as introduced - 80th Legislature (1997 - 1998) Posted on 12/15/2009 12:00am
1.1 A bill for an act 1.2 relating to taxation; providing for property tax 1.3 reform; advancing the effective dates of the sales tax 1.4 exemption for inputs to certain taxable services; 1.5 changing the payment and refund provisions for the 1.6 capital equipment exemption; providing an income tax 1.7 subtraction for personal and dependent exemptions; 1.8 advancing the effective date of the individual income 1.9 tax credit for long-term care insurance; changing 1.10 motor vehicle registration tax rates; providing for 1.11 fund transfers; appropriating money; amending 1.12 Minnesota Statutes 1996, sections 161.081, by adding a 1.13 subdivision; 168.013, subdivision 1a; 273.112, 1.14 subdivision 7a; 273.1398, subdivision 2; 297A.2572; 1.15 297A.2573; 477A.0122, subdivision 6; and 477A.03, 1.16 subdivision 2; Minnesota Statutes 1997 Supplement, 1.17 sections 270.60, subdivision 4; 273.112, subdivision 1.18 3; 273.127, subdivision 3; 273.13, subdivisions 22, 1.19 23, 24, 25, as amended, 31, and 32; 273.1382, 1.20 subdivision 1; and 289A.56, subdivision 4; 290.01, 1.21 subdivision 19b; Laws 1997, chapter 231, articles 5, 1.22 section 20; and 7, section 47; proposing coding for 1.23 new law in Minnesota Statutes, chapter 275; repealing 1.24 Minnesota Statutes 1996, sections 273.11, subdivisions 1.25 6a and 15; 273.124, subdivision 17; 273.1315; and 1.26 297A.15, subdivision 5. 1.27 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 1.28 ARTICLE 1 1.29 PROPERTY TAX REFORM 1.30 Section 1. Minnesota Statutes 1997 Supplement, section 1.31 273.112, subdivision 3, is amended to read: 1.32 Subd. 3. Real estate shall be entitled to valuation and 1.33 tax deferment under this section only if it is: 1.34 (a) actively and exclusively devoted to golf, skiing,lawn1.35bowling, croquet,or archery or firearms range recreational use 1.36 or other recreational or social uses carried on at the 2.1 establishment; 2.2 (b) five acres in size or more, except in the case ofa2.3lawn bowling or croquet green oran archery or firearms range or 2.4 an establishment actively and exclusively devoted to indoor 2.5 fitness, health, social, recreational, and related uses in which 2.6 the establishment is owned and operated by a not-for-profit 2.7 corporation; 2.8 (c)(1) operated by private individualsor, in the case of a2.9lawn bowling or croquet green, by private individuals or2.10corporations,and open to the public; or 2.11 (2) operated by firms or corporations for the benefit of 2.12 employees or guests; or 2.13 (3) operated by private clubs having a membership of 50 or 2.14 more or open to the public, provided that the club does not 2.15 discriminate in membership requirements or selection on the 2.16 basis of sex or marital status; and 2.17 (d) made available for use without discrimination on the 2.18 basis of sex during the time when the facility is open to use by 2.19 the public or by members, except that use for golf may be 2.20 restricted on the basis of sex no more frequently than one, or 2.21 part of one, weekend each calendar month for each sex and no 2.22 more than two, or part of two, weekdays each week for each sex. 2.23 If a golf club membership allows use of golf course 2.24 facilities by more than one adult per membership, the use must 2.25 be equally available to all adults entitled to use of the golf 2.26 course under the membership, except that use may be restricted 2.27 on the basis of sex as permitted in this section. Memberships 2.28 that permit play during restricted times may be allowed only if 2.29 the restricted times apply to all adults using the membership. 2.30 A golf club may not offer a membership or golfing privileges to 2.31 a spouse of a member that provides greater or less access to the 2.32 golf course than is provided to that person's spouse under the 2.33 same or a separate membership in that club, except that the 2.34 terms of a membership may provide that one spouse may have no 2.35 right to use the golf course at any time while the other spouse 2.36 may have either limited or unlimited access to the golf course. 3.1 A golf club may have or create an individual membership 3.2 category which entitles a member for a reduced rate to play 3.3 during restricted hours as established by the club. The club 3.4 must have on record a written request by the member for such 3.5 membership. 3.6 A golf club that has food or beverage facilities or 3.7 services must allow equal access to those facilities and 3.8 services for both men and women members in all membership 3.9 categories at all times. Nothing in this paragraph shall be 3.10 construed to require service or access to facilities to persons 3.11 under the age of 21 years or require any act that would violate 3.12 law or ordinance regarding sale, consumption, or regulation of 3.13 alcoholic beverages. 3.14 For purposes of this subdivision and subdivision 7a, 3.15 discrimination means a pattern or course of conduct and not 3.16 linked to an isolated incident. 3.17 Sec. 2. Minnesota Statutes 1996, section 273.112, 3.18 subdivision 7a, is amended to read: 3.19 Subd. 7a. Notwithstanding subdivision 7, when real 3.20 property ceases to qualify under subdivision 3 because of 3.21 failure to comply with prohibitions against discrimination on 3.22 the basis of sex, or because of the changes made by this 3.23 article, payment of additional taxes imposed under subdivision 7 3.24 is not required. 3.25 Sec. 3. Minnesota Statutes 1997 Supplement, section 3.26 273.127, subdivision 3, is amended to read: 3.27 Subd. 3. [CLASS 4C PROPERTIES.] For the market value of 3.28 properties that meet the criteria of subdivision 2, paragraph 3.29 (a), and which no longer qualify as a result of the eligibility 3.30 criteria specified in section 273.126, a class rate of 2.4 3.31 percent applies for taxes payable in 1999 and a class rate of 3.322.62.5 percent applies for taxes payable in 2000. 3.33 Sec. 4. Minnesota Statutes 1997 Supplement, section 3.34 273.13, subdivision 22, is amended to read: 3.35 Subd. 22. [CLASS 1.] (a) Except as provided in subdivision 3.36 23, real estate which is residential and used for homestead 4.1 purposes is class 1. The market value of class 1a property must 4.2 be determined based upon the value of the house, garage, and 4.3 land. 4.4For taxes payable in 1998 and thereafter,The first $75,000 4.5 of market value of class 1a property has a net class rate of one 4.6 percent of its market value; and the market value of class 1a 4.7 property that exceeds $75,000 has a class rate of1.851.7 4.8 percent of its market value for taxes payable in 1999 and 4.9 thereafter. 4.10 (b) Class 1bproperty includes homestead real estate or4.11homestead manufactured homes used for the purposes of a4.12homestead by4.13(1) any blind person, or the blind person and the blind4.14person's spouse; or4.15(2) any person, hereinafter referred to as "veteran," who:4.16(i) served in the active military or naval service of the4.17United States; and4.18(ii) is entitled to compensation under the laws and4.19regulations of the United States for permanent and total4.20service-connected disability due to the loss, or loss of use, by4.21reason of amputation, ankylosis, progressive muscular4.22dystrophies, or paralysis, of both lower extremities, such as to4.23preclude motion without the aid of braces, crutches, canes, or a4.24wheelchair; and4.25(iii) has acquired a special housing unit with special4.26fixtures or movable facilities made necessary by the nature of4.27the veteran's disability, or the surviving spouse of the4.28deceased veteran for as long as the surviving spouse retains the4.29special housing unit as a homestead; or4.30(3) any person who:4.31(i) is permanently and totally disabled and4.32(ii) receives 90 percent or more of total income from4.33(A) aid from any state as a result of that disability; or4.34(B) supplemental security income for the disabled; or4.35(C) workers' compensation based on a finding of total and4.36permanent disability; or5.1(D) social security disability, including the amount of a5.2disability insurance benefit which is converted to an old age5.3insurance benefit and any subsequent cost of living increases;5.4or5.5(E) aid under the federal Railroad Retirement Act of 1937,5.6United States Code Annotated, title 45, section 228b(a)5; or5.7(F) a pension from any local government retirement fund5.8located in the state of Minnesota as a result of that5.9disability; or5.10(G) pension, annuity, or other income paid as a result of5.11that disability from a private pension or disability plan,5.12including employer, employee, union, and insurance plans and5.13(iii) has household income as defined in section 290A.03,5.14subdivision 5, of $50,000 or less; or5.15(4) any person who is permanently and totally disabled and5.16whose household income as defined in section 290A.03,5.17subdivision 5, is 275 percent or less of the federal poverty5.18level.5.19Property is classified and assessed under clause (4) only5.20if the government agency or income-providing source certifies,5.21upon the request of the homestead occupant, that the homestead5.22occupant satisfies the disability requirements of this paragraph.5.23Property is classified and assessed pursuant to clause (1)5.24only if the commissioner of economic security certifies to the5.25assessor that the homestead occupant satisfies the requirements5.26of this paragraph.5.27Permanently and totally disabled for the purpose of this5.28subdivision means a condition which is permanent in nature and5.29totally incapacitates the person from working at an occupation5.30which brings the person an income. The first $32,000 market5.31value of class 1b property has a net class rate of .45 percent5.32of its market value. The remaining market value of class 1b5.33property has a net class rate using the rates for class 1 or5.34class 2a property, whichever is appropriate, of similar market5.35value.5.36(c) Class 1cproperty is commercial use real property that 6.1 abuts a lakeshore line and is devoted to temporary and seasonal 6.2 residential occupancy for recreational purposes but not devoted 6.3 to commercial purposes for more than 250 days in the year 6.4 preceding the year of assessment, and that includes a portion 6.5 used as a homestead by the owner, which includes a dwelling 6.6 occupied as a homestead by a shareholder of a corporation that 6.7 owns the resort or a partner in a partnership that owns the 6.8 resort, even if the title to the homestead is held by the 6.9 corporation or partnership. For purposes of this clause, 6.10 property is devoted to a commercial purpose on a specific day if 6.11 any portion of the property, excluding the portion used 6.12 exclusively as a homestead, is used for residential occupancy 6.13 and a fee is charged for residential occupancy. In order for a 6.14 property to be classified as class1c1b, at least 40 percent of 6.15 the annual gross lodging receipts related to the property must 6.16 be from business conducted between Memorial Day weekend and 6.17 Labor Day weekend, and at least 60 percent of all bookings by 6.18 lodging guests during the year must be for periods of at least 6.19 two consecutive nights. Class1c1b property has a class rate 6.20 of one percent of total market value with the following 6.21 limitation: the area of the property must not exceed 100 feet 6.22 of lakeshore footage for each cabin or campsite located on the 6.23 property up to a total of 800 feet and 500 feet in depth, 6.24 measured away from the lakeshore. 6.25(d)(c) Class1d1c property includes structures that meet 6.26 all of the following criteria: 6.27 (1) the structure is located on property that is classified 6.28 as agricultural property under section 273.13, subdivision 23; 6.29 (2) the structure is occupied exclusively by seasonal farm 6.30 workers during the time when they work on that farm, and the 6.31 occupants are not charged rent for the privilege of occupying 6.32 the property, provided that use of the structure for storage of 6.33 farm equipment and produce does not disqualify the property from 6.34 classification under this paragraph; 6.35 (3) the structure meets all applicable health and safety 6.36 requirements for the appropriate season; and 7.1 (4) the structure is not saleable as residential property 7.2 because it does not comply with local ordinances relating to 7.3 location in relation to streets or roads. 7.4 The market value of class1d1c property has the same class 7.5 rates as class 1a property under paragraph (a). 7.6 Sec. 5. Minnesota Statutes 1997 Supplement, section 7.7 273.13, subdivision 23, is amended to read: 7.8 Subd. 23. [CLASS 2.] (a) Class 2a property is agricultural 7.9 land including any improvements that is homesteaded. The market 7.10 value of the house and garage and immediately surrounding one 7.11 acre of land has the same class rates as class 1a property under 7.12 subdivision 22. The value of the remaining land including 7.13 improvements up to $115,000 has a net class rate of0.40.35 7.14 percent of market value for taxes payable in 1999 and 7.15 thereafter. The remaining value of class 2a property over 7.16 $115,000 of market value that does not exceed 320 acres has a 7.17 net class rate of0.90.8 percent of market value for taxes 7.18 payable in 1999 and thereafter. The remaining property over the 7.19 $115,000 market value in excess of 320 acres has a class rate of 7.201.41.3 percent of market value for taxes payable in 1999 and 7.21 thereafter. 7.22 (b) Class 2b property is (1) real estate, rural in 7.23 character and used exclusively for growing trees for timber, 7.24 lumber, and wood and wood products; (2) real estate that is not 7.25 improved with a structure and is used exclusively for growing 7.26 trees for timber, lumber, and wood and wood products, if the 7.27 owner has participated or is participating in a cost-sharing 7.28 program for afforestation, reforestation, or timber stand 7.29 improvement on that particular property, administered or 7.30 coordinated by the commissioner of natural resources; (3) real 7.31 estate that is nonhomestead agricultural land; or (4) a landing 7.32 area or public access area of a privately owned public use 7.33 airport. Class 2b property has a net class rate of1.41.3 7.34 percent of market value for taxes payable in 1999 and thereafter. 7.35 (c) Agricultural land as used in this section means 7.36 contiguous acreage of ten acres or more, used during the 8.1 preceding year for agricultural purposes. "Agricultural 8.2 purposes" as used in this section means the raising or 8.3 cultivation of agricultural products or enrollment in the 8.4 Reinvest in Minnesota program under sections 103F.501 to 8.5 103F.535 or the federal Conservation Reserve Program as 8.6 contained in Public Law Number 99-198. Contiguous acreage on 8.7 the same parcel, or contiguous acreage on an immediately 8.8 adjacent parcel under the same ownership, may also qualify as 8.9 agricultural land, but only if it is pasture, timber, waste, 8.10 unusable wild land, or land included in state or federal farm 8.11 programs. Agricultural classification for property shall be 8.12 determined excluding the house, garage, and immediately 8.13 surrounding one acre of land, and shall not be based upon the 8.14 market value of any residential structures on the parcel or 8.15 contiguous parcels under the same ownership. 8.16 (d) Real estate, excluding the house, garage, and 8.17 immediately surrounding one acre of land, of less than ten acres 8.18 which is exclusively and intensively used for raising or 8.19 cultivating agricultural products, shall be considered as 8.20 agricultural land. 8.21 Land shall be classified as agricultural even if all or a 8.22 portion of the agricultural use of that property is the leasing 8.23 to, or use by another person for agricultural purposes. 8.24 Classification under this subdivision is not determinative 8.25 for qualifying under section 273.111. 8.26 The property classification under this section supersedes, 8.27 for property tax purposes only, any locally administered 8.28 agricultural policies or land use restrictions that define 8.29 minimum or maximum farm acreage. 8.30 (e) The term "agricultural products" as used in this 8.31 subdivision includes production for sale of: 8.32 (1) livestock, dairy animals, dairy products, poultry and 8.33 poultry products, fur-bearing animals, horticultural and nursery 8.34 stock described in sections 18.44 to 18.61, fruit of all kinds, 8.35 vegetables, forage, grains, bees, and apiary products by the 8.36 owner; 9.1 (2) fish bred for sale and consumption if the fish breeding 9.2 occurs on land zoned for agricultural use; 9.3 (3) the commercial boarding of horses if the boarding is 9.4 done in conjunction with raising or cultivating agricultural 9.5 products as defined in clause (1); 9.6 (4) property which is owned and operated by nonprofit 9.7 organizations used for equestrian activities, excluding racing; 9.8 and 9.9 (5) game birds and waterfowl bred and raised for use on a 9.10 shooting preserve licensed under section 97A.115. 9.11 (f) If a parcel used for agricultural purposes is also used 9.12 for commercial or industrial purposes, including but not limited 9.13 to: 9.14 (1) wholesale and retail sales; 9.15 (2) processing of raw agricultural products or other goods; 9.16 (3) warehousing or storage of processed goods; and 9.17 (4) office facilities for the support of the activities 9.18 enumerated in clauses (1), (2), and (3), 9.19 the assessor shall classify the part of the parcel used for 9.20 agricultural purposes as class 1b, 2a, or 2b, whichever is 9.21 appropriate, and the remainder in the class appropriate to its 9.22 use. The grading, sorting, and packaging of raw agricultural 9.23 products for first sale is considered an agricultural purpose. 9.24 A greenhouse or other building where horticultural or nursery 9.25 products are grown that is also used for the conduct of retail 9.26 sales must be classified as agricultural if it is primarily used 9.27 for the growing of horticultural or nursery products from seed, 9.28 cuttings, or roots and occasionally as a showroom for the retail 9.29 sale of those products. Use of a greenhouse or building only 9.30 for the display of already grown horticultural or nursery 9.31 products does not qualify as an agricultural purpose. 9.32 The assessor shall determine and list separately on the 9.33 records the market value of the homestead dwelling and the one 9.34 acre of land on which that dwelling is located. If any farm 9.35 buildings or structures are located on this homesteaded acre of 9.36 land, their market value shall not be included in this separate 10.1 determination. 10.2 (g) To qualify for classification under paragraph (b), 10.3 clause (4), a privately owned public use airport must be 10.4 licensed as a public airport under section 360.018. For 10.5 purposes of paragraph (b), clause (4), "landing area" means that 10.6 part of a privately owned public use airport properly cleared, 10.7 regularly maintained, and made available to the public for use 10.8 by aircraft and includes runways, taxiways, aprons, and sites 10.9 upon which are situated landing or navigational aids. A landing 10.10 area also includes land underlying both the primary surface and 10.11 the approach surfaces that comply with all of the following: 10.12 (i) the land is properly cleared and regularly maintained 10.13 for the primary purposes of the landing, taking off, and taxiing 10.14 of aircraft; but that portion of the land that contains 10.15 facilities for servicing, repair, or maintenance of aircraft is 10.16 not included as a landing area; 10.17 (ii) the land is part of the airport property; and 10.18 (iii) the land is not used for commercial or residential 10.19 purposes. 10.20 The land contained in a landing area under paragraph (b), clause 10.21 (4), must be described and certified by the commissioner of 10.22 transportation. The certification is effective until it is 10.23 modified, or until the airport or landing area no longer meets 10.24 the requirements of paragraph (b), clause (4). For purposes of 10.25 paragraph (b), clause (4), "public access area" means property 10.26 used as an aircraft parking ramp, apron, or storage hangar, or 10.27 an arrival and departure building in connection with the airport. 10.28 Sec. 6. Minnesota Statutes 1997 Supplement, section 10.29 273.13, subdivision 24, is amended to read: 10.30 Subd. 24. [CLASS 3.] (a) Commercial and industrial 10.31 property and utility real and personal property, except class 5 10.32 property as identified in subdivision 31, clause (1), is class 10.33 3a. Each parcel has a class rate of2.72.5 percent for taxes 10.34 payable in 1999 and thereafter of the first tier of market 10.35 value, and4.03.0 percent for taxes payable in 1999 and 10.36 thereafter of the remaining market value, except that in the 11.1 case of contiguous parcels of commercial and industrial property 11.2 owned by the same person or entity, only the value equal to the 11.3 first-tier value of the contiguous parcels qualifies for the 11.4 reduced class rate. For the purposes of this subdivision, the 11.5 first tier means the first $150,000 of market value. In the 11.6 case of utility property owned by one person or entity, only one 11.7 parcel in each county has a reduced class rate on the first tier 11.8 of market value. 11.9 For purposes of this paragraph, parcels are considered to 11.10 be contiguous even if they are separated from each other by a 11.11 road, street, vacant lot, waterway, or other similar intervening 11.12 type of property. 11.13 (b) Employment property defined in section 469.166, during 11.14 the period provided in section 469.170, shall constitute class 11.15 3b and has a class rate of 2.3 percent of the first $50,000 of 11.16 market value and3.63.0 percent for taxes payable in 1999 and 11.17 thereafter of the remainder, except that for employment property 11.18 located in a border city enterprise zone designated pursuant to 11.19 section 469.168, subdivision 4, paragraph (c), the class rate of 11.20 the first tier of market value and the class rate of the 11.21 remainder is determined under paragraph (a), unless the 11.22 governing body of the city designated as an enterprise zone 11.23 determines that a specific parcel shall be assessed pursuant to 11.24 the first clause of this sentence. The governing body may 11.25 provide for assessment under the first clause of the preceding 11.26 sentence only for property which is located in an area which has 11.27 been designated by the governing body for the receipt of tax 11.28 reductions authorized by section 469.171, subdivision 1. 11.29 (c) Structures which are (i) located on property classified 11.30 as class 3a, (ii) constructed under an initial building permit 11.31 issued after January 2, 1996, (iii) located in a transit zone as 11.32 defined under section 473.3915, subdivision 3, (iv) located 11.33 within the boundaries of a school district, and (v) not 11.34 primarily used for retail or transient lodging purposes, shall 11.35 have a class rate equal to 85 percent of the class rate of the 11.36 second tier of the commercial property rate under paragraph (a) 12.1 on any portion of the market value that does not qualify for the 12.2 first tier class rate under paragraph (a). As used in item (v), 12.3 a structure is primarily used for retail or transient lodging 12.4 purposes if over 50 percent of its square footage is used for 12.5 those purposes.The four percent rateA class rate equal to 85 12.6 percent of the class rate of the second tier of the commercial 12.7 property rate under paragraph (a) shall also apply to 12.8 improvements to existing structures that meet the requirements 12.9 of items (i) to (v) if the improvements are constructed under an 12.10 initial building permit issued after January 2, 1996, even if 12.11 the remainder of the structure was constructed prior to January 12.12 2, 1996. For the purposes of this paragraph, a structure shall 12.13 be considered to be located in a transit zone if any portion of 12.14 the structure lies within the zone. If any property once 12.15 eligible for treatment under this paragraph ceases to remain 12.16 eligible due to revisions in transit zone boundaries, the 12.17 property shall continue to receive treatment under this 12.18 paragraph for a period of three years. 12.19 Sec. 7. Minnesota Statutes 1997 Supplement, section 12.20 273.13, subdivision 25, as amended by Laws 1997, Third Special 12.21 Session chapter 3, section 28, is amended to read: 12.22 Subd. 25. [CLASS 4.] (a) Class 4a is residential real 12.23 estate containing four or more units and used or held for use by 12.24 the owner or by the tenants or lessees of the owner as a 12.25 residence for rental periods of 30 days or more. Class 4a also 12.26 includes hospitals licensed under sections 144.50 to 144.56, 12.27 other than hospitals exempt under section 272.02, and contiguous 12.28 property used for hospital purposes, without regard to whether 12.29 the property has been platted or subdivided. Class 4a property 12.30 in a city with a population of 5,000 or less, that is (1) 12.31 located outside of the metropolitan area, as defined in section 12.32 473.121, subdivision 2, or outside any county contiguous to the 12.33 metropolitan area, and (2) whose city boundary is at least 15 12.34 miles from the boundary of any city with a population greater 12.35 than 5,000 has a class rate of2.32.15 percent of market value 12.36 for taxes payable in 1999 and thereafter. All other class 4a 13.1 property has a class rate of2.92.5 percent of market value for 13.2 taxes payable in 1999 and thereafter. For purposes of this 13.3 paragraph, population has the same meaning given in section 13.4 477A.011, subdivision 3. 13.5 (b) Class 4b includes: 13.6 (1) residential real estate containing less than four units 13.7 that does not qualify as class 4bb, other than seasonal 13.8 residential, and recreational; 13.9 (2) manufactured homes not classified under any other 13.10 provision; 13.11 (3) a dwelling, garage, and surrounding one acre of 13.12 property on a nonhomestead farm classified under subdivision 23, 13.13 paragraph (b) containing two or three units; 13.14 (4) unimproved property that is classified residential as 13.15 determined under section 273.13, subdivision 33. 13.16 Class 4b property has a class rate of2.11.8 percent of 13.17 market value. 13.18 (c) Class 4bb includes: 13.19 (1) nonhomestead residential real estate containing one 13.20 unit, other than seasonal residential, and recreational; and 13.21 (2) a single family dwelling, garage, and surrounding one 13.22 acre of property on a nonhomestead farm classified under 13.23 subdivision 23, paragraph (b). 13.24 Class 4bb has a class rate of1.91.25 percent for taxes 13.25 payable in 1999 and thereafter on the first $75,000 of market 13.26 value and a class rate of2.11.7 percent for taxes payable in 13.27 1999 and thereafter of its market value that exceeds $75,000. 13.28 Property that has been classified as seasonal recreational 13.29 residential property at any time during which it has been owned 13.30 by the current owner or spouse of the current owner does not 13.31 qualify for class 4bb. 13.32 (d) Class 4c property includes: 13.33 (1) except as provided in subdivision 22, 13.34 paragraph(c)(b), real property devoted to temporary and 13.35 seasonal residential occupancy for recreation purposes, 13.36 including real property devoted to temporary and seasonal 14.1 residential occupancy for recreation purposes and not devoted to 14.2 commercial purposes for more than 250 days in the year preceding 14.3 the year of assessment. For purposes of this clause, property 14.4 is devoted to a commercial purpose on a specific day if any 14.5 portion of the property is used for residential occupancy, and a 14.6 fee is charged for residential occupancy. In order for a 14.7 property to be classified as class 4c, seasonal recreational 14.8 residential for commercial purposes, at least 40 percent of the 14.9 annual gross lodging receipts related to the property must be 14.10 from business conducted between Memorial Day weekend and Labor 14.11 Day weekend and at least 60 percent of all bookings by lodging 14.12 guests during the year must be for periods of at least two 14.13 consecutive nights. Class 4c also includes commercial use real 14.14 property used exclusively for recreational purposes in 14.15 conjunction with class 4c property devoted to temporary and 14.16 seasonal residential occupancy for recreational purposes, up to 14.17 a total of two acres, provided the property is not devoted to 14.18 commercial recreational use for more than 250 days in the year 14.19 preceding the year of assessment and is located within two miles 14.20 of the class 4c property with which it is used. Class 4c 14.21 property classified in this clause also includes the remainder 14.22 of class1c1b resorts. Owners of real property devoted to 14.23 temporary and seasonal residential occupancy for recreation 14.24 purposes and all or a portion of which was devoted to commercial 14.25 purposes for not more than 250 days in the year preceding the 14.26 year of assessment desiring classification as class1c1b or 4c, 14.27 must submit a declaration to the assessor designating the cabins 14.28 or units occupied for 250 days or less in the year preceding the 14.29 year of assessment by January 15 of the assessment year. Those 14.30 cabins or units and a proportionate share of the land on which 14.31 they are located will be designated class1c1b or 4c as 14.32 otherwise provided. The remainder of the cabins or units and a 14.33 proportionate share of the land on which they are located will 14.34 be designated as class 3a. The owner of property desiring 14.35 designation as class1c1b or 4c property must provide guest 14.36 registers or other records demonstrating that the units for 15.1 which class1c1b or 4c designation is sought were not occupied 15.2 for more than 250 days in the year preceding the assessment if 15.3 so requested. The portion of a property operated as a (1) 15.4 restaurant, (2) bar, (3) gift shop, and (4) other nonresidential 15.5 facility operated on a commercial basis not directly related to 15.6 temporary and seasonal residential occupancy for recreation 15.7 purposes shall not qualify for class1c1b or 4c; 15.8 (2) qualified property used as a golf course if: 15.9 (i) any portion of the property is located within a county 15.10 that has a population of less than 50,000, or within a county 15.11 containing a golf course owned by a municipality, the county, or 15.12 a special taxing district; 15.13 (ii) it is open to the public on a daily fee basis. It may 15.14 charge membership fees or dues, but a membership fee may not be 15.15 required in order to use the property for golfing, and its green 15.16 fees for golfing must be comparable to green fees typically 15.17 charged by municipal courses; and 15.18 (iii) it meets the requirements of section 273.112, 15.19 subdivision 3, paragraph (d). 15.20 A structure used as a clubhouse, restaurant, or place of 15.21 refreshment in conjunction with the golf course is classified as 15.22 class 3a property. 15.23 (3) real property up to a maximum of one acre of land owned 15.24 by a nonprofit community service oriented organization; provided 15.25 that the property is not used for a revenue-producing activity 15.26 for more than six days in the calendar year preceding the year 15.27 of assessment and the property is not used for residential 15.28 purposes on either a temporary or permanent basis. For purposes 15.29 of this clause, a "nonprofit community service oriented 15.30 organization" means any corporation, society, association, 15.31 foundation, or institution organized and operated exclusively 15.32 for charitable, religious, fraternal, civic, or educational 15.33 purposes, and which is exempt from federal income taxation 15.34 pursuant to section 501(c)(3), (10), or (19) of the Internal 15.35 Revenue Code of 1986, as amended through December 31, 1990. For 15.36 purposes of this clause, "revenue-producing activities" shall 16.1 include but not be limited to property or that portion of the 16.2 property that is used as an on-sale intoxicating liquor or 3.2 16.3 percent malt liquor establishment licensed under chapter 340A, a 16.4 restaurant open to the public, bowling alley, a retail store, 16.5 gambling conducted by organizations licensed under chapter 349, 16.6 an insurance business, or office or other space leased or rented 16.7 to a lessee who conducts a for-profit enterprise on the 16.8 premises. Any portion of the property which is used for 16.9 revenue-producing activities for more than six days in the 16.10 calendar year preceding the year of assessment shall be assessed 16.11 as class 3a. The use of the property for social events open 16.12 exclusively to members and their guests for periods of less than 16.13 24 hours, when an admission is not charged nor any revenues are 16.14 received by the organization shall not be considered a 16.15 revenue-producing activity; 16.16 (4) post-secondary student housing of not more than one 16.17 acre of land that is owned by a nonprofit corporation organized 16.18 under chapter 317A and is used exclusively by a student 16.19 cooperative, sorority, or fraternity for on-campus housing or 16.20 housing located within two miles of the border of a college 16.21 campus; and 16.22 (5) manufactured home parks as defined in section 327.14, 16.23 subdivision 3. 16.24 Class 4c property has a class rate of 2.1 percent on the 16.25 first $150,000 of market value and the market value of class 4c 16.26 property that exceeds $150,000 has a class rate of 2.3 percent 16.27 for taxes payable in 1999 and thereafter, except that (i) for 16.28 each parcel of seasonal residential recreational property not 16.29 used for commercial purposes the first $75,000 of market value 16.30 has a class rate of1.41.3 percent for taxes payable in 1999 16.31 and thereafter, and the market value that exceeds $75,000 has a 16.32 class rate of2.52.3 percent for taxes payable in 1999 and 16.33 thereafter, and (ii) manufactured home parks assessed under 16.34 clause (5) have a class rate of two percent. 16.35 (e) Class 4d property is qualifying low-income rental 16.36 housing certified to the assessor by the housing finance agency 17.1 under sections 273.126 and 462A.071. Class 4d includes land in 17.2 proportion to the total market value of the building that is 17.3 qualifying low-income rental housing. For all properties 17.4 qualifying as class 4d, the market value determined by the 17.5 assessor must be based on the normal approach to value using 17.6 normal unrestricted rents. 17.7 Class 4d property has a class rate of one percent of market 17.8 value. 17.9(f) Class 4e property consists of the residential portion17.10of any structure located within a city that was converted from17.11nonresidential use to residential use, provided that:17.12(1) the structure had formerly been used as a warehouse;17.13(2) the structure was originally constructed prior to 1940;17.14(3) the conversion was done after December 31, 1995, but17.15before January 1, 2003; and17.16(4) the conversion involved an investment of at least17.17$25,000 per residential unit.17.18Class 4e property has a class rate of 2.3 percent, provided17.19that a structure is eligible for class 4e classification only in17.20the 12 assessment years immediately following the conversion.17.21 Sec. 8. Minnesota Statutes 1997 Supplement, section 17.22 273.13, subdivision 31, is amended to read: 17.23 Subd. 31. [CLASS 5.] Class 5 property includes: 17.24 (1) tools, implements, and machinery of an electric 17.25 generating, transmission, or distribution system or a pipeline 17.26 system transporting or distributing water, gas, crude oil, or 17.27 petroleum products or mains and pipes used in the distribution 17.28 of steam or hot or chilled water for heating or cooling 17.29 buildings, which are fixtures; 17.30 (2) unmined iron ore and low-grade iron-bearing formations 17.31 as defined in section 273.14; and 17.32 (3) all other property not otherwise classified. 17.33 Class 5 property has a class rate of4.03.5 percent of 17.34 market value for taxes payable in19981999 and thereafter. 17.35 Sec. 9. Minnesota Statutes 1997 Supplement, section 17.36 273.13, subdivision 32, is amended to read: 18.1 Subd. 32. [TARGET CLASS RATES.] (a) All classes of 18.2 property with a class rate of4four percent for taxes payable 18.3 in 1998 have a target class rate of3.5three percent. Class 4a 18.4 shall have a target class rate of2.5two percent. Class 4bb 18.5 has a target class rate of1.25one percent of the first $75,000 18.6 of market value and a target class rate of1.851.5 percent of 18.7 the market value in excess of $75,000. 18.8 (b) By the fourth Tuesday in January of 1998 and at the 18.9 time of submission of the biennial budget under section 16A.11 18.10 in each biennium thereafter, the governor must recommend the 18.11 class rate schedule for all properties for taxes payable in 1999 18.12 for the schedule submitted in 1998 and for the following two 18.13 calendar years in each biennium thereafter. The class rate 18.14 schedule must include reductions in the class rates of the 18.15 classes designated in paragraph (a) until such time as the 18.16 target class rates are reached unless the governor recommends no 18.17 change in the class rate schedule for all properties. As part 18.18 of the recommendation, the governor shall recommend 18.19 appropriation of monies from the property tax reform account 18.20 under section 16A.1521 and include within the budget additional 18.21 funding for the education homestead credit, the property tax 18.22 refund under chapter 290A and education aids under chapters 124 18.23 and 124A to the extent those aids will be used to reduce 18.24 property tax levies. The governor may propose alternative 18.25 programs to prevent the taxes of classes other than those 18.26 designated in paragraph (a) from increasing as a result of the 18.27 governor's recommended class rate schedule. 18.28 Sec. 10. Minnesota Statutes 1997 Supplement, section 18.29 273.1382, subdivision 1, is amended to read: 18.30 Subdivision 1. [EDUCATION HOMESTEAD CREDIT.] Each year, 18.31 beginning with property taxes payable in 1998, the respective 18.32 county auditors shall determine the initial tax rate for each 18.33 school district for the general education levy certified under 18.34 section 124A.23, subdivision 2 or 3. That rate plus the school 18.35 district's education homestead credit tax rate adjustment under 18.36 section 275.08, subdivision 1e, shall be the general education 19.1 homestead credit local tax rate for the district. The auditor 19.2 shall then determine a general education homestead credit for 19.3 each homestead within the county equal to3266 percent for 19.4 taxes payable in 1999 and thereafter of the general education 19.5 homestead credit local tax rate times the net tax capacity of 19.6 the homestead for the taxes payable year. The amount of general 19.7 education homestead credit for a homestead may not 19.8 exceed$225$350 for taxes payable in 1999 and thereafter. In 19.9 the case of an agricultural homestead, only the net tax capacity 19.10 of the house, garage, and surrounding one acre of land shall be 19.11 used in determining the property's education homestead credit. 19.12 Sec. 11. Minnesota Statutes 1996, section 273.1398, 19.13 subdivision 2, is amended to read: 19.14 Subd. 2. [HOMESTEAD AND AGRICULTURAL CREDIT AID.] 19.15 Homestead and agricultural credit aid for each unique taxing 19.16 jurisdiction equals the product of (1) the homestead and 19.17 agricultural credit aid base, and (2) the growth adjustment 19.18 factor, plus the net tax capacity adjustment and the fiscal 19.19 disparity adjustment. Beginning with homestead and agricultural 19.20 credit aid payable in 1999, each county that receives an amount 19.21 in calendar year 1999 under section 477A.0122 as a result of the 19.22 appropriation in section 477A.03, subdivision 2, paragraph (c), 19.23 clause (3), shall have its homestead and agricultural credit aid 19.24 permanently reduced by an equal amount. 19.25 Sec. 12. [275.071] [MARKET VALUE TAX.] 19.26 That portion of any county's, city's, town's, or special 19.27 taxing district's levy which exceeds the jurisdiction's levy for 19.28 taxes payable in 1999 shall be levied against the referendum 19.29 market value of the jurisdiction, as defined in section 124A.02, 19.30 subdivision 3b. When the jurisdiction reports its levy to the 19.31 county auditor under section 275.07, it must separately identify 19.32 the portion to be levied against net tax capacity and the 19.33 portion to be levied against market value. 19.34 Sec. 13. Minnesota Statutes 1996, section 477A.0122, 19.35 subdivision 6, is amended to read: 19.36 Subd. 6. [REPORT.] On or before March 15 of the year 20.1 following the year in which the distributions under this section 20.2 are received, each county shall file with the commissioner of 20.3 revenue and commissioner of human services a report on prior 20.4 year expenditures for out-of-home placement and family 20.5 preservation, including expenditures under this section. For 20.6 the human services programs specified in this section, the 20.7 commissioner of revenue and commissioner of human services, in 20.8 consultation with representatives of county governments, shall 20.9 make a recommendation to the 1999 legislature as to which 20.10 current reporting requirements imposed on county governments, if 20.11 any, may be eliminated, replaced, or consolidated on the report 20.12 established by this section. For aid payable in calendar year 20.13 2000 and thereafter, each county shall provide information on 20.14 the amount of state aid, local property tax revenue, and federal 20.15 aid expended by that county on the programs specified in this 20.16 section using the consolidated financial report recommended by 20.17 the commissioner of revenue and commissioner of human services 20.18 under this subdivision. 20.19 Sec. 14. Minnesota Statutes 1996, section 477A.03, 20.20 subdivision 2, is amended to read: 20.21 Subd. 2. [ANNUAL APPROPRIATION.] (a) A sum sufficient to 20.22 discharge the duties imposed by sections 477A.011 to 477A.014 is 20.23 annually appropriated from the general fund to the commissioner 20.24 of revenue. For aids payable in 1996 and thereafter, the total 20.25 aids paid undersectionssection 477A.013, subdivision 9,and20.26477A.0122are the amounts certified to be paid in the previous 20.27 year, adjusted for inflation as provided under subdivision 20.28 3.Aid payments to counties under section 477A.0121 are limited20.29to $20,265,000 in 1996. Aid payments to counties under section20.30477A.0121 are limited to $27,571,625 in 1997.20.31 (b) For aid payable in 1998 and thereafter, the total aids 20.32 paid under section 477A.0121 are the amounts certified to be 20.33 paid in the previous year, adjusted for inflation as provided 20.34 under subdivision 3. 20.35 (c) For aid payable in 1999, the total aid payments under 20.36 section 477A.0122 are the sum of: 21.1 (1) the amounts certified to be paid in the previous year, 21.2 adjusted for inflation as provided in subdivision 3; plus 21.3 (2) $20,000,000; plus 21.4 (3) $10,000,000. 21.5 For aid payable in 2000 and thereafter, the total aid 21.6 payments under section 477A.0122 are the amounts certified to be 21.7 paid in the previous year, adjusted for inflation as provided in 21.8 subdivision 3. 21.9 Sec. 15. [APPROPRIATIONS.] 21.10 (a) [SHIFT RECOGNITION APPROPRIATION.] In addition to any 21.11 amounts appropriated by other law, $3,900,000 is appropriated to 21.12 the commissioner of children, families, and learning in fiscal 21.13 year 1999 to fund early recognition of education aid. 21.14 (b) [EDUCATION LEVY REDUCTION APPROPRIATION.] In addition 21.15 to any amount appropriated by other law, $55,000,000 is 21.16 appropriated to the commissioner of children, families, and 21.17 learning in fiscal year 2000 and thereafter to fund a reduction 21.18 in the statewide general education property tax levy. 21.19 Sec. 16. [INSTRUCTION TO REVISOR.] 21.20 In the next edition of the Minnesota Statutes, the revisor 21.21 of statutes shall correct references to class 1b, class 1c, and 21.22 class 4e properties so that the statutes properly reflect the 21.23 changes made to Minnesota Statutes, section 273.13, by this 21.24 article. 21.25 Sec. 17. [REPEALER.] 21.26 Minnesota Statutes 1996, sections 273.11, subdivisions 6a 21.27 and 15; 273.124, subdivision 17; and 273.1315, are repealed. 21.28 Sec. 18. [EFFECTIVE DATE.] 21.29 Sections 1 to 10 and 17 are effective for taxes payable in 21.30 1999 and thereafter. Sections 11 and 14 are effective for aid 21.31 payable in 1999 and thereafter. Section 12 is effective for 21.32 taxes payable in 2000 and thereafter. Section 13 is effective 21.33 the day following final enactment. 21.34 ARTICLE 2 21.35 SALES AND EXCISE TAXES 21.36 Section 1. Minnesota Statutes 1997 Supplement, section 22.1 270.60, subdivision 4, is amended to read: 22.2 Subd. 4. [PAYMENTS TO COUNTIES.] (a) The commissioner 22.3 shall pay to aqualifiedcounty in which an Indian gaming casino 22.4 is located ten percent of the state share of all taxes generated 22.5 from activities on reservations and collected under a tax 22.6 agreement under this section with the tribal government for the 22.7 reservation located in the county. If the tribe has casinos 22.8 located in more than one county, the payment must be divided 22.9 equally among the counties in which the casinos are located. 22.10 (b)A county qualifies for payments under this subdivision22.11only if one of the following conditions is met:22.12(1) the county's per capita income is less than 80 percent22.13of the state per capita personal income, based on the most22.14recent estimates made by the United States Bureau of Economic22.15Analysis; or22.16(2) 30 percent or more of the total market value of real22.17property in the county is exempt from ad valorem taxation.22.18(c)The commissioner shall make the payments required under 22.19 this subdivision by February 28 of the year following the year 22.20 the taxes are collected. 22.21(d)(c) An amount sufficient to make the payments 22.22 authorized by this subdivision, not to exceed $1,100,000 in any 22.23 fiscal year, is annually appropriated from the general fund to 22.24 the commissioner. If the authorized payments exceed the amount 22.25 of the appropriation, the commissioner shall proportionately 22.26 reduce the rate so that the total amount equals the 22.27 appropriation. 22.28 Sec. 2. Minnesota Statutes 1997 Supplement, section 22.29 289A.56, subdivision 4, is amended to read: 22.30 Subd. 4. [CAPITAL EQUIPMENT REFUNDS;REFUNDS TO 22.31 PURCHASERS.] Notwithstanding subdivision 3,for refunds payable22.32under section 297A.15, subdivision 5, interest is computed from22.33the date the refund claim is filed with the commissioner.for 22.34 refunds payable under section 289A.50, subdivision 2a, interest 22.35 is computed from the 20th day of the month following the month 22.36 of the invoice date for the purchase which is the subject of the 23.1 refund. 23.2 Sec. 3. Minnesota Statutes 1996, section 297A.2572, is 23.3 amended to read: 23.4 297A.2572 [AGRICULTURE PROCESSING FACILITY MATERIALS; 23.5 EXEMPTION.] 23.6 Purchases of construction materials and supplies are exempt 23.7 from the sales and use taxes imposed under this chapter, 23.8 regardless of whether purchased by the owner or a contractor, 23.9 subcontractor, or builder, if the materials and supplies are 23.10 used or consumed in constructing an agriculture processing 23.11 facility as defined in section 469.1811 in which the total 23.12 capital investment in the processing facility is expected to 23.13 exceed $100,000,000. The tax shall be imposed and collected as 23.14 if the rate under section 297A.02, subdivision 1, applied, and 23.15 then refunded in the manner provided in Minnesota Statutes 1996, 23.16 section 297A.15, subdivision 5. 23.17 Sec. 4. Minnesota Statutes 1996, section 297A.2573, is 23.18 amended to read: 23.19 297A.2573 [MINERAL PRODUCTION FACILITIES; EXEMPTION.] 23.20 Materials, equipment, and supplies used or consumed in 23.21 constructing, or incorporated into the construction of exempted 23.22 facilities as defined in this section are exempt from the taxes 23.23 imposed under this chapter and from any sales and use tax 23.24 imposed by a local unit of government, notwithstanding any 23.25 ordinance or city charter provision. 23.26 As used in this section, "exempted facilities" means: 23.27 (1) a value added iron products plant, which may be either 23.28 a new plant or a facility incorporated into an existing plant 23.29 that produces iron upgraded to a minimum of 75 percent iron 23.30 content or any iron alloy with a total minimum metallic content 23.31 of 90 percent; 23.32 (2) a facility used for the manufacture of fluxed taconite 23.33 pellets as defined in section 298.24; 23.34 (3) a new capital project that has a total cost of over 23.35 $40,000,000 that is directly related to production, cost, or 23.36 quality at an existing taconite facility that does not qualify 24.1 under clause (1) or (2); and 24.2 (4) a new mine or minerals processing plant for any mineral 24.3 subject to the net proceeds tax imposed under section 298.015. 24.4 The tax shall be imposed and collected as if the rate under 24.5 section 297A.02, subdivision 1, applied, and then refunded in 24.6 the manner provided in Minnesota Statutes 1996, section 297A.15, 24.7 subdivision 5. 24.8 Sec. 5. Laws 1997, chapter 231, article 7, section 47, is 24.9 amended to read: 24.10 Sec. 47. [EFFECTIVE DATES.] 24.11 Section 1 is effective for refund claims filed afterJune24.1230December 31, 1997. 24.13 Sections 2, 6, 7, 9, 13, 15, 16, 17, 18, 20, 21, 25, 31, 24.14 and 32 are effective for purchases, sales, storage, use, or 24.15 consumption occurring after June 30, 1997. 24.16 Section 3 is effective on July 1, 1997, or upon adoption of 24.17 the corresponding rules, whichever occurs earlier. 24.18 Section 4, paragraph (i), clause (iv), is effective for 24.19 purchases and sales occurring after September 30, 1987; the 24.20 remainder of section 4 is effective for purchases and sales 24.21 occurring after June 30, 1997. 24.22 Section 5, paragraph (h), is effective for purchases and 24.23 sales occurring after June 30, 1997, and paragraph (i) is 24.24 effective for purchases and sales occurring after December 31, 24.25 1992. 24.26 Sections 8 and 46 are effective July 1, 1998. 24.27 Sections 10 and 22 are effective for purchases, sales, 24.28 storage, use, or consumption occurring after August 31, 1996. 24.29 Sections 11, 12, 33, 34, and 35 are effective July 1, 1997. 24.30SectionsSection 14and 19 areis effective for purchases 24.31 and sales after June 30, 1999. 24.32 Section 19 is effective for purchases and sales after June 24.33 30, 1998. 24.34 Section 23 is effective January 1, 1997. 24.35 Section 24 is effective for purchases, sales, storage, use, 24.36 or consumption occurring after April 30, 1997. 25.1 Sections 26 and 45 are effective for purchases, sales, 25.2 storage, use, or consumption occurring after July 31, 1997, and 25.3 before August 1, 2003. 25.4 Section 27 is effective for purchases, sales, storage, use, 25.5 or consumption occurring after May 31, 1997. 25.6 Section 28 is effective for sales made after December 31, 25.7 1989, and before January 1, 1997. The provisions of Minnesota 25.8 Statutes, section 289A.50, apply to refunds claimed under 25.9 section 28. Refunds claimed under section 28 must be filed by 25.10 the later of December 31, 1997, or the time limit under 25.11 Minnesota Statutes, section 289A.40, subdivision 1. 25.12 Section 29 is effective for sales or first use after May 25.13 31, 1997, and before June 1, 1998. 25.14 Sections 30, 42, and 43 are effective the day following 25.15 final enactment. 25.16 Sections 36 to 39 are effective the day after compliance by 25.17 the governing body of Cook county with Minnesota Statutes, 25.18 section 645.021, subdivision 3. 25.19 Section 40 is effective for STAR funds collected after June 25.20 30, 1997. 25.21 Sec. 6. [REPEALER.] 25.22 Minnesota Statutes 1996, section 297A.15, subdivision 5, is 25.23 repealed. 25.24 Sec. 7. [EFFECTIVE DATE.] 25.25 Sections 2 to 4 and 6 are effective for sales and purchases 25.26 occurring after June 30, 1998. Section 5 is effective the day 25.27 following final enactment. 25.28 ARTICLE 3 25.29 MOTOR VEHICLE REGISTRATION TAX 25.30 Section 1. Minnesota Statutes 1996, section 161.081, is 25.31 amended by adding a subdivision to read: 25.32 Subd. 3. [TRANSFER TO FUND.] The commissioner of finance 25.33 shall include a minimum transfer of $80,000,000 in each fiscal 25.34 year from the general fund to the highway user tax distribution 25.35 fund in the biennial budget for fiscal years 2000 and 2001 and 25.36 in each biennial budget thereafter, in order to compensate the 26.1 fund for the reduction in revenues by reason of section 2. 26.2 Sec. 2. Minnesota Statutes 1996, section 168.013, 26.3 subdivision 1a, is amended to read: 26.4 Subd. 1a. [PASSENGER AUTOMOBILES; HEARSES.] (a) On 26.5 passenger automobiles as defined in section 168.011, subdivision 26.6 7, and hearses, except as otherwise provided, the tax shall be 26.7 $10 plus an additional tax equal to1.25.95 percent of the base 26.8 value. 26.9 (b) Subject to the classification provisions herein, "base 26.10 value" means the manufacturer's suggested retail price of the 26.11 vehicle including destination charge using list price 26.12 information published by the manufacturer or determined by the 26.13 registrar if no suggested retail price exists, and shall not 26.14 include the cost of each accessory or item of optional equipment 26.15 separately added to the vehicle and the suggested retail price. 26.16 (c) If the manufacturer's list price information contains a 26.17 single vehicle identification number followed by various 26.18 descriptions and suggested retail prices, the registrar shall 26.19 select from those listings only the lowest price for determining 26.20 base value. 26.21 (d) If unable to determine the base value because the 26.22 vehicle is specially constructed, or for any other reason, the 26.23 registrar may establish such value upon the cost price to the 26.24 purchaser or owner as evidenced by a certificate of cost but not 26.25 including Minnesota sales or use tax or any local sales or other 26.26 local tax. 26.27 (e) The registrar shall classify every vehicle in its 26.28 proper base value class as follows: 26.29 FROM TO 26.30 $ 0 $199.99 26.31 200 399.99 26.32 and thereafter a series of classes successively set in brackets 26.33 having a spread of $200 consisting of such number of classes as 26.34 will permit classification of all vehicles. 26.35 (f) The base value for purposes of this section shall be 26.36 the middle point between the extremes of its class. 27.1 (g) The registrar shall establish the base value, when new, 27.2 of every passenger automobile and hearse registered prior to the 27.3 effective date of Extra Session Laws 1971, chapter 31, using 27.4 list price information published by the manufacturer or any 27.5 nationally recognized firm or association compiling such data 27.6 for the automotive industry. If unable to ascertain the base 27.7 value of any registered vehicle in the foregoing manner, the 27.8 registrar may use any other available source or method. The tax 27.9 on all previously registered vehicles shall be computed upon the 27.10 base value thus determined taking into account the depreciation 27.11 provisions of paragraph (h). 27.12 (h)Except as provided in paragraph (i),The annual 27.13 additional tax computed upon the base value as provided herein, 27.14 during the first and second years of vehicle life shall be 27.15 computed upon 100 percent of the base value; for the third and 27.16 fourth years, 90 percent of such value; for the fifth and sixth 27.17 years, 75 percent of such value; for the seventh year, 60 27.18 percent of such value; for the eighth year, 40 percent of such 27.19 value; for the ninth year, 30 percent of such value; for the 27.20 tenth year, ten percent of such value; for the 11th and each 27.21 succeeding year, the sum of $25. 27.22 In no event shall the annual additional tax be less than 27.23 $25. 27.24(i) The annual additional tax under paragraph (h) on a27.25motor vehicle on which the first annual tax was paid before27.26January 1, 1990, must not exceed the tax that was paid on that27.27vehicle the year before.27.28 Sec. 3. [APPROPRIATION.] 27.29 $40,000,000 is appropriated from the general fund to the 27.30 commissioner of finance for transfer to the highway user tax 27.31 distribution fund. 27.32 Sec. 4. [EFFECTIVE DATE.] 27.33 Section 2 is effective January 1, 1999. 27.34 ARTICLE 4 27.35 INCOME TAX 27.36 Section 1. Minnesota Statutes 1997 Supplement, section 28.1 290.01, subdivision 19b, is amended to read: 28.2 Subd. 19b. [SUBTRACTIONS FROM FEDERAL TAXABLE INCOME.] For 28.3 individuals, estates, and trusts, there shall be subtracted from 28.4 federal taxable income: 28.5 (1) interest income on obligations of any authority, 28.6 commission, or instrumentality of the United States to the 28.7 extent includable in taxable income for federal income tax 28.8 purposes but exempt from state income tax under the laws of the 28.9 United States; 28.10 (2) if included in federal taxable income, the amount of 28.11 any overpayment of income tax to Minnesota or to any other 28.12 state, for any previous taxable year, whether the amount is 28.13 received as a refund or as a credit to another taxable year's 28.14 income tax liability; 28.15 (3) the amount paid to others, less the credit allowed 28.16 under section 290.0674, not to exceed $1,625 for each dependent 28.17 in grades kindergarten to 6 and $2,500 for each dependent in 28.18 grades 7 to 12, for tuition, textbooks, and transportation of 28.19 each dependent in attending an elementary or secondary school 28.20 situated in Minnesota, North Dakota, South Dakota, Iowa, or 28.21 Wisconsin, wherein a resident of this state may legally fulfill 28.22 the state's compulsory attendance laws, which is not operated 28.23 for profit, and which adheres to the provisions of the Civil 28.24 Rights Act of 1964 and chapter 363. For the purposes of this 28.25 clause, "tuition" includes fees or tuition as defined in section 28.26 290.0674, subdivision 1, clause (1). As used in this clause, 28.27 "textbooks" includes books and other instructional materials and 28.28 equipment used in elementary and secondary schools in teaching 28.29 only those subjects legally and commonly taught in public 28.30 elementary and secondary schools in this state. Equipment 28.31 expenses qualifying for deduction includes expenses as defined 28.32 and limited in section 290.0674, subdivision 1, clause (3). 28.33 "Textbooks" does not include instructional books and materials 28.34 used in the teaching of religious tenets, doctrines, or worship, 28.35 the purpose of which is to instill such tenets, doctrines, or 28.36 worship, nor does it include books or materials for, or 29.1 transportation to, extracurricular activities including sporting 29.2 events, musical or dramatic events, speech activities, driver's 29.3 education, or similar programs; 29.4 (4) to the extent included in federal taxable income, 29.5 distributions from a qualified governmental pension plan, an 29.6 individual retirement account, simplified employee pension, or 29.7 qualified plan covering a self-employed person that represent a 29.8 return of contributions that were included in Minnesota gross 29.9 income in the taxable year for which the contributions were made 29.10 but were deducted or were not included in the computation of 29.11 federal adjusted gross income. The distribution shall be 29.12 allocated first to return of contributions until the 29.13 contributions included in Minnesota gross income have been 29.14 exhausted. This subtraction applies only to contributions made 29.15 in a taxable year prior to 1985; 29.16 (5) income as provided under section 290.0802; 29.17 (6) the amount of unrecovered accelerated cost recovery 29.18 system deductions allowed under subdivision 19g; 29.19 (7) to the extent included in federal adjusted gross 29.20 income, income realized on disposition of property exempt from 29.21 tax under section 290.491; 29.22 (8) to the extent not deducted in determining federal 29.23 taxable income, the amount paid for health insurance of 29.24 self-employed individuals as determined under section 162(l) of 29.25 the Internal Revenue Code, except that the 25 percent limit does 29.26 not apply. If the taxpayer deducted insurance payments under 29.27 section 213 of the Internal Revenue Code of 1986, the 29.28 subtraction under this clause must be reduced by the lesser of: 29.29 (i) the total itemized deductions allowed under section 29.30 63(d) of the Internal Revenue Code, less state, local, and 29.31 foreign income taxes deductible under section 164 of the 29.32 Internal Revenue Code and the standard deduction under section 29.33 63(c) of the Internal Revenue Code; or 29.34 (ii) the lesser of (A) the amount of insurance qualifying 29.35 as "medical care" under section 213(d) of the Internal Revenue 29.36 Code to the extent not deducted under section 162(1) of the 30.1 Internal Revenue Code or excluded from income or (B) the total 30.2 amount deductible for medical care under section 213(a); 30.3 (9) the exemption amount allowed under Laws 1995, chapter 30.4 255, article 3, section 2, subdivision 3; 30.5 (10) to the extent included in federal taxable income, 30.6 postservice benefits for youth community service under section 30.7 121.707 for volunteer service under United States Code, title 30.8 42, section 5011(d), as amended;and30.9 (11) the amount of income or gain included in federal 30.10 taxable income under section 1366 of the Internal Revenue Code 30.11 flowing from a corporation that has a valid election in effect 30.12 for the taxable year under section 1362 of the Internal Revenue 30.13 Code which is not allowed to be an "S" corporation under section 30.14 290.9725.; and 30.15 (12) beginning with the 1998 taxable year, an amount equal 30.16 to $375 for each of the taxpayer's personal and dependent 30.17 exemptions, as defined in sections 151 and 152 of the Internal 30.18 Revenue Code, and allowed on the taxpayer's federal income tax 30.19 return for the tax year, provided that the amount of each 30.20 subtraction is reduced according to the phaseout formula in 30.21 section 151(d)(3). Beginning with the 1999 taxable year, the 30.22 amount of the subtraction for each personal and dependent 30.23 exemption must be adjusted for inflation by the commissioner of 30.24 revenue in the manner provided in section 290.06, subdivision 2d. 30.25 Sec. 2. Laws 1997, chapter 231, article 5, section 20, is 30.26 amended to read: 30.27 Sec. 20. [EFFECTIVE DATE.] 30.28 Sections 1, 5, 6, 11, 16, and 18 are effective the day 30.29 following final enactment. 30.30 Sections 2 to 4, and 9 are effective for taxable years 30.31 beginning after December 31, 1996. 30.32 Section 7 is effective for taxable years beginning after 30.33 December 31,19981997. 30.34 Section 8 is effective for tax credit certificates issued 30.35 after December 31, 1996, and used in taxable years beginning 30.36 after December 31, 1996. 31.1 Section 10 is effective January 1, 1998. 31.2 Sections 12, 13, 15, and 19 are effective beginning for 31.3 property tax refunds based on rent paid after December 31, 1996. 31.4 Section 17 is effective April 16, 1997. 31.5 Sec. 3. [EFFECTIVE DATE.] 31.6 Section 1 is effective for taxable years beginning after 31.7 December 31, 1997. Section 2 is effective the day following 31.8 final enactment.