SF 3281

as introduced - 82nd Legislature (2001 - 2002) Posted on 12/15/2009 12:00am

  1.1                          A bill for an act 
  1.2             relating to economic development; authorizing the 
  1.3             establishing of tax-free zones; providing tax 
  1.4             exemptions for individuals and business entities in 
  1.5             tax-free zones; providing for repayment of tax 
  1.6             benefits under certain circumstances; providing for 
  1.7             the payment of state aid; appropriating money; 
  1.8             amending Minnesota Statutes 2000, sections 272.02, by 
  1.9             adding a subdivision; 290.0922, subdivision 3; 
  1.10            297A.68, by adding a subdivision; Minnesota Statutes 
  1.11            2001 Supplement, sections 290.01, subdivisions 19b, 
  1.12            29; 290.091, subdivision 2; 290.0921, subdivision 3; 
  1.13            297B.03; proposing coding for new law in Minnesota 
  1.14            Statutes, chapters 469; 477A. 
  1.15  BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.16     Section 1.  Minnesota Statutes 2000, section 272.02, is 
  1.17  amended by adding a subdivision to read: 
  1.18     Subd. 50.  [TAX-FREE ZONE PROPERTY.] (a) Property located 
  1.19  in a tax-free zone is exempt from taxation.  The exemption is 
  1.20  limited to improvements and personal property; it does not apply 
  1.21  to land.  For property classified as class 3 (commercial and 
  1.22  industrial property and utility property) to qualify under this 
  1.23  subdivision either the owner of the property or the lessee or 
  1.24  other user must be a qualified business, as defined in section 
  1.25  469.310, subdivision 8. 
  1.26     (b) The exemption applies beginning for the first 
  1.27  assessment year after designation of the tax-free zone by the 
  1.28  commissioner of trade and economic development.  The exemption 
  1.29  applies to each assessment year that begins during the duration 
  1.30  of the tax-free zone.  This exemption does not apply to the levy 
  2.1   under section 475.61 or similar levy provisions under any other 
  2.2   law to pay general obligation bonds, if the bonds were issued 
  2.3   before the date of designation of the tax-free zone. 
  2.4      [EFFECTIVE DATE.] This section is effective beginning for 
  2.5   property taxes assessed in 2003, payable in 2004. 
  2.6      Sec. 2.  Minnesota Statutes 2001 Supplement, section 
  2.7   290.01, subdivision 19b, is amended to read: 
  2.8      Subd. 19b.  [SUBTRACTIONS FROM FEDERAL TAXABLE INCOME.] For 
  2.9   individuals, estates, and trusts, there shall be subtracted from 
  2.10  federal taxable income: 
  2.11     (1) interest income on obligations of any authority, 
  2.12  commission, or instrumentality of the United States to the 
  2.13  extent includable in taxable income for federal income tax 
  2.14  purposes but exempt from state income tax under the laws of the 
  2.15  United States; 
  2.16     (2) if included in federal taxable income, the amount of 
  2.17  any overpayment of income tax to Minnesota or to any other 
  2.18  state, for any previous taxable year, whether the amount is 
  2.19  received as a refund or as a credit to another taxable year's 
  2.20  income tax liability; 
  2.21     (3) the amount paid to others, less the amount used to 
  2.22  claim the credit allowed under section 290.0674, not to exceed 
  2.23  $1,625 for each qualifying child in grades kindergarten to 6 and 
  2.24  $2,500 for each qualifying child in grades 7 to 12, for tuition, 
  2.25  textbooks, and transportation of each qualifying child in 
  2.26  attending an elementary or secondary school situated in 
  2.27  Minnesota, North Dakota, South Dakota, Iowa, or Wisconsin, 
  2.28  wherein a resident of this state may legally fulfill the state's 
  2.29  compulsory attendance laws, which is not operated for profit, 
  2.30  and which adheres to the provisions of the Civil Rights Act of 
  2.31  1964 and chapter 363.  For the purposes of this clause, 
  2.32  "tuition" includes fees or tuition as defined in section 
  2.33  290.0674, subdivision 1, clause (1).  As used in this clause, 
  2.34  "textbooks" includes books and other instructional materials and 
  2.35  equipment purchased or leased for use in elementary and 
  2.36  secondary schools in teaching only those subjects legally and 
  3.1   commonly taught in public elementary and secondary schools in 
  3.2   this state.  Equipment expenses qualifying for deduction 
  3.3   includes expenses as defined and limited in section 290.0674, 
  3.4   subdivision 1, clause (3).  "Textbooks" does not include 
  3.5   instructional books and materials used in the teaching of 
  3.6   religious tenets, doctrines, or worship, the purpose of which is 
  3.7   to instill such tenets, doctrines, or worship, nor does it 
  3.8   include books or materials for, or transportation to, 
  3.9   extracurricular activities including sporting events, musical or 
  3.10  dramatic events, speech activities, driver's education, or 
  3.11  similar programs.  For purposes of the subtraction provided by 
  3.12  this clause, "qualifying child" has the meaning given in section 
  3.13  32(c)(3) of the Internal Revenue Code; 
  3.14     (4) contributions made in taxable years beginning after 
  3.15  December 31, 1981, and before January 1, 1985, to a qualified 
  3.16  governmental pension plan, an individual retirement account, 
  3.17  simplified employee pension, or qualified plan covering a 
  3.18  self-employed person that were included in Minnesota gross 
  3.19  income in the taxable year for which the contributions were made 
  3.20  but were deducted or were not included in the computation of 
  3.21  federal adjusted gross income, less any amount allowed to be 
  3.22  subtracted as a distribution under this subdivision or a 
  3.23  predecessor provision in taxable years that began before January 
  3.24  1, 2000.  This subtraction applies only for taxable years 
  3.25  beginning after December 31, 1999, and before January 1, 2001.  
  3.26  If an individual's subtraction under this clause exceeds the 
  3.27  individual's taxable income, the excess may be carried forward 
  3.28  to taxable years beginning after December 31, 2000, and before 
  3.29  January 1, 2002; 
  3.30     (5) income as provided under section 290.0802; 
  3.31     (6) to the extent included in federal adjusted gross 
  3.32  income, income realized on disposition of property exempt from 
  3.33  tax under section 290.491; 
  3.34     (7) to the extent not deducted in determining federal 
  3.35  taxable income or used to claim the long-term care insurance 
  3.36  credit under section 290.0672, the amount paid for health 
  4.1   insurance of self-employed individuals as determined under 
  4.2   section 162(l) of the Internal Revenue Code, except that the 
  4.3   percent limit does not apply.  If the individual deducted 
  4.4   insurance payments under section 213 of the Internal Revenue 
  4.5   Code of 1986, the subtraction under this clause must be reduced 
  4.6   by the lesser of: 
  4.7      (i) the total itemized deductions allowed under section 
  4.8   63(d) of the Internal Revenue Code, less state, local, and 
  4.9   foreign income taxes deductible under section 164 of the 
  4.10  Internal Revenue Code and the standard deduction under section 
  4.11  63(c) of the Internal Revenue Code; or 
  4.12     (ii) the lesser of (A) the amount of insurance qualifying 
  4.13  as "medical care" under section 213(d) of the Internal Revenue 
  4.14  Code to the extent not deducted under section 162(1) of the 
  4.15  Internal Revenue Code or excluded from income or (B) the total 
  4.16  amount deductible for medical care under section 213(a); 
  4.17     (8) the exemption amount allowed under Laws 1995, chapter 
  4.18  255, article 3, section 2, subdivision 3; 
  4.19     (9) to the extent included in federal taxable income, 
  4.20  postservice benefits for youth community service under section 
  4.21  124D.42 for volunteer service under United States Code, title 
  4.22  42, sections 12601 to 12604; 
  4.23     (10) to the extent not deducted in determining federal 
  4.24  taxable income by an individual who does not itemize deductions 
  4.25  for federal income tax purposes for the taxable year, an amount 
  4.26  equal to 50 percent of the excess of charitable contributions 
  4.27  allowable as a deduction for the taxable year under section 
  4.28  170(a) of the Internal Revenue Code over $500; 
  4.29     (11) for taxable years beginning before January 1, 2008, 
  4.30  the amount of the federal small ethanol producer credit allowed 
  4.31  under section 40(a)(3) of the Internal Revenue Code which is 
  4.32  included in gross income under section 87 of the Internal 
  4.33  Revenue Code; and 
  4.34     (12) for individuals who are allowed a federal foreign tax 
  4.35  credit for taxes that do not qualify for a credit under section 
  4.36  290.06, subdivision 22, an amount equal to the carryover of 
  5.1   subnational foreign taxes for the taxable year, but not to 
  5.2   exceed the total subnational foreign taxes reported in claiming 
  5.3   the foreign tax credit.  For purposes of this clause, "federal 
  5.4   foreign tax credit" means the credit allowed under section 27 of 
  5.5   the Internal Revenue Code, and "carryover of subnational foreign 
  5.6   taxes" equals the carryover allowed under section 904(c) of the 
  5.7   Internal Revenue Code minus national level foreign taxes to the 
  5.8   extent they exceed the federal foreign tax credit; and 
  5.9      (13) the income received by a resident of a tax-free zone 
  5.10  or by an individual operating or investing in a trade or 
  5.11  business in a tax-free zone as provided under section 469.316. 
  5.12     [EFFECTIVE DATE.] This section is effective for taxable 
  5.13  years beginning after December 31, 2002. 
  5.14     Sec. 3.  Minnesota Statutes 2001 Supplement, section 
  5.15  290.01, subdivision 29, is amended to read: 
  5.16     Subd. 29.  [TAXABLE INCOME.] The term "taxable income" 
  5.17  means:  
  5.18     (1) for individuals, estates, and trusts, the same as 
  5.19  taxable net income; 
  5.20     (2) for corporations, the taxable net income less 
  5.21     (i) the net operating loss deduction under section 290.095; 
  5.22  and 
  5.23     (ii) the dividends received deduction under section 290.21, 
  5.24  subdivision 4; and 
  5.25     (iii) the exemption for operating in a tax-free zone under 
  5.26  section 469.317. 
  5.27     [EFFECTIVE DATE.] This section is effective for taxable 
  5.28  years beginning after December 31, 2002. 
  5.29     Sec. 4.  Minnesota Statutes 2001 Supplement, section 
  5.30  290.091, subdivision 2, is amended to read: 
  5.31     Subd. 2.  [DEFINITIONS.] For purposes of the tax imposed by 
  5.32  this section, the following terms have the meanings given: 
  5.33     (a) "Alternative minimum taxable income" means the sum of 
  5.34  the following for the taxable year: 
  5.35     (1) the taxpayer's federal alternative minimum taxable 
  5.36  income as defined in section 55(b)(2) of the Internal Revenue 
  6.1   Code; 
  6.2      (2) the taxpayer's itemized deductions allowed in computing 
  6.3   federal alternative minimum taxable income, but excluding: 
  6.4      (i) the Minnesota charitable contribution deduction; 
  6.5      (ii) the medical expense deduction; 
  6.6      (iii) the casualty, theft, and disaster loss deduction; 
  6.7      (iv) the impairment-related work expenses of a disabled 
  6.8   person; and 
  6.9      (v) holocaust victims' settlement payments to the extent 
  6.10  allowed under section 290.01, subdivision 19b; 
  6.11     (3) for depletion allowances computed under section 613A(c) 
  6.12  of the Internal Revenue Code, with respect to each property (as 
  6.13  defined in section 614 of the Internal Revenue Code), to the 
  6.14  extent not included in federal alternative minimum taxable 
  6.15  income, the excess of the deduction for depletion allowable 
  6.16  under section 611 of the Internal Revenue Code for the taxable 
  6.17  year over the adjusted basis of the property at the end of the 
  6.18  taxable year (determined without regard to the depletion 
  6.19  deduction for the taxable year); 
  6.20     (4) to the extent not included in federal alternative 
  6.21  minimum taxable income, the amount of the tax preference for 
  6.22  intangible drilling cost under section 57(a)(2) of the Internal 
  6.23  Revenue Code determined without regard to subparagraph (E); and 
  6.24     (5) to the extent not included in federal alternative 
  6.25  minimum taxable income, the amount of interest income as 
  6.26  provided by section 290.01, subdivision 19a, clause (1); 
  6.27     less the sum of the amounts determined under the following: 
  6.28     (1) interest income as defined in section 290.01, 
  6.29  subdivision 19b, clause (1); 
  6.30     (2) an overpayment of state income tax as provided by 
  6.31  section 290.01, subdivision 19b, clause (2), to the extent 
  6.32  included in federal alternative minimum taxable income; 
  6.33     (3) the amount of investment interest paid or accrued 
  6.34  within the taxable year on indebtedness to the extent that the 
  6.35  amount does not exceed net investment income, as defined in 
  6.36  section 163(d)(4) of the Internal Revenue Code.  Interest does 
  7.1   not include amounts deducted in computing federal adjusted gross 
  7.2   income; and 
  7.3      (4) amounts subtracted from federal taxable income as 
  7.4   provided by section 290.01, subdivision 19b, clause 
  7.5   clauses (4) and (13). 
  7.6      In the case of an estate or trust, alternative minimum 
  7.7   taxable income must be computed as provided in section 59(c) of 
  7.8   the Internal Revenue Code. 
  7.9      (b) "Investment interest" means investment interest as 
  7.10  defined in section 163(d)(3) of the Internal Revenue Code. 
  7.11     (c) "Tentative minimum tax" equals 6.4 percent of 
  7.12  alternative minimum taxable income after subtracting the 
  7.13  exemption amount determined under subdivision 3. 
  7.14     (d) "Regular tax" means the tax that would be imposed under 
  7.15  this chapter (without regard to this section and section 
  7.16  290.032), reduced by the sum of the nonrefundable credits 
  7.17  allowed under this chapter.  
  7.18     (e) "Net minimum tax" means the minimum tax imposed by this 
  7.19  section. 
  7.20     (f) "Minnesota charitable contribution deduction" means a 
  7.21  charitable contribution deduction under section 170 of the 
  7.22  Internal Revenue Code to or for the use of an entity described 
  7.23  in Minnesota Statutes 2000, section 290.21, subdivision 3, 
  7.24  clauses (a) to (e).  When the federal deduction for charitable 
  7.25  contributions is limited under section 170(b) of the Internal 
  7.26  Revenue Code, the allowable contributions in the year of 
  7.27  contribution are deemed to be first contributions to entities 
  7.28  described in Minnesota Statutes 2000, section 290.21, 
  7.29  subdivision 3, clauses (a) to (e). 
  7.30     [EFFECTIVE DATE.] This section is effective for taxable 
  7.31  years beginning after December 31, 2002. 
  7.32     Sec. 5.  Minnesota Statutes 2001 Supplement, section 
  7.33  290.0921, subdivision 3, is amended to read: 
  7.34     Subd. 3.  [ALTERNATIVE MINIMUM TAXABLE INCOME.] 
  7.35  "Alternative minimum taxable income" is Minnesota net income as 
  7.36  defined in section 290.01, subdivision 19, and includes the 
  8.1   adjustments and tax preference items in sections 56, 57, 58, and 
  8.2   59(d), (e), (f), and (h) of the Internal Revenue Code.  If a 
  8.3   corporation files a separate company Minnesota tax return, the 
  8.4   minimum tax must be computed on a separate company basis.  If a 
  8.5   corporation is part of a tax group filing a unitary return, the 
  8.6   minimum tax must be computed on a unitary basis.  The following 
  8.7   adjustments must be made. 
  8.8      (1) For purposes of the depreciation adjustments under 
  8.9   section 56(a)(1) and 56(g)(4)(A) of the Internal Revenue Code, 
  8.10  the basis for depreciable property placed in service in a 
  8.11  taxable year beginning before January 1, 1990, is the adjusted 
  8.12  basis for federal income tax purposes, including any 
  8.13  modification made in a taxable year under section 290.01, 
  8.14  subdivision 19e, or Minnesota Statutes 1986, section 290.09, 
  8.15  subdivision 7, paragraph (c). 
  8.16     For taxable years beginning after December 31, 2000, the 
  8.17  amount of any remaining modification made under section 290.01, 
  8.18  subdivision 19e, or Minnesota Statutes 1986, section 290.09, 
  8.19  subdivision 7, paragraph (c), not previously deducted is a 
  8.20  depreciation allowance in the first taxable year after December 
  8.21  31, 2000. 
  8.22     (2) The alternative tax net operating loss deduction under 
  8.23  sections 56(a)(4) and 56(d) of the Internal Revenue Code does 
  8.24  not apply. 
  8.25     (3) The special rule for certain dividends under section 
  8.26  56(g)(4)(C)(ii) of the Internal Revenue Code does not apply. 
  8.27     (4) The special rule for dividends from section 936 
  8.28  companies under section 56(g)(4)(C)(iii) does not apply. 
  8.29     (5) The tax preference for depletion under section 57(a)(1) 
  8.30  of the Internal Revenue Code does not apply. 
  8.31     (6) The tax preference for intangible drilling costs under 
  8.32  section 57(a)(2) of the Internal Revenue Code must be calculated 
  8.33  without regard to subparagraph (E) and the subtraction under 
  8.34  section 290.01, subdivision 19d, clause (4). 
  8.35     (7) The tax preference for tax exempt interest under 
  8.36  section 57(a)(5) of the Internal Revenue Code does not apply.  
  9.1      (8) The tax preference for charitable contributions of 
  9.2   appreciated property under section 57(a)(6) of the Internal 
  9.3   Revenue Code does not apply. 
  9.4      (9) For purposes of calculating the tax preference for 
  9.5   accelerated depreciation or amortization on certain property 
  9.6   placed in service before January 1, 1987, under section 57(a)(7) 
  9.7   of the Internal Revenue Code, the deduction allowable for the 
  9.8   taxable year is the deduction allowed under section 290.01, 
  9.9   subdivision 19e. 
  9.10     For taxable years beginning after December 31, 2000, the 
  9.11  amount of any remaining modification made under section 290.01, 
  9.12  subdivision 19e, not previously deducted is a depreciation or 
  9.13  amortization allowance in the first taxable year after December 
  9.14  31, 2000. 
  9.15     (10) For purposes of calculating the adjustment for 
  9.16  adjusted current earnings in section 56(g) of the Internal 
  9.17  Revenue Code, the term "alternative minimum taxable income" as 
  9.18  it is used in section 56(g) of the Internal Revenue Code, means 
  9.19  alternative minimum taxable income as defined in this 
  9.20  subdivision, determined without regard to the adjustment for 
  9.21  adjusted current earnings in section 56(g) of the Internal 
  9.22  Revenue Code. 
  9.23     (11) For purposes of determining the amount of adjusted 
  9.24  current earnings under section 56(g)(3) of the Internal Revenue 
  9.25  Code, no adjustment shall be made under section 56(g)(4) of the 
  9.26  Internal Revenue Code with respect to (i) the amount of foreign 
  9.27  dividend gross-up subtracted as provided in section 290.01, 
  9.28  subdivision 19d, clause (1), (ii) the amount of refunds of 
  9.29  income, excise, or franchise taxes subtracted as provided in 
  9.30  section 290.01, subdivision 19d, clause (10), or (iii) the 
  9.31  amount of royalties, fees or other like income subtracted as 
  9.32  provided in section 290.01, subdivision 19d, clause (11). 
  9.33     (12) Alternative minimum taxable income excludes the income 
  9.34  from operating in a tax-free zone as provided under section 
  9.35  469.317. 
  9.36     Items of tax preference must not be reduced below zero as a 
 10.1   result of the modifications in this subdivision. 
 10.2      [EFFECTIVE DATE.] This section is effective for taxable 
 10.3   years beginning after December 31, 2002. 
 10.4      Sec. 6.  Minnesota Statutes 2000, section 290.0922, 
 10.5   subdivision 3, is amended to read: 
 10.6      Subd. 3.  [DEFINITIONS.] (a) "Minnesota sales or receipts" 
 10.7   means the total sales apportioned to Minnesota pursuant to 
 10.8   section 290.191, subdivision 5, the total receipts attributed to 
 10.9   Minnesota pursuant to section 290.191, subdivisions 6 to 8, 
 10.10  and/or the total sales or receipts apportioned or attributed to 
 10.11  Minnesota pursuant to any other apportionment formula applicable 
 10.12  to the taxpayer. 
 10.13     (b) "Minnesota property" means total Minnesota tangible 
 10.14  property as provided in section 290.191, subdivisions 9 to 11, 
 10.15  and any other tangible property located in Minnesota, but does 
 10.16  not include property located in a tax-free zone designated under 
 10.17  section 469.314.  Intangible property shall not be included in 
 10.18  Minnesota property for purposes of this section.  Taxpayers who 
 10.19  do not utilize tangible property to apportion income shall 
 10.20  nevertheless include Minnesota property for purposes of this 
 10.21  section.  On a return for a short taxable year, the amount of 
 10.22  Minnesota property owned, as determined under section 290.191, 
 10.23  shall be included in Minnesota property based on a fraction in 
 10.24  which the numerator is the number of days in the short taxable 
 10.25  year and the denominator is 365.  
 10.26     (c) "Minnesota payrolls"  means total Minnesota payrolls as 
 10.27  provided in section 290.191, subdivision 12, but does not 
 10.28  include payrolls paid to employees working in a tax-free zone 
 10.29  designated under section 469.314.  Taxpayers who do not utilize 
 10.30  payrolls to apportion income shall nevertheless include 
 10.31  Minnesota payrolls for purposes of this section. 
 10.32     Sec. 7.  Minnesota Statutes 2000, section 297A.68, is 
 10.33  amended by adding a subdivision to read: 
 10.34     Subd. 36.  [TAX-FREE ZONES.] (a) Purchases of tangible 
 10.35  personal property or taxable services by a person for use in a 
 10.36  trade or business are exempt, if the property or services are 
 11.1   primarily used or consumed in a tax-free zone, designated under 
 11.2   section 469.314.  This subdivision applies to sales made during 
 11.3   the duration of the designation of the zone. 
 11.4      (b) Purchase and use of construction materials and supplies 
 11.5   for construction of improvements to real property in a tax-free 
 11.6   zone are exempt, if the improvements after completion of 
 11.7   construction are to be used in the conduct of a trade or 
 11.8   business.  This exemption applies regardless of whether the 
 11.9   purchases are made by the business or a contractor. 
 11.10     (c) The exemptions under this subdivision apply to a local 
 11.11  sales and use tax, regardless of whether the local sales tax is 
 11.12  imposed on the sales taxable as defined under this chapter. 
 11.13     [EFFECTIVE DATE.] This section is effective for sales made 
 11.14  after December 31, 2002. 
 11.15     Sec. 8.  Minnesota Statutes 2001 Supplement, section 
 11.16  297B.03, is amended to read: 
 11.17     297B.03 [EXEMPTIONS.] 
 11.18     There is specifically exempted from the provisions of this 
 11.19  chapter and from computation of the amount of tax imposed by it 
 11.20  the following:  
 11.21     (1) purchase or use, including use under a lease purchase 
 11.22  agreement or installment sales contract made pursuant to section 
 11.23  465.71, of any motor vehicle by the United States and its 
 11.24  agencies and instrumentalities and by any person described in 
 11.25  and subject to the conditions provided in section 297A.67, 
 11.26  subdivision 11; 
 11.27     (2) purchase or use of any motor vehicle by any person who 
 11.28  was a resident of another state or country at the time of the 
 11.29  purchase and who subsequently becomes a resident of Minnesota, 
 11.30  provided the purchase occurred more than 60 days prior to the 
 11.31  date such person began residing in the state of Minnesota and 
 11.32  the motor vehicle was registered in the person's name in the 
 11.33  other state or country; 
 11.34     (3) purchase or use of any motor vehicle by any person 
 11.35  making a valid election to be taxed under the provisions of 
 11.36  section 297A.90; 
 12.1      (4) purchase or use of any motor vehicle previously 
 12.2   registered in the state of Minnesota when such transfer 
 12.3   constitutes a transfer within the meaning of section 118, 331, 
 12.4   332, 336, 337, 338, 351, 355, 368, 721, 731, 1031, 1033, or 
 12.5   1563(a) of the Internal Revenue Code of 1986, as amended through 
 12.6   December 31, 1999; 
 12.7      (5) purchase or use of any vehicle owned by a resident of 
 12.8   another state and leased to a Minnesota based private or for 
 12.9   hire carrier for regular use in the transportation of persons or 
 12.10  property in interstate commerce provided the vehicle is titled 
 12.11  in the state of the owner or secured party, and that state does 
 12.12  not impose a sales tax or sales tax on motor vehicles used in 
 12.13  interstate commerce; 
 12.14     (6) purchase or use of a motor vehicle by a private 
 12.15  nonprofit or public educational institution for use as an 
 12.16  instructional aid in automotive training programs operated by 
 12.17  the institution.  "Automotive training programs" includes motor 
 12.18  vehicle body and mechanical repair courses but does not include 
 12.19  driver education programs; 
 12.20     (7) purchase of a motor vehicle for use as an ambulance by 
 12.21  an ambulance service licensed under section 144E.10; 
 12.22     (8) purchase of a motor vehicle by or for a public library, 
 12.23  as defined in section 134.001, subdivision 2, as a bookmobile or 
 12.24  library delivery vehicle; 
 12.25     (9) purchase of a ready-mixed concrete truck; 
 12.26     (10) purchase or use of a motor vehicle by a town for use 
 12.27  exclusively for road maintenance, including snowplows and dump 
 12.28  trucks, but not including automobiles, vans, or pickup trucks; 
 12.29     (11) purchase or use of a motor vehicle by a corporation, 
 12.30  society, association, foundation, or institution organized and 
 12.31  operated exclusively for charitable, religious, or educational 
 12.32  purposes, except a public school, university, or library, but 
 12.33  only if the vehicle is: 
 12.34     (i) a truck, as defined in section 168.011, a bus, as 
 12.35  defined in section 168.011, or a passenger automobile, as 
 12.36  defined in section 168.011, if the automobile is designed and 
 13.1   used for carrying more than nine persons including the driver; 
 13.2   and 
 13.3      (ii) intended to be used primarily to transport tangible 
 13.4   personal property or individuals, other than employees, to whom 
 13.5   the organization provides service in performing its charitable, 
 13.6   religious, or educational purpose; 
 13.7      (12) purchase of a motor vehicle for use by a transit 
 13.8   provider exclusively to provide transit service is exempt if the 
 13.9   transit provider is either (i) receiving financial assistance or 
 13.10  reimbursement under section 174.24 or 473.384, or (ii) operating 
 13.11  under section 174.29, 473.388, or 473.405; 
 13.12     (13) purchase or use of a motor vehicle by a person engaged 
 13.13  in a trade or business located in a tax-free zone, if the motor 
 13.14  vehicle is garaged in the tax-free zone and is primarily used as 
 13.15  part of or in direct support of the person's operations carried 
 13.16  on in the tax-free zone.  The exemption under this clause also 
 13.17  applies to any local sales and use tax. 
 13.18     [EFFECTIVE DATE.] This section is effective for sales made 
 13.19  after December 31, 2002. 
 13.20     Sec. 9.  [469.310] [DEFINITIONS.] 
 13.21     Subdivision 1.  [SCOPE.] For purposes of sections 469.310 
 13.22  to 469.318, the following terms have the meanings given. 
 13.23     Subd. 2.  [AGRICULTURAL PROCESSING FACILITY.] "Agricultural 
 13.24  processing facility" means one or more facilities or operations 
 13.25  that transform, package, sort, or grade livestock or livestock 
 13.26  products, agricultural commodities, or plants or plant products 
 13.27  into goods that are used for intermediate or final consumption 
 13.28  including goods for nonfood use, and surrounding property. 
 13.29     Subd. 3.  [APPLICANT.] "Applicant" means a local government 
 13.30  unit or units applying for designation of an area as a tax-free 
 13.31  zone. 
 13.32     Subd. 4.  [COMMISSIONER.] "Commissioner" means the 
 13.33  commissioner of trade and economic development. 
 13.34     Subd. 5.  [DEVELOPMENT PLAN.] "Development plan" means a 
 13.35  plan meeting the requirements of section 469.311. 
 13.36     Subd. 6.  [LOCAL GOVERNMENT UNIT.] "Local government unit" 
 14.1   means a statutory or home rule charter city, a county, a town, 
 14.2   or school district. 
 14.3      Subd. 7.  [PERSON.] "Person" includes an individual, 
 14.4   corporation, partnership, limited liability company, 
 14.5   association, or any other entity. 
 14.6      Subd. 8.  [QUALIFIED BUSINESS.] "Qualified business" means 
 14.7   a person carrying on a trade or business within a tax-free 
 14.8   zone.  A person that relocates a trade or business from outside 
 14.9   a tax-free zone into a tax-free zone is not a qualified 
 14.10  business, unless the business either: 
 14.11     (1) increases full-time employment by at least 20 percent 
 14.12  in the first full year of operation within the tax-free zone; or 
 14.13     (2) makes a capital investment in the property located 
 14.14  within a zone equivalent to ten percent of the gross revenues of 
 14.15  that business in the immediately preceding taxable year. 
 14.16     Subd. 9.  [TAX-FREE ZONE OR ZONE.] "Tax-free zone" or "zone"
 14.17  means a zone designated by the commissioner under section 
 14.18  469.314, and includes an agricultural processing facility zone. 
 14.19     Subd. 10.  [TAX-FREE ZONE PERCENTAGE OR ZONE 
 14.20  PERCENTAGE.] "Tax-free zone percentage" or "zone percentage" 
 14.21  means for a business operating within and without a tax-free 
 14.22  zone, the following fraction reduced to a percentage: 
 14.23     (1) the numerator of fraction is: 
 14.24     (i) the ratio of the taxpayer's property factor under 
 14.25  section 290.191 located in the zone for the taxable year over 
 14.26  the property factor numerator determined under section 290.191, 
 14.27  plus 
 14.28     (ii) the ratio of the taxpayer's payroll factor under 
 14.29  section 290.191 located in the zone for the taxable year over 
 14.30  the payroll factor numerator determined under section 290.191; 
 14.31  and 
 14.32     (2) the denominator of the fraction is two. 
 14.33     [EFFECTIVE DATE.] This section is effective the day 
 14.34  following final enactment. 
 14.35     Sec. 10.  [469.311] [DEVELOPMENT PLAN.] 
 14.36     (a) An applicant for designation of a tax-free zone must 
 15.1   adopt a written development plan for the zone before submitting 
 15.2   the application to the commissioner. 
 15.3      (b) The development plan must contain, at least, the 
 15.4   following: 
 15.5      (1) a map of the proposed zone that indicates the 
 15.6   geographic boundaries of the zone, the total area, and present 
 15.7   use and conditions generally of the land and structures within 
 15.8   those boundaries; 
 15.9      (2) evidence of community support and commitment from local 
 15.10  government, school districts, and other education institutions, 
 15.11  business groups, and the public; 
 15.12     (3) a description of the methods proposed to increase 
 15.13  economic opportunity and expansion, facilitate infrastructure 
 15.14  improvement, reduce the local regulatory burden, and identify 
 15.15  job training job opportunities; 
 15.16     (4) current social, economic, and demographic 
 15.17  characteristics of the proposed zone and anticipated 
 15.18  improvements in education, health, human services, and 
 15.19  employment if the zone is created; 
 15.20     (5) a description of anticipated activity in the zone and 
 15.21  each subzone, including, but not limited to, industrial use, 
 15.22  industrial site reuse, commercial or retail use, and residential 
 15.23  use; and 
 15.24     (6) any other information required by the commissioner. 
 15.25     [EFFECTIVE DATE.] This section is effective the day 
 15.26  following final enactment. 
 15.27     Sec. 11.  [469.312] [TAX-FREE ZONES; LIMITATIONS.] 
 15.28     Subdivision 1.  [MAXIMUM SIZE.] A tax-free zone may not 
 15.29  exceed 5,000 acres.  For a zone designated as an agricultural 
 15.30  processing facility zone, the zone also may not exceed the size 
 15.31  of a site necessary for the agricultural processing facility, 
 15.32  including ancillary operations and space for expansion in the 
 15.33  reasonably foreseeable future. 
 15.34     Subd. 2.  [SUBZONES.] The area of a tax-free zone may 
 15.35  consist of up to six noncontiguous areas or subzones.  A subzone 
 15.36  must consist of, at least, 20 acres. 
 16.1      Subd. 3.  [OUTSIDE METROPOLITAN AREA.] The area of a 
 16.2   tax-free zone must be located outside of the metropolitan area, 
 16.3   as defined in section 473.121, subdivision 2. 
 16.4      Subd. 4.  [PROPERTY OWNERSHIP.] No more than one-half of 
 16.5   the real property in each subzone may be owned by the same 
 16.6   person or a related entity, as defined in section 1313(c) of the 
 16.7   Internal Revenue Code of 1986, as amended.  This subdivision 
 16.8   does not apply to an agricultural processing facility zone. 
 16.9      Subd. 5.  [BORDER CITY DEVELOPMENT ZONES.] (a) The area of 
 16.10  a tax-free zone may not include the area of a border city 
 16.11  development zone designated under section 469.1731.  The city 
 16.12  may remove property from a border city development zone, 
 16.13  contingent upon the area being designated as a tax-free zone.  
 16.14  Before removing a parcel of property from a border city 
 16.15  development zone, the city must obtain the written consent to 
 16.16  the removal from each recipient that is located on the parcel 
 16.17  and who receives incentives under the border city development 
 16.18  zone.  Consent of any other property owner or taxpayer in the 
 16.19  border city development zone is not required. 
 16.20     (b) A city may not provide tax incentives under section 
 16.21  469.1734 to individuals or businesses for operations or activity 
 16.22  in a tax-free zone. 
 16.23     Subd. 6.  [DURATION LIMIT.] The maximum duration of a zone 
 16.24  is 12 years.  The applicant may request a shorter duration.  The 
 16.25  commissioner may specify a shorter duration, regardless of the 
 16.26  requested duration. 
 16.27     [EFFECTIVE DATE.] This section is effective the day 
 16.28  following final enactment. 
 16.29     Sec. 12.  [469.313] [APPLICATION FOR DESIGNATION.] 
 16.30     Subdivision 1.  [WHO MAY APPLY.] One or more local 
 16.31  government units may apply for designation of an area as a 
 16.32  tax-free zone.  All or part of the area proposed for designation 
 16.33  as a zone must be located within the boundaries of each of the 
 16.34  governmental units.  A local government unit may not submit more 
 16.35  than one application for designation of a tax-free zone. 
 16.36     Subd. 2.  [APPLICATION CONTENT.] The application must 
 17.1   include: 
 17.2      (1) a development plan meeting the requirements of section 
 17.3   469.311; 
 17.4      (2) the proposed duration of the zone, not to exceed 12 
 17.5   years; 
 17.6      (3) a resolution or ordinance adopted by each of the cities 
 17.7   or towns and the counties in which the zone is located, agreeing 
 17.8   to provide all of the local tax exemptions provided under 
 17.9   section 469.315; 
 17.10     (4) if the proposed zone includes area in a border city 
 17.11  development zone, written consent to removal of the property 
 17.12  from the border city development zone to the extent required by 
 17.13  section 469.312, subdivision 5; and 
 17.14     (5) supporting evidence to allow the commissioner to 
 17.15  evaluate the application under the criteria in section 469.314. 
 17.16     [EFFECTIVE DATE.] This section is effective the day 
 17.17  following final enactment. 
 17.18     Sec. 13.  [469.314] [DESIGNATION OF TAX-FREE ZONES.] 
 17.19     Subdivision 1.  [COMMISSIONER TO DESIGNATE.] (a) The 
 17.20  commissioner, in consultation with the commissioner of revenue 
 17.21  and the director of the office of strategic and long-range 
 17.22  planning, shall designate not more than ten tax-free zones.  In 
 17.23  making the designations, the commissioner shall consider need 
 17.24  and likelihood of success to yield the most economic development 
 17.25  and revitalization of economically distressed rural areas of 
 17.26  Minnesota. 
 17.27     (b) In addition to the designations under paragraph (a), 
 17.28  the commissioner may, in consultation with the commissioners of 
 17.29  agriculture and revenue, designate up to five agricultural 
 17.30  processing facility zones. 
 17.31     Subd. 2.  [NEED INDICATORS.] (a) In evaluating applications 
 17.32  to determine the need for designation of a tax-free zone, the 
 17.33  commissioner shall consider the following factors as indicators 
 17.34  of need: 
 17.35     (1) the percentage of the population that is below the 
 17.36  poverty rate, compared with the state as a whole; 
 18.1      (2) the extent to which the area's unemployment rate is 
 18.2   significantly higher than the state unemployment rate; 
 18.3      (3) the amount of property in or near the zone that is 
 18.4   deteriorated or underutilized; 
 18.5      (4) the amount of housing in or near the zone that is 
 18.6   deteriorated; 
 18.7      (5) the extent to which the median family income of the 
 18.8   area is lower than the state median family income; 
 18.9      (6) the extent to which the area experienced a population 
 18.10  loss between 1980 and 1990 or between 1990 and the most recent 
 18.11  estimates by the state demographer; 
 18.12     (7) the extent to which an area has experienced sudden or 
 18.13  severe job loss as a result of closing of businesses or other 
 18.14  employers; 
 18.15     (8) the extent to which property in the area would remain 
 18.16  underdeveloped or nonperforming due to physical characteristics; 
 18.17  and 
 18.18     (9) the extent to which the area has substantial real 
 18.19  property with adequate infrastructure and energy to support new 
 18.20  or expanded development. 
 18.21     (b) In applying the need indicators, the best available 
 18.22  data should be used.  If reported data are not available for the 
 18.23  proposed zone, data for the smallest area that is available and 
 18.24  includes the area of the proposed zone may be used.  The 
 18.25  commissioner may require applicants to provide data to 
 18.26  demonstrate how the area meets one or more of the indicators of 
 18.27  need. 
 18.28     Subd. 3.  [SUCCESS INDICATORS.] In determining the 
 18.29  likelihood of success of a proposed zone, the commissioner may 
 18.30  consider: 
 18.31     (1) the strength and viability of the proposed development 
 18.32  goals, objectives, and strategies in the development plan; 
 18.33     (2) whether the development plan is creative and innovative 
 18.34  in comparison to other applications; 
 18.35     (3) local public and private commitment to development of 
 18.36  the proposed zone and the potential cooperation of surrounding 
 19.1   communities; 
 19.2      (4) existing resources available to the proposed zone; 
 19.3      (5) how the designation of the zone would relate to other 
 19.4   economic and community development projects and to regional 
 19.5   initiatives or programs; 
 19.6      (6) how the regulatory burden will be eased for businesses 
 19.7   operating in the proposed zone; and 
 19.8      (7) proposals to establish and link job creation and job 
 19.9   training. 
 19.10     Subd. 4.  [DESIGNATION SCHEDULE.] The following schedule 
 19.11  for designation of tax-free zones applies: 
 19.12     (1) The commissioner shall publish the form for 
 19.13  applications and any procedural, form, or content requirements 
 19.14  for applications by no later than ...., 2002.  The commissioner 
 19.15  may publish these requirements on the Internet, in the State 
 19.16  Register, or by any other means the commissioner determines 
 19.17  appropriate to disseminate the information to potential 
 19.18  applicants for designation. 
 19.19     (2) Applications must be submitted by ......., 2002. 
 19.20     (3) The commissioner shall designate the zones by no later 
 19.21  than ......., 2002. 
 19.22     (4) The designation of the zones takes effect January 1, 
 19.23  2003. 
 19.24     [EFFECTIVE DATE.] This section is effective the day 
 19.25  following final enactment. 
 19.26     Sec. 14.  [469.315] [TAX INCENTIVES AVAILABLE IN ZONES.] 
 19.27     Individuals who are residents of a tax-free zone, 
 19.28  businesses that operate in a tax-free zone, and individuals who 
 19.29  invest in a business that operates in a tax-free zone qualify 
 19.30  for: 
 19.31     (1) exemption from the individual income tax as provided 
 19.32  under section 469.316 and the associated provisions of chapter 
 19.33  290; 
 19.34     (2) exemption from the corporate franchise tax for 
 19.35  operation of a qualified business in the tax-free zone as 
 19.36  provided under section 469.317 and the associated provisions of 
 20.1   chapter 290; 
 20.2      (3) exemption from the state sales and use tax and any 
 20.3   local sales and use taxes on qualifying purchases as provided in 
 20.4   section 297A.68, subdivision 36; 
 20.5      (4) exemption from the state sales tax on motor vehicles 
 20.6   and any local sales tax on motor vehicles under section 297B.03; 
 20.7   and 
 20.8      (5) exemption from the property tax as provided in section 
 20.9   272.02, subdivision 50. 
 20.10     [EFFECTIVE DATE.] This section is effective the day 
 20.11  following final enactment. 
 20.12     Sec. 15.  [469.316] [INDIVIDUAL INCOME TAX EXEMPTION.] 
 20.13     Subdivision 1.  [APPLICATION.] A resident of a tax-free 
 20.14  zone, an individual operating a trade or business in a tax-free 
 20.15  zone, and an individual making a qualifying investment in a 
 20.16  business operating in a tax-free zone qualifies for the 
 20.17  exemptions from the taxes imposed under chapter 290, as provided 
 20.18  in this section.  The exemptions provided under this section 
 20.19  apply only to the extent that the income otherwise would be 
 20.20  taxable under chapter 290.  Subtractions under this section from 
 20.21  federal taxable income, alternative minimum taxable income, or 
 20.22  any other base subject to tax are limited to the amount that 
 20.23  otherwise would be included in the tax base absent the exemption 
 20.24  under this section. 
 20.25     Subd. 2.  [DEFINITION OF RESIDENT.] For purposes of this 
 20.26  section and the associated provisions of chapter 290, a resident 
 20.27  of a tax-free zone means an individual who is domiciled and 
 20.28  resides in a zone for 184 consecutive days, beginning on the 
 20.29  earlier of (1) the date of designation of the zone by the 
 20.30  commissioner, or (2) the date the individual first resides in a 
 20.31  zone.  An individual who has not satisfied this test by the end 
 20.32  of the taxable year is not a resident for the taxable year. 
 20.33     Subd. 3.  [RESIDENT INDIVIDUALS.] A resident of a tax-free 
 20.34  zone is exempt from the taxes imposed under chapter 290 for the 
 20.35  taxable year on the following: 
 20.36     (1) wages as defined in section 3401(a) and (f) of the 
 21.1   Internal Revenue Code received during a period when the 
 21.2   individual qualified as a resident of the zone; 
 21.3      (2) net income from the operation of a trade or business 
 21.4   received or accrued during the period when the individual 
 21.5   qualified as a resident of the zone; 
 21.6      (3) interest and dividends received during a period when 
 21.7   the individual qualified as a resident of the zone; 
 21.8      (4) net gains or income derived from an estate or trust 
 21.9   during a period when the individual qualified as a resident of 
 21.10  the zone; and 
 21.11     (5) net gain on the sale or exchange of property that does 
 21.12  not qualify for an exemption under subdivision 6.  In 
 21.13  calculating this exemption, the gain must be prorated based on 
 21.14  the percentage of time, measured in calendar days, that the 
 21.15  property was held while the individual was a resident of the 
 21.16  zone in relation to the total time the property was held by the 
 21.17  individual. 
 21.18     Subd. 4.  [RENTS.] An individual, whether or not the 
 21.19  individual is a resident of a tax-free zone, is exempt from the 
 21.20  taxes imposed under chapter 290 on net rents derived from real 
 21.21  or tangible personal property located in a zone for a taxable 
 21.22  year in which the zone was designated a tax-free zone.  If 
 21.23  tangible personal property was used both within and outside of 
 21.24  the zone, the exemption amount for the net rental income must be 
 21.25  multiplied by a fraction, the numerator of which is the number 
 21.26  of days the property was used in the zone and the denominator of 
 21.27  which is the total days. 
 21.28     Subd. 5.  [BUSINESS INCOME; NONRESIDENTS.] An individual 
 21.29  who is not a resident of a tax-free zone is exempt from the 
 21.30  taxes imposed under chapter 290 on net income from the operation 
 21.31  of a qualified business in a tax-free zone.  If the trade or 
 21.32  business is carried on within and without the zone and the 
 21.33  individual is not a resident of Minnesota, the exemption must be 
 21.34  apportioned based on the zone percentage for the taxable year.  
 21.35  If the trade or business is carried on within and without the 
 21.36  zone and the individual is a resident of Minnesota, the 
 22.1   exemption must be apportioned based on the zone percentage for 
 22.2   the taxable year, except the ratios under section 469.310, 
 22.3   subdivision 10, clause (1), items (i) and (ii), must use the 
 22.4   denominators of the property and payroll factors determined 
 22.5   under section 290.191. 
 22.6      Subd. 6.  [CAPITAL GAINS.] (a) An individual is exempt from 
 22.7   the taxes imposed under chapter 290 on: 
 22.8      (1) Net gain derived on a sale or exchange of real property 
 22.9   located in the zone.  If the property was held by the individual 
 22.10  during a period when the zone was not designated, the gain must 
 22.11  be prorated based on the percentage of time, measured in 
 22.12  calendar days, that the real property was held by the individual 
 22.13  during the period the zone designation was in effect to the 
 22.14  total period of time the real property was held by the 
 22.15  individual; 
 22.16     (2) Net gain derived on a sale or exchange of tangible 
 22.17  personal property located in the zone.  If the property was held 
 22.18  by the individual during a period when the zone was not 
 22.19  designated, the gain must be prorated based on the percentage of 
 22.20  time, measured in calendar days, that the property was held by 
 22.21  the individual during the period the zone designation was in 
 22.22  effect to the total period of time the property was held by the 
 22.23  individual.  If the tangible personal property was used outside 
 22.24  of the zone during the period of the zone's designation, the 
 22.25  exemption must be multiplied by a fraction, the numerator of 
 22.26  which is the number of days the property was used in the zone 
 22.27  during the time of the designation and the denominator of which 
 22.28  is the total days the property was held during the time of the 
 22.29  designation; and 
 22.30     (3) Net gain derived on a sale of an ownership interest in 
 22.31  a qualified business operating in the tax-free zone, meeting the 
 22.32  requirements of paragraph (b).  The exemption on the gain must 
 22.33  be multiplied by the zone percentage, certified by the qualified 
 22.34  business under paragraph (b). 
 22.35     (b) A qualified business meets the requirements of this 
 22.36  subdivision if it is a corporation, an S corporation, or a 
 23.1   partnership and for the taxable year its tax-free zone 
 23.2   percentage exceeds 25 percent.  For purposes of this subdivision 
 23.3   the zone percentage must be calculated by modifying the ratios 
 23.4   under section 469.310, subdivision 10, clause (1), items (i) and 
 23.5   (ii), to use the denominators of the property and payroll 
 23.6   factors determined under section 290.191.  Upon the request of 
 23.7   an individual holding an ownership interest in the entity, the 
 23.8   entity must certify to the owner, in writing, the tax-free zone 
 23.9   percentage for the most recent taxable year for which a return 
 23.10  has been filed with the commissioner of revenue. 
 23.11     [EFFECTIVE DATE.] This section is effective for taxable 
 23.12  years beginning after December 31, 2002. 
 23.13     Sec. 16.  [469.317] [CORPORATE FRANCHISE TAX EXEMPTION.] 
 23.14     (a) A qualified business is exempt from the corporate 
 23.15  franchise tax under chapter 290 on the income derived from 
 23.16  operation of its business in the tax-free zone. 
 23.17     (b) If the entire business of the corporation is carried on 
 23.18  entirely within the zone, the corporation is exempt from 
 23.19  taxation under chapter 290, including the alternative minimum 
 23.20  tax under section 290.0921 and the minimum fee under section 
 23.21  290.0922. 
 23.22     (c) If the corporation carries on business partly within 
 23.23  and partly without the zone, the corporation qualifies for an 
 23.24  exemption on the portion of its income attributable to 
 23.25  operations within the zone.  This exemption is determined as 
 23.26  follows: 
 23.27     (1) for purposes of the tax imposed under section 290.02, 
 23.28  by multiplying its taxable net income by its zone percentage and 
 23.29  subtracting the result in determining taxable income; 
 23.30     (2) for purposes of the alternative minimum tax under 
 23.31  section 290.0921, by multiplying its alternative minimum taxable 
 23.32  income by its zone percentage and reducing alternative minimum 
 23.33  taxable income by this amount; and 
 23.34     (3) for purposes of the alternative minimum fee under 
 23.35  section 290.0922, by excluding property and payroll in the zone 
 23.36  from the computations of the fee. 
 24.1      [EFFECTIVE DATE.] This section is effective for taxable 
 24.2   years beginning after December 31, 2002. 
 24.3      Sec. 17.  [469.318] [REPAYMENT OF TAX BENEFITS.] 
 24.4      Subdivision 1.  [REPAYMENT OBLIGATION.] A business must 
 24.5   repay the amount of the tax reduction or local contribution 
 24.6   received during the two years immediately before it ceased to 
 24.7   operate in the zone, if the business: 
 24.8      (1) received tax reductions authorized by section 469.315; 
 24.9      (2) relocated into a tax-free zone after designation of the 
 24.10  zone; and 
 24.11     (3) ceased to operate its facility located within the 
 24.12  tax-free zone. 
 24.13     Subd. 2.  [DISPOSITION OR REPAYMENT.] The repayment must be 
 24.14  paid to the state to the extent it represents a state tax 
 24.15  reduction and to the county to the extent it represents a 
 24.16  property tax reduction.  Any amount repaid to the state must be 
 24.17  deposited in the general fund.  Any amount repaid to the county 
 24.18  for the property tax exemption must be distributed to the local 
 24.19  governments with authority to levy taxes in the zone in the same 
 24.20  manner provided for distribution of payment of delinquent 
 24.21  property taxes.  Any repayment of local sales taxes must be 
 24.22  repaid to the city or county imposing the local sales tax. 
 24.23     Subd. 3.  [AUTHORITY TO COLLECT.] The commissioner of 
 24.24  revenue may seek repayment of tax exemptions from a business 
 24.25  ceasing to operate within a tax-free zone by utilizing any 
 24.26  remedies available for the collection of taxes. 
 24.27     [EFFECTIVE DATE.] This section is effective the day 
 24.28  following final enactment. 
 24.29     Sec. 18.  [477A.08] [TAX-FREE ZONE AID.] 
 24.30     Subdivision 1.  [ELIGIBILITY.] (a) For each assessment year 
 24.31  that the exemption for tax-free zone property is in effect under 
 24.32  section 272.02, subdivision 50, the assessor shall determine the 
 24.33  difference between the actual net tax capacity and the net tax 
 24.34  capacity that would be determined for the tax-free zone if the 
 24.35  exemption were not in effect. 
 24.36     (b) Each city and county is eligible for aid equal to 
 25.1   one-half of: 
 25.2      (1) the amount by which the sum of the differences 
 25.3   determined in paragraph (a) for the corresponding assessment 
 25.4   year exceeds three percent of the city's or county's total 
 25.5   taxable net tax capacity for taxes payable in 2002, multiplied 
 25.6   by 
 25.7      (2) the city's or the county's, as applicable, average 
 25.8   local tax rate for taxes payable in 2002.  
 25.9      Subd. 2.  [CERTIFICATION.] The county assessor shall notify 
 25.10  the commissioner of revenue of the amount determined under 
 25.11  subdivision 1, paragraph (b), clause (1), for any city or county 
 25.12  that qualifies for aid under this section by June 30 of the 
 25.13  assessment year, in a form prescribed by the commissioner.  The 
 25.14  commissioner shall notify each city and county of its qualifying 
 25.15  aid amount by August 15 of the assessment year. 
 25.16     Subd. 3.  [APPROPRIATION; PAYMENT.] The commissioner shall 
 25.17  pay each city and county its qualifying aid amount by July 20.  
 25.18  An amount sufficient to pay the aid under this section is 
 25.19  appropriated to the commissioner of revenue from the general 
 25.20  fund. 
 25.21     [EFFECTIVE DATE.] This section is effective beginning for 
 25.22  aid based on property taxes assessed in 2003, payable in 2004. 
 25.23     Sec. 19.  [APPROPRIATION; COST OF ADMINISTRATION.] 
 25.24     $....... is appropriated to the commissioner of trade and 
 25.25  economic development for the cost of designating tax-free zones. 
 25.26     $....... is appropriated to the commissioner of revenue for 
 25.27  the cost of administering the tax provisions of this act. 
 25.28     [EFFECTIVE DATE.] This section is effective the day 
 25.29  following final enactment.