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Office of the Revisor of Statutes

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

                              CHAPTER 1-H.F.No. 45 
                  An act relating to taxation; making technical 
                  corrections and clarifications; making administrative 
                  changes; amending Minnesota Statutes 1994, sections 
                  270.0604, subdivision 4; 273.11, subdivision 16; 
                  273.121; 290.067, subdivision 1; and 297B.01, 
                  subdivision 8; and Laws 1994, chapter 587, article 11, 
                  section 9, subdivision 5. 
        BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
           Section 1.  Minnesota Statutes 1994, section 270.0604, 
        subdivision 4, is amended to read: 
           Subd. 4.  [ISSUANCE.] The issuance of revenue notices is at 
        the discretion of the commissioner of revenue.  The commissioner 
        shall establish procedures governing the issuance of revenue 
        notices and tax information bulletins.  At least one week before 
        publication of a revenue notice in the State Register, the 
        commissioner shall provide a copy of the notice to the chairs of 
        the taxes committee of the house of representatives and the 
        taxes and tax laws committee of the senate. 
           Sec. 2.  Minnesota Statutes 1994, section 273.11, 
        subdivision 16, is amended to read: 
           Subd. 16.  [VALUATION EXCLUSION FOR CERTAIN IMPROVEMENTS.] 
        Improvements to homestead property made before January 2, 2003, 
        shall be fully or partially excluded from the value of the 
        property for assessment purposes provided that (1) the house is 
        at least 35 years old at the time of the improvement and (2) 
        either (a) the assessor's estimated market value of the house on 
        January 2 of the current year is equal to or less than $150,000, 
        or (b) if the estimated market value of the house is over 
        $150,000 market value but is less than $300,000 on January 2 of 
        the current year, the property qualifies if 
           (i) it is located in a city or town in which 50 percent or 
        more of the homes were constructed before 1960 based upon the 
        1990 federal census, and 
           (ii) the city or town's median family income based upon the 
        1990 federal census is less than the statewide median family 
        income based upon the 1990 federal census. 
           Any house which has an estimated market value of $300,000 
        or more on January 2 of the current year is not eligible to 
        receive any property valuation exclusion under this section.  
        For purposes of determining this eligibility, "house" means land 
        and buildings.  
           The age of a residence is the number of years that the 
        residence has existed at its present site.  In the case of an 
        owner-occupied duplex or triplex, the improvement is eligible 
        regardless of which portion of the property was improved. 
           If the property lies in a jurisdiction which is subject to 
        a building permit process, a building permit must have been 
        issued prior to commencement of the improvement.  Any 
        improvement must add at least $1,000 to the value of the 
        property to be eligible for exclusion under this subdivision.  
        Only improvements to the structure which is the residence of the 
        qualifying homesteader or construction of or improvements to no 
        more than one two-car garage per residence qualify for the 
        provisions of this subdivision.  If an improvement was begun 
        between January 2, 1992, and January 2, 1993, any value added 
        from that improvement for the January 1994 and subsequent 
        assessments shall qualify for exclusion under this subdivision 
        provided that a building permit was obtained for the improvement 
        between January 2, 1992, and January 2, 1993.  Whenever a 
        building permit is issued for property currently classified as 
        homestead, the issuing jurisdiction shall notify the property 
        owner of the possibility of valuation exclusion under this 
        subdivision.  The assessor shall require an application, 
        including documentation of the age of the house from the owner, 
        if unknown by the assessor.  The application may be filed 
        subsequent to the date of the building permit provided that the 
        application is must be filed prior to July 1 of the next 
        assessment date year in which the market value from the 
        qualifying improvement is added to that property's assessment. 
           After the adjournment of the 1994 county board of 
        equalization meetings, no exclusion may be granted for an 
        improvement by a local board of review or county board of 
        equalization unless (1) a building permit was issued prior to 
        the commencement of the improvement if the jurisdiction requires 
        a building permit, and (2) an application was completed on a 
        timely basis.  No abatement of the taxes for qualifying 
        improvements may be granted by a county board unless (1) a 
        building permit was issued prior to commencement of the 
        improvement if the jurisdiction requires a building permit, and 
        (2) an application was completed on a timely basis. 
           The assessor shall note the qualifying value of each 
        improvement on the property's record, and the sum of those 
        amounts shall be subtracted from the value of the property in 
        each year for ten years after the improvement has been made, at 
        which time an amount equal to 20 percent of the qualifying value 
        shall be added back in each of the five subsequent assessment 
        years.  The valuation exclusion shall terminate whenever (1) the 
        property is sold, or (2) the property is reclassified to a class 
        which does not qualify for treatment under this subdivision. 
        Improvements made by an occupant who is the purchaser of the 
        property under a conditional purchase contract do not qualify 
        under this subdivision unless the seller of the property is a 
        governmental entity.  The qualifying value of the property shall 
        be computed based upon the increase from that structure's market 
        value as of January 2 preceding the acquisition of the property 
        by the governmental entity. 
           The total qualifying value for a homestead may not exceed 
        $50,000.  The total qualifying value for a homestead with a 
        house that is less than 70 years old may not exceed $25,000.  
        The term "qualifying value" means the increase in estimated 
        market value resulting from the improvement if the improvement 
        occurs when the house is at least 70 years old, or one-half of 
        the increase in estimated market value resulting from the 
        improvement otherwise.  The $25,000 and $50,000 maximum 
        qualifying value under this subdivision may result from up to 
        three separate improvements to the homestead.  The application 
        shall state, in clear language, that if more than three 
        improvements are made to the qualifying property, a taxpayer may 
        choose which three improvements are eligible, provided that 
        after the taxpayer has made the choice and any valuation 
        attributable to those improvements has been excluded from 
        taxation, no further changes can be made by the taxpayer. 
           If 50 percent or more of the square footage of a structure 
        is voluntarily razed or removed, the valuation increase 
        attributable to any subsequent improvements to the remaining 
        structure does not qualify for the exclusion under this 
        subdivision.  If a structure is unintentionally or accidentally 
        destroyed by a natural disaster, the property is eligible for an 
        exclusion under this subdivision provided that the structure was 
        not completely destroyed.  The qualifying value on property 
        destroyed by a natural disaster shall be computed based upon the 
        increase from that structure's market value as determined on 
        January 2 of the year in which the disaster occurred.  A 
        property receiving benefits under the homestead disaster 
        provisions under section 273.123 is not disqualified from 
        receiving an exclusion under this subdivision.  If any 
        combination of improvements made to a structure after January 1, 
        1993, increases the size of the structure by 100 percent or 
        more, the valuation increase attributable to the portion of the 
        improvement that causes the structure's size to exceed 100 
        percent does not qualify for exclusion under this subdivision. 
           Sec. 3.  Minnesota Statutes 1994, 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.  
        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:  (1) the market 
        value, (2) the limited market value under section 273.11, 
        subdivision 1a, (3) the qualifying amount of any improvements 
        under section 273.11, subdivision 16, (4) the market value 
        subject to taxation after subtracting the amount of any 
        qualifying improvements, (5) the new classification, (6) a note 
        that if the property is homestead and at least 35 years old, 
        improvements made to the property may be eligible for a 
        valuation exclusion under section 273.11, subdivision 16, (7) 
        the assessor's office address, and (7)(8) 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. 4.  Minnesota Statutes 1994, section 290.067, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [AMOUNT OF CREDIT.] (a) A taxpayer may take 
        as a credit against the tax 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 except that in 
        determining whether the child qualified as a dependent, income 
        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 taxpayer, and the provisions of 
        section 32(b)(1)(D) of the Internal Revenue Code do not apply. 
           (b) If a child who is six years of age or less at the close 
        of the taxable year is cared for at a licensed family day care 
        home operated by the child's parent, the taxpayer is deemed to 
        have paid employment-related expenses.  If the child is 16 
        months old or younger at the close of the taxable year, the 
        amount of expenses deemed to have been paid equals the maximum 
        limit for one qualified individual under section 21(c) and (d) 
        of the Internal Revenue Code.  If the child is older than 16 
        months of age but not older than six years of age at the close 
        of the taxable year, the amount of expenses deemed to have been 
        paid equals the amount the licensee would charge for the care of 
        a child of the same age for the same number of hours of care.  
           (c) If a married couple: 
           (1) has a child one year of age or less who has not 
        attained the age of one year at the close of the taxable year; 
           (2) files a joint tax return for the taxable year; and 
           (3) does not participate in a dependent care assistance 
        program as defined in section 129 of the Internal Revenue Code, 
        in lieu of the actual employment related expenses paid for that 
        child under paragraph (a) or the deemed amount under paragraph 
        (b), the lesser of (i) the combined earned income of the couple 
        or (ii) $2,400 will be deemed to be the employment related 
        expense paid for that child.  The earned income limitation of 
        section 21(d) of the Internal Revenue Code shall not apply to 
        this deemed amount.  These deemed amounts apply regardless of 
        whether any employment-related expenses have been paid.  
           (d) If the taxpayer is not required and does not file a 
        federal individual income tax return for the tax year, no credit 
        is allowed for any amount paid to any person unless: 
           (1) the name, address, and taxpayer identification number 
        of the person are included on the return claiming the credit; or 
           (2) if the person is an organization described in section 
        501(c)(3) of the Internal Revenue Code and exempt from tax under 
        section 501(a) of the Internal Revenue Code, the name and 
        address of the person are included on the return claiming the 
        credit.  
        In the case of a failure to provide the information required 
        under the preceding sentence, the preceding sentence does not 
        apply if it is shown that the taxpayer exercised due diligence 
        in attempting to provide the information required. 
           In the case of a nonresident, part-year resident, or a 
        person who has earned income not subject to tax under this 
        chapter, 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. 5.  Minnesota Statutes 1994, section 297B.01, 
        subdivision 8, is amended to read: 
           Subd. 8.  [PURCHASE PRICE.] "Purchase price" means the 
        total consideration valued in money for a sale, whether paid in 
        money or otherwise, provided however, that when.  The purchase 
        price excludes the amount of a manufacturer's rebate paid or 
        payable to the purchaser.  If a motor vehicle is taken in trade 
        as a credit or as part payment on a motor vehicle taxable 
        under Laws 1971, chapter 853 this chapter, the credit or 
        trade-in value allowed by the person selling the motor vehicle 
        shall be deducted from the total selling price to establish the 
        purchase price of the vehicle being sold and the trade-in 
        allowance allowed by the seller shall constitute the purchase 
        price of the motor vehicle accepted as a trade-in.  The purchase 
        price in those instances where the motor vehicle is acquired by 
        gift or by any other transfer for a nominal or no monetary 
        consideration shall also include the average value of similar 
        motor vehicles, established by standards and guides as 
        determined by the motor vehicle registrar.  The purchase price 
        in those instances where a motor vehicle is manufactured by a 
        person who registers it under the laws of this state shall mean 
        the manufactured cost of such motor vehicle and manufactured 
        cost shall mean the amount expended for materials, labor and 
        other properly allocable costs of manufacture, except that in 
        the absence of actual expenditures for the manufacture of a part 
        or all of the motor vehicle, manufactured costs shall mean the 
        reasonable value of the completed motor vehicle.  
           The term "purchase price" shall not include the portion of 
        the value of a motor vehicle due solely to modifications 
        necessary to make the motor vehicle handicapped accessible.  The 
        term "purchase price" shall not include the transfer of a motor 
        vehicle by way of gift between a husband and wife or parent and 
        child, nor shall it include the transfer of a motor vehicle by a 
        guardian to a ward when there is no monetary consideration and 
        the title to such vehicle was registered in the name of the 
        guardian, as guardian, only because the ward was a minor.  There 
        shall not be included in "purchase price" the amount of any tax 
        imposed by the United States upon or with respect to retail 
        sales whether imposed upon the retailer or the consumer.  
           Sec. 6.  Laws 1994, chapter 587, article ll, section 9, 
        subdivision 5, is amended to read: 
           Subd. 5.  [PUBLIC INSTRUMENTALITY.] Revenue bonds of the 
        authority are deemed and must be treated as instrumentalities of 
        the public government agency; and as such, together with 
        interest on the bonds, are exempt from taxation. 
           Sec. 7.  [EFFECTIVE DATE.] 
           Sections 1 and 5 are effective the day following final 
        enactment.  Section 2 is effective July 1, 1994, and thereafter. 
        Section 3 is effective beginning with 1995 valuation notices.  
        Section 4 is effective for taxable years beginning after 
        December 31, 1993.  Section 6 is effective September 21, 1994. 
           Presented to the governor February 13, 1995 
           Signed by the governor February 14, 1995, 11:32 a.m.