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Office of the Revisor of Statutes

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

                             CHAPTER 31-H.F.No. 293 
                  An act relating to taxation; making technical and 
                  administrative changes and corrections; amending 
                  Minnesota Statutes 1996, sections 60A.15, subdivision 
                  2a; 60E.04, subdivision 4; 69.021, subdivision 2; 
                  270.07, subdivision 3; 272.02, subdivision 4; 272.04, 
                  subdivision 1; 273.032; 273.124, subdivisions 1 and 
                  13; 273.1392; 273.1398, subdivision 1; 275.011, 
                  subdivision 1; 275.065, subdivision 3; 275.295, 
                  subdivision 3; 276A.01, subdivision 7; 277.21, 
                  subdivision 3; 287.22; 289A.01; 289A.08, subdivision 
                  11; 289A.09, subdivision 2; 289A.10, subdivision 1; 
                  289A.11, subdivision 1; 289A.18, subdivision 2; 
                  289A.19, subdivisions 1, 2, 3, and 4; 289A.35; 
                  289A.38, subdivision 7; 289A.65, subdivision 1; 
                  290.01, subdivisions 2 and 4a; 290.06, subdivision 22; 
                  290.17, subdivision 2; 290.92, subdivision 24; 
                  290A.04, subdivision 6; 295.50, subdivisions 3, 4, 7, 
                  13, and by adding a subdivision; 295.51, subdivision 
                  1; 295.52, subdivision 1b; 295.53, subdivisions 1, 3, 
                  and 5; 295.54, subdivision 1; 295.582; 297A.01, 
                  subdivision 1; 297A.09; 297A.12; 297A.14, subdivision 
                  4; 297A.22; 297A.23; 297A.25, subdivisions 1, 2, 3, 6, 
                  8, 9, 11, 16, 17, 18, 19, 20, 21, 23, 26, 27, 28, 29, 
                  30, 34, 35, 38, 39, 40, 41, 42, 43, 46, 49, 51, 52, 
                  53, 57, and 61; 297A.256, subdivision 1; 297A.44, 
                  subdivision 1; 297B.03; 297B.035, subdivision 3; 
                  297B.11; 299F.21, subdivision 2; 414.033, subdivisions 
                  7 and 12; 469.177, subdivision 9; 473.388, subdivision 
                  7; and 473F.02, subdivision 7. 
        BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
                                   ARTICLE 1
                             INCOME AND WITHHOLDING
           Section 1.  Minnesota Statutes 1996, section 270.07, 
        subdivision 3, is amended to read: 
           Subd. 3.  [ADDITIONAL POWERS OF COMMISSIONER.] 
        Notwithstanding any other provision of law the commissioner of 
        revenue may, 
           (a) based upon the administrative costs of processing, 
        determine minimum standards for the determination of additional 
        tax for which an order shall be issued, and 
           (b) based upon collection costs as compared to the amount 
        of tax involved, determine minimum standards of collection, and 
           (c) based upon the administrative costs of processing, 
        determine the minimum amount of refunds for which an order shall 
        be issued and refund made where no claim therefor has been 
        filed, and 
           (d) cancel any amounts below these minimum standards 
        determined under (a) and (b) hereof, and 
           (e) based upon the inability of a taxpayer to pay a 
        delinquent tax liability, abate the liability if the taxpayer 
        agrees to perform uncompensated public service work for a state 
        agency, a political subdivision or public corporation of this 
        state, or a nonprofit educational, medical, or social service 
        agency.  The department of corrections shall administer the work 
        program.  No benefits under chapter 176 or 268 shall be 
        available, but a claim authorized under section 3.739 may be 
        made by the taxpayer.  The state may not enter into any 
        agreement that has the purpose of or results in the displacement 
        of public employees by a delinquent taxpayer under this 
        section.  The state must certify to the appropriate bargaining 
        agent or employees, as applicable, that the work performed by a 
        delinquent taxpayer will not result in the displacement of 
        currently employed workers or layoff from a substantially 
        equivalent position, including partial displacement such as 
        reduction in hours of nonovertime work, wages, or other 
        employment benefits.  The program authorized under this 
        paragraph terminates June 30, 1998. 
           Sec. 2.  Minnesota Statutes 1996, section 289A.01, is 
        amended to read: 
           289A.01 [APPLICATION OF CHAPTER.] 
           This chapter applies to taxes laws administered by or paid 
        to the commissioner under chapters 290, 290A, 291, and 297A, and 
        sections 298.01 and 298.015. 
           Sec. 3.  Minnesota Statutes 1996, section 289A.08, 
        subdivision 11, is amended to read: 
           Subd. 11.  [INFORMATION INCLUDED IN INCOME TAX RETURN.] The 
        return must state the name of the taxpayer, or taxpayers, if the 
        return is a joint return, and the address of the taxpayer in the 
        same name or names and same address as the taxpayer has used in 
        making the taxpayer's income tax return to the United States, 
        and must state the social security number of the taxpayer, or 
        taxpayers, if a social security number has been issued by the 
        United States with respect to the taxpayers, and must state the 
        amount of the taxable income of the taxpayer as it appears on 
        the federal return for the taxable year to which the Minnesota 
        state return applies.  The taxpayer must attach to the 
        taxpayer's Minnesota state income tax return a copy of the 
        federal income tax return that the taxpayer has filed or is 
        about to file for the period, unless the taxpayer is eligible to 
        telefile the federal return and does file the Minnesota return 
        by telefiling. 
           Sec. 4.  Minnesota Statutes 1996, section 289A.09, 
        subdivision 2, is amended to read: 
           Subd. 2.  [WITHHOLDING STATEMENT TO EMPLOYEE OR PAYEE AND 
        TO COMMISSIONER.] (a) A person required to deduct and withhold 
        from an employee a tax under section 290.92, subdivision 2a or 
        3, or 290.923, subdivision 2, or who would have been required to 
        deduct and withhold a tax under section 290.92, subdivision 2a 
        or 3, or persons required to withhold tax under section 290.923, 
        subdivision 2, determined without regard to section 290.92, 
        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 section 290.92, 
        subdivision 2a or 3, or 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 
        under section 290.92, subdivision 20, must give every employee 
        or person receiving royalty payments in respect to the 
        remuneration paid by the person to the 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 the 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: 
           (1) name of the person; 
           (2) the name of the employee or payee and the employee's or 
        payee's social security account number; 
           (3) the total amount of wages as that term is defined in 
        section 290.92, subdivision 1, paragraph (1); the total amount 
        of remuneration subject to withholding under section 290.92, 
        subdivision 20; the amount of sick pay as required under section 
        6051(f) of the Internal Revenue Code; and the amount of 
        royalties subject to withholding under section 290.923, 
        subdivision 2; and 
           (4) the total amount deducted and withheld as tax under 
        section 290.92, subdivision 2a or 3, or 290.923, subdivision 2. 
           (b) The statement required to be furnished by this 
        paragraph with respect to any remuneration must be furnished at 
        those times, must contain the information required, and must be 
        in the form the commissioner prescribes. 
           (c) The commissioner may prescribe rules providing for 
        reasonable extensions of time, not in excess of 30 days, to 
        employers or payers required to give the statements to their 
        employees or payees under this subdivision. 
           (d) A duplicate of any statement made under this 
        subdivision and in accordance with rules prescribed by the 
        commissioner, along with a reconciliation in the form the 
        commissioner prescribes of the statements for the calendar year, 
        including a reconciliation of the quarterly returns required to 
        be filed under subdivision 1, must be filed with the 
        commissioner on or before February 28 of the year after the 
        payments were made.  
           (e) If an employer cancels the employer's Minnesota 
        withholding account number required by section 290.92, 
        subdivision 24, the information required by paragraph (d), must 
        be filed with the commissioner within 30 days of the end of the 
        quarter in which the employer cancels its account number. 
           (f) The employer must submit the statements required to be 
        sent to the commissioner on magnetic media, if the magnetic 
        media was required to satisfy the federal reporting requirements 
        of section 6011(e) of the Internal Revenue Code and the 
        regulations issued under it. 
           Sec. 5.  Minnesota Statutes 1996, section 289A.10, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [RETURN REQUIRED.] In the case of a 
        decedent who has an interest in property with a situs in 
        Minnesota, the personal representative must submit a Minnesota 
        estate tax return to the commissioner, on a form prescribed by 
        the commissioner, in instances in which a federal estate tax 
        return is required to be filed. 
           The return must be accompanied by a federal estate tax 
        return, a schedule of the assets in the estate at their date of 
        death values, and must contain a computation of the Minnesota 
        estate tax due.  The return must be signed by the personal 
        representative. 
           Sec. 6.  Minnesota Statutes 1996, section 289A.18, 
        subdivision 2, is amended to read: 
           Subd. 2.  [WITHHOLDING RETURNS, ENTERTAINER WITHHOLDING 
        RETURNS, RETURNS FOR WITHHOLDING FROM PAYMENTS TO OUT-OF-STATE 
        CONTRACTORS, AND WITHHOLDING RETURNS FROM PARTNERSHIPS AND S 
        CORPORATIONS.] Withholding returns for the first, second, and 
        third quarters are due on or before the last day of the month 
        following the close of the quarterly period.  However, if the 
        return shows timely deposits in full payment of the taxes due 
        for that period, the returns for the first, second, and third 
        quarters may be filed on or before the tenth day of the second 
        calendar month following the period and.  The return for the 
        fourth quarter may must be filed on or before the 28th day of 
        the second calendar month following the period.  An employer, in 
        preparing a quarterly return, may take credit for monthly 
        deposits previously made for that quarter.  Entertainer 
        withholding tax returns are due within 30 days after each 
        performance.  Returns for withholding from payments to 
        out-of-state contractors are due within 30 days after the 
        payment to the contractor.  Returns for withholding by 
        partnerships are due on or before the due date specified for 
        filing partnership returns.  Returns for withholding by S 
        corporations are due on or before the due date specified for 
        filing corporate franchise tax returns. 
           Sec. 7.  Minnesota Statutes 1996, section 289A.19, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [FIDUCIARY INCOME, ENTERTAINMENT TAX, AND 
        INFORMATION RETURNS.] When, in the commissioner's judgment, good 
        cause exists, the commissioner may extend the time for 
        filing fiduciary income tax returns, entertainment tax returns, 
        and information returns for not more than six months.  If an 
        extension to file the federal fiduciary income tax return or 
        information return has been granted under section 6081 of the 
        Internal Revenue Code, the time for filing the state return is 
        extended for that period.  The commissioner may require the 
        taxpayer to file a tentative return when the regularly required 
        return is due, and to pay a tax on the basis of the tentative 
        return at the times required for the payment of taxes on the 
        basis of the regularly required return from the taxpayer.  
           Sec. 8.  Minnesota Statutes 1996, section 289A.19, 
        subdivision 2, is amended to read: 
           Subd. 2.  [CORPORATE FRANCHISE AND MINING COMPANY TAXES.] 
        The commissioner may grant Corporations or mining companies 
        shall receive an extension of up to seven months for filing the 
        return of a corporation subject to tax under chapter 290 or a 
        mining company for filing the return of a mining company subject 
        to tax under sections 298.01 and 298.015 if:  
           (1) the corporation or mining company files a tentative 
        return when the regularly required return is due; 
           (2) the corporation or mining company pays the tax on the 
        basis of the tentative return and at least 90 percent of the 
        amount of tax, determined without regard to any prepayment of 
        tax, shown on the tentative return, or the amount of tax paid on 
        or before the regular due date of the return, is at least 90 
        percent of the amount shown on the corporation's or mining 
        company's regularly required return; 
           (3) (2) the balance due shown on the regularly required 
        return is paid on or before the extended due date of the return; 
        and 
           (4) (3) interest on any balance due is paid at the rate 
        specified in section 270.75 from the regular due date of the 
        return until the tax is paid. 
           Sec. 9.  Minnesota Statutes 1996, section 289A.19, 
        subdivision 3, is amended to read: 
           Subd. 3.  [WITHHOLDING RETURNS.] The commissioner shall 
        grant an automatic extension of 60 days to file a withholding 
        tax return with the commissioner provided all the withholding 
        taxes have been paid by the date prescribed by section 289A.20, 
        subdivision 2.  In any case where good cause exists, the 
        commissioner may grant an extension of time of not more than 60 
        days for filing a withholding return.  
           Sec. 10.  Minnesota Statutes 1996, section 289A.19, 
        subdivision 4, is amended to read: 
           Subd. 4.  [ESTATE TAX RETURNS.] Where good cause exists, 
        the commissioner may extend the time for filing an estate tax 
        return for not more than six months.  When an extension to file 
        the federal estate tax return has been granted under section 
        6081 of the Internal Revenue Code, the time for filing the 
        estate tax return is extended for that period.  
           Sec. 11.  Minnesota Statutes 1996, section 289A.38, 
        subdivision 7, is amended to read: 
           Subd. 7.  [FEDERAL TAX CHANGES.] If the amount of income, 
        items of tax preference, deductions, or credits for any year of 
        a taxpayer as reported to the Internal Revenue Service is 
        changed or corrected by the commissioner of Internal Revenue or 
        other officer of the United States or other competent authority, 
        or where a renegotiation of a contract or subcontract with the 
        United States results in a change in income, items of tax 
        preference, deductions, or credits, or withholding tax, or, in 
        the case of estate tax, where there are adjustments to the 
        taxable estate resulting in a change to the credit for state 
        death taxes, the taxpayer shall report the change or correction 
        or renegotiation results in writing to the commissioner.  The 
        report must be submitted within 180 days after the final 
        determination and must be in the form of either an amended 
        Minnesota return conceding the accuracy of the federal 
        determination or a letter detailing how the federal 
        determination is incorrect or does not change the Minnesota 
        tax.  A taxpayer filing an amended federal tax return must also 
        file a copy of the amended return with the commissioner of 
        revenue within 180 days after filing the amended return. 
           Sec. 12.  Minnesota Statutes 1996, section 289A.65, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [TAXPAYER RIGHT TO RECONSIDERATION.] A 
        taxpayer may obtain reconsideration by the commissioner of an 
        order assessing tax, a denial of a request for abatement of 
        penalty or interest, or a denial of a claim for refund by filing 
        an administrative appeal under subdivision 4.  A taxpayer cannot 
        obtain reconsideration under this section if the action taken by 
        the commissioner is the outcome of an administrative appeal. 
           Sec. 13.  Minnesota Statutes 1996, section 290.01, 
        subdivision 2, is amended to read: 
           Subd. 2.  [PERSON.] The term "person" includes individuals, 
        fiduciaries, estates, and trusts, and partnerships not included 
        in the definition of corporations and may, where the context 
        requires, include corporations as herein defined. 
           Sec. 14.  Minnesota Statutes 1996, section 290.01, 
        subdivision 4a, is amended to read: 
           Subd. 4a.  [FINANCIAL INSTITUTION.] (a) "Financial 
        institution" means: 
           (1) a holding company; 
           (2) any regulated financial corporation; or 
           (3) any other corporation organized under the laws of the 
        United States or organized under the laws of this state or any 
        other state or country that is carrying on the business of a 
        financial institution. 
           (b) "Holding company" means any corporation registered 
        under the Federal Bank Holding Company Act of 1956, as amended, 
        or registered as a savings and loan holding company under the 
        Federal National Housing Act, as amended, or a federal savings 
        bank holding company. 
           (c) "Regulated financial corporation" means an institution, 
        the deposits or accounts of which are insured under the Federal 
        Deposit Insurance Act or by the Federal Savings and Loan 
        Insurance Corporation, any institution which is a member of a 
        Federal Home Loan Bank, any other bank or thrift institution 
        incorporated or organized under the laws of any state or any 
        foreign country which is engaged in the business of receiving 
        deposits, any corporation organized under the provisions of 
        United States Code, title 12, sections 611 to 631 (Edge Act 
        Corporations), and any agency of a foreign depository as defined 
        in United States Code, title 12, section 3101. 
           (d) "Business of a financial institution" means: 
           (1) the business that any corporation organized under the 
        authority of the United States or organized under the laws of 
        this state or any other state or country does or has authority 
        to do which is substantially similar to the business which a 
        corporation may be created to do under chapters 46 to 55 or any 
        business which a corporation is authorized to do by those laws; 
        or 
           (2) the business that any corporation organized under the 
        authority of the United States or organized under the laws of 
        this state or any other state or country does or has authority 
        to do if the corporation derives more than 50 percent of its 
        gross income from lending activities (including discounting 
        obligations) in substantial competition with the businesses 
        described in clause (1).  For purposes of this clause, the 
        computation of the gross income of a corporation does not 
        include income from nonrecurring, extraordinary items. 
           Sec. 15.  Minnesota Statutes 1996, section 290.06, 
        subdivision 22, is amended 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 7, clause (2), 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, modified by the addition 
        required by section 290.01, subdivision 19a, clause (1), and the 
        subtraction allowed by section 290.01, subdivision 19b, clause 
        (1), 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 
        (c), 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.  To the extent the total 
        lump sum distribution defined in section 290.032, subdivision 1, 
        includes lump sum distributions received in prior years or is 
        all or in part an annuity contract, the reduction to the tax on 
        the lump sum distribution allowed under section 290.032, 
        subdivision 2, includes tax paid to another state that is 
        properly apportioned to that distribution. 
           (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. 
           (g) For the purposes of this subdivision, a resident 
        shareholder of a corporation having a valid election in effect 
        under section 1362 of the Internal Revenue Code must be 
        considered to have paid a tax imposed on the shareholder in an 
        amount equal to the shareholder's pro rata share of any net 
        income tax paid by the S corporation to another state.  For the 
        purposes of the preceding sentence, the term "net income tax" 
        means any tax imposed on or measured by a corporation's net 
        income. 
           (h) For the purposes of this subdivision, a resident member 
        partner of a limited liability company an entity taxed as a 
        partnership under the Internal Revenue Code must be considered 
        to have paid a tax imposed on the member partner in an amount 
        equal to the member's partner's pro rata share of any net income 
        tax paid by the limited liability company partnership to a 
        another state that does not measure the income of the member of 
        the limited liability company by reference to the income of the 
        limited liability company.  For purposes of the preceding 
        sentence, the term "net income" tax means any tax imposed on or 
        measured by a limited liability company's partnership's net 
        income. 
           (i) For the purposes of this subdivision, "another state" 
        includes the District of Columbia, but does not include Puerto 
        Rico or the several territories organized by Congress. 
           (j) The limitations on the credit in paragraphs (b), (c), 
        and (d), are imposed on a state by state basis. 
           Sec. 16.  Minnesota Statutes 1996, 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.  
           Severance pay shall be considered income from labor or 
        personal or professional services. 
           (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, 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) 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 goodwill or income from a covenant not 
        to compete that is connected with a business operating all or 
        partially in Minnesota is allocated to this state to the extent 
        that the income from the business in the year preceding the year 
        of sale was assignable to Minnesota under subdivision 3.  
           When an employer pays an employee for a covenant not to 
        compete, the income allocated to this state is in the ratio of 
        the employee's service in Minnesota in the calendar year 
        preceding leaving the employment of the employer over the total 
        services performed by the employee for the employer in that year.
           (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, the Minnesota state lottery, and lawful gambling as 
        defined in section 349.12, subdivision 24, conducted within the 
        boundaries of the state of Minnesota shall be assigned to this 
        state.  
           (f) (e) All items of gross income not covered in paragraphs 
        (a) to (e) (d) and not part of the taxpayer's income from a 
        trade or business shall be assigned to the taxpayer's domicile. 
           Sec. 17.  Minnesota Statutes 1996, section 290.92, 
        subdivision 24, is amended to read: 
           Subd. 24.  [APPLICATION FOR ACCOUNT NUMBER.] An employer, 
        or person withholding tax under section 290.923, desiring to 
        engage in business in Minnesota shall file with the commissioner 
        an application for a withholding account number on or before the 
        due date of the first payment required to be made under 
        subdivision 6 date the employer is required to withhold 
        Minnesota taxes under this section.  An application for an 
        account number must be made upon a form prescribed by the 
        commissioner.  It must give the name of the employer or payor, 
        the location of the place or places of business, the names, 
        addresses and social security numbers of the owners or partners, 
        or if the employer or payor is a corporation of the officers, or 
        if the employer or payor is a trust of the trustees, and other 
        information the commissioner may require.  The application must 
        be filed by the owner if the employer or payor is a natural 
        person; by a member or partner if the employer or payor is an 
        association or partnership; by a trustee if the employer or 
        payor be a trust, or by a person authorized to sign the 
        application if the employer or payor is a corporation. 
           No fee shall be charged for the application. 
           The account number is not assignable. 
           Sec. 18.  Minnesota Statutes 1996, section 290A.04, 
        subdivision 6, is amended to read: 
           Subd. 6.  [INFLATION ADJUSTMENT.] Beginning for property 
        tax refunds payable in calendar year 1996, the commissioner 
        shall annually adjust the dollar amounts of the income 
        thresholds and the maximum refunds under subdivisions 2 and 2a 
        for inflation.  The commissioner shall make the inflation 
        adjustments in accordance with section 290.06, subdivision 2d, 
        except that for purposes of this subdivision the percentage 
        increase shall be determined from the year ending on August 31 
        June 30, 1994, to the year ending on August 31 June 30 of the 
        year preceding that in which the refund is payable.  The 
        commissioner shall use the appropriate percentage increase to 
        annually adjust the income thresholds and maximum refunds under 
        subdivisions 2 and 2a for inflation without regard to whether or 
        not the income tax brackets are adjusted for inflation in that 
        year.  The commissioner shall round the thresholds and the 
        maximum amounts, as adjusted to the nearest $10 amount.  If the 
        amount ends in $5, the commissioner shall round it up to the 
        next $10 amount.  
           The commissioner shall annually announce the adjusted 
        refund schedule at the same time provided under section 290.06.  
        The determination of the commissioner under this subdivision is 
        not a rule under the administrative procedure act. 
           Sec. 19.  [EFFECTIVE DATE.] 
           Section 2 is effective the day following final enactment.  
        Section 3 is effective for taxable years beginning after 
        December 31, 1995.  Sections 5 and 10 are effective for estates 
        of decedents dying after the date of final enactment.  Sections 
        6 and 7 are effective for returns due after December 31, 1996.  
        Section 9 is effective for returns due after July 30, 1997.  
        Section 11 is effective for federal changes beginning after the 
        date of final enactment.  Section 12 is effective for actions of 
        the commissioner after the date of final enactment.  Sections 13 
        to 16 are effective for taxable years beginning after December 
        31, 1996.  Section 17 is effective for wages paid after December 
        31, 1997.  Section 18 is effective for property tax refunds 
        based on rents paid in 1997 and property taxes payable in 1998 
        and thereafter. 
                                   ARTICLE 2
                            SALES AND SPECIAL TAXES
           Section 1.  Minnesota Statutes 1996, section 60A.15, 
        subdivision 2a, is amended to read: 
           Subd. 2a.  [PROCEDURE FOR FILING AND ADJUSTMENT OF 
        STATEMENTS AND TAXES.] (a) Every insurer required to pay a 
        premium tax in this state shall make and file a statement of 
        estimated premium taxes for the period covered by the 
        installment tax payment.  Such statement shall be in the form 
        prescribed by the commissioner of revenue. 
           (b) On or before March 1, annually every insurer subject to 
        taxation under this section shall make an annual return for the 
        preceding calendar year setting forth such information as the 
        commissioner of revenue may reasonably require on forms 
        prescribed by the commissioner. 
           (c) On March 1, the insurer shall pay any additional amount 
        due for the preceding calendar year; if there has been an 
        overpayment, such overpayment may be credited without interest 
        on the estimated tax due April 15 1. 
           (d) If unpaid by this date, penalties as provided in 
        section 289A.60, subdivision 1, as it relates to withholding and 
        sales or use taxes, shall be imposed.  
           Sec. 2.  Minnesota Statutes 1996, section 60E.04, 
        subdivision 4, is amended to read: 
           Subd. 4.  [TAXATION.] (a) Each risk retention group is 
        liable for the payment of premium taxes and taxes on premiums of 
        direct business for risks resident or located within this state, 
        and shall report to the commissioner of revenue the net premiums 
        written for risks resident or located within this state.  The 
        risk retention group shall be subject to taxation, and any 
        applicable taxation-related fines and penalties, on the same 
        basis as a foreign admitted insurer. 
           (b) To the extent licensed agents or brokers are utilized 
        pursuant to section 60E.12, they shall report to the 
        commissioner of revenue the premiums for direct business for 
        risks resident or located within this state which the licensees 
        have placed with or on behalf of a risk retention group not 
        chartered in this state. 
           (c) To the extent that insurance agents or brokers are 
        utilized pursuant to section 60E.12, each agent or broker shall 
        keep a complete and separate record of all policies procured 
        from each risk retention group, which shall be open to 
        examination by the commissioner, as provided in section 
        60A.031 and by the commissioner of revenue.  These records 
        shall, for each policy and each kind of insurance provided, 
        include the following: 
           (1) the limit of liability; 
           (2) the time period covered; 
           (3) the effective date; 
           (4) the name of the risk retention group which issued the 
        policy; 
           (5) the gross premium charged; and 
           (6) the amount of return premiums, if any. 
           Sec. 3.  Minnesota Statutes 1996, section 69.021, 
        subdivision 2, is amended to read: 
           Subd. 2.  [REPORT OF PREMIUMS.] Each insurer, including 
        township and farmers mutual insurers where applicable, shall 
        return to the commissioner with its annual financial statement 
        the reports described in subdivision 1 certified by its 
        secretary and president or chief financial officer.  The 
        Minnesota Firetown Premium Report shall contain a true and 
        accurate statement of the total premium for all gross direct 
        fire, lightning, sprinkler leakage, and extended coverage 
        insurance of all domestic mutual insurers and the total premiums 
        for all gross direct fire, lightning, sprinkler leakage and 
        extended coverage insurance of all other insurers, less return 
        premiums and dividends received by them on that business written 
        or done during the preceding calendar year upon property located 
        within the state or brought into the state for temporary use.  
        The fire and extended coverage portion of multiperil and 
        multiple peril package premiums and all other combination 
        premiums shall be determined by applying percentages determined 
        by the commissioner or by rating bureaus recognized by the 
        commissioner.  The Minnesota Aid to Police Premium Report shall 
        contain a true and accurate statement of the total premiums, 
        less return premiums and dividends, on all direct business 
        received by such insurer in this state, or by its agents for it, 
        in cash or otherwise, during the preceding calendar year, with 
        reference to insurance written for perils described in section 
        69.011, subdivision 1, clause (f).  
           Sec. 4.  Minnesota Statutes 1996, section 289A.11, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [RETURN REQUIRED.] Except as provided in 
        section 289A.18, subdivision 4, for the month in which taxes 
        imposed by sections 297A.01 to 297A.44 chapter 297A are payable, 
        or for which a return is due, a return for the preceding 
        reporting period must be filed with the commissioner in the form 
        and manner the commissioner prescribes.  A person making sales 
        at retail at two or more places of business may file a 
        consolidated return subject to rules prescribed by the 
        commissioner.  In computing the dollar amount of items on the 
        return, the amounts are rounded off to the nearest whole dollar, 
        disregarding amounts less than 50 cents and increasing amounts 
        of 50 cents to 99 cents to the next highest dollar. 
           Notwithstanding this subdivision, a person who is not 
        required to hold a sales tax permit under chapter 297A and who 
        makes annual purchases of less than $18,500 that are subject to 
        the use tax imposed by section 297A.14, may file an annual use 
        tax return on a form prescribed by the commissioner.  If a 
        person who qualifies for an annual use tax reporting period is 
        required to obtain a sales tax permit or makes use tax purchases 
        in excess of $18,500 during the calendar year, the reporting 
        period must be considered ended at the end of the month in which 
        the permit is applied for or the purchase in excess of $18,500 
        is made and a return must be filed for the preceding reporting 
        period. 
           Sec. 5.  Minnesota Statutes 1996, section 289A.35, is 
        amended to read: 
           289A.35 [ASSESSMENTS.] 
           The commissioner shall make determinations, corrections, 
        and assessments with respect to state taxes, including interest, 
        additions to taxes, and assessable penalties.  The commissioner 
        may audit and adjust the taxpayer's computation of federal 
        taxable income, items of federal tax preferences, or federal 
        credit amounts to make them conform with the provisions of 
        chapter 290 or section 298.01.  If a taxpayer fails to file a 
        required return, the commissioner, from information in the 
        commissioner's possession or obtainable by the commissioner, may 
        make a return for the taxpayer.  The return will be prima facie 
        correct and valid.  If a return has been filed, the commissioner 
        shall examine the return and make any audit or investigation 
        that is considered necessary.  The commissioner may use 
        statistical or other sampling techniques consistent with 
        generally accepted accounting principles auditing standards in 
        examining returns or records and making assessments. 
           Sec. 6.  Minnesota Statutes 1996, section 297A.01, 
        subdivision 1, is amended to read: 
           Subdivision 1.  The following words, terms, and phrases 
        when used in sections 297A.01 to 297A.44 this chapter shall have 
        the meanings ascribed to them in this section except where the 
        context clearly indicates a different meaning. 
           Sec. 7.  Minnesota Statutes 1996, section 297A.09, is 
        amended to read: 
           297A.09 [PRESUMPTION OF TAX; BURDEN OF PROOF.] 
           For the purpose of the proper administration of sections 
        297A.01 to 297A.44 this chapter and to prevent evasion of the 
        tax, it shall be presumed that all gross receipts are subject to 
        the tax until the contrary is established.  The burden of 
        proving that a sale is not a sale at retail is upon the person 
        who makes the sale, but that person may take from the purchaser 
        an exemption certificate to the effect that the property 
        purchased is for resale or that the sale is otherwise exempt 
        from the application of the tax imposed by sections 297A.01 to 
        297A.44.  
           Sec. 8.  Minnesota Statutes 1996, section 297A.12, is 
        amended to read: 
           297A.12 [IMPROPER USE OF SUBJECT OF PURCHASE OBTAINED WITH 
        EXEMPTION CERTIFICATE.] 
           If a purchaser who gives an exemption certificate makes any 
        use of the subject of the purchase other than for a purpose 
        exempted by sections 297A.01 to 297A.44 under this chapter, such 
        use shall be deemed a retail sale by the purchaser as of the 
        time of first use by the purchaser, and the sales price to the 
        purchaser shall be deemed the gross receipts from such retail 
        sale.  If the sole nonexempt use is rental while holding for 
        sale, the purchaser shall include in the purchaser's gross 
        receipts the amount of the rental charged.  Upon subsequent sale 
        of such property, the seller shall include the entire amount of 
        gross receipts received therefrom without deduction of amounts 
        previously received as rentals.  
           Sec. 9.  Minnesota Statutes 1996, section 297A.14, 
        subdivision 4, is amended to read: 
           Subd. 4.  [DE MINIMIS EXEMPTION.] Purchases subject to use 
        tax under this section are exempt if (1) the purchase is made by 
        an individual for personal use, and (2) the total purchases that 
        are subject to the use tax do not exceed $770 in the calendar 
        year.  For purposes of this subdivision, "personal use" includes 
        purchases for gifts.  If an individual makes purchases, which 
        are subject to use tax, of more than $770 in the calendar year 
        the individual must pay the use tax on the entire amount.  This 
        exemption does not apply to purchases made from retailers who 
        are required or registered to collect taxes under this chapter. 
           Sec. 10.  Minnesota Statutes 1996, section 297A.22, is 
        amended to read: 
           297A.22 [PRESUMPTION OF PURPOSE OF SALE, BURDEN OF PROOF.] 
           For the purpose of the proper administration of sections 
        297A.01 to 297A.44 and to prevent evasion of the use tax and the 
        duty to collect the use tax, it shall be presumed that all 
        retail sales for delivery in Minnesota are for storage, use or 
        other consumption in Minnesota until the contrary is 
        established.  The burden of proving the contrary shall be upon 
        The person retailer who makes the sale but that person may take 
        from the purchaser an exemption certificate in accordance with 
        sections 297A.09 to 297A.13.  
           Sec. 11.  Minnesota Statutes 1996, section 297A.23, is 
        amended to read: 
           297A.23 [PROPERTY BROUGHT TO STATE; PRESUMPTION; BURDEN OF 
        PROOF.] 
           Any purchaser of tangible personal property or any items 
        enumerated in section 297A.14 which are shipped or brought to 
        Minnesota by the purchaser after July 31, 1967, shall have the 
        burden of proving that the same were not purchased from a 
        retailer for storage, use or consumption in Minnesota.  
           Sec. 12.  Minnesota Statutes 1996, section 297A.25, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [SCOPE.] The items contained in this 
        section are specifically exempted from the taxes imposed by 
        sections 297A.01 to 297A.44 this chapter. 
           Sec. 13.  Minnesota Statutes 1996, section 297A.25, 
        subdivision 2, is amended to read: 
           Subd. 2.  [FOOD PRODUCTS.] The gross receipts from the sale 
        of and storage, use, or consumption of food products including 
        but not limited to cereal and cereal products, butter, cheese, 
        milk and milk products, oleomargarine, meat and meat products, 
        fish and fish products, eggs and egg products, vegetables and 
        vegetable products, fruit and fruit products, spices and salt, 
        sugar and sugar products, coffee and coffee substitutes, tea, 
        cocoa and cocoa products, and food products which are not 
        taxable pursuant to section 297A.01, subdivision 3, clause (c) 
        are exempt.  This exemption does not include the following:  
           (1) candy and candy products, except when sold for 
        fundraising purposes by a nonprofit organization that provides 
        educational and social activities for young people primarily 
        aged 18 and under; 
           (2) carbonated beverages, beverages commonly referred to as 
        soft drinks containing less than 15 percent fruit juice, or 
        bottled water other than noncarbonated and noneffervescent 
        bottled water sold in individual containers of one-half gallon 
        or more in size. 
           Sec. 14.  Minnesota Statutes 1996, section 297A.25, 
        subdivision 3, is amended to read: 
           Subd. 3.  [MEDICINES; MEDICAL DEVICES.] The gross receipts 
        from the sale of and storage, use, or consumption 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, fever thermometers, 
        therapeutic, and prosthetic devices.  "Prescribed drugs" or 
        "prescribed medicine" includes over-the-counter drugs or 
        medicine prescribed by a licensed physician.  "Therapeutic 
        devices" includes reusable finger pricking devices for the 
        extraction of blood, blood glucose monitoring machines, and 
        other diagnostic agents used in diagnosing, monitoring, or 
        treating diabetes.  Nonprescription analgesics consisting 
        principally (determined by the weight of all ingredients) of 
        acetaminophen, acetylsalicylic acid, ibuprofen, or a combination 
        thereof are exempt. 
           Sec. 15.  Minnesota Statutes 1996, section 297A.25, 
        subdivision 6, is amended to read: 
           Subd. 6.  [PACKING MATERIALS.] The gross receipts from the 
        sale of and storage, use, or consumption of packing materials 
        used to pack and ship household goods, the ultimate destination 
        of which is outside the state of Minnesota and which are not 
        thereafter returned to a point within Minnesota, except in the 
        course of interstate commerce, are exempt.  
           Sec. 16.  Minnesota Statutes 1996, section 297A.25, 
        subdivision 8, is amended to read: 
           Subd. 8.  [CLOTHING.] The gross receipts from the sale 
        of and storage, use, or consumption of clothing and wearing 
        apparel are exempt, except the following: 
           (1) all articles commonly or commercially known as jewelry, 
        whether real or imitation; pearls, precious and semiprecious 
        stones, and imitations thereof; articles made of, or ornamented, 
        mounted or fitted with precious metals or imitations thereof; 
        watches; clocks; cases and movements for watches and clocks; 
        gold, gold-plated, silver, or sterling flatware or hollowware 
        and silver-plated hollowware; opera glasses; lorgnettes; marine 
        glasses; field glasses and binoculars; 
           (2) articles made of fur on the hide or pelt, and articles 
        of which such fur is the component material or chief value, but 
        only if such value is more than three times the value of the 
        next most valuable component material; 
           (3) perfume, essences, extracts, toilet waters, cosmetics, 
        petroleum jellies, hair oils, pomades, hair dressings, hair 
        restoratives, hair dyes, aromatic cachous and toilet powders.  
        The tax imposed by this chapter shall not apply to lotion, oil, 
        powder, or other articles intended to be used or applied only in 
        the case of babies; 
           (4) trunks, valises, traveling bags, suitcases, satchels, 
        overnight bags, hat boxes for use by travelers, beach bags, 
        bathing suit bags, brief cases made of leather or imitation 
        leather, salespeople's sample and display cases, purses, 
        handbags, pocketbooks, wallets, billfolds, card, pass, and key 
        cases and toilet cases. 
           Sec. 17.  Minnesota Statutes 1996, section 297A.25, 
        subdivision 9, is amended to read: 
           Subd. 9.  [MATERIALS CONSUMED IN PRODUCTION.] The gross 
        receipts from the sale of and the storage, use, or consumption 
        of all materials, including chemicals, fuels, petroleum 
        products, lubricants, packaging materials, including returnable 
        containers used in packaging food and beverage products, feeds, 
        seeds, fertilizers, electricity, gas and steam, used or consumed 
        in agricultural or industrial production of personal property 
        intended to be sold ultimately at retail, whether or not the 
        item so used becomes an ingredient or constituent part of the 
        property produced are exempt.  Seeds, trees, fertilizers, and 
        herbicides purchased for use by farmers in the Conservation 
        Reserve Program under United States Code, title 16, section 
        590h, as amended through December 31, 1991, the Integrated Farm 
        Management Program under section 1627 of Public Law Number 
        101-624, the Wheat and Feed Grain Programs under sections 301 to 
        305 and 401 to 405 of Public Law Number 101-624, and the 
        conservation reserve program under sections 103F.505 to 
        103F.531, are included in this exemption.  Sales to a 
        veterinarian of materials used or consumed in the care, 
        medication, and treatment of horses and agricultural production 
        animals and horses used in agricultural production are exempt 
        under this subdivision.  Chemicals used for cleaning food 
        processing machinery and equipment are included in this 
        exemption.  Materials, including chemicals, fuels, and 
        electricity purchased by persons engaged in agricultural or 
        industrial production to treat waste generated as a result of 
        the production process are included in this exemption.  Such 
        production shall include, but is not limited to, research, 
        development, design or production of any tangible personal 
        property, manufacturing, processing (other than by restaurants 
        and consumers) of agricultural products whether vegetable or 
        animal, commercial fishing, refining, smelting, reducing, 
        brewing, distilling, printing, mining, quarrying, lumbering, 
        generating electricity and the production of road building 
        materials.  Such production shall not include painting, 
        cleaning, repairing or similar processing of property except as 
        part of the original manufacturing process.  Machinery, 
        equipment, implements, tools, accessories, appliances, 
        contrivances, furniture and fixtures, used in such production 
        and fuel, electricity, gas or steam used for space heating or 
        lighting, are not included within this exemption; however, 
        accessory tools, equipment and other short lived items, which 
        are separate detachable units used in producing a direct effect 
        upon the product, where such items have an ordinary useful life 
        of less than 12 months, are included within the exemption 
        provided herein.  Electricity used to make snow for outdoor use 
        for ski hills, ski slopes, or ski trails is included in this 
        exemption. 
           Sec. 18.  Minnesota Statutes 1996, 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 colleges, 
        state academies, the Lola and Rudy Perpich Minnesota center for 
        arts education, and school districts are exempt. 
           As used in this subdivision, "school districts" means 
        public school entities and districts of every kind and nature 
        organized under the laws of the state of Minnesota, including, 
        without limitation, school districts, intermediate school 
        districts, education districts, service cooperatives, secondary 
        vocational cooperative centers, special education cooperatives, 
        joint purchasing cooperatives, telecommunication cooperatives, 
        regional management information centers, and any instrumentality 
        of a school district, as defined in section 471.59. 
           Sales exempted by this subdivision include sales under 
        section 297A.01, subdivision 3, paragraph (f), but do not 
        include sales under section 297A.01, subdivision 3, paragraph 
        (j) (i), clause (vii).  
           Sales to hospitals and nursing homes owned and operated by 
        political subdivisions of the state are exempt under this 
        subdivision.  
           The sales to and exclusively for the use of libraries of 
        books, periodicals, audio-visual materials and equipment, 
        photocopiers for use by the public, and all cataloguing and 
        circulation equipment, and cataloguing and circulation software 
        for library use are exempt under this subdivision.  For purposes 
        of this paragraph "libraries" means libraries as defined in 
        section 134.001, county law libraries under chapter 134A, the 
        state library under section 480.09, and the legislative 
        reference library. 
           Sales of supplies and equipment used in the operation of an 
        ambulance service owned and operated by a political subdivision 
        of the state are exempt under this subdivision provided that the 
        supplies and equipment are used in the course of providing 
        medical care.  Sales to a political subdivision of repair and 
        replacement parts for emergency rescue vehicles and fire trucks 
        and apparatus are exempt under this subdivision.  
           Sales to a political subdivision of machinery and 
        equipment, except for motor vehicles, used directly for mixed 
        municipal solid waste management services at a solid waste 
        disposal facility as defined in section 115A.03, subdivision 10, 
        are exempt under this subdivision.  
           Sales to political subdivisions of chore and homemaking 
        services to be provided to elderly or disabled individuals are 
        exempt. 
           Sales of telephone services to the department of 
        administration that are used to provide telecommunications 
        services through the intertechnologies revolving fund are exempt 
        under this subdivision. 
           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. 
           This exemption does not apply to the leasing of a motor 
        vehicle as defined in section 297B.01, subdivision 5, except for 
        leases entered into by the United States or its agencies or 
        instrumentalities.  
           The tax imposed on sales to political subdivisions of the 
        state under this section applies to all political subdivisions 
        other than those explicitly exempted under this subdivision, 
        notwithstanding section 115A.69, subdivision 6, 116A.25, 
        360.035, 458A.09, 458A.30, 458D.23, 469.101, subdivision 2, 
        469.127, 473.448, 473.545, or 473.608 or any other law to the 
        contrary enacted before 1992. 
           Sales exempted by this subdivision include sales made to 
        other states or political subdivisions of other states, if the 
        sale would be exempt from taxation if it occurred in that state, 
        but do not include sales under section 297A.01, subdivision 3, 
        paragraphs (c) and (e). 
           Sec. 19.  Minnesota Statutes 1996, section 297A.25, 
        subdivision 16, is amended to read: 
           Subd. 16.  [SALES TO NONPROFIT GROUPS.] The gross receipts 
        from the sale of tangible personal property to, and the storage, 
        use or other consumption of such property by, any corporation, 
        society, association, foundation, or institution organized and 
        operated exclusively for charitable, religious, or educational 
        purposes if the property purchased is to be used in the 
        performance of charitable, religious, or educational functions, 
        or any senior citizen group or association of groups that in 
        general limits membership to persons who are either (1) age 55 
        or older, or (2) physically disabled, 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, are exempt.  For 
        purposes of this subdivision, charitable purpose includes the 
        maintenance of a cemetery owned by a religious organization.  
        Sales exempted by this subdivision include sales pursuant to 
        section 297A.01, subdivision 3, paragraphs (d) and (f), but do 
        not include sales under section 297A.01, subdivision 3, 
        paragraph (j) (i), clause (vii).  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.  This exemption does not 
        apply to the leasing of a motor vehicle as defined in section 
        297B.01, subdivision 5. 
           Sec. 20.  Minnesota Statutes 1996, section 297A.25, 
        subdivision 17, is amended to read: 
           Subd. 17.  [CASKETS; VAULTS.] The gross receipts from the 
        sale of and storage, use, or consumption of caskets and burial 
        vaults are exempt.  
           Sec. 21.  Minnesota Statutes 1996, section 297A.25, 
        subdivision 18, is amended to read: 
           Subd. 18.  [AUTOMOBILES; DISABLED VETERANS.] The gross 
        receipts from the sale of and storage, use, or consumption of an 
        automobile or other conveyance are exempt if the purchaser is 
        assisted by a grant from the United States in accordance with 
        United States Code, title 38, section 1901 3901, as 
        amended through August 6, 1991. 
           Sec. 22.  Minnesota Statutes 1996, section 297A.25, 
        subdivision 19, is amended to read: 
           Subd. 19.  [AIRCRAFT.] The gross receipts from the sale 
        to and the storage, use, or consumption by a licensed aircraft 
        dealer of an aircraft for which a commercial use permit has been 
        issued pursuant to section 360.654 is exempt, if the aircraft is 
        resold while the permit is in effect. 
           Sec. 23.  Minnesota Statutes 1996, section 297A.25, 
        subdivision 20, is amended to read: 
           Subd. 20.  [BUILDING MATERIALS; DISABLED VETERANS.] The 
        gross receipts from the sale of and the storage, use, or 
        consumption of building materials to be used in the construction 
        or remodeling of a residence are exempt when the construction or 
        remodeling is financed in whole or in part by the United States 
        in accordance with United States Code, title 38, sections 801 to 
        805 2101 to 2105, as amended through August 6, 1991.  This 
        exemption shall not be effective at time of sale of the 
        materials to contractors, subcontractors, builders or owners, 
        but shall be applicable only upon a claim for refund to the 
        commissioner of revenue filed by recipients of the benefits 
        provided in United States Code, title 38, chapter 21, as amended 
        through August 6, 1991.  The commissioner shall provide by rule 
        for the refund of taxes paid on sales exempt in accordance with 
        this subdivision. 
           Sec. 24.  Minnesota Statutes 1996, section 297A.25, 
        subdivision 21, is amended to read: 
           Subd. 21.  [TEXTBOOKS.] The gross receipts from the sale of 
        and storage, use, or consumption of textbooks which are 
        prescribed for use in conjunction with a course of study in a 
        public or private school, college, university and business or 
        trade school to students who are regularly enrolled at such 
        institutions are exempt.  For purposes of this subdivision a 
        "public school" is defined as one that furnishes course of 
        study, enrollment and staff that meets standards of the state 
        board of education and a "private school" is one which under the 
        standards of the state board of education, provides an education 
        substantially equivalent to that furnished at a public school.  
        "Business and trade schools" shall mean such schools licensed 
        pursuant to section 141.25. 
           Sec. 25.  Minnesota Statutes 1996, section 297A.25, 
        subdivision 23, is amended to read: 
           Subd. 23.  [RESIDENTIAL HEATING FUELS.] The gross receipts 
        from the sale of and the storage, use, or consumption of 
        residential heating fuels are exempt in the following manner: 
           (1) all fuel oil, coal, wood, steam, hot water, propane 
        gas, and L.P. gas sold to residential customers for residential 
        use; 
           (2) natural gas sold for residential use to customers who 
        are metered and billed as residential users and who use natural 
        gas for their primary source of residential heat, for the 
        billing months of November, December, January, February, March 
        and April; 
           (3) electricity sold for residential use to customers who 
        are metered and billed as residential users and who use 
        electricity for their primary source of residential heat, for 
        the billing months of November, December, January, February, 
        March and April. 
           Sec. 26.  Minnesota Statutes 1996, section 297A.25, 
        subdivision 26, is amended to read: 
           Subd. 26.  [FEMININE HYGIENE PRODUCTS.] The gross receipts 
        from the sale of and storage, use, or consumption of sanitary 
        napkins, tampons, or similar items used for feminine hygiene, 
        are exempt.  
           Sec. 27.  Minnesota Statutes 1996, section 297A.25, 
        subdivision 27, is amended to read: 
           Subd. 27.  [MANUFACTURED HOMES.] The gross receipts from 
        the sale of and the storage, use, or consumption of a 
        manufactured home, as defined in section 327.31, subdivision 6, 
        to be used by the purchaser for residential purposes are exempt, 
        unless the sale is the first retail sale of the manufactured 
        home in this state. 
           Sec. 28.  Minnesota Statutes 1996, section 297A.25, 
        subdivision 28, is amended to read: 
           Subd. 28.  [WASTE PROCESSING EQUIPMENT.] The gross receipts 
        from the sale of and storage, use, or consumption of equipment 
        used for processing solid or hazardous waste at a resource 
        recovery facility, as defined in section 115A.03, subdivision 
        28, are exempt, including pollution control equipment at a 
        resource recovery facility that burns refuse-derived fuel or 
        mixed municipal solid waste as its primary fuel. 
           Sec. 29.  Minnesota Statutes 1996, section 297A.25, 
        subdivision 29, is amended to read: 
           Subd. 29.  [FARM MACHINERY REPAIR PARTS.] The gross 
        receipts from the sale of and the storage, use, or consumption 
        of repair and replacement parts, except tires, used for 
        maintenance or repair of farm machinery are exempt, if the part 
        replaces a farm machinery part assigned a specific or generic 
        part number by the manufacturer of the farm machinery.  
           Sec. 30.  Minnesota Statutes 1996, section 297A.25, 
        subdivision 30, is amended to read: 
           Subd. 30. [SCHOOL TICKETS OR ADMISSIONS.] The gross 
        receipts from sales and use of tickets or admissions to regular 
        season school games, events, and activities are exempt.  For 
        purposes of this subdivision, "school" has the meaning given it 
        in section 120.101, subdivision 4.  
           Sec. 31.  Minnesota Statutes 1996, section 297A.25, 
        subdivision 34, is amended to read: 
           Subd. 34.  [MOTOR VEHICLES.] The gross receipts from the 
        sale or use of any motor vehicle taxable under the provisions of 
        the sales tax on motor vehicles laws of Minnesota shall be 
        exempt from taxation under this chapter.  Notwithstanding 
        subdivision 11, the exemption provided under this subdivision 
        remains in effect for motor vehicles purchased or leased by 
        political subdivisions of the state if the vehicles are not 
        subject to taxation under chapter 297B exempt from registration 
        under section 168.012, subdivision 1, paragraph (b). 
           Sec. 32.  Minnesota Statutes 1996, section 297A.25, 
        subdivision 35, is amended to read: 
           Subd. 35.  [FOOD STAMPS.] The gross receipts from the 
        sale and the storage, use, or consumption of tangible personal 
        property purchased with food stamps, coupons, or vouchers issued 
        by the federal government under the Food Stamp Program are 
        exempt.  This exemption also applies to food purchased under the 
        Special Supplemental Food Program for Women, Infants, and 
        Children.  The exemption provided by this subdivision is 
        effective and applies only to the extent required by federal law.
           Sec. 33.  Minnesota Statutes 1996, section 297A.25, 
        subdivision 38, is amended to read: 
           Subd. 38.  [USED MOTOR OILS.] The gross receipts from the 
        sale of and the storage, use, or consumption of used motor oils 
        are exempt. 
           Sec. 34.  Minnesota Statutes 1996, section 297A.25, 
        subdivision 39, is amended to read: 
           Subd. 39.  [CROSS-COUNTRY SKI PASSES.] The gross receipts 
        from the sale and use of cross-country ski passes issued under 
        sections 85.40 to 85.43 are exempt. 
           Sec. 35.  Minnesota Statutes 1996, section 297A.25, 
        subdivision 40, is amended to read: 
           Subd. 40.  [STATE FAIR ADMISSIONS.] The gross receipts from 
        the sale and use 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. 36.  Minnesota Statutes 1996, section 297A.25, 
        subdivision 41, is amended to read: 
           Subd. 41.  [BULLET-PROOF VESTS.] The gross receipts from 
        the sale of and storage, use, or consumption 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 law enforcement agency of the state or 
        a political subdivision of the state, or 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. 37.  Minnesota Statutes 1996, section 297A.25, 
        subdivision 42, is amended to read: 
           Subd. 42.  [CAPITAL EQUIPMENT.] The gross receipts from the 
        sale of and storage, use, or consumption of capital equipment 
        are exempt.  
           Sec. 38.  Minnesota Statutes 1996, section 297A.25, 
        subdivision 43, is amended to read: 
           Subd. 43.  [CHAIR LIFTS, RAMPS, ELEVATORS.] The gross 
        receipts from the sale of and storage, use, or consumption of 
        chair lifts, ramps, and elevators and building materials used to 
        install or construct them are exempt, if they are authorized by 
        a physician and installed in or attached to the owner's 
        homestead. 
           Sec. 39.  Minnesota Statutes 1996, section 297A.25, 
        subdivision 46, is amended to read: 
           Subd. 46.  [SACRAMENTAL WINE.] The gross receipts from the 
        sale of and storage, use, or consumption of wine for sacramental 
        purposes in religious ceremonies, as described in section 
        340A.316, if the wine is purchased from a nonprofit religious 
        organization meeting the requirements of subdivision 16 or from 
        the holder of a sacramental wine license as provided in section 
        340A.316 are exempt. 
           Sec. 40.  Minnesota Statutes 1996, section 297A.25, 
        subdivision 49, is amended to read: 
           Subd. 49.  [AIR COOLING EQUIPMENT.] The gross receipts from 
        the sale of and storage, use, or consumption of equipment used 
        for air cooling are exempt, if the equipment is purchased for 
        conversion or replacement of an existing groundwater based 
        once-through cooling system as required under section 103G.271, 
        subdivision 5. 
           Sec. 41.  Minnesota Statutes 1996, section 297A.25, 
        subdivision 51, is amended to read: 
           Subd. 51.  [AUTOMATIC FIRE-SAFETY SPRINKLER SYSTEMS.] The 
        gross receipts from the sale of and storage, use, or consumption 
        of automatic fire-safety sprinkler systems described in section 
        273.11, subdivision 6a, are exempt. 
           Sec. 42.  Minnesota Statutes 1996, section 297A.25, 
        subdivision 52, is amended to read: 
           Subd. 52.  [PARTS AND ACCESSORIES USED TO MAKE A MOTOR 
        VEHICLE HANDICAPPED ACCESSIBLE.] The gross receipts from the 
        sale of and storage, use, or consumption of parts and 
        accessories that are used solely to modify a motor vehicle to 
        make it handicapped accessible are exempt.  Labor charges for 
        modifying a motor vehicle to make it handicapped accessible are 
        included in this exemption. 
           Sec. 43.  Minnesota Statutes 1996, section 297A.25, 
        subdivision 53, is amended to read: 
           Subd. 53.  [SPECIAL TOOLING.] The gross receipts from the 
        sale of and storage, use, or consumption of special tooling are 
        exempt. 
           Sec. 44.  Minnesota Statutes 1996, section 297A.25, 
        subdivision 57, is amended to read: 
           Subd. 57.  [HORSES; RELATED MATERIALS.] (a) The gross 
        receipts from the sale of and storage or use of horses, 
        including racehorses, are exempt. 
           (b) Sales of and storage, use, or consumption of all 
        materials, including feed and bedding, used or consumed in the 
        breeding, raising, owning, boarding, and keeping of horses, are 
        exempt.  Machinery, equipment, implements, tools, appliances, 
        furniture, and fixtures, used in the breeding, raising, owning, 
        boarding, and keeping of horses, are not included within this 
        exemption. 
           Sec. 45.  Minnesota Statutes 1996, section 297A.25, 
        subdivision 61, is amended to read: 
           Subd. 61.  [CONSTRUCTION MATERIALS FOR INDOOR ICE ARENAS.] 
        The gross receipts from the sale of and storage, use, or 
        consumption of construction materials and supplies are exempt if:
           (1) the materials and supplies are to be used in 
        constructing an indoor ice arena intended to be used 
        predominantly for youth athletic activities; and 
           (2) the construction project is financed in whole or in 
        part from a grant under sections 240A.09 and 240A.10 or the 
        proceeds of obligations issued under section 373.43 or 475.58, 
        subdivision 3.  
           This exemption applies regardless of whether the purchases 
        are made by the owner of the facility or a contractor. 
           Sec. 46.  Minnesota Statutes 1996, section 297A.256, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [FUNDRAISING SALES BY 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 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 and no part of the net earnings inure to the benefit of 
        any private shareholders.  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 paragraph, 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 inures 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 paragraph 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 paragraph 
        is limited to no more than 24 days a year.  Fundraising events 
        conducted on premises leased for more than four days but less 
        than 30 days do not qualify for this exemption. 
           (d) The gross receipts from the sale or use of tickets or 
        admissions to a golf tournament held in Minnesota are exempt if 
        the beneficiary of the tournament's net proceeds qualifies as a 
        tax-exempt organization under section 501(c)(3) of the Internal 
        Revenue Code, as amended through December 31, 1994, including a 
        tournament conducted on premises leased or occupied for more 
        than four days. 
           Sec. 47.  Minnesota Statutes 1996, section 297A.44, 
        subdivision 1, is amended to read: 
           Subdivision 1.  (a) Except as provided in paragraphs (b), 
        (c), and (d), all revenues, including interest and penalties, 
        derived from the excise and use taxes imposed by sections 
        297A.01 to 297A.44 shall be deposited by the commissioner in the 
        state treasury and credited to the general fund.  
           (b) All excise and use taxes derived from sales and use of 
        property and services purchased for the construction and 
        operation of an agricultural resource project, from and after 
        the date on which a conditional commitment for a loan guaranty 
        for the project is made pursuant to section 41A.04, subdivision 
        3, shall be deposited in the Minnesota agricultural and economic 
        account in the special revenue fund.  The commissioner of 
        finance shall certify to the commissioner the date on which the 
        project received the conditional commitment.  The amount 
        deposited in the loan guaranty account shall be reduced by any 
        refunds and by the costs incurred by the department of revenue 
        to administer and enforce the assessment and collection of the 
        taxes.  
           (c) All revenues, including interest and penalties, derived 
        from the excise and use taxes imposed on sales and purchases 
        included in section 297A.01, subdivision 3, paragraphs (d) and 
        (l) (k), clauses (1) and (2), must be deposited by the 
        commissioner in the state treasury, and credited as follows: 
           (1) first to the general obligation special tax bond debt 
        service account in each fiscal year the amount required by 
        section 16A.661, subdivision 3, paragraph (b); and 
           (2) after the requirements of clause (1) have been met, the 
        balance must be credited to the general fund. 
           (d) The revenues, including interest and penalties, derived 
        from the taxes imposed on solid waste collection services as 
        described in section 297A.45, shall be deposited by the 
        commissioner in the state treasury and credited to the general 
        fund to be used for funding solid waste reduction and recycling 
        programs. 
           Sec. 48.  Minnesota Statutes 1996, 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 
        1986, as amended through December 31, 1988.  
           (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 tax or sales 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.  "Automotive training programs" includes motor 
        vehicle body and mechanical repair courses but does not include 
        driver education programs.  
           (7) Purchase of a motor vehicle for use as an ambulance by 
        an ambulance service licensed under section 144.802. 
           (8) Purchase of a motor vehicle by or for a public library, 
        as defined in section 134.001, subdivision 2, as a bookmobile or 
        library delivery vehicle. 
           Sec. 49.  Minnesota Statutes 1996, section 297B.035, 
        subdivision 3, is amended to read: 
           Subd. 3.  [SALES IN VIOLATION OF LICENSING REQUIREMENTS.] 
        Motor vehicles sold by a new motor vehicle dealer in 
        contravention of section 168.27, subdivision 10, clause (1)(b) 
        shall not be considered to have been acquired or purchased for 
        resale in the ordinary or regular course of business for the 
        purposes of this chapter, and the dealer shall be required to 
        pay the excise tax due on the purchase of those vehicles.  The 
        sale by a lessor of a new motor vehicle under lease within 120 
        days of the commencement of the lease is deemed a sale in 
        contravention of section 168.27, subdivision 10, clause (1)(b) 
        unless the lessor holds a valid contract or franchise with the 
        manufacturer or distributor of the vehicle.  Notwithstanding 
        section 297B.11, the rights of a dealer to appeal any amounts 
        owed by the dealer under this subdivision are governed 
        exclusively by the hearing procedure under section 168.27, 
        subdivision 13. 
           Sec. 50.  Minnesota Statutes 1996, section 297B.11, is 
        amended to read: 
           297B.11 [REGISTRAR AS AGENT OF COMMISSIONER OF REVENUE; 
        POWERS.] 
           The state commissioner of revenue is charged with the 
        administration of the sales tax on motor vehicles.  The 
        commissioner may prescribe all rules not inconsistent with the 
        provisions of this chapter, necessary and advisable for the 
        proper and efficient administration of the law.  The collection 
        of this sales tax on motor vehicles shall be carried out by the 
        motor vehicle registrar who shall act as the agent of the 
        commissioner and who shall be subject to all rules not 
        inconsistent with the provisions of this chapter, that may be 
        prescribed by the commissioner.  
           The provisions of chapters 289A and 297A relating to the 
        commissioner's authority to audit, assess, and collect the tax, 
        and to issue refunds and to hear appeals, are applicable to the 
        sales tax on motor vehicles.  The commissioner may impose civil 
        penalties as provided in chapters 289A and 297A, and the 
        additional tax and penalties are subject to interest at the rate 
        provided in section 270.75.  
           Sec. 51.  Minnesota Statutes 1996, section 299F.21, 
        subdivision 2, is amended to read: 
           Subd. 2.  [ANNUAL RETURNS.] (a) Every insurer required to 
        pay a tax under this section shall make and file a statement of 
        estimated taxes for the period covered by the installment tax 
        payment.  The statement shall be in the form prescribed by the 
        commissioner of revenue.  
           (b) On or before March 1, annually every insurer subject to 
        taxation under this section shall make an annual return for the 
        preceding calendar year setting forth information the 
        commissioner of revenue may reasonably require on forms 
        prescribed by the commissioner.  
           (c) On March 1, the insurer shall pay any additional amount 
        due for the preceding calendar year; if there has been an 
        overpayment, the overpayment may be credited without interest on 
        the estimated tax due April 15 1.  
           (d) If unpaid by this date, penalties as provided in 
        section 289A.60, subdivision 1, as related to withholding and 
        sales or use taxes, shall be imposed. 
           Sec. 52.  [EFFECTIVE DATE.] 
           Sections 1 to 51 are effective July 1, 1997. 
                                   ARTICLE 3
                                 PROPERTY TAXES
           Section 1.  Minnesota Statutes 1996, section 272.02, 
        subdivision 4, is amended to read: 
           Subd. 4.  [CONVERSION TO EXEMPT OR TAXABLE USES.] (a) Any 
        property exempt from taxation on January 2 of any year which, 
        due to sale or other reason, loses its exemption prior to July 1 
        of any year, shall be placed on the current assessment rolls for 
        that year. 
           The valuation shall be determined with respect to its value 
        on January 2 of such year.  The classification shall be based 
        upon the use to which the property was put by the purchaser, or 
        in the event the purchaser has not utilized the property by July 
        1, the intended use of the property, determined by the county 
        assessor, based upon all relevant facts. 
           (b) Property subject to tax on January 2 that is acquired 
        by a governmental entity, institution of purely public charity, 
        church, or educational institution before July 1 of the year is 
        exempt for that assessment year if the property is to be used 
        for an exempt purpose under subdivision 1, clauses (1) to (7).  
           (c) Property which forfeits to the state for nonpayment of 
        real estate taxes on or before December 31 in an assessment 
        year, shall be removed from the assessment rolls for that 
        assessment year.  Forfeited property that is repurchased, or 
        sold at a public or private sale, on or before December 31 of an 
        assessment year shall be placed on the assessment rolls for that 
        year's assessment. 
           Sec. 2.  Minnesota Statutes 1996, section 272.04, 
        subdivision 1, is amended to read: 
           Subdivision 1.  When any mineral, gas, coal, oil, or other 
        similar interests in real estate are owned separately and apart 
        from and independently of the rights and interests owned in the 
        surface of such real estate, such mineral, gas, coal, oil, or 
        other similar interests may be assessed and taxed separately 
        from such surface rights and interests in such real estate, 
        including but not limited to the taxation provided in section 
        273.165, subdivision 1, and may be sold for taxes in the same 
        manner and with the same effect as other interests in real 
        estate are sold for taxes.  All laws for the enforcement of 
        taxes on real estate apply to such interest. 
           Sec. 3.  Minnesota Statutes 1996, section 273.032, is 
        amended to read: 
           273.032 [MARKET VALUE DEFINITION.] 
           For the purpose of determining any property tax levy 
        limitation based on market value, any net debt limit based on 
        market value, any limit on the issuance of bonds, certificates 
        of indebtedness, or capital notes based on market value, any 
        qualification to receive state aid based on market value, or any 
        state aid amount based on market value, the terms "market 
        value," "taxable market value," and "market valuation," whether 
        equalized or unequalized, mean the total taxable market value of 
        property within the local unit of government before any 
        adjustments for tax increment, fiscal disparity, or powerline 
        credit, or wind energy values, but after the limited market 
        adjustments under section 273.11, subdivision 1a, and after the 
        market value exclusions of certain improvements to homestead 
        property under section 273.11, subdivision 16.  Unless otherwise 
        provided, "market value," "taxable market value," and "market 
        valuation" refer to the taxable market value for the previous 
        assessment year. 
           Sec. 4.  Minnesota Statutes 1996, section 273.124, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [GENERAL RULE.] (a) 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 residential 
        homestead.  
           Agricultural land, as defined in section 273.13, 
        subdivision 23, that is occupied and used as a homestead by its 
        owner, who must be a Minnesota resident, is an agricultural 
        homestead. 
           Dates for establishment of a homestead and homestead 
        treatment provided to particular types of property are as 
        provided in this section.  
           Property of a trustee, beneficiary, or grantor of a trust 
        is not disqualified from receiving homestead benefits if the 
        homestead requirements under this chapter are satisfied. 
           The assessor shall require proof, as provided in 
        subdivision 13, of the facts upon which classification as a 
        homestead may be determined.  Notwithstanding any other law, the 
        assessor may at any time require a homestead application to be 
        filed in order to verify that any property classified as a 
        homestead continues to be eligible for homestead status.  
        Notwithstanding any other law to the contrary, the department of 
        revenue may, upon request from an assessor, verify whether an 
        individual who is requesting or receiving homestead 
        classification has filed a Minnesota income tax return as a 
        resident for the most recent taxable year for which the 
        information is available. 
           When there is a name change or a transfer of homestead 
        property, the assessor may reclassify the property in the next 
        assessment unless a homestead application is filed to verify 
        that the property continues to qualify for homestead 
        classification. 
           (b) 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 must use the property for the purposes of the homestead, 
        and must apply for it to the assessor, both by July 1 of the 
        year when the treatment is initially sought the deadlines given 
        in subdivision 9.  After initial qualification for the homestead 
        treatment, additional applications for subsequent years are not 
        required. 
           (c) Residential real estate that is occupied and used for 
        purposes of a homestead by a relative of the owner is a 
        homestead but only to the extent of the homestead treatment that 
        would be provided if the related owner occupied the property.  
        For purposes of this paragraph and paragraph (f), "relative" 
        means a parent, stepparent, child, stepchild, grandparent, 
        grandchild, brother, sister, uncle, or aunt.  This relationship 
        may be by blood or marriage.  Property that has been classified 
        as seasonal recreational residential property at any time during 
        which it has been owned by the current owner or spouse of the 
        current owner will not be reclassified as a homestead unless it 
        is occupied as a homestead by the owner; this prohibition also 
        applies to property that, in the absence of this paragraph, 
        would have been classified as seasonal recreational residential 
        property at the time when the residence was constructed.  
        Neither the related occupant nor the owner of the property may 
        claim a property tax refund under chapter 290A for a homestead 
        occupied by a relative.  In the case of a residence located on 
        agricultural land, only the house, garage, and immediately 
        surrounding one acre of land shall be classified as a homestead 
        under this paragraph, except as provided in paragraph (d). 
           (d) Agricultural property that is occupied and used for 
        purposes of a homestead by a relative of the owner, is a 
        homestead, only to the extent of the homestead treatment that 
        would be provided if the related owner occupied the property, 
        and only if all of the following criteria are met: 
           (1) the relative who is occupying the agricultural property 
        is a son, daughter, father, or mother of the owner of the 
        agricultural property or a son or daughter of the spouse of the 
        owner of the agricultural property, 
           (2) the owner of the agricultural property must be a 
        Minnesota resident, 
           (3) the owner of the agricultural property must not receive 
        homestead treatment on any other agricultural property in 
        Minnesota, and 
           (4) the owner of the agricultural property is limited to 
        only one agricultural homestead per family under this paragraph. 
           Neither the related occupant nor the owner of the property 
        may claim a property tax refund under chapter 290A for a 
        homestead occupied by a relative qualifying under this 
        paragraph.  For purposes of this paragraph, "agricultural 
        property" means the house, garage, other farm buildings and 
        structures, and agricultural land. 
           Application must be made to the assessor by the owner of 
        the agricultural property to receive homestead benefits under 
        this paragraph.  The assessor may require the necessary proof 
        that the requirements under this paragraph have been met. 
           (e) In the case of property owned by a property owner who 
        is married, the assessor must not deny homestead treatment in 
        whole or in part if only one of the spouses occupies the 
        property and the other spouse is absent due to:  (1) marriage 
        dissolution proceedings, (2) legal separation, (3) employment or 
        self-employment in another location, (4) residence in a nursing 
        home or boarding care facility, or (5) other personal 
        circumstances causing the spouses to live separately, not 
        including an intent to obtain two homestead classifications for 
        property tax purposes.  To qualify under clause (3), the 
        spouse's place of employment or self-employment must be at least 
        50 miles distant from the other spouse's place of employment, 
        and the homesteads must be at least 50 miles distant from each 
        other.  Homestead treatment, in whole or in part, shall not be 
        denied to the owner's spouse who previously occupied the 
        residence with the owner if the absence of the owner is due to 
        one of the exceptions provided in this paragraph. 
           (f) 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 a relative shown on the deed as 
        a coowner, the assessor shall allow a full homestead 
        classification.  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. 5.  Minnesota Statutes 1996, section 273.124, 
        subdivision 13, is amended to read: 
           Subd. 13.  [HOMESTEAD APPLICATION.] (a) A person who meets 
        the homestead requirements under subdivision 1 must file a 
        homestead application with the county assessor to initially 
        obtain homestead classification. 
           (b) On or before January 2, 1993, each county assessor 
        shall mail a homestead application to the owner of each parcel 
        of property within the county which was classified as homestead 
        for the 1992 assessment year.  The format and contents of a 
        uniform homestead application shall be prescribed by the 
        commissioner of revenue.  The commissioner shall consult with 
        the chairs of the house and senate tax committees on the 
        contents of the homestead application form.  The application 
        must clearly inform the taxpayer that this application must be 
        signed by all owners who occupy the property or by the 
        qualifying relative and returned to the county assessor in order 
        for the property to continue receiving homestead treatment.  The 
        envelope containing the homestead application shall clearly 
        identify its contents and alert the taxpayer of its necessary 
        immediate response. 
           (c) Every property owner applying for homestead 
        classification must furnish to the county assessor the social 
        security number of each occupant who is listed as an owner of 
        the property on the deed of record, the name and address of each 
        owner who does not occupy the property, and the name and social 
        security number of each owner's spouse who occupies the 
        property.  The application must be signed by each owner who 
        occupies the property and by each owner's spouse who occupies 
        the property, or, in the case of property that qualifies as a 
        homestead under subdivision 1, paragraph (c), by the qualifying 
        relative. 
           If a property owner occupies a homestead, the property 
        owner's spouse may not claim another property as a homestead 
        unless the property owner and the property owner's spouse file 
        with the assessor an affidavit or other proof required by the 
        assessor stating that the property qualifies as a homestead 
        under subdivision 1, paragraph (e). 
           Owners or spouses occupying residences owned by their 
        spouses and previously occupied with the other spouse, either of 
        whom fail to include the other spouse's name and social security 
        number on the homestead application or provide the affidavits or 
        other proof requested, will be deemed to have elected to receive 
        only partial homestead treatment of their residence.  The 
        remainder of the residence will be classified as nonhomestead 
        residential.  When an owner or spouse's name and social security 
        number appear on homestead applications for two separate 
        residences and only one application is signed, the owner or 
        spouse will be deemed to have elected to homestead the residence 
        for which the application was signed. 
           The social security numbers or affidavits or other proofs 
        of the property owners and spouses 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, or, for purposes of proceeding 
        under the revenue recapture act to recover personal property 
        taxes owing, to the county treasurer. 
           (d) If residential real estate is occupied and used for 
        purposes of a homestead by a relative of the owner and qualifies 
        for a homestead under subdivision 1, paragraph (c), in order for 
        the property to receive homestead status, a homestead 
        application must be filed with the assessor.  The social 
        security number of each relative occupying the property and the 
        social security number of each owner who is related to an 
        occupant of the property shall be required on the homestead 
        application filed under this subdivision.  If a different 
        relative of the owner subsequently occupies the property, the 
        owner of the property must notify the assessor within 30 days of 
        the change in occupancy.  The social security number of a 
        relative occupying the property is private data on individuals 
        as defined by section 13.02, subdivision 12, but may be 
        disclosed to the commissioner of revenue.  
           (e) The homestead application shall also notify the 
        property owners that the application filed under this section 
        will not be mailed annually and that if the property is granted 
        homestead status for the 1993 assessment, or any assessment year 
        thereafter, that same property shall remain classified as 
        homestead until the property is sold or transferred to another 
        person, or the owners, the spouse of the owner, or the relatives 
        no longer use the property as their homestead.  Upon the sale or 
        transfer of the homestead property, a certificate of value must 
        be timely filed with the county auditor as provided under 
        section 272.115.  Failure to notify the assessor within 30 days 
        that the property has been sold, transferred, or that the owner, 
        the spouse of the owner, or the relative is no longer occupying 
        the property as a homestead, shall result in the penalty 
        provided under this subdivision and the property will lose its 
        current homestead status. 
           (f) If the homestead application is not returned within 30 
        days, the county will send a second application to the present 
        owners of record.  The notice of proposed property taxes 
        prepared under section 275.065, subdivision 3, shall reflect the 
        property's classification.  Beginning with assessment year 1993 
        for all properties, if a homestead application has not been 
        filed with the county by December 15, the assessor shall 
        classify the property as nonhomestead for the current assessment 
        year for taxes payable in the following year, provided that the 
        owner may be entitled to receive the homestead classification by 
        proper application under section 375.192. 
           (g) At the request of the commissioner, each county must 
        give the commissioner a list that includes the name and social 
        security number of each property owner and the property owner's 
        spouse occupying the property, or relative of a property owner, 
        applying for homestead classification under this subdivision.  
        The commissioner shall use the information provided on the lists 
        as appropriate under the law, including for the detection of 
        improper claims by owners, or relatives of owners, under chapter 
        290A.  
           (h) If the commissioner finds that a property owner may be 
        claiming a fraudulent 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 classification as a homestead under section 
        273.13, the taconite homestead credit under section 273.135, and 
        the supplemental homestead credit under section 273.1391. 
           The county auditor shall send a notice to the person who 
        owned the affected property at the time the homestead 
        application related to the improper homestead was filed, 
        demanding reimbursement of the homestead benefits plus a penalty 
        equal to 100 percent of the homestead benefits.  The person 
        notified may appeal the county's determination by serving copies 
        of a petition for review with county officials as provided in 
        section 278.01 and filing proof of service as provided in 
        section 278.01 with the Minnesota tax court within 60 days of 
        the date of the notice from the county.  Procedurally, the 
        appeal is governed by the provisions in chapter 271 which apply 
        to the appeal of a property tax assessment or levy, but without 
        requiring any prepayment of the amount in controversy.  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 of taxes and penalty to the county 
        treasurer.  The county treasurer will add interest to the unpaid 
        homestead benefits and penalty amounts at the rate provided for 
        delinquent personal property taxes in section 279.03 for real 
        property taxes becoming delinquent in the calendar year during 
        which the amount remains unpaid.  Interest may be assessed for 
        the period beginning 60 days after demand for payment was 
        made until payment. 
           If the person notified is the current owner of the 
        property, the treasurer may add the total amount of benefits, 
        penalty, interest, and costs to the real estate ad valorem taxes 
        otherwise payable on the property in the following year by 
        including the amounts on the property tax statements under 
        section 276.04, subdivision 3.  The amounts added under this 
        paragraph to the ad valorem taxes shall include interest accrued 
        through December 31 of the year preceding the taxes payable year 
        for which the amounts are first added.  These amounts, when 
        added to the property tax statement, become subject to all the 
        laws for the enforcement of real or personal property taxes for 
        that year, and for any subsequent year. 
           If the person notified is not the current owner of the 
        property, the treasurer may collect the amounts due under the 
        revenue recapture act in chapter 270A, or use any of the powers 
        granted in sections 277.20 and 277.21 without exclusion, to 
        enforce payment of the benefits, penalty, interest, and costs, 
        as if those amounts were delinquent tax obligations of the 
        person who owned the property at the time the application 
        related to the improperly allowed homestead was filed.  The 
        treasurer may relieve a prior owner of personal liability for 
        the benefits, penalty, interest, and costs, and instead extend 
        those amounts on the tax lists against the property for taxes 
        payable in the following year as provided in this paragraph to 
        the extent that the current owner agrees in writing.  On all 
        demands, billings, property tax statements, and related 
        correspondence, the county must list and state separately the 
        amounts of homestead benefits, penalty, interest and costs being 
        demanded, billed or assessed. 
           (i) Any amount of homestead benefits recovered by the 
        county from the property owner shall be distributed to the 
        county, city or town, and school district where the property is 
        located in the same proportion that each taxing district's levy 
        was to the total of the three taxing districts' levy for the 
        current year.  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.  Any amount recovered that is attributable to 
        supplemental homestead credit is to be transmitted to the 
        commissioner of revenue for deposit in the general fund of the 
        state treasury.  The total amount of penalty collected must be 
        deposited in the county general fund. 
           (j) 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. 
           (k) In addition to lists of homestead properties, the 
        commissioner may ask the counties to furnish lists of all 
        properties and the record owners. 
           Sec. 6.  Minnesota Statutes 1996, section 273.1392, is 
        amended to read: 
           273.1392 [PAYMENT; SCHOOL DISTRICTS.] 
           The amounts of conservation tax credits under section 
        273.119; disaster or emergency reimbursement under section 
        273.123; attached machinery aid under section 273.138; homestead 
        credit under section 273.13; aids and credits under section 
        273.1398; wetlands reimbursement under section 275.295; 
        enterprise zone property credit payments under section 469.171; 
        and metropolitan agricultural preserve reduction under section 
        473H.10 for school districts, shall be certified to the 
        department of children, families, and learning by the department 
        of revenue.  The amounts so certified shall be paid according to 
        section 124.195, subdivisions 6 and 10. 
           Sec. 7.  Minnesota Statutes 1996, section 273.1398, 
        subdivision 1, is amended to read: 
           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 local tax rates. 
           (c) "Previous net tax capacity" means the product of the 
        appropriate net class rates for the year previous to the year in 
        which the aid is payable, and estimated market values for the 
        assessment two years prior to that in which aid is payable.  
        "Total previous net tax capacity" means the previous net tax 
        capacities for all property within the unique taxing 
        jurisdiction.  The total previous net tax capacity shall be 
        reduced by the sum of (1) the unique taxing jurisdiction's 
        previous net tax capacity of commercial-industrial property as 
        defined in section 473F.02, subdivision 3, or 276A.02, 
        subdivision 3, multiplied by the ratio determined pursuant to 
        section 473F.08, subdivision 6, or 276A.06, subdivision 7, for 
        the municipality, as defined in section 473F.02, subdivision 8, 
        or 276A.06, subdivision 7, in which the unique taxing 
        jurisdiction is located, (2) the previous net tax capacity of 
        the captured value of tax increment financing districts as 
        defined in section 469.177, subdivision 2, and (3) the previous 
        net tax capacity of transmission lines deducted from a local 
        government's total net tax capacity under section 273.425.  
        Previous net tax capacity cannot be less than zero. 
           (d) "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.  The equalized market values 
        shall equal the unequalized market values divided by the 
        assessment sales ratio. 
           (e) "Equalized school levies" means the amounts levied for: 
           (1) general education under section 124A.23, subdivision 2; 
           (2) supplemental revenue under section 124A.22, subdivision 
        8a; 
           (3) transition revenue under section 124A.22, subdivision 
        13c; 
           (4) basic transportation under section 124.226, subdivision 
        1; and 
           (5) referendum revenue under section 124A.03. 
           (f) "Current local tax rate" means the quotient derived by 
        dividing the taxes levied within a unique taxing jurisdiction 
        for taxes payable in the year prior to that for which aids are 
        being calculated by the total previous net tax capacity of the 
        unique taxing jurisdiction.  
           (g) For purposes of calculating and allocating homestead 
        and agricultural credit aid authorized pursuant to subdivision 2 
        and the disparity reduction aid authorized in subdivision 3, 
        "gross taxes levied on all properties," "gross taxes," or "taxes 
        levied" means the total net tax capacity based 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 or gross tax capacity, 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.  "Gross taxes" are before any reduction for 
        disparity reduction aid but "taxes levied" are after any 
        reduction for disparity reduction aid.  Gross taxes levied or 
        taxes levied cannot be less than zero.  
           "Taxes levied" excludes equalized school levies. 
           (h) "Household adjustment factor" means the number of 
        households for the second most recent year preceding that in 
        which the aids are payable, for the year most recently 
        determined as of July 1 in the aid calculation year, divided by 
        the number of households for the third most recent year 
        immediately preceding the year for which the number of 
        households has most recently been determined as of July 1.  The 
        household adjustment factor cannot be less than one.  
           (i) "Growth adjustment factor" means the household 
        adjustment factor in the case of counties.  In the case of 
        cities, towns, school districts, and special taxing districts, 
        the growth adjustment factor equals one.  The growth adjustment 
        factor cannot be less than one.  
           (j) "Homestead and agricultural credit base" means the 
        previous year's certified homestead and agricultural credit aid 
        determined under subdivision 2 less any permanent aid reduction 
        in the previous year to homestead and agricultural credit aid.  
           (k) "Net tax capacity adjustment" means (1) the tax base 
        differential defined in subdivision 1a, multiplied by (2) the 
        unique taxing jurisdiction's current local tax rate.  The net 
        tax capacity adjustment cannot be less than zero. 
           (l) "Fiscal disparity adjustment" means a taxing 
        jurisdiction's fiscal disparity distribution levy under section 
        473F.08, subdivision 3, clause (a), or 276A.06, subdivision 3, 
        clause (a), for taxes payable in the year prior to that for 
        which aids are being calculated, multiplied by the ratio of the 
        tax base differential percent referenced in subdivision 1a for 
        the highest class rate for class 3 property for taxes payable in 
        the year prior to that for which aids are being calculated to 
        the highest class rate for class 3 property for taxes payable in 
        the second prior year to that for which aids are being 
        calculated.  In the case of school districts, the fiscal 
        disparity distribution levy shall exclude that part of the levy 
        attributable to equalized school levies. 
           Sec. 8.  Minnesota Statutes 1996, section 275.011, 
        subdivision 1, is amended to read: 
           Subdivision 1.  The property tax levied for any purpose 
        under a special law that is not codified in Minnesota Statutes 
        or a city charter provision and that is subject to a mill rate 
        limitation imposed by the special law or city charter provision, 
        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 special law or city 
        charter provision 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 
        chapters 276A and 473F), tax increment financing (sections 
        469.174 to 469.179), and high voltage transmission 
        lines powerline credit (section 273.425), or wind energy 
        (sections 276.20 to 276.21) values. 
           Sec. 9.  Minnesota Statutes 1996, section 275.065, 
        subdivision 3, is amended to read: 
           Subd. 3.  [NOTICE OF PROPOSED PROPERTY TAXES.] (a) The 
        county auditor shall prepare and the county treasurer shall 
        deliver after November 10 and on or before November 24 each 
        year, by first class mail to each taxpayer at the address listed 
        on the county's current year's assessment roll, a notice of 
        proposed property taxes and, in the case of a town, final 
        property taxes.  
           (b) The commissioner of revenue shall prescribe the form of 
        the notice. 
           (c) The notice must inform taxpayers that it contains the 
        amount of property taxes each taxing authority other than a town 
        proposes to collect for taxes payable the following year and, 
        for a town, the amount of its final levy.  It must clearly state 
        that each taxing authority, including regional library districts 
        established under section 134.201, and including the 
        metropolitan taxing districts as defined in paragraph (i), but 
        excluding all other special taxing districts and towns, will 
        hold a public meeting to receive public testimony on the 
        proposed budget and proposed or final property tax levy, or, in 
        case of a school district, on the current budget and proposed 
        property tax levy.  It must clearly state the time and place of 
        each taxing authority's meeting and an address where comments 
        will be received by mail.  
           (d) The notice must state for each parcel: 
           (1) the market value of the property as determined under 
        section 273.11, and used for computing property taxes payable in 
        the following year and for taxes payable in the current year as 
        each appears in the records of the county assessor on November 1 
        of the current year; and, in the case of residential property, 
        whether the property is classified as homestead or 
        nonhomestead.  The notice must clearly inform taxpayers of the 
        years to which the market values apply and that the values are 
        final values; 
           (2) by county, city or town, school district excess 
        referenda levy, remaining school district levy, regional library 
        district, if in existence, the total of the metropolitan special 
        taxing districts as defined in paragraph (i) and the sum of the 
        remaining special taxing districts, and as a total of the taxing 
        authorities, including all special taxing districts, the 
        proposed or, for a town, final net tax on the property for taxes 
        payable the following year and the actual tax for taxes payable 
        the current year.  If a school district has certified under 
        section 124A.03, subdivision 2, that a referendum will be held 
        in the school district at the November general election, the 
        county auditor must note next to the school district's proposed 
        amount that a referendum is pending and that, if approved by the 
        voters, the tax amount may be higher than shown on the notice.  
        For the purposes of this subdivision, "school district excess 
        referenda levy" means school district taxes for operating 
        purposes approved at referendums, including those taxes based on 
        net tax capacity as well as those based on market value.  
        "School district excess referenda levy" does not include school 
        district taxes for capital expenditures approved at referendums 
        or school district taxes to pay for the debt service on bonds 
        approved at referenda.  In the case of the city of Minneapolis, 
        the levy for the Minneapolis library board and the levy for 
        Minneapolis park and recreation shall be listed separately from 
        the remaining amount of the city's levy.  In the case of a 
        parcel where tax increment or the fiscal disparities areawide 
        tax under chapter 276A or 473F applies, the proposed tax levy on 
        the captured value or the proposed tax levy on the tax capacity 
        subject to the areawide tax must each be stated separately and 
        not included in the sum of the special taxing districts; and 
           (3) the increase or decrease in the amounts in clause (2) 
        from taxes payable in the current year to proposed or, for a 
        town, final taxes payable the following year, expressed as a 
        dollar amount and as a percentage. 
           (e) The notice must clearly state that the proposed or 
        final taxes do not include the following: 
           (1) special assessments; 
           (2) levies approved by the voters after the date the 
        proposed taxes are certified, including bond referenda, school 
        district levy referenda, and levy limit increase referenda; 
           (3) amounts necessary to pay cleanup or other costs due to 
        a natural disaster occurring after the date the proposed taxes 
        are certified; 
           (4) amounts necessary to pay tort judgments against the 
        taxing authority that become final after the date the proposed 
        taxes are certified; and 
           (5) the contamination tax imposed on properties which 
        received market value reductions for contamination. 
           (f) Except as provided in subdivision 7, failure of the 
        county auditor to prepare or the county treasurer to deliver the 
        notice as required in this section does not invalidate the 
        proposed or final tax levy or the taxes payable pursuant to the 
        tax levy. 
           (g) If the notice the taxpayer receives under this section 
        lists the property as nonhomestead, and the homeowner provides 
        satisfactory documentation is provided to the county assessor 
        that by the applicable deadline, and the property is owned and 
        used as the owner's qualifies for the homestead classification 
        in that assessment year, the assessor shall reclassify the 
        property to homestead for taxes payable in the following year. 
           (h) In the case of class 4 residential property used as a 
        residence for lease or rental periods of 30 days or more, the 
        taxpayer must either: 
           (1) mail or deliver a copy of the notice of proposed 
        property taxes to each tenant, renter, or lessee; or 
           (2) post a copy of the notice in a conspicuous place on the 
        premises of the property.  
           The notice must be mailed or posted by the taxpayer by 
        November 27 or within three days of receipt of the notice, 
        whichever is later.  A taxpayer may notify the county treasurer 
        of the address of the taxpayer, agent, caretaker, or manager of 
        the premises to which the notice must be mailed in order to 
        fulfill the requirements of this paragraph. 
           (i) For purposes of this subdivision, subdivisions 5a and 
        6, "metropolitan special taxing districts" means the following 
        taxing districts in the seven-county metropolitan area that levy 
        a property tax for any of the specified purposes listed below: 
           (1) metropolitan council under section 473.132, 473.167, 
        473.249, 473.325, 473.446, 473.521, 473.547, or 473.834; 
           (2) metropolitan airports commission under section 473.667, 
        473.671, or 473.672; and 
           (3) metropolitan mosquito control commission under section 
        473.711. 
           For purposes of this section, any levies made by the 
        regional rail authorities in the county of Anoka, Carver, 
        Dakota, Hennepin, Ramsey, Scott, or Washington under chapter 
        398A shall be included with the appropriate county's levy and 
        shall be discussed at that county's public hearing. 
           (j) For taxes levied in 1996, payable in 1997 only, in the 
        case of a statutory or home rule charter city or town that 
        exercises the local levy option provided in section 473.388, 
        subdivision 7, the notice of its proposed taxes may include a 
        statement of the amount by which its proposed tax increase for 
        taxes payable in 1997 is attributable to its exercise of that 
        option, together with a statement that the levy of the 
        metropolitan council was decreased by a similar amount because 
        of the exercise of that option. 
           Sec. 10.  Minnesota Statutes 1996, section 275.295, 
        subdivision 3, is amended to read: 
           Subd. 3.  [APPROPRIATION.] There is appropriated from the 
        general fund to the commissioner of revenue the amount necessary 
        to make the payments required in subdivision 2.  There is 
        appropriated from the general fund to the commissioner of 
        children, families, and learning the amount necessary to make 
        the payments determined under subdivisions 1 and 2 for school 
        districts. 
           Sec. 11.  Minnesota Statutes 1996, section 276A.01, 
        subdivision 7, is amended to read: 
           Subd. 7.  [POPULATION.] "Population" means the most recent 
        estimate of the population of a municipality made by the state 
        demographer and filed with the commissioner of revenue as of 
        July 1 of the year in which a municipality's distribution net 
        tax capacity is calculated.  The state demographer shall 
        annually estimate the population of each municipality and, in 
        the case of a municipality which is located partly within and 
        partly without the area, the proportion of the total which 
        resides within the area, and shall file the estimates with the 
        commissioner of revenue. 
           Sec. 12.  Minnesota Statutes 1996, section 277.21, 
        subdivision 3, is amended to read: 
           Subd. 3.  [MANNER OF EXECUTION AND SALE.] In making the 
        execution of the levy and in collecting the taxes due in a 
        manner consistent with the provisions of this chapter, the 
        county treasurer has all of the powers in chapter 550 and in any 
        other law, and the powers given to the commissioner of revenue 
        in sections 270.7001, 270.7002, and 290.92, subdivision 23, for 
        purposes of effecting an execution against property in this 
        state.  The sale of property levied upon, and the time and 
        manner of redemption therefrom, must be consistent with 
        authority granted to the commissioner of revenue to collect 
        state taxes under sections 270.70 to 270.709.  The seal of the 
        court, subscribed by the court administrator, as provided in 
        section 550.04, is not required.  The levy for collection of 
        taxes may be made, whether or not a legal action for collection 
        of the taxes has been commenced.  
           Sec. 13.  Minnesota Statutes 1996, section 287.22, is 
        amended to read: 
           287.22 [EXCEPTIONS.] 
           The tax imposed by section 287.21 shall not apply to: 
           A.  Any executory contract for the sale of land under which 
        the vendee is entitled to or does take possession thereof, or 
        any assignment or cancellation thereof.  
           B.  Any mortgage or any assignment, extension, partial 
        release, or satisfaction thereof.  
           C.  Any will.  
           D.  Any plat.  
           E.  Any lease.  
           F.  Any deed, instrument, or writing in which the United 
        States or any agency or instrumentality thereof is the grantor, 
        assignor, transferor, conveyor, grantee or assignee. 
           G.  Deeds for cemetery lots.  
           H.  Deeds of distribution by personal representatives.  
           I.  Deeds to or from coowners partitioning undivided 
        interests in the same piece of property. 
           J.  Any deed or other instrument of conveyance issued 
        pursuant to a land exchange under section 92.121 and related 
        laws.  
           K.  A referee's or sheriff's certificate of sale in a 
        mortgage or lien foreclosure sale. 
           L.  A referee's or sheriff's certificate of redemption from 
        a mortgage or lien foreclosure sale issued to the redeeming 
        mortgagor or lienee. 
           M.  Any deed, instrument, or writing which grants, creates, 
        modifies, or cancels an easement. 
           Sec. 14.  Minnesota Statutes 1996, section 414.033, 
        subdivision 7, is amended to read: 
           Subd. 7.  [FILING; EFFECTIVE DATE; COPY, LEVIES.] Any 
        annexation ordinance provided for in this section must be filed 
        with the board, the township, the county auditor and the 
        secretary of state and is final on the date the ordinance is 
        approved by the board.  A copy of the annexation ordinance must 
        be delivered immediately by the governing body of the 
        municipality to the appropriate county auditor or auditors.  For 
        the purposes of taxation, if the annexation becomes effective on 
        or before August 1 of a levy year, the municipality may levy on 
        the annexed area beginning with that same levy year.  If the 
        annexation becomes effective after August 1 of a levy year, the 
        town may continue to levy on the annexed area for that levy 
        year, and the municipality may not levy on the annexed area 
        until the following levy year. 
           Sec. 15.  Minnesota Statutes 1996, section 414.033, 
        subdivision 12, is amended to read: 
           Subd. 12.  [PROPERTY TAXES.] When a municipality annexes 
        land under subdivision 2, clause (2), (3), or (4), or 
        subdivision 2a, property taxes payable on the annexed land shall 
        continue to be paid to the affected town or towns for the year 
        in which the annexation becomes effective.  If the annexation 
        becomes effective on or before August 1 of a levy year, the 
        municipality may levy on the annexed area beginning with that 
        same levy year.  If the annexation becomes effective after 
        August 1 of a levy year, the town may continue to levy on the 
        annexed area for that levy year, and the municipality may not 
        levy on the annexed area until the following levy year.  In the 
        first year following the year when the municipality could first 
        levy on the annexed area under this subdivision, and thereafter, 
        property taxes on the annexed land shall be paid to the 
        municipality.  In the first year following the year the land was 
        annexed municipality could first levy on the annexed area, the 
        municipality shall make a cash payment to the affected town or 
        towns in an amount equal to 90 percent of the property taxes 
        paid in the year the land was annexed distributed to the town in 
        regard to the annexed area in the last year the property taxes 
        from the annexed area were payable to the town; in the second 
        year, an amount equal to 70 percent of the property taxes paid 
        in the year the land was annexed; in the third year, an amount 
        equal to 50 percent of the property taxes paid in the year the 
        land was annexed; in the fourth year, an amount equal to 30 
        percent of the property taxes paid in the year the land was 
        annexed; and in the fifth year, an amount equal to ten 
        percent of the property taxes paid in the year the land was 
        annexed.  The municipality and the affected township may agree 
        to a different payment. 
           Sec. 16.  Minnesota Statutes 1996, section 469.177, 
        subdivision 9, is amended to read: 
           Subd. 9.  [DISTRIBUTIONS OF EXCESS TAXES ON CAPTURED NET 
        TAX CAPACITY.] (a) If the amount of tax paid on captured net tax 
        capacity 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 local 
        tax rate of the governmental unit less the governmental unit's 
        local tax rate for the year the original local tax 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 local tax 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 local tax rates. 
           The school district's tax rate must be divided into the 
        portion of the tax rate attributable (1) to state equalized 
        levies, and (2) unequalized levies.  As used in this 
        subdivision, "equalized levies" means the sum of the maximum 
        amounts that may be levied for:  (i) general education under 
        section 124A.23, subdivision 2; (ii) supplemental revenue under 
        section 124A.22, subdivision 8a; (iii) capital expenditure 
        facilities revenue under section 124.243, subdivision 3; (iv) 
        capital expenditure equipment revenue under section 124.244, 
        subdivision 2; and (v) basic transportation under section 
        124.226, subdivision 1. "equalized school levies" which are 
        defined in section 273.1398, subdivision 1, for aids payable in 
        the year following the year in which the excess taxes on 
        captured net tax capacity are due and payable.  Unequalized 
        levies mean the rest of the school district's levies.  The 
        calculations under clause (2) must determine the amount of 
        excess taxes attributable to each portion of the school 
        district's tax rate.  If one of the portions of the change in 
        the school district tax rate is less than zero and the combined 
        change is greater than zero, the combined rate must be used and 
        all the school district's share of excess taxes allocated to 
        that portion of the tax rate. 
           (b) The amounts distributed shall be deducted in computing 
        the levy limits of the taxing district for the succeeding 
        taxable year.  In the case of a school district, only the 
        proportion of the excess taxes attributable to unequalized 
        levies that are subject to a fixed dollar amount levy limit 
        shall be deducted from the levy limit. 
           (c) In the case of distributions to a school district that 
        are attributable to state equalized levies, the county auditor 
        shall report amounts distributed to the commissioner of 
        children, families, and learning in the same manner as provided 
        for excess increments under section 469.176, subdivision 2, and 
        the distribution shall be deducted from the school district's 
        state aid payments. 
           Sec. 17.  Minnesota Statutes 1996, section 473.388, 
        subdivision 7, is amended to read: 
           Subd. 7.  [LOCAL LEVY OPTION.] (a) A statutory or home rule 
        charter city or town that is eligible for assistance under this 
        section, in lieu of receiving the assistance, may levy a tax for 
        payment of the operating and capital expenditures for transit 
        and other related activities and to provide for payment of 
        obligations issued by the municipality for such purposes, 
        provided that the tax must be sufficient to maintain the level 
        of transit service provided in the municipality in the previous 
        year. 
           (b) The transit tax revenues derived by the municipality 
        may not exceed: 
           (1) for the first transit levy year and any subsequent 
        transit levy year immediately following a year in which the 
        municipality declines to make the levy, the maximum available 
        local transit funds for the municipality for taxes payable in 
        the current year under section 473.446, calculated as if the 
        percentage of transit tax revenues for the municipality were 88 
        percent instead of 90 percent, and multiplied by the 
        municipality's market value adjustment ratio; and 
           (2) for taxes levied in any year that immediately follows a 
        year in which the municipality elects to levy under this 
        subdivision, the maximum transit tax that the municipality may 
        have levied in the previous year under this subdivision, 
        multiplied by the municipality's market value adjustment ratio. 
           The commissioner of revenue shall certify the 
        municipality's levy limitation under this subdivision to the 
        municipality by June 1 of the levy year.  The tax must be 
        accumulated and kept in a separate fund to be known as the 
        "replacement transit fund." 
           (c) To enable the municipality to receive revenues 
        described in clauses (2) and (3) of the definition of "tax 
        revenues" in subdivision 4, that would otherwise be lost if the 
        municipality's transit tax levy was not treated as a successor 
        levy to that made by the council under section 473.446: 
           (1) in the first transit levy year and any subsequent 
        transit levy year immediately following a year in which the 
        municipality declined to make the levy, 88 percent of the 
        council's nondebt spread levy for the current taxes payable year 
        shall be treated as levied by the municipality, and not the 
        council, for purposes of section 473F.08, subdivision 3, for the 
        purpose of determining its local tax rate for the preceding 
        year; and 
           (2) 88 percent of the revenues described in clause (3) of 
        the definition of "tax revenues" in subdivision 4, payable in 
        the first transit levy year, or payable in any subsequent 
        transit levy year following a year in which a municipality 
        declined to make the levy, shall be permanently transferred from 
        the council to the municipality.  If a municipality levies a tax 
        under this subdivision in one year, but declines to levy in a 
        subsequent year, the aid transferred under this clause shall be 
        transferred back to the council. 
           (d) Any transit taxes levied under this subdivision are not 
        subject to, or counted towards, any limit hereafter imposed by 
        law on the levy of taxes upon taxable property within any 
        municipality unless the law specifically includes the transit 
        tax. 
           (e) This subdivision is consistent with the transit 
        redesign plan.  Eligible municipalities opting to levy the 
        transit tax under this subdivision shall continue to meet the 
        regional performance standards established by the council. 
           (f) Within the designated Americans with Disabilities Act 
        area, metro mobility remains the obligation of the state. 
           (g) For purposes of this subdivision, "transit levy year" 
        is any year in which the municipality elects to levy under this 
        subdivision. 
           (h) A municipality may not levy taxes under this 
        subdivision in any year unless it notifies the council and the 
        commissioner of revenue of its intent to levy before July 1 of 
        the levy year.  The notification must include the amount of the 
        municipality's proposed transit tax for the current levy 
        year.  After June 30 in the levy year, a municipality's decision 
        to levy or not levy taxes under this subdivision is irrevocable 
        for that levy year. 
           Sec. 18.  Minnesota Statutes 1996, section 473F.02, 
        subdivision 7, is amended to read: 
           Subd. 7.  [POPULATION.] "Population" means the most recent 
        estimate of the population of a municipality made by the 
        metropolitan council and filed with the commissioner of 
        revenue as of July 1 of the year in which a municipality's 
        distribution net tax capacity is calculated.  The council shall 
        annually estimate the population of each municipality as of a 
        date which it determines and, in the case of a municipality 
        which is located partly within and partly without the area, the 
        proportion of the total which resides within the area, and shall 
        promptly thereafter file its estimates with the commissioner of 
        revenue. 
           Sec. 19.  [EFFECTIVE DATE.] 
           Sections 1, 2, 4 to 7, 9 to 13, and 16 to 18 are effective 
        the day following final enactment.  Sections 3 and 8 are 
        effective for determinations made in regard to taxes payable in 
        1996 and thereafter.  Sections 14 and 15 are effective beginning 
        with annexations that become effective in 1996 and thereafter. 
                                   ARTICLE 4
                                 MINNESOTACARE
           Section 1.  Minnesota Statutes 1996, section 295.50, 
        subdivision 3, is amended to read: 
           Subd. 3.  [GROSS REVENUES.] "Gross revenues" are total 
        amounts received in money or otherwise by: 
           (1) a hospital for patient services; 
           (2) a surgical center for patient services; 
           (3) a health care provider, other than a staff model health 
        carrier, for patient services; 
           (4) a wholesale drug distributor for sale or distribution 
        of legend drugs that are delivered:  (i) to a in Minnesota 
        resident by a wholesale drug distributor who is a nonresident 
        pharmacy directly, by common carrier, or by mail; or (ii) in 
        Minnesota by the wholesale drug distributor, by common carrier, 
        or by mail, unless the legend drugs are delivered to another 
        wholesale drug distributor who sells legend drugs exclusively at 
        wholesale.  Legend drugs do not include nutritional products as 
        defined in Minnesota Rules, part 9505.0325; 
           (5) a staff model health plan company as gross premiums for 
        enrollees, copayments, deductibles, coinsurance, and fees for 
        patient services covered under its contracts with groups and 
        enrollees; and 
           (6) a pharmacy medical supplies distributor for sale, rent, 
        lease, or repair of medical supplies, appliances, and equipment. 
           Sec. 2.  Minnesota Statutes 1996, section 295.50, 
        subdivision 4, is amended to read: 
           Subd. 4.  [HEALTH CARE PROVIDER.] (a) "Health care 
        provider" means: 
           (1) a person whose health care occupation is required to be 
        licensed or registered by the state of Minnesota furnishing any 
        or all of the following goods or services directly to a patient 
        or consumer:  medical, surgical, optical, visual, dental, 
        hearing, nursing services, drugs, medical supplies, medical 
        appliances, laboratory, diagnostic or therapeutic services, or 
        any goods and services not listed above that qualify for 
        reimbursement under the medical assistance program provided 
        under chapter 256B.  For purposes of this clause, "directly to a 
        patient or consumer" includes goods and services provided in 
        connection with independent medical examinations under section 
        65B.56 or other examinations for purposes of litigation or 
        insurance claims; 
           (2) a staff model health plan company; or 
           (3) an ambulance service required to be licensed. 
           (b) Health care provider does not include 
        hospitals, medical supplies distributors, nursing homes licensed 
        under chapter 144A or licensed in any other jurisdiction, 
        pharmacies, surgical centers, bus and taxicab transportation, or 
        any other providers of transportation services other than 
        ambulance services required to be licensed, supervised living 
        facilities for persons with mental retardation or related 
        conditions, licensed under Minnesota Rules, parts 4665.0100 to 
        4665.9900, residential care homes licensed under chapter 144B, 
        board and lodging establishments providing only custodial 
        services that are licensed under chapter 157 and registered 
        under section 157.17 to provide supportive services or health 
        supervision services, adult foster homes as defined in Minnesota 
        Rules, part 9555.5105, day training and habilitation services 
        for adults with mental retardation and related conditions as 
        defined in section 252.41, subdivision 3, and boarding care 
        homes, as defined in Minnesota Rules, part 4655.0100. 
           Sec. 3.  Minnesota Statutes 1996, section 295.50, 
        subdivision 7, is amended to read: 
           Subd. 7.  [HOSPITAL.] "Hospital" means a hospital licensed 
        under chapter 144, or a hospital licensed by any other state or 
        province or territory of Canada jurisdiction. 
           Sec. 4.  Minnesota Statutes 1996, section 295.50, is 
        amended by adding a subdivision to read: 
           Subd. 7a.  [MEDICAL SUPPLIES DISTRIBUTOR.] A medical 
        supplies distributor is a person who sells, rents, leases, or 
        repairs medical supplies, appliances, and equipment. 
           Sec. 5.  Minnesota Statutes 1996, section 295.50, 
        subdivision 13, is amended to read: 
           Subd. 13.  [SURGICAL CENTER.] "Surgical center" is an 
        outpatient surgical center as defined in Minnesota Rules, 
        chapter 4675 or a similar facility located in any other state or 
        province or territory of Canada jurisdiction. 
           Sec. 6.  Minnesota Statutes 1996, section 295.51, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [BUSINESS TRANSACTIONS IN MINNESOTA.] A 
        hospital, surgical center, pharmacy medical supplies 
        distributor, or health care provider is subject to tax under 
        sections 295.50 to 295.59 if it is "transacting business in 
        Minnesota."  A hospital, surgical center, pharmacy medical 
        supplies distributor, or health care provider is transacting 
        business in Minnesota if it maintains contacts with or presence 
        in the state of Minnesota sufficient to permit taxation of gross 
        revenues received for patient services under the United States 
        Constitution. 
           Sec. 7.  Minnesota Statutes 1996, section 295.52, 
        subdivision 1b, is amended to read: 
           Subd. 1b.  [PHARMACY MEDICAL SUPPLIES DISTRIBUTOR TAX.] A 
        tax is imposed on each pharmacy medical supplies distributor 
        equal to two percent of its gross revenues. 
           Sec. 8.  Minnesota Statutes 1996, section 295.53, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [EXEMPTIONS.] (a) The following payments 
        are excluded from the gross revenues subject to the hospital, 
        surgical center, or health care provider taxes under sections 
        295.50 to 295.57: 
           (1) payments received for services provided under the 
        Medicare program, including payments received from the 
        government, and organizations governed by sections 1833 and 1876 
        of title XVIII of the federal Social Security Act, United States 
        Code, title 42, section 1395, and enrollee deductibles, 
        coinsurance, and copayments, whether paid by the Medicare 
        enrollee or by a Medicare supplemental coverage as defined in 
        section 62A.011, subdivision 3, clause (10).  Payments for 
        services not covered by Medicare are taxable; 
           (2) medical assistance payments including payments received 
        directly from the government or from a prepaid plan; 
           (3) payments received for home health care services; 
           (4) payments received from hospitals or surgical centers 
        for goods and services on which liability for tax is imposed 
        under section 295.52 or the source of funds for the payment is 
        exempt under clause (1), (2), (7), (8), or (10); 
           (5) payments received from health care providers for goods 
        and services on which liability for tax is imposed under this 
        chapter or the source of funds for the payment is exempt under 
        clause (1), (2), (7), (8), or (10); 
           (6) amounts paid for legend drugs, other than nutritional 
        products, to a wholesale drug distributor who is subject to tax 
        under section 295.52, subdivision 3, reduced by reimbursements 
        received for legend drugs under clauses (1), (2), (7), and (8); 
           (7) payments received under the general assistance medical 
        care program including payments received directly from the 
        government or from a prepaid plan; 
           (8) payments received for providing services under the 
        MinnesotaCare program including payments received directly from 
        the government or from a prepaid plan and enrollee deductibles, 
        coinsurance, and copayments.  For purposes of this clause, 
        coinsurance means the portion of payment that the enrollee is 
        required to pay for the covered service; 
           (9) payments received by a health care provider or the 
        wholly owned subsidiary of a health care provider for care 
        provided outside Minnesota to a patient who is not domiciled in 
        Minnesota; 
           (10) payments received from the chemical dependency fund 
        under chapter 254B; 
           (11) payments received in the nature of charitable 
        donations that are not designated for providing patient services 
        to a specific individual or group; 
           (12) payments received for providing patient services 
        incurred through a formal program of health care research 
        conducted in conformity with federal regulations governing 
        research on human subjects.  Payments received from patients or 
        from other persons paying on behalf of the patients are subject 
        to tax; 
           (13) payments received from any governmental agency for 
        services benefiting the public, not including payments made by 
        the government in its capacity as an employer or insurer; 
           (14) payments received for services provided by community 
        residential mental health facilities licensed under Minnesota 
        Rules, parts 9520.0500 to 9520.0690, community support programs 
        and family community support programs approved under Minnesota 
        Rules, parts 9535.1700 to 9535.1760, and community mental health 
        centers as defined in section 245.62, subdivision 2; 
           (15) government payments received by a regional treatment 
        center; 
           (16) payments received for hospice care services; 
           (17) payments received by a health care provider for 
        medical supplies, appliances, and equipment delivered outside of 
        Minnesota; 
           (18) payments received by a post-secondary educational 
        institution from student tuition, student activity fees, health 
        care service fees, government appropriations, donations, or 
        grants.  Fee for service payments and payments for extended 
        coverage are taxable; and 
           (19) payments received for services provided by:  assisted 
        living programs and congregate housing programs. 
           (b) Payments received by wholesale drug distributors for 
        prescription legend drugs sold directly to veterinarians or 
        veterinary bulk purchasing organizations are excluded from the 
        gross revenues subject to the wholesale drug distributor tax 
        under sections 295.50 to 295.59. 
           Sec. 9.  Minnesota Statutes 1996, section 295.53, 
        subdivision 3, is amended to read: 
           Subd. 3.  [SEPARATE STATEMENT OF TAX.] A hospital, surgical 
        center, pharmacy medical supplies distributor, or health care 
        provider must not state the tax obligation under section 295.52 
        in a deceptive or misleading manner.  It must not separately 
        state tax obligations on bills provided to patients, consumers, 
        or other payers when the amount received for the services or 
        goods is not subject to tax.  
           Pharmacies that separately state the tax obligations on 
        bills provided to consumers or to other payers who purchase 
        legend drugs may state the tax obligation as two percent of the 
        wholesale price of the legend drugs.  Pharmacies must not state 
        the tax obligation as two percent of the retail price.  
           Whenever the commissioner determines that a person has 
        engaged in any act or practice constituting a violation of this 
        subdivision, the commissioner may bring an action in the name of 
        the state in the district court of the appropriate county to 
        enjoin the act or practice and to enforce compliance with this 
        subdivision, or the commissioner may refer the matter to the 
        attorney general or the county attorney of the appropriate 
        county.  Upon a proper showing, a permanent or temporary 
        injunction, restraining order, or other appropriate relief must 
        be granted.  
           Sec. 10.  Minnesota Statutes 1996, section 295.53, 
        subdivision 5, is amended to read: 
           Subd. 5.  [EXEMPTIONS FOR PHARMACIES MEDICAL SUPPLIES 
        DISTRIBUTORS.] (a) Pharmacies Medical supplies distributors may 
        exclude from their gross revenues subject to tax payments for 
        medical supplies, appliances, and devices equipment that are 
        exempt under subdivision 1, clauses (1), (2), (4), (5), (7), 
        (8), and (13). 
           (b) Pharmacies Medical supplies distributors may exclude 
        from their gross revenues subject to tax payments received for 
        medical supplies, appliances, and equipment delivered outside of 
        Minnesota. 
           Sec. 11.  Minnesota Statutes 1996, section 295.54, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [TAXES PAID TO ANOTHER STATE.] A hospital, 
        surgical center, pharmacy medical supplies distributor, or 
        health care provider that has paid taxes to another state or 
        province or territory of Canada jurisdiction measured by gross 
        revenues and is subject to tax under sections 295.52 to 295.59 
        on the same gross revenues is entitled to a credit for the tax 
        legally due and paid to another state or province or territory 
        of Canada jurisdiction to the extent of the lesser of (1) the 
        tax actually paid to the other state or province or territory of 
        Canada jurisdiction, or (2) the amount of tax imposed by 
        Minnesota on the gross revenues subject to tax in the other 
        taxing jurisdictions. 
           Sec. 12.  Minnesota Statutes 1996, section 295.582, is 
        amended to read: 
           295.582 [AUTHORITY.] 
           (a) A hospital, surgical center, pharmacy medical supplies 
        distributor, or health care provider that is subject to a tax 
        under section 295.52, or a pharmacy that has paid additional 
        expense transferred under this section by a wholesale drug 
        distributor, may transfer additional expense generated by 
        section 295.52 obligations on to all third-party contracts for 
        the purchase of health care services on behalf of a patient or 
        consumer.  The additional expense transferred to the third-party 
        purchaser must not exceed two percent of the gross revenues 
        received under the third-party contract, and two percent of 
        copayments and deductibles paid by the individual patient or 
        consumer.  The expense must not be generated on revenues derived 
        from payments that are excluded from the tax under section 
        295.53.  All third-party purchasers of health care services 
        including, but not limited to, third-party purchasers regulated 
        under chapter 60A, 62A, 62C, 62D, 62H, 62N, 64B, 65A, 65B, 79, 
        or 79A, or under section 471.61 or 471.617, must pay the 
        transferred expense in addition to any payments due under 
        existing contracts with the hospital, surgical center, pharmacy 
        medical supplies distributor, or health care provider, to the 
        extent allowed under federal law.  A third-party purchaser of 
        health care services includes, but is not limited to, a health 
        carrier, integrated service network, or community integrated 
        service network that pays for health care services on behalf of 
        patients or that reimburses, indemnifies, compensates, or 
        otherwise insures patients for health care services.  A 
        third-party purchaser shall comply with this section regardless 
        of whether the third-party purchaser is a for-profit, 
        not-for-profit, or nonprofit entity.  A wholesale drug 
        distributor may transfer additional expense generated by section 
        295.52 obligations to entities that purchase from the 
        wholesaler, and the entities must pay the additional expense.  
        Nothing in this section limits the ability of a hospital, 
        surgical center, pharmacy medical supplies distributor, 
        wholesale drug distributor, or health care provider to recover 
        all or part of the section 295.52 obligation by other methods, 
        including increasing fees or charges. 
           (b) Each third-party purchaser regulated under any chapter 
        cited in paragraph (a) shall include with its annual renewal for 
        certification of authority or licensure documentation indicating 
        compliance with paragraph (a).  If the commissioner responsible 
        for regulating the third-party purchaser finds at any time that 
        the third-party purchaser has not complied with paragraph (a), 
        the commissioner may by order fine or censure the third-party 
        purchaser or revoke or suspend the certificate of authority or 
        license of the third-party purchaser to do business in this 
        state.  The third-party purchaser may appeal the commissioner's 
        order through a contested case hearing in accordance with 
        chapter 14. 
           Sec. 13.  [EFFECTIVE DATE.] 
           Sections 1 to 12 are effective the day following final 
        enactment. 
           Presented to the governor April 14, 1997 
           Signed by the governor April 15, 1997, 2:05 p.m.