1.1 	A bill for an act
1.2 	relating to taxation; providing for tax reductions to low- and middle-income 
1.3 	families; closing corporate tax loopholes; providing aid to local government units; 
1.4 	modifying income, property, tobacco, sales and use, and special taxes and other 
1.5 	various tax provisions; appropriating money;amending Minnesota Statutes 2016, 
1.6 	sections 16D.08, subdivision 2; 116J.8737, subdivisions 1, 5, 5a, 12; 123B.53, 
1.7 	subdivision 4; 128C.24; 270.80, subdivisions 2, 3, 4, by adding subdivisions; 
1.8 	270.81, subdivision 3, by adding a subdivision; 270.82; 270.83, subdivisions 1, 2; 
1.9 	270.84; 270.86; 270.87; 270C.03, subdivision 1; 270C.33, subdivision 6; 270C.722, 
1.10 	subdivision 1; 270C.728, by adding a subdivision; 272.02, subdivision 9; 273.1384, 
1.11 	subdivision 2; 273.1392; 273.1393; 275.025, subdivisions 1, 4; 275.065, subdivision 
1.12 	3; 275.07, subdivision 2; 275.08, subdivision 1b; 276.04, subdivision 2; 289A.19, 
1.13 	subdivision 7; 289A.60, by adding a subdivision; 290.01, subdivision 4a; 290.05, 
1.14 	subdivision 1; 290.067, subdivisions 1, 2, 2b, 3; 290.0671, subdivisions 1, as 
1.15 	amended, 7; 290.0674, by adding a subdivision; 290.0677, subdivision 1a; 290.068, 
1.16 	subdivision 2; 290.17, subdivision 4; 290.191, subdivision 5; 290.21, subdivision 
1.17 	4; 290A.03, subdivision 13; 290B.03, subdivision 1; 290B.04, subdivision 1; 
1.18 	290C.01; 290C.02, subdivisions 1, 3, 6; 290C.03; 290C.04; 290C.05; 290C.055; 
1.19 	290C.07; 290C.08, subdivision 1; 290C.10; 290C.11; 290C.13, subdivision 6; 
1.20 	291.03, subdivision 11; 295.52, subdivision 8; 296A.01, subdivision 12; 296A.08, 
1.21 	subdivision 2; 297A.61, subdivisions 3, 54; 297A.67, subdivision 10, by adding 
1.22 	a subdivision; 297A.70, subdivisions 1, 4, by adding a subdivision; 297A.71, by 
1.23 	adding subdivisions; 297A.75, subdivisions 1, 2, 3; 297A.815, subdivision 3; 
1.24 	297F.01, subdivisions 9a, 10, 14, 17, 19, 20, 21, by adding subdivisions; 297F.03, 
1.25 	subdivisions 1, 2, 3, 5, 6, 7, by adding a subdivision; 297F.04, subdivisions 1, 2; 
1.26 	297F.05, subdivision 3, by adding a subdivision; 297F.06, by adding a subdivision; 
1.27 	297F.08, subdivision 8a; 297F.09, subdivisions 2, 7, 10; 297F.12, subdivision 3; 
1.28 	297F.13, subdivisions 2, 4, by adding a subdivision; 297F.15, subdivision 9; 
1.29 	297F.19, by adding a subdivision; 297F.20, subdivisions 5, 6, 7, 9, by adding 
1.30 	subdivisions; 297F.21, subdivision 1; 297H.04, subdivision 2; 297I.05, subdivision 
1.31 	7; 298.015; 461.12, subdivision 8; 477A.03, subdivisions 2a, 2b; Laws 2010, 
1.32 	chapter 216, section 12, as amended; proposing coding for new law in Minnesota 
1.33 	Statutes, chapters 103F; 270C; 273; 290; 290C; 297F; 477A; repealing Minnesota 
1.34 	Statutes 2016, sections 270.81, subdivision 4; 270.83, subdivision 3; 290.067, 
1.35 	subdivision 2a; 290C.02, subdivisions 5, 9; 297A.67, subdivision 33; 297F.185; 
1.36 	Laws 2011, First Special Session chapter 9, article 6, section 97, subdivision 6; 
1.37 	Minnesota Rules, parts 8106.0100, subparts 1, 2, 3, 4, 5, 6, 7, 8, 10, 12, 13, 14, 
2.1 	17, 17a, 18, 19, 20, 21; 8106.0300, subparts 1, 3; 8106.0400; 8106.0500; 8106.0600; 
2.2 	8106.0700; 8106.0800; 8106.9900.
2.3 	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

2.4 	ARTICLE 1
2.5 	INDIVIDUAL INCOME TAX

2.6 	Section 1. Minnesota Statutes 2016, section 290.067, subdivision 1, is amended to read:
2.7 		Subdivision 1.Amount of credit. (a) A taxpayer may take as a credit against the tax 
2.8 	due from the taxpayer and a spouse, if any, imposed under this chapter an amount equal to 
2.9 	the sum of dependent care credit for which the taxpayer is eligible pursuant to the provisions 
2.10 	of section 21 of the Internal Revenue Code subject to the limitations provided in subdivision 
2.11 	2 except that credits calculated under this paragraph and paragraphs (b), (d), and (e). In 
2.12 	determining whether the child qualified as a dependent expenses were paid to care for a 
2.13 	qualifying individual, income received as a Minnesota family investment program grant or 
2.14 	allowance to or on behalf of the child individual must not be taken into account in 
2.15 	determining whether the child individual received more than half of the child's individual's
2.16 	support from the taxpayer, and the provisions of section 32(b)(1)(D) of the Internal Revenue 
2.17 	Code do not apply.
2.18 	(b) A taxpayer who incurs actual employment-related expenses may take as a credit 
2.19 	against the tax imposed under this chapter an amount equal to the dependent care credit for 
2.20 	which the taxpayer is eligible pursuant to the provisions of section 21 of the Internal Revenue 
2.21 	Code.
2.22 	(c) A taxpayer who elects to claim a credit under paragraph (d) or (e) may claim a credit 
2.23 	under paragraph (b) only for employment-related expenses paid to care for qualifying 
2.24 	individuals other than the child for whom deemed expenses were used to claim the credit 
2.25 	under paragraph (d) or (e).
2.26 	(b) If a child who has not attained the age of six years at the close of the taxable year is 
2.27 	cared for at a licensed family day care home operated by the child's parent, the taxpayer is 
2.28 	deemed to have paid employment-related expenses. (d) In lieu of the credit under paragraph 
2.29 	(b), a taxpayer who operates a licensed family day care home may elect to claim as a credit 
2.30 	against the tax imposed under this chapter an amount equal to the dependent care credit for 
2.31 	which the taxpayer is eligible pursuant to the provisions of section 21 of the Internal Revenue 
2.32 	Code calculated using deemed expenses rather than actual expenses paid. If the child is 16 
2.33 	months old or younger at the close of the taxable year, the amount of deemed expenses 
2.34 	deemed to have been paid equals are equal to the maximum limit amount of 
3.1 	employment-related expenses incurred during the taxable year that may be taken into account
3.2 	for one qualified qualifying individual under section 21(c) and (d) of the Internal Revenue 
3.3 	Code minus the amount of employment-related expenses paid by the taxpayer for the care 
3.4 	of the individual. If the child is older than 16 months of age but has not attained the age of 
3.5 	six years at the close of the taxable year, the amount of deemed expenses deemed to have 
3.6 	been paid equals are equal to the amount the licensee would charge for the care of a child 
3.7 	of the same age for the same number of hours of care. If the child has attained six years of 
3.8 	age at the close of the taxable year, deemed expenses are zero.
3.9 	(c) If a (e) In lieu of the credit under paragraph (b), a married couple may elect to claim 
3.10 	a credit against the tax imposed under this chapter as computed under paragraph (f) if the 
3.11 	married couple:
3.12 	(1) has a child who has not attained the age of one year at the close of the taxable year;
3.13 	(2) files a joint tax return for the taxable year; and
3.14 	(3) does not participate in a dependent care assistance program as defined in section 129 
3.15 	of the Internal Revenue Code, in lieu of the actual employment related expenses paid for 
3.16 	that child under paragraph (a) or the deemed amount under paragraph (b), the lesser of (i) 
3.17 	the combined earned income of the couple or (ii) the amount of the maximum limit for one 
3.18 	qualified individual under section 21(c) and (d) of the Internal Revenue Code will be deemed 
3.19 	to be the employment related expense paid for that child. The earned income limitation of 
3.20 	section 21(d) of the Internal Revenue Code shall not apply to this deemed amount. These 
3.21 	deemed amounts apply regardless of whether any employment-related expenses have been 
3.22 	paid.; and
3.23 	(4) does not operate a licensed family day care center home.
3.24 	(f) A married couple meeting the requirements of paragraph (e) is allowed a credit against 
3.25 	the tax due under this chapter equal to the dependent care for which the couple is eligible 
3.26 	pursuant to section 21 of the Internal Revenue Code calculated using deemed expenses 
3.27 	rather than actual employment-related expenses paid. For purposes of this paragraph, deemed 
3.28 	expenses are the lesser of (i) the combined earned income of the couple or (ii) the maximum 
3.29 	amount of employment-related expenses incurred during the taxable year that may be taken 
3.30 	into account for one qualified individual under section 2l(c) and (d) of the Internal Revenue 
3.31 	Code or for two qualifying individuals for a taxpayer with two children who have not attained 
3.32 	one year of age. The earned income limitation of section 21(d) of the Internal Revenue Code 
3.33 	does not apply to this deemed amount. These deemed amounts apply regardless of whether 
3.34 	any employment-related expenses have been paid.
4.1 	(d) (g) If the taxpayer is not required and does not file a federal individual income tax 
4.2 	return for the tax year, or if the taxpayer files a federal return but does not claim a federal 
4.3 	dependent care credit, no credit is allowed for any amount paid to any person unless:
4.4 	(1) the name, address, and taxpayer identification number of the person are included on 
4.5 	the return claiming the credit; or
4.6 	(2) if the person is an organization described in section 501(c)(3) of the Internal Revenue 
4.7 	Code and exempt from tax under section 501(a) of the Internal Revenue Code, the name 
4.8 	and address of the person are included on the return claiming the credit.
4.9 	In the case of a failure to provide the information required under the preceding sentence, 
4.10 	the preceding sentence does not apply if it is shown that the taxpayer exercised due diligence 
4.11 	in attempting to provide the information required.
4.12 	(e) (h) In the case of a nonresident, part-year resident, or a person who has earned income 
4.13 	not subject to tax under this chapter including earned income excluded pursuant to section 
4.14 	290.0132, subdivision 10, the credit determined under this section 21 of the Internal Revenue 
4.15 	Code must be allocated based on the ratio by which the earned income of the claimant and 
4.16 	the claimant's spouse from Minnesota sources bears to the total earned income of the claimant 
4.17 	and the claimant's spouse.
4.18 	(f) (i) For residents of Minnesota, the subtractions for military pay under section 
4.19 	290.0132, subdivisions 11 and 12, are not considered "earned income not subject to tax 
4.20 	under this chapter."
4.21 	(g) (j) For residents of Minnesota, the exclusion of combat pay under section 112 of the 
4.22 	Internal Revenue Code is not considered "earned income not subject to tax under this 
4.23 	chapter."
4.24 	(k) For purposes of this section, "qualifying individual" and "employment-related 
4.25 	expenses" have the meanings given in section 21 of the Internal Revenue Code.

4.26 	EFFECTIVE DATE. This section is effective for taxable years beginning after December 
4.27 	31, 2016.

4.28 	Sec. 2. Minnesota Statutes 2016, section 290.067, subdivision 2, is amended to read:
4.29 		Subd. 2.Limitations. The credit for expenses incurred for the care of each dependent 
4.30 	shall not exceed $720 in any taxable year, and the total credit for all dependents of a claimant 
4.31 	shall not exceed $1,440 in a taxable year. The maximum total credit shall be reduced 
4.32 	according to the amount of the income of the claimant and a spouse, if any, as follows:
5.1 	income up to $18,040, $720 maximum for one dependent, $1,440 for all dependents;
5.2 	income over $18,040, the maximum credit for one dependent shall be reduced by $18 
5.3 	for every $350 of additional income, $36 for all dependents.
5.4 	The commissioner shall construct and make available to taxpayers tables showing the 
5.5 	amount of the credit at various levels of income and expenses. The tables shall follow the 
5.6 	schedule contained in this subdivision, except that the commissioner may graduate the 
5.7 	transitions between expenses and income brackets.
5.8 	(a) The maximum credit under subdivision l, paragraph (b), is:
5.9 	(1) $1,050 for a taxpayer with employment-related expenses for one qualifying individual;
5.10 	(2) $2,100 for a taxpayer with employment-related expenses for two or more qualifying 
5.11 	individuals;
5.12 	(3) $1,050 for a taxpayer who elects to claim a credit under subdivision l, paragraph (d) 
5.13 	or (e), if that credit is based on deemed expenses for one child; and
5.14 	(4) $0 for a taxpayer who elects to claim a credit under subdivision 1, paragraph (d) or 
5.15 	(e), if that credit is based on deemed expenses for two or more children.
5.16 	(b) The maximum credit under subdivision l, paragraphs (d) and (e), is:
5.17 	(1) $720 for a taxpayer with deemed expenses for one child; and
5.18 	(2) $1,440 for a taxpayer with deemed expenses for two or more children.
5.19 	(c) For a taxpayer who claims a credit under subdivision l, paragraph (b), who has federal 
5.20 	adjusted gross income as defined in the Internal Revenue Code in excess of $77,000, the 
5.21 	credit under subdivision l, paragraph (b), is equal to the lesser of:
5.22 	(1) the credit calculated under subdivision l, paragraph (b); or
5.23 	(2) $600 minus five percent of federal adjusted gross income in excess of $77,000 for 
5.24 	a taxpayer with one qualifying individual, or $1,200 minus five percent of federal gross 
5.25 	adjusted income in excess of $77,000 for a taxpayer with two or more qualifying individuals, 
5.26 	but in no case is the credit less than zero.
5.27 	(d) For a taxpayer who elects to claim the credit under subdivision l, paragraph (d) or 
5.28 	(e), with federal adjusted gross income as defined in the Internal Revenue Code in excess 
5.29 	of $25,000, the credit is equal to the lesser of:
5.30 	(1) the credit calculated under subdivision l, paragraph (d) or (e); or
6.1 	(2) $720 minus five percent of federal adjusted gross income in excess of $25,000 for 
6.2 	a taxpayer with one qualifying individual, or $1,440 minus five percent of federal gross 
6.3 	adjusted income in excess of $25,000 for a taxpayer with two or more qualifying individuals, 
6.4 	but in no case is the credit less than zero.

6.5 	EFFECTIVE DATE. This section is effective for taxable years beginning after December 
6.6 	31, 2016.

6.7 	Sec. 3. Minnesota Statutes 2016, section 290.067, subdivision 2b, is amended to read:
6.8 		Subd. 2b.Inflation adjustment. The commissioner shall adjust the dollar amount of 
6.9 	the income threshold at which the maximum credit begins to be reduced under subdivision 
6.10 	2 by the percentage determined pursuant to the provisions of section 1(f) of the Internal 
6.11 	Revenue Code, except that in section 1(f)(3)(B) the word "1999" "2016" shall be substituted 
6.12 	for the word "1992." For 2001 2018, the commissioner shall then determine the percent 
6.13 	change from the 12 months ending on August 31, 1999 2016, to the 12 months ending on 
6.14 	August 31, 2000 2017, and in each subsequent year, from the 12 months ending on August 
6.15 	31, 1999 2016, to the 12 months ending on August 31 of the year preceding the taxable 
6.16 	year. The determination of the commissioner pursuant to this subdivision must not be 
6.17 	considered a "rule" and is not subject to the Administrative Procedure Act contained in 
6.18 	chapter 14. The threshold amount as adjusted must be rounded to the nearest $10 amount. 
6.19 	If the amount ends in $5, the amount is rounded up to the nearest $10 amount.

6.20 	EFFECTIVE DATE. This section is effective for taxable years beginning after December 
6.21 	31, 2017.

6.22 	Sec. 4. Minnesota Statutes 2016, section 290.067, subdivision 3, is amended to read:
6.23 		Subd. 3.Credit to be refundable. If the amount of credit which a claimant would be 
6.24 	eligible to receive pursuant to this subdivision section exceeds the claimant's tax liability 
6.25 	under chapter 290, the excess amount of the credit shall be refunded to the claimant by the 
6.26 	commissioner of revenue.

6.27 	EFFECTIVE DATE. This section is effective for taxable years beginning after December 
6.28 	31, 2016.

6.29 	Sec. 5. Minnesota Statutes 2016, section 290.0671, subdivision 1, as amended by Laws 
6.30 	2017, chapter 1, section 6, is amended to read:
6.31 		Subdivision 1.Credit allowed. (a) An individual who is a resident of Minnesota is 
6.32 	allowed a credit against the tax imposed by this chapter equal to a percentage of earned 
7.1 	income. To receive a credit, a taxpayer must be eligible for a credit under section 32 of the 
7.2 	Internal Revenue Code., except that:
7.3 	(1) the earned income and adjusted gross income limitations of section 32 of the Internal 
7.4 	Revenue Code do not apply; and
7.5 	(2) a taxpayer with no qualifying children who has attained the age of 21, but has not 
7.6 	attained the age of 65 before the close of the taxable year and is otherwise eligible for a 
7.7 	credit under section 32 of the Internal Revenue Code may also receive a credit.
7.8 	(b) For individuals with no qualifying children, the credit equals 2.10 three percent of 
7.9 	the first $6,180 $6,550 of earned income. The credit is reduced by 2.01 three percent of 
7.10 	earned income or adjusted gross income, whichever is greater, in excess of $8,130 $12,100, 
7.11 	but in no case is the credit less than zero.
7.12 	(c) For individuals with one qualifying child, the credit equals 9.35 12.71 percent of the 
7.13 	first $11,120 $8,420 of earned income. The credit is reduced by 6.02 5.2 percent of earned 
7.14 	income or adjusted gross income, whichever is greater, in excess of $21,190 $21,790, but 
7.15 	in no case is the credit less than zero.
7.16 	(d) For individuals with two or more qualifying children, the credit equals 11 14.94
7.17 	percent of the first $18,240 $13,810 of earned income. The credit is reduced by 10.82 9.2
7.18 	percent of earned income or adjusted gross income, whichever is greater, in excess of 
7.19 	$25,130 $25,850, but in no case is the credit less than zero.
7.20 	(e) For a part-year resident, the credit must be allocated based on the percentage calculated 
7.21 	under section 290.06, subdivision 2c, paragraph (e).
7.22 	(f) For a person who was a resident for the entire tax year and has earned income not 
7.23 	subject to tax under this chapter, including income excluded under section 290.0132, 
7.24 	subdivision 10, the credit must be allocated based on the ratio of federal adjusted gross 
7.25 	income reduced by the earned income not subject to tax under this chapter over federal 
7.26 	adjusted gross income. For purposes of this paragraph, the subtractions for military pay 
7.27 	under section 290.0132, subdivisions 11 and 12, are not considered "earned income not 
7.28 	subject to tax under this chapter."
7.29 	For the purposes of this paragraph, the exclusion of combat pay under section 112 of 
7.30 	the Internal Revenue Code is not considered "earned income not subject to tax under this 
7.31 	chapter."
7.32 	(g) For tax years beginning after December 31, 2013 2016, the $8,130 $12,100 in 
7.33 	paragraph (b), the $21,190 $21,790 in paragraph (c), and the $25,130 $25,850 in paragraph 
8.1 	(d), after being adjusted for inflation under subdivision 7, are each increased by $5,000 for 
8.2 	married taxpayers filing joint returns. For tax years beginning after December 31, 2013
8.3 	2016, the commissioner shall annually adjust the $5,000 by the percentage determined 
8.4 	pursuant to the provisions of section 1(f) of the Internal Revenue Code, except that in section 
8.5 	1(f)(3)(B), the word "2008" "2016" shall be substituted for the word "1992." For 2014 2017, 
8.6 	the commissioner shall then determine the percent change from the 12 months ending on 
8.7 	August 31, 2008, to the 12 months ending on August 31, 2013 2016, and in each subsequent 
8.8 	year, from the 12 months ending on August 31, 2008, to the 12 months ending on August 
8.9 	31 of the year preceding the taxable year. The earned income thresholds as adjusted for 
8.10 	inflation must be rounded to the nearest $10. If the amount ends in $5, the amount is rounded 
8.11 	up to the nearest $10. The determination of the commissioner under this subdivision is not 
8.12 	a rule under the Administrative Procedure Act.
8.13 	(h) The commissioner shall construct tables showing the amount of the credit at various 
8.14 	income levels and make them available to taxpayers. The tables shall follow the schedule 
8.15 	contained in this subdivision, except that the commissioner may graduate the transition 
8.16 	between income brackets.

8.17 	EFFECTIVE DATE. This section is effective for taxable years beginning after December 
8.18 	31, 2016.

8.19 	Sec. 6. Minnesota Statutes 2016, section 290.0671, subdivision 7, is amended to read:
8.20 		Subd. 7.Inflation adjustment. The earned income amounts used to calculate the credit 
8.21 	and the income thresholds at which the maximum credit begins to be reduced in subdivision 
8.22 	1, and the additional threshold amount for married taxpayers filing joint returns, must be 
8.23 	adjusted for inflation. The commissioner shall adjust by the percentage determined pursuant 
8.24 	to the provisions of section 1(f) of the Internal Revenue Code, except that in section 1(f)(3)(B) 
8.25 	the word "2013" "2016" shall be substituted for the word "1992." For 2015 2018, the 
8.26 	commissioner shall then determine the percent change from the 12 months ending on August 
8.27 	31, 2013 2016, to the 12 months ending on August 31, 2014 2017, and in each subsequent 
8.28 	year, from the 12 months ending on August 31, 2013 2016, to the 12 months ending on 
8.29 	August 31 of the year preceding the taxable year. The earned income thresholds as adjusted 
8.30 	for inflation must be rounded to the nearest $10 amount. If the amount ends in $5, the amount 
8.31 	is rounded up to the nearest $10 amount. The determination of the commissioner under this 
8.32 	subdivision is not a rule under the Administrative Procedure Act.

8.33 	EFFECTIVE DATE. This section is effective for taxable years beginning after December 
8.34 	31, 2017.

9.1 	Sec. 7. Minnesota Statutes 2016, section 290.0674, is amended by adding a subdivision 
9.2 	to read:
9.3 		Subd. 2a.Income. (a) For purposes of this section, "income" means the sum of the 
9.4 	following:
9.5 	(1) federal adjusted gross income as defined in section 62 of the Internal Revenue Code; 
9.6 	and
9.7 	(2) the sum of the following amounts to the extent not included in clause (1):
9.8 	(i) all nontaxable income;
9.9 	(ii) the amount of a passive activity loss that is not disallowed as a result of section 469, 
9.10 	paragraph (i) or (m), of the Internal Revenue Code and the amount of passive activity loss 
9.11 	carryover allowed under section 469(b) of the Internal Revenue Code;
9.12 	(iii) an amount equal to the total of any discharge of qualified farm indebtedness of a 
9.13 	solvent individual excluded from gross income under section 108(g) of the Internal Revenue 
9.14 	Code;
9.15 	(iv) cash public assistance and relief;
9.16 	(v) any pension or annuity (including railroad retirement benefits, all payments received 
9.17 	under the federal Social Security Act, Supplemental Security Income, and veterans benefits), 
9.18 	which was not exclusively funded by the claimant or spouse, or which was funded exclusively 
9.19 	by the claimant or spouse and which funding payments were excluded from federal adjusted 
9.20 	gross income in the years when the payments were made;
9.21 	(vi) interest received from the federal or a state government or any instrumentality or 
9.22 	political subdivision thereof;
9.23 	(vii) workers' compensation;
9.24 	(viii) nontaxable strike benefits;
9.25 	(ix) the gross amounts of payments received in the nature of disability income or sick 
9.26 	pay as a result of accident, sickness, or other disability, whether funded through insurance 
9.27 	or otherwise;
9.28 	(x) a lump-sum distribution under section 402(e)(3) of the Internal Revenue Code of 
9.29 	1986, as amended through December 31, 1995;
9.30 	(xi) contributions made by the claimant to an individual retirement account, including 
9.31 	a qualified voluntary employee contribution; simplified employee pension plan; 
10.1 	self-employed retirement plan; cash or deferred arrangement plan under section 401(k) of 
10.2 	the Internal Revenue Code; or deferred compensation plan under section 457 of the Internal 
10.3 	Revenue Code;
10.4 	(xii) nontaxable scholarship or fellowship grants;
10.5 	(xiii) the amount of deduction allowed under section 199 of the Internal Revenue Code;
10.6 	(xiv) the amount of deduction allowed under section 220 or 223 of the Internal Revenue 
10.7 	Code;
10.8 	(xv) the amount deducted for tuition expenses under section 222 of the Internal Revenue 
10.9 	Code; and
10.10 	(xvi) the amount deducted for certain expenses of elementary and secondary school 
10.11 	teachers under section 62(a)(2)(D) of the Internal Revenue Code.
10.12 	In the case of an individual who files an income tax return on a fiscal year basis, the 
10.13 	term "federal adjusted gross income" means federal adjusted gross income reflected in the 
10.14 	fiscal year ending in the next calendar year. Federal adjusted gross income may not be 
10.15 	reduced by the amount of a net operating loss carryback or carryforward or a capital loss 
10.16 	carryback or carryforward allowed for the year.
10.17 	(b) "Income" does not include:
10.18 	(1) amounts excluded pursuant to the Internal Revenue Code, sections 101(a) and 102;
10.19 	(2) amounts of any pension or annuity that were exclusively funded by the claimant or 
10.20 	spouse if the funding payments were not excluded from federal adjusted gross income in 
10.21 	the years when the payments were made;
10.22 	(3) surplus food or other relief in kind supplied by a governmental agency;
10.23 	(4) relief granted under chapter 290A;
10.24 	(5) child support payments received under a temporary or final decree of dissolution or 
10.25 	legal separation; and
10.26 	(6) restitution payments received by eligible individuals and excludable interest as 
10.27 	defined in section 803 of the Economic Growth and Tax Relief Reconciliation Act of 2001, 
10.28 	Public Law 107-16.

10.29 	EFFECTIVE DATE. This section is effective for taxable years beginning after December 
10.30 	31, 2016.

11.1 	Sec. 8. Minnesota Statutes 2016, section 290.0677, subdivision 1a, is amended to read:
11.2 		Subd. 1a.Credit allowed; past military service. (a) A qualified individual is allowed 
11.3 	a credit against the tax imposed under this chapter for past military service. The credit equals 
11.4 	$750 $1,000. The credit allowed under this subdivision is reduced by ten percent of adjusted 
11.5 	gross income in excess of $30,000 $50,000, but in no case is the credit less than zero.
11.6 	(b) For a nonresident or a part-year resident, the credit under this subdivision must be 
11.7 	allocated based on the percentage calculated under section 290.06, subdivision 2c, paragraph 
11.8 	(e).

11.9 	EFFECTIVE DATE. This section is effective for taxable years beginning after December 
11.10 	31, 2016.

11.11 	Sec. 9. Minnesota Statutes 2016, section 290A.03, subdivision 13, is amended to read:
11.12 		Subd. 13.Property taxes payable. "Property taxes payable" means the property tax 
11.13 	exclusive of special assessments, penalties, and interest payable on a claimant's homestead 
11.14 	after deductions made under sections 273.135, 273.1384, 273.1391, 273.42, subdivision 2, 
11.15 	and any other state paid property tax credits in any calendar year, and after any refund 
11.16 	claimed and allowable under section 290A.04, subdivision 2h, that is first payable in the 
11.17 	year that the property tax is payable. In the case of a claimant who makes ground lease 
11.18 	payments, "property taxes payable" includes the amount of the payments directly attributable 
11.19 	to the property taxes assessed against the parcel on which the house is located. No 
11.20 	apportionment or reduction of the "property taxes payable" shall be required for the use of 
11.21 	a portion of the claimant's homestead for a business purpose if the claimant does not deduct 
11.22 	any business depreciation expenses for the use of a portion of the homestead in the 
11.23 	determination of federal adjusted gross income. Regardless of the limitations in section 
11.24 	280A(c)(5) of the Internal Revenue Code, "property taxes payable" must be apportioned or 
11.25 	reduced for the use of a portion of the claimant's homestead for a business purpose if the 
11.26 	claimant deducts any business depreciation expenses for the use of a portion of the homestead 
11.27 	or deducts expenses under section 280A of the Internal Revenue Code for a business operated 
11.28 	in the claimant's homestead. For homesteads which are manufactured homes as defined in 
11.29 	section 273.125, subdivision 8, and for homesteads which are park trailers taxed as 
11.30 	manufactured homes under section 168.012, subdivision 9, "property taxes payable" shall 
11.31 	also include 17 percent of the gross rent paid in the preceding year for the site on which the 
11.32 	homestead is located. When a homestead is owned by two or more persons as joint tenants 
11.33 	or tenants in common, such tenants shall determine between them which tenant may claim 
11.34 	the property taxes payable on the homestead. If they are unable to agree, the matter shall 
12.1 	be referred to the commissioner of revenue whose decision shall be final. Property taxes 
12.2 	are considered payable in the year prescribed by law for payment of the taxes.
12.3 	In the case of a claim relating to "property taxes payable," the claimant must have owned 
12.4 	and occupied the homestead on January 2 of the year in which the tax is payable and (i) the 
12.5 	property must have been classified as homestead property pursuant to section 273.124, on 
12.6 	or before December 15 of the assessment year to which the "property taxes payable" relate; 
12.7 	or (ii) the claimant must provide documentation from the local assessor that application for 
12.8 	homestead classification has been made on or before December 15 of the year in which the 
12.9 	"property taxes payable" were payable and that the assessor has approved the application.

12.10 	EFFECTIVE DATE. This section is effective for refunds based on rent paid after 
12.11 	December 31, 2015, and property taxes payable after December 31, 2016.

12.12 	Sec. 10. Minnesota Statutes 2016, section 291.03, subdivision 11, is amended to read:
12.13 		Subd. 11.Recapture tax. (a) If, within three years after the decedent's death and before 
12.14 	the death of the qualified heir, the qualified heir disposes of any interest in the qualified 
12.15 	property, other than by a disposition to a family member, or a family member ceases to 
12.16 	satisfy the requirement under subdivision 9, clause (7); or 10, clause (5), an additional estate 
12.17 	tax is imposed on the property. In the case of a sole proprietor, if the qualified heir replaces 
12.18 	qualified small business property excluded under subdivision 9 with similar property, then 
12.19 	the qualified heir will not be treated as having disposed of an interest in the qualified property.
12.20 	(b) The amount of the additional tax equals the amount of the exclusion claimed by the 
12.21 	estate under subdivision 8, paragraph (d), multiplied by 16 percent.
12.22 	(c) The additional tax under this subdivision is due on the day which is six months after 
12.23 	the date of the disposition or cessation in paragraph (a).
12.24 	(d) The tax under this subdivision does not apply to the following: acquisition of title 
12.25 	or possession of the qualified property by a federal, state, or local government unit, or any 
12.26 	other entity with the power of eminent domain for a public purpose, as defined in section 
12.27 	117.025, subdivision 11, within the three-year holding period.

12.28 	EFFECTIVE DATE. This section is effective retroactively for estates of decedents 
12.29 	dying after June 30, 2011.

12.30 	Sec. 11. APPROPRIATIONS
 12.31 	$775,000 in fiscal year 2018 and $1,101,000 in fiscal year 2019 are appropriated from 
12.32 	the general fund to the commissioner of revenue to administer sections 1 to 6. $1,101,000 
13.1 	shall be added to the base appropriations to the Department of Revenue for fiscal years 2020 
13.2 	and 2021.

13.3 	EFFECTIVE DATE. This section is effective the day following final enactment.

13.4 	Sec. 12.  REPEALER.
 13.5 	Minnesota Statutes 2016, section 290.067, subdivision 2a, is repealed.

13.6 	EFFECTIVE DATE. This section is effective for taxable years beginning after December 
13.7 	31, 2016.

13.8 	ARTICLE 2
13.9 	PROPERTY TAX AND LOCAL GOVERNMENT AIDS

13.10 	Section 1. [103F.485] RIPARIAN BUFFER COMPENSATION PROGRAM.
13.11 		Subdivision 1.Definitions. (a) For purposes of this section, the following terms have 
13.12 	the meanings given.
13.13 	(b) "Board" means the Board of Water and Soil Resources.
13.14 	(c) "Claimant" means:
13.15 	(1) a person, as defined in section 290.01, subdivision 2, who owns agricultural land in 
13.16 	Minnesota and files an application under this section; or
13.17 	(2) a purchaser or grantee of property sold or transferred after the original application 
13.18 	was submitted.
13.19 	(d) "Commissioner" means the commissioner of revenue.
13.20 	(e) "Program" means the riparian buffer compensation program established in this section.
13.21 	(f) "Public waters buffer" means a 50-foot average width, 30-foot minimum width 
13.22 	continuous area consisting of perennially rooted vegetation, excluding invasive plants and 
13.23 	noxious weeds, adjacent to public waters, as defined in section 103G.005, subdivision 15, 
13.24 	that protects the water resources of the state from runoff pollution; stabilizes soils, shores, 
13.25 	and banks; and protects or provides riparian corridors.
13.26 		Subd. 2.Eligibility requirements. Land may be enrolled in the program if all of the 
13.27 	following conditions are met:
13.28 	(1) the land is tillable land classified as 2a under section 273.13, subdivision 23;
14.1 	(2) a public waters buffer is required to be maintained on the property by the landowner 
14.2 	pursuant to section 103F.48, subdivision 3, and the public waters buffer is identified and 
14.3 	mapped on a buffer protection map established and maintained by the commissioner of 
14.4 	natural resources;
14.5 	(3) the tillable land is converted to a public waters buffer during calendar years 2015 
14.6 	through 2018 to comply with section 103F.48;
14.7 	(4) there are no delinquent property taxes on the land; and
14.8 	(5) an application is submitted to the commissioner as specified in subdivision 3 on or 
14.9 	before April 1, 2019.
14.10 		Subd. 3.Applications. (a) An owner of agricultural land in Minnesota may apply to 
14.11 	enroll agricultural land in the program under this section. The application shall be on a form 
14.12 	prescribed by the commissioner and must include the following information: (1) the 
14.13 	landowner's Social Security number and date of birth, or state or federal business tax 
14.14 	identification number, (2) the landowner's address, (3) the landowner's signature, (4) the 
14.15 	county parcel identification numbers for the tax parcels that completely contain the 
14.16 	agricultural land on which a public waters buffer is required to be established and maintained, 
14.17 	(5) the number of acres of tillable class 2a agricultural land converted to a public waters 
14.18 	buffer during calendar years 2015 through 2018 to comply with section 103F.48, rounded 
14.19 	to the nearest whole acre, (6) the signature of an employee of the soil and water conservation 
14.20 	district where the land is located, certifying the accuracy of the parcel identification numbers 
14.21 	and the converted acres figure included in the application, and (7) any other information 
14.22 	the commissioner deems necessary.
14.23 	(b) The commissioner shall review the application and determine if the property is 
14.24 	eligible for enrollment in the program. The commissioner shall notify the claimant of the 
14.25 	determination within 90 days of receipt of the completed application.
14.26 	(c) Social Security numbers collected from individuals under this section are private 
14.27 	data as provided in section 13.355. The federal business tax identification number and date 
14.28 	of birth data collected under this section are private data on individuals or nonpublic data, 
14.29 	as defined in section 13.02, subdivisions 9 and 12, but may be shared with county treasurers 
14.30 	for purposes of the revenue recapture under chapter 270A.
14.31 		Subd. 4.Annual certification. On or before February 15, 2019, and each February 15 
14.32 	thereafter, the commissioner shall send each claimant a certification form. The claimant 
14.33 	must sign the certification, attesting that the requirements and conditions the commissioner 
14.34 	deems necessary for continued enrollment in the program are currently being met, and must 
15.1 	return the signed certification form to the commissioner by April 1 of the same year. If the 
15.2 	claimant does not return the annual certification form by the due date, the commissioner 
15.3 	must notify the claimant that the land will be terminated from the program if the certification 
15.4 	is not received within 30 days.
15.5 		Subd. 5.Notification to commissioner of noncompliance. On or before June 1, 2019, 
15.6 	and each June 1 thereafter, the commissioner shall provide by electronic means to the board 
15.7 	data sufficient for a county, watershed district, or the board to identify claimants enrolled 
15.8 	in the program. The board shall notify the commissioner of any claimant that has been 
15.9 	determined by a county, watershed district, or the board to be noncompliant with the 
15.10 	requirements of section 103F.48 on or before August 1 of each year in which the certification 
15.11 	under subdivision 4 is due.
15.12 		Subd. 6.Length of enrollment. Land approved for enrollment under subdivision 3, 
15.13 	paragraph (b), remains in the program for five years unless terminated under subdivision 
15.14 	10.
15.15 		Subd. 7.Payment amount. A claimant is eligible to receive an annual payment equal 
15.16 	to $40 per acre for each tillable acre converted a public waters buffer.
15.17 		Subd. 8.Annual payment. The commissioner shall make the payments required under 
15.18 	subdivision 7 annually on or before October 1 based on applications or certifications received 
15.19 	on or before April 1 of that year. No future payment shall be made to a claimant for property 
15.20 	after it has been terminated from the program. Interest at the annual rate determined under 
15.21 	section 270C.40 shall be included with any payment not paid by the later of October 1 of 
15.22 	the year the application or certification was due, or 180 days after the completed application 
15.23 	or certification was filed.
15.24 		Subd. 9.Multiple claimants. No more than one claimant is entitled to a payment under 
15.25 	this section with respect to any tract, parcel, or piece of land that has been assigned the same 
15.26 	parcel identification number. When enrolled agricultural land is owned by two or more 
15.27 	persons, the owners must determine which person is eligible to claim the payments. In the 
15.28 	case of property sold or transferred, the former owner and the purchaser or grantee may 
15.29 	determine which person is eligible to claim the payments. If they cannot agree, the matter 
15.30 	shall be referred to the commissioner, whose decision shall be final.
15.31 		Subd. 10.Reasons for termination. (a) Agricultural land enrolled in the program may 
15.32 	be terminated from the program for any of the following reasons:
15.33 	(1) there are delinquent taxes on the land;
16.1 	(2) the commissioner receives notification from the board of noncompliance under 
16.2 	subdivision 5;
16.3 	(3) the claimant does not timely submit a certification form after being notified by the 
16.4 	commissioner that the annual certification was not received by April l; or
16.5 	(4) the claimant voluntarily withdraws from the program.
16.6 	(b) The commissioner shall prepare a notice of termination for any land that is to be 
16.7 	terminated from the program. The notice of termination must contain the parcel identification 
16.8 	numbers, the reason for termination, and the effective date of termination. The commissioner 
16.9 	shall mail the notice of the termination to the claimant at least 60 days before the effective 
16.10 	date of termination.
16.11 		Subd. 11.Compliance audit. The commissioner may examine any application or annual 
16.12 	certification to ensure compliance with this section.
16.13 		Subd. 12.Penalty. If the commissioner determines a claimant intentionally filed a false 
16.14 	application or certification under this section, the commissioner shall notify the claimant 
16.15 	of the determination and the penalty amount for which the claimant is liable. The penalty 
16.16 	is equal to the total payments received while enrolled in the program, plus interest calculated 
16.17 	from the date the payments were made at the annual rate determined under section 270C.40. 
16.18 	The claimant has 90 days to satisfy the payment from the date on the notice of determination. 
16.19 	If the penalty is not paid within the 90-day period, the commissioner shall certify the amount 
16.20 	to the county auditor for collection as a part of the general ad valorem real property taxes 
16.21 	on the land in the following taxes payable year.
16.22 		Subd. 13.Appeal to Tax Court. Any person aggrieved by the commissioner's decision 
16.23 	to deny an application for enrollment, to assess a penalty, to terminate land from the program, 
16.24 	or to deny payment to a claimant may, within 60 days of the date on the notice of 
16.25 	determination or notice of termination, or after 180 days of the submission of the application 
16.26 	or annual certification if no determination is issued, appeal to the Tax Court under chapter 
16.27 	271 as if the appeal is from an order of the commissioner.
16.28 		Subd. 14.Appropriation. The amount necessary to make the payments under this section 
16.29 	is annually appropriated to the commissioner from the general fund.

16.30 	EFFECTIVE DATE. This section is effective for payments made in 2018 and thereafter.

17.1 	Sec. 2. Minnesota Statutes 2016, section 123B.53, subdivision 4, is amended to read:
17.2 		Subd. 4.Debt service equalization revenue. (a) The debt service equalization revenue 
17.3 	of a district equals the sum of the first tier debt service equalization revenue and the second 
17.4 	tier debt service equalization revenue.
17.5 	(b) The first tier debt service equalization revenue of a district equals the greater of zero 
17.6 	or the eligible debt service revenue minus the amount raised by a levy of 15.74 percent 
17.7 	times the adjusted net tax capacity of the district minus the second tier debt service 
17.8 	equalization revenue of the district.
17.9 	(c) The second tier debt service equalization revenue of a district equals the greater of 
17.10 	zero or the eligible debt service revenue, minus the amount raised by a levy of 26.24 percent
17.11 	for fiscal year 2017, 22.34 percent for fiscal year 2018, and 19 percent for fiscal year 2019 
17.12 	and later times the adjusted net tax capacity of the district.

17.13 	EFFECTIVE DATE. This section is effective for revenue for fiscal year 2018 and later.

17.14 	Sec. 3. Minnesota Statutes 2016, section 273.1384, subdivision 2, is amended to read:
17.15 		Subd. 2.Agricultural homestead market value credit. Property classified as agricultural 
17.16 	homestead under section 273.13, subdivision 23, paragraph (a), is eligible for an agricultural 
17.17 	credit. The credit is computed using the property's agricultural credit market value, defined 
17.18 	for this purpose as the property's market value excluding the market value of the house, 
17.19 	garage, and immediately surrounding one acre of land. The credit is equal to 0.3 percent of 
17.20 	the first $115,000 of the property's agricultural credit market value plus 0.1 percent of the 
17.21 	property's agricultural credit market value in excess of $115,000, subject to a maximum 
17.22 	credit of $490. In the case of property that is classified as part homestead and part 
17.23 	nonhomestead solely because not all the owners occupy or farm the property, not all the 
17.24 	owners have qualifying relatives occupying or farming the property, or solely because not 
17.25 	all the spouses of owners occupy the property, the credit must be initially is computed as 
17.26 	if that nonhomestead agricultural land was also classified as agricultural homestead and 
17.27 	then prorated on the amount of agricultural credit market value corresponding to the 
17.28 	owner-occupant's percentage of ownership homestead. The percentage of homestead is 
17.29 	equal to 100 divided by the number of owners of the property, or, in the case of a trust, the 
17.30 	number of grantors of the trust that owns the property.

17.31 	EFFECTIVE DATE. This section is effective for taxes payable in 2019.

18.1 	Sec. 4. [273.1387] SCHOOL BUILDING BOND AGRICULTURAL CREDIT.
18.2 		Subdivision 1.Eligibility. All class 2a, 2b, and 2c property under section 273.13, 
18.3 	subdivision 23, other than property consisting of the house, garage, and immediately 
18.4 	surrounding one acre of land of an agricultural homestead, is eligible to receive the credit 
18.5 	under this section.
18.6 		Subd. 2.Credit amount. For each qualifying property, the school building bond 
18.7 	agricultural credit is equal to 40 percent of the property's eligible net tax capacity multiplied 
18.8 	by the school debt tax rate determined under section 275.08, subdivision lb.
18.9 		Subd. 3.Credit reimbursements. The county auditor shall determine the tax reductions 
18.10 	allowed under this section within the county for each taxes payable year and shall certify 
18.11 	that amount to the commissioner of revenue as part of the abstracts of tax lists submitted 
18.12 	under section 275.29. Any prior year adjustments shall also be certified on the abstracts of 
18.13 	tax lists. The commissioner shall review the certifications for accuracy, and may make 
18.14 	necessary changes or return the certification to the county auditor for correction. The credit 
18.15 	under this section must be used to reduce the school district net tax capacity-based property 
18.16 	tax as provided in section 273.1393.
18.17 		Subd. 4.Payment. The commissioner of revenue shall certify the total of the tax 
18.18 	reductions granted under this section for each taxes payable year within each school district 
18.19 	to the commissioner of education, who shall pay the reimbursement amounts to each school 
18.20 	district as provided in section 273.1392.
18.21 		Subd. 5.Appropriation. An amount sufficient to make payments required by this section 
18.22 	is annually appropriated from the general fund to the commissioner of education.

18.23 	EFFECTIVE DATE. This section is effective beginning with taxes payable in 2018.

18.24 	Sec. 5. Minnesota Statutes 2016, section 273.1392, is amended to read:
18.25 	273.1392 PAYMENT; SCHOOL DISTRICTS.
18.26 	The amounts of bovine tuberculosis credit reimbursements under section 273.113; 
18.27 	conservation tax credits under section 273.119; disaster or emergency reimbursement under 
18.28 	sections 273.1231 to 273.1235; homestead and agricultural credits under section sections
18.29 	273.1384 and 273.1387; aids and credits under section 273.1398; enterprise zone property 
18.30 	credit payments under section 469.171; and metropolitan agricultural preserve reduction 
18.31 	under section 473H.10 for school districts, shall be certified to the Department of Education 
18.32 	by the Department of Revenue. The amounts so certified shall be paid according to section 
18.33 	127A.45, subdivisions 9, 10, and 13.

19.1 	EFFECTIVE DATE. This section is effective beginning with taxes payable in 2018.

19.2 	Sec. 6. Minnesota Statutes 2016, section 273.1393, is amended to read:
19.3 	273.1393 COMPUTATION OF NET PROPERTY TAXES.
19.4 	Notwithstanding any other provisions to the contrary, "net" property taxes are determined 
19.5 	by subtracting the credits in the order listed from the gross tax:
19.6 	(1) disaster credit as provided in sections 273.1231 to 273.1235;
19.7 	(2) powerline credit as provided in section 273.42;
19.8 	(3) agricultural preserves credit as provided in section 473H.10;
19.9 	(4) enterprise zone credit as provided in section 469.171;
19.10 	(5) disparity reduction credit;
19.11 	(6) conservation tax credit as provided in section 273.119;
19.12 	(7) the school bond credit, as provided in section 273.1387;
19.13 	(8) agricultural credit as provided in section 273.1384;
19.14 	(8) (9) taconite homestead credit as provided in section 273.135;
19.15 	(9) (10) supplemental homestead credit as provided in section 273.1391; and
19.16 	(10) (11) the bovine tuberculosis zone credit, as provided in section 273.113.
19.17 	The combination of all property tax credits must not exceed the gross tax amount.

19.18 	EFFECTIVE DATE. This section is effective beginning with taxes payable in 2018.

19.19 	Sec. 7. Minnesota Statutes 2016, section 275.065, subdivision 3, is amended to read:
19.20 		Subd. 3.Notice of proposed property taxes. (a) The county auditor shall prepare and 
19.21 	the county treasurer shall deliver after November 10 and on or before November 24 each 
19.22 	year, by first class mail to each taxpayer at the address listed on the county's current year's 
19.23 	assessment roll, a notice of proposed property taxes. Upon written request by the taxpayer, 
19.24 	the treasurer may send the notice in electronic form or by electronic mail instead of on paper 
19.25 	or by ordinary mail.
19.26 	(b) The commissioner of revenue shall prescribe the form of the notice.
19.27 	(c) The notice must inform taxpayers that it contains the amount of property taxes each 
19.28 	taxing authority proposes to collect for taxes payable the following year. In the case of a 
20.1 	town, or in the case of the state general tax, the final tax amount will be its proposed tax. 
20.2 	The notice must clearly state for each city that has a population over 500, county, school 
20.3 	district, regional library authority established under section 134.201, and metropolitan taxing 
20.4 	districts as defined in paragraph (i), the time and place of a meeting for each taxing authority 
20.5 	in which the budget and levy will be discussed and public input allowed, prior to the final 
20.6 	budget and levy determination. The taxing authorities must provide the county auditor with 
20.7 	the information to be included in the notice on or before the time it certifies its proposed 
20.8 	levy under subdivision 1. The public must be allowed to speak at that meeting, which must 
20.9 	occur after November 24 and must not be held before 6:00 p.m. It must provide a telephone 
20.10 	number for the taxing authority that taxpayers may call if they have questions related to the 
20.11 	notice and an address where comments will be received by mail, except that no notice 
20.12 	required under this section shall be interpreted as requiring the printing of a personal 
20.13 	telephone number or address as the contact information for a taxing authority. If a taxing 
20.14 	authority does not maintain public offices where telephone calls can be received by the 
20.15 	authority, the authority may inform the county of the lack of a public telephone number and 
20.16 	the county shall not list a telephone number for that taxing authority.
20.17 	(d) The notice must state for each parcel:
20.18 	(1) the market value of the property as determined under section 273.11, and used for 
20.19 	computing property taxes payable in the following year and for taxes payable in the current 
20.20 	year as each appears in the records of the county assessor on November 1 of the current 
20.21 	year; and, in the case of residential property, whether the property is classified as homestead 
20.22 	or nonhomestead. The notice must clearly inform taxpayers of the years to which the market 
20.23 	values apply and that the values are final values;
20.24 	(2) the items listed below, shown separately by county, city or town, and state general 
20.25 	tax, agricultural homestead credit under section 273.1384, school building bond credit under 
20.26 	section 273.1387, voter approved school levy, other local school levy, and the sum of the 
20.27 	special taxing districts, and as a total of all taxing authorities:
20.28 	(i) the actual tax for taxes payable in the current year; and
20.29 	(ii) the proposed tax amount.
20.30 	If the county levy under clause (2) includes an amount for a lake improvement district 
20.31 	as defined under sections 103B.501 to 103B.581, the amount attributable for that purpose 
20.32 	must be separately stated from the remaining county levy amount.
20.33 	In the case of a town or the state general tax, the final tax shall also be its proposed tax 
20.34 	unless the town changes its levy at a special town meeting under section 365.52. If a school 
21.1 	district has certified under section 126C.17, subdivision 9, that a referendum will be held 
21.2 	in the school district at the November general election, the county auditor must note next 
21.3 	to the school district's proposed amount that a referendum is pending and that, if approved 
21.4 	by the voters, the tax amount may be higher than shown on the notice. In the case of the 
21.5 	city of Minneapolis, the levy for Minneapolis Park and Recreation shall be listed separately 
21.6 	from the remaining amount of the city's levy. In the case of the city of St. Paul, the levy for 
21.7 	the St. Paul Library Agency must be listed separately from the remaining amount of the 
21.8 	city's levy. In the case of Ramsey County, any amount levied under section 134.07 may be 
21.9 	listed separately from the remaining amount of the county's levy. In the case of a parcel 
21.10 	where tax increment or the fiscal disparities areawide tax under chapter 276A or 473F 
21.11 	applies, the proposed tax levy on the captured value or the proposed tax levy on the tax 
21.12 	capacity subject to the areawide tax must each be stated separately and not included in the 
21.13 	sum of the special taxing districts; and
21.14 	(3) the increase or decrease between the total taxes payable in the current year and the 
21.15 	total proposed taxes, expressed as a percentage.
21.16 	For purposes of this section, the amount of the tax on homesteads qualifying under the 
21.17 	senior citizens' property tax deferral program under chapter 290B is the total amount of 
21.18 	property tax before subtraction of the deferred property tax amount.
21.19 	(e) The notice must clearly state that the proposed or final taxes do not include the 
21.20 	following:
21.21 	(1) special assessments;
21.22 	(2) levies approved by the voters after the date the proposed taxes are certified, including 
21.23 	bond referenda and school district levy referenda;
21.24 	(3) a levy limit increase approved by the voters by the first Tuesday after the first Monday 
21.25 	in November of the levy year as provided under section 275.73;
21.26 	(4) amounts necessary to pay cleanup or other costs due to a natural disaster occurring 
21.27 	after the date the proposed taxes are certified;
21.28 	(5) amounts necessary to pay tort judgments against the taxing authority that become 
21.29 	final after the date the proposed taxes are certified; and
21.30 	(6) the contamination tax imposed on properties which received market value reductions 
21.31 	for contamination.
22.1 	(f) Except as provided in subdivision 7, failure of the county auditor to prepare or the 
22.2 	county treasurer to deliver the notice as required in this section does not invalidate the 
22.3 	proposed or final tax levy or the taxes payable pursuant to the tax levy.
22.4 	(g) If the notice the taxpayer receives under this section lists the property as 
22.5 	nonhomestead, and satisfactory documentation is provided to the county assessor by the 
22.6 	applicable deadline, and the property qualifies for the homestead classification in that 
22.7 	assessment year, the assessor shall reclassify the property to homestead for taxes payable 
22.8 	in the following year.
22.9 	(h) In the case of class 4 residential property used as a residence for lease or rental 
22.10 	periods of 30 days or more, the taxpayer must either:
22.11 	(1) mail or deliver a copy of the notice of proposed property taxes to each tenant, renter, 
22.12 	or lessee; or
22.13 	(2) post a copy of the notice in a conspicuous place on the premises of the property.
22.14 	The notice must be mailed or posted by the taxpayer by November 27 or within three 
22.15 	days of receipt of the notice, whichever is later. A taxpayer may notify the county treasurer 
22.16 	of the address of the taxpayer, agent, caretaker, or manager of the premises to which the 
22.17 	notice must be mailed in order to fulfill the requirements of this paragraph.
22.18 	(i) For purposes of this subdivision and subdivision 6, "metropolitan special taxing 
22.19 	districts" means the following taxing districts in the seven-county metropolitan area that 
22.20 	levy a property tax for any of the specified purposes listed below:
22.21 	(1) Metropolitan Council under section 473.132, 473.167, 473.249, 473.325, 473.446, 
22.22 	473.521, 473.547, or 473.834;
22.23 	(2) Metropolitan Airports Commission under section 473.667, 473.671, or 473.672; and
22.24 	(3) Metropolitan Mosquito Control Commission under section 473.711.
22.25 	For purposes of this section, any levies made by the regional rail authorities in the county 
22.26 	of Anoka, Carver, Dakota, Hennepin, Ramsey, Scott, or Washington under chapter 398A 
22.27 	shall be included with the appropriate county's levy.
22.28 	(j) The governing body of a county, city, or school district may, with the consent of the 
22.29 	county board, include supplemental information with the statement of proposed property 
22.30 	taxes about the impact of state aid increases or decreases on property tax increases or 
22.31 	decreases and on the level of services provided in the affected jurisdiction. This supplemental 
22.32 	information may include information for the following year, the current year, and for as 
23.1 	many consecutive preceding years as deemed appropriate by the governing body of the 
23.2 	county, city, or school district. It may include only information regarding:
23.3 	(1) the impact of inflation as measured by the implicit price deflator for state and local 
23.4 	government purchases;
23.5 	(2) population growth and decline;
23.6 	(3) state or federal government action; and
23.7 	(4) other financial factors that affect the level of property taxation and local services 
23.8 	that the governing body of the county, city, or school district may deem appropriate to 
23.9 	include.
23.10 	The information may be presented using tables, written narrative, and graphic 
23.11 	representations and may contain instruction toward further sources of information or 
23.12 	opportunity for comment.

23.13 	EFFECTIVE DATE. This section is effective beginning with taxes payable in 2018.

23.14 	Sec. 8. Minnesota Statutes 2016, section 275.07, subdivision 2, is amended to read:
23.15 		Subd. 2.School district in more than one county levies; special requirements. (a) In 
23.16 	school districts lying in more than one county, the clerk shall certify the tax levied to the 
23.17 	auditor of the county in which the administrative offices of the school district are located.
23.18 	(b) The district must identify the portion of the school district levy that is levied for debt 
23.19 	service at the time the levy is certified under this section. For the purposes of this paragraph, 
23.20 	"levied for debt service" means levies authorized under sections 123B.53, 123B.535, and 
23.21 	123B.55, as adjusted by sections 126C.46 and 126C.48, net of any debt excess levy reductions 
23.22 	under section 475.61, subdivision 4, excluding debt service amounts necessary for repayment 
23.23 	of other postemployment benefits under section 475.52, subdivision 6.

23.24 	EFFECTIVE DATE. This section is effective beginning with taxes payable in 2018.

23.25 	Sec. 9. Minnesota Statutes 2016, section 275.08, subdivision 1b, is amended to read:
23.26 		Subd. 1b.Computation of tax rates. (a) The amounts certified to be levied against net 
23.27 	tax capacity under section 275.07 by an individual local government unit shall be divided 
23.28 	by the total net tax capacity of all taxable properties within the local government unit's 
23.29 	taxing jurisdiction. The resulting ratio, the local government's local tax rate, multiplied by 
23.30 	each property's net tax capacity shall be each property's net tax capacity tax for that local 
23.31 	government unit before reduction by any credits.
24.1 	(b) The auditor must also determine the school debt tax rate for each school district equal 
24.2 	to (1) the school debt service levy certified under section 275.07, subdivision 2, divided by 
24.3 	(2) the total net tax capacity of all taxable property within the district.
24.4 	(c) Any amount certified to the county auditor to be levied against market value shall 
24.5 	be divided by the total referendum market value of all taxable properties within the taxing 
24.6 	district. The resulting ratio, the taxing district's new referendum tax rate, multiplied by each 
24.7 	property's referendum market value shall be each property's new referendum tax before 
24.8 	reduction by any credits. For the purposes of this subdivision, "referendum market value" 
24.9 	means the market value as defined in section 126C.01, subdivision 3.

24.10 	EFFECTIVE DATE. This section is effective beginning with taxes payable in 2018.

24.11 	Sec. 10. Minnesota Statutes 2016, section 276.04, subdivision 2, is amended to read:
24.12 		Subd. 2.Contents of tax statements. (a) The treasurer shall provide for the printing of 
24.13 	the tax statements. The commissioner of revenue shall prescribe the form of the property 
24.14 	tax statement and its contents. The tax statement must not state or imply that property tax 
24.15 	credits are paid by the state of Minnesota. The statement must contain a tabulated statement 
24.16 	of the dollar amount due to each taxing authority and the amount of the state tax from the 
24.17 	parcel of real property for which a particular tax statement is prepared. The dollar amounts 
24.18 	attributable to the county, the state tax, the voter approved school tax, the other local school 
24.19 	tax, the township or municipality, and the total of the metropolitan special taxing districts 
24.20 	as defined in section 275.065, subdivision 3, paragraph (i), must be separately stated. The 
24.21 	amounts due all other special taxing districts, if any, may be aggregated except that any 
24.22 	levies made by the regional rail authorities in the county of Anoka, Carver, Dakota, Hennepin, 
24.23 	Ramsey, Scott, or Washington under chapter 398A shall be listed on a separate line directly 
24.24 	under the appropriate county's levy. If the county levy under this paragraph includes an 
24.25 	amount for a lake improvement district as defined under sections 103B.501 to 103B.581, 
24.26 	the amount attributable for that purpose must be separately stated from the remaining county 
24.27 	levy amount. In the case of Ramsey County, if the county levy under this paragraph includes 
24.28 	an amount for public library service under section 134.07, the amount attributable for that 
24.29 	purpose may be separated from the remaining county levy amount. The amount of the tax 
24.30 	on homesteads qualifying under the senior citizens' property tax deferral program under 
24.31 	chapter 290B is the total amount of property tax before subtraction of the deferred property 
24.32 	tax amount. The amount of the tax on contamination value imposed under sections 270.91
24.33 	to 270.98, if any, must also be separately stated. The dollar amounts, including the dollar 
24.34 	amount of any special assessments, may be rounded to the nearest even whole dollar. For 
25.1 	purposes of this section whole odd-numbered dollars may be adjusted to the next higher 
25.2 	even-numbered dollar. The amount of market value excluded under section 273.11, 
25.3 	subdivision 16, if any, must also be listed on the tax statement.
25.4 	(b) The property tax statements for manufactured homes and sectional structures taxed 
25.5 	as personal property shall contain the same information that is required on the tax statements 
25.6 	for real property.
25.7 	(c) Real and personal property tax statements must contain the following information 
25.8 	in the order given in this paragraph. The information must contain the current year tax 
25.9 	information in the right column with the corresponding information for the previous year 
25.10 	in a column on the left:
25.11 	(1) the property's estimated market value under section 273.11, subdivision 1;
25.12 	(2) the property's homestead market value exclusion under section 273.13, subdivision 
25.13 	35;
25.14 	(3) the property's taxable market value under section 272.03, subdivision 15;
25.15 	(4) the property's gross tax, before credits;
25.16 	(5) for homestead agricultural properties, the credit credits under section sections
25.17 	273.1384 and 273.1387;
25.18 	(6) any credits received under sections 273.119; 273.1234 or 273.1235; 273.135; 
25.19 	273.1391; 273.1398, subdivision 4; 469.171; and 473H.10, except that the amount of credit 
25.20 	received under section 273.135 must be separately stated and identified as "taconite tax 
25.21 	relief"; and
25.22 	(7) the net tax payable in the manner required in paragraph (a).
25.23 	(d) If the county uses envelopes for mailing property tax statements and if the county 
25.24 	agrees, a taxing district may include a notice with the property tax statement notifying 
25.25 	taxpayers when the taxing district will begin its budget deliberations for the current year, 
25.26 	and encouraging taxpayers to attend the hearings. If the county allows notices to be included 
25.27 	in the envelope containing the property tax statement, and if more than one taxing district 
25.28 	relative to a given property decides to include a notice with the tax statement, the county 
25.29 	treasurer or auditor must coordinate the process and may combine the information on a 
25.30 	single announcement.

25.31 	EFFECTIVE DATE. This section is effective beginning with taxes payable in 2018.

26.1 	Sec. 11. Minnesota Statutes 2016, section 290B.03, subdivision 1, is amended to read:
26.2 		Subdivision 1.Program qualifications. The qualifications for the senior citizens' 
26.3 	property tax deferral program are as follows:
26.4 	(1) the property must be owned and occupied as a homestead by a person 65 years of 
26.5 	age or older. In the case of a married couple, at least one of the spouses must be at least 65 
26.6 	years old at the time the first property tax deferral is granted, regardless of whether the 
26.7 	property is titled in the name of one spouse or both spouses, or titled in another way that 
26.8 	permits the property to have homestead status, and the other spouse must be at least 62 years 
26.9 	of age;
26.10 	(2) the total household income of the qualifying homeowners, as defined in section 
26.11 	290A.03, subdivision 5, for the calendar year preceding the year of the initial application 
26.12 	may not exceed $60,000;
26.13 	(3) the homestead must have been owned and occupied as the homestead of at least one 
26.14 	of the qualifying homeowners for at least 15 five years prior to the year the initial application 
26.15 	is filed;
26.16 	(4) there are no state or federal tax liens or judgment liens on the homesteaded property;
26.17 	(5) there are no mortgages or other liens on the property that secure future advances, 
26.18 	except for those subject to credit limits that result in compliance with clause (6); and
26.19 	(6) the total unpaid balances of debts secured by mortgages and other liens on the 
26.20 	property, including unpaid and delinquent special assessments and interest and any delinquent 
26.21 	property taxes, penalties, and interest, but not including property taxes payable during the 
26.22 	year, does not exceed 75 percent of the assessor's estimated market value for the year.

26.23 	EFFECTIVE DATE. This section is effective for applications for deferral of taxes 
26.24 	payable in 2018 and thereafter.

26.25 	Sec. 12. Minnesota Statutes 2016, section 290B.04, subdivision 1, is amended to read:
26.26 		Subdivision 1.Initial application. (a) A taxpayer meeting the program qualifications 
26.27 	under section 290B.03 may apply to the commissioner of revenue for the deferral of taxes. 
26.28 	Applications are due on or before July November 1 for deferral of any of the following 
26.29 	year's property taxes. A taxpayer may apply in the year in which the taxpayer becomes 65 
26.30 	years old, provided that no deferral of property taxes will be made until the calendar year 
26.31 	after the taxpayer becomes 65 years old. The application, which shall be prescribed by the 
27.1 	commissioner of revenue, shall include the following items and any other information which 
27.2 	the commissioner deems necessary:
27.3 	(1) the name, address, and Social Security number of the owner or owners;
27.4 	(2) a copy of the property tax statement for the current payable year for the homesteaded 
27.5 	property;
27.6 	(3) the initial year of ownership and occupancy as a homestead;
27.7 	(4) the owner's household income for the previous calendar year; and
27.8 	(5) information on any mortgage loans or other amounts secured by mortgages or other 
27.9 	liens against the property, for which purpose the commissioner may require the applicant 
27.10 	to provide a copy of the mortgage note, the mortgage, or a statement of the balance owing 
27.11 	on the mortgage loan provided by the mortgage holder. The commissioner may require the 
27.12 	appropriate documents in connection with obtaining and confirming information on unpaid 
27.13 	amounts secured by other liens.
27.14 	The application must state that program participation is voluntary. The application must 
27.15 	also state that the deferred amount depends directly on the applicant's household income, 
27.16 	and that program participation includes authorization for the annual deferred amount, the 
27.17 	cumulative deferral and interest that appear on each year's notice prepared by the county 
27.18 	under subdivision 6, is public data.
27.19 	The application must state that program participants may claim the property tax refund 
27.20 	based on the full amount of property taxes eligible for the refund, including any deferred 
27.21 	amounts. The application must also state that property tax refunds will be used to offset any 
27.22 	deferral and interest under this program, and that any other amounts subject to revenue 
27.23 	recapture under section 270A.03, subdivision 7, will also be used to offset any deferral and 
27.24 	interest under this program.
27.25 	(b) As part of the initial application process, the commissioner may require the applicant 
27.26 	to obtain at the applicant's own cost and submit:
27.27 	(1) if the property is registered property under chapter 508 or 508A, a copy of the original 
27.28 	certificate of title in the possession of the county registrar of titles (sometimes referred to 
27.29 	as "condition of register"); or
27.30 	(2) if the property is abstract property, a report prepared by a licensed abstracter showing 
27.31 	the last deed and any unsatisfied mortgages, liens, judgments, and state and federal tax lien 
27.32 	notices which were recorded on or after the date of that last deed with respect to the property 
27.33 	or to the applicant.
28.1 	The certificate or report under clauses (1) and (2) need not include references to any 
28.2 	documents filed or recorded more than 40 years prior to the date of the certification or report. 
28.3 	The certification or report must be as of a date not more than 30 days prior to submission 
28.4 	of the application.
28.5 	The commissioner may also require the county recorder or county registrar of the county 
28.6 	where the property is located to provide copies of recorded documents related to the applicant 
28.7 	or the property, for which the recorder or registrar shall not charge a fee. The commissioner 
28.8 	may use any information available to determine or verify eligibility under this section. The 
28.9 	household income from the application is private data on individuals as defined in section 
28.10 	13.02, subdivision 12.

28.11 	EFFECTIVE DATE. This section is effective for applications for deferral of taxes 
28.12 	payable in 2018 and thereafter.

28.13 	Sec. 13. [477A.0126] REIMBURSEMENT OF COUNTY AND TRIBES FOR 
28.14 	CERTAIN OUT-OF-HOME PLACEMENT.
28.15 		Subdivision 1.Definition. For purposes of this section, "out-of-home placement" means 
28.16 	24-hour substitute care for an Indian child as defined by section 260C.007, subdivision 21, 
28.17 	placed under chapter 260C and the Indian Child Welfare Act (ICWA), away from the child's 
28.18 	parent or guardian and for whom the county social services agency or county correctional 
28.19 	agency has been assigned responsibility for the child's placement and care, which includes 
28.20 	placement in foster care under section 260C.007, subdivision 18, and a correctional facility 
28.21 	pursuant to a court order.
28.22 		Subd. 2.Determination of nonfederal share of costs. (a) By July 1, 2017, each county 
28.23 	shall report the following information to the commissioners of human services and 
28.24 	corrections: (1) the separate amounts paid out of the county's social service agency and its 
28.25 	corrections budget for out-of-home placement of children under the ICWA in calendar years 
28.26 	2013, 2014, and 2015; and (2) the number of case days associated with the expenditures 
28.27 	from each budget. The commissioner of human services shall prescribe the format of the 
28.28 	report. By July 15, 2017, the commissioner of human services, in consultation with the 
28.29 	commissioner of corrections, shall certify to the commissioner of revenue and to the 
28.30 	legislative committees with jurisdiction over local government aids and out-of-home 
28.31 	placement funding whether the data reported under this subdivision accurately reflect total 
28.32 	expenditures by counties for out-of-home placement costs of children under the ICWA.
28.33 	(b) By January 1, 2018, and each January 1 thereafter, each county shall report to the 
28.34 	commissioners of human services and corrections the separate amounts paid out of the 
29.1 	county's social service agency and its corrections budget for out-of-home placement of 
29.2 	children under the ICWA in the calendar years two years before the current calendar year 
29.3 	along with the number of case days associated with the expenditures from each budget. The 
29.4 	commissioner of human services shall prescribe the format of the report.
29.5 	(c) Until the commissioner of human services develops another mechanism for collecting 
29.6 	and verifying data on out-of-home placements of children under the ICWA, and the 
29.7 	legislature authorizes the use of that data, the data collected under this subdivision must be 
29.8 	used to calculate payments under subdivision 3. The commissioner of human services shall 
29.9 	certify the nonfederal out-of-home placement costs for the three prior calendar years for 
29.10 	each county and the amount of any federal reimbursement received by a tribe under the 
29.11 	ICWA for the three prior calendar years to the commissioner of revenue by June 1 of the 
29.12 	year before the aid payment.
29.13 		Subd. 3.Aid for counties. For aids payable in calendar year 2018 and thereafter, the 
29.14 	amount of reimbursement to each county is a county's proportionate share of the appropriation 
29.15 	in subdivision 6 that remains after the aid for tribes has been paid. Each county's 
29.16 	proportionate share is based on the county's average nonfederal share of the cost for 
29.17 	out-of-home placement of children under the ICWA for the three calendar years that were 
29.18 	certified by the commissioner of human services by June 1 of the prior year, provided that 
29.19 	the commissioner of human services, in consultation with the commissioner of corrections, 
29.20 	certifies to the commissioner of revenue that accurate data are available to make the aid 
29.21 	determination under this section. For aids payable in calendar year 2018, each county's 
29.22 	proportionate share is based on the county's nonfederal share of the cost for out-of-home 
29.23 	placement of children under the ICWA that was certified by the commissioner of human 
29.24 	services by July 15, 2017.
29.25 		Subd. 4.Aid for tribes. For aids payable in 2018 and thereafter, the amount of 
29.26 	reimbursement to each tribe shall be the greater of (1) five percent of the average 
29.27 	reimbursement amount received from the federal government for out-of-home placement 
29.28 	costs for the three calendar years that were certified by June 1 of the prior year, or (2) 
29.29 	$200,000.
29.30 		Subd. 5.Payments. The commissioner of revenue must compute the amount of the 
29.31 	reimbursement aid payable to each county and tribe under this section. On or before August 
29.32 	1 of each year, the commissioner shall certify the amount to be paid to each county and 
29.33 	tribe in the following year. The commissioner shall pay reimbursement aid annually at the 
29.34 	times provided in section 477A.015.
30.1 		Subd. 6.Appropriation. $10,000,000 is annually appropriated to the commissioner of 
30.2 	revenue from the general fund to pay aid under this section.

30.3 	EFFECTIVE DATE. This section is effective beginning with aids payable in 2018.

30.4 	Sec. 14. Minnesota Statutes 2016, section 477A.03, subdivision 2a, is amended to read:
30.5 		Subd. 2a.Cities. The total aid paid under section 477A.013, subdivision 9, is 
30.6 	$516,898,012 for aids payable in 2015. For aids payable in 2016 and thereafter 2017, the 
30.7 	total aid paid under section 477A.013, subdivision 9, is $519,398,012. For aids payable in 
30.8 	2018 and thereafter, the total aid paid under section 477A.013, subdivision 9, is 
30.9 	$539,398,012.

30.10 	EFFECTIVE DATE. This section is effective for aids payable in 2018 and thereafter.

30.11 	Sec. 15. Minnesota Statutes 2016, section 477A.03, subdivision 2b, is amended to read:
30.12 		Subd. 2b.Counties. (a) For aids payable in 2014 and thereafter through 2017, the total 
30.13 	aid payable under section 477A.0124, subdivision 3, is $100,795,000. For aids payable in 
30.14 	2018 through 2024, the total aid payable under section 477A.0124, subdivision 3, is 
30.15 	$108,795,000, of which $3,000,000 shall be allocated as required under Laws 2014, chapter 
30.16 	150, article 4, section 6. For aids payable in 2025 and thereafter, the total aid payable under 
30.17 	section 477A.0124, subdivision 3, is $105,795,000. Each calendar year, $500,000 of this 
30.18 	appropriation shall be retained by the commissioner of revenue to make reimbursements to 
30.19 	the commissioner of management and budget for payments made under section 611.27. The 
30.20 	reimbursements shall be to defray the additional costs associated with court-ordered counsel 
30.21 	under section 611.27. Any retained amounts not used for reimbursement in a year shall be 
30.22 	included in the next distribution of county need aid that is certified to the county auditors 
30.23 	for the purpose of property tax reduction for the next taxes payable year.
30.24 	(b) For aids payable in 2014 and thereafter 2017, the total aid under section 477A.0124, 
30.25 	subdivision 4, is $104,909,575. For aids payable in 2018 and thereafter, the total aid payable 
30.26 	under section 477A.0124, subdivision 4, is $109,909,575. The commissioner of revenue 
30.27 	shall transfer to the commissioner of management and budget $207,000 annually for the 
30.28 	cost of preparation of local impact notes as required by section 3.987, and other local 
30.29 	government activities. The commissioner of revenue shall transfer to the commissioner of 
30.30 	education $7,000 annually for the cost of preparation of local impact notes for school districts 
30.31 	as required by section 3.987. The commissioner of revenue shall deduct the amounts 
30.32 	transferred under this paragraph from the appropriation under this paragraph. The amounts 
31.1 	transferred are appropriated to the commissioner of management and budget and the 
31.2 	commissioner of education respectively.

31.3 	EFFECTIVE DATE. This section is effective for aids payable in 2018 and thereafter.

31.4 	Sec. 16. [477A.21] RIPARIAN PROTECTION AID.
31.5 		Subdivision 1.Definition. (a) For purposes of this section, the following terms have the 
31.6 	meanings given.
31.7 	(b) "Buffer protection map" means the buffer protection map as defined in section 
31.8 	103F.48, subdivision 1.
31.9 	(c) "Commissioner" means the commissioner of revenue.
31.10 		Subd. 2.Certification to commissioner. (a) The Board of Water and Soil Resources 
31.11 	must certify to the commissioner by September 1, 2017, and by July 1 of each year thereafter, 
31.12 	which counties and watershed districts have affirmed their jurisdiction under section 103F.48, 
31.13 	and the proportion of the number of centerline miles of public watercourses, and the miles 
31.14 	of public drainage system ditches on the buffer protection map, within each county and 
31.15 	each watershed district within the county with affirmed jurisdiction.
31.16 	(b) On or before July 1 of each year, the commissioner of natural resources shall certify 
31.17 	to the commissioner the statewide and countywide number of centerline miles of public 
31.18 	watercourses and the miles of public drainage system ditches on the buffer protection map.
31.19 		Subd. 3.Distribution. (a) A county that is certified under subdivision 2, or that portion 
31.20 	of a county containing a watershed district certified under subdivision 2, is eligible to receive 
31.21 	aid under this section to enforce and implement the riparian protection and water quality 
31.22 	practices under section 103F.48. The commissioner shall calculate a preliminary aid for all 
31.23 	counties that shall equal the sum of (1) the total number of acres in the county classified as 
31.24 	class 2a under section 273.13, subdivision 23; (2) the countywide number of centerline 
31.25 	miles of public watercourses on the buffer protection map; and (3) the countywide number 
31.26 	of miles of public drainage system on the buffer protection map; divided by the sum of (4) 
31.27 	the statewide total number of acres classified as class 2a under section 273.13, subdivision 
31.28 	23; (5) the statewide total number of centerline miles of public watercourses on the buffer 
31.29 	protection map; and (6) the statewide total number of miles of public drainage system on 
31.30 	the buffer protection map; multiplied by (7) $10,000,000.
31.31 	(b) Aid to a county shall not be greater than $200,000 or less than $50,000. If the sum 
31.32 	of the preliminary aids payable to counties under paragraph (a) is greater or less than the 
31.33 	appropriation under subdivision 5, the commissioner shall calculate the percentage adjustment 
32.1 	necessary so that the total of the aid under paragraph (a) equals the total amount available 
32.2 	for aid under subdivision 5.
32.3 	(c) If only a portion of a county is certified as eligible to receive aid under subdivision 
32.4 	2, the aid otherwise payable to that county under this section shall be multiplied by a fraction, 
32.5 	the numerator of which is the area of the certified watershed districts contained within the 
32.6 	county and the denominator of which is the total area of the county.
32.7 	(d) Any aid that would otherwise be paid to a county or portion of a county that is not 
32.8 	certified under subdivision 2 shall be paid to the Board of Water and Soil Resources for the 
32.9 	purpose of enforcing and implementing the riparian protection and water quality practices 
32.10 	under section 103F.48.
32.11 		Subd. 4.Payments. The commissioner of revenue must compute the amount of riparian 
32.12 	protection aid payable to each eligible county and to the Board of Water and Soil Resources 
32.13 	under this section. On or before November 1, 2017, and on or before each August 1 thereafter, 
32.14 	the commissioner shall certify the amount to be paid to each county and the Board of Water 
32.15 	and Soil Resources in the following year. The commissioner shall pay riparian protection 
32.16 	aid to counties and the Board of Water and Soil Resources in the same manner and at the 
32.17 	same time as aid payments under section 477A.015.
32.18 		Subd. 5.Appropriation. $10,000,000 is annually appropriated from the general fund 
32.19 	to the commissioner to make the payments required under this section.

32.20 	EFFECTIVE DATE. This section is effective beginning with aids payable in 2018.

32.21 	Sec. 17. ST. PAUL SOCCER STADIUM PROPERTY TAX EXEMPTION; SPECIAL 
32.22 	ASSESSMENT.
 32.23 	Any real or personal property acquired, owned, leased, controlled, used, or occupied by 
32.24 	the city of St. Paul for the primary purpose of providing a soccer stadium for a major league 
32.25 	soccer team is declared to be acquired, owned, leased, controlled, used, and occupied for 
32.26 	public, governmental, and municipal purposes, and is exempt from ad valorem taxation by 
32.27 	the state or any political subdivision of the state, provided that the property is subject to 
32.28 	special assessments levied by a political subdivision for a local improvement in amounts 
32.29 	proportionate to and not exceeding the special benefit received by the property from the 
32.30 	improvement. In determining the special benefit received by the property, no possible use 
32.31 	of any of the property in any manner different from its intended use for providing a major 
32.32 	league soccer stadium at the time may be considered. Notwithstanding Minnesota Statutes, 
32.33 	section 272.01, subdivision 2, or 273.19, real or personal property subject to a lease or use 
33.1 	agreement between the city and another person for uses related to the operation of the 
33.2 	stadium and related parking facilities is exempt from taxation regardless of the length of 
33.3 	the lease or use agreement. This section, insofar as it provides an exemption or special 
33.4 	treatment, does not apply to any real property that is leased for residential, business, or 
33.5 	commercial development or other purposes different from those necessary to the provision 
33.6 	and operation of the stadium.

33.7 	EFFECTIVE DATE. This section is effective the day after compliance by the governing 
33.8 	body of the city of St. Paul with Minnesota Statutes, section 645.021, subdivisions 2 and 
33.9 	3.

33.10 	Sec. 18. WATONWAN COUNTY; CITY OF MADELIA; ADDITIONAL AID.
 33.11 	$46,000 is appropriated annually from the general fund to the commissioner of revenue 
33.12 	for payments to compensate the county of Watonwan and the city of Madelia for costs 
33.13 	related to a fire in the city of Madelia in February 2016. The commissioner shall annually 
33.14 	pay $15,000 to the county of Watonwan and $31,000 to the city of Madelia. The payments 
33.15 	shall be made on July 20, 2017, and July 20 of each subsequent year, with the last payment 
33.16 	to be made on July 20, 2036.

33.17 	EFFECTIVE DATE. This section is effective for aids payable in 2017 and thereafter. 
33.18 	This section expires on August 1, 2036.

33.19 	Sec. 19. APPROPRIATION; RIPARIAN BUFFER COMPENSATION PROGRAM.
 33.20 	$11,000 in fiscal year 2018 and $434,000 in fiscal year 2019 are appropriated from the 
33.21 	general fund to the commissioner of revenue to administer section 1. $286,000 shall be 
33.22 	added to base appropriations to the Department of Revenue for fiscal years 2020 and 2021.

33.23 	Sec. 20. APPROPRIATION; DEBT SERVICE EQUALIZATION.
 33.24 		Subdivision 1.Department of Education. The sums indicated in this section are 
33.25 	appropriated from the general fund to the Department of Education for the fiscal years 
33.26 	designated.
33.27 		Subd. 2.Debt service equalization. For debt service aid under Minnesota Statutes, 
33.28 	section 123B.53, subdivision 6:

33.29		$
	30,235,000
	.......
	2018
	
33.30		$
	38,147,000
	.......
	2019
	
33.31 	The 2018 appropriation includes $2,324,000 for 2017 and $27,911,000 for 2018.
34.1 	The 2019 appropriation includes $3,101,000 for 2018 and $35,046,000 for 2019.

34.2 	ARTICLE 3
34.3 	TOBACCO AND VAPOR PRODUCTS

34.4 	Section 1. Minnesota Statutes 2016, section 270C.722, subdivision 1, is amended to read:
34.5 		Subdivision 1.Notice of revocation; hearings. (a) If: (1) a person fails to comply with 
34.6 	chapter 297A or the sales and use tax provisions of chapter 289A or the rules related to 
34.7 	sales tax, or (2) any retailer purchases for resale from an unlicensed seller more than 20,000 
34.8 	cigarettes or $500 or more worth of tobacco products, without reasonable cause, the 
34.9 	commissioner may give the person 30 days' notice in writing, specifying the violations, and 
34.10 	stating that based on the violations the commissioner intends to revoke the person's permit 
34.11 	issued under section 297A.84. The notice must also advise the person of the right to contest 
34.12 	the revocation under this subdivision. It must also explain the general procedures for a 
34.13 	contested case hearing under chapter 14. The notice may be served personally or by mail 
34.14 	in the manner prescribed for service of an order of assessment.
34.15 	(b) If the person does not request a hearing within 30 days after the date of the notice 
34.16 	of intent, the commissioner may serve a notice of revocation of permit upon the person, and 
34.17 	the permit is revoked. If a hearing is timely requested, and held, the permit is revoked after 
34.18 	the commissioner serves an order of revocation of permit under section 14.62, subdivision 
34.19 	1.

34.20 	EFFECTIVE DATE. This section is effective August 1, 2017.

34.21 	Sec. 2. Minnesota Statutes 2016, section 270C.728, is amended by adding a subdivision 
34.22 	to read:
34.23 		Subd. 8.Publication of revoked retail cigarette licenses. (a) Notwithstanding any 
34.24 	other law, the commissioner may publish a list of persons who have had their retail licenses 
34.25 	to sell cigarettes or tobacco products revoked under section 297F.186. In the case of a license 
34.26 	holder that is a business entity, the commissioner may also publish the name of responsible 
34.27 	persons of the license holder, as defined in section 297F.186, subdivision 1.
34.28 	(b) At least 30 days before publishing the name of a license holder or responsible person, 
34.29 	the commissioner shall mail a written notice to the license holder and to responsible persons 
34.30 	of the license holder of the commissioner's intent to publish. This notice may be included 
34.31 	as part of the notice of intent to revoke a license as required under section 297F.186, 
34.32 	subdivision 3.
35.1 	(c) The list may be published by any medium or method. The list must contain the name 
35.2 	and address of the license holder and name of the responsible person and the date the license 
35.3 	was revoked.
35.4 	(d) The commissioner shall remove the name of a license holder or responsible person 
35.5 	from the list five years from the date of the license revocation or upon the license holder or 
35.6 	responsible person receiving a license clearance under section 297F.186.

35.7 	EFFECTIVE DATE. This section is effective August 1, 2017.

35.8 	Sec. 3. Minnesota Statutes 2016, section 297F.01, is amended by adding a subdivision to 
35.9 	read:
35.10 		Subd. 6a.Consumable material. "Consumable material" means any liquid nicotine 
35.11 	solution or other material containing nicotine that is depleted as a vapor product is used.

35.12 	EFFECTIVE DATE. This section is effective January 1, 2018.

35.13 	Sec. 4. Minnesota Statutes 2016, section 297F.01, is amended by adding a subdivision to 
35.14 	read:
35.15 		Subd. 7a.Consumer packaging. "Consumer packaging" means any container of vapor 
35.16 	product that is of an appropriate size for sale to a consumer.

35.17 	EFFECTIVE DATE. This section is effective January 1, 2018.

35.18 	Sec. 5. Minnesota Statutes 2016, section 297F.01, subdivision 9a, is amended to read:
35.19 		Subd. 9a.Invoice. "Invoice" means a detailed list of cigarettes and tobacco products 
35.20 	purchased or sold in this state that contains the following information:
35.21 	(1) name of seller;
35.22 	(2) name of purchaser;
35.23 	(3) date of sale;
35.24 	(4) invoice number;
35.25 	(5) itemized list of goods sold including brands of cigarettes and number of cartons of 
35.26 	each brand, unit price, and identification of tobacco products by name, quantity, and unit 
35.27 	price; and
35.28 	(6) any rebates, discounts, or other reductions.; and
36.1 	(7) the weight or volume of the consumable material and concentration level of nicotine 
36.2 	of each vapor product sold.

36.3 	EFFECTIVE DATE. This section is effective for invoices issued for vapor products 
36.4 	purchased or sold after December 31, 2017.

36.5 	Sec. 6. Minnesota Statutes 2016, section 297F.01, subdivision 10, is amended to read:
36.6 		Subd. 10.Manufacturer. "Manufacturer" means a person who produces and sells 
36.7 	cigarettes or tobacco products and includes a manufacturer of vapor products.

36.8 	EFFECTIVE DATE. This section is effective January 1, 2018.

36.9 	Sec. 7. Minnesota Statutes 2016, section 297F.01, is amended by adding a subdivision to 
36.10 	read:
36.11 		Subd. 10c.Manufacturer of vapor products. "Manufacturer of vapor products" means 
36.12 	a person who makes, modifies, mixes, fabricates, assembles, processes, repacks, or relabels 
36.13 	a vapor product in Minnesota to sell.

36.14 	EFFECTIVE DATE. This section is effective January 1, 2018.

36.15 	Sec. 8. Minnesota Statutes 2016, section 297F.01, subdivision 14, is amended to read:
36.16 		Subd. 14.Retailer. "Retailer" means a person required to be licensed under chapter 461
36.17 	located in this state engaged in this state in the business of selling, or offering to sell, 
36.18 	cigarettes or tobacco products to consumers.

36.19 	EFFECTIVE DATE. This section is effective August 1, 2017.

36.20 	Sec. 9. Minnesota Statutes 2016, section 297F.01, is amended by adding a subdivision to 
36.21 	read:
36.22 		Subd. 16a.Sales price of vapor products. (a) "Sales price of vapor products" means 
36.23 	the price at which a distributor or retailer purchases a vapor product or the price at which 
36.24 	a subjobber purchases vapor products from a manufacturer of vapor products.
36.25 	(b) For the purposes of section 297F.05, subdivision 3b, paragraph (a), clause (5), "sales 
36.26 	price of vapor product" means the price at which the manufacturer sells the product minus 
36.27 	a retailer markup equal to ten percent of that price.
36.28 	(c) If a vapor product described in section 297F.01, subdivision 22b, paragraph (b), 
36.29 	includes a cartridge, bottle, or other package of nicotine solution which is available for 
37.1 	purchase as a separate item by the distributor, retailer, subjobber, or consumer, then the 
37.2 	price at which the vapor product is purchased or sold for purposes of paragraphs (a) and (b) 
37.3 	is limited to the usual price, without regard to any discount or reduction, at which the 
37.4 	cartridge, bottle, or other package of nicotine solution is separately sold to a distributor, 
37.5 	retailer, subjobber, or consumer.
37.6 	(d) Sales price of vapor products includes the applicable federal excise tax, freight 
37.7 	charges, and packaging costs, regardless of whether they were included in the purchase 
37.8 	price, but does not include the tax imposed under section 297F.05, subdivision 3b.

37.9 	EFFECTIVE DATE. This section is effective for vapor products subject to tax after 
37.10 	December 31, 2017.

37.11 	Sec. 10. Minnesota Statutes 2016, section 297F.01, subdivision 17, is amended to read:
37.12 		Subd. 17.Stamp. "Stamp" means the adhesive stamp supplied by the commissioner of 
37.13 	revenue for use on cigarette packages or packages of moist snuff or other tobacco products 
37.14 	or any other indicia adopted by the commissioner to indicate that the tax has been paid.

37.15 	EFFECTIVE DATE. This section is effective July 1, 2019.

37.16 	Sec. 11. Minnesota Statutes 2016, section 297F.01, subdivision 19, is amended to read:
37.17 		Subd. 19.Tobacco products. (a) "Tobacco products" means any product containing, 
37.18 	made, or derived from tobacco that is intended for human consumption, whether chewed, 
37.19 	smoked, absorbed, dissolved, inhaled, snorted, sniffed, or ingested by any other means, or 
37.20 	any component, part, or accessory of a tobacco product, including, but not limited to, cigars; 
37.21 	cheroots; stogies; periques; granulated, plug cut, crimp cut, ready rubbed, and other smoking 
37.22 	tobacco; snuff; snuff flour; cavendish; plug and twist tobacco; fine-cut and other chewing 
37.23 	tobacco; shorts; refuse scraps, clippings, cuttings and sweepings of tobacco, vapor products,
37.24 	and other kinds and forms of tobacco; but does not include cigarettes as defined in this 
37.25 	section. Tobacco products excludes any tobacco product that has been approved by the 
37.26 	United States Food and Drug Administration for sale as a tobacco cessation product, as a 
37.27 	tobacco dependence product, or for other medical purposes, and is being marketed and sold 
37.28 	solely for such an approved purpose.
37.29 	(b) Except for the imposition of tax under section 297F.05, subdivisions 3 and 4, tobacco 
37.30 	products includes a premium cigar, as defined in subdivision 13a.

37.31 	EFFECTIVE DATE. This section is effective the day following final enactment.

38.1 	Sec. 12. Minnesota Statutes 2016, section 297F.01, subdivision 20, is amended to read:
38.2 		Subd. 20.Tobacco products distributor. (a) "Tobacco products distributor" means any 
38.3 	of the following:
38.4 	(1) a person engaged in the business of selling tobacco products in this state who brings, 
38.5 	or causes to be brought, into this state from outside the state any tobacco products for sale;
38.6 	or
38.7 	(2) a person who makes, manufactures, or fabricates tobacco products in this state for 
38.8 	sale in this state;
38.9 	(3) a person engaged in the business of selling tobacco products outside this state who 
38.10 	ships or transports tobacco products to retailers in this state, to be sold by those retailers.
38.11 	(b) "Tobacco products distributor" includes a person who makes, manufactures, or 
38.12 	fabricates tobacco products, other than vapor products, in this state for sale in this state.
38.13 	(c) "Tobacco products distributor" includes a manufacturer of vapor products only to 
38.14 	the extent that the manufacturer brings tobacco products into this state for use other than in 
38.15 	manufacturing vapor products.

38.16 	EFFECTIVE DATE. This section is effective January 1, 2018.

38.17 	Sec. 13. Minnesota Statutes 2016, section 297F.01, subdivision 21, is amended to read:
38.18 		Subd. 21.Tobacco products subjobber. "Tobacco products subjobber" means:
38.19 	(1) a person, other than a manufacturer or distributor, who buys, from a manufacturer 
38.20 	of vapor products or a distributor, tobacco products upon which the tax imposed by this 
38.21 	chapter has been paid and sells them to persons other than the ultimate consumers, ; and
38.22 	(2) any licensed distributor who delivers, sells, or distributes tobacco products upon 
38.23 	which the tax imposed by this chapter has been paid from a place of business other than 
38.24 	that licensed in the distributor's license.

38.25 	EFFECTIVE DATE. This section is effective January 1, 2018.

38.26 	Sec. 14. Minnesota Statutes 2016, section 297F.01, is amended by adding a subdivision 
38.27 	to read:
38.28 		Subd. 22b.Vapor product. (a) "Vapor product" means any cartridge, bottle, or other 
38.29 	package that contains nicotine that is derived from tobacco and is in a solution that is 
38.30 	consumed, or meant to be consumed, through the use of a heating element, power source, 
39.1 	electronic circuit, or other electronic, chemical, or mechanical means that produces vapor 
39.2 	from the nicotine.
39.3 	(b) Vapor product includes any electronic cigarette, electronic cigar, electronic cigarillo, 
39.4 	electronic pipe, or similar product or device, and any batteries, heating elements, or other 
39.5 	components, parts, or accessories sold with and meant to be used in the consumption of the 
39.6 	nicotine solution described in paragraph (a).

39.7 	EFFECTIVE DATE. This section is effective January 1, 2018.

39.8 	Sec. 15. Minnesota Statutes 2016, section 297F.03, subdivision 1, is amended to read:
39.9 		Subdivision 1.Selling without license illegal. No person shall engage in the business 
39.10 	of a manufacturer of vapor products, distributor, or subjobber at any place of business 
39.11 	without first having received a license from the commissioner to engage in that business at 
39.12 	that place of business.

39.13 	EFFECTIVE DATE. This section is effective January 1, 2018.

39.14 	Sec. 16. Minnesota Statutes 2016, section 297F.03, subdivision 2, is amended to read:
39.15 		Subd. 2.Form of application. Every application for a cigarette or, tobacco products, 
39.16 	or manufacturer of vapor products license shall be made on a form prescribed by the 
39.17 	commissioner.

39.18 	EFFECTIVE DATE. This section is effective January 1, 2018.

39.19 	Sec. 17. Minnesota Statutes 2016, section 297F.03, subdivision 3, is amended to read:
39.20 		Subd. 3.Place of application. A separate application for a distributor's license or a 
39.21 	manufacturer of vapor products license shall be made for each place of business at which 
39.22 	a distributor proposes to engage in business or a manufacturer proposes to manufacture 
39.23 	vapor products.
39.24 	A separate application for a subjobber's license may be made by a licensed distributor 
39.25 	for each place of business, other than that licensed in the distributor's license, to which the 
39.26 	distributor sells or distributes stamped cigarettes or tobacco products.

39.27 	EFFECTIVE DATE. This section is effective January 1, 2018.

40.1 	Sec. 18. Minnesota Statutes 2016, section 297F.03, subdivision 5, is amended to read:
40.2 		Subd. 5.License fees; cigarettes. Each application for a cigarette distributor's license 
40.3 	must be accompanied by a fee of $300 $500. Each application for a cigarette subjobber's 
40.4 	license must be accompanied by a fee of $24 $100. A distributor or subjobber applying for 
40.5 	a license during the second year of a two-year licensing period is required to pay only 
40.6 	one-half of the license fee.

40.7 	EFFECTIVE DATE. This section is effective for license periods beginning after 
40.8 	December 31, 2017.

40.9 	Sec. 19. Minnesota Statutes 2016, section 297F.03, subdivision 6, is amended to read:
40.10 		Subd. 6.License fees; tobacco products. Each application for a tobacco products 
40.11 	distributor's license must be accompanied by a fee of $75 $500. Each application for a 
40.12 	tobacco products subjobber's license must be accompanied by a fee of $20 $100. A distributor 
40.13 	or subjobber applying for a license during the second year of a two-year licensing period 
40.14 	is required to pay only one-half of the license fee.

40.15 	EFFECTIVE DATE. This section is effective for license periods beginning after 
40.16 	December 31, 2017.

40.17 	Sec. 20. Minnesota Statutes 2016, section 297F.03, is amended by adding a subdivision 
40.18 	to read:
40.19 		Subd. 6a.License fees, vapor products. Each application for a manufacturer of vapor 
40.20 	products license must be accompanied by a fee equal to the fee for a tobacco products 
40.21 	distributor license under subdivision 6. A manufacturer of vapor products is not required 
40.22 	to obtain a distributor license under subdivision 6 to sell vapor products manufactured by 
40.23 	the licensee and sold in consumer packaging to a tobacco products distributor, a tobacco 
40.24 	products subjobber, or a retailer.

40.25 	EFFECTIVE DATE. This section is effective January 1, 2018.

40.26 	Sec. 21. Minnesota Statutes 2016, section 297F.03, subdivision 7, is amended to read:
40.27 		Subd. 7.Issuance of license. The commissioner, upon receipt of the application in proper 
40.28 	form, and payment of the license fee required by this chapter, shall, unless otherwise provided 
40.29 	by this chapter, issue the applicant a license in the form prescribed by the commissioner. 
40.30 	The license permits the applicant to engage in business as a manufacturer of vapor products,
40.31 	distributor, or subjobber at the place of business shown in the application.

41.1 	EFFECTIVE DATE. This section is effective January 1, 2018.

41.2 	Sec. 22. Minnesota Statutes 2016, section 297F.04, subdivision 1, is amended to read:
41.3 		Subdivision 1.Powers of commissioner. The commissioner may revoke or suspend the 
41.4 	license or licenses of any manufacturer of vapor products, distributor, or subjobber for 
41.5 	violation of this chapter, any other act applicable to the sale of cigarettes or tobacco products, 
41.6 	or any rule promulgated by the commissioner, in furtherance of this chapter.

41.7 	EFFECTIVE DATE. This section is effective January 1, 2018.

41.8 	Sec. 23. Minnesota Statutes 2016, section 297F.04, subdivision 1, is amended to read:
41.9 		Subdivision 1.Powers of commissioner. The commissioner may revoke or, suspend, 
41.10 	or refuse to renew the license or licenses of any distributor or subjobber, or refuse to issue 
41.11 	a license to an applicant for a distributor or subjobber license, for violation of this chapter, 
41.12 	any other act applicable to the sale of cigarettes or tobacco products, or any rule promulgated 
41.13 	by the commissioner, in furtherance of this chapter.

41.14 	EFFECTIVE DATE. This section is effective August 1, 2017.

41.15 	Sec. 24. Minnesota Statutes 2016, section 297F.04, subdivision 2, is amended to read:
41.16 		Subd. 2.Refusal to issue or renew; revocation. The commissioner must not issue or 
41.17 	renew a license under this chapter, and may revoke a license under this chapter, if the 
41.18 	applicant or licensee:
41.19 	(1) owes $500 or more in delinquent taxes as defined in section 270C.72, subdivision 
41.20 	2;
41.21 	(2) after demand, has not filed tax returns required by the commissioner;
41.22 	(3) had a cigarette or tobacco license under this chapter revoked by the commissioner 
41.23 	within the past two years;
41.24 	(4) had a sales and use tax permit revoked by the commissioner within the past two 
41.25 	years; or
41.26 	(5) has been convicted of a crime involving cigarettes, including but not limited to: 
41.27 	selling stolen cigarettes or tobacco products, receiving stolen cigarettes or tobacco products, 
41.28 	or involvement in the smuggling of cigarettes or tobacco products.

41.29 	EFFECTIVE DATE. This section is effective January 1, 2018.

42.1 	Sec. 25. Minnesota Statutes 2016, section 297F.05, subdivision 3, is amended to read:
42.2 		Subd. 3.Rates; tobacco products. (a) Except as provided in subdivision 3a and 3b, a 
42.3 	tax is imposed upon all tobacco products in this state and upon any person engaged in 
42.4 	business as a distributor, at the rate of 95 percent of the wholesale sales price of the tobacco 
42.5 	products. The tax is imposed at the time the distributor:
42.6 	(1) brings, or causes to be brought, into this state from outside the state tobacco products 
42.7 	for sale;
42.8 	(2) makes, manufactures, or fabricates tobacco products in this state for sale in this state; 
42.9 	or
42.10 	(3) ships or transports tobacco products to retailers in this state, to be sold by those 
42.11 	retailers.
42.12 	(b) Notwithstanding paragraph (a), a minimum tax equal to the rate imposed on a pack 
42.13 	of 20 cigarettes weighing not more than three pounds per thousand, as established under 
42.14 	subdivision 1, is imposed on each container of moist snuff.
42.15 	For purposes of this subdivision, a "container" means the smallest consumer-size can, 
42.16 	package, or other container that is marketed or packaged by the manufacturer, distributor, 
42.17 	or retailer for separate sale to a retail purchaser. When more than one container is packaged 
42.18 	together, each container is subject to tax.

42.19 	EFFECTIVE DATE. This section is effective January 1, 2018.

42.20 	Sec. 26. Minnesota Statutes 2016, section 297F.05, is amended by adding a subdivision 
42.21 	to read:
42.22 		Subd. 3b.Rates; vapor products. (a) In lieu of the tax imposed under subdivision 3, a 
42.23 	tax is imposed upon all vapor products in this state equal to:
42.24 	(1) in the case of a Minnesota distributor who brings, or causes to be brought, vapor 
42.25 	products into this state, 95 percent of the sales price of vapor products paid by the distributor;
42.26 	(2) in the case of a distributor who sells vapor products from outside this state to a 
42.27 	retailer, 95 percent of the sales price of vapor products paid by the retailer;
42.28 	(3) in the case of a manufacturer of vapor products who sells the manufactured product 
42.29 	to retailers or subjobbers, 95 percent of the sales price of vapor products paid by the retailer 
42.30 	or subjobber;
43.1 	(4) in the case of a Minnesota distributor who purchases vapor products from a 
43.2 	manufacturer of vapor products, 95 percent of the sales price of vapor products paid by the 
43.3 	distributor; and
43.4 	(5) in the case of a manufacturer of vapor products who is also a retailer who sells the 
43.5 	manufactured product to consumers, 95 percent of the sales price of vapor products.
43.6 	(b) The tax under this subdivision is imposed:
43.7 	(1) on the distributor at the time the vapor products in consumer packaging are brought 
43.8 	into the state or received by the distributor who brings, or causes to be brought, into this 
43.9 	state the vapor products for sale in this state;
43.10 	(2) on the distributor at the time the distributor ships or transports the vapor products in 
43.11 	consumer packaging from outside this state to retailers in this state;
43.12 	(3) on the manufacturer of vapor products at the time the vapor products are sold to a 
43.13 	retailer or subjobber;
43.14 	(4) on the distributor at the time a Minnesota distributor purchases the vapor products 
43.15 	in consumer packaging that were manufactured by a Minnesota manufacturer of vapor 
43.16 	products; and
43.17 	(5) on the manufacturer of vapor products who is also a retailer of vapor products, at 
43.18 	the time the vapor products manufactured in this state are sold to the consumer.

43.19 	EFFECTIVE DATE. This section is effective for vapor products bought, sold, or 
43.20 	manufactured in Minnesota after December 31, 2017.

43.21 	Sec. 27. Minnesota Statutes 2016, section 297F.06, is amended by adding a subdivision 
43.22 	to read:
43.23 		Subd. 6.Exempt sales of vapor products to licensed manufacturers of vapor 
43.24 	products. (a) A tobacco products distributor or manufacturer of vapor products, who at the 
43.25 	time of sale accepts in good faith a valid exemption certificate from a purchaser that is a 
43.26 	licensed manufacturer of vapor products, may sell vapor products in consumer packaging 
43.27 	containing more than 50 milliliters of nicotine solution to the purchaser exempt from the 
43.28 	tax imposed under section 297F.05, subdivision 3b.
43.29 	(b) An exemption certificate is valid if it:
43.30 	(1) is substantially in the form prescribed by the commissioner;
43.31 	(2) bears the name and address of the purchaser;
44.1 	(3) indicates the manufacturer of vapor products identification number issued to the 
44.2 	purchaser by the commissioner;
44.3 	(4) is signed by the purchaser if it is in paper form, or meets the requirements of section 
44.4 	270C.304 if it is in electronic form; and
44.5 	(5) indicates that the purchaser:
44.6 	(i) intends to use the product to manufacture vapor products;
44.7 	(ii) agrees to pay the applicable tax on the finished manufactured vapor products; and
44.8 	(iii) agrees to pay the applicable tax if the purchaser does not use the product to 
44.9 	manufacture vapor product, but sells the product to a consumer or retailer.
44.10 	(c) For determining the tax due under paragraph (b), clause (5), item (iii), any product 
44.11 	subject to tax is treated as if it was manufactured by the purchaser.
44.12 	(d) A purchaser may use a blanket exemption certificate for continuing purchases. A 
44.13 	purchaser using a blanket exemption certificate must update the certificate as needed to 
44.14 	accurately reflect the information required under paragraph (b).

44.15 	EFFECTIVE DATE. This section is effective January 1, 2018.

44.16 	Sec. 28. Minnesota Statutes 2016, section 297F.08, subdivision 8a, is amended to read:
44.17 		Subd. 8a.Revolving account. A cigarette tax stamp revolving account is created. The 
44.18 	commissioner shall use the amounts in this fund to purchase stamps for resale. The 
44.19 	commissioner shall charge distributors for the tax value of the stamps they receive along 
44.20 	with the commissioner's cost to purchase the stamps and ship them to the distributor. The 
44.21 	stamp purchase and shipping costs recovered must be credited to the revolving account and 
44.22 	are appropriated to the commissioner for the further purchases and shipping costs. The 
44.23 	revolving account is initially funded by a $40,000 transfer from the Department of Revenue.

44.24 	EFFECTIVE DATE. This section is effective January 1, 2019.

44.25 	Sec. 29. [297F.081] TOBACCO PRODUCTS STAMPS.
44.26 		Subdivision 1.Stamp affixed by distributor. (a) Before delivering, or causing to be 
44.27 	delivered, a package of moist snuff to a distributor, subjobber, retailer, or consumer in this 
44.28 	state, a distributor in this state must firmly affix to each package of moist snuff a tax stamp 
44.29 	obtained from the commissioner.
45.1 	(b) When moist snuff is shipped into this state by any distributor from outside this state 
45.2 	to a retailer or subjobber, the appropriate stamp must be affixed to the package at the time 
45.3 	the package enters the state.
45.4 		Subd. 2.Stamps; design; printing. The commissioner shall adopt the design of the 
45.5 	moist snuff stamp. At least one stamp must be designed for application to packages of moist 
45.6 	snuff destined for retail sale on an Indian reservation that is a party to an agreement under 
45.7 	section 270C.19, subdivision 2, and only to those packages. The commissioner shall arrange 
45.8 	for the printing of stamps in such amounts and denominations as the commissioner deems 
45.9 	necessary.
45.10 		Subd. 3.Deposit of proceeds. The commissioner shall use the amounts appropriated 
45.11 	by law to purchase stamps for resale. The commissioner shall charge the purchasers for the 
45.12 	commissioner's cost to purchase the stamps along with the tax value of the stamps plus 
45.13 	shipping costs. The tax value of the stamps must be deposited in the general fund. The 
45.14 	portion of the charge to the purchaser that represents the commissioner's cost to purchase 
45.15 	the stamps and the shipping costs must be deposited in the revolving stamp fund under 
45.16 	section 297F.08, subdivision 8a.
45.17 		Subd. 4.Sale of stamps. (a) The commissioner shall sell moist snuff stamps only to 
45.18 	persons licensed as a tobacco products distributor.
45.19 	(b) The commissioner may prescribe the method of shipment of the stamps to the 
45.20 	distributor.
45.21 	(c) The commissioner shall charge the purchaser for the commissioner's cost to purchase 
45.22 	the stamps along with the tax value plus shipping costs.
45.23 	(d)(1) The commissioner may sell moist snuff stamps on a credit basis to a distributor 
45.24 	unless:
45.25 	(i) the distributor has been licensed by the commissioner as a tobacco products distributor 
45.26 	for less than one year;
45.27 	(ii) the distributor has failed, without reasonable cause, to timely file tax returns or 
45.28 	reports required to be filed with the commissioner under a law administered by the 
45.29 	commissioner at any time during the prior 24 months; or
45.30 	(iii) the distributor has failed, without reasonable cause, to timely pay taxes and fees 
45.31 	payable to the commissioner under a law administered by the commissioner at any time 
45.32 	during the prior 24 months.
46.1 	(2) A distributor may purchase on a credit basis in any calendar month no more than the 
46.2 	number of stamps needed to affix to 15 percent of the number of moist snuff packages 
46.3 	reported to the commissioner as sold by the distributor during the previous 12-month period.
46.4 	(3) A distributor who purchases stamps on a credit basis must pay the cost of the stamps 
46.5 	determined under paragraph (c) to the commissioner no later than the due date of the return 
46.6 	required under section 297F.09, subdivision 2, for the month that the order for the stamps 
46.7 	was received by the commissioner.
46.8 		Subd. 5.Tax stamping machines. The commissioner may require any person licensed 
46.9 	as a distributor to stamp packages of moist snuff with a tax stamping machine, approved 
46.10 	by the commissioner, which shall be provided by the distributor. The commissioner shall 
46.11 	also supervise and check the operation of the machines. If the commissioner finds that a 
46.12 	stamping machine is not affixing a legible stamp on the package, the commissioner may 
46.13 	order the distributor to immediately cease the stamping process until the machine is 
46.14 	functioning properly.
46.15 		Subd. 6.Resale or transfer of stamps prohibited. (a) No distributor shall resell or 
46.16 	transfer any moist snuff stamps purchased by the distributor from the commissioner. A 
46.17 	distributor may transfer another state's stamped moist snuff to another distributor for the 
46.18 	purpose of resale in the other state.
46.19 	(b) A distributor who has on hand any moist snuff stamps when its tobacco products 
46.20 	distributor license is revoked, canceled, or not renewed may return the stamps to the 
46.21 	commissioner and receive a refund of the amount paid for the stamps.
46.22 	(c) Moist snuff stamps that have become mutilated or unfit for use, or are affixed to 
46.23 	moist snuff packages being returned to the manufacturer, or are affixed to packages of moist 
46.24 	snuff that, or the contents of which, have become damaged and unfit for sale, shall be 
46.25 	replaced by the commissioner, upon application by the distributor owning the stamps or 
46.26 	moist snuff if the commissioner determines the stamps have not evidenced a taxable 
46.27 	transaction.
46.28 		Subd. 7.Rulemaking for stamps on other tobacco products. The commissioner may 
46.29 	promulgate rules that require tax stamps to be affixed to tobacco products other than moist 
46.30 	snuff. The rules may apply to one or more classes or types of tobacco product.

46.31 	EFFECTIVE DATE. Subdivision 1 is effective for moist snuff delivered, caused to be 
46.32 	delivered, or shipped after June 30, 2019. Subdivisions 2 to 7 are effective January 1, 2019.

47.1 	Sec. 30. Minnesota Statutes 2016, section 297F.09, subdivision 2, is amended to read:
47.2 		Subd. 2.Monthly return; tobacco products distributor. On or before the 18th day of 
47.3 	each calendar month, a distributor with a place of business in this state or a manufacturer 
47.4 	of vapor products shall file a return with the commissioner showing the quantity and 
47.5 	wholesale sales price or sales price of vapor product of each tobacco product:
47.6 	(1) brought, or caused to be brought, into this state for sale; and
47.7 	(2) made, manufactured, or fabricated in this state for sale in this state, during the 
47.8 	preceding calendar month.
47.9 	Every licensed distributor outside this state shall in like manner file a return showing 
47.10 	the quantity and wholesale sales price or sales of vapor product of each tobacco product 
47.11 	shipped or transported to retailers in this state to be sold by those retailers, during the 
47.12 	preceding calendar month. Returns must be made in the form and manner prescribed by the 
47.13 	commissioner and must contain any other information required by the commissioner. The 
47.14 	return must be accompanied by a remittance for the full tax liability shown. For distributors 
47.15 	subject to the accelerated tax payment requirements in subdivision 10, the return for the 
47.16 	May liability is due two business days before June 30th of the year and the return for the 
47.17 	June liability is due on or before August 18th of the year.

47.18 	EFFECTIVE DATE. This section is effective for taxes imposed on vapor products 
47.19 	brought into the state or manufactured in the state after December 31, 2017.

47.20 	Sec. 31. Minnesota Statutes 2016, section 297F.09, subdivision 7, is amended to read:
47.21 		Subd. 7.Electronic payment. A cigarette or tobacco products distributor or a 
47.22 	manufacturer of vapor products having a liability of $10,000 or more during a fiscal year 
47.23 	ending June 30 must remit all liabilities in all subsequent calendar years by electronic means.

47.24 	EFFECTIVE DATE. This section is effective January 1, 2018.

47.25 	Sec. 32. Minnesota Statutes 2016, section 297F.09, subdivision 10, is amended to read:
47.26 		Subd. 10.Accelerated tax payment; cigarette or tobacco products distributor or 
47.27 	manufacturer of vapor products. A cigarette or tobacco products distributor or a 
47.28 	manufacturer of vapor products having a liability of $250,000 or more during a fiscal year 
47.29 	ending June 30, shall remit the June liability for the next year in the following manner:
48.1 	(a) Two business days before June 30 of the year, the distributor or manufacturer shall 
48.2 	remit the actual May liability and 81.4 percent of the estimated June liability to the 
48.3 	commissioner and file the return in the form and manner prescribed by the commissioner.
48.4 	(b) On or before August 18 of the year, the distributor or manufacturer shall submit a 
48.5 	return showing the actual June liability and pay any additional amount of tax not remitted 
48.6 	in June. A penalty is imposed equal to ten percent of the amount of June liability required 
48.7 	to be paid in June, less the amount remitted in June. However, the penalty is not imposed 
48.8 	if the amount remitted in June equals the lesser of:
48.9 	(1) 81.4 percent of the actual June liability; or
48.10 	(2) 81.4 percent of the preceding May liability.

48.11 	EFFECTIVE DATE. This section is effective January 1, 2018.

48.12 	Sec. 33. Minnesota Statutes 2016, section 297F.12, subdivision 3, is amended to read:
48.13 		Subd. 3.Manufacturers. (a) A manufacturer of tobacco products as defined by this 
48.14 	chapter shall report in the form and manner prescribed by the commissioner all sales of 
48.15 	tobacco products to Minnesota licensed distributors, subjobbers, retailers, or to any locations 
48.16 	within the state. The report is due on the 18th day of the month following the reporting 
48.17 	period.
48.18 	(b) A manufacturer of vapor products must file a report with the commissioner no later 
48.19 	than the 18th day of each month identifying all vapor products placed into consumer 
48.20 	packaging and all sales of vapor products made by the manufacturer during the preceding 
48.21 	month. The report must identify the names and addresses of the persons within the state to 
48.22 	whom shipments to tobacco products distributors, subjobbers, or retailers were made, and 
48.23 	the quantity of vapor products manufactured or sold by type of product, brand, and size. 
48.24 	The reports must also include information related to sales and purchases of tax exempt vapor 
48.25 	products. If the manufacturer is also a retailer, the report must include the quantity of vapor 
48.26 	products sold to customers by type of product, brand, and size.

48.27 	EFFECTIVE DATE. This section is effective January 1, 2018.

48.28 	Sec. 34. Minnesota Statutes 2016, section 297F.13, subdivision 2, is amended to read:
48.29 		Subd. 2.Tobacco products distributor. (a) A distributor shall keep at each licensed 
48.30 	place of business complete and accurate records for that place of business, including itemized 
48.31 	invoices of tobacco products held, purchased, manufactured, brought in or caused to be 
48.32 	brought in from outside the state, or shipped or transported to retailers in this state, and all 
49.1 	sales of tobacco products made, except sales to the ultimate consumer. These records must 
49.2 	show the names and addresses of purchasers, the inventory of all moist snuff stamps affixed 
49.3 	and unaffixed to packages of moist snuff, and all moist snuff on hand at the close of each 
49.4 	period for which a return is required, and any other pertinent papers and documents relating 
49.5 	to the purchase, sale, or disposition of moist snuff.
49.6 	(b) When a licensed distributor sells tobacco products exclusively to the ultimate 
49.7 	consumer at the address given in the license, no invoice of those sales is required, but 
49.8 	itemized invoices must be made of all tobacco products transferred to other retail outlets 
49.9 	owned or controlled by that licensed distributor.
49.10 	(c) All books, records, and other documents required by this chapter must be preserved 
49.11 	for a period of at least 3-1/2 years after the date of the documents or the date of the entries 
49.12 	appearing in the records, unless the commissioner authorizes in writing their destruction or 
49.13 	disposal at an earlier date.
49.14 	(d) To determine whether the distributor is in compliance with the provisions of this 
49.15 	chapter, at any time during usual business hours the commissioner, or duly authorized agents 
49.16 	or employees, may enter a place of business of a distributor, without a search warrant, and 
49.17 	inspect the premises, the records required to be kept under this chapter, and the tobacco 
49.18 	products in that place of business. If the commissioner, or an agent or employee of the 
49.19 	commissioner, is denied free access or is hindered or interfered with in making the 
49.20 	examination, the commissioner may revoke the distributor's license.

49.21 	EFFECTIVE DATE. This section is effective for moist snuff purchased, sold, or 
49.22 	disposed of after June 30, 2019.

49.23 	Sec. 35. Minnesota Statutes 2016, section 297F.13, is amended by adding a subdivision 
49.24 	to read:
49.25 		Subd. 2a.Manufacturers of vapor products. (a) A manufacturer of vapor products 
49.26 	shall keep at each licensed place of business complete and accurate records for that place 
49.27 	of business, including itemized invoices of vapor products held, purchased, manufactured, 
49.28 	brought in or caused to be brought in from outside the state, or shipped or transported to 
49.29 	distributors, subjobbers, or retailers in this state.
49.30 	(b) A manufacturer of vapor products who is also a retailer must keep records of all sales 
49.31 	made to the ultimate customer. These records must include cash register tapes or other 
49.32 	similar electronic records and any other records which involve purchases or sales of vapor 
50.1 	products which are required to be kept by a retailer who makes sales subject to tax under 
50.2 	chapter 297A.
50.3 	(c) When a manufacturer of vapor products sells vapor products exclusively to the 
50.4 	ultimate consumer at the address given in the license, no invoice of those sales is required, 
50.5 	but itemized invoices must be made of all vapor products transferred to other retail outlets 
50.6 	owned or controlled by that manufacturer.
50.7 	(d) All books, records, and other documents required by this subdivision must be 
50.8 	preserved for a period of at least 3-1/2 years after the date of the documents or the date of 
50.9 	the entries appearing in the records, unless the commissioner authorizes in writing the 
50.10 	destruction or disposal at an earlier date.
50.11 	(e) To determine whether the manufacturer is in compliance with the provisions of this 
50.12 	chapter, at any time during usual business hours the commissioner, or duly authorized agents 
50.13 	or employees, may enter a place of business of a manufacturer, without a search warrant, 
50.14 	and inspect the premises, the records required to be kept under this chapter, and the vapor 
50.15 	products in that place of business. If the commissioner, or an agent or employee of the 
50.16 	commissioner, is denied free access or is hindered or interfered with in making the 
50.17 	examination, the commissioner may revoke the manufacturer's license.

50.18 	EFFECTIVE DATE. This section is effective January 1, 2018.

50.19 	Sec. 36. Minnesota Statutes 2016, section 297F.13, subdivision 4, is amended to read:
50.20 		Subd. 4.Retailer and subjobber to preserve purchase invoices. Every retailer and 
50.21 	subjobber shall procure itemized invoices of all cigarettes or tobacco products purchased.
50.22 	The retailer and subjobber shall preserve a legible copy of each invoice for one year 
50.23 	from the date of the invoice or as long as the cigarette or tobacco product listed on the 
50.24 	invoice is available for sale or in their possession, whichever period is longer. The retailer 
50.25 	and subjobber shall preserve copies of the invoices at each retail location or at a central 
50.26 	location provided that the invoice must be produced and made available at a retail location 
50.27 	within one hour when requested by the commissioner or duly authorized agents and 
50.28 	employees. Copies should be numbered and kept in chronological order.
50.29 	To determine whether the business is in compliance with the provisions of this chapter, 
50.30 	at any time during usual business hours, the commissioner, or duly authorized agents and 
50.31 	employees, may enter any place of business of a retailer or subjobber without a search 
50.32 	warrant and inspect the premises, the records required to be kept under this chapter, and the 
50.33 	packages of cigarettes, tobacco products, and vending devices contained on the premises.

51.1 	EFFECTIVE DATE. This section is effective for sales and purchases by subjobbers 
51.2 	and retailers made on or after August 1, 2017.

51.3 	Sec. 37. Minnesota Statutes 2016, section 297F.15, subdivision 9, is amended to read:
51.4 		Subd. 9.Physical inventory. The commissioner or the commissioner's authorized agents 
51.5 	may, as considered necessary, require a cigarette or tobacco products distributor or a 
51.6 	manufacturer of vapor products to furnish a physical inventory of all cigarettes or tobacco 
51.7 	products in stock. The inventory must contain the information that the commissioner requests 
51.8 	and must be certified by an officer of the corporation.

51.9 	EFFECTIVE DATE. This section is effective January 1, 2018.

51.10 	Sec. 38. [297F.186] REVOCATION OF CIGARETTE AND TOBACCO RETAIL 
51.11 	LICENSE.
51.12 		Subdivision 1.Cigarette and tobacco retail revocation. (a) A licensing authority must 
51.13 	not issue, transfer, or renew, and must revoke, a license if the commissioner notifies the 
51.14 	licensing authority that the license holder has been in possession of contraband cigarettes 
51.15 	or tobacco products under section 297F.21 at the location covered by the license.
51.16 	(b) Within ten days after receipt of the notification from the commissioner under 
51.17 	paragraph (a), the licensing authority must notify the license holder by mail of the revocation 
51.18 	of the license. The notice must include a copy of the commissioner's notice to the licensing 
51.19 	authority and information, in the form specified by the commissioner, on the licensee's 
51.20 	option for receiving a license clearance from the commissioner. The licensing authority 
51.21 	must revoke the license within 30 days after receiving the notice from the commissioner, 
51.22 	unless it receives a license clearance from the commissioner as provided in subdivision 2, 
51.23 	paragraph (b).
51.24 	(c) For purposes of this section, the following terms have the meanings given.
51.25 	(1) "License holder" means an individual or legal entity who has a license to sell cigarettes 
51.26 	or tobacco products issued under chapter 461.
51.27 	(2) "License" means a license to sell cigarettes or tobacco products under chapter 461.
51.28 	(3) "Licensing authority" means a town board, county board, governing body of a home 
51.29 	rule charter or statutory city, or state agricultural society authorized to issue licenses under 
51.30 	chapter 461.
52.1 	(4) "Applicant" is any individual, corporation, partnership, or any other legal entity that 
52.2 	is a holder of a license or that has filed an application to obtain a license.
52.3 	(5) "Responsible person" means any individual who, either singly or jointly with others, 
52.4 	has the control of, supervision of, or responsibility for filing tax returns or reports, paying 
52.5 	taxes, or collecting or withholding and remitting taxes to the commissioner for a license 
52.6 	holder, or who has authority to purchase cigarettes or tobacco products, or supervises a 
52.7 	person who has authority to purchase cigarettes or tobacco products for the license holder.
52.8 		Subd. 2.New licenses after revocation. (a) An applicant who has had a license revoked 
52.9 	under this section, or an applicant with a responsible person who was a responsible person 
52.10 	for another entity for which a license was revoked under this section, may not apply for a 
52.11 	license or seek the reinstatement of a revoked license unless the applicant presents to the 
52.12 	licensing authority a license clearance issued by the commissioner. A licensing authority 
52.13 	must not issue a new license to an applicant with such a responsible person or to an applicant 
52.14 	who has had a license revoked under this section or reinstate a revoked license unless the 
52.15 	applicant presents to the authority a license clearance issued by the commissioner.
52.16 	(b) Except as provided in paragraph (f), the commissioner may issue a license clearance 
52.17 	if the applicant and all responsible persons of the applicant:
52.18 	(1) sign an agreement that acknowledges that the applicant and the responsible person 
52.19 	will follow all laws related to the taxation of cigarettes and tobacco products, including the 
52.20 	requirements to:
52.21 	(i) purchase all cigarettes and tobacco products from distributors and subjobbers licensed 
52.22 	by the commissioner;
52.23 	(ii) maintain invoices of all cigarettes or tobacco products purchased as required under 
52.24 	section 297F.13, subdivision 4, and produce those invoices within one hour when requested 
52.25 	by the commissioner or duly authorized agents and employees; and
52.26 	(iii) timely file and pay to the commissioner all returns and all sales taxes related to the 
52.27 	sale of tobacco products; and
52.28 	(2) deposit with the commissioner security or a surety bond in an amount equal to ten 
52.29 	times the amount of tax on the contraband cigarettes or tobacco products. The commissioner 
52.30 	must hold the security deposit for two years.
52.31 	(c) The commissioner must pay interest on any money deposited as security. The interest 
52.32 	is calculated from the date of deposit to the date of refund, or date of application to any 
52.33 	outstanding tax liability, at a rate specified in section 270C.405. The commissioner must 
53.1 	refund the security deposit to the applicant at the end of the two-year period unless the 
53.2 	applicant has any unpaid tax liabilities payable to the commissioner. The commissioner 
53.3 	may apply the security deposit to any unpaid tax liabilities of the applicant owed to the 
53.4 	commissioner as well as the tax on any contraband cigarettes or tobacco products owned, 
53.5 	possessed, sold, or offered for sale by the applicant after the license clearance has been 
53.6 	issued.
53.7 	(d) The commissioner may refund the security deposit before the end of the two-year 
53.8 	holding period if the license holder no longer has a license to sell cigarettes or tobacco 
53.9 	products issued by any licensing authority in the state.
53.10 	(e) If the commissioner determines that a licensing authority has issued a new license 
53.11 	or reinstated a revoked license without the applicant submitting a license clearance, the 
53.12 	commissioner may notify the licensing authority to revoke the license. Revocations under 
53.13 	this subdivision are controlled by the provisions of subdivision 1, paragraph (b), and 
53.14 	subdivision 3. Notice of intent to require revocation from the commissioner must be sent 
53.15 	to the license holder and to the responsible person of the license holder.
53.16 	(f) If an applicant has had, or if a person has been a responsible person to, a cumulative 
53.17 	number of two licenses revoked under this subdivision in a five-year period by all licensing 
53.18 	authorities within the state, the commissioner may refuse to issue a license clearance until 
53.19 	24 months have elapsed after the last revocation and the applicant has satisfied the conditions 
53.20 	for reinstatement of a revoked license or issuance of a new license imposed by this 
53.21 	subdivision.
53.22 		Subd. 3.Notice and hearing. (a) Prior to notifying a licensing authority pursuant to 
53.23 	subdivision 1 to revoke a license, the commissioner must send a notice to the license holder 
53.24 	and to any known responsible person of the license holder of the commissioner's intent to 
53.25 	require revocation of the license and of the license holder's or responsible person's right to 
53.26 	a hearing. If the license holder or responsible person requests a hearing in writing within 
53.27 	30 days of the date of the notice, a contested case hearing must be held. The hearing must 
53.28 	be held within 45 days of the date the commissioner refers the case to the Office of 
53.29 	Administrative Hearings. Notwithstanding any law to the contrary, the license holder or 
53.30 	responsible person must be served within 20 days' notice in writing specifying the time and 
53.31 	place of the hearing and the allegations against the license holder or responsible person. 
53.32 	The notice may be served personally or by mail. A license is subject to revocation when 30 
53.33 	days have passed following the date of the notice in this paragraph without the license holder 
53.34 	requesting a hearing, or, if a hearing is timely requested, upon final determination of the 
53.35 	hearing under section 14.62, subdivision 1.
54.1 	(b) The commissioner may notify a licensing authority under subdivision 1 only after 
54.2 	the requirements of paragraph (a) have been satisfied.
54.3 	(c) A hearing under this subdivision is in lieu of any other hearing or proceeding provided 
54.4 	by law arising from any action taken under subdivision 1.

54.5 	EFFECTIVE DATE. This section is effective August 1, 2017.

54.6 	Sec. 39. Minnesota Statutes 2016, section 297F.19, is amended by adding a subdivision 
54.7 	to read:
54.8 		Subd. 10.Penalty for retailers who fail to comply. (a) A retailer who fails to produce 
54.9 	an itemized invoice from a licensed seller within one hour of being requested by the 
54.10 	commissioner to do so as required under section 297F.13, subdivision 4, or who offers for 
54.11 	sale or holds in inventory cigarettes or tobacco products without a license required under 
54.12 	chapter 461 is subject to a penalty of $100 for the first violation, $2,000 for the second 
54.13 	violation, and $5,000 for the third and each subsequent violation occurring during any 
54.14 	36-month period.
54.15 	(b) A retailer who offers for sale or holds in inventory untaxed cigarettes or tobacco 
54.16 	products is subject to a penalty equal to the greater of $2,000, or 150 percent of the tax due 
54.17 	on the cigarettes or tobacco products.

54.18 	EFFECTIVE DATE. This section is effective for violations occurring on or after August 
54.19 	1, 2017.

54.20 	Sec. 40. Minnesota Statutes 2016, section 297F.20, is amended by adding a subdivision 
54.21 	to read:
54.22 		Subd. 2a.Penalties for willful failure to file or pay. (a) A person or consumer required 
54.23 	to file a return, report, or other document with the commissioner who willfully attempts in 
54.24 	any manner to evade or defeat a tax by failing to do so when required is guilty of a felony.
54.25 	(b) A person or consumer required to pay or to collect and remit a tax under this chapter, 
54.26 	who willfully attempts to evade or defeat a tax by failing to do so when required, is guilty 
54.27 	of a felony.

54.28 	EFFECTIVE DATE. This section is effective for offenses committed on or after August 
54.29 	1, 2017.

55.1 	Sec. 41. Minnesota Statutes 2016, section 297F.20, subdivision 5, is amended to read:
55.2 		Subd. 5.Unstamped cigarettes or moist snuff; presumption. (a) Except as provided 
55.3 	in paragraph (b), whenever a package of cigarettes or moist snuff is found in the place of 
55.4 	business or in the possession of any person without a proper stamp affixed as required by 
55.5 	this chapter, it is presumed that those cigarettes or moist snuff are kept there or held by that 
55.6 	person illegally.
55.7 	(b) This presumption does not apply to:
55.8 	(1) cigarettes or moist snuff in the place of business or in the possession of a licensed 
55.9 	distributor;
55.10 	(2) cigarettes or moist snuff in the possession of a common carrier or sleeping car 
55.11 	company engaged in interstate commerce;
55.12 	(3) cigarettes or moist snuff held in a public warehouse of first destination in this state, 
55.13 	in the unbroken, original shipping containers, subject to delivery or shipping instructions 
55.14 	from the manufacturer or a distributor;
55.15 	(4) cigarettes or moist snuff in the possession of a person other than a distributor in 
55.16 	quantities of 200 cigarettes or less or $50 or less of moist snuff, when those cigarettes or 
55.17 	moist snuff have had the individual packages or seals broken, and when they are intended 
55.18 	for personal use and not to be sold or offered for sale;
55.19 	(5) cigarettes or moist snuff sold under circumstances in which the tax cannot legally 
55.20 	be imposed because of the laws or Constitution of the United States.

55.21 	EFFECTIVE DATE. This section is effective for moist snuff possessed after December 
55.22 	31, 2019.

55.23 	Sec. 42. Minnesota Statutes 2016, section 297F.20, subdivision 6, is amended to read:
55.24 		Subd. 6.Unstamped cigarettes; untaxed tobacco products. (a) A person, other than 
55.25 	a licensed distributor, a licensed manufacturer of vapor products, or a consumer, who 
55.26 	possesses, receives, or transports fewer than 5,000 unstamped cigarettes, or up to $350 
55.27 	worth of untaxed tobacco products is guilty of a misdemeanor.
55.28 	(b) A person, other than a licensed distributor, a licensed manufacturer of vapor products,
55.29 	or a consumer, who possesses, receives, or transports 5,000 or more, but fewer than 20,001 
55.30 	unstamped cigarettes, or more than $350 but less than $1,400 worth of untaxed tobacco 
55.31 	products is guilty of a gross misdemeanor.
56.1 	(c) A person, other than a licensed distributor, a licensed manufacturer of vapor products,
56.2 	or a consumer, who possesses, receives, or transports more than 20,000 unstamped cigarettes, 
56.3 	or $1,400 or more worth of untaxed tobacco products is guilty of a felony.
56.4 	(d) For purposes of this subdivision, an individual in possession of more than 4,999 
56.5 	unstamped cigarettes, or more than $350 worth of untaxed tobacco products, is presumed 
56.6 	not to be a consumer.

56.7 	EFFECTIVE DATE. This section is effective January 1, 2018.

56.8 	Sec. 43. Minnesota Statutes 2016, section 297F.20, subdivision 6, is amended to read:
56.9 		Subd. 6.Unstamped cigarettes; untaxed tobacco products. (a) A person, other than 
56.10 	a licensed distributor or a consumer, who possesses, receives, or transports fewer than 5,000 
56.11 	unstamped cigarettes, or up to $350 worth of untaxed tobacco products or unstamped moist 
56.12 	snuff is guilty of a misdemeanor.
56.13 	(b) A person, other than a licensed distributor or a consumer, who possesses, receives, 
56.14 	or transports 5,000 or more, but fewer than 20,001 unstamped cigarettes, or more than $350 
56.15 	but less than $1,400 worth of untaxed tobacco products or unstamped moist snuff is guilty 
56.16 	of a gross misdemeanor.
56.17 	(c) A person, other than a licensed distributor or a consumer, who possesses, receives, 
56.18 	or transports more than 20,000 unstamped cigarettes, or $1,400 or more worth of untaxed 
56.19 	tobacco products or unstamped moist snuff is guilty of a felony.
56.20 	(d) For purposes of this subdivision, an individual in possession of more than 4,999 
56.21 	unstamped cigarettes, or more than $350 worth of untaxed tobacco products or unstamped 
56.22 	moist snuff, is presumed not to be a consumer.

56.23 	EFFECTIVE DATE. This section is effective for moist snuff possessed after December 
56.24 	31, 2019, or for moist snuff received or transported after June 30, 2019.

56.25 	Sec. 44. Minnesota Statutes 2016, section 297F.20, subdivision 7, is amended to read:
56.26 		Subd. 7.Sale of cigarette packages with Indian stamp. (a) A retailer doing business 
56.27 	off of an Indian reservation who sells or offers to sell more than 200 but fewer than 5,000 
56.28 	cigarettes or up to $350 worth of tobacco products with Indian stamps is guilty of a 
56.29 	misdemeanor.
57.1 	(b) A retailer doing business off of an Indian reservation who sells or offers to sell 5,000 
57.2 	or more, but fewer than 20,001 cigarettes or more than $350 but less than $1,400 worth of 
57.3 	tobacco products with Indian stamps is guilty of a gross misdemeanor.
57.4 	(c) A retailer doing business off of an Indian reservation who sells or offers to sell more 
57.5 	than 20,000 cigarettes or $1,400 or more worth of tobacco products with Indian stamps is 
57.6 	guilty of a felony.

57.7 	EFFECTIVE DATE. This section is effective for sales of tobacco products, or offers 
57.8 	to sell tobacco products, after June 30, 2019.

57.9 	Sec. 45. Minnesota Statutes 2016, section 297F.20, subdivision 9, is amended to read:
57.10 		Subd. 9.Purchases from unlicensed sellers. (a) No retailer or subjobber shall purchase 
57.11 	cigarettes or tobacco products from any person who is not licensed under section 297F.03
57.12 	as a licensed distributor, manufacturer of vapor products, or subjobber.
57.13 	(b) A retailer or subjobber who purchases from an unlicensed seller fewer than 5,000 
57.14 	cigarettes or up to $350 worth of tobacco products is guilty of a misdemeanor.
57.15 	(c) A retailer or subjobber who purchases from an unlicensed seller 5,000 or more, but 
57.16 	fewer than 20,001 cigarettes or more than $350 but less than $1,400 worth of tobacco 
57.17 	products is guilty of a gross misdemeanor.
57.18 	(d) A retailer or subjobber who purchases from an unlicensed seller more than 20,000 
57.19 	cigarettes or $1,400 or more worth of tobacco products is guilty of a felony.

57.20 	EFFECTIVE DATE. This section is effective January 1, 2018.

57.21 	Sec. 46. Minnesota Statutes 2016, section 297F.20, is amended by adding a subdivision 
57.22 	to read:
57.23 		Subd. 13.Aggregation and consolidation of venue. In any prosecution under this 
57.24 	section, the number of unstamped cigarettes or the value of the untaxed tobacco products 
57.25 	possessed, received, transported, sold, offered to be sold, or purchased in violation of this 
57.26 	section within any six-month period may be aggregated and the defendant charged 
57.27 	accordingly in applying the provisions of this section. When two or more offenses are 
57.28 	committed by the same individual in two or more counties, the accused may be prosecuted 
57.29 	in any county in which one of the offenses was committed.

57.30 	EFFECTIVE DATE. This section is effective for offenses committed on or after August 
57.31 	1, 2017.

58.1 	Sec. 47. Minnesota Statutes 2016, section 297F.21, subdivision 1, is amended to read:
58.2 		Subdivision 1.Contraband defined. The following are declared to be contraband and 
58.3 	therefore subject to civil and criminal penalties under this chapter:
58.4 	(a) Cigarette packages which do not have stamps affixed to them as provided in this 
58.5 	chapter, including but not limited to (i) packages with illegible stamps and packages with 
58.6 	stamps that are not complete or whole even if the stamps are legible, and (ii) all devices for 
58.7 	the vending of cigarettes in which packages as defined in item (i) are found, including all 
58.8 	contents contained within the devices.
58.9 	(b) A device for the vending of cigarettes and all packages of cigarettes, where the device 
58.10 	does not afford at least partial visibility of contents. Where any package exposed to view 
58.11 	does not carry the stamp required by this chapter, it shall be presumed that all packages 
58.12 	contained in the device are unstamped and contraband.
58.13 	(c) A device for the vending of cigarettes to which the commissioner or authorized agents 
58.14 	have been denied access for the inspection of contents. In lieu of seizure, the commissioner 
58.15 	or an agent may seal the device to prevent its use until inspection of contents is permitted.
58.16 	(d) A device for the vending of cigarettes which does not carry the name and address of 
58.17 	the owner, plainly marked and visible from the front of the machine.
58.18 	(e) A device including, but not limited to, motor vehicles, trailers, snowmobiles, airplanes, 
58.19 	and boats used with the knowledge of the owner or of a person operating with the consent 
58.20 	of the owner for the storage or transportation of more than 5,000 cigarettes which are 
58.21 	contraband under this subdivision. When cigarettes are being transported in the course of 
58.22 	interstate commerce, or are in movement from either a public warehouse to a distributor 
58.23 	upon orders from a manufacturer or distributor, or from one distributor to another, the 
58.24 	cigarettes are not contraband, notwithstanding the provisions of clause (a).
58.25 	(f) A device including, but not limited to, motor vehicles, trailers, snowmobiles, airplanes, 
58.26 	and boats used with the knowledge of the owner, or of a person operating with the consent 
58.27 	of the owner, for the storage or transportation of untaxed tobacco products intended for sale 
58.28 	in Minnesota other than those in the possession of a licensed distributor on or before the 
58.29 	due date for payment of the tax under section 297F.09, subdivision 2.
58.30 	(g) Cigarette packages or tobacco products obtained from an unlicensed seller.
58.31 	(h) Cigarette packages offered for sale or held as inventory in violation of section 
58.32 	297F.20, subdivision 7.
59.1 	(i) Tobacco products on which the tax has not been paid by a licensed distributor or 
59.2 	manufacturer of vapor products.
59.3 	(j) Any cigarette packages or tobacco products offered for sale or held as inventory for 
59.4 	which there is not an invoice from a licensed seller as required under section 297F.13, 
59.5 	subdivision 4.
59.6 	(k) Cigarette packages which have been imported into the United States in violation of 
59.7 	United States Code, title 26, section 5754. All cigarettes held in violation of that section 
59.8 	shall be presumed to have entered the United States after December 31, 1999, in the absence 
59.9 	of proof to the contrary.
59.10 	(l) Cigarettes subject to forfeiture under section 299F.854, subdivision 5, and cigarette 
59.11 	packaging and markings, including the cigarettes contained therein, which do not meet the 
59.12 	requirements under section 299F.853, paragraph (a).
59.13 	(m) Vapor products purchased exempt from tax under section 297F.06, subdivision 6, 
59.14 	by a person other than a licensed manufacturer of vapor products.

59.15 	EFFECTIVE DATE. This section is effective January 1, 2018.

59.16 	Sec. 48. Minnesota Statutes 2016, section 297F.21, subdivision 1, is amended to read:
59.17 		Subdivision 1.Contraband defined. The following are declared to be contraband and 
59.18 	therefore subject to civil and criminal penalties under this chapter:
59.19 	(a) Cigarette packages which do not have stamps affixed to them as provided in this 
59.20 	chapter, including but not limited to (i) packages with illegible stamps and packages with 
59.21 	stamps that are not complete or whole even if the stamps are legible, and (ii) all devices for 
59.22 	the vending of cigarettes in which packages as defined in item (i) are found, including all 
59.23 	contents contained within the devices.
59.24 	(b) A device for the vending of cigarettes and all packages of cigarettes, where the device 
59.25 	does not afford at least partial visibility of contents. Where any package exposed to view 
59.26 	does not carry the stamp required by this chapter, it shall be presumed that all packages 
59.27 	contained in the device are unstamped and contraband.
59.28 	(c) A device for the vending of cigarettes to which the commissioner or authorized agents 
59.29 	have been denied access for the inspection of contents. In lieu of seizure, the commissioner 
59.30 	or an agent may seal the device to prevent its use until inspection of contents is permitted.
59.31 	(d) A device for the vending of cigarettes which does not carry the name and address of 
59.32 	the owner, plainly marked and visible from the front of the machine.
60.1 	(e) A device including, but not limited to, motor vehicles, trailers, snowmobiles, airplanes, 
60.2 	and boats used with the knowledge of the owner or of a person operating with the consent 
60.3 	of the owner for the storage or transportation of more than 5,000 cigarettes which are 
60.4 	contraband under this subdivision. When cigarettes are being transported in the course of 
60.5 	interstate commerce, or are in movement from either a public warehouse to a distributor 
60.6 	upon orders from a manufacturer or distributor, or from one distributor to another, the 
60.7 	cigarettes are not contraband, notwithstanding the provisions of clause (a).
60.8 	(f) A device including, but not limited to, motor vehicles, trailers, snowmobiles, airplanes, 
60.9 	and boats used with the knowledge of the owner, or of a person operating with the consent 
60.10 	of the owner, for the storage or transportation of untaxed tobacco products intended for sale 
60.11 	in Minnesota other than those in the possession of a licensed distributor on or before the 
60.12 	due date for payment of the tax under section 297F.09, subdivision 2.
60.13 	(g) Cigarette packages or tobacco products obtained from an unlicensed seller.
60.14 	(h) Cigarette packages offered for sale or held as inventory in violation of section 
60.15 	297F.20, subdivision 7.
60.16 	(i) Tobacco products on which the tax has not been paid by a licensed distributor.
60.17 	(j) Any cigarette packages or tobacco products offered for sale or held as inventory for 
60.18 	which there is not an invoice from a licensed seller the retailer or subjobber does not produce 
60.19 	an itemized invoice from a licensed seller within one hour after being requested by the 
60.20 	commissioner to do so as required under section 297F.13, subdivision 4.
60.21 	(k) Cigarette packages which have been imported into the United States in violation of 
60.22 	United States Code, title 26, section 5754. All cigarettes held in violation of that section 
60.23 	shall be presumed to have entered the United States after December 31, 1999, in the absence 
60.24 	of proof to the contrary.
60.25 	(l) Cigarettes subject to forfeiture under section 299F.854, subdivision 5, and cigarette 
60.26 	packaging and markings, including the cigarettes contained therein, which do not meet the 
60.27 	requirements under section 299F.853, paragraph (a).
60.28 	(m) All cigarettes and tobacco products, including those for which the tax has been paid, 
60.29 	offered for sale or held as inventory by a retailer operating without a license required under 
60.30 	chapter 461.

60.31 	EFFECTIVE DATE. This section is effective August 1, 2017.

61.1 	Sec. 49. Minnesota Statutes 2016, section 297F.21, subdivision 1, is amended to read:
61.2 		Subdivision 1.Contraband defined. The following are declared to be contraband and 
61.3 	therefore subject to civil and criminal penalties under this chapter:
61.4 	(a) Cigarette or tobacco products packages which do not have stamps affixed to them 
61.5 	as provided in this chapter, including but not limited to (i) packages with illegible stamps 
61.6 	and packages with stamps that are not complete or whole even if the stamps are legible, and 
61.7 	(ii) all devices for the vending of cigarettes in which packages as defined in item (i) are 
61.8 	found, including all contents contained within the devices.
61.9 	(b) A device for the vending of cigarettes and all packages of cigarettes, where the device 
61.10 	does not afford at least partial visibility of contents. Where any package exposed to view 
61.11 	does not carry the stamp required by this chapter, it shall be presumed that all packages 
61.12 	contained in the device are unstamped and contraband.
61.13 	(c) A device for the vending of cigarettes to which the commissioner or authorized agents 
61.14 	have been denied access for the inspection of contents. In lieu of seizure, the commissioner 
61.15 	or an agent may seal the device to prevent its use until inspection of contents is permitted.
61.16 	(d) A device for the vending of cigarettes which does not carry the name and address of 
61.17 	the owner, plainly marked and visible from the front of the machine.
61.18 	(e) A device including, but not limited to, motor vehicles, trailers, snowmobiles, airplanes, 
61.19 	and boats used with the knowledge of the owner or of a person operating with the consent 
61.20 	of the owner for the storage or transportation of more than 5,000 cigarettes which are 
61.21 	contraband under this subdivision. When cigarettes are being transported in the course of 
61.22 	interstate commerce, or are in movement from either a public warehouse to a distributor 
61.23 	upon orders from a manufacturer or distributor, or from one distributor to another, the 
61.24 	cigarettes are not contraband, notwithstanding the provisions of clause paragraph (a).
61.25 	(f) A device including, but not limited to, motor vehicles, trailers, snowmobiles, airplanes, 
61.26 	and boats used with the knowledge of the owner, or of a person operating with the consent 
61.27 	of the owner, for the storage or transportation of untaxed tobacco products intended for sale 
61.28 	in Minnesota other than those in the possession of a licensed distributor on or before the 
61.29 	due date for payment of the tax under section 297F.09, subdivision 2.
61.30 	(g) Cigarette packages or tobacco products obtained from an unlicensed seller.
61.31 	(h) Cigarette or tobacco products packages offered for sale or held as inventory in 
61.32 	violation of section 297F.20, subdivision 7.
61.33 	(i) Tobacco products on which the tax has not been paid by a licensed distributor.
62.1 	(j) Any cigarette packages or tobacco products offered for sale or held as inventory for 
62.2 	which there is not an invoice from a licensed seller as required under section 297F.13, 
62.3 	subdivision 4.
62.4 	(k) Cigarette packages which have been imported into the United States in violation of 
62.5 	United States Code, title 26, section 5754. All cigarettes held in violation of that section 
62.6 	shall be presumed to have entered the United States after December 31, 1999, in the absence 
62.7 	of proof to the contrary.
62.8 	(l) Cigarettes subject to forfeiture under section 299F.854, subdivision 5, and cigarette 
62.9 	packaging and markings, including the cigarettes contained therein, which do not meet the 
62.10 	requirements under section 299F.853, paragraph (a).

62.11 	EFFECTIVE DATE. The amendment to paragraph (a) is effective January 1, 2020. 
62.12 	The amendment to paragraph (h) is effective for packages of tobacco products offered for 
62.13 	sale or held as inventory after June 30, 2019.

62.14 	Sec. 50. Minnesota Statutes 2016, section 461.12, subdivision 8, is amended to read:
62.15 		Subd. 8.Notice to commissioner. The licensing authority under this section shall, within 
62.16 	30 days of the issuance or renewal of a license, inform provide the commissioner of revenue 
62.17 	of, on a form prescribed by the commissioner and completed by the applicant, the licensee's 
62.18 	name, address, trade name, Minnesota business identification number, the name of the 
62.19 	individual or individuals who will be responsible for purchasing cigarettes or tobacco 
62.20 	products for the licensee, and the effective and expiration dates of the license. The 
62.21 	commissioner of revenue must also be informed of a license renewal, transfer, cancellation, 
62.22 	suspension, or revocation during the license period.

62.23 	EFFECTIVE DATE. This section is effective for licenses issued, renewed, transferred, 
62.24 	canceled, suspended, or revoked after December 31, 2017.

62.25 	Sec. 51. APPROPRIATIONS.
 62.26 	$398,000 in fiscal year 2018 and $371,000 in fiscal year 2019 are appropriated from the 
62.27 	general fund to the commissioner of revenue to carry out the provisions of this article. 
62.28 	$429,000 in fiscal year 2020 and $316,000 in fiscal year 2021 shall be added to the base 
62.29 	appropriations to the Department of Revenue.

62.30 	EFFECTIVE DATE. This section is effective the day following final enactment.

63.1 	Sec. 52.  REPEALER.
 63.2 	Minnesota Statutes 2016, section 297F.185, is repealed

63.3 	EFFECTIVE DATE. This section is effective August 1, 2017.

63.4 	ARTICLE 4
63.5 	CORPORATE TAX REFORM

63.6 	Section 1. Minnesota Statutes 2016, section 16D.08, subdivision 2, is amended to read:
63.7 		Subd. 2.Powers. (a) In addition to the collection remedies available to private collection 
63.8 	agencies in this state, the commissioner, with legal assistance from the attorney general, 
63.9 	may utilize any statutory authority granted to a referring agency for purposes of collecting 
63.10 	debt owed to that referring agency. The commissioner may also use the tax collection 
63.11 	remedies in sections 270C.03, subdivision 1, clause (8) (9), 270C.31, 270C.32, 270C.52, 
63.12 	subdivisions 2 and 3, 270C.63, 270C.65, and 270C.67 to 270C.72. A debtor may take 
63.13 	advantage of any administrative or appeal rights contained in the listed sections. For 
63.14 	administrative and appeal rights for nontax debts, references to administrative appeals or 
63.15 	to the taxpayer rights advocate shall be construed to be references to the case reviewer, 
63.16 	references to Tax Court shall be construed to mean district court, and offers in compromise 
63.17 	shall be submitted to the referring agency. A debtor who qualifies for cancellation of 
63.18 	collection costs under section 16D.11, subdivision 3, clause (1), can apply to the 
63.19 	commissioner for reduction or release of a continuous wage levy, if the debtor establishes 
63.20 	that the debtor needs all or a portion of the wages being levied upon to pay for essential 
63.21 	living expenses, such as food, clothing, shelter, medical care, or expenses necessary for 
63.22 	maintaining employment. The commissioner's determination not to reduce or release a 
63.23 	continuous wage levy is appealable to district court. The word "tax" or "taxes" when used 
63.24 	in the tax collection statutes listed in this subdivision also means debts referred under this 
63.25 	chapter.
63.26 	(b) Before using the tax collection remedies listed in this subdivision, notice and demand 
63.27 	for payment of the amount due must be given to the person liable for the payment or 
63.28 	collection of the debt at least 30 days prior to the use of the remedies. The notice must be 
63.29 	sent to the person's last known address and must include a brief statement that sets forth in 
63.30 	simple and nontechnical terms the amount and source of the debt, the nature of the available 
63.31 	collection remedies, and remedies available to the debtor.

63.32 	EFFECTIVE DATE. This section is effective for taxable years beginning after December 
63.33 	31, 2016.

64.1 	Sec. 2. Minnesota Statutes 2016, section 116J.8737, subdivision 1, is amended to read:
64.2 		Subdivision 1.Definitions. (a) For the purposes of this section, the following terms have 
64.3 	the meanings given.
64.4 	(b) "Qualified small business" means a business that has been certified by the 
64.5 	commissioner under subdivision 2.
64.6 	(c) "Qualified investor" means an investor who has been certified by the commissioner 
64.7 	under subdivision 3.
64.8 	(d) "Qualified fund" means a pooled angel investment network fund that has been certified 
64.9 	by the commissioner under subdivision 4.
64.10 	(e) "Qualified investment" means a cash investment in a qualified small business of a 
64.11 	minimum of:
64.12 	(1) $10,000 in a calendar year by a qualified investor; or
64.13 	(2) $5,000 by a qualified investor, if the qualified investment is made pursuant to 
64.14 	subdivision 5, paragraph (a), clause (2); or
64.15 	(2) (3) $30,000 in a calendar year by a qualified fund.
64.16 	A qualified investment must be made in exchange for common stock, a partnership or 
64.17 	membership interest, preferred stock, debt with mandatory conversion to equity, or an 
64.18 	equivalent ownership interest as determined by the commissioner.
64.19 	(f) "Family" means a family member within the meaning of the Internal Revenue Code, 
64.20 	section 267(c)(4).
64.21 	(g) "Pass-through entity" means a corporation that for the applicable taxable year is 
64.22 	treated as an S corporation or a general partnership, limited partnership, limited liability 
64.23 	partnership, trust, or limited liability company and which for the applicable taxable year is 
64.24 	not taxed as a corporation under chapter 290.
64.25 	(h) "Intern" means a student of an accredited institution of higher education, or a former 
64.26 	student who has graduated in the past six months from an accredited institution of higher 
64.27 	education, who is employed by a qualified small business in a nonpermanent position for 
64.28 	a duration of nine months or less that provides training and experience in the primary 
64.29 	business activity of the business.
64.30 	(i) "Liquidation event" means a conversion of qualified investment for cash, cash and 
64.31 	other consideration, or any other form of equity or debt interest.
65.1 	(j) "Qualified greater Minnesota business" means a qualified small business that is also 
65.2 	certified by the commissioner as a qualified greater Minnesota business under subdivision 
65.3 	2, paragraph (h).
65.4 	(k) "Minority group member" means a United States citizen who is Asian, Pacific 
65.5 	Islander, Black, Hispanic, or Native American.
65.6 	(l) "Minority-owned business" means a business for which one or more minority group 
65.7 	members:
65.8 	(1) own at least 50 percent of the business, or, in the case of a publicly owned business, 
65.9 	own at least 51 percent of the stock; and
65.10 	(2) manage the business and control the daily business operations.
65.11 	(m) "Women" means persons of the female gender.
65.12 	(n) "Women-owned business" means a business for which one or more women:
65.13 	(1) own at least 50 percent of the business, or, in the case of a publicly owned business, 
65.14 	own at least 51 percent of the stock; and
65.15 	(2) manage the business and control the daily business operations.
65.16 	(o) "Veteran" has the meaning given in section 197.447.
65.17 	(p) "Veteran-owned business" means a business for which one or more veterans:
65.18 	(1) own at least 50 percent of the business, or, in the case of a publicly owned business, 
65.19 	own at least 51 percent of the stock; and
65.20 	(2) manage the business and control the daily business operations.
65.21 	(q) "Persons with disabilities" means a person with a disability as defined in section 
65.22 	12102 of the Americans with Disabilities Act of 1990.
65.23 	(r) "Business owned by a person with disabilities" means a business for which one or 
65.24 	more people with disabilities:
65.25 	(1) own at least 50 percent of the business, or, in the case of a publicly owned business, 
65.26 	own at least 51 percent of the stock; and
65.27 	(2) manage the business and control the daily business operations.
65.28 	(o) (s) "Officer" means a person elected or appointed by the board of directors to manage 
65.29 	the daily operations of the qualified small business;.
66.1 	(p) (t) "Principal" means a person having authority to act on behalf of the qualified small 
66.2 	business.
66.3 	(u) "Targeted business" means a business that qualifies under paragraph (j), (l), (n), (p), 
66.4 	or (r); or a business owned by persons described in paragraph (k), (m), (o), or (q), of which 
66.5 	one or more of those owners manage and control the daily business operations, and in which 
66.6 	those owners cumulatively own at least 50 percent of the business, or, in the case of a 
66.7 	publicly owned business, own at least 51 percent of the stock.

66.8 	EFFECTIVE DATE. This section is effective for taxable years beginning after December 
66.9 	31, 2016.

66.10 	Sec. 3. Minnesota Statutes 2016, section 116J.8737, subdivision 5, is amended to read:
66.11 		Subd. 5.Credit allowed. (a)(1) A qualified investor or qualified fund is eligible for a 
66.12 	credit equal to 25 percent of the qualified investment in a qualified small business. 
66.13 	Investments made by a pass-through entity qualify for a credit only if the entity is a qualified 
66.14 	fund. The commissioner must not allocate more than $15,000,000 in credits to qualified 
66.15 	investors or qualified funds for taxable years beginning after December 31, 2013, and before 
66.16 	January 1, 2017 2018, and must not allocate more than $10,000,000 in credits to qualified 
66.17 	investors or qualified funds for taxable years beginning after December 31, 2016, and before 
66.18 	January 1, 2018 2019; and
66.19 	(2) for taxable years beginning after December 31, 2014, and before January 1, 2018
66.20 	2019, 50 percent must be allocated to credits for qualifying investments in qualified greater 
66.21 	Minnesota businesses and minority- or women-owned qualified small businesses targeted 
66.22 	businesses in Minnesota. Any portion of a taxable year's credits that is reserved for qualifying 
66.23 	investments in greater Minnesota businesses and minority- or women-owned qualified small
66.24 	targeted businesses in Minnesota that is not allocated by September 30 of the taxable year 
66.25 	is available for allocation to other credit applications beginning on October 1. Any portion 
66.26 	of a taxable year's credits that is not allocated by the commissioner does not cancel and may 
66.27 	be carried forward to subsequent taxable years until all credits have been allocated.
66.28 	(b) The commissioner may not allocate more than a total maximum amount in credits 
66.29 	for a taxable year to a qualified investor for the investor's cumulative qualified investments 
66.30 	as an individual qualified investor and as an investor in a qualified fund; for married couples 
66.31 	filing joint returns the maximum is $250,000, and for all other filers the maximum is 
66.32 	$125,000. The commissioner may not allocate more than a total of $1,000,000 in credits 
66.33 	over all taxable years for qualified investments in any one qualified small business.
67.1 	(c) The commissioner may not allocate a credit to a qualified investor either as an 
67.2 	individual qualified investor or as an investor in a qualified fund if, at the time the investment 
67.3 	is proposed:
67.4 	(1) the investor is an officer or principal of the qualified small business; or
67.5 	(2) the investor, either individually or in combination with one or more members of the 
67.6 	investor's family, owns, controls, or holds the power to vote 20 percent or more of the 
67.7 	outstanding securities of the qualified small business.
67.8 	A member of the family of an individual disqualified by this paragraph is not eligible for a 
67.9 	credit under this section. For a married couple filing a joint return, the limitations in this 
67.10 	paragraph apply collectively to the investor and spouse. For purposes of determining the 
67.11 	ownership interest of an investor under this paragraph, the rules under section 267(c) and 
67.12 	267(e) of the Internal Revenue Code apply.
67.13 	(d) Applications for tax credits for 2010 must be made available on the department's 
67.14 	Web site by September 1, 2010, and the department must begin accepting applications by 
67.15 	September 1, 2010. Applications for subsequent years must be made available by November 
67.16 	1 of the preceding year.
67.17 	(e) Qualified investors and qualified funds must apply to the commissioner for tax credits. 
67.18 	Tax credits must be allocated to qualified investors or qualified funds in the order that the 
67.19 	tax credit request applications are filed with the department. The commissioner must approve 
67.20 	or reject tax credit request applications within 15 days of receiving the application. The 
67.21 	investment specified in the application must be made within 60 days of the allocation of 
67.22 	the credits. If the investment is not made within 60 days, the credit allocation is canceled 
67.23 	and available for reallocation. A qualified investor or qualified fund that fails to invest as 
67.24 	specified in the application, within 60 days of allocation of the credits, must notify the 
67.25 	commissioner of the failure to invest within five business days of the expiration of the 
67.26 	60-day investment period.
67.27 	(f) All tax credit request applications filed with the department on the same day must 
67.28 	be treated as having been filed contemporaneously. If two or more qualified investors or 
67.29 	qualified funds file tax credit request applications on the same day, and the aggregate amount 
67.30 	of credit allocation claims exceeds the aggregate limit of credits under this section or the 
67.31 	lesser amount of credits that remain unallocated on that day, then the credits must be allocated 
67.32 	among the qualified investors or qualified funds who filed on that day on a pro rata basis 
67.33 	with respect to the amounts claimed. The pro rata allocation for any one qualified investor 
67.34 	or qualified fund is the product obtained by multiplying a fraction, the numerator of which 
68.1 	is the amount of the credit allocation claim filed on behalf of a qualified investor and the 
68.2 	denominator of which is the total of all credit allocation claims filed on behalf of all 
68.3 	applicants on that day, by the amount of credits that remain unallocated on that day for the 
68.4 	taxable year.
68.5 	(g) A qualified investor or qualified fund, or a qualified small business acting on their 
68.6 	behalf, must notify the commissioner when an investment for which credits were allocated 
68.7 	has been made, and the taxable year in which the investment was made. A qualified fund 
68.8 	must also provide the commissioner with a statement indicating the amount invested by 
68.9 	each investor in the qualified fund based on each investor's share of the assets of the qualified 
68.10 	fund at the time of the qualified investment. After receiving notification that the investment 
68.11 	was made, the commissioner must issue credit certificates for the taxable year in which the 
68.12 	investment was made to the qualified investor or, for an investment made by a qualified 
68.13 	fund, to each qualified investor who is an investor in the fund. The certificate must state 
68.14 	that the credit is subject to revocation if the qualified investor or qualified fund does not 
68.15 	hold the investment in the qualified small business for at least three years, consisting of the 
68.16 	calendar year in which the investment was made and the two following years. The three-year 
68.17 	holding period does not apply if:
68.18 	(1) the investment by the qualified investor or qualified fund becomes worthless before 
68.19 	the end of the three-year period;
68.20 	(2) 80 percent or more of the assets of the qualified small business is sold before the end 
68.21 	of the three-year period;
68.22 	(3) the qualified small business is sold before the end of the three-year period;
68.23 	(4) the qualified small business's common stock begins trading on a public exchange 
68.24 	before the end of the three-year period; or
68.25 	(5) the qualified investor dies before the end of the three-year period.
68.26 	(h) The commissioner must notify the commissioner of revenue of credit certificates 
68.27 	issued under this section.
68.28 	(i) For purposes of paragraph (a), clause (2), a member of the family of an individual 
68.29 	disqualified by this paragraph shall be limited to spouses, parents, and lineal descendants.

68.30 	EFFECTIVE DATE. This section is effective for taxable years beginning after December 
68.31 	31, 2016.

69.1 	Sec. 4. Minnesota Statutes 2016, section 116J.8737, subdivision 5a, is amended to read:
69.2 		Subd. 5a.Promotion of credit in greater Minnesota. (a) By July 1, 2014, the 
69.3 	commissioner shall develop a plan to increase awareness of and use of the credit for 
69.4 	investments in qualified greater Minnesota businesses and minority-owned and 
69.5 	women-owned qualified small other targeted businesses with the goal that the portion of 
69.6 	the credit reserved for investments in qualified greater Minnesota businesses and 
69.7 	minority-owned and women-owned qualified small targeted businesses is allocated in full 
69.8 	to those investments.
69.9 	(b) Beginning with the legislative report due on March 15, 2015, under subdivision 9, 
69.10 	the commissioner shall report on its plan under this subdivision and the results achieved.

69.11 	EFFECTIVE DATE. This section is effective for taxable years beginning after December 
69.12 	31, 2016.

69.13 	Sec. 5. Minnesota Statutes 2016, section 116J.8737, subdivision 12, is amended to read:
69.14 		Subd. 12.Sunset. This section expires for taxable years beginning after December 31, 
69.15 	2017 2018, except that reporting requirements under subdivision 6 and revocation of credits 
69.16 	under subdivision 7 remain in effect through 2019 2020 for qualified investors and qualified 
69.17 	funds, and through 2021 2022 for qualified small businesses, reporting requirements under 
69.18 	subdivision 9 remain in effect through 2022 2023, and the appropriation in subdivision 11 
69.19 	remains in effect through 2021 2022.

69.20 	EFFECTIVE DATE. This section is effective for taxable years beginning after December 
69.21 	31, 2016.

69.22 	Sec. 6. Minnesota Statutes 2016, section 270C.03, subdivision 1, is amended to read:
69.23 		Subdivision 1.Powers and duties. The commissioner shall have and exercise the 
69.24 	following powers and duties:
69.25 	(1) administer and enforce the assessment and collection of taxes;
69.26 	(2) make determinations, corrections, and assessments with respect to taxes, including 
69.27 	interest, additions to taxes, and assessable penalties;
69.28 	(3) disallow the tax effects of a transaction that does not have economic substance;
69.29 	(3) (4) use statistical or other sampling techniques consistent with generally accepted 
69.30 	auditing standards in examining returns or records and making assessments;
70.1 	(4) (5) investigate the tax laws of other states and countries, and formulate and submit 
70.2 	to the legislature such legislation as the commissioner may deem expedient to prevent 
70.3 	evasions of state revenue laws and to secure just and equal taxation and improvement in 
70.4 	the system of state revenue laws;
70.5 	(5) (6) consult and confer with the governor upon the subject of taxation, the 
70.6 	administration of the laws in regard thereto, and the progress of the work of the department, 
70.7 	and furnish the governor, from time to time, such assistance and information as the governor 
70.8 	may require relating to tax matters;
70.9 	(6) (7) execute and administer any agreement with the secretary of the treasury or the 
70.10 	Bureau of Alcohol, Tobacco, Firearms and Explosives in the Department of Justice of the 
70.11 	United States or a representative of another state regarding the exchange of information and 
70.12 	administration of the state revenue laws;
70.13 	(7) (8) require town, city, county, and other public officers to report information as to 
70.14 	the collection of taxes received from licenses and other sources, and such other information 
70.15 	as may be needful in the work of the commissioner, in such form as the commissioner may 
70.16 	prescribe;
70.17 	(8) (9) authorize the use of unmarked motor vehicles to conduct seizures or criminal 
70.18 	investigations pursuant to the commissioner's authority;
70.19 	(9) (10) authorize the participation in audits performed by the Multistate Tax Commission. 
70.20 	For the purposes of chapter 270B, the Multistate Tax Commission will be considered to be 
70.21 	a state for the purposes of auditing corporate sales, excise, and income tax returns;
70.22 	(10) (11) maintain toll-free telephone access for taxpayer assistance for calls from 
70.23 	locations within the state; and
70.24 	(11) (12) exercise other powers and authority and perform other duties required of or 
70.25 	imposed upon the commissioner by law.

70.26 	EFFECTIVE DATE. This section is effective for taxable years beginning after December 
70.27 	31, 2016.

70.28 	Sec. 7. Minnesota Statutes 2016, section 270C.33, subdivision 6, is amended to read:
70.29 		Subd. 6.Assessment presumed valid. (a) A return or assessment of tax made by the 
70.30 	commissioner is prima facie correct and valid. The taxpayer has the burden of establishing 
70.31 	its incorrectness or invalidity in any related action or proceeding.
71.1 	(b) To overcome the presumption that an order of the commissioner that disallows the 
71.2 	tax effects of a transaction because the commissioner determined the transaction does not 
71.3 	have economic substance pursuant to section 270C.03, subdivision l, clause (3), is prima 
71.4 	facie correct and valid, the taxpayer must prove with clear and convincing evidence that 
71.5 	the transaction has economic substance.

71.6 	EFFECTIVE DATE. This section is effective for taxable years beginning after December 
71.7 	31, 2016.

71.8 	Sec. 8. [270C.331] PREVENTING TAX EVASION.
71.9 		Subdivision 1.Economic substance. (a) For purposes of disallowing the tax effects of 
71.10 	a transaction that does not have economic substance pursuant to section 270C.03, subdivision 
71.11 	l, clause (3), a transaction shall be treated as having economic substance only if:
71.12 	(1) the transaction changes in a meaningful way, apart from tax effects, the taxpayer's 
71.13 	economic position; and
71.14 	(2) the taxpayer has a substantial purpose, apart from tax effects, for entering into the 
71.15 	transaction.
71.16 	(b) In determining whether the requirements of paragraph (a), clauses (1) and (2), are 
71.17 	met, the potential for profit of a transaction shall be taken into account only if the present 
71.18 	value of the reasonable expected pretax profit from the transaction is substantial in relation 
71.19 	to the present value of the expected net tax benefits that would be allowed if the transaction 
71.20 	was respected. Fees and other transaction expenses shall be taken into account as expenses 
71.21 	in determining pretax profit.
71.22 	(c) For purposes of paragraph (a), clause (2), achieving a financial accounting benefit 
71.23 	shall not be taken into account as a purpose for entering into a transaction if the origin of 
71.24 	such financial accounting benefit is a reduction of federal, state, or local tax.
71.25 		Subd. 2.Apart from tax effects. For purposes of this section, "apart from tax effects" 
71.26 	means apart from the state and local tax effects arising from the application of the laws of 
71.27 	any state or local unit of government to the form of the transaction, the federal tax effects 
71.28 	resulting from the transaction, or both.
71.29 		Subd. 3.Transaction. For purposes of this section and section 270C.03, subdivision l, 
71.30 	clause (3), "transaction" includes a series of transactions.
72.1 		Subd. 4.Personal transactions of individuals. In the case of an individual, subdivision 
72.2 	1 applies only to transactions entered into in connection with a trade or business or an 
72.3 	activity engaged in for the production of income.
72.4 		Subd. 5.Commissioner to issue guidance. (a) The commissioner shall promulgate 
72.5 	guidance on how the provisions of this section will be applied. The guidance must include, 
72.6 	at a minimum, examples of transactions that will not be challenged as not having economic 
72.7 	substance and examples of transactions that may be challenged as not having economic 
72.8 	substance.
72.9 	(b) The commissioner shall establish and publish a formal departmental procedure for 
72.10 	uniform application of this section, except the publishing of such procedure is subject to 
72.11 	limitations of protected nonpublic data in section 270B.02.

72.12 	EFFECTIVE DATE. This section is effective for taxable years beginning after December 
72.13 	31, 2016.

72.14 	Sec. 9. Minnesota Statutes 2016, section 289A.19, subdivision 7, is amended to read:
72.15 		Subd. 7.Federal extensions. When an extension of time to file a partnership, fiduciary 
72.16 	income tax, or S corporation tax return is granted by the Internal Revenue Service, the 
72.17 	commissioner shall grant an automatic extension to file the comparable Minnesota return 
72.18 	for that period. An extension granted under this subdivision does not affect the due date for 
72.19 	making payments of tax.

72.20 	EFFECTIVE DATE. This section is effective the day following final enactment.

72.21 	Sec. 10. Minnesota Statutes 2016, section 289A.60, is amended by adding a subdivision 
72.22 	to read:
72.23 		Subd. 27a.Noneconomic substance transaction understatement penalty. (a) If the 
72.24 	tax effects of a transaction are disallowed pursuant to section 270C.03, subdivision 1, clause 
72.25 	(3), a penalty equal to 20 percent of the amount of the disclosed noneconomic substance 
72.26 	transaction understatement must be added to the tax. This subdivision applies to any income 
72.27 	or item that is attributable to any transaction disallowed pursuant to section 270C.03, 
72.28 	subdivision 1, clause (3).
72.29 	(b) If the tax effects of a transaction are disallowed pursuant to section 270C.03, 
72.30 	subdivision l, clause (3), a penalty equal to 40 percent of the amount of the nondisclosed 
72.31 	noneconomic substance transaction understatement must be added to the tax. This subdivision 
73.1 	applies to any income or item that is attributable to any transaction disallowed pursuant to 
73.2 	section 270C.03, subdivision 1, clause (3).
73.3 	(c) For purposes of this subdivision, "disclosed noneconomic substance transaction" 
73.4 	means a transaction that fails to meet the criteria for having economic substance as described 
73.5 	in section 270C.03, subdivision 1, clause (3), with respect to which the relevant facts affecting 
73.6 	the tax treatment are adequately disclosed in the return or in a statement attached to the 
73.7 	return.
73.8 	(d) For purposes of this subdivision, "nondisclosed noneconomic substance transaction" 
73.9 	means a transaction that fails to meet the criteria for having economic substance as described 
73.10 	in section 270C.03, subdivision 1, clause (3), with respect to which the relevant facts affecting 
73.11 	the tax treatment are not adequately disclosed in the return nor in a statement attached to 
73.12 	the return.
73.13 	(e) In no event shall any amendment or supplement to a tax return be taken into account 
73.14 	for purposes of this subdivision to reduce the noneconomic substance transaction 
73.15 	understatement if the amendment or supplement is filed after the date the taxpayer is first 
73.16 	contacted by the commissioner regarding examination of the return.
73.17 	(f) For purposes of this subdivision, "understatement" means the product of:
73.18 	(1) the amount of the increase, if any, in taxable income that results from a difference 
73.19 	between the proper tax treatment of an item to which section 270C.03, subdivision 1, clause 
73.20 	(3), applies and the taxpayer's treatment of that item as shown on the taxpayer's tax return. 
73.21 	For purposes of this clause, any reduction of the excess of deductions allowed for the taxable 
73.22 	year over gross income for that year, and any reduction in the amount of capital losses that 
73.23 	would, without regard to section 1211 of the Internal Revenue Code, be allowed for that 
73.24 	year, must be treated as an increase in taxable income; and
73.25 	(2) the highest rate of tax imposable on the taxpayer under section 290.06 determined 
73.26 	without regard to the understatement.
73.27 	(g) If the noneconomic substance transaction understatement penalty is imposed under 
73.28 	this subdivision, the noneconomic substance transaction understatement penalty applies in 
73.29 	lieu of the penalties imposed under subdivision 27.

73.30 	EFFECTIVE DATE. This section is effective for taxable years beginning after December 
73.31 	31, 2016.

74.1 	Sec. 11. Minnesota Statutes 2016, section 290.01, subdivision 4a, is amended to read:
74.2 		Subd. 4a.Financial institution. (a) "Financial institution" means:
74.3 	(1) a holding company any corporation or other business entity registered (i) under state 
74.4 	law as a bank holding company; (ii) under the federal Bank Holding Company Act of 1956, 
74.5 	as amended; or (iii) as a savings and loan holding company under the federal National 
74.6 	Housing Act, as amended;
74.7 	(2) any regulated financial corporation; or a national bank organized and existing as a 
74.8 	national bank association pursuant to the provisions of United States Code, title 12, chapter 
74.9 	2;
74.10 	(3) any other corporation organized under the laws of the United States or organized 
74.11 	under the laws of this state or any other state or country that is carrying on the business of 
74.12 	a financial institution. a savings association or federal savings bank as defined in United 
74.13 	States Code, title 12, section 1813(b)(1);
74.14 	(4) any bank or thrift institution incorporated or organized under the laws of any state;
74.15 	(5) any corporation organized under United States Code, title 12, sections 611 to 631;
74.16 	(6) any agency or branch of a foreign depository as defined under United States Code, 
74.17 	title 12, section 3101;
74.18 	(7) any corporation or other business entity that is more than 50 percent owned, directly 
74.19 	or indirectly, by any person or business entity described in clauses (1) to (6), other than an 
74.20 	insurance company taxable under chapter 297I;
74.21 	(8) a corporation or other business entity that derives more than 50 percent of its total 
74.22 	gross income for financial accounting purposes from finance leases. For the purposes of 
74.23 	this clause, "gross income" means the average from the current tax year and immediately 
74.24 	preceding two years and excludes gross income from incidental or occasional transactions. 
74.25 	For purposes of this clause, "finance lease" means any lease transaction that is the functional 
74.26 	equivalent of an extension of credit and that transfers substantially all the benefits and risks 
74.27 	incident to the ownership of property, including any direct financing lease or leverage lease 
74.28 	that meets the criteria of Financial Accounting Standards Board Statement No. 13, accounting 
74.29 	for leases, or any other lease that is accounted for as financing by a lessor under generally 
74.30 	accepted accounting principles; or
74.31 	(9) any other person or business entity, other than an insurance company taxable under 
74.32 	chapter 297I, that derives more than 50 percent of its gross income from activities that an 
75.1 	entity described in clauses (2) to (6) or (8) is authorized to transact. For the purposes of this 
75.2 	clause, gross income does not include income from nonrecurring, extraordinary items.
75.3 	(b) "Holding company" means any corporation registered under the Federal Bank Holding 
75.4 	Company Act of 1956, as amended, or registered as a savings and loan holding company 
75.5 	under the Federal National Housing Act, as amended, or a federal savings bank holding 
75.6 	company. The commissioner is authorized to exclude any person from the application of 
75.7 	paragraph (a), clause (9), if the person proves by clear and convincing evidence that the 
75.8 	person's income-producing activity is not in substantial competition with any person described 
75.9 	in paragraph (a), clauses (2) to (6) or (8).
75.10 	(c) "Regulated financial corporation" means an institution, the deposits or accounts of 
75.11 	which are insured under the Federal Deposit Insurance Act or by the Federal Savings and 
75.12 	Loan Insurance Corporation, any institution which is a member of a Federal Home Loan 
75.13 	Bank, any other bank or thrift institution incorporated or organized under the laws of any 
75.14 	state or any foreign country which is engaged in the business of receiving deposits, any 
75.15 	corporation organized under the provisions of United States Code, title 12, sections 611 to 
75.16 	631 (Edge Act Corporations), and any agency of a foreign depository as defined in United 
75.17 	States Code, title 12, section 3101.
75.18 	(d) "Business of a financial institution" means:
75.19 	(1) the business that any corporation organized under the authority of the United States 
75.20 	or organized under the laws of this state or any other state or country does or has authority 
75.21 	to do which is substantially similar to the business which a corporation may be created to 
75.22 	do under chapters 46 to 55 or any business which a corporation is authorized to do by those 
75.23 	laws; or
75.24 	(2) the business that any corporation organized under the authority of the United States 
75.25 	or organized under the laws of this state or any other state or country does or has authority 
75.26 	to do if the corporation derives more than 50 percent of its gross income from lending 
75.27 	activities (including discounting obligations) in substantial competition with the businesses 
75.28 	described in clause (1). For purposes of this clause, the computation of the gross income of 
75.29 	a corporation does not include income from nonrecurring, extraordinary items.

75.30 	EFFECTIVE DATE. This section is effective for taxable years beginning after December 
75.31 	31, 2016.

76.1 	Sec. 12. [290.0137] ACCELERATED RECOGNITION OF CERTAIN 
76.2 	INSTALLMENT SALE GAINS.
76.3 	(a) In the case of a nonresident individual or a person who becomes a nonresident 
76.4 	individual during the tax year, taxable net income shall include the allocable amount realized 
76.5 	upon a sale of the assets of, or any interest in, an S corporation or partnership that operated 
76.6 	in Minnesota during the year of sale, including any income or gain to be recognized in future 
76.7 	years pursuant to an installment sale method of reporting under the Internal Revenue Code.
76.8 	(1) For the purposes of this paragraph, an individual who becomes a nonresident of 
76.9 	Minnesota in any year after an installment sale is required to recognize the full amount of 
76.10 	any income or gain described in this paragraph on the individual's final Minnesota resident 
76.11 	tax return to the extent that such income has not been recognized in a prior year.
76.12 	(2) For the purposes of this section, "realized" has the meaning given in section 1001(b) 
76.13 	of the Internal Revenue Code.
76.14 	(3) For the purposes of this section, "installment sale" means any installment sale under 
76.15 	section 453 of the Internal Revenue Code and any other sale that is reported utilizing a 
76.16 	method of accounting authorized under subchapter E of the Internal Revenue Code that 
76.17 	allows taxpayers to delay reporting or recognizing a realized gain until a future year.
76.18 	(4) For the purposes of this section, "allocable amount" means the full amount to be 
76.19 	apportioned to Minnesota under section 290.191 or 290.20, or the full amount to be assigned 
76.20 	to Minnesota under section 290.17.
76.21 	(b) Notwithstanding paragraph (a), nonresident taxpayers may elect to defer recognizing 
76.22 	unrecognized installment sale gains by making an election under this paragraph. The election 
76.23 	must be filed on a form to be determined or prescribed by the commissioner and must be 
76.24 	filed by the due date of the individual income tax return, including any extension. Electing 
76.25 	taxpayers must make an irrevocable agreement to:
76.26 	(1) file Minnesota tax returns in all subsequent years when gains from the installment 
76.27 	sales are recognized and reported to the Internal Revenue Service;
76.28 	(2) allocate gains to the state of Minnesota as though the gains were occurred in the year 
76.29 	of sale under section 290.17, 290.191, or 290.20; and
76.30 	(3) include all relevant federal tax documents reporting the installment sale with 
76.31 	subsequent Minnesota tax returns.
76.32 	(c) Income or gain recognized for Minnesota purposes pursuant to paragraph (a) must 
76.33 	be excluded from taxable net income in any future year that the taxpayer files a Minnesota 
77.1 	tax return to the extent that the income or gain has already been subject to tax pursuant to 
77.2 	paragraph (a).

77.3 	EFFECTIVE DATE. This section is effective for taxable years beginning after December 
77.4 	31, 2016.

77.5 	Sec. 13. Minnesota Statutes 2016, section 290.05, subdivision 1, is amended to read:
77.6 		Subdivision 1.Exempt entities. The following corporations, individuals, estates, trusts, 
77.7 	and organizations shall be exempted from taxation under this chapter, provided that every 
77.8 	such person or corporation claiming exemption under this chapter, in whole or in part, must 
77.9 	establish to the satisfaction of the commissioner the taxable status of any income or activity:
77.10 	(a) corporations, individuals, estates, and trusts engaged in the business of mining or 
77.11 	producing iron ore and mining, producing, or refining other ores, metals, and minerals, the 
77.12 	mining, production, or refining of which is subject to the occupation tax imposed by section 
77.13 	298.01; but if any such corporation, individual, estate, or trust engages in any other business 
77.14 	or activity or has income from any property not used in such business it shall be subject to 
77.15 	this tax computed on the net income from such property or such other business or activity. 
77.16 	Royalty shall not be considered as income from the business of mining or producing iron 
77.17 	ore within the meaning of this section;
77.18 	(b) the United States of America, the state of Minnesota or any political subdivision of 
77.19 	either agencies or instrumentalities, whether engaged in the discharge of governmental or 
77.20 	proprietary functions; and
77.21 	(c) any insurance company, as defined in section 290.17, subdivision 4, paragraph (a), 
77.22 	clause (1), but including any insurance company licensed and domiciled in another state 
77.23 	that grants, on a reciprocal basis, exemption from retaliatory taxes.

77.24 	EFFECTIVE DATE. This section is effective for taxable years beginning after December 
77.25 	31, 2016.

77.26 	Sec. 14. Minnesota Statutes 2016, section 290.068, subdivision 2, is amended to read:
77.27 		Subd. 2.Definitions. For purposes of this section, the following terms have the meanings 
77.28 	given.
77.29 	(a) "Qualified research expenses" means (i) qualified research expenses and basic research 
77.30 	payments as defined in section 41(b) and (e) of the Internal Revenue Code, except it does 
77.31 	not include expenses incurred for qualified research or basic research conducted outside 
77.32 	the state of Minnesota pursuant to section 41(d) and (e) of the Internal Revenue Code; and 
78.1 	(ii) contributions to a nonprofit corporation established and operated pursuant to the 
78.2 	provisions of chapter 317A for the purpose of promoting the establishment and expansion 
78.3 	of business in this state, provided the contributions are invested by the nonprofit corporation 
78.4 	for the purpose of providing funds for small, technologically innovative enterprises in 
78.5 	Minnesota during the early stages of their development.
78.6 	(b) "Qualified research" means qualified research as defined in section 41(d) of the 
78.7 	Internal Revenue Code, except that the term does not include qualified research conducted 
78.8 	outside the state of Minnesota.
78.9 	(c) "Base amount" means base amount as defined in section 41(c) of the Internal Revenue 
78.10 	Code, except that the average annual gross receipts must be calculated using Minnesota 
78.11 	sales or receipts under section 290.191 and the definitions contained in clauses paragraphs
78.12 	(a) and (b) shall apply. If there are inadequate records or the records are unavailable to 
78.13 	compute or verify the base percentage, a fixed base percentage of 16 percent must be used.

78.14 	EFFECTIVE DATE. This section is effective for taxable years beginning after December 
78.15 	31, 2016.

78.16 	Sec. 15. Minnesota Statutes 2016, section 290.17, subdivision 4, is amended to read:
78.17 		Subd. 4.Unitary business principle. (a) If a trade or business conducted wholly within 
78.18 	this state or partly within and partly without this state is part of a unitary business, the entire 
78.19 	income of the unitary business is subject to apportionment pursuant to section 290.191. 
78.20 	Notwithstanding subdivision 2, paragraph (c), none of the income of a unitary business is 
78.21 	considered to be derived from any particular source and none may be allocated to a particular 
78.22 	place except as provided by the applicable apportionment formula. The provisions of this 
78.23 	subdivision do not apply to business income subject to subdivision 5, income of an insurance 
78.24 	company, or income of an investment company determined under section 290.36.
78.25 	(b) The term "unitary business" means business activities or operations which result in 
78.26 	a flow of value between them. The term may be applied within a single legal entity or 
78.27 	between multiple entities and without regard to whether each entity is a sole proprietorship, 
78.28 	a corporation, a partnership or a trust.
78.29 	(c) Unity is presumed whenever there is unity of ownership, operation, and use, evidenced 
78.30 	by centralized management or executive force, centralized purchasing, advertising, 
78.31 	accounting, or other controlled interaction, but the absence of these centralized activities 
78.32 	will not necessarily evidence a nonunitary business. Unity is also presumed when business 
79.1 	activities or operations are of mutual benefit, dependent upon or contributory to one another, 
79.2 	either individually or as a group.
79.3 	(d) Where a business operation conducted in Minnesota is owned by a business entity 
79.4 	that carries on business activity outside the state different in kind from that conducted within 
79.5 	this state, and the other business is conducted entirely outside the state, it is presumed that 
79.6 	the two business operations are unitary in nature, interrelated, connected, and interdependent 
79.7 	unless it can be shown to the contrary.
79.8 	(e) Unity of ownership does not exist when two or more corporations are involved unless 
79.9 	more than 50 percent of the voting stock of each corporation is directly or indirectly owned 
79.10 	by a common owner or by common owners, either corporate or noncorporate, or by one or 
79.11 	more of the member corporations of the group. For this purpose, the term "voting stock" 
79.12 	shall include membership interests of mutual insurance holding companies formed under 
79.13 	section 66A.40.
79.14 	(f) The net income and apportionment factors under section 290.191 or 290.20 of foreign 
79.15 	corporations and other foreign entities which are part of a unitary business shall not be 
79.16 	included in the net income or the apportionment factors of the unitary business; except that 
79.17 	the income and apportionment factors of a foreign entity, other than an entity treated as a 
79.18 	C corporation for federal income tax purposes, that are included in the federal taxable 
79.19 	income, as defined in section 63 of the Internal Revenue Code as amended through the date 
79.20 	named in section 290.01, subdivision 19, of a domestic corporation, domestic entity, or 
79.21 	individual must be included in determining net income and the factors to be used in the 
79.22 	apportionment of net income pursuant to section 290.191 or 290.20. A foreign corporation 
79.23 	or other foreign entity which is not included on a combined report and which is required to 
79.24 	file a return under this chapter shall file on a separate return basis.
79.25 	(g) For purposes of determining the net income of a unitary business and the factors to 
79.26 	be used in the apportionment of net income pursuant to section 290.191 or 290.20, there 
79.27 	must be included only the income and apportionment factors of domestic corporations or 
79.28 	other domestic entities that are determined to be part of the unitary business pursuant to this 
79.29 	subdivision, notwithstanding that foreign corporations or other foreign entities might be 
79.30 	included in the unitary business; except that the income and apportionment factors of a 
79.31 	foreign entity, other than an entity treated as a C corporation for federal income tax purposes, 
79.32 	that is included in the federal taxable income, as defined in section 63 of the Internal Revenue 
79.33 	Code as amended through the date named in section 290.01, subdivision 19, of a domestic 
79.34 	corporation, domestic entity, or individual must be included in determining net income and 
80.1 	the factors to be used in the apportionment of net income pursuant to section 290.191 or 
80.2 	290.20.
80.3 	(h) Each corporation or other entity, except a sole proprietorship, that is part of a unitary 
80.4 	business must file combined reports as the commissioner determines. On the reports, all 
80.5 	intercompany transactions between entities included pursuant to paragraph (g) must be 
80.6 	eliminated and the entire net income of the unitary business determined in accordance with 
80.7 	this subdivision is apportioned among the entities by using each entity's Minnesota factors 
80.8 	for apportionment purposes in the numerators of the apportionment formula and the total 
80.9 	factors for apportionment purposes of all entities included pursuant to paragraph (g) in the 
80.10 	denominators of the apportionment formula. Except as otherwise provided by paragraph 
80.11 	(f), all sales of the unitary business made within this state pursuant to section 290.191 or 
80.12 	290.20 must be included on the combined report of a corporation or other entity that is a 
80.13 	member of the unitary business and is subject to the jurisdiction of this state to impose tax 
80.14 	under this chapter.
80.15 	(i) If a corporation has been divested from a unitary business and is included in a 
80.16 	combined report for a fractional part of the common accounting period of the combined 
80.17 	report:
80.18 	(1) its income includable in the combined report is its income incurred for that part of 
80.19 	the year determined by proration or separate accounting; and
80.20 	(2) its sales, property, and payroll included in the apportionment formula must be prorated 
80.21 	or accounted for separately.
80.22 	(j) For purposes of this subdivision, "insurance company" means a company that is:
80.23 	(1) licensed to engage in the business of insurance in Minnesota pursuant to chapter 
80.24 	60A; or
80.25 	(2) domiciled and licensed to engage in the business of insurance in another state or 
80.26 	country that imposes retaliatory taxes, fines, deposits, penalties, licenses, or fees and that 
80.27 	does not grant, on a reciprocal basis, exemption from such retaliatory taxes to insurance 
80.28 	companies or their agents domiciled in Minnesota.
80.29 	(k) For purposes of this subdivision, "retaliatory taxes" means taxes imposed on insurance 
80.30 	companies organized in another state or country that result from the fact that an insurance 
80.31 	company organized in the taxing jurisdiction and doing business in the other jurisdiction is 
80.32 	subject to taxes, fines, deposits, penalties, licenses, or fees in an amount exceeding that 
81.1 	imposed by the taxing jurisdiction upon an insurance company organized in the other state 
81.2 	or country and doing business to the same extent in the taxing jurisdiction.

81.3 	EFFECTIVE DATE. This section is effective for taxable years beginning after December 
81.4 	31, 2016.

81.5 	Sec. 16. Minnesota Statutes 2016, section 290.191, subdivision 5, is amended to read:
81.6 		Subd. 5.Determination of sales factor. For purposes of this section, the following rules 
81.7 	apply in determining the sales factor.
81.8 	(a) The sales factor includes all sales, gross earnings, or receipts received in the ordinary 
81.9 	course of the business, except that the following types of income are not included in the 
81.10 	sales factor:
81.11 	(1) interest;
81.12 	(2) dividends;
81.13 	(3) sales of capital assets as defined in section 1221 of the Internal Revenue Code;
81.14 	(4) sales of property used in the trade or business, except sales of leased property of a 
81.15 	type which is regularly sold as well as leased; and
81.16 	(5) sales of debt instruments as defined in section 1275(a)(1) of the Internal Revenue 
81.17 	Code or sales of stock.
81.18 	(b) Sales of tangible personal property are made within this state if the property is 
81.19 	received by a purchaser at a point within this state, regardless of the f.o.b. point, other 
81.20 	conditions of the sale, or the ultimate destination of the property.
81.21 	(c) Tangible personal property delivered to a common or contract carrier or foreign 
81.22 	vessel for delivery to a purchaser in another state or nation is a sale in that state or nation, 
81.23 	regardless of f.o.b. point or other conditions of the sale.
81.24 	(d) Notwithstanding paragraphs (b) and (c), when intoxicating liquor, wine, fermented 
81.25 	malt beverages, cigarettes, or tobacco products are sold to a purchaser who is licensed by 
81.26 	a state or political subdivision to resell this property only within the state of ultimate 
81.27 	destination, the sale is made in that state.
81.28 	(e) Sales made by or through a corporation that is qualified as a domestic international 
81.29 	sales corporation under section 992 of the Internal Revenue Code are not considered to have 
81.30 	been made within this state.
82.1 	(f) Sales, rents, royalties, and other income in connection with real property is attributed 
82.2 	to the state in which the property is located.
82.3 	(g) Receipts from the lease or rental of tangible personal property, including finance 
82.4 	leases and true leases, must be attributed to this state if the property is located in this state 
82.5 	and to other states if the property is not located in this state. Receipts from the lease or rental 
82.6 	of moving property including, but not limited to, motor vehicles, rolling stock, aircraft, 
82.7 	vessels, or mobile equipment are included in the numerator of the receipts factor to the 
82.8 	extent that the property is used in this state. The extent of the use of moving property is 
82.9 	determined as follows:
82.10 	(1) A motor vehicle is used wholly in the state in which it is registered.
82.11 	(2) The extent that rolling stock is used in this state is determined by multiplying the 
82.12 	receipts from the lease or rental of the rolling stock by a fraction, the numerator of which 
82.13 	is the miles traveled within this state by the leased or rented rolling stock and the denominator 
82.14 	of which is the total miles traveled by the leased or rented rolling stock.
82.15 	(3) The extent that an aircraft is used in this state is determined by multiplying the 
82.16 	receipts from the lease or rental of the aircraft by a fraction, the numerator of which is the 
82.17 	number of landings of the aircraft in this state and the denominator of which is the total 
82.18 	number of landings of the aircraft.
82.19 	(4) The extent that a vessel, mobile equipment, or other mobile property is used in the 
82.20 	state is determined by multiplying the receipts from the lease or rental of the property by a 
82.21 	fraction, the numerator of which is the number of days during the taxable year the property 
82.22 	was in this state and the denominator of which is the total days in the taxable year.
82.23 	(h) Royalties and other income received for the use of or for the privilege of using 
82.24 	intangible property, including patents, know-how, formulas, designs, processes, patterns, 
82.25 	copyrights, trade names, service names, franchises, licenses, contracts, customer lists, or 
82.26 	similar items, must be attributed to the state in which the property is used by the purchaser. 
82.27 	If the property is used in more than one state, the royalties or other income must be 
82.28 	apportioned to this state pro rata according to the portion of use in this state. If the portion 
82.29 	of use in this state cannot be determined, the royalties or other income must be excluded 
82.30 	from both the numerator and the denominator. Intangible property is used in this state if the 
82.31 	purchaser uses the intangible property or the rights therein in the regular course of its business 
82.32 	operations in this state, regardless of the location of the purchaser's customers.
82.33 	(i) Sales of intangible property are made within the state in which the property is used 
82.34 	by the purchaser. If the property is used in more than one state, the sales must be apportioned 
83.1 	to this state pro rata according to the portion of use in this state. If the portion of use in this 
83.2 	state cannot be determined, the sale must be excluded from both the numerator and the 
83.3 	denominator of the sales factor. Intangible property is used in this state if the purchaser used 
83.4 	the intangible property in the regular course of its business operations in this state.
83.5 	(j) Receipts from the performance of services must be attributed to the state where the 
83.6 	services are received. For the purposes of this section, receipts from the performance of 
83.7 	services provided to a corporation, partnership, or trust may only be attributed to a state 
83.8 	where it has a fixed place of doing business. If the state where the services are received is 
83.9 	not readily determinable or is a state where the corporation, partnership, or trust receiving 
83.10 	the service does not have a fixed place of doing business, the services shall be deemed to 
83.11 	be received at the location of the office of the customer from which the services were ordered 
83.12 	in the regular course of the customer's trade or business. If the ordering office cannot be 
83.13 	determined, the services shall be deemed to be received at the office of the customer to 
83.14 	which the services are billed.
83.15 	(k) For the purposes of this subdivision and subdivision 6, paragraph (l), receipts from 
83.16 	management, distribution, or administrative services performed by a corporation, a 
83.17 	partnership, a limited liability company, or trust for a fund of a corporation, a partnership, 
83.18 	a limited liability company, or trust regulated under United States Code, title 15, sections 
83.19 	80a-1 through 80a-64, must be attributed to the state where the shareholder of the fund 
83.20 	resides. Under this paragraph, receipts for services attributed to shareholders are determined 
83.21 	on the basis of the ratio of: (1) the average of the outstanding shares in the fund owned by 
83.22 	shareholders residing within Minnesota at the beginning and end of each year; and (2) the 
83.23 	average of the total number of outstanding shares in the fund at the beginning and end of 
83.24 	each year. Residence of the shareholder, in the case of an individual, is determined by the 
83.25 	mailing address furnished by the shareholder to the fund. Residence of the shareholder, 
83.26 	when the shares are held by an insurance company as a depositor for the insurance company 
83.27 	policyholders, is the mailing address of the policyholders. In the case of an insurance 
83.28 	company holding the shares as a depositor for the insurance company policyholders, if the 
83.29 	mailing address of the policyholders cannot be determined by the taxpayer, the receipts 
83.30 	must be excluded from both the numerator and denominator. Residence of other shareholders 
83.31 	is the mailing address of the shareholder.

83.32 	EFFECTIVE DATE. This section is effective for taxable years beginning after December 
83.33 	31, 2016.

84.1 	Sec. 17. Minnesota Statutes 2016, section 290.21, subdivision 4, is amended to read:
84.2 		Subd. 4.Dividends received from another corporation. (a)(1) Eighty percent of 
84.3 	dividends received by a corporation during the taxable year from another corporation, in 
84.4 	which the recipient owns 20 percent or more of the stock, by vote and value, not including 
84.5 	stock described in section 1504(a)(4) of the Internal Revenue Code when the corporate 
84.6 	stock with respect to which dividends are paid does not constitute the stock in trade of the 
84.7 	taxpayer or would not be included in the inventory of the taxpayer, or does not constitute 
84.8 	property held by the taxpayer primarily for sale to customers in the ordinary course of the 
84.9 	taxpayer's trade or business, or when the trade or business of the taxpayer does not consist 
84.10 	principally of the holding of the stocks and the collection of the income and gains therefrom; 
84.11 	and
84.12 	(2)(i) the remaining 20 percent of dividends if the dividends received are the stock in 
84.13 	an affiliated company transferred in an overall plan of reorganization and the dividend is 
84.14 	eliminated in consolidation under Treasury Department Regulation 1.1502-14(a), as amended 
84.15 	through December 31, 1989;
84.16 	(ii) the remaining 20 percent of dividends if the dividends are received from a corporation 
84.17 	which is subject to tax under section 290.36 and which is a member of an affiliated group 
84.18 	of corporations as defined by the Internal Revenue Code and the dividend is eliminated in 
84.19 	consolidation under Treasury Department Regulation 1.1502-14(a), as amended through 
84.20 	December 31, 1989, or is deducted under an election under section 243(b) of the Internal 
84.21 	Revenue Code; or
84.22 	(iii) the remaining 20 percent of the dividends if the dividends are received from a 
84.23 	property and casualty insurer as defined under section 60A.60, subdivision 8, which is a 
84.24 	member of an affiliated group of corporations as defined by the Internal Revenue Code and 
84.25 	either: (A) the dividend is eliminated in consolidation under Treasury Regulation 
84.26 	1.1502-14(a), as amended through December 31, 1989; or (B) the dividend is deducted 
84.27 	under an election under section 243(b) of the Internal Revenue Code.
84.28 	(b) Seventy percent of dividends received by a corporation during the taxable year from 
84.29 	another corporation in which the recipient owns less than 20 percent of the stock, by vote 
84.30 	or value, not including stock described in section 1504(a)(4) of the Internal Revenue Code 
84.31 	when the corporate stock with respect to which dividends are paid does not constitute the 
84.32 	stock in trade of the taxpayer, or does not constitute property held by the taxpayer primarily 
84.33 	for sale to customers in the ordinary course of the taxpayer's trade or business, or when the 
85.1 	trade or business of the taxpayer does not consist principally of the holding of the stocks 
85.2 	and the collection of income and gain therefrom.
85.3 	(c) The dividend deduction provided in this subdivision shall be allowed only with 
85.4 	respect to dividends that are included in a corporation's Minnesota taxable net income for 
85.5 	the taxable year.
85.6 	The dividend deduction provided in this subdivision does not apply to a dividend from 
85.7 	a corporation which, for the taxable year of the corporation in which the distribution is made 
85.8 	or for the next preceding taxable year of the corporation, is a corporation exempt from tax 
85.9 	under section 501 of the Internal Revenue Code.
85.10 	The dividend deduction provided in this subdivision does not apply to a dividend received 
85.11 	from a real estate investment trust as defined in section 856 of the Internal Revenue Code.
85.12 	The dividend deduction provided in this subdivision applies to the amount of regulated 
85.13 	investment company dividends only to the extent determined under section 854(b) of the 
85.14 	Internal Revenue Code.
85.15 	The dividend deduction provided in this subdivision shall not be allowed with respect 
85.16 	to any dividend for which a deduction is not allowed under the provisions of section 246(c)
85.17 	or 246A  of the Internal Revenue Code.
85.18 	(d) If dividends received by a corporation that does not have nexus with Minnesota under 
85.19 	the provisions of Public Law 86-272 are included as income on the return of an affiliated 
85.20 	corporation permitted or required to file a combined report under section 290.17, subdivision 
85.21 	4, or 290.34, subdivision 2, then for purposes of this subdivision the determination as to 
85.22 	whether the trade or business of the corporation consists principally of the holding of stocks 
85.23 	and the collection of income and gains therefrom shall be made with reference to the trade 
85.24 	or business of the affiliated corporation having a nexus with Minnesota.
85.25 	(e) The deduction provided by this subdivision does not apply if the dividends are paid 
85.26 	by a FSC as defined in section 922 of the Internal Revenue Code.
85.27 	(f) If one or more of the members of the unitary group whose income is included on the 
85.28 	combined report received a dividend, the deduction under this subdivision for each member 
85.29 	of the unitary business required to file a return under this chapter is the product of: (1) 100 
85.30 	percent of the dividends received by members of the group; (2) the percentage allowed 
85.31 	pursuant to paragraph (a) or (b); and (3) the percentage of the taxpayer's business income 
85.32 	apportionable to this state for the taxable year under section 290.191 or 290.20.
86.1 	(g) Amounts included in the net income of shareholders of foreign corporations as the 
86.2 	result of sections 951 and 1248 of the Internal Revenue Code are not dividends for the 
86.3 	purposes of this chapter.

86.4 	EFFECTIVE DATE. This section is effective for taxable years beginning after December 
86.5 	31, 2016.

86.6 	Sec. 18. Minnesota Statutes 2016, section 297I.05, subdivision 7, is amended to read:
86.7 		Subd. 7.Nonadmitted insurance premium tax. (a) A tax is imposed on surplus lines 
86.8 	brokers. The rate of tax is equal to three percent of the gross premiums less return premiums 
86.9 	paid by an insured whose home state is Minnesota.
86.10 	(b) A tax is imposed on a person, firm, corporation, or purchasing group as defined in 
86.11 	section 60E.02, or any member of a purchasing group, that procures insurance directly from 
86.12 	a nonadmitted insurer. The rate of tax is equal to two three percent of the gross premiums 
86.13 	less return premiums paid by an insured whose home state is Minnesota.
86.14 	(c) No state other than the home state of an insured may require any premium tax payment 
86.15 	for nonadmitted insurance. When Minnesota is the home state of the insured, as provided 
86.16 	under section 297I.01, 100 percent of the gross premiums are taxable in Minnesota with no 
86.17 	allocation of the tax to other states.

86.18 	EFFECTIVE DATE. This section is effective for nonadmitted insurance policies that 
86.19 	go into effect after December 31, 2017.

86.20 	Sec. 19. Laws 2010, chapter 216, section 12, the effective date, as amended by Laws 2016, 
86.21 	chapter 158, article 1, section 212, is amended to read:

86.22 	EFFECTIVE DATE. This section is effective for investments made after July 1, 2010, 
86.23 	for taxable years beginning after December 31, 2009, and before January 1, 2017 2019, and 
86.24 	only applies to investments made after the qualified small business receiving the investment 
86.25 	has been certified by the commissioner of employment and economic development.

86.26 	ARTICLE 5
86.27 	RAILROAD RECODIFICATION

86.28 	Section 1. Minnesota Statutes 2016, section 270.80, subdivision 2, is amended to read:
86.29 		Subd. 2.Railroad company. "Railroad company" means:
87.1 	(1) any company which as a common carrier operates a railroad or a line or lines of 
87.2 	railway railroads situated within or partly within Minnesota; or
87.3 	(2) any company owning or operating, other than as a common carrier, a railway railroad
87.4 	principally used for transportation of taconite concentrates from the plant at which the 
87.5 	taconite concentrates are produced in shipping form to a point of consumption or port for 
87.6 	shipment beyond the state; or
87.7 	(3) any company that produces concentrates from taconite and transports that taconite 
87.8 	in the course of the concentrating process and before the concentrating process is completed 
87.9 	to a concentrating plant located within the state over a railroad that is not a common carrier 
87.10 	and shall does not use a common carrier or taconite railroad company as defined in clause 
87.11 	(2) for the movement of the concentrate to a point of consumption or port for shipment 
87.12 	beyond the state.

87.13 	EFFECTIVE DATE. This section is effective beginning in assessment year 2018.

87.14 	Sec. 2. Minnesota Statutes 2016, section 270.80, subdivision 3, is amended to read:
87.15 		Subd. 3.Operating property. "Operating property" means all property owned or used 
87.16 	by a railroad company in the performance of railroad transportation services, including 
87.17 	without limitation franchises, rights-of-way, bridges, trestles, shops, docks, wharves, 
87.18 	buildings and structures. but not limited to road, locomotives, freight cars, and improvements 
87.19 	to leased property. Operating property is listed and assessed by the commissioner where 
87.20 	the property is located.

87.21 	EFFECTIVE DATE. This section is effective beginning in assessment year 2018.

87.22 	Sec. 3. Minnesota Statutes 2016, section 270.80, subdivision 4, is amended to read:
87.23 		Subd. 4.Nonoperating property. "Nonoperating property" means and includes all 
87.24 	property other than property defined in subdivision 3. Nonoperating property shall include
87.25 	includes real property which that is leased or rented or available for lease or rent to any 
87.26 	person which that is not a railroad company. Vacant land shall be is presumed to be available 
87.27 	for lease or rent if it has not been used as operating property for a period of one year 
87.28 	immediately preceding the valuation date. Nonoperating property also includes land which
87.29 	that is not necessary and integral to the performance of railroad transportation services and 
87.30 	which that is not used on a regular and continual basis in the performance of these services. 
87.31 	Nonoperating property also includes that portion of a general corporation office building 
88.1 	and its proportionate share of land which that is not used for railway railroad operation or 
88.2 	purpose.

88.3 	EFFECTIVE DATE. This section is effective beginning in assessment year 2018.

88.4 	Sec. 4. Minnesota Statutes 2016, section 270.80, is amended by adding a subdivision to 
88.5 	read:
88.6 		Subd. 6.Company. "Company" means any corporation, limited liability company, 
88.7 	association, partnership, trust, estate, fiduciary, public or private organization of any kind, 
88.8 	or other legal entity.

88.9 	EFFECTIVE DATE. This section is effective beginning in assessment year 2018.

88.10 	Sec. 5. Minnesota Statutes 2016, section 270.80, is amended by adding a subdivision to 
88.11 	read:
88.12 		Subd. 7.Unit value. "Unit value" means the value of the system of a railroad company 
88.13 	taken as a whole, without regard to the value of its component parts.

88.14 	EFFECTIVE DATE. This section is effective beginning in assessment year 2018.

88.15 	Sec. 6. Minnesota Statutes 2016, section 270.80, is amended by adding a subdivision to 
88.16 	read:
88.17 		Subd. 8.Book depreciation. "Book depreciation" means the depreciation shown by a 
88.18 	railroad company on its accounting records and allowed the company by the Surface 
88.19 	Transportation Board.

88.20 	EFFECTIVE DATE. This section is effective beginning in assessment year 2018.

88.21 	Sec. 7. Minnesota Statutes 2016, section 270.80, is amended by adding a subdivision to 
88.22 	read:
88.23 		Subd. 9.Equalization. "Equalization" means the adjustment of the estimated market 
88.24 	value of railroad operating property to the apparent sales ratio accepted by the State Board 
88.25 	of Equalization.

88.26 	EFFECTIVE DATE. This section is effective beginning in assessment year 2018.

89.1 	Sec. 8. Minnesota Statutes 2016, section 270.80, is amended by adding a subdivision to 
89.2 	read:
89.3 		Subd. 10.Exempt property. "Exempt property" means property that is nontaxable for 
89.4 	ad valorem tax purposes under Minnesota Statutes, including personal property exempt 
89.5 	from taxation under chapter 272.

89.6 	EFFECTIVE DATE. This section is effective beginning in assessment year 2018.

89.7 	Sec. 9. Minnesota Statutes 2016, section 270.80, is amended by adding a subdivision to 
89.8 	read:
89.9 		Subd. 11.Original cost. "Original cost" means the amount paid for an asset as recorded 
89.10 	on the railroad's accounting records in accordance with Surface Transportation Board 
89.11 	accounting rules and regulations.

89.12 	EFFECTIVE DATE. This section is effective beginning in assessment year 2018.

89.13 	Sec. 10. Minnesota Statutes 2016, section 270.80, is amended by adding a subdivision to 
89.14 	read:
89.15 		Subd. 12.System. "System" means the total real and personal property of a railroad that 
89.16 	is used in its railroad operations in all states in which it operates.

89.17 	EFFECTIVE DATE. This section is effective beginning in assessment year 2018.

89.18 	Sec. 11. Minnesota Statutes 2016, section 270.80, is amended by adding a subdivision to 
89.19 	read:
89.20 		Subd. 13.Minnesota allocated value. "Minnesota allocated value" means the value of 
89.21 	a railroad company's operating property that is assigned to Minnesota for tax purposes.

89.22 	EFFECTIVE DATE. This section is effective beginning in assessment year 2018.

89.23 	Sec. 12. Minnesota Statutes 2016, section 270.81, subdivision 3, is amended to read:
89.24 		Subd. 3.Determination of type of property. (a) The commissioner shall have has 
89.25 	exclusive primary jurisdiction to determine what whether railroad property is operating 
89.26 	property and what is or nonoperating property. In making such this determination, the 
89.27 	commissioner shall may solicit information and opinions from outside the department and 
89.28 	afford all interested persons an opportunity to submit data or views on the subject in writing 
89.29 	or orally.
90.1 	(b) Local and county assessors may submit written requests to the commissioner, asking 
90.2 	for a determination of the nature of specific whether property owned by a railroad and 
90.3 	located within their assessing jurisdiction is operating or nonoperating property. Any 
90.4 	determination made by the commissioner may be appealed by the assessor to the Tax Court 
90.5 	pursuant to chapter 271. The requests must be submitted by April 1 of the assessing year. 
90.6 	Following a request, the commissioner must send the assessor a written determination by 
90.7 	May 1. Assessors may appeal determinations made by the commissioner to the Tax Court 
90.8 	pursuant to chapter 271.

90.9 	EFFECTIVE DATE. This section is effective beginning in assessment year 2018.

90.10 	Sec. 13. Minnesota Statutes 2016, section 270.81, is amended by adding a subdivision to 
90.11 	read:
90.12 		Subd. 6.Deduction for nonoperating and exempt property. Property located in 
90.13 	Minnesota that was part of the unit but is nonoperating property, or that is exempt from ad 
90.14 	valorem taxation, is deducted from the Minnesota allocated value under section 273.3718, 
90.15 	subdivision 1a. Only qualifying property located in Minnesota may be deducted from the 
90.16 	Minnesota allocated value. The railroad company has the burden of proof to establish that 
90.17 	the property should be deducted from the Minnesota allocated value. The railroad company 
90.18 	must submit schedules of exempt or nonoperating property as the commissioner may require. 
90.19 	The commissioner must determine if property claimed by the railroad as nonoperating 
90.20 	property or exempt property qualifies for deduction from the Minnesota allocated value. 
90.21 	The commissioner must determine the market value of the qualifying property to be deducted 
90.22 	by multiplying the book value of the qualifying property by the market-to-book ratio of the 
90.23 	unit. The remaining amount after this deduction is the Minnesota apportionable market 
90.24 	value.

90.25 	EFFECTIVE DATE. This section is effective beginning in assessment year 2018.

90.26 	Sec. 14. Minnesota Statutes 2016, section 270.82, is amended to read:
90.27 	270.82 REPORTS OF RAILROAD COMPANIES.
90.28 		Subdivision 1.Annual report required. Before March 31, every railroad company 
90.29 	doing business in Minnesota shall must annually file with the commissioner on or before 
90.30 	March 31 a report under oath setting forth the information prescribed by the commissioner 
90.31 	to enable the commissioner to make the valuation and equalization required by sections 
90.32 	270.80 to 270.87. 273.3712 to 273.3719. The commissioner shall prescribe the content, 
90.33 	format, and manner of the report pursuant to section 270C.30. If a report is made 
91.1 	electronically, the taxpayer's signature is defined pursuant to section 270C.304, except that 
91.2 	a "law administered by the commissioner" includes the property tax laws.
91.3 		Subd. 2.Extension of time. If the commissioner for gooddetermines that there is 
91.4 	reasonable cause, the commissioner may extend the time for filing the report required by 
91.5 	subdivision 1 for up to 15 days the time for filing the report required by subdivision 1.
91.6 		Subd. 3.Amended reports. A railroad company may file an amended report to correct 
91.7 	or add information to the original report. Amended reports must be filed with the 
91.8 	commissioner by April 30.
91.9 		Subd. 4.Failure to file reports. (a) The commissioner may make a valuation pursuant 
91.10 	to sections 273.3712 to 273.3719 according to the commissioner's best judgment based on 
91.11 	available information if any railroad company does not:
91.12 	(1) make the report required by this subdivision;
91.13 	(2) permit an inspection and examination of its property, records, books, accounts, or 
91.14 	other papers when requested by the commissioner; or
91.15 	(3) appear before the commissioner or a person appointed under section 273.3715 when 
91.16 	required to do so.
91.17 	(b) If the commissioner makes a valuation pursuant to paragraph (a), the commissioner's 
91.18 	valuation is final. Notwithstanding any other law to the contrary, a valuation made pursuant 
91.19 	to this subdivision is not appealable administratively.

91.20 	EFFECTIVE DATE. This section is effective beginning in assessment year 2018.

91.21 	Sec. 15. Minnesota Statutes 2016, section 270.83, subdivision 1, is amended to read:
91.22 		Subdivision 1.Powers of commissioner. The commissioner shall have has the power 
91.23 	to examine or cause to be examined any books, papers, records, or memoranda relevant to 
91.24 	the determination of the valuation of operating property as herein provided. The 
91.25 	commissioner shall have the further power to may require the attendance of any person 
91.26 	having knowledge or information in the premises concerning the valuation of the operating 
91.27 	property, to compel the production of books, papers, records, or memoranda by persons so 
91.28 	required to attend, to take testimony on matters material to such determinationdetermining 
91.29 	the valuation of operating property, and administer oaths or affirmations.

91.30 	EFFECTIVE DATE. This section is effective beginning in assessment year 2018.

92.1 	Sec. 16. Minnesota Statutes 2016, section 270.83, subdivision 2, is amended to read:
92.2 		Subd. 2.Appointment of persons; subpoenas. For the purpose of making such 
92.3 	examinations, The commissioner may appoint such persons as the commissioner may deem
92.4 	deems necessary to make the examinations described in subdivision 1. Such persons shall 
92.5 	have the rights and powers of the examining of Persons appointed may examine books, 
92.6 	papers, records, or memoranda, and of subpoenaing subpoena witnesses, administering
92.7 	administer oaths and affirmations, and taking of take testimony, which are conferred upon 
92.8 	the commissioner hereby. The court administrator of any court of record, upon demand of 
92.9 	any such person appointed, shall issue a subpoena for the attendance of any witness or the 
92.10 	production of any books, papers, records, or memoranda before such person. The 
92.11 	commissioner may also issue subpoenas for the appearance of witnesses before the 
92.12 	commissioner or before such persons. Disobedience of subpoenas so issued shall be punished 
92.13 	by the district court of the district in which the subpoena is issued for a contempt of the 
92.14 	district court. Failure to comply with a subpoena shall be punished in the same manner as 
92.15 	contempt of the district court.

92.16 	EFFECTIVE DATE. This section is effective beginning in assessment year 2018.

92.17 	Sec. 17. Minnesota Statutes 2016, section 270.84, is amended to read:
92.18 	270.84 ANNUAL VALUATION OF OPERATING PROPERTY.
92.19 		Subdivision 1.Annual valuation; rules. (a) Before July 1, the commissioner shall 
92.20 	annually between March 31 and May 31 make a determination of must determine the fair
92.21 	market value of the operating property of every railroad company doing business in this 
92.22 	state as of January 2 of the year in which the valuation is made. In making this determination,
92.23 	The commissioner shallmust employ generally accepted appraisal principles and practices 
92.24 	which may include the unit method of determining value, and approaches developed by the 
92.25 	Western States Association of Tax Administrators, National Conference of Unit Valuation 
92.26 	States, and the International Association of Assessing Officers.
92.27 	(b) The unit value of railroad property is the reconciled value considering the cost, 
92.28 	income, and market approaches under subdivisions 1a, 1b, and 1c. Each approach must be 
92.29 	weighed in accordance with (1) the reliability of the information and (2) the commissioner's 
92.30 	judgment.
92.31 		Subd. 1a.Cost approach. (a) The commissioner may use the cost approach, including 
92.32 	but not limited to original cost less book depreciation and replacement cost less depreciation.
93.1 	(b) Book depreciation is allowed as a deduction from original cost less book depreciation. 
93.2 	Book depreciation is assumed to include all forms of depreciation.
93.3 	(c) Explicitly calculated appraisal depreciation, including physical, functional, and 
93.4 	external obsolescence, is allowed as a deduction from the replacement cost model.
93.5 		Subd. 1b.Income approach. (a) The commissioner may use the income approach, 
93.6 	including but not limited to direct capitalization models and yield capitalization models.
93.7 	(b) The yield rate is calculated using market data on selected comparable companies in 
93.8 	the band of investment method.
93.9 	(1) Discounted cash flow is a yield capitalization model that calculates the present value 
93.10 	of explicit cash flow forecasts capitalized using the yield rate, plus reversion to stable growth 
93.11 	yield capitalization after the period of explicit forecasts.
93.12 	(2) Stable growth yield capitalization is a yield capitalization model that calculates the 
93.13 	present value of anticipated future cash flows, capitalized using the yield rate and considering 
93.14 	growth.
93.15 	(c) Direct capitalization is the expected net operating income for the following year, 
93.16 	divided by the direct capitalization rate. The direct capitalization rate is calculated by using 
93.17 	direct market observations from comparable sales or using market earning-to-price 
93.18 	information in the band of investment method.
93.19 		Subd. 1c.Market approach. The commissioner may use the market approach, including 
93.20 	but not limited to a sales comparison model, a stock and debt model, or other market models 
93.21 	that are available and reliable.
93.22 		Subd. 2.Notice. The commissioner, after determining the fair market value of the 
93.23 	operating property of each railroad company, shall give notice to must notify the railroad 
93.24 	company of the valuation by first class mail, overnight delivery, or messenger service.

93.25 	EFFECTIVE DATE. This section is effective beginning in assessment year 2018.

93.26 	Sec. 18. Minnesota Statutes 2016, section 270.86, is amended to read:
93.27 	270.86 APPORTIONMENT AND EQUALIZATION OF VALUATION.
93.28 		Subdivision 1.Apportionment of value. Upon determining (a) After allocating to 
93.29 	Minnesota the fair market value of the operating property of each railroad company, the 
93.30 	commissioner shallmust apportion suchthe value to the respective counties and to the 
93.31 	taxing districts therein in conformity with fair and reasonable rules and standards to be 
93.32 	established by the commissioner pursuant to notice and hearing, except as provided in 
94.1 	section 270.81. In establishing such rules and standards the commissioner may consider (a) 
94.2 	the physical situs of all station houses, depots, docks, wharves, and other buildings and 
94.3 	structures with an original cost in excess of $10,000; (b) the proportion that the length and 
94.4 	type of all the tracks used by the railroad in such county and taxing district bears to the 
94.5 	length and type of all the track used in the state; and (c) other facts as will result in a fair 
94.6 	and equitable apportionment of value. the operating parcels in Minnesota.
94.7 	(b) The taxable Minnesota portion of the railroad's value must be apportioned to each 
94.8 	parcel with railroad operating property based on a property factor and a use factor. Each 
94.9 	parcel's apportioned market value is equal to the sum of the parcel's cost component 
94.10 	multiplied by the property factor and the parcel's ton miles of revenue freight times the use 
94.11 	factor.
94.12 	(c) For purposes of calculating the apportioned market value in paragraph (b), the property 
94.13 	factor is equal to the taxable value of a railroad allocated to Minnesota divided by the sum 
94.14 	of each parcel's cost components, the result of which is multiplied by 0.5. A parcel's cost 
94.15 	components are the following:
94.16 	(1) the average estimated market value per taxable commercial acre within a city or 
94.17 	township times the number of operating acres for each parcel. If the average market value 
94.18 	per commercial acre within a city or township cannot be determined, the average estimated 
94.19 	market value per taxable acre within that city or township is used;
94.20 	(2) the miles of track within a parcel multiplied by the average cost of grading, ties, rails, 
94.21 	and ballast per mile of track within Minnesota; and
94.22 	(3) the original cost of structures within a parcel.
94.23 	(d) For purposes of calculating the apportioned market value in paragraph (b), the use 
94.24 	factor is equal to the taxable value of a railroad allocated to Minnesota divided by the sum 
94.25 	of each parcel's ton miles of revenue freight for the subject railroad, the result of which is 
94.26 	multiplied by 0.5. Each railroad must report the ton miles of revenue freight for each railroad 
94.27 	operating parcel.
94.28 		Subd. 1a.Allocation of value. After the market value of the operating property has been 
94.29 	estimated, the portion of the value that is attributable to Minnesota must be determined by 
94.30 	calculating an allocation percentage using factors relevant to the industry segment of the 
94.31 	railroad company. This allocation percentage must be multiplied by the value of the operating 
94.32 	property to determine the Minnesota allocated value.
94.33 	The Minnesota allocated value is determined by averaging the following factors:
95.1 	(1) the miles of railroad track operated in Minnesota divided by miles of railroad track 
95.2 	operated in all states;
95.3 	(2) the ton miles of revenue freight transported in Minnesota divided by ton miles of 
95.4 	revenue freight transported in all states;
95.5 	(3) the gross revenues from transportation operations within Minnesota divided by gross 
95.6 	revenues from transportation operations in all states; and
95.7 	(4) the cost of railroad property in Minnesota divided by the cost of railroad property in 
95.8 	all states.
95.9 	The average of the factors must be multiplied by the value of the railroad company's 
95.10 	operating property to calculate the Minnesota portion of the railroad's operating property.
95.11 		Subd. 2.Equalized valuation. After making the apportionment provided in subdivision 
95.12 	1, the commissioner shall determine the equalized valuation of the operating property in 
95.13 	each county by applying to the apportioned value an estimated current year median sales 
95.14 	ratio for all commercial and industrial property in that county must equalize the values of 
95.15 	the operating property to the level accepted by the State Board of Equalization if the 
95.16 	appropriate assessment-to-sales ratio for each county as conducted by the Department of 
95.17 	Revenue in section 270.12, subdivision 2, clause 6, is outside the range accepted by the 
95.18 	State Board of Equalization. If the commissioner decides there are insufficient sales to 
95.19 	determine a median commercial-industrial sales ratio, an estimated current year countywide 
95.20 	median sales ratio for all property shall be applied to the apportioned value. No equalization 
95.21 	shall be made toThe commissioner must not equalize the market value of the operating 
95.22 	property if the median sales ratio assessment-to-sales ratio determined pursuant to this 
95.23 	subdivision is within five percent of the assessment ratio of the railroad operating property
95.24 	the range accepted by the State Board of Equalization.

95.25 	EFFECTIVE DATE. This section is effective beginning in assessment year 2018.

95.26 	Sec. 19. Minnesota Statutes 2016, section 270.87, is amended to read:
95.27 	270.87 CERTIFICATION TO COUNTY ASSESSORS.
95.28 	After making an annual determination of the equalized fair market value of the operating 
95.29 	property of each company in each of the respective counties, and in the taxing districts 
95.30 	therein, The commissioner shallmust certify the equalized fair market value of the operating 
95.31 	property to the county assessor on or before June 30 August 1. The equalized fair market 
95.32 	value of the operating property of the railroad company in the county and the taxing districts 
95.33 	therein is the value on which taxes must be levied and collected in the same manner as on 
96.1 	the commercial and industrial property of such county and the taxing districts therein in the 
96.2 	counties and taxing districts. If the commissioner determines that the equalized fair market 
96.3 	value certified on or before June 30 before August 1 is in error, the commissioner may issue 
96.4 	a corrected certification on or before August 31 before October 1. The commissioner may 
96.5 	correct errors that are merely clerical in nature until December 31.

96.6 	EFFECTIVE DATE. This section is effective beginning in assessment year 2018.

96.7 	Sec. 20. Minnesota Statutes 2016, section 272.02, subdivision 9, is amended to read:
96.8 		Subd. 9.Personal property; exceptions. Except for the taxable personal property 
96.9 	enumerated below, all personal property and the property described in section 272.03, 
96.10 	subdivision 1, paragraphs (c) and (d), shall be exempt.
96.11 	The following personal property shall be taxable:
96.12 	(a) personal property which is part of an electric generating, transmission, or distribution 
96.13 	system or a pipeline system transporting or distributing water, gas, crude oil, or petroleum 
96.14 	products or mains and pipes used in the distribution of steam or hot or chilled water for 
96.15 	heating or cooling buildings and structures;
96.16 	(b) railroad docks and wharves which are personal property that is part of the operating 
96.17 	property of a railroad company as defined in section 270.80 273.3712;
96.18 	(c) personal property defined in section 272.03, subdivision 2, clause (3);
96.19 	(d) leasehold or other personal property interests which are taxed pursuant to section 
96.20 	272.01, subdivision 2; 273.124, subdivision 7; or 273.19, subdivision 1; or any other law 
96.21 	providing the property is taxable as if the lessee or user were the fee owner;
96.22 	(e) manufactured homes and sectional structures, including storage sheds, decks, and 
96.23 	similar removable improvements constructed on the site of a manufactured home, sectional 
96.24 	structure, park trailer or travel trailer as provided in section 273.125, subdivision 8, paragraph 
96.25 	(f); and
96.26 	(f) flight property as defined in section 270.071.

96.27 	EFFECTIVE DATE. This section is effective beginning in assessment year 2018.

96.28 	Sec. 21. Minnesota Statutes 2016, section 275.025, subdivision 1, is amended to read:
96.29 		Subdivision 1.Levy amount. The state general levy is levied against 
96.30 	commercial-industrial property and seasonal residential recreational property, as defined 
96.31 	in this section. The state general levy base amount for commercial-industrial property is 
97.1 	$592,000,000 $927,500,000 for taxes payable in 2002 2019. For taxes payable in subsequent 
97.2 	years, the levy base amount is increased each year by multiplying the levy base amount for 
97.3 	the prior year by the sum of one plus the rate of increase, if any, in the implicit price deflator 
97.4 	for government consumption expenditures and gross investment for state and local 
97.5 	governments prepared by the Bureau of Economic Analysts of the United States Department 
97.6 	of Commerce for the 12-month period ending March 31 of the year prior to the year the 
97.7 	taxes are payable. The tax under this section is not treated as a local tax rate under section 
97.8 	469.177 and is not the levy of a governmental unit under chapters 276A and 473F.
97.9 	The commissioner shall increase or decrease the preliminary or final rate for a year as 
97.10 	necessary to account for errors and tax base changes that affected a preliminary or final rate 
97.11 	for either of the two preceding years. Adjustments are allowed to the extent that the necessary 
97.12 	information is available to the commissioner at the time the rates for a year must be certified, 
97.13 	and for the following reasons:
97.14 	(1) an erroneous report of taxable value by a local official;
97.15 	(2) an erroneous calculation by the commissioner; and
97.16 	(3) an increase or decrease in taxable value for commercial-industrial or seasonal 
97.17 	residential recreational property reported on the abstracts of tax lists submitted under section 
97.18 	275.29 that was not reported on the abstracts of assessment submitted under section 270C.89
97.19 	for the same year.
97.20 	The commissioner may, but need not, make adjustments if the total difference in the tax 
97.21 	levied for the year would be less than $100,000.

97.22 	EFFECTIVE DATE. This section is effective for taxes payable in 2019 and thereafter.

97.23 	Sec. 22. Minnesota Statutes 2016, section 275.025, subdivision 4, is amended to read:
97.24 		Subd. 4.Apportionment and levy of state general tax. Ninety-five 95.1 percent of the 
97.25 	state general tax must be levied by applying a uniform rate to all commercial-industrial tax 
97.26 	capacity and five 4.9 percent of the state general tax must be levied by applying a uniform 
97.27 	rate to all seasonal residential recreational tax capacity. On or before October 1 each year, 
97.28 	the commissioner of revenue shall certify the preliminary state general levy rates to each 
97.29 	county auditor that must be used to prepare the notices of proposed property taxes for taxes 
97.30 	payable in the following year. By January 1 of each year, the commissioner shall certify 
97.31 	the final state general levy rate to each county auditor that shall be used in spreading taxes.

97.32 	EFFECTIVE DATE. This section is effective for taxes payable in 2019 and thereafter.

98.1 	Sec. 23. SEVERABILITY.
 98.2 	If any part of this article is found to be invalid because it is in conflict with a provision 
98.3 	of the Minnesota Constitution or for any other reason, all other provisions of this act shall 
98.4 	remain valid and any rights, remedies, and privileges that have been otherwise accrued by 
98.5 	this act shall remain in effect and may be proceeded with and concluded under the provisions 
98.6 	of this act.

98.7 	EFFECTIVE DATE. This section is effective the day following final enactment.

98.8 	Sec. 24. APPROPRIATIONS.
 98.9 	$291,000 in fiscal year 2018 and $175,000 in fiscal year 2019 are appropriated from the 
98.10 	general fund to the commissioner of revenue to administer the provisions in this article. 
98.11 	$175,000 shall be added to the base appropriations to the Department of Revenue for fiscal 
98.12 	years 2020 and 2021.

98.13 	Sec. 25. REVISOR'S INSTRUCTION.
 98.14 	(a) The revisor of statutes shall renumber the statutory section in column A with the 
98.15 	section in column B. The revisor shall make necessary cross-reference changes in Minnesota 
98.16 	Statutes and Minnesota Rules.

98.17		Column A
	Column B
	
98.18		270.80
	273.3712
	
98.19		270.81
	273.3713
	
98.20		270.82
	273.3714
	
98.21		270.83
	273.3715
	
98.22		270.84
	273.3716
	
98.23		270.85
	273.3717
	
98.24		270.86
	273.3718
	
98.25		270.87
	273.3719
	
98.26 	(b) The revisor shall make changes necessary to correct the punctuation, grammar, or 
98.27 	remaining text that result from implementing this instruction.

98.28 	Sec. 26.  REPEALER.
 98.29 	Minnesota Statutes 2016, sections 270.81, subdivision 4; and 270.83, subdivision 3, and 
98.30 	Minnesota Rules, parts 8106.0100, subparts 1, 2, 3, 4, 5, 6, 7, 8, 10, 12, 13, 14, 17, 17a, 18, 
98.31 	19, 20, and 21; 8106.0300, subparts 1 and 3; 8106.0400; 8106.0500; 8106.0600; 8106.0700; 
98.32 	8106.0800; and 8106.9900, are repealed.

99.1 	EFFECTIVE DATE. This section is effective beginning in assessment year 2018.

99.2 	ARTICLE 6
99.3 	SALES AND USE TAXES AND SPECIAL TAXES

99.4 	Section 1. Minnesota Statutes 2016, section 128C.24, is amended to read:
99.5 	128C.24 LEAGUE FUNDS TRANSFER.
99.6 	Beginning July 1, 2007, the Minnesota State High School League shall annually determine 
99.7 	the sales tax savings attributable to section 297A.70, subdivision 11 11a, and annually 
99.8 	transfer that amount to a nonprofit charitable foundation created for the purpose of promoting 
99.9 	high school extracurricular activities. The funds must be used by the foundation to make 
99.10 	grants to fund, assist, recognize, or promote high school students' participation in 
99.11 	extracurricular activities. The first priority for funding will be grants for scholarships to 
99.12 	individuals to offset athletic fees. The foundation must equitably award grants based on 
99.13 	considerations of gender balance, school size, and geographic location, to the extent feasible.

99.14 	EFFECTIVE DATE. This section is effective July 1, 2017.

99.15 	Sec. 2. Minnesota Statutes 2016, section 295.52, subdivision 8, is amended to read:
99.16 		Subd. 8.Contingent reduction in tax rate. (a) By December 1 of each year, beginning 
99.17 	in 2011, the commissioner of management and budget shall determine the projected balance 
99.18 	in the health care access fund for the biennium.
99.19 	(b) If the commissioner of management and budget determines that the projected balance 
99.20 	in the health care access fund for the biennium reflects a ratio of revenues to expenditures 
99.21 	and transfers greater than 125 percent, and if the actual cash balance in the fund is adequate, 
99.22 	as determined by the commissioner of management and budget, the commissioner, in 
99.23 	consultation with the commissioner of revenue, shall reduce the tax rates levied under 
99.24 	subdivisions 1, 1a, 2, 3, and 4, for the subsequent calendar year sufficient to reduce the 
99.25 	structural balance in the fund. The rate may be reduced to the extent that the projected 
99.26 	revenues for the biennium do not exceed 125 percent of expenditures and transfers. The 
99.27 	new rate shall be rounded to the nearest one-tenth of one percent. The rate reduction under 
99.28 	this paragraph expires at the end of each calendar year and is subject to an annual 
99.29 	redetermination by the commissioner of management and budget.
99.30 	(c) For purposes of the analysis defined in paragraph (b), the commissioner of 
99.31 	management and budget shall include projected revenues, notwithstanding the repeal of the 
99.32 	tax imposed under this section effective January 1, 2020.

100.1 	EFFECTIVE DATE. This section is effective the day following final enactment.

100.2 	Sec. 3. Minnesota Statutes 2016, section 296A.01, subdivision 12, is amended to read:
100.3 		Subd. 12.Compressed natural gas or CNG. "Compressed natural gas" or "CNG" 
100.4 	means natural gas, primarily methane, condensed under high pressure and stored in specially 
100.5 	designed storage tanks at between 2,000 and 3,600 pounds per square inch. For purposes 
100.6 	of this chapter, the energy content of CNG is considered to be 1,000 900 BTUs per cubic 
100.7 	foot.

100.8 	EFFECTIVE DATE. This section is effective for sales and purchases made after June 
100.9 	30, 2017.

100.10 	Sec. 4. Minnesota Statutes 2016, section 296A.08, subdivision 2, is amended to read:
100.11 		Subd. 2.Rate of tax. The special fuel excise tax is imposed at the following rates:
100.12 	(a) Liquefied petroleum gas or propane is taxed at the rate of 18.75 cents per gallon.
100.13 	(b) Liquefied natural gas is taxed at the rate of 15 cents per gallon.
100.14 	(c) Compressed natural gas is taxed at the rate of $2.174 $1.974 per thousand cubic feet; 
100.15 	or 25 cents per gasoline equivalent. For purposes of this paragraph, "gasoline equivalent," 
100.16 	as defined by the National Conference on Weights and Measures, is 5.66 pounds of natural 
100.17 	gas or 126.67 cubic feet.
100.18 	(d) All other special fuel is taxed at the same rate as the gasoline excise tax as specified 
100.19 	in section 296A.07, subdivision 2. The tax is payable in the form and manner prescribed 
100.20 	by the commissioner.

100.21 	EFFECTIVE DATE. This section is effective for sales and purchases made after June 
100.22 	30, 2017.

100.23 	Sec. 5. Minnesota Statutes 2016, section 297A.61, subdivision 3, is amended to read:
100.24 		Subd. 3.Sale and purchase. (a) "Sale" and "purchase" include, but are not limited to, 
100.25 	each of the transactions listed in this subdivision. In applying the provisions of this chapter, 
100.26 	the terms "tangible personal property" and "retail sale" include the taxable services listed 
100.27 	in paragraph (g), clause (6), items (i) to (vi) and (viii), and the provision of these taxable 
100.28 	services, unless specifically provided otherwise. Services performed by an employee for 
100.29 	an employer are not taxable. Services performed by a partnership or association for another 
100.30 	partnership or association are not taxable if one of the entities owns or controls more than 
100.31 	80 percent of the voting power of the equity interest in the other entity. Services performed 
101.1 	between members of an affiliated group of corporations are not taxable. For purposes of 
101.2 	the preceding sentence, "affiliated group of corporations" means those entities that would 
101.3 	be classified as members of an affiliated group as defined under United States Code, title 
101.4 	26, section 1504, disregarding the exclusions in section 1504(b).
101.5 	(b) Sale and purchase include:
101.6 	(1) any transfer of title or possession, or both, of tangible personal property, whether 
101.7 	absolutely or conditionally, for a consideration in money or by exchange or barter; and
101.8 	(2) the leasing of or the granting of a license to use or consume, for a consideration in 
101.9 	money or by exchange or barter, tangible personal property, other than a manufactured 
101.10 	home used for residential purposes for a continuous period of 30 days or more.
101.11 	(c) Sale and purchase include the production, fabrication, printing, or processing of 
101.12 	tangible personal property for a consideration for consumers who furnish either directly or 
101.13 	indirectly the materials used in the production, fabrication, printing, or processing.
101.14 	(d) Sale and purchase include the preparing for a consideration of food. Notwithstanding 
101.15 	section 297A.67, subdivision 2, taxable food includes, but is not limited to, the following:
101.16 	(1) prepared food sold by the retailer;
101.17 	(2) soft drinks;
101.18 	(3) candy;
101.19 	(4) dietary supplements; and
101.20 	(5) all food sold through vending machines.
101.21 	(e) A sale and a purchase includes the furnishing for a consideration of electricity, gas, 
101.22 	water, or steam for use or consumption within this state.
101.23 	(f) A sale and a purchase includes the transfer for a consideration of prewritten computer 
101.24 	software whether delivered electronically, by load and leave, or otherwise.
101.25 	(g) A sale and a purchase includes the furnishing for a consideration of the following 
101.26 	services:
101.27 	(1) the privilege of admission to places of amusement, recreational areas, or athletic 
101.28 	events, and the making available of amusement devices, tanning facilities, reducing salons, 
101.29 	steam baths, health clubs, and spas or athletic facilities;
101.30 	(2) lodging and related services by a hotel, rooming house, resort, campground, motel, 
101.31 	or trailer camp, including furnishing the guest of the facility with access to telecommunication 
102.1 	services, and the granting of any similar license to use real property in a specific facility, 
102.2 	other than the renting or leasing of it for a continuous period of 30 days or more under an 
102.3 	enforceable written agreement that may not be terminated without prior notice and including 
102.4 	accommodations intermediary services provided in connection with other services provided 
102.5 	under this clause;
102.6 	(3) nonresidential parking services, whether on a contractual, hourly, or other periodic 
102.7 	basis, except for parking at a meter;
102.8 	(4) the granting of membership in a club, association, or other organization if:
102.9 	(i) the club, association, or other organization makes available for the use of its members 
102.10 	sports and athletic facilities, without regard to whether a separate charge is assessed for use 
102.11 	of the facilities; and
102.12 	(ii) use of the sports and athletic facility is not made available to the general public on 
102.13 	the same basis as it is made available to members.
102.14 	Granting of membership means both onetime initiation fees and periodic membership dues. 
102.15 	Sports and athletic facilities include golf courses; tennis, racquetball, handball, and squash 
102.16 	courts; basketball and volleyball facilities; running tracks; exercise equipment; swimming 
102.17 	pools; and other similar athletic or sports facilities;
102.18 	(5) delivery of aggregate materials by a third party, excluding delivery of aggregate 
102.19 	material used in road construction; and delivery of concrete block by a third party if the 
102.20 	delivery would be subject to the sales tax if provided by the seller of the concrete block. 
102.21 	For purposes of this clause, "road construction" means construction of:
102.22 	(i) public roads;
102.23 	(ii) cartways; and
102.24 	(iii) private roads in townships located outside of the seven-county metropolitan area 
102.25 	up to the point of the emergency response location sign; and
102.26 	(6) services as provided in this clause:
102.27 	(i) laundry and dry cleaning services including cleaning, pressing, repairing, altering, 
102.28 	and storing clothes, linen services and supply, cleaning and blocking hats, and carpet, 
102.29 	drapery, upholstery, and industrial cleaning. Laundry and dry cleaning services do not 
102.30 	include services provided by coin operated facilities operated by the customer;
103.1 	(ii) motor vehicle washing, waxing, and cleaning services, including services provided 
103.2 	by coin operated facilities operated by the customer, and rustproofing, undercoating, and 
103.3 	towing of motor vehicles;
103.4 	(iii) building and residential cleaning, maintenance, and disinfecting services and pest 
103.5 	control and exterminating services;
103.6 	(iv) detective, security, burglar, fire alarm, and armored car services; but not including 
103.7 	services performed within the jurisdiction they serve by off-duty licensed peace officers as 
103.8 	defined in section 626.84, subdivision 1, or services provided by a nonprofit organization 
103.9 	or any organization at the direction of a county for monitoring and electronic surveillance 
103.10 	of persons placed on in-home detention pursuant to court order or under the direction of the 
103.11 	Minnesota Department of Corrections;
103.12 	(v) pet grooming services;
103.13 	(vi) lawn care, fertilizing, mowing, spraying and sprigging services; garden planting 
103.14 	and maintenance; tree, bush, and shrub pruning, bracing, spraying, and surgery; indoor plant 
103.15 	care; tree, bush, shrub, and stump removal, except when performed as part of a land clearing 
103.16 	contract as defined in section 297A.68, subdivision 40; and tree trimming for public utility 
103.17 	lines. Services performed under a construction contract for the installation of shrubbery, 
103.18 	plants, sod, trees, bushes, and similar items are not taxable;
103.19 	(vii) massages, except when provided by a licensed health care facility or professional 
103.20 	or upon written referral from a licensed health care facility or professional for treatment of 
103.21 	illness, injury, or disease; and
103.22 	(viii) the furnishing of lodging, board, and care services for animals in kennels and other 
103.23 	similar arrangements, but excluding veterinary and horse boarding services.
103.24 	(h) A sale and a purchase includes the furnishing for a consideration of tangible personal 
103.25 	property or taxable services by the United States or any of its agencies or instrumentalities, 
103.26 	or the state of Minnesota, its agencies, instrumentalities, or political subdivisions.
103.27 	(i) A sale and a purchase includes the furnishing for a consideration of 
103.28 	telecommunications services, ancillary services associated with telecommunication services, 
103.29 	and pay television services. Telecommunication services include, but are not limited to, the 
103.30 	following services, as defined in section 297A.669: air-to-ground radiotelephone service, 
103.31 	mobile telecommunication service, postpaid calling service, prepaid calling service, prepaid 
103.32 	wireless calling service, and private communication services. The services in this paragraph 
103.33 	are taxed to the extent allowed under federal law.
104.1 	(j) A sale and a purchase includes the furnishing for a consideration of installation if the 
104.2 	installation charges would be subject to the sales tax if the installation were provided by 
104.3 	the seller of the item being installed.
104.4 	(k) A sale and a purchase includes the rental of a vehicle by a motor vehicle dealer to a 
104.5 	customer when (1) the vehicle is rented by the customer for a consideration, or (2) the motor 
104.6 	vehicle dealer is reimbursed pursuant to a service contract as defined in section 59B.02, 
104.7 	subdivision 11.
104.8 	(l) A sale and a purchase includes furnishing for a consideration of specified digital 
104.9 	products or other digital products or granting the right for a consideration to use specified 
104.10 	digital products or other digital products on a temporary or permanent basis and regardless 
104.11 	of whether the purchaser is required to make continued payments for such right. Wherever 
104.12 	the term "tangible personal property" is used in this chapter, other than in subdivisions 10 
104.13 	and 38, the provisions also apply to specified digital products, or other digital products, 
104.14 	unless specifically provided otherwise or the context indicates otherwise.
104.15 	(m) A sale and purchase includes the transfer for a consideration of consulting services 
104.16 	sold to install, test, and implement prewritten computer software, including, but not limited 
104.17 	to, all software configuration services that determine how the prewritten computer software 
104.18 	will be used.

104.19 	EFFECTIVE DATE. This section is effective for sales and purchases made after June 
104.20 	30, 2017.

104.21 	Sec. 6. Minnesota Statutes 2016, section 297A.61, subdivision 54, is amended to read:
104.22 		Subd. 54.Other digital products. "Other digital products" means the following items 
104.23 	when transferred electronically:
104.24 	(1) greeting cards; and
104.25 	(2) online video or electronic games.; and
104.26 	(3) items that would be subject to tax if they were sold in tangible form.

104.27 	EFFECTIVE DATE. This section is effective for sales and purchases made after June 
104.28 	30, 2017.

104.29 	Sec. 7. Minnesota Statutes 2016, section 297A.67, subdivision 10, is amended to read:
104.30 		Subd. 10.Caskets; vaults. Caskets and, burial vaults, and alternative containers used 
104.31 	for viewing or transporting a deceased human or for human burial are exempt.

105.1 	EFFECTIVE DATE. This section is effective for sales and purchases made after June 
105.2 	30, 2017.

105.3 	Sec. 8. Minnesota Statutes 2016, section 297A.67, is amended by adding a subdivision to 
105.4 	read:
105.5 		Subd. 34.Specified digital products and other digital products. Specified digital 
105.6 	products as defined under section 297A.61, subdivision 55, and other digital products as 
105.7 	defined under section 297A.61, subdivision 54, are exempt if the specified digital products 
105.8 	and other digital products would not be subject to tax if sold, stored, distributed, used, or 
105.9 	consumed in tangible form or as a service.

105.10 	EFFECTIVE DATE. This section is effective for sales and purchases made after June 
105.11 	30, 2017.

105.12 	Sec. 9. Minnesota Statutes 2016, section 297A.70, subdivision 1, is amended to read:
105.13 		Subdivision 1.Scope. (a) To the extent provided in this section, the gross receipts from 
105.14 	sales of items to or by, and storage, distribution, use, or consumption of items by the 
105.15 	organizations or units of local government listed in this section are specifically exempted 
105.16 	from the taxes imposed by this chapter.
105.17 	(b) Notwithstanding any law to the contrary enacted before 1992, only sales to 
105.18 	governments and political subdivisions listed in this section are exempt from the taxes 
105.19 	imposed by this chapter.
105.20 	(c) "Sales" includes purchases under an installment contract or lease purchase agreement 
105.21 	under section 465.71.
105.22 	(d) Subdivisions 4 and 8 of section 290.05, relating to notification and the authority to 
105.23 	revoke, apply to subdivisions 4, 5, 7, and 18 of this section.

105.24 	EFFECTIVE DATE. This section is effective for sales and purchases made after June 
105.25 	30, 2017.

105.26 	Sec. 10. Minnesota Statutes 2016, section 297A.70, subdivision 4, is amended to read:
105.27 		Subd. 4.Sales to nonprofit groups. (a) All sales, except those listed in paragraph (b)
105.28 	(c), to the following "nonprofit organizations" are exempt if the item purchased is used in 
105.29 	the performance of the nonprofit organization's exempt function. The exemption under this 
105.30 	paragraph does not apply to:
105.31 	(1) veterans groups under subdivision 5;
106.1 	(2) hospitals, outpatient surgical centers, and critical access dental providers under 
106.2 	subdivision 7, paragraphs (a) to (c), (e), and (f);
106.3 	(3) products and services under subdivision 7, paragraph (d);
106.4 	(4) nursing homes and boarding care homes under subdivision 18; or
106.5 	(5) a nonprofit organization authorized under section 465.717.
106.6 	(1) a corporation, society, association, foundation, or institution organized and operated 
106.7 	exclusively for charitable, religious, or educational purposes if the item purchased is used 
106.8 	in the performance of charitable, religious, or educational functions; and
106.9 	(2) any senior citizen group or association of groups that:
106.10 	(i) in general limits membership to persons who are either age 55 or older, or physically 
106.11 	disabled;
106.12 	(ii) is organized and operated exclusively for pleasure, recreation, and other nonprofit 
106.13 	purposes, not including housing, no part of the net earnings of which inures to the benefit 
106.14 	of any private shareholders; and
106.15 	(iii) is an exempt organization under section 501(c) of the Internal Revenue Code.
106.16 	(b) For purposes of this subdivision, charitable purpose includes the maintenance of a 
106.17 	cemetery owned by a religious organization. "nonprofit organization" means:
106.18 	(1) an organization that has a current federal determination letter stating that the nonprofit 
106.19 	organization qualifies as an exempt organization under section 501(c)(3) of the Internal 
106.20 	Revenue Code, if required, and has obtained a Minnesota tax identification number from 
106.21 	the Department of Revenue under section 297A.83; or
106.22 	(2) a senior citizen group or association of groups that:
106.23 	(i) in general limits membership to persons who are either age 55 or older, or who are 
106.24 	physically disabled;
106.25 	(ii) is organized and operated exclusively for pleasure, recreation, or other nonprofit 
106.26 	purposes, not including housing, and no part of the net earnings of which inures to the 
106.27 	benefit of any private shareholders; and
106.28 	(iii) is an exempt organization under section 501(c) of the Internal Revenue Code.
106.29 	(b) (c) This exemption does not apply to the following sales:
106.30 	(1) building, construction, or reconstruction materials purchased by a contractor or a 
106.31 	subcontractor as a part of a lump-sum contract or similar type of contract with a guaranteed 
107.1 	maximum price covering both labor and materials for use in the construction, alteration, or 
107.2 	repair of a building or facility;
107.3 	(2) construction materials purchased by tax-exempt entities or their contractors to be 
107.4 	used in constructing buildings or facilities that will not be used principally by the tax-exempt 
107.5 	entities;
107.6 	(3) lodging as defined under section 297A.61, subdivision 3, paragraph (g), clause (2), 
107.7 	and prepared food, candy, soft drinks, and alcoholic beverages as defined in section 297A.67, 
107.8 	subdivision 2, except wine purchased by an established religious organization for sacramental 
107.9 	purposes or as allowed under subdivision 9a; and
107.10 	(4) leasing of a motor vehicle as defined in section 297B.01, subdivision 11, except as 
107.11 	provided in paragraph (c) (d).
107.12 	(c) (d) This exemption applies to the leasing of a motor vehicle as defined in section 
107.13 	297B.01, subdivision 11, only if the vehicle is:
107.14 	(1) a truck, as defined in section 168.002, a bus, as defined in section 168.002, or a 
107.15 	passenger automobile, as defined in section 168.002, if the automobile is designed and used 
107.16 	for carrying more than nine persons including the driver; and
107.17 	(2) intended to be used primarily to transport tangible personal property or individuals, 
107.18 	other than employees, to whom the organization provides service in performing its charitable, 
107.19 	religious, or educational purpose.
107.20 	(d) (e) A limited liability company also qualifies for exemption under this subdivision 
107.21 	if (1) it consists of a sole member that would qualify for the exemption, and (2) the items 
107.22 	purchased qualify for the exemption.

107.23 	EFFECTIVE DATE. This section is effective for sales and purchases made after June 
107.24 	30, 2017.

107.25 	Sec. 11. Minnesota Statutes 2016, section 297A.70, is amended by adding a subdivision 
107.26 	to read:
107.27 		Subd. 11a.MSHSL exemption. Tickets and admissions to games, events, and activities 
107.28 	sponsored by the Minnesota State High School League under chapter 128C are exempt.

107.29 	EFFECTIVE DATE. This section is effective for sales and purchases made after June 
107.30 	30, 2017.

108.1 	Sec. 12. Minnesota Statutes 2016, section 297A.71, is amended by adding a subdivision 
108.2 	to read:
108.3 		Subd. 49.Properties destroyed by fire. Building materials and supplies used in, and 
108.4 	equipment incorporated into, the construction or replacement of real property that is located 
108.5 	in Madelia affected by the fire on February 3, 2016, are exempt. The tax must be imposed 
108.6 	and collected as if the rate under section 297A.62, subdivision l, applied and then refunded 
108.7 	in the manner provided in section 297A.75.

108.8 	EFFECTIVE DATE. This section is effective for sales and purchases made after June 
108.9 	30, 2016, and before July 1, 2018.

108.10 	Sec. 13. Minnesota Statutes 2016, section 297A.71, is amended by adding a subdivision 
108.11 	to read:
108.12 		Subd. 50.Siding production facility materials. Building materials and supplies used 
108.13 	or consumed in, and equipment incorporated into, the expansion of an existing wood products 
108.14 	facility to convert the facility into a siding production facility that can produce at least 
108.15 	400,000,000 square feet of siding per year, including private infrastructure, are exempt. The 
108.16 	tax must be imposed and collected as if the rate under section 297A.62, subdivision 1, 
108.17 	applied, and then refunded in the manner provided in section 297A.75. This provision does 
108.18 	not exempt equipment that qualifies for exemption under section 297A.68, subdivision 5.

108.19 	EFFECTIVE DATE. This section is effective for sales and purchases made after June 
108.20 	30, 2016, and before July 1, 2020.

108.21 	Sec. 14. Minnesota Statutes 2016, section 297A.75, subdivision 1, is amended to read:
108.22 		Subdivision 1.Tax collected. The tax on the gross receipts from the sale of the following 
108.23 	exempt items must be imposed and collected as if the sale were taxable and the rate under 
108.24 	section 297A.62, subdivision 1, applied. The exempt items include:
108.25 	(1) building materials for an agricultural processing facility exempt under section 
108.26 	297A.71, subdivision 13;
108.27 	(2) building materials for mineral production facilities exempt under section 297A.71, 
108.28 	subdivision 14;
108.29 	(3) building materials for correctional facilities under section 297A.71, subdivision 3;
108.30 	(4) building materials used in a residence for disabled veterans exempt under section 
108.31 	297A.71, subdivision 11;
109.1 	(5) elevators and building materials exempt under section 297A.71, subdivision 12;
109.2 	(6) materials and supplies for qualified low-income housing under section 297A.71, 
109.3 	subdivision 23;
109.4 	(7) materials, supplies, and equipment for municipal electric utility facilities under 
109.5 	section 297A.71, subdivision 35;
109.6 	(8) equipment and materials used for the generation, transmission, and distribution of 
109.7 	electrical energy and an aerial camera package exempt under section 297A.68, subdivision 
109.8 	37;
109.9 	(9) commuter rail vehicle and repair parts under section 297A.70, subdivision 3, paragraph 
109.10 	(a), clause (10);
109.11 	(10) materials, supplies, and equipment for construction or improvement of projects and 
109.12 	facilities under section 297A.71, subdivision 40;
109.13 	(11) materials, supplies, and equipment for construction, improvement, or expansion 
109.14 	of:
109.15 	(i) an aerospace defense manufacturing facility exempt under section 297A.71, 
109.16 	subdivision 42;
109.17 	(ii) a biopharmaceutical manufacturing facility exempt under section 297A.71, subdivision 
109.18 	45;
109.19 	(iii) a research and development facility exempt under section 297A.71, subdivision 46; 
109.20 	and
109.21 	(iv) an industrial measurement manufacturing and controls facility exempt under section 
109.22 	297A.71, subdivision 47;
109.23 	(12) enterprise information technology equipment and computer software for use in a 
109.24 	qualified data center exempt under section 297A.68, subdivision 42;
109.25 	(13) materials, supplies, and equipment for qualifying capital projects under section 
109.26 	297A.71, subdivision 44;
109.27 	(14) items purchased for use in providing critical access dental services exempt under 
109.28 	section 297A.70, subdivision 7, paragraph (c); and
109.29 	(15) items and services purchased under a business subsidy agreement for use or 
109.30 	consumption primarily in greater Minnesota exempt under section 297A.68, subdivision 
109.31 	44.;
110.1 	(16) building materials, equipment, and supplies for constructing or replacing real 
110.2 	property exempt under section 297A.71, subdivision 49; and
110.3 	(17) building materials and supplies, equipment incorporated into, and private 
110.4 	infrastructure for conversion of a wood products facility into a siding facility exempt under 
110.5 	section 297A.71, subdivision 50.

110.6 	EFFECTIVE DATE. This section is effective for sales and purchases made after June 
110.7 	30, 2016.

110.8 	Sec. 15. Minnesota Statutes 2016, section 297A.75, subdivision 2, is amended to read:
110.9 		Subd. 2.Refund; eligible persons. Upon application on forms prescribed by the 
110.10 	commissioner, a refund equal to the tax paid on the gross receipts of the exempt items must 
110.11 	be paid to the applicant. Only the following persons may apply for the refund:
110.12 	(1) for subdivision 1, clauses (1), (2), and (14), the applicant must be the purchaser;
110.13 	(2) for subdivision 1, clause (3), the applicant must be the governmental subdivision;
110.14 	(3) for subdivision 1, clause (4), the applicant must be the recipient of the benefits 
110.15 	provided in United States Code, title 38, chapter 21;
110.16 	(4) for subdivision 1, clause (5), the applicant must be the owner of the homestead 
110.17 	property;
110.18 	(5) for subdivision 1, clause (6), the owner of the qualified low-income housing project;
110.19 	(6) for subdivision 1, clause (7), the applicant must be a municipal electric utility or a 
110.20 	joint venture of municipal electric utilities;
110.21 	(7) for subdivision 1, clauses (8), (11), (12), and (15), and (17), the owner of the 
110.22 	qualifying business; and
110.23 	(8) for subdivision 1, clauses (9), (10), and (13), the applicant must be the governmental 
110.24 	entity that owns or contracts for the project or facility.; and
110.25 	(9) for subdivision l, clause (16), the applicant must be the owner or developer of the 
110.26 	building or project.

110.27 	EFFECTIVE DATE. This section is effective for sales and purchases made after June 
110.28 	30, 2016.

111.1 	Sec. 16. Minnesota Statutes 2016, section 297A.75, subdivision 3, is amended to read:
111.2 		Subd. 3.Application. (a) The application must include sufficient information to permit 
111.3 	the commissioner to verify the tax paid. If the tax was paid by a contractor, subcontractor, 
111.4 	or builder, under subdivision 1, clauses (3) to (13), or (15), (16), or (17), the contractor, 
111.5 	subcontractor, or builder must furnish to the refund applicant a statement including the cost 
111.6 	of the exempt items and the taxes paid on the items unless otherwise specifically provided 
111.7 	by this subdivision. The provisions of sections 289A.40 and 289A.50 apply to refunds under 
111.8 	this section.
111.9 	(b) An applicant may not file more than two applications per calendar year for refunds 
111.10 	for taxes paid on capital equipment exempt under section 297A.68, subdivision 5.

111.11 	EFFECTIVE DATE. This section is effective for sales and purchases made after June 
111.12 	30, 2016.

111.13 	Sec. 17. Minnesota Statutes 2016, section 297A.815, subdivision 3, is amended to read:
111.14 		Subd. 3.Motor vehicle lease sales tax revenue. (a) For purposes of this subdivision, 
111.15 	"net revenue" means an amount equal to the revenues, including interest and penalties, 
111.16 	collected under this section, during the fiscal year; less $32,000,000 in each fiscal year.
111.17 	(b) On or before June 30 of each fiscal year, the commissioner of revenue shall estimate 
111.18 	the amount of the net revenue for the current fiscal year.
111.19 	(c) On or after July 1 of the subsequent fiscal year, the commissioner of management 
111.20 	and budget shall transfer the net revenue as estimated in paragraph (b) from the general 
111.21 	fund, as follows:
111.22 	(1) $9,000,000 annually until January 1, 2015, and 50 percent annually thereafter to the 
111.23 	county state-aid highway fund. Notwithstanding any other law to the contrary, the 
111.24 	commissioner of transportation shall allocate the funds transferred under this clause to the 
111.25 	counties in the metropolitan area, as defined in section 473.121, subdivision 4, excluding 
111.26 	the counties of Hennepin and Ramsey, so that each county shall receive of such amount the 
111.27 	percentage that its population, as defined in section 477A.011, subdivision 3, estimated or 
111.28 	established by July 15 of the year prior to the current calendar year, bears to the total 
111.29 	population of the counties receiving funds under this clause; and
111.30 	(2) the remainder to the greater Minnesota transit account.
111.31 	(d) The revenues deposited under this subdivision do not include the revenues, including 
111.32 	interest and penalties, generated by the sales tax imposed under section 297A.62, subdivision 
112.1 	1a, which must be deposited as provided under the Minnesota Constitution, article XI, 
112.2 	section 15.

112.3 	EFFECTIVE DATE. This section is effective the day following final enactment and 
112.4 	applies beginning with the estimate that must be completed before June 30, 2017, for a 
112.5 	transfer that occurs on or after July 1, 2017.

112.6 	Sec. 18. Minnesota Statutes 2016, section 297H.04, subdivision 2, is amended to read:
112.7 		Subd. 2.Rate. (a) Commercial generators that generate nonmixed municipal solid waste 
112.8 	shall pay a solid waste management tax of 60 cents per noncompacted cubic yard of periodic 
112.9 	waste collection capacity purchased by the generator, based on the size of the container for 
112.10 	the nonmixed municipal solid waste, the actual volume, or the weight-to-volume conversion 
112.11 	schedule in paragraph (c). However, the tax must be calculated by the waste management 
112.12 	service provider using the same method for calculating the waste management service fee 
112.13 	so that both are calculated according to container capacity, actual volume, or weight.
112.14 	(b) Notwithstanding section 297H.02, a residential generator that generates nonmixed 
112.15 	municipal solid waste shall pay a solid waste management tax in the same manner as provided 
112.16 	in paragraph (a).
112.17 	(c) The weight-to-volume conversion schedule for:
112.18 	(1) construction debris as defined in section 115A.03, subdivision 7, is one ton equals 
112.19 	3.33 cubic yards, or $2 per ton equal to 60 cents per cubic yard. The commissioner of 
112.20 	revenue, after consultation with the commissioner of the Pollution Control Agency, shall 
112.21 	determine and may publish by notice a conversion schedule for construction debris;
112.22 	(2) industrial waste as defined in section 115A.03, subdivision 13a, is equal to 60 cents 
112.23 	per cubic yard. The commissioner of revenue after consultation with the commissioner of 
112.24 	the Pollution Control Agency, shall determine, and may publish by notice, a conversion 
112.25 	schedule for various industrial wastes; and
112.26 	(3) infectious waste as defined in section 116.76, subdivision 12, and pathological waste 
112.27 	as defined in section 116.76, subdivision 14, is 150 pounds equals one cubic yard, or 60 
112.28 	cents per 150 pounds.

112.29 	EFFECTIVE DATE. This section is effective for sales and purchases made after June 
112.30 	30, 2017.

113.1 	Sec. 19. Minnesota Statutes 2016, section 298.015, is amended to read:
113.2 	298.015 NET GROSS PROCEEDS TAX ON MINING.
113.3 		Subdivision 1.Tax imposed. A person engaged in the business of mining shall pay to 
113.4 	the state of Minnesota for distribution as provided in section 298.018 a net gross proceeds 
113.5 	tax equal to two percent 2.75 percent of the net gross proceeds from mining in Minnesota. 
113.6 	The tax applies to all ores, metals, and minerals mined, extracted, produced, or refined 
113.7 	within the state of Minnesota except for iron ore, taconite concentrates, sand, silica sand, 
113.8 	gravel, building stone, crushed rock, limestone, granite, dimension granite, dimension stone, 
113.9 	horticultural peat, clay, and soil, iron ore, and taconite concentrates. The tax is in addition 
113.10 	to all other taxes provided for by law.
113.11 		Subd. 2.Net Gross proceeds. For purposes of this section, the term "net gross proceeds" 
113.12 	means the gross proceeds from mining, as defined in section 298.016, less the deductions 
113.13 	for purposes of determining taxable income under section 298.01, subdivision 3b, applied 
113.14 	to the mining, production, processing, beneficiation, smelting, or refining of metal or mineral 
113.15 	products. No other credits or deductions shall apply to this tax.
113.16 		Subd. 3.Deposit; distribution. Notwithstanding section 298.16, the taxes collected 
113.17 	under this section shall be deposited in a dedicated account in the special revenue fund. 
113.18 	Distributions of these taxes provided in section 298.018 shall be made from that dedicated 
113.19 	account.

113.20 	EFFECTIVE DATE. This section is effective for taxable years beginning after December 
113.21 	31, 2016.

113.22 	Sec. 20. APPROPRIATION.
 113.23 	$22,000 in fiscal year 2018 and $22,000 in fiscal year 2019 are appropriated from the 
113.24 	general fund to the commissioner of revenue to administer sections 9 and 10. $22,000 shall 
113.25 	be added to the base appropriations to the Department of Revenue for fiscal years 2020 and 
113.26 	2021.

113.27 	Sec. 21.  REPEALER.
 113.28 	(a) Minnesota Statutes 2016, section 297A.67, subdivision 33, is repealed.
113.29 	(b) Laws 2011, First Special Session chapter 9, article 6, section 97, subdivision 6, is 
113.30 	repealed.

114.1 	EFFECTIVE DATE. Paragraph (a) is effective for sales and purchases made after June 
114.2 	30, 2017. Paragraph (b) is effective the day following final enactment.

114.3 	ARTICLE 7
114.4 	SUSTAINABLE FOREST INCENTIVE ACT MODIFICATIONS

114.5 	Section 1. Minnesota Statutes 2016, section 290C.01, is amended to read:
114.6 	290C.01 PURPOSE.
114.7 	It is the policy of this state to promote sustainable forest resource management on the 
114.8 	state's public and private lands. Recognizing that The state's private forests comprise 
114.9 	approximately one-half of the state forest land resources, that healthy and robust forest land 
114.10 	provides significant benefits to the state of Minnesota, and that ad. These forests play a 
114.11 	critical role in protecting water quality and soil resources, and provide extensive wildlife 
114.12 	habitat, diverse recreational experiences, and significant forest products that support the 
114.13 	state's economy. Ad valorem property taxes represent a significant annual cost that can 
114.14 	discourage long-term forest management investments. In order to foster silviculture 
114.15 	investments and retain these forests for their economic and ecological benefits, this chapter, 
114.16 	hereafter referred to as the "Sustainable Forest Incentive Act," is enacted to encourage the 
114.17 	state's private forest landowners to make a long-term commitment to sustainable forest 
114.18 	management.

114.19 	EFFECTIVE DATE. This section is effective the day following final enactment.

114.20 	Sec. 2. Minnesota Statutes 2016, section 290C.02, subdivision 1, is amended to read:
114.21 		Subdivision 1.Application. When used in sections 290C.01 to 290C.11 290C.13, the 
114.22 	terms in this section have the meanings given them.

114.23 	EFFECTIVE DATE. This section is effective the day following final enactment

114.24 	Sec. 3. Minnesota Statutes 2016, section 290C.02, subdivision 3, is amended to read:
114.25 		Subd. 3.Claimant. (a) "Claimant" means:
114.26 	(1) a person, as that term is defined in section 290.01, subdivision 2, who owns forest 
114.27 	land in Minnesota and files an application authorized by the Sustainable Forest Incentive 
114.28 	Act;
115.1 	(2) a purchaser or grantee if property enrolled in the program was sold or transferred 
115.2 	after the original application was filed and prior to the annual incentive payment being 
115.3 	made; or
115.4 	(3) an owner of land previously covered by an auxiliary forest contract that automatically 
115.5 	qualifies for inclusion in the Sustainable Forest Incentive Act program pursuant to section 
115.6 	88.49, subdivision 9a, or 88.491, subdivision 2.
115.7 	The purchaser or grantee must notify the commissioner in writing of the sale or transfer 
115.8 	of the property. (b) Owners of land that qualifies for inclusion pursuant to section 88.49, 
115.9 	subdivision 9a, or 88.491, subdivision 2, must notify the commissioner in writing of the 
115.10 	expiration of the auxiliary forest contract or land trade with a governmental unit and submit 
115.11 	an application to the commissioner by August 15 July 1 in order to be eligible to receive a 
115.12 	payment by October 1 of that same year. For purposes of section 290C.11, claimant also 
115.13 	includes any person bound by the covenant required in section 290C.04.
115.14 	(b) (c) No more than one claimant is entitled to a payment under this chapter with respect 
115.15 	to any tract, parcel, or piece of land enrolled under this chapter that has been assigned the 
115.16 	same parcel identification number. When enrolled forest land is owned by two or more 
115.17 	persons, the owners must determine between them which person is eligible to claim the 
115.18 	payments provided under sections 290C.01 to 290C.11 290C.13. In the case of property 
115.19 	sold or transferred, the former owner and the purchaser or grantee must determine between 
115.20 	them which person is eligible to claim the payments provided under sections 290C.01 to 
115.21 	290C.11 290C.13. The owners, transferees, or grantees must notify the commissioner in 
115.22 	writing which person is eligible to claim the payments.

115.23 	EFFECTIVE DATE. This section is effective for certifications and applications due 
115.24 	in 2018 and thereafter.

115.25 	Sec. 4. Minnesota Statutes 2016, section 290C.02, subdivision 6, is amended to read:
115.26 		Subd. 6.Forest land. "Forest land" means land containing a minimum of 20 contiguous 
115.27 	acres for which the owner has implemented a forest management plan that was prepared or 
115.28 	updated within the past ten years by an approved plan writer. For purposes of this subdivision, 
115.29 	acres are considered to be contiguous even if they are separated by a road, waterway, railroad 
115.30 	track, or other similar intervening property. At least 50 percent of the contiguous acreage 
115.31 	must meet the definition of forest land in section 88.01, subdivision 7. For the purposes of 
115.32 	sections 290C.01 to 290C.11 290C.13, forest land does not include (i) land used for 
115.33 	residential or agricultural purposes, (ii) land enrolled in the reinvest in Minnesota program, 
115.34 	a state or federal conservation reserve or easement reserve program under sections 103F.501
116.1 	to 103F.531, the Minnesota agricultural property tax law under section 273.111, or land 
116.2 	subject to agricultural land preservation controls or restrictions as defined in section 40A.02
116.3 	or under the Metropolitan Agricultural Preserves Act under chapter 473H, (iii) land exceeding 
116.4 	60,000 acres that is subject to a single conservation easement funded under section 97A.056
116.5 	or a comparable permanent easement conveyed to a governmental or nonprofit entity; (iv)
116.6 	any land that becomes subject to a conservation easement funded under section 97A.056
116.7 	or a comparable permanent easement conveyed to a governmental or nonprofit entity after 
116.8 	May 30, 2013; or (v) (iv) land improved with a structure,; pavement, other than a paved 
116.9 	trail under easement, lease, or terminable license to the state of Minnesota or a political 
116.10 	subdivision; sewer,; campsite,; or any road, other than a township road, used for purposes 
116.11 	not prescribed in the forest management plan.

116.12 	EFFECTIVE DATE. This section is effective for applications made in 2018 and 
116.13 	thereafter.

116.14 	Sec. 5. Minnesota Statutes 2016, section 290C.03, is amended to read:
116.15 	290C.03 ELIGIBILITY REQUIREMENTS.
116.16 	(a) Land may be enrolled in the sustainable forest incentive program under this chapter 
116.17 	if all of the following conditions are met:
116.18 	(1) the land consists of at least 20 contiguous acres and at least 50 percent of the land 
116.19 	must meet the definition of forest land in section 88.01, subdivision 7, during the enrollment;
116.20 	(2) a forest management plan for the land must be prepared by an approved plan writer 
116.21 	and implemented during the period in which the land is enrolled;
116.22 	(3) timber harvesting and forest management guidelines must be used in conjunction 
116.23 	with any timber harvesting or forest management activities conducted on the land during 
116.24 	the period in which the land is enrolled;
116.25 	(4) the land must be enrolled for a minimum of eight years;
116.26 	(5) there are no delinquent property taxes on the land; and
116.27 	(6) claimants enrolling more than 1,920 acres or enrolling any land that is subject to a 
116.28 	conservation easement funded under section 97A.056, or a comparable permanent easement 
116.29 	conveyed to a governmental or nonprofit entity in the sustainable forest incentive program 
116.30 	must allow year-round, nonmotorized access to fish and wildlife resources and motorized 
116.31 	access on established and maintained roads and trails, unless the road or trail is temporarily 
116.32 	closed for safety, natural resource, or road damage reasons on enrolled land except within 
117.1 	one-fourth mile of a permanent dwelling or during periods of high fire hazard as determined 
117.2 	by the commissioner of natural resources.;
117.3 	(7) the claimant has registered the forest management plan under clause (2) with the 
117.4 	commissioner of natural resources, who has determined that the land meets qualifications 
117.5 	for enrollment; and
117.6 	(8) no portion of the tax parcel containing the enrolled land is classified as class 2c 
117.7 	managed forest land.
117.8 	(b) Claimants required to allow access under paragraph (a), clause (6), do not by that 
117.9 	action:
117.10 	(1) extend any assurance that the land is safe for any purpose;
117.11 	(2) confer upon the person the legal status of an invitee or licensee to whom a duty of 
117.12 	care is owed; or
117.13 	(3) assume responsibility for or incur liability for any injury to the person or property 
117.14 	caused by an act or omission of the person.
117.15 	(c) The commissioner of natural resources shall annually provide county assessors 
117.16 	verification information regarding plan registration under paragraph (a), clause (7), on a 
117.17 	timely basis.
117.18 	(d) A minimum of three acres must be excluded from enrolled land when the land is 
117.19 	improved with a structure that is not a minor, ancillary, and nonresidential structure.
117.20 	(e) An entire tax parcel is ineligible to be enrolled in the program if land contained within 
117.21 	the parcel does not meet the definition of forest land in section 290C.02, subdivision 6, for 
117.22 	any of the following reasons:
117.23 	(1) the land is subject to the Minnesota agricultural property tax under section 273.111; 
117.24 	or
117.25 	(2) the land is subject to agricultural land preservation controls or restrictions as defined 
117.26 	in section 40A.02, or the Metropolitan Agricultural Preserves Act under chapter 473H.
117.27 	(f) Any acres enrolled in a state or federal conservation reserve or easement program 
117.28 	under sections 103F.501 to 103F.531 are ineligible for inclusion in the program under this 
117.29 	chapter.

117.30 	EFFECTIVE DATE. This section is effective for certifications and applications due 
117.31 	in 2018 and thereafter.

118.1 	Sec. 6. Minnesota Statutes 2016, section 290C.04, is amended to read:
118.2 	290C.04 APPLICATIONS.
118.3 	(a) A landowner may apply to enroll forest land for the sustainable forest incentive 
118.4 	program under this chapter. The claimant must complete, sign, and submit an application 
118.5 	to the commissioner by September 30 October 31 in order for the land to become eligible 
118.6 	beginning in the next year. The application shall be on a form prescribed by the commissioner
118.7 	commissioners of revenue and natural resources and must include the information the 
118.8 	commissioner deems necessary. At a minimum, the application must show the following 
118.9 	information for the land and the claimant: (i) the claimant's Social Security number or state 
118.10 	or federal business tax registration number and date of birth, (ii) the claimant's address, (iii) 
118.11 	the claimant's signature, (iv) the county's parcel identification numbers for the tax parcels 
118.12 	that completely contain the claimant's forest land that is sought to be enrolled, (v) the number 
118.13 	of acres eligible for enrollment in the program, (vi) the approved plan writer's signature and 
118.14 	identification number, and (vii) proof, in a form specified by the commissioner, that the 
118.15 	claimant has executed and acknowledged in the manner required by law for a deed, and 
118.16 	recorded, a covenant that the land is not and shall not be developed in a manner inconsistent 
118.17 	with the requirements and conditions of this chapter, and (viii) a registration number for 
118.18 	the forest management plan, issued by the commissioner of natural resources. The covenant 
118.19 	shall state in writing that the covenant is binding on the claimant and the claimant's successor 
118.20 	or assignee, and that it runs with the land for a period of not less than eight years unless the 
118.21 	claimant requests termination of the covenant after a reduction in payments due to changes 
118.22 	in the payment formula under section 290C.07 or as a result of executive action, the amount 
118.23 	of payment a claimant is eligible to receive under section 290C.07 is reduced or limited. 
118.24 	The commissioner shall specify the form of the covenant and provide copies upon request. 
118.25 	The covenant must include a legal description that encompasses all the forest land that the 
118.26 	claimant wishes to enroll under this section or the certificate of title number for that land if 
118.27 	it is registered land. The commissioner of natural resources shall record the area eligible 
118.28 	for enrollment into the Sustainable Forest Incentive Act as electronic geospatial data, as 
118.29 	defined in section 16E.30, subdivision 10.
118.30 	(b) The commissioner shall provide by electronic means data sufficient for the 
118.31 	commissioner of natural resources to determine whether the applicant qualifies for enrollment. 
118.32 	The commissioner must make the data available within 30 days of receipt of the application 
118.33 	filed by the claimant by October 1, whichever is sooner. The commissioner of natural 
118.34 	resources must notify the commissioner whether the applicant qualifies for enrollment within 
118.35 	30 days of the data being available, and if the applicant qualifies for enrollment, the 
119.1 	commissioner of natural resources shall specify the number of qualifying acres per tax 
119.2 	parcel.
119.3 	(b) In all cases, (c) The commissioner shall notify the claimant within 90 days after 
119.4 	receipt of a completed application that either the land has or has not been approved for 
119.5 	enrollment. A claimant whose application is denied may appeal the denial as provided in 
119.6 	section 290C.13.
119.7 	(c) (d) Within 90 days after the denial of an application, or within 90 days after the final 
119.8 	resolution of any appeal related to the denial, the commissioner shall execute and 
119.9 	acknowledge a document releasing the land from the covenant required under this chapter. 
119.10 	The document must be mailed to the claimant and is entitled to be recorded.
119.11 	(d) (e) The Social Security numbers collected from individuals under this section are 
119.12 	private data as provided in section 13.355. The federal business tax registration number and 
119.13 	date of birth data collected under this section are also private data on individuals or nonpublic 
119.14 	data, as defined in section 13.02, subdivisions 9 and 12, but may be shared with county 
119.15 	assessors for purposes of tax administration and with county treasurers for purposes of the 
119.16 	revenue recapture under chapter 270A.

119.17 	EFFECTIVE DATE. This section is effective for certifications and applications due 
119.18 	in 2018 and thereafter.

119.19 	Sec. 7. Minnesota Statutes 2016, section 290C.05, is amended to read:
119.20 	290C.05 ANNUAL CERTIFICATION AND MONITORING.
119.21 	(a) On or before July 1 May 15 of each year, beginning with the year after the original 
119.22 	claimant has received an approved application, the commissioner shall send each claimant 
119.23 	enrolled under the sustainable forest incentive program a certification form. For purposes 
119.24 	of this section, the original claimant is the person that filed the first application under section 
119.25 	290C.04 to enroll the land in the program current property owner on record, or the person 
119.26 	designated by the owners in the case of multiple ownership. The claimant must sign and 
119.27 	return the certification, attesting to the commissioner by July 1 of that same year, and (1) 
119.28 	attest that the requirements and conditions for continued enrollment in the program are 
119.29 	currently being met, and must return the signed certification form to the commissioner by 
119.30 	August 15 of that same year (2) provide a report in the form and manner determined by the 
119.31 	commissioner of natural resources describing the management practices that have been 
119.32 	carried out on the enrolled property during the prior year. If the claimant does not return an 
120.1 	annual certification form by the due date, the provisions in section 290C.11 apply. The 
120.2 	commissioner of natural resources must verify that the claimant meets program requirements.
120.3 	(b) The commissioner must provide the certification form and annual report described 
120.4 	in paragraph (a), clause (2), to the commissioner of natural resources by August 1.
120.5 	(c) The commissioner of natural resources must conduct annual monitoring of a subset 
120.6 	of claimants, excluding land also enrolled in a conservation easement program. Claimants 
120.7 	will be selected for monitoring based on reported violations, annual certification, and random 
120.8 	selections. Monitoring will be conducted on ten percent of claimants as of July 1 of each 
120.9 	year. Monitoring may include, but is not limited to, a site visit by a Department of Natural 
120.10 	Resources or contracted forester. The commissioner of natural resources must develop a 
120.11 	monitoring form to record the monitoring data.

120.12 	EFFECTIVE DATE. Paragraphs (a) and (b) are effective for certifications and 
120.13 	applications due in 2018 and thereafter. Paragraph (c) is effective July 1, 2019.

120.14 	Sec. 8. Minnesota Statutes 2016, section 290C.055, is amended to read:
120.15 	290C.055 LENGTH OF COVENANT.
120.16 	(a) The covenant remains in effect for a minimum of eight years. Claimants enrolling 
120.17 	any land that is subject to a conservation easement funded under section 97A.056 or a 
120.18 	comparable permanent easement conveyed to a governmental or nonprofit entity must enroll 
120.19 	their land under a covenant with a minimum duration of eight years. All other claimants 
120.20 	may choose to enroll their land under a covenant with a minimum duration of eight, 20, or 
120.21 	50 years. If land is removed the claimant requests removal of land from the program before 
120.22 	it has been enrolled for four years one-half the number of years of the covenant's duration, 
120.23 	the covenant remains in effect for eight years the entire duration of the covenant from the 
120.24 	date recorded.
120.25 	(b) If land that has been enrolled for four years one-half the number of years of the 
120.26 	covenant's minimum duration or more is removed from the program for any reason, there 
120.27 	is a waiting period before the covenant terminates. The covenant terminates on January 1 
120.28 	of the fifth, 11th, or 26th calendar year for the eight-, 20- or 50-year minimum covenant, 
120.29 	respectively, that begins after the date that:
120.30 	(1) the commissioner receives notification from the claimant that the claimant wishes 
120.31 	to remove the land from the program under section 290C.10; or
120.32 	(2) the date that the land is removed from the program under section 290C.11.
121.1 	(c) Notwithstanding the other provisions of this section, the covenant is terminated:
121.2 	(1) at the same time that the land is removed from the program due to acquisition of title 
121.3 	or possession for a public purpose under section 290C.10; or
121.4 	(2) at the request of the claimant after (i) if there is a reduction in payments due to 
121.5 	changes in the payment formula under section 290C.07; or (ii) if, as a result of executive 
121.6 	action, the amount of payment a claimant is eligible to receive under section 290C.07 is 
121.7 	reduced or limited.

121.8 	EFFECTIVE DATE. This section is effective for certifications and applications in 
121.9 	2018 and thereafter.

121.10 	Sec. 9. Minnesota Statutes 2016, section 290C.07, is amended to read:
121.11 	290C.07 CALCULATION OF INCENTIVE PAYMENT.
121.12 	(a) An approved claimant under the sustainable forest incentive program is eligible to 
121.13 	receive an annual payment for each acre of enrolled land, excluding any acre improved with 
121.14 	a paved trail under easement, lease or terminable license to the state of Minnesota or a 
121.15 	political subdivision. The payment shall equal $7 per acre for each acre enrolled in the 
121.16 	sustainable forest incentive program. a percentage of the property tax that would be paid 
121.17 	on the land determined by using the previous year's statewide average total tax rate for all 
121.18 	taxes levied within townships and unorganized territories, the estimated market value per 
121.19 	acre as calculated in section 290C.06, and a class rate of one percent as follows: (1) for 
121.20 	claimants enrolling land is subject to a conservation easement funded under section 97A.056 
121.21 	or a comparable permanent easement conveyed to a governmental or nonprofit entity before 
121.22 	May 31, 2013, 25 percent; (2) for claimants enrolling land that is not subject to a conservation 
121.23 	easement under an eight-year covenant, 65 percent; (3) for claimants enrolling land that is 
121.24 	not subject to a conservation easement under a 20-year covenant, 90 percent; and (4) for 
121.25 	claimants enrolling land that is not subject to a conservation easement under a 50-year 
121.26 	covenant, 115 percent.
121.27 	(b) The calculated payment shall not be less than the payment received in 2017 and shall 
121.28 	not increase or decrease by more than ten percent relative to the payment received for the 
121.29 	previous year.
121.30 	(c) In addition to the payments provided under this section, a claimant enrolling more 
121.31 	than 1,920 acres shall be allowed an additional payment per acre equal to the amount 
121.32 	prescribed in paragraph (a), clause (1), for all acres of enrolled land on which public access 
121.33 	is allowed, as required under section 290C.03, paragraph (a), clause (6), excluding any land 
122.1 	subject to a conservation easement funded under section 97A.056, or a permanent easement 
122.2 	conveyed to a governmental or nonprofit entity that is required to allow for public access 
122.3 	under section 290C.03, paragraph (a), clause (6).

122.4 	EFFECTIVE DATE. This section is effective for calculations made in 2018 and 
122.5 	thereafter.

122.6 	Sec. 10. Minnesota Statutes 2016, section 290C.08, subdivision 1, is amended to read:
122.7 		Subdivision 1.Annual payment. An incentive payment for each acre of enrolled land 
122.8 	will be made annually to each claimant in the amount determined under section 290C.07.
122.9 	By September 15 of each year, the commissioner of natural resources will certify to the 
122.10 	commissioner the eligibility of each claimant to receive a payment. The incentive payment 
122.11 	shall be paid by the commissioner on or before October 1 each year based on the certifications 
122.12 	due August 15 July 1 of that year. Interest at the annual rate determined under section 
122.13 	270C.40 shall be included with any incentive payment not paid by the later of October 1 of 
122.14 	the year the certification was due, or 45 days after the completed certification was returned 
122.15 	or filed if the commissioner accepts a certification filed after August 15 July 1 of the taxes 
122.16 	payable year as the resolution of an appeal.

122.17 	EFFECTIVE DATE. This section is effective for certifications and applications due 
122.18 	in 2018 and thereafter.

122.19 	Sec. 11. Minnesota Statutes 2016, section 290C.10, is amended to read:
122.20 	290C.10 WITHDRAWAL PROCEDURES.
122.21 	An approved claimant (a) The current owner of land enrolled under the sustainable forest 
122.22 	incentive program for a minimum of four years one-half the number of years of the covenant's 
122.23 	minimum duration may notify the commissioner of the intent to terminate enrollment. Within 
122.24 	90 days of receipt of notice to terminate enrollment, the commissioner shall inform the 
122.25 	claimant in writing, acknowledging receipt of this notice and indicating the effective date 
122.26 	of termination from the sustainable forest incentive program. Termination of enrollment in 
122.27 	the sustainable forest incentive program occurs on January 1 of the fifth, 11th, or 26th
122.28 	calendar year for eight-, 20-, or 50-year respective minimum covenant that begins after 
122.29 	receipt by the commissioner of the termination notice. After the commissioner issues an 
122.30 	effective date of termination, a claimant wishing to continue the land's enrollment in the 
122.31 	sustainable forest incentive program beyond the termination date must apply for enrollment 
122.32 	as prescribed in section 290C.04. A claimant who withdraws a parcel of land from this 
122.33 	program may not reenroll the parcel for a period of three years. Within 90 days after the 
123.1 	termination date, the commissioner shall execute and acknowledge a document releasing 
123.2 	the land from the covenant required under this chapter. The document must be mailed to 
123.3 	the claimant and is entitled to be recorded.
123.4 	(b) Not withstanding paragraph (a), on request of the claimant, the commissioner may 
123.5 	allow early withdrawal from the Sustainable Forest Incentive Act without penalty when the 
123.6 	state of Minnesota, any local government unit, or any other entity which has the power of 
123.7 	eminent domain acquires title or possession to the land for a public purpose notwithstanding 
123.8 	the provisions of this section. In the case of such an eligible acquisition under this paragraph, 
123.9 	the commissioner shall execute and acknowledge a document releasing the land acquired 
123.10 	by the state, local government unit, or other entity from the covenant.
123.11 	(c) Notwithstanding paragraph (a), upon request of the claimant, the commissioner shall 
123.12 	allow early withdrawal from the Sustainable Forest Incentive Act without penalty when a 
123.13 	government or nonprofit entity acquires a permanent conservation easement on the enrolled 
123.14 	property and the conservation easement is at least as restrictive as the covenant required 
123.15 	under section 290C.04. The commissioner of natural resources must notify the commissioner 
123.16 	of lands acquired under this paragraph that are eligible for withdrawal. In the case of an 
123.17 	eligible easement acquisition under this paragraph, the commissioner shall execute and 
123.18 	acknowledge a document releasing the land subject to the easement from the covenant.
123.19 	(d) Notwithstanding paragraph (a), upon request of the claimant, the commissioner shall 
123.20 	allow early withdrawal from the Sustainable Forest Incentive Act without penalty for land 
123.21 	that is subject to fee or easement acquisition or lease to the state of Minnesota or a political 
123.22 	subdivision of the state for the public purpose of a paved trail. The commissioner of natural 
123.23 	resources must notify the commissioner of lands acquired under this paragraph that are 
123.24 	eligible for withdrawal. In the case of an eligible fee or easement acquisition or lease under 
123.25 	this paragraph, the commissioner shall execute and acknowledge a document releasing the 
123.26 	land subject to fee or easement acquisition or lease by the state or political subdivision of 
123.27 	the state.
123.28 	(e) All other enrolled land must remain in the program.

123.29 	EFFECTIVE DATE. The amendments to paragraphs (c) and (d) are effective the day 
123.30 	following final enactment. The amendments to paragraphs (a), (b), and (e) are effective for 
123.31 	notifications made in 2018 and thereafter.

124.1 	Sec. 12. [290C.101] TRANSFER OF OWNERSHIP.
124.2 		Subdivision 1.Definitions. (a) For purposes of this section, the following terms have 
124.3 	the meanings provided.
124.4 	(b) "New owner" means a prospective purchaser or grantee.
124.5 	(c) "Owner" means a grantor or seller.
124.6 		Subd. 2.Notification to commissioner. (a) An owner must notify the commissioner if 
124.7 	the owner transfers any or all of the owner's land enrolled in the sustainable forest incentive 
124.8 	program to one or more new owners within 60 days of the transfer of title to the property. 
124.9 	The notification must include the legal descriptions of the transferred property, the tax parcel 
124.10 	numbers, and the name and address of the new owner. If transfer of ownership is a result 
124.11 	of the death of the claimant, the provisions of section 290C.12 shall apply.
124.12 	(b) Upon notification, the commissioner shall inform the new owner of the restrictions 
124.13 	of the covenant required by section 290C.04 and the withdrawal procedures under section 
124.14 	290C.10. In order for the new owner to receive payments pursuant to this chapter, the new 
124.15 	owner must file an application and register a new forest management plan with the 
124.16 	commissioner of natural resources within two years from the date the title of the property 
124.17 	was transferred to remain eligible.
124.18 		Subd. 3.Termination of enrollment. The commissioner will terminate enrollment 
124.19 	according to the procedure in section 290C.10 for failure of the new owner to register a 
124.20 	forest management plan within the time period of subdivision 2, paragraph (b).

124.21 	EFFECTIVE DATE. This section is effective for transfers of ownership after June 30, 
124.22 	2017.

124.23 	Sec. 13. Minnesota Statutes 2016, section 290C.11, is amended to read:
124.24 	290C.11 PENALTIES FOR REMOVAL.
124.25 	(a) If the commissioner determines that land enrolled in the sustainable forest incentive 
124.26 	program is in violation of the conditions for enrollment as specified in section 290C.03, or 
124.27 	upon notification by the commissioner of natural resources that land enrolled is in violation 
124.28 	of the conditions for enrollment, the commissioner shall notify the claimant current owner 
124.29 	of the land of the intent to remove all the tax parcel of the enrolled land where the violation 
124.30 	has occurred from the sustainable forest incentive program. The penalties described under 
124.31 	paragraph (c) apply. The claimant current owner has 60 days to appeal this determination 
124.32 	under the provisions of section 290C.13.
125.1 	(b) If the commissioner determines the land is to be removed from the sustainable forest 
125.2 	incentive program due to the construction or addition of an improvement to the property, 
125.3 	the claimant owner of the tax parcel that is in violation is liable for payment to the 
125.4 	commissioner in the amount equal to; (1) the payments received issued related to the enrolled 
125.5 	tax parcel under this chapter for the previous four-year period number of years the land has 
125.6 	been bound by the covenant, or half the covenant length, whichever is less, plus interest; 
125.7 	and (2) 25 percent of the estimated market value of the property as reclassified under section 
125.8 	273.13 due to the structure being on the tax parcel, as determined by the assessor.
125.9 	(c) If the commissioner of natural resources determines that the land is used for purposes 
125.10 	other than forestry purposes, the commissioner of natural resources shall notify the 
125.11 	commissioner of revenue, who shall notify the current owner of the tax parcel that is in 
125.12 	violation that the current owner is liable to the commissioner in an amount equal to: (1) 30 
125.13 	percent of the estimated market value as property reclassified under section 273.13, due to 
125.14 	the change in use, as determined by the assessor; and (2) the payments issued related to the 
125.15 	enrolled tax parcel under this chapter for the number of years the land has been bound by 
125.16 	the covenant, or half the covenant length, whichever is less, plus interest.
125.17 	(d) The claimant has 90 days to satisfy the payment for removal of land from the 
125.18 	sustainable forest incentive program under this section. If the penalty is not paid within the 
125.19 	90-day period under this paragraph, the commissioner shall certify the amount to the county 
125.20 	auditor for collection as a part of the general ad valorem real property taxes on the land in 
125.21 	the following taxes payable year.

125.22 	EFFECTIVE DATE. This section is effective the day following final enactment.

125.23 	Sec. 14. Minnesota Statutes 2016, section 290C.13, subdivision 6, is amended to read:
125.24 		Subd. 6.Determination of appeal. On the basis of applicable law and available 
125.25 	information, the commissioner shall determine the validity, if any, in whole or in part, of 
125.26 	the appeal and notify the claimant of the decision. This notice must be in writing and contain 
125.27 	the basis for the determination. The commissioner shall consult with the commissioner of 
125.28 	natural resources when an appeal relates to the use of the property for forestry or nonforestry 
125.29 	purposes and for appeals related to forest management plans.

125.30 	EFFECTIVE DATE. This section is effective the day following final enactment.

126.1 	Sec. 15. SUSTAINABLE FOREST INCENTIVE ACT; TRANSITION PROVISION.
 126.2 	(a) For lands enrolled in the Sustainable Forest Incentive Act on or before December 
126.3 	31, 2017, the owner of enrolled lands may elect through May 15, 2019, and without penalty, 
126.4 	to change the length of a covenant, if eligible, under Minnesota Statutes, section 290C.055. 
126.5 	The owner of the enrolled land must provide notice to the commissioner of revenue of its 
126.6 	intent to change the length of its covenant.
126.7 	(b) For lands enrolled in the Sustainable Forest Incentive Act on or before December 
126.8 	31, 2017, the owner of enrolled land must comply with the changes made in the act by 
126.9 	certifications due in 2019, as required under Minnesota Statutes, section 290C.05.

126.10 	EFFECTIVE DATE. This section is effective the day following final enactment.

126.11 	Sec. 16. ADMINISTRATIVE APPROPRIATION.
 126.12 	$156,000 in fiscal year 2018 and $312,000 in fiscal year 2019 are appropriated from the 
126.13 	general fund to the commissioner of natural resources for administering this article. $231,000 
126.14 	shall be added to the base appropriations to the Department of Natural Resources for fiscal 
126.15 	years 2020 and 2021.

126.16 	EFFECTIVE DATE. This section is effective the day following final enactment.

126.17 	Sec. 17.  REPEALER.
 126.18 	Minnesota Statutes 2016, section 290C.02, subdivisions 5 and 9, are repealed.

126.19 	EFFECTIVE DATE. This section is effective the day following final enactment.

APPENDIX 

Repealed Minnesota Statutes: 17-0142 

270.81 TAXATION AND ASSESSMENT OF RAILROAD COMPANY PROPERTY.Subd. 4.Nontaxable property. 
In no event shall property owned or used by a railroad, whether operating property or nonoperating property, be subject to tax hereunder unless such property is of a character which would otherwise be subject to tax under the provisions of chapter 272. 

270.83 EXAMINATIONS AND INVESTIGATIONS.Subd. 3.Failure to file report. 
If any railroad company shall refuse or neglect to make the report required by this section to the commissioner, or shall refuse or neglect to permit an inspection and examination of its property, records, books, accounts or other papers when requested by the commissioner, or shall refuse or neglect to appear before the commissioner or a person appointed under subdivision 2 when required so to do, the commissioner shall make the valuation provided for by sections 270.80 to 270.87 against the railroad company according to the commissioner's best judgment on available information. 

290.067 DEPENDENT CARE CREDIT.Subd. 2a.Income. 
(a) For purposes of this section, "income" means the sum of the following: 

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

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

(i) all nontaxable income; 

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

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

(iv) cash public assistance and relief; 

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

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

(vii) workers' compensation; 

(viii) nontaxable strike benefits; 

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

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

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

(xii) nontaxable scholarship or fellowship grants; 

(xiii) the amount of deduction allowed under section 199 of the Internal Revenue Code; 

(xiv) the amount of deduction allowed under section 220 or 223 of the Internal Revenue Code; 

(xv) the amount deducted for tuition expenses under section 222 of the Internal Revenue Code; and 

(xvi) the amount deducted for certain expenses of elementary and secondary school teachers under section 62(a)(2)(D) of the Internal Revenue Code. 

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

(b) "Income" does not include: 

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

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

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

(4) relief granted under chapter 290A; 

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

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

290C.02 DEFINITIONS.Subd. 5.Current use value. 
"Current use value" means the statewide average annual income per acre, multiplied by 90 percent and divided by the capitalization rate determined under subdivision 9. The statewide net annual income shall be a weighted average based on the most recent data as of July 1 of the computation year on stumpage prices and annual tree growth rates and acreage by cover type provided by the Department of Natural Resources and the United States Department of Agriculture Forest Service North Central Research Station. 

Subd. 9.Capitalization rate. 
By July 1 of each year, the commissioner shall determine a statewide capitalization rate for use under this chapter. The rate shall be the average annual effective interest rate for St. Paul on new loans under the Farm Credit Bank system calculated under section 2032A(e)(7)(A) of the Internal Revenue Code. 

297A.67 GENERAL EXEMPTIONS.Subd. 33.Presentations accessed as digital audio and audiovisual works. 
The charge for a live or prerecorded presentation, such as a lecture, seminar, workshop, or course, where participants access the presentation as a digital audio work or digital audiovisual work, and are connected to the presentation via the Internet, telecommunications equipment, or other device that transfers the presentation electronically, is exempt if: 

(1) participants and the presenter, during the time that participants access the presentation, are able to give, receive, and discuss the presentation with each other, although the amount of interaction and when in the presentation the interaction occurs may be limited by the presenter; and 

(2) for those presentations where participants are given the option to attend the same presentation in person: 

(i) any limitations on the amount of interaction and when it occurs during the presentation are the same for those participants accessing the presentation electronically as those attending in person; and 

(ii) the admission to the in-person presentation is not subject to tax under this chapter. 

297F.185 REVOCATION OF SALES AND USE TAX PERMITS.
(a) If a retailer purchases for resale from an unlicensed seller more than 20,000 cigarettes or $500 or more worth of tobacco products, the commissioner may revoke the person's sales and use tax permit as provided in section 270C.722. 

(b) The commissioner may revoke a retailer's sales or use permit as provided in section 270C.722 if the retailer, directly or indirectly, purchases for resale cigarettes without the proper stamp affixed. 

Repealed Minnesota Session Laws: 17-0142 

Laws 2011, First Special Session chapter 9, article 6, section 97, subdivision 6
Sec. 97.  REPEALER. Subd. 6.MinnesotaCare provider taxes. Minnesota Statutes 2010, sections 13.4967, subdivision 3; 295.50, subdivisions 1, 1a, 2, 2a, 3, 4, 6, 6a, 7, 9b, 9c, 10a, 10b, 12b, 13, 14, and 15; 295.51, subdivisions 1 and 1a; 295.52, subdivisions 1, 1a, 2, 3, 4, 4a, 5, 6, and 7; 295.53, subdivisions 1, 2, 3, and 4a; 295.54; 295.55; 295.56; 295.57; 295.58; 295.581; 295.582; and 295.59, are repealed effective for gross revenues received after December 31, 2019.8106.0100DEFINITIONS.   Subpart 1.Scope.  
As used in this chapter, the following words, terms, and phrases have the meanings given to them by this part. Some of the words, terms, and phrases are defined by statute but are included here for completeness. 

8106.0100DEFINITIONS.   Subp. 2.Allocation.  
"Allocation" means the process by which a fair and reasonable portion of each railroad's total unit value is assigned to Minnesota for purposes of taxation. 

8106.0100DEFINITIONS.   Subp. 3.Apportionment.  
"Apportionment" means the process of distributing that portion of the railroad's unit value which has been allocated to Minnesota after deducting exempt and nonoperating property to the various counties and taxing districts in which the railroad company operates. 

8106.0100DEFINITIONS.   Subp. 4.Assessment/sales ratio.  
"Assessment/sales ratio" means the ratio derived by dividing the estimated market value of a property by its adjusted selling price and used as a measure of the level of estimated market value to real or true market value. 

8106.0100DEFINITIONS.   Subp. 5.Book depreciation.  
"Book depreciation" means the depreciation shown by a railroad company on its corporate books and allowed the company by the Surface Transportation Board. 

8106.0100DEFINITIONS.   Subp. 6.Capitalization rate.  
"Capitalization rate" means an anticipated rate of return from an investment, a rate at which income is processed (capitalized) to indicate the probable capital value. This rate is usually expressed as a percentage. 

8106.0100DEFINITIONS.   Subp. 7.Equalization.  
"Equalization" means the adjustment of the estimated market value of railroad operating property to the apparent assessment/sales ratio of commercial and industrial property. 

8106.0100DEFINITIONS.   Subp. 8.Exempt property.  
"Exempt property" means property which is nontaxable for ad valorem tax purposes by statutes. An example of such property is personal property exempt from taxation under Minnesota Statutes, chapter 272. 

8106.0100DEFINITIONS.   Subp. 10.Mainline track.  
"Mainline track" means all track reported to the STB by the respondent railroad as main line. 

8106.0100DEFINITIONS.   Subp. 12.Obsolescence allowance.  
"Obsolescence allowance" means the adjustment to be made to the gross cost indicator of value to reflect the loss of economic usefulness or value because of causes other than physical deterioration. 

8106.0100DEFINITIONS.   Subp. 13.Operating property.  
"Operating property" means all property owned or used on a regular and continual basis by a railroad company in the performance of railroad transportation services, including without limitation, franchises, rights-of-way, bridges, trestles, shops, docks, wharves, buildings, and structures. 

8106.0100DEFINITIONS.   Subp. 14.Original cost.  
"Original cost" means the amount paid for an asset as recorded on the railroad's books in accordance with STB accounting rules and regulations. 

8106.0100DEFINITIONS.   Subp. 17.Restated cost.  
"Restated cost" means the cost of an asset recorded on a railroad's books after adjusting the amount from a retirement-replacement-betterment accounting basis to a depreciation accounting basis, in accordance with Code of Federal Regulations, title 49, part 1201 (effective January 1, 1983). 

8106.0100DEFINITIONS.   Subp. 17a.STB.  
"STB" means the Surface Transportation Board, a federal regulatory agency. 

8106.0100DEFINITIONS.   Subp. 18.Structure.  
"Structure" means all coal and ore wharves or docks, station houses, depots, shops, office buildings, and all other buildings with a restated cost of over $10,000. 

8106.0100DEFINITIONS.   Subp. 19.System.  
"System" means the total tangible property, real and personal, of a company which is used in its railroad operations in all states in which it operates. 

8106.0100DEFINITIONS.   Subp. 20.Unit value.  
"Unit value" means the value of the system of a railroad company taken as a whole without any regard to the value of its component parts. 

8106.0100DEFINITIONS.   Subp. 21.Weighting.  
"Weighting" means the confidence or reliability given to a factor or indicator. It is usually expressed as a portion of 100 percent. 

8106.0300REPORTS REQUIRED.   Subpart 1.Reports to be filed.  
The data used in the valuation, allocation, and apportionment processes will be drawn from reports submitted to the Department of Revenue by the railroad companies. These reports shall include: 

A.
 the Minnesota Department of Revenue annual railroad report; 

B.
 the annual report to the STB; 

C.
 the annual stockholders report; and 

D.
 other commonly accepted sources of railroad income, expense, capitalization, and debt and stock values such as IBBOTSON Associates Inc., and Statistics of Class I Freight Railroads compiled by the STB. 

8106.0300REPORTS REQUIRED.   Subp. 3.Failure to file.  
In the event any railroad company fails to file the required reports, the commissioner shall make a valuation according to the commissioner's best judgment based on available information. 

Other sources of pertinent information may be consulted only when necessary to make the valuation, allocation, and apportionment required by parts 8106.0100 to 8106.0700. Said sources will, when applicable, be used uniformly and will be commonly accepted sources of data for which they are consulted. Questions unique to the valuation of a particular railroad may be resolved by consulting the books and records of the particular railroad involved. 

8106.0400VALUATION. Subpart 1.In general.  
The approaches to value that will be used in determining the estimated unit value of railroad operating property are cost, capitalized income, and stock and debt except as provided in subparts 4 and 6. 

Subp. 2.Cost approach to valuation.  
The cost factor that will be considered in the railroad valuation method is the restated cost of the railroad system, plus the restated cost of construction work in progress on the assessment date. The railroad system shall be considered to be made up of the following STB accounts: all road and equipment accounts, including leased equipment accounts; all general expenditures; and other elements of investment and railroad property owned and leased to others as well as railroad property leased from others. Book depreciation and obsolescence shall be allowed as a deduction from the restated cost of the railroad's assets enumerated above. The original cost if known, and the annual lease payments of any leased operating property used by the railroad must be reported to the commissioner in conjunction with the annual railroad report. The commissioner shall incorporate the value of the leased property into the railroad's unit value utilizing this information. 

Obsolescence will be calculated through the use of the "Blue Chip Method." This method compares the railroad being appraised with the best railroads in the country, the so-called blue chip railroads. Three indicators of obsolescence will be used. First, a five-year average rate of return will be calculated for the railroad under appraisal. This rate of return is computed by dividing the subject's annual net railroad operating income for each of the most recent five years preceding the assessment, by the railroad's total owned transportation property less recorded depreciation and amortization (net investment in railroad property) for each corresponding year. The resulting five rates of return are then averaged using a simple arithmetic average to arrive at a five-year average rate of return. An example of this computation is as follows: 

XYZ Railroad 

	Year	Net Railroad Operating Income	Net Investment	Indicated Rate of Return	
	....	$2,700,000	$31,500,000	8.57%	
	....	$2,900,000	$32,000,000	9.06%	
	....	$3,100,000	$33,500,000	9.25%	
	....	$3,300,000	$34,000,000	9.70%	
	....	$3,530,700	$35,000,000	10.08%	
				Total 46.66%	
	Five-year Average Rate of Return		9.33%	

A study will then be made of the Class I railroads operating within the United States for the same five-year period using such informational sources as information compiled annually by the Wisconsin Department of Revenue known as the "Blue Chip" Obsolescence Study for STB Class I Railroads. Each year the railroad with the highest rate of return will be selected as the blue chip railroad. The resulting five rates of return will then be averaged to find the five-year average blue chip rate of return. An example of this process is as follows: 

	Year	Railroad	Rate of Return	
	....	ABC	11.50%	
	....	FGH	11.27%	
	....	JKL	10.57%	
	....	MNO	11.02%	
	....	XYZ	10.08%	
			Total 54.44%	
	Five-year Average Blue Chip Rate of Return 	10.89%	

The five-year average rate of return for the railroad under appraisal will be compared to the five-year average blue chip rate of return. The deviation of the subject railroad's rate of return from the blue chip railroads' rate of return is the amount of indicated obsolescence. The following example illustrates the computation. 

	XYZ Railroad Five-Year Average Rate of Return	9.33%	
	Blue Chip Five-Year Average Rate of Return	10.89%	
	Indicated Obsolescence 1 - (9.33% ÷ 10.89%)	14.30%	

Second, a five-year average freight traffic density indicator will be calculated. This indicator is calculated by dividing the subject railroad's ton miles of revenue freight for the most recent five years preceding the assessment by the average miles of road operated for each corresponding year. The resulting five indicators of freight traffic density are then averaged using a simple arithmetic average to arrive at a five-year average of freight traffic density. An example of this computation is as follows: 

XYZ Railroad 

	Year	Ton Miles of Revenue Freight	Average Miles of Road Operated	Indicated Freight Traffic Density	
	....	1,300,000,000	575	2,260,000	
	....	1,402,500,000	550	2,550,000	
	....	1,200,000,000	550	2,180,000	
	....	1,100,000,000	500	2,200,000	
	....	1,000,000,000	500	2,000,000	
				Total 11,190,000	
	Five-Year Average Freight Traffic Density		2,238,000	

A five-year study is then made of the Class I railroads operating within the United States in the same manner and using the same sources as the rate of return study with the exception that this study concentrates on the freight traffic density achieved by the various Class I railroads. Each year the railroad with the highest freight traffic density will be selected as the blue chip railroad. The resulting five freight traffic density amounts will then be averaged to find the five-year average blue chip freight traffic density amount. An example of this process is as follows: 

	Year	Railroad	Freight Traffic Density	
	....	JKL	2,280,000	
	....	FGH	2,600,000	
	....	FGH	2,200,000	
	....	MNO	2,900,000	
	....	ABC	2,280,000	
			Total 12,260,000	
	Five-year Average Blue Chip Freight Traffic Density	2,452,000	

The five-year average freight traffic density indicator of the railroad under appraisal will be compared to the five-year average blue chip freight traffic density indicator. The deviation of the subject railroad's freight traffic density from the blue chip railroad's freight traffic density is the amount of indicated obsolescence. The following example illustrates this computation: 

	XYZ Railroad Five-Year Average Freight Traffic Density	2,238,000	
	Blue Chip Five-Year Average Freight Traffic Density	2,452,000	
	Indicated Obsolescence 1 - (2,238,000 ÷ 2,452,000)	8.70%	

Third, a five-year average gross profit margin indicator will be calculated. This indicator measures a railroad's ability to convert gross revenue to net profit. This indicator is calculated by dividing net railway operating income, before federal and deferred taxes, by gross revenues. This calculation is performed using the subject railroad income figures for the most recent five years preceding the assessment. The resulting five indicators of gross profit margin are then averaged using a simple arithmetic average to arrive at a five-year average of gross profit margin. An example of this computation is as follows: 

XYZ Railroad 

	Year	Net Railroad Operating Income Before Taxes	Gross Revenue	Indicated Gross Profit Margin	
	....	4,050,000	15,000,000	27.0%	
	....	4,350,000	15,800,000	27.5%	
	....	4,650,000	16,500,000	28.2%	
	....	4,950,000	17,300,000	28.6%	
	....	5,295,000	19,000,000	27.9%	
				Total 139.2%	
	Five-Year Average Gross Profit Margin	27.8%	

A study will then be made of the Class I railroads operating within the United States for the same five-year period in the same manner and using the same sources in the two previous five-year studies mentioned above. This study will look at the gross profit margin achieved by the various Class I railroads. Each year the railroad with the highest gross profit margin will be selected as the blue chip railroad. The resulting five gross profit margin percents will then be averaged to find a five-year average blue chip gross profit margin percentage. An example of this process is as follows: 

	Year	Railroad	Gross Profit Margin	
	....	ABC	30.0%	
	....	ABC	31.2%	
	....	JKL	29.9%	
	....	FGH	32.6%	
	....	JKL	33.3%	
			Total 157.0%	
	Five-Year Average Blue Chip Gross Profit Margin	31.4%	

The five-year average gross profit margin percent for the railroad under appraisal will be compared to the five-year average blue chip gross profit margin percent. The deviation of the subject railroad's gross profit margin from the blue chip railroad's gross profit margin is the amount of indicated obsolescence. The following example illustrates this computation: 

	XYZ Railroad Five-Year Average Gross Profit Margin	27.8%	
	Blue Chip Five-Year Average Gross Profit Margin	31.4%	
	Indicated Obsolescence 1 - (27.8% ÷ 31.4%)	11.5%	

The obsolescence percentage indicated by this comparison of gross profit margins will be added to the obsolescence indicated by a comparison of rates of return and freight traffic density. The total of these three amounts will be averaged and this result will be the overall obsolescence percentage for the subject railroad. The following is an example of this computation: 

XYZ Railroad 

	Obsolescence Indicated by Rate of Return Comparison	14.30%	
	Obsolescence Indicated by Freight Traffic Density Comparison	8.70%	
	Obsolescence Indicated by Gross Profit Margin Comparison	11.50%	
		Total 34.50%	
			
	Average Obsolescence Percentage	11.50%	

The obsolescence percentage will then be applied to the road accounts of the subject railroad, excluding land and personal property, after the allowance for depreciation has been deducted. In no instance shall the allowance for obsolescence exceed 50 percent. The following example illustrates how the cost indicator of value is computed and how the allowance for obsolescence is applied. 

XYZ Railroad 

	Account		Amount	
				
	Road		$24,000,000	
	Equipment -- Owned and Leased	9,000,000	
	Construction Work in Progress	4,500,000	
	General Expenditures		1,823,000	
	Gross Cost Indicator		39,323,000	
	Less Depreciation		10,000,000	
	Net Cost Indicator		$29,323,000	
				
	Road	$24,000,000		
	Less Land and Personal Property	1,000,000		
	Adjusted Road	23,000,000		
				
	Adjusted Road		$23,000,000	
	Depreciation on Adjusted Road	7,000,000	
	Net Road		16,000,000	
	Obsolescence Percent		11.5%	
	Obsolescence Amount		1,840,000	
	Adjusted Cost Indicator of Value	$27,483,000	

This cost indicator of value computed in accordance with this part will bear a weighting of 15 percent of the total unit value estimate of the railroad's property, except in the case of bankrupt railroads, or railroads with no income to be capitalized, as provided for in subpart 6, or railroads not meeting the criteria for use of the stock and debt approach to value as specified in subpart 4. These railroads will be valued using a 40 percent weighting for the cost indicator of value. 

Subp. 3.Income approach to valuation.  
The income indicator of value will be calculated by averaging the net railway operating income, as defined by the STB, of the railroad for the most recent five years preceding the assessment. This average income shall be capitalized by applying to it a capitalization rate which will be computed by using the band of investment method. This method will consider: 

A.
 the capital structure of railroads, including capital surplus and retained earnings; 

B.
 the cost of debt or interest rate paying particular attention to imbedded debt of railroads; 

C.
 the yield on preferred stock of railroads; and 

D.
 the yield on common stock of railroads. 

This rate will be calculated each year using the method described in this subpart. 

An example of a computation of the capitalized income approach to value is as follows: 

XYZ Railroad 

	Year	Net Railway Operating Income	
	....	$ 2,600,000	
	....	2,700,000	
	....	3,000,000	
	....	3,100,000	
	....	3,492,500	
	Total	$14,892,500	
			
	Average	$ 2,978,500	

Five-year average Net Railway Operating Income Capitalized at 14.0 percent (2,978,500 ÷ 14.0 percent) equals $21,275,000. 

The income indicator of value computed in accordance with this part shall be weighted 60 percent of the total estimated unit value of the railroad's property except in the case of bankrupt railroads or railroads having no net operating income as provided for in subpart 6. 

Subp. 4.Stock and debt approach to valuation.  
The stock and debt approach to value is the third method which will be used to estimate the unit value of the railroad operating property. This approach to value is based on the accounting principle: assets = liabilities + equity. Therefore, when the value of a company's liabilities (debt) is found and this added to the worth of its stock, a value can be established for its assets (property). 

The use of this approach to value will be limited to only those railroads meeting qualifications in items A to C: 

A.
 The stock of the railroad must be traded on either the New York or American Stock Exchange. 

B.
 The bonds of the railroad must be traded or have a rating by either Standard and Poor's or Moody's rating services. 

C.
 If the railroad is part of a diversified company, the value of the railroad portion of the total stock price must be able to be separated on an earnings basis using the following method: 

XYZ Railroad 

	XYZ railroad is wholly owned by ABC Industries Inc.	
			
	Net Earnings of ABC Industries	$5,200,500	
	Net Earnings of XYZ Railroad	$2,600,250	
	Percent of XYZ net earnings to total conglomerate earnings	50%	
	Value of share of ABC Industries stock	$100	
	XYZ Railroad portion of stock value	$50	

If a railroad has no net earnings, and is part of a conglomerate, then the stock and debt indicator of value will not be used. 

The value of the stock used in the stock and debt method shall be an average of the month-ending stock prices for the 12 months immediately preceding the assessment date of January 2. The value of the bonds, equipment obligations, and conditional sales contracts, and other long-term debts shall also be an average of the cost of money quotes for the 12 months immediately preceding the assessment date of January 2. The source for these stock and bond prices shall be Standard and Poor's Stock Guide or other applicable financial service. 

An illustration of a computation of the stock and debt approach to value is as follows: 

XYZ Railroad Company 

	Shares of Common Stock issued x		
	Average price for preceding year		
		1,000,000 x $12 = $12,000,000	
	Shares of Preferred Stock x		
	Average price for preceding year		
		100,000 x $15 = $ 1,500,000	
	Rate and face value of bonds x		
	Average price for class of bonds for preceding year		
	A rated 8% bonds $10,000,000 x 99% of par = $ 9,900,000	
			
	Stock and Debt Indicator of Value	$23,400,000	

After the gross stock and debt indicator of value has been computed, an allowance will be made for the effect, if any, of revenue from other than railway operations included in this indicator of value. This allowance shall be based on the ratio of a five-year average of net revenue from railway operations, as determined by the STB, to a similar five-year average of income available for fixed charges as determined by the STB. The five-year average will be the most recent five years preceding the assessment date. An example of this computation is as follows: 

XYZ Railroad Company 

	Year	Net Revenue fromRailway Operations	Income Availablefor Fixed Charges	
	....	$ 3,000,000	$ 3,500,000	
	....	4,000,000	4,300,000	
	....	5,200,000	5,700,000	
	....	6,000,000	6,800,000	
	....	5,200,000	5,400,000	
		$23,400,000	$25,700,000	
	Average	$ 4,680,000	$ 5,140,000	
	Ratio $4,680,000 ÷ $5,140,000 = 91%		
				
	Gross Stock and Debt Indicator of Value	$23,400,000	
	Ratio of Operating to Noncarrier Earnings	91%	
	Net Stock and Debt Indicator of Value	$21,300,000	

The stock and debt indicator of value computed in accordance with this part will bear a weighting of 25 percent of the total unit value of the railroad's property, except in the case of bankrupt railroads, railroads in bankruptcy proceedings, or railroads with no income to be capitalized, as provided for in subpart 6. If no stock and debt indicator of value is computed, the weighting of 25 percent which would have been applied to this indicator of value will be placed on the cost indicator of value. 

Subp. 5.Unit value computation.  
The estimated unit value of the railroad property will be the total of the three weighted indicators of value. The following is an example of the computation of the unit value. 

XYZ Railroad 

	Valuation Approach	Value	Weighting		
	Cost indicator of value	$27,483,000	15%	$ 4,122,500	
	Income indicator of value	21,275,000	60%	12,765,000	
	Stock and debt indicator of value	21,300,000	25%	5,325,000	
			Unit Value $22,212,500	

The weighting shown above may vary from railroad to railroad as provided for in subparts 2 to 4. 

Subp. 6.Railroads operating at a loss, bankrupt railroads involved in federal bankruptcy proceedings, and railroads adjudged bankrupt by a federal court.  
Railroads which are involved in federal bankruptcy proceedings, adjudged bankrupt, or railroads having no net railway operating income will be valued using the cost and stock and debt approaches to value. If the stocks or bonds of such railroads are not traded, or do not meet the other requirements for use of the stock and debt indicator of value, then these railroads will be valued using the cost approach to value only. 

8106.0500ALLOCATION. Subpart 1.In general.  
After the estimated unit value of the railroad property has been determined, the portion of value which is attributable to Minnesota must be established. This is accomplished through the use of certain allocation factors. Each of the factors in the allocation method shows a relationship between the railroad system operations in all states and its Minnesota operations. These relationships are expressed in percentage figures. These percentages are then added and an average is computed. The resulting average of the factors, multiplied by the unit value, yields the Minnesota portion of the railroad property which will, after the adjustments described in parts 8106.0600and 8106.0800, be subject to ad valorem tax in Minnesota. 

Subp. 2.Allocation factors.  
The factors to be considered in making allocations of unit values to Minnesota for railroad companies are: 

A.
 miles of railroad track operated in Minnesota divided by miles of railroad track operated in all states; 

B.
 ton miles of revenue freight transported in Minnesota divided by ton miles of revenue freight transported in all states; 

C.
 gross revenues from transportation operations within Minnesota divided by gross revenues from transportation operations in all states; and 

D.
 cost of road property in Minnesota divided by the cost of road property in all states. 

The following example illustrates the allocation method to be applied to the unit value of railroad property. 

	XYZ Railroad	
	Minnesota miles of track	100				
	Total miles of track	........_____500	=	20%		
						
	Minnesota ton miles of revenue freight	2,200,000				
	Total ton miles of revenue freight	_____9,000,000	=	24%		
						
	Minnesota gross transportation revenue	$10,000,000				
	Total gross transportation revenue	_____$40,000,000	=	25%		
						
	Minnesota cost of road property	2,990,000				
	Total cost of road property	_____13,000,000	=	23%		
		Total		92%		
	Minnesota Percent of Unit Value 		23%		
	Total Unit Value ($22,212,500 x 23%) =					
	Minnesota Portion of Unit Value	 $5,108,875				
8106.0600ADJUSTMENTS FOR NONFORMULA ASSESSED PROPERTY OR EXEMPT PROPERTY. 
After the Minnesota portion of the unit value of the railroad company is determined, property which is either exempt from taxation, such as personal property, or classified as nonoperating will be deducted from the Minnesota portion of the unit value to the extent that it has been included in the computation of this value. 

Property which has been included in the computation of the unit value but has been defined as nonoperating property will be valued by the local assessor. The Minnesota portion of the unit value will be reduced by the restated cost of this property. Only nonoperating property located within Minnesota will be eligible for this exclusion. 

The railroad company shall have the responsibility to submit to the commissioner of revenue, in the form required by the commissioner, such schedules of nonoperating property as the commissioner may require. 

In addition to nonoperating property which will be valued and assessed locally, a deduction from the Minnesota portion of the unit value will be made for personal property. 

A percentage of the Minnesota portion of the unit value before deducting nonoperating property will be excluded as personal property. This percentage will be computed in the following way: 

A.
 The following STB accounts for property within Minnesota will be totaled: 

(1)
 that portion of coal and ore wharves determined to be personal property; 

(2)
 communication systems; 

(3)
 signals and interlockers; 

(4)
 roadway machines; 

(5)
 shop machinery; 

(6)
 power plant machinery; 

(7)
 computer and word processing equipment; and 

(8)
 equipment, allocated to Minnesota on the basis of car and locomotive miles in Minnesota compared to total system car and locomotive miles. 

B.
 The total of these accounts will then be divided by the total of the Minnesota road, equipment, leased property, general expenditures, construction work in progress, and other elements of investment accounts. The resulting percentage will be used to determine the personal property amount of the Minnesota portion of the unit value. This amount will not be taxable for ad valorem purposes. 

C.
 The following is an illustration of the computation for the personal property exclusion. 

XYZ Railway 

	Personal Property Account		Amount in Minnesota	
				
	Computer and Word Processing Equipment		$ 89,200	
	Coal and Ore Wharves		100,000	
	Communication Equipment		100,000	
	Signals and Interlockers		200,000	
	Roadway Machines		200,000	
	Shop Machinery		100,000	
	Power Plant Machinery		100,000	
	* Equipment -- Owned and Leased		2,250,000	
			3,139,200	
	* Total Equipment Account	$9,000,000		
	Car and Locomotive Miles in Minnesota	1,000,000		
	Total Car and Locomotive Miles	4,000,000		
	Ratio of Minnesota to Total	25%		
	Minnesota Allocated Equipment Account	$2,250,000		
				
	Restated Cost Account		Amount in Minnesota	
				
	Road		$2,990,000	
	Equipment -- Owned and Leased		2,250,000	
	Construction Work in Progress		800,000	
	General expenditures		500,000	
			$6,540,000	
				
	Minnesota Personal Property Accounts	$3,139,200		
	Minnesota Restated Cost	$6,540,000		
	Ratio of Personal Property to Cost	48%		
				
	Minnesota portion of unit value		5,108,875	
	Personal Property exclusion at 48%		2,452,260	
	Taxable Minnesota Portion of Unit Value		$2,656,615	
8106.0700APPORTIONMENT. Subpart 1.In general.  
After the taxable Minnesota portion of the railroad's unit value has been determined, this value must be distributed to the various counties and taxing districts in which the railroad operates. This distribution will be accomplished by the commissioner of revenue through the use of certain apportionment components. Each of the components in the apportionment method is a reflection of the property owned or used by the railroad within a particular taxing district. The figures making up these components will be developed on information submitted by the railroad companies in annual reports filed with the commissioner, and information supplied to the commissioner by the various county auditors and assessors. 

Subp. 2.Apportionment components.  
There are three components which will be used in the distribution of the value of railroad property to the various taxing districts. They are railroad operating land, miles of track, and railroad operating structures with a restated cost of $10,000 or more. 

Subp. 3.Railroad operating land.  
The information for the computation of this apportionment component will be based on information submitted by both the railroads and the various county auditors and assessors. The railroad companies shall file with the commissioner of revenue each year, in conjunction with their annual reports required by part 8106.0300, subpart 1, the number of acres of railroad operating land owned or used by them in each taxing district in which they operate. The county auditor shall also be required to submit to the commissioner of revenue a report showing the number of acres of railroad operating land, detailed by owning railroad, in each taxing district within the county. If either the railroads or the auditors find that it is administratively impracticable to submit this information, the commissioner shall make an estimate of the number of acres of railroad operating land within each taxing district based on the best information available. Such information would usually consist of the miles of railroad track within the taxing district and the normal width of the right-of-way used by the railroad. In addition, information relative to the current estimated market value of all land within the respective taxing districts will be obtained from the county or city assessors by a review of the abstract of assessment of real and personal property which the various assessors are required to submit yearly to the commissioner of revenue in compliance with Minnesota Statutes, section 273.061, subdivision 9. A review will also be made of the abstract of assessment of exempt real property which is submitted to the commissioner of revenue by the various assessors in compliance with Minnesota Statutes, section 273.18. 

The computation for the railroad operating land apportionment component will be accomplished annually in the following manner: 

A.
 The average estimated market value per taxable acre within a specific taxing district will be calculated by dividing the estimated market value of all taxable land within the taxing district as indicated by the most recent abstract of assessment of real and personal property by the number of taxable acres within the taxing district. The number of acres within a taxing district will be obtained from the most recent statistics available from the Minnesota Geospatial Information Office, Department of Administration. The total number of acres will be adjusted to allow for nontaxable or exempt acres by subtracting these nontaxable or exempt acres from the total acres. The number of nontaxable or exempt acres will be obtained from the most recent abstract of assessment of exempt real property. The following example illustrates this calculation. 

	Estimated Market Value of All Taxable Land Within Taxing District		$200,000	
	Total Area of Taxing District	210 Acres		
	Nontaxable or Exempt Acres	10 Acres		
	Taxable Acres Within Taxing District		200	
			_____	
	Average Estimated Market Value per Acre		$1,000	
B.
 This average estimated market value per taxable acre is then applied to the number of acres of railroad operating land within the taxing district to compute a gross railroad operating land component within the taxing district. The following example illustrates this computation: 

	Average Estimated Market Value Per Acre	$1,000		
	Acres of Railroad Operating Land	x 5		
		_____		
	Gross Railroad Operating Land Component	$5,000		
C.
 This railroad operating land component will then be adjusted. This adjustment is achieved by striking a ratio between the system unit value for all Minnesota railroads, as described in part 8106.0400, subpart 5, to the total of net investment in railway property used in transportation service as defined by the STB for all railroads operating in Minnesota. This relationship will be computed annually and will then be applied to the gross railroad operating land component to arrive at the adjusted railroad operating land component. This adjusted land value will then be used as one element of the apportionment computation. 

The following is an example of how the adjusted railroad operating land component is to be computed: 

	Railroad	System Unit Value		Net Investment in Railway Property Used in Transportation Services 	
							
	ABC Railway	$ 20,000,000			$ 40,000,000		
	FGH Railway	5,256,000			8,000,000		
	JKL Railroad	2,000,000			4,780,830		
	MNO Railroad	50,000,000			90,000,000		
	XYZ Railroad	22,212,500			25,000,000		
		_____			_____		
		$ 99,468,500			$ 165,780,830		

Total System Unit Value ($99,468,500) ÷ Total Net Investment in Railway Property Used in Transportation Services ($165,780,830) = 60% 

	Gross Railroad Operating Land Component Within the Taxing District	$5,000		
	Adjustment Factor	60%		
		_____		
	Adjusted Railroad Operating Land Component	$3,000		
Subp. 4.Miles of track.  
The information for the computation of this apportionment component will be based on information submitted by the railroads to the commissioner of revenue in conjunction with the annual report required by part 8106.0300, subpart 1. Each railroad will be required to list the miles of track they own in each taxing district within Minnesota. The track must be separated into two classes, main line track and all other track. 

In order to make the miles of track in each taxing district compatible with the other apportionment components, the miles must be converted to dollars. This conversion will be computed annually. The conversion will be accomplished by adding together the following STB accounts for each railroad's net investment in Minnesota: account 3, grading; account 8, ties; account 9, rails; account 11, ballast. The total of these accounts will then be divided by the number of miles of track operated by the respective railroads within Minnesota to obtain a cost per mile figure. This will be used as the average cost per mile for track within Minnesota. 

The following is an example of how the average cost per mile of track in Minnesota will be computed: 

	Railroad	Total of Accounts #3,8, 9, 11	Mileage Operated in Minnesota 	
							
	ABC Railway	$ 4,000,000			154		
	FGH Railway	800,000			42		
	JKL Railroad	500,000			20		
	MNO Railroad	7,450,000			290		
	XYZ Railroad	2,500,000			104		
		_____			_____		
		$ 15,250,000			610		

Total cost of track ($15,250,000) ÷ Total miles operated (610) = Average Cost per Mile of Track $25,000. 

Main line track shall be weighted at 1.5 times the cost of all other track; thus, if the average cost per mile of track is $25,000, main line track would be worth more than $25,000 per mile, while all other track would be worth less. The calculation for the average cost of both main line and all other track shall be made annually on an industry basis. 

The calculation to determine the average cost per mile of main line track and the average cost per mile of all other track will be computed in the following manner: 

A.
 Total mileage operated will be multiplied by the average cost per mile to arrive at a total track cost. 

B.
 Total mileage operated will be separated into the two types of track, main line and all other track. 

C.
 Main line track will be multiplied by 1.5 to arrive at adjusted main line miles. 

D.
 Adjusted main line miles will be added to all other track miles to arrive at adjusted total track miles. 

E.
 Total track cost will be divided by adjusted total track miles to arrive at the cost per mile of all other track. 

F.
 The cost per mile of main line track will be computed by multiplying the cost per mile of all other track by 1.5. 

An illustration of this computation is as follows: 

	Railroad	Mileage Operated	Main Line Miles	All other Track Miles	
								
	ABC Railway	154		96		58		
	FGH Railway	42		10		32		
	JKL Railroad	20		15		5		
	MNO Railroad	290		132		158		
	XYZ Railroad	104		52		52		
		_____		_____		_____		
		610		305		305		

	Total Mileage Operated			610		
	Average Cost Per Mile of Track			$ 25,000		
	Total Track Cost			$ 15,250,000		
						
	Main Line Miles		305			
	Weighting Factor		1.5			
						
	Adjusted Main Line Miles			457.5		
	Other Track Miles			305.0		
	Adjusted Total Track Miles			762.5		
						
	Total Track Cost			$ 15,250,000		
	Adjusted Total Track Miles			762.5		
	Average Cost Per Mile of Other Track		$ 20,000		
						
	Average Cost Per Mile of Other Track		$ 20,000		
	Weighting Factor			1.5		
	Average Cost Per Mile of Main Line Track		$ 30,000		

After the per mile cost figures for main line and all other track are obtained, these per mile cost figures would be multiplied by the length of each type of track in a particular taxing district to obtain the value of the trackage in that district. The same cost figures will be used for all railroads operating in Minnesota. 

Subp. 5.Structures.  
The information for the computation of this apportionment component will be based on statements submitted by the railroads. These schedules shall be submitted annually to the commissioner of revenue in conjunction with the annual report required by part 8106.0300, subpart 1. The schedules shall show the location, by taxing district, of all operating structures owned by the reporting railroad within Minnesota with a restated cost of $10,000 or more. The schedules shall list a description of the structure and the railroad's current restated cost investment in the structure as it appears in the appropriate STB account. 

An example of this listing is as follows: 

XYZ Railroad 

	Taxing District	Description	Restated Cost	
				
	St. Paul, S.D. #625	Office Building	$ 400,000	
	Minneapolis, S.D. #1	Depot	20,000	
	Fridley, S.D. #16	Yard Tower	200,000	
	Anoka, S.D. #11	Engine and Car Shop 	250,000	
			_____	
		Total	$ 870,000	
Subp. 6.Apportionment computation.  
The apportionment of a railroad's taxable Minnesota value is accomplished by totaling the amount of the land, track, and structure components as developed in subparts 3 to 5 for each taxing district, then finding the sum of these totals for all the taxing districts in which the subject railroad operates. The taxable Minnesota portion of the railroad's unit value is divided by the total of the three apportionment components for all taxing districts in which the railroad operates in order to arrive at a percentage. This resulting percentage is then applied to the total amount of the three apportionment components for each specific taxing district. The figure produced by this multiplication process is the taxing district's share of the railroad's taxable Minnesota portion of the unit value. No more value can be distributed to the various taxing districts than that produced by the valuation process described in parts 8106.0100 to 8106.0600. 

The example in part 8106.9900 illustrates the apportionment process. 

8106.0800EQUALIZATION. Subpart 1.In general.  
After the apportionment of value referred to in part 8106.0700has been made, the railroad property values must be equalized to coincide with the assessment levels of commercial and industrial property within each respective county receiving a share of the apportioned railroad value. This equalization will be accomplished through the use of an assessment/sales ratio. 

Subp. 2.Assessment/sales ratio computation.  
A comprehensive assessment/sales ratio study compiled annually by the sales ratio section of the Property Tax Division of the Department of Revenue commonly known as the State Board of Equalization Sales/Ratio Study will be used in this computation. The portions of this study which will be used for purposes of this section are known as the "County Commercial and Industrial Sales Ratio." 

This commercial and industrial (C & I) sales ratio is computed through an analysis of the certificates of real estate value filed by the buyers or sellers of commercial or industrial property within each county. The information contained on these certificates of real estate value is compiled pursuant to requests, standards, and methods set forth by the Minnesota Department of Revenue acting upon recommendations of the Minnesota legislature. The most recent C & I study available will be used for purposes of this section. 

The median C & I sales ratio from the County Commercial and Industrial Sales Ratio study will be used as a basis to estimate the current year C & I median ratio for each county. 

The process used to estimate this current year median ratio will be as follows. 

The State Board of Equalization abstract of market value will be examined. The current estimated market value of commercial and industrial property within each county will be taken from this abstract. The amount of the value of new commercial and industrial construction, ("new" meaning since the last assessment period) as well as the value of commercial and industrial property which has changed classification (i.e. commercial to tax exempt property) will also be taken from the abstract. The value of new construction will then be deducted from the estimated market value, resulting in a net estimated current year market value for commercial and industrial property within the county. The value of commercial and industrial property which has changed classification will be deducted from the previous years estimated market value to arrive at a net estimated previous year market value for commercial and industrial property within the county. The net current year value will be compared to the net previous year's estimated market value for commercial and industrial property within the county and the difference between the two values noted. This difference will be divided by the previous year's net estimated market value for commercial and industrial property to find the percentage of increase, or decrease, in assessment level for each year. This percent of change will be applied to the most recent C & I median ratio to estimate the current year's C & I median ratio. An example of this calculation for a typical county is shown below. 

	Current Year Estimated Market Value for Commercial and Industrial Property	$12,000,000		
	Less: New Construction	1,500,000		
		_____		
	Current Year Net Estimated Market Value for Commercial and Industrial Property		10,500,000	
				
	Previous Year Estimated Market Value for Commercial and Industrial Property	10,250,000		
	Less: Classification Changes	250,000		
		_____		
	Previous Year Net Estimated Market Value for Commercial and Industrial Property		10,000,000	
			_____	
	Difference Previous Year vs. Current Year Estimated Market Value		500,000	
	Percent of Change (500,000 ÷ 10,000,000)		5%	
	Previous Year Median Commercial and Industrial Ratio		88%	
	Current Year Estimated Median Commercial and Industrial Ratio (88% x 105%)		92.4%	

This same calculation is performed for each Minnesota county which contains operating railroad property. If there are five or fewer valid sales of commercial and industrial property within a county during the study period, these few sales are insufficient to form the basis for a meaningful C & I ratio. Therefore, the median assessment/sales ratio to be used for purposes of the above computation will not be the median C & I ratio but will be the weighted median ratio of all property classes within the county for which a sales ratio is available. This weighted median ratio is computed in the same manner using the same procedures and standards as the C & I ratio. In addition, the computation described above will not be performed using the commercial and industrial estimated market value but will use the estimated market value for all property within the county. All other aspects of the calculations are identical except for this substitution. 

The weighted median ratio is developed by multiplying the median ratio for each class of property (agricultural, residential, recreational, commercial) by the percentage of value that class of property comprises of the total county value. An example of this calculation is as follows: 

	Class of Property	Amount of Value	Percent of Value	Median Ratio	Weighted Median Ratio	
						
	Residential	$ 20,000,000	20%	85%	17.00%	
	Agricultural	55,000,000	55%	95%	52.25%	
	Seasonal - Recreational	5,000,000	5%	90%	4.50%	
	Commercial - Industrial	20,000,000	20%	85%	17.00%	
	Total	$100,000,000	100%		90.75%	
Subp. 3.Application of the estimated current year median assessment/sales ratio.  
After the estimated current year median ratio has been calculated pursuant to subpart 2, it is used to adjust the apportioned estimated market value of operating railroad property to the apparent assessment level of commercial and industrial property in each county. This is done by multiplying the estimated market value of the railroad property by the estimated sales ratio to arrive at the equalized market value of operating railroad property. In no instance will any adjustment be made if, after comparing the estimated current year sales ratio to the assessment level of operating railroad property, the difference between the two is five percent or less. An example of this adjustment is as follows: 

		Estimated Market Value of Railroad Operating Property*	Estimated Current Year Median Sales Ratio	Equalized Estimated Market Value of Railroad Operating Property 	
					
	County A	$ 100,000	85%	 $ 85,000	
	County B	250,000	88%	220,000	
	County C	300,000	90%	270,000	
	County D	150,000	92%	138,000	
	County E	100,000	95%	100,000**	

* For purposes of this example, assume that railroad property is assessed at 100 percent of market value. 

** No adjustment made because estimated current year median sales ratio is within five percent of assessment level on operating railroad property. 

All railroads operating within a particular county will be equalized at the same percentage. 

These equalized estimated market values of operating railroad property will be certified to the county assessor denoting specific railroads and taxing districts pursuant to Minnesota Statutes, section 270.87. 

8106.9900EXAMPLE OF APPORTIONMENT PROCESS. 
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