Skip to main content Skip to office menu Skip to footer
Minnesota Legislature

Office of the Revisor of Statutes

Key: (1) language to be deleted (2) new language

 

                         Laws of Minnesota 1986 

                          CHAPTER 2-H.F.No. 2 
           An act relating to agriculture; authorizing the 
          issuance of general obligation bonds to finance 
          certain payments to be made by the state on family 
          farm loan guarantees; providing an additional payment 
          to certain sellers; adjusting certain provisions of 
          the 1986 farm bill relating to mediation, farm 
          business management training, disposal of farm land by 
          corporations and agencies, deficiencies, and interest; 
          appropriating money; amending Minnesota Statutes 1984, 
          sections 41.51; 41.56, subdivision 4b; and 41.57, by 
          adding a subdivision; Minnesota Statutes 1985 
          Supplement, section 41.61; Laws 1986, chapter 398, 
          article 1, sections 7, subdivisions 2, 8, and by 
          adding subdivisions; 9, subdivision 2, and by adding a 
          subdivision; 11, subdivision 2; 12; 13; 14; article 8, 
          section 1; article 19, section 5, subdivision 1; 
          article 20, section 1; article 23, section 1, 
          subdivision 4; and article 29, section 1, subdivision 
          7; and proposing coding for new law in Minnesota 
          Statutes, chapters 41 and 583; repealing Laws 1986, 
          chapter 398, article 1, section 7, subdivision 3; 
          article 8; and article 29, section 1, subdivision 6.  
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 

                               ARTICLE 1  
    Section 1.  Minnesota Statutes 1984, section 41.51, is 
amended to read: 
    41.51 [PURPOSE.] 
    In order to aid farmers in obtaining credit for the 
acquisition of farm real estate, there is established a family 
farm security program which shall to provide state money in 
guarantee of loans made according to the provisions of Laws 
1976, Chapter 210 this chapter.  The family farm security 
program established by this chapter, and the issuance of state 
bonds under section 5, is necessary to develop the state's 
agricultural resources. 
    Sec. 2.  Minnesota Statutes 1984, section 41.56, 
subdivision 4b, is amended to read: 
    Subd. 4b.  [PROCEEDS OF SALE.] Proceeds from the sale of a 
parcel of property obtained by the state pursuant to under this 
section shall be paid into the state family farm program bond 
account to the extent that proceeds of bonds issued under 
section 5, have been expended by the commissioner of agriculture 
for the purposes specified in section 5.  The balance of the 
sale proceeds shall be paid into the general fund to the extent 
that funds were disbursed as payment adjustments by the 
commissioner and into the special account authorized in section 
41.61, subdivision 1, to the extent that funds from the special 
account were disbursed according to the terms of the family farm 
security loan guarantee and for any insurance premiums or taxes 
paid on the property.  Proceeds in excess of these amounts shall 
be paid to the lender to the extent that payment to the lender 
pursuant to the loan guarantee was less than the money due and 
payable to the lender under the family farm security loan. 
Proceeds in excess of these amounts shall be paid to cooperating 
agencies according to the terms of the family farm memorandum of 
understanding.  Additional proceeds, if any, shall be paid into 
the special account authorized in section 41.61, subdivision 1.  
    Sec. 3.  Minnesota Statutes 1984, section 41.57, is amended 
by adding a subdivision to read: 
    Subd. 4.  [ADDITIONAL PAYMENT; PRINCIPAL REDUCTION.] (a) 
The commissioner must annually pay to qualified sellers of 
property, financed by a family farm security loan, an amount 
approximately equal to the additional state income tax paid as a 
result of the inclusion in gross income of the interest and 
payment adjustment earned on a seller sponsored family farm 
security loan.  No payment may be made under this subdivision to 
a qualified seller, unless the seller agrees to reduce the 
outstanding principal amount of the loan by three percent 
effective beginning for the year in which application is made. 
    (b) The payment amount must be determined as follows: 
    (1) In order to qualify for a payment, the seller must 
apply to the commissioner by October 1, 1986.  The application 
must include a copy of the seller's 1985 state income tax 
return.  The commissioner must recompute the seller's total 
state income tax liability that would be due if the interest and 
payment adjustment amounts were not includable in gross income 
for state income tax purposes.  The commissioner may require the 
seller to compute these amounts as part of the application.  For 
calendar year 1986 the amount of the payment equals the 
reduction in state income tax liability that would occur if the 
interest and payment adjustment were not included in gross 
income for state tax purposes. 
    (2) For calendar years beginning with 1987, the additional 
payment amount must be determined as follows:  (A) The calendar 
year 1986 payment must be divided by the amount of interest and 
payment adjustment received during calendar year 1986.  (B) The 
resulting quotient must be multiplied by the interest and 
payment adjustment received for the calendar year.  (C) The 
product determined under clause (B) is the payment for the 
calendar year. 
    (c) If for a tax year after 1986 the qualified seller's 
taxable income has changed substantially, the commissioner may 
provide by rule that upon reapplication a later tax year will be 
used to compute the quotient under clause (b)(2)(A). 
    (d)(1) If the seller elects to receive payments under this 
subdivision, the buyer's payments of principal and interest 
under the loan must be recalculated.  The revised payment 
schedule must reflect the three percent reduction in the 
outstanding principal required by paragraph (a) and must provide 
for equal payments over the remaining term of the loan.  The 
interest rate on the loan may not be increased. 
    (2) The state's payment adjustment under subdivision 2 and 
the amount of the payment under paragraph (b) of this 
subdivision must be calculated on the basis of the outstanding 
principal amount of the loan before the reduction required by 
paragraph (a). 
    (e) The commissioner may make the payments under this 
subdivision in the same manner provided for the payment 
adjustment under subdivision 2. 
    (f) For purposes of this subdivision, the following terms 
have the meanings given: 
    (1) "Gross income" means gross income as defined for 
purposes of chapter 290. 
    (2) "Qualified seller" means an individual who sold farm 
land under a seller sponsored loan after April 1, 1978 and 
before June 28, 1985, and who is a resident of Minnesota during 
the calendar year and is subject to the payment of Minnesota 
income taxes. 
    Sec. 4.  Minnesota Statutes 1985 Supplement, section 41.61, 
is amended to read: 
    41.61 [APPROPRIATIONS.] 
    Subdivision 1.  [SPECIAL ACCOUNT; STANDING APPROPRIATION.] 
There is created a special account in the state treasury for the 
purposes of financing the family farm security program.  
    The amount needed from time to time to pay lenders for 
defaulted loans and make other payments authorized by this 
chapter including insurance premiums, taxes, repairs and 
maintenance costs, advertising, and other sales expenses on 
defaulted farms is appropriated from the special account to the 
commissioner.  Money is also appropriated to the commissioner 
from the special account so that the commissioner may purchase 
the rights of first lienholders at mortgage foreclosure sales 
and satisfy certain fixture loans.  The sum of all outstanding 
family farm security loans guaranteed by the commissioner at any 
time may not exceed $100,000,000.  All bond proceeds received in 
the fund must be used only for the purposes specified in section 
5. 
    Sec. 5.  [41.62] [GENERAL OBLIGATION BONDS.] 
    Subdivision 1.  [PROCEDURE.] Upon request of the 
commissioner of agriculture, the commissioner of finance is 
authorized to issue general obligation bonds of the state in a 
principal amount not exceeding $20,000,000 to acquire public 
lands by providing money to be paid by the commissioner of 
agriculture from the special account established by section 
41.61 to pay lenders for defaulted loans and to purchase the 
rights of first lienholders at mortgage foreclosure sales.  The 
bonds shall be secured as provided in the Minnesota 
Constitution, article XI, section 7, and, except as provided in 
this section, shall be issued and secured as provided in 
Minnesota Statutes, section 16A.641.  The proceeds of the bonds, 
except any premium and accrued interest, shall be deposited in 
the special account established in section 41.61 and used solely 
for the purposes specified above and in section 16A.641, 
subdivision 8.  The premium and accrued interest, if any, shall 
be deposited in the state family farm security program bond 
account in the state bond fund.  The commissioner shall issue 
only the amount of bonds as from time to time the commissioner 
determines are necessary for the purposes specified in this 
section. 
    Subd. 2.  [TERMS OF BONDS.] The commissioner of finance may 
fix the terms of the bonds in any manner permitted for bonds of 
a municipality under chapter 475, and may enter into, on behalf 
of the state, all agreements deemed necessary for this purpose, 
including those authorized to be entered into by municipalities 
in chapter 475.  
     Subd. 3.  [SALE OF BONDS.] If determined by the 
commissioner of finance to be necessary in order to reduce costs 
of issuance, to secure a favorable prevailing interest rate, or 
to receive the bond proceeds by a specified date, or if the 
terms of the bonds are fixed as provided in sections 475.54, 
subdivision 5a, and 475.56, paragraph (b), the bonds may be sold 
by negotiation and without solicitation of sealed bids.  
     Subd. 4.  [BOND FUND ACCOUNT.] The commissioner of finance 
shall maintain in the state bond fund a separate bookkeeping 
account that shall be designated as the state family farm 
security program bond account, to record receipts and 
disbursements of money transferred to the fund to pay bonds 
issued under this section and to record income from the 
investment of the money.  The income shall be credited to the 
account in each fiscal year in an amount equal to the 
approximate average return that year on all funds invested by 
the commissioner of finance, as determined by the commissioner 
of finance, times the average balance in the account that year.  
    Subd. 5.  [TRANSFERS, APPROPRIATION.] In addition to the 
money required to be transferred to the state family farm 
security program bond account under section 41.56, subdivision 
4b, and in order to reduce the amount of taxes otherwise 
required by the Minnesota Constitution to be levied for the 
state bond fund, the commissioner of finance shall transfer from 
the general fund to the state family farm security program bond 
account, on December 1 in each year, a sum of money sufficient 
in amount, when added to the balance then on hand in that 
account, to pay all bonds issued under this section and the 
interest on them due and to become due to and including July 1 
in the second ensuing year.  All money to be so credited and all 
income from its investment is annually appropriated for the 
payment of the bonds and interest on them, and shall be 
available in the state family farm security program bond account 
before the levy of the tax in any year required by the Minnesota 
Constitution, article XI, section 7.  The legislature may also 
appropriate to the state family farm security program bond 
account any other money in the state treasury not otherwise 
appropriated, for the security of bonds issued under this 
section in the event that sufficient money should not be 
available in the account from the appropriation in this section, 
before the levy of the tax in any year.  The commissioner of 
finance shall make the appropriate entries in the accounts of 
the respective funds.  
    Subd. 6.  [CONSTITUTIONAL LEVY.] On or before December 1 in 
each year the state auditor shall levy on all taxable property 
within the state whatever tax may be necessary to produce an 
amount sufficient, with all money then in the state family farm 
security program bond account, to pay the entire amount of 
principal and interest due then or earlier and principal and 
interest to become due on or before July 1 in the second year 
thereafter on bonds issued under this section.  This tax shall 
be levied upon all real property used for a homestead, as well 
as other taxable property, notwithstanding section 273.13, 
subdivisions 6 and 7.  The tax must not be limited in rate or 
amount until all the bonds and interest on them are fully paid.  
The proceeds of this tax are appropriated and shall be credited 
to the state bond fund, and the principal and interest on the 
bonds are payable from all the proceeds.  As much of the 
proceeds as is necessary, is appropriated for the payments.  If 
at any time there is insufficient money from the proceeds of the 
taxes to pay the principal and interest when due on the bonds, 
the principal and interest must be paid out of the general fund 
in the state treasury, and the amount necessary for the payment 
is appropriated. 
    Subd. 7.  [COMPLIANCE WITH FEDERAL LAW.] The commissioner 
of finance is authorized to covenant and agree with the holders 
of the bonds issued under this section that the state will 
comply, insofar as possible, with the provisions of the United 
States Internal Revenue Code now or hereafter enacted that are 
applicable to the bonds and that establish conditions under 
which the interest to be paid on the bonds will not be 
includable in gross income for federal tax purposes.  
    Subd. 8.  [TAXABILITY OF INTEREST.] The bonds authorized by 
this section may be issued without regard to whether the 
interest to be paid on them is includable in gross income for 
federal tax purposes. 
    Sec. 6.  [FAMILY FARM SECURITY ACT ADDITIONAL INTEREST 
PAYMENTS.] 
    $740,000 is appropriated to the commissioner of agriculture 
from the general fund for the biennium ending June 30, 1987 in 
order to make the payments required by section 3.  
    Sec. 7.  [APPROPRIATIONS FOR FAMILY FARM SECURITY PROGRAM.] 
    Subdivision 1.  [OPERATING EXPENSES.] 
$660,000 in fiscal year 1986 and 
$2,500,000 in fiscal year 1987 are 
appropriated to the commissioner of 
agriculture for transfer to the family 
farm security account in the special 
revenue fund created by Minnesota 
Statutes, section 41.61, subdivision 1, 
for accrued interest payments and other 
program expenses. 
Notwithstanding the provisions of Laws 
1985, First Special Session chapter 10, 
section 5, subdivision 3, no more than 
eight new loan guarantees may be 
approved for the biennium ending June 
30, 1987.  The participant's interest 
in a family farm loan guarantee 
executed before the effective date of 
this act may be assigned to a new 
participant. 
If the appropriation for 1986 is 
insufficient, the 1987 appropriation is 
available for it.  
    Subd. 2.  [GENERAL CONTINGENT.] 
$830,000 in fiscal year 1986 is 
appropriated from the general fund and 
is added to the appropriation in Laws 
1985, First Special Session chapter 13, 
section 45. 
The appropriation represents repayment 
to the account of advances made in 1986 
for the family farm security program. 
    Sec. 8.  [REPEALER.] 
    Laws 1986, chapter 398, articles 8 and 29, section 1, 
subdivision 6, are repealed.  
    Sec. 9.  [EFFECTIVE DATE.] 
    Sections 1 to 8 are effective the day after their final 
enactment. 

                               ARTICLE 2 
    Section 1.  Laws 1986, chapter 398, article 1, section 7, 
subdivision 2, is amended to read: 
    Subd. 2.  [AGRICULTURAL PROPERTY.] "Agricultural property" 
means real property that is principally used for farming as 
defined in section 500.24, subdivision 2, paragraph (a), and 
raising poultry, and personal property that is used as security 
to finance a farm operation or used as part of a farm operation 
including equipment, crops, livestock, and proceeds of the 
security.  "Agricultural property" shall also does not include 
agriculturally related businesses as defined by the 
commission personal property that is subject to a possessory 
lien under sections 514.18 to 514.22. 
    Sec. 2.  Laws 1986, chapter 398, article 1, section 7, 
subdivision 8, is amended to read: 
    Subd. 8.  [SERVE.] "Serve" means (1) personal service as in 
a district court civil action; (2) service by certified mail 
using return receipt signed by addressee only; or (3) actual 
delivery of required documents with signed receipt.  
    Sec. 3.  Laws 1986, chapter 398, article 1, section 7, is 
amended by adding a subdivision to read: 
    Subd. 7a.  [NECESSARY FARM OPERATING EXPENSES.] As used in 
section 12, "necessary farm operating expenses" means a sum or 
sums adequate to continue, during the mediation period, farm 
operations begun prior to the notice of default.  "Necessary 
farm operating expenses" does not include expenses for 
increasing the scale of an on-going farming operation or 
planting additional crops. 
    Sec. 4.  Laws 1986, chapter 398, article 1, section 7, is 
amended by adding a subdivision to read: 
    Subd. 7b.  [NECESSARY LIVING EXPENSES.] As used in section 
12, "necessary living expenses" means a sum approximately equal 
to the amount to which the family would be entitled if eligible 
for payments under section 256.74. 
    Sec. 5.  Laws 1986, chapter 398, article 1, section 9, 
subdivision 2, is amended to read: 
    Subd. 2.  [DEBTORS.] (a) Except as provided in paragraph 
(b) the farmer-lender mediation act applies to a debtor who is: 
    (1) a person operating a family farm as defined in section 
500.24, subdivision 2; 
    (2) a family farm corporation as defined in section 500.24, 
subdivision 2; or 
    (3) an authorized farm corporation as defined in section 
500.24, subdivision 2; or 
    (4) an owner of an agriculturally related business. 
    (b) The farmer-lender mediation act does not apply to a 
debtor who owns and leases less than 60 acres with less than 
$20,000 in gross sales of agricultural products the preceding 
year, except for an owner of an agriculturally related business 
as defined by the director.  
    Sec. 6.  Laws 1986, chapter 398, article 1, section 9, is 
amended by adding a subdivision to read: 
    Subd. 3.  [FINANCIAL INSTITUTION UNDER CEASE AND DESIST 
ORDER.] Upon the request of an institution, as defined in 
section 46.23, subdivision 4, the commissioner of commerce may 
exempt the institution from the farmer-lender mediation act 
without a hearing or contested case proceeding if: 
    (1) the institution is subject to a cease and desist order 
issued under sections 46.23 to 46.33; and 
    (2) the commissioner determines that exemption is essential 
to the financial survival of the institution.  
    The commissioner shall notify the director that the 
institution is exempt from mediation.  The director shall notify 
the mediator that the institution is exempt.  The reason for the 
exemption is confidential. 
    Sec. 7.  Laws 1986, chapter 398, article 1, section 11, 
subdivision 2, is amended to read: 
    Subd. 2.  [MEDIATION REQUEST.] (a) A debtor must file a 
mediation request form with the director by 14 days after 
receiving a mediation notice.  The mediation request form must 
state all known creditors.  The director shall make mediation 
request forms available in the county recorder's and county 
extension office of each county. 
    (b) A debtor who fails to file a timely mediation request 
waives the right to mediation under the farmer-lender mediation 
act.  The director shall notify a creditor stating that the 
creditor may proceed against the agricultural property because 
the debtor has failed to file a mediation request. 
    (c) If a debtor has not received a mediation notice and is 
subject to a proceeding of a creditor enforcing a debt against 
agricultural property under chapter 580 or 581 or sections 
336.9-501 to 336.9-508, terminating a contract for deed to 
purchase agricultural property under section 559.21, or 
garnishing, levying on, executing on, seizing, or attaching 
agricultural property, the debtor may file a mediation request 
with the commission director.  The mediation request form must 
indicate that the debtor has not received a mediation notice. 
    Sec. 8.  Laws 1986, chapter 398, article 1, section 12, is 
amended to read: 
    Subdivision 1.  [OBLIGATION OF GOOD FAITH.] The parties 
must engage in mediation in good faith.  Not participating in 
good faith includes:  (1) a failure on a regular or continuing 
basis to attend and participate in mediation sessions without 
cause; (2) failure to provide full information regarding the 
financial obligations of the parties and other creditors; (3) 
failure of the creditor to designate a representative to 
participate in the mediation with adequate authority to make 
binding commitments within one business day to fully settle, 
compromise, or otherwise mediate the matter; (4) lack of a 
written statement of debt restructuring alternatives and a 
statement of reasons why alternatives are unacceptable to one of 
the parties; (5) failure of the a creditor to release funds from 
the sale of farm products to the debtor for necessary living and 
farm operating expenses; or (6) other similar behavior which 
evidences lack of good faith by the party.  A failure to agree 
to reduce, restructure, refinance, or forgive debt does not, in 
itself, evidence lack of good faith by the creditor. 
    Subd. 2.  [LACK OF GOOD FAITH AFFIDAVIT; MEDIATOR'S 
RESPONSIBILITY.] If the mediator determines that either party is 
not participating in good faith as defined in subdivision 1, the 
mediator shall file an affidavit indicating the reasons for the 
finding with the agricultural extension service director and 
both with parties to the mediation. 
    Subd. 3.  [CREDITOR'S LACK OF GOOD FAITH; COURT SUPERVISED 
MEDIATION.] If the mediator finds the creditor has not 
participated in mediation in good faith, the debtor may require 
court supervised mandatory mediation by filing the affidavit 
with the district court of the county where the property is 
located with a request for court supervision of mediation and 
filing serving a copy of the request with on the creditor.  Upon 
request the court shall require both parties to mediate under 
the supervision of the court in good faith for a period of 
not less more than 60 days.  All creditor remedies must be 
suspended during this period.  The court may issue orders 
necessary to effect good faith mediation.  Following the 60-day 
mediation period, if the court finds the creditor has not 
participated in mediation in good faith, the court shall by 
order suspend the creditor's remedies for an additional period 
of 180 days.  A creditor found by the mediator not to have 
participated in good faith shall pay attorneys' fees and costs 
of the debtor requesting court-supervision of mediation or 
additional suspension of creditor's remedies. 
    Subd. 4.  [DEBTOR LACK OF GOOD FAITH.] A creditor may 
immediately proceed with creditor's remedies upon receipt of a 
mediator's affidavit of a debtor's lack of good faith 
notwithstanding any other requirements of sections 5 to 17. 
    Sec. 9.  Laws 1986, chapter 398, article 1, section 13, is 
amended to read: 
    Sec. 13.  [583.28] [CREDITOR NOT ATTENDING MEDIATION 
MEETING.] 
    Subdivision 1.  [FILING AND EFFECT OF CLAIM FORM.] A 
creditor that is notified of the initial mediation meeting is 
subject to and bound by a mediation agreement if the creditor 
does not attend mediation meetings unless the creditor files a 
claim form.  In lieu of attending a mediation meeting, a 
creditor may file a notice of claim and proof of claim on a 
claim form with the mediator before the scheduled meeting.  By 
filing a claim form the creditor agrees to be bound by a 
mediation agreement reached at the mediation meeting unless an 
objection is filed within the time specified.  The mediator must 
notify the creditors who have filed claim forms of the terms of 
any agreement reached at the farm mediation board meeting.  
    Subd. 2.  [OBJECTIONS TO AGREEMENTS.] A creditor who has 
filed a claim form may serve a written objection to the terms of 
the agreement on the mediator and the debtor by within ten days 
after receiving notice of the agreement.  If a creditor files an 
objection to the terms of an agreement, the mediator may shall 
meet again with debtors and creditors by within ten days after 
receiving the objection to attempt to reach mediate a new 
agreement.  Notwithstanding the mediation period under section 
11, subdivision 8, if an objection is filed, the mediator may 
shall call mediation meetings during the ten-day period 
following receipt of the objection. 
    Sec. 10.  [583.285] [RULES.] 
    The state court administrator, in consultation with the 
director of the bureau of mediation services and the director of 
the University of Minnesota agricultural extension service, 
shall make rules under chapter 14, to implement the 
farmer-lender mediation act.  The state court administrator may 
adopt emergency rules. 
    Sec. 11.  Laws 1986, chapter 398, article 1, section 14, is 
amended to read: 
    Sec. 14.  [583.29] [PRIVATE DATA.] 
    All data regarding the finances of individual debtors and 
creditors created, collected, and maintained by the mediators or 
the debt restructuring commission director are classified as 
private data on individuals under section 13.02, subdivision 12, 
or nonpublic data under section 13.02, subdivision 9. 
    Sec. 12.  Laws 1986, chapter 398, article 29, section 1, 
subdivision 7, is amended to read: 
    Subd. 7.  [AVTI AND UNIVERSITY OF MINNESOTA TECHNICAL 
COLLEGES FARM BUSINESS MANAGEMENT TRAINING TUITION SUPPLEMENT.] 
$1,350,000 is appropriated from the general fund to the state 
board of vocational technical education, for the biennium ending 
June 30, 1987, for the following services in proportions deemed 
necessary by the board to the agricultural independent school 
districts, area vocational technical institutes, and the 
University of Minnesota two-year technical colleges for: 
    (1) reduced tuition costs for existing farm business 
management and small business management programs; and 
    (2) additional farm business management programs and 
workshops.  
    Sec 13.  Laws 1986, chapter 398, article 20, section 1, is 
amended to read:  
    Subd. 6.  [DISPOSAL OF LAND.] A state or federal agency or 
a corporation, other than a family farm corporation or an 
authorized farm corporation, when leasing or selling farm land 
or a farm homestead, must offer or make a good faith effort to 
offer land for sale or lease to the immediately preceding former 
owner at a price no higher than the highest price offered by a 
third party that is acceptable to the seller or lessor.  An 
offer to lease to the former owner is required only on the first 
occasion on which the property is leased.  An offer to sell to 
the former owner is required only on the first occasion on which 
the property is sold.  An offer delivered by certified mail to 
the former owner's last known address is a good faith offer.  
This subdivision does not apply to a sale or lease that occurs 
after the seller or lessor has held the property for five years. 
    The former owner must exercise the right to lease farm land 
within 30 ten days after receiving an offer to lease under this 
subdivision.  The former owner must exercise the right to buy 
farm land within 90 60 days after receiving an offer to buy 
under this subdivision.  This subdivision does not apply if the 
former owner is a bankruptcy estate. 
    Sec. 14.  [REPEALER.] 
    Laws 1986, chapter 398, article 1, section 7, subdivision 
3, is repealed. 
    Sec. 15.  [EFFECTIVE DATE.] 
    This article is effective the day following final enactment.

                               ARTICLE 3 
    Section 1.  Laws 1986, chapter 398, article 8, section 1, 
is amended to read: 
    Section 1.  [41.595] [FAMILY FARM SECURITY INTEREST 
EXCLUSIONS.] 
    (a) The commissioner shall annually pay to qualified 
sellers of property, financed by a family farm security loan, an 
amount approximately equal to the additional state income tax 
paid as a result of the inclusion in gross income of the 
interest and payment adjustment earned on a seller-sponsored 
family farm security loan. 
    (b) The payment amount must be determined as follows: 
    (1) In order to qualify for a payment, the seller must 
apply to the commissioner.  The application must include a copy 
of the seller's 1985 state income tax return and any other 
information that the commissioner requests to verify that the 
applicant is a qualified seller.  The commissioner shall 
recompute the seller's total state income tax liability that 
would be due if the interest and payment adjustment amounts were 
not includable in gross income for state income tax purposes.  
The commissioner may require the seller to compute these amounts 
as part of the application.  For calendar year 1986 the amount 
of the payment equals the reduction in state income tax 
liability that would occur if the interest and payment 
adjustment were not included in gross income for state tax 
purposes. 
    (2) For calendar years beginning with 1987, the additional 
payment amount must be determined as follows: 
    (i) The calendar year 1986 payment must be divided by the 
amount of interest and payment adjustment received during 
calendar year 1986. 
    (ii) The resulting quotient must be multiplied by the 
interest and payment adjustment received for the calendar year. 
    (iii) The product determined under clause (ii) is the 
payment for the calendar year. 
    (c) If for a tax year after 1986 the qualified seller's 
taxable income has changed substantially, the commissioner may 
provide by rule that upon reapplication a later tax year will be 
used to compute the quotient under clause (b)(2)(i). 
    (d) The commissioner may make the payments under this 
subdivision section in the same manner provided for the payment 
adjustment under section 41.57, subdivision 2. 
    (e) For purposes of this subdivision section, the following 
terms have the meanings given: 
    (1) "Gross income" means gross income as defined for 
purposes of chapter 290. 
    (2) "Qualified seller" means an individual who sold farm 
land under a seller-sponsored loan prior to July 1, 1985, and 
who is a resident of Minnesota during the calendar year and 
subject to the payment of Minnesota income taxes. 
    Sec. 2.  Laws 1986, chapter 398, article 19, section 5, 
subdivision 1, is amended to read: 
    Subdivision 1.  [DEFICIENCY ALLOWED.] (a) Except as 
provided in this section, a person holding a mortgage may obtain 
a deficiency judgment against the mortgagor if the amount a 
person holding a mortgage receives from a foreclosure sale is 
less than: 
    (1) the amount remaining unpaid on the mortgage under 
chapter 580; or 
    (2) the amount of the judgment entered under chapter 581. 
    (b) Except as provided in subdivision subdivisions 3 and 5, 
the judgment may not be for more than the difference between the 
amount received from the foreclosure sale less expenses and 
costs and: 
    (1) for a foreclosure by advertisement, the total amount 
that attaches to the sale proceeds under chapter 580; or 
    (2) for a foreclosure by action, the amount of the judgment 
entered under chapter 581. 
    Sec. 3.  Laws 1986, chapter 398, article 23, section 1, 
subdivision 4, is amended to read: 
    Subd. 4.  [COMMISSIONER'S INTEREST INDEX.] "Commissioner's 
interest index" means an interest rate that is three percent 
above the current lending rate of the Federal Interest 
Intermediate Credit Bank to production credit associations as 
certified each month by the commissioner. 
    Sec. 4.  [EFFECTIVE DATE.] 
    This article is effective the day following final enactment.
    Approved April 11, 1986