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Minnesota Legislature

Office of the Revisor of Statutes

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

  
    Laws of Minnesota 1993 

                        CHAPTER 271-H.F.No. 1524 
           An act relating to finance; providing conditions and 
          requirements for the issuance of public debt and for 
          the financial obligations of authorities; providing an 
          exemption from the mortgage registration tax; 
          providing an exemption from an ad valorem taxation for 
          certain lease purchase property; providing a property 
          tax exemption for certain property devoted to public 
          use; regulating certain exempt securities 
          transactions; changing the applicability of deductions 
          from certain bond entitlement allocations; amending 
          Minnesota Statutes 1992, sections 80A.15, subdivision 2; 275.065, 
          subdivision 7; 287.04; 447.45, subdivision 2; 475.67, 
          subdivisions 3 and 13; and 501B.25; proposing coding for new law in 
          Minnesota Statutes, chapter 80A; repealing 
          Minnesota Rules, part 2875.3532. 
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
    Section 1.  [80A.125) [PROHIBITION; NONRECOURSE LOANS.] 
    No part of the 
offering proceeds resulting from the sale of bonds or similar 
interest-bearing securities issued by the United States, any 
state, any political subdivision of any state, or any corporate 
or other instrumentality of one or more of those entities may be 
loaned to a person on a nonrecourse basis.  This prohibition 
does not apply to bonds or similar interest-bearing securities: 
    (1) exempt from registration under section 80A.15; 
    (2) rated in one of the top four letter rating categories 
by Fitch Investors Service, Inc., Standard and Poor's 
Corporation, or Moody's Investor Services, Inc.; or 
    (3) issued to provide housing facilities with respect to 
which low income tax credits are to be obtained. 
    Sec. 2.  Minnesota Statutes 1992, section 80A.15, 
subdivision 2, is amended to read: 
    Subd. 2.  The following transactions are exempted from 
sections 80A.08 and 80A.16: 
    (a) Any isolated sales, whether or not effected through a 
broker-dealer, provided that no person shall make more than ten 
sales of securities of the same issuer pursuant to this 
exemption during any period of 12 consecutive months; provided 
further, that in the case of sales by an issuer, except sales of 
securities registered under the Securities Act of 1933 or 
exempted by section 3(b) of that act, (1) the seller reasonably 
believes that all buyers are purchasing for investment, and (2) 
the securities are not advertised for sale to the general public 
in newspapers or other publications of general circulation or 
otherwise, or by radio, television, electronic means or similar 
communications media, or through a program of general 
solicitation by means of mail or telephone. 
    (b) Any nonissuer distribution of an outstanding security 
if (1) either Moody's, Fitch's, or Standard & Poor's Securities 
Manuals, or other recognized manuals approved by the 
commissioner contains the names of the issuer's officers and 
directors, a balance sheet of the issuer as of a date not more 
than 18 months prior to the date of the sale, and a profit and 
loss statement for the fiscal year preceding the date of the 
balance sheet, and (2) the issuer or its predecessor has been in 
active, continuous business operation for the five-year period 
next preceding the date of sale, and (3) if the security has a 
fixed maturity or fixed interest or dividend provision, the 
issuer has not, within the three preceding fiscal years, 
defaulted in payment of principal, interest, or dividends on the 
securities. 
         (c) The execution of any orders by a licensed broker-dealer 
for the purchase or sale of any security, pursuant to an 
unsolicited offer to purchase or sell; provided that the 
broker-dealer acts as agent for the purchaser or seller, and has 
no direct material interest in the sale or distribution of the 
security, receives no commission, profit, or other compensation 
from any source other than the purchaser and seller and delivers 
to the purchaser and seller written confirmation of the 
transaction which clearly itemizes the commission, or other 
compensation. 
         (d) Any nonissuer sale of notes or bonds secured by a 
mortgage lien if the entire mortgage, together with all notes or 
bonds secured thereby, is sold to a single purchaser at a single 
sale. 
        (e) Any judicial sale, exchange, or issuance of securities 
made pursuant to an order of a court of competent jurisdiction. 
        (f) The sale, by a pledge holder, of a security pledged in 
good faith as collateral for a bona fide debt. 
        (g) Any offer or sale to a bank, savings institution, trust 
company, insurance company, investment company as defined in the 
Investment Company Act of 1940, pension or profit sharing trust, 
or other financial institution or institutional buyer, or to a 
broker-dealer, whether the purchaser is acting for itself or in 
some fiduciary capacity. 
      (h) Any sales by an issuer to the number of persons that 
shall not exceed 25 persons in this state, or 35 persons if the 
sales are made in compliance with Regulation D promulgated by 
the Securities and Exchange Commission, Code of Federal 
Regulations, title 17, sections 230.501 to 230.506, (other than 
those designated in paragraph (a) or (g)), whether or not any of 
the purchasers is then present in this state, if (1) the issuer 
reasonably believes that all of the buyers in this state (other 
than those designated in clause (g)) are purchasing for 
investment, and (2) no commission or other remuneration is paid 
or given directly or indirectly for soliciting any prospective 
buyer in this state (other than those designated in clause (g)), 
except reasonable and customary commissions paid by the issuer 
to a broker-dealer licensed under this chapter, and (3) the 
issuer has, ten days prior to any sale pursuant to this 
paragraph, supplied the commissioner with a statement of issuer 
on forms prescribed by the commissioner, containing the 
following information:  (i) the name and address of the issuer, 
and the date and state of its organization; (ii) the number of 
units, price per unit, and a description of the securities to be 
sold; (iii) the amount of commissions to be paid and the persons 
to whom they will be paid; (iv) the names of all officers, 
directors and persons owning five percent or more of the equity 
of the issuer; (v) a brief description of the intended use of 
proceeds; (vi) a description of all sales of securities made by 
the issuer within the six-month period next preceding the date 
of filing; and (vii) a copy of the investment letter, if any, 
intended to be used in connection with any sale.  Sales that are 
made more than six months before the start of an offering made 
pursuant to this exemption or are made more than six months 
after completion of an offering made pursuant to this exemption 
will not be considered part of the offering, so long as during 
those six-month periods there are no sales of unregistered 
securities (other than those made pursuant to paragraph (a) or 
(g)) by or for the issuer that are of the same or similar class 
as those sold under this exemption.  The commissioner may by 
rule or order as to any security or transaction or any type of 
security or transaction, withdraw or further condition this 
exemption, or increase the number of offers and sales permitted, 
or waive the conditions in clause (1), (2), or (3) with or 
without the substitution of a limitation or remuneration. 
        (i) Any offer (but not a sale) of a security for which a 
registration statement has been filed under sections 80A.01 to 
80A.31, if no stop order or refusal order is in effect and no 
public proceeding or examination looking toward an order is 
pending; and any offer of a security if the sale of the security 
is or would be exempt under this section.  The commissioner may 
by rule exempt offers (but not sales) of securities for which a 
registration statement has been filed as the commissioner deems 
appropriate, consistent with the purposes of sections 80A.01 to 
80A.31. 
        (j) The offer and sale by a cooperative association 
organized under chapter 308A, of its securities when the 
securities are offered and sold only to its members, or when the 
purchase of the securities is necessary or incidental to 
establishing membership in such association, or when such 
securities are issued as patronage dividends. 
        (l) The issuance and delivery of any securities of one 
corporation to another corporation or its security holders in 
connection with a merger, exchange of shares, or transfer of 
assets whereby the approval of stockholders of the other 
corporation is required to be obtained, provided, that the 
commissioner has been furnished with a general description of 
the transaction and with other information as the commissioner 
by rule prescribes not less than ten days prior to the issuance 
and delivery. 
        (m) Any transaction between the issuer or other person on 
whose behalf the offering is made and an underwriter or among 
underwriters. 
     (n) The distribution by a corporation of its or other 
securities to its own security holders as a stock dividend or as 
a dividend from earnings or surplus or as a liquidating 
distribution; or upon conversion of an outstanding convertible 
security; or pursuant to a stock split or reverse stock split. 
     (o) Any offer or sale of securities by an affiliate of the 
issuer thereof if:  (1) a registration statement is in effect 
with respect to securities of the same class of the issuer and 
(2) the offer or sale has been exempted from registration by 
rule or order of the commissioner.  
    (p) Any transaction pursuant to an offer to existing 
security holders of the issuer, including persons who at the 
time of the transaction are holders of convertible securities, 
nontransferable warrants, or transferable warrants exercisable 
within not more than 90 days of their issuance, if:  (1) no 
commission or other remuneration (other than a standby 
commission) is paid or given directly or indirectly for 
soliciting any security holder in this state; and (2) the 
commissioner has been furnished with a general description of 
the transaction and with other information as the commissioner 
may by rule prescribe no less than ten days prior to the 
transaction. 
    (q)  Any nonissuer sales of any security, including a 
revenue obligation, issued by the state of Minnesota or any of 
its political or governmental subdivisions, municipalities, 
governmental agencies, or instrumentalities. 
    Sec. 3.  Minnesota Statutes 1992, section 275.065, 
subdivision 7, is amended to read: 
    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 the information 
required by the commissioner of revenue to determine compliance 
with this section.  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.  The decision of the commissioner is 
final.  When fixing rates under section 275.08 for a taxing 
authority that has not complied with this section, the county 
auditor must use the taxing authority's previous year's levy, 
plus any additional amounts necessary to pay principal and 
interest on general obligation bonds of the taxing authority for 
which its taxing powers have been pledged if the bonds were 
issued before 1989.  
    Sec. 4.  Minnesota Statutes 1992, section 287.04, is 
amended to read: 
    287.04 [MORTGAGES EXEMPTED.] 
    Subdivision 1.  [GENERALLY.] A decree of marriage 
dissolution or an instrument made pursuant to it or a mortgage 
given to correct a misdescription of the mortgaged property, or 
to include additional security for the same indebtedness on 
which a mortgage registration tax has been paid, shall are not 
be subject to the tax imposed by this chapter except as provided 
in section 287.05, subdivision 2, paragraph (b).  
    Subd. 2.  [MORTGAGES ON PUBLIC PROPERTY.] No tax is imposed 
upon the principal amount of bonds or other obligations issued 
by the St. Paul port authority under its common revenue bond 
fund if each of the following conditions are met. 
    (a) The bonds or other obligations are secured by a 
mortgage on property, title to which is held by the political 
subdivision. 
    (b) The mortgage is recorded or registered after the date 
of enactment. 
    (c) The bonds or other obligations are either (i)  
outstanding on the date of enactment or (ii) issued in exchange 
for or to otherwise refund bonds or other obligations the 
original series of which were issued before the date of 
enactment. 
    Sec. 5.  Minnesota Statutes 1992, section 447.45, 
subdivision 2, is amended to read: 
    Subd. 2.  [POWERS OVER SPECIAL FACILITIES.] With respect to 
facilities for the care, treatment, and training of persons with 
mental retardation or related conditions, and facilities 
attached or related to a nursing home providing supportive 
services to elderly persons who are not yet in need of nursing 
home care, including congregate housing, adult day care and 
respite care services, a county or city may exercise the powers 
in sections 447.45 to 447.50 as if these facilities were 
hospital or nursing home facilities within the meaning of 
sections 447.45 to 447.50.  "County or city" includes cities of 
the first class and counties containing them.  "Related 
conditions" is defined in section 252.27, subdivision 1a. 
    Sec. 6.  Minnesota Statutes 1992, section 475.67, 
subdivision 3, is amended to read: 
    Subd. 3.  (a) Any or all obligations and interest thereon 
may be refunded if and when and to the extent that for any 
reason the taxes or special assessments, revenues, or other 
funds appropriated for their payment are not sufficient to pay 
all principal and interest due or about to become due thereon.  
     (b) Any or all obligations of one or more issues regardless 
of their source of payment and interest thereon may be refunded 
before their due dates, if:  
     (1) consistent with covenants made with the holders 
thereof; and 
     (2) determined by the governing body to be necessary or 
desirable:  
     (i) for the reduction of debt service cost to the 
municipality; or 
     (ii) for the extension or adjustment of the maturities in 
relation to the resources available for their payment; or 
     (iii) for the issuance of obligations bearing a fixed rate 
of interest in the case of obligations bearing interest at a 
rate varying periodically; or 
     (iv) in the case of obligations payable solely from a 
special fund, for the more advantageous sale of additional 
obligations payable from the same fund or to relieve the 
municipality of restrictions imposed by covenants made with the 
holders of the obligations to be refunded.  
     (c) The amount of interest which may be refunded from the 
proceeds of the refunding obligations shall not exceed the 
amount of proceeds estimated to be required in excess of the 
principal amount of refunded obligations to retire the refunded 
obligations in accordance with subdivision 6.  In no event shall 
the aggregate principal amount of the refunding obligations 
exceed by more than ten percent the aggregate principal amount 
of the obligations to be refunded.  
    (d) No general obligations, for which the full faith and 
credit of the issuer is pledged, shall be issued to refund 
special obligations previously issued for any purpose, payable 
solely from a special fund, unless the issuance is authorized by 
the election, hearing, petition, resolution, or other procedure 
that would have been required as a condition precedent to the 
original issuance of general obligations for the same purpose. 
    Sec. 7.  Minnesota Statutes 1992, section 475.67, 
subdivision 13, is amended to read: 
    Subd. 13.  Crossover refunding obligations may be issued by 
a municipality without regard to the limitations in subdivisions 
4 to 10.  The proceeds of crossover refunding obligations, less 
any proceeds applied to payment of the costs of their issuance, 
shall be deposited in a debt service fund irrevocably 
appropriated to the payment of principal of and interest on the 
refunding obligations until the date the proceeds are applied to 
payment of the obligations to be refunded.  The debt service 
fund shall be maintained as an escrow account with a suitable 
financial institution within or without the state and amounts in 
it shall be invested in securities described in subdivision 8 or 
in an investment contract or similar agreement with a bank or 
insurance company meeting the requirements of section 475.66, 
subdivision 3, clause (f).  Excess proceeds, if any, of the tax 
levy pursuant to section 475.61, subdivision 1, made with 
respect to the obligations to be refunded, and any other 
available amounts, may be deposited in the escrow account.  In 
the resolution authorizing the issuance of crossover refunding 
obligations, the governing body may pledge to their payment any 
source of payment of the obligations to be refunded.  The 
resolution may provide that the refunding obligations are 
payable solely from the escrow account prior to the date 
scheduled for payment of the obligations to be refunded and that 
the obligations to be refunded shall not be discharged if the 
amounts on deposit in the escrow account on that date are 
insufficient.  Subdivisions 11 and 12 shall not apply to any 
crossover refunding obligations, or the obligations to be 
refunded.  Subdivision 12 applies to crossover refunding 
obligations, but the present value of debt service on the 
refunding and refunded obligations shall be determined as of the 
date the proceeds are applied to payment of the obligations to 
be refunded.  Subject to section 475.61, subdivision 3, in the 
case of general obligation bonds, taxes shall be levied pursuant 
to section 475.61 and appropriated to the debt service fund in 
the amounts needed, together with estimated investment income of 
the debt service fund and any other revenues available upon 
discharge of the obligations refunded, to pay when due the 
principal of and interest on the refunding obligations.  The 
levy so imposed may be reduced by earnings to be received from 
investments on hand in the debt service fund to the extent the 
applicable recording officer certifies to the county auditor 
that the earnings are expected to be received in amounts and at 
such times as to be sufficient, together with the remaining 
levy, to satisfy the purpose of the levy requirements under 
section 475.61. 
    Sec. 8.  Minnesota Statutes 1992, section 501B.25, is 
amended to read: 
    501B.25 [APPLICATION.] 
    Sections 501B.16 to 501B.23 do not apply to trusts in the 
nature of mortgages or to trusts commonly known as voting trusts.
Sections 501B.16 to 501B.23 apply, however, unless otherwise 
provided in the trust instrument, to trusts established in 
connection with bonds issued under chapter 474 469, and, at the 
sole election of the issuer of bonds issued under chapter 469, 
without a trust indenture, to the pledges and other bond 
covenants made by the issuer in one or more resolutions with 
respect to the bonds.  If the issuer so elects to apply sections 
501B.16 to 501B.23, for such purposes only, the pledges and 
other bond covenants shall be deemed the "trust," the resolution 
or resolutions shall be deemed the "trust instrument," and the 
issuer shall be deemed the "trustee" notwithstanding the absence 
of any fiduciary responsibility owed by the "issuer" toward the 
bondholders.  Nothing in this section shall preclude the issuer 
from seeking approval under sections 501B.16 to 501B.23 of the 
creation of any express trust under a trust indenture and the 
appointment of a trustee thereunder to act as a fiduciary for 
the benefit of the bondholders.  As used in sections 501B.16 to 
501B.23, "person" includes an artificial as well as a natural 
person, and "beneficiary" includes a bondholder. 
    Sec. 9.  [CERTAIN LEASE PURCHASE PROPERTY.] 
    Notwithstanding any other law to the contrary, real 
property acquired by a city under a lease purchase agreement is 
exempt from ad valorem taxation if the following conditions are 
met: 
    (1) the city's population is less than 1,000; 
    (2) title to the property is held by the city; 
    (3) the term of the lease is more than 15 years; 
    (4) the city has exclusive right to purchase the property; 
and 
    (5) the leased property is attached to improvements owned 
in fee simple by the city. 
    This exemption applies as long as and to the extent that 
the property is used by the city and devoted to a public use and 
to the extent it is not subleased to any private individual, 
association, or corporation in connection with a business 
operated for profit. 
    Sec. 10.  [1994 ENTITLEMENT ALLOCATION.] 
    The deduction required under Minnesota Statutes, section 
474A.04, subdivision 1a, does not apply to an entitlement 
issuer's 1994 entitlement allocation if: 
    (1) the entitlement issuer's 1992 entitlement allocation is 
carried forward and not permanently issued by the end of 
calendar year 1993; and 
    (2) federal authorization for mortgage bonds is not 
effective before October 1, 1993. 
    Sec. 11.  [REPEALER.] 
    Minnesota Rules, part 2875.3532, is repealed. 
    Sec. 12.  [EFFECTIVE DATE.] 
    Sections 1 to 8 and 11 are effective the day following 
final enactment.  Section 9 is effective for the 1993 
assessment, taxes payable in 1994 and thereafter. 
    Presented to the governor May 15, 1993 
    Signed by the governor May 19, 1993, 8:21 a.m.