and thereafter.  
 10.7      (d) Class 4d property includes: 
 10.8      (1) a structure that is: 
 10.9      (i) situated on real property that is used for housing for 
 10.10  the elderly or for low and moderate income families as defined 
 10.11  by the Farmers Home Administration; 
 10.12     (ii) located in a municipality of less than 10,000 
 10.13  population; and 
 10.14     (iii) financed by a direct loan or insured loan from the 
 10.15  Farmers Home Administration.  Property is classified under this 
 10.16  clause for 15 years from the date of the completion of the 
 10.17  original construction or for the original term of the loan.  
 10.18     The class rates in paragraph (c), clauses (1), (2), and (3) 
 10.19  and this clause apply to the properties described in them, only 
 10.20  in proportion to occupancy of the structure by elderly or 
 10.21  handicapped persons or low and moderate income families as 
 10.22  defined in the applicable laws unless construction of the 
 10.23  structure had been commenced prior to January 1, 1984; or the 
 10.24  project had been approved by the governing body of the 
 10.25  municipality in which it is located prior to June 30, 1983; or 
 10.26  financing of the project had been approved by a federal or state 
 10.27  agency prior to June 30, 1983.  For those properties, 4c or 4d 
 10.28  classification is available only for those units meeting the 
 10.29  requirements of section 273.1318. 
 10.30     Classification under this clause is only available to 
 10.31  property of a nonprofit or limited dividend entity. 
 10.32     In the case of a structure financed or refinanced under any 
 10.33  federal or state mortgage insurance or direct loan program 
 10.34  exclusively for housing for the elderly or for housing for the 
 10.35  handicapped, a unit shall be considered occupied so long as it 
 10.36  is actually occupied by an elderly or handicapped person or, if 
 11.1   vacant, is held for rental to an elderly or handicapped person. 
 11.2      (2) For taxes payable in 1992, 1993, and 1994, only, 
 11.3   buildings and appurtenances, together with the land upon which 
 11.4   they are located, leased by the occupant under the community 
 11.5   lending model lease-purchase mortgage loan program administered 
 11.6   by the Federal National Mortgage Association, provided the 
 11.7   occupant's income is no greater than 60 percent of the county or 
 11.8   area median income, adjusted for family size and the building 
 11.9   consists of existing single family or duplex housing.  The lease 
 11.10  agreement must provide for a portion of the lease payment to be 
 11.11  escrowed as a nonrefundable down payment on the housing.  To 
 11.12  qualify under this clause, the taxpayer must apply to the county 
 11.13  assessor by May 30 of each year.  The application must be 
 11.14  accompanied by an affidavit or other proof required by the 
 11.15  assessor to determine qualification under this clause. 
 11.16     (3) Qualifying buildings and appurtenances, together with 
 11.17  the land upon which they are located, leased for a period of up 
 11.18  to five years by the occupant under a lease-purchase program 
 11.19  administered by the Minnesota housing finance agency or a 
 11.20  housing and redevelopment authority authorized under sections 
 11.21  469.001 to 469.047, provided the occupant's income is no greater 
 11.22  than 80 percent of the county or area median income, adjusted 
 11.23  for family size, and the building consists of two or less 
 11.24  dwelling units.  The lease agreement must provide for a portion 
 11.25  of the lease payment to be escrowed as a nonrefundable down 
 11.26  payment on the housing.  The administering agency shall verify 
 11.27  the occupants income eligibility and certify to the county 
 11.28  assessor that the occupant meets the income criteria under this 
 11.29  paragraph.  To qualify under this clause, the taxpayer must 
 11.30  apply to the county assessor by May 30 of each year.  For 
 11.31  purposes of this section, "qualifying buildings and 
 11.32  appurtenances" shall be defined as one or two unit residential 
 11.33  buildings which are unoccupied and have been abandoned and 
 11.34  boarded for at least six months is qualifying low-income rental 
 11.35  housing certified to the assessor by the housing finance agency 
 11.36  under sections 273.126 and 462A.071.  Class 4d includes land in 
 12.1   proportion to the total market value of the building that is 
 12.2   qualifying low-income rental housing.  For all properties 
 12.3   qualifying as class 4d, the market value determined by the 
 12.4   assessor must be based on the normal approach to value using 
 12.5   normal unrestricted rents. 
 12.6      Class 4d property has a class rate of two 1.5 percent of 
 12.7   market value except that property classified under clause (3), 
 12.8   shall have the same class rate as class 1a property. 
 12.9      (e) Residential rental property that would otherwise be 
 12.10  assessed as class 4 property under paragraph (a); paragraph (b), 
 12.11  clauses (1) and (3); paragraph (c), clause (1), (2), (3), or 
 12.12  (4), is assessed at the class rate applicable to it under 
 12.13  Minnesota Statutes 1988, section 273.13, if it is found to be a 
 12.14  substandard building under section 273.1316.  Residential rental 
 12.15  property that would otherwise be assessed as class 4 property 
 12.16  under paragraph (d) is assessed at 2.3 percent of market value 
 12.17  if it is found to be a substandard building under section 
 12.18  273.1316. 
 12.19     Sec. 4.  Minnesota Statutes 1995 Supplement, section 
 12.20  273.1398, subdivision 1, is amended to read: 
 12.21     Subdivision 1.  [DEFINITIONS.] (a) In this section, the 
 12.22  terms defined in this subdivision have the meanings given them. 
 12.23     (b) "Unique taxing jurisdiction" means the geographic area 
 12.24  subject to the same set of local tax rates. 
 12.25     (c) "Net tax capacity" means the product of (i) the 
 12.26  appropriate net class rates for the year in which the aid is 
 12.27  payable, except that (A) for aid payable in 1996 1997 the class 
 12.28  rate applicable to all the general class 4a shall be 3.4 
 12.29  percent, the class rate for class 4b is 2.3 percent, and the 
 12.30  class rate for class 4d is 2.0 percent; (B) for aid payable in 
 12.31  1998, the class rate for the general class 4a is 3.2 percent, 
 12.32  the class rate for class 4b is 2.2 percent, the class rate for 
 12.33  class 4d is 1.5 percent; and (C) for aid payable in 1999, the 
 12.34  class rate for the general class 4a is 3.0 percent and for class 
 12.35  4b is 2.1 percent; and (ii) estimated market values for the 
 12.36  assessment two years prior to that in which aid is payable.  The 
 13.1   general class 4a means the portion of class 4a properties that 
 13.2   has a class rate of 3.4 percent of market value for taxes 
 13.3   payable in 1996.  "Total net tax capacity" means the net tax 
 13.4   capacities for all property within the unique taxing 
 13.5   jurisdiction.  The total net tax capacity used shall be reduced 
 13.6   by the sum of (1) the unique taxing jurisdiction's net tax 
 13.7   capacity of commercial industrial property as defined in section 
 13.8   473F.02, subdivision 3, multiplied by the ratio determined 
 13.9   pursuant to section 473F.08, subdivision 6, for the 
 13.10  municipality, as defined in section 473F.02, subdivision 8, in 
 13.11  which the unique taxing jurisdiction is located, (2) the net tax 
 13.12  capacity of the captured value of tax increment financing 
 13.13  districts as defined in section 469.177, subdivision 2, and (3) 
 13.14  the net tax capacity of transmission lines deducted from a local 
 13.15  government's total net tax capacity under section 273.425.  For 
 13.16  purposes of determining the net tax capacity of property 
 13.17  referred to in clauses (1), (2), and (3), the net tax capacity 
 13.18  shall be multiplied by the ratio of the highest class rate for 
 13.19  class 3a property for taxes payable in the year in which the aid 
 13.20  is payable to the highest class rate for class 3a property in 
 13.21  the prior year.  Net tax capacity cannot be less than zero. 
 13.22     (d) "Previous net tax capacity" means the product of the 
 13.23  appropriate net class rates for the year previous to the year in 
 13.24  which the aid is payable, and estimated market values for the 
 13.25  assessment two years prior to that in which aid is payable.  
 13.26  "Total previous net tax capacity" means the previous net tax 
 13.27  capacities for all property within the unique taxing 
 13.28  jurisdiction.  The total previous net tax capacity shall be 
 13.29  reduced by the sum of (1) the unique taxing jurisdiction's 
 13.30  previous net tax capacity of commercial-industrial property as 
 13.31  defined in section 473F.02, subdivision 3, multiplied by the 
 13.32  ratio determined pursuant to section 473F.08, subdivision 6, for 
 13.33  the municipality, as defined in section 473F.02, subdivision 8, 
 13.34  in which the unique taxing jurisdiction is located, (2) the 
 13.35  previous net tax capacity of the captured value of tax increment 
 13.36  financing districts as defined in section 469.177, subdivision 
 14.1   2, and (3) the previous net tax capacity of transmission lines 
 14.2   deducted from a local government's total net tax capacity under 
 14.3   section 273.425.  Previous net tax capacity cannot be less than 
 14.4   zero. 
 14.5      (e) "Equalized market values" are market values that have 
 14.6   been equalized by dividing the assessor's estimated market value 
 14.7   for the second year prior to that in which the aid is payable by 
 14.8   the assessment sales ratios determined by class in the 
 14.9   assessment sales ratio study conducted by the department of 
 14.10  revenue pursuant to section 124.2131 in the second year prior to 
 14.11  that in which the aid is payable.  The equalized market values 
 14.12  shall equal the unequalized market values divided by the 
 14.13  assessment sales ratio. 
 14.14     (f) "Equalized school levies" means the amounts levied for: 
 14.15     (1) general education under section 124A.23, subdivision 2; 
 14.16     (2) supplemental revenue under section 124A.22, subdivision 
 14.17  8a; 
 14.18     (3) capital expenditure facilities revenue under section 
 14.19  124.243, subdivision 3; 
 14.20     (4) capital expenditure equipment revenue under section 
 14.21  124.244, subdivision 2; 
 14.22     (5) basic transportation under section 124.226, subdivision 
 14.23  1; and 
 14.24     (6) referendum revenue under section 124A.03. 
 14.25     (g) "Current local tax rate" means the quotient derived by 
 14.26  dividing the taxes levied within a unique taxing jurisdiction 
 14.27  for taxes payable in the year prior to that for which aids are 
 14.28  being calculated by the total previous net tax capacity of the 
 14.29  unique taxing jurisdiction.  
 14.30     (h) For purposes of calculating and allocating homestead 
 14.31  and agricultural credit aid authorized pursuant to subdivision 2 
 14.32  and the disparity reduction aid authorized in subdivision 3, 
 14.33  "gross taxes levied on all properties," "gross taxes," or "taxes 
 14.34  levied" means the total net tax capacity based taxes levied on 
 14.35  all properties except that levied on the captured value of tax 
 14.36  increment districts as defined in section 469.177, subdivision 
 15.1   2, and that levied on the portion of commercial industrial 
 15.2   properties' assessed value or gross tax capacity, as defined in 
 15.3   section 473F.02, subdivision 3, subject to the areawide tax as 
 15.4   provided in section 473F.08, subdivision 6, in a unique taxing 
 15.5   jurisdiction.  "Gross taxes" are before any reduction for 
 15.6   disparity reduction aid but "taxes levied" are after any 
 15.7   reduction for disparity reduction aid.  Gross taxes levied or 
 15.8   taxes levied cannot be less than zero.  
 15.9      "Taxes levied" excludes equalized school levies. 
 15.10     (i) "Human services aids" means: 
 15.11     (1) aid to families with dependent children under sections 
 15.12  256.82, subdivision 1, and 256.935, subdivision 1; 
 15.13     (2) medical assistance under sections 256B.041, subdivision 
 15.14  5, and 256B.19, subdivision 1; 
 15.15     (3) general assistance medical care under section 256D.03, 
 15.16  subdivision 6; 
 15.17     (4) general assistance under section 256D.03, subdivision 
 15.18  2; 
 15.19     (5) work readiness under section 256D.03, subdivision 2; 
 15.20     (6) emergency assistance under section 256.871, subdivision 
 15.21  6; 
 15.22     (7) Minnesota supplemental aid under section 256D.36, 
 15.23  subdivision 1; 
 15.24     (8) preadmission screening and alternative care grants; 
 15.25     (9) work readiness services under section 256D.051; 
 15.26     (10) case management services under section 256.736, 
 15.27  subdivision 13; 
 15.28     (11) general assistance claims processing, medical 
 15.29  transportation and related costs; and 
 15.30     (12) medical assistance, medical transportation and related 
 15.31  costs. 
 15.32     (j) "Household adjustment factor" means the number of 
 15.33  households for the second most recent year preceding that in 
 15.34  which the aids are payable divided by the number of households 
 15.35  for the third most recent year.  The household adjustment factor 
 15.36  cannot be less than one.  
 16.1      (k) "Growth adjustment factor" means the household 
 16.2   adjustment factor in the case of counties.  In the case of 
 16.3   cities, towns, school districts, and special taxing districts, 
 16.4   the growth adjustment factor equals one.  The growth adjustment 
 16.5   factor cannot be less than one.  
 16.6      (l) For aid payable in 1992 and subsequent years, 
 16.7   "homestead and agricultural credit base" means the previous 
 16.8   year's certified homestead and agricultural credit aid 
 16.9   determined under subdivision 2 less any permanent aid reduction 
 16.10  in the previous year to homestead and agricultural credit aid 
 16.11  under section 477A.0132, plus, for aid payable in 1992, fiscal 
 16.12  disparity homestead and agricultural credit aid under 
 16.13  subdivision 2b.  
 16.14     (m) "Net tax capacity adjustment" means (1) the total 
 16.15  previous net tax capacity minus the total net tax capacity, 
 16.16  multiplied by (2) the unique taxing jurisdiction's current local 
 16.17  tax rate.  The net tax capacity adjustment cannot be less than 
 16.18  zero. 
 16.19     (n) "Fiscal disparity adjustment" means the difference 
 16.20  between (1) a taxing jurisdiction's fiscal disparity 
 16.21  distribution levy under section 473F.08, subdivision 3, clause 
 16.22  (a), for taxes payable in the year prior to that for which aids 
 16.23  are being calculated, and (2) the same distribution levy 
 16.24  multiplied by the ratio of the highest class rate for class 3 
 16.25  property for taxes payable in the year prior to that for which 
 16.26  aids are being calculated to the highest class rate for class 3 
 16.27  property for taxes payable in the second prior year to that for 
 16.28  which aids are being calculated.  In the case of school 
 16.29  districts, the fiscal disparity distribution levy shall exclude 
 16.30  that part of the levy attributable to equalized school levies. 
 16.31     Sec. 5.  [462A.071] [CERTIFICATION OF HOUSING QUALIFYING 
 16.32  FOR REDUCED PROPERTY TAX RATE.] 
 16.33     Subdivision 1.  [CERTIFICATION.] By June 30 of each year, 
 16.34  the agency must certify to local assessors the units of 
 16.35  low-income rental properties that qualify for class 4d under 
 16.36  sections 273.126 and 273.13.  In making these certifications, 
 17.1   the agency may rely on the application and supporting 
 17.2   information supplied by the property owner as to compliance with 
 17.3   the income limits under subdivision 2 and satisfaction of the 
 17.4   minimum housing quality standards under subdivision 4. 
 17.5      Subd. 2.  [APPLICATION.] (a) In order to qualify for 
 17.6   certification under subdivision 1, the owner or manager of the 
 17.7   property must annually apply to the agency.  The application 
 17.8   must be in the form prescribed by the agency, contain the 
 17.9   information required by the agency, and be submitted by the date 
 17.10  and time specified by the agency. 
 17.11     (b) Each application must include: 
 17.12     (1) the property tax identification number; 
 17.13     (2) the number, type, and size of units the applicant seeks 
 17.14  to qualify as low-income housing under class 4d; 
 17.15     (3) the number, type, and size of units in the property for 
 17.16  which the applicant is not seeking qualification, if any; 
 17.17     (4) a certification that the property has been inspected by 
 17.18  a qualified inspector within the past three years and meets the 
 17.19  minimum housing quality standards or is exempt from the 
 17.20  inspection requirement under subdivision 4; 
 17.21     (5) information documenting compliance with the income 
 17.22  limits; 
 17.23     (6) an executed agreement to restrict rents meeting the 
 17.24  requirements specified by the agency and the rent schedule; and 
 17.25     (7) any additional information the agency deems appropriate 
 17.26  to require. 
 17.27     (c) The applicant must pay an application fee of $....... 
 17.28  per unit.  The fee must be deposited in the general fund. 
 17.29     Subd. 3.  [AGREEMENT TO RESTRICT RENTS.] The agency may 
 17.30  prescribe one or more standard form agreements to restrict rents 
 17.31  that meet the requirements of section 273.126, subdivision 3.  
 17.32  The agency may require applicants to execute a rent restriction 
 17.33  agreement in this form as a condition of entering an agreement 
 17.34  to restrict rents. 
 17.35     Subd. 4.  [MINIMUM HOUSING QUALITY STANDARDS.] (a) The 
 17.36  agency must prescribe a set of minimum housing quality standards 
 18.1   for decent, safe, and sanitary housing that units must meet to 
 18.2   qualify for taxation under class 4d.  In prescribing the 
 18.3   standards the agency may use standards established by (1) local 
 18.4   units of government, (2) the United States Department of Housing 
 18.5   and Urban Development, or (3) other governmental entities.  The 
 18.6   minimum housing standards may not require compliance with the 
 18.7   building code. 
 18.8      (b) In order to meet the minimum housing quality standards 
 18.9   a building must be inspected by an independent qualified 
 18.10  inspector at least once every three years.  The inspector must 
 18.11  certify that the building complies with the minimum standards.  
 18.12  The property owner must pay the cost of the inspection. 
 18.13     (c) The agency may exempt from the inspection requirement 
 18.14  housing units that are: 
 18.15     (1) financed by a governmental entity and subject to 
 18.16  regular inspection or other compliance checks with regard to 
 18.17  minimum housing quality; or 
 18.18     (2) subject to local government inspections for housing 
 18.19  quality at least every three years. 
 18.20     Written certification must be supplied, however, showing 
 18.21  that these exempt units have been inspected within the last 
 18.22  three years and comply with the requirements under the public 
 18.23  financing or local requirements. 
 18.24     Subd. 5.  [HOUSING INSPECTORS.] (a) Housing inspections 
 18.25  required by this section may be conducted by any qualified 
 18.26  inspector, including the agency, a local housing agency or 
 18.27  authority, a municipality, or a private person or entity.  The 
 18.28  inspector must be independent of the owner or manager of the 
 18.29  inspected property. 
 18.30     (b) The agency must provide for designation of qualified 
 18.31  inspectors.  It may do so by referencing those qualified to do 
 18.32  inspections under federal, state, or local inspection 
 18.33  requirements or otherwise as it deems appropriate. 
 18.34     (c) The agency may provide housing inspection services 
 18.35  under this section and may set and charge appropriate fees for 
 18.36  the services.  The fees are deposited in the general fund. 
 19.1      Sec. 6.  Minnesota Statutes 1994, section 469.040, is 
 19.2   amended by adding a subdivision to read: 
 19.3      Subd. 1a.  [LIMITS FOR EXEMPT HOUSING PROJECTS.] (a) The 
 19.4   provisions of this subdivision apply to housing projects 
 19.5   acquired, constructed, or refinanced after December 31, 1996. 
 19.6      (b) For a housing project to qualify for the property tax 
 19.7   exemption under this section, the authority must establish 
 19.8   income guidelines meeting the requirements of paragraph (c) and 
 19.9   rent restrictions under paragraph (d). 
 19.10     (c) The housing authority must establish and make good 
 19.11  faith efforts to abide by one of the following income limits for 
 19.12  the housing project: 
 19.13     (1) at least 20 percent of the housing units are occupied 
 19.14  by individuals whose incomes are 50 percent or less of the area 
 19.15  median gross income; or 
 19.16     (2) at least 40 percent of the housing units are occupied 
 19.17  by individuals whose incomes are 60 percent or less of the area 
 19.18  median gross income. 
 19.19     For purposes of this paragraph, the terms defined in 
 19.20  section 42 of the Internal Revenue Code of 1986 apply, except 
 19.21  "median area gross income" means the greater of (1) the median 
 19.22  gross income for the area determined under section 42 of the 
 19.23  Internal Revenue Code of 1986, as amended, or (2) the median 
 19.24  gross income for the state. 
 19.25     (d) The housing authority must establish rents that meet 
 19.26  the requirements of section 42(g) of the Internal Revenue Code 
 19.27  of 1986.  These rent restrictions are only required to apply for 
 19.28  the units of the housing project that are income restricted 
 19.29  under the guidelines established under paragraph (c). 
 19.30     Sec. 7.  [TRANSITION CLASS RATES.] 
 19.31     Subdivision 1.  [APPLICATION.] (a) The class rates under 
 19.32  this section apply for property taxes payable in 1998 to 2002 
 19.33  for the market value of properties classified as class 4c or 
 19.34  class 4d for taxes payable in 1997 and which do not qualify as 
 19.35  class 4d property as a result of the amendments in this act to 
 19.36  Minnesota Statutes, section 273.13, subdivision 25. 
 20.1      (b) To qualify for the class rates under this section, the 
 20.2   building's owner must annually certify to the assessor in 
 20.3   writing that the property, building, or unit continues to 
 20.4   qualify under the laws in effect and applicable to its 
 20.5   classification for taxes payable in 1997. 
 20.6      (c) A property no longer qualifies under this section: 
 20.7      (1) if it is transferred or sold; or 
 20.8      (2) if loans, that have a principal amount equal to more 
 20.9   than 25 percent of the property's market value and that are 
 20.10  secured by the property, are refinanced. 
 20.11     Subd. 2.  [CLASS 4C PROPERTIES.] For the market value of 
 20.12  properties that were classified as class 4c for taxes payable in 
 20.13  1997 and which no longer qualify as a result of the amendments 
 20.14  to Minnesota Statutes, section 273.13, subdivision 25, the 
 20.15  following class rates apply: 
 20.16     (1) for taxes payable in 1998, a class rate of 2.4 percent; 
 20.17     (2) for taxes payable in 1999, a class rate of 2.5 percent; 
 20.18     (3) for taxes payable in 2000, a class rate of 2.7 percent; 
 20.19     (4) for taxes payable in 2001, a class rate of 2.8 percent. 
 20.20     Subd. 3.  [CLASS 4D PROPERTIES.] For the market value of 
 20.21  properties that were classified as class 4d for taxes payable in 
 20.22  1997 and which no longer qualify as a result of the amendments 
 20.23  to Minnesota Statutes, section 273.13, subdivision 25, the 
 20.24  following class rates apply: 
 20.25     (1) for taxes payable in 1998, a class rate of 2.1 percent; 
 20.26     (2) for taxes payable in 1999, a class rate of 2.2 percent; 
 20.27     (3) for taxes payable in 2000, a class rate of 2.4 percent; 
 20.28     (4) for taxes payable in 2001, a class rate of 2.6 percent; 
 20.29     (5) for taxes payable in 2002, a class rate of 2.8 percent. 
 20.30     Sec. 8.  [LEASEHOLD COOPERATIVES.] 
 20.31     Subdivision 1.  [STUDY.] (a) The commissioner of revenue 
 20.32  shall study leasehold cooperatives and report the findings of 
 20.33  the study to the legislature by February 1, 1997.  The study 
 20.34  must examine: 
 20.35     (1) the extent to which leasehold cooperatives receiving 
 20.36  homestead classification are in compliance with the requirements 
 21.1   of the law; 
 21.2      (2) the extent to which leasehold cooperatives are better 
 21.3   maintained than other comparable rental housing; 
 21.4      (3) whether leasehold cooperatives have lower tenant 
 21.5   turnover rates than other comparable rental housing; 
 21.6      (4) the extent to which leasehold cooperatives charge below 
 21.7   market rents that reflect their lower property taxes; 
 21.8      (5) the extent to which tenant participation in the 
 21.9   management of leasehold cooperatives results in qualitative 
 21.10  differences in the operation and management of the cooperatives; 
 21.11  and 
 21.12     (6) any other factors that provide public benefits in 
 21.13  return for the lower property taxes leasehold cooperatives pay 
 21.14  relative to other rental housing. 
 21.15     The study must include a random audit of a sample of 
 21.16  leasehold cooperatives to assess the extent of compliance with 
 21.17  the law. 
 21.18     (b) The requirements of this subdivision do not apply if 
 21.19  the legislative audit commission selects a study of leasehold 
 21.20  cooperatives as a 1996 program evaluation topic. 
 21.21     Subd. 2.  [MORATORIUM.] No application for classification 
 21.22  of a property as a leasehold cooperative under Minnesota 
 21.23  Statutes, section 273.124, may be made after July 1, 1996, and 
 21.24  before June 1, 1997. 
 21.25     Sec. 9.  [APPROPRIATIONS.] 
 21.26     $....... is appropriated for fiscal years 1996 and 1997 
 21.27  from the general fund to the housing finance agency for purposes 
 21.28  of administering the certification of qualifying low-income 
 21.29  residential properties for property taxation under class 4d. 
 21.30     $....... is appropriated from the general fund for fiscal 
 21.31  years 1996 and 1997 to the commissioner of revenue for purposes 
 21.32  of the study required under section 8, if subdivision 1, 
 21.33  paragraph (b), does not preempt the study. 
 21.34     Sec. 10.  [EFFECTIVE DATE.] 
 21.35     Sections 1 to 3, are effective for property taxes payable 
 21.36  in 1998 and thereafter, except the amendments to class 4a and 
 22.1   class 4b are effective for taxes payable in 1997.  Section 4 is 
 22.2   effective for property taxes payable in 1997 and thereafter.  
 22.3   Section 6 is effective August 1, 1996.  Section 8 is effective 
 22.4   the day following final enactment.