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Minnesota Session Laws - 1988, Regular Session

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

  

                         Laws of Minnesota 1988 

                        CHAPTER 719-H.F.No. 2590 
           An act relating to the financing of government in 
          Minnesota; changing tax rates and bases; modifying the 
          administration, collection, and enforcement of taxes; 
          imposing taxes; changing the computation, 
          administration, and payment of aids, credits, and 
          refunds; limiting taxing powers; transferring and 
          imposing governmental powers and duties; making 
          technical corrections and clarifications; providing 
          bonding authority to Hennepin county, Ramsey county, 
          the city of Little Falls, and the city of Shafer; 
          authorizing establishment of special service districts 
          in the cities of Robbinsdale, Minneapolis, and White 
          Bear Lake; imposing penalties; appropriating money and 
          reducing appropriations; amending Minnesota Statutes 
          1986, sections 62E.13, by adding a subdivision; 
          69.031, subdivision 3; 183.411, subdivisions 1, 3, and 
          by adding a subdivision; 183.466; 183.51, subdivisions 
          4, 7, and 10; 237.075, subdivision 8; 256.72; 256.81; 
          256.82, subdivision 1; 256.863; 256.871, subdivision 
          6; 256.935, subdivision 1; 256.991; 256B.041, 
          subdivisions 5 and 7; 256B.05, subdivision 1; 256B.19, 
          subdivision 2; 256D.03, subdivision 6; 256D.04; 
          256D.36, subdivision 1; 270.075, subdivision 2; 
          270.41; 270.70, subdivision 1; 271.01, subdivision 5; 
          273.01; 273.05, subdivision 1; 273.061, subdivision 2; 
          273.112, subdivisions 3 and 6; 273.121; 273.124, 
          subdivisions 1 and 6; 273.13, by adding a subdivision; 
          273.1315; 273.40; 275.07, by adding a subdivision; 
          275.08, by adding subdivisions; 275.51, subdivision 
          3f, and by adding a subdivision; 277.05; 277.06; 
          279.01, subdivision 3; 287.21, by adding a 
          subdivision; 290.01, by adding subdivisions; 290.06, 
          by adding a subdivision; 290.067, subdivision 1; 
          290.39, by adding a subdivision; 290.50, subdivision 
          3; 290.92, subdivision 21; 290.931, subdivision 1; 
          290.934, subdivisions 1, 3, and by adding a 
          subdivision; 290A.03, subdivision 7; 290A.04, by 
          adding a subdivision; 297.01, by adding a subdivision; 
          297.03, subdivision 12, and by adding a subdivision; 
          297.041, subdivision 1; 297.06, subdivisions 1, 2, 3, 
          and by adding a subdivision; 297.08, subdivision 1; 
          297.12, subdivision 1; 297.35, by adding a 
          subdivision; 297A.15, subdivisions 1 and 5; 297A.16; 
          297A.17; 297A.21; 297A.25, subdivision 5, and by 
          adding subdivisions; 297A.256; 297A.35, subdivision 1; 
          297C.02, subdivisions 3 and 4; 297C.03, by adding a 
          subdivision; 297C.07; 297D.08; 298.223; 298.28, 
          subdivisions 3 and 6; 299.01, subdivision 1; 303.03; 
          329.11; 349.12, subdivision 18, and by adding 
          subdivisions; 349.2121, subdivisions 1, 2, 5, and by 
          adding a subdivision; 349.22, subdivision 1, and by 
          adding subdivisions; 373.40, subdivision 4; 375.192, 
          subdivision 1; 387.212; 393.07, subdivision 2; 
          473.843, subdivision 2; 473F.02, by adding a 
          subdivision; 473F.07, subdivisions 4 and 5; 473F.08, 
          subdivisions 1, 3, 3a, 5, and 10; 473F.10; 477A.011, 
          by adding subdivisions; 477A.015; and 507.235, 
          subdivision 1; Minnesota Statutes 1987 Supplement, 
          sections 16A.15, subdivision 6; 16A.1541; 60A.15, 
          subdivision 1; 60E.04, subdivision 4; 69.021, 
          subdivision 5; 69.54; 124.155, subdivision 2; 
          124.2131, subdivision 3; 124.2139; 124A.02, 
          subdivisions 3a and 11; 256.01, subdivision 2; 
          256B.091, subdivision 8; 256B.15; 256B.19, subdivision 
          1; 256B.431, subdivision 2b; 256D.03, subdivision 2; 
          256G.01, subdivision 3; 256G.02, subdivision 4; 
          256G.04, subdivision 1; 256G.05; 256G.07; 256G.10; 
          256G.11; 270.485; 272.01, subdivision 2; 272.02, 
          subdivision 1; 272.115, subdivision 4; 272.121; 
          273.061, subdivision 1; 273.1102, by adding a 
          subdivision; 273.1195; 273.123, subdivisions 4 and 5; 
          273.124, subdivisions 8, 11, and 13; 273.13, 
          subdivisions 15a, 22, 23, 24, 25, and 31; 273.135, 
          subdivision 2; 273.1391, subdivision 2; 273.1392; 
          273.1393; 273.165, subdivision 2; 273.37, subdivision 
          2; 274.01, subdivision 1; 275.07, subdivision 1; 
          275.50, subdivisions 2 and 5; 275.51, subdivisions 3h 
          and 3i; 276.04; 276.06; 279.01, subdivision 1; 290.01, 
          subdivisions 3a, 4, 5, 7, 19, 19a, 19b, 19c, 19d, 19e, 
          20, and 29; 290.015, subdivisions 1, 2, 3, and 4; 
          290.032, subdivision 2; 290.06, subdivisions 1, 2c, 
          and 21; 290.081; 290.092, subdivisions 3, 4, 5, and by 
          adding a subdivision; 290.095, subdivisions 1, 2, 3, 
          and by adding a subdivision; 290.10; 290.17, 
          subdivisions 2 and 4; 290.191, subdivisions 1, 4, 5, 
          6, and 11; 290.21, subdivisions 3 and 4; 290.34, 
          subdivision 2; 290.35, subdivision 2; 290.37, 
          subdivision 1; 290.371, subdivisions 1, 3, 4, and 5; 
          290.38; 290.41, subdivision 2; 290.491; 290.92, 
          subdivisions 7 and 15; 290.934, subdivision 2; 
          290.9725; 290A.03, subdivisions 3, 13, 14, and 15; 
          290A.04, subdivisions 2 and 2b; 290A.06; 295.32; 
          295.34, subdivision 1; 297.01, subdivisions 7 and 14; 
          297.03, subdivision 6; 297.11, subdivision 5; 297A.01, 
          subdivision 3; 297A.212; 297A.25, subdivisions 3 and 
          11; 297B.03; 297C.04; 298.01, subdivisions 3 and 4; 
          298.22, subdivision 1; 298.2213, subdivision 3; 
          349.212, subdivisions 1 and 4; 349.2121, subdivisions 
          4a and 10; 349.2122; 349.2123; 393.07, subdivision 10; 
          469.170, by adding a subdivision; 469.174, 
          subdivisions 2, 7, 10, 11, and by adding subdivisions; 
          469.175, subdivisions 1, 2, 3, 4, and by adding 
          subdivisions; 469.176, subdivisions 1, 4, 5, and 6; 
          469.177, subdivisions 1, 3, 4, and by adding 
          subdivisions; 469.179; 473.446, subdivision 1; 
          473F.02, subdivision 4; 473F.05; 473F.06; 473F.07, 
          subdivision 1; 473F.08, subdivisions 2, 4, and 6; 
          475.53, subdivision 4; 475.61, subdivision 3; 
          477A.013, subdivisions 1, 2, and by adding 
          subdivisions; and 508.25; Laws 1987, chapter 268, 
          articles 3, section 12; 6, sections 53 and 54; Laws 
          1988, chapter 516, section 3; proposing coding for new 
          law in Minnesota Statutes, chapters 256, 270, 273, 
          275, 290, 290A, 297, 297C, 298, 349, 375, and 424A; 
          proposing coding for new law as Minnesota Statutes, 
          chapter 428A; repealing Minnesota Statutes 1986, 
          sections 13.58; 124.2131, subdivision 4; 124.2137; 
          124.2139; 124A.031, subdivision 4; 256.965; 272.64; 
          273.112, subdivision 9; 273.115; 273.116; 273.13, 
          subdivisions 7a, 26, 27, 28, 29, and 30; 273.1311; 
          273.1315; 273.135, subdivision 5; 273.1391, 
          subdivision 4; 275.035; 275.49; 275.50, subdivisions 
          3, 7, and 8; 290.07, subdivisions 3 and 6; 290.11; 
          290.12, as amended; 290.131, as amended; 290.132, as 
          amended; 290.133, as amended; 290.134, as amended; 
          290.135, as amended; 290.136, as amended; 290.138, as 
          amended; 290.934, subdivision 4; 297A.15, subdivision 
          2; 297C.03, subdivision 5; 298.401; 299.013; 477A.011, 
          subdivisions 4, 5, 6, 7a, 10, 11, 12, 13, and 14; 
          Minnesota Statutes 1987 Supplement, sections 256D.22; 
          273.1102, subdivision 2; 273.1195; 273.13, 
          subdivisions 9 and 15a; 273.1394; 273.1395; 273.1396; 
          273.1397; 275.081; 275.082; 275.125, subdivision 22; 
          290.06, subdivision 20; 290.077, subdivision 1; 
          290.14; 290.21, subdivision 8; 290.371, subdivision 2; 
          290A.04, subdivision 2a; 296.02, subdivisions 2a and 
          2b; 296.025, subdivisions 2a and 2b; and 477A.011, 
          subdivision 7; Laws 1987, chapter 268, articles 3, 
          section 11; and 6, section 19. 
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 

                                ARTICLE 1

                         INDIVIDUAL INCOME TAX
    Section 1.  Minnesota Statutes 1987 Supplement, section 
290.01, subdivision 3a, is amended to read:  
    Subd. 3a.  [TRUST.] The term "trust" has the meaning given 
in provided under the Internal Revenue Code of 1986, as amended 
through December 31, 1986 1987. 
    Sec. 2.  Minnesota Statutes 1987 Supplement, section 
290.01, subdivision 7, is amended to read:  
    Subd. 7.  [RESIDENT.] The term "resident" means (1) any 
individual domiciled in Minnesota, except that an individual is 
not a "resident" for the period of time that the individual is a 
"qualified individual" as defined in section 911(d)(1) of the 
Internal Revenue Code of 1986, as amended through December 31, 
1986, unless, during that period, a Minnesota homestead 
application is filed for property in which the individual has an 
interest; and (2) any individual domiciled outside the state who 
maintains a place of abode in the state and spends in the 
aggregate more than one-half of the tax year in Minnesota, 
unless the individual or the spouse of the individual is in the 
armed forces of the United States, or the individual is covered 
under the reciprocity provisions in section 290.081. 
    For purposes of this subdivision, presence within the state 
for any part of a calendar day constitutes a day spent in the 
state.  Individuals shall keep adequate records to substantiate 
the days spent outside the state. 
    Sec. 3.  Minnesota Statutes 1987 Supplement, section 
290.01, subdivision 19a, is amended to read:  
    Subd. 19a.  [ADDITIONS TO FEDERAL TAXABLE INCOME.] For 
individuals, estates, and trusts, there shall be added to 
federal taxable income: 
    (1)(i) interest income on obligations of any state other 
than Minnesota or a political or governmental subdivision, 
municipality, or governmental agency or instrumentality of any 
state other than Minnesota exempt from federal income taxes 
under the Internal Revenue Code or any other federal statute, 
and 
    (ii) exempt-interest dividends as defined in section 
852(b)(5)(A) of the Internal Revenue Code of 1986, except the 
portion of the exempt-interest dividends derived from interest 
income on obligations of the state of Minnesota or its political 
or governmental subdivisions, municipalities, governmental 
agencies or instrumentalities, but only if the portion of the 
exempt-interest dividends from such Minnesota sources paid to 
all shareholders represents 95 percent or more of the 
exempt-interest dividends that are paid by the fund or series of 
funds regulated investment company as defined in section 851(a) 
of the Internal Revenue Code of 1986, or the fund of the 
regulated investment company as defined in section 851(q) of the 
Internal Revenue Code of 1986, making the payment; and 
    (2) the amount of income taxes paid or accrued within the 
taxable year under this chapter and income taxes paid to any 
other state or to any province or territory of Canada, to the 
extent allowed as a deduction under section 63(d) of the 
Internal Revenue Code, but the addition may not be more than the 
amount by which the itemized deductions as allowed under section 
63(d) of the Internal Revenue Code exceeds the amount of the 
standard deduction as defined in section 63(c) of the Internal 
Revenue Code; and 
    (3) the capital gain amount of a lump sum distribution to 
which the special tax under section 1122(h)(3)(B)(ii) of the Tax 
Reform Act of 1986, Public Law Number 99-514, applies. 
    Sec. 4.  Minnesota Statutes 1987 Supplement, section 
290.01, subdivision 19b, is amended to read: 
    Subd. 19b.  [SUBTRACTIONS FROM FEDERAL TAXABLE INCOME.] For 
individuals, estates, and trusts, there shall be subtracted from 
federal taxable income: 
    (1) interest income on obligations of any authority, 
commission, or instrumentality of the United States to the 
extent includable in taxable income for federal income tax 
purposes but exempt from state income tax under the laws of the 
United States; 
    (2) if included in federal taxable income, the amount of 
any overpayment of income tax to Minnesota or to any other 
state, for any previous taxable year, whether the amount is 
received as a refund or as a credit to another taxable year's 
income tax liability; and 
    (3) the amount paid to others not to exceed $650 for each 
dependent in grades kindergarten to six and $1,000 for each 
dependent in grades seven to 12, for tuition, textbooks, and 
transportation of each dependent in attending an elementary or 
secondary school situated in Minnesota, North Dakota, South 
Dakota, Iowa, or Wisconsin, wherein a resident of this state may 
legally fulfill the state's compulsory attendance laws, which is 
not operated for profit, and which adheres to the provisions of 
the Civil Rights Act of 1964 and chapter 363.  As used in this 
clause, "textbooks" includes books and other instructional 
materials and equipment used in elementary and secondary schools 
in teaching only those subjects legally and commonly taught in 
public elementary and secondary schools in this state.  
"Textbooks" does not include instructional books and materials 
used in the teaching of religious tenets, doctrines, or worship, 
the purpose of which is to instill such tenets, doctrines, or 
worship, nor does it include books or materials for, or 
transportation to, extracurricular activities including sporting 
events, musical or dramatic events, speech activities, driver's 
education, or similar programs.  In order to qualify for the 
subtraction under this clause the taxpayer must elect to itemize 
deductions under section 63(e) of the Internal Revenue Code of 
1986, as amended through December 31, 1986; 
    (4) to the extent included in federal taxable income, 
distributions from a qualified governmental pension plan, an 
individual retirement account, simplified employee pension, or 
qualified plan covering a self-employed person that represent a 
return of contributions that were included in Minnesota gross 
income in the taxable year for which the contributions were made 
but were deducted or were not included in the computation of 
federal adjusted gross income.  The distribution shall be 
allocated first to return of contributions until the 
contributions included in Minnesota gross income have been 
exhausted.  This subtraction applies only to contributions made 
in a taxable year prior to 1985; 
    (5) income as provided under section 10; and 
     (6) the amount of unrecovered accelerated cost recovery 
system deductions allowed under section 5. 
    Sec. 5.  Minnesota Statutes 1986, section 290.01, is 
amended by adding a subdivision to read: 
    Subd. 19g.  [ACRS MODIFICATION FOR INDIVIDUALS.] (a) An 
individual is allowed a subtraction from federal taxable income 
for the amount of accelerated cost recovery system deductions 
that were added to federal adjusted gross income in computing 
Minnesota gross income for taxable year 1981, 1982, 1983, or 
1984 and that were not deducted in a later taxable year.  The 
deduction is allowed beginning in the first taxable year after 
the entire allowable deduction for the property has been allowed 
under federal law or the first taxable year beginning after 
December 31, 1987, whichever is later.  The amount of the 
deduction is computed by deducting the amount added to federal 
adjusted gross income in computing Minnesota gross income (less 
any deduction allowed under Minnesota Statutes 1986, section 
290.01, subdivision 20f) in equal annual amounts over five years.
    (b) In the event of a sale or exchange of the property, a 
deduction is allowed equal to the lesser of (1) the remaining 
amount that would be allowed as a deduction under paragraph (a) 
or (2) the amount of capital gain recognized and the amount of 
cost recovery deductions that were subject to recapture under 
sections 1245 and 1250 of the Internal Revenue Code of 1986 for 
the taxable year. 
    (c) In the case of a corporation electing S corporation 
status under section 1362 of the Internal Revenue Code, the 
amount of the corporation's cost recovery allowances that have 
been deducted in computing federal tax, but have been added to 
federal taxable income or not deducted in computing tax under 
this chapter as a result of the application of subdivision 19e, 
paragraphs (a) and (c) or Minnesota Statutes 1986, section 
290.09, subdivision 7 is allowed as a deduction to the 
shareholders under the provisions of paragraph (a). 
    Sec. 6.  Minnesota Statutes 1987 Supplement, section 
290.032, subdivision 2, is amended to read:  
    Subd. 2.  The amount of tax imposed by subdivision 1 shall 
be computed in the same way as the tax imposed under section 
402(e) of the Internal Revenue Code of 1986, as amended through 
December 31, 1986, except that the initial separate tax shall be 
an amount equal to five times the tax which would be imposed by 
section 290.06, subdivision 2c, if the recipient was an 
unmarried individual, and the taxable net income was an amount 
equal to one-fifth of the excess of 
    (i) the total taxable amount of the lump sum distribution 
for the year, over 
    (ii) the minimum distribution allowance, and except that 
references in section 402(e) of the Internal Revenue Code of 
1986, as amended through December 31, 1986, to paragraph (1)(A) 
thereof shall instead be references to subdivision 1, and the 
excess, if any, of the subtraction base amount over federal 
taxable income for a qualified individual as provided under 
section 290.0802, subdivision 2. 
     Sec. 7.  Minnesota Statutes 1987 Supplement, section 
290.06, subdivision 2c, is amended to read: 
    Subd. 2c.  [SCHEDULES OF RATES FOR INDIVIDUALS, ESTATES, 
AND TRUSTS.] (a) The income taxes imposed by this chapter upon 
married individuals filing joint returns and surviving spouses 
as defined in section 2(a) of the Internal Revenue Code of 1986 
as amended through December 31, 1987, must be computed by 
applying to their taxable net income the following schedule of 
rates: 
    (1) For taxable years beginning after December 31, 1986, 
and before January 1, 1988 
     if taxable income is:               the tax is:
       not over $4,000              4 percent
       over $4,000, but not         $160 plus 6 percent of the
       over $11,000                 excess over $4,000
       over $11,000, but not        $580 plus 8 percent of the
       over $21,000                 excess over $11,000
       over $21,000                 $1,380 plus 9 percent of
                                    the excess over $21,000
    (2) For taxable years beginning after December 31, 1987 
     if taxable income is:               the tax is:
       not over $19,000             6 percent
       over $19,000                 $1,140 plus 8 percent of
                                    the excess over $19,000;
plus an amount equal to ten percent of the tax paid by the 
taxpayer under section 1(g) of the Internal Revenue Code of 
1986, as amended through December 31, 1986 computed using the 
following schedule of rates: 
     if taxable income is:               the tax is: 
       over $75,500, but not        0.5 percent of the 
       over $165,000                excess over $75,500 
       over $165,000                $447.50. 
     Married individuals filing separate returns, estates, and 
trusts must compute their income tax by applying the above rates 
to their taxable income, except that the income brackets will be 
one-half of the above amounts. 
    (b) The income taxes imposed by this chapter upon unmarried 
individuals, married individuals filing separate returns, 
estates, and trusts must be computed by applying to taxable net 
income the following schedule of rates: 
    (1) For taxable years beginning after December 31, 1986, 
and before January 1, 1988 
     if taxable income is:               the tax is:
       not over $3,000              4 percent
       over $3,000, but not         $120 plus 6 percent
       over $9,000                  of the excess over $3,000
       over $9,000, but not         $480 plus 8 percent
       over $16,000                 of the excess over $9,000
       over $16,000                 $1,040 plus 9 percent
                                    of the excess over $16,000
    (2) For taxable years beginning after December 31, 1987 
     if taxable income is:               the tax is:
       not over $13,000             6 percent
       over $13,000                 $780 plus 8 percent
                                    of the excess over $13,000;
plus an amount equal to ten percent of the tax paid by the 
taxpayer under section 1(g) of the Internal Revenue Code of 
1986, as amended through December 31, 1986 computed using the 
following schedule of rates: 
     if taxable income is:               the tax is: 
       over $42,700, but not         0.5 percent of the 
       over $93,000                  excess over $42,700 
       over $93,000                  $251.50.  
    (c) The income taxes imposed by this chapter upon unmarried 
individuals qualifying as a head of household as defined in 
section 2(b) of the Internal Revenue Code of 1986, as amended 
through December 31, 1986 1987, must be computed by applying to 
taxable net income the following schedule of rates: 
    (1) For taxable years beginning after December 31, 1986, 
and before January 1, 1988 
     if taxable income is:               the tax is:
       not over $3,500              4 percent
       over $3,500, but not         $140 plus 6 percent
       over $10,000                 of the excess over $3,500
       over $10,000, but not        $530 plus 8 percent
       over $18,500                 of the excess over $10,000
       over $18,500                 $1,210 plus 9 percent
                                    of the excess over $18,500
    (2) For taxable years beginning after December 31, 1987 
     if taxable income is:               the tax is:
       not over $16,000             6 percent
       over $16,000                 $960 plus 8 percent
                                    of the excess over $16,000;.
    plus an amount equal to ten percent of the tax paid by the 
taxpayer under section 1(g) of the Internal Revenue Code of 
1986, as amended through December 31, 1986 computed using the 
following schedule of rates: 
     if taxable income is:               the tax is: 
       over $64,300, but not        0.5 percent of the 
       over $135,000                excess over $64,300 
       over $135,000                $353.50. 
    (d) In lieu of a tax computed according to the rates set 
forth in this subdivision, the tax of any individual taxpayer 
whose taxable net income for the taxable year is less than an 
amount determined by the commissioner must be computed in 
accordance with tables prepared and issued by the commissioner 
of revenue based on income brackets of not more than $100.  The 
amount of tax for each bracket shall be computed at the rates 
set forth in this subdivision, provided that the commissioner 
may disregard a fractional part of a dollar unless it amounts to 
50 cents or more, in which case it may be increased to $1. 
    (e) An individual who is not a Minnesota resident for the 
entire year must compute the individual's Minnesota income tax 
as provided in this subdivision.  After the application of the 
nonrefundable credits provided in this chapter, the tax 
liability must then be multiplied by a fraction in which:  
    (1) The numerator is the individual's Minnesota sourced 
source federal adjusted gross income as defined in section 62 of 
the Internal Revenue Code of 1986, as amended through December 
31, 1986, after applying the allocation and assignability 
provisions of section 290.081, clause (a), or 290.17; and 
    (2) the denominator is the individual's federal adjusted 
gross income as defined in section 62 of the Internal Revenue 
Code of 1986, as amended through December 31, 1986 1987, 
increased by the addition required for interest income from 
non-Minnesota state and municipal bonds under section 290.01, 
subdivision 19a, clause (1). 
    (f) Any individual who has income which is included in the 
computation of federal adjusted gross income but is not subject 
to tax by Minnesota other than income specifically allowed as a 
subtraction under section 290.01, subdivision 19b, shall compute 
the tax in the same manner described in paragraph (e).  The 
numerator of the fraction under paragraph (e) is the 
individual's Minnesota source federal adjusted gross income 
reduced by the income not subject to Minnesota tax and the 
denominator is the federal adjusted gross income. 
    Sec. 8.  Minnesota Statutes 1986, section 290.06, is 
amended by adding a subdivision to read: 
    Subd. 22.  [CREDIT FOR TAXES PAID TO ANOTHER STATE.] (a) A 
taxpayer who is liable for taxes on or measured by net income to 
another state or province or territory of Canada, as provided in 
paragraphs (b) through (f), upon income allocated or apportioned 
to Minnesota, is entitled to a credit for the tax paid to 
another state or province or territory of Canada if the tax is 
actually paid in the taxable year or a subsequent taxable year.  
A taxpayer who is a resident of this state pursuant to section 
290.01, subdivision 7a, clause (b) and who is subject to income 
tax as a resident in the state of the individual's domicile is 
not allowed this credit unless the state of domicile does not 
allow a similar credit. 
    (b) For an individual, estate, or trust, the credit is 
determined by multiplying the tax payable under this chapter by 
the ratio derived by dividing the income subject to tax in the 
other state or province or territory of Canada that is also 
subject to tax in Minnesota while a resident of Minnesota by the 
taxpayer's federal adjusted gross income, as defined in section 
62 of the Internal Revenue Code of 1986, as amended through 
December 31, 1987, to the extent the income is allocated or 
assigned to Minnesota under sections 290.081 and 290.17.  
    (c) If the taxpayer is an athletic team that apportions all 
of its income under section 290.17, subdivision 5, paragraph 
(a), the credit is determined by multiplying the tax payable 
under this chapter by the ratio derived from dividing the total 
net income subject to tax in the other state or province or 
territory of Canada by the taxpayer's Minnesota taxable income. 
    (d) The credit determined under paragraph (b) or (c) shall 
not exceed the amount of tax so paid to the other state or 
province or territory of Canada on the gross income earned 
within the other state or province or territory of Canada 
subject to tax under this chapter, nor shall the allowance of 
the credit reduce the taxes paid under this chapter to an amount 
less than what would be assessed if such income amount was 
excluded from taxable net income. 
     (e) In the case of the tax assessed on a lump sum 
distribution under section 290.032, the credit allowed under 
paragraph (a) is the tax assessed by the other state or province 
or territory of Canada on the lump sum distribution that is also 
subject to tax under section 290.032, and shall not exceed the 
tax assessed under section 290.032. 
     (f) If a Minnesota resident reported an item of income to 
Minnesota and is assessed tax in such other state or province or 
territory of Canada on that same income after the Minnesota 
statute of limitations has expired, the taxpayer shall receive a 
credit for that year under paragraph (a), notwithstanding any 
statute of limitations to the contrary.  The claim for the 
credit must be submitted within one year from the date the taxes 
were paid to the other state or province or territory of 
Canada.  The taxpayer must submit sufficient proof to show 
entitlement to a credit. 
    Sec. 9.  Minnesota Statutes 1986, section 290.067, 
subdivision 1, is amended to read: 
    Subdivision 1.  [AMOUNT OF CREDIT.] A taxpayer may take as 
a credit against the tax due from the taxpayer and a spouse, if 
any, 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 subject to 
the limitations provided in subdivision 2. 
    In the case of nonresident or part-year resident, the 
credit determined under section 21 of the Internal Revenue Code 
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. 
    Sec. 10.  [290.0802] [SUBTRACTION FOR THE ELDERLY AND 
DISABLED.] 
    Subdivision 1.  [DEFINITIONS.] For purposes of this 
section, the following terms have the meanings given. 
    (a) "Adjusted gross income" means federal adjusted gross 
income as used in section 22(d) of the Internal Revenue Code for 
the taxable year plus the ordinary income portion of a lump sum 
distribution as defined in section 407(e) of the Internal 
Revenue Code. 
    (b) "Disability income" means disability income as defined 
in section 22(c)(2)(B)(iii) of the Internal Revenue Code. 
    (c) "Internal Revenue Code" means the Internal Revenue Code 
of 1986, as amended through December 31, 1987. 
    (d) "Nontaxable retirement and disability benefits" means 
the amount of pension, annuity, or disability benefits that 
would be included in the reduction under section 22(c)(3) of the 
Internal Revenue Code, but excluding tier one railroad 
retirement benefits. 
    (e) "Qualified individual" means a qualified individual as 
defined in section 22(b) of the Internal Revenue Code. 
    Subd. 2.  [SUBTRACTION.] (a) A qualified individual is 
allowed a subtraction from federal taxable income equal to the 
lesser of federal taxable income or the individual's subtraction 
base amount.  The excess of the subtraction base amount over 
federal taxable income may be used to reduce the amount of a 
lump sum distribution subject to tax under section 290.032. 
    (b)(1) The initial subtraction base amount equals 
    (i) $10,000 for a married taxpayer filing a joint return if 
a spouse is a qualified individual, 
    (ii) $8,000 for a single taxpayer, and 
    (iii) $5,000 for a married taxpayer filing a separate 
federal return. 
    (2) The qualified individual's initial subtraction base 
amount, then, must be reduced by the sum of nontaxable 
retirement and disability benefits and one-half of the amount of 
adjusted gross income in excess of the following thresholds: 
    (i) $15,000 for a married taxpayer filing a joint return if 
both spouses are qualified individuals, 
    (ii) $12,000 for a single taxpayer or for a married couple 
filing a joint return if only one spouse is a qualified 
individual, and 
    (iii) $7,500 for a married taxpayer filing a separate 
federal return. 
    (3) In the case of a qualified individual who is under the 
age of 65, the maximum amount of the subtraction base may not 
exceed the taxpayer's disability income. 
    (4) The resulting amount is the subtraction base amount. 
    Subd. 3.  [RESTRICTIONS; MARRIED COUPLES.] Except in the 
case of a husband and wife who live apart at all times during 
the taxable year, if the taxpayer is married at the close of the 
taxable year, the subtraction under subdivision 2 is allowable 
only if the taxpayers file joint federal and state income tax 
returns for the taxable year. 
    Sec. 11.  Minnesota Statutes 1987 Supplement, section 
290.081, is amended to read:  
    290.081 [INCOME OF NONRESIDENTS, RECIPROCITY; CREDIT FOR 
TAXES PAID TO ANOTHER STATE.] 
    (a) The compensation received for the performance of 
personal or professional services within this state by an 
individual whose residence, place of abode, and place 
customarily returned to at least once a month is in another 
state, shall be excluded from gross income to the extent such 
compensation is subject to an income tax imposed by the state of 
residence; provided that such state allows a similar exclusion 
of compensation received by residents of Minnesota for services 
performed therein, or. 
    (b) If any taxpayer who is a resident of this state, or a 
domestic corporation or corporation commercially domiciled 
therein, has become liable for taxes on or measured by net 
income to another state or a province or territory of Canada 
upon, if the taxpayer is an individual, or if the taxpayer is an 
athletic team and all of the team's income is apportioned to 
Minnesota, any income, or if it is a corporation, estate, or 
trust, upon income derived from the performance of personal or 
professional services within such other state or province or 
territory of Canada and subject to taxation under this chapter 
the taxpayer shall be entitled to a credit against the amount of 
taxes payable under this chapter, of such proportion thereof, as 
such gross income subject to taxation in such state or province 
or territory of Canada bears to the taxpayer's entire gross 
income subject to taxation under this chapter; provided (1) that 
such credit shall in no event exceed the amount of tax so paid 
to such other state or province or territory of Canada on the 
gross income earned within such other state or province or 
territory of Canada and subject to taxation under this chapter, 
and (2) the allowance of such credit shall not operate to reduce 
the taxes payable under this chapter to an amount less than 
would have been payable if the gross income earned in such other 
state or province or territory of Canada had been excluded in 
computing net income under this chapter.  A taxpayer who is a 
resident of this state pursuant to section 290.01, subdivision 
7a, clause (2), and is subject to income tax as a resident in 
the state of the individual's domicile is not allowed this 
credit unless the state of domicile does not allow a similar 
credit. 
    (c) The commissioner shall by rule determine with respect 
to gross income earned in any other state the applicable clause 
of this section.  When it is deemed to be in the best interests 
of the people of this state, the commissioner may determine that 
the provisions of clause (a) shall not apply.  As long as the 
provisions of clause (a) apply between Minnesota and Wisconsin, 
the provisions of clause (a) shall apply to any individual who 
is domiciled in Wisconsin.  
    (d) "Tax So Paid" as used in this section means taxes on or 
measured by net income payable to another state or province or 
territory of Canada on income earned within the taxable year for 
which the credit is claimed, provided that such tax is actually 
paid in that taxable year, or subsequent taxable years. 
    For purposes of clause (b), where a Minnesota resident 
reported an item of income to Minnesota and is assessed tax in 
another state or a province or territory of Canada on that same 
item of income after the Minnesota statute of limitations has 
expired, the taxpayer shall be allowed to receive a credit for 
that year based on clause (b), notwithstanding the provisions of 
sections 290.49, 290.50, and 290.56.  For purposes of the 
preceding sentence, the burden of proof shall be on the taxpayer 
to show entitlement to a credit.  
    (e) (c) For the purposes of clause (a), whenever the 
Wisconsin tax on Minnesota residents which would have been paid 
Wisconsin without clause (a) exceeds the Minnesota tax on 
Wisconsin residents which would have been paid Minnesota without 
clause (a), or vice versa, then the state with the net revenue 
loss resulting from clause (a) shall receive from the other 
state the amount of such loss.  This provision shall be 
effective for all years beginning after December 31, 1972.  The 
data used for computing the loss to either state shall be 
determined on or before September 30 of the year following the 
close of the previous calendar year. 
    Interest shall be payable on all delinquent balances 
relating to taxable years beginning after December 31, 1977.  
The commissioner of revenue is authorized to enter into 
agreements with the state of Wisconsin specifying the 
reciprocity payment due date, conditions constituting 
delinquency, interest rates, and a method for computing interest 
due on any delinquent amounts. 
    If an agreement cannot be reached as to the amount of the 
loss, the commissioner of revenue and the taxing official of the 
state of Wisconsin shall each appoint a member of a board of 
arbitration and these members shall appoint the third member of 
the board.  The board shall select one of its members as chair.  
Such board may administer oaths, take testimony, subpoena 
witnesses, and require their attendance, require the production 
of books, papers and documents, and hold hearings at such places 
as are deemed necessary.  The board shall then make a 
determination as to the amount to be paid the other state which 
determination shall be final and conclusive. 
    Notwithstanding the provisions of section 290.61, the 
commissioner may furnish copies of returns, reports, or other 
information to the taxing official of the state of Wisconsin, a 
member of the board of arbitration, or a consultant under joint 
contract with the states of Minnesota and Wisconsin for the 
purpose of making a determination as to the amount to be paid 
the other state under the provisions of this section.  Prior to 
the release of any information under the provisions of this 
section, the person to whom the information is to be released 
shall sign an agreement which provides that the person will 
protect the confidentiality of the returns and information 
revealed thereby to the extent that it is protected under the 
laws of the state of Minnesota. 
    Sec. 12.  Minnesota Statutes 1987 Supplement, section 
290.17, subdivision 2, is amended to read:  
    Subd. 2.  [INCOME NOT DERIVED FROM CONDUCT OF A TRADE OR 
BUSINESS.] The income of a taxpayer subject to the allocation 
rules that is not derived from the conduct of a trade or 
business must be assigned in accordance with paragraphs (a) to 
(f):  
    (a)(1) Subject to paragraphs (a)(2) and (a)(3), income from 
labor or personal or professional services is assigned to this 
state if, and to the extent that, the labor or services are 
performed within it; all other income from such sources is 
treated as income from sources without this state.  
    (2) In the case of an individual who is a nonresident of 
Minnesota and who is an athlete or entertainer, income from 
compensation for labor or personal services performed within 
this state shall be determined in the following manner:  
    (i) The amount of income to be assigned to Minnesota for an 
individual who is a nonresident salaried athletic team employee 
shall be determined by using a fraction in which the denominator 
contains the total number of days in which the individual is 
under a duty to perform for the employer, and the numerator is 
the total number of those days spent in Minnesota; and 
    (ii) The amount of income to be assigned to Minnesota for 
an individual who is a nonresident, and who is an athlete or 
entertainer not listed in clause (i), for that person's athletic 
or entertainment performance in Minnesota shall be determined by 
assigning to this state all income from performances or athletic 
contests in this state.  
    (3) For purposes of this section, amounts received by a 
nonresident from the United States, its agencies or 
instrumentalities, the Federal Reserve Bank, the state of 
Minnesota or any of its political or governmental subdivisions, 
or a Minnesota volunteer firefighters' relief association, by 
way of payment as a pension, public employee retirement benefit, 
or any combination of these, or as a retirement or survivor's 
benefit made from a plan qualifying under section 401, 403, 408, 
or 409, or as defined in section 403(b) or 457 of the Internal 
Revenue Code of 1986, as amended through December 31, 1986, are 
not considered income derived from carrying on a trade or 
business or from performing personal or professional services in 
Minnesota, and are not taxable under this chapter.  
    (b) Income or gains from tangible property located in this 
state that is not employed in the business of the recipient of 
the income or gains must be assigned to this state. 
    (c) Except upon the sale of a partnership interest or the 
sale of stock of an "S" corporation, income or gains from 
intangible personal property not employed in the business of the 
recipient of the income or gains must be assigned to this state 
if the recipient of the income or gains is a resident of this 
state or is a resident trust or estate.  
    Gain on the sale of a partnership interest is allocable to 
this state in the ratio of the original cost of partnership 
tangible property in this state to the original cost of 
partnership tangible property everywhere, determined at the time 
of the sale.  If more than 50 percent of the value of the 
partnership's assets consists of intangibles, gain or loss from 
the sale of the partnership interest is allocated to this state 
in accordance with the sales factor of the partnership for its 
first full tax period immediately preceding the tax period of 
the partnership during which the partnership interest was sold. 
    Gain on the sale of stock held in an "S" corporation is 
allocable to this state in the ratio of the original cost of 
tangible property of the "S" corporation within this state to 
the original cost of tangible property of the "S" corporation 
everywhere. 
    (d) Income from the operation of a farm shall be assigned 
to this state if the farm is located within this state and to 
other states only if the farm is not located in this state.  
    (e) Income from winnings on Minnesota pari-mutuel betting 
tickets and lawful gambling as defined in section 349.12, 
subdivision 2, conducted within the boundaries of the state of 
Minnesota shall be assigned to this state.  
    (f) All items of gross income not covered in paragraphs (a) 
to (e) and not part of the taxpayer's income from a trade or 
business shall be assigned to the taxpayer's domicile. 
    Sec. 13.  Minnesota Statutes 1987 Supplement, section 
290.38, is amended to read:  
    290.38 [RETURNS OF MARRIED PERSONS.] 
    A husband and wife must file a joint Minnesota income tax 
return if they filed a joint federal income tax return.  If a 
joint return is made the tax shall be computed on the aggregate 
income and the liability with respect to the tax shall be joint 
and several; provided that a spouse who is relieved of a 
liability attributable to a substantial underpayment under 
section 6013(e) of the Internal Revenue Code of 1986, as amended 
through December 31, 1987, shall also be relieved of the state 
tax liability on the substantial underpayment.  If the husband 
and wife have elected to file separate federal income tax 
returns they must file separate Minnesota income tax returns.  
This election to file a joint or separate returns must be 
changed if they change their election for federal purposes.  In 
the event taxpayers desire to change their election, such change 
shall be done in the manner and on such form as the commissioner 
shall prescribe by rule. 
    The determination of whether an individual is married shall 
be made under provisions of section 7703 of the Internal Revenue 
Code of 1986, as amended through December 31, 1986.  
    Sec. 14.  Minnesota Statutes 1986, section 290.39, is 
amended by adding a subdivision to read: 
    Subd. 5.  [PARTNERSHIPS; NONRESIDENT PARTNERS.] (a) The 
commissioner may allow a partnership with five or more 
nonresident partners to file a composite return on behalf of 
nonresident partners who have no other Minnesota source income.  
This composite return must include the names, addresses, social 
security numbers, income allocation, and tax liability for all 
nonresident partners electing to be covered by the composite 
return.  
    (b) The computation of each partner's tax liability will be 
determined by multiplying the income allocated to that partner 
by the highest rate used to determine the tax liability for 
individuals under section 290.06, subdivision 2c.  Nonbusiness 
deductions, standard deductions, or personal exemptions are not 
allowed. 
    (c) The partnership must submit a request to use this 
composite return filing method for nonresident partners on or 
before the due date for filing the individual income tax 
return.  The request may be made a part of the return filed.  
    (d) The electing partner must not have any Minnesota source 
income other than the income from the partnership and other 
electing partnerships.  If it is determined that the electing 
partner has other Minnesota source income, the inclusion of the 
income and tax liability for that partner under this provision 
will not constitute a return to satisfy the requirements of 
subdivision 1.  The penalty for failure to file a return as 
provided in section 290.53, subdivision 2, is assessed from the 
due date for filing a return until a non-composite return is 
filed.  The tax paid for such an individual as part of the 
composite return is allowed as a payment of the tax by the 
individual on the date on which the composite return payment was 
made.  If the electing nonresident partner has no other 
Minnesota source income, filing of the composite return 
constitutes a return for purposes of subdivision 1 of this 
section.  
    (e) This subdivision does not preclude the requirement that 
an individual pay estimated tax if the individual's liability 
would exceed the requirements set forth in section 290.93.  
However, a composite estimate may be filed in a manner similar 
to and containing the same information required under paragraph 
(a). 
     (f) If an electing partner's share of the partnership's 
gross income from Minnesota sources is less than the filing 
requirements for a nonresident under section 290.37, subdivision 
1, the tax liability is zero.  However, a statement showing the 
partner's share of gross income must be included as part of the 
composite return. 
    (g) The election provided in this subdivision is not 
available to any partner other than a full-year nonresident 
individual who has no other Minnesota source income. 
    (h) A corporation defined in section 290.9725 and its 
nonresident shareholders may make an election under this 
subdivision.  The provisions covering the partnership apply to 
the corporation and the provisions applying to the partner apply 
to each shareholder. 
    (i) Estates and trusts distributing current income only and 
the nonresident individual beneficiaries of such estates or 
trusts may make an election under this subdivision.  The 
provisions covering the partnership apply to the estate or 
trust.  The provisions applying to the partner apply to each 
beneficiary.  
    Sec. 15.  Minnesota Statutes 1987 Supplement, section 
290.41, subdivision 2, is amended to read:  
    Subd. 2.  [BY PERSONS, CORPORATIONS, COOPERATIVES, 
GOVERNMENTAL ENTITIES OR SCHOOL DISTRICTS.] To the extent 
required by section 6041 of the Internal Revenue Code of 1986, 
as amended through December 31, 1986 1987, every person, 
corporation, or cooperative, the state of Minnesota and its 
political subdivisions, and every city, county and school 
district in Minnesota, making payments in the regular course of 
a trade or business during the taxable year to any person or 
corporation of $600 or more on account of rents or royalties, or 
of $10 or more on account of interest, or $10 or more on account 
of dividends or patronage dividends, or $600 or more on account 
of either wages, salaries, commissions, fees, prizes, awards, 
pensions, annuities, or any other fixed or determinable gains, 
profits or income, not otherwise reportable under section 
290.92, subdivision 7, or on account of earnings of $10 or more 
distributed to its members by savings, building and loan 
associations or credit unions chartered under the laws of this 
state or the United States, (a) shall make a return (except in 
cases where a valid agreement to participate in the combined 
federal and state information reporting system has been entered 
into, and such return is therefore filed only with the 
commissioner of internal revenue pursuant to the applicable 
filing and informational reporting requirements of the Internal 
Revenue Code of 1986, as amended through December 31, 1986 1987) 
in respect to such payments in excess of the amounts specified, 
giving the names and addresses of the persons to whom such 
payments were made, the amounts paid to each, and (b) shall make 
a return in respect to the total number of such payments and 
total amount of such payments, for each category of income 
specified, which were in excess of the amounts specified.  This 
subdivision shall not apply to the payment of interest or 
dividends to a person who was a nonresident of Minnesota for the 
entire year.  
    A person, corporation, or cooperative required to file 
returns under this subdivision on interest, dividends, or 
patronage dividend payments with respect to more than 50 payees 
for any calendar year must file all of these returns on magnetic 
media if the media were used to satisfy the federal reporting 
requirement under section 6011(e) of the Internal Revenue Code 
of 1986, as amended through December 31, 1987, unless the person 
establishes to the satisfaction of the commissioner that 
compliance with this requirement would be an undue hardship.  
    Sec. 16.  Minnesota Statutes 1987 Supplement, section 
290.491, is amended to read:  
    290.491 [TAX ON GAIN; DISCHARGE IN BANKRUPTCY.] 
    (a) Any tax due under this chapter on a gain realized on a 
forced sale pursuant to foreclosure of a mortgage or other 
security interest in agricultural production property, other 
real property, or equipment, used in a farm business that was 
owned and operated by the taxpayer shall be a dischargeable debt 
in a bankruptcy proceeding under United States Code, title 11, 
section 727. 
    (b) Income realized on a sale or exchange of agricultural 
production property, other real property, or equipment, used in 
a farm business that was owned and operated by the taxpayer 
shall be exempt from taxation under this chapter, if the 
taxpayer was insolvent at the time of the sale and the proceeds 
of the sale were used solely to discharge indebtedness secured 
by a mortgage, lien, or other security interest on the property 
sold.  For purposes of this section, "insolvent" means insolvent 
as defined in section 108(d)(3) of the Internal Revenue Code of 
1954, as amended through December 31, 1985.  This paragraph 
applies only to the extent that the gain is includable in 
federal taxable income or in the computation of the alternative 
minimum taxable income under section 290.091 for purposes of the 
alternative minimum tax.  The amount of the exemption is limited 
to the excess of the taxpayer's (1) liabilities over (2) the 
total assets and any exclusion claimed under section 108 of the 
Internal Revenue Code of 1986, as amended through December 31, 
1987, determined immediately before application of this 
paragraph. 
    (c) For purposes of this section, any tax due under this 
chapter specifically includes, but is not limited to, tax 
imposed under sections 290.02 and 290.03 on income derived from 
a sale or exchange, whether constituting gain, discharge of 
indebtedness or recapture of depreciation deductions, or the 
alternative minimum tax imposed under section 290.091. 
    Sec. 17.  Minnesota Statutes 1987 Supplement, section 
290.92, subdivision 7, is amended to read:  
    Subd. 7.  [WITHHOLDING STATEMENT TO EMPLOYEE OR PAYEE AND 
TO COMMISSIONER.] (1) Every person required to deduct and 
withhold from an employee a tax under subdivision 2a or 3, or 
section 290.923, subdivision 2, or who would have been required 
to deduct and withhold a tax under subdivision 2a or 3, or 
persons required to withhold tax under section 290.923, 
subdivision 2, determined without regard to subdivision 19, if 
the employee or payee had claimed no more than one withholding 
exemption, or who paid wages or made payments not subject to 
withholding under subdivision 2a or 3, or section 290.923, 
subdivision 2, to an employee or person receiving royalty 
payments in excess of $600, or who has entered into a voluntary 
withholding agreement with a payee pursuant to subdivision 20, 
shall furnish to each such employee or person receiving royalty 
payments in respect to the remuneration paid by such person to 
such employee or person receiving royalty payments during the 
calendar year, on or before January 31 of the succeeding year, 
or, if employment is terminated before the close of such 
calendar year, within 30 days after the date of receipt of a 
written request from the employee if the 30-day period ends 
before January 31, a written statement showing the following: 
    (a) Name of such person, 
    (b) The name of the employee or payee and the employee's or 
payee's social security account number, 
    (c) The total amount of wages as that term is defined in 
subdivision 1(1), and/or the total amount of remuneration 
subject to withholding pursuant to subdivision 20, and the 
amount of sick pay as required under section 6051(f) of the 
Internal Revenue Code of 1954 1986, as amended through December 
31, 1985 1987, 
    (d) The total amount deducted and withheld as tax under 
subdivision 2a or 3, or section 290.923, subdivision 2. 
    (2) The statement required to be furnished by this 
subdivision in respect of any remuneration shall be furnished at 
such other times, shall contain such other information, and 
shall be in such form as the commissioner may prescribe. 
    (3) The commissioner may prescribe rules providing for 
reasonable extensions of time, not in excess of 30 days, to 
employers or payers required to furnish such statements to their 
employees or payees under this subdivision. 
    (4) A duplicate of any statement made pursuant to this 
subdivision and in accordance with rules prescribed by the 
commissioner, along with a reconciliation in such form as the 
commissioner may prescribe of all such statements for the 
calendar year (including a reconciliation of the quarterly 
returns required to be filed pursuant to subdivision 6), shall 
be filed with the commissioner on or before February 28 of the 
year after the payments were made.  
    (5) The employer must submit the statements required to be 
sent to the commissioner on magnetic media, if the media were 
required to satisfy the federal reporting requirements pursuant 
to section 6011(e) of the Internal Revenue Code of 1986, as 
amended through December 31, 1987, and the regulations issued 
under it. 
    Sec. 18.  Minnesota Statutes 1987 Supplement, section 
290.92, subdivision 15, is amended to read:  
    Subd. 15.  [PENALTIES; FAILURE TO PAY TAX.] (1) In the case 
of any failure to withhold a tax on wages, or make payments to 
or deposits with the commissioner of amounts withheld, as 
required by this section, within the time prescribed by law, 
there shall be added to the tax a penalty equal to three percent 
of the amount of tax that should have been properly withheld and 
paid over to or deposited with the commissioner if the failure 
is for not more than 30 days with an additional three percent 
for each additional 30 days or fraction thereof during which the 
failure continues, not exceeding 24 percent in the aggregate.  
The amount of the tax together with this amount shall bear 
interest at the rate specified in section 270.75 from the time 
the tax should have been paid until paid.  The amount added to 
the tax shall be collected at the same time and in the same 
manner and as a part of the tax unless the tax has been paid 
before the discovery of the negligence, in which case the amount 
added shall be collected in the same manner as the tax. 
    (1a) In the case of a failure to make and file quarterly 
returns with the commissioner as required by this section, there 
shall be added to the tax a penalty equal to three percent of 
the amount of tax not properly withheld and paid over to or 
deposited with the commissioner if the failure is for not more 
than 30 days with an additional five percent of the amount of 
tax remaining unpaid during each additional 30 days or fraction 
thereof during which the failure continues, not exceeding 23 
percent in the aggregate.  The amount of the tax together with 
this amount shall bear interest at the rate specified in section 
270.75 from the time the tax should have been paid until paid.  
The amount added to the tax shall be collected at the same time 
and in the same manner and as a part of the tax unless the tax 
has been paid before the discovery of the negligence, in which 
case the amount added shall be collected in the same manner as 
the tax. 
    (1b) In the case of a failure to file a return of tax 
imposed by this chapter within 60 days of the date prescribed 
for filing of the return (determined with regard to any 
extension of time for filing), the addition to tax under 
paragraph (1a) shall not be less than the lesser of (i) $200; or 
(ii) the greater of (a) 25 percent of the amount required to be 
shown as tax on the return without reduction for any payments 
made or refundable credits allowable against the tax or (b) $50. 
    (1c) Where penalties are imposed under paragraphs (1) and 
(1a), except for the minimum penalty under paragraph (1b), the 
combined penalty percentage shall not exceed 38 percent in the 
aggregate. 
    (2) If any employer required to withhold a tax on wages, 
make deposits, make and file quarterly returns and make payments 
to the commissioner of amounts withheld, as required by sections 
290.92 to 290.97, willfully fails to withhold the tax or make 
the deposits, files a false or fraudulent return, willfully 
fails to make the payment or deposit, or willfully attempts in 
any manner to evade or defeat the tax or the payment or deposit 
of it, there shall also be imposed on the employer as a penalty 
an amount equal to 50 percent of the amount of tax, less any 
amount paid or deposited by the employer on the basis of the 
false or fraudulent return or deposit, that should have been 
properly withheld and paid over or deposited with the 
commissioner.  The amount of the tax together with this amount 
shall bear interest at the rate specified in section 270.75 from 
the time the tax should have been paid until paid.  The penalty 
imposed by this paragraph shall be collected as a part of the 
tax, and shall be in addition to any other penalties civil and 
criminal, prescribed by this subdivision. 
    (3) If any person required under the provisions of 
subdivision 7 to furnish a statement to an employee or payee and 
a duplicate statement to the commissioner, or to furnish a 
reconciliation of the statements, and quarterly returns, to the 
commissioner, willfully furnishes a false or fraudulent 
statement to an employee or payee or a false or fraudulent 
duplicate statement or reconciliation of statements, and 
quarterly returns, to the commissioner, or willfully fails to 
furnish a statement or the reconciliation in the manner, at the 
time, and showing the information required by the provisions of 
subdivision 7, or rules prescribed by the commissioner 
thereunder, there shall be imposed on the person a penalty of 
$50 for each act or failure to act, but the total amount imposed 
on the delinquent person for all such failures during any 
calendar year shall not exceed $25,000.  The penalty imposed by 
this paragraph is due and payable within ten days after the 
mailing of a written demand therefor, and may be collected in 
the manner prescribed in subdivision 6, paragraph (8). 
    (4) In addition to any other penalties prescribed, any 
person required to withhold a tax on wages, file quarterly 
returns, and make payments or deposits to the commissioner of 
amounts withheld, as required by this section, who attempts to 
evade the tax by (i) willfully failing to withhold the tax, file 
the return, or make the payment or deposit, or (ii) willfully 
preparing or filing a false return, is guilty of a gross 
misdemeanor unless the tax involved exceeds $300, in which event 
the person is guilty of a felony. 
    (5) In lieu of any other penalty provided by law, except 
the penalty provided by paragraph (3), any person required under 
the provisions of subdivision 7 to furnish a statement of wages 
to an employee and a duplicate statement to the commissioner, 
who willfully furnishes a false or fraudulent statement of wages 
to an employee or a false or fraudulent duplicate statement of 
wages to the commissioner, or who willfully fails to furnish a 
statement in the manner, at the time, and showing the 
information required by the provisions of subdivision 7, or 
rules prescribed by the commissioner thereunder, is guilty of a 
gross misdemeanor. 
    (6) Any employee required to supply information to an 
employer under the provisions of subdivision subdivisions 4a and 
5, who willfully fails to supply information or willfully 
supplies false or fraudulent information thereunder which would 
require an increase in the tax to be deducted and withheld under 
subdivision 2a or 3, is guilty of a gross misdemeanor. 
    (7) The term "person," as used in this section, includes an 
officer or employee of a corporation, or a member or employee of 
a partnership, who as an officer, employee, or member is under a 
duty to perform the act in respect of which the violation occurs.
    (8) All payments received may, in the discretion of the 
commissioner of revenue, be credited first to the oldest 
liability not secured by a judgment or lien, but in all cases 
shall be credited first to penalties, next to interest, and then 
to the tax due. 
    (9) In addition to any other penalty provided by law, any 
employee who furnishes a withholding exemption certificate or a 
residency affidavit to an employer which the employee has reason 
to know contains a materially incorrect statement is liable to 
the commissioner of revenue for a penalty of $500 for each 
instance.  The penalty is immediately due and payable and may be 
collected in the same manner as any delinquent income tax. 
    (10) In addition to any other penalty provided by law, any 
employer who fails to submit a copy of a withholding exemption 
certificate or a residency affidavit required by subdivision 5a, 
clause (1)(a), (1)(b), or (2) is liable to the commissioner of 
revenue for a penalty of $50 for each instance.  The penalty is 
immediately due and payable and may be collected in the manner 
provided in subdivision 6, paragraph (8).  
    (11) Any person who willfully aids or assists in, or 
procures, counsels, or advises the preparation or presentation 
under, or in connection with any matter arising under this 
section, of a return, affidavit, claim, or other document, which 
is fraudulent or false as to any material matter, whether or not 
the falsity or fraud is with the knowledge or consent of the 
person authorized or required to present the return, affidavit, 
claim, or document, is guilty of a gross misdemeanor, unless the 
tax involved exceeds $300, in which event the actor is guilty of 
a felony.  
    (12) Notwithstanding the provisions of section 628.26, or 
any other provision of the criminal laws of this state, an 
indictment may be found and filed, or a complaint filed, upon 
any criminal offense specified in this subdivision, in the 
proper court within six years after the commission of the 
offense.  
    Sec. 19.  Minnesota Statutes 1986, section 290.92, 
subdivision 21, is amended to read: 
    Subd. 21.  [EXTENSION OF WITHHOLDING TO UNEMPLOYMENT 
COMPENSATION BENEFITS.] (a) At the time an individual makes a 
claim for unemployment compensation benefits, the commissioner 
of jobs and training must notify the individual that the 
individual's unemployment compensation may be subject to state 
income taxes depending on the individual's other income and that 
the individual may elect to have the payments subject to 
withholding under this section.  If the individual so requests, 
unemployment compensation benefits paid to the individual shall 
be treated as if it were a payment of wages by an employer to an 
employee for a payroll period. 
    (b) For purposes of this section, any supplemental 
unemployment compensation benefit paid to an individual to the 
extent includable in such individual's Minnesota gross income, 
shall be treated as if it were a payment of wages by an employer 
to an employee for a payroll period. 
    Sec. 20.  [ESTIMATED TAX EXCEPTION FOR 1987.] 
    For taxable years beginning after December 31, 1986, but 
beginning before January 1, 1988, the required amount of the 
annual payment of the current year's tax in determining the 
underpayment in Minnesota Statutes, section 290.93, subdivision 
10, paragraph (4), clause (a), shall be 80 percent instead of 90 
percent and the penalty shall also be reduced by the ratio by 
which the salary income subject to withholding bears to the 
federal adjusted gross income for 1987 as determined under 
section 62 of the Internal Revenue Code of 1986, as amended 
through December 31, 1987. 
    Sec. 21.  [REPEALER.] 
    Minnesota Statutes 1987 Supplement, sections 290.06, 
subdivision 20; and 290.077, subdivision 1, are repealed. 
    Sec. 22.  [EFFECTIVE DATES.] 
    Except as otherwise provided, sections 1 to 3 and 16 are 
effective for taxable years beginning after December 31, 1986.  
Sections 5, 7 to 12, 14, 15, 17, and 21 are effective for 
taxable years beginning after December 31, 1987.  The deduction 
allowed under section 4, clause (4) and the ability of surviving 
spouses to use the married filing joint rates in section 7 are 
effective for taxable years beginning after December 31, 1986.  
The rest of sections 4 and 7 are effective for taxable years 
beginning after December 31, 1987.  Section 13 is effective for 
taxable years beginning after December 31, 1984.  Section 18 is 
effective the day following final enactment. 

                               ARTICLE 2 

                             BUSINESS TAXES 
    Section 1.  Minnesota Statutes 1987 Supplement, section 
60A.15, subdivision 1, is amended to read:  
    Subdivision 1.  [DOMESTIC AND FOREIGN COMPANIES.] (a) On or 
before April 15, June 15, and December 15 of each year, every 
domestic and foreign company, including town and farmers' mutual 
insurance companies and domestic mutual insurance companies, 
shall pay to the commissioner of revenue installments equal to 
one-third of the insurer's total estimated tax for the current 
year.  For insurers other than town and farmers' mutual 
insurance companies and mutual property and casualty insurance 
companies other than those (i) principally writing workers' 
compensation insurance, (ii) writing life insurance, or (iii) 
whose total assets at the end of the preceding calendar year 
exceed $1,600,000,000, installments must be based on a sum equal 
to two percent of the premiums described in paragraph (b).  For 
town and farmers' mutual insurance companies and mutual property 
and casualty insurance companies other than those (i) 
principally writing workers' compensation insurance, (ii) 
writing life insurance, or (iii) whose total assets at the end 
of the preceding calendar year exceed $1,600,000,000, the 
installments must be based on an amount equal to the following 
percentages of the premiums described in paragraph (b):  
     (1) for premiums paid after December 31, 1987, and before 
January 1, 1989, 1.5 percent; 
     (2) for premiums paid after December 31, 1988, and before 
January 1, 1992, one percent; and 
     (3) for premiums paid after December 31, 1991, one-half of 
one percent. 
    (b) Installments under paragraph (a) are percentages of 
gross premiums less return premiums on all direct business 
received by it the insurer in this state, or by its agents for 
it, in cash or otherwise, during such year, excepting premiums 
written for marine insurance as specified in subdivision 6.  
    (c) Failure of a company to make payments of at least 
one-third of either (a) (1) the total tax paid during the 
previous calendar year or (b) (2) 80 percent of the actual tax 
for the current calendar year shall subject the company to the 
penalty and interest provided in this section. 
    Sec. 2.  Minnesota Statutes 1987 Supplement, section 
60E.04, subdivision 4, is amended to read:  
    Subd. 4.  [TAXATION.] (a) All premiums paid for coverages 
within this state to risk retention groups are subject to 
taxation at the same rate and subject to the same interest, 
fines, and penalties for nonpayment as that applicable to 
foreign admitted other insurers. 
    (b) To the extent agents or brokers are utilized, they 
shall report and pay the taxes for the premiums for risks which 
they have placed with or on behalf of a risk retention group not 
chartered in this state.  The agents or brokers are subject to 
the provisions of sections 60A.195 to 60A.209. 
    (c) To the extent agents or brokers are not utilized or 
fail to pay the tax, each risk retention group shall pay the tax 
for risks insured within the state.  Each risk retention group 
shall report all premiums paid to it for risks insured within 
the state and shall be subject to the same interest, fines, and 
penalties for nonpayment as that applicable to foreign admitted 
insurers. 
    Sec. 3.  Minnesota Statutes 1986, section 62E.13, is 
amended by adding a subdivision to read: 
    Subd. 10.  Premiums received by the writing carrier for the 
comprehensive health insurance plan are exempt from the 
provisions of section 60A.15. 
    Sec. 4.  Minnesota Statutes 1987 Supplement, section 
69.021, subdivision 5, is amended to read:  
    Subd. 5.  [CALCULATION OF STATE AID.] The amount of state 
aid available for apportionment shall be two percent of the 
fire, lightning, sprinkler leakage, and extended coverage 
premiums reported to the commissioner by insurers on the 
Minnesota Firetown Premium Report and two percent of the 
premiums reported to the commissioner by insurers on the 
Minnesota Aid to Police Premium Report.  The amount for 
apportionment in respect to firefighter's state aid shall not be 
greater or lesser than the amount of premium taxes paid to the 
state upon the premiums reported to the commissioner by insurers 
on the Minnesota Firetown Premium Report after subtracting This 
amount shall be reduced by the amount required to pay the state 
auditor's costs and expenses of the audits or exams of the 
firefighters relief associations.  The total amount for 
apportionment in respect to police state aid shall not be 
greater or lesser than the amount of premium taxes paid to the 
state upon the premiums reported to the commissioner by insurers 
on the Minnesota Aid to Police Premium Report after subtracting 
the amount required to pay the state auditor's costs and 
expenses of the audits or exams of the police relief 
associations.  The amount for apportionment in respect to police 
state aid shall be distributed to the municipalities maintaining 
police departments and to the county on the basis of the number 
of active peace officers, as certified pursuant to section 
69.011, subdivision 2, clause (b).  The commissioner shall 
calculate the percentage of increase or decrease reflected in 
the apportionment over or under the previous year's available 
state aid using the same premiums as a basis for comparison. 
    Sec. 5.  Minnesota Statutes 1986, section 69.031, 
subdivision 3, is amended to read:  
    Subd. 3.  [APPROPRIATIONS.] There is hereby appropriated 
annually from the state general fund to the commissioner of 
revenue an amount sufficient to make the payments specified in 
this section and section 69.021 not exceeding the tax collected. 
     Sec. 6.  Minnesota Statutes 1986, section 237.075, 
subdivision 8, is amended to read:  
    Subd. 8.  [CHARITABLE CONTRIBUTIONS.] The commission shall 
allow as operating expenses only those charitable contributions 
which the commission deems prudent and which qualify under 
section 290.21, subdivision 3, clause (b) or (e).  Only 50 
percent of the qualified contributions shall be allowed as 
operating expenses. 
    Sec. 7.  Minnesota Statutes 1987 Supplement, section 
290.01, subdivision 5, is amended to read:  
    Subd. 5.  [DOMESTIC CORPORATIONS.] The term "domestic" when 
applied to a corporation means a corporation:  
    (1) created or organized in Minnesota or under its laws; 
and the term "foreign" when thus applied means a corporation 
other than a domestic corporation the United States, or under 
the laws of the United States or of any state, the District of 
Columbia, or any political subdivision of any of the foregoing 
but not including the commonwealth of Puerto Rico, or any 
possession of the United States; 
    (2) which qualifies as a DISC, as defined in section 992(a) 
of the Internal Revenue Code of 1954, as amended through 
December 31, 1985; or 
    (3) which qualifies as a FSC, as defined in section 922 of 
the Internal Revenue Code of 1986, as amended through December 
31, 1987.  
    Sec. 8.  Minnesota Statutes 1986, section 290.01, is 
amended by adding a subdivision to read: 
    Subd. 5a.  [FOREIGN CORPORATION.] The term "foreign," when 
applied to a corporation, means a corporation other than a 
domestic corporation. 
    Sec. 9.  Minnesota Statutes 1986, section 290.01, is 
amended by adding a subdivision to read: 
    Subd. 6b.  [FOREIGN OPERATING CORPORATION.] The term 
"foreign operating corporation," when applied to a corporation, 
means a domestic corporation with the following characteristics: 
    (1) it is part of a unitary business at least one member of 
which is taxable in this state; and 
    (2) either (i) the average of the percentages of its 
property and payrolls assigned to locations inside the United 
States and the District of Columbia, excluding the commonwealth 
of Puerto Rico and possessions of the United States, as 
determined under section 290.191 or 290.20, is 20 percent or 
less; or (ii) it has in effect a valid election under section 
936 of the Internal Revenue Code of 1986, as amended through 
December 31, 1987. 
    Sec. 10.  Minnesota Statutes 1987 Supplement, section 
290.01, subdivision 19, is amended to read:  
    Subd. 19.  [NET INCOME.] The term "net income" means the 
federal taxable income, as defined in section 63 of the Internal 
Revenue Code of 1986, as amended through the date named in this 
subdivision, incorporating any elections made by the taxpayer in 
accordance with the Internal Revenue Code in determining federal 
taxable income for federal income tax purposes, and with the 
modifications provided in subdivisions 19a to 19f.  
    In the case of a regulated investment company or a fund 
thereof, as defined in section 851(a) or 851(q) of the Internal 
Revenue Code, federal taxable income means investment company 
taxable income as defined in section 852(b)(2) of the Internal 
Revenue Code, except that:  
    (1) the exclusion of net capital gain provided in section 
852(b)(2)(A) of the Internal Revenue Code does not apply; and 
    (2) the deduction for dividends paid under section 
852(b)(2)(D) of the Internal Revenue Code must be applied by 
allowing a deduction for capital gain dividends and 
exempt-interest dividends as defined in sections 852(b)(3)(C) 
and 852(b)(5) of the Internal Revenue Code.  
    The Internal Revenue Code of 1986, as amended through 
December 31, 1986, shall be in effect for taxable years 
beginning after December 31, 1986. 
    Except as otherwise provided, references to the Internal 
Revenue Code in subdivisions 19a to 19f mean the code in effect 
for purposes of determining net income for the applicable year. 
    Sec. 11.  Minnesota Statutes 1987 Supplement, section 
290.01, subdivision 19c, is amended to read:  
    Subd. 19c.  [CORPORATIONS; ADDITIONS TO FEDERAL TAXABLE 
INCOME.] For corporations, there shall be added to federal 
taxable income: 
    (1) the amount of any deduction taken for federal income 
tax purposes for income, excise, or franchise taxes based on net 
income or related minimum taxes paid by the corporation to 
Minnesota, another state, a political subdivision of another 
state, the District of Columbia, or any foreign country or 
possession of the United States; 
    (2) interest not subject to federal tax upon obligations 
of:  the United States, its possessions, its agencies, or its 
instrumentalities to the extent the obligations are not subject 
to federal tax; the state of Minnesota or any other state, any 
of its political or governmental subdivisions, any of its 
municipalities, or any of its governmental agencies or 
instrumentalities; or the District of Columbia;  
    (3) exempt interest exempt-interest dividends received as 
defined in section 852(b)(5) of the Internal Revenue Code of 
1986, as amended through December 31, 1986;  
    (4) the amount of any windfall profits tax deducted under 
section 164 or 471 of the Internal Revenue Code of 1986, as 
amended through December 31, 1986;  
    (5) the amount of any net operating loss deduction taken 
for federal income tax purposes under section 172 of the 
Internal Revenue Code of 1986, as amended through December 31, 
1986;  
    (6) the amount of any special deductions taken for federal 
income tax purposes under sections 241 to 247 of the Internal 
Revenue Code of 1986, as amended through December 31, 1986; 
    (7) losses from the business of mining, as defined in 
section 290.05, subdivision 1, clause (a), that are not subject 
to Minnesota income tax; 
    (8) the amount of any capital losses deducted for federal 
income tax purposes under sections 1211 and 1212 of the Internal 
Revenue Code of 1986, as amended through December 31, 1986; 
    (9) the amount of any charitable contributions deducted for 
federal income tax purposes under section 170 of the Internal 
Revenue Code of 1986, as amended through December 31, 1986; 
    (10) the exempt foreign trade income of a foreign sales 
corporation under sections 921(a) and 291 of the Internal 
Revenue Code of 1986, as amended through December 31, 1986; 
    (11) the amount of percentage depletion deducted under 
sections 611 through 614 and 291 of the Internal Revenue Code of 
1986, as amended through December 31, 1986; and 
    (12) for certified pollution control facilities placed in 
service in a taxable year beginning before December 31, 1986, 
and for which amortization deductions were elected under section 
169 of the Internal Revenue Code of 1954, as amended through 
December 31, 1985, the amount of the amortization deduction 
allowed in computing federal taxable income for those 
facilities; and 
    (13) the amount of any deemed dividend from a foreign 
operating corporation determined pursuant to section 290.17, 
subdivision 4, paragraph (g). 
    Sec. 12.  Minnesota Statutes 1987 Supplement, section 
290.01, subdivision 19d, is amended to read:  
    Subd. 19d.  [CORPORATIONS; MODIFICATIONS DECREASING FEDERAL 
TAXABLE INCOME.] For corporations, there shall be subtracted 
from federal taxable income after the increases provided in 
subdivision 19c:  
    (1) the amount of foreign dividend gross-up added to gross 
income for federal income tax purposes under section 78 of the 
Internal Revenue Code;  
    (2) the decrease in salary expense for federal income tax 
purposes due to claiming the federal jobs credit under section 
51 of the Internal Revenue Code; 
    (3) any dividend (not including any distribution in 
liquidation) paid within the taxable year by a national or state 
bank to the United States, or to any instrumentality of the 
United States exempt from federal income taxes, on the preferred 
stock of the bank owned by the United States or the 
instrumentality; 
    (4) amounts disallowed for intangible drilling costs due to 
differences between this chapter and the Internal Revenue Code 
in taxable years beginning before January 1, 1987, as follows: 
    (i) to the extent the disallowed costs are represented by 
physical property, an amount equal to the allowance for 
depreciation under Minnesota Statutes 1986, section 290.09, 
subdivision 7, subject to the modifications contained in 
subdivision 19e; and 
    (ii) to the extent the disallowed costs are not represented 
by physical property, an amount equal to the allowance for cost 
depletion under Minnesota Statutes 1986, section 290.09, 
subdivision 8; 
    (5) the deduction for capital losses pursuant to sections 
1211 and 1212 of the Internal Revenue Code of 1986, as amended 
through December 31, 1986, except that: 
    (i) for capital losses incurred in taxable years beginning 
after December 31, 1986, capital loss carrybacks shall not be 
allowed; and 
    (ii) for capital losses incurred in taxable years beginning 
after December 31, 1986, a capital loss carryover to each of the 
15 taxable years succeeding the loss year shall be allowed;  
    (iii) for capital losses incurred in taxable years 
beginning before January 1, 1987, a capital loss carryback to 
each of the three taxable years preceding the loss year, subject 
to the provisions of Minnesota Statutes 1986, section 290.16, 
shall be allowed; and 
    (iv) for capital losses incurred in taxable years beginning 
before January 1, 1987, a capital loss carryover to each of the 
five taxable years succeeding the loss year to the extent such 
loss was not used in a prior taxable year and subject to the 
provisions of Minnesota Statutes 1986, section 290.16, shall be 
allowed; 
    (6) an amount for interest and expenses relating to income 
not taxable for federal income tax purposes, if (i) the income 
is taxable under this chapter and (ii) the interest and expenses 
were disallowed as deductions under the provisions of section 
171(a)(2), 265 or 291 of the Internal Revenue Code of 1986, as 
amended through December 31, 1986, in computing federal taxable 
income; 
    (7) in the case of mines, oil and gas wells, other natural 
deposits, and timber for which percentage depletion was 
disallowed pursuant to subdivision 19c, clause (11), a 
reasonable allowance for depletion based on actual cost.  In the 
case of leases the deduction must be apportioned between the 
lessor and lessee in accordance with rules prescribed by the 
commissioner.  In the case of property held in trust, the 
allowable deduction must be apportioned between the income 
beneficiaries and the trustee in accordance with the pertinent 
provisions of the trust, or if there is no provision in the 
instrument, on the basis of the trust's income allocable to each;
    (8) for certified pollution control facilities placed in 
service in a taxable year beginning before December 31, 1986, 
and for which amortization deductions were elected under section 
169 of the Internal Revenue Code of 1954, as amended through 
December 31, 1985, an amount equal to the allowance for 
depreciation under Minnesota Statutes 1986, section 290.09, 
subdivision 7; 
    (9) the amount included in federal taxable income 
attributable to the credits provided in Minnesota Statutes 1986, 
section 273.1314, subdivision 9, or Minnesota Statutes, section 
469.171, subdivision 6;  
    (10) amounts included in federal taxable income that are 
due to refunds of income, excise, or franchise taxes based on 
net income or related minimum taxes paid by the corporation to 
Minnesota, another state, a political subdivision of another 
state, the District of Columbia, or a foreign country or 
possession of the United States to the extent that the taxes 
were added to federal taxable income under section 290.01, 
subdivision 19c, clause (1), in a prior taxable year; and 
    (11) the following percentage of royalties, fees, or other 
like income accrued or received from a foreign operating 
corporation or a foreign corporation which is part of the same 
unitary business as the receiving corporation: 
      Taxable Year 
      Beginning After .......... Percentage 
      December 31, 1988 ........ 50 percent 
      December 31, 1990 ........ 80 percent.
    Sec. 13.  Minnesota Statutes 1987 Supplement, section 
290.01, subdivision 19e, is amended to read:  
    Subd. 19e.  [DEPRECIATION MODIFICATIONS FOR CORPORATIONS.] 
In the case of corporations, a modification shall be made for 
the accelerated cost recovery system.  The allowable deduction 
for the accelerated cost recovery system is the same amount as 
provided in section 168 of the Internal Revenue Code with the 
following modifications.  The modifications apply to taxable 
years beginning after December 31, 1986, and to property for 
which deductions under the Tax Reform Act of 1986, Public Law 
Number 99-514, are elected or apply.  
    (a) For property placed in service after December 31, 1980, 
and before January 1, 1987, 40 percent of the allowance pursuant 
to section 168 of the Internal Revenue Code of 1954, as amended 
through December 31, 1985, for 15-, 18-, or 19-year real 
property shall not be allowed and for all other property 20 
percent shall not be allowed.  
    (b) For property placed in service after December 31, 1987, 
no modification shall be made. 
    (c) For property placed in service after July 31, 1986, and 
before January 1, 1987, for which the taxpayer elects the 
deduction pursuant to section 203 of the Tax Reform Act of 1986, 
Public Law Number 99-514, and for property placed in service 
after December 31, 1986, and before January 1, 1988, 15 percent 
of the allowance pursuant to section 168 of the Internal Revenue 
Code of 1986 shall not be allowed.  
    (d) For property placed in service after December 31, 1980, 
and before January 1, 1987, for which the taxpayer elects to use 
the straight line method provided in section 168(b)(3), (f)(12), 
or (j)(1) or a method provided in section 168(e)(2) of the 
Internal Revenue Code of 1986, as amended through December 31, 
1986, but excluding property for which the taxpayer elects the 
deduction pursuant to section 203 of the Tax Reform Act of 1986, 
Public Law Number 99-514, the modifications provided in 
paragraph (a) do not apply. 
    (e) For property subject to the modifications contained in 
paragraphs (a) and (b) (c) and Minnesota Statutes 1986, section 
290.09, subdivision 7, clause (c), the following modification 
shall be made after the entire amount of the allowable deduction 
has been allowed for federal tax purposes for that property 
under the provisions of section 168 of the Internal Revenue Code 
of 1986, as amended through December 31, 1986.  The remaining 
depreciable basis in those assets for Minnesota purposes, 
including the amount of any basis reduction to reflect the 
investment tax credit for federal purposes under sections 48(q) 
and 49(d) of the Internal Revenue Code of 1986, as amended 
through December 31, 1986, shall be a depreciation allowance 
computed using the straight line method over the following 
number of years: 
    (1) three-year property, one year;  
    (2) five-year and seven-year property, two years;  
    (3) ten-year property, five years; and 
    (4) all other property, seven years.  
    (f) For property placed in service after December 31, 1987, 
the remaining depreciable basis for Minnesota purposes that is 
attributable to the basis reduction for federal purposes to 
reflect the investment tax credit under sections 48(q) and 49(d) 
of the Internal Revenue Code of 1986, as amended through 
December 31, 1986, shall be allowed as a deduction in the first 
taxable year after the entire amount of the allowable deduction 
for that property under the provisions of section 168 of the 
Internal Revenue Code of 1986, has been allowed, except that 
where the straight line method provided in section 168(b)(3) is 
used, the deduction provided in this clause shall be allowed in 
the last taxable year in which an allowance for depreciation is 
allowed for that property.  
    (g) For qualified timber property for which the taxpayer 
made an election under section 194 of the Internal Revenue Code 
of 1986, the remaining depreciable basis for Minnesota purposes 
is allowed as a deduction in the first taxable year after the 
entire allowable deduction has been allowed for federal tax 
purposes. 
    (h) The basis of property to which section 168 of the 
Internal Revenue Code applies is its basis as provided in this 
chapter including the modifications provided in this subdivision 
and in Minnesota Statutes 1986, section 290.09, subdivision 7, 
paragraph (c).  The recapture tax provisions provided in 
sections 1245 and 1250 of the Internal Revenue Code of 1986, as 
amended through December 31, 1986, apply but must be calculated 
using the basis provided in the preceding sentence.  
    (i) The basis of an asset acquired in an exchange of 
assets, including an involuntary conversion, is the same as its 
federal basis under the provisions of the Internal Revenue Code 
of 1986, except that the difference in basis due to the 
modifications in this subdivision and in Minnesota Statutes 
1986, section 290.09, subdivision 7, paragraph (c), is a 
deduction as provided in paragraph (e). 
    Sec. 14.  Minnesota Statutes 1987 Supplement, section 
290.01, subdivision 29, is amended to read:  
    Subd. 29.  [TAXABLE INCOME.] For tax years beginning after 
December 31, 1986, the term "taxable income" means:  
    (1) for individuals, estates, and trusts, the same as 
taxable net income;  
    (2) for corporations, the taxable net income less 
    (i) the net operating loss deduction under section 290.095; 
    (ii) the dividends received deduction under section 290.21, 
subdivision 4; and 
    (iii) the charitable contribution deduction under section 
290.21, subdivision 3; and 
    (iv) the foreign royalty deduction under section 290.21, 
subdivision 8. 
    Sec. 15.  Minnesota Statutes 1987 Supplement, section 
290.015, subdivision 1, is amended to read:  
    Subdivision 1.  [GENERAL RULE.] A person, other than a 
resident individual, that conducts a trade or business with its 
principal place of business outside of Minnesota is subject to 
the taxes imposed by this chapter with respect to that trade or 
business if the trade or business makes sales or receives other 
income that is assignable or apportionable to this state under 
section 290.17, 290.191, 290.20, 290.35 or 290.36 without regard 
to physical presence in this state, except as provided in 
subdivision 3.  Activities that create jurisdiction to tax under 
this chapter include, but are not limited to: 
    (1) having a place of business in this state; 
    (2) having employees, representatives, or independent 
contractors conducting business activities in this state; 
    (3) regularly selling products or services of any kind or 
nature to customers in this state who receive the product or 
service in this state; 
    (4) regularly soliciting business from potential customers 
in this state; 
    (5) regularly performing services from outside this state 
which are consumed within this state; 
    (6) regularly engaging in transactions with customers in 
this state that involve intangible property, including loans but 
not property described in subdivision 3, paragraph (b), and 
result in income flowing to the person from within this state;  
    (7) owning or leasing tangible personal or real property 
located in this state; or 
    (8) if a financial institution, regularly soliciting and 
receiving deposits from customers in this state. 
    (a) Except as provided in subdivision 3, a person that 
conducts a trade or business that has a place of business in 
this state, regularly has employees or independent contractors 
conducting business activities on its behalf in this state, or 
owns or leases real property located in this state or tangible 
personal property located in this state as defined in section 
290.191, subdivision 6, paragraph (e), is subject to the taxes 
imposed by this chapter. 
    (b) Except as provided in subdivision 3, a person that 
conducts a trade or business not described in paragraph (a) is 
subject to the taxes imposed by this chapter if the trade or 
business obtains or regularly solicits business from within this 
state, without regard to physical presence in this state. 
    (c) For purposes of paragraph (b), business from within 
this state includes, but is not limited to: 
    (1) sales of products or services of any kind or nature to 
customers in this state who receive the product or service in 
this state; 
    (2) sales of services which are performed from outside this 
state but the benefits of which are consumed in this state; 
    (3) transactions with customers in this state that involve 
intangible property and result in income flowing to the person 
from within this state as provided in section 290.191; 
    (4) leases of tangible personal property that is located in 
this state as defined in section 290.191, subdivision 6, 
paragraph (e); 
    (5) sales and leases of real property located in this 
state; and 
    (6) if a financial institution, deposits received from 
customers in this state.  
    (d) For purposes of paragraph (b), solicitation includes, 
but is not limited to: 
    (1) the distribution, by mail or otherwise, without regard 
to the state from which such distribution originated or in which 
the materials were prepared, of catalogs, periodicals, 
advertising flyers, or other written solicitations of business 
to customers in this state; 
    (2) display of advertisements on billboards or other 
outdoor advertising in this state; 
    (3) advertisements in newspapers published in this state; 
    (4) advertisements in trade journals or other periodicals, 
the circulation of which is primarily within this state; 
    (5) advertisements in a Minnesota edition of a national or 
regional publication or a limited regional edition of which this 
state is included of a broader regional or national publication 
which are not placed in other geographically defined editions of 
the same issue of the same publication; 
    (6) advertisements in regional or national publications in 
an edition which is not by its contents geographically targeted 
to Minnesota, but which is sold over the counter in Minnesota or 
by subscription to Minnesota residents; 
    (7) advertisements broadcast on a radio or television 
station located in Minnesota; or 
    (8) any other solicitation by telegraph, telephone, 
computer data base, cable, optic, microwave, or other 
communication system. 
    Sec. 16.  Minnesota Statutes 1987 Supplement, section 
290.015, subdivision 2, is amended to read:  
    Subd. 2.  [PRESUMPTION.] (a) A person is presumed, subject 
to rebuttal, to be engaged in regular solicitation within this 
state if it conducts transactions described in any of 
subdivision 1, clauses (3) to (6), with 20 or more residents of 
this state during any tax period or, if a financial institution, 
if the sum of its assets and the absolute value of its deposits 
attributable to sources within this state equals or exceeds 
$5,000,000.  Assets and deposits must be attributed to sources 
within this state by applying the principles established under 
section 290.191 obtaining or regularly soliciting business from 
within this state if: 
    (1) it is a financial institution and it conducts 
activities described in subdivision 1, paragraph (b), without 
regard to transactions described in subdivision 3, with 20 or 
more persons within this state during any tax period; or 
    (2) it is a financial institution as defined in section 
290.01, subdivision 4a, and the sum of its assets and the 
absolute value of its deposits attributable to sources within 
this state equals or exceeds $5,000,000, with assets and 
deposits attributed to sources within this state by applying the 
principles established under section 290.191, except as provided 
in subdivision 3. 
    (b) A financial institution that (i) is not engaged in 
activities within this state under subdivision 1, paragraph (a), 
and (ii) does not satisfy the requirements of paragraph (a) is 
not subject to taxes imposed by this chapter.  
    Sec. 17.  Minnesota Statutes 1987 Supplement, section 
290.015, subdivision 3, is amended to read:  
    Subd. 3.  [EXCEPTIONS.] (a) A person is not subject to tax 
under this chapter if the person is engaged in the business of 
selling tangible personal property and taxation of that person 
under this chapter is precluded by Public Law Number 86-272, 
United States Code, title 15, sections 381 to 384 or would be so 
precluded except for the fact that the person stored tangible 
personal property in a state licensed facility under chapter 231.
    (b) Ownership of an interest in the following types of 
property (including those contacts with this state reasonably 
required to evaluate and complete the acquisition or disposition 
of the property, the servicing of the property or the income 
from it, the collection of income from the property, or the 
acquisition or liquidation of collateral relating to the 
property) shall not be a factor in determining whether the owner 
is subject to tax under this chapter: 
    (1) an interest in a real estate mortgage investment 
conduit, a real estate investment trust, or a regulated 
investment company, as those terms are defined in the Internal 
Revenue Code of 1986, as amended through December 31, 1986; and 
    (2) an interest in a loan-backed, mortgage-backed, or 
receivable-backed security representing either:  (i) ownership 
in a pool of promissory notes, mortgages, or receivables or 
certificates of interest or participation in such notes, 
mortgages, or receivables, or (ii) debt obligations or equity 
interests which provide for payments in relation to payments or 
reasonable projections of payments on the notes, mortgages, or 
receivables, and which are issued by a financial institution or 
by an entity substantially all of whose assets consist of 
promissory notes, mortgages, receivables, or interests in them; 
    (3) an interest in any assets described in section 290.191, 
subdivision 11, paragraphs (e) to (l), and in which the payment 
obligations embodies in such assets were solicited and entered 
into by persons independent and not acting on behalf of the 
owner; 
    (4) an interest in the right to service, or collect income 
from any assets described in section 290.191, subdivision 11, 
paragraphs (e) to (l), and in which the payment obligations 
embodied in such assets were solicited and entered into by 
persons independent and not acting on behalf of the owner; 
    (5) an interest of a person other than an individual, 
estate, or trust, in any intangible, tangible, real, or personal 
property acquired in satisfaction, whether in whole or in part, 
of any asset embodying a payment obligation which is in default, 
whether secured or unsecured, the ownership of an interest in 
which would be exempt under the preceding provisions of this 
subdivision, provided the property is disposed of within a 
reasonable period of time; or 
    (6) amounts held in escrow or trust accounts, pursuant to 
and in accordance with the terms of property described in this 
subdivision. 
    If the person is a member of the unitary group, paragraph 
(b) does not apply to an interest acquired from another member 
of the unitary group.  
    Sec. 18.  Minnesota Statutes 1987 Supplement, section 
290.015, subdivision 4, is amended to read:  
    Subd. 4.  [LIMITATIONS.] (a) This section does not (1) 
subject a trade or business to any regulation, including any 
tax, of any local unit of government or subdivision of this 
state if the trade or business does not own or lease tangible or 
real property located within this state and has no employees or 
independent contractors present in this state to assist in the 
carrying on of the business; or (2) exclude a trade or business 
from the filing requirements of the notice of business 
activities report under section 290.371. 
    (b) The purchase of tangible personal property or 
intangible property or services by a person that conducts a 
trade or business with the principal place of business outside 
of Minnesota (the "non-Minnesota person") from a person within 
Minnesota shall not be taken into account in determining whether 
the non-Minnesota person is subject to the taxes imposed by this 
chapter, except for services involving either the direct 
solicitation of Minnesota customers or relationships with 
Minnesota customers after sales are made. 
    (c) No contact with any Minnesota financial institution by 
any financial institution with its principal place of business 
outside Minnesota with respect to transactions described in 
subdivision 3, or with respect to deposits received from or by a 
Minnesota financial institution, shall be taken into account in 
determining whether such a financial institution is subject to 
the taxes imposed by this chapter.  The fact of participation by 
a Minnesota financial institution in a transaction which also 
involves a borrower and a financial institution that conducts a 
trade or business with its principal place of business outside 
of Minnesota shall not be a factor in determining whether such 
financial institution is subject to the taxes imposed by this 
chapter.  This paragraph does not apply to transactions between 
or among members of the same unitary group.  
     Sec. 19.  Minnesota Statutes 1987 Supplement, section 
290.06, subdivision 1, is amended to read:  
    Subdivision 1.  [COMPUTATION, CORPORATIONS.] (a) The 
franchise tax imposed by this chapter upon corporations shall be 
computed by applying to their taxable income the rate of 9.5 
percent adjusted as provided in paragraph (b). 
    (b) For taxable years beginning after December 31, 1989, 
the commissioner of revenue must adjust the rate provided in 
paragraph (a) as provided in this paragraph.  By December 15, 
1989, the commissioner shall prepare a forecast of revenues 
predicted to be raised for taxable years beginning in 1990 by 
the franchise tax on corporations under this chapter for taxable 
years beginning in 1990, including the tax under section 
290.092, computed as if the tax were imposed under section 
290.092, subdivisions 1 to 4, and the rate in effect in this 
subdivision were 9.5 percent.  The commissioner shall adjust the 
rate provided in paragraph (a) so that the amount forecast to be 
raised by the franchise tax on corporations under this chapter, 
including the tax under section 290.092, subdivision 5, is equal 
to the amount of the forecast computed as if the tax under 
section 290.092, subdivisions 1 to 4, were in effect.  The 
adjustment of the tax rate by the commissioner under this 
subdivision shall not be considered a "rule" and shall not be 
subject to the administrative procedure act contained in chapter 
14. 
    Sec. 20.  Minnesota Statutes 1987 Supplement, section 
290.06, subdivision 21, is amended to read:  
    Subd. 21.  [ALTERNATIVE MINIMUM TAX.] (a) A corporation is 
allowed a credit for alternative minimum tax previously paid for 
any taxable year in which the corporation has no tax liability 
under section 290.092, subdivision 1, and has an alternative 
minimum tax credit carryover from a previous year.  The credit 
allowable in any taxable year shall be equal to the lesser of (1)
the excess of the tax under section 290.06 for the taxable year 
over the amount computed under section 290.092, subdivision 1, 
clause (a) (1), for the taxable year, or (2) the alternative 
minimum tax credit carryover to the taxable year. 
    (b) The tax imposed under section 290.092, subdivision 1, 
for any taxable year is a credit for an alternative minimum tax 
previously paid which is a credit carryover to each of the five 
taxable years succeeding the taxable year.  The entire amount of 
the alternative minimum tax credit must be carried to the 
earliest of the taxable years year to which such amount may be 
carried.  The portion of the alternative minimum tax credit 
which is carried to each of the other taxable years to which the 
credit may be carried is the excess, if any, of the credit over 
the amount allowable under paragraph (a) for each of the taxable 
years to which the credit may be carried.  In each taxable year 
in which a credit is allowable under paragraph (a), the credit 
for alternative minimum tax previously paid must be used 
beginning with the earliest taxable year from which the credit 
may be carried Any unused portion of the credit must be carried 
to the following taxable year.  No credit may be carried to a 
taxable year more than five years after the taxable year in 
which the alternative minimum tax was paid. 
    Sec. 21.  Minnesota Statutes 1987 Supplement, section 
290.092, subdivision 3, is amended to read:  
    Subd. 3.  [ALTERNATIVE MINIMUM TAX BASE.] The alternative 
minimum tax base equals the sum of:  
    (1) the total amount of Minnesota sales and or receipts;  
    (2) the amount of the taxpayer's total Minnesota property; 
and 
    (3) the taxpayer's total Minnesota payrolls; 
less the exemption amount, if any. 
    Sec. 22.  Minnesota Statutes 1987 Supplement, section 
290.092, subdivision 4, is amended to read:  
    Subd. 4.  [DEFINITIONS.] (a) "Minnesota sales and or 
receipts" means the total sales apportioned to Minnesota 
pursuant to section 290.191, subdivision 5, the total receipts 
attributed to Minnesota pursuant to section 290.191, 
subdivisions 6 to 8, and/or the total sales or receipts 
apportioned or attributed to Minnesota pursuant to any other 
apportionment formula applicable to the taxpayer. 
    (b) "Minnesota property" means total Minnesota tangible 
property as provided in section 290.191, subdivisions 9 to 11, 
and any other tangible property located in Minnesota except as 
provided in subdivision 4a.  Intangible property shall not be 
included in Minnesota property for purposes of this section.  
Taxpayers who do not utilize tangible property to apportion 
income shall nevertheless include Minnesota property for 
purposes of this section.  For the first five taxable years 
during which a corporation is subject to taxation under this 
chapter, the amount of its Minnesota property and payrolls shall 
be deemed to be zero for purposes of this section On a return 
for a short taxable year, the amount of Minnesota property 
owned, as determined under section 290.191, shall be included in 
Minnesota property based on a fraction in which the numerator is 
the number of days in the short taxable year and the denominator 
is 365.  
    (c) "Minnesota payrolls" means total Minnesota payrolls as 
provided in section 290.191, subdivision 12, except as provided 
in subdivision 4a.  Taxpayers who do not utilize payrolls to 
apportion income shall nevertheless include Minnesota payrolls 
for purposes of this section. 
    (d) The "exemption amount" equals the lesser of (1) the sum 
of the taxpayer's Minnesota sales and or receipts, property, and 
payrolls, as defined in this section, or (2) $5,000,000 reduced 
by one-half of the amount of the taxpayer's total sales and 
receipts, property, and payrolls, as defined in this section, in 
excess of $10,000,000.  In the case of a unitary group, the 
exemption amount equals the lesser of (1) the sum of the unitary 
group's Minnesota sales or receipts, property, and payrolls or 
(2) $5,000,000 reduced by one-half of the unitary group's total 
sales or receipts, property, and payrolls in excess of 
$10,000,000.  Each member of a unitary group may use a portion 
of the unitary group's exemption amount based on a fraction, the 
numerator of which is the sum of the taxpayer's Minnesota sales 
or receipts, property, and payrolls and the denominator is the 
sum of the Minnesota sales or receipts, property, and payrolls 
of all unitary members subject to the taxes imposed by this 
chapter.  Total sales and receipts, property, and payroll means 
the total determined under section 290.191 as the denominator of 
the apportionment formula.  For purposes of this section, 
taxpayers who use an apportionment formula that does not include 
sales or receipts, property, and payrolls shall, nevertheless, 
use those amounts as defined in section 290.191, subdivisions 5 
to 12.  On a return for a short taxable year, the amount of 
total property owned, as determined under section 290.191, shall 
be included in Minnesota property based on a fraction in which 
the numerator is the number of days in the short taxable year 
and the denominator is 365.  In the case of a unitary business, 
the exemption amount must reflect the factors of the entire all 
businesses included in the unitary business group as reported on 
the combined report defined in section 290.17, subdivision 4.  A 
corporation that has as its sole or primary business activity 
(1) the providing of professional services, as defined in 
section 319A.02; (2) operation as a financial institution, as 
defined in section 290.01, subdivision 4a; (3) sales or 
management of real estate; or (4) operation as an insurance 
agency, as defined in section 60A.02, does not have an exemption 
amount.  
    Sec. 23.  Minnesota Statutes 1987 Supplement, section 
290.092, is amended by adding a subdivision to read: 
    Subd. 4a.  [NEW BUSINESS EXCLUSION.] For the first five 
taxable years during which a corporation is subject to taxation 
under this chapter, the amount of its Minnesota property and 
payrolls must be excluded from the alternative minimum tax base 
unless it is disqualified in this subdivision.  A corporation is 
considered subject to taxation under this chapter if it would be 
subject to Minnesota's jurisdiction to tax as provided in 
section 290.015, before claiming this exclusion.  The following 
does not qualify for this exclusion:  
    (1) a corporation that is a member of a unitary group that 
includes at least one business that does not qualify for this 
exclusion;  
    (2) any corporation organized under the laws of this state 
or certified to do business within this state at least five 
taxable years before the taxable year in which this exclusion is 
claimed;  
     (3) corporations created by:  reorganizations, as defined 
in section 368 of the Internal Revenue Code of 1986, as amended 
through December 31, 1987; or split-ups, split-offs, or 
spin-offs, as described in section 355 of the Internal Revenue 
Code of 1986, as amended through December 31, 1987; or the 
transfer or acquisition, whether directly or indirectly, of 
assets which constitute a trade or business, including stock 
purchases under section 338 of the Internal Revenue Code of 
1986, as amended through December 31, 1987, where the surviving, 
newly formed, or acquiring corporation conducts substantially 
the same activities as the predecessor corporation, regardless 
of whether or not the survivor corporation also conducts 
additional activities, and the predecessor corporation would not 
otherwise qualify for this exclusion if it had continued to 
conduct those activities; 
    (4) any change in identity or form of business where the 
original business entity would have been subject to Minnesota's 
taxing jurisdiction, as provided in section 290.015, at least 
five taxable years before the taxable year in which this 
exclusion is claimed; 
    (5) a corporation, the primary business activity of which 
is the providing of professional services as defined in section 
319A.02, operation as a financial institution, as defined in 
section 290.01, subdivision 4a; sales or management of real 
estate; or operation as an insurance agency, as defined in 
section 60A.03; or 
    (6) a corporation the affairs of which the commissioner 
finds were arranged as they were primarily to reduce taxes by 
qualifying as a new business under this subdivision. 
    Sec. 24.  Minnesota Statutes 1987 Supplement, section 
290.092, subdivision 5, is amended to read: 
    Subd. 5.  [IMPOSITION OF TAX AFTER 1989.] For taxable years 
beginning after December 31, 1989, in addition to the taxes 
computed under this chapter without regard to this section, the 
franchise tax imposed on corporations includes a tax equal to 
the excess, if any, of:  
    (1) 40 percent of the tax imposed upon the corporation 
under section 55(a) of the Internal Revenue Code of 1986, as 
amended through December 31, 1986, apportioned to Minnesota 
under section 290.191.  In computing the amount of the liability 
under section 55(a) of the Internal Revenue Code of 1986, the 
regular federal tax liability under section 55(a)(2) of the 
Internal Revenue Code of 1986, must be determined using federal 
taxable income as modified by sections 290.01, subdivisions 19c 
and 19d, 290.095, and 290.21, and alternative minimum taxable 
income under section 56 of the Internal Revenue Code of 1986 
must be computed as if the section 290.095 restrictions on net 
operating losses applied. 
    (2) the amount of tax computed under this chapter without 
regard to this section.  
    Sec. 25.  Minnesota Statutes 1987 Supplement, section 
290.095, subdivision 1, is amended to read:  
    Subdivision 1.  [ALLOWANCE OF DEDUCTION.] (a) There shall 
be allowed as a deduction for the taxable year the amount of any 
net operating loss deduction as provided in section 172 of the 
Internal Revenue Code of 1986, as amended through December 31, 
1986, subject to the limitations and modifications provided in 
this section. 
    (b) A net operating loss deduction shall be available under 
this section only to corporate taxpayers except that 
subdivisions 7, 9, and 11 hereof apply only to individuals, 
estates, and trusts.  
    (c) In the case of a regulated investment company or fund 
thereof, as defined in section 851(a) or 851(q) of the Internal 
Revenue code of 1986, as amended through December 31, 1987, the 
deduction provided by this section shall not be allowed. 
    Sec. 26.  Minnesota Statutes 1987 Supplement, section 
290.095, subdivision 2, is amended to read:  
    Subd. 2.  [DEFINED AND LIMITED.] (a) The term "net 
operating loss" as used in this section shall mean a net 
operating loss as defined in section 172(c) of the Internal 
Revenue Code of 1986, as amended through December 31, 1986, with 
the modifications specified in subdivision 4.  The deductions 
provided in section 290.21 and the modification provided in 
section 290.01, subdivision 19d, clause (11), cannot be used in 
the determination of a net operating loss.  
    (b) The term "net operating loss deduction" as used in this 
section means the aggregate of the net operating loss carryovers 
to the taxable year, computed in accordance with subdivision 3.  
The provisions of section 172(b) of the Internal Revenue Code of 
1986, as amended through December 31, 1986, relating to the 
carryback of net operating losses, do not apply. 
    Sec. 27.  Minnesota Statutes 1987 Supplement, section 
290.095, subdivision 3, is amended to read:  
    Subd. 3.  [CARRYOVER.] (a) A net operating loss for any 
taxable year incurred in a taxable year:  (i) beginning after 
December 31, 1986, shall be a net operating loss carryover to 
each of the 15 taxable years following the taxable year of such 
loss; (ii) beginning before January 1, 1987, shall be a net 
operating loss carryover to each of the five taxable years 
following the taxable year of such loss subject to the 
provisions of Minnesota Statutes 1986, section 290.095; and (iii)
beginning before January 1, 1987, shall be a net operating loss 
carryback to each of the three taxable years preceding the loss 
year subject to the provisions of Minnesota Statutes 1986, 
section 290.095. 
    (b) The entire amount of the net operating loss for any 
taxable year shall be carried to the earliest of the taxable 
years to which such loss may be carried.  The portion of such 
loss which shall be carried to each of the other taxable years 
shall be the excess, if any, of the amount of such loss over the 
sum of the taxable net income, adjusted by the modifications 
specified in subdivision 4, for each of the taxable years to 
which such loss may be carried. 
    (c) Where a corporation does business both within and 
without Minnesota, and apportions its income under the 
provisions of section 290.191, the net operating loss deduction 
incurred in any taxable year shall be allowed to the extent of 
the apportionment ratio of the loss year. 
    (d) No additional net operating loss deduction is allowed 
in a subsequent taxable year for the portion of a net operating 
loss deduction incurred in any taxable year used to offset 
Minnesota income in a year in which the taxpayer is subject to 
the alternative minimum tax in section 290.092. 
    Sec. 28.  Minnesota Statutes 1987 Supplement, section 
290.095, is amended by adding a subdivision to read: 
    Subd. 12.  [UNITARY GROUP; CARRYBACK; CARRYFORWARD.] A 
taxpayer may elect a net operating loss carryback to each of the 
three taxable years preceding the taxable year of the loss and a 
net operating loss carryover to each of the five taxable years 
following the taxable year of the loss, notwithstanding 
subdivision 3, clause (a).  The net operating loss carryback and 
carryover allowed under this subdivision is limited to the part 
of the net operating loss attributable to the deduction allowed 
for bad debts under section 166(a) of the Internal Revenue Code 
of 1986, as amended through December 31, 1987.  The part of the 
net operating loss for any taxable year that is attributable to 
the deduction allowed for bad debts is the excess of the net 
operating loss for the taxable year, over the net operating loss 
for the taxable year determined without regard to the amount 
allowed as a deduction for bad debts for the taxable year.  In 
applying the provisions of subdivision 3, clause (b), the part 
of the net operating loss for the loss year that is attributable 
to the deduction allowed for bad debts is considered a separate 
net operating loss for the year to be applied before the other 
part of the net operating loss.  This subdivision applies only 
to taxpayers where a member of the unitary group meets the 
definition found in section 585(c)(2)(A) of the Internal Revenue 
Code of 1986, as amended through December 31, 1987, and includes 
all corporations included in the unitary group and required to 
be included on a combined report.  A refund of tax that is the 
result of a net operating loss carryback under this section must 
be paid after two years but before two years and 30 days after 
the claim for refund was filed. 
    Sec. 29.  Minnesota Statutes 1987 Supplement, section 
290.10, is amended to read:  
    290.10 [NONDEDUCTIBLE ITEMS.] 
    Notwithstanding any other provision of law Except as 
provided in section 290.17, subdivision 4, paragraph (i), in 
computing the net income of a corporation no deduction shall in 
any case be allowed for expenses, interest and taxes connected 
with or allocable against the production or receipt of all 
income not included in the measure of the tax imposed by this 
chapter, except that for corporations engaged in the business of 
mining or producing iron ore, the mining of which is subject to 
the occupation tax imposed by section 298.01, subdivision 1, and 
the provisions of section 298.031, this shall not prevent the 
deduction of expenses and other items to the extent that the 
expenses and other items are allowable under this chapter and 
are not deductible, capitalizable, retainable in basis, or taken 
into account by allowance or otherwise in computing the 
occupation tax and do not exceed the amounts taken for federal 
income tax purposes for that year.  Occupation taxes imposed 
under chapter 298, royalty taxes imposed under chapter 299, or 
depletion expenses may not be deducted under this clause. 
    Sec. 30.  Minnesota Statutes 1987 Supplement, 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 farm income 
subject to subdivision 5, paragraph (a), business income subject 
to subdivision 5, paragraph (b) or (c), income of an insurance 
company determined under section 290.35, or income of an 
investment company determined under section 290.36. 
    (b) The term "unitary business" means business activities 
or operations which are of mutual benefit, dependent upon, or 
contributory to one another, individually or as a group.  The 
term may be applied within a single legal entity or between 
multiple entities and without regard to whether each entity is 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. 
    (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 is not deemed to exist when a 
corporation is involved unless that corporation is a member of a 
group of two or more business entities and more than 50 percent 
of the voting stock of each member of the group 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.  
    (f) 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 
corporations or other entities created or organized in the 
United States or under the laws of the United States or of any 
state, the District of Columbia, the commonwealth of Puerto 
Rico, any possession of the United States, or any political 
subdivision of any the foregoing and of any FSC as defined in 
section 922 of the Internal Revenue Code of 1986, as amended 
through December 31, 1986, that are determined to be part of the 
unitary business pursuant to this subdivision, notwithstanding 
that other corporations or other entities organized in foreign 
countries might be included in the unitary business.  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.  A 
foreign corporation or other foreign entity which is required to 
file a return under this chapter shall file on a separate return 
basis.  The net income and apportionment factors under section 
290.191 or 290.20 of foreign operating corporations shall not be 
included in the net income or the apportionment factors of the 
unitary business except as provided in paragraph (g). 
    (g) The adjusted net income of a foreign operating 
corporation shall be deemed to be paid as a dividend on the last 
day of its taxable year to each shareholder thereof, in 
proportion to each shareholder's ownership, with which such 
corporation is engaged in a unitary business.  Such deemed 
dividend shall be treated as a dividend under section 290.21, 
subdivision 4. 
    Dividends actually paid by a foreign operating corporation 
to a corporate shareholder which is a member of the same unitary 
business as the foreign operating corporation shall be 
eliminated from the net income of the unitary business in 
preparing a combined report for the unitary business.  The 
adjusted net income of a foreign operating corporation shall be 
its net income adjusted as follows: 
    (1) any taxes paid or accrued to a foreign country, the 
commonwealth of Puerto Rico, or a United States possession or 
political subdivision of any of the foregoing shall be a 
deduction; and 
    (2) the subtraction from federal taxable income for 
payments received from foreign corporations or foreign operating 
corporations under section 290.01, subdivision 19d, clause (11), 
shall not be allowed. 
    If a foreign operating corporation incurs a net loss, 
neither income nor deduction from that corporation shall be 
included in determining the net income of the unitary business. 
    (h) 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 other than foreign 
operating corporations 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.  
    (i) Deductions for expenses, interest, or taxes otherwise 
allowable under this chapter that are connected with or 
allocable against dividends, deemed dividends described in 
paragraph (g) or royalties, fees, or other like income described 
in section 290.01, subdivision 19d, clause (11), shall not be 
disallowed. 
    (g) (j) Each corporation or other entity 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 (f) (h) 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 (f) (h) in the 
denominators of the apportionment formula. 
    (k) 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. 
    Sec. 31.  Minnesota Statutes 1987 Supplement, section 
290.191, subdivision 1, is amended to read:  
    Subdivision 1.  [GENERAL RULE.] Except as otherwise 
provided in section 290.17, subdivision 5, the net income from a 
trade or business carried on partly within and partly without 
this state must be apportioned to this state as provided in this 
section.  For purposes of this section, state means a state of 
the United States, the District of Columbia, the commonwealth of 
Puerto Rico, or any territory or possession of the United States 
or any foreign country. 
    Sec. 32.  Minnesota Statutes 1987 Supplement, section 
290.191, subdivision 4, is amended to read:  
    Subd. 4.  [APPORTIONMENT FORMULA FOR CERTAIN MAIL ORDER 
BUSINESSES.] If the business consists exclusively of the selling 
of tangible personal property and services in response to orders 
received by United States mail or telephone, and 100 99 percent 
of the taxpayer's property and payroll is within Minnesota, then 
the taxpayer may apportion net income to Minnesota based solely 
upon the percentage that the sales made within this state in 
connection with the trade or business during the tax period are 
of the total sales wherever made in connection with the trade or 
business during the tax period.  Property and payroll factors 
are disregarded.  In determining eligibility for this 
subdivision, the sale not in the ordinary course of business of 
tangible or intangible assets used in conducting business 
activities must be disregarded.  This subdivision is repealed 
effective for taxable years beginning after December 31, 1988. 
    Sec. 33.  Minnesota Statutes 1987 Supplement, section 
290.191, subdivision 5, is amended to read:  
    Subd. 5.  [DETERMINATION OF SALES FACTOR.] (a) For purposes 
of this section, the following rules apply in determining the 
sales factor.  
    (b) (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 of 1986, as amended through December 
31, 1987; 
     (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; 
     (5) sales of debt instruments as defined in section 
1275(a)(1) of the Internal Revenue Code of 1986, as amended 
through December 31, 1987, or sales of stock; and 
     (6) royalties, fees, or other like income of a type which 
qualify for a subtraction from federal taxable income under 
section 290.01, subdivision 19(d)(11).  
    (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, and the taxpayer is taxable in 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, other than sales of tangible personal property, 
are made in this state if the property is used, or the benefits 
of the services are consumed, in this state.  If the property is 
used or the benefits of the services are consumed in more than 
one state, the sales must be apportioned pro rata according to 
the portion of use or consumption of benefits in this 
state.  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.  Moving property including, but not limited to, motor 
vehicles, rolling stock, aircraft, vessels, or mobile equipment 
is located in this state if: 
    (1) the operation of the property is entirely within this 
state; or 
    (2) the operation of the property is in two or more states 
and the principal base of operations from which the property is 
sent out is in this state. 
    (h) Royalties and other income not described in paragraph 
(a), clause (6), 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 in which the benefits of the services 
are consumed.  If the benefits are consumed in more than one 
state, the receipts from those benefits must be apportioned to 
this state pro rata according to the portion of the benefits 
consumed in this state.  If the extent to which the benefits of 
services are consumed in this state is not readily determinable, 
the benefits of the services shall be deemed to be consumed 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 benefits of the services shall be deemed to be consumed at 
the office of the customer to which the services are billed.  
    Sec. 34.  Minnesota Statutes 1987 Supplement, section 
290.191, subdivision 6, is amended to read:  
    Subd. 6.  [DETERMINATION OF RECEIPTS FACTOR FOR FINANCIAL 
INSTITUTIONS.] (a) For purposes of this section, the rules in 
this subdivision and subdivisions 7 and 8 apply in determining 
the receipts factor for financial institutions.  
    (b) "Receipts" for this purpose means gross income, 
including net taxable gain on disposition of assets, including 
securities and money market transactions instruments, when 
derived from transactions and activities in the regular course 
of the taxpayer's trade or business.  
    (c) "Money market instruments" means federal funds sold and 
securities purchased under agreements to resell, commercial 
paper, banker's acceptances, and purchased certificates of 
deposit and similar instruments to the extent that the 
instruments are reflected as assets under generally accepted 
accounting principles.  
    (d) "Securities" means United States Treasury securities, 
obligations of United States government agencies and 
corporations, obligations of state and political subdivisions, 
corporate stock and other securities, participations in 
securities backed by mortgages held by United States or state 
government agencies, loan-backed securities and similar 
investments to the extent the investments are reflected as 
assets under generally accepted accounting principles.  
    (e) Receipts from the lease or rental of real or tangible 
personal property, including both finance leases and true 
leases, must be attributed to this state if the property is 
located in this state.  Tangible personal property that is 
characteristically moving property, such as motor vehicles, 
rolling stock, aircraft, vessels, mobile equipment, and the 
like, is considered to be located in a state if:  
    (1) the operation of the property is entirely within the 
state; or 
    (2) the operation of the property is in two or more states, 
but the principal base of operations from which the property is 
sent out is in the state.  
    (f) Interest income and other receipts from assets in the 
nature of loans that are secured primarily by real estate or 
tangible personal property must be attributed to this state if 
the security property is located in this state under the 
principles stated in paragraph (e).  
    (g) Interest income and other receipts from consumer loans 
not secured by real or tangible personal property that are made 
to residents of this state, whether at a place of business, by 
traveling loan officer, by mail, by telephone or other 
electronic means, must be attributed to this state.  
    (h) Interest income and other receipts from commercial 
loans and installment obligations not secured by real or 
tangible personal property must be attributed to this state if 
the proceeds of the loan are to be applied in this state.  If it 
cannot be determined where the funds are to be applied, the 
income and receipts are attributed to the state in which the 
business applied for the loan.  "Applied for" means initial 
inquiry (including customer assistance in preparing the loan 
application) or submission of a completed loan application, 
whichever occurs first the office of the borrower from which the 
application would be made in the regular course of business is 
located.  If this cannot be determined, the transaction is 
disregarded in the apportionment formula.  
    (i) Interest income and other receipts from a participating 
financial institution's portion of participation loans must be 
attributed under paragraphs (e) to (h).  A participation loan is 
a loan in which more than one lender is a creditor to a common 
borrower.  
    (j) Interest income and other receipts including service 
charges from financial institution credit card and travel and 
entertainment credit card receivables and credit card holders' 
fees must be attributed to the state to which the card charges 
and fees are regularly billed.  
    (k) Merchant discount income derived from financial 
institution credit card holder transactions with a merchant must 
be attributed to the state in which the merchant is located.  In 
the case of merchants located within and outside the state, only 
receipts from merchant discounts attributable to sales made from 
locations within the state are attributed to this state.  It is 
presumed, subject to rebuttal, that the location of a merchant 
is the address shown on the invoice submitted by the merchant to 
the taxpayer.  
    (l) Receipts from the performance of fiduciary and other 
services must be attributed to the state in which the benefits 
of the services are consumed.  If the benefits are consumed in 
more than one state, the receipts from those benefits must be 
apportioned to this state pro rata according to the portion of 
the benefits consumed in this state.  If the extent to which the 
benefits of services are consumed in this state is not readily 
determinable, the benefits of the services shall be deemed to be 
consumed 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 benefits of the services shall be deemed to be 
consumed at the office of the customer to which the services are 
billed.  
    (m) Receipts from the issuance of travelers checks and 
money orders must be attributed to the state in which the checks 
and money orders are purchased.  
    (n) Receipts from investments of a financial institution in 
securities of this state, its political subdivisions, agencies, 
and instrumentalities must be attributed to this state.  
    (o) Receipts from a financial institution's interest in any 
property described in section 290.015, subdivision 3, paragraph 
(b), is not included in the numerator or the denominator of the 
receipts factor provided the financial institution's activities 
within this state with respect to any interest in the property 
are limited in the manner provided in section 290.015, 
subdivision 3, paragraph (b).  If a financial institution is 
subject to tax under this chapter, its interest in property 
described in section 290.015, subdivision 3, paragraph (b), is 
included in the receipts factor in the same manner as assets in 
the nature of securities or money market instruments are 
included under paragraph (n) and subdivision 7. 
    Sec. 35.  Minnesota Statutes 1987 Supplement, section 
290.191, subdivision 11, is amended to read:  
    Subd. 11.  [FINANCIAL INSTITUTIONS; PROPERTY FACTOR.] (a) 
For financial institutions, the property factor includes, as 
well as tangible property, intangible property as set forth in 
this subdivision.  
    (b) Intangible personal property must be included at its 
tax basis for federal income tax purposes.  
    (c) Goodwill must not be included in the property factor.  
    (d) Coin and currency located in this state must be 
attributed to this state.  
    (e) Lease financing receivables must be attributed to this 
state if and to the extent that the property is located within 
this state.  
    (f) Assets in the nature of loans that are secured by real 
or tangible personal property must be attributed to this state 
if and to the extent that the security property is located 
within this state.  
    (g) Assets in the nature of consumer loans and installment 
obligations that are unsecured or secured by intangible property 
must be attributed to this state if the loan was made to a 
resident of this state.  
    (h) Assets in the nature of commercial loan and installment 
obligations that are unsecured or secured by intangible property 
must be attributed to this state if the loan proceeds of the 
loan are to be applied in this state.  If it cannot be 
determined where the funds are to be applied, the assets must be 
attributed to the state in which the business applied for the 
loan.  "Applied for" means initial inquiry (including customer 
assistance in preparing the loan application) or submission of a 
completed loan application, whichever occurs first there is 
located the office of the borrower from which the application 
would be made in the regular course of business.  If this cannot 
be determined, the transaction is disregarded in the 
apportionment formula.  
    (i) A participating financial institution's portion of a 
participation loan must be attributed under paragraphs (e) to 
(h).  
    (j) Financial institution credit card and travel and 
entertainment credit card receivables must be attributed to the 
state to which the credit card charges and fees are regularly 
billed.  
    (k) Receivables arising from merchant discount income 
derived from financial institution credit card holder 
transactions with a merchant are attributed to the state in 
which the merchant is located.  In the case of merchants located 
within and without the state, only receipts from merchant 
discounts attributable to sales made from locations within the 
state are attributed to this state.  It is presumed, subject to 
rebuttal, that the location of a merchant is the address shown 
on the invoice submitted by the merchant to the taxpayer. 
    (l) Assets in the nature of securities and money market 
instruments are apportioned to this state based upon the ratio 
that total deposits from this state, its residents, its 
political subdivisions, agencies and instrumentalities bear to 
the total deposits from all states, their residents, their 
political subdivisions, agencies and instrumentalities.  In the 
case of an unregulated financial institution subject to this 
regulation, the receipts assets are apportioned to this state 
based upon the ratio that its gross business income earned from 
sources within this state bears to gross business income earned 
from sources within all states.  For purposes of this 
subsection, deposits made by this state, its residents, its 
political subdivisions, agencies, and instrumentalities are 
attributed to this state, whether or not the deposits are 
accepted or maintained by the taxpayer at locations within this 
state. 
    (m) A financial institution's interest in any property 
described in section 290.015, subdivision 3, paragraph (b), is 
not included in the numerator or the denominator of the property 
factor provided the financial institution's activities within 
this state with respect to any interest in such property are 
limited in the manner provided in section 290.015, subdivision 
3, paragraph (b).  If a financial institution is subject to tax 
under this chapter, its interest in property described in 
section 290.015, subdivision 3, paragraph (b), is included in 
the property factor in the same manner as assets in the nature 
of securities or money market instruments are included under 
paragraph (1).  
    Sec. 36.  Minnesota Statutes 1987 Supplement, section 
290.21, subdivision 3, is amended to read:  
    Subd. 3.  An amount for contribution or gifts made within 
the taxable year: 
    (a) to or for the use of the state of Minnesota, or any of 
its political subdivisions for exclusively public purposes, 
    (b) to or for the use of any community chest, corporation, 
organization, trust, fund, association, or foundation located in 
and carrying on substantially all of its activities within this 
state, organized and operating exclusively for religious, 
charitable, public cemetery, scientific, literary, artistic, or 
educational purposes, or for the prevention of cruelty to 
children or animals, no part of the net earnings of which inures 
to the benefit of any private stockholder or individual, 
    (c) to a fraternal society, order, or association, 
operating under the lodge system located in and carrying on 
substantially all of their activities within this state if such 
contributions or gifts are to be used exclusively for the 
purposes specified in clause (b), or for or to posts or 
organizations of war veterans or auxiliary units or societies of 
such posts or organizations, if they are within the state and no 
part of their net income inures to the benefit of any private 
shareholder or individual, 
    (d) to or for the use of the United States of America for 
exclusively public purposes if the contribution or gift consists 
of real property located in Minnesota, 
    (e) to or for the use of a foundation if the foundation is 
organized and operated exclusively for a purpose in clause (b), 
and has no part of its net earnings inuring to the benefit of a 
private shareholder or individual, but does not carry on 
substantially all of its activities within this state.  The 
deduction under this clause equals the amount of the 
corporation's contributions or gifts to the foundation within 
the taxable year multiplied by a fraction equal to the ratio of 
the foundation's total expenditures during the taxable year for 
the benefit of organizations described in clause (b) to the 
foundation's total expenditures during the taxable year. 
     (f) the total deduction hereunder shall not exceed 15 
percent of the taxpayer's taxable net income less the deductions 
allowable under this section other than those for contributions 
or gifts, 
    (f) (g) in the case of a corporation reporting its taxable 
income on the accrual basis, if:  (A) the board of directors 
authorizes a charitable contribution during any taxable year, 
and (B) payment of such contribution is made after the close of 
such taxable year and on or before the fifteenth day of the 
third month following the close of such taxable year; then the 
taxpayer may elect to treat such contribution as paid during 
such taxable year.  The election may be made only at the time of 
the filing of the return for such taxable year, and shall be 
signified in such manner as the commissioner shall by rules 
prescribe. 
    Sec. 37.  Minnesota Statutes 1987 Supplement, section 
290.21, subdivision 4, is amended to read:  
    Subd. 4.  (a) 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 of 1986, as amended 
through December 31, 1987, 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.  The remaining 20 percent shall be allowed if the 
recipient owns 80 percent or more of all the voting stock of the 
other corporation and the dividends were paid from income 
arising out of business done in this state by the corporation 
paying the dividends.  If the dividends were declared from 
income arising out of business done within and without this 
state, then a proportion of the remainder shall be allowed as a 
deduction.  The proportion must be that which the amount of the 
taxable net income of the corporation paying the dividends 
assignable or allocable to this state bears to the entire net 
income of the corporation.  The amounts must be determined by 
the returns under this chapter of the corporation paying the 
dividends for the taxable year preceding their distribution.  
The burden is on the taxpayer to show that the amount of 
remainder claimed as a deduction has been received from income 
arising out of business done in this state.  
    (b) If the trade or business of the taxpayer consists 
principally of the holding of the stocks and the collection of 
the income and gains therefrom, dividends received by a 
corporation during the taxable year from another corporation, if 
the recipient owns 80 percent or more of all the voting stock of 
the other corporation, from income arising out of business done 
in this state by the corporation paying the dividends.  If the 
dividends were declared from income arising out of business done 
within and without this state, then a proportion of the 
dividends shall be allowed as a deduction.  The proportion must 
be that which the amount of the taxable net income of the 
corporation paying the dividends assignable or allocable to this 
state bears to the entire net income of the corporation.  The 
amounts must be determined by the returns under this chapter of 
the corporation paying the dividends for the taxable year 
preceding their distribution.  The burden is on the taxpayer to 
show that the amount of dividends claimed as a deduction has 
been received from income arising out of business done in this 
state.  
     (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 of 1986 as amended through December 
31, 1987, 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 of 1986, as amended through December 31, 
1986.  
    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 of 1986, as amended through December 31, 1986. 
    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) 
of the Internal Revenue Code of 1986, as amended through 
December 31, 1986.  
    (d) If dividends received by a corporation that does not 
have nexus with Minnesota under the provisions of Public Law 
Number 86-272 are included as income on the return of an 
affiliated corporation permitted or required to file a combined 
report under section 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 of 1986, as amended through 
December 31, 1986. 
     (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) 80 percent or 70 percent, 
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.  
    Sec. 38.  Minnesota Statutes 1987 Supplement, section 
290.34, subdivision 2, is amended to read:  
    Subd. 2.  [AFFILIATED OR RELATED CORPORATIONS, COMBINED 
REPORT.] (a) When a corporation which is required to file an 
income tax return is affiliated with or related to any other 
corporation through stock ownership by the same interests or as 
parent or subsidiary corporations, or has its income regulated 
through contract or other arrangement, the commissioner of 
revenue may permit or require such combined report as, in the 
commissioner's opinion, is necessary in order to determine the 
taxable net income of any one of the affiliated or related 
corporations.  
    (b) If a corporation has been divested from the unitary 
group and is included in a combined report for a fractional part 
of the common accounting period that the report is based on, 
then the sales, property, and payroll attributed to the 
corporation in the apportionment formula must be prorated or 
separately accounted and must show for what part of the 
accounting period the corporation is included in the report. 
    (c) The combined report shall reflect the income of the 
entire unitary business as provided in section 290.17, 
subdivision 4.  If a corporation has been divested from the 
unitary group and is included in the combined report for a 
fractional part of the common accounting period that the 
combined report is based on, its income includable in the 
combined report is its income for that part of the year.  
    Sec. 39.  Minnesota Statutes 1987 Supplement, section 
290.35, subdivision 2, is amended to read:  
    Subd. 2.  [APPORTIONMENT OF TAXABLE NET INCOME.] The 
commissioner shall compute therefrom the taxable net income of 
such companies by assigning to this state that proportion 
thereof which the gross premiums collected by them during the 
taxable year from old and new business within this state bears 
to the total gross premiums collected by them during that year 
from their entire old and new business, including reinsurance 
premiums; provided, the commissioner shall add to the taxable 
net income so apportioned to this state the amount of any taxes 
on premiums paid by the company by virtue of any law of this 
state (other than the surcharge on premiums imposed by sections 
69.54 to 69.56) which shall have been deducted from gross income 
by the company in arriving at its total net income under the 
provisions of such act of congress. 
    (a) For purposes of determining the Minnesota apportionment 
percentage, premiums from reinsurance contracts assumed from 
companies domiciled in Minnesota and premiums in connection with 
property in or liability arising out of activity in, or in 
connection with the lives or health of Minnesota residents shall 
be assigned to Minnesota and premiums from reinsurance contracts 
assumed from companies domiciled outside of Minnesota and 
premiums in connection with property in or liability arising out 
of activity in, or in connection with the lives or health of 
non-Minnesota residents shall be assigned outside of Minnesota. 
Reinsurance premiums are presumed to be received for a Minnesota 
risk and are assigned to Minnesota, if:  
    (1) the reinsurance contract is assumed for a company 
domiciled in Minnesota; and 
    (2) the taxpayer, upon request of the commissioner, fails 
to provide reliable records indicating the reinsured contract 
covered non-Minnesota risks. 
For purposes of this paragraph, "Minnesota risk" means coverage 
in connection with property in or liability arising out of 
activity in Minnesota, or in connection with the lives or health 
of Minnesota residents. 
    (b) The apportionment method prescribed by paragraph (a) 
shall be presumed to fairly and correctly determine the 
taxpayer's taxable net income.  If the method prescribed in 
paragraph (a) does not fairly reflect all or any part of taxable 
net income, the taxpayer may petition for or the commissioner 
may require the determination of taxable net income by use of 
another method if that method fairly reflects taxable net 
income.  A petition within the meaning of this section must be 
filed by the taxpayer on such form as the commissioner shall 
require. 
    Sec. 40.  Minnesota Statutes 1987 Supplement, section 
290.37, subdivision 1, is amended to read:  
    Subdivision 1.  [PERSONS MAKING RETURNS.] (a) A taxpayer 
shall file a return for each taxable year the taxpayer is 
required to file a return under section 6012 of the Internal 
Revenue Code of 1986, as amended through December 31, 1986, 
except that an individual who is not a Minnesota resident for 
any part of the year is not required to file a Minnesota income 
tax return if the individual's gross income derived from 
Minnesota sources under sections 290.081, paragraph (a), and 
290.17, is less than the filing requirements for a single 
individual who is a full year resident of Minnesota.  
    The decedent's final income tax return, and all other 
income tax returns for prior years where the decedent had gross 
income in excess of the minimum amount at which an individual is 
required to file and did not file, shall be filed by the 
decedent's personal representative, if any.  If there is no 
personal representative, the return or returns shall be filed by 
the transferees as defined in section 290.29, subdivision 3, who 
receive any property of the decedent. 
    The trustee or other fiduciary of property held in trust 
shall file a return with respect to the taxable net income of 
such trust if that exceeds an amount determined by the 
commissioner if such trust belongs to the class of taxable 
persons. 
    Every corporation shall file a return, if the corporation 
is subject to the state's jurisdiction to tax under section 
290.014, subdivision 5, except that a foreign operating 
corporation as defined in section 290.01, subdivision 6b, is not 
required to file a return.  The return in the case of a 
corporation must be signed by a person designated by the 
corporation.  The commissioner may adopt rules for the filing of 
one return on behalf of the members of an affiliated group of 
corporations that are required to file a combined report if the 
affiliated group includes a bank subject to tax under this 
chapter.  Members of an affiliated group that elect to file one 
return on behalf of the members of the group under rules adopted 
by the commissioner may modify or rescind the election by filing 
the form required by the commissioner.  
    The receivers, trustees in bankruptcy, or assignees 
operating the business or property of a taxpayer shall file a 
return with respect to the taxable net income of such taxpayer 
if a return is required. 
    (b) Such return shall (1) contain a written declaration 
that it is correct and complete, and (2) shall contain language 
prescribed by the commissioner providing a confession of 
judgment for the amount of the tax shown due thereon to the 
extent not timely paid. 
    Sec. 41.  Minnesota Statutes 1987 Supplement, section 
290.371, subdivision 1, is amended to read:  
    Subdivision 1.  [REPORT REQUIRED.] Every corporation that, 
during any calendar year or fiscal accounting year ending 
beginning after December 31, 1986, carried on any activity or 
owned or maintained any property in this state, unless 
specifically exempted under subdivision 3 obtained any business 
from within this state as described in section 290.015, 
subdivision 1, with the exception of:  
    (1) activity levels lower than those set forth in section 
290.015, subdivision 2, paragraph (a), if the corporation is a 
financial institution; or 
    (2) activities described in section 290.015, subdivision 3, 
paragraph (b); or 
    (3) corporations specifically exempted under subdivision 3, 
must file a notice of business activities report, as provided in 
this section.  Filing of the report is not a factor in 
determining whether a corporation is subject to taxation under 
this chapter. 
    Sec. 42.  Minnesota Statutes 1987 Supplement, section 
290.371, subdivision 3, is amended to read:  
    Subd. 3.  [EXEMPTIONS.] A corporation is not required to 
file a notice of business activities report if:  
    (1) by the end of an accounting period for which it was 
otherwise required to file a notice of business activities 
report under this section, it had received a certificate of 
authority to do business in this state; 
    (2) a timely return or report has been filed under section 
290.05, subdivision 4; or 290.37; or 
    (3) the corporation is exempt from taxation under this 
chapter pursuant to section 290.05, subdivision 1; or 
    (4) the corporation's activities in Minnesota, or the 
interests in property which it owns, consist solely of 
activities or property exempted from jurisdiction to tax under 
section 290.015, subdivision 3, paragraph (b). 
    Sec. 43.  Minnesota Statutes 1987 Supplement, section 
290.371, subdivision 4, is amended to read:  
    Subd. 4.  [ANNUAL FILING.] Every corporation not exempt 
under subdivision 3 must file annually a notice of business 
activities report, including such forms as the commissioner may 
require, with respect to all or any part of each of its calendar 
or fiscal accounting years beginning after December 31, 1986, on 
or before the 15th day of the fourth month after the close of 
the calendar or fiscal accounting year.  
    Sec. 44.  Minnesota Statutes 1987 Supplement, section 
290.371, subdivision 5, is amended to read:  
    Subd. 5.  [FAILURE TO FILE TIMELY REPORT.] (a) Any 
corporation required to file a notice of business activities 
report does not have any cause of action upon which it may bring 
suit under Minnesota law unless the corporation has filed a 
notice of business activities report.  
    (b) The failure of a corporation to file a timely report 
prevents the use of the courts in this state, except regarding 
activities and property described in section 290.015, 
subdivision 3, paragraph (b), for all contracts executed and all 
causes of action that arose at any time before the end of the 
last accounting period for which the corporation failed to file 
a required report.  
    (c) The court in which the issues arise has the power to 
excuse the corporation for its failure to file a report when 
due, and restore the corporation's cause of action under the 
laws of this state, if the corporation has paid all taxes, 
interest, and civil penalties due the state for all periods, or 
provided for payment of them by adequate security or bond 
approved by the commissioner.  
    (d) Notwithstanding the provisions of section 290.61, the 
commissioner may acknowledge whether or not a particular 
corporation has filed with the commissioner reports or returns 
required by this chapter if the acknowledgment: 
    (1) is to a party in a civil action; 
    (2) relates to the filing status of another party in the 
same civil action; and 
    (3) is in response to a written request accompanied by a 
copy of the summons and complaint in the civil action.  
    Sec. 45.  Minnesota Statutes 1986, section 290.50, 
subdivision 3, is amended to read:  
    Subd. 3.  [EXCEPTIONS.] This section shall not be construed 
so as to disallow: 
    (a) a net operating loss carryback to any taxable year 
authorized by section 290.095 or section 172 of the Internal 
Revenue Code of 1954, as amended through December 31, 1985, but 
the refund or credit shall be limited to the amount of 
overpayment arising from the carryback; 
    (b) a capital loss carryback by a corporation 
under Minnesota Statutes 1986, section 290.16, provided that the 
claim for refund or credit is made prior to the expiration of 
the 15th day of the 45th month following the end of the taxable 
year of the net capital loss which results in the carryback, 
plus any extension of time granted for filing the return, but 
only if the return was filed within the extended time, and the 
refund or credit is limited to the amount of overpayment arising 
from the carryback. 
    Sec. 46.  Minnesota Statutes 1987 Supplement, section 
290.9725, is amended to read:  
    290.9725 [ELECTION BY SMALL BUSINESS CORPORATION S 
CORPORATIONS.] 
    For purposes of this chapter, the term "S corporation" 
means any corporation having a valid election in effect for the 
taxable year under section 1362 of the Internal Revenue Code of 
1986, as amended through December 31, 1986, 1987.  An S 
corporation shall not be subject to the taxes imposed by this 
chapter, except: 
    (1) the corporation is subject to the tax imposed under 
section 290.92; and 
    (2) the corporation is subject to the tax imposed under 
section 290.02 in any tax period in which it recognizes income 
for federal income tax purposes under Internal Revenue Code, 
section 1363(d), 1374, or 1375; the total amount of income 
recognized is the federal taxable income for the corporation 
within the meaning of section 290.01, subdivision 19; the 
provisions of sections 290.01, subdivisions 19a to 19f, and 
290.17 to 290.20, must be employed to determine the taxable net 
income of the corporation; and the taxable net income of the 
corporation is its taxable income, except that any net operating 
loss carryforward that arose in a year when there was no 
election in effect under Section 1362 of the Internal Revenue 
Code is allowed as a deduction the taxes imposed under sections 
290.92, 290.9727, 290.9728, and 290.9729. 
    Sec. 47.  [290.9727] [TAX ON CERTAIN BUILT-IN GAINS.] 
    Subdivision 1.  [TAX IMPOSED.] For a corporation electing S 
corporation status pursuant to section 1362 of the Internal 
Revenue Code of 1986, as amended through December 31, 1987, 
after December 31, 1986, and having a recognized built-in gain 
as defined in section 1374 of the Internal Revenue Code of 1986, 
as amended through December 31, 1987, there is imposed a tax on 
the taxable income of such S corporation, as defined in this 
section, at the rate prescribed by section 290.06, subdivision 
1.  This section does not apply to any corporation having an S 
election in effect for each of its taxable years.  An S 
corporation and any predecessor corporation must be treated as 
one corporation for purposes of the preceding sentence.  
    Subd. 2.  [TAXABLE INCOME.] For purposes of this section, 
taxable income means taxable net income less the deduction for 
net operating loss carryforwards as provided by this section. 
    Subd. 3.  [TAXABLE NET INCOME.] For purposes of this 
section, taxable net income means the lesser of:  
    (1) the recognized built-in gains of the S corporation for 
the taxable year, as determined under section 1374 of the 
Internal Revenue Code of 1986, as amended through December 31, 
1987, subject to the modifications provided in section 290.01, 
subdivisions 19e and 19f, that are allocable to this state under 
section 290.17, 290.191, or 290.20; or 
    (2) the amount of the S corporation's federal taxable 
income, as determined under section 1374(d)(4) of the Internal 
Revenue Code of 1986, as amended through December 31, 1987, 
subject to the provisions of section 290.01, subdivisions 19c to 
19f, that is allocable to this state under section 290.17, 
290.191, or 290.20, less the deduction for charitable 
contributions in section 290.21, subdivision 3.  
    Subd. 4.  [NET OPERATING LOSS CARRYFORWARD.] A net 
operating loss carryforward, as determined under section 
290.095, arising in a taxable year before the corporation 
elected S corporation status, shall be allowed as a deduction 
against the lesser of the amounts referred to in subdivision 3, 
clauses (1) and (2).  For purposes of determining the amount of 
any such loss that may be carried to later taxable years, the 
lesser of the amounts referred to in subdivision 3, clauses (1) 
and (2) shall be treated as taxable income.  
    Sec. 48.  [290.9728] [TAX ON CAPITAL GAINS.] 
    Subdivision 1.  [TAX IMPOSED.] There is imposed a tax on 
the taxable income of a corporation that has:  
    (1) elected S corporation status pursuant to section 1362 
of the Internal Revenue Code of 1954, as amended through 
December 31, 1985, before January 1, 1987; 
    (2) a net capital gain for the taxable year (i) in excess 
of $25,000 and (ii) exceeding 50 percent of the corporation's 
federal taxable income for the taxable year; and 
    (3) federal taxable income for the taxable year exceeding 
$25,000.  
    The tax is imposed at the rate prescribed by section 
290.06, subdivision 1.  For purposes of this section, "federal 
taxable income" means federal taxable income determined under 
section 1374(4)(d) of the Internal Revenue Code of 1986, as 
amended through December 31, 1987.  This section does not apply 
to an S corporation which has had an election under section 1362 
of the Internal Revenue Code of 1954, in effect for the three 
immediately preceding taxable years.  This section does not 
apply to an S corporation that has been in existence for less 
than four taxable years and has had an election in effect under 
section 1362 of the Internal Revenue Code of 1954 for each of 
the corporation's taxable years.  For purposes of this section, 
an S corporation and any predecessor corporation are treated as 
one corporation.  
    Subd. 2.  [TAXABLE INCOME.] For purposes of this section, 
taxable income means the lesser of:  
    (1) the amount of the net capital gain of the S corporation 
for the taxable year, as determined under sections 1222 and 1374 
of the Internal Revenue Code of 1986, as amended through 
December 31, 1987, and subject to the modifications provided in 
section 290.01, subdivisions 19e and 19f, in excess of $25,000 
that is allocable to this state under section 290.17, 290.191, 
or 290.20; or 
    (2) the amount of the S corporation's federal taxable 
income, subject to the provisions of section 290.01, 
subdivisions 19c to 19f, that is allocable to this state under 
section 290.17, 290.191, or 290.20, less the deduction for 
charitable contributions in section 290.21, subdivision 3.  
    Sec. 49.  [290.9729] [TAX ON PASSIVE INVESTMENT INCOME.] 
    Subdivision 1.  [TAX IMPOSED.] There is imposed a tax for 
the taxable year on the taxable income of an S corporation, if 
for the taxable year an S corporation has:  
    (1) subchapter C earnings and profits at the close of such 
taxable year; and 
    (2) gross receipts more than 25 percent of which are 
passive investment income.  
    The tax is imposed at the rate prescribed by section 
290.06, subdivision 1.  The terms "subchapter C earnings and 
profits," "passive investment income," and "gross receipts" have 
the same meanings as when used in sections 1362(d)(3) and 1375 
of the Internal Revenue Code of 1986, as amended through 
December 31, 1987.  
    Subd. 2.  [TAXABLE INCOME.] For the purposes of this 
section, taxable income means the lesser of:  
    (1) the amount of the S corporation's excess net passive 
income, as determined under section 1375 of the Internal Revenue 
Code of 1986, as amended through December 31, 1986, subject to 
the provisions of section 290.01, subdivisions 19c to 19f, that 
is allocable to this state under section 290.17, 290.191, or 
290.20; or 
    (2) the amount of the S corporation's federal taxable 
income, as determined under section 1374(d)(4) of the Internal 
Revenue Code of 1986, as amended through December 31, 1987, 
subject to the provisions of section 290.01, subdivisions 19c to 
19f, that is allocable to this state under section 290.17, 
290.191, or 290.20, less the deduction for charitable 
contributions in section 290.21, subdivision 3.  
    Subd. 3.  [WAIVER OF TAX.] The tax imposed by this section 
shall be waived if the taxpayer receives a waiver for federal 
income tax purposes under section 1375(d) of the Internal 
Revenue Code of 1986, as amended through December 31, 1987.  
    Sec. 50.  Minnesota Statutes 1987 Supplement, section 
295.34, subdivision 1, is amended to read: 
    Subdivision 1.  Except as provided in subdivision 2 every 
telephone company shall file a return with the commissioner of 
revenue on or before April 15 of each year, and submit payment 
therewith, of the following percentages of its gross earnings, 
including long distance access charges, of the preceding 
calendar year derived from business within this state: 
    (a) for gross earnings from service to rural subscribers 
and from exchange business of all cities of the fourth class and 
statutory cities having a population of 10,000 or less 
    for calendar years beginning before December 31, 1988, 4 
percent, 
    for calendar year 1989, 3 percent, provided that the 
estimated tax payments made on March 15 and June 15, 1989, 
pursuant to section 295.365, must be made as if the tax were 
imposed at a rate of four percent, 
    for calendar year 1990, 1.5 percent, 
    for calendar year 1991, 1 percent, and 
    for calendar years beginning after December 31, 1991, 
exempt; and 
    (b) for gross earnings derived from all other business 
    for calendar years beginning before December 31, 1988, 7 
percent, 
    for calendar year 1989, 5.5 percent, provided that the 
estimated tax payments made on March 15 and June 15, 1989, 
pursuant to section 295.365, must be made as if the tax were 
imposed at a rate of seven percent, 
    for calendar year 1990, 3 percent, 
    for calendar year 1991, 2.5 percent, and 
    for calendar years beginning after December 31, 1991, 
exempt. 
    A tax shall not be imposed on the gross earnings of a 
telephone company from business originating or terminating 
outside of Minnesota, except that the gross earnings tax is 
imposed on all long distance access charges allocated to 
interstate service received in payment from a telephone company 
before December 31, 1989. 
    The tax imposed is in lieu of all other taxes, except the 
taxes imposed by chapter 290, property taxes assessed beginning 
in 1989, payable in 1990, and sales and use taxes imposed as a 
result of chapter 297A.  All money paid by a company for 
connecting fees and switching charges to any other company shall 
be reported as earnings by the company to which they are paid.  
For the purposes of this section, the population of any 
statutory city shall be considered as that stated in the latest 
federal census. 
     (c) For the period January 1, 1984 through December 31, 
1986, all money paid by a company for connecting fees and 
switching charges, including carriers access charges except that 
portion paid for directory assistance and billing and collection 
services, to any other company must be reported as earnings by 
the company to which they are paid, but are not deemed to be 
earnings of the collecting and paying company. 
    Sec. 51.  Minnesota Statutes 1987 Supplement, section 
298.01, subdivision 3, is amended to read: 
    Subd. 3.  [OCCUPATION TAX; OTHER ORES.] Every person 
engaged in the business of mining or producing ores, except iron 
ore or taconite concentrates, shall pay an occupation tax to the 
state of Minnesota as provided in this subdivision.  The tax is 
measured by the person's taxable income for the year for which 
the tax is imposed, and computed in the manner and at the rates 
provided in chapter 290, except that section sections 290.01, 
subdivisions 19c, clause (11), 19d, clause (7), and 290.05, 
subdivision 1, clause (a), does do not apply.  Corporations and 
individuals shall be subject to the alternative minimum taxes 
imposed under chapter 290.  The tax is in addition to all other 
taxes and is due and payable on or before June 15 of the year 
succeeding the calendar year covered by the report required by 
section 298.05. 
    Sec. 52.  Minnesota Statutes 1987 Supplement, section 
298.01 subdivision 4, is amended to read: 
    Subd. 4.  [OCCUPATION TAX; IRON ORE; TACONITE 
CONCENTRATES.] A person engaged in the business of mining or 
producing of iron ore or taconite concentrates shall pay an 
occupation tax to the state of Minnesota.  The tax is measured 
by the person's taxable income for the year for which the tax is 
imposed, and computed in the manner and at the rates provided 
for in chapter 290, except that section sections 290.01, 
subdivisions 19c, clause (11), 19d, clause (7), and 290.05, 
subdivision 1, clause (a), does do not apply.  Corporations and 
individuals shall be subject to the alternative minimum taxes 
imposed under chapter 290.  The tax is in addition to all other 
taxes and is due and payable on or before June 15 of the year 
succeeding the calendar year covered by the report required by 
section 298.05. 
    Sec. 53.  [298.402] [NET OPERATING LOSSES.] 
    For purposes of the computation under section 298.40, 
subdivision 1, clause (b), a net operating loss incurred in a 
taxable year beginning after December 31, 1986, is a net 
operating loss carryover to each of the 15 taxable years 
following the taxable year of the loss, in accordance with 
section 290.095.  A net operating loss incurred in a taxable 
year beginning after December 31, 1981, and before January 1, 
1987, is a net operating loss carryover to taxable years 
beginning after December 31, 1986, not to exceed the five 
taxable years following the taxable year of the loss, in 
accordance with section 290.095.  No net operating loss 
carryback is allowed for a net operating loss incurred in a 
taxable year beginning after December 31, 1986. 
    Sec. 54.  Minnesota Statutes 1986, section 299.01, 
subdivision 1, is amended to read:  
    Subdivision 1.  There shall be levied and collected upon 
all royalty received during each calendar year for permission to 
explore, mine, take out and remove iron ore or taconites from 
land in this state, a tax of 15 percent before January 1, 1986, 
a tax of 14.5 percent after December 31, 1985, and before 
January 1, 1987, and a tax of 14 percent after December 31, 1986.
    Sec. 55.  Minnesota Statutes 1986, section 303.03, is 
amended to read:  
    303.03 [FOREIGN CORPORATIONS MUST HAVE CERTIFICATE OF 
AUTHORITY.] 
    No foreign corporation shall transact business in this 
state unless it holds a certificate of authority so to do; and 
no foreign corporation whose certificate of authority has been 
revoked or canceled pursuant to the provisions of this chapter 
shall be entitled to obtain a certificate of authority except in 
accordance with the provisions of section 303.19.  This section 
does not establish standards for those activities that may 
subject a foreign corporation to taxation under section 290.015 
and to the reporting requirements of section 290.371.  Without 
excluding other activities which may not constitute transacting 
business in this state, and subject to the provisions of 
sections 303.13 and 543.19, a foreign corporation shall not be 
considered to be transacting business in this state for the 
purposes of this chapter solely by reason of carrying on in this 
state any one or more of the following activities:  
    (a) Maintaining or defending any action or suit or any 
administrative or arbitration proceeding, or effecting the 
settlement thereof or the settlement of claims or disputes;  
    (b) Holding meetings of its directors or shareholders or 
carrying on other activities concerning its internal affairs;  
    (c) Maintaining bank accounts;  
    (d) Maintaining offices or agencies for the transfer, 
exchange and registration of its securities, or appointing and 
maintaining trustees or depositaries with relation to its 
securities;  
    (e) Holding title to and managing real or personal 
property, or any interest therein, situated in this state, as 
executor of the will or administrator of the estate of any 
decedent, as trustee of any trust, or as guardian or conservator 
of the person or estate, or both, of any person;  
    (f) Making, participating in, or investing in loans or 
creating, as borrower or lender, or otherwise acquiring 
indebtedness or mortgages or other security interests in real or 
personal property;  
    (g) Securing or collecting its debts or enforcing any 
rights in property securing them; or 
    (h) Conducting an isolated transaction completed within a 
period of 30 days and not in the course of a number of repeated 
transactions of like nature.  
    Sec. 56.  [REPEALER.] 
    (a) Minnesota Statutes 1986, section 298.401, is repealed.  
    (b) Minnesota Statutes 1986, section 299.013, is repealed. 
    (c) Minnesota Statutes 1987 Supplement, section 290.21, 
subdivision 8, is repealed.  
    (d) Minnesota Statutes 1987 Supplement, section 290.371, 
subdivision 2, is repealed.  
    Sec. 57.  [EFFECTIVE DATE.] 
    Sections 1, 4, and 5 are effective January 1, 1988.  
Sections 7, 8, 9, 11, clause (13), 31, and 40 are effective for 
taxable years beginning after December 31, 1990, except that 
sections 9, 11, clause (13), and 40 are effective for taxable 
years beginning after December 31, 1989, insofar as they apply 
to 936 corporations.  In this section, "936 corporations" are 
corporations referred to in section 9, clause (2)(ii).  Sections 
12, clause (11), 14, 26, 33, and 56, paragraph (c), are 
effective for taxable years beginning after December 31, 1988.  
Sections 2, 3, 32, 36, 37, and 38 are effective for taxable 
years beginning after December 31, 1987.  Section 30, paragraphs 
(f), (g), (h), and (j) are effective for taxable years beginning 
after December 31, 1990, except that insofar as they apply to 
936 corporations, they are effective for taxable years beginning 
after December 31, 1989.  Sections 29, in its reference to 
section 290.17, subdivision 4, paragraph (i), and 30, paragraph 
(i), are effective for taxable years beginning after December 
31, 1988, in its application to income described in section 
290.01, subdivision 19d, clause (11), for taxable years 
beginning after December 31, 1989, in its application to other 
income of 936 corporations, and for taxable years beginning 
after December 31, 1990, in its application to other income of 
foreign operating corporations.  Section 30, paragraph (k) is 
effective for taxable years beginning after December 31, 1987. 
    Sections 10, 11, clauses (2) and (3), 12, except for clause 
(11), 13, 15 to 18, 20, 21, 23, 25, 29 insofar as it refers to 
companies subject to the occupation tax, 34, 35, 39, 41 to 49, 
and 56, paragraph (d), are effective for taxable years beginning 
after December 31, 1986.  Section 22 is effective for taxable 
years beginning after December 31, 1986, except that the part 
relating to the apportionment of the exemption amount among 
members of a unitary group is effective for taxable years 
beginning after December 31, 1987.  Section 27 is effective for 
taxable years beginning after December 31, 1986, except that the 
part relating to the allowance of a net operating loss incurred 
in any taxable year to the extent of the apportionment ratio of 
the loss year is effective for taxable years beginning after 
December 31, 1987.  Section 28 is effective for losses incurred 
in taxable years beginning after December 31, 1986, and is 
repealed effective for taxable years beginning after December 
31, 1993.  Sections 6, 50, and 55 are effective the day 
following final enactment.  Sections 51 and 52 are effective for 
ores mined after December 31, 1989.  Section 53 is effective for 
ores mined after December 31, 1986, and before January 1, 1990.  
Section 54 is effective for ore mined after December 31, 1986.  
Section 56, paragraph (a), is effective for ores mined after 
December 31, 1989.  Section 56, paragraph (b), is effective for 
ores mined after December 31, 1986, and supersedes the repealer 
in Laws 1987, chapter 268, article 9, section 43. 

                               ARTICLE 3 

                            FEDERAL UPDATE 
    Section 1.  Minnesota Statutes 1987 Supplement, section 
290.01, subdivision 4, is amended to read:  
    Subd. 4.  [CORPORATIONS.] The term "corporation" shall 
include every entity which is a corporation under section 
7701(a)(3) or is treated as a corporation under section 851(q) 
or 7704 of the Internal Revenue Code of 1986, as amended through 
December 31, 1986 1987, and financial institutions.  A 
corporation's franchise is its authorization to exist and 
conduct business, whether created by legislation, by executive 
order, by a governmental agency, by contract or other private 
action, or by some combination thereof.  Every corporation is 
deemed to have a corporate franchise.  An entity described in 
section 646(b) of the Tax Reform Act of 1986, Public Law Number 
99-514, shall be classified in the same manner for purposes of 
this chapter as it is for federal income tax purposes. 
    Sec. 2.  Minnesota Statutes 1987 Supplement, section 
290.01, subdivision 19, is amended to read:  
    Subd. 19.  [NET INCOME.] The term "net income" means the 
federal taxable income, as defined in section 63 of the Internal 
Revenue Code of 1986, as amended through the date named in this 
subdivision, incorporating any elections made by the taxpayer in 
accordance with the Internal Revenue Code in determining federal 
taxable income for federal income tax purposes, and with the 
modifications provided in subdivisions 19a to 19f. 
    The Internal Revenue Code of 1986, as amended through 
December 31, 1986, shall be in effect for taxable years 
beginning after December 31, 1986.  The provisions of sections 
10104, 10202, 10203, 10204, 10206, 10212, 10221, 10222, 10223, 
10226, 10227, 10228, 10611, 10631, 10632, and 10711 of the 
Omnibus Budget Reconciliation Act of 1987, Public Law Number 
100-203, shall be effective at the time they become effective 
for federal income tax purposes.  
    The Internal Revenue Code of 1986, as amended through 
December 31, 1987, shall be in effect for taxable years 
beginning after December 31, 1987. 
    Except as otherwise provided, references to the Internal 
Revenue Code in subdivisions 19a to 19f mean the code in effect 
for purposes of determining net income for the applicable year. 
    Sec. 3.  Minnesota Statutes 1987 Supplement, section 
290.01, subdivision 20, is amended to read:  
    Subd. 20.  [GROSS INCOME.] For tax years beginning after 
December 31, 1986, The term "gross income" means the gross 
income as defined in section 61 of the Internal Revenue Code of 
1986, as amended through the date named in subdivision 19 for 
the applicable taxable year, plus any additional items of income 
taxable under this chapter but not taxable under the Internal 
Revenue Code, less any items included in federal gross income 
but of a character exempt from state income tax under the laws 
of the United States.  For tax years beginning before January 1, 
1987, except as otherwise provided in this chapter, the term 
"gross income," as applied to corporations includes every kind 
of compensation for labor or personal services of every kind 
from any private or public employment, office, position or 
services; income derived from the ownership or use of property; 
gains or profits derived from every kind of disposition of, or 
every kind of dealing in, property; income derived from the 
transaction of any trade or business; and income derived from 
any source.  
    For tax years beginning before January 1, 1987, the term 
"gross income" in its application to individuals, estates, and 
trusts shall mean the adjusted gross income as defined in the 
Internal Revenue Code of 1954, as amended through the date 
specified herein for the applicable taxable year, with the 
modifications specified in this subdivision and in Minnesota 
Statutes 1986, section 290.01, subdivisions 20a to 20f.  For 
estates and trusts the adjusted gross income for purposes of the 
preceding sentence shall be their federal taxable income as 
defined in the Internal Revenue Code of 1954, as amended through 
the date specified herein for the applicable taxable year, with 
the modifications specified in this subdivision and in Minnesota 
Statutes 1986, section 290.01, subdivisions 20a to 20f. 
    (i) The Internal Revenue Code of 1954, as amended through 
December 31, 1981, shall be in effect for taxable years 
beginning after December 31, 1981.  The provisions of sections 
205(a), 214 to 222, 231, 232, 236, 247, 251, 252, 253, 265, 266, 
285, 288, and 335 of the Tax Equity and Fiscal Responsibility 
Act of 1982, Public Law Number 97-248, section 6(b)(2) and (3) 
of the Subchapter S Revision Act of 1982, Public Law Number 
97-354, section 517 of Public Law Number 97-424, sections 101(c) 
and (d), 102(a), (aa), (f)(4), (g), (j), (l), 103(c), 104(b)(3), 
105, 305(d), 306(a)(9) of Public Law Number 97-448, sections 101 
and 102 of Public Law Number 97-473, and section 243 of the Tax 
Reform Act of 1986, Public Law Number 99-514, shall be effective 
at the same time that they become effective for federal income 
tax purposes.  The Payment-in-Kind Tax Treatment Act of 1983, 
Public Law Number 98-4, shall be effective at the same time that 
it becomes effective for federal income tax purposes. 
    (ii) The Internal Revenue Code of 1954, as amended through 
January 15, 1983, shall be in effect for taxable years beginning 
after December 31, 1982.  The provisions of sections 905, 1708, 
and 1879(m) of the Tax Reform Act of 1986, Public Law Number 
99-514, shall be effective at the same time that they become 
effective for federal income tax purposes. 
    (iii) The Internal Revenue Code of 1954, as amended through 
December 31, 1983, shall be in effect for taxable years 
beginning after December 31, 1983.  The provisions of sections 
13, 17, 25(b), 31, 32, 41 to 43, 52, 55, 56, 71 to 74, 77, 81, 
82, 91, 92, 94, 101 to 103, 105 to 108, 111 to 113, 147(c), 171, 
172, 174, 175, 179(a), 221, 223, 224, 421(b), 432, 481, 491, 
512, 522 to 524, 554 to 557, 561, 611(a), 621 to 623, 626 to 
628, 711(c), 712(d), 713(b), (e), (g), and (h), 721(a), (b), 
(d), (g), (i), (o), (p), (r), (t), and (w), 722(e), 1001, 1026, 
1061 to 1064, 1066, 1076, 1078, and 2638(b) of the Deficit 
Reduction Act of 1984, Public Law Number 98-369, section 1 of 
Public Law Number 98-611, and sections 1801, 1802, 1805 to 1809, 
1812, 1842, 1853 to 1855, 1866, 1869 to 1873, 1875, and 1878(g) 
and (h) of the Tax Reform Act of 1986, Public Law Number 99-514, 
shall be effective at the same time that they become effective 
for federal income tax purposes.  
    (iv) The Internal Revenue Code of 1954, as amended through 
May 25, 1985, shall be in effect for taxable years beginning 
after December 31, 1984.  The provisions of sections 101, 102, 
103, 201, and 202 of Public Law Number 99-121 and sections 402, 
403, 1803, 1804, 1852, and 1861 of the Tax Reform Act of 1986, 
Public Law Number 99-514, shall be effective at the same time 
that they become effective for federal income tax purposes.  
    (v) The Internal Revenue Code of 1954, as amended through 
December 31, 1985, shall be in effect for taxable years 
beginning after December 31, 1985.  
    The provisions of sections 121 to 123, 201, 202, 241, 401, 
405, 411 to 413, 653, 654, 804, 811, 822, 1001, 1003, 1122, 
1162, 1164, 1166, 1301, 1401, 1402, 1707, 1826, 1827, 1843, 
1867, 1868, 1879(f), and 1895 of the Tax Reform Act of 1986, 
Public Law Number 99-514, shall be effective at the same time 
that they become effective for federal income tax purposes. 
    References to the Internal Revenue Code of 1954 in 
subdivisions 20a, 20b, 20e, and 20f mean the code in effect for 
the purpose of defining gross income for the applicable taxable 
year.  
    Sec. 4.  Minnesota Statutes 1987 Supplement, section 
290.095, subdivision 3, is amended to read:  
    Subd. 3.  [CARRYOVER.] (a) A net operating loss for any 
taxable year shall be a net operating loss carryover to each of 
the 15 taxable years following the taxable year of such loss. 
    (b) The entire amount of the net operating loss for any 
taxable year shall be carried to the earliest of the taxable 
years to which such loss may be carried.  The portion of such 
loss which shall be carried to each of the other taxable years 
shall be the excess, if any, of the amount of such loss over the 
sum of the taxable net income, adjusted by the modifications 
specified in subdivision 4, for each of the taxable years to 
which such loss may be carried. 
    (c) Where a corporation does business both within and 
without Minnesota, and apportions its income under the 
provisions of section 290.191, the net operating loss deduction 
shall be allowed to the extent of the apportionment ratio of the 
loss year. 
    (d) No additional net operating loss deduction is allowed 
in a subsequent taxable year for the portion of a net operating 
loss deduction used to offset Minnesota income in a year in 
which the taxpayer is subject to the alternative minimum tax in 
section 290.092. 
    (e) The provisions of sections 381, 382, and 384 of the 
Internal Revenue Code of 1986, as amended through December 31, 
1987, apply to carryovers in certain corporate acquisitions and 
special limitations on net operating loss carryovers. 
    Sec. 5.  Minnesota Statutes 1986, section 290.931, 
subdivision 1, is amended to read:  
    Subdivision 1.  [REQUIREMENTS OF DECLARATION.] Every 
corporation subject to taxation under this chapter (excluding 
section 290.92) shall make a declaration of estimated tax for 
the taxable year if its tax liability so computed can reasonably 
be expected to exceed $1,000 $500, or in accordance with rules 
prescribed by the commissioner for an affiliated group of 
corporations electing to file one return as permitted by rules 
prescribed under section 290.37, subdivision 1. 
    Sec. 6.  Minnesota Statutes 1986, section 290.934, 
subdivision 1, is amended to read:  
    Subdivision 1.  [ADDITION TO THE TAX.] In case of any 
underpayment of estimated tax by a corporation, except as 
provided in subdivision 4, there shall be added to the tax for 
the taxable year an amount determined at the rate specified in 
section 270.75 upon the amount of the underpayment (determined 
under subdivision 2) for the period of the underpayment 
(determined under subdivision 3). 
    Sec. 7.  Minnesota Statutes 1987 Supplement, section 
290.934, subdivision 2, is amended to read:  
    Subd. 2.  [AMOUNT OF UNDERPAYMENT.] For purposes of 
subdivision 1, the amount of the underpayment shall be the 
excess of 
    (1) the amount of tax shown on the return for the tax year 
or, if no return is filed, the tax for the tax year required 
installment, over 
    (2) the amount, if any, of the installment paid on or 
before the last date prescribed for payment. 
    Sec. 8.  Minnesota Statutes 1986, section 290.934, 
subdivision 3, is amended to read:  
    Subd. 3.  [PERIOD OF UNDERPAYMENT.] The period of the 
underpayment shall run from the date the installment was 
required to be paid to whichever of the following dates is the 
earlier 
    (1) The 15th day of the third month following the close of 
the taxable year. 
    (2) With respect to any portion of the underpayment, the 
date on which such portion is paid.  For purposes of this 
paragraph, a payment of estimated tax on any installment date 
shall be considered a payment of any previous underpayment only 
to the extent such payment exceeds the amount of the installment 
determined under subdivision 2(1) for such installment 
date credited against unpaid required installments in the order 
in which such installments are required to be paid. 
    Sec. 9.  Minnesota Statutes 1986, section 290.934, is 
amended by adding a subdivision to read: 
    Subd. 3a.  [REQUIRED INSTALLMENTS.] (1) Except as otherwise 
provided in this subdivision, the amount of a required 
installment is 25 percent of the required annual payment. 
    (2) Except as otherwise provided in this subdivision, the 
term "required annual payment" means the lesser of: 
    (a) 90 percent of the tax shown on the return for the 
taxable year, or if no return is filed 90 percent of the tax for 
such year; or 
    (b) 100 percent of the tax shown on the return of the 
corporation for the preceding taxable year providing such return 
was for a full 12-month period, did show a liability, and was 
filed by the corporation. 
    (3) Except for determining the first required installment 
for any taxable year, paragraph (2), clause (b) does not apply 
in the case of a large corporation.  The term "large 
corporation" means a corporation or any predecessor corporation 
that had taxable net income of $1,000,000 or more for any 
taxable year during the testing period.  The term "testing 
period" means the three taxable years immediately preceding the 
taxable year involved.  A reduction allowed to a large 
corporation for the first installment that is allowed by 
applying paragraph (2), clause (b) must be recaptured by 
increasing the next required installment by the amount of the 
reduction. 
    (4) In the case of a required installment, if the 
corporation establishes that the annualized income installment 
is less than the amount determined in paragraph (1), the amount 
of the required installment is the annualized income installment 
and the recapture of previous quarters' reductions allowed by 
this paragraph must be recovered by increasing subsequent 
required installments to the extent the reductions have not 
previously been recovered.  A reduction shall be treated as 
recaptured for purposes of this paragraph if 90 percent of the 
reduction is recaptured.  
    (5) The "annualized income installment" is the excess, if 
any, of: 
    (a) an amount equal to the applicable percentage of the tax 
for the taxable year computed by placing on an annualized basis 
the taxable income: 
    (i) for the first two months of the taxable year, in the 
case of the first required installment; 
    (ii) for the first two months or for the first five months 
of the taxable year, in the case of the second required 
installment; 
    (iii) for the first six months or for the first eight 
months of the taxable year, in the case of the third required 
installment; and 
    (iv) for the first nine months or for the first 11 months 
of the taxable year, in the case of the fourth required 
installment, over; 
    (b) the aggregate amount of any prior required installments 
for the taxable year. 
    (c) For the purpose of this paragraph, the annualized 
income shall be computed by placing on an annualized basis the 
taxable income for the year up to the end of the month preceding 
the due date for the quarterly payment multiplied by 12 and 
dividing the resulting amount by the number of months in the 
taxable year (2, 5, 6, 8, 9, or 11 as the case may be) referred 
to in clause (a). 
    (d) The "applicable percentage" used in clause (a) is: 
     In the case of the following         The applicable
     required installments:               percentage is:
               1st                             22.5
               2nd                             45
               3rd                             67.5
               4th                             90
    (6)(a) If this paragraph applies, the amount determined for 
any installment must be determined in the following manner: 
    (i) take the taxable income for all months during the 
taxable year preceding the filing month; 
    (ii) divide that amount by the base period percentage for 
all months during the taxable year preceding the filing month; 
    (iii) determine the tax on the amount determined under item 
(ii); and 
    (iv) multiply the tax computed under item (iii) by the base 
period percentage for the filing month and all months during the 
taxable year preceding the filing month. 
    (b) For purposes of this paragraph: 
    (i) the "base period percentage" for any period of months 
is the average percent which the taxable income for the 
corresponding months in each of the three preceding taxable 
years bears to the taxable income for the three preceding 
taxable years; 
    (ii) the term "filing month" means the month in which the 
installment is required to be paid; 
    (iii) this paragraph shall only apply if the base period 
percentage for any six consecutive months of the taxable year 
equals or exceeds 70 percent; and 
    (iv) the commissioner may provide by rule for the 
determination of the base period percentage in the case of 
reorganizations, new corporations, and other similar 
circumstances.  
    (c)  In the case of a required installment, determined 
under this paragraph, if the corporation determines that the 
installment is less than the amount determined in paragraph (1), 
the amount of the required installment is the amount determined 
under this paragraph and the recapture of previous quarters' 
reductions allowed by this paragraph must be recovered by 
increasing subsequent required installments to the extent the 
reductions have not previously been recovered.  A reduction 
shall be treated as recaptured for purposes of this paragraph if 
90 percent of the reduction is recaptured.  
    Sec. 10.  Minnesota Statutes 1987 Supplement, section 
290A.03, subdivision 15, is amended to read:  
    Subd. 15.  [INTERNAL REVENUE CODE.] "Internal Revenue Code" 
means the Internal Revenue Code of 1986, as amended through 
December 31, 1986 1987. 
    Sec. 11.  [REPEALER.] 
    Minnesota Statutes 1986, sections 290.07, subdivisions 3 
and 6; 290.11; 290.12, as amended by Laws 1987, chapter 268, 
article 1, section 64; 290.131, as amended by Laws 1987, chapter 
268, article 1, section 65; 290.132, as amended by Laws 1987, 
chapter 268, article 1, section 66; 290.133, as amended by Laws 
1987, chapter 268, article 1, section 67; 290.134, as amended by 
Laws 1987, chapter 268, article 1, section 68; 290.135, as 
amended by Laws 1987, chapter 268, article 1, section 69; 
290.136, as amended by Laws 1987, chapter 268, article 1, 
section 70; 290.138, as amended by Laws 1987, chapter 268, 
article 1, section 71; and 290.934, subdivision 4; and Minnesota 
Statutes 1987 Supplement, section 290.14, is repealed. 
    Sec. 12.  [INSTRUCTION TO REVISOR.] 
    In the next edition of Minnesota Statutes, the revisor of 
statutes shall substitute the phrase "Internal Revenue Code of 
1986, as amended through December 31, 1987" for the phrase 
"Internal Revenue Code of 1986, as amended through December 31, 
1986" whenever that phrase occurs in chapter 290, except section 
290.01, subdivision 19, and chapter 291. 
    Sec. 13.  [EFFECTIVE DATES.] 
    Section 4 is effective for taxable years beginning after 
December 31, 1986.  The repeal in section 11 of Minnesota 
Statutes 1986, section 290.07, subdivisions 3 and 6, are 
effective for taxable years beginning after December 31, 1986.  
The remainder of section 11 is effective for taxable years 
beginning after December 31, 1987.  Except as provided in 
section 2, all other sections of this article are effective for 
taxable years beginning after December 31, 1987. 

                               ARTICLE 4 

                          PROPERTY TAX REFUND
    Section 1.  Minnesota Statutes 1987 Supplement, section 
290A.03, subdivision 3, is amended to read:  
    Subd. 3.  [INCOME.] (1) "Income" means the sum of the 
following: 
    (a) the greater of federal adjusted gross income as defined 
in the Internal Revenue Code or zero; and 
    (b) the sum of the following amounts to the extent not 
included in clause (a): 
    (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 (1) 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) the ordinary income portion of a lump sum distribution 
under section 402(e)(3) of the Internal Revenue Code; and 
    (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; and 
    (xii) nontaxable scholarship or fellowship grants. 
    In the case of an individual who files an income tax return 
on a fiscal year basis, the term "federal adjusted gross income" 
shall mean federal adjusted gross income reflected in the fiscal 
year ending in the calendar year.  Federal adjusted gross income 
shall not be reduced by the amount of a net operating loss 
carryback. 
    (2) "Income" does not include 
    (a) amounts excluded pursuant to the Internal Revenue Code, 
sections 101(a), 102, 117, and 121; 
    (b) amounts of any pension or annuity which was exclusively 
funded by the claimant or spouse and which funding payments were 
not excluded from federal adjusted gross income in the years 
when the payments were made; 
    (c) surplus food or other relief in kind supplied by a 
governmental agency; 
    (d) relief granted under this chapter; or 
    (e) child support payments received under a temporary or 
final decree of dissolution or legal separation.  
    (3) The sum of the following amounts shall be subtracted 
from income:  
     (a) for the claimant's first dependent, the exemption 
amount multiplied by 1.4; 
     (b) for the claimant's second dependent, the exemption 
amount multiplied by 1.3; 
     (c) for the claimant's third dependent, the exemption 
amount multiplied by 1.2; 
     (d) for the claimant's fourth dependent, the exemption 
amount multiplied by 1.1; 
     (e) for the claimant's fifth dependent, the exemption 
amount; and 
     (f) if the claimant or claimant's spouse was disabled or 
attained the age of 65 prior to June 1 of the year for which the 
taxes were levied or rent paid, the exemption amount. 
     For purposes of this subdivision, the "exemption amount" 
means the exemption amount under section 151(d) of the Internal 
Revenue Code of 1986, as amended through December 31, 1987, for 
the taxable year for which the income is reported. 
    Sec. 2.  Minnesota Statutes 1986, section 290A.03, 
subdivision 7, is amended to read:  
    Subd. 7.  [DEPENDENT.] "Dependent" means any person who 
is under 18 years of age at the end of the calendar year who 
receives more than 50 percent of support from the claimant, or 
who is between 18 and 21 years of age and is a full time student 
who receives more than 50 percent of support from the 
claimant considered a dependent under sections 151 and 152 of 
the Internal Revenue Code of 1986, as amended through December 
31, 1987.  In the case of a son, stepson, daughter, or 
stepdaughter of the claimant, amounts received as an aid to 
families with dependent children grant or allowance to or on 
behalf of the child must not be taken into account in 
determining whether the child received more than half of the 
child's support from the claimant.  "Dependent" includes a 
parent of the claimant or spouse who lives in the claimant's 
homestead.  "Dependent" includes a person over 18 years of age 
who lives in the claimant's homestead and who receives more than 
50 percent of support from the claimant.  
    Sec. 3.  Minnesota Statutes 1987 Supplement, 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 before reductions made under section 273.13 but after 
deductions made pursuant to under sections 273.132, 273.135, 
273.1391, 273.42, subdivision 2, and any other state paid 
property tax credits in any calendar year.  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.  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.  For homesteads which are 
manufactured homes as defined in section 274.19, subdivision 8, 
"property taxes payable" shall also include the amount of the 
gross rent paid in the preceding year for the site on which the 
homestead is located, which is attributable to the net tax paid 
on the site.  The amount attributable to property taxes shall be 
determined by multiplying the net tax on the parcel by a 
fraction, the numerator of which is the gross rent paid for the 
calendar year for the site and the denominator of which is the 
gross rent paid for the calendar year for the parcel.  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 273.13, subdivision 22 or 23 on or 
before June 1 of the year in which the "property taxes payable" 
were levied; or (ii) the claimant must provide documentation 
from the local assessor that application for homestead 
classification has been made prior to October 1 of the year in 
which the "property taxes payable" were payable and that the 
assessor has approved the application.  
    Sec. 4.  Minnesota Statutes 1987 Supplement, section 
290A.03, subdivision 14, is amended to read: 
    Subd. 14.  [NET TAX.] "Net tax" means 
    (a) the property tax, exclusive of special assessments, 
interest, and penalties, and after reduction for any state paid 
property tax credits as required in subdivision 13 except for 
the reduction under section 273.13, subdivisions 22 and 23, or 
    (b) the payments made in lieu of ad valorem taxes, 
including payments of special assessments imposed in lieu of ad 
valorem taxes, 
    for the calendar year in which the rent was paid.  If a 
portion of the property is occupied as a homestead or is used 
for other than rental purposes, the net tax shall be the amount 
of tax reduced by the percentage that the nonrental use 
comprises of the total square footage of the building.  If a 
portion of the property is used for purposes other than for 
residential rental and none of the property is occupied as a 
homestead, the net tax shall be the amount of the tax of the 
parcel multiplied by a fraction, the numerator of which is the 
assessed value of the residential rental portion and the 
denominator of which is the total assessed value of the parcel.  
If a portion of the property is used for other than rental 
residential purposes, the county treasurer shall list on the 
property tax statement the amount of net tax pertaining to the 
rental residential portion of the property.  
     The amount of the net tax shall not be reduced by an 
abatement or a court ordered reduction in the property tax on 
the property made after the certificate of rent constituting 
property tax has been provided to the renter.  
    Sec. 5.  Minnesota Statutes 1987 Supplement, section 
290A.04, subdivision 2, is amended to read: 
    Subd. 2.  A claimant who is disabled or has attained the 
age of 65 by June 1 of the year in which a refund is payable or 
who, on the federal tax return filed for the prior year, claimed 
a personal exemption for a dependent pursuant to section 151 of 
the Internal Revenue Code, and whose property taxes payable or 
rent constituting property taxes are in excess of the percentage 
of the household income stated below shall pay an amount equal 
to the percent of income shown for the appropriate household 
income level along with the percent to be paid by the claimant 
of the remaining amount of property taxes payable or rent 
constituting property taxes.  The state refund will be equal to 
the amount of property taxes payable or rent constituting 
property taxes that remain, up to the state refund amount shown 
below.  
                     Percent              Percent    Maximum
Household Income    of Income             Paid by     State
                                          Claimant    Refund
 $0 to 999        1.0 percent            10 percent  $1,100
 1,000 to 1,999   1.0 1.1 percent        10 11 percent  $1,100
 2,000 to 2,999   1.0 1.2 percent        10 12 percent  $1,100
 3,000 to 3,499   1.0 1.3 percent        11 13 percent  $1,100
 3,500 to 3,999   1.0 1.3 percent        11 13 percent  $1,100
 4,000 to 4,499   1.0 1.4 percent        11 14 percent  $1,100
 4,500 to 4,999   1.0 1.4 percent        12 14 percent  $1,100
 5,000 to 5,999   1.0 1.5 percent        12 15 percent  $1,100
 6,000 to 6,999   1.1 1.5 percent        12 16 percent  $1,100
 7,000 to 7,999   1.1 1.6 percent        13 17 percent  $1,100
 8,000 to 8,999   1.2 1.6 percent        13 18 percent  $1,100
 9,000 to 9,999   1.2 1.7 percent        13 19 percent  $1,100
10,000 to 10,999  1.3 1.7 percent        14 20 percent  $1,075
11,000 to 11,999  1.4 1.8 percent        14 22 percent  $1,075
12,000 to 12,999  1.5 1.8 percent        14 24 percent  $1,075
13,000 to 13,999  1.5 1.9 percent        15 26 percent  $1,075
14,000 to 14,999  1.5 2.0 percent        16 28 percent  $1,075
15,000 to 15,999  1.6 2.1 percent        17 30 percent  $1,075
16,000 to 16,999  1.7 2.2 percent        18 32 percent  $1,075
17,000 to 17,999  1.8 2.3 percent        19 34 percent  $1,050
18,000 to 18,999  1.9 2.4 percent        20 36 percent  $1,050
19,000 to 19,999  2.0 2.6 percent        22 38 percent  $1,050
20,000 to 20,999  2.1 2.8 percent        24 40 percent  $1,050
21,000 to 21,999  2.2 3.0 percent        26 42 percent  $1,050
22,000 to 22,999  2.2 3.2 percent        28 44 percent  $1,050
23,000 to 23,999  2.2 3.3 percent        30 46 percent  $1,025
24,000 to 24,999  2.3 3.4 percent        32 48 percent  $1,025
25,000 to 25,999  2.3 3.5 percent        34 50 percent  $1,025
26,000 to 26,999  2.3 3.6 percent        36 52 percent  $1,025
27,000 to 27,999  2.4 3.7 percent        38 54 percent  $1,000
28,000 to 28,999  2.4 3.8 percent        40 56 percent  $  900
29,000 to 29,999  2.4 3.9 percent        42 58 percent  $  800
30,000 to 30,999  2.4 4.0 percent        44 60 percent  $  700
31,000 to 31,999  2.5 4.0 percent        46 60 percent  $  600
32,000 to 32,999  2.5 4.0 percent        48 60 percent  $  500
33,000 to 33,999  2.5 4.0 percent        50 60 percent  $  300
34,000 to 34,999  2.5 4.0 percent        50 60 percent  $  100
    The payment made to a claimant shall be the amount of the 
state refund calculated pursuant to this subdivision.  For taxes 
payable in 1989, the amount of the refund must be reduced by the 
homestead credit.  No payment is allowed if the claimant's 
household income is $35,000 or more. 
    Sec. 6.  Minnesota Statutes 1987 Supplement, section 
290A.04, subdivision 2b, is amended to read:  
    Subd. 2b.  The commissioner may reconstruct the tables in 
subdivisions subdivision 2 and 2a for homeowners to reflect the 
elimination of the homestead credit beginning for claims based 
on taxes payable in 1989 1990.  
     Sec. 7.  Minnesota Statutes 1986, section 290A.04, is 
amended by adding a subdivision to read: 
    Subd. 2h.  If the net property taxes payable in 1989 on a 
homestead increase more than ten percent over the net property 
taxes payable in 1988 on the same property, and the amount of 
that increase is $40 or more, a claimant who is a homeowner 
shall be allowed an additional refund equal to 75 percent of the 
amount by which the increase exceeds ten percent.  This 
subdivision shall not apply to any increase in the net property 
taxes payable attributable to improvements made to the homestead.
     A refund under this subdivision shall not exceed $250. 
    For purposes of this subdivision, "net property taxes 
payable" means property taxes payable after reductions made 
pursuant to sections 273.13, subdivisions 22 and 23; 273.132; 
273.135; 273.1391; and 273.42, subdivision 2, and any other 
state paid property tax credits and after the deduction of tax 
refund amounts for which the claimant qualifies pursuant to 
subdivision 2. 
     In addition to the other proofs required by this chapter, 
each claimant under this subdivision shall file with the 
property tax refund return a copy of the property tax statement 
for taxes payable in the preceding year or other documents 
required by the commissioner. 
    Sec. 8.  Minnesota Statutes 1987 Supplement, section 
290A.06, is amended to read:  
    290A.06 [FILING TIME LIMIT, LATE FILING; INCOME TAX 
RETURN.] 
    Any claim for a refund based on property taxes payable 
shall be filed with the department of revenue on or before 
August 15 of the year in which the property taxes are due and 
payable.  A copy of the claimant's federal income tax return for 
the taxable year preceding the year in which the property taxes 
are payable must be filed with the claim if the claimant filed a 
federal income tax return for that year. 
    Any claim for rent constituting property taxes shall be 
filed with the department of revenue on or before August 15 of 
the year following the year in which the rent was paid.  A copy 
of the claimant's federal income tax return for the taxable year 
in which the rent was paid must be filed with the claim if the 
claimant filed a federal income tax return for that year.  
    The commissioner may extend the time for filing these 
claims for a period not to exceed six months in the case of 
sickness, absence, or other disability, or when in the 
commissioner's judgment other good cause exists. 
    A claim filed after the original or extended due date shall 
be allowed, but the amount of credit shall be reduced by five 
percent of the amount otherwise allowable, plus an additional 
five percent for each month of delinquency, not exceeding a 
total reduction of 25 percent which may be canceled or reduced 
by the commissioner in the case of sickness, absence, or other 
disability, or when in the commissioner's judgment other good 
cause exists.  In any event no claim shall be allowed if the 
initial claim is filed one year after the original due date for 
filing the claim. 
    The time limit on redetermination of claims for refund and 
examination of records shall be governed by sections 290.49, 
290.50, and 290.56 and for purposes of computing the time limit 
as provided in these sections the due date of the property tax 
refund return shall be the same as the due date contained in 
section 290.42 for an income tax return covering the year in 
which the rent was paid or the year preceding the year in which 
the property taxes are payable. 
    Sec. 9.  [290A.24] [FINANCIAL REPORTING.] 
    For financial reporting and accounting purposes and for 
purposes of the state budget, the refunds paid under this 
chapter must be recognized and accounted for as an adjustment in 
the total amount of withholding tax paid under section 290.92 
and declarations of estimated tax under section 290.93. 
    Sec. 10.  [TRANSITION RULE.] 
    For purposes of claims based on rent paid in 1987 and 
property taxes payable in 1988, a claimant who has a dependent 
under the revised definition in section 2 shall be treated as 
having claimed a personal exemption for a dependent under 
federal law in order to qualify for a refund under Minnesota 
Statutes 1987 Supplement, section 290A.04, subdivision 2.  
    Sec. 11.  Laws 1987, chapter 268, article 3, section 12, is 
amended to read:  
    Sec. 12.  [LIMITATIONS ON PROPERTY TAX REFUNDS.] 
    (a)  For claims filed based on rent paid in 1986 and 
property taxes payable in 1987, the commissioner shall pay 67 
100 percent of the payments allowable under section 290A.04, 
subdivisions 1 and 2.  The commissioner shall include with each 
reduced refund a statement that the reduction is required by 
this section.  
    (b) Minnesota Statutes 1986, section 290A.23 does not apply 
to claims based on property taxes payable in 1988 and rent paid 
in 1987 under section 290A.04, subdivisions 1 and 2.  
$125,000,000 is appropriated to the commissioner of revenue for 
fiscal year 1989 to pay the claims.  The commissioner shall 
estimate the amount of payments allowable under section 290A.04, 
subdivisions 1 and 2, by August 25, 1988.  If the estimate 
exceeds the $125,000,000 limitation, the commissioner shall 
proportionally reduce the refunds paid so that the refunds paid 
equal $125,000,000.  All refunds for claims based on property 
taxes payable in 1988 and rent paid in 1987 must be reduced by 
the same percentage.  If reduced, the commissioner shall include 
with each refund a statement that the reduction is required by 
this section. 
    Sec. 12.  [PAYMENT.] 
    By June 15, 1988, the commissioner of revenue shall pay 
claimants for claims paid before the date of final enactment 
based on rent paid in 1986 and property taxes payable in 1987 
the difference between the payments allowable under Minnesota 
Statutes, section 290A.04, subdivisions 1 and 2, and the amounts 
paid under Laws 1987, chapter 268, article 3, section 12, 
paragraph (a).  The amounts paid shall be reduced for claims 
filed after the original or extended due date as provided in 
Minnesota Statutes, section 290A.06.  Interest shall not be paid 
on payments made by June 15, 1988.  Thereafter, interest shall 
be added at the rate specified in Minnesota Statutes, section 
270.76, from June 15, 1988, until the claim is paid.  
    The commissioner of revenue shall include with each payment 
a statement explaining that the payment is the balance of the 
claim filed based on rent paid in 1986 or property taxes payable 
in 1987 and that the payment is required by this act.  The 
statement must read substantially as follows: 
    "Here is the rest of your 1986 property tax refund. 
    As you recall, a state law reduced all 1986 property tax 
refund checks by 33 percent. 
    The amount of this check, together with the amount of the 
property tax refund check you received last fall, should equal 
the amount of the refund you listed on your 1986 property tax 
refund application." 
    Sec 13.  [REPEALER.] 
    Minnesota Statutes 1987 Supplement, section 290A.04, 
subdivision 2a, is repealed. 
    Sec. 14.  [APPROPRIATION.] 
    The amount necessary to pay the refunds required in section 
12 is appropriated for fiscal year 1988 from the general fund to 
the commissioner of revenue. 
    Sec. 15.  [EFFECTIVE DATES.] 
    Sections 1 to 5 and 13 are effective for claims based on 
rent paid in 1988 and subsequent years and claims based on 
property taxes payable in 1989 and subsequent years.  Section 6 
is effective for claims based on property taxes paid in 1990.  
Section 7 is effective for property taxes payable in 1989.  
Section 8 is effective for claims based on rent paid in 1987 and 
subsequent years and claims based on property taxes payable in 
1988 and subsequent years.  Sections 10, 11, 12, and 14 are 
effective the day following final enactment. 

                               ARTICLE 5 

                          PROPERTY TAX REFORM 
    Section 1.  Minnesota Statutes 1987 Supplement, section 
124.155, subdivision 2, is amended to read: 
    Subd. 2.  [ADJUSTMENT TO AIDS.] The amount specified in 
subdivision 1 shall be used to adjust the following state aids 
and credits in the order listed: 
    (a) foundation aid as defined in section 124A.01;  
    (b) secondary vocational aid authorized in section 124.573; 
    (c) special education aid authorized in section 124.32;  
    (d) secondary vocational aid for handicapped children 
authorized in section 124.574;  
    (e) gifted and talented aid authorized in section 124.247;  
    (f) aid for pupils of limited English proficiency 
authorized in section 124.273;  
    (g) aid for chemical use programs authorized in section 
124.246;  
    (h) interdistrict cooperation aid authorized in section 
124.272; 
    (i) summer program aid authorized in section 124A.033; 
    (j) transportation aid authorized in section 124.225;  
    (k) community education programs aid authorized in section 
124.271;  
    (l) adult education aid authorized in section 124.26;  
    (m) early childhood family education aid authorized in 
section 124.2711; 
    (n) capital expenditure equalization aid authorized in 
section 124.245;  
    (o) homestead credit replacement aid authorized in section 
273.1394 under section 273.13 for taxes payable in 1989 and 
under section 273.1398 for taxes payable in 1990 and thereafter; 
    (p) agricultural credit replacement aid authorized in under 
section 273.1395 273.132 for taxes payable in 1989 and under 
section 273.1398 for taxes payable in 1990 and thereafter;  
    (q) transition aid and disparity reduction aid authorized 
in section 273.1398; 
    (q) (r) attached machinery aid authorized in section 
273.138, subdivision 3; and 
    (r) (s) teacher retirement and F.I.C.A. aid authorized in 
sections 124.2162 and 124.2163.  
    The commissioner of education shall schedule the timing of 
the adjustments to state aids and credits specified in 
subdivision 1, as close to the end of the fiscal year as 
possible. 
     Sec. 2.  Minnesota Statutes 1987 Supplement, section 
124.2131, subdivision 3, is amended to read: 
    Subd. 3.  [DECREASE IN IRON ORE ASSESSED VALUE.] If in any 
year the assessed value gross tax capacity of iron ore property, 
as defined in section 273.13, subdivision 31 in any district is 
less than the assessed value gross tax capacity of such property 
in the preceding year, the commissioner of revenue shall 
redetermine for all purposes the adjusted assessed value gross 
tax capacity of the preceding year taking into account only the 
decrease in assessed value gross tax capacity of iron ore 
property as defined in section 273.13, subdivision 31.  If 
subdivision 2, clause (a), is applicable to the district, the 
decrease in iron ore property shall be applied to the adjusted 
assessed value as limited therein.  In all other respects, the 
provisions of clause (1) shall apply.  
    Sec. 3.  Minnesota Statutes 1987 Supplement, section 
124.2139, is amended to read: 
    124.2139 [REDUCTION OF HOMESTEAD CREDIT PAYMENTS TO SCHOOL 
DISTRICTS.] 
    The commissioner of revenue shall reduce the homestead 
credit replacement aid payments under section 273.13 for fiscal 
year 1990, the sum of the homestead credit, and transition aid 
and disparity reduction aid payments under section 273.1398 for 
fiscal years 1991 and thereafter made to school 
districts pursuant to section 273.1394 by the product of:  
    (1) the district's fiscal year 1984 payroll for coordinated 
plan members of the public employees retirement association, 
times 
    (2) the difference between the employer contribution rate 
in effect prior to July 1, 1984, and the total employer 
contribution rate in effect after June 30, 1984.  
    Sec. 4.  Minnesota Statutes 1987 Supplement, section 
124A.02, subdivision 3a, is amended to read:  
    Subd. 3a.  [ADJUSTED ASSESSED VALUATION.] "Adjusted 
assessed valuation" means the assessed valuation of the taxable 
property notwithstanding the provisions of section 275.49 of the 
school district as adjusted by the commissioner of revenue under 
section 124.2131.  The adjusted assessed valuation for any given 
calendar year shall be used to compute levy limitations for 
levies certified in the succeeding calendar year and aid for the 
school year beginning in the second succeeding calendar year. 
    Sec. 5.  Minnesota Statutes 1987 Supplement, section 
124A.02, subdivision 11, is amended to read: 
    Subd. 11.  [MINIMUM AID.] A qualifying district's minimum 
aid for each school year shall equal its minimum guarantee for 
that school year, minus the sum of: 
    (1) the amount of the district's homestead credit 
replacement aid paid under section 273.1394 and its 273.13, for 
taxes payable in 1989 and under section 273.1398 for taxes 
payable in 1990 and thereafter, agricultural credit replacement 
aid under section 273.1395 273.132, for taxes payable in 1989 
and under section 273.1398 for taxes payable in 1990 and 
thereafter, and transition aid and disparity reduction aid paid 
under section 273.1398 for that school year, after any positive 
tax base adjustment but prior to any negative tax base 
adjustment under section 273.1396; 
    (2) the amount by which property taxes of the district for 
use in that school year are reduced by the attached machinery 
provisions in section 273.138, subdivision 6;  
    (3) the amount by which property taxes of the district for 
use in that school year are reduced by the state reimbursed 
disaster or emergency reassessment provisions in section 
273.123; and 
    (4) the amount by which property taxes of the district for 
use in that school year are reduced by the metropolitan 
agricultural preserve provisions in section 473H.10. 
    Sec. 6.  Minnesota Statutes 1987 Supplement, section 
272.115, subdivision 4, is amended to read: 
    Subd. 4.  No real estate sold on or after January 1, 1978, 
for which a certificate of value is required pursuant to 
subdivision 1 shall receive the homestead value exemption amount 
or the agricultural exemption amount computed in section 
275.081; or the taconite homestead credit provided in sections 
273.134 to 273.136 be classified as a homestead, unless a 
certificate of value has been filed with the county auditor in 
accordance with this section. 
    This subdivision shall apply to any real estate taxes that 
are payable the year or years following the sale of the property.
    Sec. 7.  Minnesota Statutes 1987 Supplement, section 
273.1102, is amended by adding a subdivision to read: 
    Subd. 3.  [1988 ADJUSTMENT.] For school districts levy 
limitations or authorities expressed in terms of mills and 
adjusted assessed value, their levy limitations shall be 
converted by the department of education to "equalized tax 
capacity rates."  For purposes of this calculation, the 1987 
adjusted assessed values of the district shall be converted to 
"adjusted gross tax capacities" by multiplying the equalized 
market values by class of property by the gross tax capacity 
rates provided in section 273.13.  Each county assessor and the 
city assessors of Minneapolis, Duluth, and St. Cloud shall 
furnish the commissioner of revenue the 1987 market value for 
taxes payable in 1988 for any new classes of property 
established in this article.  The commissioner shall use those 
values, and estimate values where needed, in developing the 1987 
tax capacity for each school district under this section.  The 
requirements of section 124.2131, subdivision 1, paragraph (c), 
and subdivisions 2 and 3, shall remain in effect. 
    Sec. 8.  Minnesota Statutes 1987 Supplement, section 
273.123, subdivision 4, is amended to read: 
    Subd. 4.  [STATE REIMBURSEMENT.] The county auditor shall 
calculate the tax on the property described in subdivision 2 
based on the assessment made on January 2 of the year in which 
the disaster or emergency occurred.  The difference between the 
tax determined on the January 2 assessed value and the tax 
actually payable based on the reassessed value determined under 
subdivision 2 shall be reimbursed to each taxing jurisdiction in 
which the damaged property is located.  The amount shall be 
certified by the county auditor and reported to the commissioner 
of revenue.  The commissioner shall make the payments to the 
taxing jurisdictions containing the property at the time 
distributions are made pursuant to section 273.1394 273.13 for 
taxes payable in 1989, and pursuant to section 273.1398 for 
taxes payable in 1990 and thereafter, in the same proportion 
that the ad valorem tax is distributed.  
    Sec. 9.  Minnesota Statutes 1987 Supplement, section 
273.123, subdivision 5, is amended to read:  
    Subd. 5.  [COMPUTATION OF CREDITS.] The amounts of any 
credits or tax relief which reduce the gross tax shall be 
computed upon the reassessed value determined under subdivision 
2.  Payment shall be made pursuant to section 273.1394 273.13 
for taxes payable in 1989, and pursuant to section 273.1398 for 
taxes payable in 1990 and thereafter.  For purposes of the 
property tax refund, property taxes payable, as defined in 
section 290A.03, subdivision 13, and net property taxes payable, 
as defined in section 290A.04, subdivision 2d, shall be computed 
upon the reassessed value determined under subdivision 2.  
    Sec. 10.  Minnesota Statutes 1987 Supplement, section 
273.124, subdivision 8, is amended to read: 
    Subd. 8.  [HOMESTEAD OWNED BY FAMILY FARM CORPORATION OR 
PARTNERSHIP.] (a) Each family farm corporation and each 
partnership operating a family farm is entitled to class 1b 
under section 273.13, subdivision 22, paragraph (b), or class 2a 
assessment for one homestead occupied by a shareholder or 
partner thereof who is residing on the land and actively engaged 
in farming of the land owned by the corporation or partnership.  
Homestead treatment applies even if legal title to the property 
is in the name of the corporation or partnership and not in the 
name of the person residing on it.  "Family farm corporation" 
and "family farm" have the meanings given in section 500.24. 
    (b) In addition to property specified in paragraph (a), any 
other residences owned by corporations or partnerships described 
in paragraph (a) which are located on agricultural land and 
occupied as homesteads by shareholders or partners who are 
actively engaged in farming on behalf of the corporation or 
partnership must also be assessed as class 2a property or as 
class 1b property under section 273.13, subdivision 22, 
paragraph (b), but the property eligible is limited to the 
residence itself and as much of the land surrounding the 
homestead, not exceeding one acre, as is reasonably necessary 
for the use of the dwelling as a home, and does not include any 
other structures that may be located on it. 
    Sec. 11.  Minnesota Statutes 1987 Supplement, section 
273.124, subdivision 11, is amended to read: 
    Subd. 11.  [LIMITATION ON HOMESTEAD CLASSIFICATION.] If the 
assessor has classified a property as both homestead and 
nonhomestead, the greater of the value attributable to the 
portion of the property classified as class 1 or class 2a or the 
value of the first tier of assessment gross tax capacity 
percentages provided under section 273.13, subdivision 22, or 
23, paragraph (a) is entitled to assessment as a homestead under 
section 273.13, subdivision 22 or 23, and the homestead 
exemption under section 275.081, subdivision 2.  The limitation 
in this subdivision does not apply to buildings containing fewer 
than four residential units or to a single rented or leased 
dwelling unit located within or attached to a private garage or 
similar structure owned by the owner of a homestead and located 
on the premises of that homestead.  
    If the assessor has classified a property as both homestead 
and nonhomestead, the homestead credit provided in section 
273.13, subdivisions 22 and 23 and the reductions in tax 
provided under sections 273.135 and 273.1391 apply to the value 
of both the homestead and the nonhomestead portions of the 
property. 
    Sec. 12.  Minnesota Statutes 1987 Supplement, section 
273.124, subdivision 13, is amended to read: 
    Subd. 13.  [SOCIAL SECURITY NUMBER REQUIRED FOR HOMESTEAD 
APPLICATION.] Beginning with the January 2, 1987, assessment, 
Every property owner applying for homestead classification must 
furnish to the county assessor that owner's social security or 
taxpayer identification number.  If the social security or 
taxpayer identification number is not provided, the county 
assessor shall classify the property as nonhomestead.  The 
social security numbers of the property owners are private data 
on individuals as defined by section 13.02, subdivision 12, but, 
notwithstanding that section, the private data may be disclosed 
to the commissioner of revenue. 
    At the request of the commissioner, each county must give 
the commissioner a listing list that includes the name and 
social security or taxpayer identification number of each 
property owner applying for homestead classification.  
    If, in comparing the lists supplied by the counties, the 
commissioner finds that a property owner is claiming more than 
one homestead, the commissioner shall notify the appropriate 
counties.  Within 90 days of the notification, the county 
assessor shall investigate to determine if the homestead 
classification was properly claimed.  If the property owner does 
not qualify, the county assessor shall notify the county auditor 
who will determine the amount of homestead benefits that had 
been improperly allowed.  For the purpose of this section, 
"homestead benefits" means the tax reduction resulting from the 
homestead exemption amount provided under section 275.081 
classification as a homestead under section 273.13, the 
homestead credit under section 273.13 for taxes payable in 1989 
and under section 273.1398 for taxes payable in 1990 and 
thereafter, the taconite homestead credit, and the supplemental 
homestead credit, and the tax reduction resulting from the 
agricultural exemption amount provided in section 275.081 credit 
under section 273.132 for taxes payable in 1989 and under 
section 273.1398 for taxes payable in 1990 and thereafter.  The 
county auditor shall send a notice to the owners of the affected 
property, demanding reimbursement of the homestead benefits plus 
a penalty equal to 25 percent of the homestead benefits.  The 
property owners may appeal the county's determination by filing 
a notice of appeal with the Minnesota tax court within 60 days 
of the date of the notice from the county. 
    If the amount of homestead benefits and penalty is not paid 
within 60 days, and if no appeal has been filed, the county 
auditor shall certify the amount to the succeeding year's tax 
list to be collected as part of the property taxes. 
    Any amount of homestead benefits recovered from the 
property owner must be transmitted to the commissioner by the 
end of each calendar quarter.  Any amount recovered attributable 
to taconite homestead credit shall be transmitted to the St. 
Louis county auditor to be deposited in the taconite property 
tax relief account.  The amount of penalty collected must be 
deposited in the county general fund. 
    The commissioner will provide suggested homestead 
applications to each county.  If a property owner has applied 
for more than one homestead and the county assessors cannot 
determine which property should be classified as homestead, the 
county assessors will refer the information to the commissioner. 
The commissioner shall make the determination and notify the 
counties within 60 days. 
     In addition to lists of homestead properties, the 
commissioner may ask the counties to furnish lists of all 
properties and the record owners. 
    Sec. 13.  Minnesota Statutes 1987 Supplement, section 
273.13, subdivision 15a, is amended to read:  
    Subd. 15a.  [GENERAL FUND, REPLACEMENT OF REVENUE.] (1) 
Payment from the general fund shall be made, as provided herein, 
for the purpose of replacing revenue lost as a result of the 
reduction of property taxes provided in subdivision subdivisions 
22 and 23. 
    (2) Each county auditor shall certify, not later than May 1 
of each year to the commissioner of revenue the amount of 
reduction resulting from subdivision subdivisions 22 and 23 in 
the auditor's county.  This certification shall be submitted to 
the commissioner of revenue as part of the abstracts of tax 
lists required to be filed with the commissioner under the 
provisions of section 275.29.  Any prior year adjustments shall 
also be certified in the abstracts of tax lists.  The 
commissioner of revenue shall review such certifications to 
determine their accuracy.  The commissioner may make such 
changes in the certification as are deemed necessary or return a 
certification to the county auditor for corrections. 
    (3) Based on current year tax data reported in the 
abstracts of tax lists, the commissioner of revenue shall 
annually determine the taxing district distribution of the 
amounts certified under clause (2).  The commissioner of revenue 
shall pay to each taxing district, other than school districts, 
its total payment for the year in equal installments on or 
before July 15 20 and December 15 of each year. 
    Sec. 14.  Minnesota Statutes 1986, section 273.13, is 
amended by adding a subdivision to read:  
    Subd. 21a.  [TAX CAPACITY.] In this section, wherever the 
"tax capacity" of a class of property is specified without 
qualification as to whether it is the property's "net tax 
capacity" or its "gross tax capacity," the "net tax capacity" 
and "gross tax capacity" of that property are the same as its 
"tax capacity." 
    Sec. 15.  Minnesota Statutes 1987 Supplement, section 
273.13, subdivision 22, is amended to read:  
    Subd. 22.  [CLASS 1.] (a) Except as provided in subdivision 
23, real estate which is residential and used for homestead 
purposes is class 1.  The market value of class 1a property must 
be determined based upon the value of the house, garage, and 
land.  
    The first $68,000 of market value of class 1a property must 
be assessed at 17 has a net tax capacity of one percent of its 
market value and a gross tax capacity of 2.17 percent of its 
market value.  The homestead market value of class 1a property 
that exceeds $68,000 must be assessed at 27 but does not exceed 
$100,000 has a tax capacity of 2.5 percent of its market value.  
The market value of class 1a property that exceeds $100,000 has 
a tax capacity of 3.3 percent of its market value.  
    (b) Class 1b property includes real estate or manufactured 
homes used for the purposes of a homestead by 
    (1) any blind person, if the blind person is the owner 
thereof or if the blind person and the blind person's spouse are 
the sole owners thereof; or 
    (2) any person, hereinafter referred to as "veteran," who: 
    (i) served in the active military or naval service of the 
United States; and 
    (ii) is entitled to compensation under the laws and 
regulations of the United States for permanent and total 
service-connected disability due to the loss, or loss of use, by 
reason of amputation, ankylosis, progressive muscular 
dystrophies, or paralysis, of both lower extremities, such as to 
preclude motion without the aid of braces, crutches, canes, or a 
wheelchair; and 
    (iii) with assistance by the administration of veterans 
affairs has acquired a special housing unit with special 
fixtures or movable facilities made necessary by the nature of 
the veteran's disability, or the surviving spouse of the 
deceased veteran for as long as the surviving spouse retains the 
special housing unit as a homestead; or 
    (3) any person who: 
    (i) is permanently and totally disabled and 
    (ii) receives 90 percent or more of total income from 
    (A) aid from any state as a result of that disability; or 
    (B) supplemental security income for the disabled; or 
    (C) workers' compensation based on a finding of total and 
permanent disability; or 
    (D) social security disability, including the amount of a 
disability insurance benefit which is converted to an old age 
insurance benefit and any subsequent cost of living increases; 
or 
    (E) aid under the Federal Railroad Retirement Act of 1937, 
United States Code Annotated, title 45, section 228b(a)5; or 
    (F) a pension from any local government retirement fund 
located in the state of Minnesota as a result of that disability;
or 
     (iii) whose household income as defined in section 290A.03, 
subdivision 5, is 150 percent or less of the federal poverty 
level. 
    Property is classified and assessed pursuant to clause (1) 
only if the commissioner of jobs and training certifies to the 
assessor that the owner of the property satisfies the 
requirements of this subdivision.  The commissioner of jobs and 
training shall provide a copy of the certification to the 
commissioner of revenue.  
    Class 1b property is valued and assessed as follows:  in 
the case of agricultural land, including a manufactured home, 
used for a homestead, the first $33,000 of market value shall be 
valued and assessed at five percent, the next $33,000 of market 
value shall be valued and assessed at 14 percent, and the 
remaining market value shall be valued and assessed at 18 
percent; and in the case of all other real estate and 
manufactured homes, the first $34,000 of market value shall be 
valued and assessed at five percent, the next $34,000 of market 
value shall be valued and assessed at 17 percent, and the 
remaining market value shall be valued and assessed at 27 
percent.  In the case of agricultural land including a 
manufactured home used for purposes of a homestead, the 
commissioner of revenue shall adjust, as provided in section 
273.1311, the maximum amount of the market value of the 
homestead brackets subject to the five percent and 18 percent 
rates; and for all other real estate and manufactured homes, the 
commissioner of revenue shall adjust, as provided in section 
273.1311, the maximum amount of the market value of the 
homestead brackets subject to the five percent and 17 percent 
rates.  Permanently and totally disabled for the purpose of this 
subdivision means a condition which is permanent in nature and 
totally incapacitates the person from working at an occupation 
which brings the person an income.  The first $32,000 market 
value of class 1b property has a net tax capacity of .4 percent 
of its market value and a gross tax capacity of .87 percent of 
its market value.  The remaining market value of class 1b 
property has a gross or net tax capacity using the rates for 
class 1 or class 2a property, whichever is appropriate, of 
similar market value.  
    (c) Class 1c property is commercial use real property that 
abuts a lakeshore line and is devoted to temporary and seasonal 
residential occupancy for recreational purposes but not devoted 
to commercial purposes for more than 200 days in the year 
preceding the year of assessment, and that includes a portion 
used as a homestead by the owner.  It must be assessed at 12 
Class 1c property has a tax capacity of .9 percent of market 
value with the following limitation:  the area of the property 
must not exceed 100 feet of lakeshore footage for each cabin or 
campsite located on the property up to a total of 800 feet and 
500 feet in depth, measured away from the lakeshore. 
    (d) For taxes levied in 1988, payable in 1989 only, the tax 
to be paid on class 1a or class 1b property, less any reduction 
received pursuant to sections 273.123 and 473H.10, shall be 
reduced by 54 percent of the tax imposed on the first $68,000 of 
market value.  The amount of the reduction shall not 
exceed $700 $725. 
    Sec. 16.  Minnesota Statutes 1987 Supplement, section 
273.13, subdivision 23, is amended to read:  
    Subd. 23.  [CLASS 2.] (a) Class 2a property is agricultural 
land including any improvements that is homesteaded, together 
with the house and garage.  The first $66,000 of market value of 
an agricultural homestead is valued at 30 percent.  The market 
value of the house and garage and immediately surrounding one 
acre of land that does not exceed $65,000 has a net tax capacity 
of .805 percent of market value and a gross tax capacity of 1.75 
percent of market value.  The excess market value over $65,000 
has a tax capacity of 2.2 percent.  If the market value of the 
house, garage, and surrounding one acre of land is less than 
$65,000, the value of the remaining land including improvements 
equal to the difference between $65,000 and the market value of 
the house, garage, and surrounding one acre of land has a net 
tax capacity of 1.12 percent of market value and a gross tax 
capacity of 1.75 percent of market value for the first 320 acres 
of land and the remaining value over 320 acres has a net tax 
capacity of 1.295 percent of market value and a gross tax 
capacity of 1.75 percent of market value.  The remaining value 
of class 2a property is assessed at 40 over the $65,000 market 
value that does not exceed 320 acres has a net tax capacity of 
1.44 percent of market value and a gross tax capacity of 2.25 
percent of market value.  The remaining property over the 
$65,000 market value in excess of 320 acres has a net tax 
capacity of 1.665 percent of market value and a gross tax 
capacity of 2.25 percent of market value.  
    Noncontiguous land shall constitute class 2a only if the 
homestead is classified as class 2a and the detached land is 
located in the same township or city or not farther than two 
townships or cities or combination thereof from the homestead. 
    Agricultural land used for purposes of a homestead and 
actively farmed by a person holding a vested remainder interest 
in it must be classified class 2a.  If agricultural land is 
classified class 2a, any other dwellings on the land used for 
purposes of a homestead by persons holding vested remainder 
interests who are actively engaged in farming the property, and 
up to one acre of the land surrounding each homestead and 
reasonably necessary for the use of the dwelling as a home, must 
also be assessed class 2a and is entitled to the homestead 
credit. 
    For taxes levied in 1988, payable in 1989 only, the tax to 
be paid on class 2a property, less any reduction received 
pursuant to sections 273.123 and 473H.10 and class 1b property 
under section 273.13, subdivision 22, paragraph (b), used for 
agricultural purposes shall be reduced by 52 54 percent of the 
tax.  The amount of the reduction shall not exceed $700 $725.  
    (b) Class 2b property is (1) real estate, rural in 
character and used exclusively for growing trees for timber, 
lumber, and wood and wood products; and (2) real estate that is 
nonhomestead agricultural land.  Class 2b property is assessed 
at 40 has a net tax capacity of 1.665 percent of market value 
and a gross tax capacity of 2.25 percent of market value. 
    Agricultural land as used in this section shall mean means 
contiguous acreage of ten acres or more, primarily used during 
the preceding year for agricultural purposes.  Agricultural use 
may include pasture, timber, waste, unusable wild land and land 
included in federal farm programs. 
    Real estate of less than ten acres used principally for 
raising poultry, livestock, fruit, vegetables or other 
agricultural products, including the breeding of fish for sale 
and consumption provided that it is located on land zoned for 
agricultural use, shall be considered as agricultural land, if 
it is not used primarily for residential purposes. 
    The assessor shall determine and list separately on the 
records the market value of the homestead dwelling and the one 
acre of land on which that dwelling is located.  If any farm 
buildings or structures are located on this homesteaded acre of 
land, their market value shall not be included in this separate 
determination. 
    Sec. 17.  Minnesota Statutes 1987 Supplement, section 
273.13, subdivision 24, is amended to read:  
    Subd. 24.  [CLASS 3.] (a) Commercial and, industrial, and 
utility property is class 3a.  It is assessed at 60 has a tax 
capacity of 3.3 percent of the first $80,000 $100,000 of market 
value and 96 5.25 percent of the market value 
over $80,000 $100,000.  For taxes payable in 1991, the 5.25 
percent rate shall be 5.2 percent and for taxes payable in 1992 
and subsequent years the rate shall be 5.15 percent.  In the 
case of state-assessed commercial or, industrial, and utility 
property owned by one person or entity, only one parcel may 
qualify for the 60 has a tax capacity 3.3 percent assessment.  
In the case of other commercial or, industrial, and utility 
property owned by one person or entity, only one parcel in each 
county may qualify for the 60 has a tax capacity of 3.3 percent 
assessment. 
    (b) Employment property defined in section 469.166, during 
the period provided in section 469.170, shall constitute class 
3b and shall be valued and assessed at 45 has a tax capacity of 
2.5 percent of the first $50,000 of market value and 50 3.5 
percent of the remainder, except that for employment property 
located in a border city enterprise zone designated pursuant to 
section 469.168, subdivision 4, paragraph (c), the tax capacity 
of the first $80,000 $100,000 of market value shall be valued 
and assessed at 60 is 3.3 percent and the tax capacity of the 
remainder shall be assessed and valued at 86 is 4.8 percent, 
unless the governing body of the city designated as an 
enterprise zone determines that a specific parcel shall be 
assessed pursuant to the first clause of this sentence.  The 
governing body may provide for assessment under the first clause 
of the preceding sentence only for property which is located in 
an area which has been designated by the governing body for the 
receipt of tax reductions authorized by section 469.171, 
subdivision 1. 
    Sec. 18.  Minnesota Statutes 1987 Supplement, section 
273.13, subdivision 25, is amended to read:  
    Subd. 25.  [CLASS 4.] (a) Class 4a is residential real 
estate containing four or more units and used or held for use by 
the owner or by the tenants or lessees of the owner as a 
residence for rental periods of 30 days or more.  Class 4a also 
includes hospitals licensed under sections 144.50 to 144.56, 
other than hospitals exempt under section 272.02, and contiguous 
property used for hospital purposes, without regard to whether 
the property has been platted or subdivided.  Class 4a property 
is assessed at 70 has a tax capacity of 4.1 percent of market 
value. 
    (b) Class 4b includes: 
    (1) residential real estate containing less than four 
units, other than seasonal residential, recreational, and 
homesteads a structure having five or more stories that is 
constructed with materials meeting the requirements for type I 
or II construction as defined in the state building code, 90 
percent or more of which is used or is to be used as apartment 
housing for a period of 40 years from the date of completion of 
original construction, or the date of initial though partial 
use, whichever is the earlier date; 
    (2) post-secondary student housing not to exceed one acre 
of land which is owned by a nonprofit corporation organized 
under chapter 317 and is used exclusively by a sorority or 
fraternity organization for housing;  
    (3) manufactured homes not classified under any other 
provision; and 
    (4) a dwelling, garage, and surrounding one acre of 
property on a nonhomestead farm classified under subdivision 23, 
paragraph (b), which has a tax capacity of 2.7 percent of market 
value.  
    Class 4b property is assessed at 60 percent for taxes 
levied in 1988, payable in 1989 and thereafter has a tax 
capacity of 3.5 percent of market value, except as provided in 
clause (4). 
    (c) Class 4c property includes: 
    (1) a structure that is situated on real property that is 
used for housing for the elderly or for low and moderate income 
families as defined by Title II of the National Housing Act or 
the Minnesota housing finance agency law of 1971 or rules 
promulgated by the agency pursuant thereto and financed by a 
direct federal loan or federally insured loan or a loan made by 
the Minnesota housing finance agency pursuant to the provisions 
of either of those acts and acts amendatory thereof.  This 
clause applies only to property of a nonprofit or limited 
dividend entity.  Property is classified as class 4c under this 
clause for 15 years from the date of the completion of the 
original construction or substantial rehabilitation, or for the 
original term of the loan;  
    (2) a structure that is: 
    (i) situated upon real property that is used for housing 
lower income families or elderly or handicapped persons, as 
defined in section 8 of the United States Housing Act of 1937, 
as amended; and 
    (ii) owned by an entity which has entered into a housing 
assistance payments contract under section 8 which provides 
assistance for 100 percent of the dwelling units in the 
structure, other than dwelling units intended for management or 
maintenance personnel.  Property is classified as class 4c under 
this clause for the term of the housing assistance payments 
contract, including all renewals, or for the term of its 
permanent financing, whichever is shorter.; and 
    (3) a qualified low-income building that (i) receives a 
low-income housing credit under section 42 of the Internal 
Revenue Code of 1986, as amended through December 31, 1987; or 
(ii) meets the requirements of that section.  Classification 
pursuant to this clause is limited to buildings the construction 
or rehabilitation of which began after May 1, 1988 and to a term 
of 15 years. 
    For all properties described in clauses (1) and (2), (2), 
and (3) and in paragraph (d), clause (2), the market value 
determined by the assessor must be based on the normal approach 
to value using normal unrestricted rents.  The land on which 
these structures are situated has a tax capacity of 3.5 percent 
of market value if the structure contains fewer than four units, 
and 4.1 percent of market value if the structure contains four 
or more units.  
    (3) (4) a parcel of land, not to exceed one acre, and its 
improvements or a parcel of unimproved land, not to exceed one 
acre, if it is owned by a neighborhood real estate trust and at 
least 60 percent of the dwelling units, if any, on all land 
owned by the trust are leased to or occupied by lower income 
families or individuals.  This clause does not apply to any 
portion of the land or improvements used for nonresidential 
purposes.  For purposes of this clause, a lower income family is 
a family with an income that does not exceed 65 percent of the 
median family income for the area, and a lower income individual 
is an individual whose income does not exceed 65 percent of the 
median individual income for the area, as determined by the 
United States Secretary of Housing and Urban Development.  For 
purposes of this clause, "neighborhood real estate trust" means 
an entity which is certified by the governing body of the 
municipality in which it is located to have the following 
characteristics:  (a) it is a nonprofit corporation organized 
under chapter 317; (b) it has as its principal purpose providing 
housing for lower income families in a specific geographic 
community designated in its articles or bylaws; (c) it limits 
membership with voting rights to residents of the designated 
community; and (d) it has a board of directors consisting of at 
least seven directors, 60 percent of whom are members with 
voting rights and, to the extent feasible, 25 percent of whom 
are elected by resident members of buildings owned by the trust; 
and 
    (4) (5) except as provided in subdivision 22, 
paragraph (d) (c), clause (1), real property devoted to 
temporary and seasonal residential occupancy for recreation 
purposes, including real property devoted to temporary and 
seasonal residential occupancy for recreation purposes and not 
devoted to commercial purposes for more than 200 days in the 
year preceding the year of assessment.  For this purpose, 
property is devoted to commercial use on a specific day if it is 
used, or offered for use, and a fee is charged for the use.  
Class 4c also includes commercial use real property used 
exclusively for recreational purposes in conjunction with class 
4c property devoted to temporary and seasonal residential 
occupancy for recreational purposes, up to a total of two acres, 
provided the property is not devoted to commercial recreational 
use for more than 200 days in the year preceding the year of 
assessment and is located within two miles of the class 4c 
property with which it is used.  Class 4c property classified in 
clauses (5) and (6) also includes the remainder of class 4d 1c 
resorts and has a tax capacity of 2.6 percent of market value, 
except that noncommercial seasonal recreational property has a 
tax capacity of 2.3 percent of market value; and 
    (5) (6) real property up to a maximum of one acre of land 
owned by a nonprofit community service oriented organization; 
provided that the property is not used for a revenue-producing 
activity for more than six days in the calendar year preceding 
the year of assessment and the property is not used for 
residential purposes on either a temporary or permanent basis.  
For purposes of this clause, a "nonprofit community service 
oriented organization" means any corporation, society, 
association, foundation, or institution organized and operated 
exclusively for charitable, religious, fraternal, civic, or 
educational purposes, and which is exempt from federal income 
taxation pursuant to section 501(c)(3), (10), or (19) of the 
Internal Revenue Code of 1986, as amended through December 31, 
1986.  For purposes of this clause, "revenue-producing 
activities" shall include but not be limited to property or that 
portion of the property that is used as an on-sale intoxicating 
liquor or nonintoxicating malt liquor establishment licensed 
under chapter 340A, a restaurant open to the public, bowling 
alley, a retail store, gambling conducted by organizations 
licensed under chapter 349, an insurance business, or office or 
other space leased or rented to a lessee who conducts a 
for-profit enterprise on the premises.  Any portion of the 
property which is used for revenue-producing activities for more 
than six days in the calendar year preceding the year of 
assessment shall be assessed as class 3a.  The use of the 
property for social events open exclusively to members and their 
guests for periods of less than 24 hours, when an admission is 
not charged nor any revenues are received by the organization 
shall not be considered a revenue-producing activity; and 
    Class 4c property is assessed at 50 classified under 
clauses (1), (2), (3), and (4) has a tax capacity of 2.5 percent 
of market value. 
    (d) Class 4d property includes: 
    (1) commercial use real property that abuts a lakeshore 
line and is devoted to temporary and seasonal residential 
occupancy for recreational purposes but not devoted to 
commercial purposes for more than 200 days in the year preceding 
the year of assessment, and that includes a portion used as a 
homestead by the owner.  The area of the property that is 
classified as class 4d must not exceed 100 feet of lakeshore 
footage for each cabin or campsite located on the property up to 
a total of 800 feet and 500 feet in depth, measured away from 
the lakeshore;  
    (2) any structure: 
    (i) situated on real property that is used for housing for 
the elderly or for low and moderate income families as defined 
by the farmers home administration; 
    (ii) located in a municipality of less than 10,000 
population; and 
    (iii) financed by a direct loan or insured loan from the 
farmers home administration.  Property must be assessed is 
classified under this clause for 15 years from the date of the 
completion of the original construction or for the original term 
of the loan.  
    The 30 percent and 50 percent assessment ratios 1.5 percent 
and 2.5 percent tax capacity assignments apply to the properties 
described in paragraph (c), clauses (1) and (2), (2), and (3) 
and this clause, only in proportion to occupancy of the 
structure by elderly or handicapped persons or low and moderate 
income families as defined in the applicable laws unless 
construction of the structure had been commenced prior to 
January 1, 1984; or the project had been approved by the 
governing body of the municipality in which it is located prior 
to June 30, 1983; or financing of the project had been approved 
by a federal or state agency prior to June 30, 1983.  
Classification under this clause is only available to property 
of a nonprofit or limited dividend entity; and 
    (3) the first $34,000 of market value of real estate or 
manufactured homes used for the purposes of a homestead by 
    (i) any blind person, if the blind person is the owner 
thereof or if the blind person and the blind person's spouse are 
the sole owners thereof; or 
    (ii) any person, hereinafter referred to as "veteran," who: 
    (A) served in the active military or naval service of the 
United States; and 
    (B) is entitled to compensation under the laws and 
regulations of the United States for permanent and total 
service-connected disability due to the loss, or loss of use, by 
reason of amputation, ankylosis, progressive muscular 
dystrophies, or paralysis, of both lower extremities, such as to 
preclude motion without the aid of braces, crutches, canes, or a 
wheelchair; and 
    (C) with assistance by the administration of veterans 
affairs has acquired a special housing unit with special 
fixtures or movable facilities made necessary by the nature of 
the veteran's disability, or the surviving spouse of the 
deceased veteran for as long as the surviving spouse retains the 
special housing unit as a homestead; or 
    (iii) any person who: 
    (A) is permanently and totally disabled and 
    (B) receives 90 percent or more of total income from 
    (1) aid from any state as a result of that disability; or 
    (2) supplemental security income for the disabled; or 
    (3) workers' compensation based on a finding of total and 
permanent disability; or 
    (4) social security disability, including the amount of a 
disability insurance benefit which is converted to an old age 
insurance benefit and any subsequent cost of living increases; 
or 
    (5) aid under the Federal Railroad Retirement Act of 1937, 
United States Code Annotated, title 45, section 228b(a)5; or 
    (6) a pension from any local government retirement fund 
located in the state of Minnesota as a result of that disability.
    Property is classified and assessed pursuant to this clause 
only if the commissioner of human services certifies to the 
assessor that the owner of the property satisfies the 
requirements of this subdivision.  The commissioner of human 
services shall provide a copy of the certification to the 
commissioner of revenue.  
    The remaining value of class 4(d)(3) property in excess of 
$34,000 shall be valued and assessed under subdivision 22 or 23, 
as appropriate, provided that only the value in excess of 
$34,000 but not in excess of $68,000 is assessed at the rate 
provided for the first tier of value in subdivision 22 or only 
the value in excess of $34,000 but not in excess of $66,000 is 
assessed at the rate provided for the first tier of value in 
subdivision 23. 
    Class 4d property is assessed at 30 percent of market value 
has a tax capacity of 1.5 percent of market value.  
    Sec. 19.  Minnesota Statutes 1987 Supplement, section 
273.13, subdivision 31, is amended to read:  
    Subd. 31.  [CLASS 5.] All property not included in any 
other class is class 5 property and is assessed at 96 percent of 
market value.  
    (a) Tools, implements, and machinery 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, which are fixtures, have a tax capacity of 4.6 
percent of market value. 
    (b) Unmined iron ore and low-grade iron-bearing formations 
as defined in section 273.14 have a tax capacity of 5.25 percent 
of market value. 
    (c) Vacant land has a tax capacity of 5.25 percent of 
market value. 
    (d) All other property not otherwise classified has a tax 
capacity of 5.25 percent of market value. 
    Sec. 20.  Minnesota Statutes 1986, section 273.1315, is 
amended to read:  
    273.1315 [CERTIFICATION OF 1B PROPERTY.] 
    Any property owner seeking classification and assessment of 
the owner's homestead as class 1b property pursuant to section 
273.13, subdivision 22, paragraph (b), clause (2) or (3), shall 
file with the commissioner of revenue for each assessment year a 
1b homestead declaration, on a form prescribed by the 
commissioner.  The declaration shall contain the following 
information:  
    (a) the information necessary to verify that the property 
owner or the owner's spouse satisfies the requirements of 
section 273.13, subdivision 22, paragraph (b), clause (2) or 
(3), for 1b classification;  
    (b) the property owner's household income, as defined in 
section 290A.03, for the previous calendar year; and 
    (c) any additional information prescribed by the 
commissioner.  
    The declaration shall be filed on or before March 1 of each 
year to be effective for property taxes payable during the 
succeeding calendar year.  The declaration and any supplementary 
information received from the property owner pursuant to this 
section shall be subject to section 290A.17.  
    The commissioner shall provide to the assessor on or before 
April 1 a listing of the parcels of property qualifying for 1b 
classification.  
    Sec. 21.  [273.132] [STATE AGRICULTURAL CREDIT.] 
    Subdivision 1.  [AGRICULTURAL HOMESTEAD PROPERTY.] For 
taxes levied in 1988, payable in 1989 only, the county auditor 
shall reduce the tax for all purposes on all property receiving 
the homestead credit under section 273.13, subdivision 23, by an 
amount equal to 36 percent of the tax levy imposed on up to 320 
acres of land including the buildings and structures thereon but 
excluding all dwellings and an acre of land for each dwelling. 
    Subd. 2.  [OTHER AGRICULTURAL PROPERTY.] For taxes levied 
in 1988, payable in 1989 only, the county auditor shall reduce 
the tax for all purposes on all other agricultural lands 
classified under section 273.13, subdivision 23, including 
buildings and structures thereon but excluding all dwellings and 
an acre of land for each dwelling, and on timber land classified 
under section 273.13, subdivision 23, paragraph (b) by an amount 
equal to 26 percent of the tax levy imposed on the property.  
    Subd. 3.  [ADMINISTRATION.] The amounts so computed by the 
county auditor shall be submitted to the commissioner of revenue 
as part of the abstracts of tax lists required to be filed with 
the commissioner under the provisions of section 275.29.  Any 
prior year adjustments shall also be certified in the abstracts 
of tax lists.  The commissioner of revenue shall review the 
certifications to determine their accuracy and may make changes 
in the certification as deemed necessary or return a 
certification to the county auditor for corrections. 
    Subd. 4.  [PAYMENT TO TAXING JURISDICTIONS.] Payment from 
the general fund must be made to each taxing jurisdiction to 
replace the revenue lost as a result of the credit provided in 
this section.  Payment to taxing jurisdictions other than school 
districts must be made by the commissioner in equal installments 
on or before July 20 and December 15 each year.  Payment to 
school districts must be made to the commissioner of education 
as provided in section 273.1392. 
    Subd. 5.  [APPROPRIATION.] The amount necessary to make the 
payments required under this section is appropriated from the 
general fund in the state treasury to the commissioners of 
revenue and education for property taxes payable in 1989. 
    Sec. 22.  Minnesota Statutes 1987 Supplement, section 
273.135, subdivision 2, is amended to read: 
    Subd. 2.  For taxes payable in 1989 only, the amount of the 
reduction authorized by subdivision 1 shall be: 
    (a) In the case of property located within the boundaries 
of a municipality which meets the qualifications prescribed in 
section 273.134, 66 percent of the net tax up to the taconite 
breakpoint plus a percentage equal to the homestead credit 
equivalency percentage of the net tax in excess of the taconite 
breakpoint, provided that the reduction shall not exceed the 
maximum amounts specified in clause (c), and shall not exceed an 
amount sufficient to reduce the effective tax rate on each 
parcel of property to 95 percent of the base year effective tax 
rate.  In no case will the reduction resulting from this credit 
be less than $10.  
    (b) In the case of property located within the boundaries 
of a school district which qualifies as a tax relief area but 
which is outside the boundaries of a municipality which meets 
the qualifications prescribed in section 273.134, 57 percent of 
the net tax up to the taconite breakpoint plus a percentage 
equal to the homestead credit equivalency percentage of the net 
tax in excess of the taconite breakpoint, provided that the 
reduction shall not exceed the maximum amounts specified in 
clause (c), and shall not exceed an amount sufficient to reduce 
the effective tax rate on each parcel of property to 95 percent 
of the base year effective tax rate.  In no case will the 
reduction resulting from this credit be less than $10.  
    (c)(1) The maximum reduction of the net tax up to the 
taconite breakpoint is $225.40 on property described in clause 
(a) and $200.10 on property described in clause (b), for taxes 
payable in 1985.  These maximum amounts shall increase by $15 
times the quantity one minus the homestead credit equivalency 
percentage per year for taxes payable in 1986 and subsequent 
years.  
    (2) The total maximum reduction of the net tax on property 
described in clause (a) is $490 for taxes payable in 1985.  The 
total maximum reduction for the net tax on property described in 
clause (b) is $435 for taxes payable in 1985.  These maximum 
amounts shall increase by $15 per year for taxes payable in 1986 
and thereafter.  
    For the purposes of this subdivision, "net tax" means the 
tax on the property after deduction of any credit under section 
273.13, subdivision 22 or 23, "taconite breakpoint" means the 
lowest possible net tax for a homestead qualifying for the 
maximum reduction pursuant to section 273.13, subdivision 22, 
rounded to the nearest whole dollar, "homestead credit 
equivalency percentage" means a percentage equal to the 
percentage reduction authorized in section 273.13, subdivision 
22, "effective tax rate" means tax divided by the market value 
of the property, and the "base year effective tax rate" means 
the tax on the property after the application of the credits 
payable under section 273.13, subdivisions 22 and 23, and this 
section for taxes payable in 1988, divided by the market value 
of the property.  A new parcel of property or a parcel with a 
current year classification that is different from its base year 
classification has the same base year effective tax rate as an 
equivalent homesteaded parcel. 
    Subd. 2a.  For taxes payable in 1990 and thereafter, the 
amount of the reduction authorized by subdivision 1 shall be 
    (a) In the case of property located within the boundaries 
of a municipality which meets the qualifications prescribed in 
section 273.134, 66 percent of the tax, provided that the 
reduction shall not exceed the maximum amounts specified in 
clause (c) and shall not exceed an amount sufficient to reduce 
the effective tax rate on each parcel of property to 95 percent 
of the base year effective tax rate.  In no case will the 
reduction resulting from this credit be less than $10. 
    (b) In the case of property located within the boundaries 
of a school district which qualifies as a tax relief area but 
which is outside the boundaries of a municipality which meets 
the qualifications prescribed in section 273.134, 57 percent of 
the tax, provided that the reduction shall not exceed the 
maximum amounts specified in clause (c) and shall not exceed an 
amount sufficient to reduce the effective tax rate on each 
parcel of property to 95 percent of the base year effective tax 
rate.  In no case will the reduction resulting from this credit 
be less than $10. 
    (c) The total maximum reduction of the net tax on property 
described in clause (a) is $490 for taxes payable in 1985.  The 
total maximum reduction for the net tax on property described in 
clause (b) is $435 for taxes payable in 1985.  These maximum 
amounts shall increase by $15 per year for taxes payable in 1986 
and thereafter.  
    For the purposes of this subdivision, "tax" means the tax 
on the property before application of the credit payable under 
this section and "effective tax rate" means tax divided by the 
market value of the property, and "base year effective tax rate" 
means the tax on the property after the application of the 
credits payable under section 273.13, subdivisions 22 and 23, 
and this section for taxes payable in 1988, divided by the 
market value of the property.  A new parcel of property or a 
parcel with a current year classification that is different from 
its base year classification has the same base year effective 
tax rate as an equivalent homesteaded parcel. 
    Sec. 23.  Minnesota Statutes 1987 Supplement, section 
273.1391, subdivision 2, is amended to read:  
    Subd. 2.  For taxes payable in 1989 only, the amount of the 
reduction authorized by subdivision 1 shall be:  
    (a) In the case of property located within a school 
district which does not meet the qualifications of section 
273.134 as a tax relief area, but which is located in a county 
with a population of less than 100,000 in which taconite is 
mined or quarried and wherein a school district is located which 
does meet the qualifications of a tax relief area, and provided 
that at least 90 percent of the area of the school district 
which does not meet the qualifications of section 273.134 lies 
within such county, 57 percent of the net tax up to the taconite 
breakpoint plus a percentage equal to the homestead credit 
equivalency percentage of the net tax in excess of the taconite 
breakpoint on qualified property located in the school district 
that does not meet the qualifications of section 273.134, 
provided that the amount of said reduction shall not exceed the 
maximum amounts specified in clause (c), and shall not exceed an 
amount sufficient to reduce the effective tax rate on each 
parcel of property to 95 percent of the base year effective tax 
rate.  In no case will the reduction resulting from this credit 
be less than $10.  The reduction provided by this clause shall 
only be applicable to property located within the boundaries of 
the county described therein.  
    (b) In the case of property located within a school 
district which does not meet the qualifications of section 
273.134 as a tax relief area, but which is located in a school 
district in a county containing a city of the first class and a 
qualifying municipality, but not in a school district containing 
a city of the first class or adjacent to a school district 
containing a city of the first class unless the school district 
so adjacent contains a qualifying municipality, 57 percent of 
the net tax up to the taconite breakpoint plus a percentage 
equal to the homestead credit equivalency percentage of the net 
tax in excess of the taconite breakpoint, but not to exceed the 
maximums specified in clause (c), and shall not exceed an amount 
sufficient to reduce the effective tax rate on each parcel of 
property to 95 percent of the base year effective tax rate.  In 
no case will the reduction resulting from this credit be less 
than $10. 
    (c)(1) The maximum reduction of the net tax up to the 
taconite breakpoint is $200.10 for taxes payable in 1985.  This 
maximum amount shall increase by $15 multiplied by the quantity 
one minus the homestead credit equivalency percentage per year 
for taxes payable in 1986 and subsequent years.  
    (2) The total maximum reduction of the net tax is $435 for 
taxes payable in 1985.  This total maximum amount shall increase 
by $15 per year for taxes payable in 1986 and thereafter. 
    For the purposes of this subdivision, "net tax" means the 
tax on the property after deduction of any credit under section 
273.13, subdivision 22 or 23, "taconite breakpoint" means the 
lowest possible net tax for a homestead qualifying for the 
maximum reduction pursuant to section 273.13, subdivision 22, 
rounded to the nearest whole dollar, "homestead credit 
equivalency percentage" means a percentage equal to the 
percentage reduction authorized in section 273.13, subdivision 
22 and "effective tax rate" means tax divided by the market 
value of the property, and the "base year effective tax rate" 
means the tax on the property after application of the credits 
payable under section 273.13, subdivisions 22 and 23 and this 
section for taxes payable in 1988, divided by the market value 
of the property.  A new parcel with a current year 
classification that is different from its base year 
classification has the same base year effective tax rate as an 
equivalent homesteaded parcel.  
    Subd. 2a.  For taxes payable in 1990 and thereafter, the 
amount of the reduction authorized by subdivision 1 shall be:  
    (a) In the case of property located within a school 
district which does not meet the qualifications of section 
273.134 as a tax relief area, but which is located in a county 
with a population of less than 100,000 in which taconite is 
mined or quarried and wherein a school district is located which 
does meet the qualifications of a tax relief area, and provided 
that at least 90 percent of the area of the school district 
which does not meet the qualifications of section 273.134 lies 
within such county, 57 percent of the tax, provided that the 
amount of said the reduction shall not exceed the maximum 
amounts specified in clause (c) and shall not exceed an amount 
sufficient to reduce the effective tax rate on each parcel of 
property to 95 percent of the base year effective tax rate.  In 
no case will the reduction resulting from this credit be less 
than $10.  The reduction provided by this clause shall only be 
applicable to property located within the boundaries of the 
county described therein.  
    (b) In the case of property located within a school 
district which does not meet the qualifications of section 
273.134 as a tax relief area, but which is located in a school 
district in a county containing a city of the first class and a 
qualifying municipality, but not in a school district containing 
a city of the first class or adjacent to a school district 
containing a city of the first class unless the school district 
so adjacent contains a qualifying municipality, 57 percent of 
the tax, but not to exceed the maximums specified in clause 
(c) and not to exceed an amount sufficient to reduce the 
effective tax rate on each parcel of property to 95 percent of 
the base year effective tax rate.  In no case will the reduction 
resulting from this credit be less than $10. 
    (c) The total maximum reduction of the tax is $435 for 
taxes payable in 1985.  This total maximum amount shall increase 
by $15 per year for taxes payable in 1986 and thereafter. 
    For the purposes of this subdivision, "tax" means the tax 
on the property before application of the credit under this 
section, "effective tax rate" means tax divided by the market 
value of the property, and "base year effective tax rate" means 
the tax on the property after the application of the credits 
payable under section 273.13, subdivisions 22 and 23, and this 
section for taxes payable in 1988, divided by the market value 
of the property.  A new parcel of property or a parcel with a 
current year classification that is different from its base year 
classification has the same base year effective tax rate as an 
equivalent homesteaded parcel. 
    Sec. 24.  Minnesota Statutes 1987 Supplement, section 
273.1392, is amended to read: 
    The amounts of small business transition credit under 
section 273.1195; disaster or emergency reimbursement under 
section 273.123; attached machinery aid under section 273.138;  
homestead credit replacement aid under section 273.1394 273.13; 
agricultural credit replacement aid under section 273.1395 
273.132; aids and credits under section 273.1398; and 
metropolitan agricultural preserve reduction under section 
473H.10, shall be certified to the department of education by 
the department of revenue.  The amounts so certified shall be 
paid according to section 124.195, subdivisions 6 and 10. 
    Sec. 25.  Minnesota Statutes 1987 Supplement, section 
273.1393, is amended to read: 
    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) small business property tax transition credit as 
provided in section 273.1195; 
    (2) disaster credit as provided in section 273.123;  
    (3) (2) powerline credit as provided in section 273.42;  
    (4) (3) agricultural preserves credit as provided in 
section 473H.10; 
    (5) (4) enterprise zone credit as provided in section 
469.171; 
    (5) state agricultural credit as provided in section 
273.132; 
    (6) state paid homestead credit as provided in section 
273.13, subdivision 23; 
    (7) taconite homestead credit as provided in section 
273.135;  
    (8) supplemental homestead credit as provided in section 
273.1391.  
    The combination of all property tax credits must not exceed 
the gross tax amount.  
    Sec. 26.  [273.1398] [TRANSITION AND DISPARITY REDUCTION 
AID; CREDIT GUARANTEE.] 
    Subdivision 1.  [DEFINITIONS.] (a) In this section, the 
terms defined in this subdivision have the meanings given them. 
    (b) "Unique taxing jurisdiction" means the geographic area 
subject to the same set of mill rates. 
    (c) "Gross tax capacity" means the product of the 
appropriate percentages of market value listed as gross tax 
capacities in section 273.13 and equalized market values.  
"Total gross tax capacity" means the gross tax capacities for 
all property within the unique taxing jurisdiction.  The total 
gross tax capacity used shall be reduced by the sum of (1) the 
unique taxing jurisdiction's gross tax capacity of commercial 
industrial property as defined in section 473F.02, subdivision 
3, multiplied by the ratio determined pursuant to section 
473F.08, subdivision 6, for the municipality, as defined in 
section 473F.02, subdivision 8, in which the unique taxing 
jurisdiction is located and (2) the gross tax capacity of the 
captured value of tax increment financing districts as defined 
in section 469.177, subdivision 2.  For purposes of determining 
the gross tax capacity of property referred to in clauses (1) 
and (2) for disparity reduction aid payable in 1989, the gross 
tax capacity before equalization shall equal the property's 1987 
assessed value multiplied by 12 percent.  Gross tax capacity 
cannot be less than zero. 
     (d) "Net tax capacity" means the product of the appropriate 
percentages of market value listed as net tax capacities in 
section 273.13 and equalized market values.  "Total net tax 
capacity" means the net tax capacities for all property within 
the unique taxing jurisdiction.  The total net tax capacity used 
shall be reduced by the sum of (1) the unique taxing 
jurisdiction's net tax capacity of commercial industrial 
property as defined in section 473F.02, subdivision 3, 
multiplied by the ratio determined pursuant to section 473F.08, 
subdivision 6, for the municipality, as defined in section 
473F.02, subdivision 8, in which the unique taxing jurisdiction 
is located and (2) the net tax capacity of the captured value of 
tax increment financing districts as defined in section 469.177, 
subdivision 2.  For purposes of determining the net tax capacity 
of property referred to in clauses (1) and (2), the net tax 
capacity before equalization shall equal the property's 1987 
assessed value multiplied by 12 percent.  Net tax capacity 
cannot be less than zero. 
    (e) "Equalized market values" are market values that have 
been equalized by dividing the assessor's estimated market value 
for the second year prior to that in which the aid is payable by 
the assessment sales ratios determined by class in the 
assessment sales ratio study conducted by the department of 
revenue pursuant to section 124.2131 in the second year prior to 
that in which the aid is payable.  For computation of aids 
payable in 1989 only, if the aggregate assessment sales ratio is 
less than or equal to 92 percent, the assessment sales ratios by 
class shall be adjusted proportionally so that the aggregate 
ratio of the unequalized market values to the equalized market 
values equals 92 percent; otherwise the equalized market values 
shall equal the unequalized market values divided by the 
assessment sales ratio. 
    (f) "Homestead effective rate" means the product of (i) 46 
percent; (ii) 2.17 percent; and (iii) the total tax capacity 
rate for taxes payable in 1989 within a unique taxing 
jurisdiction multiplied by the 1988 aggregate assessment sales 
ratio.  A sales ratio of .92 is used if the actual sales ratio 
is less than .92.  
    (g) For purposes of calculating the transition aid 
authorized pursuant to subdivision 2, the "subtraction factor" 
is the product of (i) a unique taxing jurisdiction's homestead 
effective rate; (ii) its net tax capacity; and (iii) 103. 
    (h) For purposes of calculating and allocating transition 
aid authorized pursuant to subdivision 2 and the disparity 
reduction aid authorized in subdivision 3, "gross taxes levied 
on all properties" or "gross taxes" means the total gross taxes 
levied on all properties except that levied on the captured 
value of tax increment districts as defined in section 469.177, 
subdivision 2, and that levied on the portion of commercial 
industrial properties' assessed value, as defined in section 
473F.02, subdivision 3, subject to the areawide tax as provided 
in section 473F.08, subdivision 6, in a unique taxing 
jurisdiction before reduction by any credits for taxes payable 
in the year prior to that in which the aids are payable.  For 
purposes of disparity reduction aid only, total gross taxes 
shall be reduced by the taxes levied for any school district 
referendum levies authorized pursuant to section 124A.03, 
subdivision 2, and any school district debt levies authorized 
pursuant to section 475.61.  Gross taxes levied cannot be less 
than zero.  
    (i) "Income maintenance aids" means: 
    (1) medical assistance under sections 256B.041, subdivision 
5, and 256B.19, subdivision 1;  
    (2) preadmission screening and alternative care grants 
under section 256B.091, subdivision 8;  
    (3) general assistance, and work readiness under section 
256D.03, subdivision 2;  
    (4) general assistance medical care under section 256D.03, 
subdivision 6;  
    (5) aid to families with dependent children under section 
256.82, subdivision 1, including emergency assistance under 
section 256.871, subdivision 6; and funeral expense payments 
under section 256.935, subdivision 1; and 
    (6) supplemental aid under section 256D.36, subdivision 1. 
    Subd. 2.  [TRANSITION AID.] (a) Transition aid for each 
unique taxing jurisdiction for taxes payable in 1990 equals the 
total gross taxes levied on all properties, minus the unique 
taxing jurisdiction's subtraction factor.  Transition aid cannot 
be less than zero.  The transition aid so determined for school 
districts for purposes of general education and transportation 
levies shall be multiplied by the ratio of the adjusted gross 
tax capacity based upon the 1988 adjusted gross tax capacity to 
the estimated 1987 adjusted gross tax capacity based upon the 
1987 adjusted assessed value.  Each county assessor and the city 
assessors of Minneapolis, Duluth, and St. Cloud shall furnish 
the commissioner of revenue with the 1988 market values for 
taxes payable in 1989 for any new classes of property 
established in this article.  The commissioner shall use those 
values, and estimate values where needed, in developing the 1988 
tax capacity for each unique taxing jurisdiction under this 
section. 
    (b)(1) The transition aid is allocated to each local 
government levying taxes in the unique taxing jurisdiction in 
the proportion that the local government's gross taxes bears to 
the total gross taxes levied within the unique taxing 
jurisdiction.  
    (2) If a local government's total tax capacity rate for all 
funds for taxes payable in 1989 varies within the area in which 
it exercises taxing authority, the local government's allocated 
transition aid must be further allocated between the part of its 
levy in respect to which the tax capacity rate is constant 
throughout the area in which it exercises taxing authority and 
the part of its levy in respect to which the tax capacity rate 
varies throughout the area in which it exercises taxing 
authority.  
     (c) In 1991 and subsequent years, a local government shall 
receive transition aid equal to that it received in 1990 subject 
to the requirement of the last sentence of subdivision 6. 
    (d) The difference between (1) the income maintenance aids 
payable to a county and (2) the income maintenance aids that 
would be payable to the county pursuant to the rates in effect 
for calendar year 1989 shall be reduced by the sum of the amount 
of transition aid a county receives under this subdivision for 
all unique taxing jurisdictions located within its borders.  The 
reduction must not reduce the difference to less than zero.  The 
reduction shall be prorated among all payments of the increased 
income maintenance aids so that each payment is reduced by an 
equal percentage amount.  The commissioner of revenue shall 
certify each county's transition aid to the commissioner of 
human services for purposes of this adjustment.  
    Subd. 3.  [DISPARITY REDUCTION AID.] (a) For taxes payable 
in 1989, a disparity reduction aid shall be calculated for each 
unique taxing jurisdiction.  The aid is the greater of: 
    (1) the difference between (i) the total 1988 gross tax 
payable on all taxable property within the unique taxing 
jurisdiction, and (ii) the gross tax capacity of the unique 
taxing jurisdiction; or 
    (2) 20 percent of the difference between (i) the 1988 gross 
tax of the city or township, and (ii) 23 percent of the city's 
or township's gross tax capacity.  
In no case can the aid be less than $0.  
    (b) The disparity reduction aid is allocated to each local 
government levying taxes in the unique taxing jurisdiction in 
the proportion that the local government's payable gross taxes 
bears to the total payable gross taxes levied within the unique 
taxing jurisdiction. 
    (c) In 1990 and subsequent years, a local government shall 
receive disparity reduction aid equal to that it received in 
1989. 
    Subd. 4.  [DISPARITY REDUCTION CREDIT.] (a) Beginning with 
taxes payable in 1989, class 4a, class 3a, and class 3b property 
located in a border city enterprise zone designated pursuant to 
section 469.168, subdivision 4, located in cities with a 
population greater than 2,500 and less than 35,000 according to 
the 1980 decennial census which are adjacent to cities in 
another state or immediately adjacent to a city adjacent to a 
city in another state qualify for disparity reduction credits, 
if the adjacent city in the other state has a population of 
greater than 5,000 and less than 75,000.  The credit is an 
amount sufficient to reduce (i) the taxes levied on class 4a 
property to three percent of the property's market value and 
(ii) the tax on class 3a and class 3b property to 3.3 percent of 
market value.  
    (b) The county auditor shall annually certify the costs of 
the credits to the department of revenue.  The department shall 
reimburse local governments for the property taxes foregone as 
the result of the credits in proportion to their total levies. 
    Subd. 5.  [HOMESTEAD AND AGRICULTURAL CREDIT 
GUARANTEE.] Beginning with taxes payable in 1990, each unique 
taxing jurisdiction may receive additional homestead and 
agricultural credit payments.  
    (1) Each year, the commissioner shall certify to the county 
auditor the total education aids paid under chapters 124 and 
124A, transition aid and disparity reduction aid paid under 
section 273.1398, local government aid to cities, counties, and 
towns paid under chapter 477A, and income maintenance aid paid 
to counties for each taxing jurisdiction.  The county auditor 
shall apportion each local government's aids to the unique 
taxing jurisdiction based upon the proportion that the unique 
taxing jurisdiction's tax capacity bears to the total tax 
capacity of the local government. 
    (2) Each year, the county auditor will compute a gross tax 
capacity rate for each taxing jurisdiction equal to its total 
levy divided by its gross tax capacity.  For each unique taxing 
jurisdiction, a total gross tax capacity rate will be determined.
This total gross tax capacity rate will be applied against the 
gross tax capacity of each property that would have been 
eligible for the homestead credit or the agricultural credit for 
taxes payable in 1989.  A credit amount will be determined for 
each parcel based upon the credit rate structure in effect for 
taxes payable in 1989.  The resulting credit amounts will be 
summed for all parcels in the unique taxing jurisdiction. 
    If the amount determined in clause (2) is greater than the 
amount determined in clause (1), the difference will be 
additional homestead and agricultural credit payments for the 
unique taxing jurisdiction.  The additional credit amount shall 
proportionately reduce the tax capacity rates of all local 
governments levying taxes within the unique taxing jurisdiction. 
The county auditor shall certify the amounts of all additional 
credits determined under this section in a form prescribed by 
the commissioner.  
    Subd. 6.  [PAYMENT.] The commissioner shall certify the 
aids provided in subdivisions 2 and 3 before September 30 of the 
year preceding the distribution year to the county auditor of 
the affected local government and pay them and the credit 
reimbursements to local governments other than school districts 
at the times provided in section 477A.015 for payment of local 
government aid to taxing jurisdictions.  Aids and credit 
reimbursements to school districts must be certified to the 
commissioner of education and paid under section 273.1392.  
Payment shall not be made to any taxing jurisdiction that has 
ceased to levy a property tax nor shall transition aid be 
payable on the part of a levy to which transition aid was 
separately allocated under subdivision 2, paragraph (b), clause 
(2) which is no longer levied. 
    Subd. 7.  [APPROPRIATION.] An amount sufficient to pay the 
aids and credits provided under this section is annually 
appropriated from the general fund to the commissioner of 
revenue. 
    Sec. 27.  Minnesota Statutes 1987 Supplement, section 
273.165, subdivision 2, is amended to read:  
    Subd. 2.  [IRON ORE.] Unmined iron ore included in class 5, 
paragraph (b), must be assessed with and as a part of the real 
estate in which it is located, but at the rate its gross tax 
capacity would be as established in section 273.13, subdivision 
30 31.  The real estate in which iron ore is located, other than 
the ore, must be classified and assessed in accordance with the 
provisions of the appropriate classes.  In assessing any tract 
or lot of real estate in which iron ore is known to exist, the 
assessable value of the ore exclusive of the land in which it is 
located, and the assessable value of the land exclusive of the 
ore must be determined and set down separately and the aggregate 
of the two must be assessed against the tract or lot. 
    Sec. 28.  Minnesota Statutes 1987 Supplement, section 
273.37, subdivision 2, is amended to read: 
    Subd. 2.  Transmission lines of less than 69 kv, 
transmission lines of 69 kv and above located in an unorganized 
township, and distribution lines, and equipment attached 
thereto, having a fixed situs outside the corporate limits of 
cities except distribution lines taxed as provided in sections 
273.40 and 273.41, shall be listed with and assessed by the 
commissioner of revenue in the county where situated.  The 
commissioner shall assess such property at the percentage of 
market value fixed by law; and, on or before the 15th day of 
November, shall certify to the auditor of each county in which 
such property is located the amount of the assessment made 
against each company and person owning such property. 
    Sec. 29.  Minnesota Statutes 1986, section 273.40, is 
amended to read:  
    273.40 [ANNUAL TAX ON COOPERATIVE ASSOCIATIONS.] 
    Cooperative associations organized under the provisions of 
Laws 1923, chapter 326, and laws amendatory thereof and laws 
supplemental thereto, and engaged in electrical heat, light or 
power business upon a mutual, nonprofit, and cooperative plan in 
rural areas, as hereinafter defined, are hereby recognized as 
quasi-public in their nature and purposes; but such cooperative 
associations, which operate within the corporate limits of any 
city shall be assessed on the basis of 43 percent have a tax 
capacity of the market value of that portion of its property 
located within the corporate limits of any city as provided for 
in section 273.13, subdivisions 24 and 31. 
    Sec. 30.  [275.065] [PROPOSED PROPERTY TAXES; NOTICE.] 
    Subdivision 1.  [PROPOSED LEVY.] On or before August 1, 
each taxing authority shall adopt a proposed budget and certify 
to the county auditor the proposed property tax levy for taxes 
payable in the following year.  For purposes of this section, 
"taxing authority" shall include all home rule and statutory 
cities with a population of over 2,500, counties, school 
districts, the metropolitan council, and the metropolitan 
regional transit commission. 
    Subd. 2.  [TAX RATE COMPUTATIONS.] (a) The county auditor 
shall compute each taxing authority's tax capacity rate that 
when applied to the net tax capacity of the taxing district as 
of January 2 of the current year, excluding new construction, 
additions to structures, or property added to or deleted from 
the assessment rolls since the previous year's assessment, 
yields the taxing authority the same levy as the taxing 
authority levied the previous year.  This tax capacity rate is 
the "no-increase tax rate." 
    (b) The county auditor shall compute a tax capacity rate 
that when applied to the net tax capacity of the taxing 
authority as of January 2 of the current year, including new 
construction, additions to structures, or property added to or 
deleted from the assessment rolls since the previous year's 
assessment, yields the authority's proposed levy for taxes 
levied in the current year.  This tax capacity rate is the 
"proposed tax rate." 
    (c) The county auditor shall notify the taxing authority of 
its no-increase tax capacity rate and its proposed tax capacity 
rate on or before August 8.  The taxing authority may amend its 
proposed levy but must certify to the county auditor by August 
15 its final proposed levy and the date the taxing authority 
will hold a public hearing to adopt its budget and property tax 
levy. 
    (d) The county auditor shall recompute the taxing 
authority's proposed tax capacity rate to reflect any 
adjustments made by the taxing authority under paragraph (c), 
and notify the taxing authority of the proposed tax capacity 
rate and the percent, if any, by which the recomputed proposed 
tax capacity rate exceeds the no-increase tax capacity rate.  
That percent is the percentage increase in property taxes 
proposed by the taxing authority.  
    Subd. 3.  [NOTICE OF PROPOSED PROPERTY TAXES.] (a) If there 
is a percentage increase in property taxes proposed by the 
taxing authority, on or before September 15, the county auditor 
shall compute for each parcel of property on the assessment 
rolls within the taxing authority the proposed property tax for 
taxes levied in the current year.  In the case of cities under 
2,500 population, and all special taxing districts except the 
metropolitan council and the metropolitan regional transit 
commission, the auditor shall use the taxing district's previous 
year tax capacity rate for use in computing the total property 
tax.  The county auditor shall prepare and deliver by first 
class mail to each taxpayer at the address listed on the city's 
current year's assessment roll, a notice of the taxpayer's 
proposed property taxes.  
    (b) The commissioner of revenue shall prescribe the form of 
the notice. 
    (c) A notice in substantially the following form shall be 
sufficient. 
 NOTICE OF PROPOSED PROPERTY TAXES 
 DO NOT PAY - THIS IS NOT A BILL
 This notice shows the amount your next property tax bill will be 
if proposed budgets are approved by the local government 
districts you live in.  It also shows the amount of your next 
property tax bill if the local government districts you live in 
do not change their budgets from this year.  
Name of       Description      Market value      Class of 
property      of property      of property       property 
owner 
John Q.         Lot 1,           $65,000         residential 
and Mary        Block 1                          homestead 
W. Smith        Pleasant 
                Acres sub- 
                division 
                Middletown, 
                Minnesota 
 Based on their proposed budgets, next year the governing bodies 
of the county, city, school district, and special tax districts 
you live in are proposing to collect from you the amount of 
property tax shown below.  At the meetings listed below, the 
governing bodies will discuss and vote on the amount of their 
budgets for next year.  The larger the amount of the budget, the 
more property tax you will pay.  You can attend the meetings and 
express your opinions about the amount of the budget before the 
budget is voted on.  
These local         Amount of    Amount of    Time and 
governments         your tax     your tax     place of 
collect             next year    next year    meetings on 
property tax        if they      if they      proposed 
from you            do not       adopt        budgets 
                    change       their 
                    their        proposed 
                    budgets      budgets 
                    from 
                    this 
                    year 
County:  Spruce     $218.55       $257.75     September 1,
                                              1988, 7:30 pm
                                              Room 123, Spruce
                                              Co. Courthouse
City or Town:       $168.63       $184.09     October 1, 1988,
Middletown                                    8:00 pm Middletown
                                              Town Hall
Public School:  Ind. Dist. 123
set by school        $47.56       $146.88     September 25, 1988,
board
set by state law    $300.00       $300.00     Cafeteria,
                                              Middletown
                                              Town Hall
Special Tax Districts
Metropolitan Council $25.00        $50.00     October 5,
                                              1988, 3:00 pm
                                              Board Room, 
                                              Tri-County
                                              Hospital
Metropolitan         $10.00        $12.00     October 12,
Regional Transit                              1988, 6:00 pm
Board                                         Common Room,
                                              Tri-County
                                              Library
Tax before State 
 payments:          $769.74       $950.72
Payments by 
State:   (subtract: $215.00) (subtract: $235.00)
-----------------------------------------------------------
      Your tax if budget is not changed: $554.74
                Your tax if proposed budget is adopted: $715.72
    Subd. 4.  [COSTS.] The taxing authority shall pay the 
county for the reasonable cost of the county auditor's services 
and for the costs of preparing and mailing the notice required 
in this section.  
    Subd. 5.  [PUBLIC ADVERTISEMENT.] (a) On or before 
September 15, the taxing authority shall advertise in a 
qualified newspaper a notice of its intent to adopt a budget and 
property tax levy at a public hearing. 
    The advertisement must be no less than one-quarter page in 
size of a standard-size or a tabloid-size newspaper, and the 
headline in the advertisement shall be in a type no smaller than 
18 point.  The advertisement must not be placed in the part of 
the newspaper where legal notices and classified advertisements 
appear.  The advertisement must be published in a newspaper of 
general paid circulation in the city.  Whenever possible, the 
advertisement must appear in a newspaper that is published at 
least five days a week, unless the only newspaper in the city is 
published less than five days a week.  The newspaper selected 
must be one of general interest and readership in the community, 
and not one of limited subject matter. 
    (b) If the taxing authority proposes a percentage increase 
in property taxes, the advertisement must be in the following 
form: 
 "NOTICE OF TAX INCREASE
    The ...(name of taxing authority)... has tentatively 
adopted a measure to increase its property tax levy by 
...(percentage of increase over no-increase rate)... percent. 
    All concerned citizens are invited to attend a public 
hearing on the tax increase to be held on ...(date and time)... 
at ...(meeting place).... 
    A FINAL DECISION on the proposed tax increase and the 
budget will be made at this hearing." 
    Subd. 6.  [PUBLIC HEARING; ADOPTION OF BUDGET AND 
LEVY.] Prior to October 25, the governing body of the city shall 
hold a public hearing to adopt its final budget and property tax 
levy for taxes payable in the following year.  The hearing must 
be held not less than two days or more than five days after the 
day the notice is first published. 
    At the hearing the taxing authority may amend the proposed 
budget and property tax levy and must adopt a final budget and 
property tax levy.  The property tax levy adopted may not exceed 
the final proposed levy determined under subdivision 2, 
paragraph (c). 
    At the hearing the percentage increase in property taxes 
proposed by the taxing authority, if any, and the specific 
purposes for which property tax revenues are being increased 
must be discussed.  During the discussion, the governing body 
shall hear comments regarding a proposed increase and explain 
the reasons for the proposed increase.  The public shall be 
allowed to speak and to ask questions prior to adoption of any 
measures by the governing body.  The governing body shall adopt 
its final property tax levy prior to adopting its final budget. 
    The hearing must be held after 5:00 p.m. if scheduled on a 
day other than Saturday.  No hearing may be held on a Sunday.  
The school board and county board shall not schedule public 
meetings on days scheduled for the hearing by the governing body 
of the city. 
    If the hearing is recessed, the taxing authority shall 
publish a notice in a qualified newspaper of general paid 
circulation in the city.  The notice must state the time and 
place for the continuation of the hearing and must be published 
at least two days but not more than five days prior to the date 
the hearing will be continued. 
    Subd. 7.  [CERTIFICATION OF COMPLIANCE.] At the time the 
taxing authority certifies its tax levy under section 275.07, it 
shall certify to the commissioner of revenue its compliance with 
this section.  The certification must contain copies of the 
advertisement required under subdivision 5, the resolution 
adopting the final property tax levy under subdivision 6, and 
any other information required by the commissioner of revenue.  
If the commissioner determines that the taxing authority has 
failed to substantially comply with the requirements of this 
section, the commissioner of revenue shall notify the county 
auditor.  When fixing rates under section 275.08 for a taxing 
authority that has not complied with this section, the county 
auditor must use the no-increase tax rate.  
    Sec. 31.  Minnesota Statutes 1987 Supplement, section 
275.07, subdivision 1, is amended to read:  
    Subdivision 1.  The taxes voted by cities and, towns, 
counties, school districts, and special districts shall be 
certified by the proper authorities to the county auditor on or 
before October 10 25 in each year.  The taxes of a school 
district must be certified to the commissioner of education by 
October 10 in each year certified shall not be adjusted by the 
aid received under section 273.1398, subdivisions 2 and 3.  If a 
city, town, county, school district, or special district fails 
to certify its levy by that date, its levy shall be the amount 
levied by it for the preceding year.  If the local unit notifies 
the commissioner of revenue, or the commissioner of education in 
the case of a school district, before October 10 25 of its 
inability to certify its levy by that date, and the commissioner 
is satisfied that the delay is unavoidable and is not due to the 
negligence of the local unit's officials or staff, the 
commissioner shall extend the time within which the local unit 
shall certify its levy up to 15 calendar days beyond the date of 
request for extension.  For 1988 only, the commissioner may 
extend the certification time to November 7 if the requirements 
of this subdivision are met.  
    Sec. 32.  Minnesota Statutes 1986, section 275.07, is 
amended by adding a subdivision to read: 
    Subd. 3.  The county auditor shall adjust each local 
government's levy certified under subdivision 1 by the amount of 
transition aid certified by section 273.1398, subdivision 2.  If 
a local government's transition aid was further allocated 
between portions of its levy pursuant to section 273.1398, 
subdivision 2, paragraph (b)(2), the levy or fund to which the 
transition aid was allocated is the levy or fund which must be 
adjusted. 
    Sec. 33.  Minnesota Statutes 1986, section 275.08, is 
amended by adding a subdivision to read: 
    Subd. 1a.  For taxes payable in 1989, the county auditor 
shall compute the gross tax capacity for each parcel according 
to the rates specified in section 273.13.  The gross tax 
capacity will be the appropriate rate multiplied by the parcel's 
market value.  For taxes payable in 1990 and subsequent years, 
the county auditor shall compute the net tax capacity for each 
parcel according to the rates specified in section 273.13.  The 
net tax capacity will be the appropriate rate multiplied by the 
parcel's market value.  
    Sec. 34.  Minnesota Statutes 1986, section 275.08, is 
amended by adding a subdivision to read: 
    Subd. 1b.  The amounts certified under section 275.07 after 
adjustment under section 275.07, subdivision 3 by an individual 
local government unit shall be divided by the total gross tax 
capacity of all taxable properties within the local government 
unit's taxing jurisdiction for tax payable in 1989 and by the 
total net tax capacity of all taxable properties within the 
local government unit's taxing jurisdiction, for taxes payable 
in 1990 and thereafter.  The resulting ratio, the local 
government's tax capacity rate, multiplied by each property's 
gross tax capacity for taxes payable in 1989 and net tax 
capacity for taxes payable in 1990 and subsequent years shall be 
each property's total tax for that local government unit before 
reduction by any credits.  
    Sec. 35.  Minnesota Statutes 1986, section 275.08, is 
amended by adding a subdivision to read: 
    Subd. 1c.  After the tax capacity rate of a local 
government has been determined pursuant to subdivision 1b, the 
auditor shall adjust the local government's tax capacity rate 
within each unique taxing jurisdiction as defined in section 
273.1398, subdivision 1, in which the local government exercises 
taxing authority.  The adjustment shall equal the unique taxing 
jurisdiction's disparity reduction aids allocated to the local 
government pursuant to section 273.1398, subdivision 3 divided 
by the total tax capacity of all taxable property within the 
unique taxing jurisdiction.  The adjustment shall reduce the tax 
capacity rate of the local government within the unique taxing 
jurisdiction for which the adjustment was calculated. 
    Sec. 36.  [275.011] [MILL RATE LEVY LIMITATIONS; CONVERSION 
FROM MILLS TO DOLLARS.] 
    Subdivision 1.  The property tax levied for any purpose 
subject to a mill rate limitation imposed by statute or special 
law, excluding levies subject to mill rate limitations that use 
adjusted assessed values determined by the commissioner of 
revenue under section 124.2131, must not exceed the following 
amount for the years specified: 
    (a) for taxes payable in 1988, the product of the 
applicable mill rate limitation imposed by statute or special 
law multiplied by the total assessed valuation of all taxable 
property subject to the tax as adjusted by the provisions of 
Minnesota Statutes 1986, sections 272.64; 273.13, subdivision 
7a; and 275.49; 
    (b) for taxes payable in 1989, the product of (1) the 
property tax levy limitation for the taxes payable year 1988 
determined under clause (a) multiplied by (2) an index for 
market valuation changes equal to the assessment year 1988 total 
market valuation of all taxable property subject to the tax 
divided by the assessment year 1987 total market valuation of 
all taxable property subject to the tax; and 
    (c) for taxes payable in 1990 and subsequent years, the 
product of (1) the property tax levy limitation for the previous 
year determined pursuant to this subdivision multiplied by (2) 
an index for market valuation changes equal to the total market 
valuation of all taxable property subject to the tax for the 
current assessment year divided by the total market valuation of 
all taxable property subject to the tax for the previous 
assessment year. 
    For the purpose of determining the property tax levy 
limitation for the taxes payable year 1988 and subsequent years 
under this subdivision, "total market valuation" means the total 
market valuation of all taxable property subject to the tax 
without valuation adjustments for fiscal disparities (chapter 
473F), tax increment financing (sections 469.174 to 469.179), 
and high voltage transmission lines (section 273.425). 
    Subd. 2.  A mill rate levy limitation imposed by statute or 
special law that is presently in effect, excluding those mill 
rate levy limitations that use adjusted assessed values 
determined by the commissioner of revenue under section 
124.2131, shall be construed to allow no more and no less 
property taxes than the amount determined under this section. 
    Subd. 3.  [COUNTY CAPITAL IMPROVEMENT MILL LIMITS.] For 
purposes of determining the mill rate limits applicable to 
county capital improvement programs under section 373.40, the 
mill rate limit applicable to the county must be divided by 0.45 
and multiplied by the county's assessed value for taxes payable 
in 1988.  The resulting dollar amount must be used in 
determining the limitation under the procedures provided by this 
section.  
    Sec. 37.  Minnesota Statutes 1987 Supplement, section 
275.50, subdivision 2, is amended to read:  
    Subd. 2.  [GOVERNMENTAL SUBDIVISION.] (a) "Governmental 
subdivision" means a county, a home rule charter city, or a 
statutory city, except a home rule charter or statutory city 
that has a population of less than 2,500 according to the most 
recent federal census.  
    (b) "Governmental subdivision" also includes any home rule 
charter or statutory city or town that receives a distribution 
from the taconite municipal aid account in the levy year. 
    Sec. 38.  Minnesota Statutes 1987 Supplement, section 
275.50, subdivision 5, is amended to read:  
    Subd. 5.  Notwithstanding any other law to the contrary for 
taxes levied in 1983 1988 payable in 1984 1989 and subsequent 
years, "special levies" means those portions of ad valorem taxes 
levied by governmental subdivisions to: 
    (a) satisfy judgments rendered against the governmental 
subdivision by a court of competent jurisdiction in any tort 
action, or to pay the costs of settlements out of court against 
the governmental subdivision in a tort action when substantiated 
by a stipulation for the dismissal of the action filed with the 
court of competent jurisdiction and signed by both the plaintiff 
and the legal representative of the governmental subdivision, 
but only to the extent of the increase in levy for such 
judgments and out of court settlements over levy year 1970, 
taxes payable in 1971; 
    (b) pay the costs of complying with any written lawful 
order initially issued prior to January 1, 1977, by the state of 
Minnesota, or the United States, or any agency or subdivision 
thereof, which is authorized by law, statute, special act or 
ordinance and is enforceable in a court of competent 
jurisdiction, or any stipulation agreement or permit for 
treatment works or disposal system for pollution abatement in 
lieu of a lawful order signed by the governmental subdivision 
and the state of Minnesota, or the United States, or any agency 
or subdivision thereof which is enforceable in a court of 
competent jurisdiction.  The commissioner of revenue shall in 
consultation with other state departments and agencies, develop 
a suggested form for use by the state of Minnesota, its agencies 
and subdivisions in issuing orders pursuant to this subdivision; 
    (c) pay the costs to a governmental subdivision for their 
minimum required share of any program otherwise authorized by 
law for which matching funds have been appropriated by the state 
of Minnesota or the United States, excluding the administrative 
costs of public assistance programs, to the extent of the 
increase in levy over the amount levied for the local share of 
the program for the taxes payable year 1971.  This clause shall 
apply only to those programs or projects for which matching 
funds have been designated by the state of Minnesota or the 
United States on or before September 1, of the previous year and 
only when the receipt of these matching funds is contingent upon 
the initiation or implementation of the project or program 
during the year in which the taxes are payable or those programs 
or projects approved by the commissioner; 
    (d) (a) pay the costs not reimbursed by the state or 
federal government, of payments made to or on behalf of 
recipients of aid under any public assistance program authorized 
by law, and the costs of purchase or delivery of social 
services.  Except for the costs of general assistance as defined 
in section 256D.02, subdivision 4, general assistance medical 
care under section 256D.03 and the costs of hospital care 
pursuant to section 261.21, the aggregate amounts levied 
pursuant to this clause are subject to a maximum increase of 18 
percent over the amount levied for these purposes in the 
previous year.  Effective with taxes levied in 1989, the portion 
of this special levy for income maintenance programs identified 
in section 273.1398, subdivision 1, paragraph (i), is eliminated;
    (e) (b) pay the costs of principal and interest on bonded 
indebtedness except on bonded indebtedness issued under section 
471.981, subdivisions 4 to 4c or to reimburse for the amount of 
liquor store revenues used to pay the principal and interest due 
in the year preceding the year for which the levy limit is 
calculated on municipal liquor store bonds; 
    (f) (c) pay the costs of principal and interest on 
certificates of indebtedness, except tax anticipation or aid 
anticipation certificates of indebtedness, issued for any 
corporate purpose except current expenses or funding an 
insufficiency in receipts from taxes or other sources or funding 
extraordinary expenditures resulting from a public emergency; 
and to pay the cost for certificates of indebtedness issued 
pursuant to sections 298.28 and 298.282;  
    (g) (d) fund the payments made to the Minnesota state 
armory building commission pursuant to section 193.145, 
subdivision 2, to retire the principal and interest on armory 
construction bonds; 
    (h) (e) provide for the bonded indebtedness portion of 
payments made to another political subdivision of the state of 
Minnesota; 
    (i) pay the amounts required to compensate for a decrease 
in manufactured homes property tax receipts to the extent that 
the governmental subdivision's portion of the total levy in the 
current levy year, pursuant to section 274.19, subdivision 8, as 
amended, is less than the distribution of the manufactured homes 
tax to the governmental subdivision pursuant to Minnesota 
Statutes 1969, section 273.13, subdivision 3, in calendar year 
1971; 
    (j) (f) pay the amounts required, in accordance with 
section 275.075, to correct for a county auditor's error of 
omission but only to the extent that when added to the preceding 
year's levy it is not in excess of an applicable statutory, 
special law or charter limitation, or the limitation imposed on 
the governmental subdivision by sections 275.50 to 275.56 in the 
preceding levy year; 
    (k) (g) pay amounts required to correct for an error of 
omission in the levy certified to the appropriate county auditor 
or auditors by the governing body of a city or town with 
statutory city powers in a levy year, but only to the extent 
that when added to the preceding year's levy it is not in excess 
of an applicable statutory, special law or charter limitation, 
or the limitation imposed on the governmental subdivision by 
sections 275.50 to 275.56 in the preceding levy year; 
    (l) pay the increased cost of municipal services as the 
result of an annexation or consolidation ordered by the 
Minnesota municipal board but only to the extent and for the 
levy years as provided by the board in its order pursuant to 
section 414.01, subdivision 15.  Special levies authorized by 
the board shall not exceed 50 percent of the levy limit base of 
the governmental subdivision and may not be in effect for more 
than three years after the board's order; 
    (m) pay the increased costs of municipal services provided 
to new private industrial and nonresidential commercial 
development, to the extent that the extension of such services 
are not paid for through bonded indebtedness or special 
assessments, and not to exceed the amount determined as 
follows.  The governmental subdivision may calculate the 
aggregate of: 
    (1) the increased expenditures necessary in preparation for 
the delivering of municipal services to new private industrial 
and nonresidential commercial development, but limited to one 
year's expenditures one time for each such development; 
    (2) the amount determined by dividing the overall levy 
limitation established pursuant to sections 275.50 to 275.56, 
and exclusive of special levies and special assessments, by the 
total taxable value of the governmental subdivision, and then 
multiplying this quotient times the total increase in assessed 
value of private industrial and nonresidential commercial 
development within the governmental subdivision.  For the 
purpose of this clause, the increase in the assessed value of 
private industrial and nonresidential commercial development is 
calculated as the increase in assessed value over the assessed 
value of the real estate parcels subject to such private 
development as most recently determined before the building 
permit was issued.  In the fourth levy year subsequent to the 
levy year in which the building permit was issued, the increase 
in assessed value of the real estate parcels subject to such 
private development shall no longer be included in determining 
the special levy. 
    The aggregate of the foregoing amounts, less any costs of 
extending municipal services to new private industrial and 
nonresidential commercial development which are paid by bonded 
indebtedness or special assessments, equals the maximum amount 
that may be levied as a "special levy" for the increased costs 
of municipal services provided to new private industrial and 
nonresidential commercial development.  In the levy year 
following the levy year in which the special levy made pursuant 
to this clause is discontinued, one-half of the amount of that 
special levy made in the preceding year shall be added to the 
permanent levy base of the governmental subdivision; 
    (n) recover a loss or refunds in tax receipts incurred in 
nonspecial levy funds resulting from abatements or court action 
in the previous year pursuant to section 275.48; 
    (o) (h) pay amounts required by law to be paid to pay the 
interest on and to reduce the unfunded accrued liability of 
public pension funds in accordance with the actuarial standards 
and guidelines specified in sections 356.215 and 356.216 reduced 
by 106 percent of the amount levied for that purpose in 1976, 
payable in 1977.  For the purpose of this special levy, the 
estimated receipts expected from the state of Minnesota pursuant 
to sections 69.011 to 69.031 or any other state aid expressly 
intended for the support of public pension funds shall be 
considered as a deduction in determining the required levy for 
the normal costs of the public pension funds.  No amount of 
these aids shall be considered as a deduction in determining the 
governmental subdivision's required levy for the reduction of 
the unfunded accrued liability of public pension funds; 
    (p) the amounts allowed under section 174.27 to establish 
and administer a commuter van program; 
    (q) pay the costs of financial assistance to local 
governmental units and certain administrative, engineering, and 
legal expenses pursuant to Laws 1979, chapter 253, section 3; 
    (r)(i) to compensate for revenue lost as a result of 
abatements or court action pursuant to section 270.07, 270.17 or 
278.01 due to the state for the cost of a reassessment ordered 
by the commissioner of revenue pursuant to section 270.16;  
    (s) pay the total operating cost of a county jail as 
authorized in section 641.01.  If the county government utilizes 
this special levy, then any amount levied by the county 
government in the previous year for operating its county jail 
and included in its previous year's levy limitation computed 
pursuant to section 275.51 shall be deducted from the current 
levy limitation; 
    (t) pay the costs of implementing section 18.023, including 
sanitation and reforestation; 
    (u) pay the estimated cost for the following calendar year 
of the county's share of funding the Minnesota cooperative soil 
survey; 
    (v) pay the costs of meeting the planning requirements of 
section 115A.46; the requirements of section 115A.917; the 
planning requirements of the metropolitan plan adopted under 
section 473.149 and county master plans adopted under section 
473.803; waste reduction and source separation programs and 
facilities; response actions that are financed in part by 
service charges under section 400.08 or 115A.15, subdivision 6; 
closure and postclosure care of a solid waste facility closed by 
order of the pollution control agency or by expiration of an 
agency permit before January 1, 1989; and current operating and 
maintenance costs of a publicly-owned solid waste processing 
facility financed with general obligation bonds issued after a 
referendum before March 25, 1986; 
    (w) pay the annual principal and interest due on a loan 
made under section 116J.37; 
    (x) pay the annual principal and interest due on a loan 
from money received from litigation or settlement of alleged 
violations of federal petroleum pricing regulations; and 
    (y) pay the costs of constructing public libraries. and 
    (j) pay the debt service on tax increment financing revenue 
bonds to the extent that revenue to pay the bonds or to maintain 
reserves for the bonds is insufficient as a result of the 
provisions of this article. 
    Sec. 39.  Minnesota Statutes 1986, section 275.51, 
subdivision 3f, is amended to read:  
    Subd. 3f.  [LEVY LIMIT BASE.] (a) The property tax levy 
limit base for governmental subdivisions for taxes levied in 
1983 1988 shall be calculated by adding the following 
amounts: equal to the total actual levy for taxes payable in 
1988 plus the amount of any payments the governmental 
subdivision was certified to receive in 1988 under sections 
477A.011 to 477A.014 and minus any special levies claimed for 
taxes payable in 1988 pursuant to Laws 1987, chapter 268, 
article 5, section 12, subdivision 4, clauses (1), (2), (3), and 
(4).  A county's levy limit base will be increased by the amount 
of any increase in its levy under section 134.07 over that 
levied under section 134.07 for taxes payable in 1988 which is 
required under Laws 1987, chapter 398, article 9, section 2.  
For governmental subdivisions located in the seven-county 
metropolitan area, the total actual levy for taxes payable in 
1988 shall include the fiscal disparities distribution levy 
pursuant to Minnesota Statutes 1986, section 473F.08, 
subdivision 7a.  
    (1) the property tax permitted to be levied in 1982 for 
taxes payable in 1983 pursuant to Minnesota Statutes 1982, 
section 275.51, subdivision 3e; plus 
    (2) the amount of any payments the governmental subdivision 
was certified to receive in 1983 pursuant to Minnesota Statutes 
1982, sections 477A.011 to 477A.03; plus 
    (3) the amount of any payments certified to the 
governmental subdivision in 1983 pursuant to Minnesota Statutes 
1982, sections 298.28 and 298.282; plus 
    (4) the difference between the amount certified to the 
governmental subdivision in 1983 and the amount certified in 
1984 pursuant to section 273.138; plus 
    (5) any amount levied as a special assessment to cover the 
costs of municipal operation and maintenance activities for the 
taxes payable year 1983; and 
    (6) the amount of any base adjustment authorized by the 
commissioner of revenue pursuant to subdivision 3g.  
    (b) For taxes levied in 1984 1989 and subsequent years, a 
governmental subdivision's levy limit base is equal to its 
adjusted levy limit base for the preceding year provided that, 
for taxes levied in 1984, the levy limit base of a county 
containing a city of the first class shall be increased by the 
amount paid to the county under section 273.138 in 1984 less the 
amount that will be paid to it under section 273.138 in 1985 not 
including the adjustment made under subdivision 3h, paragraph 
(c), plus for taxes levied in 1989 the administrative 
reimbursement aid received in 1988.  
    (c) The property tax levy limit base for cities and towns 
defined as a governmental subdivision only under section 275.50, 
subdivision 2, paragraph (b), for taxes levied in 1986 shall be 
calculated by adding the following amounts: 
    (1) the property tax levied in 1985 for taxes payable in 
1986, exclusive of any levies for debt service; plus 
    (2) the amount of any payments the governmental subdivision 
was certified to receive in 1986 pursuant to Minnesota Statutes 
1985 Supplement, sections 477A.011 to 477A.03; plus 
    (3) the amount of any payments certified to the 
governmental subdivision in 1986 pursuant to Minnesota Statutes 
1984, section 298.282, and Minnesota Statutes 1985 Supplement, 
section 298.28; plus 
    (4) any amount levied as a special assessment to cover the 
costs of municipal operation and maintenance activities for the 
taxes payable year 1986. 
For taxes levied in 1987 and subsequent years, the levy limit 
base of a governmental subdivision defined only in section 
275.50, subdivision 2, paragraph (b), is equal to its adjusted 
levy limit base for the preceding year.  
    Sec. 40.  Minnesota Statutes 1987 Supplement, section 
275.51, subdivision 3h, is amended to read:  
    Subd. 3h.  [ADJUSTED LEVY LIMIT BASE.] For taxes levied in 
1988 and thereafter, the adjusted levy limit base is equal to 
the levy limit base computed pursuant to Laws 1987, article 5, 
section 12, or subdivision 3f, increased by:  
    (a) a percentage equal to the percentage growth in the 
implicit price deflator, or three four percent, whichever is 
lesser for taxes levied in 1988 and three percent for taxes 
levied in 1989 and subsequent years; and 
    (b) a percentage equal to the greater of the percentage 
increases in population or in number of households, if any, for 
the most recent 12-month period for which data is available, 
using figures derived pursuant to subdivision 6;.  
    (c) one-half of the amount levied as a special levy in the 
previous year for paying the costs of municipal services 
provided to new private industrial and nonresidential commercial 
development pursuant to section 275.50, subdivision 5, clause 
(m), if the special levy is discontinued;  
    (d) the amount of any permanent increase in the levy limit 
base approved at a general or special election held during the 
12-month period ending September 30 of the levy year, pursuant 
to section 275.58, subdivisions 1 and 2; and 
    (e) the amount, if known, equal to the decrease in federal 
revenue sharing allotment from the levy year to the year in 
which the levy is payable; otherwise the amount equal to the 
decrease in federal revenue sharing allotment in the levy year 
as compared to the previous year if the levy base for the 
previous year has not been adjusted for a decrease in federal 
revenue sharing allotment. 
    For taxes levied in 1989 and subsequent years, to the 
resulting product must be added the estimated reduction in a 
county's income maintenance aids as defined in section 273.1398, 
subdivision 1, pursuant to section 273.1398, subdivision 2, 
paragraph (d).  The department of human services shall annually 
estimate the increase in income maintenance aids referred to in 
section 273.1398, subdivision 2, paragraph (d) and certify it by 
county to the department of revenue by July 15 of the levy year 
preceding that in which the aids are payable.  If the actual 
increase in a county's income maintenance aid referred to in 
section 273.1398, subdivision 2, paragraph (d) is less than or 
greater than the amount added to a county's adjusted levy limit 
base in the prior year, its adjusted levy limit base for the 
subsequent year will be increased or decreased by the 
appropriate amount.  
    Sec. 41.  Minnesota Statutes 1987 Supplement, section 
275.51, subdivision 3i, is amended to read:  
    Subd. 3i.  [LEVY LIMITATION.] The levy limitation for a 
governmental subdivision shall be equal to the adjusted levy 
limit base determined pursuant to subdivision 3h, reduced by 
    (a) the total amount of local government aid that the 
governmental subdivision has been certified to receive pursuant 
to sections 477A.011 to 477A.014;. 
    (b) taconite aids pursuant to sections 298.28 and 298.282 
including any aid received in the levy year which was required 
to be placed in a special fund for expenditure in the next 
succeeding year;  
    (c) state reimbursements for wetlands and native prairie 
property tax exemptions pursuant to sections 273.115, 
subdivision 3, and 273.116, subdivision 3; (d) payments in lieu 
of taxes to a county pursuant to section 477A.12 which are 
required to be used to provide property tax levy reduction 
certified to be paid in the calendar year in which property 
taxes are payable; and (e) payments from the proceeds of the net 
proceeds tax under section 298.018.  If the sum of the taconite 
aids deducted exceeds the adjusted levy limit base, the excess 
must be used to reduce the amounts levied as special levies 
pursuant to section 275.50, subdivisions 5 and 7.  The 
commissioner of revenue shall notify a governmental subdivision 
of any excess taconite aids to be used to reduce special levies. 
    As provided in section 298.28, one cent per taxable ton of 
the amount distributed under section 298.28, subdivision 5, 
paragraph (d), shall not be deducted from the levy limit base of 
the counties that receive that aid.  The resulting figure This 
amount is the amount of property taxes which a governmental 
subdivision may levy for all purposes other than those for which 
special levies and special assessments are made.  
    For taxes levied in 1987 and subsequent years, the levy 
limit for a county as calculated under paragraph (b) shall be 
decreased by an additional amount equal to the reduction in the 
distribution to the county under section 298.28, from the 1986 
distribution to the 1987 distribution.  
    Sec. 42.  Minnesota Statutes 1986, section 275.51, is 
amended by adding a subdivision to read:  
    Subd. 3j.  [APPEALS.] A governmental subdivision subject to 
the limitations in this section may appeal to the commissioner 
of revenue for an adjustment in its levy limit base under this 
section.  If the governmental subdivision can provide evidence 
satisfactory to the commissioner that its levy for taxes payable 
in 1988 had been reduced because it had made expenditures from 
reserve funds, the commissioner may permit the governmental 
subdivision to increase its levy limit base under this section 
by the amount determined by the commissioner.  The 
commissioner's decision is final.  
    Sec. 43.  Minnesota Statutes 1987 Supplement, section 
276.04, is amended to read:  
    276.04 [NOTICE OF RATES; PROPERTY TAX STATEMENTS.] 
    Subdivision 1.  [AUDITOR TO PUBLISH RATES.] On receiving 
the tax lists from the county auditor, the county treasurer 
shall, if directed by the county board, give three weeks' 
published notice in a newspaper specifying the rates of taxation 
for all general purposes and the amounts raised for each 
specific purpose.  
    Subd. 2.  [CONTENTS OF TAX STATEMENTS.] (a) The treasurer 
shall, whether or not directed by the county board, cause to be 
printed on all tax statements, or on an attachment, a tabulated 
statement of the dollar amount due to each taxing authority from 
the parcel of real property for which a particular tax statement 
is prepared.  The dollar amounts due the county, township or 
municipality and school district shall must be separately stated 
but.  The amounts due other taxing districts, if any, may be 
aggregated.  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 statement shall include the following sentence, 
printed in upper case letters in boldface print:  "THE STATE OF 
MINNESOTA DOES NOT RECEIVE ANY PROPERTY TAX REVENUES.  THE STATE 
OF MINNESOTA REDUCES YOUR PROPERTY TAX BY PAYING CREDITS AND 
REIMBURSEMENTS TO LOCAL UNITS OF GOVERNMENT."  
    (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) For taxes payable in 1990 and thereafter, real and 
personal property tax statements must contain (1) the property's 
market value, as defined in section 272.03, subdivision 8, (2) 
the net tax capacity rate applicable to the property's 
classification under section 273.13, and the product of (1) and 
(2), the property's initial tax.  The statement must show the 
difference between a property's gross tax capacity and net tax 
capacity multiplied by the tax capacity rate as "state paid 
homestead and agricultural credit."  The statement must also 
show the decrease in tax attributable to that portion of the sum 
of the following aids attributable to the property as "state 
paid tax relief":  (i) education aids payable under chapters 124 
and 124A, (ii) local government aid for cities, towns, and 
counties under chapter 477A, (iii) disparity reduction aid paid 
under section 273.1398, and (iv) income maintenance aids as 
defined in section 273.1398, subdivision 1, paragraph (i).  The 
commissioner of revenue shall certify to the county auditor the 
actual or estimated aids local governments will receive in the 
following year. 
    (d) For taxes payable in 1989 only, the statement must show 
the property's market value, as defined in section 272.03, 
subdivision 8, and the amount attributable to section 273.13, 
subdivisions 22 and 23 as "state paid homestead credit" and the 
amount attributable to section 273.132 as "state paid 
agricultural credit."  The statement must also show the decrease 
in tax attributable to that portion of the sum of the following 
aids attributable to the property as "state paid tax relief":  
(i) education aids under chapters 124 and 124A, (ii) local 
government aid for cities, towns, and counties under chapter 
477A, and (iii) disparity reduction aid under section 273.1398.  
The commissioner of revenue shall certify to the county auditor 
the actual or estimated aids local governments will receive in 
the following year. 
    Subd. 3.  [MAILING OF TAX STATEMENTS.] The county treasurer 
shall mail to taxpayers statements of their personal property 
taxes due, such statements to be mailed not later than February 
15 (, except in the case of manufactured homes and sectional 
structures taxed as personal property),.  Statements of the real 
property taxes due shall be mailed not later than January 31; 
provided, that.  The validity of the tax shall not be affected 
by failure of the treasurer to mail such the statement.  The 
taxpayer is defined as the owner who is responsible for the 
payment of the tax.  Such real and personal property tax 
statements shall contain the market value, as defined in section 
272.03, subdivision 8, used in determining the tax.  The 
statement shall show the amount attributable to the decrease in 
tax under section 275.082 attributable to Minnesota Statutes 
1986, section 124.2137 as "state paid agricultural credit 
amount" and the amount attributable to the decrease in tax under 
section 275.082 attributable to Minnesota Statutes 1986, section 
273.13, subdivisions 22 and 23 as "state paid homestead credit 
amount."  The statement must state the amount deducted under 
section 273.1195 and identify it as "state paid small business 
transition credit."  
    Subd. 4.  [COLLECTION SITE.] If so directed by the county 
board, the treasurer shall visit places in the county as the 
treasurer deems expedient for the purpose of receiving taxes and 
the county board is authorized to pay the expenses of such 
visits and of preparing duplicate tax lists.  Failure to mail 
the tax statement shall not be deemed a material defect to 
affect the validity of any judgment and sale for delinquent 
taxes.  
    Sec. 44.  Minnesota Statutes 1987 Supplement, section 
276.06, is amended to read:  
    276.06 [TAX STATEMENTS TO STATE APPORTIONMENT OF TAXES.] 
    The treasurer of each county may cause to be printed, 
stamped, or written on the back of all current tax statements, 
or on a separate sheet or card to be furnished with the 
statements, a statement showing the number of mills tax capacity 
rate of the current tax apportioned to the state, county, city, 
town, or school district. 
    Sec. 45.  Minnesota Statutes 1986, section 298.28, 
subdivision 6, is amended to read:  
    Subd. 6.  [PROPERTY TAX RELIEF.] (a) 22 12 cents per 
taxable ton, less any amount required to be distributed under 
paragraphs (b) and (c), must be allocated to St. Louis county 
acting as the counties' fiscal agent, to be distributed as 
provided in sections 273.134 to 273.136. 
    (b) If an electric power plant owned by and providing the 
primary source of power for a taxpayer mining and concentrating 
taconite is located in a county other than the county in which 
the mining and the concentrating processes are conducted, .1875 
cent per taxable ton of the tax imposed and collected from such 
taxpayer shall be paid to the county. 
    (c) If an electric power plant owned by and providing the 
primary source of power for a taxpayer mining and concentrating 
taconite is located in a school district other than a school 
district in which the mining and concentrating processes are 
conducted, .5625 cent per taxable ton of the tax imposed and 
collected from the taxpayer shall be paid to the school district.
    Sec. 46.  [TAX INCREMENT ADJUSTMENT.] 
    The county auditor shall determine a tax increment 
district's original tax capacity by multiplying the district's 
market values by class in the year of original certification or 
year of certification for any modification, as the case may be, 
by the tax capacity rates in section 273.13.  The original tax 
capacity of an economic development district shall also be 
inflated to reflect the annual adjustment required by section 
469.177 for prior years.  The original tax capacities of the 
districts under this section shall be certified to authorities 
by July 1, 1988.  
    Sec. 47.  Minnesota Statutes 1987 Supplement, section 
473.446, subdivision 1, is amended to read:  
    Subdivision 1.  [TAXATION WITHIN TRANSIT TAXING DISTRICT.] 
For the purposes of sections 473.401 to 473.451 and the 
metropolitan transit system, except as otherwise provided in 
this subdivision the regional transit board shall levy each year 
upon all taxable property within the metropolitan transit taxing 
district, defined in subdivision 2, a transit tax consisting of: 
    (a) an amount up to two mills times the assessed value of 
all such property, based upon the level of transit service 
provided for the property, the proceeds of which shall be used 
for payment of the expenses of operating transit and paratransit 
service and to provide for payment of obligations issued by the 
commission under section 473.436, subdivision 6; 
    (b) an additional amount, if any, as the board determines 
to be necessary to provide for the full and timely payment of 
its certificates of indebtedness and other obligations 
outstanding on July 1, 1985, to which property taxes under this 
section have been pledged; and 
    (c) an additional amount necessary to provide full and 
timely payment of certificates of indebtedness, bonds, including 
refunding bonds or other obligations issued or to be issued 
under section 473.39 by the council for purposes of acquisition 
and betterment of property and other improvements of a capital 
nature and to which the council or board has specifically 
pledged tax levies under this clause. 
    The county auditor shall reduce the tax levied pursuant to 
this subdivision on all property within statutory and home rule 
charter cities and towns that receive full peak service and 
limited off-peak service by an amount equal to the tax levy that 
would be produced by applying a rate of 0.5 mills on the 
property.  The county auditor shall reduce the tax levied 
pursuant to this subdivision on all property within statutory 
and home rule charter cities and towns that receive limited peak 
service by an amount equal to the tax levy that would be 
produced by applying a rate of 0.75 mills on the property.  The 
amounts so computed by the county auditor shall be submitted to 
the commissioner of revenue as part of the abstracts of tax 
lists required to be filed with the commissioner under section 
275.29.  Any prior year adjustments shall also be certified in 
the abstracts of tax lists.  The commissioner shall review the 
certifications to determine their accuracy and may make changes 
in the certification as necessary or return a certification to 
the county auditor for corrections.  The commissioner shall pay 
to the regional transit board the amounts certified by the 
county auditors on the dates provided in section 273.1394 
273.1398.  There is annually appropriated from the general fund 
in the state treasury to the department of revenue the amounts 
necessary to make these payments in fiscal year 1987 and 
thereafter.  
    For the purposes of this subdivision, "full peak and 
limited off-peak service" means peak period regular route 
service, plus weekday midday regular route service at intervals 
longer than 60 minutes on the route with the greatest frequency; 
and "limited peak period service" means peak period regular 
route service only.  
    Sec. 48.  Minnesota Statutes 1987 Supplement, section 
473F.02, subdivision 4, is amended to read: 
    Subd. 4.  "Residential property" means the following 
categories of property, as defined in section 273.13, excluding 
that portion of such property exempt from taxation pursuant to 
section 272.02: 
    (a) Class 1, 1b, 2a, 4a, 4b, 4c, and 4d property except 
resorts and property classified under section 273.13, 
subdivision 25, paragraph (c), clause (6); 
    (b) and that portion of class 3a, 3b, and 5 property used 
exclusively for residential occupancy. 
    Sec. 49.  Minnesota Statutes 1986, section 473F.02, is 
amended by adding a subdivision to read: 
    Subd. 23.  "Gross tax capacity" means the market value of 
real and personal property multiplied by its gross tax capacity 
rates in section 273.13. 
    Sec. 50.  Minnesota Statutes 1987 Supplement, section 
473F.05, is amended to read:  
    473F.05 [ASSESSED VALUATION GROSS TAX CAPACITY; 1972 1988 
AND SUBSEQUENT YEARS.] 
    On or before November 20 of 1972 1988 and each subsequent 
year, the assessors within each county in the area shall 
determine and certify to the county auditor the assessed 
valuation gross tax capacity in that year of 
commercial-industrial property subject to taxation within each 
municipality in the county, determined without regard to section 
469.177, subdivision 3.  
    Sec. 51.  Minnesota Statutes 1987 Supplement, section 
473F.06, is amended to read:  
    473F.06 [INCREASE IN ASSESSED VALUATION GROSS TAX 
CAPACITY.] 
    On or before September 1 of 1976 and each subsequent year, 
the auditor of each county in the area shall determine the 
amount, if any, by which the assessed valuation gross tax 
capacity determined in the preceding year pursuant to section 
473F.05, of commercial-industrial property subject to taxation 
within each municipality in the auditor's county exceeds 
the assessed valuation gross tax capacity in 1971 of 
commercial-industrial property subject to taxation within that 
municipality.  If a municipality is located in two or more 
counties within the area, the auditors of those counties shall 
certify the data required by section 473F.05 to the county 
auditor who is responsible under other provisions of law for 
allocating the levies of that municipality between or among the 
affected counties.  That county auditor shall determine the 
amount of the net excess, if any, for the municipality under 
this section, and certify that amount under section 473F.07.  
Notwithstanding any other provision of sections 473F.01 to 
473F.13 to the contrary, in the case of a municipality which is 
designated on July 24, 1971, as a redevelopment area pursuant to 
section 401(a)(4) of the Public Works and Economic Development 
Act of 1965, Public Law Number 89-136, the increase in 
its assessed valuation gross tax capacity of 
commercial-industrial property for purposes of this section 
shall be determined in each year subsequent to the termination 
of such designation by using as a base the assessed valuation 
gross tax capacity of commercial-industrial property in that 
municipality in the year following that in which such 
designation is terminated, rather than the assessed valuation 
gross tax capacity of such property in 1971.  The increase in 
assessed valuation gross tax capacity determined by this section 
shall be reduced by the amount of any decreases in the assessed 
valuation gross tax capacity of commercial-industrial property 
resulting from any court decisions, court related stipulation 
agreements, or abatements for a prior year, and only in the 
amount of such decreases made during the 12-month period ending 
on June 30 of the current assessment year, where such decreases, 
if originally reflected in the determination of a prior 
year's valuation gross tax capacity under section 473F.05, would 
have resulted in a smaller contribution from the municipality in 
that year.  An adjustment for such decreases shall be made only 
if the municipality made a contribution in a prior year based on 
the higher valuation gross tax capacity of the 
commercial-industrial property. 
    Sec. 52.  Minnesota Statutes 1987 Supplement, section 
473F.07, subdivision 1, is amended to read:  
    Subdivision 1.  Each county auditor shall certify the 
determinations pursuant to sections 473F.05 and 473F.06 to the 
administrative auditor on or before November 20 of each year.  
The administrative auditor shall determine the sum of the 
amounts certified pursuant to section 473F.06, and divide that 
sum by 2-1/2.  The resulting amount shall be known as the 
"areawide gross tax base capacity for ........(year)." 
    Sec. 53.  Minnesota Statutes 1986, section 473F.07, 
subdivision 4, is amended to read:  
    Subd. 4.  The administrative auditor shall determine the 
proportion which the index of each municipality bears to the sum 
of the indices of all municipalities and shall then multiply 
this proportion in the case of each municipality, by the 
areawide gross tax base capacity. 
    Sec. 54.  Minnesota Statutes 1986, section 473F.07, 
subdivision 5, is amended to read:  
    Subd. 5.  The product of the multiplication prescribed by 
subdivision 4 shall be known as the "areawide gross tax base 
capacity for ........(year) attributable to 
..................(municipality)."  The administrative auditor 
shall certify such product to the auditor of the county in which 
the municipality is located on or before November 25. 
    Sec. 55.  Minnesota Statutes 1986, section 473F.08, 
subdivision 1, is amended to read:  
    Subdivision 1.  The county auditor shall determine the 
taxable value gross tax capacity of each governmental unit 
within the auditor's county in the manner prescribed by this 
section. 
    Sec. 56.  Minnesota Statutes 1987 Supplement, section 
473F.08, subdivision 2, is amended to read:  
    Subd. 2.  The taxable value gross tax capacity of a 
governmental unit is its assessed valuation gross tax capacity, 
as determined in accordance with other provisions of law 
including section 469.177, subdivision 3, subject to the 
following adjustments:  
    (a) There shall be subtracted from its assessed valuation 
gross tax capacity, in each municipality in which the 
governmental unit exercises ad valorem taxing jurisdiction, an 
amount which bears the same proportion to 40 percent of the 
amount certified in that year pursuant to section 473F.06 in 
respect to that municipality as the total preceding 
year's assessed valuation gross tax capacity of 
commercial-industrial property which is subject to the taxing 
jurisdiction of the governmental unit within the municipality, 
determined without regard to section 469.177, subdivision 3, 
bears to the total preceding year's assessed valuation gross tax 
capacity of commercial-industrial property within the 
municipality, determined without regard to section 469.177, 
subdivision 3;  
    (b) There shall be added to its assessed valuation gross 
tax capacity, in each municipality in which the governmental 
unit exercises ad valorem taxing jurisdiction, an amount which 
bears the same proportion to the areawide base gross tax 
capacity for the year attributable to that municipality as the 
total preceding year's assessed valuation gross tax capacity of 
residential property which is subject to the taxing jurisdiction 
of the governmental unit within the municipality bears to the 
total preceding year's assessed valuation gross tax capacity of 
residential property of the municipality.  
    Sec. 57.  Minnesota Statutes 1986, section 473F.08, 
subdivision 3, is amended to read:  
    Subd. 3.  On or before October 15 of 1976 and each 
subsequent year, the county auditor shall apportion the levy of 
each governmental unit in the auditor's county in the manner 
prescribed by this subdivision.  The auditor shall: 
    (a) Determine the areawide portion of the levy for each 
governmental unit by multiplying the nonagricultural mill rate 
tax capacity rate of the governmental unit for the preceding 
levy year times the distribution value set forth in subdivision 
2, clause (b); and 
    (b) Determine the local portion of the current year's levy 
by subtracting the resulting amount from clause (a) from the 
governmental unit's current year's levy. 
    Sec. 58.  Minnesota Statutes 1986, section 473F.08, 
subdivision 3a, is amended to read:  
    Subd. 3a.  Beginning in 1987 and each subsequent year 
through 1998, the city of Bloomington shall determine the 
interest payments for that year for the bonds which have been 
sold for the highway improvements pursuant to Laws 1986, chapter 
391, section 2, paragraph (g).  Effective for property taxes 
payable in 1988 through property taxes payable in 1999, after 
the Hennepin county auditor has computed the areawide portion of 
the levy for the city of Bloomington pursuant to subdivision 3, 
clause (a), the auditor shall annually add a dollar amount to 
the city of Bloomington's areawide portion of the levy equal to 
the amount which has been certified to the auditor by the city 
of Bloomington for the interest payments for that year for the 
bonds which were sold for highway improvements.  The total 
areawide portion of the levy for the city of Bloomington 
including the additional amount for interest repayment certified 
pursuant to this subdivision shall be certified by the Hennepin 
county auditor to the administrative auditor pursuant to 
subdivision 5.  The Hennepin county auditor shall distribute to 
the city of Bloomington the additional areawide portion of the 
levy computed pursuant to this subdivision at the same time that 
payments are made to the other counties pursuant to subdivision 
7a.  This additional areawide portion of the levy which is 
distributed to the city of Bloomington shall be exempt from the 
city's levy limit provisions contained in sections 275.50 to 
275.56.  For property taxes payable from the year 2000 through 
2009, the Hennepin county auditor shall adjust Bloomington's 
contribution to the areawide gross tax base capacity upward each 
year by a value equal to ten percent of the total additional 
areawide levy distributed to Bloomington under this subdivision 
from 1988 to 1999, divided by the areawide mill rate tax 
capacity rate for taxes payable in the previous year.  
    Sec. 59.  Minnesota Statutes 1987 Supplement, section 
473F.08, subdivision 4, is amended to read:  
    Subd. 4.  In 1972 and subsequent years, the county auditor 
shall divide that portion of the levy determined pursuant to 
subdivision 3, clause (b), by the assessed valuation gross tax 
capacity of the governmental unit, taking section 469.177, 
subdivision 3, into account, less that portion subtracted 
from assessed valuation gross tax capacity pursuant to 
subdivision 2, clause (a).  The resulting rate shall apply to 
all taxable property except commercial-industrial property, 
which shall be taxed in accordance with subdivision 6. 
    Sec. 60.  Minnesota Statutes 1986, section 473F.08, 
subdivision 5, is amended to read:  
    Subd. 5.  On or before November 30 of 1972 and each 
subsequent year, the county auditor shall certify to the 
administrative auditor that portion of the levy of each 
governmental unit determined pursuant to subdivision 3, clause 
(a).  The administrative auditor shall then determine the rate 
of taxation tax capacity rate sufficient to yield an amount 
equal to the sum of such levies from the areawide gross tax base 
capacity.  On or before December 5 the administrative auditor 
shall certify said rate to each of the county auditors. 
    Sec. 61.  Minnesota Statutes 1987 Supplement, section 
473F.08, subdivision 6, is amended to read:  
    Subd. 6.  The rate of taxation determined in accordance 
with subdivision 5 shall apply in the taxation of each item of 
commercial-industrial property subject to taxation within a 
municipality, including property located within any tax 
increment financing district, as defined in section 469.174, 
subdivision 9, to that portion of the assessed valuation gross 
tax capacity of the item which bears the same proportion to its 
total assessed valuation gross tax capacity as 40 percent of the 
amount determined pursuant to section 473F.06 in respect to the 
municipality in which the property is taxable bears to the 
amount determined pursuant to section 473F.05.  The rate of 
taxation determined in accordance with subdivision 4 shall apply 
in the taxation of the remainder of the assessed valuation gross 
tax capacity of the item. 
    Sec. 62.  Minnesota Statutes 1986, section 473F.08, 
subdivision 10, is amended to read:  
    Subd. 10.  For the purpose of computing the amount or rate 
of any salary, aid, tax, or debt authorized, required, or 
limited by any provision of any law or charter, where such 
authorization, requirement, or limitation is related in any 
manner to any value or valuation of taxable property within any 
governmental unit, such value or valuation gross tax capacity 
shall be adjusted to reflect the adjustments to valuation gross 
tax capacity effected by subdivision 2, provided that:  (1) in 
determining the market value of commercial-industrial property 
or any class thereof within a governmental unit for any purpose 
other than section 473F.07, (a) the reduction required by this 
subdivision shall be that amount which bears the same proportion 
to the amount subtracted from the governmental unit's assessed 
valuation gross tax capacity pursuant to subdivision 2, clause 
(a), as the market value of commercial-industrial property, or 
such class thereof, located within the governmental unit bears 
to the assessed valuation gross tax capacity of 
commercial-industrial property, or such class thereof, located 
within the governmental unit, and (b) the increase required by 
this subdivision shall be that amount which bears the same 
proportion to the amount added to the governmental 
unit's assessed valuation gross tax capacity pursuant to 
subdivision 2, clause (b), as the market value of 
commercial-industrial property, or such class thereof, located 
within the governmental unit bears to the assessed valuation 
gross tax capacity of commercial-industrial property, or such 
class thereof, located within the governmental unit; and (2) in 
determining the market value of real property within a 
municipality for purposes of section 473F.07, the adjustment 
prescribed by clause (1) (a) hereof shall be made and that 
prescribed by clause (1) (b) hereof shall not be made. 
    Sec. 63.  Minnesota Statutes 1986, section 473F.10, is 
amended to read:  
    473F.10 [REASSESSMENTS AND OMITTED PROPERTY.] 
    Subdivision 1.  If the commissioner of revenue orders a 
reassessment of all or any portion of the property in a 
municipality other than in the form of a mathematically 
prescribed adjustment of valuation, or if omitted property is 
placed upon the tax rolls, and the reassessment has not been 
completed or the property placed upon the rolls, as the case may 
be, by November 15, the assessed valuation gross tax capacity of 
the affected property shall, for purposes of sections 473F.03 to 
473F.08, be determined from the abstracts filed by the county 
auditor with the commissioner of revenue.  
    Subd. 2.  If the reassessment, when completed and 
incorporated in the commissioner of revenue's certification of 
the assessed valuation gross tax capacity of the municipality, 
or the listing of omitted property, when placed on the rolls, 
results in an increase in the assessed valuation gross tax 
capacity of commercial-industrial property in the municipality 
which differs from that used, pursuant to subdivision 1, for 
purposes of sections 473F.03 to 473F.08, the increase in 
the assessed valuation gross tax capacity of 
commercial-industrial property in that municipality in the 
succeeding year, as otherwise computed under section 473F.06, 
shall be adjusted in a like amount, by an increase if the 
reassessment or listing discloses a larger increase than was 
used for purposes of sections 473F.03 to 473F.08, or by a 
decrease if the reassessment or listing discloses a smaller 
increase than was used for those purposes, provided that no 
adjustment shall reduce the amount determined under section 
473F.06 to an amount less than zero.  
    Subd. 3.  Subdivisions 1 and 2 shall not apply to the 
determination of the tax rate under section 473F.08, subdivision 
4, or to the determination of the assessed valuation gross tax 
capacity of commercial-industrial property and each item thereof 
for purposes of section 473F.08, subdivision 6.  
    Sec. 64.  [FISCAL DISPARITIES ADJUSTMENT.] 
    For purposes of determining the areawide levy and local 
levies under section 473F.08, subdivisions 3, 4, 5, and 6, for 
taxes payable in 1989, the initial computation shall be done 
based on chapter 473F as codified in Minnesota Statutes 1986 and 
Minnesota Statutes 1987 Supplement.  However, after the dollar 
amount of the areawide and local levies has been determined 
under section 473F.08, subdivisions 3, 4, 5, and 6, the dollar 
amount of the levies shall be spread on the basis of this act.  
The dollar amount of the areawide tax shall be levied against 
the portion of commercial-industrial gross tax capacity equal to 
the portion of commercial-industrial assessed value that would 
have been subject to the areawide tax under Minnesota Statutes 
1986.  Prior to November 20, 1988, the county auditors with the 
assistance of the county assessors shall determine the gross tax 
capacity of commercial-industrial property in each municipality 
as of the January 2, 1971, assessment.  The gross tax capacity 
shall be computed by multiplying the municipality's market value 
of commercial-industrial assessed value by class by the gross 
tax capacity rates in section 273.13.  
    Sec. 65.  Minnesota Statutes 1987 Supplement, section 
475.53, subdivision 4, is amended to read:  
    Subd. 4.  [SCHOOL DISTRICTS.] Except as otherwise provided 
by law, no school district shall be subject to a net debt in 
excess of ten percent of the actual market value of all taxable 
property and of exempt property referred to in section 275.49, 
situated within its corporate limits, as computed in accordance 
with this subdivision.  The county auditor of each county 
containing taxable real or personal property situated within any 
school district shall certify to the district upon request the 
market value of all such property.  The county auditor of each 
county containing exempt property referred to in section 275.49, 
situated within any school district, shall certify to the 
district upon request the total market value of all such 
property as determined under section 275.49.  The commissioner 
of revenue shall certify to the district upon request the market 
value of railroad property within the district as most recently 
determined under section 270.87.  Whenever the commissioner of 
revenue, in accordance with section 124.2131, subdivision 1, has 
determined that the assessed valuation of any district furnished 
by county auditors is not based upon the market value of taxable 
property in the district, the commissioner of revenue shall 
certify to the district upon request the ratio most recently 
ascertained to exist between such value and the actual market 
value of property within the district.  The actual market value 
of property within a district, on which its debt limit under 
this subdivision is based, is (a) the value certified by the 
county auditors and, where applicable, by the commissioner of 
revenue under section 270.87, or (b) this value divided by the 
ratio certified by the commissioner of revenue, whichever 
results in a higher value. 
    Sec. 66.  Minnesota Statutes 1986, section 477A.011, is 
amended by adding a subdivision to read: 
    Subd. 15.  [CITY REVENUE.] "City revenue" equals the sum of 
(i) the city's aid payable under section 477A.013, in the year 
prior to that for which aids are being calculated, and (ii) its 
levy for taxes payable in the year prior to that for which aids 
are being calculated, and (iii) for aids payable in 1991 and 
subsequent years, the city's transition aid payable under 
section 273.1398, subdivision 2, in the year prior to that for 
which aids are being calculated.  
    Sec. 67.  Minnesota Statutes 1986, section 477A.011, is 
amended by adding a subdivision to read: 
    Subd. 16.  [BASE REVENUE GUARANTEE.] "Base revenue 
guarantee" is the sum of (1) $160 per household plus (2) $150 
multiplied by each tenfold increase in households, or fraction 
thereof, above ten rounded to the nearest dollar. 
    Sec. 68.  Minnesota Statutes 1986, section 477A.011, is 
amended by adding a subdivision to read: 
    Subd. 17.  [REVENUE GUARANTEE INCREASE.] "Revenue guarantee 
increase" is the sum of:  
    (1) $190 per household for cities of the first class 
located in the metropolitan area and $190 per household for 
cities located outside the metropolitan area; and 
    (2) 15 percent of a city's base revenue guarantee for 
cities in which the population has declined since the estimate 
for the third year preceding the most recent estimate.  
    Sec. 69.  Minnesota Statutes 1986, section 477A.011, is 
amended by adding a subdivision to read: 
    Subd. 18.  [CITY REVENUE GUARANTEE.] "City revenue 
guarantee" is the product of: 
    (1) the sum of a city's base revenue guarantee and the 
city's revenue guarantee increase;  
    (2) the number of households in the city; and 
    (3) 108 percent for aids payable in 1989 and 104 percent 
for aids payable in 1990 and subsequent years.  
    Sec. 70.  Minnesota Statutes 1986, section 477A.011, is 
amended by adding a subdivision to read: 
    Subd. 19.  [METROPOLITAN AREA.] "Metropolitan area" is the 
metropolitan area as defined in section 473.121, subdivision 2.  
    Sec. 71.  Minnesota Statutes 1986, section 477A.011, is 
amended by adding a subdivision to read: 
    Subd. 20.  [CITY TAX CAPACITY.] "City tax capacity" means 
(1) 23 percent of the net tax capacity computed using the net 
tax capacity rates listed in section 273.13 for all taxable 
property within the city based on the assessment two years prior 
to that for which aids are being calculated, plus (2) a city's 
levy on the fiscal disparities distribution under section 
473F.08, subdivision 3, paragraph (a), for taxes payable in the 
year prior to that for which aids are being calculated.  The 
market value utilized in computing net tax capacity shall be 
reduced by the sum of (1) a city's market value of commercial 
industrial property as defined in section 473F.02, subdivision 
3, multiplied by the ratio determined pursuant to section 
473F.08, subdivision 2, paragraph (a), and (2) the market value 
of the captured value of tax increment financing districts as 
defined in section 469.177, subdivision 2.  The net tax capacity 
will be computed using equalized market values.  
    Sec. 72.  Minnesota Statutes 1986, section 477A.011, is 
amended by adding a subdivision to read: 
    Subd. 21.  [EQUALIZED MARKET VALUES.] Equalized market 
values are equalized market values as defined in section 
273.1398, subdivision 1. 
    Sec. 73.  Minnesota Statutes 1986, section 477A.011, is 
amended by adding a subdivision to read: 
    Subd. 22.  [CITY INITIAL AID.] "Initial aid" for a city is 
its city revenue guarantee minus the city's tax capacity. 
Initial aid cannot be less than $0. 
    Sec. 74.  Minnesota Statutes 1986, section 477A.011, is 
amended by adding a subdivision to read: 
    Subd. 23.  [CITY EXPENDITURE/UNLIMITED AID RATIO.] 
"Expenditure/unlimited aid ratio" for a city is the ratio of its 
city revenue to its city revenue guarantee.  
    Sec. 75.  Minnesota Statutes 1986, section 477A.011, is 
amended by adding a subdivision to read: 
    Subd. 24.  [LOCAL GOVERNMENT AID INCREASE.] "Local 
government aid increase" is aid payable in 1989 pursuant to 
section 477A.013, subdivision 3, minus the city's 1988 local 
government aid. 
    Sec. 76.  Minnesota Statutes 1987 Supplement, section 
477A.013, subdivision 1, is amended to read:  
    Subdivision 1.  [TOWNS.] In calendar year 1988 and calendar 
years thereafter, each town which had levied for taxes payable 
in the previous year at least one mill on the dollar of the 
assessed value of the town shall receive a distribution equal to 
the greater of:  (a) 60 percent of the amount received in 1983 
pursuant to Minnesota Statutes 1982, sections 273.138, 273.139, 
and 477A.011 to 477A.03; or (b) the amount certified in 1987 
pursuant to sections 477A.011 to 477A.03.  In calendar year 
1989, each town that had levied for taxes payable in 1988 at 
least one mill on the dollar of the assessed value of the town 
shall receive a distribution equal to 106 percent of the 
distribution received under Minnesota Statutes 1987 Supplement, 
section 477A.013, subdivision 1, in 1988.  In calendar year 1990 
and subsequent years, each town that had levied for taxes 
payable in the prior year a tax capacity rate of at least .0125 
shall receive a distribution equal to the amount received in 
1989 under this subdivision. 
    Sec. 77.  Minnesota Statutes 1987 Supplement, section 
477A.013, subdivision 2, is amended to read:  
    Subd. 2.  [CITIES.] In calendar year 1988 and calendar 
years thereafter, each city shall receive a local government aid 
distribution equal to the amount that the city was certified to 
receive for calendar year 1987 under this subdivision. 
    Sec. 78.  Minnesota Statutes 1987 Supplement, section 
477A.013, is amended by adding a subdivision to read: 
    Subd. 3.  [CITY AID DISTRIBUTION.] In 1989, a city whose 
initial aid is greater than $0 will receive the following aid 
increases in addition to an amount equal to the local government 
aid it received in 1988 under Minnesota Statutes 1987 
Supplement, section 477A.013: 
    (1) for a city whose expenditure/unlimited aid ratio is at 
least 1.5, two percent of city revenue;  
    (2) for a city whose expenditure/unlimited aid ratio is at 
least 1.4 but less than 1.5, 2.5 percent of city revenue; 
    (3) for a city whose expenditure/unlimited aid ratio is at 
least 1.3 but less than 1.4, three percent of city revenue; 
    (4) for a city whose expenditure/unlimited aid ratio is at 
least 1.2 but less than 1.3, four percent of city revenue; 
    (5) for a city whose expenditure/unlimited aid ratio is at 
least 1.1 but less than 1.2, five percent of city revenue; 
    (6) for a city whose expenditure/unlimited aid ratio is at 
least 1.05 but less than 1.1, six percent of city revenue; 
    (7) for a city whose expenditure/unlimited aid ratio is at 
least 1.0 but less than 1.05, seven percent of city revenue;  
    (8) for a city whose expenditure/unlimited aid ratio is at 
least .95 but less than 1.0, 7.5 percent of city revenue; 
    (9) for a city whose expenditure/unlimited aid ratio is at 
least .75 but less than .95, 8.5 percent of city revenue; and 
    (10) for a city whose expenditure/unlimited aid ratio is 
less than .75, nine percent of city revenue.  
    In 1990 and subsequent years, a city whose initial aid is 
greater than $0 will receive an amount equal to the aid it 
received under this subdivision and subdivision 4 in the year 
prior to that for which aids are being calculated plus an aid 
increase equal to 50 percent of the rates listed in clauses 1 to 
10 multiplied by city revenue. 
    A city's aid increase under this subdivision is limited to 
the lesser of (1) 20 percent of its levy for taxes payable in 
the year prior to that for which aids are being calculated after 
the adjustments provided in section 273.1398, subdivision 2, or 
(2) its initial aid amount, provided that no city will receive 
an increase that is less than two percent of its 1988 local 
government aid for aids payable in 1989. 
     A city whose initial aid is $0 will receive in 1989 an 
amount equal to 102 percent of the local government aid it 
received in 1988 under Minnesota Statutes 1987 Supplement, 
section 477A.013.  A city whose initial aid is $0 will receive 
in 1990 and subsequent years an amount equal to the aid it 
received in the previous year under this subdivision and 
subdivision 4.  
    Sec. 79.  Minnesota Statutes 1987 Supplement, section 
477A.013, is amended by adding a subdivision to read: 
    Subd. 4.  [ADDITIONAL DISTRIBUTION.] A city with a 
population over 2,500 is eligible for additional aid in 1989 
only.  The amount of additional aid is equal to (1) the product 
of (i) the lesser of 50 percent of a city's "city revenue 
guarantee" or 50 percent of a city's "city revenue" and (ii) one 
minus the ratio of the city's tax capacity per household to 435; 
less (2) the sum of (i) the disparity reduction aid payable to 
all unique taxing jurisdictions within a city and (ii) the local 
government aid increase for the city.  The additional aid under 
this section cannot be less than zero. 
    Sec. 80.  [NOTIFICATION OF ADMINISTRATIVE DIRECTIVES.] 
    The commissioner of revenue shall notify the chairs of the 
senate committee on taxes and tax laws and the house committee 
on taxes of administrative directives or interpretations of the 
provisions of this article.  The notice must be given at least 
five days before a directive or interpretation is released to 
the public or provided to a local government to allow time for 
the chairs to provide advice or to comment on the commissioner's 
directive or interpretation of the law.  An administrative 
directive or interpretation includes an explanation of a 
provision, a clarification of its application to a particular 
circumstance, a directive on how to apply or administer a 
provision, and other similar communications that are intended to 
direct or guide local government officials in administering the 
law.  This section applies only to written materials that are 
either released to the public or mailed, sent or provided to a 
local government or a local government official. 
    Sec. 81.  [REPEALER.] 
    (a) Minnesota Statutes 1986, sections 272.64; 273.13, 
subdivisions 7a and 30; 275.49; 477A.011, subdivisions 4, 5, 6, 
7a, 10, 11, 12, 13, and 14; and Minnesota Statutes 1987 
Supplement, sections 273.1102, subdivision 2; 273.1195; 273.13, 
subdivision 9; 273.1394; 273.1395; 273.1396; 273.1397; 275.081; 
275.082; 275.125, subdivision 22; and 477A.011, subdivision 7; 
and Laws 1987, chapter 268, article 6, section 19, are repealed. 
    (b) Minnesota Statutes 1986, section 275.50, subdivisions 
3, 7, and 8 are repealed. 
    (c) Minnesota Statutes 1987 Supplement, section 273.13, 
subdivision 15a, and section 21 are repealed.  
    Sec. 82.  Laws 1987, chapter 268, article 6, section 53, is 
amended to read: 
    Sec. 53.  [REPEALER.] 
    Minnesota Statutes 1986, sections 13.58; 124.2131, 
subdivision 4; 124.2137; 124.2139; 124A.031, subdivision 4; 
273.112, subdivision 9; 273.115; 273.116; 273.13, subdivisions 
26, 27, 28, and 29; and 273.1311; 273.1315; 273.135, subdivision 
5; and 273.1391, subdivision 4, are repealed. 
    Sec. 83.  [REENACTMENT.] 
    Notwithstanding Minnesota Statutes, section 645.36, 
Minnesota Statutes, sections 124.2139; 273.1315; 273.135, 
subdivision 5; and 273.1391, subdivision 4, are reenacted and 
are effective as amended in this article for taxes levied in 
1988 and thereafter, payable in 1989 and thereafter. 
    Sec. 84.  [INSTRUCTION TO REVISOR.] 
    The revisor of statutes shall change the words "assessed 
value" or "assessed valuation" wherever they appear in Minnesota 
Statutes to "gross tax capacity" in Minnesota Statutes 1988 and 
"net tax capacity" in Minnesota Statutes 1989 Supplement and 
subsequent editions of the statutes except section 275.011.  The 
revisor of statutes shall change the words "mill rate" wherever 
they appear in Minnesota Statutes to "tax capacity rate" in 
Minnesota Statutes 1988 and subsequent editions of the statutes 
except section 275.011. 
    Sec. 85.  [APPROPRIATION.] 
    $4,000,000 is appropriated to the commissioner of revenue 
from the general fund for the biennium ending June 30, 1989.  
This money is to be used by the commissioner to provide grants 
and other assistance to all counties for the purpose of 
developing, upgrading, and maintaining county property tax 
administrative data collection and processing systems and for 
the costs of administering this article.  
    Sec. 86.  [EFFECTIVE DATE.] 
    Sections 1 to 29, 31 to 79, 81, paragraphs (a) and (b), 82 
and 83 are effective for taxes levied in 1988, payable in 1989, 
and thereafter, except as otherwise provided.  Sections 30 and 
81, paragraph (c) are effective for taxes levied in 1989, 
payable in 1990, and thereafter.  Sections 80 and 85 are 
effective the day following final enactment. 

                               ARTICLE 6 

               PROPERTY TAX TECHNICAL AND ADMINISTRATION 
    Section 1.  Minnesota Statutes 1986, section 270.075, 
subdivision 2, is amended to read:  
    Subd. 2.  As soon as practicable and not later than 
November December 1 next following the levy of the tax, the 
commissioner shall give actual notice to the airline company of 
the assessed valuation and of the tax.  The taxes imposed under 
sections 270.071 to 270.079 shall become due and payable on 
January 1 following the levy thereof.  If any tax is not paid on 
the due date or, if an appeal is made pursuant to section 
270.076, within 60 days after notice of an increased tax, a late 
payment penalty of ten percent of the unpaid tax shall be 
assessed.  The unpaid tax and penalty shall bear interest at the 
rate specified in section 270.75 from the time such tax should 
have been paid until paid.  All interest and penalties shall be 
added to the tax and collected as a part thereof. 
    Sec. 2.  Minnesota Statutes 1987 Supplement, section 
272.01, subdivision 2, is amended to read:  
    Subd. 2.  (a) When any real or personal property which for 
any reason is exempt from ad valorem taxes, and taxes in lieu 
thereof, is leased, loaned, or otherwise made available and used 
by a private individual, association, or corporation in 
connection with a business conducted for profit, there shall be 
imposed a tax, for the privilege of so using or possessing such 
real or personal property, in the same amount and to the same 
extent as though the lessee or user was the owner of such 
property. 
    (b) The tax imposed by this subdivision shall not apply to 
(1) property leased or used by way of a concession in or 
relative to the use in whole or part of a public park, market, 
fairgrounds, port authority, economic development authority 
established under chapter 458C, municipal auditorium, airport 
owned by a city, town, county, or group thereof but not the 
airports owned or operated by the metropolitan airports 
commission or a city of over 50,000 population or an airport 
authority therein, municipal museum or municipal stadium or (2) 
property constituting or used as a public pedestrian ramp or 
concourse in connection with a public airport or (3) property 
constituting or used as a passenger check-in area or ticket sale 
counter, boarding area, or luggage claim area in connection with 
a public airport but not the airports owned or operated by the 
metropolitan airports commission or cities of over 50,000 
population or an airport authority therein.  Real estate owned 
by a municipality in connection with the operation of a public 
airport and leased or used for agricultural purposes shall not 
be exempt. 
    (c) Taxes imposed by this subdivision shall be due and 
payable as in the case of personal property taxes and such taxes 
shall be assessed to such lessees or users of real or personal 
property in the same manner as taxes assessed to owners of real 
or personal property, except that such taxes shall not become a 
lien against the property.  When due, the taxes shall constitute 
a debt due from the lessee or user to the state, township, city, 
county and school district for which the taxes were assessed and 
shall be collected in the same manner as personal property 
taxes.  If property subject to the tax imposed by this 
subdivision is leased or used jointly by two or more persons, 
each lessee or user shall be jointly and severally liable for 
payment of the tax. 
    Sec. 3.  Minnesota Statutes 1987 Supplement, section 
272.02, subdivision 1, is amended to read:  
    Subdivision 1.  All property described in this section to 
the extent herein limited shall be exempt from taxation: 
    (1) all public burying grounds; 
    (2) all public schoolhouses; 
    (3) all public hospitals; 
    (4) all academies, colleges, and universities, and all 
seminaries of learning; 
    (5) all churches, church property, and houses of worship; 
    (6) institutions of purely public charity except parcels of 
property containing structures and the structures described in 
section 273.13, subdivision 25, paragraph (c), clause (1) or 
(2), or paragraph (d), clause (2); 
    (7) all public property exclusively used for any public 
purpose; 
    (8) 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) railroad docks and wharves which are part of the 
operating property of a railroad company as defined in section 
270.80;  
    (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; and 
    (f) flight property as defined in section 270.071.  
    (9) Real and personal property used primarily for the 
abatement and control of air, water, or land pollution to the 
extent that it is so used, other than real property used 
primarily as a solid waste disposal site. 
    Any taxpayer requesting exemption of all or a portion of 
any equipment or device, or part thereof, operated primarily for 
the control or abatement of air or water pollution shall file an 
application with the commissioner of revenue.  The equipment or 
device shall meet standards, rules or criteria prescribed by the 
Minnesota pollution control agency, and must be installed or 
operated in accordance with a permit or order issued by that 
agency.  The Minnesota pollution control agency shall upon 
request of the commissioner furnish information or advice to the 
commissioner.  On determining that property qualifies for 
exemption, the commissioner shall issue an order exempting the 
property from taxation.  The equipment or device shall continue 
to be exempt from taxation as long as the permit issued by the 
Minnesota pollution control agency remains in effect. 
    (10) Wetlands.  For purposes of this subdivision, 
"wetlands" means (1) land described in section 105.37, 
subdivision 15, or (2) land which is mostly under water, 
produces little if any income, and has no use except for 
wildlife or water conservation purposes, provided it is 
preserved in its natural condition and drainage of it would be 
legal, feasible, and economically practical for the production 
of livestock, dairy animals, poultry, fruit, vegetables, forage 
and grains, except wild rice.  "Wetlands" shall include adjacent 
land which is not suitable for agricultural purposes due to the 
presence of the wetlands.  "Wetlands" shall not include woody 
swamps containing shrubs or trees, wet meadows, meandered water, 
streams, rivers, and floodplains or river bottoms.  Exemption of 
wetlands from taxation pursuant to this section shall not grant 
the public any additional or greater right of access to the 
wetlands or diminish any right of ownership to the wetlands. 
    (11) Native prairie.  The commissioner of the department of 
natural resources shall determine lands in the state which are 
native prairie and shall notify the county assessor of each 
county in which the lands are located.  Pasture land used for 
livestock grazing purposes shall not be considered native 
prairie for the purposes of this clause and section 273.116.  
Upon receipt of an application for the exemption and credit 
provided in this clause and section 273.116 for lands for which 
the assessor has no determination from the commissioner of 
natural resources, the assessor shall refer the application to 
the commissioner of natural resources who shall determine within 
30 days whether the land is native prairie and notify the county 
assessor of the decision.  Exemption of native prairie pursuant 
to this clause shall not grant the public any additional or 
greater right of access to the native prairie or diminish any 
right of ownership to it. 
    (12) Property used in a continuous program to provide 
emergency shelter for victims of domestic abuse, provided the 
organization that owns and sponsors the shelter is exempt from 
federal income taxation pursuant to section 501(c)(3) of the 
Internal Revenue Code of 1986, as amended through December 31, 
1986, notwithstanding the fact that the sponsoring organization 
receives funding under section 8 of the United States Housing 
Act of 1937, as amended. 
    (13) If approved by the governing body of the municipality 
in which the property is located, property not exceeding one 
acre which is owned and operated by any senior citizen group or 
association of groups that in general limits membership to 
persons age 55 or older and is organized and operated 
exclusively for pleasure, recreation, and other nonprofit 
purposes, no part of the net earnings of which inures to the 
benefit of any private shareholders; provided the property is 
used primarily as a clubhouse, meeting facility or recreational 
facility by the group or association and the property is not 
used for residential purposes on either a temporary or permanent 
basis. 
    (14) To the extent provided by section 295.44, real and 
personal property used or to be used primarily for the 
production of hydroelectric or hydromechanical power on a site 
owned by the state or a local governmental unit which is 
developed and operated pursuant to the provisions of section 
105.482, subdivisions 1, 8, and 9. 
    (15) If approved by the governing body of the municipality 
in which the property is located, and if construction is 
commenced after June 30, 1983:  
    (a) a "direct satellite broadcasting facility" operated by 
a corporation licensed by the federal communications commission 
to provide direct satellite broadcasting services using direct 
broadcast satellites operating in the 12-ghz. band; and 
    (b) a "fixed satellite regional or national program service 
facility" operated by a corporation licensed by the federal 
communications commission to provide fixed satellite-transmitted 
regularly scheduled broadcasting services using satellites 
operating in the 6-ghz. band. 
An exemption provided by paragraph (15) shall apply for a period 
not to exceed five years.  When the facility no longer qualifies 
for exemption, it shall be placed on the assessment rolls as 
provided in subdivision 4.  Before approving a tax exemption 
pursuant to this paragraph, the governing body of the 
municipality shall provide an opportunity to the members of the 
county board of commissioners of the county in which the 
facility is proposed to be located and the members of the school 
board of the school district in which the facility is proposed 
to be located to meet with the governing body.  The governing 
body shall present to the members of those boards its estimate 
of the fiscal impact of the proposed property tax exemption.  
The tax exemption shall not be approved by the governing body 
until the county board of commissioners has presented its 
written comment on the proposal to the governing body, or 30 
days has passed from the date of the transmittal by the 
governing body to the board of the information on the fiscal 
impact, whichever occurs first. 
    (16) Real and personal property owned and operated by a 
private, nonprofit corporation exempt from federal income 
taxation pursuant to United States Code, title 26, section 
501(c)(3), primarily used in the generation and distribution of 
hot water for heating buildings and structures.  
    (17) Notwithstanding section 273.19, state lands that are 
leased from the department of natural resources under section 
92.46. 
    (18) Electric power distribution lines and their 
attachments and appurtenances, that are used primarily for 
supplying electricity to farmers at retail.  
    (19) Transitional housing facilities.  "Transitional 
housing facility" means a facility that meets the following 
requirements.  (i) It provides temporary housing to parents and 
children who are receiving AFDC or parents of children who are 
temporarily in foster care.  (ii) It has the purpose of 
reuniting families and enabling parents to advance their 
education, get job training, or become employed in jobs that 
provide a living wage.  (iii) It provides support services such 
as child care, work readiness training, and career development 
counseling; and a self-sufficiency program with periodic 
monitoring of each resident's progress in completing the 
program's goals.  (iv) It provides services to a resident of the 
facility for at least six months but no longer than one year, 
except residents enrolled in an educational or vocational 
institution or job training program.  These residents may 
receive services during the time they are enrolled but in no 
event longer than four years.  (v) It is sponsored by an 
organization that has received a grant under section 256.7365 
for the biennium ending June 30, 1989, for the purposes of 
providing the services in items (i) to (iv).  (vi) It is 
sponsored by an organization that is exempt from federal income 
tax under section 501(c)(3) of the Internal Revenue Code of 
1986, as amended through December 31, 1987.  This exemption 
applies notwithstanding the fact that the sponsoring 
organization receives financing by a direct federal loan or 
federally insured loan or a loan made by the Minnesota housing 
finance agency under the provisions of either Title II of the 
National Housing Act or the Minnesota housing finance agency law 
of 1971 or rules promulgated by the agency pursuant to it, and 
notwithstanding the fact that the sponsoring organization 
receives funding under Section 8 of the United States Housing 
Act of 1937, as amended. 
    Sec. 4.  Minnesota Statutes 1987 Supplement, section 
272.121, is amended to read:  
    272.121 [CURRENT TAX ON DIVIDED PARCELS.] 
    Subdivision 1.  [CERTIFICATION OF PAYMENT.] Except as 
provided in subdivision 2, if a deed or other instrument conveys 
a parcel of land that is less than a whole parcel of land as 
described in the current tax list, the county auditor shall not 
transfer or divide the land in the auditor's official records, 
and the county recorder shall not file and record the 
instrument, unless the instrument of conveyance contains a 
certification by the county treasurer that the taxes due in the 
current tax year for the whole parcel have been paid.  This 
certification is in addition to the certification for delinquent 
tax required by section 272.12.  
    Subd. 2.  [EXCEPTIONS.] No certification of current tax 
paid is required when the land is being conveyed to the federal 
government, the state, or a home rule charter or statutory city 
or any other political subdivision, or for any sheriff's or 
referee's certificate of sale or other instrument if a 
certification of delinquent tax for the instrument is not 
required under section 272.12. 
    Sec. 5.  Minnesota Statutes 1986, section 273.112, 
subdivision 3, is amended to read:  
    Subd. 3.  Real estate shall be entitled to valuation and 
tax deferment under this section only if it is: 
    (a) actively and exclusively devoted to golf, skiing or 
archery or firearms range recreational use or uses and other 
recreational uses carried on at the establishment; 
    (b) five acres in size or more, except in the case of an 
archery or firearms range; 
    (c)(1) operated by private individuals and open to the 
public; or 
    (2) operated by firms or corporations for the benefit of 
employees or guests; or 
    (3) operated by private clubs having a membership of 50 or 
more, provided that the club does not discriminate in membership 
requirements or selection on the basis of sex; and 
    (d) made available, in the case of real estate devoted to 
golf, for use without discrimination on the basis of sex during 
the time when the facility is open to use by the public or by 
members, except that use for golf may be restricted on the basis 
of sex no more frequently than one, or part of one, weekend each 
calendar month for each sex and no more than two, or part of 
two, weekdays each week for each sex.  
    If a golf club membership allows use of golf course 
facilities by more than one adult per membership, the use must 
be equally available to all adults entitled to use of the golf 
course under the membership, except that use may be restricted 
on the basis of sex as permitted in this section.  Memberships 
that permit play during restricted times may be allowed only if 
the restricted times apply to all adults using the membership. 
    A golf club may have or create an individual membership 
category which entitles a member for a reduced rate to play 
during restricted hours as established by the club.  The club 
must have on record a written request by the member for such 
membership. 
    For purposes of this subdivision and subdivision 7a, 
discrimination means a pattern or course of conduct and not 
linked to an isolated incident. 
    Sec. 6.  Minnesota Statutes 1986, section 273.112, 
subdivision 6, is amended to read:  
    Subd. 6.  Application for deferment of taxes and assessment 
under this section shall be made at least 60 days prior to 
January 2 of each year.  Such application shall be filed with 
the assessor of the taxing district in which the real property 
is located on such form as may be prescribed by the commissioner 
of revenue.  The assessor may require proof by affidavit or 
other written verification that the property qualifies under 
subdivision 3.  In the case of property operated by private 
clubs pursuant to subdivision 3, clause (c)(3), in order to 
qualify for valuation and tax deferment under this section, the 
taxpayer must submit to the assessor proof by affidavit or other 
written verification that the bylaws or rules and regulations of 
the club meet the eligibility requirements provided under this 
section.  The signed affidavit or other written verification 
shall be sufficient demonstration of eligibility for the 
assessor unless the county attorney determines otherwise. 
    The county assessor shall refer any question regarding the 
eligibility for valuation and deferment under this section to 
the county attorney for advice and opinion under section 
388.051, subdivision 1.  Upon request of the county attorney, 
the taxpayer shall furnish information that the county attorney 
considers necessary in order to determine eligibility under this 
section. 
    Real estate is not entitled to valuation and deferment 
under this section unless the county assessor has filed with the 
assessor's tax records prior to October 16 a statement that the 
application has been accepted. 
    Sec. 7.  Minnesota Statutes 1987 Supplement, section 
273.1195, is amended to read:  
    273.1195 [STATE PAID SMALL BUSINESS PROPERTY TAX TRANSITION 
CREDIT.] 
    For property taxes payable in 1988 only, class 3a 
commercial industrial property is eligible for a state paid 
small business transition property tax credit if the payable 
1988 property taxes on the first $120,000 of market value of the 
property exceed three percent of the January 2, 1987, market 
value.  The credit is equal to 50 percent of the property tax 
amount which is in excess of three percent of market value.  
Only the first $120,000 of market value of a qualifying parcel 
and the taxes attributable to the first $120,000 of market value 
are eligible for the computation of this credit.  Only a parcel 
that qualifies for the 28 percent assessment ratio contained in 
section 273.13, subdivision 24, paragraph (a), qualifies for the 
credit provided in this section.  Only the market value and 
property tax attributable to the part of the parcel that is 
class 3a must be used in computing the credit provided in this 
section. 
    In the case of taxes paid in installments pursuant to 
section 279.01, subdivision 1, the credit under this section 
must be deducted from the second one-half installment payable 
October 15.  The amount of the reduction must be reported to the 
commissioner of revenue as part of the abstracts of tax lists 
required to be filed with the commissioner under section 275.29. 
    There is annually appropriated from the general fund to the 
commissioners of revenue and education the amount necessary to 
replace the revenue lost to local units of government and school 
districts as a result of the reduction in property taxes 
provided in this section.  The payment amounts must be 
determined and the installments paid under the provisions of 
sections 273.13, subdivision 15a, and 273.1392. 
    Sec. 8.  Minnesota Statutes 1986, section 273.121, is 
amended to read:  
    273.121 [VALUATION OF REAL PROPERTY, NOTICE.] 
    Any county assessor or city assessor having the powers of a 
county assessor, valuing or classifying taxable real property 
shall in each year notify those persons whose property is to be 
assessed or reclassified that year if the person's address is 
known to the assessor, otherwise the occupant of the property.  
In the case of property owned by a married couple in joint 
tenancy or tenancy in common, the assessor shall not deny 
homestead treatment in whole or in part if only one of the 
spouses is occupying the property and the other spouse is absent 
due to divorce or separation, or is a resident of a nursing home 
or a boarding care facility.  The notice shall be in writing and 
shall be sent by ordinary mail at least ten days before the 
meeting of the local board of review or equalization.  It shall 
contain the amount of the valuation in terms of market value, 
the new classification, the assessor's office address, and the 
dates, places, and times set for the meetings of the local board 
of review or equalization and the county board of equalization.  
If the assessment roll is not complete, the notice shall be sent 
by ordinary mail at least ten days prior to the date on which 
the board of review has adjourned.  The assessor shall attach to 
the assessment roll a statement that the notices required by 
this section have been mailed.  Any assessor who is not provided 
sufficient funds from the assessor's governing body to provide 
such notices, may make application to the commissioner of 
revenue to finance such notices.  The commissioner of revenue 
shall conduct an investigation and, if satisfied that the 
assessor does not have the necessary funds, issue a 
certification to the commissioner of finance of the amount 
necessary to provide such notices.  The commissioner of finance 
shall issue a warrant for such amount and shall deduct such 
amount from any state payment to such county or municipality.  
The necessary funds to make such payments are hereby 
appropriated.  Failure to receive the notice shall in no way 
affect the validity of the assessment, the resulting tax, the 
procedures of any board of review or equalization, or the 
enforcement of delinquent taxes by statutory means. 
    Sec. 9.  Minnesota Statutes 1986, section 273.124, 
subdivision 1, is amended to read:  
    Subdivision 1.  [GENERAL RULE.] Residential real estate 
that is occupied and used for the purposes of a homestead by its 
owner, who must be a Minnesota resident, is a homestead.  Dates 
for establishment of a homestead and homestead treatment 
provided to particular types of property are as provided in this 
section.  
    The assessor shall require proof, by affidavit or 
otherwise, of the facts upon which classification as a homestead 
may be determined. 
    For purposes of this section, homestead property shall 
include property which is used for purposes of the homestead but 
is separated from the homestead by a road, street, lot, 
waterway, or other similar intervening property.  The term "used 
for purposes of the homestead" shall include but not be limited 
to uses for gardens, garages, or other outbuildings commonly 
associated with a homestead, but shall not include vacant land 
held primarily for future development.  In order to receive 
homestead treatment for the noncontiguous property, the owner 
shall apply for it to the assessor by July 1 of the year when 
the treatment is initially sought.  After initial qualification 
for the homestead treatment, additional applications for 
subsequent years are not required. 
    In the case of property owned by a married couple in joint 
tenancy or tenancy in common, the assessor must not deny 
homestead treatment in whole or in part if only one of the 
spouses is occupying the property and the other spouse is absent 
due to divorce or separation, or is a resident of a nursing home 
or a boarding care facility.  
    If an individual is purchasing property with the intent of 
claiming it as a homestead, and is required by the terms of the 
financing agreement to have one or both parents shown on the 
deed as coowners, the assessor shall allow a full homestead 
classification and extend full homestead credit.  This provision 
only applies to first time purchasers, whether married or 
single, or to a person who had previously been married and is 
purchasing as a single individual for the first time.  The 
application for homestead benefits must be on a form prescribed 
by the commissioner and must contain the data necessary for the 
assessor to determine if full homestead benefits are warranted. 
    Sec. 10.  Minnesota Statutes 1986, section 273.124, 
subdivision 6, is amended to read:  
    Subd. 6.  [LEASEHOLD COOPERATIVES.] When one or more 
dwellings or one or more buildings which each contain several 
dwelling units is owned by a nonprofit corporation subject to 
the provisions of chapter 317 or a limited partnership which 
corporation or partnership operates the property in conjunction 
with a cooperative association, homestead treatment may be 
claimed by the cooperative association on behalf of the members 
of the cooperative for each dwelling unit occupied by a member 
of the cooperative.  The cooperative association must provide 
the assessor with the social security numbers of those members.  
To qualify for the treatment provided by this subdivision, the 
following conditions must be met:  (a) the cooperative 
association must be organized under sections 308.05 to 308.18; 
(b) the cooperative association must have a lease for occupancy 
of the property for a term of at least 20 years; (c) to the 
extent permitted under state or federal law, the cooperative 
association must have a right under a written agreement with the 
owner to purchase the property if the owner proposes to sell it; 
if the cooperative association does not purchase the property 
when it is offered for sale, the owner may not subsequently sell 
the property to another purchaser at a price lower than the 
price at which it was offered for sale to the cooperative 
association unless the cooperative association approves the 
sale; and (d) if a limited partnership owns the property, it 
must include as the managing general partner either the 
cooperative association or a nonprofit organization operating 
under the provisions of chapter 317.  Homestead treatment must 
be afforded to units occupied by members of the cooperative 
association and the units must be assessed as provided in 
subdivision 3, provided that any unit not so occupied shall be 
classified and assessed pursuant to the appropriate class.  No 
more than three acres of land may, for assessment purposes, be 
included with each dwelling unit that qualifies for homestead 
treatment under this subdivision. 
    Sec. 11.  Minnesota Statutes 1986, section 277.05, is 
amended to read:  
    277.05 [SHERIFF TO FILE LIST OF UNCOLLECTED TAXES.] 
    If the sheriff is unable, for want of goods and chattels 
whereon to levy, to collect by a distress, or otherwise, the 
taxes, or any part thereof, assessed upon the personal property 
of any persons, the sheriff shall file with the court 
administrator of the district court, on September first 
following, a list of such taxes, with an affidavit of the 
sheriff, or of the deputy sheriff entrusted with the collection 
thereof, stating that the affiant has made diligent search and 
inquiry for goods and chattels from which to collect such taxes, 
and is unable to collect the same.  The list of such taxes as 
they apply to manufactured homes shall be filed on December 1.  
The sheriff shall note on the margin of such list the place to 
which any delinquent taxpayer may have removed, with the date of 
removal, if known.  At the time of filing the list the sheriff 
shall also return all the warrants with endorsements thereon 
showing the doings of the sheriff or deputy in the premises, and 
the court administrator shall file and preserve the same.  On or 
before September tenth thereafter, the court administrator shall 
deliver such list and affidavit to the county treasurer, who 
shall, by comparison of such list with the tax duplicates in the 
treasurer's office, ascertain whether or not all personal 
property taxes reported by the treasurer to the court 
administrator as delinquent, except those included in such list, 
have been paid into the treasurer's office, and shall attach to 
the list a certificate stating whether or not all taxes reported 
by the treasurer to the court administrator as delinquent and 
not included in the list have been received, and stating the 
items of such taxes, if any, as have been received.  The court 
administrator shall deliver such list and affidavit as they 
apply to manufactured homes on or before December 10.  The 
treasurer shall deliver such list and affidavit, with the 
certificate attached, to the county board at its first session 
thereafter, which shall cancel such taxes as it is satisfied 
cannot be collected.  A copy of the tax list so revised, and 
also a separate list of the taxes so canceled, shall be included 
in the records of the proceedings of the board, and published in 
full, as a part of the proceedings.  
    Sec. 12.  Minnesota Statutes 1986, section 277.06, is 
amended to read:  
    277.06 [CITATION TO DELINQUENTS; DEFAULT JUDGMENT.] 
    On October 20, or within ten days after the adjournment of 
the county board, whichever occurs first, the county auditor 
shall file a copy of such revised list with the court 
administrator of the district court, and.  The county auditor 
shall file a copy of the revised list as it applies to 
manufactured homes on January 20.  Within ten days 
thereafter after the list has been filed, the court 
administrator shall issue a citation to each delinquent named in 
the list, stating the amount of tax and penalty, and requiring 
such delinquent to appear on a day to be set by the district 
court in the county, appointed to be held at a time not less 
than 30 days after the issuance of such citation, and show 
cause, if any there be, why the delinquent should not pay the 
tax and penalty.  The citation shall be delivered for service to 
the sheriff of the county where such person may at the time 
reside or be.  If such person, after service of the citation, 
fails to pay such tax, penalty, and costs to the sheriff before 
the first day of the term, or on such day to show cause as 
aforesaid, the court shall direct judgment against the person 
for the amount of such tax, penalty, and costs.  When unable to 
serve the citation, the sheriff shall return the same to the 
court administrator, with a return thereto to that effect, and 
thereupon, or if the court decides that the service of such 
citation made or attempted to be made, or the issuance thereof 
by the court administrator, was illegal, the court administrator 
shall issue another like citation, requiring such delinquent to 
appear on the first day of the next general term to be held in 
the county, and show cause as aforesaid, and if the delinquent 
fails to pay or to show cause, the court shall direct judgment 
as aforesaid.  Whenever the sheriff has been unable to serve any 
such citation theretofore issued in any year or years, or 
whenever the court decides that the service of any such citation 
theretofore made or attempted to be made, or the issuance 
thereof by the court administrator, was illegal, the court 
administrator shall issue another like citation requiring such 
delinquent to appear, as in the case last provided, and with 
like effect; provided, that all citations other than the first 
shall be issued only on the request of the county attorney. 
    Sec. 13.  Minnesota Statutes 1987 Supplement, section 
279.01, subdivision 1, is amended to read:  
    Subdivision 1.  Except as provided in subdivision 3, on May 
16, of each year, with respect to property actually occupied and 
used as a homestead by the owner of the property, a penalty of 
three percent shall accrue and thereafter be charged upon all 
unpaid taxes on real estate on the current lists in the hands of 
the county treasurer, and a penalty of seven percent on 
nonhomestead property, except that this penalty shall not accrue 
until June 1 of each year on commercial use real property used 
for seasonal residential recreational purposes and classified as 
class 4d or 4c, and on other commercial use real property 
classified as class 3a, provided that over 60 percent of the 
gross income earned by the enterprise on the class 3a property 
is earned during the months of May, June, July, and August.  Any 
property owner of such class 3a property who pays the first half 
of the tax due on the property after May 15 and before June 1 
shall attach an affidavit to the payment attesting to compliance 
with the income provision of this subdivision.  Thereafter, for 
both homestead and nonhomestead property, on the 16th first day 
of each month, up to and including October 16 1 following, an 
additional penalty of one percent for each month shall accrue 
and be charged on all such unpaid taxes.  When the taxes against 
any tract or lot exceed $50, one-half thereof may be paid prior 
to May 16; and, if so paid, no penalty shall attach; the 
remaining one-half shall be paid at any time prior to October 16 
following, without penalty; but, if not so paid, then a penalty 
of four percent shall accrue thereon for homestead property and 
a penalty of four percent on nonhomestead property.  Thereafter, 
for homestead property, on the 16th day of each month up to and 
including December 16 first day of November and December 
following, an additional penalty of two percent for each month 
shall accrue and be charged on all such unpaid taxes.  
Thereafter, for nonhomestead property, on the 16th day of each 
month up to and including December 16 first day of November and 
December following, an additional penalty of four percent for 
each month shall accrue and be charged on all such unpaid 
taxes.  If one-half of such taxes shall not be paid prior to May 
16, the same may be paid at any time prior to October 16, with 
accrued penalties to the date of payment added, and thereupon no 
penalty shall attach to the remaining one-half until October 16 
following.  
    A county may provide by resolution that in the case of a 
property owner that has multiple tracts or parcels with 
aggregate taxes exceeding $50, payments may be made in 
installments as provided in this subdivision. 
    The county treasurer may accept payments of more or less 
than the exact amount of a tax installment due.  If the accepted 
payment is less than the amount due, payments must be applied 
first to the penalty accrued for the year the payment is made.  
Acceptance of partial payment of tax does not constitute a 
waiver of the minimum payment required as a condition for filing 
an appeal under section 278.03 or any other law, nor does it 
affect the order of payment of delinquent taxes under section 
280.39. 
    Sec. 14.  Minnesota Statutes 1986, section 279.01, 
subdivision 3, is amended to read:  
    Subd. 3.  In the case of class 1b agricultural homestead, 
class 2a agricultural homestead property, and class 2c 
agricultural nonhomestead property, no penalties shall attach to 
the second one-half property tax payment as provided in this 
section if paid by November 15.  Thereafter for class 1b 
agricultural homestead and class 2a homestead property, on 
November 16 following, a penalty of six percent shall accrue and 
be charged on all such unpaid taxes and on December 16 1 
following, an additional two percent shall be charged on all 
such unpaid taxes.  Thereafter for class 2c agricultural 
nonhomestead property, on November 16 following, a penalty of 
eight percent shall accrue and be charged on all such unpaid 
taxes and on December 16 1 following, an additional four percent 
shall be charged on all such unpaid taxes. 
    If the owner of class 1b agricultural homestead, class 2a, 
or class 2c agricultural property receives a consolidated 
property tax statement that shows only an aggregate of the taxes 
and special assessments due on that property and on other 
property not classified as class 1b agricultural homestead, 
class 2a, or class 2c agricultural property, the aggregate tax 
and special assessments shown due on the property by the 
consolidated statement will be due on November 15 provided that 
at least 50 percent of the property's market value is classified 
class 1b agricultural, class 2a, or class 2c agricultural. 
     Sec. 15.  [375.1691] [JUDICIAL ORDER AFTER BUDGET 
PREPARATION.] 
     Notwithstanding any law to the contrary, a judicial order 
compelling payment out of county funds shall not be paid unless 
approved by the county board, if a budget request for the item 
was not submitted to the county board prior to adoption of the 
budget in effect for the fiscal year.  If the county board 
refuses to approve payment, the order may be paid in the first 
fiscal year for which a budget is approved after receipt of the 
order.  This section does not apply to a judgment or other award 
against the county that is a result of litigation to which the 
county or a county official in an official capacity was a party. 
    Sec. 16.  Minnesota Statutes 1986, section 375.192, 
subdivision 1, is amended to read:  
    Subdivision 1.  Notwithstanding section 270.07, upon 
written application by the owner of the property, the county 
board may grant a reduction, for the current year, of the 
assessed valuation of any real property in that county which 
erroneously has been classified, for tax purposes, as 
nonhomestead property, as is necessary to give it the assessed 
valuation which it would have received if it had been classified 
correctly.  The application shall be made on a form prescribed 
by the commissioner of revenue.  It shall include the social 
security number of the applicant and a statement of facts of 
ownership and occupancy.  The social security number of the 
property owner is private data on individuals as defined by 
section 13.02, subdivision 12.  It shall be sworn to by the 
owner of the property before an officer authorized to take 
acknowledgments.  Before it is acted upon by the county board, 
the application shall be referred to the county assessor, or if 
the property is located in a city of the first class having a 
city assessor, to the city assessor, who shall investigate the 
facts and attach a report of the investigation to the 
application. 
    With respect to abatements relating to the current year's 
tax processed through June 30, the county auditor shall notify 
the commissioner of revenue on or before July 31 of that same 
year of all applications granted pursuant to this subdivision.  
With respect to abatements relating to the current year's tax 
processed after June 30 through the balance of the year, the 
county auditor shall notify the commissioner of revenue on or 
before the following January 31 of all applications granted 
pursuant to this subdivision.  The form submitted by the county 
auditor shall be prescribed by the commissioner of revenue and 
shall contain the information which the commissioner deems 
necessary. 
    Sec. 17.  Minnesota Statutes 1987 Supplement, section 
475.61, subdivision 3, is amended to read: 
    Subd. 3.  [IRREVOCABILITY.] Tax levies so made and filed 
shall be irrevocable, except as provided in this subdivision. 
    In each year when there is on hand any excess amount in the 
debt redemption fund of a school district at the time the 
district makes its property tax levies, the amount of the excess 
shall be certified by the school board to the commissioner of 
education who shall compute the reduced tax levy, after 
adjustment for the homestead credit replacement aid paid 
pursuant to section 273.1394, the agricultural credit 
replacement aid paid pursuant to section 273.1395, and the tax 
base adjustment pursuant to section 273.1396.  The commissioner 
of education shall certify the adjusted reduced tax levy to the 
county auditor and the auditor shall reduce the tax levy 
otherwise to be included in the rolls next prepared by the 
amount certified, unless the school board determines that the 
excess amount is necessary to ensure the prompt and full payment 
of the obligations and any call premium on the obligations, or 
will be used for redemption of the obligations in accordance 
with their terms.  An amount shall be presumed to be excess for 
a school district in the amount that it, together with the levy 
required by subdivision 1, will exceed 106 percent of the amount 
needed to meet when due the principal and interest payments on 
the obligations due before the second following July 1.  This 
subdivision shall not limit a school board's authority to 
specify a tax levy in a higher amount if necessary because of 
anticipated tax delinquency or for cash flow needs to meet the 
required payments from the debt redemption fund.  
    If the governing body, including the governing body of a 
school district, in any year makes an irrevocable appropriation 
to the debt service fund of moneys actually on hand or if there 
is on hand any excess amount in the debt service fund, the 
recording officer may certify to the county auditory the fact 
and amount thereof and the auditor shall reduce by the amount so 
certified the amount otherwise to be included in the rolls next 
thereafter prepared.  
    Sec. 18.  Minnesota Statutes 1986, section 477A.015, is 
amended to read:  
    477A.015 [PAYMENT DATES.] 
    The commissioner of revenue shall make the payments of 
local government aid to affected taxing authorities in two 
installments on July 15 20 and December 15 annually.  
    The commissioner may pay all or part of the payment due on 
December 15 at any time after August 15 upon the request of a 
city that requests such payment as being necessary for meeting 
its cash flow needs. 
    Sec. 19.  [ADJUSTMENT FOR CREDITS.] 
    Subdivision 1.  A county auditor may make a final 
certification of prior year adjustments not previously claimed 
for wetlands credit and reimbursement, native prairie credit and 
reimbursement, and the small business credit in the 1989 
abstract of tax lists.  The commissioner of revenue shall review 
the certifications to determine their accuracy and make the 
changes deemed necessary.  After they have been reviewed, the 
commissioner shall include these prior year adjustments in the 
1989 aid payments. 
    Subd. 2.  A county auditor may make a final certification 
of prior year adjustments not previously claimed for homestead 
credit and agricultural credit in the 1990 abstract of tax 
lists.  The commissioner of revenue shall review the 
certifications to determine their accuracy and make the changes 
deemed necessary.  After they have been reviewed, the 
commissioner shall include these prior year adjustments in the 
1990 aid payments. 
    Sec. 20.  Laws 1987, chapter 268, article 6, section 54, is 
amended to read:  
    Sec. 54.  [EFFECTIVE DATE.] 
    Except where provided otherwise, sections 1 to 13, and 15 
to 53 are effective for taxes levied in 1988, payable in 1989, 
and thereafter.  Section 14 is effective for taxes payable in 
1987 and thereafter. 
    Sec. 21.  [REPEALER.] 
    Minnesota Statutes 1986, section 275.035, is repealed. 
    Sec. 22.  [EFFECTIVE DATE.] 
    Sections 2, 3, 9, 10, 13, 14, and 17 are effective for 
taxes levied in 1988 and thereafter, payable in 1989 and 
thereafter.  
    Sections 4 and 20 are effective the day following final 
enactment. 
    Sections 5 and 6 are effective for assessment year 1988 and 
thereafter, taxes payable in 1989 and thereafter. 
Notwithstanding Minnesota Statutes, section 273.112, subdivision 
6, in order to qualify for the valuation and tax deferment for 
the 1988 assessment, the taxpayer of the property operated by 
private clubs under Minnesota Statutes, section 273.112, 
subdivision 3, clause (c)(3), must submit an affidavit or other 
written verification to the assessor by September 1, 1988, 
showing that the bylaws or rules and regulations of the private 
club meet the eligibility requirements of section 5 by September 
1, 1988. 
    Section 7 is effective only for taxes payable in 1988. 

                               ARTICLE 7 

                               ASSESSORS 
    Section 1.  [270.185] [REASSESSMENT FUND; COMPENSATION.] 
    Subdivision 1.  A permanent reassessment revolving fund of 
$250,000 is created.  $250,000 is appropriated from the general 
fund to the permanent reassessment revolving fund.  The fund is 
annually appropriated to the commissioner of revenue for the 
purposes of this section. 
    Subd. 2.  Each special assessor or deputy appointed under 
sections 270.11, subdivision 3, or 270.16 shall be compensated 
from the revolving fund for costs of assessment in an amount 
fixed by the commissioner.  The commissioner shall certify the 
amounts to the commissioner of finance who shall make payment 
from the revolving fund.  Each county shall reimburse the 
revolving fund within two years after the expenses are paid.  
The commissioner shall notify each county auditor of the 
reimbursable amount and the auditor shall levy a tax upon all 
taxable property in the assessment district or districts where 
the reassessment was made to pay the expenses.  The amounts 
reimbursed shall be deposited in the revolving fund and are 
annually appropriated for its purposes. 
    Sec. 2.  Minnesota Statutes 1986, section 270.41, is 
amended to read:  
    270.41 [BOARD OF ASSESSORS.] 
    (a) A board of assessors is hereby created.  The board 
shall be for the purpose of establishing, conducting, reviewing, 
supervising, coordinating or approving courses in assessment 
practices, and establishing criteria for determining assessor's 
qualifications.  The board shall also have authority and 
responsibility to consider other matters relating to assessment 
administration brought before it by the commissioner of 
revenue.  The board may grant, renew, suspend, or revoke an 
assessor's license.  The board shall consist of nine members, 
who shall be appointed by the commissioner of revenue, in the 
manner provided herein.  
    1.  Two from the department of revenue, 
    2.  Two county assessors, 
    3.  Two assessors who are not county assessors, one of whom 
shall be a township assessor, and 
    4.  One from the private appraisal field holding a 
professional appraisal designation, 
    5.  Two public members as defined by section 214.02.  
    The appointment provided in 2 and 3 may be made from two 
lists of not less than three names each, one submitted to the 
commissioner of revenue by the Minnesota association of 
assessing officers or its successor organization containing 
recommendations for the appointment of appointees described in 
2, and one by the Minnesota association of assessors, inc. or 
its successor organization containing recommendations for the 
appointees described in 3.  The lists must be submitted 30 days 
before the commencement of the term.  In the case of a vacancy, 
a new list shall be furnished to the commissioner by the 
respective organization immediately.  A member of the board who 
shall no longer be engaged in the capacity listed above shall 
automatically be disqualified from membership in the board. 
    The board shall annually elect a chair and a secretary of 
the board. 
    (b) The board may refuse to grant or renew, or may suspend 
or revoke, a license of an applicant or licensee for any of the 
following causes or acts: 
    (1) failure to complete required training; 
    (2) inefficiency or neglect of duty; 
    (3) "unprofessional conduct" which means knowingly 
neglecting to perform a duty required by law, or violation of 
the laws of this state relating to the assessment of property or 
unlawfully exempting property or knowingly and intentionally 
listing property on the tax list at substantially less than its 
market value or the level required by law in order to gain favor 
or benefit, or knowingly and intentionally misclassifying 
property in order to gain favor or benefit; or 
    (4) conviction of a crime involving moral turpitude; or 
    (5) any other cause or act that in the board's opinion 
warrants a refusal to issue or suspension or revocation of a 
license. 
    (c) The board of assessors may adopt rules under chapter 
14, defining or interpreting grounds for refusing to grant or 
renew, and for suspending or revoking a license under this 
section.  An action of the board of assessors in refusing to 
grant or renew a license or in suspending or revoking a license 
is subject to review in accordance with chapter 14.  
    Sec. 3.  Minnesota Statutes 1987 Supplement, section 
270.485, is amended to read:  
    270.485 [SENIOR ACCREDITATION.] 
    The legislature finds that the property tax system would be 
enhanced by requiring that every county assessor and senior 
appraiser in the department of revenue's property tax review 
local government services division obtain senior accreditation 
from the state board of assessors.  By January 1, 1989 1990, or 
in the case of a county assessor within one year of the first 
appointment under section 273.061, whichever is later, every 
county assessor and senior appraiser, including the department's 
regional representatives, must obtain senior accreditation from 
the state board of assessors.  The board shall provide the 
necessary courses or training.  If a department senior appraiser 
or regional representative fails to obtain senior accreditation 
by January 1, 1989 1990, the failure shall be grounds for 
dismissal, disciplinary action, or corrective action.  Except as 
provided in section 273.061, subdivision 2, paragraph (c), after 
December 30, 1988 1989, the commissioner must not approve the 
appointment of a county assessor who is not senior accredited by 
the state board of assessors.  No employee hired by the 
commissioner as a senior appraiser or regional representative 
after June 30, 1987, shall attain permanent status until the 
employee obtains senior accreditation. 
    Sec. 4.  Minnesota Statutes 1986, section 273.01, is 
amended to read:  
    273.01 [LISTING AND ASSESSMENT, TIME.] 
    All real property subject to taxation shall be listed and 
at least one-fourth of the parcels listed shall be appraised 
each year with reference to their value on January 2 preceding 
the assessment so that each parcel shall be reappraised at 
maximum intervals of four years.  All real property becoming 
taxable in any year shall be listed with reference to its value 
on January 2 of that year.  Except for the corrections permitted 
herein as provided in section 274.01, subdivision 1, all real 
property assessments shall be completed two weeks prior to the 
date scheduled for the local board of review or equalization and 
no valuations entered thereafter shall be of any force and 
effect.  In the event a valuation and classification is not 
placed on any real property by the dates scheduled for the local 
board of review or equalization the valuation and classification 
determined in the preceding assessment shall be continued in 
effect and the provisions of section 273.13 shall, in such case, 
not be applicable, except with respect to real estate which has 
been constructed since the previous assessment.  The county 
assessor or any assessor in any city of the first class may 
either before or after the dates specified herein correct any 
errors in valuation of any parcels of property, that may have 
been incurred in the assessment; provided, that in the case of 
such correction it increases the valuation of any parcel of 
property, the assessor shall notify the owner of record or the 
person to whom the tax statement is mailed.  Not more than two 
percent of the total number of parcels in the assessor's 
jurisdiction may be corrected after the dates specified herein 
and in the event of any corrections in excess of the authorized 
number of such corrections, all corrections shall be void.  Real 
property containing iron ore, the fee to which is owned by the 
state of Minnesota, shall, if leased by the state after January 
2 in any year, be subject to assessment for that year on the 
value of any iron ore removed under said lease prior to January 
2 of the following year.  Personal property subject to taxation 
shall be listed and assessed annually with reference to its 
value on January 2; and, if acquired on that day, shall be 
listed by or for the person acquiring it. 
    Sec. 5.  Minnesota Statutes 1986, section 273.05, 
subdivision 1, is amended to read:  
    Subdivision 1.  [APPOINTMENT OF TOWN AND CITY ASSESSORS.] 
Notwithstanding any other provision of law all town assessors 
shall be appointed by the town board, and notwithstanding any 
charter provisions to the contrary, all city assessors shall be 
appointed by the city council or other appointing authority as 
provided by law or charter.  Such assessors shall be residents 
of the state but need not be a resident of the town or city for 
which they are appointed.  They shall be selected and appointed 
because of their knowledge and training in the field of property 
taxation.  All town and statutory city assessors shall be 
appointed for indefinite terms.  The term of the town or city 
assessors may be terminated at any time by the town board or 
city council on charges by the commissioner of revenue of 
inefficiency or neglect of duty.  Vacancies in the office of 
town or city assessor shall be filled within 90 days by 
appointment of the respective appointing authority indicated 
above.  If the vacancy is not filled within 90 days, the office 
shall be terminated.  When a vacancy in the office of town or 
city assessor is not filled by appointment, and it is imperative 
that the office of assessor be filled, the county auditor shall 
appoint some resident of the county as assessor for such town or 
city.  The county auditor may appoint the county assessor as 
assessor for such town or city, in which case the town or city 
shall pay to the county treasurer the amount determined by the 
county auditor to be due for the services performed and expenses 
incurred by the county assessor in acting as assessor for such 
town or city.  The term of any town or statutory city assessor 
in a county electing in accordance with section 273.052 shall be 
terminated as provided in section 273.055. 
    The commissioner of revenue may recommend to the state 
board of assessors the nonrenewal, suspension, or revocation of 
an assessor's license as provided in sections 270.41 to 270.53.  
    Sec. 6.  Minnesota Statutes 1987 Supplement, section 
273.061, subdivision 1, is amended to read:  
    Subdivision 1.  [OFFICE CREATED; APPOINTMENT, 
QUALIFICATIONS.] Every county in this state shall have a county 
assessor.  The county assessor shall be appointed by the board 
of county commissioners and shall be a resident of this state.  
The assessor shall be selected and appointed because of 
knowledge and training in the field of property taxation and 
appointment shall be approved by the commissioner of revenue 
before the same shall become effective.  Upon receipt by the 
county commissioners of the commissioner of revenue's refusal to 
approve an appointment, the term of the appointee shall 
terminate at the end of that day.  Notwithstanding any law to 
the contrary, a county assessor must have senior accreditation 
from the state board of assessors by January 1, 1989 1990, or 
within one year of the assessor's first appointment under this 
section, whichever is later. 
    Sec. 7.  Minnesota Statutes 1986, section 273.061, 
subdivision 2, is amended to read:  
    Subd. 2.  [TERM; VACANCY.] (a) The terms of county 
assessors appointed under this section shall be four years.  A 
new term shall begin on January 1 of every fourth year after 
1973.  When any vacancy in the office occurs, the board of 
county commissioners, within 30 days thereafter, shall fill the 
same by appointment for the remainder of the term, following the 
procedure prescribed in subdivision 1.  The term of the county 
assessor may be terminated by the board of county commissioners 
at any time, on charges of inefficiency or neglect of duty by 
the commissioner of revenue.  If the board of county 
commissioners does not intend to reappoint a county assessor who 
has been certified by the state board of assessors, the board 
shall present written notice to the county assessor not later 
than 90 days prior to the termination of the assessor's term, 
that it does not intend to reappoint the assessor.  If written 
notice is not timely made, the county assessor will 
automatically be reappointed by the board of county 
commissioners. 
    The commissioner of revenue may recommend to the state 
board of assessors the nonrenewal, suspension, or revocation of 
an assessor's license as provided in sections 270.41 to 270.53.  
    (b) In the event of a vacancy in the office of county 
assessor, through death, resignation or other reasons, the 
deputy (or chief deputy, if more than one) shall perform the 
functions of the office.  If there is no deputy, the county 
auditor shall designate a person to perform the duties of the 
office until an appointment is made as provided in clause (a).  
Such person shall perform the duties of the office for a period 
not exceeding 30 days during which the county board must appoint 
a county assessor.  Such 30-day period may, however, be extended 
by written approval of the commissioner of revenue. 
    (c) In the case of the first appointment under paragraph 
(a) of a county assessor who is accredited but who does not have 
senior accreditation, an approval of the appointment by the 
commissioner shall be for a term of one year.  A county assessor 
appointed to a one-year term under this paragraph must reapply 
to the commissioner at the end of the one-year term.  The 
commissioner shall not approve the appointment for the remainder 
of the four-year term unless the assessor has obtained senior 
accreditation. 
    Sec. 8.  Minnesota Statutes 1987 Supplement, section 
274.01, subdivision 1, is amended to read:  
    Subdivision 1.  [ORDINARY BOARD; MEETINGS, DEADLINES, 
GRIEVANCES.] (a) The town board of a town, or the council or 
other governing body of a city, is the board of review except in 
cities whose charters provide for a board of equalization.  The 
county assessor shall fix a day and time when the board or the 
board of equalization shall meet in the assessment districts of 
the county.  On or before February 15 of each year the assessor 
shall give written notice of the time to the city or town 
clerk.  Notwithstanding the provisions of any charter to the 
contrary, the meetings must be held between April 1 and May 31 
each year.  The clerk shall give published and posted notice of 
the meeting at least ten days before the date of the meeting.  
The board shall meet at the office of the clerk to review the 
assessment and classification of property in the town or 
city.  No changes in valuation may be made by the county 
assessor after the board of review or the county board of 
equalization has adjourned.  This restriction does not apply to 
corrections of errors that are merely clerical or administrative 
in nature. 
    (b) The board shall determine whether the taxable property 
in the town or city has been properly placed on the list and 
properly valued by the assessor.  If real or personal property 
has been omitted, the board shall place it on the list with its 
market value, and correct the assessment so that each tract or 
lot of real property, and each article, parcel, or class of 
personal property, is entered on the assessment list at its 
market value.  No assessment of the property of any person may 
be raised unless the person has been duly notified of the intent 
of the board to do so.  On application of any person feeling 
aggrieved, the board shall review the assessment or 
classification, or both, and correct it as appears just.  
    (c) A local board of review may reduce assessments upon 
petition of the taxpayer but the total reductions must not 
reduce the aggregate assessment made by the county assessor by 
more than one percent.  If the total reductions would lower the 
aggregate assessments made by the county assessor by more than 
one percent, none of the adjustments may be made.  The assessor 
shall correct any clerical errors or double assessments 
discovered by the board of review without regard to the one 
percent limitation. 
    (d) A majority of the members may act at the meeting, and 
adjourn from day to day until they finish hearing the cases 
presented.  The assessor shall attend, with the assessment books 
and papers, and take part in the proceedings, but must not 
vote.  The county assessor, or an assistant delegated by the 
county assessor shall attend the meetings.  The board shall list 
separately, on a form appended to the assessment book, all 
omitted property added to the list by the board and all items of 
property increased or decreased, with the market value of each 
item of property, added or changed by the board, placed opposite 
the item.  The county assessor shall enter all changes made by 
the board in the assessment book. 
    (e) If a person fails to appear in person, by counsel, or 
by written communication before the board after being duly 
notified of the board's intent to raise the assessment of the 
property, or if a person feeling aggrieved by an assessment or 
classification fails to apply for a review of the assessment or 
classification, the person may not appear before the county 
board of equalization for a review of the assessment or 
classification.  This paragraph does not apply if an assessment 
was made after the board meeting, as provided in section 273.01, 
or if the person can establish not having received notice of 
market value at least five days before the local board of review 
meeting. 
    (f) The board of review or the board of equalization must 
complete its work and adjourn within 20 days from the time of 
convening stated in the notice of the clerk, unless a longer 
period is approved by the commissioner of revenue.  No action 
taken after that date is valid.  All complaints about an 
assessment or classification made after the meeting of the board 
must be heard and determined by the county board of 
equalization.  A nonresident may, at any time, before the 
meeting of the board of review file written objections to an 
assessment or classification with the county assessor.  The 
objections must be presented to the board of review at its 
meeting by the county assessor for its consideration. 
    Sec. 9.  [COUNTY ASSESSORS; SENIOR ACCREDITATION.] 
    Notwithstanding Minnesota Statutes, section 273.061, the 
commissioner of revenue's approval on January 1, 1989, of 
appointments of assessors who are not senior accredited on 
January 1, 1989, shall be for a term of one year.  A county 
assessor appointed for a one-year term must reapply to the 
commissioner by January 1, 1990, to obtain the approval of the 
commissioner for the remainder of the four-year term. 
    Sec. 10.  [APPROPRIATION.] 
    There is appropriated to the state board of assessors from 
the general fund the amount of $10,000 to be used in fiscal year 
1989 for adopting rules under section 2. 
     Sec. 11.  [EFFECTIVE DATE.] 
     Section 1 is effective the day after final enactment. 

                               ARTICLE 8 

                        HUMAN SERVICES PROGRAMS 
    Section 1.  Minnesota Statutes 1987 Supplement, section 
256.01, subdivision 2, is amended to read:  
    Subd. 2.  [SPECIFIC POWERS.] Subject to the provisions of 
section 241.021, subdivision 2, the commissioner of human 
services shall: 
    (1) Administer and supervise all forms of public assistance 
provided for by state law and other welfare activities or 
services as are vested in the commissioner.  Administration and 
supervision of human services activities or services includes, 
but is not limited to, assuring timely and accurate distribution 
of benefits, completeness of service, and quality program 
management.  In addition to administering and supervising human 
services activities vested by law in the department, the 
commissioner shall have the authority to: 
    (a) require local agency participation in training and 
technical assistance programs to promote compliance with 
statutes, rules, federal laws, regulations and policies 
governing human services; 
    (b) monitor, on an ongoing basis, the performance of local 
agencies in the operation and administration of human services, 
enforce compliance with statutes, rules, federal laws, 
regulations, and policies governing welfare services and promote 
excellence of administration and program operation; 
    (c) develop a quality control program or other monitoring 
program to review county performance and accuracy of benefit 
determinations; 
    (d) require local agencies to make an adjustment to the 
public assistance benefits issued to any individual consistent 
with federal law and regulation and state law and rule and to 
issue or recover benefits as appropriate; 
    (e) delay or deny payment of all or part of the state and 
federal share of benefits and administrative reimbursement 
according to the procedures set forth in section 256.016; and 
    (f) make contracts with and grants to public and private 
agencies and organizations, both profit and nonprofit, and 
individuals, using appropriated funds. 
    (2) Inform local agencies, on a timely basis, of changes in 
statute, rule, federal law, regulation, and policy necessary to 
local agency administration of the programs. 
    (3) Administer and supervise all child welfare activities; 
promote the enforcement of laws protecting handicapped, 
dependent, neglected and delinquent children, and children born 
to mothers who were not married to the children's fathers at the 
times of the conception nor at the births of the children; 
license and supervise child-caring and child-placing agencies 
and institutions; supervise the care of children in boarding and 
foster homes or in private institutions; and generally perform 
all functions relating to the field of child welfare now vested 
in the state board of control. 
    (3) (4) Administer and supervise all noninstitutional 
service to handicapped persons, including those who are visually 
impaired, hearing impaired, or physically impaired or otherwise 
handicapped.  The commissioner may provide and contract for the 
care and treatment of qualified indigent children in facilities 
other than those located and available at state hospitals when 
it is not feasible to provide the service in state hospitals. 
    (4) (5) Assist and actively cooperate with other 
departments, agencies and institutions, local, state, and 
federal, by performing services in conformity with the purposes 
of Laws 1939, chapter 431. 
    (5) (6) Act as the agent of and cooperate with the federal 
government in matters of mutual concern relative to and in 
conformity with the provisions of Laws 1939, chapter 431, 
including the administration of any federal funds granted to the 
state to aid in the performance of any functions of the 
commissioner as specified in Laws 1939, chapter 431, and 
including the promulgation of rules making uniformly available 
medical care benefits to all recipients of public assistance, at 
such times as the federal government increases its participation 
in assistance expenditures for medical care to recipients of 
public assistance, the cost thereof to be borne in the same 
proportion as are grants of aid to said recipients. 
    (6) (7) Establish and maintain any administrative units 
reasonably necessary for the performance of administrative 
functions common to all divisions of the department. 
    (7) Administer and supervise any additional welfare 
activities and services as are vested by law in the department. 
    (8) The commissioner is designated as guardian of both the 
estate and the person of all the wards of the state of 
Minnesota, whether by operation of law or by an order of court, 
without any further act or proceeding whatever, except as to 
persons committed as mentally retarded.  
    (9) Act as coordinating referral and informational center 
on requests for service for newly arrived immigrants coming to 
Minnesota. 
    (10) The specific enumeration of powers and duties as 
hereinabove set forth shall in no way be construed to be a 
limitation upon the general transfer of powers herein contained. 
    (11) Establish county, regional, or statewide schedules of 
maximum fees and charges which may be paid by local agencies for 
medical, dental, surgical, hospital, nursing and nursing home 
care and medicine and medical supplies under all programs of 
medical care provided by the state and for congregate living 
care under the income maintenance programs. 
    (12) Have the authority to conduct and administer 
experimental projects to test methods and procedures of 
administering assistance and services to recipients or potential 
recipients of public welfare.  To carry out such experimental 
projects, it is further provided that the commissioner of human 
services is authorized to waive the enforcement of existing 
specific statutory program requirements, rules, and standards in 
one or more counties.  The order establishing the waiver shall 
provide alternative methods and procedures of administration, 
shall not be in conflict with the basic purposes, coverage, or 
benefits provided by law, and in no event shall the duration of 
a project exceed four years.  It is further provided that no 
order establishing an experimental project as authorized by the 
provisions of this section shall become effective until the 
following conditions have been met: 
    (a) The proposed comprehensive plan including estimated 
project costs and the proposed order establishing the waiver 
shall be filed with the secretary of the senate and chief clerk 
of the house of representatives at least 60 days prior to its 
effective date. 
    (b) The secretary of health, education, and welfare of the 
United States has agreed, for the same project, to waive state 
plan requirements relative to statewide uniformity. 
    (c) A comprehensive plan, including estimated project 
costs, shall be approved by the legislative advisory commission 
and filed with the commissioner of administration.  
    (13) In accordance with federal requirements establish 
procedures to be followed by local welfare boards in creating 
citizen advisory committees, including procedures for selection 
of committee members. 
    (14) Allocate federal fiscal disallowances or sanctions 
which are based on quality control error rates for the aid to 
families with dependent children, medical assistance, or food 
stamp program in the following manner:  
    (a) One-half of the total amount of the disallowance shall 
be borne by the county boards responsible for administering the 
programs.  For the medical assistance and AFDC programs, 
disallowances shall be shared by each county board in the same 
proportion as that county's expenditures for the sanctioned 
program are to the total of all counties' expenditures for the 
AFDC and medical assistance programs.  For the food stamp 
program, sanctions shall be shared by each county board, with 50 
percent of the sanction being distributed to each county in the 
same proportion as that county's administrative costs for food 
stamps are to the total of all food stamp administrative costs 
for all counties, and 50 percent of the sanctions being 
distributed to each county in the same proportion as that 
county's value of food stamp benefits issued are to the total of 
all benefits issued for all counties.  Each county shall pay its 
share of the disallowance to the state of Minnesota.  When a 
county fails to pay the amount due hereunder, the commissioner 
may deduct the amount from reimbursement otherwise due the 
county, or the attorney general, upon the request of the 
commissioner, may institute civil action to recover the amount 
due. 
    (b) Notwithstanding the provisions of paragraph (a), if the 
disallowance results from knowing noncompliance by one or more 
counties with a specific program instruction, and that knowing 
noncompliance is a matter of official county board record, the 
commissioner may require payment or recover from the county or 
counties, in the manner prescribed in paragraph (a), an amount 
equal to the portion of the total disallowance which resulted 
from the noncompliance, and may distribute the balance of the 
disallowance according to paragraph (a).  
    (15) Develop and implement special projects that maximize 
reimbursements and result in the recovery of money to the 
state.  For the purpose of recovering state money, the 
commissioner may enter into contracts with third parties.  Any 
recoveries that result from projects or contracts entered into 
under this paragraph shall be deposited in the state treasury 
and credited to a special account until the balance in the 
account reaches $400,000.  When the balance in the account 
exceeds $400,000, the excess shall be transferred and credited 
to the general fund.  All money in the account is appropriated 
to the commissioner for the purposes of this paragraph. 
    (16) Have the authority to make direct payments to 
facilities providing shelter to women and their children 
pursuant to section 256D.05, subdivision 3.  Upon the written 
request of a shelter facility that has been denied payments 
under section 256.05, subdivision 3, the commissioner shall 
review all relevant evidence and make a determination within 30 
days of the request for review regarding issuance of direct 
payments to the shelter facility.  Failure to act within 30 days 
shall be considered a determination not to issue direct payments.
    Sec. 2.  [256.017] [COMPLIANCE SYSTEM.] 
    Subdivision 1.  [AUTHORITY AND PURPOSE.] The commissioner 
shall administer a compliance system for aid to families with 
dependent children, the food stamp program, emergency 
assistance, general assistance, work readiness, medical 
assistance, general assistance medical care, emergency general 
assistance, Minnesota supplemental assistance, preadmission 
screening, and alternative care grants under the powers and 
authorities named in section 256.01, subdivision 2.  The purpose 
of the compliance system is to permit the commissioner to 
supervise the administration of public assistance programs and 
to enforce timely and accurate distribution of benefits, 
completeness of service and efficient and effective program 
management and operations, to increase uniformity and 
consistency in the administration and delivery of public 
assistance programs throughout the state, and to reduce the 
possibility of sanctions and fiscal disallowances for 
noncompliance with federal regulations and state statutes. 
    The commissioner shall utilize training, technical 
assistance, and monitoring activities, as specified in section 
256.01, subdivision 2, to encourage local agency compliance with 
written policies and procedures. 
    Subd. 2.  [DEFINITIONS.] The following terms have the 
meanings given for the purpose of this section. 
    (a) "Administrative penalty" means an adjustment against 
the local agency's state and federal benefit and federal 
administrative reimbursement when the commissioner determines 
that the local agency is not in compliance with the policies and 
procedures established by the commissioner. 
    (b) "Quality control case penalty" means an adjustment 
against the local agency's federal administrative reimbursement 
and state and federal benefit reimbursement when the 
commissioner determines through a quality control review that 
the local agency has made incorrect payments, terminations, or 
denials of benefits as determined by state quality control 
procedures for the aid to families with dependent children, food 
stamp, or medical assistance programs, or any other programs for 
which the commissioner has developed a quality control system.  
Quality control case penalties apply only to agency errors as 
defined by state quality control procedures. 
    (c) "Quality control" means a review system of a statewide 
random sample of cases, designed to provide data on the accuracy 
with which state and federal policies are being applied in 
issuing benefits and as a fiscal audit to ensure the accuracy of 
expenditures.  The quality control system is administered by the 
department.  For the aid to families with dependent children, 
food stamp, and medical assistance programs, the quality control 
system is that required by federal regulation. 
    Subd. 3.  [QUALITY CONTROL CASE PENALTY.] The department 
shall disallow, withhold, or deny state and federal benefit 
reimbursement and federal administrative reimbursement payment 
to a county when the commissioner determines that the county has 
incorrectly issued benefits or incorrectly denied or terminated 
benefits.  These cases shall be identified by state quality 
control reviews. 
    Subd. 4.  [DETERMINING THE AMOUNT OF THE QUALITY CONTROL 
CASE PENALTY.] (a) The amount of the quality control case 
penalty is limited to the amount of the dollar error for the 
quality control sample month in a reviewed case as determined by 
the state quality control review procedures for the aid to 
families with dependent children and food stamp programs or for 
any other income transfer program for which the commissioner 
develops a quality control program. 
    (b) Payment errors in medical assistance or any other 
medical services program for which the department develops a 
quality control program are subject to set rate penalties based 
on the average cost of the specific quality control error 
element for a sample review month for that household size and 
status of institutionalization and as determined from state 
quality control data in the preceding fiscal year for the 
corresponding program. 
    (c) Errors identified in negative action cases, such as 
incorrect terminations or denials of assistance are subject to 
set rate penalties based on the average benefit cost of that 
household size as determined from state quality control data in 
the preceding fiscal year for the corresponding program. 
    Subd. 5.  [ADMINISTRATIVE PENALTIES.] The department shall 
disallow or withhold state and federal benefit reimbursement and 
federal administrative reimbursement from local agencies when 
the actions performed by the local agency are not in compliance 
with the written policies and procedures established by the 
commissioner.  The policies and procedures must be previously 
communicated to the local agency.  A local agency shall not be 
penalized for complying with a written policy or procedure, even 
if the policy or procedure is found to be erroneous and is 
subsequently rescinded by the commissioner.  
    Subd. 6.  [DETERMINING THE AMOUNT OF THE ADMINISTRATIVE 
PENALTY.] The amount of the penalty imposed on any local agency 
is based on the numbers of public assistance applicants and 
recipients that may be affected by the local agency's failure to 
comply with the policies and procedures established by the 
commissioner, the fiscal impact of the local agency's action, 
and the duration of the noncompliance as determined by the 
commissioner.  Administrative penalties shall be imposed 
independent of any quality control case penalties. 
    Subd. 7.  [PROCESS AND EXCEPTION.] (a)(1) The department 
shall notify the local agency in writing of all proposed quality 
control case penalties. 
    (2) The local agency may submit a written exception of the 
quality control error claim and proposed penalty.  The exception 
must be submitted to the commissioner within ten calendar days 
of the receipt of the penalty notice. 
    (3) Within 20 calendar days of receipt of the written 
exception, the commissioner shall sustain, dismiss, or amend the 
quality control findings and case penalty and notify the local 
agency, in writing, of the decision and the amount of any 
penalty.  The commissioner's decision is not subject to judicial 
review. 
    (b)(1) The department shall notify the local agency in 
writing of any proposed administrative penalty, the date by 
which the local agency must correct the issues noted in the 
penalty, and the time period within which the local agency must 
submit a corrective action plan for compliance. 
    (2) If the local agency fails to submit a corrective action 
plan within the stated time period, or if the corrective action 
plan does not bring the agency into compliance as determined by 
the department, or if the local agency fails to meet the 
commitments in the corrective action plan, the department shall 
issue the administrative penalty and notify the local agency in 
writing. 
    (3) The local agency may file written exception to the 
administrative penalty with the commissioner within 30 days of 
the receipt of the department's notice of issuing the 
administrative penalty.  The local agency must notify the 
commissioner of its intent to file a written exception within 
ten days of the delivery of the department's notice of the 
administrative penalty.  If the local agency does not notify the 
commissioner of its intent to file and does not file a written 
exception within the prescribed time periods, the department's 
initial decision shall be final. 
    (4) The commissioner shall sustain, dismiss, or amend the 
administrative penalty findings, and shall issue a written order 
to the local agency within 30 calendar days after receiving the 
local agency's written exception. 
    Subd. 8.  [JUDICIAL REVIEW.] A local agency that is 
aggrieved by the order of the commissioner in an administrative 
penalty of over $75,000, or 1.5 percent of the total benefit 
expenditures for the income maintenance programs listed in 
subdivision 1, for that county, whichever is the lesser amount, 
may appeal the order to the court of appeals by serving a 
written copy of a notice of appeal upon the commissioner within 
30 days after the date the commissioner issued the 
administrative penalty order, and by filing the original notice 
and proof of service with the court administrator of the court 
of appeals.  Service may be made personally or by mail.  Service 
by mail is complete upon mailing.  The record of review shall 
consist of the advance notice of the administrative penalty to 
the local agency, the local agency corrective action plan if 
any, the final notice of the administrative penalty, the local 
agency's written exception to the administrative penalty order, 
and any other material submitted for the commissioner's 
consideration, and the commissioner's final written order.  The 
court may affirm the commissioner's decision or remand the case 
for further proceedings, or it may reverse or modify the 
decision if the substantial rights of the local agency have been 
prejudiced because the decision is:  (1) in excess of the 
statutory authority or jurisdiction of the agency; (2) 
unsupported by substantial evidence in view of the entire record 
as submitted; (3) arbitrary or capricious; or (4) in violation 
of constitutional provisions. 
    Subd. 9.  [TIMING AND DISPOSITION OF PENALTY AND CASE 
DISALLOWANCE FUNDS.] Quality control case penalty and 
administrative penalty amounts shall be disallowed or withheld 
from the next regular reimbursement made to the county agency 
for state and federal benefit reimbursements and federal 
administrative reimbursements for all programs covered in this 
section, according to procedures established in statute, but 
shall not be imposed sooner than 30 calendar days from the date 
of written notice of such penalties.  All penalties must be 
deposited in the county incentive fund provided in section 
256.017.  All penalties must be imposed according to this 
provision until a decision is made regarding the status of a 
written exception.  Penalties must be returned to local agencies 
when a review of a written exception results in a decision in 
their favor. 
    Subd. 10.  [COUNTY OBLIGATION TO MAKE BENEFIT 
PAYMENTS.] Counties subject to fiscal penalties shall not reduce 
or withhold benefits from eligible recipients of programs listed 
in subdivision 1 in order to cover the cost of penalties under 
this section.  County funds shall be used to cover the cost of 
any penalties.  
    Sec. 3.  [256.018] [COUNTY PUBLIC ASSISTANCE INCENTIVE 
FUND.] 
    Beginning in 1990, $1,000,000 is appropriated from the 
general fund to the department in each fiscal year for awards to 
counties:  (1) that have not been assessed an administrative 
penalty under section 256.016 in the corresponding fiscal year; 
and (2) that perform satisfactorily according to indicators 
established by the commissioner.  
    After consultation with local agencies, the commissioner 
shall inform local agencies in writing of the performance 
indicators that govern the awarding of the incentive fund for 
each fiscal year by April of the preceding fiscal year. 
    The commissioner may set performance indicators to govern 
the awarding of the total fund, may allocate portions of the 
fund to be awarded by unique indicators, or may set a sole 
indicator to govern the awarding of funds. 
    The funds shall be awarded to qualifying local agencies 
according to their share of benefits for the programs related to 
the performance indicators governing the distribution of the 
fund or part of it as compared to the total benefits of all 
qualifying local agencies for the programs related to the 
performance indicators governing the distribution of the fund or 
part of it. 
    Sec. 4.  Minnesota Statutes 1986, section 256.72, is 
amended to read:  
    256.72 [DUTIES OF COUNTY AGENCIES.] 
    The county agencies shall: 
    (1) Administer the provisions of sections 256.72 to 256.87 
in the respective counties subject to the rules prescribed by 
the state agency pursuant to the provisions of those 
sections and to the supervision of the commissioner of human 
services specified in section 256.01; 
    (2) Report to the state agency at such times and in such 
manner and form as the state agency may from time to time 
direct; and 
    (3) Submit quarterly and annually to the county board of 
commissioners a budget containing an estimate and supporting 
data setting forth the amount of money needed to carry out the 
provisions of those sections.  
    (4) In addition to providing financial assistance, provide 
such services as will help to maintain and strengthen family 
life and promote the support and personal independence of 
parents and relatives insofar as such help is consistent with 
continuing parental care and protection.  
    Sec. 5.  Minnesota Statutes 1986, section 256.81, is 
amended to read:  
    256.81 [COUNTY AGENCY, DUTIES.] 
    (1) The county agency shall keep such records, accounts, 
and statistics in relation to aid to families with dependent 
children as the state agency shall prescribe.  
    (2) Each grant of aid to families with dependent children 
shall be paid to the recipient by the county agency except in 
those instances in which the county agency subject to the rules 
of the state agency determines that payments for care shall be 
made to an individual other than the parent or relative with 
whom the dependent child is living or to vendors of goods and 
services for the benefit of the child because such parent or 
relative is unable to properly manage the funds in the best 
interests and welfare of the child.  
    (3) The county shall be paid from state and federal funds 
available therefor the amount provided for in section 256.82.  
    (4) Federal funds available for administrative purposes 
shall be distributed between the state and the counties in the 
same proportion that expenditures were made except as provided 
for in section 256.016.  
    Sec. 6.  Minnesota Statutes 1986, section 256.82, 
subdivision 1, is amended to read:  
    Subdivision 1.  [MONTHLY PAYMENTS.] For the period from 
January 1 to June 30, based upon estimates submitted by the 
county agency to the state agency, which shall state the 
estimated required expenditures for the succeeding month, upon 
the direction of the state agency payment shall be made monthly 
in advance by the state to the counties of all federal funds 
available for that purpose for such succeeding month, together 
with an amount of state funds equal to 70 85 percent of the 
difference between the total estimated cost and the federal 
funds so available for payments made after December 31, 1979 and 
before January 1, 1981, and 85 percent of the difference for 
payments made after December 31, 1980 except as provided for in 
section 256.016.  Adjustment of any overestimate or 
underestimate made by any county shall be made upon the 
direction of the state agency in any succeeding month.  
Subsequent to July 1 of each year, the state agency shall 
reimburse the county agency for the funds expended during the 
January 1 to June 30 period except as provided for in section 
256.016.  For the period from July 1 to December 31 based upon 
the estimates submitted by the county agency to the state 
agency, which shall state the estimated required expenditures 
for the succeeding month, upon the direction of the state 
agency, payment shall be made monthly in advance by the state to 
the counties of all state and federal funds available for that 
purpose for the succeeding month except as provided for in 
section 256.016.  Payment shall be made on the basis of federal 
and state participation rates described in this subdivision.  
Adjustment of any overestimate or underestimate made by any 
county shall be made upon the direction of the state agency in 
any succeeding month.  Effective January 1, 1989, the state rate 
of participation shall be determined as a percentage that equals 
the difference between 100 percent and the percentage rate of 
federal financial participation. 
    Sec. 7.  Minnesota Statutes 1986, section 256.863, is 
amended to read:  
    256.863 [RECOVERY OF MONEYS; APPORTIONMENT.] 
    When any amount shall be recovered from any source for 
assistance furnished under the provisions of sections 256.72 to 
256.87, except as provided in sections 256.018 and 256.98, 
subdivision 7, there shall be paid to the United States the 
amount which shall be due under the terms of the Social Security 
Act and the balance thereof shall be paid into the treasury of 
the state or county substantially in the proportion in which 
they have respectively contributed toward the total assistance 
paid.  The amount due the respective participating units of 
government shall be determined by rule adopted by the 
commissioner of human services pursuant to a formula of 
reimbursement prescribed or authorized by the federal Social 
Security Administration. 
    Sec. 8.  Minnesota Statutes 1986, section 256.871, 
subdivision 6, is amended to read:  
    Subd. 6.  [ESTIMATED EXPENDITURES; PAYMENTS.] The county 
agency shall submit to the state agency an estimate of 
expenditures for each succeeding month in such form as required 
by the state agency.  For the period from January 1 to June 30, 
payment shall be made monthly in advance by the state agency to 
the counties, of federal funds available for that purpose for 
each succeeding month, together with an amount of state funds 
equal to ten percent of the difference between the total 
estimated cost and the federal funds so available, except as 
provided for in section 256.016.  Subsequent to July 1 of each 
year the state agency shall reimburse the county agency for the 
funds expended during the January 1 to June 30 period, except as 
provided for in section 256.016.  For the period from July 1 to 
December 31, payment shall be made monthly in advance by the 
state agency to the counties, of all state and federal funds 
available for that purpose for the succeeding month, except as 
provided for in section 256.016.  Payment shall be made on the 
basis of federal and state participation rates described in this 
subdivision.  Effective January 1, 1989, the state rate of 
participation shall be determined as a percentage that equals 
the difference between 100 percent and the percentage rate of 
federal financial participation.  Adjustment of any overestimate 
or underestimate made by any county shall be made upon the 
direction of the state agency in any succeeding month.  
    Sec. 9.  Minnesota Statutes 1986, section 256.935, 
subdivision 1, is amended to read:  
    Subdivision 1.  On the death of any person receiving public 
assistance through aid to dependent children, the county agency 
shall pay an amount for funeral expenses not exceeding $370 and 
actual cemetery charges.  No funeral expenses shall be paid if 
the estate of the deceased is sufficient to pay such expenses or 
if the children, or spouse, who were legally responsible for the 
support of the deceased while living, are able to pay such 
expenses; provided, that the additional payment or donation of 
the cost of cemetery lot, interment, religious service, or for 
the transportation of the body into or out of the community in 
which the deceased resided, shall not limit payment by the 
county agency as herein authorized.  Freedom of choice in the 
selection of a funeral director shall be granted to persons 
lawfully authorized to make arrangements for the burial of any 
such deceased recipient.  In determining the sufficiency of such 
estate, due regard shall be had for the nature and marketability 
of the assets of the estate.  The county agency may grant 
funeral expenses where the sale would cause undue loss to the 
estate.  Any amount paid for funeral expenses shall be a prior 
claim against the estate, as provided in section 524.3-805, and 
any amount recovered shall be reimbursed to the agency which 
paid the expenses.  For the period from January 1 to June 30, 
the state shall reimburse the county for 50 percent of any 
payments made for funeral expenses except as provided for in 
section 256.016.  Subsequent to July 1 of each year, the state 
agency shall reimburse the county agency for the funds expended 
during the January 1 to June 30 period.  For the period from 
July 1 to December 31, the state shall reimburse the county for 
100 percent of any payments made for funeral expenses except as 
provided for in section 256.016. 
    Sec. 10.  Minnesota Statutes 1986, section 256.991, is 
amended to read:  
    256.991 [RULES.] 
    The commissioner of human services may promulgate emergency 
and permanent rules as necessary to implement sections 256.01, 
subdivision 2; 256.82, subdivision 3; 256.966, subdivision 1; 
256.968; 256D.03, subdivisions 3, 4, 6, and 7; and 261.23.  The 
commissioner shall promulgate emergency and permanent rules to 
establish standards and criteria for deciding which medical 
assistance services require prior authorization and for deciding 
whether a second medical opinion is required for an elective 
surgery.  The commissioner shall promulgate permanent and 
emergency rules as necessary to establish the methods and 
standards for determining inappropriate utilization of medical 
assistance services.  
    The commissioner of human services shall adopt emergency 
rules which meet the requirements of sections 14.29 to 14.36 for 
the medical assistance demonstration project.  Notwithstanding 
the provisions of section 14.35, the emergency rules promulgated 
to implement section 256B.69 shall be effective for 360 days and 
may be continued in effect for an additional 900 days if the 
commissioner gives notice by publishing a notice in the state 
register and mailing notice to all persons registered with the 
commissioner to receive notice of rulemaking proceedings in 
connection with the project.  The emergency rules shall not be 
effective beyond December 31, 1986, without meeting the 
requirements of sections 14.13 to 14.20.  
    Sec. 11.  Minnesota Statutes 1986, section 256B.041, 
subdivision 5, is amended to read:  
    Subd. 5.  [PAYMENT BY COUNTY TO STATE TREASURER.] If 
required by federal law or rules promulgated thereunder, or by 
authorized rule of the state agency, each county shall pay to 
the state treasurer the portion of medical assistance paid by 
the state for which it is responsible.  The county's share of 
cost shall be ten percent of that portion not met by federal 
funds.  Effective January 1, 1989, the state rate of 
participation shall be determined as a percentage that equals 
the difference between 100 percent and the percentage rate of 
federal financial participation. 
    For the period from January 1 to June 30, the county shall 
advance its portion ten percent of that portion of medical 
assistance costs not met by federal funds, based upon estimates 
submitted by the state agency to the county agency, stating the 
estimated expenditures for the succeeding month.  Upon the 
direction of the county agency, payment shall be made monthly by 
the county to the state for the estimated expenditures for each 
month.  Adjustment of any overestimate or underestimate based on 
actual expenditures shall be made by the state agency by 
adjusting the estimate for any succeeding month.  Subsequent to 
July 1 of each year, the state agency shall reimburse the county 
agency for the funds expended during the January 1 to June 30 
period, except as provided for in section 256.016.  For the 
period from July 1 to December 31, payments will be made by the 
state agency, except as provided for in section 256.016, and the 
county agency will be advised of the amounts paid monthly.  
    Sec. 12.  Minnesota Statutes 1986, section 256B.041, 
subdivision 7, is amended to read:  
    Subd. 7.  Federal funds available for administrative 
purposes shall be distributed between the state and the county 
on the same basis that reimbursements are earned, except as 
provided for under section 256.016. 
    Sec. 13.  Minnesota Statutes 1986, section 256B.05, 
subdivision 1, is amended to read:  
    Subdivision 1.  The county agencies shall administer 
medical assistance in their respective counties under the 
supervision of the state agency and the commissioner of human 
services as specified in section 256.01, and shall make such 
reports, prepare such statistics, and keep such records and 
accounts in relation to medical assistance as the state agency 
may require.  
    Sec. 14.  Minnesota Statutes 1987 Supplement, section 
256B.091, subdivision 8, is amended to read:  
    Subd. 8.  [ALTERNATIVE CARE GRANTS.] The commissioner shall 
provide grants to counties participating in the program to pay 
costs of providing alternative care to individuals screened 
under subdivision 4 and nursing home or boarding care home 
residents who request a screening.  Prior to July of each year, 
the commissioner shall allocate state funds available for 
alternative care grants to each local agency.  This allocation 
must be made as follows:  half of the state funds available for 
alternative care grants must be allocated to each county 
according to the total number of adults in that county who are 
recipients age 65 or older who are reported to the department by 
March 1 of each state fiscal year and half of the state funds 
available for alternative care grants must be allocated to a 
county according to that county's number of Medicare enrollments 
age 65 or older for the most recent statistical report.  Payment 
is available under this subdivision only for individuals (1) for 
whom the screening team would recommend nursing home or boarding 
care home admission, or continued stay if alternative care were 
not available; (2) who are receiving medical assistance or who 
would be eligible for medical assistance within 180 days of 
admission to a nursing home; (3) who need services that are not 
available at that time in the county through other public 
assistance; and (4) who are age 65 or older. 
    The commissioner shall establish by rule, in accordance 
with chapter 14, procedures for determining grant reallocations, 
limits on the rates for payment of approved services, including 
screenings, and submittal and approval of a biennial county plan 
for the administration of the preadmission screening and 
alternative care grants program.  Grants may be used for payment 
of costs of providing care-related supplies, equipment, and 
services such as, but not limited to, foster care for elderly 
persons, day care whether or not offered through a nursing home, 
nutritional counseling, or medical social services, which 
services are provided by a licensed health care provider, a home 
health service eligible for reimbursement under Titles XVIII and 
XIX of the federal Social Security Act, or by persons employed 
by or contracted with by the county board or the local welfare 
agency.  The county agency shall ensure that a plan of care is 
established for each individual in accordance with subdivision 
3, clause (e)(2), and that a client's service needs and 
eligibility is reassessed at least every six months.  The plan 
shall include any services prescribed by the individual's 
attending physician as necessary and follow up services as 
necessary.  The county agency shall provide documentation to the 
commissioner verifying that the individual's alternative care is 
not available at that time through any other public assistance 
or service program and shall provide documentation in each 
individual's plan of care and to the commissioner that the most 
cost-effective alternatives available have been offered to the 
individual and that the individual was free to choose among 
available qualified providers, both public and private.  The 
county agency shall document to the commissioner that the agency 
made reasonable efforts to inform potential providers of the 
anticipated need for services under the alternative care grants 
program, including a minimum of 14 days written advance notice 
of the opportunity to be selected as a service provider and an 
annual public meeting with providers to explain and review the 
criteria for selection, and that the agency allowed potential 
providers an opportunity to be selected to contract with the 
county board.  Grants to counties under this subdivision are 
subject to audit by the commissioner for fiscal and utilization 
control. 
    The county must select providers for contracts or 
agreements using the following criteria and other criteria 
established by the county: 
    (1) the need for the particular services offered by the 
provider; 
    (2) the population to be served, including the number of 
clients, the length of time services will be provided, and the 
medical condition of clients; 
    (3) the geographic area to be served; 
    (4) quality assurance methods, including appropriate 
licensure, certification, or standards, and supervision of 
employees when needed; 
    (5) rates for each service and unit of service exclusive of 
county administrative costs; 
    (6) evaluation of services previously delivered by the 
provider; and 
    (7) contract or agreement conditions, including billing 
requirements, cancellation, and indemnification. 
    The county must evaluate its own agency services under the 
criteria established for other providers.  The county shall 
provide a written statement of the reasons for not selecting 
providers. 
    The commissioner shall establish a sliding fee schedule for 
requiring payment for the cost of providing services under this 
subdivision to persons who are eligible for the services but who 
are not yet eligible for medical assistance.  The sliding fee 
schedule is not subject to chapter 14 but the commissioner shall 
publish the schedule and any later changes in the State Register 
and allow a period of 20 working days from the publication date 
for interested persons to comment before adopting the sliding 
fee schedule in final forms.  
    The commissioner shall apply for a waiver for federal 
financial participation to expand the availability of services 
under this subdivision.  The commissioner shall provide grants 
to counties from the nonfederal share, unless the commissioner 
obtains a federal waiver for medical assistance payments, of 
medical assistance appropriations.  A county agency may use 
grant money to supplement but not supplant services available 
through other public assistance or service programs and shall 
not use grant money to establish new programs for which public 
money is available through sources other than grants provided 
under this subdivision.  A county agency shall not use grant 
money to provide care under this subdivision to an individual if 
the anticipated cost of providing this care would exceed the 
average payment, as determined by the commissioner, for the 
level of care that the recipient would receive if placed in a 
nursing home or boarding care home.  For the period from January 
1 to June 30, the nonfederal share may be used to pay up to 90 
percent of the start-up and service delivery costs of providing 
care under this subdivision.  Each county agency that receives a 
grant shall pay ten percent of the costs for persons who are 
eligible for the services but who are not yet eligible for 
medical assistance.  Subsequent to July 1 of each year, the 
state agency shall reimburse the county agency for the funds 
expended during the January 1 to June 30 period, except as 
provided for in section 256.016.  For the period from July 1 to 
December 31, the nonfederal share may be used to pay up to 100 
percent of the start-up and service delivery costs of providing 
care under this subdivision. 
    The commissioner shall promulgate emergency rules in 
accordance with sections 14.29 to 14.36, to establish required 
documentation and reporting of care delivered. 
    Sec. 15.  Minnesota Statutes 1987 Supplement, section 
256B.15, is amended to read:  
    256B.15 [CLAIMS AGAINST ESTATES.] 
    If a person receives any medical assistance hereunder, on 
the person's death, if single, or on the death of the survivor 
of a married couple, either or both of whom received medical 
assistance, and only when there is no surviving child who is 
under 21 or is blind or totally disabled, the total amount paid 
for medical assistance rendered for the person and spouse, after 
age 65, without interest, shall be filed as a claim against the 
estate of the person or the estate of the surviving spouse in 
the court having jurisdiction to probate the estate.  A claim 
against the estate of a surviving spouse who did not receive 
medical assistance, for medical assistance rendered for the 
predeceased spouse, is limited to the value of the assets of the 
estate that were marital property or jointly-owned property at 
any time during the marriage.  The claim shall be considered an 
expense of the last illness of the decedent for the purpose of 
section 524.3-805.  Any statute of limitations that purports to 
limit any county agency or the state agency, or both, to recover 
for medical assistance granted hereunder shall not apply to any 
claim made hereunder for reimbursement for any medical 
assistance granted hereunder.  Counties may retain are entitled 
to one-half of the nonfederal share of medical assistance 
collections from estates that are directly attributable to 
county effort.  
    Sec. 16.  Minnesota Statutes 1987 Supplement, section 
256B.19, subdivision 1, is amended to read:  
    Subdivision 1.  [DIVISION OF COST.] The cost of medical 
assistance paid by each county of financial responsibility shall 
be borne as follows:  For the period from January 1 to June 30, 
payments shall be made by the state to the county for that 
portion of medical assistance paid by the federal government and 
the state on or before the 20th day of each month for the 
succeeding month upon requisition from the county showing the 
amount required for the succeeding month.  Ninety percent of the 
expense of assistance not paid by federal funds available for 
that purpose shall be paid by the state and ten percent shall be 
paid by the county of financial responsibility, except as 
provided for in section 256.016.  
    For the period from January 1 to June 30, for counties that 
participate in a Medicaid demonstration project under sections 
256B.69 and 256B.71, the division of the nonfederal share of 
medical assistance expenses for payments made to prepaid health 
plans or for payments made to health maintenance organizations 
in the form of prepaid capitation payments, this division of 
medical assistance expenses shall be 95 percent by the state and 
five percent by the county of financial 
responsibility.  Subsequent to July 1 of each year, the state 
agency shall reimburse the county agency for the funds expended 
during the January 1 to June 30 period, except as provided for 
in section 256.016. 
    For the period from July 1 to December 31, except as 
provided for in section 256.016, payments shall be made by the 
state to the county for that portion of medical assistance paid 
by the federal government and the state on or before the 20th 
day of each month for the succeeding month upon requisition from 
the county showing the amount required for the succeeding 
month.  The expense of assistance not paid by federal funds 
available for that purpose shall be paid by the state. 
    In counties where prepaid health plans are under contract 
to the commissioner to provide services to medical assistance 
recipients, the cost of court ordered treatment ordered without 
consulting the prepaid health plan that does not include 
diagnostic evaluation, recommendation, and referral for 
treatment by the prepaid health plan is the responsibility of 
the county of financial responsibility.  
    Sec. 17.  Minnesota Statutes 1986, section 256B.19, 
subdivision 2, is amended to read:  
    Subd. 2.  Federal funds available for administrative 
purposes shall be distributed between the state and the county 
in the same proportion that expenditures were made, except as 
provided for in section 256.016.  
    Sec. 18.  Minnesota Statutes 1987 Supplement, section 
256D.03, subdivision 2, is amended to read:  
    Subd. 2.  After December 31, 1980, For the period from 
January 1 to June 30, state aid shall be paid to local agencies 
for 75 percent of all general assistance and work readiness 
grants up to the standards of sections 256D.01, subdivision 1a, 
and 256D.051, and according to procedures established by the 
commissioner, except as provided for under section 256.016.  
Subsequent to July 1 of each year, the state agency shall 
reimburse the county agency for the funds expended during the 
January 1 to June 30 period, except as provided for in section 
256.016. 
    For the period from July 1 to December 31, state aid shall 
be paid to local agencies for 75 100 percent of all general 
assistance and work readiness grants up to the standards 
of section sections 256D.01, subdivision 1a, and 256D.051, and 
according to procedures established by the commissioner, except 
as provided for under section 256.016 and except that, after 
December 31, 1987 1988, state aid is reduced to 65 percent of 
all general assistance grants if the local agency does not make 
occupational or vocational literacy training available and 
accessible to recipients who are eligible for assistance under 
section 256D.05, subdivision 1, paragraph (a), clause (15).  
    After December 31, 1986 1988, state aid must be paid to 
local agencies for 65 percent of work readiness assistance paid 
under section 256D.051 if the county does not have an approved 
and operating community investment program.  
    Any local agency may, from its own resources, make payments 
of general assistance:  (a) at a standard higher than that 
established by the commissioner without reference to the 
standards of section 256D.01, subdivision 1; or, (b) to persons 
not meeting the eligibility standards set forth in section 
256D.05, subdivision 1, but for whom the aid would further the 
purposes established in the general assistance program in 
accordance with rules promulgated by the commissioner pursuant 
to the administrative procedure act. 
    Sec. 19.  Minnesota Statutes 1986, section 256D.03, 
subdivision 6, is amended to read:  
    Subd. 6.  [DIVISION OF COSTS.] The state shall pay 90 100 
percent of the cost of general assistance medical care paid by 
the local agency or county pursuant to this section, in 
accordance with sections 256B.041, subdivision 5, and 256B.19, 
subdivision 1, except as provided for in section 256.016.  In 
counties where prepaid health plans are under contract to the 
commissioner to provide services to general assistance medical 
care recipients, the cost of court ordered treatment that does 
not include diagnostic evaluation, recommendation, or referral 
for treatment by the prepaid health plan is the responsibility 
of the county of financial responsibility.  
    Sec. 20.  Minnesota Statutes 1986, section 256D.04, is 
amended to read:  
    256D.04 [DUTIES OF THE COMMISSIONER.] 
    In addition to any other duties imposed by law, the 
commissioner shall: 
    (1) Supervise according to section 256.01 the 
administration of general assistance and general assistance 
medical care by local agencies as provided in sections 256D.01 
to 256D.21; 
    (2) Promulgate uniform rules consistent with law for 
carrying out and enforcing the provisions of sections 256D.01 to 
256D.21 to the end that general assistance may be administered 
as uniformly as possible throughout the state; rules shall be 
furnished immediately to all local agencies and other interested 
persons; in promulgating rules, the provisions of sections 14.01 
to 14.70, shall apply; 
    (3) Allocate moneys appropriated for general assistance and 
general assistance medical care to local agencies as provided in 
section 256D.03, subdivisions 2 and 3; 
    (4) Accept and supervise the disbursement of any funds that 
may be provided by the federal government or from other sources 
for use in this state for general assistance and general 
assistance medical care; 
    (5) Cooperate with other agencies including any agency of 
the United States or of another state in all matters concerning 
the powers and duties of the commissioner under sections 256D.01 
to 256D.21; 
    (6) Cooperate to the fullest extent with other public 
agencies empowered by law to provide vocational training, 
rehabilitation, or similar services; and 
    (7) Gather and study current information and report at 
least annually to the governor and legislature on the nature and 
need for general assistance and general assistance medical care, 
the amounts expended under the supervision of each local agency, 
and the activities of each local agency and publish such reports 
for the information of the public.  
    Sec. 21.  Minnesota Statutes 1986, section 256D.36, 
subdivision 1, is amended to read:  
    Subdivision 1.  Commencing January 1, 1974, the 
commissioner shall certify to each local agency the names of all 
county residents who were eligible for and did receive aid 
during December, 1973 pursuant to a categorical aid program of 
old age assistance, aid to the blind, or aid to the disabled.  
From and after January 1, 1980, until January 1, 1981, For the 
period from January 1 to June 30, the state shall pay 70 85 
percent and the county shall pay 30 15 percent of the 
supplemental aid calculated for each county resident certified 
under this section who is an applicant for or recipient of 
supplemental security income, except as provided for in section 
256.016.  After December 31, 1980, the state shall pay 85 
percent and the county shall pay 15 percent of the aid.  
Subsequent to July 1 of each year, the state agency shall 
reimburse the county agency for the funds expended during the 
January 1 to June 30 period, except as provided for in section 
256.016.  For the period from July 1 to December 31, the state 
agency shall pay 100 percent of the supplemental aid calculated 
for each county resident certified under this section who is an 
applicant for or recipient of supplemental security income, 
except as provided for in section 256.016.  The amount of 
supplemental aid for each individual eligible under this section 
shall be calculated pursuant to the formula prescribed in title 
II, section 212 (a) (3) of Public Law Number 93-66, as amended. 
    Sec. 22.  Minnesota Statutes 1987 Supplement, section 
256G.01, subdivision 3, is amended to read:  
    Subd. 3.  [PROGRAM COVERAGE.] This chapter applies to all 
programs administered by the commissioner in which residence is 
the determining factor in establishing financial 
responsibility.  These include, but are not limited to: aid to 
families with dependent children; medical assistance; general 
assistance; general assistance medical care; Minnesota 
supplemental aid; commitment proceedings, including voluntary 
admissions; poor relief funded wholly through local agencies; 
and social services, including title XX, IV-E and other 
components of the community social services act, sections 
256E.01 to 256E.12.  It also applies to service responsibility 
in the income maintenance and health care programs administered 
by the commissioner. 
    Sec. 23.  Minnesota Statutes 1987 Supplement, section 
256G.02, subdivision 4, is amended to read:  
    Subd. 4.  [COUNTY OF FINANCIAL RESPONSIBILITY.] (a) "County 
of financial responsibility" has the meanings in paragraphs (b) 
to (h) (e).  
    (b) For an applicant who resides in the state and is not in 
a facility described in subdivision 5, it means the county in 
which the applicant resides at the time of application.  
    (c) For an applicant who resides in a facility described in 
subdivision 5, it means the county in which the applicant last 
resided in nonexcluded status immediately before entering the 
facility.  
    (d) For an applicant who has not resided in this state for 
any time other than the excluded time, it means the county in 
which the applicant resides at the time of making application.  
    (e) For medical assistance purposes only, and for an infant 
who has resided only in an excluded time facility, it means the 
county that would have been responsible for the infant if 
eligibility had been established, based on that of the birth 
mother, at the time of application.  
    (f) Notwithstanding paragraphs (b) to (d), the county of 
financial responsibility for medical assistance recipients is 
the county from which a recipient is receiving a maintenance 
grant or money payment under the program of aid to families with 
dependent children or Minnesota supplemental aid. 
    (g) Notwithstanding paragraphs (b) to (f), the county of 
financial responsibility for social services for a person 
receiving aid to families with dependent children, general 
assistance, general assistance medical care, medical assistance, 
or Minnesota supplemental aid is the county from which that 
person is receiving the aid or assistance.  If more than one 
named program is open concurrently, financial responsibility for 
social services attaches to the program that has the earliest 
date of application and has been open without interruption.  
    (h) (f) Notwithstanding paragraphs (b) to (g) (e), the 
county of financial responsibility for semi-independent living 
services provided under section 252.275, and Minnesota Rules, 
parts 9525.0500 to 9525.0660, is the county of residence in 
nonexcluded status immediately before the placement into or 
request for those services. 
    Sec. 24.  Minnesota Statutes 1987 Supplement, section 
256G.04, subdivision 1, is amended to read:  
    Subdivision 1.  [TIME OF DETERMINATION.] For purposes of 
establishing financial responsibility, residence must be 
determined as of the date a local agency receives a signed 
request or signed application or the date of eligibility, 
whichever is later.  This subdivision extends to cases in which 
the applicant may move to another county after the date of 
application but before the grant or service is actually approved.
    Sec. 25.  Minnesota Statutes 1987 Supplement, section 
256G.05, is amended to read:  
    256G.05 [RESPONSIBILITY FOR EMERGENCIES.] 
    Subdivision 1.  [RESIDENCE NOT A TEST.] In situations 
involving emergencies verified by a local agency, financial 
responsibility for aid to families with dependent children, 
general assistance, and Minnesota supplemental aid rests with 
the county in which an otherwise eligible person is physically 
present when the application is filed.  The county of residence 
is not obligated to reimburse.  Financial responsibility is 
limited to 30 days unless otherwise specified in the context of 
the affected program. 
    Subd. 2.  [NON-MINNESOTA RESIDENTS.] 
     State residence is not required for receiving emergency 
assistance in the general assistance and Minnesota supplemental 
aid programs only.  The receipt of emergency assistance must not 
be used as a factor in determining county or state residence. 
    Sec. 26.  Minnesota Statutes 1987 Supplement, section 
256G.07, is amended to read:  
    256G.07 [MOVING TO ANOTHER COUNTY.] 
    Subdivision 1.  [EFFECT OF MOVING.] Except as provided in 
subdivision 4, a person who has applied for and is 
receiving assistance services under a program governed by this 
chapter, in any county in this state, and who moves to another 
county in this state, is entitled to continue to receive that 
assistance from the county from which that person has moved 
until that person has resided in nonexcluded status for two full 
calendar months in the county to which that person has moved. 
    For purposes of general assistance and general assistance 
medical care, this time period is, however, one full calendar 
month. 
    Subd. 2.  [TRANSFER OF RECORDS.] Before the person has 
resided in nonexcluded status for two calendar months, or one 
calendar month in the case of general assistance or general 
assistance medical care, in the county to which that person has 
moved, the local agency of the county from which the person has 
moved shall transfer all necessary records relating to that 
person to the local agency of the county to which the person has 
moved. 
    Subd. 3.  [CONTINUATION OF CASE.] When the case is 
terminated for 30 days or less before the recipient reapplies, 
that case remains the financial responsibility of the county 
from which the recipient moved until the residence requirement 
in subdivision 1 is met. 
    Subd. 4.  [MULTIPLE FINANCIAL RESPONSIBILITY.] When more 
than one county becomes financially responsible for a case 
involving a single assistance unit, under a program covered by 
this chapter, that case must be immediately reconsidered by the 
affected local agencies.  Beginning with the first day of the 
calendar month after that reconsideration, financial 
responsibility for the entire assistance unit belongs to the 
county that was initially responsible for the program with the 
earliest date of application. 
    Subd. 5.  [SOCIAL SERVICE PROVISION.] The types and level 
of social services to be provided in any case governed by this 
chapter are those otherwise provided in the county in which the 
person is physically residing at the time those services are 
provided. 
    Sec. 27.  Minnesota Statutes 1987 Supplement, section 
256G.10, is amended to read:  
    256G.10 [DERIVATIVE SETTLEMENT ELIMINATED.] 
    Except as described in section 256G.02, subdivision 4, 
paragraph (d), Residence under this chapter must be determined 
independently for each applicant.  The residence of the parent 
or guardian does not determine the residence of the child or 
ward.  Physical or legal custody has no bearing on residence 
determinations.  This section does not, however, apply to 
situations involving another state or limit the application of 
an interstate compact. 
    Sec. 28.  Minnesota Statutes 1987 Supplement, section 
256G.11, is amended to read:  
    256G.11 [NO RETROACTIVE EFFECT.] 
    This chapter is not retroactive and does not require the 
retroactive redetermination of financial responsibility for 
cases existing on January 1, 1988.  This chapter applies only to 
applications and redeterminations of eligibility taken or 
routinely made after January 1, 1988. 
    Notwithstanding this section, however, existing social 
service cases tie to cases for those programs outlined in 
section 256G.02, subdivision 4, paragraph (g), for which an 
application is taken or a redetermination is made after January 
1, 1988. 
    Sec. 29.  [256.019] [RECOVERY OF MONEY; APPORTIONMENT.] 
    When an amount is recovered from any source for assistance 
given under the provisions governing public assistance programs 
including aid to families with dependent children, emergency 
assistance, general assistance, work readiness, and Minnesota 
supplemental aid, there shall be paid to the United States the 
amount due under the terms of the Social Security Act and the 
balance must be paid into the treasury of the state or county in 
accordance with current rates of financial participation; except 
if the recovery is directly attributable to county effort, the 
county may keep one-half of the nonfederal share of the 
recovery.  This does not apply to recoveries from medical 
providers or to recoveries begun by the department of human 
services' surveillance and utilization review division, state 
hospital collections unit, and the benefit recoveries division 
or, by the attorney general's office, or child support 
collections. 
    Sec. 30.  Minnesota Statutes 1986, section 393.07, 
subdivision 2, is amended to read:  
    Subd. 2.  [ADMINISTRATION OF PUBLIC WELFARE.] The county 
welfare board, subject to the supervision of the commissioner of 
human services, shall administer all forms of public welfare, 
both for children and adults, responsibility for which now or 
hereafter may be imposed on the commissioner of human services 
by law, including general assistance, aid to dependent children, 
county supplementation, if any, or state aid to recipients of 
supplemental security income for aged, blind and disabled, child 
welfare services, mental health services, and other public 
assistance or public welfare services, provided that the county 
welfare board shall not employ public health nursing or home 
health service personnel other than homemaker-home help aides, 
but shall contract for or purchase the necessary services from 
existing community agencies.  The duties of the county welfare 
board shall be performed in accordance with the standards and 
rules which may be promulgated by the commissioner of human 
services to achieve the purposes intended by law and in order to 
comply with the requirements of the federal Social Security Act 
in respect to public assistance and child welfare services, so 
that the state may qualify for grants-in-aid available under 
that act.  To avoid administrative penalties under section 
256.016, the county welfare board must comply with (1) policies 
established by state law and (2) instructions from the 
commissioner relating (i) to public assistance program policies 
consistent with federal law and regulation and state law and 
rule and (ii) to local agency program operations.  The 
commissioner may enforce county welfare board compliance with 
the instructions, and may delay, withhold, or deny payment of 
all or part of the state and federal share of benefits and 
federal administrative reimbursement, according to the 
provisions under section 256.016.  The county welfare board 
shall supervise wards of the commissioner and, when so 
designated, act as agent of the commissioner of human services 
in the placement of the commissioner's wards in adoptive homes 
or in other foster care facilities.  The county welfare board 
may contract with a bank or other financial institution to 
provide services associated with the processing of public 
assistance checks and pay a service fee for these services, 
provided the fee charged does not exceed the fee charged to 
other customers of the institution for similar services. 
    Sec. 31.  Minnesota Statutes 1987 Supplement, section 
393.07, subdivision 10, is amended to read:  
    Subd. 10.  [FEDERAL FOOD STAMP PROGRAM.] (a) The county 
welfare board shall establish and administer the food stamp 
program pursuant to rules of the commissioner of human services, 
the supervision of the commissioner as specified in section 
256.01, and all federal laws and regulations.  The commissioner 
of human services shall monitor food stamp program delivery on 
an ongoing basis to ensure that each county complies with 
federal laws and regulations.  Program requirements to be 
monitored include, but are not limited to, number of 
applications, number of approvals, number of cases pending, 
length of time required to process each application and deliver 
benefits, number of applicants eligible for expedited issuance, 
length of time required to process and deliver expedited 
issuance, number of terminations and reasons for terminations, 
client profiles by age, household composition and income level 
and sources, and the use of phone certification and home 
visits.  The commissioner shall determine the county-by-county 
and statewide participation rate.  The commissioner shall report 
on the monitoring activities on a county-by-county basis in a 
report presented to the legislature by July 1 each year.  This 
monitoring activity shall be separate from the management 
evaluation survey sample required under federal regulations.  
    (b) On July 1 of each year, the commissioner of human 
services shall determine a statewide and county-by-county food 
stamp program participation rate.  The commissioner may 
designate a different agency to administer the food stamp 
program in a county if the agency administering the program 
fails to increase the food stamp program participation rate 
among families or eligible individuals, or comply with all 
federal laws and regulations governing the food stamp program.  
The commissioner shall review agency performance annually to 
determine compliance with this paragraph. 
    (c) The county welfare board shall participate in a food 
stamp quality control system subject to the supervision of the 
commissioner of human services and pursuant to federal 
regulations.  
    A person who commits any of the following acts has violated 
section 256.98 and is subject to both the criminal and civil 
penalties provided under that section: 
    (1) Obtains or attempts to obtain, or aids or abets any 
person to obtain by means of a willfully false statement or 
representation, or intentional concealment of a material fact, 
food stamps to which the person is not entitled or in an amount 
greater than that to which that person is entitled; or 
    (2) Presents or causes to be presented, coupons for payment 
or redemption knowing them to have been received, transferred or 
used in a manner contrary to existing state or federal law; or 
    (3) Willfully uses or transfers food stamp coupons or 
authorization to purchase cards in any manner contrary to 
existing state or federal law. 
     Sec. 32.  [TRANSFER OF COUNTY FOOD STAMP QUALITY CONTROL 
SYSTEM EMPLOYEES.] 
    (a) All positions covered by the Minnesota merit system 
located in Crow Wing county family social service center and in 
the Redwood county welfare department classified as food stamp 
corrective action specialist I and II and as financial assistant 
supervisor I, if the positions supervise food stamp corrective 
action specialists, are transferred to the department of human 
services and become state civil service positions. 
    (b) All incumbent employees affected by this transfer, who 
choose to transfer to state civil service positions in the 
department of human services, must be transferred with no 
reduction in salary.  Salaries of individual employees who 
transfer must be adjusted to the minimum salary or to the 
nearest equal or higher step on the state compensation plan for 
their class, whichever is greater. 
    (c) Existing sick leave and vacation accruals for an 
employee who transfers must be transferred to the department of 
human services and the employee shall accrue additional vacation 
and sick leave under the provisions of the appropriate state 
collective bargaining agreement based on the employee's years of 
service in either Crow Wing county family service center or in 
the Redwood county welfare department. 
    (d) If an employee who transfers chooses to retain the 
county coverage for employee and dependent health, dental, and 
life insurance, the department of human services shall reimburse 
the employee for one month of continued enrollment in the 
health, dental, and life insurance plans in an amount equal to 
what their former county employer would have paid for the 
coverage had the employee remained a county employee, until the 
employee is eligible for coverage under the state insurance 
plans. 
    (e) Classification seniority for an employee who transfers 
must be calculated according to the provisions of the 
appropriate state collective bargaining agreement based upon the 
employee's years of service in the county merit system. 
    Sec. 33.  [REPEALER.] 
    Minnesota Statutes 1986, section 256.965; and Minnesota 
Statutes 1987 Supplement, section 256D.22, are repealed.  
    Sec. 34.  [HUMAN SERVICES; APPROPRIATIONS.] 
    $1,655,500 is appropriated from the general fund to the 
commissioner of human services for the purposes indicated. 
   (a) $990,000 is for the county incentive fund, to be 
available until June 30, 1991. 
   (b) $110,000 is available beginning June 1, 1989, to 
convert county food stamp quality control staff to state 
employment. 
   (c) $555,500 is available beginning January 1, 1990, to 
implement state financing of income maintenance benefits as 
contained in this article by monitoring local agency performance 
in administering the income maintenance programs, providing 
technical assistance and program support, and reviewing local 
agency exceptions to compliance actions. 
    Sec. 35.  [HUMAN SERVICES APPROPRIATION REDUCTION.] 
    The appropriation in Laws 1987, chapter 403, article 1, 
section 2, subdivision 2, for county administrative aid for 
fiscal year 1989 is reduced by $1,150,000 because of the changes 
made by this article. 
    Sec. 36.  [POSITIONS.] 
    The following additional positions are approved for the 
department of human services. 
     Appeals and Contracts               1
     Financial Management                2
     Assistance Payments                22 
     Food Stamp Quality Control         25 
    Sec. 37.  [EFFECTIVE DATE.] 
    The part of section 31 that strikes a part of paragraph (c) 
is effective June 1, 1990.  Section 32 is effective June 1, 1989.
Except as provided in section 34, the rest of this article is 
effective January 1, 1990. 

                               ARTICLE 9 

                              PULL-TAB TAX 
    Section 1.  Minnesota Statutes 1986, section 349.12, 
subdivision 18, is amended to read:  
    Subd. 18.  [DEAL.] "Deal" means each separate package, or 
series of packages, consisting of one game of pull-tabs or 
tipboards with the same serial number purchased from a 
distributor. 
    Sec. 2.  Minnesota Statutes 1986, section 349.12, is 
amended by adding a subdivision to read: 
    Subd. 19.  [IDEAL GROSS.] "Ideal gross" means the total 
amount of receipts that would be received if every individual 
ticket in the pull-tab or tipboard deal was sold at its face 
value. 
    Sec. 3.  Minnesota Statutes 1986, section 349.12, is 
amended by adding a subdivision to read: 
    Subd. 20.  [IDEAL NET.] "Ideal net" means the pull-tab or 
tipboard deal's ideal gross, as defined under subdivision 19, 
less the total predetermined prize amounts available to be paid 
out.  When the prize is not a monetary one, the ideal net is 50 
percent of the ideal gross. 
    Sec. 4.  Minnesota Statutes 1987 Supplement, section 
349.212, subdivision 1, is amended to read:  
    Subdivision 1.  [RATE.] There is hereby imposed a tax on 
all lawful gambling, other than (1) pull-tabs purchased and 
placed into inventory after January 1, 1987, and (2) tipboards 
purchased and placed into inventory after June 30, 1988, 
conducted by organizations licensed by the board at the rate 
specified in this subdivision.  The tax imposed by this 
subdivision is in lieu of the tax imposed by section 297A.02 and 
all local taxes and license fees except a fee authorized under 
section 349.16, subdivision 4. 
    On all lawful gambling, other than (1) pull-tabs purchased 
and placed into inventory after January 1, 1987, and (2) 
tipboards purchased and placed into inventory after June 30, 
1988, the tax is ten percent of the gross receipts of a licensed 
organization from lawful gambling less prizes actually paid out, 
payable by the organization. 
    Sec. 5.  Minnesota Statutes 1987 Supplement, section 
349.212, subdivision 4, is amended to read:  
    Subd. 4.  [PULL-TAB AND TIPBOARD TAX.] (a) There is imposed 
a tax on the sale of each deal of pull-tabs and tipboards sold 
by a licensed distributor to a licensed organization, or to an 
organization holding an exemption identification number.  The 
rate of the tax is ten percent of the face resale value of all 
the pull-tabs in each deal less the total prizes which may be 
paid out on all the pull-tabs in that ideal net of the pull-tab 
and tipboard deal.  The tax is payable to the commissioner of 
revenue in the manner prescribed in section 349.2121 and the 
rules of the commissioner.  The commissioner shall pay the 
proceeds of the tax to the state treasurer for deposit in the 
general fund.  The sales tax imposed by chapter 297A on the sale 
of the pull-tabs and tipboards by the licensed distributor to an 
organization is imposed on the retail sales price less the tax 
imposed by this subdivision.  The retail sale of pull-tabs or 
tipboards by the organization is exempt from taxes imposed by 
chapter 297A if the tax imposed by this subdivision has been 
paid and is exempt from all local taxes and license fees except 
a fee authorized under section 349.16, subdivision 4. 
    (b) The liability for the tax imposed by this section is 
incurred when the pull-tabs and tipboards are delivered by the 
distributor to the licensed or exempt organization, to a common 
or contract carrier for delivery to the organization, or when 
received by the organization's authorized representative at the 
distributor's place of business, regardless of the distributor's 
method of accounting or the terms of the sale. 
    If a licensed organization or any organization holding an 
exemption number receives pull-tabs directly from the 
manufacturer and the manufacturer is not a licensed distributor, 
the distributor from whom the pull-tabs were purchased is liable 
for tax when the manufacturer delivers the pull-tabs to the 
organization, or to a contract or common carrier for delivery to 
the organization, or when the pull-tabs are received by the 
organization's authorized representative at the manufacturer's 
place of business, regardless of the manufacturer's or the 
distributor's method of accounting or the terms of the sale. 
    (c) The exemptions contained in section 349.214, 
subdivision 2, paragraph (b), do not apply to the tax imposed in 
this subdivision. 
    Sec. 6.  Minnesota Statutes 1986, section 349.2121, 
subdivision 1, is amended to read:  
    Subdivision 1.  [APPLICATION AND ISSUANCE.] Every 
distributor licensed by the board who sells pull-tabs and 
tipboards to organizations authorized to sell pull-tabs and 
tipboards under this chapter must file with the commissioner of 
revenue an application, on a form the commissioner prescribes, 
for a gambling tax identification number and gambling tax 
permit.  The commissioner, when satisfied that the applicant has 
a valid license from the board, shall issue the applicant a 
permit and number.  A permit is not assignable and is valid only 
for the distributor in whose name it is issued. 
    Sec. 7.  Minnesota Statutes 1986, section 349.2121, 
subdivision 2, is amended to read:  
    Subd. 2.  [RECORDS.] The commissioner may by rule require a 
licensed distributor holding a permit under this section to keep 
such books, papers, documents, and records as the commissioner 
deems necessary to the enforcement of this chapter.  The 
commissioner may examine, or cause to be examined, any books, 
papers, records, or other documents relevant to making a 
determination, whether they are in the possession of a 
distributor or another person or corporation.  The commissioner 
may require the attendance of any persons having knowledge or 
information in the premises, to compel the production of books, 
papers, records, or memoranda by persons so required to attend, 
to take testimony on matters material to a determination, and to 
administer oaths or affirmations.  A distributor shall keep at 
each licensed place of business complete and accurate records 
for that place of business, including itemized invoices of 
pull-tabs and tipboards held, purchased, manufactured, or 
brought in or caused to be brought in from without this state, 
and of all sales of pull-tabs and tipboards.  The records must 
show the names and addresses of purchasers, the inventory at the 
close of each period for which a return is required of all 
pull-tab and tipboard deals on hand, and other pertinent papers 
and documents relating to the purchase, sale, or disposition of 
pull-tab and tipboard deals.  Books, records, and other papers 
and documents required by this section must be kept 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.  At any time during usual business hours, 
the commissioner, executive secretary of the charitable gambling 
control board, or any of their duly authorized agents or 
employees, may enter a place of business of a distributor, 
charitable organization, or any site from which pull-tabs or 
tipboards are being sold and inspect the premises and the 
records required to be kept under this section to determine 
whether or not all the provisions of this section are being 
fully complied with.  If the commissioner, executive secretary, 
or their duly authorized agents or employees are denied free 
access to or are hindered or interfered with in making an 
inspection of the distributor's place of business, the permit of 
the distributor may be revoked by the commissioner, and the 
license of the distributor may be revoked by the charitable 
gambling control board. 
    Sec. 8.  Minnesota Statutes 1986, section 349.2121, is 
amended by adding a subdivision to read: 
    Subd. 2a.  A distributor who sells pull-tabs and tipboards 
to persons other than the ultimate consumer shall give with each 
sale an itemized invoice showing the distributor's name and 
address, the purchaser's name and address, the date of the sale, 
description of the deals including the ideal net amounts, and 
all prices and discounts, and shall keep legible copies of all 
the itemized invoices for 3-1/2 years from the date of sale. 
    Sec. 9.  Minnesota Statutes 1987 Supplement, section 
349.2121, subdivision 4a, is amended to read:  
    Subd. 4a.  [REFUND.] If any deal of pull-tabs or tipboards 
registered with the board and upon which the tax imposed by 
section 349.212, subdivision 4, has been paid is returned 
unplayed to the distributor, the commissioner of revenue shall 
allow a refund of the tax paid. 
    In the case of a defective deal registered with the board 
and upon which the taxes have been paid is returned to the 
manufacturer, the distributor shall submit to the commissioner 
of revenue certification from the manufacturer that the deal was 
returned and in what respect it was defective.  The 
certification must be in a form prescribed by the commissioner 
and must contain additional information the commissioner 
requires. 
    The commissioner may require that no refund under this 
subdivision be made unless the returned pull-tabs or tipboards 
have been set aside for inspection by the commissioner's 
employee. 
    Reductions in previously paid taxes authorized by this 
subdivision shall be made at the time and in the manner 
prescribed by the commissioner. 
    Sec. 10.  Minnesota Statutes 1986, section 349.2121, 
subdivision 5, is amended to read:  
    Subd. 5.  [PUBLIC INFORMATION CONFIDENTIAL.] Neither the 
commissioner nor any other public official or employee may 
divulge or otherwise make known in any manner any particulars 
disclosed in any report or return required by this section, or 
any information concerning the affairs of the distributor making 
the return acquired from its records, officers, or employees 
while examining or auditing under the authority of this chapter, 
except in connection with a proceeding involving taxes due under 
this chapter.  Nothing herein prohibits the commissioner from 
publishing statistics so classified as not to disclose the 
identity of particular returns or reports and their contents.  
Any person violating the provisions of this section is guilty of 
a gross misdemeanor. 
    Notwithstanding the provisions of this section, the 
commissioner may furnish information on a reciprocal basis to 
the taxing officials of another state or the board in order to 
implement the purposes of this chapter. 
    In order to facilitate processing of returns and payments 
of taxes required by this chapter, the commissioner may contract 
with outside vendors and may disclose private and nonpublic data 
to the vendor.  The data disclosed must be administered by the 
vendor consistent with this section.  All records concerning the 
administration of the pull-tab and tipboard taxes are classified 
as public information.  
    Sec. 11.  Minnesota Statutes 1987 Supplement, section 
349.2121, subdivision 10, is amended to read:  
    Subd. 10.  [UNTAXED PULL-TABS OR TIPBOARDS.] It is a gross 
misdemeanor for any person to possess pull-tabs or tipboards for 
resale in this state that have not been registered with the 
board, for which a registration stamp has not been affixed to 
the flare, and upon which the taxes imposed by section 349.212, 
subdivision 4, or chapter 297A have not been paid.  The 
executive secretary of the charitable gambling control board or 
the commissioner of revenue or their designated inspectors and 
employees may seize in the name of the state of Minnesota any 
unregistered or untaxed pull-tabs or tipboards. 
    Sec. 12.  Minnesota Statutes 1987 Supplement, section 
349.2122, is amended to read:  
    349.2122 [MANUFACTURERS; REPORTS TO THE COMMISSIONER; 
PENALTY.] 
    A manufacturer registered with the board who sells 
pull-tabs and tipboards to a distributor licensed by the board 
must file with the commissioner of revenue, on a form prescribed 
by the commissioner, a report of pull-tabs and tipboards sold to 
licensed distributors.  The report must be filed monthly on or 
before the 25th day of the month succeeding the month in which 
the sale was made.  Any person violating this section shall be 
guilty of a misdemeanor. 
    Sec. 13.  Minnesota Statutes 1987 Supplement, section 
349.2123, is amended to read:  
    349.2123 [CERTIFIED PHYSICAL INVENTORY.] 
    The commissioner of revenue may, upon request, require a 
pull-tab licensed distributor to furnish a certified physical 
inventory of the pull-tabs and tipboards in stock.  The 
inventory must contain the information required by the 
commissioner. 
    Sec. 14.  [349.2125] [CONTRABAND.] 
    Subdivision 1.  [CONTRABAND DEFINED.] The following are 
contraband: 
    (1) all pull-tab or tipboard deals that do not have stamps 
affixed to them as provided in section 349.162; 
    (2) all pull-tab or tipboard deals in the possession of any 
unlicensed organization whether stamped or unstamped;  
    (3) any container used for the storage and display of any 
contraband pull-tab or tipboard deals as defined in clauses (1) 
and (2);  
    (4) any cash drawer, cash register, or any other container 
used for illegal pull-tab or tipboard transactions including its 
contents; and 
    (5) any 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 five pull-tab or tipboard deals that are contraband under 
this subdivision.  When pull-tabs and tipboards are being 
transported in the course of interstate commerce, or from one 
distributor to another, the pull-tab and tipboard deals are not 
contraband, notwithstanding the provisions of clause (1).  
    Subd. 2.  [SEIZURE.] Pull-tabs or tipboards or other 
property made contraband by subdivision 1 may be seized by the 
commissioner of revenue or the executive secretary of the 
charitable gambling control board or their authorized agents or 
by any sheriff or other police officer, hereinafter referred to 
as the seizing authority, with or without process, and shall be 
subject to forfeiture as provided in subdivisions 3 and 4. 
    Subd. 3.  [INVENTORY; JUDICIAL DETERMINATION; APPEAL; 
DISPOSITION OF SEIZED PROPERTY.] Within two days after the 
seizure of any alleged contraband, the person making the seizure 
shall deliver an inventory of the property seized to the person 
from whom the property was seized, if known, and file a copy 
with the commissioner or the executive secretary of the 
charitable gambling control board.  Within ten days after the 
date of service of the inventory, the person from whom the 
property was seized or any person claiming an interest in the 
property may file with the seizing authority a demand for 
judicial determination of whether the property was lawfully 
subject to seizure and forfeiture.  Within 30 days after the 
date of filing of the demand, the seizing authority must bring 
an action in the district court of the county where seizure was 
made to determine the issue of forfeiture.  The action must be 
brought in the name of the state and be prosecuted by the county 
attorney or by the attorney general.  The court shall hear the 
action without a jury and determine the issues of fact and laws 
involved.  When a judgment of forfeiture is entered, the seizing 
authority may, unless the judgment is stayed pending an appeal, 
either (1) cause the forfeited property to be destroyed; or (2) 
cause it to be sold at a public auction as provided by law.  
    If demand for judicial determination is made and no action 
is commenced as provided in this subdivision, the property must 
be released by the seizing authority and delivered to the person 
entitled to it.  If no demand is made, the property seized is 
considered forfeited to the state by operation of law and may be 
disposed of by the seizing authority as provided where there has 
been a judgment of forfeiture.  When the seizing authority is 
satisfied that a person from whom property is seized was acting 
in good faith and without intent to evade the tax imposed by 
section 349.2121, subdivision 4, the seizing authority shall 
release the property seized without further legal proceedings.  
    Subd. 4.  [DISPOSAL.] The property described in subdivision 
1, clauses (4) and (5), must be confiscated after conviction of 
the person from whom it was seized, upon compliance with the 
following procedure:  the seizing authority shall file with the 
court a separate complaint against the property, describing it 
and charging its use in the specific violation, and specifying 
substantially the time and place of the unlawful use.  A copy of 
the complaint must be served upon the defendant or person in 
charge of the property at the time of seizure, if any.  If the 
person arrested is acquitted, the court shall dismiss the 
complaint against the property and order it returned to the 
persons legally entitled to it.  Upon conviction of the person 
arrested, the court shall issue an order directed to any person 
known or believed to have any right, title or interest in, or 
lien upon, any of the property, and to persons unknown claiming 
any right, title, interest, or lien in it, describing the 
property and (1) stating that it was seized and that a complaint 
against it, charging the specified violation, has been filed 
with the court, (2) requiring the persons to file with the court 
administrator their answer to the complaint, setting forth any 
claim they may have to any right or title to, interest in, or 
lien upon the property, within 30 days after the service of the 
order, and (3) notifying them in substance that if they fail to 
file their answer within the time, the property will be ordered 
sold by the seizing authority.  The court shall cause the order 
to be served upon any person known or believed to have any 
right, title, interest, or lien as in the case of a summons in a 
civil action, and upon unknown persons by publication, as 
provided for service of summons in a civil action.  If no answer 
is filed within the time prescribed, the court shall, upon 
affidavit by the court administrator, setting forth the fact, 
order the property sold by the seizing authority.  The proceeds 
of the sale, after deducting the expense of keeping the property 
and fees and costs of sale, must be paid into the state treasury 
and credited to the general fund.  If answer is filed within the 
time provided, the court shall fix a time for a hearing, which 
shall be not less than ten nor more than 30 days after the time 
for filing answer expires.  At the time fixed for hearing, 
unless continued for cause, the matter shall be heard and 
determined by the court, without a jury, as in other civil 
actions.  
    If the court finds that the property, or any part of it, 
was used in the violation specified in the complaint, it shall 
order the property unlawfully used, sold as provided by law, 
unless the owner shows to the satisfaction of the court that the 
owner had no notice or knowledge or reason to believe that the 
property was used or intended to be used in the violation.  The 
officer making a sale, after deducting the expense of keeping 
the property, the fee for seizure, and the costs of the sale, 
shall pay all liens according to their priority, which are 
established at the hearing as being bona fide and as existing 
without the lienor having any notice or knowledge that the 
property was being used or was intended to be used for or in 
connection with the violation specified in the order of the 
court, and shall pay the balance of the proceeds into the state 
treasury to be credited to the general fund.  A sale under this 
section shall free the property sold from any and all liens on 
it.  Appeal from the order of the district court will lie as in 
other civil cases.  At any time after seizure of the articles 
specified in this subdivision, and before the hearing provided 
for, the property must be returned to the owner or person having 
a legal right to its possession, upon execution of a good and 
valid bond to the state, with corporate surety, in the sum of 
not less than $100 and not more than double the value of the 
property seized, to be approved by the court in which the case 
is triable, or a judge of it, conditioned to abide any order and 
the judgment of the court, and to pay the full value of the 
property at the time of the seizure.  The seizing authority may 
dismiss the proceedings outlined in this subdivision when the 
seizing authority considers it to be in the best interests of 
the state to do so.  
    Sec. 15.  [349.2127] [PROHIBITIONS.] 
    Subdivision 1.  [COUNTERFEITING.] No person shall with 
intent to defraud the state, make, alter, forge, or counterfeit 
any license or stamp provided for in this chapter, or have in 
possession any forged, spurious, or altered stamps, with the 
intent, or with the result of, depriving the state of the tax 
imposed by this chapter.  
    Subd. 2.  [PROHIBITION AGAINST POSSESSION.] No person, 
other than a licensed distributor, shall sell, offer for sale, 
or have in possession with intent to sell or offer for sale, a 
pull-tab or tipboard deal not stamped in accordance with the 
provisions of this chapter.  
    Subd. 3.  [FALSIFICATION OF RECORDS.] No person required by 
section 349.2121, subdivision 2, to keep records or to make 
returns shall falsify or fail to keep the records or falsify or 
fail to make the returns. 
    Subd. 4.  [TRANSPORTING UNSTAMPED DEALS.] No person shall 
transport into, or receive, carry, or move from place to place 
in this state, any deals of pull-tabs or tipboards not stamped 
in accordance with this chapter except in the course of 
interstate commerce, unless the deals are moving from one 
distributor to another. 
    Sec. 16.  Minnesota Statutes 1986, section 349.22, 
subdivision 1, is amended to read:  
    Subdivision 1.  [GROSS MISDEMEANOR.] Any other violation of 
A person who in any manner violates sections 349.11 to 
349.214 is to evade the tax imposed by this chapter, or who aids 
and abets evasion of the tax, or hinders or interferes with a 
seizing authority when a seizure is made as provided by section 
349.2125, is guilty of a gross misdemeanor.  
    Sec. 17.  Minnesota Statutes 1986, section 349.22, is 
amended by adding a subdivision to read: 
    Subd. 3.  [FELONY.] (a) A person violating section 
349.2127, subdivision 1 or 3, is guilty of a felony.  
    (b) A person violating section 349.2127, subdivisions 2 and 
4, by possessing, receiving, or transporting more than ten 
pull-tab or tipboard deals not stamped in accordance with this 
chapter is guilty of a felony. 
    Sec. 18.  Minnesota Statutes 1986, section 349.22, is 
amended by adding a subdivision to read: 
    Subd. 4.  [SALES AFTER REVOCATION.] A person selling 
pull-tabs or tipboards after the person's license or permit has 
been revoked is guilty of a felony.  
     Sec. 19.  [EFFECTIVE DATE.] 
    Sections 1 to 4 and 6 to 18 are effective July 1, 1988.  
Section 5 is effective for deals of tipboards purchased and 
placed into inventory after June 30, 1988. 

                               ARTICLE 10 

                               SALES TAX 
    Section 1.  Minnesota Statutes 1987 Supplement, section 
297A.01, subdivision 3, is amended to read:  
    Subd. 3.  A "sale" and a "purchase" includes, but is not 
limited to, each of the following transactions: 
    (a) Any transfer of title or possession, or both, of 
tangible personal property, whether absolutely or conditionally, 
and the leasing of or the granting of a license to use or 
consume tangible personal property other than manufactured homes 
used for residential purposes for a continuous period of 30 days 
or more, for a consideration in money or by exchange or barter; 
    (b) 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; 
    (c) The furnishing, preparing or serving for a 
consideration of food, meals or drinks, not including meals or 
drinks served to patients, inmates, or persons residing at 
hospitals, sanatoriums, nursing homes or, senior citizens homes, 
and correctional, detention, and detoxification facilities, 
meals or drinks purchased for and served exclusively to 
individuals who are 60 years of age or over and their spouses or 
to the handicapped and their spouses by governmental agencies, 
nonprofit organizations, agencies, or churches or pursuant to 
any program funded in whole or part through 42 USCA sections 
3001 through 3045, wherever delivered, prepared or served, meals 
and lunches served at public and private schools, universities 
or colleges.  "Sales" also includes meals furnished by employers 
to employees at less than fair market value, except meals 
furnished at no charge to employees of hospitals, nursing homes, 
boarding care homes, sanatoriums, group homes, and correctional, 
detention, and detoxification facilities, who are required to 
eat with the patients, residents, or inmates residing in them.  
Notwithstanding section 297A.25, subdivision 2, taxable food or 
meals include, but are not limited to, the following:  
    (i) heated food or drinks;  
    (ii) sandwiches prepared by the retailer;  
    (iii) single sales of prepackaged ice cream or ice milk 
novelties prepared by the retailer; 
    (iv) hand-prepared or dispensed ice cream or ice milk 
products including cones, sundaes, and snow cones;  
    (v) soft drinks and other beverages prepared or served by 
the retailer;  
    (vi) gum;  
    (vii) ice;  
    (viii) all food sold in vending machines;  
    (ix) party trays prepared by the retailers; and 
    (x) all meals and single servings of packaged snack food, 
single cans or bottles of pop, sold in restaurants and bars; 
    (d) The granting of the privilege of admission to places of 
amusement, recreational areas, or athletic events and the 
privilege of having access to and the use of amusement devices, 
tanning facilities, reducing salons, steam baths, turkish baths, 
massage parlors, health clubs, and spas or athletic facilities; 
    (e) The furnishing for a consideration of lodging and 
related services by a hotel, rooming house, tourist court, motel 
or trailer camp and of the granting of any similar license to 
use real property other than the renting or leasing thereof for 
a continuous period of 30 days or more; 
    (f) The furnishing for a consideration of electricity, gas, 
water, or steam for use or consumption within this state, or 
local exchange telephone service, intrastate toll service, and 
interstate toll service, if that service originates from and is 
charged to a telephone located in this state; the tax imposed on 
amounts paid for telephone services is the liability of and 
shall be paid by the person paying for the services.  Sales by 
municipal corporations in a proprietary capacity are included in 
the provisions of this clause.  The furnishing of water and 
sewer services for residential use shall not be considered a 
sale;  
    (g) The furnishing for a consideration of cable television 
services, including charges for basic monthly service, charges 
for monthly premium service, and charges for any other similar 
television services;  
    (h) Notwithstanding subdivision 4, and section 297A.25, 
subdivision 9, the sales of horses including claiming sales and 
fees paid for breeding a stallion to a mare.  This clause 
applies to sales and fees with respect to a horse to be used for 
racing whose birth has been recorded by the Jockey Club or the 
United States Trotting Association or the American Quarter Horse 
Association; 
    (i) The furnishing for a consideration of parking services, 
whether on a contractual, hourly, or other periodic basis, 
except for parking at a meter; 
    (j) The furnishing for a consideration of services listed 
in this paragraph: 
    (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 and exterminating services; 
    (iv) services provided by detective agencies, security 
services, burglar, fire alarm, and armored car services not 
including services performed within the jurisdiction they serve 
by off-duty licensed peace officers as defined in section 
626.84, subdivision 1; 
    (v) pet grooming services; and 
    (vi) lawn care, fertilizing, mowing, spraying and sprigging 
services; garden planting and maintenance; arborist services; 
tree, bush, and shrub planting, pruning, bracing, spraying, and 
surgery; and tree trimming for public utility lines. 
The services listed in this paragraph are taxable under section 
297A.02 if the service is performed wholly within Minnesota or 
if the service is performed partly within and partly without 
Minnesota and the greater proportion of the service is performed 
in Minnesota, based on the cost of performance.  In applying the 
provisions of this chapter, the terms "tangible personal 
property" and "sales at retail" include taxable services and the 
provision of taxable services, unless specifically provided 
otherwise.  Services performed by an employee for an employer 
are not taxable under this paragraph.  Services performed by a 
corporation, partnership, or association for another 
corporation, partnership, or association are not taxable under 
this paragraph 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 this section, "affiliated group of corporations" includes 
those entities that would be classified as a member of an 
affiliated group under United States Code, title 26, section 
1504, and who are eligible to file a consolidated tax return for 
federal income tax purposes;  
    (k) A "sale" and a "purchase" includes the transfer of 
computer software, meaning information and directions that 
dictate the function performed by data processing equipment.  A 
"sale" and a "purchase" does not include the design, 
development, writing, translation, fabrication, lease, or 
transfer for a consideration of title or possession of a custom 
computer program; and 
    (l) The granting of membership in a club, association, or 
other organization if: 
    (1) 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 
    (2) use of the sports and athletic facilities is not made 
available to the general public on the same basis as it is made 
available to members.  
Granting of membership includes both one-time 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.  The provisions of this paragraph do not 
apply to camps or other recreation facilities owned and operated 
by an exempt organization under section 501(c)(3) of the 
Internal Revenue Code of 1986, as amended through December 31, 
1986, for educational and social activities for young people 
primarily age 18 and under.  The provisions of this paragraph do 
not apply to an association incorporated under section 315.44.  
    Sec. 2.  Minnesota Statutes 1986, section 297A.15, 
subdivision 1, is amended to read:  
    Subdivision 1.  Liability for the payment of the use tax is 
not extinguished until the tax has been paid to Minnesota.  
However, a receipt from a retailer maintaining a place of 
business in Minnesota, or from a retailer who is authorized by 
the commissioner under such rules as the commissioner may 
prescribe, to collect the tax, given to the purchaser pursuant 
to section 297A.16 relieves the purchaser of further liability 
for the tax to which the receipt refers, unless the purchaser 
knows or has reason to know that the retailer did not have a 
permit to collect the tax.  
    Sec. 3.  Minnesota Statutes 1986, section 297A.15, 
subdivision 5, is amended to read:  
    Subd. 5.  [REFUND; APPROPRIATION.] Notwithstanding the 
provisions of sections 297A.02, subdivision 2, and 297A.257 the 
tax on sales of capital equipment, and construction materials 
and supplies under section 297A.257, shall be imposed and 
collected as if the rate under section 297A.02, subdivision 1, 
applied.  Upon application by the purchaser, on forms prescribed 
by the commissioner, a refund equal to the reduction in the tax 
due as a result of the application of the rates under section 
297A.02, subdivision 2, or the exemption under section 297A.257 
shall be paid to the purchaser.  In the case of building 
materials qualifying under section 297A.257 where the tax was 
paid by a contractor, application must be made by the owner for 
the sales tax paid by all the contractors, subcontractors, and 
builders for the project.  The application must include 
sufficient information to permit the commissioner to verify the 
sales tax paid for the project.  The application shall include 
information necessary for the commissioner initially to verify 
that the purchases qualified as capital equipment under section 
297A.02, subdivision 2, or capital equipment or construction 
materials and supplies under section 297A.257.  No more than two 
applications for refunds may be filed under this subdivision in 
a calendar year.  Unless otherwise specifically provided by this 
subdivision, the provisions of section 297A.34 apply to the 
refunds payable under this subdivision.  There is annually 
appropriated to the commissioner of revenue the amount required 
to make the refunds.  
    The amount to be refunded shall bear interest at the rate 
in section 270.76 from the date the refund claim is filed with 
the commissioner. 
    Sec. 4.  Minnesota Statutes 1986, section 297A.16, is 
amended to read:  
    297A.16 [COLLECTION OF TAX AT TIME OF SALE.] 
    Any corporation authorized to do business in Minnesota, any 
retailer as defined in who is required under section 297A.21, or 
any other retailer as the commissioner shall authorize pursuant 
to section 297A.15, or authorized by the commissioner to collect 
the use tax upon making retail sales of any items enumerated in 
this chapter not exempted under sections 297A.01 to 297A.44, to 
which the use tax applies shall at the time of making such sales 
collect the use tax from the purchaser and give to the purchaser 
a receipt therefor in the form of a notation on the sales slip 
or receipt for the sales price or in such other form as 
prescribed by the commissioner.  Any such corporation or 
retailer shall not collect the tax from a purchaser who 
furnishes to such corporation or retailer a copy of a 
certificate issued by the commissioner authorizing such 
purchaser to pay any sales or use tax due on purchases made by 
such purchaser directly to the commissioner.  The tax collected 
by such corporation or retailer pursuant to the provisions of 
this section shall be remitted to the commissioner as provided 
in other sections of this chapter. 
    Any corporation or any retailer required to collect the use 
tax and remit such tax to the commissioner pursuant to this 
section shall file with the commissioner an application for a 
permit pursuant to section 297A.04.  Every such corporation or 
retailer shall furnish the commissioner with the name and 
address of all its agents operating in Minnesota and the 
location of each of its distribution or sales houses or offices 
or other places of business in this state.  
    Sec. 5.  Minnesota Statutes 1986, section 297A.17, is 
amended to read:  
    297A.17 [TAX TO BE COLLECTED; STATUS AS DEBT.] 
    The use tax required to be collected by the retailer 
constitutes a debt owed by the retailer to Minnesota and shall 
be a debt from the purchaser to the retailer recoverable at law 
in the same manner as other debts.  A retailer who does not 
maintain a place of business within this state shall not be 
indebted to Minnesota for amounts of use tax which it was 
required to collect but did not collect unless the retailer knew 
or had been advised by the commissioner of its obligation to 
collect the use tax. 
    Sec. 6.  Minnesota Statutes 1986, section 297A.21, is 
amended to read:  
    297A.21 [REGISTRATION; INFORMATION RELATING TO BUSINESS 
LOCATION TO COLLECT USE TAX.] 
    Subdivision 1.  Every retailer making retail sales for 
storage, use or other consumption in Minnesota shall register 
with the commissioner and give the name and address of all 
agents operating in Minnesota, the location of all distribution 
or sales houses, offices or other places of business in 
Minnesota, and such other information as the commissioner may 
require.  When, in the opinion of the commissioner, it is 
necessary for the efficient administration of sections 297A.14 
to 297A.25 to regard any salesperson, representative, trucker, 
peddler, or canvasser as the agent of the dealer, distributor, 
supervisor, employer, or other person under whom that person 
operates or from whom the person obtains the tangible personal 
property sold, whether making sales personally or in behalf of 
such dealer, distributor, supervisor, employer, or other person, 
the commissioner may regard the salesperson, representative, 
trucker, peddler, or canvasser as such agent, and may regard the 
dealer, distributor, supervisor, employer, or other person as a 
retailer for the purposes of sections 297A.14 to 297A.25.  
    Subd. 2. [RETAILER MAINTAINING PLACE OF BUSINESS IN 
MINNESOTA.] "Retailer maintaining a place of business in this 
state", or any like term, shall mean any retailer having or 
maintaining within this state, directly or by a subsidiary, an 
office, distribution house, sales house, warehouse, or other 
place of business, or any agent operating within this state 
under the authority of the retailer or its subsidiary, whether 
such place of business or agent is located in the state 
permanently or temporarily, or whether or not such retailer or 
subsidiary is authorized to do business within this state.  
    Subd. 2.  [DESTINATION.] The destination of a sale is the 
location to which the retailer makes delivery of the property 
sold, or causes the property to be delivered, to the purchaser 
of the property, or to the agent or designee of the purchaser by 
any means of delivery, including the United States Postal 
Service, a common carrier, or a contract carrier. 
     Subd. 3.  [OUT-OF-STATE RETAILER MAINTAINING PLACE OF 
BUSINESS IN MINNESOTA.] A retailer making retail sales from 
outside this state to a destination within this state and 
maintaining a place of business in this state shall file an 
application for a permit pursuant to section 297A.04 and shall 
collect and remit the use tax as provided in section 297A.16. 
     Subd. 4.  [REQUIRED REGISTRATION BY OUT-OF-STATE RETAILER 
NOT MAINTAINING PLACE OF BUSINESS IN MINNESOTA.] (a) A retailer 
making retail sales from outside this state to a destination 
within this state and not maintaining a place of business in 
this state shall file an application for a permit pursuant to 
section 297A.04 and shall collect and remit the use tax as 
provided in section 297A.16 if the retailer engages in the 
regular or systematic soliciting of sales from potential 
customers in this state by: 
    (1) the distribution, by mail or otherwise, without regard 
to the state from which such distribution originated or in which 
the materials were prepared, of catalogs, periodicals, 
advertising flyers, or other written solicitations of business 
to customers in this state; 
    (2) display of advertisements on billboards or other 
outdoor advertising in this state; 
    (3) advertisements in newspapers published in this state; 
    (4) advertisements in trade journals or other periodicals 
the circulation of which is primarily within this state; 
     (5) advertisements in a Minnesota edition of a national or 
regional publication or a limited regional edition in which this 
state is included of a broader regional or national publication 
which are not placed in other geographically defined editions of 
the same issue of the same publication; 
     (6) advertisements in regional or national publications in 
an edition which is not by its contents geographically targeted 
to Minnesota but which is sold over the counter in Minnesota or 
by subscription to Minnesota residents; 
    (7) advertisements broadcast on a radio or television 
station located in Minnesota; or 
    (8) any other solicitation by telegraphy, telephone, 
computer data base, cable, optic, microwave, or other 
communication system. 
    (b) The location within or without this state of vendors 
independent of the retailer which provide products or services 
to the retailer in connection with its solicitation of customers 
within this state, including such products and services as 
creation of copy, printing, distribution, and recording, is not 
to be taken into account in the determination of whether the 
retailer is required to collect use tax.  Paragraph (a) shall be 
construed without regard to the state from which distribution of 
the materials originated or in which they were prepared.  
    (c) A retailer not maintaining a place of business in this 
state shall be presumed, subject to rebuttal, to be engaged in 
regular solicitation within this state if it engages in any of 
the activities in paragraph (a) and makes 100 or more retail 
sales from outside this state to destinations within this state 
during a period of 12 consecutive months. 
    (d) A retailer not maintaining a place of business in this 
state shall not be required to collect use tax imposed by any 
local governmental unit or subdivision of this state and this 
section does not subject such a retailer to any regulation of 
any local unit of government or subdivision of this state. 
     Subd. 5.  [VOLUNTARY REGISTRATION BY OUT-OF-STATE RETAILER 
NOT MAINTAINING PLACE OF BUSINESS IN MINNESOTA.] A retailer 
making retail sales from outside this state to a destination 
within this state who is not required to collect and remit use 
tax may nevertheless voluntarily file an application for a 
permit pursuant to section 297A.04.  If the application is 
granted, the retailer shall collect and remit the use tax as 
provided in section 297A.16 until the permit is canceled or 
revoked. 
    Subd. 6.  [COMMISSIONER'S DISCRETION.] (a) The commissioner 
may decline to issue a permit to any retailer not maintaining a 
place of business in this state, or may cancel a permit 
previously issued to the retailer, if the commissioner believes 
that the use tax can be collected more effectively from the 
persons using the property in this state.  A refusal to issue or 
cancellation of a permit on such grounds does not affect the 
retailer's right to make retail sales from outside this state to 
destinations within this state. 
    (b) When, in the opinion of the commissioner, it is 
necessary for the efficient administration of sections 297A.14 
to 297A.25 to regard a salesperson, representative, trucker, 
peddler, or canvasser as the agent of the dealer, distributor, 
supervisor, employer, or other person under whom that person 
operates or from whom the person obtains the tangible personal 
property sold, whether making sales personally or in behalf of 
that dealer, distributor, supervisor, employer, or other person 
the commissioner may regard the salesperson, representative, 
trucker, peddler, or canvasser as such agent, and may regard the 
dealer, distributor, supervisor, employer, or other person as a 
retailer for the purposes of sections 297A.14 to 297A.25. 
    Sec. 7.  Minnesota Statutes 1987 Supplement, section 
297A.212, is amended to read:  
    297A.212 [RAILROAD ROLLING STOCK.] 
    Railroad rolling stock used by a railroad operating in this 
state that is licensed as a common carrier by the Interstate 
Commerce Commission and used to transport persons or property in 
interstate or foreign commerce is subject to taxation under this 
chapter only to the extent provided in this section.  The tax 
must be computed using the ratio of intrastate mileage to 
interstate or foreign mileage traveled by the carrier during the 
previous fiscal year of the carrier revenue ton miles of 
passengers, mail, express, and freight carried by the railroad 
within this state to the total number of revenue ton miles 
carried by the railroad within and without this state.  This 
ratio must be determined at the close of the carrier's previous 
fiscal year.  This ratio must be applied each month to 
the purchase price total amount of purchases of total purchases 
of rolling stock that are used in within and without this state 
by the railroad to establish that portion of the total used and 
consumed in intrastate movement and subject to tax under this 
chapter.  "Railroad rolling stock" means all portable or moving 
apparatus and machinery of a railroad company and includes 
engines, cars, tenders, coaches, sleeping cars, and parts 
necessary for the repair and maintenance of the rolling stock.  
   Sec. 8.  Minnesota Statutes 1987 Supplement, section 
297A.25, subdivision 3, is amended to read: 
    Subd. 3.  [MEDICINES; MEDICAL DEVICES.] The gross receipts 
from the sale of prescribed drugs, prescribed medicine and 
insulin, intended for use, internal or external, in the cure, 
mitigation, treatment or prevention of illness or disease in 
human beings are exempt, together with prescription glasses, 
therapeutic, and prosthetic devices.  "Prescribed drugs" or 
"prescribed medicine" includes over-the-counter drugs or 
medicine prescribed by a licensed physician.  Nonprescription 
analgesics consisting principally (determined by the weight of 
all ingredients) of acetaminophen, acetylsalicylic acid, 
ibuprofen, or a combination thereof are exempt. 
    Sec. 9.  Minnesota Statutes 1986, section 297A.25, 
subdivision 5, is amended to read:  
    Subd. 5. [OUTSTATE TRANSPORT OR DELIVERY.] The gross 
receipts from the following sales of tangible personal property 
are exempt:  
    (1) property which, without intermediate use, is shipped or 
transported outside Minnesota by the purchaser and thereafter 
used in a trade or business or is stored, processed, fabricated 
or manufactured into, attached to or incorporated into other 
tangible personal property transported or shipped outside 
Minnesota and thereafter used in a trade or business outside 
Minnesota, and which is not thereafter returned to a point 
within Minnesota, except in the course of interstate commerce 
(storage shall not constitute intermediate use); provided that 
the property is not subject to tax in that state or country to 
which it is transported for storage or use, or, if subject to 
tax in that other state, that state allows a similar exemption 
for property purchased therein and transported to Minnesota for 
use in this state; except that sales of tangible personal 
property that is shipped or transported for use outside 
Minnesota shall be taxed at the rate of the use tax imposed by 
the state to which the property is shipped or transported, 
unless that state has no use tax, in which case the sale shall 
be taxed at the rate generally imposed by this state; and 
provided further that sales of tangible personal property to be 
used in other states or countries as part of a maintenance 
contract shall be specifically exempt; or 
    (2) property which the seller delivers to a common carrier 
for delivery outside Minnesota, places in the United States mail 
or parcel post directed to the purchaser outside Minnesota, or 
delivers to the purchaser outside Minnesota by means of the 
seller's own delivery vehicles, and which is not thereafter 
returned to a point within Minnesota, except in the course of 
interstate commerce. 
    Sec. 10.  Minnesota Statutes 1987 Supplement, section 
297A.25, subdivision 11, is amended to read:  
    Subd. 11.  [SALES TO GOVERNMENT.] The gross receipts from 
all sales, including sales in which title is retained by a 
seller or a vendor or is assigned to a third party under an 
installment sale or lease purchase agreement under section 
465.71, of tangible personal property to, and all storage, use 
or consumption of such property by, the United States and its 
agencies and instrumentalities, the University of Minnesota, 
state universities, community colleges, technical institutes, 
state academies, and political subdivisions of the state are 
exempt.  Sales exempted by this subdivision include sales under 
section 297A.01, subdivision 3, clause (f).  This exemption 
shall not apply to 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.  This exemption does not apply to construction 
materials purchased by tax exempt entities or their contractors 
to be used in constructing buildings or facilities which will 
not be used principally by the tax exempt entities. 
    Sec. 11.  Minnesota Statutes 1986, section 297A.25, is 
amended by adding a subdivision to read: 
    Subd. 37.  [YMCA AND YWCA MEMBERSHIPS.] The gross receipts 
from the sale of memberships, including both one-time initiation 
fees and periodic membership dues, to an association 
incorporated under section 315.44 are exempt.  However, all 
separate charges made for the privilege of having access to and 
the use of the association's sports and athletic facilities are 
taxable. 
    Sec. 12.  Minnesota Statutes 1986, section 297A.25, is 
amended by adding a subdivision to read: 
    Subd. 38.  [USED MOTOR OILS.] The gross receipts from the 
sale of used motor oils are exempt. 
    Sec. 13.  Minnesota Statutes 1986, section 297A.25, is 
amended by adding a subdivision to read: 
    Subd. 39.  [CROSS COUNTRY SKI PASSES.] The gross receipts 
from the sale of cross country ski passes issued under sections 
85.40 to 85.43 are exempt. 
    Sec. 14.  Minnesota Statutes 1986, section 297A.25, is 
amended by adding a subdivision to read: 
    Subd. 40.  [STATE FAIR ADMISSIONS.] The gross receipts from 
the sale of tickets to the premises of or events sponsored by 
the state agricultural society and conducted on the state 
fairgrounds during the period of the annual state fair are 
exempt, provided that: 
    (1) the tax foregone under this subdivision is used 
exclusively for the purpose of making capital improvements to 
state-owned buildings and facilities on the state fairgrounds; 
and 
    (2) the tax foregone under this subdivision is matched in 
equal amount by proceeds from special assessments levied against 
commercial exhibits, concessions and rentals, and from other 
special user fees specifically designated for capital 
improvements. 
    Sec. 15.  Minnesota Statutes 1986, section 297A.25, is 
amended by adding a subdivision to read: 
    Subd. 41.  [BULLET-PROOF VESTS.] The gross receipts from 
the sale of bullet-resistant soft body armor that is flexible, 
concealable, and custom-fitted to provide the wearer with 
ballistic and trauma protection are exempt if purchased by a 
licensed peace officer, as defined in section 626.84, 
subdivision 1.  The bullet-resistant soft body armor must meet 
or exceed the requirements of standard 0101.01 of the National 
Institute of Law Enforcement and Criminal Justice in effect on 
December 30, 1986, or meet or exceed the requirements of the 
standard except wet armor conditioning. 
    Sec. 16.  Minnesota Statutes 1986, section 297A.256, is 
amended to read:  
    297A.256 [EXEMPTIONS FOR CERTAIN NONPROFIT GROUPS.] 
    Notwithstanding the provisions of this chapter, the 
following sales made by a "nonprofit organization" are exempt 
from the sales and use tax. 
    (a) (1) All sales made by an organization for fundraising 
purposes if that organization exists solely for the purpose of 
providing educational or social activities for young people 
primarily age 18 and under.  This exemption shall apply only if 
the gross annual sales receipts of the organization from 
fundraising do not exceed $10,000. 
    (2) A club, association, or other organization of 
elementary or secondary school students organized for the 
purpose of carrying on sports, educational, or other 
extracurricular activities is a separate organization from the 
school district or school for purposes of applying the $10,000 
limit.  This paragraph does not apply if the sales are derived 
from admission charges or from activities for which the money 
must be deposited with the school district treasurer under 
section 123.38, subdivision 2 or be recorded in the same manner 
as other revenues or expenditures of the school district under 
section 123.38, subdivision 2b. 
    (b) All sales made by an organization for fundraising 
purposes if that organization is a senior citizen group which 
qualifies for exemption on its purchases pursuant to section 
297A.25, subdivision 16.  This exemption shall apply only if the 
gross annual sales receipts of the organization from fundraising 
do not exceed $10,000. 
    (c) The gross receipts from the sales of tangible personal 
property at, admission charges for, and sales of food, meals, or 
drinks at fundraising events sponsored by a nonprofit 
organization when the entire proceeds, except for the necessary 
expenses therewith, will be used solely and exclusively for 
charitable, religious, or educational purposes.  This exemption 
does not apply to admission charges for events involving bingo 
or other gambling activities or to charges for use of amusement 
devices involving bingo or other gambling activities.  For 
purposes of this clause, a "nonprofit organization" means any 
unit of government, corporation, society, association, 
foundation, or institution organized and operated for 
charitable, religious, educational, civic, fraternal, senior 
citizens' or veterans' purposes, no part of the net earnings of 
which enures to the benefit of a private individual. 
    If the profits are not used solely and exclusively for 
charitable, religious, or educational purposes, the entire gross 
receipts are subject to tax. 
    Each nonprofit organization shall keep a separate 
accounting record, including receipts and disbursements from 
each fundraising event.  All deductions from gross receipts must 
be documented with receipts and other records.  If records are 
not maintained as required, the entire gross receipts are 
subject to tax. 
    The exemption provided by this section does not apply to 
any sale made by or in the name of a nonprofit corporation as 
the active or passive agent of a person that is not a nonprofit 
corporation. 
    The exemption for fundraising events under this section is 
limited to no more than 24 days a year.  Fundraising events 
conducted on premises leased or occupied for more than four days 
but less than 30 days do not qualify for this exemption.  
    Sec. 17.  Minnesota Statutes 1986, section 297A.35, 
subdivision 1, is amended to read:  
    Subdivision 1.  A person who has, pursuant to the 
provisions of this chapter, paid to the commissioner an amount 
of tax for any period in excess of the amount legally due for 
that period, may file with the commissioner a claim for a refund 
of such excess subject to the conditions specified in 
subdivision 5.  Except as provided in subdivision 4 no such 
claim shall be entertained unless filed within two years after 
such tax was paid, or within three years from the filing of the 
return, whichever period is the longer.  The commissioner shall 
examine the claim and make and file written findings thereon 
denying or allowing the claim in whole or in part and shall mail 
a notice thereof to such person at the address stated upon the 
claim.  Any allowance shall include interest on the excess 
determined at a rate specified in section 270.76 from the date 
such excess was paid or collected until the date it is refunded 
or credited, unless otherwise specified in this chapter.  If 
such claim is allowed in whole or in part, the commissioner 
shall credit the amount of the allowance against any taxes under 
sections 297A.01 to 297A.44 due from the claimant and for the 
balance of said allowance, if any, the commissioner shall issue 
a certificate for the refundment of the excess paid, and the 
commissioner of finance shall cause such refund to be paid out 
of the proceeds of the taxes imposed by sections 297A.01 to 
297A.44, as other state moneys are expended.  So much of the 
proceeds of such taxes as may be necessary are hereby 
appropriated for that purpose. 
    Sec. 18.  Minnesota Statutes 1987 Supplement, section 
297B.03, is amended to read:  
    297B.03 [EXEMPTIONS.] 
    There is specifically exempted from the provisions of this 
chapter and from computation of the amount of tax imposed by it 
the following: 
    (1) Purchase or use, including use under a lease purchase 
agreement or installment sales contract made pursuant to section 
465.71, of any motor vehicle by the United States and its 
agencies and instrumentalities and by any person described in 
and subject to the conditions provided in section 297A.25, 
subdivision 18. 
    (2) Purchase or use of any motor vehicle by any person who 
was a resident of another state at the time of the purchase and 
who subsequently becomes a resident of Minnesota, provided the 
purchase occurred more than 60 days prior to the date such 
person began residing in the state of Minnesota. 
    (3) Purchase or use of any motor vehicle by any person 
making a valid election to be taxed under the provisions of 
section 297A.211. 
    (4) Purchase or use of any motor vehicle previously 
registered in the state of Minnesota by any corporation or 
partnership when such transfer constitutes a transfer within the 
meaning of section 351 or 721 of the Internal Revenue Code of 
1954, as amended through December 31, 1974. 
    (5) Purchase or use of any vehicle owned by a resident of 
another state and leased to a Minnesota based private or for 
hire carrier for regular use in the transportation of persons or 
property in interstate commerce provided the vehicle is titled 
in the state of the owner or secured party, and that state does 
not impose a sales or motor vehicle excise tax on motor vehicles 
used in interstate commerce.  
    (6) Purchase or use of a motor vehicle by a private 
nonprofit or public educational institution for use as an 
instructional aid in automotive training programs operated by 
the institution. 
    Sec. 19.  Minnesota Statutes 1986, section 329.11, is 
amended to read:  
    329.11 [LICENSE; APPLICATION, ISSUANCE, FEE; BOND; AGENT 
FOR SERVICE OF PROCESS.] 
    Any transient merchant desiring to engage in, do, or 
transact business by auction or otherwise, in any county in this 
state shall file an application for a license for that purpose 
with the auditor of the county in which the desired business is 
to be conducted, which application shall state the name of the 
applicant, the proposed place of business, the kind of business 
proposed to be conducted, and the length of time desired to do 
business.  Such transient merchant shall pay to the treasurer of 
such county a license fee of $150, any personal property taxes 
payable by the merchant pursuant to Minnesota Statutes 1949, 
Sections 288.01 to 288.03, and shall give bond to the county in 
an amount to be determined by the county treasurer, which shall 
be not less than $1,000 nor more than $3,000 which.  The bond 
shall be approved by the treasurer and be conditioned that the 
merchant will in all things conform to the laws relating to 
transient merchants and further conditioned on full compliance 
with all material oral or written statements and representations 
made by the seller, the seller's agents, representatives, or 
auctioneers with reference to merchandise sold or offered for 
sale and on faithful performance under all warranties made with 
reference thereto.  The treasurer of such county shall issue to 
such person receipts therefor, and such transient merchant shall 
thereupon file such receipts with the auditor of such county, 
who shall thereupon issue to such transient merchant a license 
to do business as such at the place described in the 
application; and the kind of business to be done shall be 
described therein.  No license shall be good for more than one 
person unless such person shall be a member of a copartnership, 
nor for more than one place, and shall not be good outside of 
the county in which it was issued.  Such license shall be good 
for a period of one year from the date of its issuance.  The 
auditor shall keep a record of such licenses in a book provided 
for that purpose, which shall at all times be open for public 
inspection.  No license shall be issued unless the merchant 
produces evidence that the merchant is the holder of a valid 
seller's permit issued under section 297A.04, or a written 
statement from the merchant that the merchant is not offering 
for sale any item that is taxable under chapter 297A.  
    The application shall further contain the applicant's 
residence and business address for the prior two year period; 
the type of business engaged in during the previous two years; 
and the name and address of the auctioneer who will conduct the 
sale.  No such sale shall be conducted in the name of any person 
other than the bona fide owner of the merchandise. 
    The applicant shall attach to the application an itemized 
list of merchandise to be offered for sale reciting as to each 
item a description thereof including serial number if any, the 
owner's actual cost thereof, and a designation by number 
corresponding with a number to be affixed to each item by a tag 
which shall be kept fastened to the item at all times until sold.
    Prior to the issuance of the license and approval of bond, 
the applicant shall in writing appoint the county auditor as the 
applicant's agent to accept service of process in any action 
commenced against the applicant arising out of the sale for 
which the license is sought.  Such action shall be brought in 
the county where the sale was held.  
    Sec. 20.  [REPEALER.] 
    Minnesota Statutes 1986, section 297A.15, subdivision 2, is 
repealed. 
    Sec. 21.  [TODD COUNTY.] 
    For purposes of the designation of distressed counties 
under Minnesota Statutes, section 297A.257, the city of Staples 
is deemed to be located entirely in Todd county. 
    Sec. 22.  [EFFECTIVE DATE.] 
    Section 1, paragraph (c), is effective for all meals 
furnished on or after October 15, 1987, except the provisions 
relating to meals furnished to inmates or residents of 
correctional, detention, and detoxification facilities are 
effective for sales made after June 30, 1988.  Sections 1, 
paragraphs (j) and (l), 8, 10 to 13, 15, 16 and 18 are effective 
for retail sales made after June 30, 1988, except as otherwise 
provided.  Sections 2, and 4 to 6 and 20 are effective June 1, 
1988.  Section 19 is effective July 1, 1988.  Sections 3 and 17 
are effective for all refund claims filed after June 30, 1988.  
Section 7 and the provisions of section 10 exempting utility 
services purchased by governmental units and all purchases by 
the University of Minnesota hospitals are effective for all 
sales made after May 31, 1987, but do not apply to sales of 
tangible personal property made pursuant to bona fide written 
contracts that were enforceable before June 1, 1987, and 
delivery is made on or before December 31, 1987.  Section 9 is 
effective for all sales made after June 30, 1988, but does not 
apply to sales of tangible personal property made pursuant to 
bona fide written contracts that were enforceable before July 1, 
1988, and delivery is made on or before December 31, 1988.  
Section 14 is effective for sales made after December 31, 1988. 
Section 21 is effective beginning with the designation of 
distressed counties in calendar year 1987. 

                               ARTICLE 11 

                       CIGARETTE AND LIQUOR TAXES 
    Section 1.  Minnesota Statutes 1987 Supplement, section 
297.01, subdivision 7, is amended to read:  
    Subd. 7.  "Distributor" means any and each of the following:
    (1) any person engaged in the business of selling 
cigarettes in this state and who manufactures or who brings, or 
causes to be brought, into this state from without the state any 
packages of cigarettes for sale to subjobbers or retailers; 
    (2) any person who makes, manufactures, or fabricates 
cigarettes in this state for sale in this state; 
    (3) any person engaged in the business without this state 
who ships or transports cigarettes to retailers in this state, 
to be sold by those retailers; 
    (4) (3) any person who is on direct purchase from a 
cigarette manufacturer and applies cigarette stamps or indicia 
on at least 50 percent of cigarettes sold by that person. 
    A distributor who also sells at retail must maintain a 
separate inventory, substantiated with invoices for cigarettes 
that were acquired for retail sale.  
    A distributor may transfer another state's stamped 
cigarettes to another distributor for the purpose of resale in 
the other state. 
    Sec. 2.  Minnesota Statutes 1987 Supplement, section 
297.01, subdivision 14, is amended to read:  
    Subd. 14.  "Subjobber" means any person who acquires 
stamped cigarettes or other state's stamped cigarettes for the 
primary purpose of resale to retailers, and any licensed 
distributor who delivers to and sells or distributes stamped 
cigarettes from a place of business other than that licensed in 
the distributor's license.  The definition of subjobber does not 
include the occasional sale of stamped cigarettes from one 
retailer to another.  Notwithstanding the foregoing, "subjobber" 
shall also mean any person who is a vending machine operator.  A 
vending machine operator is any person whose principal business 
is operating, or owning and leasing to operators, machines for 
the vending of merchandise or service.  
    For the purpose of this section, any subjobber that sells 
at retail must maintain a separate inventory, substantiated with 
invoices, that reflect the cigarettes were acquired for retail 
sale.  
    Sec. 3.  Minnesota Statutes 1986, section 297.01, is 
amended by adding a subdivision to read: 
    Subd. 15.  "Prior continuous compliance taxpayer" means a 
person who is licensed under section 297.04 and who, having been 
a licensee for a continuous period of five years, the 
commissioner determines has not been either delinquent or 
deficient in the payment of tax liability during that period or 
otherwise in violation of this chapter.  Any taxpayer who has, 
as verified by the commissioner, continuously complied with the 
condition of a bond or other security under provisions of this 
chapter for a period of five consecutive years is considered a 
"prior continuous compliance taxpayer."  A continuous period of 
time of qualifying compliance immediately prior to August 1, 
1988, is credited to any licensee who became licensed on or 
before that date. 
    Sec. 4.  Minnesota Statutes 1986, section 297.03, is 
amended by adding a subdivision to read: 
    Subd. 5a.  [REVOLVING ACCOUNT.] A heat applied cigarette 
tax stamp revolving account is created.  The commissioner shall 
use the amounts in this fund to purchase heat applied stamps for 
resale.  The commissioner shall charge the purchasers for the 
costs of the stamps along with the tax value plus shipping 
costs.  The costs recovered along with shipping costs must be 
deposited into this revolving account and are available to the 
commissioner for further purchases and shipping costs.  The 
revolving account must be funded by reducing the stamping 
discounts allowed in subdivision 5 for the first three months of 
fiscal year 1989.  The stamping discounts are 0.75 percent of 
the face amount of any stamps purchased in the first three 
months for the first $1,500,000 of the stamps and 0.50 percent 
on the remainder of the stamps purchased. 
    At the end of each of the first three months of fiscal year 
1989, the commissioner shall notify the commissioner of finance 
of the amount of reduced stamping discounts that have accrued to 
the tobacco tax revenue fund.  The commissioner of finance shall 
then transfer the amounts to the heat applied cigarette tax 
stamp revolving account from the tobacco tax revenue fund. 
    Sec. 5.  Minnesota Statutes 1987 Supplement, section 
297.03, subdivision 6, is amended to read:  
    Subd. 6.  [TAX METER MACHINES.] (1) (a) Before January 1, 
1990, the commissioner may authorize any person licensed as a 
distributor to stamp packages with a tax meter machine, approved 
by the commissioner, which shall be provided by the 
distributor.  The commissioner may provide for the use of such a 
machine by the distributor, supervise and check its operation, 
provide for the payment of the tax on any package so stamped, 
subject to the discount provided in subdivision 5, and in that 
connection.  Except as provided in paragraph (d), the 
commissioner may require the furnishing of a corporate surety 
bond, check guarantee bond, or certified check in a suitable 
amount to guarantee the payment of the tax.  
    (2) (b) Before January 1, 1990, the commissioner may 
authorize, and after December 31, 1989, the commissioner shall 
require any person licensed as a distributor whose stamp meter 
machine is no longer operational to stamp packages with a 
heat-applied tax stamping machine, approved by the commissioner, 
which shall be provided by the distributor.  The commissioner 
shall supervise and check the operation of the machines and 
shall provide for the payment of the tax on any package so 
stamped, subject to the discount provided in subdivision 5.  The 
commissioner may sell heat-applied stamps on a credit basis 
under conditions prescribed by the commissioner, and in that 
connection.  Except as provided in paragraph (d), the 
commissioner may require the furnishing of a corporate surety 
bond, check guarantee bond, or certified check in an amount 
suitable to guarantee payment of the tax stamps so purchased by 
a distributor.  The stamps shall be sold by the commissioner at 
a price which includes the tax after giving effect to the 
discount provided in subdivision 5.  The commissioner shall 
recover the actual costs of the stamps from the distributor.  
    (3) (c) If the commissioner finds that a stamping machine 
is not printing or 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. 
     (d) Every prior continuous compliance taxpayer is exempt 
from all requirements under this chapter concerning the 
furnishing of a bond.  This exemption continues for the taxpayer 
until the commissioner determines that the taxpayer (1) is 
delinquent in the filing of any return, or (2) is delinquent or 
deficient in the payment of any uncontested tax liability under 
this chapter.  At that time that taxpayer is subject to the bond 
requirements of this chapter and, as a condition of being 
allowed to continue to engage in the business licensed under 
this chapter, is required to furnish bond to the commissioner as 
provided in this chapter.  The taxpayer shall furnish the bond 
for a period of two years, after which, if the taxpayer has not 
been delinquent in the filing of any returns, or delinquent or 
deficient in the paying of any tax under this chapter, the 
commissioner may reinstate the person as a prior continuous 
compliance taxpayer.  A taxpayer who fails to pay an uncontested 
tax liability under this chapter may be required to post bond or 
other acceptable security with the commissioner guaranteeing the 
payment of the uncontested tax liability.  The commissioner 
shall annually establish the maximum amount of heat applied 
stamps or meter units that may be purchased each month.  
Notwithstanding any other provisions of this chapter, the tax 
due on the return will be based upon actual heat applied stamps 
or meter units purchased during the reporting period. 
    Sec. 6.  Minnesota Statutes 1986, section 297.03, 
subdivision 12, is amended to read:  
    Subd. 12.  [SETTING OF TAX METERS.] The commissioner may 
designate the county treasurer of any county or any banking 
institution as defined by section 48.01, or any banking 
institution as defined by any states' statutes as the 
representative of the commissioner in the setting of a tax meter 
machine of any particular distributor and the collection of the 
cigarette tax upon such setting.  The county treasurer or 
banking institution so designated shall be required to set tax 
meter machines following the method prescribed by the 
commissioner of revenue and to transmit the amount of tax 
collected and to report the setting of each tax meter to the 
commissioner on or before the next business day.  For purposes 
of this paragraph, a business day shall not include Saturday.  
Such duties shall be within the coverage of the official bond of 
the county treasurer.  The commissioner shall prescribe the form 
and amount of a surety bond which shall be furnished by a 
banking institution designated pursuant to this subdivision.  
The commissioner shall have the right to withdraw this 
designation without cause.  
    Sec. 7.  Minnesota Statutes 1986, section 297.041, 
subdivision 1, is amended to read:  
    Subdivision 1.  [WHOLESALERS.] Any wholesaler who furnishes 
a surety bond in a sum satisfactory to the commissioner shall be 
permitted to set aside, without affixing the stamps required by 
this chapter, that part of the wholesaler's stock necessary for 
the conduct of business in making sales to the established 
governing body of any Indian tribe recognized by the United 
States Department of Interior.  The unstamped stock shall be 
kept separate and apart from stamped stock.  Every wholesaler 
shall, at the time of shipping or delivering any of the 
unstamped stock to an Indian tribal organization, make a true 
duplicate invoice which shall show the complete details of the 
sale or delivery and shall transmit the duplicate to the 
commissioner not later than the fifteenth 18th day of the 
following calendar month.  Failure to comply with the 
requirements of this section shall cause the commissioner to 
revoke the permission granted to the wholesaler to maintain a 
stock of goods which may be unstamped.  The commissioner may 
also revoke this permission to maintain a stock of unstamped 
goods for sale to a specific Indian tribal organization when it 
appears that sales of unstamped cigarettes to persons who are 
not enrolled members of a recognized Indian tribe are taking 
place, or have taken place, within the exterior boundaries of 
the reservation occupied by that tribe.  
    Sec. 8.  Minnesota Statutes 1986, section 297.06, 
subdivision 1, is amended to read:  
    Subdivision 1.  [DISTRIBUTOR TO KEEP RECORDS.] Every 
distributor shall keep at each licensed place of business 
complete and accurate records, for that place of business, 
including itemized invoices, of cigarettes held, purchased, 
manufactured, or brought in or caused to be brought in from 
without the state, and of all sales of cigarettes made, except 
sales to the ultimate consumer.  These records shall show the 
names and addresses of purchasers, the inventory at the close of 
each period for which a return is required of all cigarettes on 
hand, and of all stamps, affixed and unaffixed, and other 
pertinent papers and documents relating to the purchase, sale, 
or disposition of cigarettes.  When a licensed distributor sells 
cigarettes exclusively to the ultimate consumer at the address 
given in the license, no invoice of those sales shall be 
required, but itemized invoices shall be made of all cigarettes 
transferred to other retail outlets owned or controlled by that 
licensed distributor.  All books, records, and other papers and 
documents required by sections 297.01 to 297.13 to be kept shall 
be preserved for a period of at least one year three years after 
the date of the documents, as aforesaid, or the date of the 
entries thereof appearing in the records, unless the 
commissioner, in writing, authorizes their destruction or 
disposal at an earlier date.  At any time during usual business 
hours the commissioner, or duly authorized agents or employees, 
may enter any place of business of a distributor, without a 
search warrant, and inspect the premises, the records required 
to be kept under sections 297.01 to 297.13, and the packages of 
cigarettes and the vending devices contained therein, to 
determine whether or not all the provisions of these sections 
are being fully complied with.  If the commissioner, or any such 
agent or employee, is denied free access or is hindered or 
interfered with in making such examination, the license of the 
distributor at such premises shall be subject to revocation by 
the commissioner.  
    Sec. 9.  Minnesota Statutes 1986, section 297.06, 
subdivision 2, is amended to read:  
    Subd. 2.  [DISTRIBUTOR TO PRESERVE COPIES OF INVOICES.] 
Every person who sells cigarettes to persons other than the 
ultimate consumer shall render with each sale itemized invoices 
showing the seller's name and address, the purchaser's name and 
address, the date of sale, and all prices and discounts and 
shall preserve legible copies of all such invoices for one year 
three years from the date of sale.  
    Sec. 10.  Minnesota Statutes 1986, section 297.06, 
subdivision 3, is amended to read:  
    Subd. 3.  [RETAILER AND SUBJOBBER TO PRESERVE PURCHASE 
INVOICES.] Every retailer and subjobber shall procure itemized 
invoices of all cigarettes purchased.  The invoices shall show 
the name and address of the seller and the date of purchase.  
The retailer and subjobber shall preserve a legible copy of each 
such invoice for one year from the date of purchase.  Invoices 
shall be available for inspection by the commissioner or 
authorized agents or employees at the retailer's or subjobber's 
place of business. 
    At any time during normal business hours, the commissioner 
or the commissioner's agents may enter any place of business of 
a retailer or subjobber and inspect the premises, the records 
required to be kept for this subdivision, and the packages of 
cigarettes, tobacco products, and vending devices contained on 
the premises to determine whether all provisions of chapter 297 
and sections 325D.30 to 325D.40 are being fully complied with.  
    Sec. 11.  Minnesota Statutes 1986, section 297.06, is 
amended by adding a subdivision to read: 
    Subd. 4.  [PHYSICAL INVENTORY.] The commissioner of revenue 
or the commissioner's authorized agents may, upon request but 
not more than twice annually, require a cigarette or tobacco 
distributor to furnish a physical inventory of all cigarettes in 
stock.  The inventory must contain the information that the 
commissioner requests and must be certified by an officer of the 
corporation. 
    Sec. 12.  Minnesota Statutes 1986, section 297.08, 
subdivision 1, is amended to read:  
    Subdivision 1.  [CONTRABAND DEFINED.] The following are 
declared to be contraband: 
    (1) All packages which do not have stamps affixed to them 
as provided in sections 297.01 to 297.13 and all devices for the 
vending of cigarettes in which such unstamped packages are 
found, including all contents contained within the devices. 
    (2) Any device for the vending of cigarettes and all 
packages of cigarettes contained therein, where the device does 
not afford at least partial visibility of contents.  Where any 
package exposed to view does not carry the stamp or imprint 
required by sections 297.01 to 297.13, it shall be presumed that 
all packages contained in the device are unstamped and 
contraband. 
    (3) Any 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. 
    (4) Any 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. 
    (5) Any 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 (1). 
    Sec. 13.  Minnesota Statutes 1987 Supplement, section 
297.11, subdivision 5, is amended to read:  
    Subd. 5.  [TRANSPORTING UNSTAMPED PACKAGES.] No person 
shall transport into, or receive, carry, or move from place to 
place in this state, any packages of cigarettes not stamped in 
accordance with the provisions of this act except in the course 
of interstate commerce, unless the cigarettes are moving from a 
public warehouse to a distributor upon orders from the 
manufacturer or distributor.  This subdivision shall not apply 
to a person carrying for personal use not more than 200 
cigarettes when those cigarettes have had the individual 
packages or seals thereof broken and are intended for personal 
use by that person and not to be sold or offered for sale.  
    Common carriers and contract carriers transporting 
cigarettes into this state shall file with the commissioner 
reports of all such shipments other than those which are 
delivered to public warehouses of first destination in this 
state which are licensed under the provisions of chapter 231.  
Such reports shall be filed monthly on or before the 10th day of 
each month and shall show with respect to deliveries made in the 
preceding month: the date, point of origin, point of delivery, 
name of consignee, the quantity of cigarettes delivered and such 
other information as the commissioner may require.  
    All common carriers and contract carriers transporting 
cigarettes into Minnesota shall permit examination by the 
commissioner of their records relating to the shipment of 
cigarettes.  
    Any person who fails or refuses to transmit to the 
commissioner the required reports or whoever refuses to permit 
the examination of the records by the commissioner shall be 
guilty of a gross misdemeanor.  
    Sec. 14.  Minnesota Statutes 1986, section 297.12, 
subdivision 1, is amended to read:  
    Subdivision 1.  [FELONY.] (a) Any person violating section 
297.11, subdivision 1, shall be guilty of a felony. 
    (b) Any person violating section 297.11, subdivisions 2 or 
5 by possessing, receiving, or transporting more than 20,000 
cigarettes not stamped in accordance with the provisions of 
sections 297.01 to 297.13 shall be guilty of a felony. 
    (c) A person selling cigarettes after the person's license 
has been revoked is guilty of a felony. 
    Sec. 15.  Minnesota Statutes 1986, section 297.35, is 
amended by adding a subdivision to read: 
    Subd. 10.  A manufacturer of tobacco products as defined by 
section 297.31, shall report on a form 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 of the month following 
the reporting period. 
    Anyone violating this section is guilty of a gross 
misdemeanor.  
    Sec. 16.  [297.44] [TIME LIMITATIONS.] 
    Subdivision 1.  [TIME FOR ASSESSMENT; NOTICE.] Except as 
otherwise provided in this chapter, the amount of taxes 
assessable with respect to a taxable period must be assessed 
within three years after the return for the period is filed.  
The taxes are considered assessed within the meaning of this 
section when the commissioner has prepared a notice of tax 
assessment and mailed it to the person required to file a return 
to the post office address given in the return.  The record of 
the mailing is presumptive evidence of the giving of the notice, 
and the records must be preserved by the commissioner.  
    Subd. 2.  [OMISSION OVER 25 PERCENT.] If the person 
required to file the return omits from the return a dollar 
amount properly includable in it that is in excess of 25 percent 
of the dollar amount reported in the return, the tax may be 
assessed, or a proceeding in court for the collection of such 
tax may be begun, at any time within five years after the return 
was filed.  
    Subd. 3.  [DATE OF FILING.] For purposes of this section 
and section 297.36, a return filed before the last day 
prescribed by law for its filing is considered filed on the last 
day. 
    Subd. 4.  [FRAUD; FAILURE TO FILE.] In the case of a false 
or fraudulent return with intent to evade tax or failure with 
the same intent to file a return, the tax may be assessed at any 
time, and a proceeding in court for the collection of the tax 
must be begun within five years after the assessment.  
    Subd. 5.  [COLLECTION.] Where the assessment of any tax is 
made within the period of limitation properly applicable to it, 
the tax may be collected by a proceeding in court, but only if 
begun within five years after the date of assessment. 
    Subd. 6.  [SUSPENSION OF TIME; BANKRUPTCY PROCEEDINGS.] The 
time during which a tax must be assessed or collection 
proceedings commenced under this chapter is suspended during the 
period from the date of a filing of a petition in bankruptcy 
until 30 days after notice to the commissioner of revenue that 
the bankruptcy proceedings have been closed or dismissed, or 
that the automatic stay has been terminated or has expired.  
    The suspension of the statute of limitations under this 
subdivision applies to the person against whom the petition in 
bankruptcy is filed, and to all other persons who may be wholly 
or partially liable for the tax under this chapter. 
    Sec. 17.  Minnesota Statutes 1986, section 297C.02, 
subdivision 3, is amended to read:  
    Subd. 3.  [TAX CREDIT.] A qualified brewer producing 
fermented malt beverages is entitled to a tax credit of $4 $4.60 
per barrel on 25,000 barrels sold in any fiscal year beginning 
July 1, regardless of the alcohol content of the product.  
Qualified brewers may take the credit on the 15th 18th day of 
each month, but the total credit allowed may not exceed in any 
fiscal year the lesser of (a) the liability for tax or (b) 
$100,000 $115,000.  
    For purposes of this subdivision, a "qualified brewer" 
means a brewer, whether or not located in this state, 
manufacturing less than 100,000 barrels of fermented malt 
beverages in the calendar year immediately preceding the 
calendar year for which the credit under this subdivision is 
claimed.  In determining the number of barrels, all brands or 
labels of a brewer must be combined.  All facilities for the 
manufacture of fermented malt beverages owned or controlled by 
the same person, corporation, or other entity must be treated as 
a single brewer. 
    Sec. 18.  Minnesota Statutes 1986, section 297C.02, 
subdivision 4, is amended to read:  
    Subd. 4.  [BOTTLE TAX.] A tax of one cent is imposed on 
each bottle or container of distilled spirits and wine.  The 
wholesaler is responsible for the payment of this tax when the 
bottles of distilled spirits and wine are removed from inventory 
for sale, delivery, or shipment. 
    The following are exempt from the tax: 
    (1) miniatures of distilled spirits and wines; 
    (2) containers of fermented malt beverage; 
    (3) containers of intoxicating liquor or wine holding less 
than 200 milliliters; 
    (4) containers of wine intended exclusively for sacramental 
purposes; 
    (5) containers of alcoholic beverages sold to qualified, 
approved military clubs; 
    (6) containers of alcoholic beverages sold to common 
carriers engaged in interstate commerce; 
    (7) containers of alcoholic beverages sold to authorized 
food processors or pharmaceutical firms for use exclusively in 
the manufacturing of food products or medicines; 
    (8) containers of alcoholic beverages sold and shipped to 
dealers, wineries, or distillers in other states; and 
    (9) containers of alcoholic beverages sold to other 
Minnesota wholesalers. 
    Sec. 19.  Minnesota Statutes 1986, section 297C.03, is 
amended by adding a subdivision to read: 
    Subd. 6.  [INFORMATIONAL RETURNS.] Manufacturers, 
wholesalers, and importers licensed to ship distilled spirits or 
wine into Minnesota shall file with the commissioner a monthly 
informational report on a form prescribed by the commissioner.  
No payment of any tax is required to be remitted with this 
report.  The report must be filed on or before the tenth day 
following the end of each calendar month, regardless of whether 
or not any shipments were made into Minnesota during the 
previous month.  A person failing to file this monthly report is 
subject to the provisions of section 297C.14, subdivision 8. 
    Sec. 20.  Minnesota Statutes 1987 Supplement, section 
297C.04, is amended to read:  
    297C.04 [PAYMENT OF TAX; MALT LIQUOR.] 
    The commissioner may by rule provide a reporting method for 
paying and collecting the excise tax on fermented malt 
beverages.  The tax is imposed upon the first sale or 
importation made in this state by a licensed brewer or 
importer.  The rules must require reports to be filed with and 
the excise tax to be paid to the commissioner on or before the 
18th day of the month following the month in which the 
importation into or the first sale is made in this state, 
whichever first occurs.  The rules must also require payments in 
June of 1987 and subsequent years according to the provisions of 
section 297C.05, subdivision 2.  
    A distributor who has title to or possession of fermented 
malt beverages upon which the excise tax has not been paid and 
who knows that the tax has not been paid, shall file a return 
with the commissioner on or before the 18th day of the month 
following the month in which the distributor obtains title or 
possession of the fermented malt beverages.  The return must be 
made on a form furnished and prescribed by the commissioner, and 
must contain all information that the commissioner requires.  
The return must be accompanied by a remittance for the full 
unpaid liability shown on it. 
    Sec. 21.  Minnesota Statutes 1986, section 297C.07, is 
amended to read:  
    297C.07 [EXCEPTIONS.] 
    The following are not subject to the excise tax: 
    (1) Sales by a manufacturer, brewer, or wholesaler for 
shipment outside the state in interstate commerce. 
    (2) Sales of wine for sacramental purposes under section 
340A.316. 
    (3) Fruit juices naturally fermented or beer naturally 
brewed in the home for family use. 
    (4) Malt beverages served by a brewery for on-premise 
consumption at no charge, or distributed to brewery employees 
for on-premise consumption under a labor contract. 
    (5) Alcoholic beverages sold to authorized manufacturers of 
food products or pharmaceutical firms.  The alcoholic beverage 
must be used exclusively in the manufacture of food products or 
medicines.  For purposes of this part, "manufacturer" means a 
manufacturer of food products intended for sale to wholesalers 
or retailers for ultimate sale to the consumer. 
    (6) Sales to common carriers engaged in interstate 
transportation of passengers and qualified approved military 
clubs, except as provided in section 297C.17.  
    (7) Alcoholic beverages sold or transferred between 
Minnesota wholesalers.  
    (8) Sales to a federal agency, that the state of Minnesota 
is prohibited from taxing under the constitution or laws of the 
United States or under the constitution of Minnesota. 
    Sec. 22.  [297C.17] [COMMON CARRIERS.] 
    Common carriers engaged in interstate transportation of 
passengers must file monthly reports together with the tax 
payment on the sale of alcoholic beverages sold within the state 
of Minnesota.  The report and payment must be filed by the 18th 
day of the month following the month in which the sale took 
place.  A common carrier is permitted to use a formula for the 
allocation of the total sales of alcoholic beverages among 
states on the basis of passenger miles in each state or some 
other method of allocation if written approval is received from 
the commissioner. 
    Sec. 23.  [REPEALER.] 
    Minnesota Statutes 1986, section 297C.03, subdivision 5, is 
repealed. 
    Sec. 24.  [EFFECTIVE DATE.] 
    This article is effective July 1, 1988, except section 17 
is effective for barrels sold after June 1, 1987, and sections 3 
and 5 are effective January 1, 1989. 

                               ARTICLE 12 

                        TAX INCREMENT FINANCING 
    Section 1.  Minnesota Statutes 1987 Supplement, section 
469.174, subdivision 2, is amended to read:  
    Subd. 2.  [AUTHORITY.] "Authority" means a rural 
development financing authority created pursuant to sections 
469.142 to 469.150; a housing and redevelopment authority 
created pursuant to sections 469.001 to 469.047; a port 
authority created pursuant to sections 469.048 to 469.068; an 
economic development authority created pursuant to sections 
469.090 to 469.108; a redevelopment agency as defined in 
sections 469.152 to 469.165; a municipality that is 
administering a development district created pursuant to 
sections 469.124 to 469.134 or any special law; a municipality 
that undertakes a project pursuant to sections 469.152 to 
469.165, except a town located outside the metropolitan area or 
with a population of 5,000 persons or less; or a municipality 
that exercises the powers of a port authority pursuant to any 
general or special law.  
    Sec. 2.  Minnesota Statutes 1987 Supplement, section 
469.174, subdivision 7, is amended to read:  
    Subd. 7.  [ORIGINAL ASSESSED VALUE.] (a) Except as provided 
in paragraph (b), "original assessed value" means the assessed 
value of all taxable real property within a tax increment 
financing district as most recently certified by the 
commissioner of revenue as of the date of the request by an 
authority for certification by the county auditor, together with 
subsequent adjustments as set forth in section 469.177, 
subdivisions 1 and 4.  In determining the original assessed 
value the assessed value of real property exempt from taxation 
at the time of the request shall be zero, except for real 
property which is tax exempt by reason of public ownership by 
the requesting authority and which has been publicly owned for 
less than one year prior to the date of the request for 
certification, in which event the assessed value of the property 
shall be the assessed value as most recently determined by the 
commissioner of revenue.  
    (b) The original assessed value of any designated hazardous 
substance site or hazardous substance subdistrict shall be 
determined on January 2 following the date the agency or 
municipality certifies to the county auditor that the agency or 
municipality has entered a redevelopment or other agreement for 
the removal actions or remedial actions specified in a 
development response action plan, or otherwise provided funds to 
finance the development response action plan.  The original 
assessed value equals (i) the assessed value of the parcel, as 
most recently determined by the commissioner of revenue, less 
(ii) the estimated reasonable and necessary costs of the removal 
actions and remedial actions as specified in a development 
response action plan to be undertaken with respect to the parcel 
as certified to the county auditor by the municipality or 
agency, (iii) but not less than zero. 
    (c) The original assessed value of a hazardous substance 
site or subdistrict shall be increased by the amount by which it 
was reduced pursuant to paragraph (b), clause (ii), upon 
certification by the municipality that the removal and remedial 
actions specified in the development response action plan, 
except for long-term monitoring and similar activities, have 
been completed. 
    (d) For purposes of this subdivision, "real property" shall 
include any property normally taxable as personal property by 
reason of its location on or over publicly-owned property.  
    Sec. 3.  Minnesota Statutes 1987 Supplement, section 
469.174, subdivision 10, is amended to read:  
    Subd. 10.  [REDEVELOPMENT DISTRICT.] (a) "Redevelopment 
district" means a type of tax increment financing district 
consisting of a project, or portions of a project, within which 
the authority finds by resolution that one of the following 
conditions, reasonably distributed throughout the district, 
exists: 
    (1) 70 percent of the parcels in the district are occupied 
by buildings, streets, utilities, or other improvements and more 
than 50 percent of the buildings, not including outbuildings, 
are structurally substandard to a degree requiring substantial 
renovation or clearance; or 
    (2) 70 percent of the parcels in the district are occupied 
by buildings, streets, utilities, or other improvements and 20 
percent of the buildings are structurally substandard and an 
additional 30 percent of the buildings are found to require 
substantial renovation or clearance in order to remove such 
existing conditions as:  inadequate street layout, incompatible 
uses or land use relationships, overcrowding of buildings on the 
land, excessive dwelling unit density, obsolete buildings not 
suitable for improvement or conversion, or other identified 
hazards to the health, safety, and general well-being of the 
community; or 
    (3) less than 70 percent of the parcels in the district are 
occupied by buildings, streets, utilities, or other 
improvements, but due to unusual terrain or soil deficiencies 
requiring substantial filling, grading, or other physical 
preparation for use at least 80 percent of the total acreage of 
such land has a fair market value upon inclusion in the 
redevelopment district which, when added to the estimated cost 
of preparing that land for development, excluding costs directly 
related to roads as defined in section 160.01 and local 
improvements as described in section 429.021, subdivision 1, 
clauses 1 to 7, 11 and 12, and 430.01, if any, exceeds its 
anticipated fair market value after completion of the 
preparation.  No parcel shall be included within a redevelopment 
district pursuant to this paragraph unless the authority has 
concluded an agreement or agreements for the development of at 
least 50 percent of the acreage having the unusual soil or 
terrain deficiencies, which agreement provides recourse for the 
authority should the development not be completed; or 
    (4) the property consists of underutilized air rights 
existing over a public street, highway, or right-of-way; or 
    (5) (4) the property consists of vacant, unused, underused, 
inappropriately used, or infrequently used railyards, rail 
storage facilities, or excessive or vacated railroad 
rights-of-way; or 
    (6) (5) the district consists of an existing or proposed 
industrial park no greater in size than 250 acres, which 
contains a sewage lagoon contaminated with polychlorinated 
biphenyls.  
    (b) For purposes of this subdivision, "structurally 
substandard" shall mean containing defects in structural 
elements or a combination of deficiencies in essential utilities 
and facilities, light and ventilation, fire protection including 
adequate egress, layout and condition of interior partitions, or 
similar factors, which defects or deficiencies are of sufficient 
total significance to justify substantial renovation or 
clearance.  
    Sec. 4.  Minnesota Statutes 1987 Supplement, section 
469.174, subdivision 11, is amended to read: 
    Subd. 11.  [HOUSING DISTRICT.] "Housing district" means a 
type of tax increment financing district which consists of a 
project, or a portion of a project, intended for occupancy, in 
part, by persons or families of low and moderate income, as 
defined in chapter 462A, Title II of the National Housing Act of 
1934, the National Housing Act of 1959, the United States 
Housing Act of 1937, as amended, Title V of the Housing Act of 
1949, as amended, any other similar present or future federal, 
state, or municipal legislation, or the regulations promulgated 
under any of those acts.  A project does not qualify under this 
subdivision if the fair market value of the improvements which 
are constructed for commercial uses or for uses other than low 
and moderate income housing consists of more than one-third of 
the total fair market value of the planned improvements in the 
development plan or agreement.  The fair market value of the 
improvements may be determined using the cost of construction, 
capitalized income, or other appropriate method of estimating 
market value. 
    Sec. 5.  Minnesota Statutes 1987 Supplement, section 
469.174, is amended by adding a subdivision to read: 
    Subd. 16.  [DESIGNATED HAZARDOUS SUBSTANCE 
SITE.] "Designated hazardous substance site" means any parcel or 
parcels with respect to which the authority or municipality has 
certified to the county auditor that the authority or 
municipality has entered into a redevelopment or other agreement 
providing for the removal actions or remedial actions specified 
in a development response action plan or the municipality or 
authority will use other available money, including without 
limitation tax increments, to finance the removal or remedial 
actions. 
    Sec. 6.  Minnesota Statutes 1987 Supplement, section 
469.174, is amended by adding a subdivision to read: 
    Subd. 17.  [DEVELOPMENT ACTION RESPONSE PLAN.] "Development 
action response plan" means a plan or proposal for removal 
actions or remedial actions if the plan or proposal is submitted 
to the pollution control agency and the actions contained in the 
plan or proposal are approved in writing by the commissioner of 
the agency as reasonable and necessary to protect the public 
health, welfare, and environment. 
    Sec. 7.  Minnesota Statutes 1987 Supplement, section 
469.174, is amended by adding a subdivision to read: 
    Subd. 18.  [TERMS DEFINED IN OTHER CHAPTERS.] The terms 
"removal," "remedy," "remedial action," "response," "hazardous 
substance," and "pollutant or contaminant" have the meanings 
given in section 115B.02.  The term "petroleum" has the meaning 
given in section 115C.02. 
    Sec. 8.  Minnesota Statutes 1987 Supplement, section 
469.174, is amended by adding a subdivision to read: 
    Subd. 19.  [SOILS CONDITION DISTRICTS.] (a) "Soils 
condition district" means a type of tax increment financing 
district consisting of a project, or portions of a project, 
within which the authority finds by resolution that the 
following conditions exist: 
    (1) less than 70 percent of the parcels in the district are 
occupied by buildings, streets, utilities, or other improvements;
    (2) unusual terrain or soil deficiencies for 80 percent of 
the acreage in the district require substantial filling, 
grading, or other physical preparation for use; 
    (3) the estimated cost of the physical preparation under 
clause (2), but excluding costs directly related to roads as 
defined in section 160.01 and local improvements as described in 
section 429.021, subdivision 1, clauses (1) to (7), (11) and 
(12), and 430.01, when added to the fair market value of the 
land upon inclusion in the district exceeds the anticipated fair 
market value of the land upon completion of the preparation. 
    (b) An area does not qualify as a soils condition district 
if it contains a wetland, as defined in section 105.37, unless 
the development agreement prohibits draining, filling, or other 
alteration of the wetland or other binding legal assurances for 
preservation of the wetland are provided. 
    (c) If the district is located in the metropolitan area, 
the proposed development of the district in the tax increment 
financing plan must be consistent with the municipality's land 
use plan adopted in accordance with sections 473.851 to 473.872 
and reviewed by the metropolitan council under section 473.175.  
If the district is located outside of the metropolitan area, the 
proposed development of the district must be consistent with the 
municipality's comprehensive municipal plan. 
     (d) No parcel shall be included in the district unless the 
authority has concluded an agreement or agreements for the 
development of at least 50 percent of the acreage having the 
unusual soil or terrain deficiencies.  The agreement must 
provide recourse for the authority if the development is not 
completed. 
    Sec. 9.  Minnesota Statutes 1987 Supplement, section 
469.175, subdivision 1, is amended to read:  
    Subdivision 1.  [TAX INCREMENT FINANCING PLAN.] A tax 
increment financing plan shall contain:  
    (1) a statement of objectives of an authority for the 
improvement of a project;  
    (2) a statement as to the development program for the 
project, including the property within the project, if any, that 
the authority intends to acquire;  
    (3) a list of any development activities that the plan 
proposes to take place within the project, for which contracts 
have been entered into at the time of the preparation of the 
plan, including the names of the parties to the contract, the 
activity governed by the contract, the cost stated in the 
contract, and the expected date of completion of that activity;  
    (4) identification or description of the type of any other 
specific development reasonably expected to take place within 
the project, and the date when the development is likely to 
occur;  
    (5) estimates of the following:  
    (i) cost of the project, including administration expenses; 
    (ii) amount of bonded indebtedness to be incurred; 
    (iii) sources of revenue to finance or otherwise pay public 
costs; 
    (iv) the most recent assessed value of taxable real 
property within the tax increment financing district; 
    (v) the estimated captured assessed value of the tax 
increment financing district at completion; and 
    (vi) the duration of the tax increment financing district's 
existence; and 
    (6) a statement statements of the authority's estimate 
alternate estimates of the impact of tax increment financing on 
the assessed values of all taxing jurisdictions in which the tax 
increment financing district is located in whole or in 
part.  For purposes of one statement, the authority shall assume 
that the estimated captured assessed value would be available to 
the taxing jurisdictions without creation of the district, and 
for purposes of the second statement, the authority shall assume 
that none of the estimated captured assessed value would be 
available to the taxing jurisdictions without creation of the 
district; 
    (7) identification and description of studies and analyses 
used to make the determination set forth in subdivision 3, 
clause (2); and 
    (8) identification of all parcels to be included in the 
district. 
    Sec. 10.  Minnesota Statutes 1987 Supplement, section 
469.175, is amended by adding a subdivision to read: 
    Subd. 1a.  [INCLUSION OF COUNTY ROAD COSTS.] (a) The county 
board may require the authority to pay all or a portion of the 
cost of county road improvements out of increment revenues, if 
the following conditions occur: 
    (1) the proposed tax increment financing plan or an 
amendment to the plan contemplates construction of a development 
that will, in the judgment of the county, substantially increase 
the use of county roads requiring construction of road 
improvements or other road costs; 
    (2) the proposed tax increment financing district is a 
soils condition district; and 
     (3) the road improvements or other road costs, in the 
opinion of the county, would not reasonably be expected to be 
needed within the reasonably foreseeable future if the tax 
increment financing plan were not implemented. 
    (b) If the county elects to use increments to finance the 
road improvements, the county must notify the authority and 
municipality within 30 days after receipt of the information on 
the proposed tax increment district under subdivision 2.  The 
notice must include the estimated cost of the road improvements 
and schedule for construction and payment of the cost.  The 
authority must include the improvements in the tax increment 
financing plan.  The improvements may be financed with the 
proceeds of tax increment bonds or the authority and the county 
may agree that the county will finance the improvements with 
county funds to be repaid in installments, with or without 
interest, out of increment revenues.  If the cost of the road 
improvements and other project costs exceed the projected amount 
of the increment revenues, the county and authority shall 
negotiate an agreement, modifying the development plan or 
proposed road improvements that will permit financing of the 
costs before the tax increment financing plan may be approved. 
    Sec. 11.  Minnesota Statutes 1987 Supplement, section 
469.175, subdivision 2, is amended to read:  
    Subd. 2.  [CONSULTATIONS; COMMENT AND FILING.] Before 
formation of a tax increment financing district, the authority 
shall provide an opportunity to the members of the county boards 
of commissioners of any county in which any portion of the 
proposed district is located and the members of the school board 
of any school district in which any portion of the proposed 
district is located to meet with the authority.  The authority 
shall present to the members of the county boards of 
commissioners and the school boards its estimate of the fiscal 
and economic implications of the proposed tax increment 
financing district.  The information on the fiscal and economic 
implications of the plan must be provided to the county and 
school district boards at least 30 days before the public 
hearing required by subdivision 3.  The 30-day requirement is 
waived if the county and school district submit written comments 
on the proposal and any modification of the proposal to the 
authority after receipt of the information.  The members of the 
county boards of commissioners and the school boards may present 
their comments at the public hearing on the tax increment 
financing plan required by subdivision 3.  The county auditor 
shall not certify the original assessed value of a district 
pursuant to section 469.177, subdivision 1, until the county 
board of commissioners has presented its written comment on the 
proposal to the authority, or 30 days has passed from the date 
of the transmittal by the authority to the board of the 
information regarding the fiscal and economic implications, 
whichever occurs first.  Upon adoption of the tax increment 
financing plan, the authority shall file a copy of the plan with 
the commissioner of energy trade and economic development.  The 
authority must also file with the commissioner a copy of the 
development plan for the project area. 
    Sec. 12.  Minnesota Statutes 1987 Supplement, section 
469.175, subdivision 3, is amended to read:  
    Subd. 3.  [MUNICIPALITY APPROVAL.] A county auditor shall 
not certify the original assessed value of a tax increment 
financing district until the tax increment financing plan 
proposed for that district has been approved by the municipality 
in which the district is located.  If an authority that proposes 
to establish a tax increment financing district and the 
municipality are not the same, the authority shall apply to the 
municipality in which the district is proposed to be located and 
shall obtain the approval of its tax increment financing plan by 
the municipality before the authority may use tax increment 
financing.  The municipality shall approve the tax increment 
financing plan only after a public hearing thereon after 
published notice in a newspaper of general circulation in the 
municipality at least once not less than ten days nor more than 
30 days prior to the date of the hearing.  This hearing may be 
held before or after the approval or creation of the project or 
it may be held in conjunction with a hearing to approve the 
project.  Before or at the time of approval of the tax increment 
financing plan, the municipality shall make the following 
findings, and shall set forth in writing the reasons and 
supporting facts for each determination: 
    (1) that the proposed tax increment financing district is a 
redevelopment district, a mined underground space development 
district, a housing district, a soils condition district, or an 
economic development district; if the proposed district is a 
redevelopment district, the reasons and supporting facts for the 
determination that the district meets the criteria of section 
469.174, subdivision 10, paragraph (a), clauses (1) to (5), must 
be retained and made available to the public by the authority 
until the district has been terminated. 
    (2) that the proposed development or redevelopment, in the 
opinion of the municipality, would not reasonably be expected to 
occur solely through private investment within the reasonably 
foreseeable future and therefore the use of tax increment 
financing is deemed necessary. 
    (3) that the tax increment financing plan conforms to the 
general plan for the development or redevelopment of the 
municipality as a whole. 
    (4) that the tax increment financing plan will afford 
maximum opportunity, consistent with the sound needs of the 
municipality as a whole, for the development or redevelopment of 
the project by private enterprise. 
    (5) that the municipality elects the method of tax 
increment computation set forth in section 469.177, subdivision 
3, clause (b), if applicable. 
    When the municipality and the authority are not the same, 
the municipality shall approve or disapprove the tax increment 
financing plan within 60 days of submission by the authority, or 
the plan shall be deemed approved.  When the municipality and 
the authority are not the same, the municipality may not amend 
or modify a tax increment financing plan except as proposed by 
the authority pursuant to subdivision 4.  Once approved, the 
determination of the authority to undertake the project through 
the use of tax increment financing and the resolution of the 
governing body shall be conclusive of the findings therein and 
of the public need for the financing. 
    Sec. 13.  Minnesota Statutes 1987 Supplement, section 
469.175, subdivision 4, is amended to read:  
    Subd. 4.  [MODIFICATION OF PLAN.] (a) A tax increment 
financing plan may be modified by an authority, provided that 
any reduction or enlargement of geographic area of the project 
or tax increment financing district, increase in amount of 
bonded indebtedness to be incurred, including a determination to 
capitalize interest on the debt if that determination was not a 
part of the original plan, or to increase or decrease the amount 
of interest on the debt to be capitalized, increase in the 
portion of the captured assessed value to be retained by the 
authority, increase in total estimated tax increment 
expenditures or designation of additional property to be 
acquired by the authority shall be approved upon the notice and 
after the discussion, public hearing, and findings required for 
approval of the original plan; provided that if an authority 
changes the type of district from housing, redevelopment, or 
economic development to another type of district, this change 
shall not be considered a modification but shall require the 
authority to follow the procedure set forth in sections 469.174 
to 469.179 for adoption of a new plan, including certification 
of the assessed valuation of the district by the county 
auditor.  If a redevelopment district is enlarged, the reasons 
and supporting facts for the determination that the addition to 
the district meets the criteria of section 469.174, subdivision 
10, paragraph (a), clauses (1) to (5), must be documented.  The 
requirements of this paragraph do not apply if (1) the only 
modification is elimination of parcels from the project or 
district and (2)(A) the current assessed value of the parcels 
eliminated from the district equals or exceeds the assessed 
value of those parcels in the district's original assessed value 
or (B) the authority agrees that, notwithstanding section 
469.177, subdivision 1, the original assessed value will be 
reduced by no more than the current assessed value of the 
parcels eliminated from the district.  The authority must notify 
the county auditor of any modification that reduces or enlarges 
the geographic area of a district or a project area.  
    (b) The geographic area of a tax increment financing 
district may be reduced, but shall not be enlarged after five 
years following the date of certification of the original 
assessed value by the county auditor or after August 1, 1984, 
for tax increment financing districts authorized prior to August 
1, 1979, except that development districts created pursuant to 
Minnesota Statutes 1978, chapter 472A, prior to August 1, 1979, 
may be reduced but shall not be enlarged after five years 
following the date of designation of the district. 
    Sec. 14.  Minnesota Statutes 1987 Supplement, section 
469.175, is amended by adding a subdivision to read: 
    Subd. 7.  [CREATION OF HAZARDOUS SUBSTANCE SUBDISTRICT; 
RESPONSE ACTIONS.] (a) A municipality or authority which is 
creating or has created a tax increment financing district may 
establish within the district a hazardous substance subdistrict 
upon the notice and after the discussion, public hearing, and 
findings required for approval of the original plan.  The 
geographic area of the subdistrict is made up of any parcels in 
the district designated for inclusion by the municipality or 
authority that are designated hazardous substance sites, and any 
additional parcels in the district designated for inclusion that 
are contiguous except for the interposition of a right-of-way.  
Before or at the time of approval of the tax increment financing 
plan, the municipality must make the findings under paragraphs 
(b) to (d), and set forth in writing the reasons and supporting 
facts for each. 
    (b) Development or redevelopment of the site, in the 
opinion of the municipality, would not reasonably be expected to 
occur solely through private investment and tax increment 
otherwise available, and therefore the hazardous substance 
district is deemed necessary. 
    (c) Other parcels that are not designated hazardous 
substance sites are expected to be developed together with a 
designated hazardous substance site.  
    (d) The subdistrict is not larger than, and the period of 
time during which increments are elected to be received is not 
longer than, that which is necessary in the opinion of the 
municipality to provide for the additional costs due to the 
designated hazardous substance site. 
    (e) Upon request by a municipality or authority that has 
incurred expenses for removal or remedial actions to implement a 
development response action plan, the attorney general may: 
     (1) bring a civil action on behalf of the municipality or 
authority to recover the expenses, including administrative 
costs and litigation expenses, under section 115B.04 or other 
law; or 
     (2) assist the municipality or agency in bringing an action 
as described in clause (1), by providing legal and technical 
advice, intervening in the action, or other appropriate 
assistance. 
The decision to participate in any action to recover expenses is 
at the discretion of the attorney general. 
     (f) If the attorney general brings an action as provided in 
paragraph (e), clause (1), the municipality or authority shall 
certify its reasonable and necessary expenses incurred to 
implement the development response action plan and shall 
cooperate with the attorney general as required to effectively 
pursue the action.  The certification by the municipality or 
authority is prima facie evidence that the expenses are 
reasonable and necessary.  The attorney general may deduct 
litigation expenses incurred by the attorney general from any 
amounts recovered in an action brought under paragraph (e), 
clause (1).  The municipality or authority shall reimburse the 
attorney general for litigation expenses not recovered in an 
action under paragraph (e), clause (1), and for litigation 
expenses incurred to assist in bringing an action under 
paragraph (e), clause (1).  All money recovered or paid to the 
attorney general for litigation expenses under this paragraph 
shall be paid to the general fund of the state for deposit to 
the account of the attorney general.  For the purposes of this 
section, "litigation expenses" means attorney fees and costs of 
discovery and other preparation for litigation. 
    (g) The municipality or authority shall reimburse the 
pollution control agency for its administrative expenses 
incurred to review and approve a development action response 
plan and associated activities, and for expenses incurred for 
any services rendered to the attorney general to support the 
attorney general in actions brought or assistance provided under 
paragraph (e).  All money paid to the pollution control agency 
under this paragraph shall be deposited in the environmental 
response, compensation and compliance fund. 
    (h) Actions taken by a municipality or authority consistent 
with a development response action plan are deemed to be 
authorized response actions for the purpose of section 115B.17, 
subdivision 12.  A municipality or agency that takes actions 
consistent with a development response action plan qualifies for 
the defenses available under sections 115B.04, subdivision 11, 
and 115B.05, subdivision 9. 
    (i) All money recovered by a municipality or authority in 
an action brought under paragraph (e) in excess of the amounts 
paid to the attorney general and the pollution control agency 
must be treated as excess increments and be distributed as 
provided in section 469.176, subdivision 2, clause (4), to the 
extent the removal and remedial actions were initially financed 
with increment revenues. 
    Sec. 15.  Minnesota Statutes 1987 Supplement, section 
469.176, subdivision 1, is amended to read:  
    Subdivision 1.  [DURATION OF TAX INCREMENT FINANCING 
DISTRICTS.] (a) Subject to the limitations contained in 
paragraphs (b) to (f), any tax increment financing district as 
to which bonds are outstanding, payment for which the tax 
increment and other revenues have been pledged, shall remain in 
existence at least as long as the bonds continue to be 
outstanding.  
    (b) The tax increment pledged to the payment of the bonds 
and interest thereon may be discharged and the tax increment 
financing district may be terminated if sufficient funds have 
been irrevocably deposited in the debt service fund or other 
escrow account held in trust for all outstanding bonds to 
provide for the payment of the bonds at maturity or date of 
redemption and interest thereon to the maturity or redemption 
date.  
    (c) For bonds issued pursuant to section 469.178, 
subdivisions 2 and 3, the full faith and credit and any taxing 
powers of the municipality or authority shall continue to be 
pledged to the payment of the bonds until the principal of and 
interest on the bonds has been paid in full.  
    (d) No tax increment shall be paid to an authority for a 
tax increment financing district after three years from the date 
of certification of the original assessed value of the taxable 
real property in the district by the county auditor or after 
August 1, 1982, for tax increment financing districts authorized 
prior to August 1, 1979, unless within the three-year period (1) 
bonds have been issued pursuant to section 469.178, or in aid of 
a project pursuant to any other law, except revenue bonds issued 
pursuant to sections 469.152 to 469.165, prior to August 1, 
1979, or (2) the authority has acquired property within the 
district, or (3) the authority has constructed or caused to be 
constructed public improvements within the district.  
    (e) No tax increment shall in any event be paid to the 
authority from a redevelopment district after 25 years from date 
of receipt by the authority of the first tax increment, after 25 
years from the date of the receipt for a housing district, after 
25 years from the date of the receipt for a mined underground 
space development district, after 12 years from approval of the 
tax increment financing plan for a soils condition district, and 
after eight years from the date of the receipt, or ten years 
from approval of the tax increment financing plan, whichever is 
less, for an economic development district. 
    For tax increment financing districts created prior to 
August 1, 1979, no tax increment shall be paid to the authority 
after 30 years from August 1, 1979 April 1, 2001, or the term of 
a nondefeased bond or obligation outstanding on April 1, 1990, 
secured by increments from the district or project area, 
whichever time is greater, provided that in no case will a tax 
increment be paid to an authority after August 1, 2009, from 
such a district.  If a district's termination date is extended 
beyond April 1, 2001, because bonds were outstanding on April 1, 
1990, with maturities extending beyond April 1, 2001, the 
following restrictions apply.  No increment collected from the 
district may be expended after April 1, 2001, except to pay or 
defease (i) bonds issued before April 1, 1990, or (ii) bonds 
issued to refund the principal of the outstanding bonds and pay 
associated issuance costs, provided the average maturity of the 
refunding bonds does not exceed the bonds refunded. 
    (f) Modification of a tax increment financing plan pursuant 
to section 469.175, subdivision 4, shall not extend the 
durational limitations of this subdivision. 
    (g) If a parcel of a district is part of a designated 
hazardous substance site or a hazardous substance subdistrict, 
tax increment may be paid to the authority from the parcel for 
longer than the period otherwise provided by this subdivision.  
The extended period for collection of tax increment begins on 
the date of receipt of the first tax increment from the parcel 
that is more than any tax increment received from the parcel 
before the date of the certification under section 469.175, 
subdivision 7, paragraph (b), and received after the date of 
certification to the county auditor described in section 
469.175, subdivision 7, paragraph (b).  The extended period for 
collection of tax increment is the lesser of:  (1) 25 years from 
the date of commencement of the extended period; or (2) the 
period necessary to recover the costs of removal actions or 
remedial actions specified in a development response action plan.
    Sec. 16.  Minnesota Statutes 1987 Supplement, section 
469.176, subdivision 4, is amended to read:  
    Subd. 4.  [LIMITATION ON USE OF TAX INCREMENT; GENERAL 
RULE.] (a) All revenues derived from tax increment shall be used 
in accordance with the tax increment financing plan.  The 
revenues shall be used solely for the following purposes:  (1) 
to pay the principal of and interest on bonds issued to finance 
a project; (2) by a rural development financing authority for 
the purposes stated in section 469.142, by a port authority or 
municipality exercising the powers of a port authority to 
finance or otherwise pay the cost of redevelopment pursuant to 
sections 469.048 to 469.068, by an economic development 
authority to finance or otherwise pay the cost of redevelopment 
pursuant to sections 469.090 to 469.108, by a housing and 
redevelopment authority or economic development authority to 
finance or otherwise pay public redevelopment costs pursuant to 
sections 469.001 to 469.047, by a municipality or economic 
development authority to finance or otherwise pay the capital 
and administration costs of a development district pursuant to 
sections 469.124 to 469.134, by a municipality or redevelopment 
agency to finance or otherwise pay premiums for insurance or 
other security guaranteeing the payment when due of principal of 
and interest on the bonds pursuant to chapter 462C, sections 
469.152 to 469.165, or both, or to accumulate and maintain a 
reserve securing the payment when due of the principal of and 
interest on the bonds pursuant to chapter 462C, sections 469.152 
to 469.165, or both, which revenues in the reserve shall not 
exceed, subsequent to the fifth anniversary of the date of issue 
of the first bond issue secured by the reserve, an amount equal 
to 20 percent of the aggregate principal amount of the 
outstanding and nondefeased bonds secured by the reserve.  
    Subd. 4a.  [MINED UNDERGROUND SPACE DISTRICTS.] Revenue 
derived from tax increment from a mined underground space 
development district may be used only to pay for the costs of 
excavating and supporting the space, of providing public access 
to the mined underground space including roadways, and of 
installing utilities including fire sprinkler systems in the 
space. 
    (b) Subd. 4b.  [SOILS CONDITION DISTRICTS.] Revenue derived 
from tax increment from a soils condition district under section 
469.174, subdivision 19, may be used only to (1) acquire parcels 
on which the improvements described in clause (2) will occur; 
(2) pay for the cost of correcting the unusual terrain or soil 
deficiencies and the additional cost of installing public 
improvements directly caused by the deficiencies; and (3) pay 
for the administrative expenses of the authority allocable to 
the district.  The sale by the authority of a parcel acquired 
and improved as described in clauses (1) and (2) must be for a 
price that is no less than the cost of acquisition. 
    Subd. 4c.  [ECONOMIC DEVELOPMENT DISTRICTS.] Revenue 
derived from tax increment from an economic development district 
may not be used to provide improvements, loans, subsidies, 
grants, interest rate subsidies, or assistance in any form to 
developments consisting of buildings and ancillary facilities, 
if 25 percent of the buildings and facilities (determined on the 
basis of square footage) are used for the purposes listed in 
section 144(a)(8) of the Internal Revenue Code of 1986 
(determined without regard to the 25 percent restriction in 
subparagraph (A)).  The restrictions under this paragraph apply 
only to districts located in development regions, as defined in 
section 462.384, with populations in excess of 1,000,000.  
Population must be determined under the provisions of section 
477A.011. 
    Subd. 4d.  [HOUSING DISTRICTS.] Revenue derived from tax 
increment from a housing district must be used solely to finance 
the cost of housing projects as defined in section 469.174, 
subdivision 11.  The cost of public improvements directly 
related to the housing projects and the allocated administrative 
expenses of the authority may be included in the cost of a 
housing project. 
    Subd. 4e.  [HAZARDOUS SUBSTANCE SUBDISTRICTS.] The 
additional tax increment received by the municipality from a 
hazardous substance subdistrict as a result of a reduction in 
original assessed value pursuant to section 469.174, subdivision 
7, paragraph (b), or as a result of the extension of the period 
for collection of tax increment from a hazardous substance site 
or subdistrict provided for in section 469.176, subdivision 1, 
paragraph (g), may be used only to pay or reimburse the costs 
of:  (1) removal actions or remedial actions with respect to 
hazardous substances or pollutants or contaminants or petroleum 
releases affecting or which may affect the designated hazardous 
substance site; (2) pollution testing, demolition, and soil 
compaction correction necessitated by the development response 
action plan for the designated hazardous substance site; and (3) 
related administrative and legal costs, including costs of 
review and approval of development response action plans by the 
pollution control agency and litigation expenses of the attorney 
general. 
    Subd. 4f.  [INTEREST REDUCTION.] Revenues derived from tax 
increment may be used to finance the costs of an interest 
reduction program operated pursuant to section 469.012, 
subdivisions 7 to 10, or pursuant to other law granting interest 
reduction authority and power by reference to those subdivisions 
only under the following conditions:  (1) tax increments may not 
be collected for a program for a period in excess of 12 years 
after the date of the first interest rate reduction payment for 
the program, (2) tax increments may not be used for an interest 
reduction program, if the proceeds of bonds issued pursuant to 
section 469.178 after December 31, 1985, have been or will be 
used to provide financial assistance to the specific project 
which would receive the benefit of the interest reduction 
program, and (3) tax increments may not be used to finance an 
interest reduction program for owner-occupied single-family 
dwellings.  
    (c) Subd. 4g.  [GENERAL GOVERNMENT USE PROHIBITED.] These 
revenues shall not be used to circumvent existing levy limit 
law.  No revenues derived from tax increment from any district, 
whether certified before or after August 1, 1979, shall be used 
for the acquisition, construction or, renovation, operation, or 
maintenance of a municipally owned building to be used primarily 
and regularly for conducting the business of the a municipality 
;, county, school district, or any other local unit of 
government or the state or federal government.  This provision 
shall not prohibit the use of revenues derived from tax 
increments for the construction or renovation of a parking 
structure, a commons area used as a public park, or a facility 
used for social, recreational, or conference purposes and not 
primarily for conducting the business of the municipality.  
    Subd. 4h.  [COUNTY COSTS.] (a) Tax increments may be used 
to pay for the county's actual administrative expenses under 
sections 469.174 to 469.179.  The county may require payment of 
those expenses by February 15 of the year after the year in 
which the expenses are incurred.  The amount of these payments 
is not required to be set forth in the tax increment financing 
plan for the project.  To obtain payment for actual 
administrative costs, the county auditor must submit to the 
authority a record of costs incurred by the county auditor 
related to administration of the authority's tax increment 
financing districts. 
     (b) Tax increments may be used to pay county road costs as 
provided in section 469.175, subdivision 1a. 
    Subd. 4i.  [MULTI-COUNTY USE PROHIBITED.] If a tax 
increment district is located in a municipality, parts of which 
are situated in more than one county, the revenue derived from 
tax increments from parcels located in one county must be 
expended for the direct and primary benefit of a project located 
or conducted within that county, unless the county boards of 
each of the counties involved agree to waive this requirement. 
    Sec. 17.  Minnesota Statutes 1987 Supplement, section 
469.176, subdivision 5, is amended to read:  
    Subd. 5.  [REQUIREMENT FOR AGREEMENTS.] No more than 25 
percent, by acreage, of the property to be acquired within a 
project which contains a redevelopment district, or ten percent, 
by acreage, of the property to be acquired within a project 
which contains a housing or economic development district, as 
set forth in the tax increment financing plan, shall at any time 
be owned by an authority as a result of acquisition with the 
proceeds of bonds issued pursuant to section 469.178 unless 
prior to acquisition in excess of the percentages, the authority 
has concluded an agreement for the development or redevelopment 
of the property acquired and which provides recourse for the 
authority should the development or redevelopment not be 
completed.  This subdivision does not apply to a parcel of a 
district that is a designated hazardous substance site 
established under section 469.174, subdivision 16, or part of a 
hazardous substance subdistrict established under section 
469.175, subdivision 7.  
    Sec. 18.  Minnesota Statutes 1987 Supplement, section 
469.176, subdivision 6, is amended to read:  
    Subd. 6.  [ACTION REQUIRED.] If, after four years from the 
date of certification of the original assessed value of the tax 
increment financing district pursuant to section 469.177, no 
demolition, rehabilitation, or renovation of property or other 
site preparation, including improvement of a street adjacent to 
a parcel but not installation of utility service including sewer 
or water systems, has been commenced on a parcel located within 
a tax increment financing district by the authority or by the 
owner of the parcel in accordance with the tax increment 
financing plan, no additional tax increment may be taken from 
that parcel, and the original assessed value of that parcel 
shall be excluded from the original assessed value of the tax 
increment financing district.  If the authority or the owner of 
the parcel subsequently commences demolition, rehabilitation, or 
renovation or other site preparation on that parcel including 
improvement of a street adjacent to that parcel, in accordance 
with the tax increment financing plan, the authority shall 
certify to the county auditor that the activity has commenced, 
and the county auditor shall certify the assessed value thereof 
as most recently certified by the commissioner of revenue and 
add it to the original assessed value of the tax increment 
financing district.  The county auditor must enforce the 
provisions of this subdivision.  The authority must submit to 
the county auditor evidence that the required activity has taken 
place for each parcel in the district.  The evidence for a 
parcel must be submitted by February 1 of the fifth year 
following the year in which the parcel was certified as included 
in the district. 
    Sec. 19.  Minnesota Statutes 1987 Supplement, section 
469.177, subdivision 1, is amended to read:  
    Subdivision 1.  [ORIGINAL ASSESSED VALUE.] Upon or after 
adoption of a tax increment financing plan, the auditor of any 
county in which the district is situated shall, upon request of 
the authority, certify the original assessed value of the tax 
increment financing district as described in the tax increment 
financing plan and shall certify in each year thereafter the 
amount by which the original assessed value has increased or 
decreased as a result of a change in tax exempt status of 
property within the district, reduction or enlargement of the 
district or changes pursuant to subdivision 4.  In the case of a 
mined underground space development district the county auditor 
shall certify the original assessed value as zero, plus the 
assessed value, if any, previously assigned to any subsurface 
area included in the mined underground space development 
district pursuant to section 272.04.  For districts approved 
under section 469.175, subdivision 3, or parcels added to 
existing districts after May 1, 1988, if the classification 
under section 273.13 of property located in a district changes 
to a classification that has a different assessment ratio, the 
original assessed value of that property must be redetermined at 
the time when its use is changed as if the property had 
originally been classified in the same class in which it is 
classified after its use is changed.  The amount to be added to 
the original assessed value of the district as a result of 
previously tax exempt real property within the district becoming 
taxable shall be equal to the assessed value of the real 
property as most recently assessed pursuant to section 273.18 
or, if that assessment was made more than one year prior to the 
date of title transfer rendering the property taxable, the value 
assessed by the assessor at the time of the transfer.  The 
amount to be added to the original assessed value of the 
district as a result of enlargements thereof shall be equal to 
the assessed value of the added real property as most recently 
certified by the commissioner of revenue as of the date of 
modification of the tax increment financing plan pursuant to 
section 469.175, subdivision 4.  For districts approved under 
section 469.175, subdivision 3, or parcels added to existing 
districts after May 1, 1988, if the assessed value of a property 
increases because the property no longer qualifies under the 
Minnesota agricultural property tax law, section 273.111; the 
Minnesota open space property tax law, section 273.112; or the 
metropolitan agricultural preserves act, chapter 473H, or 
because platted, unimproved property is improved or three years 
pass after approval of the plat under section 273.11, 
subdivision 1, the increase in assessed value must be added to 
the original assessed value.  Each year the auditor shall also 
add to the original assessed value of each economic development 
district an amount equal to the original assessed value for the 
preceding year multiplied by the average percentage increase in 
the assessed valuation of all property included in the economic 
development district during the five years prior to 
certification of the district.  The amount to be subtracted from 
the original assessed value of the district as a result of 
previously taxable real property within the district becoming 
tax exempt, or a reduction in the geographic area of the 
district, shall be the amount of original assessed value 
initially attributed to the property becoming tax exempt or 
being removed from the district.  If the assessed value of 
property located within the tax increment financing district is 
reduced by reason of a court-ordered abatement, stipulation 
agreement, voluntary abatement made by the assessor or auditor 
or by order of the commissioner of revenue, the reduction shall 
be applied to the original assessed value of the district when 
the property upon which the abatement is made has not been 
improved since the date of certification of the district and to 
the captured assessed value of the district in each year 
thereafter when the abatement relates to improvements made after 
the date of certification.  The county auditor may specify 
reasonable form and content of the request for certification of 
the authority and any modification thereof pursuant to section 
469.175, subdivision 4.  
    Sec. 20.  Minnesota Statutes 1987 Supplement, section 
469.177, is amended by adding a subdivision to read: 
    Subd. 1a.  [ORIGINAL MILL RATE.] (a) At the time of the 
initial certification of the original assessed value for a tax 
increment financing district, the county auditor shall certify 
the original mill rate that applies to the district.  The 
original mill rate is the sum of all the mill rates that apply 
to a property in the district for the taxes payable in the 
calendar year in which the initial certification of original 
assessed value is requested under subdivision 1.  If the total 
mill rate applicable to properties in the tax increment 
financing district varies, the mill rate must be computed by 
determining the average total mill rate in the district, 
weighted on the basis of assessed value.  The resulting mill 
rate is the original mill rate for the life of the district. 
    (b) In the case of districts certified during calendar year 
1988, the original mill rate equals the amount calculated under 
paragraph (a) multiplied by 0.45. 
    Sec. 21.  Minnesota Statutes 1987 Supplement, section 
469.177, subdivision 3, is amended to read: 
    Subd. 3.  [TAX INCREMENT, RELATIONSHIP TO CHAPTER 473F.] 
(a) Unless the governing body elects pursuant to clause (b) the 
following method of computation shall apply: 
    (1) The original assessed value and the current assessed 
value shall be determined before the application of the fiscal 
disparity provisions of chapter 473F.  Where the original 
assessed value is equal to or greater than the current assessed 
value, there is no captured assessed value and no tax increment 
determination.  Where the original assessed value is less than 
the current assessed value, the difference between the original 
assessed value and the current assessed value is the captured 
assessed value.  This amount less any portion thereof which the 
authority has designated, in its tax increment financing plan, 
to share with the local taxing districts is the retained 
captured assessed value of the authority.  
    (2) The county auditor shall exclude the retained captured 
assessed value of the authority from the taxable value of the 
local taxing districts in determining local taxing district mill 
rates.  The mill rates so determined are to be extended against 
the retained captured assessed value of the authority as well as 
the taxable value of the local taxing districts.  The tax 
generated by the extension of the lesser of (A) the local taxing 
district mill rates or (B) the original mill rate to the 
retained captured assessed value of the authority is the tax 
increment of the authority.  
     (b) The governing body may, by resolution approving the tax 
increment financing plan pursuant to section 469.175, 
subdivision 3, elect the following method of computation: 
     (1) The original assessed value shall be determined before 
the application of the fiscal disparity provisions of chapter 
473F.  The current assessed value shall exclude any fiscal 
disparity commercial-industrial assessed value increase between 
the original year and the current year multiplied by the fiscal 
disparity ratio determined pursuant to section 473F.08, 
subdivision 6.  Where the original assessed value is equal to or 
greater than the current assessed value, there is no captured 
assessed value and no tax increment determination.  Where the 
original assessed value is less than the current assessed value, 
the difference between the original assessed value and the 
current assessed value is the captured assessed value.  This 
amount less any portion thereof which the authority has 
designated, in its tax increment financing plan, to share with 
the local taxing districts is the retained captured assessed 
value of the authority.  
    (2) The county auditor shall exclude the retained captured 
assessed value of the authority from the taxable value of the 
local taxing districts in determining local taxing district mill 
rates.  The mill rates so determined are to be extended against 
the retained captured assessed value of the authority as well as 
the taxable value of the local taxing districts.  The tax 
generated by the extension of the lesser of (A) the local taxing 
district mill rates or (B) the original mill rate to the 
retained captured assessed value of the authority is the tax 
increment of the authority.  
    (3) An election by the governing body pursuant to part 
paragraph (b) shall be submitted to the county auditor by the 
authority at the time of the request for certification pursuant 
to subdivision 1. 
    (c) The method of computation of tax increment applied to a 
district pursuant to clause paragraph (a) or (b) shall remain 
the same for the duration of the district, except that the 
governing body may elect to change its election from the method 
of computation in paragraph (a) to the method in paragraph (b). 
    Sec. 22.  Minnesota Statutes 1987 Supplement, section 
469.177, subdivision 4, is amended to read:  
    Subd. 4.  [PRIOR PLANNED IMPROVEMENTS.] The authority 
shall, after diligent search, accompany its request for 
certification to the county auditor pursuant to subdivision 1, 
or its notice of district enlargement pursuant to section 
469.175, subdivision 4, with a listing of all properties within 
the tax increment financing district or area of enlargement for 
which building permits have been issued during the 18 months 
immediately preceding approval of the tax increment financing 
plan by the municipality pursuant to section 469.175, 
subdivision 3.  The county auditor shall increase the original 
assessed value of the district by the assessed valuation of the 
improvements each improvement for which the a building permit 
was issued, excluding the assessed valuation of improvements for 
which a building permit was issued during the three-month period 
immediately preceding said approval of the tax increment 
financing plan, as certified by the assessor. 
    Sec. 23.  Minnesota Statutes 1987 Supplement, section 
469.177, is amended by adding a subdivision to read: 
    Subd. 9.  [DISTRIBUTIONS OF EXCESS TAXES ON CAPTURED 
VALUE.] (a) If the amount of tax paid on captured value exceeds 
the amount of tax increment, the county auditor shall distribute 
the excess to the municipality, county, and school district as 
follows:  each governmental unit's share of the excess equals 
    (1) the total amount of the excess for the tax increment 
financing district, multiplied by 
    (2) a fraction, the numerator of which is the current mill 
rate of the governmental unit less the governmental unit's mill 
rate for the year the original mill rate for the district was 
certified (in no case may this amount be less than zero) and the 
denominator of which is the sum of the numerators for the 
municipality, county, and school district. 
If the entire increase in the mill rate is attributable to a 
taxing district, other than the municipality, county, or school 
district, then the excess must be distributed to the 
municipality, county, and school district in proportion to their 
respective mill rates. 
    (b) The amounts distributed shall be deducted in computing 
the levy limits of the taxing district for the succeeding 
taxable year. 
    (c) In the case of distributions to a school district, the 
county auditor shall report amounts distributed to the 
commissioner of education in the same manner as provided for 
excess increments under section 469.176, subdivision 2, and the 
distribution shall be treated as an excess increment for 
purposes of section 124.214, subdivision 3. 
    Sec. 24.  Minnesota Statutes 1987 Supplement, section 
469.177, is amended by adding a subdivision to read: 
    Subd. 10.  [PAYMENT TO SCHOOL FOR REFERENDUM LEVY.] The 
provisions of this subdivision apply to tax increment financing 
districts and projects for which certification was requested 
before May 1, 1988, that are located in a school district in 
which the voters have approved new millage or an increase in 
millage after the tax increment financing district was certified 
(1) if there are no outstanding bonds on May 1, 1988, to which 
increment from the district is pledged, or (2) if the referendum 
is approved after May 1, 1988, and there are no bonds 
outstanding at the time the referendum is approved, that were 
issued before May 1, 1988, or (3) if the referendum increasing 
the mill rate was approved after the most recent issue of bonds 
to which increment from the district is pledged.  If clause (1) 
or (2) applies, the authority must annually pay to the school 
district an amount of increment equal to the increment that is 
attributable to the increase in the mill rate under the 
referendum.  If clause (3) applies, upon approval by a majority 
vote of the governing body of the municipality and the school 
board, the authority must pay to the school district an amount 
of increment equal to the increment that is attributable to the 
increase in the mill rate under the referendum.  The amounts of 
these increments may be expended and must be treated by the 
school district in the same manner as provided for the revenues 
derived from the referendum levy approved by the voters. 
    Sec. 25.  Minnesota Statutes 1987 Supplement, section 
469.179, is amended to read:  
    469.179 [EXISTING PROJECTS.] 
    Subdivision 1.  [EXEMPTION.] The provisions of sections 
469.174 to 469.178 shall not affect any project for which tax 
increment certification was requested pursuant to law prior to 
August 1, 1979, or any project carried on by an authority 
pursuant to section 469.033, subdivision 5, with respect to 
which the governing body has by resolution designated properties 
for inclusion in the district prior to August 1, 1979, except: 
    (1) as otherwise expressly provided in sections 469.174 to 
469.178; or 
    (2) as an authority elects to proceed with an existing 
district, under the provisions of sections 469.174 to 469.178; 
or 
    (3) that any enlargements of the geographic area of an 
existing tax increment financing district subsequent to August 
1, 1979, shall be accomplished in accordance with and shall 
subject the property added as a result of the enlargement to the 
terms and conditions of sections 469.174 to 469.178 as provided 
in subdivision 2; or 
    (4) that beginning with taxes payable in 1980, section 
469.177, subdivision 3, clause (b), shall apply to all 
development districts created pursuant to Minnesota Statutes 
1978, chapter 472A, or any special law, prior to August 1, 1979. 
    Subd. 2.  [APPLICATION TO EXISTING DISTRICTS.] If the 
development or redevelopment activity within the project or 
district of a tax increment financing project certified prior to 
August 1, 1979, is extended beyond the scope of activity set 
forth in the district's redevelopment plan under Minnesota 
Statutes, chapter 462, or Minnesota Statutes, chapter 472A, if 
applicable, after May 1, 1988, the authority must with regard to 
the new activity conform to the provisions of sections 469.174 
to 469.178 with the following exceptions.  
    (a) Section 469.175, subdivision 3, paragraphs (1) and (5), 
shall not apply.  Furthermore, the provisions of section 
473F.02, subdivision 3, shall continue to apply to the entire 
district, if applicable.  
    (b) Section 469.177, subdivision 3, shall not apply. 
    Sec. 26.  [CITY OF VIRGINIA TAX INCREMENT FINANCING 
DISTRICT; PARCELS INCLUDED.] 
    Redevelopment tax increment financing district No. 1 in 
enterprise zone development district No. 3 in the city of 
Virginia, is deemed for all purposes under Minnesota Statutes, 
sections 469.174 to 469.179 to include the following parcels of 
real property as of June 12, 1984: 
    (1) Parcel No. 90-124-245 - Ely 79.2' of Lot 1 and all of 
Lot 2, Block 3, Olcott Addition; 
    (2) Parcel No. 90-125-247 - Lot 3, Block 3, Olcott Addition;
and 
    (3) Parcel No. 90-125-270 - Lot 4, Block 3, Olcott Addition.
    Sec. 27.  [ORIGINAL ASSESSED VALUE.] 
    The original assessed value of the parcels of real property 
described in sections 24 to 26 is deemed for all purposes under 
Minnesota Statutes, sections 469.174 to 469.179 to be the 
original assessed value of those parcels as of June 12, 1984. 
    Sec. 28.  [CAPTURED ASSESSED VALUE.] 
    The captured assessed value of the parcels of real property 
described in sections 24 to 26 is deemed for all purposes under 
Minnesota Statutes, sections 469.174 to 469.179 to be the 
increased assessed value of those parcels computed in the manner 
prescribed by Minnesota Statutes, section 469.177, and in 
accordance with sections 26 to 28.  
     Sec. 29.  [TRANSITION RULES.] 
    (a) The provisions of sections 3, 6, 10, and 14 do not 
apply to proposed tax increment financing districts for which 
the authority called for a public hearing in a resolution dated 
March 23, 1987, and for which a public hearing was held on April 
28, 1987.  The provisions of Minnesota Statutes 1987 Supplement, 
sections 469.174, subdivision 10, and 469.176, subdivision 4, 
apply to such districts. 
    (b) The provisions of sections 3, 6, 10, and 14 do not 
apply to candidate sites in the old highway 8 corridor tax 
increment project area, identified in the old highway 8 corridor 
plan as approved by an authority on October 14, 1986, if the 
requests for certification of the districts are filed with the 
county before January 1, 1998.  The provisions of Minnesota 
Statutes 1987 Supplement, sections 469.174, subdivision 10, and 
469.176, subdivision 4, apply to such districts. 
    (c) The provisions of section 14, subdivision 4c, do not 
apply to an economic development district located in a 
development district approved on November 9, 1987, provided the 
request for certification of the tax increment district is 
submitted to the county by September 30, 1988.  
    Sec. 30.  [EFFECTIVE DATES.] 
    Sections 2, 5, 6, 7, 14, 16, subdivision 4e, 17, and the 
provisions of section 15 relating to the duration of hazardous 
substance sites and subdistricts are effective for hazardous 
substance sites and subdistricts designated and created after 
the day following final enactment.  Except as otherwise 
specifically provided, sections 1, 3, 4, 8 to 12, 16, and 20 to 
23, and the provisions of section 15 applying to soils condition 
districts are effective for districts and amendments adding 
geographic area to an existing district for which the request 
for certification was filed with the county auditor after May 1, 
1988.  Sections 13, 15, 16, subdivision 4g, 18, 24, and 25, and 
the provisions of section 21 allowing a change in the fiscal 
disparities election are effective May 1, 1988, except as 
otherwise specifically provided.  Section 16, subdivision 4c, is 
effective for districts for which the request for certification 
is filed with the county before May 1, 1988, and to all 
increment collected after January 1, 1990.  Sections 26 to 28 
are effective upon approval by the city council of the city of 
Virginia and compliance with Minnesota Statutes, section 
645.021.  Section 29 is effective the day following final 
enactment. 

                               ARTICLE 13

                             BUDGET RESERVE
    Section 1.  Minnesota Statutes 1987 Supplement, section 
16A.15, subdivision 6, is amended to read:  
    Subd. 6.  [BUDGET AND CASH FLOW RESERVE ACCOUNT.] A budget 
and cash flow reserve account is created in the general fund in 
the state treasury.  The commissioner of finance shall, as 
authorized from time to time by law, restrict part or all of the 
budgetary balance in the general fund for use as the budget and 
cash flow reserve account.  The commissioner of finance on July 
1, 1987, shall transfer to the budget and cash flow reserve 
account the amount necessary such amounts as are available to 
bring the total amount, including any existing balance in the 
account on June 30, 1987 1988, to $250,000,000 $265,000,000.  
The amounts restricted shall remain in the account until drawn 
down under subdivision 1 or increased under section 16A.1541.  
    Sec. 2.  Minnesota Statutes 1987 Supplement, section 
16A.1541, is amended to read:  
    16A.1541 [ADDITIONAL REVENUES; PRIORITY.] 
    If on the basis of a forecast of general fund revenues and 
expenditures the commissioner of finance determines that there 
will be a positive unrestricted budgetary general fund balance 
at the close of the biennium, the commissioner of finance must 
allocate money in the following order of priority:  
    (1) the amount necessary to reduce the property tax levy 
recognition percent under section 121.904, subdivision 4c, to 24 
percent; 
    (2) the remainder (i) one-half to the greater Minnesota 
fund, but not to exceed $120,000,000 and (ii) one-half to the 
budget and cash flow reserve account until the total amount in 
the account equals $550,000,000. 
    The amounts necessary to meet the requirements of clauses 
(1) and (2) this section are appropriated from the general fund. 
    Sec. 3.  [TRANSFER RETURNED.] 
    The Greater Minnesota Corporation shall return to the state 
treasury $80,500,000 of the money transferred to it under 
Minnesota Statutes 1987 Supplement, section 16A.1541.  The 
return must be made to the commissioner of finance, who shall 
credit the receipt to the general fund.  The return must be made 
as soon as is practical, while minimizing any investment losses 
that might result from early redemption. 
    Sec. 4.  [APPROPRIATION REDUCTION.] 
    The appropriation from the general fund under Minnesota 
Statutes 1987 Supplement, section 16A.1541 to reduce the 
property tax recognition percent is reduced to zero.  
    Sec. 5.  [EFFECTIVE DATE.] 
    Sections 1 to 4 are effective the day following final 
enactment. 

                               ARTICLE 14 
SPECIAL SERVICE DISTRICT PROCEDURES 
    Section 1.  [428A.01] [SPECIAL SERVICE DISTRICT PROCEDURES; 
DEFINITIONS.] 
    Subdivision 1.  [APPLICABILITY.] As used in sections 1 to 
10, the terms defined in this section have the meanings given 
them. 
    Subd. 2.  [CITY.] "City" means the city in which the 
special service district is authorized to be established under a 
special law.  
    Subd. 3.  [SPECIAL SERVICES.] "Special services" has the 
meaning given in the city's enabling legislation. 
    Special services do not include a service that is 
ordinarily provided throughout the city from general fund 
revenues of the city unless an increased level of the service is 
provided in the special service district. 
    Subd. 4.  [SPECIAL SERVICE DISTRICT.] "Special service 
district" means a defined area within the city where special 
services are rendered and the costs of the special services are 
paid from revenues collected from service charges imposed within 
that area. 
    Subd. 5.  [ASSESSED VALUE.] "Assessed value" means the 
assessed value most recently certified by the county auditor 
before the effective date of the ordinance or resolution adopted 
under section 2 or 3. 
    Subd. 6.  [LAND AREA.] "Land area" means the land area in 
the district that is subject to property taxes. 
    Sec. 2.  [428A.02] [ESTABLISHMENT OF SPECIAL SERVICE 
DISTRICT.] 
    Subdivision 1.  [ORDINANCE.] The governing body of the city 
may adopt an ordinance establishing a special service district.  
Only property that is classified under section 273.13 and used 
for commercial, industrial, or public utility purposes, or is 
vacant land zoned or designated on a land use plan for 
commercial or industrial use and located in the special service 
district, may be subject to the charges imposed by the city on 
the special service district.  Other types of property may be 
included within the boundaries of the special service district 
but are not subject to the levies or charges imposed by the city 
on the special service district.  If 50 percent or more of the 
market value of a parcel of property is classified under section 
273.13 as commercial, industrial, or vacant land zoned or 
designated on a land use plan for commercial or industrial use, 
or public utility for the current assessment year, then the 
entire market value of the property is subject to a service 
charge based on assessed value for purposes of sections 1 to 
10.  The ordinance shall describe with particularity the area 
within the city to be included in the district and the special 
services to be furnished in the district.  The ordinance may not 
be adopted until after a public hearing has been held on the 
question.  Notice of the hearing shall include the time and 
place of hearing, a map showing the boundaries of the proposed 
district, and a statement that all persons owning property in 
the proposed district that would be subject to a service charge 
will be given opportunity to be heard at the hearing. 
    Subd. 2.  [NOTICE.] Notice of the hearing must be given by 
publication in at least two issues of the official newspaper of 
the city.  The two publications must be two weeks apart and the 
hearing must be held at least three days after the last 
publication.  Not less than ten days before the hearing, notice 
must also be mailed to the owner of each parcel within the area 
proposed to be included in the district.  For the purpose of 
giving mailed notice, owners are those shown on the records of 
the county auditor.  Other records may be used to supply the 
necessary information.  For properties that are tax exempt or 
subject to taxation on a gross earnings basis in lieu of 
property tax and are not listed on the records of the county 
auditor, the owners must be ascertained by any practicable means 
and mailed notice given them.  At the public hearing a person 
affected by the proposed district may testify on any issues 
relevant to the proposed district.  The hearing may be adjourned 
from time to time and the ordinance establishing the district 
may be adopted at any time within six months after the date of 
the conclusion of the hearing by a vote of the majority of the 
governing body of the city. 
    Subd. 3.  [CHARGES; RELATIONSHIP TO SERVICES.] The city may 
impose service charges under sections 1 to 10 that are 
reasonably related to the special services provided.  Charges 
for service shall be as nearly as possible proportionate to the 
cost of furnishing the service, and may be fixed on the basis of 
the service directly rendered, or by reference to a reasonable 
classification of the types of premises to which service is 
furnished, or on any other equitable basis. 
    Subd. 4.  [BENEFIT; OBJECTION.] Before the ordinance is 
adopted or at the hearing at which it is to be adopted, any 
affected landowner may file a written objection with the city 
clerk asserting that the landowner's property should not be 
included in the district or should not be subjected to a service 
charge and objecting to:  
    (1) the inclusion of the landowner's property in the 
district, for the reason that the property would not receive 
services that are not provided throughout the city to the same 
degree;  
    (2) the levy of a service charge on the landowner's 
property, for the reason that the property is exempted under 
this article or the special law under which the district was 
created; or 
    (3) the fact that neither the landowner's property nor its 
use is benefited by the proposed special service.  
The governing body shall make a determination on the objection 
within 30 days of its filing.  Pending its determination, the 
governing body may delay adoption of the ordinance or it may 
adopt the ordinance with a reservation that the landowner's 
property may be excluded from the district or district service 
charges when the determination is made.  
    Subd. 5.  [APPEAL TO DISTRICT COURT.] Within 30 days after 
the determination of the objection, any person aggrieved, who is 
not precluded by failure to object before or at the hearing, or 
whose failure to object is due to a reasonable cause, may appeal 
to the district court by serving a notice upon the mayor or city 
clerk.  The notice shall be filed with the court administrator 
of the district court within ten days after its service.  The 
city clerk shall furnish the appellant a certified copy of the 
findings and determination of the governing body.  The court may 
affirm the action objected to or, if the appellant's objections 
have merit, modify or cancel it.  If the appellant does not 
prevail upon the appeal, the costs incurred shall be taxed to 
the appellant by the court and judgment entered for them.  All 
objections shall be deemed waived unless presented on appeal.  
    Sec. 3.  [428A.03] [SERVICE CHARGE AUTHORITY; NOTICE AND 
HEARING REQUIREMENTS.] 
    Subdivision 1.  [HEARING.] Service charges may be imposed 
by the city within the special service district at a rate or 
amount sufficient to produce the revenues required to provide 
special services in the district.  To determine the appropriate 
rate for a service charge based on assessed value, taxable 
property or value must be determined without regard to captured 
or original assessed value under section 469.177 or to the 
distribution or contribution value under section 473F.08.  
Service charges may not be imposed to finance a special service 
if the service is ordinarily provided by the city from its 
general fund revenues unless the service is provided in the 
district at an increased level.  In that case, a service charge 
may be imposed only in the amount needed to pay for the 
increased level of service.  A service charge may not be imposed 
on the receipts from the sale of intoxicating liquor, food, or 
lodging.  Before the imposition of service charges in a 
district, for each calendar year, a hearing must be held under 
section 2 and notice must be given and must be mailed to any 
individual or business organization subject to a service 
charge.  For purposes of this section, the notice shall also 
include: 
     (1) a statement that all interested persons will be given 
an opportunity to be heard at the hearing regarding a proposed 
service charge; 
     (2) the estimated cost of improvements to be paid for in 
whole or in part by service charges imposed under this section, 
the estimated cost of operating and maintaining the improvements 
during the first year and upon completion of the improvements, 
the proposed method and source of financing the improvements, 
and the annual cost of operating and maintaining the 
improvements; 
    (3) the proposed rate or amount of the proposed service 
charge to be imposed in the district during the calendar year 
and the nature and character of special services to be rendered 
in the district during the calendar year in which the service 
charge is to be collected; and 
    (4) a statement that the petition requirements of section 8 
have either been met or do not apply to the proposed service 
charge. 
     Within six months of the public hearing, the city may adopt 
a resolution imposing a service charge within the district not 
exceeding the amount or rate expressed in the notice issued 
under this section. 
     Subd. 2.  [EXEMPTION OF CERTAIN PROPERTIES FROM TAXES AND 
SERVICE CHARGES.] Property exempt from taxation by section 
272.02 is exempt from any service charges based on assessed 
value imposed under sections 1 to 10. 
    Subd. 3.  [LEVY LIMIT.] Service charges imposed under 
sections 1 to 10 are not included in the calculation of levies 
or limits on levies imposed under law or charter. 
    Sec. 4.  [428A.04] [ENLARGEMENT OF SPECIAL SERVICE 
DISTRICTS.] 
     Boundaries of a special service district may be enlarged 
only after hearing and notice as provided in sections 2 and 3.  
Notice must be served in the original district and in the area 
proposed to be added to the district.  Property added to the 
district is subject to all service charges imposed within the 
district after the property becomes a part of the district if it 
is property of the type that is subject to service charges in 
the district.  On the question of enlargement, the petition 
requirement in section 8 and the veto power in section 9 apply 
only to owners, individuals, and business organizations in the 
area proposed to be added to the district. 
    Sec. 5.  [428A.05] [COLLECTION OF SERVICE CHARGES.] 
    Service charges may be imposed on the basis of the assessed 
value of the property on which the service charge is imposed but 
must be spread only upon the assessed value of the taxable 
property located in the geographic area described in the 
ordinance.  Service charges based on assessed value may be 
payable and collected at the same time and in the same manner as 
provided for payment and collection of ad valorem taxes.  Other 
service charges imposed must be collected as provided by 
ordinance.  Service charges based on assessed value collected 
under sections 1 to 10 are not included in computations under 
section 469.177, chapter 473F, or any other law that applies to 
general ad valorem levies. 
    Sec. 6.  [428A.06] [BONDS.] 
    At any time after a contract for the construction of all or 
part of an improvement authorized under sections 1 to 10 has 
been entered into or the work has been ordered done by day 
labor, the governing body of the city may issue obligations in 
the amount it deems necessary to defray in whole or in part the 
expense incurred and estimated to be incurred in making the 
improvement, including every item of cost from inception to 
completion and all fees and expenses incurred in connection with 
the improvement or the financing.  The obligations are payable 
primarily out of the proceeds of the service charge based on 
assessed value imposed under section 3, or from any other 
special assessments or nontax revenues available to be pledged 
for their payment under charter or statutory authority, or from 
two or more of those sources.  The governing body may, by 
resolution adopted prior to the sale of obligations, pledge the 
full faith, credit, and taxing power of the city to assure 
payment of the principal and interest if the proceeds of the 
service charge in the district are insufficient to pay the 
principal and interest.  The obligations must be issued in 
accordance with chapter 475, except that an election is not 
required, and the amount of the obligations need not be included 
in determining the net debt of the city under the provisions of 
any law or charter limiting debt. 
    Sec. 7.  [428A.07] [ADVISORY BOARD.] 
     The governing body of the city may create and appoint an 
advisory board for each special service district in the city to 
advise the governing body in connection with the construction, 
maintenance, and operation of improvements, and the furnishing 
of special services in a district.  The advisory board shall 
make recommendations to the governing body on the requests and 
complaints of owners, occupants, and users of property within 
the district and members of the public.  Before the adoption of 
any proposal by the governing body to provide services or impose 
service charges within the district, the advisory board of the 
district shall have an opportunity to review and comment upon 
the proposal. 
    Sec. 8.  [428A.08] [PETITION REQUIRED.] 
    No action may be taken under section 2 unless owners of 25 
percent or more of the land area of property that would be 
subject to service charges in the proposed special service 
district and owners of 25 percent or more of the assessed value 
of property that would be subject to service charges in the 
proposed special service district file a petition requesting a 
public hearing on the proposed action with the city clerk.  No 
action may be taken under section 3 to impose a service charge 
based on assessed value unless owners of 25 percent or more of 
the land area subject to a proposed service charge and owners of 
25 percent or more of the assessed value subject to a proposed 
service charge file a petition requesting a public hearing on 
the proposed action with the city clerk.  No action may be taken 
under section 3 to impose any other type of service charge 
unless 25 percent or more of the individual or business 
organizations subject to the proposed service charge file a 
petition requesting a public hearing on the proposed action with 
the city clerk.  If the boundaries of a proposed district are 
changed or the land area or assessed value subject to a service 
charge or the individuals or business organizations subject to a 
service charge are changed after the public hearing, a petition 
meeting the requirements of this section must be filed with the 
city clerk before the ordinance establishing the district or 
resolution imposing the service charge may become effective. 
    Sec. 9.  [428A.09] [VETO POWER OF OWNERS.] 
    Subdivision 1.  [NOTICE OF RIGHT TO FILE 
OBJECTIONS.] Except as provided in section 10, the effective 
date of any ordinance or resolution adopted under sections 2 and 
3 must be at least 45 days after it is adopted.  Within five 
days after adoption of the ordinance or resolution, a summary of 
the ordinance or resolution must be mailed to the owner of each 
parcel included in the special service district and any 
individual or business organization subject to a service charge 
in the same manner that notice is mailed under section 2.  The 
mailing must include a notice that owners subject to a service 
charge based on assessed value and individuals and business 
organizations subject to a service charge imposed on another 
basis have a right to veto the ordinance or resolution by filing 
the required number of objections with the city clerk before the 
effective date of the ordinance or resolution and that a copy of 
the ordinance or resolution is on file with the city clerk for 
public inspection. 
    Subd. 2.  [REQUIREMENTS FOR VETO.] If owners of 35 percent 
or more of the land area in the district subject to the service 
charge based on assessed value or owners of 35 percent or more 
of the assessed value in the district subject to the service 
charge based on assessed value file an objection to the 
ordinance adopted by the city under section 2 with the city 
clerk before the effective date of the ordinance, the ordinance 
does not become effective.  If owners of 35 percent or more of 
the land area subject to the service charge based on assessed 
value or owners of 35 percent or more of the assessed value 
subject to the service charge based on assessed value file an 
objection to the resolution adopted imposing a service charge 
based on assessed value under section 3 with the city clerk 
before the effective date of the resolution, the resolution does 
not become effective.  If 35 percent or more of individuals and 
business organizations subject to a service charge file an 
objection to the resolution adopted imposing a service charge on 
a basis other than assessed value under section 3 with the city 
clerk before the effective date of the resolution, the 
resolution does not become effective.  In the event of a veto, 
no district shall be established during the current calendar 
year and until a petition meeting the qualifications set forth 
in this subdivision for a veto has been filed.  
    Sec. 10.  [428A.10] [EXCLUSION FROM PETITION REQUIREMENTS 
AND VETO POWER.] 
    The petition requirements of section 8 and the right of 
owners and those subject to a service charge to veto a 
resolution in section 9 do not apply to second or subsequent 
years' applications of a service charge that is authorized to be 
in effect for more than one year under a resolution that has met 
the petition requirements of section 8 and which has not been 
vetoed under section 9 for the first year's application.  A 
resolution imposing a service charge for more than one year must 
not be adopted unless the notice of public hearing required by 
section 3 and the notice mailed with the adopted resolution 
under section 9 include the following information: 
    (1) in the case of improvements, the maximum service charge 
to be imposed in any year and the maximum number of years the 
service charges imposed to pay for the improvement; and 
    (2) in the case of operating and maintenance services, the 
maximum service charge to be imposed in any year and the maximum 
number of years, or a statement that the service charge will be 
imposed for an indefinite number of years, the service charges 
will be imposed to pay for operation and maintenance services. 
    The resolution may provide that the maximum service charge 
to be imposed in any year will increase or decrease from the 
maximum amount authorized in the preceding year based on an 
indicator of increased cost or a percentage amount established 
by the resolution. 

                               ARTICLE 15 

                  ROBBINSDALE SPECIAL SERVICE DISTRICT 
    Section 1.  [CITY OF ROBBINSDALE SPECIAL SERVICE DISTRICT; 
DEFINITIONS.] 
    Subdivision 1.  [APPLICABILITY.] For purposes of sections 1 
and 2, the terms defined in this section have the meanings given 
them. 
    Subd. 2.  [CITY.] "City" means the city of Robbinsdale.  
    Subd. 3.  [SPECIAL SERVICES.] "Special services" means all 
services rendered or contracted for by the city, including, but 
not limited to: 
    (1) the repair, maintenance, operation, and construction of 
any improvements authorized by section 429.021; 
    (2) parking services rendered or contracted for by the 
city; and 
    (3) any other service provided to the public by the city 
that is authorized by law or charter. 
    Sec. 2.  [ESTABLISHMENT OF SPECIAL SERVICE DISTRICT.] 
    Subdivision 1.  [ORDINANCE.] The governing body of the city 
may adopt an ordinance establishing a special service district.  
The provisions of article 14 govern the establishment and 
operation of special service districts in the city. 
    Sec. 3.  [LOCAL APPROVAL.] 
    This article takes effect the day after the governing body 
of the city of Robbinsdale complies with Minnesota Statutes, 
section 645.021, subdivision 3. 

                               ARTICLE 16 

          MINNEAPOLIS NEIGHBORHOODS SPECIAL SERVICE DISTRICTS 
    Section 1.  [DEFINITIONS.] 
    Subdivision 1.  [TERMS DEFINED.] For the purposes of 
sections 1 to 6, the terms defined in this section have the 
meanings given them.  
    Subd. 2.  [CITY.] "City" means the city of Minneapolis.  
    Subd. 3.  [SPECIAL SERVICES.] "Special services" means the 
following services rendered or contracted for by the city:  
    (1) snow and ice removal;  
    (2) sweeping and cleaning sidewalks, curbs, gutters, 
streets, and alleys; 
    (3) litter, poster, and handbill removal;  
    (4) construction, repair, operation, and maintenance of 
sidewalks, curbs, gutters, bus shelters, lighting, benches, 
chairs, tables, telephone booths, traffic signs, fire hydrants, 
newsstands, kiosks, trash receptacles, utility connections, 
marquees, awnings, canopies, display cases, information booths, 
and banners;  
    (5) landscaping, planting, repair, maintenance, and care of 
trees, shrubs, bushes, flowers, grass, and other decorative 
materials;  
    (6) security personnel, equipment, and systems;  
    (7) approval and supervision of special activities; 
    (8) insurance; and 
    (9) administration, coordination, studies, and preparation 
of designs.  
    Special service district funds may be used to pay operating 
costs of a neighborhood business association composed of a 
majority of owners or operators of businesses located within the 
district. 
    Sec. 2.  [ESTABLISHMENT OF SPECIAL SERVICE DISTRICT.] 
    Subdivision 1.  [ORDINANCE.] The governing body of the city 
may adopt an ordinance establishing a special service district 
in any area zoned for commercial, business, or industrial use 
outside of the area bounded by the centerlines of the main 
channel of the Mississippi river, 10th Avenue South, Washington 
Avenue South, Chicago Avenue South, South 3rd Street, 11th 
Avenue South, South 6th Street, 5th Avenue South, South 12th 
Street, 4th Avenue South, East 16th Street, 1st Avenue South, 
Grant Street, Willow Street extended, Harmon Place, Interstate 
Highway 94, Highway 12, North 12th Street, and 3rd Avenue North; 
and, south of 28th Street, west of Fremont Avenue South, north 
of 31st Street, and east of Humboldt Avenue South; and outside 
any other existing special service district.  The provisions of 
article 14 govern the establishment and operation of special 
service districts in the city under sections 1 to 6, except to 
the extent specified otherwise in sections 1 to 6. 
    Subd. 2.  [USE OF CITY EMPLOYEES.] If the city determines 
that any of the special services to be provided are under the 
jurisdiction of a city public employee bargaining unit, the city 
shall negotiate with that unit to determine whether that service 
shall be provided by the city or contracted for with another 
service provider. 
    Sec. 3.  [SERVICE CHARGE ABATEMENT.] 
    An individual or business organization subject to a service 
charge imposed under sections 1 to 6 may apply to the city for a 
service charge abatement for that calendar year on the basis of 
economic hardship.  The city may grant the abatement of the 
service charge for the calendar year if the city determines that 
an economic hardship exists. 
    Sec. 4.  [BONDS.] 
    The provisions of article 14, section 6, govern the 
issuance of bonds for the special service district, except that 
the obligations shall be payable primarily out of the proceeds 
of the service charge imposed under article 14, section 3.  The 
governing body may, by resolution adopted before the sale of 
obligations, pledge the full faith, credit, and taxing power of 
the city to assure payment of the principal and interest if the 
proceeds of the service charge based on assessed value in the 
special service district are insufficient to pay the principal 
and interest.  
    Sec. 5.  [EXPIRATION.] 
    A special service district established under this article 
shall expire four years after the date of its establishment 
unless renewed by following the procedure for establishing a 
district provided by article 14, section 2.  After the 
expiration or termination of a district, service charges may 
continue to be imposed in the district to pay the costs of an 
improvement specified in section 1, subdivision 3, clause (4).  
    Sec. 6.  [ADVISORY BOARD.] 
    Notwithstanding article 14, section 7, the city council 
must create and appoint an advisory board for the special 
service district to operate as provided in that section.  All 
members of the advisory board must be property owners, tenants, 
or residents of the district.  
    Sec. 7.  [LOCAL APPROVAL.] 
    This article takes effect the day after the governing body 
of the city of Minneapolis complies with Minnesota Statutes, 
section 645.021, subdivision 3. 

                               ARTICLE 17

             MINNEAPOLIS DOWNTOWN SPECIAL SERVICE DISTRICTS 
    Section 1.  [DEFINITIONS.] 
    Subdivision 1.  [TERMS DEFINED.] For purposes of sections 1 
to 7, the terms defined in this section have the meanings given 
them. 
    Subd. 2.  [CITY.] "City" means the city of Minneapolis. 
    Subd. 3.  [PEDESTRIAN MALL.] "Pedestrian mall" means an 
improvement designed and used primarily for the movement, 
safety, convenience, and enjoyment of pedestrians, whether or 
not a part of a street is set apart for a roadway for emergency 
vehicles, transit vehicles, or private vehicles at some or all 
times.  A pedestrian mall includes related sidewalks, moving 
sidewalks, curbs, gutters, streets, parks, playgrounds, plazas, 
recreational facilities, performance areas, bus shelters, 
transit facilities and vehicles, sound and video systems, 
overhead and underground radiant heating devices, lighting, 
benches, chairs, tables, sculpture, telephone booths, traffic 
signs, fire hydrants, newsstands, kiosks, trash receptacles, 
utility connections, marquees, awnings, canopies, walls, 
bollards, chains, paintings, murals, alleys, display cases, 
fountains, sprinkler systems, restrooms, information booths, 
aquariums, aviaries, pedestrian tunnels, banners, pedestrian 
bridges, pedestrian ramps, pedestrian overpasses, pedestrian 
underpasses, drainage, sewers, and water mains.  A pedestrian 
mall does not include a plaza adjacent to a convention center. 
    Subd. 4.  [SPECIAL SERVICES.] "Special services" means the 
following services rendered or contracted for by the city: 
    (a) snow and ice removal; 
    (b) sweeping and cleaning of sidewalks, curbs, gutters, 
streets, and alleys; 
    (c) litter, poster, and handbill removal; 
    (d) construction, repair, operation, and maintenance of 
pedestrian malls; 
     (e) repair and maintenance of capital improvements 
constructed with funds other than special service district 
proceeds; 
    (f) landscaping, planting, repair, maintenance, and care of 
trees, shrubs, bushes, flowers, grass, and other decorative 
materials; 
    (g) security personnel, equipment, and systems and 
coordination of private security, including lighting; 
    (h) operation of public transit; 
    (i) information and signs relating to parking and vehicle 
and pedestrian movement at street and skyway levels; 
    (j) approval, supervision, and coordination of special 
activities; and 
    (k) administration, coordination, studies, and preparation 
of designs. 
     Sec. 2.  [ESTABLISHMENT OF SPECIAL SERVICE DISTRICT.] 
     Subdivision 1.  [ORDINANCE.] The governing body of the city 
may adopt an ordinance establishing special service districts in 
that part of the city bounded by the centerlines of the main 
channel of the Mississippi river, 10th Avenue South, Washington 
Avenue South, Chicago Avenue South, South 3rd Street, 11th 
Avenue South, South 6th Street, 5th Avenue South, South 12th 
Street, 4th Avenue South, East 16th Street, 1st Avenue South, 
Grant Street, Willow Street extended, Harmon Place, Interstate 
Highway 94, Highway 12, North 12th Street and 3rd Avenue North.  
Only property that is used for commercial, business, or 
industrial purposes or classified as public utility or vacant 
land and located in the special service district may be subject 
to the charges imposed by the city on the special service 
district.  Property used for residential purposes, including 
condominiums, apartments, and cooperatives, or used by a church 
or a charitable organization organized under Minnesota Statutes, 
sections 315.44 and 315.49, or owned or leased in its entirety 
by a charitable organization described in section 501(c)(3) of 
the Internal Revenue Code, as amended through December 31, 1987, 
shall not be subject to any service charges under sections 1 to 
6.  Property owned by a unit of government and used to raise 
revenue, except public hospitals, libraries, and Orchestra Hall, 
shall be subject to service charges other than service charges 
based on assessed value.  In addition, property that is exempt 
from taxation under Minnesota Statutes, section 272.02, is 
exempt from service charges based on assessed value imposed 
under sections 1 to 6, but is subject to other types of service 
charges under sections 1 to 6 unless otherwise exempted under 
this subdivision.  The owner of any property that is exempted 
from any or all service charges under this subdivision may 
notify the governing body of its intent to receive the benefits 
provided to property within the special service district, and 
thereby elect to be subject to the service charges imposed for 
those services.  Property may be served within the boundaries of 
the special service district whether or not the property is 
subject to the charges imposed by the city on the special 
service district.  The ordinance must specifically describe the 
area within the city to be included in the district and the 
special services to be furnished in the district.  The ordinance 
must state the reasons for establishment of a district.  The 
ordinance may not be adopted until after a public hearing has 
been held on the question.  The provisions of article 14 govern 
the establishment and operation of special service districts in 
the city under sections 1 to 7, except to the extent specified 
otherwise under sections 1 to 7.  
    Subd. 2.  [CONTRACTORS.] Notwithstanding any other 
provision of law or charter to the contrary, the city may 
provide or contract for services in the district.  All hiring by 
contractors must be done in accordance with the Federal Civil 
Rights Act of 1964, United States Code, title 21, sections 2000e 
to 2000e-17; Minnesota Statutes, section 363.03; and the 
Minneapolis Code of Ordinances, chapters 139 and 141.  
    Subd. 3.  [CITY EMPLOYEES.] Job activities for special 
services that are under the jurisdiction of any city public 
employee bargaining unit must be performed by a member of the 
bargaining unit. 
    Subd. 4.  [LEVEL OF SERVICE.] The governing body of the 
city shall not transfer the financial burden of citywide 
services to the district nor discriminate against the district 
in reductions and increases in citywide services because of the 
existence of the district.  Prior to establishment of a 
district, the city and the downtown management board, provided 
in section 6, shall meet to review the level of services in the 
downtown area in order to assure that downtown is equitably 
served through the city's normal operating budget.  They shall 
meet each succeeding year prior to the adoption of a budget for 
the district and prior to imposition of a service charge in the 
district under article 14, section 3.  
    Sec. 3.  [LIMITATIONS.] 
    Subdivision 1.  [SERVICES EXPENDITURES CAP.] Service 
charges imposed in the special service district in any year for 
special services specified in section 1, subdivision 4, with the 
exception of construction under paragraph (d), must not exceed 
an amount equal to the funds raised by a levy of three mills on 
current assessed value of property subject to a service charge 
in the district under property tax classifications in effect on 
July 1, 1987. 
    Subd. 2.  [CAPITAL EXPENDITURES CAP.] Service charges 
imposed in any year in a special service district established 
under sections 1 to 6 for construction of an improvement 
specified in section 1, subdivision 4, paragraph (d), must not 
exceed 50 percent of the total costs of the improvement, 
including interest, payable in that year; no more than 50 
percent of the total costs of the improvement may be specially 
assessed under Minnesota Statutes, chapter 429 or 430.  
    Sec. 4.  [VETO POWERS.] 
    Subdivision 1.  [GENERALLY.] In addition to the provisions 
of article 14, section 9, relating to veto of the establishment 
of a district, the provisions of this section apply to special 
service districts established under sections 1 to 6.  
    Subd. 2.  [VETO OF PEDESTRIAN MALLS.] The effective date of 
any imposition of service charge for construction of an 
improvement specified in section 1, subdivision 4, paragraph 
(d), under article 14, section 3, must be at least 45 days after 
it is adopted.  Within five days after adoption, a summary of 
the city council action must be mailed to the owner of each 
parcel included in the special service district and any 
individual or business organization subject to a service charge 
in the same manner that notice is mailed under article 14, 
section 2.  The mailing must include a notice that owners 
subject to a service charge based on assessed value and 
individuals and business organizations subject to a service 
charge have a right to veto the action by filing the required 
number of objections with the city clerk before the effective 
date of the imposition and that a copy of the action is on file 
with the city clerk for public inspection.  If owners of at 
least 35 percent of the land area subject to a service charge 
based on assessed value or owners of at least 35 percent of the 
assessed value subject to the service charge based on assessed 
value file an objection to the service charge with the city 
clerk before the effective date, the service charge based on 
assessed value does not become effective.  If individuals and 
business organizations subject to at least 35 percent of a 
service charge imposed on a basis other than assessed value file 
an objection to imposition of the service charge with the city 
clerk before the effective date, the service charge does not 
become effective.  In the event of a veto, no service charge may 
be imposed in the district for construction of a pedestrian mall 
during the current calendar year and until a petition meeting 
the qualifications set forth in this subdivision for a veto has 
been filed.  Service charges may continue to be levied and 
imposed in the district, regardless of a veto under this 
subdivision, to pay the costs of construction of an improvement 
specified in section 1, subdivision 4, paragraph (d), for which 
debt has been incurred and a service charge imposed during a 
prior year. 
    Subd. 3.  [VETO OF SERVICES.] Each year after the fourth 
year after establishment of a district, the veto provisions of 
this subdivision apply, except that a veto is not effective 
until the year following the year of the veto.  Four years after 
establishment of a district, the effective date of any 
imposition of service charge under article 14, section 3, for 
services specified in section 1, subdivision 4, with the 
exception of construction under paragraph (d), must be at least 
45 days after it is adopted.  Within five days after adoption, a 
summary of the city council action must be mailed to the owner 
of each parcel included in the special service district and any 
individual or business organization subject to a service charge, 
in the same manner that notice is mailed under article 14, 
section 2.  The mailing must include a notice that owners 
subject to a service charge based on assessed value and 
individuals and business organizations subject to a service 
charge have a right to veto the action by filing the required 
number of objections with the city clerk before the effective 
date of the imposition, and that a copy of the action is on file 
with the city clerk for public inspection.  If owners of at 
least 35 percent of the land area subject to a service charge 
based on assessed value or the owners of at least 35 percent of 
the assessed value subject to the service charge based on 
assessed value file an objection to the service charge for 
services under section 3 with the city clerk before the 
effective date, the service charge based on assessed value does 
not become effective.  If individuals and business organizations 
subject to at least 35 percent of a service charge imposed on a 
basis other than assessed value file an objection to imposition 
of the service charge under section 3 with the city clerk before 
the effective date, the service charge does not become 
effective.  In the event of a veto, no service charge may be 
imposed in the district for services during the current calendar 
year and until a petition meeting the qualifications set forth 
in this subdivision for a veto has been filed, and no service 
charge may be collected during a year for which a service charge 
has been vetoed.  Service charges may continue to be imposed in 
the district, regardless of a veto under this subdivision, to 
pay the costs of services specified in section 1, subdivision 4, 
with the exception of construction under clause (d), for which 
debt has been incurred prior to the filing of a veto.  
    Sec. 5.  [DEBT OBLIGATIONS.] 
    Subdivision 1.  [GENERALLY.] The provisions of this section 
apply to service districts created under sections 1 to 6 in lieu 
of the provisions of article 14, section 6. 
    Subd. 2.  [CERTIFICATES OF INDEBTEDNESS.] Certificates of 
indebtedness may be issued for purposes of any work or service 
authorized under sections 1 to 6.  The certificates shall be 
payable in not more than five years and shall be issued on the 
terms and in the manner determined by the issuer.  The 
obligations are payable out of the proceeds of the tax or charge 
levied under article 14, section 3, in the same manner as bonds. 
    Subd. 3.  [BONDS.] Obligations may be issued in the amount 
deemed necessary to defray in whole or in part the expense 
incurred and estimated to be incurred in making a pedestrian 
mall improvement authorized under sections 1 to 6, including 
every item of cost from inception to completion and all fees and 
expenses incurred in connection with the improvement or the 
financing.  The obligations are payable primarily out of the 
proceeds of the charge levied under article 14, section 3, or 
from any other special assessments or nontax revenues available 
to be pledged for their payment under charter or statutory 
authority, or from two or more of those sources.  The full 
faith, credit, and taxing power of the city may, by resolution 
adopted prior to the sale of obligations, be pledged to assure 
payment of the principal and interest if the proceeds of the 
service charge in the district and other pledged special 
assessments or revenues are insufficient to pay the principal 
and interest. 
    Subd. 4.  [PROCEDURES.] Debt obligations must be issued in 
accordance with Minnesota Statutes, chapter 475, and the city 
charter, except that an election is not required under any 
circumstances, and the amount of the obligations need not be 
included in determining the net debt of the city. 
    Sec. 6.  [DOWNTOWN MANAGEMENT BOARD.] 
    In lieu of the advisory board authorized under article 14, 
section 7, the city council shall create and provide for 
appointment of a downtown management board for the special 
service district to advise the governing body in connection with 
the furnishing of special services in a district.  The downtown 
management board shall make recommendations to the governing 
body on the requests and complaints of owners, occupants, and 
users of property within the district and members of the 
public.  Before the adoption of any proposal by the governing 
body to provide services or impose service charges within the 
district, the downtown management board of the district shall 
review and comment upon the proposal.  The board may incorporate 
as a nonprofit corporation under Minnesota Statutes, chapter 317.
The board shall have the power to enter into contracts.  A 
majority of members of the board must be property owners or 
tenants in the district and subject to a service charge.  At 
least one member must be an owner of commercial property.  
    Sec. 7.  [CITY OPTION.] 
    The city may elect to exercise the powers provided by 
sections 1 to 6 or the powers provided by general or special law 
relating to the same subject. 
    Sec. 8.  [EFFECTIVE DATE.] 
    Sections 1 to 7 are effective the day after compliance with 
Minnesota Statutes, section 645.021, subdivision 3, by the 
governing body of the city of Minneapolis. 
  ARTICLE 18 
WHITE BEAR LAKE SPECIAL SERVICE DISTRICTS
    Section 1.  [DEFINITIONS.] 
    Subdivision 1.  For the purposes of sections 1 and 2, the 
terms defined in this section have the meanings given them.  
    Subd. 2.  "City" means the city of White Bear Lake.  
    Subd. 3.  "Special services" mean:  
    (1) the promotion and management of a special service 
district as a trade or shopping area;  
    (2) parking services rendered or contracted for by the 
city; and 
    (3) the repair, maintenance, operation and replacement of 
improvements, within the boundaries of a special service 
district established under section 2.  
    Sec. 2.  [ESTABLISHMENT OF SPECIAL SERVICE DISTRICT.] 
    Subdivision 1.  [ORDINANCE.] The governing body of the city 
may adopt ordinances establishing special service districts in 
the following areas:  
    All that land zoned as "General Business (B-4)" or "Central 
Business (B-5)" within the following described area:  Beginning 
at the northeast corner of the intersection of Minnesota State 
Highway 96E and U.S. Highway 61, thence easterly along the north 
right-of-way line of Minnesota State Highway 96E and Stewart 
Avenue, thence southerly along the east right-of-way line of 
Stewart Avenue a distance of 3,600 feet to the northeast 
intersection of Stewart Avenue with Lake Avenue, thence 
southwesterly along Lake Avenue a distance of 3,400 feet to the 
northwest corner of the intersection of Lake Avenue with U.S. 
Highway 61, thence northerly a distance of 2,600 feet along the 
east right-of-way line of Bald Eagle Avenue to a point of 
intersection with the north right-of-way line of 5th Street, 
thence easterly along the north right-of-way line of 5th Street 
a distance of 1,280 feet to a point of intersection with the 
west right-of-way line of Division Street, thence northerly 
along the west right-of-way line of Division Street a distance 
of 2,700 feet to a point of intersection with the north 
right-of-way line of 12th Street, thence easterly 1,200 feet 
along a line extended on the north right-of-way line of 12th 
Street to the intersection with the west right-of-way line of 
U.S. Highway 61, thence southeasterly 160 feet along the west 
right-of-way line of U.S. Highway 61 to the point of beginning.  
    The provisions of article 14 govern the establishment and 
operation of special service districts in the city, except to 
the extent otherwise specified in sections 1 and 2.  
    Sec. 3.  [LOCAL APPROVAL.] 
    This article is effective the day after the governing body 
of the city of White Bear Lake complies with Minnesota Statutes, 
section 645.021, subdivision 3. 

                               ARTICLE 19

                              MISCELLANEOUS
    Section 1.  Minnesota Statutes 1987 Supplement, section 
69.54, is amended to read:  
    69.54 [SURCHARGE ON PREMIUMS TO RESTORE DEFICIENCY IN 
SPECIAL FUND.] 
    The commissioner shall order and direct a surcharge to be 
collected of two percent of the fire, lightning, and sprinkler 
leakage gross premiums, less return premiums, on all direct 
business received by any licensed foreign or domestic fire 
insurance company on property in this city of the first class, 
or by its agents for it, in cash or otherwise.  This surcharge 
shall be due and payable from these companies to the state 
treasurer on March 15 31, May 15 31, and November 15 30 of 
each calendar year, and if not paid within 30 days after these 
dates, a penalty of ten percent shall accrue thereon and 
thereafter this sum and penalty shall draw interest at the rate 
of one percent per month until paid.  
    Sec. 2.  Minnesota Statutes 1986, section 183.411, 
subdivision 1, is amended to read:  
    Subdivision 1.  [DEFINITION.] For the purpose of this 
section "stationary show boiler" means a boiler that is used 
only for display and demonstration purposes.  In recognition of 
the historical significance of show boilers in maintaining a 
working reminder of Minnesota's agricultural and lumber 
industries, show boilers and engines are considered to be 
historical artifacts. 
    Sec. 3.  Minnesota Statutes 1986, section 183.411, 
subdivision 3, is amended to read:  
    Subd. 3.  [LICENSES.] A license to operate steam farm 
traction engines, portable and stationary show engines and 
portable and stationary show boilers shall be issued to an 
applicant who: 
    (a) is 18 years of age or older; 
    (b) has two licensed second class, grade A engineers or 
steam traction engineers, or any combination thereof, cosign the 
application; attesting to the applicant's competence in 
operating said devices;  
    (c) passes a written test for competence in operating said 
devices; and 
    (d) has at least 25 hours of actual operating experience on 
said devices; and 
    (e) pays the required fee. 
    A license shall be valid for the lifetime of the licensee.  
A one time fee set by the commissioner pursuant to section 
16A.128, shall be charged for the license. 
    Sec. 4.  Minnesota Statutes 1986, section 183.411, is 
amended by adding a subdivision to read: 
     Subd. 5.  [LICENSED OPERATOR; PRESENCE REQUIRED.] An 
operator licensed under this section must be present when a 
traction engine, portable or stationary show engine, or portable 
or stationary show boiler is in operation and a member of the 
public is present. 
    Sec. 5.  Minnesota Statutes 1986, section 183.466, is 
amended to read:  
    183.466 [STANDARDS OF REPAIRS.] 
    The recommended rules for repair of boilers and pressure 
vessels for use in this state shall be those established by the 
national board of boiler and pressure vessel inspectors 
inspection code and the rules of the division of boiler 
inspection adopted by the department of labor and industry.  
    Sec. 6.  Minnesota Statutes 1986, section 183.51, 
subdivision 4, is amended to read:  
    Subd. 4.  [CHIEF ENGINEER, GRADE A.] A person seeking 
licensure as a chief engineer, Grade A, shall be at least 18 
years of age and have habits and experience which justify the 
belief verifies that the person is competent to take charge of 
and be responsible for the safe operation and maintenance of all 
classes of boilers, steam engines, or and turbines and their 
appurtenances; and, before receiving a license, the applicant 
shall take and subscribe an oath attesting to at least five 
years actual experience in operating such boilers, including at 
least two years experience in operating such engines or turbines.
    Sec. 7.  Minnesota Statutes 1986, section 183.51, 
subdivision 7, is amended to read:  
    Subd. 7.  [FIRST-CLASS ENGINEER, GRADE A.] A person seeking 
licensure as a first-class engineer, Grade A, shall be at least 
18 years of age and have habits and experience which justify the 
belief verifies that the person is competent to take charge of 
and be responsible for the safe operation and maintenance of all 
classes of boilers, engines, or and turbines and their 
appurtenances of not more than 300 horsepower or to operate as a 
shift engineer in a plant of unlimited horsepower.  Before 
receiving a license, the applicant shall take and subscribe an 
oath attesting to at least three years actual experience in 
operating such boilers, including at least two years experience 
in operating such engines, or turbines. 
    Sec. 8.  Minnesota Statutes 1986, section 183.51, 
subdivision 10, is amended to read:  
    Subd. 10.  [SECOND-CLASS ENGINEER, GRADE A.] A person 
seeking licensure as a second-class engineer, Grade A, shall be 
at least 18 years of age and have habits and experience which 
justify the belief verifies that the person is competent to take 
charge of and be responsible for the safe operation and 
maintenance of all classes of boilers, engines, or and turbines 
and their appurtenances of not more than 100 horsepower or to 
operate as a shift engineer in a plant of not more than 300 
horsepower, or to assist the shift engineer, under direct 
supervision, in a plant of unlimited horsepower.  Before 
receiving a license the applicant shall take and subscribe an 
oath attesting to at least one year of actual experience in 
operating such boilers, including at least one year of 
experience in operating such engines, or turbines. 
    Sec. 9.  Minnesota Statutes 1987 Supplement, section 
256B.431, subdivision 2b, as amended by H.F. No. 2126, if 
enacted, is amended to read: 
    Subd. 2b.  [OPERATING COSTS, AFTER JULY 1, 1985.] (a) For 
rate years beginning on or after July 1, 1985, the commissioner 
shall establish procedures for determining per diem 
reimbursement for operating costs.  
    (b) The commissioner shall contract with an econometric 
firm with recognized expertise in and access to national 
economic change indices that can be applied to the appropriate 
cost categories when determining the operating cost payment rate.
    (c) The commissioner shall analyze and evaluate each 
nursing home's cost report of allowable operating costs incurred 
by the nursing home during the reporting year immediately 
preceding the rate year for which the payment rate becomes 
effective.  
    (d) The commissioner shall establish limits on actual 
allowable historical operating cost per diems based on cost 
reports of allowable operating costs for the reporting year that 
begins October 1, 1983, taking into consideration relevant 
factors including resident needs, geographic location, size of 
the nursing home, and the costs that must be incurred for the 
care of residents in an efficiently and economically operated 
nursing home.  In developing the geographic groups for purposes 
of reimbursement under this section, the commissioner shall 
ensure that nursing homes in any county contiguous to the 
Minneapolis-St. Paul seven-county metropolitan area are included 
in the same geographic group.  The limits established by the 
commissioner shall not be less, in the aggregate, than the 60th 
percentile of total actual allowable historical operating cost 
per diems for each group of nursing homes established under 
subdivision 1 based on cost reports of allowable operating costs 
in the previous reporting year.  For rate years beginning on or 
after July 1, 1987, or until the new base period is established, 
facilities located in geographic group I as described in 
Minnesota Rules, part 9549.0052 (Emergency), on January 1, 1987, 
may choose to have the commissioner apply either the care 
related limits or the other operating cost limits calculated for 
facilities located in geographic group II, or both, if either of 
the limits calculated for the group II facilities is higher.  
The efficiency incentive for geographic group I nursing homes 
must be calculated based on geographic group I limits.  The 
phase-in must be established utilizing the chosen limits.  For 
purposes of these exceptions to the geographic grouping 
requirements, the definitions in Minnesota Rules, parts 
9549.0050 to 9549.0059 (Emergency), and 9549.0010 to 9549.0080, 
apply.  The limits established under this paragraph remain in 
effect until the commissioner establishes a new base period.  
Until the new base period is established, the commissioner shall 
adjust the limits annually using the appropriate economic change 
indices established in paragraph (e).  In determining allowable 
historical operating cost per diems for purposes of setting 
limits and nursing home payment rates, the commissioner shall 
divide the allowable historical operating costs by the actual 
number of resident days, except that where a nursing home is 
occupied at less than 90 percent of licensed capacity days, the 
commissioner may establish procedures to adjust the computation 
of the per diem to an imputed occupancy level at or below 90 
percent.  The commissioner shall establish efficiency incentives 
as appropriate.  The commissioner may establish efficiency 
incentives for different operating cost categories.  The 
commissioner shall consider establishing efficiency incentives 
in care related cost categories.  The commissioner may combine 
one or more operating cost categories and may use different 
methods for calculating payment rates for each operating cost 
category or combination of operating cost categories.  For the 
rate year beginning on July 1, 1985, the commissioner shall: 
    (1) allow nursing homes that have an average length of stay 
of 180 days or less in their skilled nursing level of care, 125 
percent of the care related limit and 105 percent of the other 
operating cost limit established by rule; and 
    (2) exempt nursing homes licensed on July 1, 1983, by the 
commissioner to provide residential services for the physically 
handicapped under Minnesota Rules, parts 9570.2000 to 9570.3600, 
from the care related limits and allow 105 percent of the other 
operating cost limit established by rule. 
    For the purpose of calculating the other operating cost 
efficiency incentive for nursing homes referred to in clause (1) 
or (2), the commissioner shall use the other operating cost 
limit established by rule before application of the 105 percent. 
    (e) The commissioner shall establish a composite index or 
indices by determining the appropriate economic change 
indicators to be applied to specific operating cost categories 
or combination of operating cost categories.  
    (f) Each nursing home shall receive an operating cost 
payment rate equal to the sum of the nursing home's operating 
cost payment rates for each operating cost category.  The 
operating cost payment rate for an operating cost category shall 
be the lesser of the nursing home's historical operating cost in 
the category increased by the appropriate index established in 
paragraph (e) for the operating cost category plus an efficiency 
incentive established pursuant to paragraph (d) or the limit for 
the operating cost category increased by the same index.  If a 
nursing home's actual historic operating costs are greater than 
the prospective payment rate for that rate year, there shall be 
no retroactive cost settle-up.  In establishing payment rates 
for one or more operating cost categories, the commissioner may 
establish separate rates for different classes of residents 
based on their relative care needs.  
    (g) The commissioner shall include the reported actual real 
estate tax liability or payments in lieu of real estate tax of 
each nursing home as an operating cost of that nursing 
home.  Except as provided in Minnesota Rules, parts 9549.0010 to 
9549.0080, the commissioner shall allow an amount for payments 
in lieu of real estate tax assessed by a municipality, city, 
township, or county that does not exceed an amount equivalent to 
a similar assessment for fire, police, or sanitation services 
assessed to all other nonprofit or governmental entities located 
in the municipality, city, township, or county in which a 
nursing home to be assessed is located.  Allowable costs under 
this subdivision for payments made by a nonprofit nursing home 
that are in lieu of real estate taxes shall not exceed the 
amount which the nursing home would have paid to a city or 
township and county for fire, police, sanitation services, and 
road maintenance costs had real estate taxes been levied on that 
property for those purposes.  For rate years beginning on or 
after July 1, 1987, the reported actual real estate tax 
liability or payments in lieu of real estate tax of nursing 
homes shall be adjusted to include an amount equal to one-half 
of the dollar change in real estate taxes from the prior year.  
The commissioner shall include a reported actual special 
assessment, and reported actual license fees required by the 
Minnesota department of health, for each nursing home as an 
operating cost of that nursing home.  Total adjusted real estate 
tax liability, payments in lieu of real estate tax, actual 
special assessments paid, and license fees paid as required by 
the Minnesota department of health, for each nursing home (1) 
shall be divided by actual resident days in order to compute the 
operating cost payment rate for this operating cost category, 
(2) shall not be used to compute the 60th percentile or other 
operating cost limits established by the commissioner, and (3) 
shall not be increased by the composite index or indices 
established pursuant to paragraph (e). 
    (h) For rate years beginning on or after July 1, 1987, the 
commissioner shall adjust the rates of a nursing home that meets 
the criteria for the special dietary needs of its residents as 
specified in section 144A.071, subdivision 3, clause (c), and 
the requirements in section 31.651.  The adjustment for raw food 
cost shall be the difference between the nursing home's 
allowable historical raw food cost per diem and 115 percent of 
the median historical allowable raw food cost per diem of the 
corresponding geographic group. 
    The rate adjustment shall be reduced by the applicable 
phase-in percentage as provided under subdivision 2h. 
    Sec. 10.  [270.0681] [TAX INFORMATION SAMPLE DATA.] 
    Subdivision 1.  [PREPARATION OF SAMPLES.] The commissioner 
of revenue shall prepare microdata samples of income tax returns 
and other information useful for purposes of (1) estimating 
state revenues, (2) simulating the effect of changes or proposed 
changes in state and federal tax law on the amount of state 
revenues, and (3) analyzing the incidence of present or proposed 
taxes. 
    Subd. 2.  [COORDINATING COMMITTEE.] A coordinating 
committee is established to oversee and coordinate preparation 
of the microdata samples.  The committee consists of (1) the 
director of the research division of the department of revenue 
who shall serve as chair of the committee, (2) the state 
economist, (3) the chair of the committee on taxes of the house 
of representatives or the chair's designee, and (4) the chair of 
the committee on taxes and tax laws of the senate or the chair's 
designee.  The committee shall consider the analysis needs and 
use of the microdata samples by the finance and revenue 
departments and the legislature in designing and preparing the 
samples, including the type of data to be included, the 
structure of the samples, size of the samples, and other 
relevant factors. 
    Subd. 3.  [CONTENTS OF SAMPLES.] The samples must consist 
of information derived from a random sample of federal and 
Minnesota individual income tax returns.  The samples prepared 
in odd numbered years must be augmented by additional 
information from other sources as the coordinating committee 
determines is feasible and appropriate.  The coordinating 
committee shall consider inclusion of (1) information derived 
from property tax refund returns, (2) the estimated market value 
of the taxpayer's home from the homestead declaration, and (3) 
information from other sources, such as the surveys conducted by 
the United States departments of commerce and labor. 
    Subd. 4.  [CONSULTATION ON ANALYSIS MODELS.] The 
coordinating committee shall facilitate regular consultation 
among the department of revenue, the department of finance, and 
house and senate staffs in development and maintenance of their 
respective computer models used to analyze the microdata 
samples.  The committee shall encourage efforts to attain more 
commonality in the models, greater sharing of program 
development efforts and programming tasks, and more consistency 
in the resulting analyses. 
    Sec. 11.  Minnesota Statutes 1986, section 270.70, 
subdivision 1, is amended to read:  
    Subdivision 1.  [AUTHORITY OF COMMISSIONER.] If any tax 
payable to the commissioner of revenue or to the department of 
revenue is not paid when due, such tax may be collected by the 
commissioner of revenue within five years after the date of 
assessment of the tax, or if the tax judgment has been filed, 
within the statutory period of enforcement of a valid tax 
judgment, by a levy upon all property and rights to property, 
including any property in the possession of law enforcement 
officials, of the person liable for the payment or collection of 
such tax (except that which is exempt from execution pursuant to 
section 550.37) or property on which there is a lien provided in 
section 270.69.  For this purpose, the term "tax" shall include 
any penalty, interest and costs properly payable.  The term 
"levy" includes the power of distraint and seizure by any means. 
    Sec. 12.  Minnesota Statutes 1986, section 271.01, 
subdivision 5, is amended to read:  
    Subd. 5.  [JURISDICTION.] The tax court shall have 
statewide jurisdiction.  Except for an appeal to the supreme 
court or any other appeal allowed under this subdivision, the 
tax court shall be the sole, exclusive, and final authority for 
the hearing and determination of all questions of law and fact 
arising under the tax laws of the state, as defined in this 
subdivision, in those cases that have been appealed to the tax 
court and in any case that has been transferred by the district 
court to the tax court.  The tax court shall have no 
jurisdiction in any case that does not arise under the tax laws 
of the state or in any criminal case or in any case determining 
or granting title to real property or in any case that is under 
the jurisdiction of the probate court.  The small claims 
division of the tax court shall have no jurisdiction in any case 
dealing with property valuation or assessment for property tax 
purposes until the taxpayer has appealed the valuation or 
assessment to the town or city board of equalization and to the 
county board of equalization, except for those taxpayers whose 
original assessments are determined by the commissioner of 
revenue.  The tax court shall have no jurisdiction in any case 
involving an order of the state board of equalization unless a 
taxpayer contests the valuation of property.  Only the taxes, 
aids and related matters contained in chapters 60A, 69, 124, 
270, 272, 273, 274, 275, 276, 277, 278, 279, 285, 287, 288, 290, 
290A, 291, 292, 293, 294, 295, 296, 297, 297A, 297B, 297C, 297D, 
298, 299, 299F, 473, 473F, and 477A shall be considered tax laws 
of this state subject to the jurisdiction of the tax court.  
This subdivision shall not be construed to prevent an appeal, as 
provided by law, to an administrative agency, board of 
equalization, or to the commissioner of revenue.  Wherever used 
in this chapter, the term commissioner shall mean the 
commissioner of revenue, unless otherwise specified. 
    Sec. 13.  Minnesota Statutes 1986, section 287.21, is 
amended by adding a subdivision to read: 
    Subd. 4.  [TAX-FORFEITED LAND.] Before a state deed for 
tax-forfeited land may be issued, the deed tax must be paid by 
purchasers of tax-forfeited land, persons who redeem 
tax-forfeited land, or local units of government that apply for 
use or purchase of tax-forfeited land. 
    Sec. 14.  Minnesota Statutes 1987 Supplement, section 
295.32, is amended to read:  
    295.32 [GROSS EARNINGS TAX; ANNUAL RETURN.] 
    Every telegraph company as defined in section 295.01, 
subdivision 9, shall file a return with the commissioner of 
revenue, in such form as the commissioner shall prescribe, 
containing a true and just report of its gross earnings derived 
from business within the state during the preceding calendar 
year, and make payment of the tax based upon the following 
percentages of such gross earnings:  
    for calendar years beginning before December 31, 1989, 6 
percent, 
    for calendar year 1990, 4.5 4 percent, 
    for calendar year 1991, 3 2 percent, 
    for calendar year 1992, 1.5 percent, and 
    for calendar years beginning after December 31, 1992 1991, 
exempt.  
    Such return and payment of the tax due therewith shall be 
submitted on or before March first of each year, and shall be in 
lieu of all ad valorem taxes upon the property of such company 
within the state for the year during which such gross earnings 
accrued.  The provisions of chapter 294 and acts amendatory 
thereto, shall be applicable to such telegraph companies and to 
the returns and to the taxes submitted therewith by them.  
    Sec. 15.  Minnesota Statutes 1986, section 297D.08, is 
amended to read:  
    297D.08 [TAX RATE.] 
    A tax is imposed on marijuana and controlled substances as 
defined in section 297D.01 at the following rates:  
    (1) on each gram of marijuana, or each portion of a gram, 
$3.50; and 
    (2) on each gram of controlled substance, or portion of a 
gram, $200; or 
    (3) on each 50 ten dosage units of a controlled substance 
that is not sold by weight, or portion thereof, $2,000 $400. 
    Sec. 16.  Minnesota Statutes 1987 Supplement, section 
298.22, subdivision 1, is amended to read:  
    Subdivision 1.  (1) The office of commissioner of iron 
range resources and rehabilitation is created.  The commissioner 
shall be appointed by the governor under the provisions of 
section 15.06. 
    (2) The commissioner may hold such other positions or 
appointments as are not incompatible with duties as commissioner 
of iron range resources and rehabilitation.  The commissioner 
may appoint a deputy commissioner.  All expenses of the 
commissioner, including the payment of such assistance as may be 
necessary, shall be paid out of the amounts appropriated by 
section 298.28.  The compensation of the commissioner shall be 
set by the legislative coordinating commission and may not 
exceed the maximum salary set for the commissioner of 
administration under section 15A.081, subdivision 1.  
    (3) When the commissioner shall determine that distress and 
unemployment exists or may exist in the future in any county by 
reason of the removal of natural resources or a possibly limited 
use thereof in the future and the decrease in employment 
resulting therefrom, now or hereafter, the commissioner may use 
such amounts of the appropriation made to the commissioner of 
revenue in section 298.28 as are determined to be necessary and 
proper in the development of the remaining resources of said 
county and in the vocational training and rehabilitation of its 
residents, except that the amount needed to cover cost overruns 
awarded to a contractor by an arbitrator in relation to a 
contract awarded by the commissioner or in effect after July 1, 
1985, is appropriated from the general fund.  For the purposes 
of this section, "development of remaining resources" includes, 
but is not limited to, the promotion of tourism. 
    Sec. 17.  Minnesota Statutes 1987 Supplement, section 
298.2213, subdivision 3, is amended to read:  
    Subd. 3.  [USE OF MONEY.] The money appropriated under this 
section may be used to provide loans, loan guarantees, interest 
buy-downs, and other forms of participation with private sources 
of financing, provided that a loan to a private enterprise must 
be for a principal amount not to exceed one-half of the cost of 
the project for which financing is sought, and the rate of 
interest on a loan must be no less than the lesser of eight 
percent or the rate of interest set by the Minnesota development 
board for comparable small business development loans at that 
time that is three percentage points less than a full faith and 
credit obligation of the United States government of comparable 
maturity, at the time that the loan is approved.  
    Money appropriated in this section must be expended only in 
or for the benefit of the tax relief area defined in section 
273.134, and as otherwise provided in this section. 
    Sec. 18.  Minnesota Statutes 1986, section 298.223, is 
amended to read:  
    298.223 [TACONITE AREA ENVIRONMENTAL PROTECTION FUND.] 
    Subdivision 1.  [CREATION; PURPOSES.] A fund called the 
taconite environmental protection fund is created for the 
purpose of reclaiming, restoring and enhancing those areas of 
northeast Minnesota located within a tax relief area defined in 
section 273.134 that are adversely affected by the 
environmentally damaging operations involved in mining taconite 
and iron ore and producing iron ore concentrate and for the 
purpose of promoting the economic development of northeast 
Minnesota.  The taconite environmental protection fund shall be 
used for the following purposes: 
    (a) to initiate investigations into matters the iron range 
resources and rehabilitation board determines are in need of 
study and which will determine the environmental problems 
requiring remedial action; 
    (b) reclamation, restoration or reforestation of minelands 
not otherwise provided for by state law; 
    (c) local economic development projects including 
construction of sewer and water systems, and other public works 
located within a tax relief area defined in section 273.134; 
    (d) monitoring of mineral industry related health problems 
among mining employees. 
    Subd. 2.  [ADMINISTRATION.] The taconite environmental 
protection fund shall be administered by the commissioner of the 
iron range resources and rehabilitation board.  The commissioner 
shall by September 1 of each year prepare a list of projects to 
be funded from the taconite environmental protection fund, with 
such supporting information including description of the 
projects, plans, and cost estimates as may be necessary.  Upon 
recommendation of the iron range resources and rehabilitation 
board, this list shall be submitted to the legislative advisory 
commission for its review.  This list with the recommendation of 
the legislative advisory commission shall then be transmitted to 
the governor by November 1 of each year.  By December 1 of each 
year, the governor shall approve or disapprove, or return for 
further consideration, each individual project.  Funds for a 
project may be expended only upon approval of the project by the 
governor. 
    The commissioner may submit supplemental projects for 
approval at any time.  Supplemental projects approved by the 
board must be submitted to the members of the legislative 
advisory commission for their review and recommendations of 
further review.  If a recommendation is not provided within ten 
days, no further review by the legislative advisory commission 
is required, and the governor shall approve or disapprove each 
project or return it for further consideration.  If the 
recommendation by any member is for further review the governor 
shall submit the request to the legislative advisory commission 
for its review and recommendation.  Failure or refusal of the 
commission to make a recommendation promptly is a negative 
recommendation. 
    Subd. 3.  [APPROPRIATION.] There is hereby annually 
appropriated to the commissioner of iron range resources and 
rehabilitation such funds as are necessary to carry out the 
projects approved and such funds as are necessary for 
administration of this section.  Annual administrative costs, 
not including detailed engineering expenses for the projects, 
shall not exceed five percent of the amount annually expended 
from the fund. 
    Funds for the purposes of this section are provided by 
section 298.28, subdivision 11 relating to the taconite 
environmental protection fund. 
    Sec. 19.  Minnesota Statutes 1986, section 298.28, 
subdivision 3, is amended to read:  
    Subd. 3.  [CITIES; TOWNS.] (a) 12.5 cents per taxable ton, 
less any amount distributed under subdivision 8, and paragraph 
(b) of this subdivision, must be allocated to the taconite 
municipal aid account to be distributed as provided in section 
298.282. 
    (b) An amount must be allocated to towns or cities that is 
annually certified by the county auditor of a county containing 
a taconite tax relief area within which there is (1) an 
organized township if, as of January 2, 1982, more than 75 
percent of the assessed valuation of the township consists of 
iron ore or (2) a city if, as of January 2, 1980, more than 75 
percent of the assessed valuation of the city consists of iron 
ore.  
    (c) The amount allocated under paragraph (b) will be the 
portion of a township's or city's certified levy equal to the 
proportion of (1) the difference between 50 percent of January 
2, 1982, assessed value in the case of a township and 50 percent 
of the January 2, 1980, assessed value in the case of a city and 
its current assessed value to (2) the sum of its current 
assessed value plus the difference determined in (1), provided 
that the amount distributed shall not exceed $55 per capita in 
the case of a township or $75 per capita in the case of a city.  
For purposes of this limitation, population will be determined 
according to the 1980 decennial census conducted by the United 
States Bureau of the Census.  The county auditor shall extend 
the township's or city's levy against the sum of the township's 
or city's current assessed value plus the difference between 50 
percent of its January 2, 1982, assessed value and its current 
assessed value in the case of a township and between 50 percent 
of its January 2, 1980, assessed value and its current assessed 
value in the case of a city.  If the current assessed value of 
the township exceeds 50 percent of the township's January 2, 
1982, assessed value, or if the current assessed value of the 
city exceeds 50 percent of the city's January 2, 1980, assessed 
value, this paragraph shall not apply.  
    Sec. 20.  Minnesota Statutes 1986, section 373.40, 
subdivision 4, as added by H.F. No. 1796, if enacted, is amended 
to read: 
    Subd. 4.  [LIMITATIONS ON AMOUNT.] A county, other than 
Hennepin or Ramsey, may not issue bonds under this section if 
the maximum amount of principal and interest to become due in 
any year on all the outstanding bonds issued pursuant to this 
section (including the bonds to be issued) will equal or exceed 
one mill multiplied by the taxable assessed value of property in 
the county.  Ramsey county may not issue bonds under this 
section if the maximum amount of principal and interest to 
become due in any year on all the outstanding bonds issued 
pursuant to this section (including the bonds to be issued) will 
equal or exceed 1.2 mills multiplied by the taxable assessed 
value of property in the county.  Hennepin county may not issue 
bonds under this section if the maximum amount of principal and 
interest to become due in any year on all the outstanding bonds 
issued pursuant to this section together with the bonds proposed 
to be issued, will equal or exceed one-half mill multiplied by 
the taxable assessed value of the property in the county.  
Calculation of the limit must be made using the taxable assessed 
value for the taxes payable year in which the obligations are 
issued and sold.  This section does not limit the authority to 
issue bonds under any other special or general law. 
    Sec. 21.  Minnesota Statutes 1986, section 387.212, is 
amended to read:  
    387.212 [CONTINGENT FUND.] 
    The board of county commissioners in any county may create 
a sheriff's contingent fund and may credit thereto not more than 
$3,000 $10,000.  The money in such fund may be used for the 
advancement and reimbursement of expenses of the sheriff and the 
sheriff's office.  Such moneys shall be disbursed by the county 
treasurer in accordance with rules and regulations prescribed by 
the board.  Any balance remaining at the end of the year shall 
be transferred to the revenue fund. 
    Sec. 22.  [424A.10] [STATE SUPPLEMENTAL BENEFIT; VOLUNTEER 
FIREFIGHTERS.] 
    Subdivision 1.  [DEFINITION.] For purposes of this section, 
"qualified recipient" means an individual who receives an 
involuntary lump sum distribution of pension or retirement 
benefits from a firefighters' relief association for service 
performed as a volunteer firefighter. 
    Subd. 2.  [PAYMENT OF SUPPLEMENTAL BENEFIT.] Upon the 
payment by a firefighters' relief association of an involuntary 
lump sum distribution to a qualified recipient, the association 
must pay a supplemental benefit to the qualified recipient.  
Notwithstanding any law to the contrary, the relief association 
may pay the supplemental benefit out of its special fund.  The 
amount of this benefit equals ten percent of the regular 
involuntary lump sum distribution that is paid on the basis of 
service as a volunteer firefighter.  In no case may the amount 
of the supplemental benefit exceed $1,000. 
    Subd. 3.  [STATE REIMBURSEMENT.] By February 15 of each 
year, the relief association shall apply to the commissioner of 
revenue for state reimbursement of the amount of supplemental 
benefits paid under subdivision 2 during the preceding calendar 
year.  By March 15 the commissioner shall reimburse the relief 
association for the amount of the supplemental benefits paid to 
qualified recipients.  The commissioner of revenue shall 
prescribe the form of and supporting information that must be 
supplied as part of the application for state reimbursement.  
The reimbursement payment must be deposited in the special fund 
of the relief association. 
    Subd. 4.  [IN LIEU OF INCOME TAX EXCLUSION.] The 
supplemental benefit provided by this section is in lieu of the 
state income tax exclusion for involuntary lump sum 
distributions of retirement benefits paid to volunteer 
firefighters.  If the law is modified to exclude or exempt 
volunteer firefighters' lump sum distributions from state income 
taxation, the supplemental benefits under this section may no 
longer be paid beginning with the first calendar year in which 
the exclusion or exemption is effective.  This subdivision does 
not apply to exemption of all or part of a lump sum distribution 
under section 290.032 or 290.0802. 
    Sec. 23.  Minnesota Statutes 1987 Supplement, section 
469.170, is amended by adding a subdivision to read: 
    Subd. 5d.  [AMENDMENT OF PLANS.] A written multiyear 
enterprise zone tax credit distribution plan submitted under 
subdivision 5a, 5b, or 5c, may be amended, provided that an 
initial amendment may be made no sooner than two years from the 
date of submission of the original plan, and subsequent 
amendments may be made no sooner than two years after the most 
recent prior amendment. 
    Sec. 24.  Minnesota Statutes 1986, section 473.843, 
subdivision 2, is amended to read:  
    Subd. 2.  [DISPOSITION OF PROCEEDS.] After reimbursement to 
the department of revenue for costs incurred in administering 
this section, the proceeds of the fees imposed under this 
section, including interest and penalties, must be deposited as 
follows:  
    (a) one-half of the proceeds must be deposited in the 
landfill abatement fund established in section 473.844; and 
    (b) one-half of the proceeds must be deposited in the 
metropolitan landfill contingency action fund established in 
section 473.845.  
    Sec. 25.  Minnesota Statutes 1986, section 507.235, 
subdivision 1, is amended to read:  
    Subdivision 1.  [FILING REQUIRED.] All contracts for deed 
executed on or after January 1, 1984, shall be recorded within 
six months in the office of the county recorder or registrar of 
titles in the county in which the land is situated.  This filing 
period may be extended if failure to pay the property tax due in 
the current year on a parcel as required in section 272.121 has 
prevented filing and recording of the contract.  In the case of 
a parcel that was divided and classified under section 273.13 as 
class 1a or 1b, the period may be extended to October 31 of the 
year in which the sale occurred, and in the case of a parcel 
that was divided and classified under section 273.13 as class 
2a, the period may be extended to November 30 of the year in 
which the sale occurred. 
    Sec. 26.  Minnesota Statutes 1987 Supplement, section 
508.25, is amended to read:  
    508.25 [RIGHTS OF PERSON HOLDING CERTIFICATE OF TITLE.] 
    Every person receiving a certificate of title pursuant to a 
decree of registration and every subsequent purchaser of 
registered land who receives a certificate of title in good 
faith and for a valuable consideration shall hold it free from 
all encumbrances and adverse claims, excepting only the estates, 
mortgages, liens, charges, and interests as may be noted in the 
last certificate of title in the office of the registrar, and 
also excepting any of the following rights or encumbrances 
subsisting against it, if any: 
    (1) Liens, claims, or rights arising or existing under the 
laws or the constitution of the United States, which this state 
cannot require to appear of record; 
    (2) The lien of any real property tax or special assessment 
for which the land has not been sold at the date of the 
certificate of title; 
    (3) Any lease for a period not exceeding three years when 
there is actual occupation of the premises thereunder; 
    (4) All rights in public highways upon the land; 
    (5) The right of appeal, or right to appear and contest the 
application, as is allowed by this chapter; 
    (6) The rights of any person in possession under deed or 
contract for deed from the owner of the certificate of title;  
    (7) Any outstanding mechanics lien rights which may exist 
under sections 514.01 to 514.17.  
    (8) No existing or future liens or judgments, 
notwithstanding section 508.63, arising under the laws of this 
state for the nonpayment of any amounts due under chapter 268 or 
any tax administered by the commissioner of revenue may encumber 
title to lands registered under chapter 508 unless filed under 
the terms of chapter 508. 
    Sec. 27.  Laws 1988, chapter 516, section 3, is amended to 
read: 
    Sec. 3.  [AREA OF OPERATION.] 
    The area of operation of the joint authority and the 
project for purposes of Minnesota Statutes, section 469.174, 
subdivision 8 shall include all of Cook county.  The Grand 
Marais city council must approve any project as defined in 
Minnesota Statutes, section 469.174, subdivision 8, and any 
economic development district as defined in Minnesota Statutes, 
section 469.101, if the project or economic development district 
includes real property within the boundaries of Grand Marais or 
includes real property owned by Grand Marais. 
    Sec. 28.  H.F. No. 1796, section 6, if enacted, is amended 
to read: 
    Sec. 6.  [EFFECTIVE DATE.] 
    Section 5 is effective upon compliance by the Hennepin 
county board with Minnesota Statutes, section 645.021.  The rest 
of this act is effective June 1, 1988. 
    Sec. 29.  [REFUNDING BONDS.] 
    The city of Little Falls in Morrison county, by resolution 
of its city council, may issue and sell general obligation 
refunding bonds of the city in a principal amount not exceeding 
$3,300,000, the proceeds of which are to be used to refund the 
city's general obligation tax increment bonds of 1985.  The 
refunding bonds shall be issued and sold in accordance with 
Minnesota Statutes, chapter 475, except that:  
    (1) the refunding bonds shall be treated as obligations 
described in Minnesota Statutes, section 475.58, subdivision 1, 
paragraph (3);  
    (2) Minnesota Statutes, section 475.67, subdivision 12, 
shall not apply;  
    (3) the amount of bonds issued shall not be included in 
computing any debt limitation applicable to the city; and 
    (4) the levy of taxes required by Minnesota Statutes, 
section 475.61, to pay the principal of and interest on the 
bonds shall not be subject to any levy limitation or be included 
in computing or applying any levy limitation applicable to the 
city. 
    Sec. 30.  [APPLICATION OF PROCEEDS OF REFUNDED BONDS.] 
    The city of Little Falls in Morrison county, by resolution 
of its city council, may appropriate any of the unexpended 
proceeds of its general obligation tax increment bonds of 1985, 
except proceeds held in the debt service fund for the bonds, to 
any other municipal purpose for which the city could issue its 
bonds, including the purposes set forth in Minnesota Statutes, 
section 475.52, subdivision 1 or 2, 429.021, or 444.075.  To the 
extent that the proceeds are appropriated for an improvement for 
which special assessments are levied or tax increments are 
collectible, the city shall appropriate the receipts from the 
special assessments or tax increments, subject to any prior 
pledge of them to secure other obligations of the city, to the 
payment of the general obligation tax increment bonds of 1985, 
or to the payment of any refunding bonds issued pursuant to 
section 29. 
    Sec. 31.  [CITY OF HERMANTOWN; PROPERTY TAXES ON LAND HELD 
FOR ECONOMIC DEVELOPMENT.] 
    Notwithstanding the time limitation contained in Minnesota 
Statutes 1986, section 272.02, subdivision 5, the holding of 
property that has been held for seven years as of August 1, 
1987, by the city of Hermantown for later resale for economic 
development purposes is a public purpose under Minnesota 
Statutes, section 272.02, subdivision 1, clause (7), for a 
period not to exceed 10 years.  This section does not apply if 
buildings or other improvements are constructed after 
acquisition of the property, and if more than one-half of the 
floor space of the buildings or improvements that is available 
for lease to or use by a private individual, corporation, or 
other entity is leased to or otherwise used by a private 
individual, corporation, or other entity.  This section does not 
create an exemption from Minnesota Statutes, section 272.01, 
subdivision 2; 272.68; 273.19; or 469.040, subdivision 3; or 
other provision of law providing for the taxation of or for 
payments in lieu of taxes for publicly held property which is 
leased, loaned, or otherwise made available and used by a 
private person. 
    Sec. 32.  [383A.65] [RAMSEY COUNTY; AUTHORIZATION FOR BONDS.] 
    Ramsey county may issue general obligation bonds in one or 
more series in an amount not to exceed $2,000,000, in the 
aggregate, to finance the restoration of the concourse of the 
St. Paul union depot as a facility for the exhibition of works 
of art, the proceeds of which may not be used for that purpose 
until $500,000 in operational funding has been committed by 
nonpublic sources.  The bonds shall be issued pursuant to 
Minnesota Statutes, chapter 475, except that the bonds shall not 
be subject to its election requirements or debt limits.  They 
shall not be subject to any other debt or tax levy limitations 
applicable to the county and shall not be considered in 
calculating amounts subject to any other debt or tax levy 
limitations.  Levies by the county for debt servicing payment 
for the retirement of the bonds shall be exempt from and 
disregarded in the calculation of all tax levy limitations 
applicable to the county. 
    Sec. 33.  [CITY OF SHAFER BOND ISSUE.] 
    The city of Shafer may issue general obligation bonds of 
the city in an aggregate principal amount not to exceed $40,000 
to finance the acquisition and betterment of a municipal 
building.  The bonds shall be issued and sold in accordance with 
the provisions of Minnesota Statutes, chapter 475, including the 
provision requiring the approval of a majority of the electors 
voting on the question of issuing the bonds.  Notwithstanding 
any other statutory or charter provision, the principal amount 
of bonds issued shall not be included in computing any debt 
limit applicable to the city, nor shall the taxes required to be 
levied to pay the principal of and interest on the bonds be 
subject to any levy limitation or be included in computing any 
levy limitation applicable to the city. 
    Sec. 34.  [STEARNS COUNTY; PROPERTY TAX REFUND.] 
    Stearns county shall refund to Lake Koronis Assembly 
Grounds the property taxes assessed in 1985, paid in 1986, for 
the parcels identified as 26-16447-03, 26-15788-00, 26-15790-00, 
26-15788-04, 26-16447-02, 26-16447-04, 26-16447-16, 26-16447-06, 
and 26-16447-07. 
    Stearns county shall refund to Lake Koronis Assembly 
Grounds the amount of $4,786 according to the following schedule:
    one-third by August 1, 1988; 
    one-third by July 1, 1989; and 
    one-third by July 1, 1990. 
    The refund shall be paid from the property taxes and 
charged against the receipts held by the county for the taxing 
jurisdictions in the same proportion as the taxes paid on this 
property in 1986.  No interest shall be paid on the amounts 
refunded. 
    Sec. 35.  [HARDSHIP LOANS.] 
    Notwithstanding the limitations on the metropolitan 
council's authority to make hardship loans in Minnesota 
Statutes, section 473.167, subdivision 2a, paragraph (b), the 
council may make hardship loans until December 31, 1988, to 
Washington county to purchase homestead property from and 
provide relocation assistance to property owners affected by 
hardship acquisitions incurred because of adoption of the 
Washington county Big Marine Park master plan.  Except as 
provided in this section, the hardship loans must be made in 
accordance with Minnesota Statutes, section 473.167, 
subdivisions 2 and 2a. 
    Sec. 36.  [APPROPRIATION.] 
    (a) $49,000 is appropriated for fiscal year 1989 from the 
general fund to the commissioner of revenue for purposes of 
preparing income tax samples under section 10. 
    (b) $263,000 is appropriated for fiscal year 1988 from the 
general fund to the commissioner of revenue for purposes of 
administering restoration of property tax refunds under article 
4, section 12.  Amounts not expended in fiscal year 1988 are 
available in fiscal year 1989.  
    (c) $45,000 is appropriated for fiscal year 1989 from the 
general fund to the commissioner of revenue for purposes of 
administering property tax refund targeting under article 4, 
section 7.  
    (d) $165,000 is appropriated for fiscal year 1989 from the 
general fund to the commissioner of revenue for purposes of 
administering the property tax reform provisions of article 5. 
    (e) $600,000 is appropriated for fiscal year 1989 from the 
general fund to the commissioner of revenue to make 
reimbursement payments to firefighters' relief associations 
under section 22. 
    Sec. 37.  [REPEALER.] 
    (a) Minnesota Statutes 1987 Supplement, sections 296.02, 
subdivisions 2a and 2b, as amended by H.F. No. 1749, if enacted, 
and 296.025, subdivisions 2a and 2b, as amended by H.F. No. 
1749, if enacted, are repealed. 
    (b) Laws 1987, chapter 268, article 3, section 11 is 
repealed. 
    Sec. 38.  [EFFECTIVE DATE.] 
    Sections 1, 15, and 19 are effective July 1, 1988.  Section 
13 is effective for all instruments recorded after May 31, 1987. 
Sections 11, 12, 14, 16, 17, 18, 21, 23, 24, 25, 36, and 37, 
paragraph (b), are effective the day following final enactment.  
Sections 20 and 28 are effective June 1, 1988.  Section 26 is 
effective retroactive to August 1, 1987.  Section 22 is 
effective for lump sums paid after December 31, 1986.  Section 
27 is effective at the same time Laws 1988, chapter 516, is 
effective. 
    Pursuant to Minnesota Statutes, section 645.023, 
subdivision 1, paragraph (a), sections 29, 30, and 33 are 
effective without local approval on the day following final 
enactment. 
    Section 31 is effective the day after compliance with 
Minnesota Statutes, section 645.021 by the city council of 
Hermantown and terminates effective with taxes levied in 1989, 
payable 1990.  Section 32 is effective the day after filing of 
certificates of local approval by the governing body of the city 
of St. Paul and the Ramsey county board in compliance with 
Minnesota Statutes, section 645.021, subdivision 3.  Section 37, 
paragraph (a) is effective retroactive to July 1, 1987. 
    Section 27 is effective the day after compliance by the 
governing bodies of Cook county and the city of Grand Marais 
with Minnesota Statutes, section 645.021, subdivision 3.  
     Section 35 is effective in the counties of Anoka, Carver, 
Dakota, Hennepin, Ramsey, Scott, and Washington. 
    Approved May 7, 1988

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