SF 726

as introduced - 90th Legislature (2017 - 2018) Posted on 02/07/2017 09:08am

A bill for an act
relating to taxation; providing for tax reductions to low- and middle-income
families; closing corporate tax loopholes; providing aid to local government units;
modifying income, property, tobacco, sales and use, and special taxes and other
various tax provisions; appropriating money; amending Minnesota Statutes 2016,
sections 16D.08, subdivision 2; 116J.8737, subdivisions 1, 5, 5a, 12; 123B.53,
subdivision 4; 128C.24; 270.80, subdivisions 2, 3, 4, by adding subdivisions;
270.81, subdivision 3, by adding a subdivision; 270.82; 270.83, subdivisions 1, 2;
270.84; 270.86; 270.87; 270C.03, subdivision 1; 270C.33, subdivision 6; 270C.722,
subdivision 1; 270C.728, by adding a subdivision; 272.02, subdivision 9; 273.1384,
subdivision 2; 273.1392; 273.1393; 275.025, subdivisions 1, 4; 275.065, subdivision
3; 275.07, subdivision 2; 275.08, subdivision 1b; 276.04, subdivision 2; 289A.19,
subdivision 7; 289A.60, by adding a subdivision; 290.01, subdivision 4a; 290.05,
subdivision 1; 290.067, subdivisions 1, 2, 2b, 3; 290.0671, subdivisions 1, as
amended, 7; 290.0674, by adding a subdivision; 290.0677, subdivision 1a; 290.068,
subdivision 2; 290.17, subdivision 4; 290.191, subdivision 5; 290.21, subdivision
4; 290A.03, subdivision 13; 290B.03, subdivision 1; 290B.04, subdivision 1;
290C.01; 290C.02, subdivisions 1, 3, 6; 290C.03; 290C.04; 290C.05; 290C.055;
290C.07; 290C.08, subdivision 1; 290C.10; 290C.11; 290C.13, subdivision 6;
291.03, subdivision 11; 295.52, subdivision 8; 296A.01, subdivision 12; 296A.08,
subdivision 2; 297A.61, subdivisions 3, 54; 297A.67, subdivision 10, by adding
a subdivision; 297A.70, subdivisions 1, 4, by adding a subdivision; 297A.71, by
adding subdivisions; 297A.75, subdivisions 1, 2, 3; 297A.815, subdivision 3;
297F.01, subdivisions 9a, 10, 14, 17, 19, 20, 21, by adding subdivisions; 297F.03,
subdivisions 1, 2, 3, 5, 6, 7, by adding a subdivision; 297F.04, subdivisions 1, 2;
297F.05, subdivision 3, by adding a subdivision; 297F.06, by adding a subdivision;
297F.08, subdivision 8a; 297F.09, subdivisions 2, 7, 10; 297F.12, subdivision 3;
297F.13, subdivisions 2, 4, by adding a subdivision; 297F.15, subdivision 9;
297F.19, by adding a subdivision; 297F.20, subdivisions 5, 6, 7, 9, by adding
subdivisions; 297F.21, subdivision 1; 297H.04, subdivision 2; 297I.05, subdivision
7; 298.015; 461.12, subdivision 8; 477A.03, subdivisions 2a, 2b; Laws 2010,
chapter 216, section 12, as amended; proposing coding for new law in Minnesota
Statutes, chapters 103F; 270C; 273; 290; 290C; 297F; 477A; repealing Minnesota
Statutes 2016, sections 270.81, subdivision 4; 270.83, subdivision 3; 290.067,
subdivision 2a; 290C.02, subdivisions 5, 9; 297A.67, subdivision 33; 297F.185;
Laws 2011, First Special Session chapter 9, article 6, section 97, subdivision 6;
Minnesota Rules, parts 8106.0100, subparts 1, 2, 3, 4, 5, 6, 7, 8, 10, 12, 13, 14,
17, 17a, 18, 19, 20, 21; 8106.0300, subparts 1, 3; 8106.0400; 8106.0500; 8106.0600;
8106.0700; 8106.0800; 8106.9900.

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

ARTICLE 1

INDIVIDUAL INCOME TAX

Section 1.

Minnesota Statutes 2016, section 290.067, subdivision 1, is amended to read:

Subdivision 1.

Amount of credit.

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

new text begin (b) A taxpayer who incurs actual employment-related expenses may take as a credit
against the tax imposed under this chapter an amount equal to the dependent care credit for
which the taxpayer is eligible pursuant to the provisions of section 21 of the Internal Revenue
Code.
new text end

new text begin (c) A taxpayer who elects to claim a credit under paragraph (d) or (e) may claim a credit
under paragraph (b) only for employment-related expenses paid to care for qualifying
individuals other than the child for whom deemed expenses were used to claim the credit
under paragraph (d) or (e).
new text end

deleted text begin (b) If a child who has not attained the age of six years at the close of the taxable year is
cared for at a licensed family day care home operated by the child's parent, the taxpayer is
deemed to have paid employment-related expenses. deleted text end new text begin (d) In lieu of the credit under paragraph
(b), a taxpayer who operates a licensed family day care home may elect to claim as a credit
against the tax imposed under this chapter an amount equal to the dependent care credit for
which the taxpayer is eligible pursuant to the provisions of section 21 of the Internal Revenue
Code calculated using deemed expenses rather than actual expenses paid. new text end If the child is 16
months old or younger at the close of the taxable year, deleted text begin the amount of deleted text end new text begin deemed new text end expenses
deleted text begin deemed to have been paid equals deleted text end new text begin are equal to new text end the maximum deleted text begin limit deleted text end new text begin amount of
employment-related expenses incurred during the taxable year that may be taken into account new text end
for one deleted text begin qualified deleted text end new text begin qualifying new text end individual under section 21(c) and (d) of the Internal Revenue
Code new text begin minus the amount of employment-related expenses paid by the taxpayer for the care
of the individual new text end . If the child is older than 16 months of age but has not attained the age of
six years at the close of the taxable year, deleted text begin the amount of deleted text end new text begin deemed new text end expenses deleted text begin deemed to have
been paid equals deleted text end new text begin are equal to new text end the amount the licensee would charge for the care of a child
of the same age for the same number of hours of care. new text begin If the child has attained six years of
age at the close of the taxable year, deemed expenses are zero.
new text end

deleted text begin (c) If a deleted text end new text begin (e) In lieu of the credit under paragraph (b), a new text end married couple new text begin may elect to claim
a credit against the tax imposed under this chapter as computed under paragraph (f) if the
married couple new text end :

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

(2) files a joint tax return for the taxable year; deleted text begin and
deleted text end

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

new text begin (4) does not operate a licensed family day care center home.
new text end

new text begin (f) A married couple meeting the requirements of paragraph (e) is allowed a credit against
the tax due under this chapter equal to the dependent care for which the couple is eligible
pursuant to section 21 of the Internal Revenue Code calculated using deemed expenses
rather than actual employment-related expenses paid. For purposes of this paragraph, deemed
expenses are the lesser of (i) the combined earned income of the couple or (ii) the maximum
amount of employment-related expenses incurred during the taxable year that may be taken
into account for one qualified individual under section 2l(c) and (d) of the Internal Revenue
Code or for two qualifying individuals for a taxpayer with two children who have not attained
one year of age. The earned income limitation of section 21(d) of the Internal Revenue Code
does not apply to this deemed amount. These deemed amounts apply regardless of whether
any employment-related expenses have been paid.
new text end

deleted text begin (d) deleted text end new text begin (g) new text end If the taxpayer is not required and does not file a federal individual income tax
return for the tax year, new text begin or if the taxpayer files a federal return but does not claim a federal
dependent care credit, new text end no credit is allowed for any amount paid to any person unless:

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

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

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

deleted text begin (e) deleted text end new text begin (h) new text end In the case of a nonresident, part-year resident, or a person who has earned income
not subject to tax under this chapter including earned income excluded pursuant to section
290.0132, subdivision 10, the credit determined under new text begin this new text end section deleted text begin 21 of the Internal Revenue
Code deleted text end must be allocated based on the ratio by which the earned income of the claimant and
the claimant's spouse from Minnesota sources bears to the total earned income of the claimant
and the claimant's spouse.

deleted text begin (f) deleted text end new text begin (i) new text end For residents of Minnesota, the subtractions for military pay under section
290.0132, subdivisions 11 and 12, are not considered "earned income not subject to tax
under this chapter."

deleted text begin (g) deleted text end new text begin (j) new text end For residents of Minnesota, the exclusion of combat pay under section 112 of the
Internal Revenue Code is not considered "earned income not subject to tax under this
chapter."

new text begin (k) For purposes of this section, "qualifying individual" and "employment-related
expenses" have the meanings given in section 21 of the Internal Revenue Code.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2016.
new text end

Sec. 2.

Minnesota Statutes 2016, section 290.067, subdivision 2, is amended to read:

Subd. 2.

Limitations.

deleted text begin The credit for expenses incurred for the care of each dependent
shall not exceed $720 in any taxable year, and the total credit for all dependents of a claimant
shall not exceed $1,440 in a taxable year. The maximum total credit shall be reduced
according to the amount of the income of the claimant and a spouse, if any, as follows:
deleted text end

deleted text begin income up to $18,040, $720 maximum for one dependent, $1,440 for all dependents;
deleted text end

deleted text begin income over $18,040, the maximum credit for one dependent shall be reduced by $18
for every $350 of additional income, $36 for all dependents.
deleted text end

deleted text begin The commissioner shall construct and make available to taxpayers tables showing the
amount of the credit at various levels of income and expenses. The tables shall follow the
schedule contained in this subdivision, except that the commissioner may graduate the
transitions between expenses and income brackets.
deleted text end

new text begin (a) The maximum credit under subdivision l, paragraph (b), is:
new text end

new text begin (1) $1,050 for a taxpayer with employment-related expenses for one qualifying individual;
new text end

new text begin (2) $2,100 for a taxpayer with employment-related expenses for two or more qualifying
individuals;
new text end

new text begin (3) $1,050 for a taxpayer who elects to claim a credit under subdivision l, paragraph (d)
or (e), if that credit is based on deemed expenses for one child; and
new text end

new text begin (4) $0 for a taxpayer who elects to claim a credit under subdivision 1, paragraph (d) or
(e), if that credit is based on deemed expenses for two or more children.
new text end

new text begin (b) The maximum credit under subdivision l, paragraphs (d) and (e), is:
new text end

new text begin (1) $720 for a taxpayer with deemed expenses for one child; and
new text end

new text begin (2) $1,440 for a taxpayer with deemed expenses for two or more children.
new text end

new text begin (c) For a taxpayer who claims a credit under subdivision l, paragraph (b), who has federal
adjusted gross income as defined in the Internal Revenue Code in excess of $77,000, the
credit under subdivision l, paragraph (b), is equal to the lesser of:
new text end

new text begin (1) the credit calculated under subdivision l, paragraph (b); or
new text end

new text begin (2) $600 minus five percent of federal adjusted gross income in excess of $77,000 for
a taxpayer with one qualifying individual, or $1,200 minus five percent of federal gross
adjusted income in excess of $77,000 for a taxpayer with two or more qualifying individuals,
but in no case is the credit less than zero.
new text end

new text begin (d) For a taxpayer who elects to claim the credit under subdivision l, paragraph (d) or
(e), with federal adjusted gross income as defined in the Internal Revenue Code in excess
of $25,000, the credit is equal to the lesser of:
new text end

new text begin (1) the credit calculated under subdivision l, paragraph (d) or (e); or
new text end

new text begin (2) $720 minus five percent of federal adjusted gross income in excess of $25,000 for
a taxpayer with one qualifying individual, or $1,440 minus five percent of federal gross
adjusted income in excess of $25,000 for a taxpayer with two or more qualifying individuals,
but in no case is the credit less than zero.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2016.
new text end

Sec. 3.

Minnesota Statutes 2016, section 290.067, subdivision 2b, is amended to read:

Subd. 2b.

Inflation adjustment.

The commissioner shall adjust the dollar amount of
the income threshold at which the deleted text begin maximum deleted text end credit begins to be reduced under subdivision
2 by the percentage determined pursuant to the provisions of section 1(f) of the Internal
Revenue Code, except that in section 1(f)(3)(B) the word deleted text begin "1999" deleted text end new text begin "2016" new text end shall be substituted
for the word "1992." For deleted text begin 2001 deleted text end new text begin 2018 new text end , the commissioner shall then determine the percent
change from the 12 months ending on August 31, deleted text begin 1999 deleted text end new text begin 2016 new text end , to the 12 months ending on
August 31, deleted text begin 2000 deleted text end new text begin 2017 new text end , and in each subsequent year, from the 12 months ending on August
31, deleted text begin 1999 deleted text end new text begin 2016 new text end , to the 12 months ending on August 31 of the year preceding the taxable
year. The determination of the commissioner pursuant to this subdivision must not be
considered a "rule" and is not subject to the Administrative Procedure Act contained in
chapter 14. The threshold amount as adjusted must be rounded to the nearest $10 amount.
If the amount ends in $5, the amount is rounded up to the nearest $10 amount.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2017.
new text end

Sec. 4.

Minnesota Statutes 2016, section 290.067, subdivision 3, is amended to read:

Subd. 3.

Credit to be refundable.

If the amount of credit which a claimant would be
eligible to receive pursuant to this deleted text begin subdivision deleted text end new text begin section new text end exceeds the claimant's tax liability
under chapter 290, the excess amount of the credit shall be refunded to the claimant by the
commissioner deleted text begin of revenue deleted text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2016.
new text end

Sec. 5.

Minnesota Statutes 2016, section 290.0671, subdivision 1, as amended by Laws
2017, chapter 1, section 6, is amended to read:

Subdivision 1.

Credit allowed.

(a) An individual who is a resident of Minnesota is
allowed a credit against the tax imposed by this chapter equal to a percentage of earned
income. To receive a credit, a taxpayer must be eligible for a credit under section 32 of the
Internal Revenue Code deleted text begin . deleted text end new text begin , except that:
new text end

new text begin (1) the earned income and adjusted gross income limitations of section 32 of the Internal
Revenue Code do not apply; and
new text end

new text begin (2) a taxpayer with no qualifying children who has attained the age of 21, but has not
attained the age of 65 before the close of the taxable year and is otherwise eligible for a
credit under section 32 of the Internal Revenue Code may also receive a credit.
new text end

(b) For individuals with no qualifying children, the credit equals deleted text begin 2.10 deleted text end new text begin three new text end percent of
the first deleted text begin $6,180 deleted text end new text begin $6,550 new text end of earned income. The credit is reduced by deleted text begin 2.01 deleted text end new text begin three new text end percent of
earned income or adjusted gross income, whichever is greater, in excess of deleted text begin $8,130 deleted text end new text begin $12,100 new text end ,
but in no case is the credit less than zero.

(c) For individuals with one qualifying child, the credit equals deleted text begin 9.35 deleted text end new text begin 12.71 new text end percent of the
first deleted text begin $11,120 deleted text end new text begin $8,420 new text end of earned income. The credit is reduced by deleted text begin 6.02 deleted text end new text begin 5.2 new text end percent of earned
income or adjusted gross income, whichever is greater, in excess of deleted text begin $21,190 deleted text end new text begin $21,790 new text end , but
in no case is the credit less than zero.

(d) For individuals with two or more qualifying children, the credit equals deleted text begin 11 deleted text end new text begin 14.94 new text end
percent of the first deleted text begin $18,240 deleted text end new text begin $13,810 new text end of earned income. The credit is reduced by deleted text begin 10.82 deleted text end new text begin 9.2 new text end
percent of earned income or adjusted gross income, whichever is greater, in excess of
deleted text begin $25,130 deleted text end new text begin $25,850 new text end , but in no case is the credit less than zero.

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

(f) For a person who was a resident for the entire tax year and has earned income not
subject to tax under this chapter, including income excluded under section 290.0132,
subdivision 10, the credit must be allocated based on the ratio of federal adjusted gross
income reduced by the earned income not subject to tax under this chapter over federal
adjusted gross income. For purposes of this paragraph, the subtractions for military pay
under section 290.0132, subdivisions 11 and 12, are not considered "earned income not
subject to tax under this chapter."

For the purposes of this paragraph, the exclusion of combat pay under section 112 of
the Internal Revenue Code is not considered "earned income not subject to tax under this
chapter."

(g) For tax years beginning after December 31, deleted text begin 2013 deleted text end new text begin 2016 new text end , the deleted text begin $8,130 deleted text end new text begin $12,100 new text end in
paragraph (b), the deleted text begin $21,190 deleted text end new text begin $21,790 new text end in paragraph (c), and the deleted text begin $25,130 deleted text end new text begin $25,850 new text end in paragraph
(d), after being adjusted for inflation under subdivision 7, are each increased by $5,000 for
married taxpayers filing joint returns. For tax years beginning after December 31, deleted text begin 2013 deleted text end new text begin
2016 new text end , the commissioner shall annually adjust the $5,000 by the percentage determined
pursuant to the provisions of section 1(f) of the Internal Revenue Code, except that in section
1(f)(3)(B), the word deleted text begin "2008" deleted text end new text begin "2016" new text end shall be substituted for the word "1992." For deleted text begin 2014 deleted text end new text begin 2017 new text end ,
the commissioner shall then determine the percent change from the 12 months ending on
August 31, 2008, to the 12 months ending on August 31, deleted text begin 2013 deleted text end new text begin 2016 new text end , and in each subsequent
year, from the 12 months ending on August 31, 2008, to the 12 months ending on August
31 of the year preceding the taxable year. The earned income thresholds as adjusted for
inflation must be rounded to the nearest $10. If the amount ends in $5, the amount is rounded
up to the nearest $10. The determination of the commissioner under this subdivision is not
a rule under the Administrative Procedure Act.

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

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2016.
new text end

Sec. 6.

Minnesota Statutes 2016, section 290.0671, subdivision 7, is amended to read:

Subd. 7.

Inflation adjustment.

The earned income amounts used to calculate the credit
and the income thresholds at which the maximum credit begins to be reduced in subdivision
1 new text begin , and the additional threshold amount for married taxpayers filing joint returns, new text end must be
adjusted for inflation. The commissioner shall adjust by the percentage determined pursuant
to the provisions of section 1(f) of the Internal Revenue Code, except that in section 1(f)(3)(B)
the word deleted text begin "2013" deleted text end new text begin "2016" new text end shall be substituted for the word "1992." For deleted text begin 2015 deleted text end new text begin 2018 new text end , the
commissioner shall then determine the percent change from the 12 months ending on August
31, deleted text begin 2013 deleted text end new text begin 2016 new text end , to the 12 months ending on August 31, deleted text begin 2014 deleted text end new text begin 2017 new text end , and in each subsequent
year, from the 12 months ending on August 31, deleted text begin 2013 deleted text end new text begin 2016 new text end , to the 12 months ending on
August 31 of the year preceding the taxable year. The earned income thresholds as adjusted
for inflation must be rounded to the nearest $10 amount. If the amount ends in $5, the amount
is rounded up to the nearest $10 amount. The determination of the commissioner under this
subdivision is not a rule under the Administrative Procedure Act.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2017.
new text end

Sec. 7.

Minnesota Statutes 2016, section 290.0674, is amended by adding a subdivision
to read:

new text begin Subd. 2a. new text end

new text begin Income. new text end

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

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

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

new text begin (i) all nontaxable income;
new text end

new text begin (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;
new text end

new text begin (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;
new text end

new text begin (iv) cash public assistance and relief;
new text end

new text begin (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;
new text end

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

new text begin (vii) workers' compensation;
new text end

new text begin (viii) nontaxable strike benefits;
new text end

new text begin (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;
new text end

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

new text begin (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;
new text end

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

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

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

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

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

new text begin 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.
new text end

new text begin (b) "Income" does not include:
new text end

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

new text begin (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;
new text end

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

new text begin (4) relief granted under chapter 290A;
new text end

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

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

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2016.
new text end

Sec. 8.

Minnesota Statutes 2016, section 290.0677, subdivision 1a, is amended to read:

Subd. 1a.

Credit allowed; past military service.

(a) A qualified individual is allowed
a credit against the tax imposed under this chapter for past military service. The credit equals
deleted text begin $750 deleted text end new text begin $1,000 new text end . The credit allowed under this subdivision is reduced by ten percent of adjusted
gross income in excess of deleted text begin $30,000 deleted text end new text begin $50,000 new text end , but in no case is the credit less than zero.

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

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2016.
new text end

Sec. 9.

Minnesota Statutes 2016, section 290A.03, subdivision 13, is amended to read:

Subd. 13.

Property taxes payable.

"Property taxes payable" means the property tax
exclusive of special assessments, penalties, and interest payable on a claimant's homestead
after deductions made under sections 273.135, 273.1384, 273.1391, 273.42, subdivision 2,
and any other state paid property tax credits in any calendar year, and after any refund
claimed and allowable under section 290A.04, subdivision 2h, that is first payable in the
year that the property tax is payable. In the case of a claimant who makes ground lease
payments, "property taxes payable" includes the amount of the payments directly attributable
to the property taxes assessed against the parcel on which the house is located. deleted text begin No
apportionment or reduction of the "property taxes payable" shall be required for the use of
a portion of the claimant's homestead for a business purpose if the claimant does not deduct
any business depreciation expenses for the use of a portion of the homestead in the
determination of federal adjusted gross income. deleted text end new text begin Regardless of the limitations in section
280A(c)(5) of the Internal Revenue Code, "property taxes payable" must be apportioned or
reduced for the use of a portion of the claimant's homestead for a business purpose if the
claimant deducts any business depreciation expenses for the use of a portion of the homestead
or deducts expenses under section 280A of the Internal Revenue Code for a business operated
in the claimant's homestead. new text end For homesteads which are manufactured homes as defined in
section 273.125, subdivision 8, and for homesteads which are park trailers taxed as
manufactured homes under section 168.012, subdivision 9, "property taxes payable" shall
also include 17 percent of the gross rent paid in the preceding year for the site on which the
homestead is located. When a homestead is owned by two or more persons as joint tenants
or tenants in common, such tenants shall determine between them which tenant may claim
the property taxes payable on the homestead. If they are unable to agree, the matter shall
be referred to the commissioner of revenue whose decision shall be final. Property taxes
are considered payable in the year prescribed by law for payment of the taxes.

In the case of a claim relating to "property taxes payable," the claimant must have owned
and occupied the homestead on January 2 of the year in which the tax is payable and (i) the
property must have been classified as homestead property pursuant to section 273.124, on
or before December 15 of the assessment year to which the "property taxes payable" relate;
or (ii) the claimant must provide documentation from the local assessor that application for
homestead classification has been made on or before December 15 of the year in which the
"property taxes payable" were payable and that the assessor has approved the application.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for refunds based on rent paid after
December 31, 2015, and property taxes payable after December 31, 2016.
new text end

Sec. 10.

Minnesota Statutes 2016, section 291.03, subdivision 11, is amended to read:

Subd. 11.

Recapture tax.

(a) If, within three years after the decedent's death and before
the death of the qualified heir, the qualified heir disposes of any interest in the qualified
property, other than by a disposition to a family member, or a family member ceases to
satisfy the requirement under subdivision 9, clause (7); or 10, clause (5), an additional estate
tax is imposed on the property. In the case of a sole proprietor, if the qualified heir replaces
qualified small business property excluded under subdivision 9 with similar property, then
the qualified heir will not be treated as having disposed of an interest in the qualified property.

(b) The amount of the additional tax equals the amount of the exclusion claimed by the
estate under subdivision 8, paragraph (d), multiplied by 16 percent.

(c) The additional tax under this subdivision is due on the day which is six months after
the date of the disposition or cessation in paragraph (a).

new text begin (d) The tax under this subdivision does not apply to the following: acquisition of title
or possession of the qualified property by a federal, state, or local government unit, or any
other entity with the power of eminent domain for a public purpose, as defined in section
117.025, subdivision 11, within the three-year holding period.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for estates of decedents
dying after June 30, 2011.
new text end

Sec. 11. new text begin APPROPRIATIONS
new text end

new text begin $775,000 in fiscal year 2018 and $1,101,000 in fiscal year 2019 are appropriated from
the general fund to the commissioner of revenue to administer sections 1 to 6. $1,101,000
shall be added to the base appropriations to the Department of Revenue for fiscal years 2020
and 2021.
new text end

new text begin EFFECTIVE DATE. new text end

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

Sec. 12. new text begin REPEALER.
new text end

new text begin Minnesota Statutes 2016, section 290.067, subdivision 2a, new text end new text begin is repealed.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2016.
new text end

ARTICLE 2

PROPERTY TAX AND LOCAL GOVERNMENT AIDS

Section 1.

new text begin [103F.485] RIPARIAN BUFFER COMPENSATION PROGRAM.
new text end

new text begin Subdivision 1. new text end

new text begin Definitions. new text end

new text begin (a) For purposes of this section, the following terms have
the meanings given.
new text end

new text begin (b) "Board" means the Board of Water and Soil Resources.
new text end

new text begin (c) "Claimant" means:
new text end

new text begin (1) a person, as defined in section 290.01, subdivision 2, who owns agricultural land in
Minnesota and files an application under this section; or
new text end

new text begin (2) a purchaser or grantee of property sold or transferred after the original application
was submitted.
new text end

new text begin (d) "Commissioner" means the commissioner of revenue.
new text end

new text begin (e) "Program" means the riparian buffer compensation program established in this section.
new text end

new text begin (f) "Public waters buffer" means a 50-foot average width, 30-foot minimum width
continuous area consisting of perennially rooted vegetation, excluding invasive plants and
noxious weeds, adjacent to public waters, as defined in section 103G.005, subdivision 15,
that protects the water resources of the state from runoff pollution; stabilizes soils, shores,
and banks; and protects or provides riparian corridors.
new text end

new text begin Subd. 2. new text end

new text begin Eligibility requirements. new text end

new text begin Land may be enrolled in the program if all of the
following conditions are met:
new text end

new text begin (1) the land is tillable land classified as 2a under section 273.13, subdivision 23;
new text end

new text begin (2) a public waters buffer is required to be maintained on the property by the landowner
pursuant to section 103F.48, subdivision 3, and the public waters buffer is identified and
mapped on a buffer protection map established and maintained by the commissioner of
natural resources;
new text end

new text begin (3) the tillable land is converted to a public waters buffer during calendar years 2015
through 2018 to comply with section 103F.48;
new text end

new text begin (4) there are no delinquent property taxes on the land; and
new text end

new text begin (5) an application is submitted to the commissioner as specified in subdivision 3 on or
before April 1, 2019.
new text end

new text begin Subd. 3. new text end

new text begin Applications. new text end

new text begin (a) An owner of agricultural land in Minnesota may apply to
enroll agricultural land in the program under this section. The application shall be on a form
prescribed by the commissioner and must include the following information: (1) the
landowner's Social Security number and date of birth, or state or federal business tax
identification number, (2) the landowner's address, (3) the landowner's signature, (4) the
county parcel identification numbers for the tax parcels that completely contain the
agricultural land on which a public waters buffer is required to be established and maintained,
(5) the number of acres of tillable class 2a agricultural land converted to a public waters
buffer during calendar years 2015 through 2018 to comply with section 103F.48, rounded
to the nearest whole acre, (6) the signature of an employee of the soil and water conservation
district where the land is located, certifying the accuracy of the parcel identification numbers
and the converted acres figure included in the application, and (7) any other information
the commissioner deems necessary.
new text end

new text begin (b) The commissioner shall review the application and determine if the property is
eligible for enrollment in the program. The commissioner shall notify the claimant of the
determination within 90 days of receipt of the completed application.
new text end

new text begin (c) Social Security numbers collected from individuals under this section are private
data as provided in section 13.355. The federal business tax identification number and date
of birth data collected under this section are private data on individuals or nonpublic data,
as defined in section 13.02, subdivisions 9 and 12, but may be shared with county treasurers
for purposes of the revenue recapture under chapter 270A.
new text end

new text begin Subd. 4. new text end

new text begin Annual certification. new text end

new text begin On or before February 15, 2019, and each February 15
thereafter, the commissioner shall send each claimant a certification form. The claimant
must sign the certification, attesting that the requirements and conditions the commissioner
deems necessary for continued enrollment in the program are currently being met, and must
return the signed certification form to the commissioner by April 1 of the same year. If the
claimant does not return the annual certification form by the due date, the commissioner
must notify the claimant that the land will be terminated from the program if the certification
is not received within 30 days.
new text end

new text begin Subd. 5. new text end

new text begin Notification to commissioner of noncompliance. new text end

new text begin On or before June 1, 2019,
and each June 1 thereafter, the commissioner shall provide by electronic means to the board
data sufficient for a county, watershed district, or the board to identify claimants enrolled
in the program. The board shall notify the commissioner of any claimant that has been
determined by a county, watershed district, or the board to be noncompliant with the
requirements of section 103F.48 on or before August 1 of each year in which the certification
under subdivision 4 is due.
new text end

new text begin Subd. 6. new text end

new text begin Length of enrollment. new text end

new text begin Land approved for enrollment under subdivision 3,
paragraph (b), remains in the program for five years unless terminated under subdivision
10.
new text end

new text begin Subd. 7. new text end

new text begin Payment amount. new text end

new text begin A claimant is eligible to receive an annual payment equal
to $40 per acre for each tillable acre converted a public waters buffer.
new text end

new text begin Subd. 8. new text end

new text begin Annual payment. new text end

new text begin The commissioner shall make the payments required under
subdivision 7 annually on or before October 1 based on applications or certifications received
on or before April 1 of that year. No future payment shall be made to a claimant for property
after it has been terminated from the program. Interest at the annual rate determined under
section 270C.40 shall be included with any payment not paid by the later of October 1 of
the year the application or certification was due, or 180 days after the completed application
or certification was filed.
new text end

new text begin Subd. 9. new text end

new text begin Multiple claimants. new text end

new text begin No more than one claimant is entitled to a payment under
this section with respect to any tract, parcel, or piece of land that has been assigned the same
parcel identification number. When enrolled agricultural land is owned by two or more
persons, the owners must determine which person is eligible to claim the payments. In the
case of property sold or transferred, the former owner and the purchaser or grantee may
determine which person is eligible to claim the payments. If they cannot agree, the matter
shall be referred to the commissioner, whose decision shall be final.
new text end

new text begin Subd. 10. new text end

new text begin Reasons for termination. new text end

new text begin (a) Agricultural land enrolled in the program may
be terminated from the program for any of the following reasons:
new text end

new text begin (1) there are delinquent taxes on the land;
new text end

new text begin (2) the commissioner receives notification from the board of noncompliance under
subdivision 5;
new text end

new text begin (3) the claimant does not timely submit a certification form after being notified by the
commissioner that the annual certification was not received by April l; or
new text end

new text begin (4) the claimant voluntarily withdraws from the program.
new text end

new text begin (b) The commissioner shall prepare a notice of termination for any land that is to be
terminated from the program. The notice of termination must contain the parcel identification
numbers, the reason for termination, and the effective date of termination. The commissioner
shall mail the notice of the termination to the claimant at least 60 days before the effective
date of termination.
new text end

new text begin Subd. 11. new text end

new text begin Compliance audit. new text end

new text begin The commissioner may examine any application or annual
certification to ensure compliance with this section.
new text end

new text begin Subd. 12. new text end

new text begin Penalty. new text end

new text begin If the commissioner determines a claimant intentionally filed a false
application or certification under this section, the commissioner shall notify the claimant
of the determination and the penalty amount for which the claimant is liable. The penalty
is equal to the total payments received while enrolled in the program, plus interest calculated
from the date the payments were made at the annual rate determined under section 270C.40.
The claimant has 90 days to satisfy the payment from the date on the notice of determination.
If the penalty is not paid within the 90-day period, the commissioner shall certify the amount
to the county auditor for collection as a part of the general ad valorem real property taxes
on the land in the following taxes payable year.
new text end

new text begin Subd. 13. new text end

new text begin Appeal to Tax Court. new text end

new text begin Any person aggrieved by the commissioner's decision
to deny an application for enrollment, to assess a penalty, to terminate land from the program,
or to deny payment to a claimant may, within 60 days of the date on the notice of
determination or notice of termination, or after 180 days of the submission of the application
or annual certification if no determination is issued, appeal to the Tax Court under chapter
271 as if the appeal is from an order of the commissioner.
new text end

new text begin Subd. 14. new text end

new text begin Appropriation. new text end

new text begin The amount necessary to make the payments under this section
is annually appropriated to the commissioner from the general fund.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for payments made in 2018 and thereafter.
new text end

Sec. 2.

Minnesota Statutes 2016, section 123B.53, subdivision 4, is amended to read:

Subd. 4.

Debt service equalization revenue.

(a) The debt service equalization revenue
of a district equals the sum of the first tier debt service equalization revenue and the second
tier debt service equalization revenue.

(b) The first tier debt service equalization revenue of a district equals the greater of zero
or the eligible debt service revenue minus the amount raised by a levy of 15.74 percent
times the adjusted net tax capacity of the district minus the second tier debt service
equalization revenue of the district.

(c) The second tier debt service equalization revenue of a district equals the greater of
zero or the eligible debt service revenue, minus the amount raised by a levy of 26.24 percent new text begin
for fiscal year 2017, 22.34 percent for fiscal year 2018, and 19 percent for fiscal year 2019
and later new text end times the adjusted net tax capacity of the district.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for revenue for fiscal year 2018 and later.
new text end

Sec. 3.

Minnesota Statutes 2016, section 273.1384, subdivision 2, is amended to read:

Subd. 2.

Agricultural homestead market value credit.

Property classified as agricultural
homestead under section 273.13, subdivision 23, paragraph (a), is eligible for an agricultural
credit. The credit is computed using the property's agricultural credit market value, defined
for this purpose as the property's market value excluding the market value of the house,
garage, and immediately surrounding one acre of land. The credit is equal to 0.3 percent of
the first $115,000 of the property's agricultural credit market value plus 0.1 percent of the
property's agricultural credit market value in excess of $115,000, subject to a maximum
credit of $490. In the case of property that is classified as part homestead and part
nonhomestead solely because not all the owners occupy or farm the property, not all the
owners have qualifying relatives occupying or farming the property, or solely because not
all the spouses of owners occupy the property, the credit deleted text begin must be initially deleted text end new text begin is new text end computed deleted text begin as
if that nonhomestead agricultural land was also classified as agricultural homestead and
then prorated deleted text end new text begin on the amount of agricultural credit market value corresponding new text end to the
deleted text begin owner-occupant's deleted text end percentage of deleted text begin ownership deleted text end new text begin homestead new text end . new text begin The percentage of homestead is
equal to 100 divided by the number of owners of the property, or, in the case of a trust, the
number of grantors of the trust that owns the property.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes payable in 2019.
new text end

Sec. 4.

new text begin [273.1387] SCHOOL BUILDING BOND AGRICULTURAL CREDIT.
new text end

new text begin Subdivision 1. new text end

new text begin Eligibility. new text end

new text begin All class 2a, 2b, and 2c property under section 273.13,
subdivision 23, other than property consisting of the house, garage, and immediately
surrounding one acre of land of an agricultural homestead, is eligible to receive the credit
under this section.
new text end

new text begin Subd. 2. new text end

new text begin Credit amount. new text end

new text begin For each qualifying property, the school building bond
agricultural credit is equal to 40 percent of the property's eligible net tax capacity multiplied
by the school debt tax rate determined under section 275.08, subdivision lb.
new text end

new text begin Subd. 3. new text end

new text begin Credit reimbursements. new text end

new text begin The county auditor shall determine the tax reductions
allowed under this section within the county for each taxes payable year and shall certify
that amount to the commissioner of revenue as part of the abstracts of tax lists submitted
under section 275.29. Any prior year adjustments shall also be certified on the abstracts of
tax lists. The commissioner shall review the certifications for accuracy, and may make
necessary changes or return the certification to the county auditor for correction. The credit
under this section must be used to reduce the school district net tax capacity-based property
tax as provided in section 273.1393.
new text end

new text begin Subd. 4. new text end

new text begin Payment. new text end

new text begin The commissioner of revenue shall certify the total of the tax
reductions granted under this section for each taxes payable year within each school district
to the commissioner of education, who shall pay the reimbursement amounts to each school
district as provided in section 273.1392.
new text end

new text begin Subd. 5. new text end

new text begin Appropriation. new text end

new text begin An amount sufficient to make payments required by this section
is annually appropriated from the general fund to the commissioner of education.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning with taxes payable in 2018.
new text end

Sec. 5.

Minnesota Statutes 2016, section 273.1392, is amended to read:

273.1392 PAYMENT; SCHOOL DISTRICTS.

The amounts of bovine tuberculosis credit reimbursements under section 273.113;
conservation tax credits under section 273.119; disaster or emergency reimbursement under
sections 273.1231 to 273.1235; deleted text begin homestead and deleted text end agricultural credits under deleted text begin section deleted text end new text begin sections new text end
273.1384 new text begin and 273.1387 new text end ; aids and credits under section 273.1398; enterprise zone property
credit payments under section 469.171; and metropolitan agricultural preserve reduction
under section 473H.10 for school districts, shall be certified to the Department of Education
by the Department of Revenue. The amounts so certified shall be paid according to section
127A.45, subdivisions 9 new text begin , 10, new text end and 13.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning with taxes payable in 2018.
new text end

Sec. 6.

Minnesota Statutes 2016, section 273.1393, is amended to read:

273.1393 COMPUTATION OF NET PROPERTY TAXES.

Notwithstanding any other provisions to the contrary, "net" property taxes are determined
by subtracting the credits in the order listed from the gross tax:

(1) disaster credit as provided in sections 273.1231 to 273.1235;

(2) powerline credit as provided in section 273.42;

(3) agricultural preserves credit as provided in section 473H.10;

(4) enterprise zone credit as provided in section 469.171;

(5) disparity reduction credit;

(6) conservation tax credit as provided in section 273.119;

(7) new text begin the school bond credit, as provided in section 273.1387;
new text end

new text begin (8) new text end agricultural credit as provided in section 273.1384;

deleted text begin (8) deleted text end new text begin (9) new text end taconite homestead credit as provided in section 273.135;

deleted text begin (9) deleted text end new text begin (10) new text end supplemental homestead credit as provided in section 273.1391; and

deleted text begin (10) deleted text end new text begin (11) new text end the bovine tuberculosis zone credit, as provided in section 273.113.

The combination of all property tax credits must not exceed the gross tax amount.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning with taxes payable in 2018.
new text end

Sec. 7.

Minnesota Statutes 2016, section 275.065, subdivision 3, is amended to read:

Subd. 3.

Notice of proposed property taxes.

(a) The county auditor shall prepare and
the county treasurer shall deliver after November 10 and on or before November 24 each
year, by first class mail to each taxpayer at the address listed on the county's current year's
assessment roll, a notice of proposed property taxes. Upon written request by the taxpayer,
the treasurer may send the notice in electronic form or by electronic mail instead of on paper
or by ordinary mail.

(b) The commissioner of revenue shall prescribe the form of the notice.

(c) The notice must inform taxpayers that it contains the amount of property taxes each
taxing authority proposes to collect for taxes payable the following year. In the case of a
town, or in the case of the state general tax, the final tax amount will be its proposed tax.
The notice must clearly state for each city that has a population over 500, county, school
district, regional library authority established under section 134.201, and metropolitan taxing
districts as defined in paragraph (i), the time and place of a meeting for each taxing authority
in which the budget and levy will be discussed and public input allowed, prior to the final
budget and levy determination. The taxing authorities must provide the county auditor with
the information to be included in the notice on or before the time it certifies its proposed
levy under subdivision 1. The public must be allowed to speak at that meeting, which must
occur after November 24 and must not be held before 6:00 p.m. It must provide a telephone
number for the taxing authority that taxpayers may call if they have questions related to the
notice and an address where comments will be received by mail, except that no notice
required under this section shall be interpreted as requiring the printing of a personal
telephone number or address as the contact information for a taxing authority. If a taxing
authority does not maintain public offices where telephone calls can be received by the
authority, the authority may inform the county of the lack of a public telephone number and
the county shall not list a telephone number for that taxing authority.

(d) The notice must state for each parcel:

(1) the market value of the property as determined under section 273.11, and used for
computing property taxes payable in the following year and for taxes payable in the current
year as each appears in the records of the county assessor on November 1 of the current
year; and, in the case of residential property, whether the property is classified as homestead
or nonhomestead. The notice must clearly inform taxpayers of the years to which the market
values apply and that the values are final values;

(2) the items listed below, shown separately by county, city or town, and state general
tax, agricultural homestead credit under section 273.1384, new text begin school building bond credit under
section 273.1387, new text end voter approved school levy, other local school levy, and the sum of the
special taxing districts, and as a total of all taxing authorities:

(i) the actual tax for taxes payable in the current year; and

(ii) the proposed tax amount.

If the county levy under clause (2) includes an amount for a lake improvement district
as defined under sections 103B.501 to 103B.581, the amount attributable for that purpose
must be separately stated from the remaining county levy amount.

In the case of a town or the state general tax, the final tax shall also be its proposed tax
unless the town changes its levy at a special town meeting under section 365.52. If a school
district has certified under section 126C.17, subdivision 9, that a referendum will be held
in the school district at the November general election, the county auditor must note next
to the school district's proposed amount that a referendum is pending and that, if approved
by the voters, the tax amount may be higher than shown on the notice. In the case of the
city of Minneapolis, the levy for Minneapolis Park and Recreation shall be listed separately
from the remaining amount of the city's levy. In the case of the city of St. Paul, the levy for
the St. Paul Library Agency must be listed separately from the remaining amount of the
city's levy. In the case of Ramsey County, any amount levied under section 134.07 may be
listed separately from the remaining amount of the county's levy. In the case of a parcel
where tax increment or the fiscal disparities areawide tax under chapter 276A or 473F
applies, the proposed tax levy on the captured value or the proposed tax levy on the tax
capacity subject to the areawide tax must each be stated separately and not included in the
sum of the special taxing districts; and

(3) the increase or decrease between the total taxes payable in the current year and the
total proposed taxes, expressed as a percentage.

For purposes of this section, the amount of the tax on homesteads qualifying under the
senior citizens' property tax deferral program under chapter 290B is the total amount of
property tax before subtraction of the deferred property tax amount.

(e) The notice must clearly state that the proposed or final taxes do not include the
following:

(1) special assessments;

(2) levies approved by the voters after the date the proposed taxes are certified, including
bond referenda and school district levy referenda;

(3) a levy limit increase approved by the voters by the first Tuesday after the first Monday
in November of the levy year as provided under section 275.73;

(4) amounts necessary to pay cleanup or other costs due to a natural disaster occurring
after the date the proposed taxes are certified;

(5) amounts necessary to pay tort judgments against the taxing authority that become
final after the date the proposed taxes are certified; and

(6) the contamination tax imposed on properties which received market value reductions
for contamination.

(f) Except as provided in subdivision 7, failure of the county auditor to prepare or the
county treasurer to deliver the notice as required in this section does not invalidate the
proposed or final tax levy or the taxes payable pursuant to the tax levy.

(g) If the notice the taxpayer receives under this section lists the property as
nonhomestead, and satisfactory documentation is provided to the county assessor by the
applicable deadline, and the property qualifies for the homestead classification in that
assessment year, the assessor shall reclassify the property to homestead for taxes payable
in the following year.

(h) In the case of class 4 residential property used as a residence for lease or rental
periods of 30 days or more, the taxpayer must either:

(1) mail or deliver a copy of the notice of proposed property taxes to each tenant, renter,
or lessee; or

(2) post a copy of the notice in a conspicuous place on the premises of the property.

The notice must be mailed or posted by the taxpayer by November 27 or within three
days of receipt of the notice, whichever is later. A taxpayer may notify the county treasurer
of the address of the taxpayer, agent, caretaker, or manager of the premises to which the
notice must be mailed in order to fulfill the requirements of this paragraph.

(i) For purposes of this subdivision and subdivision 6, "metropolitan special taxing
districts" means the following taxing districts in the seven-county metropolitan area that
levy a property tax for any of the specified purposes listed below:

(1) Metropolitan Council under section 473.132, 473.167, 473.249, 473.325, 473.446,
473.521, 473.547, or 473.834;

(2) Metropolitan Airports Commission under section 473.667, 473.671, or 473.672; and

(3) Metropolitan Mosquito Control Commission under section 473.711.

For purposes of this section, any levies made by the regional rail authorities in the county
of Anoka, Carver, Dakota, Hennepin, Ramsey, Scott, or Washington under chapter 398A
shall be included with the appropriate county's levy.

(j) The governing body of a county, city, or school district may, with the consent of the
county board, include supplemental information with the statement of proposed property
taxes about the impact of state aid increases or decreases on property tax increases or
decreases and on the level of services provided in the affected jurisdiction. This supplemental
information may include information for the following year, the current year, and for as
many consecutive preceding years as deemed appropriate by the governing body of the
county, city, or school district. It may include only information regarding:

(1) the impact of inflation as measured by the implicit price deflator for state and local
government purchases;

(2) population growth and decline;

(3) state or federal government action; and

(4) other financial factors that affect the level of property taxation and local services
that the governing body of the county, city, or school district may deem appropriate to
include.

The information may be presented using tables, written narrative, and graphic
representations and may contain instruction toward further sources of information or
opportunity for comment.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning with taxes payable in 2018.
new text end

Sec. 8.

Minnesota Statutes 2016, section 275.07, subdivision 2, is amended to read:

Subd. 2.

School district deleted text begin in more than one county deleted text end new text begin levies; special requirements new text end .

new text begin (a) new text end In
school districts lying in more than one county, the clerk shall certify the tax levied to the
auditor of the county in which the administrative offices of the school district are located.

new text begin (b) The district must identify the portion of the school district levy that is levied for debt
service at the time the levy is certified under this section. For the purposes of this paragraph,
"levied for debt service" means levies authorized under sections 123B.53, 123B.535, and
123B.55, as adjusted by sections 126C.46 and 126C.48, net of any debt excess levy reductions
under section 475.61, subdivision 4, excluding debt service amounts necessary for repayment
of other postemployment benefits under section 475.52, subdivision 6.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning with taxes payable in 2018.
new text end

Sec. 9.

Minnesota Statutes 2016, section 275.08, subdivision 1b, is amended to read:

Subd. 1b.

Computation of tax rates.

new text begin (a) new text end The amounts certified to be levied against net
tax capacity under section 275.07 by an individual local government unit shall be divided
by the total net tax capacity of all taxable properties within the local government unit's
taxing jurisdiction. The resulting ratio, the local government's local tax rate, multiplied by
each property's net tax capacity shall be each property's net tax capacity tax for that local
government unit before reduction by any credits.

new text begin (b) The auditor must also determine the school debt tax rate for each school district equal
to (1) the school debt service levy certified under section 275.07, subdivision 2, divided by
(2) the total net tax capacity of all taxable property within the district.
new text end

new text begin (c) new text end Any amount certified to the county auditor to be levied against market value shall
be divided by the total referendum market value of all taxable properties within the taxing
district. The resulting ratio, the taxing district's new referendum tax rate, multiplied by each
property's referendum market value shall be each property's new referendum tax before
reduction by any credits. For the purposes of this subdivision, "referendum market value"
means the market value as defined in section 126C.01, subdivision 3.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning with taxes payable in 2018.
new text end

Sec. 10.

Minnesota Statutes 2016, section 276.04, subdivision 2, is amended to read:

Subd. 2.

Contents of tax statements.

(a) The treasurer shall provide for the printing of
the tax statements. The commissioner of revenue shall prescribe the form of the property
tax statement and its contents. The tax statement must not state or imply that property tax
credits are paid by the state of Minnesota. The statement must contain a tabulated statement
of the dollar amount due to each taxing authority and the amount of the state tax from the
parcel of real property for which a particular tax statement is prepared. The dollar amounts
attributable to the county, the state tax, the voter approved school tax, the other local school
tax, the township or municipality, and the total of the metropolitan special taxing districts
as defined in section 275.065, subdivision 3, paragraph (i), must be separately stated. The
amounts due all other special taxing districts, if any, may be aggregated except that any
levies made by the regional rail authorities in the county of Anoka, Carver, Dakota, Hennepin,
Ramsey, Scott, or Washington under chapter 398A shall be listed on a separate line directly
under the appropriate county's levy. If the county levy under this paragraph includes an
amount for a lake improvement district as defined under sections 103B.501 to 103B.581,
the amount attributable for that purpose must be separately stated from the remaining county
levy amount. In the case of Ramsey County, if the county levy under this paragraph includes
an amount for public library service under section 134.07, the amount attributable for that
purpose may be separated from the remaining county levy amount. The amount of the tax
on homesteads qualifying under the senior citizens' property tax deferral program under
chapter 290B is the total amount of property tax before subtraction of the deferred property
tax amount. The amount of the tax on contamination value imposed under sections 270.91
to 270.98, if any, must also be separately stated. The dollar amounts, including the dollar
amount of any special assessments, may be rounded to the nearest even whole dollar. For
purposes of this section whole odd-numbered dollars may be adjusted to the next higher
even-numbered dollar. The amount of market value excluded under section 273.11,
subdivision 16, if any, must also be listed on the tax statement.

(b) The property tax statements for manufactured homes and sectional structures taxed
as personal property shall contain the same information that is required on the tax statements
for real property.

(c) Real and personal property tax statements must contain the following information
in the order given in this paragraph. The information must contain the current year tax
information in the right column with the corresponding information for the previous year
in a column on the left:

(1) the property's estimated market value under section 273.11, subdivision 1;

(2) the property's homestead market value exclusion under section 273.13, subdivision
35;

(3) the property's taxable market value under section 272.03, subdivision 15;

(4) the property's gross tax, before credits;

(5) for deleted text begin homestead deleted text end agricultural properties, the deleted text begin credit deleted text end new text begin credits new text end under deleted text begin section deleted text end new text begin sections new text end
273.1384 new text begin and 273.1387 new text end ;

(6) any credits received under sections 273.119; 273.1234 or 273.1235; 273.135;
273.1391; 273.1398, subdivision 4; 469.171; and 473H.10, except that the amount of credit
received under section 273.135 must be separately stated and identified as "taconite tax
relief"; and

(7) the net tax payable in the manner required in paragraph (a).

(d) If the county uses envelopes for mailing property tax statements and if the county
agrees, a taxing district may include a notice with the property tax statement notifying
taxpayers when the taxing district will begin its budget deliberations for the current year,
and encouraging taxpayers to attend the hearings. If the county allows notices to be included
in the envelope containing the property tax statement, and if more than one taxing district
relative to a given property decides to include a notice with the tax statement, the county
treasurer or auditor must coordinate the process and may combine the information on a
single announcement.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning with taxes payable in 2018.
new text end

Sec. 11.

Minnesota Statutes 2016, section 290B.03, subdivision 1, is amended to read:

Subdivision 1.

Program qualifications.

The qualifications for the senior citizens'
property tax deferral program are as follows:

(1) the property must be owned and occupied as a homestead by a person 65 years of
age or older. In the case of a married couple, at least one of the spouses must be at least 65
years old at the time the first property tax deferral is granted, regardless of whether the
property is titled in the name of one spouse or both spouses, or titled in another way that
permits the property to have homestead status, and the other spouse must be at least 62 years
of age;

(2) the total household income of the qualifying homeowners, as defined in section
290A.03, subdivision 5, for the calendar year preceding the year of the initial application
may not exceed $60,000;

(3) the homestead must have been owned and occupied as the homestead of at least one
of the qualifying homeowners for at least deleted text begin 15 deleted text end new text begin five new text end years prior to the year the initial application
is filed;

(4) there are no state or federal tax liens or judgment liens on the homesteaded property;

(5) there are no mortgages or other liens on the property that secure future advances,
except for those subject to credit limits that result in compliance with clause (6); and

(6) the total unpaid balances of debts secured by mortgages and other liens on the
property, including unpaid and delinquent special assessments and interest and any delinquent
property taxes, penalties, and interest, but not including property taxes payable during the
year, does not exceed 75 percent of the assessor's estimated market value for the year.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for applications for deferral of taxes
payable in 2018 and thereafter.
new text end

Sec. 12.

Minnesota Statutes 2016, section 290B.04, subdivision 1, is amended to read:

Subdivision 1.

Initial application.

(a) A taxpayer meeting the program qualifications
under section 290B.03 may apply to the commissioner of revenue for the deferral of taxes.
Applications are due on or before deleted text begin July deleted text end new text begin November new text end 1 for deferral of any of the following
year's property taxes. A taxpayer may apply in the year in which the taxpayer becomes 65
years old, provided that no deferral of property taxes will be made until the calendar year
after the taxpayer becomes 65 years old. The application, which shall be prescribed by the
commissioner of revenue, shall include the following items and any other information which
the commissioner deems necessary:

(1) the name, address, and Social Security number of the owner or owners;

(2) a copy of the property tax statement for the current payable year for the homesteaded
property;

(3) the initial year of ownership and occupancy as a homestead;

(4) the owner's household income for the previous calendar year; and

(5) information on any mortgage loans or other amounts secured by mortgages or other
liens against the property, for which purpose the commissioner may require the applicant
to provide a copy of the mortgage note, the mortgage, or a statement of the balance owing
on the mortgage loan provided by the mortgage holder. The commissioner may require the
appropriate documents in connection with obtaining and confirming information on unpaid
amounts secured by other liens.

The application must state that program participation is voluntary. The application must
also state that the deferred amount depends directly on the applicant's household income,
and that program participation includes authorization for the annual deferred amount, the
cumulative deferral and interest that appear on each year's notice prepared by the county
under subdivision 6, is public data.

The application must state that program participants may claim the property tax refund
based on the full amount of property taxes eligible for the refund, including any deferred
amounts. The application must also state that property tax refunds will be used to offset any
deferral and interest under this program, and that any other amounts subject to revenue
recapture under section 270A.03, subdivision 7, will also be used to offset any deferral and
interest under this program.

(b) As part of the initial application process, the commissioner may require the applicant
to obtain at the applicant's own cost and submit:

(1) if the property is registered property under chapter 508 or 508A, a copy of the original
certificate of title in the possession of the county registrar of titles (sometimes referred to
as "condition of register"); or

(2) if the property is abstract property, a report prepared by a licensed abstracter showing
the last deed and any unsatisfied mortgages, liens, judgments, and state and federal tax lien
notices which were recorded on or after the date of that last deed with respect to the property
or to the applicant.

The certificate or report under clauses (1) and (2) need not include references to any
documents filed or recorded more than 40 years prior to the date of the certification or report.
The certification or report must be as of a date not more than 30 days prior to submission
of the application.

The commissioner may also require the county recorder or county registrar of the county
where the property is located to provide copies of recorded documents related to the applicant
or the property, for which the recorder or registrar shall not charge a fee. The commissioner
may use any information available to determine or verify eligibility under this section. The
household income from the application is private data on individuals as defined in section
13.02, subdivision 12.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for applications for deferral of taxes
payable in 2018 and thereafter.
new text end

Sec. 13.

new text begin [477A.0126] REIMBURSEMENT OF COUNTY AND TRIBES FOR
CERTAIN OUT-OF-HOME PLACEMENT.
new text end

new text begin Subdivision 1. new text end

new text begin Definition. new text end

new text begin For purposes of this section, "out-of-home placement" means
24-hour substitute care for an Indian child as defined by section 260C.007, subdivision 21,
placed under chapter 260C and the Indian Child Welfare Act (ICWA), away from the child's
parent or guardian and for whom the county social services agency or county correctional
agency has been assigned responsibility for the child's placement and care, which includes
placement in foster care under section 260C.007, subdivision 18, and a correctional facility
pursuant to a court order.
new text end

new text begin Subd. 2. new text end

new text begin Determination of nonfederal share of costs. new text end

new text begin (a) By July 1, 2017, each county
shall report the following information to the commissioners of human services and
corrections: (1) the separate amounts paid out of the county's social service agency and its
corrections budget for out-of-home placement of children under the ICWA in calendar years
2013, 2014, and 2015; and (2) the number of case days associated with the expenditures
from each budget. The commissioner of human services shall prescribe the format of the
report. By July 15, 2017, the commissioner of human services, in consultation with the
commissioner of corrections, shall certify to the commissioner of revenue and to the
legislative committees with jurisdiction over local government aids and out-of-home
placement funding whether the data reported under this subdivision accurately reflect total
expenditures by counties for out-of-home placement costs of children under the ICWA.
new text end

new text begin (b) By January 1, 2018, and each January 1 thereafter, each county shall report to the
commissioners of human services and corrections the separate amounts paid out of the
county's social service agency and its corrections budget for out-of-home placement of
children under the ICWA in the calendar years two years before the current calendar year
along with the number of case days associated with the expenditures from each budget. The
commissioner of human services shall prescribe the format of the report.
new text end

new text begin (c) Until the commissioner of human services develops another mechanism for collecting
and verifying data on out-of-home placements of children under the ICWA, and the
legislature authorizes the use of that data, the data collected under this subdivision must be
used to calculate payments under subdivision 3. The commissioner of human services shall
certify the nonfederal out-of-home placement costs for the three prior calendar years for
each county and the amount of any federal reimbursement received by a tribe under the
ICWA for the three prior calendar years to the commissioner of revenue by June 1 of the
year before the aid payment.
new text end

new text begin Subd. 3. new text end

new text begin Aid for counties. new text end

new text begin For aids payable in calendar year 2018 and thereafter, the
amount of reimbursement to each county is a county's proportionate share of the appropriation
in subdivision 6 that remains after the aid for tribes has been paid. Each county's
proportionate share is based on the county's average nonfederal share of the cost for
out-of-home placement of children under the ICWA for the three calendar years that were
certified by the commissioner of human services by June 1 of the prior year, provided that
the commissioner of human services, in consultation with the commissioner of corrections,
certifies to the commissioner of revenue that accurate data are available to make the aid
determination under this section. For aids payable in calendar year 2018, each county's
proportionate share is based on the county's nonfederal share of the cost for out-of-home
placement of children under the ICWA that was certified by the commissioner of human
services by July 15, 2017.
new text end

new text begin Subd. 4. new text end

new text begin Aid for tribes. new text end

new text begin For aids payable in 2018 and thereafter, the amount of
reimbursement to each tribe shall be the greater of (1) five percent of the average
reimbursement amount received from the federal government for out-of-home placement
costs for the three calendar years that were certified by June 1 of the prior year, or (2)
$200,000.
new text end

new text begin Subd. 5. new text end

new text begin Payments. new text end

new text begin The commissioner of revenue must compute the amount of the
reimbursement aid payable to each county and tribe under this section. On or before August
1 of each year, the commissioner shall certify the amount to be paid to each county and
tribe in the following year. The commissioner shall pay reimbursement aid annually at the
times provided in section 477A.015.
new text end

new text begin Subd. 6. new text end

new text begin Appropriation. new text end

new text begin $10,000,000 is annually appropriated to the commissioner of
revenue from the general fund to pay aid under this section.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning with aids payable in 2018.
new text end

Sec. 14.

Minnesota Statutes 2016, section 477A.03, subdivision 2a, is amended to read:

Subd. 2a.

Cities.

deleted text begin The total aid paid under section 477A.013, subdivision 9, is
$516,898,012 for aids payable in 2015. deleted text end For aids payable in 2016 and deleted text begin thereafter deleted text end new text begin 2017 new text end , the
total aid paid under section 477A.013, subdivision 9, is $519,398,012. new text begin For aids payable in
2018 and thereafter, the total aid paid under section 477A.013, subdivision 9, is
$539,398,012.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for aids payable in 2018 and thereafter.
new text end

Sec. 15.

Minnesota Statutes 2016, section 477A.03, subdivision 2b, is amended to read:

Subd. 2b.

Counties.

(a) For aids payable in 2014 deleted text begin and thereafter deleted text end new text begin through 2017 new text end , the total
aid payable under section 477A.0124, subdivision 3, is $100,795,000. new text begin For aids payable in
2018 through 2024, the total aid payable under section 477A.0124, subdivision 3, is
$108,795,000, of which $3,000,000 shall be allocated as required under Laws 2014, chapter
150, article 4, section 6. For aids payable in 2025 and thereafter, the total aid payable under
section 477A.0124, subdivision 3, is $105,795,000. new text end Each calendar year, $500,000 of this
appropriation shall be retained by the commissioner of revenue to make reimbursements to
the commissioner of management and budget for payments made under section 611.27. The
reimbursements shall be to defray the additional costs associated with court-ordered counsel
under section 611.27. Any retained amounts not used for reimbursement in a year shall be
included in the next distribution of county need aid that is certified to the county auditors
for the purpose of property tax reduction for the next taxes payable year.

(b) For aids payable in deleted text begin 2014 and thereafter deleted text end new text begin 2017 new text end , the total aid under section 477A.0124,
subdivision 4, is $104,909,575. new text begin For aids payable in 2018 and thereafter, the total aid payable
under section 477A.0124, subdivision 4, is $109,909,575. new text end The commissioner of revenue
shall transfer to the commissioner of management and budget $207,000 annually for the
cost of preparation of local impact notes as required by section 3.987, and other local
government activities. The commissioner of revenue shall transfer to the commissioner of
education $7,000 annually for the cost of preparation of local impact notes for school districts
as required by section 3.987. The commissioner of revenue shall deduct the amounts
transferred under this paragraph from the appropriation under this paragraph. The amounts
transferred are appropriated to the commissioner of management and budget and the
commissioner of education respectively.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for aids payable in 2018 and thereafter.
new text end

Sec. 16.

new text begin [477A.21] RIPARIAN PROTECTION AID.
new text end

new text begin Subdivision 1. new text end

new text begin Definition. new text end

new text begin (a) For purposes of this section, the following terms have the
meanings given.
new text end

new text begin (b) "Buffer protection map" means the buffer protection map as defined in section
103F.48, subdivision 1.
new text end

new text begin (c) "Commissioner" means the commissioner of revenue.
new text end

new text begin Subd. 2. new text end

new text begin Certification to commissioner. new text end

new text begin (a) The Board of Water and Soil Resources
must certify to the commissioner by September 1, 2017, and by July 1 of each year thereafter,
which counties and watershed districts have affirmed their jurisdiction under section 103F.48,
and the proportion of the number of centerline miles of public watercourses, and the miles
of public drainage system ditches on the buffer protection map, within each county and
each watershed district within the county with affirmed jurisdiction.
new text end

new text begin (b) On or before July 1 of each year, the commissioner of natural resources shall certify
to the commissioner the statewide and countywide number of centerline miles of public
watercourses and the miles of public drainage system ditches on the buffer protection map.
new text end

new text begin Subd. 3. new text end

new text begin Distribution. new text end

new text begin (a) A county that is certified under subdivision 2, or that portion
of a county containing a watershed district certified under subdivision 2, is eligible to receive
aid under this section to enforce and implement the riparian protection and water quality
practices under section 103F.48. The commissioner shall calculate a preliminary aid for all
counties that shall equal the sum of (1) the total number of acres in the county classified as
class 2a under section 273.13, subdivision 23; (2) the countywide number of centerline
miles of public watercourses on the buffer protection map; and (3) the countywide number
of miles of public drainage system on the buffer protection map; divided by the sum of (4)
the statewide total number of acres classified as class 2a under section 273.13, subdivision
23; (5) the statewide total number of centerline miles of public watercourses on the buffer
protection map; and (6) the statewide total number of miles of public drainage system on
the buffer protection map; multiplied by (7) $10,000,000.
new text end

new text begin (b) Aid to a county shall not be greater than $200,000 or less than $50,000. If the sum
of the preliminary aids payable to counties under paragraph (a) is greater or less than the
appropriation under subdivision 5, the commissioner shall calculate the percentage adjustment
necessary so that the total of the aid under paragraph (a) equals the total amount available
for aid under subdivision 5.
new text end

new text begin (c) If only a portion of a county is certified as eligible to receive aid under subdivision
2, the aid otherwise payable to that county under this section shall be multiplied by a fraction,
the numerator of which is the area of the certified watershed districts contained within the
county and the denominator of which is the total area of the county.
new text end

new text begin (d) Any aid that would otherwise be paid to a county or portion of a county that is not
certified under subdivision 2 shall be paid to the Board of Water and Soil Resources for the
purpose of enforcing and implementing the riparian protection and water quality practices
under section 103F.48.
new text end

new text begin Subd. 4. new text end

new text begin Payments. new text end

new text begin The commissioner of revenue must compute the amount of riparian
protection aid payable to each eligible county and to the Board of Water and Soil Resources
under this section. On or before November 1, 2017, and on or before each August 1 thereafter,
the commissioner shall certify the amount to be paid to each county and the Board of Water
and Soil Resources in the following year. The commissioner shall pay riparian protection
aid to counties and the Board of Water and Soil Resources in the same manner and at the
same time as aid payments under section 477A.015.
new text end

new text begin Subd. 5. new text end

new text begin Appropriation. new text end

new text begin $10,000,000 is annually appropriated from the general fund
to the commissioner to make the payments required under this section.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning with aids payable in 2018.
new text end

Sec. 17. new text begin ST. PAUL SOCCER STADIUM PROPERTY TAX EXEMPTION; SPECIAL
ASSESSMENT.
new text end

new text begin Any real or personal property acquired, owned, leased, controlled, used, or occupied by
the city of St. Paul for the primary purpose of providing a soccer stadium for a major league
soccer team is declared to be acquired, owned, leased, controlled, used, and occupied for
public, governmental, and municipal purposes, and is exempt from ad valorem taxation by
the state or any political subdivision of the state, provided that the property is subject to
special assessments levied by a political subdivision for a local improvement in amounts
proportionate to and not exceeding the special benefit received by the property from the
improvement. In determining the special benefit received by the property, no possible use
of any of the property in any manner different from its intended use for providing a major
league soccer stadium at the time may be considered. Notwithstanding Minnesota Statutes,
section 272.01, subdivision 2, or 273.19, real or personal property subject to a lease or use
agreement between the city and another person for uses related to the operation of the
stadium and related parking facilities is exempt from taxation regardless of the length of
the lease or use agreement. This section, insofar as it provides an exemption or special
treatment, does not apply to any real property that is leased for residential, business, or
commercial development or other purposes different from those necessary to the provision
and operation of the stadium.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day after compliance by the governing
body of the city of St. Paul with Minnesota Statutes, section 645.021, subdivisions 2 and
3.
new text end

Sec. 18. new text begin WATONWAN COUNTY; CITY OF MADELIA; ADDITIONAL AID.
new text end

new text begin $46,000 is appropriated annually from the general fund to the commissioner of revenue
for payments to compensate the county of Watonwan and the city of Madelia for costs
related to a fire in the city of Madelia in February 2016. The commissioner shall annually
pay $15,000 to the county of Watonwan and $31,000 to the city of Madelia. The payments
shall be made on July 20, 2017, and July 20 of each subsequent year, with the last payment
to be made on July 20, 2036.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for aids payable in 2017 and thereafter.
This section expires on August 1, 2036.
new text end

Sec. 19. new text begin APPROPRIATION; RIPARIAN BUFFER COMPENSATION PROGRAM.
new text end

new text begin $11,000 in fiscal year 2018 and $434,000 in fiscal year 2019 are appropriated from the
general fund to the commissioner of revenue to administer section 1. $286,000 shall be
added to base appropriations to the Department of Revenue for fiscal years 2020 and 2021.
new text end

Sec. 20. new text begin APPROPRIATION; DEBT SERVICE EQUALIZATION.
new text end

new text begin Subdivision 1. new text end

new text begin Department of Education. new text end

new text begin The sums indicated in this section are
appropriated from the general fund to the Department of Education for the fiscal years
designated.
new text end

new text begin Subd. 2. new text end

new text begin Debt service equalization. new text end

new text begin For debt service aid under Minnesota Statutes,
section 123B.53, subdivision 6:
new text end

	new text begin $ new text end	new text begin 30,235,000 new text end	new text begin ....... new text end	new text begin 2018 new text end
	new text begin $ new text end	new text begin 38,147,000 new text end	new text begin ....... new text end	new text begin 2019 new text end

new text begin The 2018 appropriation includes $2,324,000 for 2017 and $27,911,000 for 2018.
new text end

new text begin The 2019 appropriation includes $3,101,000 for 2018 and $35,046,000 for 2019.
new text end

ARTICLE 3

TOBACCO AND VAPOR PRODUCTS

Section 1.

Minnesota Statutes 2016, section 270C.722, subdivision 1, is amended to read:

Subdivision 1.

Notice of revocation; hearings.

(a) If deleted text begin : (1) deleted text end a person fails to comply with
chapter 297A or the sales and use tax provisions of chapter 289A or the rules related to
sales tax, deleted text begin or (2) any retailer purchases for resale from an unlicensed seller more than 20,000
cigarettes or $500 or more worth of tobacco products, without reasonable cause, deleted text end the
commissioner may give the person 30 days' notice in writing, specifying the violations, and
stating that based on the violations the commissioner intends to revoke the person's permit
issued under section 297A.84. The notice must also advise the person of the right to contest
the revocation under this subdivision. It must also explain the general procedures for a
contested case hearing under chapter 14. The notice may be served personally or by mail
in the manner prescribed for service of an order of assessment.

(b) If the person does not request a hearing within 30 days after the date of the notice
of intent, the commissioner may serve a notice of revocation of permit upon the person, and
the permit is revoked. If a hearing is timely requested, and held, the permit is revoked after
the commissioner serves an order of revocation of permit under section 14.62, subdivision
1.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective August 1, 2017.
new text end

Sec. 2.

Minnesota Statutes 2016, section 270C.728, is amended by adding a subdivision
to read:

new text begin Subd. 8. new text end

new text begin Publication of revoked retail cigarette licenses. new text end

new text begin (a) Notwithstanding any
other law, the commissioner may publish a list of persons who have had their retail licenses
to sell cigarettes or tobacco products revoked under section 297F.186. In the case of a license
holder that is a business entity, the commissioner may also publish the name of responsible
persons of the license holder, as defined in section 297F.186, subdivision 1.
new text end

new text begin (b) At least 30 days before publishing the name of a license holder or responsible person,
the commissioner shall mail a written notice to the license holder and to responsible persons
of the license holder of the commissioner's intent to publish. This notice may be included
as part of the notice of intent to revoke a license as required under section 297F.186,
subdivision 3.
new text end

new text begin (c) The list may be published by any medium or method. The list must contain the name
and address of the license holder and name of the responsible person and the date the license
was revoked.
new text end

new text begin (d) The commissioner shall remove the name of a license holder or responsible person
from the list five years from the date of the license revocation or upon the license holder or
responsible person receiving a license clearance under section 297F.186.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective August 1, 2017.
new text end

Sec. 3.

Minnesota Statutes 2016, section 297F.01, is amended by adding a subdivision to
read:

new text begin Subd. 6a. new text end

new text begin Consumable material. new text end

new text begin "Consumable material" means any liquid nicotine
solution or other material containing nicotine that is depleted as a vapor product is used.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective January 1, 2018.
new text end

Sec. 4.

Minnesota Statutes 2016, section 297F.01, is amended by adding a subdivision to
read:

new text begin Subd. 7a. new text end

new text begin Consumer packaging. new text end

new text begin "Consumer packaging" means any container of vapor
product that is of an appropriate size for sale to a consumer.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective January 1, 2018.
new text end

Sec. 5.

Minnesota Statutes 2016, section 297F.01, subdivision 9a, is amended to read:

Subd. 9a.

Invoice.

"Invoice" means a detailed list of cigarettes and tobacco products
purchased or sold in this state that contains the following information:

(1) name of seller;

(2) name of purchaser;

(3) date of sale;

(4) invoice number;

(5) itemized list of goods sold including brands of cigarettes and number of cartons of
each brand, unit price, and identification of tobacco products by name, quantity, and unit
price; deleted text begin and
deleted text end

(6) any rebates, discounts, or other reductions deleted text begin . deleted text end new text begin ; and
new text end

new text begin (7) the weight or volume of the consumable material and concentration level of nicotine
of each vapor product sold.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for invoices issued for vapor products
purchased or sold after December 31, 2017.
new text end

Sec. 6.

Minnesota Statutes 2016, section 297F.01, subdivision 10, is amended to read:

Subd. 10.

Manufacturer.

"Manufacturer" means a person who produces and sells
cigarettes or tobacco products new text begin and includes a manufacturer of vapor products new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective January 1, 2018.
new text end

Sec. 7.

Minnesota Statutes 2016, section 297F.01, is amended by adding a subdivision to
read:

new text begin Subd. 10c. new text end

new text begin Manufacturer of vapor products. new text end

new text begin "Manufacturer of vapor products" means
a person who makes, modifies, mixes, fabricates, assembles, processes, repacks, or relabels
a vapor product in Minnesota to sell.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective January 1, 2018.
new text end

Sec. 8.

Minnesota Statutes 2016, section 297F.01, subdivision 14, is amended to read:

Subd. 14.

Retailer.

"Retailer" means a person deleted text begin required to be licensed under chapter 461 deleted text end
new text begin located in this state new text end engaged deleted text begin in this state deleted text end in the business of selling, or offering to sell,
cigarettes or tobacco products to consumers.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective August 1, 2017.
new text end

Sec. 9.

Minnesota Statutes 2016, section 297F.01, is amended by adding a subdivision to
read:

new text begin Subd. 16a. new text end

new text begin Sales price of vapor products. new text end

new text begin (a) "Sales price of vapor products" means
the price at which a distributor or retailer purchases a vapor product or the price at which
a subjobber purchases vapor products from a manufacturer of vapor products.
new text end

new text begin (b) For the purposes of section 297F.05, subdivision 3b, paragraph (a), clause (5), "sales
price of vapor product" means the price at which the manufacturer sells the product minus
a retailer markup equal to ten percent of that price.
new text end

new text begin (c) If a vapor product described in section 297F.01, subdivision 22b, paragraph (b),
includes a cartridge, bottle, or other package of nicotine solution which is available for
purchase as a separate item by the distributor, retailer, subjobber, or consumer, then the
price at which the vapor product is purchased or sold for purposes of paragraphs (a) and (b)
is limited to the usual price, without regard to any discount or reduction, at which the
cartridge, bottle, or other package of nicotine solution is separately sold to a distributor,
retailer, subjobber, or consumer.
new text end

new text begin (d) Sales price of vapor products includes the applicable federal excise tax, freight
charges, and packaging costs, regardless of whether they were included in the purchase
price, but does not include the tax imposed under section 297F.05, subdivision 3b.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for vapor products subject to tax after
December 31, 2017.
new text end

Sec. 10.

Minnesota Statutes 2016, section 297F.01, subdivision 17, is amended to read:

Subd. 17.

Stamp.

"Stamp" means the adhesive stamp supplied by the commissioner of
revenue for use on cigarette packages new text begin or packages of moist snuff or other tobacco products
new text end or any other indicia adopted by the commissioner to indicate that the tax has been paid.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2019.
new text end

Sec. 11.

Minnesota Statutes 2016, section 297F.01, subdivision 19, is amended to read:

Subd. 19.

Tobacco products.

(a) "Tobacco products" means any product containing,
made, or derived from tobacco that is intended for human consumption, whether chewed,
smoked, absorbed, dissolved, inhaled, snorted, sniffed, or ingested by any other means, or
any component, part, or accessory of a tobacco product, including, but not limited to, cigars;
cheroots; stogies; periques; granulated, plug cut, crimp cut, ready rubbed, and other smoking
tobacco; snuff; snuff flour; cavendish; plug and twist tobacco; fine-cut and other chewing
tobacco; shorts; refuse scraps, clippings, cuttings and sweepings of tobacco, new text begin vapor products, new text end
and other kinds and forms of tobacco; but does not include cigarettes as defined in this
section. Tobacco products excludes any tobacco product that has been approved by the
United States Food and Drug Administration for sale as a tobacco cessation product, as a
tobacco dependence product, or for other medical purposes, and is being marketed and sold
solely for such an approved purpose.

(b) Except for the imposition of tax under section 297F.05, subdivisions 3 and 4, tobacco
products includes a premium cigar, as defined in subdivision 13a.

new text begin EFFECTIVE DATE. new text end

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

Sec. 12.

Minnesota Statutes 2016, section 297F.01, subdivision 20, is amended to read:

Subd. 20.

Tobacco products distributor.

new text begin (a) new text end "Tobacco products distributor" means deleted text begin any
of the following deleted text end :

(1) a person engaged in the business of selling tobacco products in this state who brings,
or causes to be brought, into this state from outside the state any tobacco products for sale; new text begin
or
new text end

(2) deleted text begin a person who makes, manufactures, or fabricates tobacco products in this state for
sale in this state;
deleted text end

deleted text begin (3) deleted text end a person engaged in the business of selling tobacco products outside this state who
ships or transports tobacco products to retailers in this state, to be sold by those retailers.

new text begin (b) "Tobacco products distributor" includes a person who makes, manufactures, or
fabricates tobacco products, other than vapor products, in this state for sale in this state.
new text end

new text begin (c) "Tobacco products distributor" includes a manufacturer of vapor products only to
the extent that the manufacturer brings tobacco products into this state for use other than in
manufacturing vapor products.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective January 1, 2018.
new text end

Sec. 13.

Minnesota Statutes 2016, section 297F.01, subdivision 21, is amended to read:

Subd. 21.

Tobacco products subjobber.

"Tobacco products subjobber" means new text begin :
new text end

new text begin (1) new text end a person, other than a manufacturer or distributor, who buys new text begin , new text end from a new text begin manufacturer
of vapor products or a new text end distributor new text begin , new text end tobacco products upon which the tax imposed by this
chapter has been paid and sells them to persons other than the ultimate consumers deleted text begin , deleted text end new text begin ; new text end and

new text begin (2) new text end any licensed distributor who delivers, sells, or distributes tobacco products upon
which the tax imposed by this chapter has been paid from a place of business other than
that licensed in the distributor's license.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective January 1, 2018.
new text end

Sec. 14.

Minnesota Statutes 2016, section 297F.01, is amended by adding a subdivision
to read:

new text begin Subd. 22b. new text end

new text begin Vapor product. new text end

new text begin (a) "Vapor product" means any cartridge, bottle, or other
package that contains nicotine that is derived from tobacco and is in a solution that is
consumed, or meant to be consumed, through the use of a heating element, power source,
electronic circuit, or other electronic, chemical, or mechanical means that produces vapor
from the nicotine.
new text end

new text begin (b) Vapor product includes any electronic cigarette, electronic cigar, electronic cigarillo,
electronic pipe, or similar product or device, and any batteries, heating elements, or other
components, parts, or accessories sold with and meant to be used in the consumption of the
nicotine solution described in paragraph (a).
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective January 1, 2018.
new text end

Sec. 15.

Minnesota Statutes 2016, section 297F.03, subdivision 1, is amended to read:

Subdivision 1.

Selling without license illegal.

No person shall engage in the business
of a new text begin manufacturer of vapor products, new text end distributor new text begin , new text end or subjobber at any place of business
without first having received a license from the commissioner to engage in that business at
that place of business.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective January 1, 2018.
new text end

Sec. 16.

Minnesota Statutes 2016, section 297F.03, subdivision 2, is amended to read:

Subd. 2.

Form of application.

Every application for a cigarette deleted text begin or deleted text end new text begin , new text end tobacco products new text begin ,
or manufacturer of vapor products new text end license shall be made on a form prescribed by the
commissioner.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective January 1, 2018.
new text end

Sec. 17.

Minnesota Statutes 2016, section 297F.03, subdivision 3, is amended to read:

Subd. 3.

Place of application.

A separate application for a distributor's license new text begin or a
manufacturer of vapor products license new text end shall be made for each place of business at which
a distributor proposes to engage in business new text begin or a manufacturer proposes to manufacture
vapor products new text end .

A separate application for a subjobber's license may be made by a licensed distributor
for each place of business, other than that licensed in the distributor's license, to which the
distributor sells or distributes stamped cigarettes or tobacco products.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective January 1, 2018.
new text end

Sec. 18.

Minnesota Statutes 2016, section 297F.03, subdivision 5, is amended to read:

Subd. 5.

License fees; cigarettes.

Each application for a cigarette distributor's license
must be accompanied by a fee of deleted text begin $300 deleted text end new text begin $500 new text end . Each application for a cigarette subjobber's
license must be accompanied by a fee of deleted text begin $24 deleted text end new text begin $100 new text end . A distributor or subjobber applying for
a license during the second year of a two-year licensing period is required to pay only
one-half of the license fee.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for license periods beginning after
December 31, 2017.
new text end

Sec. 19.

Minnesota Statutes 2016, section 297F.03, subdivision 6, is amended to read:

Subd. 6.

License fees; tobacco products.

Each application for a tobacco products
distributor's license must be accompanied by a fee of deleted text begin $75 deleted text end new text begin $500 new text end . Each application for a
tobacco products subjobber's license must be accompanied by a fee of deleted text begin $20 deleted text end new text begin $100 new text end . A distributor
or subjobber applying for a license during the second year of a two-year licensing period
is required to pay only one-half of the license fee.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for license periods beginning after
December 31, 2017.
new text end

Sec. 20.

Minnesota Statutes 2016, section 297F.03, is amended by adding a subdivision
to read:

new text begin Subd. 6a. new text end

new text begin License fees, vapor products. new text end

new text begin Each application for a manufacturer of vapor
products license must be accompanied by a fee equal to the fee for a tobacco products
distributor license under subdivision 6. A manufacturer of vapor products is not required
to obtain a distributor license under subdivision 6 to sell vapor products manufactured by
the licensee and sold in consumer packaging to a tobacco products distributor, a tobacco
products subjobber, or a retailer.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective January 1, 2018.
new text end

Sec. 21.

Minnesota Statutes 2016, section 297F.03, subdivision 7, is amended to read:

Subd. 7.

Issuance of license.

The commissioner, upon receipt of the application in proper
form, and payment of the license fee required by this chapter, shall, unless otherwise provided
by this chapter, issue the applicant a license in the form prescribed by the commissioner.
The license permits the applicant to engage in business as a new text begin manufacturer of vapor products, new text end
distributor new text begin , new text end or subjobber at the place of business shown in the application.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective January 1, 2018.
new text end

Sec. 22.

Minnesota Statutes 2016, section 297F.04, subdivision 1, is amended to read:

Subdivision 1.

Powers of commissioner.

The commissioner may revoke or suspend the
license or licenses of any new text begin manufacturer of vapor products, new text end distributor new text begin , new text end or subjobber for
violation of this chapter, any other act applicable to the sale of cigarettes or tobacco products,
or any rule promulgated by the commissioner, in furtherance of this chapter.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective January 1, 2018.
new text end

Sec. 23.

Minnesota Statutes 2016, section 297F.04, subdivision 1, is amended to read:

Subdivision 1.

Powers of commissioner.

The commissioner may revoke deleted text begin or deleted text end new text begin , new text end suspend new text begin ,
or refuse to renew new text end the license or licenses of any distributor or subjobber new text begin , or refuse to issue
a license to an applicant for a distributor or subjobber license, new text end for violation of this chapter,
any other act applicable to the sale of cigarettes or tobacco products, or any rule promulgated
by the commissioner, in furtherance of this chapter.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective August 1, 2017.
new text end

Sec. 24.

Minnesota Statutes 2016, section 297F.04, subdivision 2, is amended to read:

Subd. 2.

Refusal to issue or renew; revocation.

The commissioner must not issue or
renew a license under this chapter, and may revoke a license under this chapter, if the
applicant or licensee:

(1) owes $500 or more in delinquent taxes as defined in section 270C.72, subdivision
2;

(2) after demand, has not filed tax returns required by the commissioner;

(3) had a deleted text begin cigarette or tobacco deleted text end license new text begin under this chapter new text end revoked by the commissioner
within the past two years;

(4) had a sales and use tax permit revoked by the commissioner within the past two
years; or

(5) has been convicted of a crime involving cigarettes, including but not limited to:
selling stolen cigarettes or tobacco products, receiving stolen cigarettes or tobacco products,
or involvement in the smuggling of cigarettes or tobacco products.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective January 1, 2018.
new text end

Sec. 25.

Minnesota Statutes 2016, section 297F.05, subdivision 3, is amended to read:

Subd. 3.

Rates; tobacco products.

(a) Except as provided in subdivision 3a new text begin and 3b new text end , a
tax is imposed upon all tobacco products in this state and upon any person engaged in
business as a distributor, at the rate of 95 percent of the wholesale sales price of the tobacco
products. The tax is imposed at the time the distributor:

(1) brings, or causes to be brought, into this state from outside the state tobacco products
for sale;

(2) makes, manufactures, or fabricates tobacco products in this state for sale in this state;
or

(3) ships or transports tobacco products to retailers in this state, to be sold by those
retailers.

(b) Notwithstanding paragraph (a), a minimum tax equal to the rate imposed on a pack
of 20 cigarettes weighing not more than three pounds per thousand, as established under
subdivision 1, is imposed on each container of moist snuff.

For purposes of this subdivision, a "container" means the smallest consumer-size can,
package, or other container that is marketed or packaged by the manufacturer, distributor,
or retailer for separate sale to a retail purchaser. When more than one container is packaged
together, each container is subject to tax.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective January 1, 2018.
new text end

Sec. 26.

Minnesota Statutes 2016, section 297F.05, is amended by adding a subdivision
to read:

new text begin Subd. 3b. new text end

new text begin Rates; vapor products. new text end

new text begin (a) In lieu of the tax imposed under subdivision 3, a
tax is imposed upon all vapor products in this state equal to:
new text end

new text begin (1) in the case of a Minnesota distributor who brings, or causes to be brought, vapor
products into this state, 95 percent of the sales price of vapor products paid by the distributor;
new text end

new text begin (2) in the case of a distributor who sells vapor products from outside this state to a
retailer, 95 percent of the sales price of vapor products paid by the retailer;
new text end

new text begin (3) in the case of a manufacturer of vapor products who sells the manufactured product
to retailers or subjobbers, 95 percent of the sales price of vapor products paid by the retailer
or subjobber;
new text end

new text begin (4) in the case of a Minnesota distributor who purchases vapor products from a
manufacturer of vapor products, 95 percent of the sales price of vapor products paid by the
distributor; and
new text end

new text begin (5) in the case of a manufacturer of vapor products who is also a retailer who sells the
manufactured product to consumers, 95 percent of the sales price of vapor products.
new text end

new text begin (b) The tax under this subdivision is imposed:
new text end

new text begin (1) on the distributor at the time the vapor products in consumer packaging are brought
into the state or received by the distributor who brings, or causes to be brought, into this
state the vapor products for sale in this state;
new text end

new text begin (2) on the distributor at the time the distributor ships or transports the vapor products in
consumer packaging from outside this state to retailers in this state;
new text end

new text begin (3) on the manufacturer of vapor products at the time the vapor products are sold to a
retailer or subjobber;
new text end

new text begin (4) on the distributor at the time a Minnesota distributor purchases the vapor products
in consumer packaging that were manufactured by a Minnesota manufacturer of vapor
products; and
new text end

new text begin (5) on the manufacturer of vapor products who is also a retailer of vapor products, at
the time the vapor products manufactured in this state are sold to the consumer.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for vapor products bought, sold, or
manufactured in Minnesota after December 31, 2017.
new text end

Sec. 27.

Minnesota Statutes 2016, section 297F.06, is amended by adding a subdivision
to read:

new text begin Subd. 6. new text end

new text begin Exempt sales of vapor products to licensed manufacturers of vapor
products. new text end

new text begin (a) A tobacco products distributor or manufacturer of vapor products, who at the
time of sale accepts in good faith a valid exemption certificate from a purchaser that is a
licensed manufacturer of vapor products, may sell vapor products in consumer packaging
containing more than 50 milliliters of nicotine solution to the purchaser exempt from the
tax imposed under section 297F.05, subdivision 3b.
new text end

new text begin (b) An exemption certificate is valid if it:
new text end

new text begin (1) is substantially in the form prescribed by the commissioner;
new text end

new text begin (2) bears the name and address of the purchaser;
new text end

new text begin (3) indicates the manufacturer of vapor products identification number issued to the
purchaser by the commissioner;
new text end

new text begin (4) is signed by the purchaser if it is in paper form, or meets the requirements of section
270C.304 if it is in electronic form; and
new text end

new text begin (5) indicates that the purchaser:
new text end

new text begin (i) intends to use the product to manufacture vapor products;
new text end

new text begin (ii) agrees to pay the applicable tax on the finished manufactured vapor products; and
new text end

new text begin (iii) agrees to pay the applicable tax if the purchaser does not use the product to
manufacture vapor product, but sells the product to a consumer or retailer.
new text end

new text begin (c) For determining the tax due under paragraph (b), clause (5), item (iii), any product
subject to tax is treated as if it was manufactured by the purchaser.
new text end

new text begin (d) A purchaser may use a blanket exemption certificate for continuing purchases. A
purchaser using a blanket exemption certificate must update the certificate as needed to
accurately reflect the information required under paragraph (b).
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective January 1, 2018.
new text end

Sec. 28.

Minnesota Statutes 2016, section 297F.08, subdivision 8a, is amended to read:

Subd. 8a.

Revolving account.

A deleted text begin cigarette deleted text end tax stamp revolving account is created. The
commissioner shall use the amounts in this fund to purchase stamps for resale. The
commissioner shall charge distributors for the tax value of the stamps they receive along
with the commissioner's cost to purchase the stamps and ship them to the distributor. The
stamp purchase and shipping costs recovered must be credited to the revolving account and
are appropriated to the commissioner for the further purchases and shipping costs. The
revolving account is initially funded by a $40,000 transfer from the Department of Revenue.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective January 1, 2019.
new text end

Sec. 29.

new text begin [297F.081] TOBACCO PRODUCTS STAMPS.
new text end

new text begin Subdivision 1. new text end

new text begin Stamp affixed by distributor. new text end

new text begin (a) Before delivering, or causing to be
delivered, a package of moist snuff to a distributor, subjobber, retailer, or consumer in this
state, a distributor in this state must firmly affix to each package of moist snuff a tax stamp
obtained from the commissioner.
new text end

new text begin (b) When moist snuff is shipped into this state by any distributor from outside this state
to a retailer or subjobber, the appropriate stamp must be affixed to the package at the time
the package enters the state.
new text end

new text begin Subd. 2. new text end

new text begin Stamps; design; printing. new text end

new text begin The commissioner shall adopt the design of the
moist snuff stamp. At least one stamp must be designed for application to packages of moist
snuff destined for retail sale on an Indian reservation that is a party to an agreement under
section 270C.19, subdivision 2, and only to those packages. The commissioner shall arrange
for the printing of stamps in such amounts and denominations as the commissioner deems
necessary.
new text end

new text begin Subd. 3. new text end

new text begin Deposit of proceeds. new text end

new text begin The commissioner shall use the amounts appropriated
by law to purchase stamps for resale. The commissioner shall charge the purchasers for the
commissioner's cost to purchase the stamps along with the tax value of the stamps plus
shipping costs. The tax value of the stamps must be deposited in the general fund. The
portion of the charge to the purchaser that represents the commissioner's cost to purchase
the stamps and the shipping costs must be deposited in the revolving stamp fund under
section 297F.08, subdivision 8a.
new text end

new text begin Subd. 4. new text end

new text begin Sale of stamps. new text end

new text begin (a) The commissioner shall sell moist snuff stamps only to
persons licensed as a tobacco products distributor.
new text end

new text begin (b) The commissioner may prescribe the method of shipment of the stamps to the
distributor.
new text end

new text begin (c) The commissioner shall charge the purchaser for the commissioner's cost to purchase
the stamps along with the tax value plus shipping costs.
new text end

new text begin (d)(1) The commissioner may sell moist snuff stamps on a credit basis to a distributor
unless:
new text end

new text begin (i) the distributor has been licensed by the commissioner as a tobacco products distributor
for less than one year;
new text end

new text begin (ii) the distributor has failed, without reasonable cause, to timely file tax returns or
reports required to be filed with the commissioner under a law administered by the
commissioner at any time during the prior 24 months; or
new text end

new text begin (iii) the distributor has failed, without reasonable cause, to timely pay taxes and fees
payable to the commissioner under a law administered by the commissioner at any time
during the prior 24 months.
new text end

new text begin (2) A distributor may purchase on a credit basis in any calendar month no more than the
number of stamps needed to affix to 15 percent of the number of moist snuff packages
reported to the commissioner as sold by the distributor during the previous 12-month period.
new text end

new text begin (3) A distributor who purchases stamps on a credit basis must pay the cost of the stamps
determined under paragraph (c) to the commissioner no later than the due date of the return
required under section 297F.09, subdivision 2, for the month that the order for the stamps
was received by the commissioner.
new text end

new text begin Subd. 5. new text end

new text begin Tax stamping machines. new text end

new text begin The commissioner may require any person licensed
as a distributor to stamp packages of moist snuff with a tax stamping machine, approved
by the commissioner, which shall be provided by the distributor. The commissioner shall
also supervise and check the operation of the machines. If the commissioner finds that a
stamping machine is not affixing a legible stamp on the package, the commissioner may
order the distributor to immediately cease the stamping process until the machine is
functioning properly.
new text end

new text begin Subd. 6. new text end

new text begin Resale or transfer of stamps prohibited. new text end

new text begin (a) No distributor shall resell or
transfer any moist snuff stamps purchased by the distributor from the commissioner. A
distributor may transfer another state's stamped moist snuff to another distributor for the
purpose of resale in the other state.
new text end

new text begin (b) A distributor who has on hand any moist snuff stamps when its tobacco products
distributor license is revoked, canceled, or not renewed may return the stamps to the
commissioner and receive a refund of the amount paid for the stamps.
new text end

new text begin (c) Moist snuff stamps that have become mutilated or unfit for use, or are affixed to
moist snuff packages being returned to the manufacturer, or are affixed to packages of moist
snuff that, or the contents of which, have become damaged and unfit for sale, shall be
replaced by the commissioner, upon application by the distributor owning the stamps or
moist snuff if the commissioner determines the stamps have not evidenced a taxable
transaction.
new text end

new text begin Subd. 7. new text end

new text begin Rulemaking for stamps on other tobacco products. new text end

new text begin The commissioner may
promulgate rules that require tax stamps to be affixed to tobacco products other than moist
snuff. The rules may apply to one or more classes or types of tobacco product.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin Subdivision 1 is effective for moist snuff delivered, caused to be
delivered, or shipped after June 30, 2019. Subdivisions 2 to 7 are effective January 1, 2019.
new text end

Sec. 30.

Minnesota Statutes 2016, section 297F.09, subdivision 2, is amended to read:

Subd. 2.

Monthly return; tobacco products distributor.

On or before the 18th day of
each calendar month, a distributor with a place of business in this state new text begin or a manufacturer
of vapor products new text end shall file a return with the commissioner showing the quantity and
wholesale sales price new text begin or sales price of vapor product new text end of each tobacco product:

(1) brought, or caused to be brought, into this state for sale; and

(2) made, manufactured, or fabricated in this state for sale in this state, during the
preceding calendar month.

Every licensed distributor outside this state shall in like manner file a return showing
the quantity and wholesale sales price new text begin or sales of vapor product new text end of each tobacco product
shipped or transported to retailers in this state to be sold by those retailers, during the
preceding calendar month. Returns must be made in the form and manner prescribed by the
commissioner and must contain any other information required by the commissioner. The
return must be accompanied by a remittance for the full tax liability shown. For distributors
subject to the accelerated tax payment requirements in subdivision 10, the return for the
May liability is due two business days before June 30th of the year and the return for the
June liability is due on or before August 18th of the year.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes imposed on vapor products
brought into the state or manufactured in the state after December 31, 2017.
new text end

Sec. 31.

Minnesota Statutes 2016, section 297F.09, subdivision 7, is amended to read:

Subd. 7.

Electronic payment.

A cigarette or tobacco products distributor new text begin or a
manufacturer of vapor products new text end having a liability of $10,000 or more during a fiscal year
ending June 30 must remit all liabilities in all subsequent calendar years by electronic means.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective January 1, 2018.
new text end

Sec. 32.

Minnesota Statutes 2016, section 297F.09, subdivision 10, is amended to read:

Subd. 10.

Accelerated tax payment; cigarette or tobacco products distributor new text begin or
manufacturer of vapor products new text end .

A cigarette or tobacco products distributor new text begin or a
manufacturer of vapor products new text end having a liability of $250,000 or more during a fiscal year
ending June 30, shall remit the June liability for the next year in the following manner:

(a) Two business days before June 30 of the year, the distributor new text begin or manufacturer new text end shall
remit the actual May liability and 81.4 percent of the estimated June liability to the
commissioner and file the return in the form and manner prescribed by the commissioner.

(b) On or before August 18 of the year, the distributor new text begin or manufacturer new text end shall submit a
return showing the actual June liability and pay any additional amount of tax not remitted
in June. A penalty is imposed equal to ten percent of the amount of June liability required
to be paid in June, less the amount remitted in June. However, the penalty is not imposed
if the amount remitted in June equals the lesser of:

(1) 81.4 percent of the actual June liability; or

(2) 81.4 percent of the preceding May liability.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective January 1, 2018.
new text end

Sec. 33.

Minnesota Statutes 2016, section 297F.12, subdivision 3, is amended to read:

Subd. 3.

Manufacturers.

new text begin (a) new text end A manufacturer of tobacco products as defined by this
chapter shall report in the form and manner prescribed by the commissioner all sales of
tobacco products to Minnesota licensed distributors, subjobbers, retailers, or to any locations
within the state. The report is due on the 18th day of the month following the reporting
period.

new text begin (b) A manufacturer of vapor products must file a report with the commissioner no later
than the 18th day of each month identifying all vapor products placed into consumer
packaging and all sales of vapor products made by the manufacturer during the preceding
month. The report must identify the names and addresses of the persons within the state to
whom shipments to tobacco products distributors, subjobbers, or retailers were made, and
the quantity of vapor products manufactured or sold by type of product, brand, and size.
The reports must also include information related to sales and purchases of tax exempt vapor
products. If the manufacturer is also a retailer, the report must include the quantity of vapor
products sold to customers by type of product, brand, and size.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective January 1, 2018.
new text end

Sec. 34.

Minnesota Statutes 2016, section 297F.13, subdivision 2, is amended to read:

Subd. 2.

Tobacco products distributor.

(a) A distributor shall keep at each licensed
place of business complete and accurate records for that place of business, including itemized
invoices of tobacco products held, purchased, manufactured, brought in or caused to be
brought in from outside the state, or shipped or transported to retailers in this state, and all
sales of tobacco products made, except sales to the ultimate consumer. new text begin These records must
show the names and addresses of purchasers, the inventory of all moist snuff stamps affixed
and unaffixed to packages of moist snuff, and all moist snuff on hand at the close of each
period for which a return is required, and any other pertinent papers and documents relating
to the purchase, sale, or disposition of moist snuff.
new text end

(b) When a licensed distributor sells tobacco products exclusively to the ultimate
consumer at the address given in the license, no invoice of those sales is required, but
itemized invoices must be made of all tobacco products transferred to other retail outlets
owned or controlled by that licensed distributor.

(c) All books, records, and other documents required by this chapter must be preserved
for a period of at least 3-1/2 years after the date of the documents or the date of the entries
appearing in the records, unless the commissioner authorizes in writing their destruction or
disposal at an earlier date.

(d) To determine whether the distributor is in compliance with the provisions of this
chapter, at any time during usual business hours the commissioner, or duly authorized agents
or employees, may enter a place of business of a distributor, without a search warrant, and
inspect the premises, the records required to be kept under this chapter, and the tobacco
products in that place of business. If the commissioner, or an agent or employee of the
commissioner, is denied free access or is hindered or interfered with in making the
examination, the commissioner may revoke the distributor's license.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for moist snuff purchased, sold, or
disposed of after June 30, 2019.
new text end

Sec. 35.

Minnesota Statutes 2016, section 297F.13, is amended by adding a subdivision
to read:

new text begin Subd. 2a. new text end

new text begin Manufacturers of vapor products. new text end

new text begin (a) A manufacturer of vapor products
shall keep at each licensed place of business complete and accurate records for that place
of business, including itemized invoices of vapor products held, purchased, manufactured,
brought in or caused to be brought in from outside the state, or shipped or transported to
distributors, subjobbers, or retailers in this state.
new text end

new text begin (b) A manufacturer of vapor products who is also a retailer must keep records of all sales
made to the ultimate customer. These records must include cash register tapes or other
similar electronic records and any other records which involve purchases or sales of vapor
products which are required to be kept by a retailer who makes sales subject to tax under
chapter 297A.
new text end

new text begin (c) When a manufacturer of vapor products sells vapor products exclusively to the
ultimate consumer at the address given in the license, no invoice of those sales is required,
but itemized invoices must be made of all vapor products transferred to other retail outlets
owned or controlled by that manufacturer.
new text end

new text begin (d) All books, records, and other documents required by this subdivision must be
preserved for a period of at least 3-1/2 years after the date of the documents or the date of
the entries appearing in the records, unless the commissioner authorizes in writing the
destruction or disposal at an earlier date.
new text end

new text begin (e) To determine whether the manufacturer is in compliance with the provisions of this
chapter, at any time during usual business hours the commissioner, or duly authorized agents
or employees, may enter a place of business of a manufacturer, without a search warrant,
and inspect the premises, the records required to be kept under this chapter, and the vapor
products in that place of business. If the commissioner, or an agent or employee of the
commissioner, is denied free access or is hindered or interfered with in making the
examination, the commissioner may revoke the manufacturer's license.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective January 1, 2018.
new text end

Sec. 36.

Minnesota Statutes 2016, section 297F.13, subdivision 4, is amended to read:

Subd. 4.

Retailer and subjobber to preserve purchase invoices.

Every retailer and
subjobber shall procure itemized invoices of all cigarettes or tobacco products purchased.

The retailer and subjobber shall preserve a legible copy of each invoice for one year
from the date of the invoice new text begin or as long as the cigarette or tobacco product listed on the
invoice is available for sale or in their possession, whichever period is longer new text end . The retailer
and subjobber shall preserve copies of the invoices at each retail location or at a central
location provided that the invoice must be produced and made available at a retail location
within one hour when requested by the commissioner or duly authorized agents and
employees. Copies should be numbered and kept in chronological order.

To determine whether the business is in compliance with the provisions of this chapter,
at any time during usual business hours, the commissioner, or duly authorized agents and
employees, may enter any place of business of a retailer or subjobber without a search
warrant and inspect the premises, the records required to be kept under this chapter, and the
packages of cigarettes, tobacco products, and vending devices contained on the premises.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases by subjobbers
and retailers made on or after August 1, 2017.
new text end

Sec. 37.

Minnesota Statutes 2016, section 297F.15, subdivision 9, is amended to read:

Subd. 9.

Physical inventory.

The commissioner or the commissioner's authorized agents
may, as considered necessary, require a cigarette or tobacco products distributor new text begin or a
manufacturer of vapor products new text end to furnish a physical inventory of all cigarettes or tobacco
products in stock. The inventory must contain the information that the commissioner requests
and must be certified by an officer of the corporation.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective January 1, 2018.
new text end

Sec. 38.

new text begin [297F.186] REVOCATION OF CIGARETTE AND TOBACCO RETAIL
LICENSE.
new text end

new text begin Subdivision 1. new text end

new text begin Cigarette and tobacco retail revocation. new text end

new text begin (a) A licensing authority must
not issue, transfer, or renew, and must revoke, a license if the commissioner notifies the
licensing authority that the license holder has been in possession of contraband cigarettes
or tobacco products under section 297F.21 at the location covered by the license.
new text end

new text begin (b) Within ten days after receipt of the notification from the commissioner under
paragraph (a), the licensing authority must notify the license holder by mail of the revocation
of the license. The notice must include a copy of the commissioner's notice to the licensing
authority and information, in the form specified by the commissioner, on the licensee's
option for receiving a license clearance from the commissioner. The licensing authority
must revoke the license within 30 days after receiving the notice from the commissioner,
unless it receives a license clearance from the commissioner as provided in subdivision 2,
paragraph (b).
new text end

new text begin (c) For purposes of this section, the following terms have the meanings given.
new text end

new text begin (1) "License holder" means an individual or legal entity who has a license to sell cigarettes
or tobacco products issued under chapter 461.
new text end

new text begin (2) "License" means a license to sell cigarettes or tobacco products under chapter 461.
new text end

new text begin (3) "Licensing authority" means a town board, county board, governing body of a home
rule charter or statutory city, or state agricultural society authorized to issue licenses under
chapter 461.
new text end

new text begin (4) "Applicant" is any individual, corporation, partnership, or any other legal entity that
is a holder of a license or that has filed an application to obtain a license.
new text end

new text begin (5) "Responsible person" means any individual who, either singly or jointly with others,
has the control of, supervision of, or responsibility for filing tax returns or reports, paying
taxes, or collecting or withholding and remitting taxes to the commissioner for a license
holder, or who has authority to purchase cigarettes or tobacco products, or supervises a
person who has authority to purchase cigarettes or tobacco products for the license holder.
new text end

new text begin Subd. 2. new text end

new text begin New licenses after revocation. new text end

new text begin (a) An applicant who has had a license revoked
under this section, or an applicant with a responsible person who was a responsible person
for another entity for which a license was revoked under this section, may not apply for a
license or seek the reinstatement of a revoked license unless the applicant presents to the
licensing authority a license clearance issued by the commissioner. A licensing authority
must not issue a new license to an applicant with such a responsible person or to an applicant
who has had a license revoked under this section or reinstate a revoked license unless the
applicant presents to the authority a license clearance issued by the commissioner.
new text end

new text begin (b) Except as provided in paragraph (f), the commissioner may issue a license clearance
if the applicant and all responsible persons of the applicant:
new text end

new text begin (1) sign an agreement that acknowledges that the applicant and the responsible person
will follow all laws related to the taxation of cigarettes and tobacco products, including the
requirements to:
new text end

new text begin (i) purchase all cigarettes and tobacco products from distributors and subjobbers licensed
by the commissioner;
new text end

new text begin (ii) maintain invoices of all cigarettes or tobacco products purchased as required under
section 297F.13, subdivision 4, and produce those invoices within one hour when requested
by the commissioner or duly authorized agents and employees; and
new text end

new text begin (iii) timely file and pay to the commissioner all returns and all sales taxes related to the
sale of tobacco products; and
new text end

new text begin (2) deposit with the commissioner security or a surety bond in an amount equal to ten
times the amount of tax on the contraband cigarettes or tobacco products. The commissioner
must hold the security deposit for two years.
new text end

new text begin (c) The commissioner must pay interest on any money deposited as security. The interest
is calculated from the date of deposit to the date of refund, or date of application to any
outstanding tax liability, at a rate specified in section 270C.405. The commissioner must
refund the security deposit to the applicant at the end of the two-year period unless the
applicant has any unpaid tax liabilities payable to the commissioner. The commissioner
may apply the security deposit to any unpaid tax liabilities of the applicant owed to the
commissioner as well as the tax on any contraband cigarettes or tobacco products owned,
possessed, sold, or offered for sale by the applicant after the license clearance has been
issued.
new text end

new text begin (d) The commissioner may refund the security deposit before the end of the two-year
holding period if the license holder no longer has a license to sell cigarettes or tobacco
products issued by any licensing authority in the state.
new text end

new text begin (e) If the commissioner determines that a licensing authority has issued a new license
or reinstated a revoked license without the applicant submitting a license clearance, the
commissioner may notify the licensing authority to revoke the license. Revocations under
this subdivision are controlled by the provisions of subdivision 1, paragraph (b), and
subdivision 3. Notice of intent to require revocation from the commissioner must be sent
to the license holder and to the responsible person of the license holder.
new text end

new text begin (f) If an applicant has had, or if a person has been a responsible person to, a cumulative
number of two licenses revoked under this subdivision in a five-year period by all licensing
authorities within the state, the commissioner may refuse to issue a license clearance until
24 months have elapsed after the last revocation and the applicant has satisfied the conditions
for reinstatement of a revoked license or issuance of a new license imposed by this
subdivision.
new text end

new text begin Subd. 3. new text end

new text begin Notice and hearing. new text end

new text begin (a) Prior to notifying a licensing authority pursuant to
subdivision 1 to revoke a license, the commissioner must send a notice to the license holder
and to any known responsible person of the license holder of the commissioner's intent to
require revocation of the license and of the license holder's or responsible person's right to
a hearing. If the license holder or responsible person requests a hearing in writing within
30 days of the date of the notice, a contested case hearing must be held. The hearing must
be held within 45 days of the date the commissioner refers the case to the Office of
Administrative Hearings. Notwithstanding any law to the contrary, the license holder or
responsible person must be served within 20 days' notice in writing specifying the time and
place of the hearing and the allegations against the license holder or responsible person.
The notice may be served personally or by mail. A license is subject to revocation when 30
days have passed following the date of the notice in this paragraph without the license holder
requesting a hearing, or, if a hearing is timely requested, upon final determination of the
hearing under section 14.62, subdivision 1.
new text end

new text begin (b) The commissioner may notify a licensing authority under subdivision 1 only after
the requirements of paragraph (a) have been satisfied.
new text end

new text begin (c) A hearing under this subdivision is in lieu of any other hearing or proceeding provided
by law arising from any action taken under subdivision 1.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective August 1, 2017.
new text end

Sec. 39.

Minnesota Statutes 2016, section 297F.19, is amended by adding a subdivision
to read:

new text begin Subd. 10. new text end

new text begin Penalty for retailers who fail to comply. new text end

new text begin (a) A retailer who fails to produce
an itemized invoice from a licensed seller within one hour of being requested by the
commissioner to do so as required under section 297F.13, subdivision 4, or who offers for
sale or holds in inventory cigarettes or tobacco products without a license required under
chapter 461 is subject to a penalty of $100 for the first violation, $2,000 for the second
violation, and $5,000 for the third and each subsequent violation occurring during any
36-month period.
new text end

new text begin (b) A retailer who offers for sale or holds in inventory untaxed cigarettes or tobacco
products is subject to a penalty equal to the greater of $2,000, or 150 percent of the tax due
on the cigarettes or tobacco products.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for violations occurring on or after August
1, 2017.
new text end

Sec. 40.

Minnesota Statutes 2016, section 297F.20, is amended by adding a subdivision
to read:

new text begin Subd. 2a. new text end

new text begin Penalties for willful failure to file or pay. new text end

new text begin (a) A person or consumer required
to file a return, report, or other document with the commissioner who willfully attempts in
any manner to evade or defeat a tax by failing to do so when required is guilty of a felony.
new text end

new text begin (b) A person or consumer required to pay or to collect and remit a tax under this chapter,
who willfully attempts to evade or defeat a tax by failing to do so when required, is guilty
of a felony.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for offenses committed on or after August
1, 2017.
new text end

Sec. 41.

Minnesota Statutes 2016, section 297F.20, subdivision 5, is amended to read:

Subd. 5.

Unstamped cigarettes new text begin or moist snuff new text end ; presumption.

(a) Except as provided
in paragraph (b), whenever a package of cigarettes new text begin or moist snuff new text end is found in the place of
business or in the possession of any person without a proper stamp affixed as required by
this chapter, it is presumed that those cigarettes new text begin or moist snuff new text end are kept there or held by that
person illegally.

(b) This presumption does not apply to:

(1) cigarettes new text begin or moist snuff new text end in the place of business or in the possession of a licensed
distributor;

(2) cigarettes new text begin or moist snuff new text end in the possession of a common carrier or sleeping car
company engaged in interstate commerce;

(3) cigarettes new text begin or moist snuff new text end held in a public warehouse of first destination in this state,
in the unbroken, original shipping containers, subject to delivery or shipping instructions
from the manufacturer or a distributor;

(4) cigarettes new text begin or moist snuff new text end in the possession of a person other than a distributor in
quantities of 200 cigarettes or less new text begin or $50 or less of moist snuff new text end , when those cigarettes new text begin or
moist snuff new text end have had the individual packages or seals broken, and when they are intended
for personal use and not to be sold or offered for sale;

(5) cigarettes new text begin or moist snuff new text end sold under circumstances in which the tax cannot legally
be imposed because of the laws or Constitution of the United States.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for moist snuff possessed after December
31, 2019.
new text end

Sec. 42.

Minnesota Statutes 2016, section 297F.20, subdivision 6, is amended to read:

Subd. 6.

Unstamped cigarettes; untaxed tobacco products.

(a) A person, other than
a licensed distributor new text begin , a licensed manufacturer of vapor products, new text end or a consumer, who
possesses, receives, or transports fewer than 5,000 unstamped cigarettes, or up to $350
worth of untaxed tobacco products is guilty of a misdemeanor.

(b) A person, other than a licensed distributor new text begin , a licensed manufacturer of vapor products, new text end
or a consumer, who possesses, receives, or transports 5,000 or more, but fewer than 20,001
unstamped cigarettes, or more than $350 but less than $1,400 worth of untaxed tobacco
products is guilty of a gross misdemeanor.

(c) A person, other than a licensed distributor new text begin , a licensed manufacturer of vapor products, new text end
or a consumer, who possesses, receives, or transports more than 20,000 unstamped cigarettes,
or $1,400 or more worth of untaxed tobacco products is guilty of a felony.

(d) For purposes of this subdivision, an individual in possession of more than 4,999
unstamped cigarettes, or more than $350 worth of untaxed tobacco products, is presumed
not to be a consumer.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective January 1, 2018.
new text end

Sec. 43.

Minnesota Statutes 2016, section 297F.20, subdivision 6, is amended to read:

Subd. 6.

Unstamped cigarettes; untaxed tobacco products.

(a) A person, other than
a licensed distributor or a consumer, who possesses, receives, or transports fewer than 5,000
unstamped cigarettes, or up to $350 worth of untaxed tobacco products new text begin or unstamped moist
snuff new text end is guilty of a misdemeanor.

(b) A person, other than a licensed distributor or a consumer, who possesses, receives,
or transports 5,000 or more, but fewer than 20,001 unstamped cigarettes, or more than $350
but less than $1,400 worth of untaxed tobacco products new text begin or unstamped moist snuff new text end is guilty
of a gross misdemeanor.

(c) A person, other than a licensed distributor or a consumer, who possesses, receives,
or transports more than 20,000 unstamped cigarettes, or $1,400 or more worth of untaxed
tobacco products new text begin or unstamped moist snuff new text end is guilty of a felony.

(d) For purposes of this subdivision, an individual in possession of more than 4,999
unstamped cigarettes, or more than $350 worth of untaxed tobacco products new text begin or unstamped
moist snuff new text end , is presumed not to be a consumer.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for moist snuff possessed after December
31, 2019, or for moist snuff received or transported after June 30, 2019.
new text end

Sec. 44.

Minnesota Statutes 2016, section 297F.20, subdivision 7, is amended to read:

Subd. 7.

Sale of deleted text begin cigarette deleted text end packages with Indian stamp.

(a) A retailer doing business
off of an Indian reservation who sells or offers to sell more than 200 but fewer than 5,000
cigarettes new text begin or up to $350 worth of tobacco products new text end with Indian stamps is guilty of a
misdemeanor.

(b) A retailer doing business off of an Indian reservation who sells or offers to sell 5,000
or more, but fewer than 20,001 cigarettes new text begin or more than $350 but less than $1,400 worth of
tobacco products new text end with Indian stamps is guilty of a gross misdemeanor.

(c) A retailer doing business off of an Indian reservation who sells or offers to sell more
than 20,000 cigarettes new text begin or $1,400 or more worth of tobacco products new text end with Indian stamps is
guilty of a felony.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales of tobacco products, or offers
to sell tobacco products, after June 30, 2019.
new text end

Sec. 45.

Minnesota Statutes 2016, section 297F.20, subdivision 9, is amended to read:

Subd. 9.

Purchases from unlicensed sellers.

(a) No retailer or subjobber shall purchase
cigarettes or tobacco products from any person who is not licensed under section 297F.03
as a licensed distributor new text begin , manufacturer of vapor products, new text end or subjobber.

(b) A retailer or subjobber who purchases from an unlicensed seller fewer than 5,000
cigarettes or up to $350 worth of tobacco products is guilty of a misdemeanor.

(c) A retailer or subjobber who purchases from an unlicensed seller 5,000 or more, but
fewer than 20,001 cigarettes or more than $350 but less than $1,400 worth of tobacco
products is guilty of a gross misdemeanor.

(d) A retailer or subjobber who purchases from an unlicensed seller more than 20,000
cigarettes or $1,400 or more worth of tobacco products is guilty of a felony.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective January 1, 2018.
new text end

Sec. 46.

Minnesota Statutes 2016, section 297F.20, is amended by adding a subdivision
to read:

new text begin Subd. 13. new text end

new text begin Aggregation and consolidation of venue. new text end

new text begin In any prosecution under this
section, the number of unstamped cigarettes or the value of the untaxed tobacco products
possessed, received, transported, sold, offered to be sold, or purchased in violation of this
section within any six-month period may be aggregated and the defendant charged
accordingly in applying the provisions of this section. When two or more offenses are
committed by the same individual in two or more counties, the accused may be prosecuted
in any county in which one of the offenses was committed.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for offenses committed on or after August
1, 2017.
new text end

Sec. 47.

Minnesota Statutes 2016, section 297F.21, subdivision 1, is amended to read:

Subdivision 1.

Contraband defined.

The following are declared to be contraband and
therefore subject to civil and criminal penalties under this chapter:

(a) Cigarette packages which do not have stamps affixed to them as provided in this
chapter, including but not limited to (i) packages with illegible stamps and packages with
stamps that are not complete or whole even if the stamps are legible, and (ii) all devices for
the vending of cigarettes in which packages as defined in item (i) are found, including all
contents contained within the devices.

(b) A device for the vending of cigarettes and all packages of cigarettes, where the device
does not afford at least partial visibility of contents. Where any package exposed to view
does not carry the stamp required by this chapter, it shall be presumed that all packages
contained in the device are unstamped and contraband.

(c) A device for the vending of cigarettes to which the commissioner or authorized agents
have been denied access for the inspection of contents. In lieu of seizure, the commissioner
or an agent may seal the device to prevent its use until inspection of contents is permitted.

(d) A device for the vending of cigarettes which does not carry the name and address of
the owner, plainly marked and visible from the front of the machine.

(e) A device including, but not limited to, motor vehicles, trailers, snowmobiles, airplanes,
and boats used with the knowledge of the owner or of a person operating with the consent
of the owner for the storage or transportation of more than 5,000 cigarettes which are
contraband under this subdivision. When cigarettes are being transported in the course of
interstate commerce, or are in movement from either a public warehouse to a distributor
upon orders from a manufacturer or distributor, or from one distributor to another, the
cigarettes are not contraband, notwithstanding the provisions of clause (a).

(f) A device including, but not limited to, motor vehicles, trailers, snowmobiles, airplanes,
and boats used with the knowledge of the owner, or of a person operating with the consent
of the owner, for the storage or transportation of untaxed tobacco products intended for sale
in Minnesota other than those in the possession of a licensed distributor on or before the
due date for payment of the tax under section 297F.09, subdivision 2.

(g) Cigarette packages or tobacco products obtained from an unlicensed seller.

(h) Cigarette packages offered for sale or held as inventory in violation of section
297F.20, subdivision 7.

(i) Tobacco products on which the tax has not been paid by a licensed distributor new text begin or
manufacturer of vapor products new text end .

(j) Any cigarette packages or tobacco products offered for sale or held as inventory for
which there is not an invoice from a licensed seller as required under section 297F.13,
subdivision 4.

(k) Cigarette packages which have been imported into the United States in violation of
United States Code, title 26, section 5754. All cigarettes held in violation of that section
shall be presumed to have entered the United States after December 31, 1999, in the absence
of proof to the contrary.

(l) Cigarettes subject to forfeiture under section 299F.854, subdivision 5, and cigarette
packaging and markings, including the cigarettes contained therein, which do not meet the
requirements under section 299F.853, paragraph (a).

new text begin (m) Vapor products purchased exempt from tax under section 297F.06, subdivision 6,
by a person other than a licensed manufacturer of vapor products.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective January 1, 2018.
new text end

Sec. 48.

Minnesota Statutes 2016, section 297F.21, subdivision 1, is amended to read:

Subdivision 1.

Contraband defined.

The following are declared to be contraband and
therefore subject to civil and criminal penalties under this chapter:

(a) Cigarette packages which do not have stamps affixed to them as provided in this
chapter, including but not limited to (i) packages with illegible stamps and packages with
stamps that are not complete or whole even if the stamps are legible, and (ii) all devices for
the vending of cigarettes in which packages as defined in item (i) are found, including all
contents contained within the devices.

(b) A device for the vending of cigarettes and all packages of cigarettes, where the device
does not afford at least partial visibility of contents. Where any package exposed to view
does not carry the stamp required by this chapter, it shall be presumed that all packages
contained in the device are unstamped and contraband.

(c) A device for the vending of cigarettes to which the commissioner or authorized agents
have been denied access for the inspection of contents. In lieu of seizure, the commissioner
or an agent may seal the device to prevent its use until inspection of contents is permitted.

(d) A device for the vending of cigarettes which does not carry the name and address of
the owner, plainly marked and visible from the front of the machine.

(e) A device including, but not limited to, motor vehicles, trailers, snowmobiles, airplanes,
and boats used with the knowledge of the owner or of a person operating with the consent
of the owner for the storage or transportation of more than 5,000 cigarettes which are
contraband under this subdivision. When cigarettes are being transported in the course of
interstate commerce, or are in movement from either a public warehouse to a distributor
upon orders from a manufacturer or distributor, or from one distributor to another, the
cigarettes are not contraband, notwithstanding the provisions of clause (a).

(f) A device including, but not limited to, motor vehicles, trailers, snowmobiles, airplanes,
and boats used with the knowledge of the owner, or of a person operating with the consent
of the owner, for the storage or transportation of untaxed tobacco products intended for sale
in Minnesota other than those in the possession of a licensed distributor on or before the
due date for payment of the tax under section 297F.09, subdivision 2.

(g) Cigarette packages or tobacco products obtained from an unlicensed seller.

(h) Cigarette packages offered for sale or held as inventory in violation of section
297F.20, subdivision 7.

(i) Tobacco products on which the tax has not been paid by a licensed distributor.

(j) Any cigarette packages or tobacco products offered for sale or held as inventory for
which deleted text begin there is not an invoice from a licensed seller deleted text end new text begin the retailer or subjobber does not produce
an itemized invoice from a licensed seller within one hour after being requested by the
commissioner to do so new text end as required under section 297F.13, subdivision 4.

(k) Cigarette packages which have been imported into the United States in violation of
United States Code, title 26, section 5754. All cigarettes held in violation of that section
shall be presumed to have entered the United States after December 31, 1999, in the absence
of proof to the contrary.

(l) Cigarettes subject to forfeiture under section 299F.854, subdivision 5, and cigarette
packaging and markings, including the cigarettes contained therein, which do not meet the
requirements under section 299F.853, paragraph (a).

new text begin (m) All cigarettes and tobacco products, including those for which the tax has been paid,
offered for sale or held as inventory by a retailer operating without a license required under
chapter 461.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective August 1, 2017.
new text end

Sec. 49.

Minnesota Statutes 2016, section 297F.21, subdivision 1, is amended to read:

Subdivision 1.

Contraband defined.

The following are declared to be contraband and
therefore subject to civil and criminal penalties under this chapter:

(a) Cigarette new text begin or tobacco products new text end packages which do not have stamps affixed to them
as provided in this chapter, including but not limited to (i) packages with illegible stamps
and packages with stamps that are not complete or whole even if the stamps are legible, and
(ii) all devices for the vending of cigarettes in which packages as defined in item (i) are
found, including all contents contained within the devices.

(b) A device for the vending of cigarettes and all packages of cigarettes, where the device
does not afford at least partial visibility of contents. Where any package exposed to view
does not carry the stamp required by this chapter, it shall be presumed that all packages
contained in the device are unstamped and contraband.

(c) A device for the vending of cigarettes to which the commissioner or authorized agents
have been denied access for the inspection of contents. In lieu of seizure, the commissioner
or an agent may seal the device to prevent its use until inspection of contents is permitted.

(d) A device for the vending of cigarettes which does not carry the name and address of
the owner, plainly marked and visible from the front of the machine.

(e) A device including, but not limited to, motor vehicles, trailers, snowmobiles, airplanes,
and boats used with the knowledge of the owner or of a person operating with the consent
of the owner for the storage or transportation of more than 5,000 cigarettes which are
contraband under this subdivision. When cigarettes are being transported in the course of
interstate commerce, or are in movement from either a public warehouse to a distributor
upon orders from a manufacturer or distributor, or from one distributor to another, the
cigarettes are not contraband, notwithstanding the provisions of deleted text begin clause deleted text end new text begin paragraph new text end (a).

(f) A device including, but not limited to, motor vehicles, trailers, snowmobiles, airplanes,
and boats used with the knowledge of the owner, or of a person operating with the consent
of the owner, for the storage or transportation of untaxed tobacco products intended for sale
in Minnesota other than those in the possession of a licensed distributor on or before the
due date for payment of the tax under section 297F.09, subdivision 2.

(g) Cigarette packages or tobacco products obtained from an unlicensed seller.

(h) Cigarette new text begin or tobacco products new text end packages offered for sale or held as inventory in
violation of section 297F.20, subdivision 7.

(i) Tobacco products on which the tax has not been paid by a licensed distributor.

(j) Any cigarette packages or tobacco products offered for sale or held as inventory for
which there is not an invoice from a licensed seller as required under section 297F.13,
subdivision 4.

(k) Cigarette packages which have been imported into the United States in violation of
United States Code, title 26, section 5754. All cigarettes held in violation of that section
shall be presumed to have entered the United States after December 31, 1999, in the absence
of proof to the contrary.

(l) Cigarettes subject to forfeiture under section 299F.854, subdivision 5, and cigarette
packaging and markings, including the cigarettes contained therein, which do not meet the
requirements under section 299F.853, paragraph (a).

new text begin EFFECTIVE DATE. new text end

new text begin The amendment to paragraph (a) is effective January 1, 2020.
The amendment to paragraph (h) is effective for packages of tobacco products offered for
sale or held as inventory after June 30, 2019.
new text end

Sec. 50.

Minnesota Statutes 2016, section 461.12, subdivision 8, is amended to read:

Subd. 8.

Notice to commissioner.

The licensing authority under this section shall, within
30 days of the issuance new text begin or renewal new text end of a license, deleted text begin inform deleted text end new text begin provide new text end the commissioner of revenue
deleted text begin of deleted text end new text begin , on a form prescribed by the commissioner and completed by the applicant, new text end the licensee's
name, address, trade name, new text begin Minnesota business identification number, the name of the
individual or individuals who will be responsible for purchasing cigarettes or tobacco
products for the licensee, new text end and the effective and expiration dates of the license. The
commissioner of revenue must also be informed of a license deleted text begin renewal, deleted text end transfer, cancellation,
suspension, or revocation during the license period.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for licenses issued, renewed, transferred,
canceled, suspended, or revoked after December 31, 2017.
new text end

Sec. 51. new text begin APPROPRIATIONS.
new text end

new text begin $398,000 in fiscal year 2018 and $371,000 in fiscal year 2019 are appropriated from the
general fund to the commissioner of revenue to carry out the provisions of this article.
$429,000 in fiscal year 2020 and $316,000 in fiscal year 2021 shall be added to the base
appropriations to the Department of Revenue.
new text end

new text begin EFFECTIVE DATE. new text end

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

Sec. 52. new text begin REPEALER.
new text end

new text begin Minnesota Statutes 2016, section 297F.185, new text end new text begin is repealed
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective August 1, 2017.
new text end

ARTICLE 4

CORPORATE TAX REFORM

Section 1.

Minnesota Statutes 2016, section 16D.08, subdivision 2, is amended to read:

Subd. 2.

Powers.

(a) In addition to the collection remedies available to private collection
agencies in this state, the commissioner, with legal assistance from the attorney general,
may utilize any statutory authority granted to a referring agency for purposes of collecting
debt owed to that referring agency. The commissioner may also use the tax collection
remedies in sections 270C.03, subdivision 1, clause deleted text begin (8) deleted text end new text begin (9) new text end , 270C.31, 270C.32, 270C.52,
subdivisions 2 and 3, 270C.63, 270C.65, and 270C.67 to 270C.72. A debtor may take
advantage of any administrative or appeal rights contained in the listed sections. For
administrative and appeal rights for nontax debts, references to administrative appeals or
to the taxpayer rights advocate shall be construed to be references to the case reviewer,
references to Tax Court shall be construed to mean district court, and offers in compromise
shall be submitted to the referring agency. A debtor who qualifies for cancellation of
collection costs under section 16D.11, subdivision 3, clause (1), can apply to the
commissioner for reduction or release of a continuous wage levy, if the debtor establishes
that the debtor needs all or a portion of the wages being levied upon to pay for essential
living expenses, such as food, clothing, shelter, medical care, or expenses necessary for
maintaining employment. The commissioner's determination not to reduce or release a
continuous wage levy is appealable to district court. The word "tax" or "taxes" when used
in the tax collection statutes listed in this subdivision also means debts referred under this
chapter.

(b) Before using the tax collection remedies listed in this subdivision, notice and demand
for payment of the amount due must be given to the person liable for the payment or
collection of the debt at least 30 days prior to the use of the remedies. The notice must be
sent to the person's last known address and must include a brief statement that sets forth in
simple and nontechnical terms the amount and source of the debt, the nature of the available
collection remedies, and remedies available to the debtor.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2016.
new text end

Sec. 2.

Minnesota Statutes 2016, section 116J.8737, subdivision 1, is amended to read:

Subdivision 1.

Definitions.

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

(b) "Qualified small business" means a business that has been certified by the
commissioner under subdivision 2.

(c) "Qualified investor" means an investor who has been certified by the commissioner
under subdivision 3.

(d) "Qualified fund" means a pooled angel investment network fund that has been certified
by the commissioner under subdivision 4.

(e) "Qualified investment" means a cash investment in a qualified small business of a
minimum of:

(1) $10,000 in a calendar year by a qualified investor; deleted text begin or
deleted text end

new text begin (2) $5,000 by a qualified investor, if the qualified investment is made pursuant to
subdivision 5, paragraph (a), clause (2); or
new text end

deleted text begin (2) deleted text end new text begin (3) new text end $30,000 in a calendar year by a qualified fund.

A qualified investment must be made in exchange for common stock, a partnership or
membership interest, preferred stock, debt with mandatory conversion to equity, or an
equivalent ownership interest as determined by the commissioner.

(f) "Family" means a family member within the meaning of the Internal Revenue Code,
section 267(c)(4).

(g) "Pass-through entity" means a corporation that for the applicable taxable year is
treated as an S corporation or a general partnership, limited partnership, limited liability
partnership, trust, or limited liability company and which for the applicable taxable year is
not taxed as a corporation under chapter 290.

(h) "Intern" means a student of an accredited institution of higher education, or a former
student who has graduated in the past six months from an accredited institution of higher
education, who is employed by a qualified small business in a nonpermanent position for
a duration of nine months or less that provides training and experience in the primary
business activity of the business.

(i) "Liquidation event" means a conversion of qualified investment for cash, cash and
other consideration, or any other form of equity or debt interest.

(j) "Qualified greater Minnesota business" means a qualified small business that is also
certified by the commissioner as a qualified greater Minnesota business under subdivision
2, paragraph (h).

(k) "Minority group member" means a United States citizen who is Asian, Pacific
Islander, Black, Hispanic, or Native American.

(l) "Minority-owned business" means a business for which one or more minority group
members:

(1) own at least 50 percent of the business, or, in the case of a publicly owned business,
own at least 51 percent of the stock; and

(2) manage the business and control the daily business operations.

(m) "Women" means persons of the female gender.

(n) "Women-owned business" means a business for which one or more women:

(1) own at least 50 percent of the business, or, in the case of a publicly owned business,
own at least 51 percent of the stock; and

(2) manage the business and control the daily business operations.

new text begin (o) "Veteran" has the meaning given in section 197.447.
new text end

new text begin (p) "Veteran-owned business" means a business for which one or more veterans:
new text end

new text begin (1) own at least 50 percent of the business, or, in the case of a publicly owned business,
own at least 51 percent of the stock; and
new text end

new text begin (2) manage the business and control the daily business operations.
new text end

new text begin (q) "Persons with disabilities" means a person with a disability as defined in section
12102 of the Americans with Disabilities Act of 1990.
new text end

new text begin (r) "Business owned by a person with disabilities" means a business for which one or
more people with disabilities:
new text end

new text begin (1) own at least 50 percent of the business, or, in the case of a publicly owned business,
own at least 51 percent of the stock; and
new text end

new text begin (2) manage the business and control the daily business operations.
new text end

deleted text begin (o) deleted text end new text begin (s) new text end "Officer" means a person elected or appointed by the board of directors to manage
the daily operations of the qualified small business deleted text begin ; deleted text end new text begin .
new text end

deleted text begin (p) deleted text end new text begin (t) new text end "Principal" means a person having authority to act on behalf of the qualified small
business.

new text begin (u) "Targeted business" means a business that qualifies under paragraph (j), (l), (n), (p),
or (r); or a business owned by persons described in paragraph (k), (m), (o), or (q), of which
one or more of those owners manage and control the daily business operations, and in which
those owners cumulatively own at least 50 percent of the business, or, in the case of a
publicly owned business, own at least 51 percent of the stock.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2016.
new text end

Sec. 3.

Minnesota Statutes 2016, section 116J.8737, subdivision 5, is amended to read:

Subd. 5.

Credit allowed.

(a)(1) A qualified investor or qualified fund is eligible for a
credit equal to 25 percent of the qualified investment in a qualified small business.
Investments made by a pass-through entity qualify for a credit only if the entity is a qualified
fund. The commissioner must not allocate more than $15,000,000 in credits to qualified
investors or qualified funds for taxable years beginning after December 31, 2013, and before
January 1, deleted text begin 2017 deleted text end new text begin 2018 new text end , and must not allocate more than $10,000,000 in credits to qualified
investors or qualified funds for taxable years beginning after December 31, 2016, and before
January 1, deleted text begin 2018 deleted text end new text begin 2019 new text end ; and

(2) for taxable years beginning after December 31, 2014, and before January 1, deleted text begin 2018 deleted text end new text begin
2019 new text end , 50 percent must be allocated to credits for qualifying investments in qualified deleted text begin greater
Minnesota businesses and minority- or women-owned qualified small businesses deleted text end new text begin targeted
businesses new text end in Minnesota. Any portion of a taxable year's credits that is reserved for qualifying
investments in deleted text begin greater Minnesota businesses and minority- or women-owned qualified small deleted text end new text begin
targeted new text end businesses in Minnesota that is not allocated by September 30 of the taxable year
is available for allocation to other credit applications beginning on October 1. Any portion
of a taxable year's credits that is not allocated by the commissioner does not cancel and may
be carried forward to subsequent taxable years until all credits have been allocated.

(b) The commissioner may not allocate more than a total maximum amount in credits
for a taxable year to a qualified investor for the investor's cumulative qualified investments
as an individual qualified investor and as an investor in a qualified fund; for married couples
filing joint returns the maximum is $250,000, and for all other filers the maximum is
$125,000. The commissioner may not allocate more than a total of $1,000,000 in credits
over all taxable years for qualified investments in any one qualified small business.

(c) The commissioner may not allocate a credit to a qualified investor either as an
individual qualified investor or as an investor in a qualified fund if, at the time the investment
is proposed:

(1) the investor is an officer or principal of the qualified small business; or

(2) the investor, either individually or in combination with one or more members of the
investor's family, owns, controls, or holds the power to vote 20 percent or more of the
outstanding securities of the qualified small business.

A member of the family of an individual disqualified by this paragraph is not eligible for a
credit under this section. For a married couple filing a joint return, the limitations in this
paragraph apply collectively to the investor and spouse. For purposes of determining the
ownership interest of an investor under this paragraph, the rules under section 267(c) and
267(e) of the Internal Revenue Code apply.

(d) Applications for tax credits for 2010 must be made available on the department's
Web site by September 1, 2010, and the department must begin accepting applications by
September 1, 2010. Applications for subsequent years must be made available by November
1 of the preceding year.

(e) Qualified investors and qualified funds must apply to the commissioner for tax credits.
Tax credits must be allocated to qualified investors or qualified funds in the order that the
tax credit request applications are filed with the department. The commissioner must approve
or reject tax credit request applications within 15 days of receiving the application. The
investment specified in the application must be made within 60 days of the allocation of
the credits. If the investment is not made within 60 days, the credit allocation is canceled
and available for reallocation. A qualified investor or qualified fund that fails to invest as
specified in the application, within 60 days of allocation of the credits, must notify the
commissioner of the failure to invest within five business days of the expiration of the
60-day investment period.

(f) All tax credit request applications filed with the department on the same day must
be treated as having been filed contemporaneously. If two or more qualified investors or
qualified funds file tax credit request applications on the same day, and the aggregate amount
of credit allocation claims exceeds the aggregate limit of credits under this section or the
lesser amount of credits that remain unallocated on that day, then the credits must be allocated
among the qualified investors or qualified funds who filed on that day on a pro rata basis
with respect to the amounts claimed. The pro rata allocation for any one qualified investor
or qualified fund is the product obtained by multiplying a fraction, the numerator of which
is the amount of the credit allocation claim filed on behalf of a qualified investor and the
denominator of which is the total of all credit allocation claims filed on behalf of all
applicants on that day, by the amount of credits that remain unallocated on that day for the
taxable year.

(g) A qualified investor or qualified fund, or a qualified small business acting on their
behalf, must notify the commissioner when an investment for which credits were allocated
has been made, and the taxable year in which the investment was made. A qualified fund
must also provide the commissioner with a statement indicating the amount invested by
each investor in the qualified fund based on each investor's share of the assets of the qualified
fund at the time of the qualified investment. After receiving notification that the investment
was made, the commissioner must issue credit certificates for the taxable year in which the
investment was made to the qualified investor or, for an investment made by a qualified
fund, to each qualified investor who is an investor in the fund. The certificate must state
that the credit is subject to revocation if the qualified investor or qualified fund does not
hold the investment in the qualified small business for at least three years, consisting of the
calendar year in which the investment was made and the two following years. The three-year
holding period does not apply if:

(1) the investment by the qualified investor or qualified fund becomes worthless before
the end of the three-year period;

(2) 80 percent or more of the assets of the qualified small business is sold before the end
of the three-year period;

(3) the qualified small business is sold before the end of the three-year period;

(4) the qualified small business's common stock begins trading on a public exchange
before the end of the three-year period; or

(5) the qualified investor dies before the end of the three-year period.

(h) The commissioner must notify the commissioner of revenue of credit certificates
issued under this section.

new text begin (i) For purposes of paragraph (a), clause (2), a member of the family of an individual
disqualified by this paragraph shall be limited to spouses, parents, and lineal descendants.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2016.
new text end

Sec. 4.

Minnesota Statutes 2016, section 116J.8737, subdivision 5a, is amended to read:

Subd. 5a.

Promotion of credit in greater Minnesota.

(a) By July 1, 2014, the
commissioner shall develop a plan to increase awareness of and use of the credit for
investments in qualified greater Minnesota businesses and deleted text begin minority-owned and
women-owned qualified small deleted text end new text begin other targeted new text end businesses with the goal that the portion of
the credit reserved for investments in qualified deleted text begin greater Minnesota businesses and
minority-owned and women-owned qualified small deleted text end new text begin targeted new text end businesses is allocated in full
to those investments.

(b) Beginning with the legislative report due on March 15, 2015, under subdivision 9,
the commissioner shall report on its plan under this subdivision and the results achieved.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2016.
new text end

Sec. 5.

Minnesota Statutes 2016, section 116J.8737, subdivision 12, is amended to read:

Subd. 12.

Sunset.

This section expires for taxable years beginning after December 31,
deleted text begin 2017 deleted text end new text begin 2018 new text end , except that reporting requirements under subdivision 6 and revocation of credits
under subdivision 7 remain in effect through deleted text begin 2019 deleted text end new text begin 2020 new text end for qualified investors and qualified
funds, and through deleted text begin 2021 deleted text end new text begin 2022 new text end for qualified small businesses, reporting requirements under
subdivision 9 remain in effect through deleted text begin 2022 deleted text end new text begin 2023 new text end , and the appropriation in subdivision 11
remains in effect through deleted text begin 2021 deleted text end new text begin 2022 new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2016.
new text end

Sec. 6.

Minnesota Statutes 2016, section 270C.03, subdivision 1, is amended to read:

Subdivision 1.

Powers and duties.

The commissioner shall have and exercise the
following powers and duties:

(1) administer and enforce the assessment and collection of taxes;

(2) make determinations, corrections, and assessments with respect to taxes, including
interest, additions to taxes, and assessable penalties;

new text begin (3) disallow the tax effects of a transaction that does not have economic substance;
new text end

deleted text begin (3) deleted text end new text begin (4) new text end use statistical or other sampling techniques consistent with generally accepted
auditing standards in examining returns or records and making assessments;

deleted text begin (4) deleted text end new text begin (5) new text end investigate the tax laws of other states and countries, and formulate and submit
to the legislature such legislation as the commissioner may deem expedient to prevent
evasions of state revenue laws and to secure just and equal taxation and improvement in
the system of state revenue laws;

deleted text begin (5) deleted text end new text begin (6) new text end consult and confer with the governor upon the subject of taxation, the
administration of the laws in regard thereto, and the progress of the work of the department,
and furnish the governor, from time to time, such assistance and information as the governor
may require relating to tax matters;

deleted text begin (6) deleted text end new text begin (7) new text end execute and administer any agreement with the secretary of the treasury or the
Bureau of Alcohol, Tobacco, Firearms and Explosives in the Department of Justice of the
United States or a representative of another state regarding the exchange of information and
administration of the state revenue laws;

deleted text begin (7) deleted text end new text begin (8) new text end require town, city, county, and other public officers to report information as to
the collection of taxes received from licenses and other sources, and such other information
as may be needful in the work of the commissioner, in such form as the commissioner may
prescribe;

deleted text begin (8) deleted text end new text begin (9) new text end authorize the use of unmarked motor vehicles to conduct seizures or criminal
investigations pursuant to the commissioner's authority;

deleted text begin (9) deleted text end new text begin (10) new text end authorize the participation in audits performed by the Multistate Tax Commission.
For the purposes of chapter 270B, the Multistate Tax Commission will be considered to be
a state for the purposes of auditing corporate sales, excise, and income tax returns;

deleted text begin (10) deleted text end new text begin (11) new text end maintain toll-free telephone access for taxpayer assistance for calls from
locations within the state; and

deleted text begin (11) deleted text end new text begin (12) new text end exercise other powers and authority and perform other duties required of or
imposed upon the commissioner by law.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2016.
new text end

Sec. 7.

Minnesota Statutes 2016, section 270C.33, subdivision 6, is amended to read:

Subd. 6.

Assessment presumed valid.

new text begin (a) new text end A return or assessment of tax made by the
commissioner is prima facie correct and valid. The taxpayer has the burden of establishing
its incorrectness or invalidity in any related action or proceeding.

new text begin (b) To overcome the presumption that an order of the commissioner that disallows the
tax effects of a transaction because the commissioner determined the transaction does not
have economic substance pursuant to section 270C.03, subdivision l, clause (3), is prima
facie correct and valid, the taxpayer must prove with clear and convincing evidence that
the transaction has economic substance.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2016.
new text end

Sec. 8.

new text begin [270C.331] PREVENTING TAX EVASION.
new text end

new text begin Subdivision 1. new text end

new text begin Economic substance. new text end

new text begin (a) For purposes of disallowing the tax effects of
a transaction that does not have economic substance pursuant to section 270C.03, subdivision
l, clause (3), a transaction shall be treated as having economic substance only if:
new text end

new text begin (1) the transaction changes in a meaningful way, apart from tax effects, the taxpayer's
economic position; and
new text end

new text begin (2) the taxpayer has a substantial purpose, apart from tax effects, for entering into the
transaction.
new text end

new text begin (b) In determining whether the requirements of paragraph (a), clauses (1) and (2), are
met, the potential for profit of a transaction shall be taken into account only if the present
value of the reasonable expected pretax profit from the transaction is substantial in relation
to the present value of the expected net tax benefits that would be allowed if the transaction
was respected. Fees and other transaction expenses shall be taken into account as expenses
in determining pretax profit.
new text end

new text begin (c) For purposes of paragraph (a), clause (2), achieving a financial accounting benefit
shall not be taken into account as a purpose for entering into a transaction if the origin of
such financial accounting benefit is a reduction of federal, state, or local tax.
new text end

new text begin Subd. 2. new text end

new text begin Apart from tax effects. new text end

new text begin For purposes of this section, "apart from tax effects"
means apart from the state and local tax effects arising from the application of the laws of
any state or local unit of government to the form of the transaction, the federal tax effects
resulting from the transaction, or both.
new text end

new text begin Subd. 3. new text end

new text begin Transaction. new text end

new text begin For purposes of this section and section 270C.03, subdivision l,
clause (3), "transaction" includes a series of transactions.
new text end

new text begin Subd. 4. new text end

new text begin Personal transactions of individuals. new text end

new text begin In the case of an individual, subdivision
1 applies only to transactions entered into in connection with a trade or business or an
activity engaged in for the production of income.
new text end

new text begin Subd. 5. new text end

new text begin Commissioner to issue guidance. new text end

new text begin (a) The commissioner shall promulgate
guidance on how the provisions of this section will be applied. The guidance must include,
at a minimum, examples of transactions that will not be challenged as not having economic
substance and examples of transactions that may be challenged as not having economic
substance.
new text end

new text begin (b) The commissioner shall establish and publish a formal departmental procedure for
uniform application of this section, except the publishing of such procedure is subject to
limitations of protected nonpublic data in section 270B.02.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2016.
new text end

Sec. 9.

Minnesota Statutes 2016, section 289A.19, subdivision 7, is amended to read:

Subd. 7.

Federal extensions.

When an extension of time to file a partnership new text begin , fiduciary
income tax, new text end or S corporation tax return is granted by the Internal Revenue Service, the
commissioner shall grant an automatic extension to file the comparable Minnesota return
for that period. An extension granted under this subdivision does not affect the due date for
making payments of tax.

new text begin EFFECTIVE DATE. new text end

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

Sec. 10.

Minnesota Statutes 2016, section 289A.60, is amended by adding a subdivision
to read:

new text begin Subd. 27a. new text end

new text begin Noneconomic substance transaction understatement penalty. new text end

new text begin (a) If the
tax effects of a transaction are disallowed pursuant to section 270C.03, subdivision 1, clause
(3), a penalty equal to 20 percent of the amount of the disclosed noneconomic substance
transaction understatement must be added to the tax. This subdivision applies to any income
or item that is attributable to any transaction disallowed pursuant to section 270C.03,
subdivision 1, clause (3).
new text end

new text begin (b) If the tax effects of a transaction are disallowed pursuant to section 270C.03,
subdivision l, clause (3), a penalty equal to 40 percent of the amount of the nondisclosed
noneconomic substance transaction understatement must be added to the tax. This subdivision
applies to any income or item that is attributable to any transaction disallowed pursuant to
section 270C.03, subdivision 1, clause (3).
new text end

new text begin (c) For purposes of this subdivision, "disclosed noneconomic substance transaction"
means a transaction that fails to meet the criteria for having economic substance as described
in section 270C.03, subdivision 1, clause (3), with respect to which the relevant facts affecting
the tax treatment are adequately disclosed in the return or in a statement attached to the
return.
new text end

new text begin (d) For purposes of this subdivision, "nondisclosed noneconomic substance transaction"
means a transaction that fails to meet the criteria for having economic substance as described
in section 270C.03, subdivision 1, clause (3), with respect to which the relevant facts affecting
the tax treatment are not adequately disclosed in the return nor in a statement attached to
the return.
new text end

new text begin (e) In no event shall any amendment or supplement to a tax return be taken into account
for purposes of this subdivision to reduce the noneconomic substance transaction
understatement if the amendment or supplement is filed after the date the taxpayer is first
contacted by the commissioner regarding examination of the return.
new text end

new text begin (f) For purposes of this subdivision, "understatement" means the product of:
new text end

new text begin (1) the amount of the increase, if any, in taxable income that results from a difference
between the proper tax treatment of an item to which section 270C.03, subdivision 1, clause
(3), applies and the taxpayer's treatment of that item as shown on the taxpayer's tax return.
For purposes of this clause, any reduction of the excess of deductions allowed for the taxable
year over gross income for that year, and any reduction in the amount of capital losses that
would, without regard to section 1211 of the Internal Revenue Code, be allowed for that
year, must be treated as an increase in taxable income; and
new text end

new text begin (2) the highest rate of tax imposable on the taxpayer under section 290.06 determined
without regard to the understatement.
new text end

new text begin (g) If the noneconomic substance transaction understatement penalty is imposed under
this subdivision, the noneconomic substance transaction understatement penalty applies in
lieu of the penalties imposed under subdivision 27.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2016.
new text end

Sec. 11.

Minnesota Statutes 2016, section 290.01, subdivision 4a, is amended to read:

Subd. 4a.

Financial institution.

(a) "Financial institution" means:

(1) deleted text begin a holding company deleted text end new text begin any corporation or other business entity registered (i) under state
law as a bank holding company; (ii) under the federal Bank Holding Company Act of 1956,
as amended; or (iii) as a savings and loan holding company under the federal National
Housing Act, as amended new text end ;

(2) deleted text begin any regulated financial corporation; or deleted text end new text begin a national bank organized and existing as a
national bank association pursuant to the provisions of United States Code, title 12, chapter
2;
new text end

(3) deleted text begin any other corporation organized under the laws of the United States or organized
under the laws of this state or any other state or country that is carrying on the business of
a financial institution. deleted text end new text begin a savings association or federal savings bank as defined in United
States Code, title 12, section 1813(b)(1);
new text end

new text begin (4) any bank or thrift institution incorporated or organized under the laws of any state;
new text end

new text begin (5) any corporation organized under United States Code, title 12, sections 611 to 631;
new text end

new text begin (6) any agency or branch of a foreign depository as defined under United States Code,
title 12, section 3101;
new text end

new text begin (7) any corporation or other business entity that is more than 50 percent owned, directly
or indirectly, by any person or business entity described in clauses (1) to (6), other than an
insurance company taxable under chapter 297I;
new text end

new text begin (8) a corporation or other business entity that derives more than 50 percent of its total
gross income for financial accounting purposes from finance leases. For the purposes of
this clause, "gross income" means the average from the current tax year and immediately
preceding two years and excludes gross income from incidental or occasional transactions.
For purposes of this clause, "finance lease" means any lease transaction that is the functional
equivalent of an extension of credit and that transfers substantially all the benefits and risks
incident to the ownership of property, including any direct financing lease or leverage lease
that meets the criteria of Financial Accounting Standards Board Statement No. 13, accounting
for leases, or any other lease that is accounted for as financing by a lessor under generally
accepted accounting principles; or
new text end

new text begin (9) any other person or business entity, other than an insurance company taxable under
chapter 297I, that derives more than 50 percent of its gross income from activities that an
entity described in clauses (2) to (6) or (8) is authorized to transact. For the purposes of this
clause, gross income does not include income from nonrecurring, extraordinary items.
new text end

(b) deleted text begin "Holding company" means any corporation registered under the Federal Bank Holding
Company Act of 1956, as amended, or registered as a savings and loan holding company
under the Federal National Housing Act, as amended, or a federal savings bank holding
company. deleted text end new text begin The commissioner is authorized to exclude any person from the application of
paragraph (a), clause (9), if the person proves by clear and convincing evidence that the
person's income-producing activity is not in substantial competition with any person described
in paragraph (a), clauses (2) to (6) or (8).
new text end

deleted text begin (c) "Regulated financial corporation" means an institution, the deposits or accounts of
which are insured under the Federal Deposit Insurance Act or by the Federal Savings and
Loan Insurance Corporation, any institution which is a member of a Federal Home Loan
Bank, any other bank or thrift institution incorporated or organized under the laws of any
state or any foreign country which is engaged in the business of receiving deposits, any
corporation organized under the provisions of United States Code, title 12, sections 611 to
631 (Edge Act Corporations), and any agency of a foreign depository as defined in United
States Code, title 12, section 3101.
deleted text end

deleted text begin (d) "Business of a financial institution" means:
deleted text end

deleted text begin (1) the business that any corporation organized under the authority of the United States
or organized under the laws of this state or any other state or country does or has authority
to do which is substantially similar to the business which a corporation may be created to
do under chapters 46 to 55 or any business which a corporation is authorized to do by those
laws; or
deleted text end

deleted text begin (2) the business that any corporation organized under the authority of the United States
or organized under the laws of this state or any other state or country does or has authority
to do if the corporation derives more than 50 percent of its gross income from lending
activities (including discounting obligations) in substantial competition with the businesses
described in clause (1). For purposes of this clause, the computation of the gross income of
a corporation does not include income from nonrecurring, extraordinary items.
deleted text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2016.
new text end

Sec. 12.

new text begin [290.0137] ACCELERATED RECOGNITION OF CERTAIN
INSTALLMENT SALE GAINS.
new text end

new text begin (a) In the case of a nonresident individual or a person who becomes a nonresident
individual during the tax year, taxable net income shall include the allocable amount realized
upon a sale of the assets of, or any interest in, an S corporation or partnership that operated
in Minnesota during the year of sale, including any income or gain to be recognized in future
years pursuant to an installment sale method of reporting under the Internal Revenue Code.
new text end

new text begin (1) For the purposes of this paragraph, an individual who becomes a nonresident of
Minnesota in any year after an installment sale is required to recognize the full amount of
any income or gain described in this paragraph on the individual's final Minnesota resident
tax return to the extent that such income has not been recognized in a prior year.
new text end

new text begin (2) For the purposes of this section, "realized" has the meaning given in section 1001(b)
of the Internal Revenue Code.
new text end

new text begin (3) For the purposes of this section, "installment sale" means any installment sale under
section 453 of the Internal Revenue Code and any other sale that is reported utilizing a
method of accounting authorized under subchapter E of the Internal Revenue Code that
allows taxpayers to delay reporting or recognizing a realized gain until a future year.
new text end

new text begin (4) For the purposes of this section, "allocable amount" means the full amount to be
apportioned to Minnesota under section 290.191 or 290.20, or the full amount to be assigned
to Minnesota under section 290.17.
new text end

new text begin (b) Notwithstanding paragraph (a), nonresident taxpayers may elect to defer recognizing
unrecognized installment sale gains by making an election under this paragraph. The election
must be filed on a form to be determined or prescribed by the commissioner and must be
filed by the due date of the individual income tax return, including any extension. Electing
taxpayers must make an irrevocable agreement to:
new text end

new text begin (1) file Minnesota tax returns in all subsequent years when gains from the installment
sales are recognized and reported to the Internal Revenue Service;
new text end

new text begin (2) allocate gains to the state of Minnesota as though the gains were occurred in the year
of sale under section 290.17, 290.191, or 290.20; and
new text end

new text begin (3) include all relevant federal tax documents reporting the installment sale with
subsequent Minnesota tax returns.
new text end

new text begin (c) Income or gain recognized for Minnesota purposes pursuant to paragraph (a) must
be excluded from taxable net income in any future year that the taxpayer files a Minnesota
tax return to the extent that the income or gain has already been subject to tax pursuant to
paragraph (a).
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2016.
new text end

Sec. 13.

Minnesota Statutes 2016, section 290.05, subdivision 1, is amended to read:

Subdivision 1.

Exempt entities.

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

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

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

(c) any insurance company new text begin , as defined in section 290.17, subdivision 4, paragraph (a),
clause (1), but including any insurance company licensed and domiciled in another state
that grants, on a reciprocal basis, exemption from retaliatory taxes new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2016.
new text end

Sec. 14.

Minnesota Statutes 2016, section 290.068, subdivision 2, is amended to read:

Subd. 2.

Definitions.

For purposes of this section, the following terms have the meanings
given.

(a) "Qualified research expenses" means (i) qualified research expenses and basic research
payments as defined in section 41(b) and (e) of the Internal Revenue Code, except it does
not include expenses incurred for qualified research or basic research conducted outside
the state of Minnesota pursuant to section 41(d) and (e) of the Internal Revenue Code; and
(ii) contributions to a nonprofit corporation established and operated pursuant to the
provisions of chapter 317A for the purpose of promoting the establishment and expansion
of business in this state, provided the contributions are invested by the nonprofit corporation
for the purpose of providing funds for small, technologically innovative enterprises in
Minnesota during the early stages of their development.

(b) "Qualified research" means qualified research as defined in section 41(d) of the
Internal Revenue Code, except that the term does not include qualified research conducted
outside the state of Minnesota.

(c) "Base amount" means base amount as defined in section 41(c) of the Internal Revenue
Code, except that the average annual gross receipts must be calculated using Minnesota
sales or receipts under section 290.191 and the definitions contained in deleted text begin clauses deleted text end new text begin paragraphs new text end
(a) and (b) shall apply. new text begin If there are inadequate records or the records are unavailable to
compute or verify the base percentage, a fixed base percentage of 16 percent must be used.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2016.
new text end

Sec. 15.

Minnesota Statutes 2016, section 290.17, subdivision 4, is amended to read:

Subd. 4.

Unitary business principle.

(a) If a trade or business conducted wholly within
this state or partly within and partly without this state is part of a unitary business, the entire
income of the unitary business is subject to apportionment pursuant to section 290.191.
Notwithstanding subdivision 2, paragraph (c), none of the income of a unitary business is
considered to be derived from any particular source and none may be allocated to a particular
place except as provided by the applicable apportionment formula. The provisions of this
subdivision do not apply to business income subject to subdivision 5, income of an insurance
company, or income of an investment company determined under section 290.36.

(b) The term "unitary business" means business activities or operations which result in
a flow of value between them. The term may be applied within a single legal entity or
between multiple entities and without regard to whether each entity is a sole proprietorship,
a corporation, a partnership or a trust.

(c) Unity is presumed whenever there is unity of ownership, operation, and use, evidenced
by centralized management or executive force, centralized purchasing, advertising,
accounting, or other controlled interaction, but the absence of these centralized activities
will not necessarily evidence a nonunitary business. Unity is also presumed when business
activities or operations are of mutual benefit, dependent upon or contributory to one another,
either individually or as a group.

(d) Where a business operation conducted in Minnesota is owned by a business entity
that carries on business activity outside the state different in kind from that conducted within
this state, and the other business is conducted entirely outside the state, it is presumed that
the two business operations are unitary in nature, interrelated, connected, and interdependent
unless it can be shown to the contrary.

(e) Unity of ownership does not exist when two or more corporations are involved unless
more than 50 percent of the voting stock of each corporation is directly or indirectly owned
by a common owner or by common owners, either corporate or noncorporate, or by one or
more of the member corporations of the group. For this purpose, the term "voting stock"
shall include membership interests of mutual insurance holding companies formed under
section 66A.40.

(f) The net income and apportionment factors under section 290.191 or 290.20 of foreign
corporations and other foreign entities which are part of a unitary business shall not be
included in the net income or the apportionment factors of the unitary business; except that
the income and apportionment factors of a foreign entity, other than an entity treated as a
C corporation for federal income tax purposes, that are included in the federal taxable
income, as defined in section 63 of the Internal Revenue Code as amended through the date
named in section 290.01, subdivision 19, of a domestic corporation, domestic entity, or
individual must be included in determining net income and the factors to be used in the
apportionment of net income pursuant to section 290.191 or 290.20. A foreign corporation
or other foreign entity which is not included on a combined report and which is required to
file a return under this chapter shall file on a separate return basis.

(g) For purposes of determining the net income of a unitary business and the factors to
be used in the apportionment of net income pursuant to section 290.191 or 290.20, there
must be included only the income and apportionment factors of domestic corporations or
other domestic entities that are determined to be part of the unitary business pursuant to this
subdivision, notwithstanding that foreign corporations or other foreign entities might be
included in the unitary business; except that the income and apportionment factors of a
foreign entity, other than an entity treated as a C corporation for federal income tax purposes,
that is included in the federal taxable income, as defined in section 63 of the Internal Revenue
Code as amended through the date named in section 290.01, subdivision 19, of a domestic
corporation, domestic entity, or individual must be included in determining net income and
the factors to be used in the apportionment of net income pursuant to section 290.191 or
290.20.

(h) Each corporation or other entity, except a sole proprietorship, that is part of a unitary
business must file combined reports as the commissioner determines. On the reports, all
intercompany transactions between entities included pursuant to paragraph (g) must be
eliminated and the entire net income of the unitary business determined in accordance with
this subdivision is apportioned among the entities by using each entity's Minnesota factors
for apportionment purposes in the numerators of the apportionment formula and the total
factors for apportionment purposes of all entities included pursuant to paragraph (g) in the
denominators of the apportionment formula. Except as otherwise provided by paragraph
(f), all sales of the unitary business made within this state pursuant to section 290.191 or
290.20 must be included on the combined report of a corporation or other entity that is a
member of the unitary business and is subject to the jurisdiction of this state to impose tax
under this chapter.

(i) If a corporation has been divested from a unitary business and is included in a
combined report for a fractional part of the common accounting period of the combined
report:

(1) its income includable in the combined report is its income incurred for that part of
the year determined by proration or separate accounting; and

(2) its sales, property, and payroll included in the apportionment formula must be prorated
or accounted for separately.

new text begin (j) For purposes of this subdivision, "insurance company" means a company that is:
new text end

new text begin (1) licensed to engage in the business of insurance in Minnesota pursuant to chapter
60A; or
new text end

new text begin (2) domiciled and licensed to engage in the business of insurance in another state or
country that imposes retaliatory taxes, fines, deposits, penalties, licenses, or fees and that
does not grant, on a reciprocal basis, exemption from such retaliatory taxes to insurance
companies or their agents domiciled in Minnesota.
new text end

new text begin (k) For purposes of this subdivision, "retaliatory taxes" means taxes imposed on insurance
companies organized in another state or country that result from the fact that an insurance
company organized in the taxing jurisdiction and doing business in the other jurisdiction is
subject to taxes, fines, deposits, penalties, licenses, or fees in an amount exceeding that
imposed by the taxing jurisdiction upon an insurance company organized in the other state
or country and doing business to the same extent in the taxing jurisdiction.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2016.
new text end

Sec. 16.

Minnesota Statutes 2016, section 290.191, subdivision 5, is amended to read:

Subd. 5.

Determination of sales factor.

For purposes of this section, the following rules
apply in determining the sales factor.

(a) The sales factor includes all sales, gross earnings, or receipts received in the ordinary
course of the business, except that the following types of income are not included in the
sales factor:

(1) interest;

(2) dividends;

(3) sales of capital assets as defined in section 1221 of the Internal Revenue Code;

(4) sales of property used in the trade or business, except sales of leased property of a
type which is regularly sold as well as leased; and

(5) sales of debt instruments as defined in section 1275(a)(1) of the Internal Revenue
Code or sales of stock.

(b) Sales of tangible personal property are made within this state if the property is
received by a purchaser at a point within this state, regardless of the f.o.b. point, other
conditions of the sale, or the ultimate destination of the property.

(c) Tangible personal property delivered to a common or contract carrier or foreign
vessel for delivery to a purchaser in another state or nation is a sale in that state or nation,
regardless of f.o.b. point or other conditions of the sale.

(d) Notwithstanding paragraphs (b) and (c), when intoxicating liquor, wine, fermented
malt beverages, cigarettes, or tobacco products are sold to a purchaser who is licensed by
a state or political subdivision to resell this property only within the state of ultimate
destination, the sale is made in that state.

(e) Sales made by or through a corporation that is qualified as a domestic international
sales corporation under section 992 of the Internal Revenue Code are not considered to have
been made within this state.

(f) Sales, rents, royalties, and other income in connection with real property is attributed
to the state in which the property is located.

(g) Receipts from the lease or rental of tangible personal property, including finance
leases and true leases, must be attributed to this state if the property is located in this state
and to other states if the property is not located in this state. Receipts from the lease or rental
of moving property including, but not limited to, motor vehicles, rolling stock, aircraft,
vessels, or mobile equipment are included in the numerator of the receipts factor to the
extent that the property is used in this state. The extent of the use of moving property is
determined as follows:

(1) A motor vehicle is used wholly in the state in which it is registered.

(2) The extent that rolling stock is used in this state is determined by multiplying the
receipts from the lease or rental of the rolling stock by a fraction, the numerator of which
is the miles traveled within this state by the leased or rented rolling stock and the denominator
of which is the total miles traveled by the leased or rented rolling stock.

(3) The extent that an aircraft is used in this state is determined by multiplying the
receipts from the lease or rental of the aircraft by a fraction, the numerator of which is the
number of landings of the aircraft in this state and the denominator of which is the total
number of landings of the aircraft.

(4) The extent that a vessel, mobile equipment, or other mobile property is used in the
state is determined by multiplying the receipts from the lease or rental of the property by a
fraction, the numerator of which is the number of days during the taxable year the property
was in this state and the denominator of which is the total days in the taxable year.

(h) Royalties and other income received for the use of or for the privilege of using
intangible property, including patents, know-how, formulas, designs, processes, patterns,
copyrights, trade names, service names, franchises, licenses, contracts, customer lists, or
similar items, must be attributed to the state in which the property is used by the purchaser.
If the property is used in more than one state, the royalties or other income must be
apportioned to this state pro rata according to the portion of use in this state. If the portion
of use in this state cannot be determined, the royalties or other income must be excluded
from both the numerator and the denominator. Intangible property is used in this state if the
purchaser uses the intangible property or the rights therein in the regular course of its business
operations in this state, regardless of the location of the purchaser's customers.

(i) Sales of intangible property are made within the state in which the property is used
by the purchaser. If the property is used in more than one state, the sales must be apportioned
to this state pro rata according to the portion of use in this state. If the portion of use in this
state cannot be determined, the sale must be excluded from both the numerator and the
denominator of the sales factor. Intangible property is used in this state if the purchaser used
the intangible property in the regular course of its business operations in this state.

(j) Receipts from the performance of services must be attributed to the state where the
services are received. For the purposes of this section, receipts from the performance of
services provided to a corporation, partnership, or trust may only be attributed to a state
where it has a fixed place of doing business. If the state where the services are received is
not readily determinable or is a state where the corporation, partnership, or trust receiving
the service does not have a fixed place of doing business, the services shall be deemed to
be received at the location of the office of the customer from which the services were ordered
in the regular course of the customer's trade or business. If the ordering office cannot be
determined, the services shall be deemed to be received at the office of the customer to
which the services are billed.

(k) For the purposes of this subdivision and subdivision 6, paragraph (l), receipts from
management, distribution, or administrative services performed by a corporation new text begin , a
partnership, a limited liability company, new text end or trust for a fund of a corporation new text begin , a partnership,
a limited liability company, new text end or trust regulated under United States Code, title 15, sections
80a-1 through 80a-64, must be attributed to the state where the shareholder of the fund
resides. Under this paragraph, receipts for services attributed to shareholders are determined
on the basis of the ratio of: (1) the average of the outstanding shares in the fund owned by
shareholders residing within Minnesota at the beginning and end of each year; and (2) the
average of the total number of outstanding shares in the fund at the beginning and end of
each year. Residence of the shareholder, in the case of an individual, is determined by the
mailing address furnished by the shareholder to the fund. Residence of the shareholder,
when the shares are held by an insurance company as a depositor for the insurance company
policyholders, is the mailing address of the policyholders. In the case of an insurance
company holding the shares as a depositor for the insurance company policyholders, if the
mailing address of the policyholders cannot be determined by the taxpayer, the receipts
must be excluded from both the numerator and denominator. Residence of other shareholders
is the mailing address of the shareholder.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2016.
new text end

Sec. 17.

Minnesota Statutes 2016, section 290.21, subdivision 4, is amended to read:

Subd. 4.

Dividends received from another corporation.

(a)(1) Eighty percent of
dividends received by a corporation during the taxable year from another corporation, in
which the recipient owns 20 percent or more of the stock, by vote and value, not including
stock described in section 1504(a)(4) of the Internal Revenue Code when the corporate
stock with respect to which dividends are paid does not constitute the stock in trade of the
taxpayer or would not be included in the inventory of the taxpayer, or does not constitute
property held by the taxpayer primarily for sale to customers in the ordinary course of the
taxpayer's trade or business, or when the trade or business of the taxpayer does not consist
principally of the holding of the stocks and the collection of the income and gains therefrom;
and

(2)(i) the remaining 20 percent of dividends if the dividends received are the stock in
an affiliated company transferred in an overall plan of reorganization and the dividend is
eliminated in consolidation under Treasury Department Regulation 1.1502-14(a), as amended
through December 31, 1989;

(ii) the remaining 20 percent of dividends if the dividends are received from a corporation
which is subject to tax under section 290.36 and which is a member of an affiliated group
of corporations as defined by the Internal Revenue Code and the dividend is eliminated in
consolidation under Treasury Department Regulation 1.1502-14(a), as amended through
December 31, 1989, or is deducted under an election under section 243(b) of the Internal
Revenue Code; or

(iii) the remaining 20 percent of the dividends if the dividends are received from a
property and casualty insurer as defined under section 60A.60, subdivision 8, which is a
member of an affiliated group of corporations as defined by the Internal Revenue Code and
either: (A) the dividend is eliminated in consolidation under Treasury Regulation
1.1502-14(a), as amended through December 31, 1989; or (B) the dividend is deducted
under an election under section 243(b) of the Internal Revenue Code.

(b) Seventy percent of dividends received by a corporation during the taxable year from
another corporation in which the recipient owns less than 20 percent of the stock, by vote
or value, not including stock described in section 1504(a)(4) of the Internal Revenue Code
when the corporate stock with respect to which dividends are paid does not constitute the
stock in trade of the taxpayer, or does not constitute property held by the taxpayer primarily
for sale to customers in the ordinary course of the taxpayer's trade or business, or when the
trade or business of the taxpayer does not consist principally of the holding of the stocks
and the collection of income and gain therefrom.

(c) The dividend deduction provided in this subdivision shall be allowed only with
respect to dividends that are included in a corporation's Minnesota taxable net income for
the taxable year.

The dividend deduction provided in this subdivision does not apply to a dividend from
a corporation which, for the taxable year of the corporation in which the distribution is made
or for the next preceding taxable year of the corporation, is a corporation exempt from tax
under section 501 of the Internal Revenue Code.

The dividend deduction provided in this subdivision does not apply to a dividend received
from a real estate investment trust as defined in section 856 of the Internal Revenue Code.

The dividend deduction provided in this subdivision applies to the amount of regulated
investment company dividends only to the extent determined under section 854(b) of the
Internal Revenue Code.

The dividend deduction provided in this subdivision shall not be allowed with respect
to any dividend for which a deduction is not allowed under the provisions of section 246(c) new text begin
or 246A new text end of the Internal Revenue Code.

(d) If dividends received by a corporation that does not have nexus with Minnesota under
the provisions of Public Law 86-272 are included as income on the return of an affiliated
corporation permitted or required to file a combined report under section 290.17, subdivision
4, or 290.34, subdivision 2, then for purposes of this subdivision the determination as to
whether the trade or business of the corporation consists principally of the holding of stocks
and the collection of income and gains therefrom shall be made with reference to the trade
or business of the affiliated corporation having a nexus with Minnesota.

(e) The deduction provided by this subdivision does not apply if the dividends are paid
by a FSC as defined in section 922 of the Internal Revenue Code.

(f) If one or more of the members of the unitary group whose income is included on the
combined report received a dividend, the deduction under this subdivision for each member
of the unitary business required to file a return under this chapter is the product of: (1) 100
percent of the dividends received by members of the group; (2) the percentage allowed
pursuant to paragraph (a) or (b); and (3) the percentage of the taxpayer's business income
apportionable to this state for the taxable year under section 290.191 or 290.20.

new text begin (g) Amounts included in the net income of shareholders of foreign corporations as the
result of sections 951 and 1248 of the Internal Revenue Code are not dividends for the
purposes of this chapter.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2016.
new text end

Sec. 18.

Minnesota Statutes 2016, section 297I.05, subdivision 7, is amended to read:

Subd. 7.

Nonadmitted insurance premium tax.

(a) A tax is imposed on surplus lines
brokers. The rate of tax is equal to three percent of the gross premiums less return premiums
paid by an insured whose home state is Minnesota.

(b) A tax is imposed on a person, firm, corporation, or purchasing group as defined in
section 60E.02, or any member of a purchasing group, that procures insurance directly from
a nonadmitted insurer. The rate of tax is equal to deleted text begin two deleted text end new text begin three new text end percent of the gross premiums
less return premiums paid by an insured whose home state is Minnesota.

(c) No state other than the home state of an insured may require any premium tax payment
for nonadmitted insurance. When Minnesota is the home state of the insured, as provided
under section 297I.01, 100 percent of the gross premiums are taxable in Minnesota with no
allocation of the tax to other states.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for nonadmitted insurance policies that
go into effect after December 31, 2017.
new text end

Sec. 19.

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

EFFECTIVE DATE.

This section is effective for investments made after July 1, 2010,
for taxable years beginning after December 31, 2009, and before January 1, deleted text begin 2017 deleted text end new text begin 2019 new text end , and
only applies to investments made after the qualified small business receiving the investment
has been certified by the commissioner of employment and economic development.

ARTICLE 5

RAILROAD RECODIFICATION

Section 1.

Minnesota Statutes 2016, section 270.80, subdivision 2, is amended to read:

Subd. 2.

Railroad company.

"Railroad company" means:

(1) any company which as a common carrier operates a railroad or a line or lines of
deleted text begin railway deleted text end new text begin railroads new text end situated within or partly within Minnesota; or

(2) any company owning or operating, other than as a common carrier, a deleted text begin railway deleted text end new text begin railroad new text end
principally used for transportation of taconite concentrates from the plant at which the
taconite concentrates are produced in shipping form to a point of consumption or port for
shipment beyond the state; or

(3) any company that produces concentrates from taconite and transports that taconite
in the course of the concentrating process and before the concentrating process is completed
to a concentrating plant located within the state over a railroad that is not a common carrier
and deleted text begin shall deleted text end new text begin does new text end not use a common carrier or taconite railroad company as defined in clause
(2) for the movement of the concentrate to a point of consumption or port for shipment
beyond the state.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning in assessment year 2018.
new text end

Sec. 2.

Minnesota Statutes 2016, section 270.80, subdivision 3, is amended to read:

Subd. 3.

Operating property.

"Operating property" means all property owned or used
by a railroad company in the performance of railroad transportation services, including
deleted text begin without limitation franchises, rights-of-way, bridges, trestles, shops, docks, wharves,
buildings and structures. deleted text end new text begin but not limited to road, locomotives, freight cars, and improvements
to leased property. Operating property is listed and assessed by the commissioner where
the property is located.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning in assessment year 2018.
new text end

Sec. 3.

Minnesota Statutes 2016, section 270.80, subdivision 4, is amended to read:

Subd. 4.

Nonoperating property.

"Nonoperating property" means deleted text begin and includes deleted text end all
property other than property defined in subdivision 3. Nonoperating property deleted text begin shall include deleted text end new text begin
includes new text end real property deleted text begin which deleted text end new text begin that new text end is leased or rented or available for lease or rent to any
person deleted text begin which deleted text end new text begin that new text end is not a railroad company. Vacant land deleted text begin shall be deleted text end new text begin is new text end presumed to be available
for lease or rent if it has not been used as operating property for a period of one year
new text begin immediately new text end preceding the valuation date. Nonoperating property also includes land deleted text begin which deleted text end new text begin
that new text end is not necessary and integral to the performance of railroad transportation services and
deleted text begin which deleted text end new text begin that new text end is not used on a regular and continual basis in the performance of these services.
Nonoperating property also includes that portion of a deleted text begin general corporation deleted text end office building
and its proportionate share of land deleted text begin which deleted text end new text begin that new text end is not used for deleted text begin railway deleted text end new text begin railroad new text end operation or
purpose.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning in assessment year 2018.
new text end

Sec. 4.

Minnesota Statutes 2016, section 270.80, is amended by adding a subdivision to
read:

new text begin Subd. 6. new text end

new text begin Company. new text end

new text begin "Company" means any corporation, limited liability company,
association, partnership, trust, estate, fiduciary, public or private organization of any kind,
or other legal entity.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning in assessment year 2018.
new text end

Sec. 5.

Minnesota Statutes 2016, section 270.80, is amended by adding a subdivision to
read:

new text begin Subd. 7. new text end

new text begin Unit value. new text end

new text begin "Unit value" means the value of the system of a railroad company
taken as a whole, without regard to the value of its component parts.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning in assessment year 2018.
new text end

Sec. 6.

Minnesota Statutes 2016, section 270.80, is amended by adding a subdivision to
read:

new text begin Subd. 8. new text end

new text begin Book depreciation. new text end

new text begin "Book depreciation" means the depreciation shown by a
railroad company on its accounting records and allowed the company by the Surface
Transportation Board.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning in assessment year 2018.
new text end

Sec. 7.

Minnesota Statutes 2016, section 270.80, is amended by adding a subdivision to
read:

new text begin Subd. 9. new text end

new text begin Equalization. new text end

new text begin "Equalization" means the adjustment of the estimated market
value of railroad operating property to the apparent sales ratio accepted by the State Board
of Equalization.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning in assessment year 2018.
new text end

Sec. 8.

Minnesota Statutes 2016, section 270.80, is amended by adding a subdivision to
read:

new text begin Subd. 10. new text end

new text begin Exempt property. new text end

new text begin "Exempt property" means property that is nontaxable for
ad valorem tax purposes under Minnesota Statutes, including personal property exempt
from taxation under chapter 272.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning in assessment year 2018.
new text end

Sec. 9.

Minnesota Statutes 2016, section 270.80, is amended by adding a subdivision to
read:

new text begin Subd. 11. new text end

new text begin Original cost. new text end

new text begin "Original cost" means the amount paid for an asset as recorded
on the railroad's accounting records in accordance with Surface Transportation Board
accounting rules and regulations.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning in assessment year 2018.
new text end

Sec. 10.

Minnesota Statutes 2016, section 270.80, is amended by adding a subdivision to
read:

new text begin Subd. 12. new text end

new text begin System. new text end

new text begin "System" means the total real and personal property of a railroad that
is used in its railroad operations in all states in which it operates.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning in assessment year 2018.
new text end

Sec. 11.

Minnesota Statutes 2016, section 270.80, is amended by adding a subdivision to
read:

new text begin Subd. 13. new text end

new text begin Minnesota allocated value. new text end

new text begin "Minnesota allocated value" means the value of
a railroad company's operating property that is assigned to Minnesota for tax purposes.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning in assessment year 2018.
new text end

Sec. 12.

Minnesota Statutes 2016, section 270.81, subdivision 3, is amended to read:

Subd. 3.

Determination of type of property.

new text begin (a) new text end The commissioner deleted text begin shall have deleted text end new text begin has
new text end exclusive primary jurisdiction to determine deleted text begin what deleted text end new text begin whether railroad property new text end is operating
property deleted text begin and what is deleted text end new text begin or new text end nonoperating property. In making deleted text begin such deleted text end new text begin this new text end determination, the
commissioner deleted text begin shall deleted text end new text begin may new text end solicit information and opinions from outside the department and
afford all interested persons an opportunity to submit data or views on the subject in writing
or orally.

new text begin (b) new text end Local new text begin and county new text end assessors may submit written requests to the commissioner, asking
for a determination of deleted text begin the nature of specific deleted text end new text begin whether new text end property owned by a railroad and
located within their assessing jurisdiction new text begin is operating or nonoperating property new text end . deleted text begin Any
determination made by the commissioner may be appealed by the assessor to the Tax Court
pursuant to chapter 271. deleted text end new text begin The requests must be submitted by April 1 of the assessing year.
Following a request, the commissioner must send the assessor a written determination by
May 1. Assessors may appeal determinations made by the commissioner to the Tax Court
pursuant to chapter 271.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning in assessment year 2018.
new text end

Sec. 13.

Minnesota Statutes 2016, section 270.81, is amended by adding a subdivision to
read:

new text begin Subd. 6. new text end

new text begin Deduction for nonoperating and exempt property. new text end

new text begin Property located in
Minnesota that was part of the unit but is nonoperating property, or that is exempt from ad
valorem taxation, is deducted from the Minnesota allocated value under section 273.3718,
subdivision 1a. Only qualifying property located in Minnesota may be deducted from the
Minnesota allocated value. The railroad company has the burden of proof to establish that
the property should be deducted from the Minnesota allocated value. The railroad company
must submit schedules of exempt or nonoperating property as the commissioner may require.
The commissioner must determine if property claimed by the railroad as nonoperating
property or exempt property qualifies for deduction from the Minnesota allocated value.
The commissioner must determine the market value of the qualifying property to be deducted
by multiplying the book value of the qualifying property by the market-to-book ratio of the
unit. The remaining amount after this deduction is the Minnesota apportionable market
value.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning in assessment year 2018.
new text end

Sec. 14.

Minnesota Statutes 2016, section 270.82, is amended to read:

270.82 REPORTS OF RAILROAD COMPANIES.

Subdivision 1.

Annual report required.

new text begin Before March 31, new text end every railroad company
doing business in Minnesota deleted text begin shall deleted text end new text begin must new text end annually file with the commissioner deleted text begin on or before
March 31 deleted text end a report under oath setting forth the information prescribed by the commissioner
to enable the commissioner to make the valuation and equalization required by sections
deleted text begin 270.80 to 270.87. deleted text end new text begin 273.3712 to 273.3719. The commissioner shall prescribe the content,
format, and manner of the report pursuant to section 270C.30. If a report is made
electronically, the taxpayer's signature is defined pursuant to section 270C.304, except that
a "law administered by the commissioner" includes the property tax laws.
new text end

Subd. 2.

Extension of time.

new text begin If new text end the commissioner deleted text begin for good deleted text end new text begin determines that there is
reasonable new text end cause new text begin , the commissioner new text end may extend new text begin the time for filing the report required by
subdivision 1 new text end for up to 15 days deleted text begin the time for filing the report required by subdivision 1 deleted text end .

new text begin Subd. 3. new text end

new text begin Amended reports. new text end

new text begin A railroad company may file an amended report to correct
or add information to the original report. Amended reports must be filed with the
commissioner by April 30.
new text end

new text begin Subd. 4. new text end

new text begin Failure to file reports. new text end

new text begin (a) The commissioner may make a valuation pursuant
to sections 273.3712 to 273.3719 according to the commissioner's best judgment based on
available information if any railroad company does not:
new text end

new text begin (1) make the report required by this subdivision;
new text end

new text begin (2) permit an inspection and examination of its property, records, books, accounts, or
other papers when requested by the commissioner; or
new text end

new text begin (3) appear before the commissioner or a person appointed under section 273.3715 when
required to do so.
new text end

new text begin (b) If the commissioner makes a valuation pursuant to paragraph (a), the commissioner's
valuation is final. Notwithstanding any other law to the contrary, a valuation made pursuant
to this subdivision is not appealable administratively.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning in assessment year 2018.
new text end

Sec. 15.

Minnesota Statutes 2016, section 270.83, subdivision 1, is amended to read:

Subdivision 1.

Powers of commissioner.

The commissioner deleted text begin shall have deleted text end new text begin has new text end the power
to examine or cause to be examined any books, papers, records, or memoranda relevant to
the determination of the valuation of operating property deleted text begin as herein provided deleted text end . The
commissioner deleted text begin shall have the further power to deleted text end new text begin may new text end require the attendance of any person
having knowledge or information deleted text begin in the premises deleted text end new text begin concerning the valuation of the operating
property new text end , deleted text begin to deleted text end compel the production of books, papers, records, or memoranda by persons so
required to attend, deleted text begin to deleted text end take testimony on matters material to deleted text begin such determination deleted text end new text begin determining
the valuation of operating property, new text end and administer oaths or affirmations.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning in assessment year 2018.
new text end

Sec. 16.

Minnesota Statutes 2016, section 270.83, subdivision 2, is amended to read:

Subd. 2.

Appointment of persons; subpoenas.

deleted text begin For the purpose of making such
examinations, deleted text end The commissioner may appoint such persons as the commissioner deleted text begin may deem deleted text end new text begin
deems new text end necessary new text begin to make the examinations described in subdivision 1 new text end . deleted text begin Such persons shall
have the rights and powers of the examining of deleted text end new text begin Persons appointed may examine new text end books,
papers, records new text begin , new text end or memoranda, deleted text begin and of subpoenaing deleted text end new text begin subpoena new text end witnesses, deleted text begin administering deleted text end new text begin
administer new text end oaths and affirmations, and deleted text begin taking of deleted text end new text begin take new text end testimony deleted text begin , which are conferred upon
the commissioner hereby deleted text end . The court administrator of any court of record, upon demand of
any deleted text begin such deleted text end person new text begin appointed new text end , shall issue a subpoena for the attendance of any witness or the
production of any books, papers, records, or memoranda before such person. The
commissioner may also issue subpoenas for the appearance of witnesses deleted text begin before the
commissioner or before such persons. Disobedience of subpoenas so issued shall be punished
by the district court of the district in which the subpoena is issued for a contempt of the
district court deleted text end . new text begin Failure to comply with a subpoena shall be punished in the same manner as
contempt of the district court.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning in assessment year 2018.
new text end

Sec. 17.

Minnesota Statutes 2016, section 270.84, is amended to read:

270.84 ANNUAL VALUATION OF OPERATING PROPERTY.

Subdivision 1.

Annual valuation; rules.

new text begin (a) Before July 1, new text end the commissioner deleted text begin shall
annually between March 31 and May 31 make a determination of deleted text end new text begin must determine new text end the deleted text begin fair deleted text end
market value of the operating property of every railroad company doing business in this
state as of January 2 of the year in which the valuation is made. deleted text begin In making this determination, deleted text end
The commissioner deleted text begin shall deleted text end new text begin must new text end employ generally accepted appraisal principles and practices
which may include the unit method of determining value new text begin , and approaches developed by the
Western States Association of Tax Administrators, National Conference of Unit Valuation
States, and the International Association of Assessing Officers new text end .

new text begin (b) The unit value of railroad property is the reconciled value considering the cost,
income, and market approaches under subdivisions 1a, 1b, and 1c. Each approach must be
weighed in accordance with (1) the reliability of the information and (2) the commissioner's
judgment.
new text end

new text begin Subd. 1a. new text end

new text begin Cost approach. new text end

new text begin (a) The commissioner may use the cost approach, including
but not limited to original cost less book depreciation and replacement cost less depreciation.
new text end

new text begin (b) Book depreciation is allowed as a deduction from original cost less book depreciation.
Book depreciation is assumed to include all forms of depreciation.
new text end

new text begin (c) Explicitly calculated appraisal depreciation, including physical, functional, and
external obsolescence, is allowed as a deduction from the replacement cost model.
new text end

new text begin Subd. 1b. new text end

new text begin Income approach. new text end

new text begin (a) The commissioner may use the income approach,
including but not limited to direct capitalization models and yield capitalization models.
new text end

new text begin (b) The yield rate is calculated using market data on selected comparable companies in
the band of investment method.
new text end

new text begin (1) Discounted cash flow is a yield capitalization model that calculates the present value
of explicit cash flow forecasts capitalized using the yield rate, plus reversion to stable growth
yield capitalization after the period of explicit forecasts.
new text end

new text begin (2) Stable growth yield capitalization is a yield capitalization model that calculates the
present value of anticipated future cash flows, capitalized using the yield rate and considering
growth.
new text end

new text begin (c) Direct capitalization is the expected net operating income for the following year,
divided by the direct capitalization rate. The direct capitalization rate is calculated by using
direct market observations from comparable sales or using market earning-to-price
information in the band of investment method.
new text end

new text begin Subd. 1c. new text end

new text begin Market approach. new text end

new text begin The commissioner may use the market approach, including
but not limited to a sales comparison model, a stock and debt model, or other market models
that are available and reliable.
new text end

Subd. 2.

Notice.

The commissioner, after determining the deleted text begin fair deleted text end market value of the
operating property of each railroad company, deleted text begin shall give notice to deleted text end new text begin must notify new text end the railroad
company of the valuation deleted text begin by first class mail, overnight delivery, or messenger service deleted text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning in assessment year 2018.
new text end

Sec. 18.

Minnesota Statutes 2016, section 270.86, is amended to read:

270.86 APPORTIONMENT AND EQUALIZATION OF VALUATION.

Subdivision 1.

Apportionment of value.

deleted text begin Upon determining deleted text end new text begin (a) After allocating to
Minnesota new text end the deleted text begin fair deleted text end market value of the operating property of each railroad company, the
commissioner deleted text begin shall deleted text end new text begin must new text end apportion deleted text begin such deleted text end new text begin the new text end value to deleted text begin the respective counties and to the
taxing districts therein in conformity with fair and reasonable rules and standards to be
established by the commissioner pursuant to notice and hearing, except as provided in
section 270.81. In establishing such rules and standards the commissioner may consider (a)
the physical situs of all station houses, depots, docks, wharves, and other buildings and
structures with an original cost in excess of $10,000; (b) the proportion that the length and
type of all the tracks used by the railroad in such county and taxing district bears to the
length and type of all the track used in the state; and (c) other facts as will result in a fair
and equitable apportionment of value. deleted text end new text begin the operating parcels in Minnesota.
new text end

new text begin (b) The taxable Minnesota portion of the railroad's value must be apportioned to each
parcel with railroad operating property based on a property factor and a use factor. Each
parcel's apportioned market value is equal to the sum of the parcel's cost component
multiplied by the property factor and the parcel's ton miles of revenue freight times the use
factor.
new text end

new text begin (c) For purposes of calculating the apportioned market value in paragraph (b), the property
factor is equal to the taxable value of a railroad allocated to Minnesota divided by the sum
of each parcel's cost components, the result of which is multiplied by 0.5. A parcel's cost
components are the following:
new text end

new text begin (1) the average estimated market value per taxable commercial acre within a city or
township times the number of operating acres for each parcel. If the average market value
per commercial acre within a city or township cannot be determined, the average estimated
market value per taxable acre within that city or township is used;
new text end

new text begin (2) the miles of track within a parcel multiplied by the average cost of grading, ties, rails,
and ballast per mile of track within Minnesota; and
new text end

new text begin (3) the original cost of structures within a parcel.
new text end

new text begin (d) For purposes of calculating the apportioned market value in paragraph (b), the use
factor is equal to the taxable value of a railroad allocated to Minnesota divided by the sum
of each parcel's ton miles of revenue freight for the subject railroad, the result of which is
multiplied by 0.5. Each railroad must report the ton miles of revenue freight for each railroad
operating parcel.
new text end

new text begin Subd. 1a. new text end

new text begin Allocation of value. new text end

new text begin After the market value of the operating property has been
estimated, the portion of the value that is attributable to Minnesota must be determined by
calculating an allocation percentage using factors relevant to the industry segment of the
railroad company. This allocation percentage must be multiplied by the value of the operating
property to determine the Minnesota allocated value.
new text end

new text begin The Minnesota allocated value is determined by averaging the following factors:
new text end

new text begin (1) the miles of railroad track operated in Minnesota divided by miles of railroad track
operated in all states;
new text end

new text begin (2) the ton miles of revenue freight transported in Minnesota divided by ton miles of
revenue freight transported in all states;
new text end

new text begin (3) the gross revenues from transportation operations within Minnesota divided by gross
revenues from transportation operations in all states; and
new text end

new text begin (4) the cost of railroad property in Minnesota divided by the cost of railroad property in
all states.
new text end

new text begin The average of the factors must be multiplied by the value of the railroad company's
operating property to calculate the Minnesota portion of the railroad's operating property.
new text end

Subd. 2.

Equalized valuation.

After making the apportionment provided in subdivision
1, the commissioner deleted text begin shall determine the equalized valuation of the operating property in
each county by applying to the apportioned value an estimated current year median sales
ratio for all commercial and industrial property in that county deleted text end new text begin must equalize the values of
the operating property to the level accepted by the State Board of Equalization if the
appropriate assessment-to-sales ratio for each county as conducted by the Department of
Revenue in section 270.12, subdivision 2, clause 6, is outside the range accepted by the
State Board of Equalization new text end . deleted text begin If the commissioner decides there are insufficient sales to
determine a median commercial-industrial sales ratio, an estimated current year countywide
median sales ratio for all property shall be applied to the apportioned value. No equalization
shall be made to deleted text end new text begin The commissioner must not equalize new text end the market value of the operating
property if the deleted text begin median sales ratio deleted text end new text begin assessment-to-sales ratio new text end determined pursuant to this
subdivision is within deleted text begin five percent of the assessment ratio of the railroad operating property deleted text end new text begin
the range accepted by the State Board of Equalization new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning in assessment year 2018.
new text end

Sec. 19.

Minnesota Statutes 2016, section 270.87, is amended to read:

270.87 CERTIFICATION TO COUNTY ASSESSORS.

deleted text begin After making an annual determination of the equalized fair market value of the operating
property of each company in each of the respective counties, and in the taxing districts
therein, deleted text end The commissioner deleted text begin shall deleted text end new text begin must new text end certify the equalized deleted text begin fair deleted text end market value new text begin of the operating
property new text end to the county assessor deleted text begin on or deleted text end before deleted text begin June 30 deleted text end new text begin August 1 new text end . The equalized deleted text begin fair deleted text end market
value of the operating property of the railroad company in the county and the taxing districts
therein is the value on which taxes must be levied and collected in the same manner as on
the commercial and industrial property deleted text begin of such county and the taxing districts therein deleted text end new text begin in the
counties and taxing districts new text end . If the commissioner determines that the equalized deleted text begin fair deleted text end market
value certified deleted text begin on or before June 30 deleted text end new text begin before August 1 new text end is in error, the commissioner may issue
a corrected certification deleted text begin on or before August 31 deleted text end new text begin before October 1 new text end . The commissioner may
correct errors that are merely clerical in nature until December 31.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning in assessment year 2018.
new text end

Sec. 20.

Minnesota Statutes 2016, section 272.02, subdivision 9, is amended to read:

Subd. 9.

Personal property; exceptions.

Except for the taxable personal property
enumerated below, all personal property and the property described in section 272.03,
subdivision 1, paragraphs (c) and (d), shall be exempt.

The following personal property shall be taxable:

(a) personal property which is part of an electric generating, transmission, or distribution
system or a pipeline system transporting or distributing water, gas, crude oil, or petroleum
products or mains and pipes used in the distribution of steam or hot or chilled water for
heating or cooling buildings and structures;

(b) deleted text begin railroad docks and wharves which are deleted text end new text begin personal property that is new text end part of the operating
property of a railroad company as defined in section deleted text begin 270.80 deleted text end new text begin 273.3712 new text end ;

(c) personal property defined in section 272.03, subdivision 2, clause (3);

(d) leasehold or other personal property interests which are taxed pursuant to section
272.01, subdivision 2; 273.124, subdivision 7; or 273.19, subdivision 1; or any other law
providing the property is taxable as if the lessee or user were the fee owner;

(e) manufactured homes and sectional structures, including storage sheds, decks, and
similar removable improvements constructed on the site of a manufactured home, sectional
structure, park trailer or travel trailer as provided in section 273.125, subdivision 8, paragraph
(f); and

(f) flight property as defined in section 270.071.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning in assessment year 2018.
new text end

Sec. 21.

Minnesota Statutes 2016, section 275.025, subdivision 1, is amended to read:

Subdivision 1.

Levy amount.

The state general levy is levied against
commercial-industrial property and seasonal residential recreational property, as defined
in this section. The state general levy base amount new text begin for commercial-industrial property new text end is
deleted text begin $592,000,000 deleted text end new text begin $927,500,000 new text end for taxes payable in deleted text begin 2002 deleted text end new text begin 2019 new text end . For taxes payable in subsequent
years, the levy base amount is increased each year by multiplying the levy base amount for
the prior year by the sum of one plus the rate of increase, if any, in the implicit price deflator
for government consumption expenditures and gross investment for state and local
governments prepared by the Bureau of Economic Analysts of the United States Department
of Commerce for the 12-month period ending March 31 of the year prior to the year the
taxes are payable. The tax under this section is not treated as a local tax rate under section
469.177 and is not the levy of a governmental unit under chapters 276A and 473F.

The commissioner shall increase or decrease the preliminary or final rate for a year as
necessary to account for errors and tax base changes that affected a preliminary or final rate
for either of the two preceding years. Adjustments are allowed to the extent that the necessary
information is available to the commissioner at the time the rates for a year must be certified,
and for the following reasons:

(1) an erroneous report of taxable value by a local official;

(2) an erroneous calculation by the commissioner; and

(3) an increase or decrease in taxable value for commercial-industrial or seasonal
residential recreational property reported on the abstracts of tax lists submitted under section
275.29 that was not reported on the abstracts of assessment submitted under section 270C.89
for the same year.

The commissioner may, but need not, make adjustments if the total difference in the tax
levied for the year would be less than $100,000.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes payable in 2019 and thereafter.
new text end

Sec. 22.

Minnesota Statutes 2016, section 275.025, subdivision 4, is amended to read:

Subd. 4.

Apportionment and levy of state general tax.

deleted text begin Ninety-five deleted text end new text begin 95.1 new text end percent of the
state general tax must be levied by applying a uniform rate to all commercial-industrial tax
capacity and deleted text begin five deleted text end new text begin 4.9 new text end percent of the state general tax must be levied by applying a uniform
rate to all seasonal residential recreational tax capacity. On or before October 1 each year,
the commissioner of revenue shall certify the preliminary state general levy rates to each
county auditor that must be used to prepare the notices of proposed property taxes for taxes
payable in the following year. By January 1 of each year, the commissioner shall certify
the final state general levy rate to each county auditor that shall be used in spreading taxes.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes payable in 2019 and thereafter.
new text end

Sec. 23. new text begin SEVERABILITY.
new text end

new text begin If any part of this article is found to be invalid because it is in conflict with a provision
of the Minnesota Constitution or for any other reason, all other provisions of this act shall
remain valid and any rights, remedies, and privileges that have been otherwise accrued by
this act shall remain in effect and may be proceeded with and concluded under the provisions
of this act.
new text end

new text begin EFFECTIVE DATE. new text end

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

Sec. 24. new text begin APPROPRIATIONS.
new text end

new text begin $291,000 in fiscal year 2018 and $175,000 in fiscal year 2019 are appropriated from the
general fund to the commissioner of revenue to administer the provisions in this article.
$175,000 shall be added to the base appropriations to the Department of Revenue for fiscal
years 2020 and 2021.
new text end

Sec. 25. new text begin REVISOR'S INSTRUCTION.
new text end

new text begin (a) The revisor of statutes shall renumber the statutory section in column A with the
section in column B. The revisor shall make necessary cross-reference changes in Minnesota
Statutes and Minnesota Rules.
new text end

	new text begin Column A new text end	new text begin Column B new text end
	new text begin 270.80 new text end	new text begin 273.3712 new text end
	new text begin 270.81 new text end	new text begin 273.3713 new text end
	new text begin 270.82 new text end	new text begin 273.3714 new text end
	new text begin 270.83 new text end	new text begin 273.3715 new text end
	new text begin 270.84 new text end	new text begin 273.3716 new text end
	new text begin 270.85 new text end	new text begin 273.3717 new text end
	new text begin 270.86 new text end	new text begin 273.3718 new text end
	new text begin 270.87 new text end	new text begin 273.3719 new text end

new text begin (b) The revisor shall make changes necessary to correct the punctuation, grammar, or
remaining text that result from implementing this instruction.
new text end

Sec. 26. new text begin REPEALER.
new text end

new text begin Minnesota Statutes 2016, sections 270.81, subdivision 4; and 270.83, subdivision 3, new text end new text begin and
new text end new text begin Minnesota Rules, parts 8106.0100, subparts 1, 2, 3, 4, 5, 6, 7, 8, 10, 12, 13, 14, 17, 17a, 18,
19, 20, and 21; 8106.0300, subparts 1 and 3; 8106.0400; 8106.0500; 8106.0600; 8106.0700;
8106.0800; and 8106.9900, new text end new text begin are repealed.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning in assessment year 2018.
new text end

ARTICLE 6

SALES AND USE TAXES AND SPECIAL TAXES

Section 1.

Minnesota Statutes 2016, section 128C.24, is amended to read:

128C.24 LEAGUE FUNDS TRANSFER.

Beginning July 1, 2007, the Minnesota State High School League shall annually determine
the sales tax savings attributable to section 297A.70, subdivision deleted text begin 11 deleted text end new text begin 11a new text end , and annually
transfer that amount to a nonprofit charitable foundation created for the purpose of promoting
high school extracurricular activities. The funds must be used by the foundation to make
grants to fund, assist, recognize, or promote high school students' participation in
extracurricular activities. The first priority for funding will be grants for scholarships to
individuals to offset athletic fees. The foundation must equitably award grants based on
considerations of gender balance, school size, and geographic location, to the extent feasible.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2017.
new text end

Sec. 2.

Minnesota Statutes 2016, section 295.52, subdivision 8, is amended to read:

Subd. 8.

Contingent reduction in tax rate.

(a) By December 1 of each year, beginning
in 2011, the commissioner of management and budget shall determine the projected balance
in the health care access fund for the biennium.

(b) If the commissioner of management and budget determines that the projected balance
in the health care access fund for the biennium reflects a ratio of revenues to expenditures
and transfers greater than 125 percent, and if the actual cash balance in the fund is adequate,
as determined by the commissioner of management and budget, the commissioner, in
consultation with the commissioner of revenue, shall reduce the tax rates levied under
subdivisions 1, 1a, 2, 3, and 4, for the subsequent calendar year sufficient to reduce the
structural balance in the fund. The rate may be reduced to the extent that the projected
revenues for the biennium do not exceed 125 percent of expenditures and transfers. The
new rate shall be rounded to the nearest one-tenth of one percent. The rate reduction under
this paragraph expires at the end of each calendar year and is subject to an annual
redetermination by the commissioner of management and budget.

(c) For purposes of the analysis defined in paragraph (b), the commissioner of
management and budget shall include projected revenues deleted text begin , notwithstanding the repeal of the
tax imposed under this section effective January 1, 2020 deleted text end .

new text begin EFFECTIVE DATE. new text end

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

Sec. 3.

Minnesota Statutes 2016, section 296A.01, subdivision 12, is amended to read:

Subd. 12.

Compressed natural gas or CNG.

"Compressed natural gas" or "CNG"
means natural gas, primarily methane, condensed under high pressure and stored in specially
designed storage tanks at between 2,000 and 3,600 pounds per square inch. For purposes
of this chapter, the energy content of CNG is considered to be deleted text begin 1,000 deleted text end new text begin 900 new text end BTUs per cubic
foot.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made after June
30, 2017.
new text end

Sec. 4.

Minnesota Statutes 2016, section 296A.08, subdivision 2, is amended to read:

Subd. 2.

Rate of tax.

The special fuel excise tax is imposed at the following rates:

(a) Liquefied petroleum gas or propane is taxed at the rate of 18.75 cents per gallon.

(b) Liquefied natural gas is taxed at the rate of 15 cents per gallon.

(c) Compressed natural gas is taxed at the rate of deleted text begin $2.174 deleted text end new text begin $1.974 new text end per thousand cubic feet;
or 25 cents per gasoline equivalent. For purposes of this paragraph, "gasoline equivalent,"
as defined by the National Conference on Weights and Measures, is 5.66 pounds of natural
gas new text begin or 126.67 cubic feet new text end .

(d) All other special fuel is taxed at the same rate as the gasoline excise tax as specified
in section 296A.07, subdivision 2. The tax is payable in the form and manner prescribed
by the commissioner.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made after June
30, 2017.
new text end

Sec. 5.

Minnesota Statutes 2016, section 297A.61, subdivision 3, is amended to read:

Subd. 3.

Sale and purchase.

(a) "Sale" and "purchase" include, but are not limited to,
each of the transactions listed in this subdivision. In applying the provisions of this chapter,
the terms "tangible personal property" and "retail sale" include the taxable services listed
in paragraph (g), clause (6), items (i) to (vi) and (viii), and the provision of these taxable
services, unless specifically provided otherwise. Services performed by an employee for
an employer are not taxable. Services performed by a partnership or association for another
partnership or association are not taxable if one of the entities owns or controls more than
80 percent of the voting power of the equity interest in the other entity. Services performed
between members of an affiliated group of corporations are not taxable. For purposes of
the preceding sentence, "affiliated group of corporations" means those entities that would
be classified as members of an affiliated group as defined under United States Code, title
26, section 1504, disregarding the exclusions in section 1504(b).

(b) Sale and purchase include:

(1) any transfer of title or possession, or both, of tangible personal property, whether
absolutely or conditionally, for a consideration in money or by exchange or barter; and

(2) the leasing of or the granting of a license to use or consume, for a consideration in
money or by exchange or barter, tangible personal property, other than a manufactured
home used for residential purposes for a continuous period of 30 days or more.

(c) Sale and purchase include the production, fabrication, printing, or processing of
tangible personal property for a consideration for consumers who furnish either directly or
indirectly the materials used in the production, fabrication, printing, or processing.

(d) Sale and purchase include the preparing for a consideration of food. Notwithstanding
section 297A.67, subdivision 2, taxable food includes, but is not limited to, the following:

(1) prepared food sold by the retailer;

(2) soft drinks;

(3) candy;

(4) dietary supplements; and

(5) all food sold through vending machines.

(e) A sale and a purchase includes the furnishing for a consideration of electricity, gas,
water, or steam for use or consumption within this state.

(f) A sale and a purchase includes the transfer for a consideration of prewritten computer
software whether delivered electronically, by load and leave, or otherwise.

(g) A sale and a purchase includes the furnishing for a consideration of the following
services:

(1) the privilege of admission to places of amusement, recreational areas, or athletic
events, and the making available of amusement devices, tanning facilities, reducing salons,
steam baths, health clubs, and spas or athletic facilities;

(2) lodging and related services by a hotel, rooming house, resort, campground, motel,
or trailer camp, including furnishing the guest of the facility with access to telecommunication
services, and the granting of any similar license to use real property in a specific facility,
other than the renting or leasing of it for a continuous period of 30 days or more under an
enforceable written agreement that may not be terminated without prior notice and including
accommodations intermediary services provided in connection with other services provided
under this clause;

(3) nonresidential parking services, whether on a contractual, hourly, or other periodic
basis, except for parking at a meter;

(4) the granting of membership in a club, association, or other organization if:

(i) the club, association, or other organization makes available for the use of its members
sports and athletic facilities, without regard to whether a separate charge is assessed for use
of the facilities; and

(ii) use of the sports and athletic facility is not made available to the general public on
the same basis as it is made available to members.

Granting of membership means both onetime initiation fees and periodic membership dues.
Sports and athletic facilities include golf courses; tennis, racquetball, handball, and squash
courts; basketball and volleyball facilities; running tracks; exercise equipment; swimming
pools; and other similar athletic or sports facilities;

(5) delivery of aggregate materials by a third party, excluding delivery of aggregate
material used in road construction; and delivery of concrete block by a third party if the
delivery would be subject to the sales tax if provided by the seller of the concrete block.
For purposes of this clause, "road construction" means construction of:

(i) public roads;

(ii) cartways; and

(iii) private roads in townships located outside of the seven-county metropolitan area
up to the point of the emergency response location sign; and

(6) services as provided in this clause:

(i) laundry and dry cleaning services including cleaning, pressing, repairing, altering,
and storing clothes, linen services and supply, cleaning and blocking hats, and carpet,
drapery, upholstery, and industrial cleaning. Laundry and dry cleaning services do not
include services provided by coin operated facilities operated by the customer;

(ii) motor vehicle washing, waxing, and cleaning services, including services provided
by coin operated facilities operated by the customer, and rustproofing, undercoating, and
towing of motor vehicles;

(iii) building and residential cleaning, maintenance, and disinfecting services and pest
control and exterminating services;

(iv) detective, security, burglar, fire alarm, and armored car services; but not including
services performed within the jurisdiction they serve by off-duty licensed peace officers as
defined in section 626.84, subdivision 1, or services provided by a nonprofit organization
or any organization at the direction of a county for monitoring and electronic surveillance
of persons placed on in-home detention pursuant to court order or under the direction of the
Minnesota Department of Corrections;

(v) pet grooming services;

(vi) lawn care, fertilizing, mowing, spraying and sprigging services; garden planting
and maintenance; tree, bush, and shrub pruning, bracing, spraying, and surgery; indoor plant
care; tree, bush, shrub, and stump removal, except when performed as part of a land clearing
contract as defined in section 297A.68, subdivision 40; and tree trimming for public utility
lines. Services performed under a construction contract for the installation of shrubbery,
plants, sod, trees, bushes, and similar items are not taxable;

(vii) massages, except when provided by a licensed health care facility or professional
or upon written referral from a licensed health care facility or professional for treatment of
illness, injury, or disease; and

(viii) the furnishing of lodging, board, and care services for animals in kennels and other
similar arrangements, but excluding veterinary and horse boarding services.

(h) A sale and a purchase includes the furnishing for a consideration of tangible personal
property or taxable services by the United States or any of its agencies or instrumentalities,
or the state of Minnesota, its agencies, instrumentalities, or political subdivisions.

(i) A sale and a purchase includes the furnishing for a consideration of
telecommunications services, ancillary services associated with telecommunication services,
and pay television services. Telecommunication services include, but are not limited to, the
following services, as defined in section 297A.669: air-to-ground radiotelephone service,
mobile telecommunication service, postpaid calling service, prepaid calling service, prepaid
wireless calling service, and private communication services. The services in this paragraph
are taxed to the extent allowed under federal law.

(j) A sale and a purchase includes the furnishing for a consideration of installation if the
installation charges would be subject to the sales tax if the installation were provided by
the seller of the item being installed.

(k) A sale and a purchase includes the rental of a vehicle by a motor vehicle dealer to a
customer when (1) the vehicle is rented by the customer for a consideration, or (2) the motor
vehicle dealer is reimbursed pursuant to a service contract as defined in section 59B.02,
subdivision 11.

(l) A sale and a purchase includes furnishing for a consideration of specified digital
products or other digital products or granting the right for a consideration to use specified
digital products or other digital products on a temporary or permanent basis and regardless
of whether the purchaser is required to make continued payments for such right. Wherever
the term "tangible personal property" is used in this chapter, other than in subdivisions 10
and 38, the provisions also apply to specified digital products, or other digital products,
unless specifically provided otherwise or the context indicates otherwise.

new text begin (m) A sale and purchase includes the transfer for a consideration of consulting services
sold to install, test, and implement prewritten computer software, including, but not limited
to, all software configuration services that determine how the prewritten computer software
will be used.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made after June
30, 2017.
new text end

Sec. 6.

Minnesota Statutes 2016, section 297A.61, subdivision 54, is amended to read:

Subd. 54.

Other digital products.

"Other digital products" means the following items
when transferred electronically:

(1) greeting cards; deleted text begin and
deleted text end

(2) online video or electronic games deleted text begin . deleted text end new text begin ; and
new text end

new text begin (3) items that would be subject to tax if they were sold in tangible form.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made after June
30, 2017.
new text end

Sec. 7.

Minnesota Statutes 2016, section 297A.67, subdivision 10, is amended to read:

Subd. 10.

Caskets; vaults.

Caskets deleted text begin and deleted text end new text begin , new text end burial vaults new text begin , and alternative containers used
for viewing or transporting a deceased human or new text end for human burial are exempt.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made after June
30, 2017.
new text end

Sec. 8.

Minnesota Statutes 2016, section 297A.67, is amended by adding a subdivision to
read:

new text begin Subd. 34. new text end

new text begin Specified digital products and other digital products. new text end

new text begin Specified digital
products as defined under section 297A.61, subdivision 55, and other digital products as
defined under section 297A.61, subdivision 54, are exempt if the specified digital products
and other digital products would not be subject to tax if sold, stored, distributed, used, or
consumed in tangible form or as a service.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made after June
30, 2017.
new text end

Sec. 9.

Minnesota Statutes 2016, section 297A.70, subdivision 1, is amended to read:

Subdivision 1.

Scope.

(a) To the extent provided in this section, the gross receipts from
sales of items to or by, and storage, distribution, use, or consumption of items by the
organizations or units of local government listed in this section are specifically exempted
from the taxes imposed by this chapter.

(b) Notwithstanding any law to the contrary enacted before 1992, only sales to
governments and political subdivisions listed in this section are exempt from the taxes
imposed by this chapter.

(c) "Sales" includes purchases under an installment contract or lease purchase agreement
under section 465.71.

new text begin (d) Subdivisions 4 and 8 of section 290.05, relating to notification and the authority to
revoke, apply to subdivisions 4, 5, 7, and 18 of this section.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made after June
30, 2017.
new text end

Sec. 10.

Minnesota Statutes 2016, section 297A.70, subdivision 4, is amended to read:

Subd. 4.

Sales to nonprofit groups.

(a) All sales, except those listed in paragraph deleted text begin (b) deleted text end new text begin
(c) new text end , to deleted text begin the following deleted text end "nonprofit organizations" are exempt new text begin if the item purchased is used in
the performance of the nonprofit organization's exempt function. The exemption under this
paragraph does not apply to new text end :

new text begin (1) veterans groups under subdivision 5;
new text end

new text begin (2) hospitals, outpatient surgical centers, and critical access dental providers under
subdivision 7, paragraphs (a) to (c), (e), and (f);
new text end

new text begin (3) products and services under subdivision 7, paragraph (d);
new text end

new text begin (4) nursing homes and boarding care homes under subdivision 18; or
new text end

new text begin (5) a nonprofit organization authorized under section 465.717.
new text end

deleted text begin (1) a corporation, society, association, foundation, or institution organized and operated
exclusively for charitable, religious, or educational purposes if the item purchased is used
in the performance of charitable, religious, or educational functions; and
deleted text end

deleted text begin (2) any senior citizen group or association of groups that:
deleted text end

deleted text begin (i) in general limits membership to persons who are either age 55 or older, or physically
disabled;
deleted text end

deleted text begin (ii) is organized and operated exclusively for pleasure, recreation, and other nonprofit
purposes, not including housing, no part of the net earnings of which inures to the benefit
of any private shareholders; and
deleted text end

deleted text begin (iii) is an exempt organization under section 501(c) of the Internal Revenue Code.
deleted text end

new text begin (b) new text end For purposes of this subdivision, deleted text begin charitable purpose includes the maintenance of a
cemetery owned by a religious organization. deleted text end new text begin "nonprofit organization" means:
new text end

new text begin (1) an organization that has a current federal determination letter stating that the nonprofit
organization qualifies as an exempt organization under section 501(c)(3) of the Internal
Revenue Code, if required, and has obtained a Minnesota tax identification number from
the Department of Revenue under section 297A.83; or
new text end

new text begin (2) a senior citizen group or association of groups that:
new text end

new text begin (i) in general limits membership to persons who are either age 55 or older, or who are
physically disabled;
new text end

new text begin (ii) is organized and operated exclusively for pleasure, recreation, or other nonprofit
purposes, not including housing, and no part of the net earnings of which inures to the
benefit of any private shareholders; and
new text end

new text begin (iii) is an exempt organization under section 501(c) of the Internal Revenue Code.
new text end

deleted text begin (b) deleted text end new text begin (c) new text end This exemption does not apply to the following sales:

(1) building, construction, or reconstruction materials purchased by a contractor or a
subcontractor as a part of a lump-sum contract or similar type of contract with a guaranteed
maximum price covering both labor and materials for use in the construction, alteration, or
repair of a building or facility;

(2) construction materials purchased by tax-exempt entities or their contractors to be
used in constructing buildings or facilities that will not be used principally by the tax-exempt
entities;

(3) lodging as defined under section 297A.61, subdivision 3, paragraph (g), clause (2),
and prepared food, candy, soft drinks, and alcoholic beverages as defined in section 297A.67,
subdivision 2, except wine purchased by an established religious organization for sacramental
purposes or as allowed under subdivision 9a; and

(4) leasing of a motor vehicle as defined in section 297B.01, subdivision 11, except as
provided in paragraph deleted text begin (c) deleted text end new text begin (d) new text end .

deleted text begin (c) deleted text end new text begin (d) new text end This exemption applies to the leasing of a motor vehicle as defined in section
297B.01, subdivision 11, only if the vehicle is:

(1) a truck, as defined in section 168.002, a bus, as defined in section 168.002, or a
passenger automobile, as defined in section 168.002, if the automobile is designed and used
for carrying more than nine persons including the driver; and

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

deleted text begin (d) deleted text end new text begin (e) new text end A limited liability company also qualifies for exemption under this subdivision
if (1) it consists of a sole member that would qualify for the exemption, and (2) the items
purchased qualify for the exemption.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made after June
30, 2017.
new text end

Sec. 11.

Minnesota Statutes 2016, section 297A.70, is amended by adding a subdivision
to read:

new text begin Subd. 11a. new text end

new text begin MSHSL exemption. new text end

new text begin Tickets and admissions to games, events, and activities
sponsored by the Minnesota State High School League under chapter 128C are exempt.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made after June
30, 2017.
new text end

Sec. 12.

Minnesota Statutes 2016, section 297A.71, is amended by adding a subdivision
to read:

new text begin Subd. 49. new text end

new text begin Properties destroyed by fire. new text end

new text begin Building materials and supplies used in, and
equipment incorporated into, the construction or replacement of real property that is located
in Madelia affected by the fire on February 3, 2016, are exempt. The tax must be imposed
and collected as if the rate under section 297A.62, subdivision l, applied and then refunded
in the manner provided in section 297A.75.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made after June
30, 2016, and before July 1, 2018.
new text end

Sec. 13.

Minnesota Statutes 2016, section 297A.71, is amended by adding a subdivision
to read:

new text begin Subd. 50. new text end

new text begin Siding production facility materials. new text end

new text begin Building materials and supplies used
or consumed in, and equipment incorporated into, the expansion of an existing wood products
facility to convert the facility into a siding production facility that can produce at least
400,000,000 square feet of siding per year, including private infrastructure, are exempt. The
tax must be imposed and collected as if the rate under section 297A.62, subdivision 1,
applied, and then refunded in the manner provided in section 297A.75. This provision does
not exempt equipment that qualifies for exemption under section 297A.68, subdivision 5.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made after June
30, 2016, and before July 1, 2020.
new text end

Sec. 14.

Minnesota Statutes 2016, section 297A.75, subdivision 1, is amended to read:

Subdivision 1.

Tax collected.

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

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

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

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

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

(5) elevators and building materials exempt under section 297A.71, subdivision 12;

(6) materials and supplies for qualified low-income housing under section 297A.71,
subdivision 23;

(7) materials, supplies, and equipment for municipal electric utility facilities under
section 297A.71, subdivision 35;

(8) equipment and materials used for the generation, transmission, and distribution of
electrical energy and an aerial camera package exempt under section 297A.68, subdivision
37;

(9) commuter rail vehicle and repair parts under section 297A.70, subdivision 3, paragraph
(a), clause (10);

(10) materials, supplies, and equipment for construction or improvement of projects and
facilities under section 297A.71, subdivision 40;

(11) materials, supplies, and equipment for construction, improvement, or expansion
of deleted text begin :
deleted text end

(i) an aerospace defense manufacturing facility exempt under section 297A.71,
subdivision 42;

(ii) a biopharmaceutical manufacturing facility exempt under section 297A.71, subdivision
45;

(iii) a research and development facility exempt under section 297A.71, subdivision 46;
and

(iv) an industrial measurement manufacturing and controls facility exempt under section
297A.71, subdivision 47;

(12) enterprise information technology equipment and computer software for use in a
qualified data center exempt under section 297A.68, subdivision 42;

(13) materials, supplies, and equipment for qualifying capital projects under section
297A.71, subdivision 44;

(14) items purchased for use in providing critical access dental services exempt under
section 297A.70, subdivision 7, paragraph (c); deleted text begin and
deleted text end

(15) items and services purchased under a business subsidy agreement for use or
consumption primarily in greater Minnesota exempt under section 297A.68, subdivision
44 deleted text begin . deleted text end new text begin ;
new text end

new text begin (16) building materials, equipment, and supplies for constructing or replacing real
property exempt under section 297A.71, subdivision 49; and
new text end

new text begin (17) building materials and supplies, equipment incorporated into, and private
infrastructure for conversion of a wood products facility into a siding facility exempt under
section 297A.71, subdivision 50.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made after June
30, 2016.
new text end

Sec. 15.

Minnesota Statutes 2016, section 297A.75, subdivision 2, is amended to read:

Subd. 2.

Refund; eligible persons.

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

(1) for subdivision 1, clauses (1), (2), and (14), the applicant must be the purchaser;

(2) for subdivision 1, clause (3), the applicant must be the governmental subdivision;

(3) for subdivision 1, clause (4), the applicant must be the recipient of the benefits
provided in United States Code, title 38, chapter 21;

(4) for subdivision 1, clause (5), the applicant must be the owner of the homestead
property;

(5) for subdivision 1, clause (6), the owner of the qualified low-income housing project;

(6) for subdivision 1, clause (7), the applicant must be a municipal electric utility or a
joint venture of municipal electric utilities;

(7) for subdivision 1, clauses (8), (11), (12), deleted text begin and deleted text end (15), new text begin and (17), new text end the owner of the
qualifying business; deleted text begin and
deleted text end

(8) for subdivision 1, clauses (9), (10), and (13), the applicant must be the governmental
entity that owns or contracts for the project or facility deleted text begin . deleted text end new text begin ; and
new text end

new text begin (9) for subdivision l, clause (16), the applicant must be the owner or developer of the
building or project.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made after June
30, 2016.
new text end

Sec. 16.

Minnesota Statutes 2016, section 297A.75, subdivision 3, is amended to read:

Subd. 3.

Application.

(a) The application must include sufficient information to permit
the commissioner to verify the tax paid. If the tax was paid by a contractor, subcontractor,
or builder, under subdivision 1, clauses (3) to (13), deleted text begin or deleted text end (15) new text begin , (16) new text end , new text begin or (17), new text end the contractor,
subcontractor, or builder must furnish to the refund applicant a statement including the cost
of the exempt items and the taxes paid on the items unless otherwise specifically provided
by this subdivision. The provisions of sections 289A.40 and 289A.50 apply to refunds under
this section.

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

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made after June
30, 2016.
new text end

Sec. 17.

Minnesota Statutes 2016, section 297A.815, subdivision 3, is amended to read:

Subd. 3.

Motor vehicle lease sales tax revenue.

(a) For purposes of this subdivision,
"net revenue" means an amount equal to the revenues, including interest and penalties,
collected under this section, during the fiscal year; less $32,000,000 in each fiscal year.

(b) On or before June 30 of each fiscal year, the commissioner of revenue shall estimate
the amount of the net revenue for the current fiscal year.

(c) On or after July 1 of the subsequent fiscal year, the commissioner of management
and budget shall transfer the net revenue as estimated in paragraph (b) from the general
fund, as follows:

(1) $9,000,000 annually until January 1, 2015, and 50 percent annually thereafter to the
county state-aid highway fund. Notwithstanding any other law to the contrary, the
commissioner of transportation shall allocate the funds transferred under this clause to the
counties in the metropolitan area, as defined in section 473.121, subdivision 4, excluding
the counties of Hennepin and Ramsey, so that each county shall receive of such amount the
percentage that its population, as defined in section 477A.011, subdivision 3, estimated or
established by July 15 of the year prior to the current calendar year, bears to the total
population of the counties receiving funds under this clause; and

(2) the remainder to the greater Minnesota transit account.

new text begin (d) The revenues deposited under this subdivision do not include the revenues, including
interest and penalties, generated by the sales tax imposed under section 297A.62, subdivision
1a, which must be deposited as provided under the Minnesota Constitution, article XI,
section 15.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment and
applies beginning with the estimate that must be completed before June 30, 2017, for a
transfer that occurs on or after July 1, 2017.
new text end

Sec. 18.

Minnesota Statutes 2016, section 297H.04, subdivision 2, is amended to read:

Subd. 2.

Rate.

(a) Commercial generators that generate nonmixed municipal solid waste
shall pay a solid waste management tax of 60 cents per noncompacted cubic yard of periodic
waste collection capacity purchased by the generator, based on the size of the container for
the nonmixed municipal solid waste, the actual volume, or the weight-to-volume conversion
schedule in paragraph (c). However, the tax must be calculated by the waste management
service provider using the same method for calculating the waste management service fee
so that both are calculated according to container capacity, actual volume, or weight.

(b) Notwithstanding section 297H.02, a residential generator that generates nonmixed
municipal solid waste shall pay a solid waste management tax in the same manner as provided
in paragraph (a).

(c) The weight-to-volume conversion schedule for:

(1) construction debris as defined in section 115A.03, subdivision 7, is deleted text begin one ton equals
3.33 cubic yards, or $2 per ton deleted text end new text begin equal to 60 cents per cubic yard. The commissioner of
revenue, after consultation with the commissioner of the Pollution Control Agency, shall
determine and may publish by notice a conversion schedule for construction debris new text end ;

(2) industrial waste as defined in section 115A.03, subdivision 13a, is equal to 60 cents
per cubic yard. The commissioner of revenue after consultation with the commissioner of
the Pollution Control Agency, shall determine, and may publish by notice, a conversion
schedule for various industrial wastes; and

(3) infectious waste as defined in section 116.76, subdivision 12, and pathological waste
as defined in section 116.76, subdivision 14, is 150 pounds equals one cubic yard, or 60
cents per 150 pounds.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made after June
30, 2017.
new text end

Sec. 19.

Minnesota Statutes 2016, section 298.015, is amended to read:

298.015 deleted text begin NET deleted text end new text begin GROSS new text end PROCEEDS TAX ON MINING.

Subdivision 1.

Tax imposed.

A person engaged in the business of mining shall pay to
the state of Minnesota for distribution as provided in section 298.018 a deleted text begin net deleted text end new text begin gross new text end proceeds
tax equal to deleted text begin two percent deleted text end new text begin 2.75 percent new text end of the deleted text begin net deleted text end new text begin gross new text end proceeds from mining in Minnesota.
The tax applies to all ores, metals, and minerals mined, extracted, produced, or refined
within the state of Minnesota except for new text begin iron ore, taconite concentrates, new text end sand, silica sand,
gravel, building stone, crushed rock, limestone, granite, dimension granite, dimension stone,
horticultural peat, clay, new text begin and new text end soil deleted text begin , iron ore, and taconite concentrates deleted text end . The tax is in addition
to all other taxes provided for by law.

Subd. 2.

deleted text begin Net deleted text end new text begin Gross new text end proceeds.

For purposes of this section, the term " deleted text begin net deleted text end new text begin gross new text end proceeds"
means the gross proceeds from mining, as defined in section 298.016 deleted text begin , less the deductions
for purposes of determining taxable income under section 298.01, subdivision 3b, applied
to the mining, production, processing, beneficiation, smelting, or refining of metal or mineral
products deleted text end . No deleted text begin other deleted text end credits or deductions shall apply to this tax.

new text begin Subd. 3. new text end

new text begin Deposit; distribution. new text end

new text begin Notwithstanding section 298.16, the taxes collected
under this section shall be deposited in a dedicated account in the special revenue fund.
Distributions of these taxes provided in section 298.018 shall be made from that dedicated
account.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2016.
new text end

Sec. 20. new text begin APPROPRIATION.
new text end

new text begin $22,000 in fiscal year 2018 and $22,000 in fiscal year 2019 are appropriated from the
general fund to the commissioner of revenue to administer sections 9 and 10. $22,000 shall
be added to the base appropriations to the Department of Revenue for fiscal years 2020 and
2021.
new text end

Sec. 21. new text begin REPEALER.
new text end

new text begin (a) new text end new text begin Minnesota Statutes 2016, section 297A.67, subdivision 33, new text end new text begin is repealed.
new text end

new text begin (b) new text end new text begin Laws 2011, First Special Session chapter 9, article 6, section 97, subdivision 6, new text end new text begin is
repealed.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin Paragraph (a) is effective for sales and purchases made after June
30, 2017. Paragraph (b) is effective the day following final enactment.
new text end

ARTICLE 7

SUSTAINABLE FOREST INCENTIVE ACT MODIFICATIONS

Section 1.

Minnesota Statutes 2016, section 290C.01, is amended to read:

290C.01 PURPOSE.

It is the policy of this state to promote sustainable forest resource management on the
state's public and private lands. deleted text begin Recognizing that deleted text end new text begin The state's new text end private forests comprise
approximately one-half of the state forest land resources deleted text begin , that healthy and robust forest land
provides significant benefits to the state of Minnesota, and that ad deleted text end new text begin . These forests play a
critical role in protecting water quality and soil resources, and provide extensive wildlife
habitat, diverse recreational experiences, and significant forest products that support the
state's economy. Ad new text end valorem property taxes represent a significant annual cost that can
discourage long-term forest management investments new text begin . In order to foster silviculture
investments and retain these forests for their economic and ecological benefits new text end , this chapter,
hereafter referred to as the "Sustainable Forest Incentive Act," is enacted to encourage the
state's private forest landowners to make a long-term commitment to sustainable forest
management.

new text begin EFFECTIVE DATE. new text end

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

Sec. 2.

Minnesota Statutes 2016, section 290C.02, subdivision 1, is amended to read:

Subdivision 1.

Application.

When used in sections 290C.01 to deleted text begin 290C.11 deleted text end new text begin 290C.13 new text end , the
terms in this section have the meanings given them.

new text begin EFFECTIVE DATE. new text end

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

Sec. 3.

Minnesota Statutes 2016, section 290C.02, subdivision 3, is amended to read:

Subd. 3.

Claimant.

(a) "Claimant" means:

(1) a person, as that term is defined in section 290.01, subdivision 2, who owns forest
land in Minnesota and files an application authorized by the Sustainable Forest Incentive
Act;

(2) a purchaser or grantee if property enrolled in the program was sold or transferred
after the original application was filed and prior to the annual incentive payment being
made; or

(3) an owner of land previously covered by an auxiliary forest contract that automatically
qualifies for inclusion in the Sustainable Forest Incentive Act program pursuant to section
88.49, subdivision 9a, or 88.491, subdivision 2.

deleted text begin The purchaser or grantee must notify the commissioner in writing of the sale or transfer
of the property. deleted text end new text begin (b) new text end Owners of land that qualifies for inclusion pursuant to section 88.49,
subdivision 9a, or 88.491, subdivision 2, must notify the commissioner in writing of the
expiration of the auxiliary forest contract or land trade with a governmental unit and submit
an application to the commissioner by deleted text begin August 15 deleted text end new text begin July 1 new text end in order to be eligible to receive a
payment by October 1 of that same year. For purposes of section 290C.11, claimant also
includes any person bound by the covenant required in section 290C.04.

deleted text begin (b) deleted text end new text begin (c) new text end No more than one claimant is entitled to a payment under this chapter with respect
to any tract, parcel, or piece of land enrolled under this chapter that has been assigned the
same parcel identification number. When enrolled forest land is owned by two or more
persons, the owners must determine between them which person is eligible to claim the
payments provided under sections 290C.01 to deleted text begin 290C.11 deleted text end new text begin 290C.13 new text end . In the case of property
sold or transferred, the former owner and the purchaser or grantee must determine between
them which person is eligible to claim the payments provided under sections 290C.01 to
deleted text begin 290C.11 deleted text end new text begin 290C.13 new text end . The owners, transferees, or grantees must notify the commissioner in
writing which person is eligible to claim the payments.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for certifications and applications due
in 2018 and thereafter.
new text end

Sec. 4.

Minnesota Statutes 2016, section 290C.02, subdivision 6, is amended to read:

Subd. 6.

Forest land.

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

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for applications made in 2018 and
thereafter.
new text end

Sec. 5.

Minnesota Statutes 2016, section 290C.03, is amended to read:

290C.03 ELIGIBILITY REQUIREMENTS.

(a) Land may be enrolled in the sustainable forest incentive program under this chapter
if all of the following conditions are met:

(1) the land consists of at least 20 contiguous acres and at least 50 percent of the land
must meet the definition of forest land in section 88.01, subdivision 7, during the enrollment;

(2) a forest management plan for the land must be prepared by an approved plan writer
and implemented during the period in which the land is enrolled;

(3) timber harvesting and forest management guidelines must be used in conjunction
with any timber harvesting or forest management activities conducted on the land during
the period in which the land is enrolled;

(4) the land must be enrolled for a minimum of eight years;

(5) there are no delinquent property taxes on the land; deleted text begin and
deleted text end

(6) claimants enrolling more than 1,920 acres new text begin or enrolling any land that is subject to a
conservation easement funded under section 97A.056, or a comparable permanent easement
conveyed to a governmental or nonprofit entity new text end in the sustainable forest incentive program
must allow year-round, nonmotorized access to fish and wildlife resources and motorized
access on established and maintained roads and trails, unless the road or trail is temporarily
closed for safety, natural resource, or road damage reasons on enrolled land except within
one-fourth mile of a permanent dwelling or during periods of high fire hazard as determined
by the commissioner of natural resources deleted text begin . deleted text end new text begin ;
new text end

new text begin (7) the claimant has registered the forest management plan under clause (2) with the
commissioner of natural resources, who has determined that the land meets qualifications
for enrollment; and
new text end

new text begin (8) no portion of the tax parcel containing the enrolled land is classified as class 2c
managed forest land.
new text end

(b) Claimants required to allow access under paragraph (a), clause (6), do not by that
action:

(1) extend any assurance that the land is safe for any purpose;

(2) confer upon the person the legal status of an invitee or licensee to whom a duty of
care is owed; or

(3) assume responsibility for or incur liability for any injury to the person or property
caused by an act or omission of the person.

new text begin (c) The commissioner of natural resources shall annually provide county assessors
verification information regarding plan registration under paragraph (a), clause (7), on a
timely basis.
new text end

new text begin (d) A minimum of three acres must be excluded from enrolled land when the land is
improved with a structure that is not a minor, ancillary, and nonresidential structure.
new text end

new text begin (e) An entire tax parcel is ineligible to be enrolled in the program if land contained within
the parcel does not meet the definition of forest land in section 290C.02, subdivision 6, for
any of the following reasons:
new text end

new text begin (1) the land is subject to the Minnesota agricultural property tax under section 273.111;
or
new text end

new text begin (2) the land is subject to agricultural land preservation controls or restrictions as defined
in section 40A.02, or the Metropolitan Agricultural Preserves Act under chapter 473H.
new text end

new text begin (f) Any acres enrolled in a state or federal conservation reserve or easement program
under sections 103F.501 to 103F.531 are ineligible for inclusion in the program under this
chapter.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for certifications and applications due
in 2018 and thereafter.
new text end

Sec. 6.

Minnesota Statutes 2016, section 290C.04, is amended to read:

290C.04 APPLICATIONS.

(a) A landowner may apply to enroll forest land for the sustainable forest incentive
program under this chapter. The claimant must complete, sign, and submit an application
to the commissioner by deleted text begin September 30 deleted text end new text begin October 31 new text end in order for the land to become eligible
beginning in the next year. The application shall be on a form prescribed by the deleted text begin commissioner deleted text end new text begin
commissioners of revenue and natural resources new text end and must include the information the
commissioner deems necessary. At a minimum, the application must show the following
information for the land and the claimant: (i) the claimant's Social Security number or state
or federal business tax registration number and date of birth, (ii) the claimant's address, (iii)
the claimant's signature, (iv) the county's parcel identification numbers for the tax parcels
that completely contain the claimant's forest land that is sought to be enrolled, (v) the number
of acres eligible for enrollment in the program, (vi) the approved plan writer's signature and
identification number, deleted text begin and deleted text end (vii) proof, in a form specified by the commissioner, that the
claimant has executed and acknowledged in the manner required by law for a deed, and
recorded, a covenant that the land is not and shall not be developed in a manner inconsistent
with the requirements and conditions of this chapter new text begin , and (viii) a registration number for
the forest management plan, issued by the commissioner of natural resources new text end . The covenant
shall state in writing that the covenant is binding on the claimant and the claimant's successor
or assignee, and that it runs with the land for a period of not less than eight years new text begin unless the
claimant requests termination of the covenant after a reduction in payments due to changes
in the payment formula under section 290C.07 or as a result of executive action, the amount
of payment a claimant is eligible to receive under section 290C.07 is reduced or limited new text end .
The commissioner shall specify the form of the covenant and provide copies upon request.
The covenant must include a legal description that encompasses all the forest land that the
claimant wishes to enroll under this section or the certificate of title number for that land if
it is registered land. new text begin The commissioner of natural resources shall record the area eligible
for enrollment into the Sustainable Forest Incentive Act as electronic geospatial data, as
defined in section 16E.30, subdivision 10.
new text end

new text begin (b) The commissioner shall provide by electronic means data sufficient for the
commissioner of natural resources to determine whether the applicant qualifies for enrollment.
The commissioner must make the data available within 30 days of receipt of the application
filed by the claimant by October 1, whichever is sooner. The commissioner of natural
resources must notify the commissioner whether the applicant qualifies for enrollment within
30 days of the data being available, and if the applicant qualifies for enrollment, the
commissioner of natural resources shall specify the number of qualifying acres per tax
parcel.
new text end

deleted text begin (b) In all cases, deleted text end new text begin (c) new text end The commissioner shall notify the claimant within 90 days after
receipt of a completed application that either the land has or has not been approved for
enrollment. A claimant whose application is denied may appeal the denial as provided in
section 290C.13.

deleted text begin (c) deleted text end new text begin (d) new text end Within 90 days after the denial of an application, or within 90 days after the final
resolution of any appeal related to the denial, the commissioner shall execute and
acknowledge a document releasing the land from the covenant required under this chapter.
The document must be mailed to the claimant and is entitled to be recorded.

deleted text begin (d) deleted text end new text begin (e) new text end The Social Security numbers collected from individuals under this section are
private data as provided in section 13.355. The federal business tax registration number and
date of birth data collected under this section are also private data on individuals or nonpublic
data, as defined in section 13.02, subdivisions 9 and 12, but may be shared with county
assessors for purposes of tax administration and with county treasurers for purposes of the
revenue recapture under chapter 270A.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for certifications and applications due
in 2018 and thereafter.
new text end

Sec. 7.

Minnesota Statutes 2016, section 290C.05, is amended to read:

290C.05 ANNUAL CERTIFICATION new text begin AND MONITORING new text end .

new text begin (a) new text end On or before deleted text begin July 1 deleted text end new text begin May 15 new text end of each year, beginning with the year after the original
claimant has received an approved application, the commissioner shall send each claimant
enrolled under the sustainable forest incentive program a certification form. For purposes
of this section, the deleted text begin original deleted text end claimant is the deleted text begin person that filed the first application under section
290C.04 to enroll the land in the program deleted text end new text begin current property owner on record, or the person
designated by the owners in the case of multiple ownership new text end . The claimant must sign new text begin and
return new text end the certification deleted text begin , attesting deleted text end new text begin to the commissioner by July 1 of that same year, and (1)
attest new text end that the requirements and conditions for continued enrollment in the program are
currently being met, and deleted text begin must return the signed certification form to the commissioner by
August 15 of that same year deleted text end new text begin (2) provide a report in the form and manner determined by the
commissioner of natural resources describing the management practices that have been
carried out on the enrolled property during the prior year new text end . If the claimant does not return an
annual certification form by the due date, the provisions in section 290C.11 apply. new text begin The
commissioner of natural resources must verify that the claimant meets program requirements.
new text end

new text begin (b) The commissioner must provide the certification form and annual report described
in paragraph (a), clause (2), to the commissioner of natural resources by August 1.
new text end

new text begin (c) The commissioner of natural resources must conduct annual monitoring of a subset
of claimants, excluding land also enrolled in a conservation easement program. Claimants
will be selected for monitoring based on reported violations, annual certification, and random
selections. Monitoring will be conducted on ten percent of claimants as of July 1 of each
year. Monitoring may include, but is not limited to, a site visit by a Department of Natural
Resources or contracted forester. The commissioner of natural resources must develop a
monitoring form to record the monitoring data.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin Paragraphs (a) and (b) are effective for certifications and
applications due in 2018 and thereafter. Paragraph (c) is effective July 1, 2019.
new text end

Sec. 8.

Minnesota Statutes 2016, section 290C.055, is amended to read:

290C.055 LENGTH OF COVENANT.

(a) deleted text begin The covenant remains in effect for a minimum of eight years. deleted text end new text begin Claimants enrolling
any land that is subject to a conservation easement funded under section 97A.056 or a
comparable permanent easement conveyed to a governmental or nonprofit entity must enroll
their land under a covenant with a minimum duration of eight years. All other claimants
may choose to enroll their land under a covenant with a minimum duration of eight, 20, or
50 years. new text end If deleted text begin land is removed deleted text end new text begin the claimant requests removal of land new text end from the program before
it has been enrolled for deleted text begin four years deleted text end new text begin one-half the number of years of the covenant's duration new text end ,
the covenant remains in effect for deleted text begin eight years deleted text end new text begin the entire duration of the covenant new text end from the
date recorded.

(b) If land that has been enrolled for deleted text begin four years deleted text end new text begin one-half the number of years of the
covenant's minimum duration new text end or more is removed from the program for any reason, there
is a waiting period before the covenant terminates. The covenant terminates on January 1
of the fifth new text begin , 11th, or 26th new text end calendar year new text begin for the eight-, 20- or 50-year minimum covenant,
respectively, new text end that begins after the date that:

(1) the commissioner receives notification from the claimant that the claimant wishes
to remove the land from the program under section 290C.10; or

(2) the date that the land is removed from the program under section 290C.11.

(c) Notwithstanding the other provisions of this section, the covenant is terminated:

(1) at the same time that the land is removed from the program due to acquisition of title
or possession for a public purpose under section 290C.10; or

(2) at the request of the claimant deleted text begin after deleted text end new text begin (i) if there is new text end a reduction in payments due to
changes in the payment formula under section 290C.07 new text begin ; or (ii) if, as a result of executive
action, the amount of payment a claimant is eligible to receive under section 290C.07 is
reduced or limited new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for certifications and applications in
2018 and thereafter.
new text end

Sec. 9.

Minnesota Statutes 2016, section 290C.07, is amended to read:

290C.07 CALCULATION OF INCENTIVE PAYMENT.

new text begin (a) new text end An approved claimant under the sustainable forest incentive program is eligible to
receive an annual payment new text begin for each acre of enrolled land, excluding any acre improved with
a paved trail under easement, lease or terminable license to the state of Minnesota or a
political subdivision new text end . The payment shall equal deleted text begin $7 per acre for each acre enrolled in the
sustainable forest incentive program. deleted text end new text begin a percentage of the property tax that would be paid
on the land determined by using the previous year's statewide average total tax rate for all
taxes levied within townships and unorganized territories, the estimated market value per
acre as calculated in section 290C.06, and a class rate of one percent as follows: (1) for
claimants enrolling land is subject to a conservation easement funded under section 97A.056
or a comparable permanent easement conveyed to a governmental or nonprofit entity before
May 31, 2013, 25 percent; (2) for claimants enrolling land that is not subject to a conservation
easement under an eight-year covenant, 65 percent; (3) for claimants enrolling land that is
not subject to a conservation easement under a 20-year covenant, 90 percent; and (4) for
claimants enrolling land that is not subject to a conservation easement under a 50-year
covenant, 115 percent.
new text end

new text begin (b) The calculated payment shall not be less than the payment received in 2017 and shall
not increase or decrease by more than ten percent relative to the payment received for the
previous year.
new text end

new text begin (c) In addition to the payments provided under this section, a claimant enrolling more
than 1,920 acres shall be allowed an additional payment per acre equal to the amount
prescribed in paragraph (a), clause (1), for all acres of enrolled land on which public access
is allowed, as required under section 290C.03, paragraph (a), clause (6), excluding any land
subject to a conservation easement funded under section 97A.056, or a permanent easement
conveyed to a governmental or nonprofit entity that is required to allow for public access
under section 290C.03, paragraph (a), clause (6).
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for calculations made in 2018 and
thereafter.
new text end

Sec. 10.

Minnesota Statutes 2016, section 290C.08, subdivision 1, is amended to read:

Subdivision 1.

Annual payment.

An incentive payment for each acre of enrolled land
will be made annually to each claimant in the amount determined under section 290C.07. new text begin
By September 15 of each year, the commissioner of natural resources will certify to the
commissioner the eligibility of each claimant to receive a payment. new text end The incentive payment
shall be paid new text begin by the commissioner new text end on or before October 1 each year based on the certifications
due deleted text begin August 15 deleted text end new text begin July 1 new text end of that year. Interest at the annual rate determined under section
270C.40 shall be included with any incentive payment not paid by the later of October 1 of
the year the certification was due, or 45 days after the completed certification was returned
or filed if the commissioner accepts a certification filed after deleted text begin August 15 deleted text end new text begin July 1 new text end of the taxes
payable year as the resolution of an appeal.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for certifications and applications due
in 2018 and thereafter.
new text end

Sec. 11.

Minnesota Statutes 2016, section 290C.10, is amended to read:

290C.10 WITHDRAWAL PROCEDURES.

deleted text begin An approved claimant deleted text end new text begin (a) The current owner of land enrolled new text end under the sustainable forest
incentive program for a minimum of deleted text begin four years deleted text end new text begin one-half the number of years of the covenant's
minimum duration new text end may notify the commissioner of the intent to terminate enrollment. Within
90 days of receipt of notice to terminate enrollment, the commissioner shall inform the
claimant in writing, acknowledging receipt of this notice and indicating the effective date
of termination from the sustainable forest incentive program. Termination of enrollment in
the sustainable forest incentive program occurs on January 1 of the fifth new text begin , 11th, or 26th new text end
calendar year new text begin for eight-, 20-, or 50-year respective minimum covenant new text end that begins after
receipt by the commissioner of the termination notice. After the commissioner issues an
effective date of termination, a claimant wishing to continue the land's enrollment in the
sustainable forest incentive program beyond the termination date must apply for enrollment
as prescribed in section 290C.04. A claimant who withdraws a parcel of land from this
program may not reenroll the parcel for a period of three years. Within 90 days after the
termination date, the commissioner shall execute and acknowledge a document releasing
the land from the covenant required under this chapter. The document must be mailed to
the claimant and is entitled to be recorded.

new text begin (b) Not withstanding paragraph (a), on request of the claimant, new text end the commissioner may
allow early withdrawal from the Sustainable Forest Incentive Act without penalty when the
state of Minnesota, any local government unit, or any other entity which has the power of
eminent domain acquires title or possession to the land for a public purpose deleted text begin notwithstanding
the provisions of this section deleted text end . In the case of deleted text begin such deleted text end new text begin an eligible new text end acquisition new text begin under this paragraph new text end ,
the commissioner shall execute and acknowledge a document releasing the land acquired
by the state, local government unit, or other entity from the covenant.

new text begin (c) Notwithstanding paragraph (a), upon request of the claimant, the commissioner shall
allow early withdrawal from the Sustainable Forest Incentive Act without penalty when a
government or nonprofit entity acquires a permanent conservation easement on the enrolled
property and the conservation easement is at least as restrictive as the covenant required
under section 290C.04. The commissioner of natural resources must notify the commissioner
of lands acquired under this paragraph that are eligible for withdrawal. In the case of an
eligible easement acquisition under this paragraph, the commissioner shall execute and
acknowledge a document releasing the land subject to the easement from the covenant.
new text end

new text begin (d) Notwithstanding paragraph (a), upon request of the claimant, the commissioner shall
allow early withdrawal from the Sustainable Forest Incentive Act without penalty for land
that is subject to fee or easement acquisition or lease to the state of Minnesota or a political
subdivision of the state for the public purpose of a paved trail. The commissioner of natural
resources must notify the commissioner of lands acquired under this paragraph that are
eligible for withdrawal. In the case of an eligible fee or easement acquisition or lease under
this paragraph, the commissioner shall execute and acknowledge a document releasing the
land subject to fee or easement acquisition or lease by the state or political subdivision of
the state.
new text end

new text begin (e) new text end All other enrolled land must remain in the program.

new text begin EFFECTIVE DATE. new text end

new text begin The amendments to paragraphs (c) and (d) are effective the day
following final enactment. The amendments to paragraphs (a), (b), and (e) are effective for
notifications made in 2018 and thereafter.
new text end

Sec. 12.

new text begin [290C.101] TRANSFER OF OWNERSHIP.
new text end

new text begin Subdivision 1. new text end

new text begin Definitions. new text end

new text begin (a) For purposes of this section, the following terms have
the meanings provided.
new text end

new text begin (b) "New owner" means a prospective purchaser or grantee.
new text end

new text begin (c) "Owner" means a grantor or seller.
new text end

new text begin Subd. 2. new text end

new text begin Notification to commissioner. new text end

new text begin (a) An owner must notify the commissioner if
the owner transfers any or all of the owner's land enrolled in the sustainable forest incentive
program to one or more new owners within 60 days of the transfer of title to the property.
The notification must include the legal descriptions of the transferred property, the tax parcel
numbers, and the name and address of the new owner. If transfer of ownership is a result
of the death of the claimant, the provisions of section 290C.12 shall apply.
new text end

new text begin (b) Upon notification, the commissioner shall inform the new owner of the restrictions
of the covenant required by section 290C.04 and the withdrawal procedures under section
290C.10. In order for the new owner to receive payments pursuant to this chapter, the new
owner must file an application and register a new forest management plan with the
commissioner of natural resources within two years from the date the title of the property
was transferred to remain eligible.
new text end

new text begin Subd. 3. new text end

new text begin Termination of enrollment. new text end

new text begin The commissioner will terminate enrollment
according to the procedure in section 290C.10 for failure of the new owner to register a
forest management plan within the time period of subdivision 2, paragraph (b).
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for transfers of ownership after June 30,
2017.
new text end

Sec. 13.

Minnesota Statutes 2016, section 290C.11, is amended to read:

290C.11 PENALTIES FOR REMOVAL.

(a) If the commissioner determines that land enrolled in the sustainable forest incentive
program is in violation of the conditions for enrollment as specified in section 290C.03, new text begin or
upon notification by the commissioner of natural resources that land enrolled is in violation
of the conditions for enrollment, new text end the commissioner shall notify the deleted text begin claimant deleted text end new text begin current owner
of the land new text end of the intent to remove deleted text begin all deleted text end new text begin the tax parcel of the new text end enrolled land new text begin where the violation
has occurred new text end from the sustainable forest incentive program. new text begin The penalties described under
paragraph (c) apply. new text end The deleted text begin claimant deleted text end new text begin current owner new text end has 60 days to appeal this determination
under the provisions of section 290C.13.

(b) If the commissioner determines the land is to be removed from the sustainable forest
incentive program new text begin due to the construction or addition of an improvement to the property new text end ,
the deleted text begin claimant deleted text end new text begin owner of the tax parcel that is in violation new text end is liable for payment to the
commissioner in the amount equal to new text begin ; (1) new text end the payments deleted text begin received deleted text end new text begin issued related to the enrolled
tax parcel new text end under this chapter for the deleted text begin previous four-year period deleted text end new text begin number of years the land has
been bound by the covenant, or half the covenant length, whichever is less new text end , plus interest new text begin ;
and (2) 25 percent of the estimated market value of the property as reclassified under section
273.13 due to the structure being on the tax parcel, as determined by the assessor new text end .

new text begin (c) If the commissioner of natural resources determines that the land is used for purposes
other than forestry purposes, the commissioner of natural resources shall notify the
commissioner of revenue, who shall notify the current owner of the tax parcel that is in
violation that the current owner is liable to the commissioner in an amount equal to: (1) 30
percent of the estimated market value as property reclassified under section 273.13, due to
the change in use, as determined by the assessor; and (2) the payments issued related to the
enrolled tax parcel under this chapter for the number of years the land has been bound by
the covenant, or half the covenant length, whichever is less, plus interest.
new text end

new text begin (d) new text end The claimant has 90 days to satisfy the payment for removal of land from the
sustainable forest incentive program under this section. If the penalty is not paid within the
90-day period under this paragraph, the commissioner shall certify the amount to the county
auditor for collection as a part of the general ad valorem real property taxes on the land in
the following taxes payable year.

new text begin EFFECTIVE DATE. new text end

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

Sec. 14.

Minnesota Statutes 2016, section 290C.13, subdivision 6, is amended to read:

Subd. 6.

Determination of appeal.

On the basis of applicable law and available
information, the commissioner shall determine the validity, if any, in whole or in part, of
the appeal and notify the claimant of the decision. This notice must be in writing and contain
the basis for the determination. new text begin The commissioner shall consult with the commissioner of
natural resources when an appeal relates to the use of the property for forestry or nonforestry
purposes and for appeals related to forest management plans.
new text end

new text begin EFFECTIVE DATE. new text end

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

Sec. 15. new text begin SUSTAINABLE FOREST INCENTIVE ACT; TRANSITION PROVISION.
new text end

new text begin (a) For lands enrolled in the Sustainable Forest Incentive Act on or before December
31, 2017, the owner of enrolled lands may elect through May 15, 2019, and without penalty,
to change the length of a covenant, if eligible, under Minnesota Statutes, section 290C.055.
The owner of the enrolled land must provide notice to the commissioner of revenue of its
intent to change the length of its covenant.
new text end

new text begin (b) For lands enrolled in the Sustainable Forest Incentive Act on or before December
31, 2017, the owner of enrolled land must comply with the changes made in the act by
certifications due in 2019, as required under Minnesota Statutes, section 290C.05.
new text end

new text begin EFFECTIVE DATE. new text end

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

Sec. 16. new text begin ADMINISTRATIVE APPROPRIATION.
new text end

new text begin $156,000 in fiscal year 2018 and $312,000 in fiscal year 2019 are appropriated from the
general fund to the commissioner of natural resources for administering this article. $231,000
shall be added to the base appropriations to the Department of Natural Resources for fiscal
years 2020 and 2021.
new text end

new text begin EFFECTIVE DATE. new text end

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

Sec. 17. new text begin REPEALER.
new text end

new text begin Minnesota Statutes 2016, section 290C.02, subdivisions 5 and 9, new text end new text begin are repealed.
new text end

new text begin EFFECTIVE DATE. new text end

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

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. new text begin REPEALER. new text end

new text begin Subd. 6. new text end

new text begin MinnesotaCare provider taxes. new text end

new text begin 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, new text end new text begin are repealed effective for gross revenues received after December 31, 2019. new text end

Repealed Minnesota Rule: 17-0142

8106.0100 DEFINITIONS.

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.

8106.0100 DEFINITIONS.

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.

8106.0100 DEFINITIONS.

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.

8106.0100 DEFINITIONS.

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.

8106.0100 DEFINITIONS.

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.

8106.0100 DEFINITIONS.

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.

8106.0100 DEFINITIONS.

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.

8106.0100 DEFINITIONS.

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.

8106.0100 DEFINITIONS.

Subp. 10.

Mainline track.

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

8106.0100 DEFINITIONS.

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.

8106.0100 DEFINITIONS.

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.

8106.0100 DEFINITIONS.

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.

8106.0100 DEFINITIONS.

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).

8106.0100 DEFINITIONS.

Subp. 17a.

STB.

"STB" means the Surface Transportation Board, a federal regulatory agency.

8106.0100 DEFINITIONS.

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.

8106.0100 DEFINITIONS.

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.

8106.0100 DEFINITIONS.

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.

8106.0100 DEFINITIONS.

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.

8106.0300 REPORTS 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.

8106.0300 REPORTS 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.

8106.0400 VALUATION.

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.

8106.0500 ALLOCATION.

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

8106.0600 ADJUSTMENTS 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

8106.0700 APPORTIONMENT.

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.

8106.0800 EQUALIZATION.

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.

8106.9900 EXAMPLE OF APPORTIONMENT PROCESS.

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