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2002 Minnesota Session Laws

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

                            CHAPTER 377-H.F.No. 2498 
                  An act relating to financing and operation of state 
                  and local government; modifying provisions relating to 
                  income, franchise, sales and use, property, 
                  MinnesotaCare, gross receipts, liquor, insurance, 
                  solid waste management, estate, minerals, and other 
                  taxes, property tax refunds, tax liens, and tax 
                  administration; imposing a wind energy production tax; 
                  modifying property tax and other state aids and 
                  credits; changing education aids and levies; modifying 
                  tax court jurisdiction; authorizing local units of 
                  government to levy, impose, or abate taxes, issue 
                  debt, and exercise other powers; extending and 
                  authorizing certain expenditures from the northeast 
                  Minnesota economic protection trust fund; modifying 
                  levy limits; providing powers to and imposing duties 
                  on the commissioner of revenue and other officials; 
                  clarifying utility rate reduction provisions mandated 
                  by property tax reductions; modifying tax increment 
                  financing and other economic development provisions; 
                  providing a time limit for offset of federal tax 
                  refunds; changing lawful purpose for purposes of 
                  lawful gambling; providing for data privacy and 
                  exchange of data; modifying certain debt limits; 
                  repealing an annexation provision; making technical 
                  corrections; providing for the transfer of funds; 
                  providing for a budget reserve; appropriating money; 
                  amending Minnesota Statutes 2000, sections 16A.152, by 
                  adding a subdivision; 40A.151, subdivision 1; 40A.152, 
                  subdivisions 1, 3; 69.77, by adding a subdivision; 
                  126C.44; 168A.05, by adding subdivisions; 270.063, 
                  subdivision 4; 270.60, subdivision 4; 270B.01, 
                  subdivision 8; 270B.02, subdivision 4; 270B.14, 
                  subdivision 8; 272.02, subdivision 15, by adding 
                  subdivisions; 272.0212, subdivision 4; 273.125, 
                  subdivisions 3, 4; 273.1398, subdivisions 1a, 2, 3; 
                  278.01, subdivision 1; 279.01, subdivision 3; 289A.10, 
                  subdivision 1; 289A.19, subdivision 1; 290.01, 
                  subdivision 19a; 290.067, subdivisions 1, 2a; 290.081; 
                  290.17, subdivisions 2, 3; 290.191, subdivision 4; 
                  290A.03, subdivision 3; 291.03, subdivision 1; 295.53, 
                  subdivision 1; 295.57, by adding a subdivision; 
                  296A.18, subdivision 8; 297A.66, by adding a 
                  subdivision; 297A.67, subdivision 5, by adding a 
                  subdivision; 297A.68, by adding a subdivision; 
                  297A.71, by adding subdivisions; 297A.96; 297G.07, 
                  subdivision 1; 297H.06, subdivision 2; 297I.05, 
                  subdivision 11; 298.27; 298.28, subdivisions 5, 9b, 
                  11; 298.291; 469.1813, by adding a subdivision; 
                  477A.011, subdivision 20; 477A.15; Minnesota Statutes 
                  2001 Supplement, sections 69.021, subdivision 5; 
                  124D.86, subdivision 3; 126C.17, subdivision 7a; 
                  126C.21, subdivision 4; 126C.40, subdivision 1; 
                  126C.43, subdivision 3; 126C.48, subdivision 8; 
                  216B.1646; 270.69, subdivision 2; 270.691, subdivision 
                  8; 270B.02, subdivision 3; 270B.08, subdivision 2; 
                  271.01, subdivision 5; 271.21, subdivision 2; 272.02, 
                  subdivision 22; 272.028; 273.121; 273.124, subdivision 
                  11; 273.13, subdivisions 22, 24, 25; 273.1384, 
                  subdivisions 1, 2; 273.1392; 273.1398, subdivisions 
                  4c, 4d; 275.065, subdivision 3; 275.70, subdivision 5; 
                  275.71, subdivisions 2, 3, 6; 275.74, subdivision 2; 
                  276.04, subdivision 2; 289A.02, subdivision 7; 
                  289A.20, subdivisions 2, 4; 289A.60, subdivision 2; 
                  290.01, subdivisions 19, 19b, 19c, 19d, 31; 290.0675, 
                  subdivisions 1, 3; 290.091, subdivision 2; 290.0921, 
                  subdivisions 2, 3, 6; 290.21, subdivision 4; 290A.03, 
                  subdivision 15; 290A.04, subdivision 2h; 291.005, 
                  subdivision 1; 295.60, subdivisions 2, 7, by adding 
                  subdivisions; 297A.61, subdivisions 3, 26, 31; 
                  297A.66, subdivision 1; 297A.67, subdivisions 25, 29; 
                  297A.68, subdivision 3; 297A.70, subdivisions 3, 10; 
                  297A.71, subdivision 23; 297A.75; 297A.995, 
                  subdivision 4; 298.01, subdivisions 3b, 4c; 298.225, 
                  subdivision 1; 298.28, subdivisions 4, 6, 9a, 10; 
                  298.296, subdivision 2; 349.12, subdivision 25; 
                  469.1734, subdivision 6; 469.1763, subdivision 6; 
                  469.1792, subdivision 1; 477A.011, subdivision 36; 
                  477A.0123; 477A.013, subdivision 9; 477A.03, 
                  subdivision 2; 477A.07, subdivisions 1, 2, 3; Laws 
                  1990, chapter 604, article 6, section 9, subdivision 
                  1, as amended; Laws 1993, chapter 375, article 5, 
                  section 42; Laws 1995, chapter 264, article 5, section 
                  45, subdivision 1, as amended; Laws 1998, chapter 389, 
                  article 3, section 42; Laws 1998, chapter 389, article 
                  8, section 37, subdivision 2; Laws 2001, First Special 
                  Session chapter 5, article 9, section 3; Laws 2001, 
                  First Special Session chapter 5, article 12, sections 
                  11, 82, 95; Laws 2001, First Special Session chapter 
                  6, article 1, section 53; Laws 2001, First Special 
                  Session chapter 6, article 4, sections 25, 27, 
                  subdivision 9; Laws 2001, First Special Session 
                  chapter 6, article 5, section 12; proposing coding for 
                  new law in Minnesota Statutes, chapters 126C; 272; 
                  repealing Minnesota Statutes 2000, sections 272.02, 
                  subdivision 40; 290.01, subdivisions 19g, 32; 
                  290.0921, subdivision 5; 291.03, subdivision 2; 
                  295.44; 297A.68, subdivision 26; Minnesota Statutes 
                  2001 Supplement, sections 469.176, subdivision 1h; 
                  Laws 2001, First Special Session chapter 5, article 3, 
                  section 88; Minnesota Rules, parts 8130.1400; 
                  8130.2100; 8130.2350; 8130.2600; 8130.3000; 8130.3850; 
                  8130.5000. 
        BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 

                                   ARTICLE 1 
                           INCOME AND FRANCHISE TAXES
           Section 1.  Minnesota Statutes 2001 Supplement, section 
        290.01, subdivision 19d, is amended to read: 
           Subd. 19d.  [CORPORATIONS; MODIFICATIONS DECREASING FEDERAL 
        TAXABLE INCOME.] For corporations, there shall be subtracted 
        from federal taxable income after the increases provided in 
        subdivision 19c:  
           (1) the amount of foreign dividend gross-up added to gross 
        income for federal income tax purposes under section 78 of the 
        Internal Revenue Code; 
           (2) the amount of salary expense not allowed for federal 
        income tax purposes due to claiming the federal jobs credit 
        under section 51 of the Internal Revenue Code; 
           (3) any dividend (not including any distribution in 
        liquidation) paid within the taxable year by a national or state 
        bank to the United States, or to any instrumentality of the 
        United States exempt from federal income taxes, on the preferred 
        stock of the bank owned by the United States or the 
        instrumentality; 
           (4) amounts disallowed for intangible drilling costs due to 
        differences between this chapter and the Internal Revenue Code 
        in taxable years beginning before January 1, 1987, as follows: 
           (i) to the extent the disallowed costs are represented by 
        physical property, an amount equal to the allowance for 
        depreciation under Minnesota Statutes 1986, section 290.09, 
        subdivision 7, subject to the modifications contained in 
        subdivision 19e; and 
           (ii) to the extent the disallowed costs are not represented 
        by physical property, an amount equal to the allowance for cost 
        depletion under Minnesota Statutes 1986, section 290.09, 
        subdivision 8; 
           (5) the deduction for capital losses pursuant to sections 
        1211 and 1212 of the Internal Revenue Code, except that: 
           (i) for capital losses incurred in taxable years beginning 
        after December 31, 1986, capital loss carrybacks shall not be 
        allowed; 
           (ii) for capital losses incurred in taxable years beginning 
        after December 31, 1986, a capital loss carryover to each of the 
        15 taxable years succeeding the loss year shall be allowed; 
           (iii) for capital losses incurred in taxable years 
        beginning before January 1, 1987, a capital loss carryback to 
        each of the three taxable years preceding the loss year, subject 
        to the provisions of Minnesota Statutes 1986, section 290.16, 
        shall be allowed; and 
           (iv) for capital losses incurred in taxable years beginning 
        before January 1, 1987, a capital loss carryover to each of the 
        five taxable years succeeding the loss year to the extent such 
        loss was not used in a prior taxable year and subject to the 
        provisions of Minnesota Statutes 1986, section 290.16, shall be 
        allowed; 
           (6) an amount for interest and expenses relating to income 
        not taxable for federal income tax purposes, if (i) the income 
        is taxable under this chapter and (ii) the interest and expenses 
        were disallowed as deductions under the provisions of section 
        171(a)(2), 265 or 291 of the Internal Revenue Code in computing 
        federal taxable income; 
           (7) in the case of mines, oil and gas wells, other natural 
        deposits, and timber for which percentage depletion was 
        disallowed pursuant to subdivision 19c, clause (11), a 
        reasonable allowance for depletion based on actual cost.  In the 
        case of leases the deduction must be apportioned between the 
        lessor and lessee in accordance with rules prescribed by the 
        commissioner.  In the case of property held in trust, the 
        allowable deduction must be apportioned between the income 
        beneficiaries and the trustee in accordance with the pertinent 
        provisions of the trust, or if there is no provision in the 
        instrument, on the basis of the trust's income allocable to 
        each; 
           (8) for certified pollution control facilities placed in 
        service in a taxable year beginning before December 31, 1986, 
        and for which amortization deductions were elected under section 
        169 of the Internal Revenue Code of 1954, as amended through 
        December 31, 1985, an amount equal to the allowance for 
        depreciation under Minnesota Statutes 1986, section 290.09, 
        subdivision 7; 
           (9) amounts included in federal taxable income that are due 
        to refunds of income, excise, or franchise taxes based on net 
        income or related minimum taxes paid by the corporation to 
        Minnesota, another state, a political subdivision of another 
        state, the District of Columbia, or a foreign country or 
        possession of the United States to the extent that the taxes 
        were added to federal taxable income under section 290.01, 
        subdivision 19c, clause (1), in a prior taxable year; 
           (10) 80 percent of royalties, fees, or other like income 
        accrued or received from a foreign operating corporation or a 
        foreign corporation which is part of the same unitary business 
        as the receiving corporation; 
           (11) income or gains from the business of mining as defined 
        in section 290.05, subdivision 1, clause (a), that are not 
        subject to Minnesota franchise tax; 
           (12) the amount of handicap access expenditures in the 
        taxable year which are not allowed to be deducted or capitalized 
        under section 44(d)(7) of the Internal Revenue Code; 
           (13) the amount of qualified research expenses not allowed 
        for federal income tax purposes under section 280C(c) of the 
        Internal Revenue Code, but only to the extent that the amount 
        exceeds the amount of the credit allowed under section 290.068; 
           (14) the amount of salary expenses not allowed for federal 
        income tax purposes due to claiming the Indian employment credit 
        under section 45A(a) of the Internal Revenue Code; 
           (15) the amount of any refund of environmental taxes paid 
        under section 59A of the Internal Revenue Code; 
           (16) for taxable years beginning before January 1, 2008, 
        the amount of the federal small ethanol producer credit allowed 
        under section 40(a)(3) of the Internal Revenue Code which is 
        included in gross income under section 87 of the Internal 
        Revenue Code; and 
           (17) for a corporation whose foreign sales corporation, as 
        defined in section 922 of the Internal Revenue Code, constituted 
        a foreign operating corporation during the any taxable years 
        year ending during calendar year 1992 before January 1, 1995, 
        and a return was filed by August 15, 1996, claiming the 
        deduction under this subdivision for income received from the 
        foreign operating corporation, an amount equal to 1.23 
        multiplied by the amount of income excluded under section 114 of 
        the Internal Revenue Code, provided the income is not income of 
        a foreign operating company. 
           [EFFECTIVE DATE.] This section is effective for taxable 
        years beginning after December 31, 2000. 
           Sec. 2.  Minnesota Statutes 2000, section 290.081, is 
        amended to read: 
           290.081 [INCOME OF NONRESIDENTS, RECIPROCITY.] 
           (a) The compensation received for the performance of 
        personal or professional services within this state by an 
        individual whose residence, place of abode, and place 
        customarily returned to at least once a month is in another 
        state, shall be excluded from gross income to the extent such 
        compensation is subject to an income tax imposed by the state of 
        residence; provided that such state allows a similar exclusion 
        of compensation received by residents of Minnesota for services 
        performed therein. 
           (b) When it is deemed to be in the best interests of the 
        people of this state, the commissioner may determine that the 
        provisions of clause paragraph (a) shall not apply.  As long as 
        the provisions of clause paragraph (a) apply between Minnesota 
        and Wisconsin, the provisions of clause paragraph (a) shall 
        apply to any individual who is domiciled in Wisconsin.  
           (c) For the purposes of clause paragraph (a), whenever the 
        Wisconsin tax on Minnesota residents which would have been paid 
        Wisconsin without clause paragraph (a) exceeds the Minnesota tax 
        on Wisconsin residents which would have been paid Minnesota 
        without clause paragraph (a), or vice versa, then the state with 
        the net revenue loss resulting from clause paragraph (a) shall 
        receive from the other state the amount of such loss.  This 
        provision shall be effective for all years beginning after 
        December 31, 1972.  The data used for computing the loss to 
        either state shall be determined on or before September 30 of 
        the year following the close of the previous calendar year. 
           (d) Interest shall be is payable on all delinquent balances 
        amounts calculated under paragraph (c) relating to taxable years 
        beginning after December 31, 1977 December 31, 2000.  Interest 
        accrues from July 1 of the taxable year.  The commissioner of 
        revenue is authorized to enter into agreements with the state of 
        Wisconsin specifying the reciprocity payment due date, 
        conditions constituting delinquency, interest rates, and a 
        method for computing interest due on any delinquent amounts. 
           (e) If an agreement cannot be reached as to the amount of 
        the loss, the commissioner of revenue and the taxing official of 
        the state of Wisconsin shall each appoint a member of a board of 
        arbitration and these members shall appoint the third member of 
        the board.  The board shall select one of its members as chair.  
        Such board may administer oaths, take testimony, subpoena 
        witnesses, and require their attendance, require the production 
        of books, papers and documents, and hold hearings at such places 
        as are deemed necessary.  The board shall then make a 
        determination as to the amount to be paid the other state which 
        determination shall be final and conclusive. 
           (f) The commissioner may furnish copies of returns, 
        reports, or other information to the taxing official of the 
        state of Wisconsin, a member of the board of arbitration, or a 
        consultant under joint contract with the states of Minnesota and 
        Wisconsin for the purpose of making a determination as to the 
        amount to be paid the other state under the provisions of this 
        section.  Prior to the release of any information under the 
        provisions of this section, the person to whom the information 
        is to be released shall sign an agreement which provides that 
        the person will protect the confidentiality of the returns and 
        information revealed thereby to the extent that it is protected 
        under the laws of the state of Minnesota. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment.  Income tax reciprocity under 
        Minnesota Statutes, section 290.081, with the state of Wisconsin 
        is terminated effective for taxable years beginning after 
        December 31, 2002, unless the state of Wisconsin agrees, in 
        writing, by October 1, 2002, that interest will be included in 
        payments as required by this section, calculated from the date 
        specified under this section at a rate at least equal to the 
        rate under Minnesota Statutes, section 270.75, and beginning 
        with the payment due in December 2002.  If income tax 
        reciprocity is terminated, the requirement under Minnesota 
        Statutes, section 136A.08, subdivision 3, that an income tax 
        reciprocity agreement be in effect as a condition for a higher 
        education reciprocity is suspended through the 2003-2004 school 
        year. 
           Sec. 3.  Minnesota Statutes 2001 Supplement, section 
        290.0921, subdivision 2, is amended to read: 
           Subd. 2.  [DEFINITIONS.] (a) For purposes of this section, 
        the following terms have the meanings given them. 
           (b) "Alternative minimum taxable net income" is alternative 
        minimum taxable income, 
           (1) less the exemption amount, and 
           (2) apportioned or allocated to Minnesota under section 
        290.17, 290.191, or 290.20. 
           (c) The "exemption amount" is $40,000, reduced, but not 
        below zero, by 25 percent of the excess of alternative minimum 
        taxable income over $150,000. 
           (d) "Minnesota alternative minimum taxable income" is 
        alternative minimum taxable net income, less the deductions for 
        alternative tax net operating loss under subdivision 4; 
        charitable contributions under subdivision 5; and dividends 
        received under subdivision 6.  The sum of the deductions under 
        this paragraph may not exceed 90 percent of alternative minimum 
        taxable net income.  This limitation does not apply to: 
           (1) a deduction for dividends paid to or received from a 
        corporation which is subject to tax under section 290.36 and 
        which is a member of an affiliated group of corporations as 
        defined by the Internal Revenue Code; or 
           (2) a deduction for dividends received from a property and 
        casualty insurer as defined under section 60A.60, subdivision 8, 
        which is a member of an affiliated group of corporations as 
        defined by the Internal Revenue Code and either:  (i) the 
        dividend is eliminated in consolidation under Treasury 
        Regulation 1.1502-14(a), as amended through December 31, 1989; 
        or (ii) the dividend is deducted under an election under section 
        243(b) of the Internal Revenue Code. 
           [EFFECTIVE DATE.] This section is effective for tax years 
        beginning after December 31, 2002. 
           Sec. 4.  Minnesota Statutes 2001 Supplement, section 
        290.0921, subdivision 6, is amended to read: 
           Subd. 6.  [DIVIDENDS RECEIVED.] (a) A deduction is allowed 
        from alternative minimum taxable net income equal to the 
        deduction for dividends received under section 290.21, 
        subdivision 4, for purposes of calculating taxable income under 
        section 290.01, subdivision 29. 
           (b) The amount of the deduction must not exceed 90 percent 
        of alternative minimum taxable net income. 
           This limitation does not apply to: 
           (1) dividends paid to or received from a corporation which 
        is subject to tax under section 290.36 and which is a member of 
        an affiliated group of corporations as defined by the Internal 
        Revenue Code; or 
           (2) dividends received from a property and casualty insurer 
        as defined under section 60A.60, subdivision 8, which is a 
        member of an affiliated group of corporations as defined by the 
        Internal Revenue Code and either:  (i) the dividend is 
        eliminated in consolidation under Treasury Regulation 
        1.1502-14(a), as amended through December 31, 1989; or (ii) the 
        dividend is deducted under an election under section 243(b) of 
        the Internal Revenue Code.  
           [EFFECTIVE DATE.] This section is effective for tax years 
        beginning after December 31, 2002. 
           Sec. 5.  Minnesota Statutes 2000, section 290.191, 
        subdivision 4, is amended to read: 
           Subd. 4.  [APPORTIONMENT FORMULA FOR CERTAIN MAIL ORDER 
        BUSINESSES.] If the business of a corporation, partnership, or 
        proprietorship consists exclusively of the selling of tangible 
        personal property and services at retail, as defined in section 
        297A.61, subdivision 4, paragraph (a), in response to orders 
        received by United States mail, telephone, facsimile, or other 
        electronic media, and 99 percent of the taxpayer's property and 
        payroll is within Minnesota, then the taxpayer may apportion net 
        income to Minnesota based solely upon the percentage that the 
        sales made within this state in connection with its trade or 
        business during the tax period are of the total sales wherever 
        made in connection with the trade or business during the tax 
        period.  Property and payroll factors are disregarded.  In 
        determining eligibility for this subdivision:  
           (1) the sale not in the ordinary course of business of 
        tangible or intangible assets used in conducting business 
        activities must be disregarded; and 
           (2) property and payroll at a distribution center outside 
        of Minnesota are disregarded if the sole activity at the 
        distribution center is the filling of orders, and no 
        solicitation of orders occurs at the distribution center. 
           [EFFECTIVE DATE.] This section is effective for tax years 
        beginning after December 31, 2001. 
           Sec. 6.  Minnesota Statutes 2001 Supplement, section 
        290.21, subdivision 4, is amended to read: 
           Subd. 4.  (a)(1) Eighty percent of dividends received by a 
        corporation during the taxable year from another corporation, in 
        which the recipient owns 20 percent or more of the stock, by 
        vote and value, not including stock described in section 
        1504(a)(4) of the Internal Revenue Code when the corporate stock 
        with respect to which dividends are paid does not constitute the 
        stock in trade of the taxpayer or would not be included in the 
        inventory of the taxpayer, or does not constitute property held 
        by the taxpayer primarily for sale to customers in the ordinary 
        course of the taxpayer's trade or business, or when the trade or 
        business of the taxpayer does not consist principally of the 
        holding of the stocks and the collection of the income and gains 
        therefrom; and 
           (2)(i) the remaining 20 percent of dividends if the 
        dividends received are the stock in an affiliated company 
        transferred in an overall plan of reorganization and the 
        dividend is eliminated in consolidation under Treasury 
        Department Regulation 1.1502-14(a), as amended through December 
        31, 1989; or 
           (ii) the remaining 20 percent of dividends if the dividends 
        are received from a corporation which is subject to tax under 
        section 290.36 and which is a member of an affiliated group of 
        corporations as defined by the Internal Revenue Code and the 
        dividend is eliminated in consolidation under Treasury 
        Department Regulation 1.1502-14(a), as amended through December 
        31, 1989, or is deducted under an election under section 243(b) 
        of the Internal Revenue Code; or 
           (iii) the remaining 20 percent of the dividends if the 
        dividends are received from a property and casualty insurer as 
        defined under section 60A.60, subdivision 8, which is a member 
        of an affiliated group of corporations as defined by the 
        Internal Revenue Code and either:  (A) the dividend is 
        eliminated in consolidation under Treasury Regulation 
        1.1502-14(a), as amended through December 31, 1989; or (B) the 
        dividend is deducted under an election under section 243(b) of 
        the Internal Revenue Code. 
           (b) Seventy percent of dividends received by a corporation 
        during the taxable year from another corporation in which the 
        recipient owns less than 20 percent of the stock, by vote or 
        value, not including stock described in section 1504(a)(4) of 
        the Internal Revenue Code when the corporate stock with respect 
        to which dividends are paid does not constitute the stock in 
        trade of the taxpayer, or does not constitute property held by 
        the taxpayer primarily for sale to customers in the ordinary 
        course of the taxpayer's trade or business, or when the trade or 
        business of the taxpayer does not consist principally of the 
        holding of the stocks and the collection of income and gain 
        therefrom.  
           (c) The dividend deduction provided in this subdivision 
        shall be allowed only with respect to dividends that are 
        included in a corporation's Minnesota taxable net income for the 
        taxable year. 
           The dividend deduction provided in this subdivision does 
        not apply to a dividend from a corporation which, for the 
        taxable year of the corporation in which the distribution is 
        made or for the next preceding taxable year of the corporation, 
        is a corporation exempt from tax under section 501 of the 
        Internal Revenue Code. 
           The dividend deduction provided in this subdivision applies 
        to the amount of regulated investment company dividends only to 
        the extent determined under section 854(b) of the Internal 
        Revenue Code. 
           The dividend deduction provided in this subdivision shall 
        not be allowed with respect to any dividend for which a 
        deduction is not allowed under the provisions of section 246(c) 
        of the Internal Revenue Code. 
           (d) If dividends received by a corporation that does not 
        have nexus with Minnesota under the provisions of Public Law 
        Number 86-272 are included as income on the return of an 
        affiliated corporation permitted or required to file a combined 
        report under section 290.34, subdivision 2, then for purposes of 
        this subdivision the determination as to whether the trade or 
        business of the corporation consists principally of the holding 
        of stocks and the collection of income and gains therefrom shall 
        be made with reference to the trade or business of the 
        affiliated corporation having a nexus with Minnesota. 
           (e) The deduction provided by this subdivision does not 
        apply if the dividends are paid by a FSC as defined in section 
        922 of the Internal Revenue Code. 
           (f) If one or more of the members of the unitary group 
        whose income is included on the combined report received a 
        dividend, the deduction under this subdivision for each member 
        of the unitary business required to file a return under this 
        chapter is the product of:  (1) 100 percent of the dividends 
        received by members of the group; (2) the percentage allowed 
        pursuant to paragraph (a) or (b); and (3) the percentage of the 
        taxpayer's business income apportionable to this state for the 
        taxable year under section 290.191 or 290.20. 
           [EFFECTIVE DATE.] This section is effective for tax years 
        beginning after December 31, 2002. 

                                   ARTICLE 2 
                                 FEDERAL UPDATE 
           Section 1.  Minnesota Statutes 2001 Supplement, section 
        289A.02, subdivision 7, is amended to read: 
           Subd. 7.  [INTERNAL REVENUE CODE.] Unless specifically 
        defined otherwise, "Internal Revenue Code" means the Internal 
        Revenue Code of 1986, as amended through June 15, 2001 March 15, 
        2002. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 2.  Minnesota Statutes 2001 Supplement, section 
        289A.20, subdivision 2, is amended to read: 
           Subd. 2.  [WITHHOLDING FROM WAGES, ENTERTAINER WITHHOLDING, 
        WITHHOLDING FROM PAYMENTS TO OUT-OF-STATE CONTRACTORS, AND 
        WITHHOLDING BY PARTNERSHIPS AND SMALL BUSINESS CORPORATIONS.] 
        (a) A tax required to be deducted and withheld during the 
        quarterly period must be paid on or before the last day of the 
        month following the close of the quarterly period, unless an 
        earlier time for payment is provided.  A tax required to be 
        deducted and withheld from compensation of an entertainer and 
        from a payment to an out-of-state contractor must be paid on or 
        before the date the return for such tax must be filed under 
        section 289A.18, subdivision 2.  Taxes required to be deducted 
        and withheld by partnerships and S corporations must be paid on 
        or before the date the return must be filed under section 
        289A.18, subdivision 2. 
           (b) An employer who, during the previous quarter, withheld 
        more than $1,500 of tax under section 290.92, subdivision 2a or 
        3, or 290.923, subdivision 2, must deposit tax withheld under 
        those sections with the commissioner within the time allowed to 
        deposit the employer's federal withheld employment taxes under 
        Treasury Regulation Code of Federal Regulations, title 26, 
        section 31.6302-1, as amended through December 31, 2001, without 
        regard to the safe harbor or de minimis rules in subparagraph 
        (f) or the one-day rule in subsection (c), clause (3).  
        Taxpayers must submit a copy of their federal notice of deposit 
        status to the commissioner upon request by the commissioner. 
           (c) The commissioner may prescribe by rule other return 
        periods or deposit requirements.  In prescribing the reporting 
        period, the commissioner may classify payors according to the 
        amount of their tax liability and may adopt an appropriate 
        reporting period for the class that the commissioner judges to 
        be consistent with efficient tax collection.  In no event will 
        the duration of the reporting period be more than one year. 
           (d) If less than the correct amount of tax is paid to the 
        commissioner, proper adjustments with respect to both the tax 
        and the amount to be deducted must be made, without interest, in 
        the manner and at the times the commissioner prescribes.  If the 
        underpayment cannot be adjusted, the amount of the underpayment 
        will be assessed and collected in the manner and at the times 
        the commissioner prescribes. 
           (e) If the aggregate amount of the tax withheld during a 
        fiscal year ending June 30 under section 290.92, subdivision 2a 
        or 3, is equal to or exceeds the amounts established for 
        remitting federal withheld taxes pursuant to the regulations 
        promulgated under section 6302(h) of the Internal Revenue Code, 
        the employer must remit each required deposit for wages paid in 
        the subsequent calendar year by electronic means. 
           (f) A third-party bulk filer as defined in section 290.92, 
        subdivision 30, paragraph (a), clause (2), who remits 
        withholding deposits must remit all deposits by electronic means 
        as provided in paragraph (e), regardless of the aggregate amount 
        of tax withheld during a fiscal year for all of the employers.  
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 3.  Minnesota Statutes 2001 Supplement, section 
        290.01, subdivision 19, is amended to read: 
           Subd. 19.  [NET INCOME.] The term "net income" means the 
        federal taxable income, as defined in section 63 of the Internal 
        Revenue Code of 1986, as amended through the date named in this 
        subdivision, incorporating any elections made by the taxpayer in 
        accordance with the Internal Revenue Code in determining federal 
        taxable income for federal income tax purposes, and with the 
        modifications provided in subdivisions 19a to 19f. 
           In the case of a regulated investment company or a fund 
        thereof, as defined in section 851(a) or 851(g) of the Internal 
        Revenue Code, federal taxable income means investment company 
        taxable income as defined in section 852(b)(2) of the Internal 
        Revenue Code, except that:  
           (1) the exclusion of net capital gain provided in section 
        852(b)(2)(A) of the Internal Revenue Code does not apply; 
           (2) the deduction for dividends paid under section 
        852(b)(2)(D) of the Internal Revenue Code must be applied by 
        allowing a deduction for capital gain dividends and 
        exempt-interest dividends as defined in sections 852(b)(3)(C) 
        and 852(b)(5) of the Internal Revenue Code; and 
           (3) the deduction for dividends paid must also be applied 
        in the amount of any undistributed capital gains which the 
        regulated investment company elects to have treated as provided 
        in section 852(b)(3)(D) of the Internal Revenue Code.  
           The net income of a real estate investment trust as defined 
        and limited by section 856(a), (b), and (c) of the Internal 
        Revenue Code means the real estate investment trust taxable 
        income as defined in section 857(b)(2) of the Internal Revenue 
        Code.  
           The net income of a designated settlement fund as defined 
        in section 468B(d) of the Internal Revenue Code means the gross 
        income as defined in section 468B(b) of the Internal Revenue 
        Code. 
           The provisions of sections 1113(a), 1117, 1206(a), 1313(a), 
        1402(a), 1403(a), 1443, 1450, 1501(a), 1605, 1611(a), 1612, 
        1616, 1617, 1704(l), and 1704(m) of the Small Business Job 
        Protection Act, Public Law Number 104-188, the provisions of 
        Public Law Number 104-117, the provisions of sections 313(a) and 
        (b)(1), 602(a), 913(b), 941, 961, 971, 1001(a) and (b), 1002, 
        1003, 1012, 1013, 1014, 1061, 1062, 1081, 1084(b), 1086, 1087, 
        1111(a), 1131(b) and (c), 1211(b), 1213, 1530(c)(2), 1601(f)(5) 
        and (h), and 1604(d)(1) of the Taxpayer Relief Act of 1997, 
        Public Law Number 105-34, the provisions of section 6010 of the 
        Internal Revenue Service Restructuring and Reform Act of 1998, 
        Public Law Number 105-206, the provisions of section 4003 of the 
        Omnibus Consolidated and Emergency Supplemental Appropriations 
        Act, 1999, Public Law Number 105-277, and the provisions of 
        section 318 of the Consolidated Appropriation Act of 2001, 
        Public Law Number 106-554, shall become effective at the time 
        they become effective for federal purposes. 
           The Internal Revenue Code of 1986, as amended through 
        December 31, 1996, shall be in effect for taxable years 
        beginning after December 31, 1996. 
           The provisions of sections 202(a) and (b), 221(a), 225, 
        312, 313, 913(a), 934, 962, 1004, 1005, 1052, 1063, 1084(a) and 
        (c), 1089, 1112, 1171, 1204, 1271(a) and (b), 1305(a), 1306, 
        1307, 1308, 1309, 1501(b), 1502(b), 1504(a), 1505, 1527, 1528, 
        1530, 1601(d), (e), (f), and (i) and 1602(a), (b), (c), and (e) 
        of the Taxpayer Relief Act of 1997, Public Law Number 105-34, 
        the provisions of sections 6004, 6005, 6012, 6013, 6015, 6016, 
        7002, and 7003 of the Internal Revenue Service Restructuring and 
        Reform Act of 1998, Public Law Number 105-206, the provisions of 
        section 3001 of the Omnibus Consolidated and Emergency 
        Supplemental Appropriations Act, 1999, Public Law Number 
        105-277, the provisions of section 3001 of the Miscellaneous 
        Trade and Technical Corrections Act of 1999, Public Law Number 
        106-36, and the provisions of section 316 of the Consolidated 
        Appropriation Act of 2001, Public Law Number 106-554, shall 
        become effective at the time they become effective for federal 
        purposes. 
           The Internal Revenue Code of 1986, as amended through 
        December 31, 1997, shall be in effect for taxable years 
        beginning after December 31, 1997. 
           The provisions of sections 5002, 6009, 6011, and 7001 of 
        the Internal Revenue Service Restructuring and Reform Act of 
        1998, Public Law Number 105-206, the provisions of section 9010 
        of the Transportation Equity Act for the 21st Century, Public 
        Law Number 105-178, the provisions of sections 1004, 4002, and 
        5301 of the Omnibus Consolidation and Emergency Supplemental 
        Appropriations Act, 1999, Public Law Number 105-277, the 
        provision of section 303 of the Ricky Ray Hemophilia Relief Fund 
        Act of 1998, Public Law Number 105-369, the provisions of 
        sections 532, 534, 536, 537, and 538 of the Ticket to Work and 
        Work Incentives Improvement Act of 1999, Public Law Number 
        106-170, the provisions of the Installment Tax Correction Act of 
        2000, Public Law Number 106-573, and the provisions of section 
        309 of the Consolidated Appropriation Act of 2001, Public Law 
        Number 106-554, shall become effective at the time they become 
        effective for federal purposes. 
           The Internal Revenue Code of 1986, as amended through 
        December 31, 1998, shall be in effect for taxable years 
        beginning after December 31, 1998.  
           The provisions of the FSC Repeal and Extraterritorial 
        Income Exclusion Act of 2000, Public Law Number 106-519, and the 
        provision of section 412 of the Job Creation and Worker 
        Assistance Act of 2002, Public Law Number 107-147, shall become 
        effective at the time it became effective for federal purposes. 
           The Internal Revenue Code of 1986, as amended through 
        December 31, 1999, shall be in effect for taxable years 
        beginning after December 31, 1999.  The provisions of sections 
        306 and 401 of the Consolidated Appropriation Act of 2001, 
        Public Law Number 106-554, and the provision of section 
        632(b)(2)(A) of the Economic Growth and Tax Relief 
        Reconciliation Act of 2001, Public Law Number 107-16, and 
        provisions of sections 101 and 402 of the Job Creation and 
        Worker Assistance Act of 2002, Public Law Number 107-147, shall 
        become effective at the same time it became effective for 
        federal purposes. 
           The Internal Revenue Code of 1986, as amended through 
        December 31, 2000, shall be in effect for taxable years 
        beginning after December 31, 2000.  The provisions of sections 
        659a and 671 of the Economic Growth and Tax Relief 
        Reconciliation Act of 2001, Public Law Number 107-16, the 
        provisions of sections 104, 105, and 111 of the Victims of 
        Terrorism Tax Relief Act of 2001, Public Law Number 107-134, and 
        the provisions of sections 201, 403, 413, and 606 of the Job 
        Creation and Worker Assistance Act of 2002, Public Law Number 
        107-147, shall become effective at the same time it became 
        effective for federal purposes. 
           The Internal Revenue Code of 1986, as amended through June 
        15, 2001 March 15, 2002, shall be in effect for taxable years 
        beginning after December 31, 2001. 
           The provisions of sections 101 and 102 of the Victims of 
        Terrorism Tax Relief Act of 2001, Public Law Number 107-134, 
        shall become effective at the same time it becomes effective for 
        federal purposes. 
           Except as otherwise provided, references to the Internal 
        Revenue Code in subdivisions 19a to 19g mean the code in effect 
        for purposes of determining net income for the applicable year. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 4.  Minnesota Statutes 2000, section 290.01, 
        subdivision 19a, is amended to read: 
           Subd. 19a.  [ADDITIONS TO FEDERAL TAXABLE INCOME.] For 
        individuals, estates, and trusts, there shall be added to 
        federal taxable income: 
           (1)(i) interest income on obligations of any state other 
        than Minnesota or a political or governmental subdivision, 
        municipality, or governmental agency or instrumentality of any 
        state other than Minnesota exempt from federal income taxes 
        under the Internal Revenue Code or any other federal statute, 
        and 
           (ii) exempt-interest dividends as defined in section 
        852(b)(5) of the Internal Revenue Code, except the portion of 
        the exempt-interest dividends derived from interest income on 
        obligations of the state of Minnesota or its political or 
        governmental subdivisions, municipalities, governmental agencies 
        or instrumentalities, but only if the portion of the 
        exempt-interest dividends from such Minnesota sources paid to 
        all shareholders represents 95 percent or more of the 
        exempt-interest dividends that are paid by the regulated 
        investment company as defined in section 851(a) of the Internal 
        Revenue Code, or the fund of the regulated investment company as 
        defined in section 851(g) of the Internal Revenue Code, making 
        the payment; and 
           (iii) for the purposes of items (i) and (ii), interest on 
        obligations of an Indian tribal government described in section 
        7871(c) of the Internal Revenue Code shall be treated as 
        interest income on obligations of the state in which the tribe 
        is located; 
           (2) the amount of income taxes paid or accrued within the 
        taxable year under this chapter and income taxes paid to any 
        other state or to any province or territory of Canada, to the 
        extent allowed as a deduction under section 63(d) of the 
        Internal Revenue Code, but the addition may not be more than the 
        amount by which the itemized deductions as allowed under section 
        63(d) of the Internal Revenue Code exceeds the amount of the 
        standard deduction as defined in section 63(c) of the Internal 
        Revenue Code.  For the purpose of this paragraph, the 
        disallowance of itemized deductions under section 68 of the 
        Internal Revenue Code of 1986, income tax is the last itemized 
        deduction disallowed; 
           (3) the capital gain amount of a lump sum distribution to 
        which the special tax under section 1122(h)(3)(B)(ii) of the Tax 
        Reform Act of 1986, Public Law Number 99-514, applies; 
           (4) the amount of income taxes paid or accrued within the 
        taxable year under this chapter and income taxes paid to any 
        other state or any province or territory of Canada, to the 
        extent allowed as a deduction in determining federal adjusted 
        gross income.  For the purpose of this paragraph, income taxes 
        do not include the taxes imposed by sections 290.0922, 
        subdivision 1, paragraph (b), 290.9727, 290.9728, and 290.9729; 
           (5) the amount of expense, interest, or taxes disallowed 
        pursuant to section 290.10; and 
           (6) the amount of a partner's pro rata share of net income 
        which does not flow through to the partner because the 
        partnership elected to pay the tax on the income under section 
        6242(a)(2) of the Internal Revenue Code; and 
           (7) 80 percent of the depreciation deduction allowed under 
        section 168(k) of the Internal Revenue Code. 
           [EFFECTIVE DATE.] This section is effective for tax years 
        ending after September 10, 2001. 
           Sec. 5.  Minnesota Statutes 2001 Supplement, section 
        290.01, subdivision 19b, is amended to read: 
           Subd. 19b.  [SUBTRACTIONS FROM FEDERAL TAXABLE INCOME.] For 
        individuals, estates, and trusts, there shall be subtracted from 
        federal taxable income: 
           (1) interest income on obligations of any authority, 
        commission, or instrumentality of the United States to the 
        extent includable in taxable income for federal income tax 
        purposes but exempt from state income tax under the laws of the 
        United States; 
           (2) if included in federal taxable income, the amount of 
        any overpayment of income tax to Minnesota or to any other 
        state, for any previous taxable year, whether the amount is 
        received as a refund or as a credit to another taxable year's 
        income tax liability; 
           (3) the amount paid to others, less the amount used to 
        claim the credit allowed under section 290.0674, not to exceed 
        $1,625 for each qualifying child in grades kindergarten to 6 and 
        $2,500 for each qualifying child in grades 7 to 12, for tuition, 
        textbooks, and transportation of each qualifying child in 
        attending an elementary or secondary school situated in 
        Minnesota, North Dakota, South Dakota, Iowa, or Wisconsin, 
        wherein a resident of this state may legally fulfill the state's 
        compulsory attendance laws, which is not operated for profit, 
        and which adheres to the provisions of the Civil Rights Act of 
        1964 and chapter 363.  For the purposes of this clause, 
        "tuition" includes fees or tuition as defined in section 
        290.0674, subdivision 1, clause (1).  As used in this clause, 
        "textbooks" includes books and other instructional materials and 
        equipment purchased or leased for use in elementary and 
        secondary schools in teaching only those subjects legally and 
        commonly taught in public elementary and secondary schools in 
        this state.  Equipment expenses qualifying for deduction 
        includes expenses as defined and limited in section 290.0674, 
        subdivision 1, clause (3).  "Textbooks" does not include 
        instructional books and materials used in the teaching of 
        religious tenets, doctrines, or worship, the purpose of which is 
        to instill such tenets, doctrines, or worship, nor does it 
        include books or materials for, or transportation to, 
        extracurricular activities including sporting events, musical or 
        dramatic events, speech activities, driver's education, or 
        similar programs.  For purposes of the subtraction provided by 
        this clause, "qualifying child" has the meaning given in section 
        32(c)(3) of the Internal Revenue Code; 
           (4) contributions made in taxable years beginning after 
        December 31, 1981, and before January 1, 1985, to a qualified 
        governmental pension plan, an individual retirement account, 
        simplified employee pension, or qualified plan covering a 
        self-employed person that were included in Minnesota gross 
        income in the taxable year for which the contributions were made 
        but were deducted or were not included in the computation of 
        federal adjusted gross income, less any amount allowed to be 
        subtracted as a distribution under this subdivision or a 
        predecessor provision in taxable years that began before January 
        1, 2000.  This subtraction applies only for taxable years 
        beginning after December 31, 1999, and before January 1, 2001.  
        If an individual's subtraction under this clause exceeds the 
        individual's taxable income, the excess may be carried forward 
        to taxable years beginning after December 31, 2000, and before 
        January 1, 2002; 
           (5) income as provided under section 290.0802; 
           (6) (5) to the extent included in federal adjusted gross 
        income, income realized on disposition of property exempt from 
        tax under section 290.491; 
           (7) (6) to the extent not deducted in determining federal 
        taxable income or used to claim the long-term care insurance 
        credit under section 290.0672, the amount paid for health 
        insurance of self-employed individuals as determined under 
        section 162(l) of the Internal Revenue Code, except that the 
        percent limit does not apply.  If the individual deducted 
        insurance payments under section 213 of the Internal Revenue 
        Code of 1986, the subtraction under this clause must be reduced 
        by the lesser of: 
           (i) the total itemized deductions allowed under section 
        63(d) of the Internal Revenue Code, less state, local, and 
        foreign income taxes deductible under section 164 of the 
        Internal Revenue Code and the standard deduction under section 
        63(c) of the Internal Revenue Code; or 
           (ii) the lesser of (A) the amount of insurance qualifying 
        as "medical care" under section 213(d) of the Internal Revenue 
        Code to the extent not deducted under section 162(1) of the 
        Internal Revenue Code or excluded from income or (B) the total 
        amount deductible for medical care under section 213(a); 
           (8) (7) the exemption amount allowed under Laws 1995, 
        chapter 255, article 3, section 2, subdivision 3; 
           (9) (8) to the extent included in federal taxable income, 
        postservice benefits for youth community service under section 
        124D.42 for volunteer service under United States Code, title 
        42, sections 12601 to 12604; 
           (10) (9) to the extent not deducted in determining federal 
        taxable income by an individual who does not itemize deductions 
        for federal income tax purposes for the taxable year, an amount 
        equal to 50 percent of the excess of charitable contributions 
        allowable as a deduction for the taxable year under section 
        170(a) of the Internal Revenue Code over $500; 
           (11) (10) for taxable years beginning before January 1, 
        2008, the amount of the federal small ethanol producer credit 
        allowed under section 40(a)(3) of the Internal Revenue Code 
        which is included in gross income under section 87 of the 
        Internal Revenue Code; and 
           (12) (11) for individuals who are allowed a federal foreign 
        tax credit for taxes that do not qualify for a credit under 
        section 290.06, subdivision 22, an amount equal to the carryover 
        of subnational foreign taxes for the taxable year, but not to 
        exceed the total subnational foreign taxes reported in claiming 
        the foreign tax credit.  For purposes of this clause, "federal 
        foreign tax credit" means the credit allowed under section 27 of 
        the Internal Revenue Code, and "carryover of subnational foreign 
        taxes" equals the carryover allowed under section 904(c) of the 
        Internal Revenue Code minus national level foreign taxes to the 
        extent they exceed the federal foreign tax credit; and 
           (12) in each of the five tax years immediately following 
        the tax year in which an addition is required under subdivision 
        19a, clause (7), an amount equal to one-fifth of the delayed 
        depreciation.  For purposes of this clause, "delayed 
        depreciation" means the amount of the addition made by the 
        taxpayer under subdivision 19a, clause (7), minus the positive 
        value of any net operating loss under section 172 of the 
        Internal Revenue Code generated for the tax year of the 
        addition.  The resulting delayed depreciation cannot be less 
        than zero. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment, except that clause (12) is effective 
        for tax years ending after September 10, 2001. 
           Sec. 6.  Minnesota Statutes 2001 Supplement, section 
        290.01, subdivision 19c, is amended to read: 
           Subd. 19c.  [CORPORATIONS; ADDITIONS TO FEDERAL TAXABLE 
        INCOME.] For corporations, there shall be added to federal 
        taxable income: 
           (1) the amount of any deduction taken for federal income 
        tax purposes for income, excise, or franchise taxes based on net 
        income or related minimum taxes, including but not limited to 
        the tax imposed under section 290.0922, paid by the corporation 
        to Minnesota, another state, a political subdivision of another 
        state, the District of Columbia, or any foreign country or 
        possession of the United States; 
           (2) interest not subject to federal tax upon obligations 
        of:  the United States, its possessions, its agencies, or its 
        instrumentalities; the state of Minnesota or any other state, 
        any of its political or governmental subdivisions, any of its 
        municipalities, or any of its governmental agencies or 
        instrumentalities; the District of Columbia; or Indian tribal 
        governments; 
           (3) exempt-interest dividends received as defined in 
        section 852(b)(5) of the Internal Revenue Code; 
           (4) the amount of any net operating loss deduction taken 
        for federal income tax purposes under section 172 or 832(c)(10) 
        of the Internal Revenue Code or operations loss deduction under 
        section 810 of the Internal Revenue Code; 
           (5) the amount of any special deductions taken for federal 
        income tax purposes under sections 241 to 247 of the Internal 
        Revenue Code; 
           (6) losses from the business of mining, as defined in 
        section 290.05, subdivision 1, clause (a), that are not subject 
        to Minnesota income tax; 
           (7) the amount of any capital losses deducted for federal 
        income tax purposes under sections 1211 and 1212 of the Internal 
        Revenue Code; 
           (8) the exempt foreign trade income of a foreign sales 
        corporation under sections 921(a) and 291 of the Internal 
        Revenue Code; 
           (9) the amount of percentage depletion deducted under 
        sections 611 through 614 and 291 of the Internal Revenue Code; 
           (10) for certified pollution control facilities placed in 
        service in a taxable year beginning before December 31, 1986, 
        and for which amortization deductions were elected under section 
        169 of the Internal Revenue Code of 1954, as amended through 
        December 31, 1985, the amount of the amortization deduction 
        allowed in computing federal taxable income for those 
        facilities; 
           (11) the amount of any deemed dividend from a foreign 
        operating corporation determined pursuant to section 290.17, 
        subdivision 4, paragraph (g); 
           (12) the amount of any environmental tax paid under section 
        59(a) of the Internal Revenue Code; 
           (13) the amount of a partner's pro rata share of net income 
        which does not flow through to the partner because the 
        partnership elected to pay the tax on the income under section 
        6242(a)(2) of the Internal Revenue Code; and 
           (14) the amount of net income excluded under section 114 of 
        the Internal Revenue Code; 
           (15) any increase in subpart F income, as defined in 
        section 952(a) of the Internal Revenue Code, for the taxable 
        year when subpart F income is calculated without regard to the 
        provisions of section 614 of Public Law Number 107-147; and 
           (16) 80 percent of the depreciation deduction allowed under 
        section 168(k) of the Internal Revenue Code. 
           [EFFECTIVE DATE.] This section is effective for tax years 
        ending after September 10, 2001. 
           Sec. 7.  Minnesota Statutes 2001 Supplement, section 
        290.01, subdivision 19d, is amended to read: 
           Subd. 19d.  [CORPORATIONS; MODIFICATIONS DECREASING FEDERAL 
        TAXABLE INCOME.] For corporations, there shall be subtracted 
        from federal taxable income after the increases provided in 
        subdivision 19c:  
           (1) the amount of foreign dividend gross-up added to gross 
        income for federal income tax purposes under section 78 of the 
        Internal Revenue Code; 
           (2) the amount of salary expense not allowed for federal 
        income tax purposes due to claiming the federal jobs credit 
        under section 51 of the Internal Revenue Code; 
           (3) any dividend (not including any distribution in 
        liquidation) paid within the taxable year by a national or state 
        bank to the United States, or to any instrumentality of the 
        United States exempt from federal income taxes, on the preferred 
        stock of the bank owned by the United States or the 
        instrumentality; 
           (4) amounts disallowed for intangible drilling costs due to 
        differences between this chapter and the Internal Revenue Code 
        in taxable years beginning before January 1, 1987, as follows: 
           (i) to the extent the disallowed costs are represented by 
        physical property, an amount equal to the allowance for 
        depreciation under Minnesota Statutes 1986, section 290.09, 
        subdivision 7, subject to the modifications contained in 
        subdivision 19e; and 
           (ii) to the extent the disallowed costs are not represented 
        by physical property, an amount equal to the allowance for cost 
        depletion under Minnesota Statutes 1986, section 290.09, 
        subdivision 8; 
           (5) the deduction for capital losses pursuant to sections 
        1211 and 1212 of the Internal Revenue Code, except that: 
           (i) for capital losses incurred in taxable years beginning 
        after December 31, 1986, capital loss carrybacks shall not be 
        allowed; 
           (ii) for capital losses incurred in taxable years beginning 
        after December 31, 1986, a capital loss carryover to each of the 
        15 taxable years succeeding the loss year shall be allowed; 
           (iii) for capital losses incurred in taxable years 
        beginning before January 1, 1987, a capital loss carryback to 
        each of the three taxable years preceding the loss year, subject 
        to the provisions of Minnesota Statutes 1986, section 290.16, 
        shall be allowed; and 
           (iv) for capital losses incurred in taxable years beginning 
        before January 1, 1987, a capital loss carryover to each of the 
        five taxable years succeeding the loss year to the extent such 
        loss was not used in a prior taxable year and subject to the 
        provisions of Minnesota Statutes 1986, section 290.16, shall be 
        allowed; 
           (6) an amount for interest and expenses relating to income 
        not taxable for federal income tax purposes, if (i) the income 
        is taxable under this chapter and (ii) the interest and expenses 
        were disallowed as deductions under the provisions of section 
        171(a)(2), 265 or 291 of the Internal Revenue Code in computing 
        federal taxable income; 
           (7) in the case of mines, oil and gas wells, other natural 
        deposits, and timber for which percentage depletion was 
        disallowed pursuant to subdivision 19c, clause (11), a 
        reasonable allowance for depletion based on actual cost.  In the 
        case of leases the deduction must be apportioned between the 
        lessor and lessee in accordance with rules prescribed by the 
        commissioner.  In the case of property held in trust, the 
        allowable deduction must be apportioned between the income 
        beneficiaries and the trustee in accordance with the pertinent 
        provisions of the trust, or if there is no provision in the 
        instrument, on the basis of the trust's income allocable to 
        each; 
           (8) for certified pollution control facilities placed in 
        service in a taxable year beginning before December 31, 1986, 
        and for which amortization deductions were elected under section 
        169 of the Internal Revenue Code of 1954, as amended through 
        December 31, 1985, an amount equal to the allowance for 
        depreciation under Minnesota Statutes 1986, section 290.09, 
        subdivision 7; 
           (9) amounts included in federal taxable income that are due 
        to refunds of income, excise, or franchise taxes based on net 
        income or related minimum taxes paid by the corporation to 
        Minnesota, another state, a political subdivision of another 
        state, the District of Columbia, or a foreign country or 
        possession of the United States to the extent that the taxes 
        were added to federal taxable income under section 290.01, 
        subdivision 19c, clause (1), in a prior taxable year; 
           (10) 80 percent of royalties, fees, or other like income 
        accrued or received from a foreign operating corporation or a 
        foreign corporation which is part of the same unitary business 
        as the receiving corporation; 
           (11) income or gains from the business of mining as defined 
        in section 290.05, subdivision 1, clause (a), that are not 
        subject to Minnesota franchise tax; 
           (12) the amount of handicap access expenditures in the 
        taxable year which are not allowed to be deducted or capitalized 
        under section 44(d)(7) of the Internal Revenue Code; 
           (13) the amount of qualified research expenses not allowed 
        for federal income tax purposes under section 280C(c) of the 
        Internal Revenue Code, but only to the extent that the amount 
        exceeds the amount of the credit allowed under section 290.068; 
           (14) the amount of salary expenses not allowed for federal 
        income tax purposes due to claiming the Indian employment credit 
        under section 45A(a) of the Internal Revenue Code; 
           (15) the amount of any refund of environmental taxes paid 
        under section 59A of the Internal Revenue Code; 
           (16) for taxable years beginning before January 1, 2008, 
        the amount of the federal small ethanol producer credit allowed 
        under section 40(a)(3) of the Internal Revenue Code which is 
        included in gross income under section 87 of the Internal 
        Revenue Code; and 
           (17) for a corporation whose foreign sales corporation, as 
        defined in section 922 of the Internal Revenue Code, constituted 
        a foreign operating corporation during the taxable years ending 
        during calendar year 1992 and a return was filed by August 15, 
        1996, claiming the deduction under this subdivision for income 
        received from the foreign operating corporation, an amount equal 
        to 1.23 multiplied by the amount of income excluded under 
        section 114 of the Internal Revenue Code, provided the income is 
        not income of a foreign operating company; 
           (18) any decrease in subpart F income, as defined in 
        section 952(a) of the Internal Revenue Code, for the taxable 
        year when subpart F income is calculated without regard to the 
        provisions of section 614 of Public Law Number 107-147; and 
           (19) in each of the five tax years immediately following 
        the tax year in which an addition is required under subdivision 
        19c, clause (16), an amount equal to one-fifth of the delayed 
        depreciation.  For purposes of this clause, "delayed 
        depreciation" means the amount of the addition made by the 
        taxpayer under subdivision 19c, clause (16).  The resulting 
        delayed depreciation cannot be less than zero. 
           [EFFECTIVE DATE.] This section is effective for tax years 
        ending after September 10, 2001. 
           Sec. 8.  Minnesota Statutes 2001 Supplement, section 
        290.01, subdivision 31, is amended to read: 
           Subd. 31.  [INTERNAL REVENUE CODE.] Unless specifically 
        defined otherwise, "Internal Revenue Code" means the Internal 
        Revenue Code of 1986, as amended through June 15, 2001 March 15, 
        2002. 
           [EFFECTIVE DATE.] This section is effective at the same 
        time and in the same manner as the federal changes made by the 
        Victims of Terrorism Tax Relief Act of 2001, Public Law Number 
        107-134, and by the Job Creation and Worker Assistance Act of 
        2002, Public Law Number 107-147, become effective. 
           Sec. 9.  Minnesota Statutes 2000, section 290.067, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [AMOUNT OF CREDIT.] (a) A taxpayer may take 
        as a credit against the tax due from the taxpayer and a spouse, 
        if any, under this chapter an amount equal to the dependent care 
        credit for which the taxpayer is eligible pursuant to the 
        provisions of section 21 of the Internal Revenue Code subject to 
        the limitations provided in subdivision 2 except that in 
        determining whether the child qualified as a dependent, income 
        received as a Minnesota family investment program grant or 
        allowance to or on behalf of the child must not be taken into 
        account in determining whether the child received more than half 
        of the child's support from the taxpayer, and the provisions of 
        section 32(b)(1)(D) of the Internal Revenue Code do not apply. 
           (b) If a child who has not attained the age of six years at 
        the close of the taxable year is cared for at a licensed family 
        day care home operated by the child's parent, the taxpayer is 
        deemed to have paid employment-related expenses.  If the child 
        is 16 months old or younger at the close of the taxable year, 
        the amount of expenses deemed to have been paid equals the 
        maximum limit for one qualified individual under section 21(c) 
        and (d) of the Internal Revenue Code.  If the child is older 
        than 16 months of age but has not attained the age of six years 
        at the close of the taxable year, the amount of expenses deemed 
        to have been paid equals the amount the licensee would charge 
        for the care of a child of the same age for the same number of 
        hours of care.  
           (c) If a married couple: 
           (1) has a child who has not attained the age of one year at 
        the close of the taxable year; 
           (2) files a joint tax return for the taxable year; and 
           (3) does not participate in a dependent care assistance 
        program as defined in section 129 of the Internal Revenue Code, 
        in lieu of the actual employment related expenses paid for that 
        child under paragraph (a) or the deemed amount under paragraph 
        (b), the lesser of (i) the combined earned income of the couple 
        or (ii) $2,400 the amount of the maximum limit for one qualified 
        individual under section 21(c) and (d) of the Internal Revenue 
        Code will be deemed to be the employment related expense paid 
        for that child.  The earned income limitation of section 21(d) 
        of the Internal Revenue Code shall not apply to this deemed 
        amount.  These deemed amounts apply regardless of whether any 
        employment-related expenses have been paid.  
           (d) If the taxpayer is not required and does not file a 
        federal individual income tax return for the tax year, no credit 
        is allowed for any amount paid to any person unless: 
           (1) the name, address, and taxpayer identification number 
        of the person are included on the return claiming the credit; or 
           (2) if the person is an organization described in section 
        501(c)(3) of the Internal Revenue Code and exempt from tax under 
        section 501(a) of the Internal Revenue Code, the name and 
        address of the person are included on the return claiming the 
        credit.  
        In the case of a failure to provide the information required 
        under the preceding sentence, the preceding sentence does not 
        apply if it is shown that the taxpayer exercised due diligence 
        in attempting to provide the information required. 
           In the case of a nonresident, part-year resident, or a 
        person who has earned income not subject to tax under this 
        chapter, the credit determined under section 21 of the Internal 
        Revenue Code must be allocated based on the ratio by which the 
        earned income of the claimant and the claimant's spouse from 
        Minnesota sources bears to the total earned income of the 
        claimant and the claimant's spouse. 
           [EFFECTIVE DATE.] This section is effective for tax years 
        beginning after December 31, 2002. 
           Sec. 10.  Minnesota Statutes 2001 Supplement, section 
        290.091, subdivision 2, is amended to read: 
           Subd. 2.  [DEFINITIONS.] For purposes of the tax imposed by 
        this section, the following terms have the meanings given: 
           (a) "Alternative minimum taxable income" means the sum of 
        the following for the taxable year: 
           (1) the taxpayer's federal alternative minimum taxable 
        income as defined in section 55(b)(2) of the Internal Revenue 
        Code; 
           (2) the taxpayer's itemized deductions allowed in computing 
        federal alternative minimum taxable income, but excluding: 
           (i) the Minnesota charitable contribution deduction; 
           (ii) the medical expense deduction; 
           (iii) the casualty, theft, and disaster loss deduction; and 
           (iv) the impairment-related work expenses of a disabled 
        person; and 
           (v) holocaust victims' settlement payments to the extent 
        allowed under section 290.01, subdivision 19b; 
           (3) for depletion allowances computed under section 613A(c) 
        of the Internal Revenue Code, with respect to each property (as 
        defined in section 614 of the Internal Revenue Code), to the 
        extent not included in federal alternative minimum taxable 
        income, the excess of the deduction for depletion allowable 
        under section 611 of the Internal Revenue Code for the taxable 
        year over the adjusted basis of the property at the end of the 
        taxable year (determined without regard to the depletion 
        deduction for the taxable year); 
           (4) to the extent not included in federal alternative 
        minimum taxable income, the amount of the tax preference for 
        intangible drilling cost under section 57(a)(2) of the Internal 
        Revenue Code determined without regard to subparagraph (E); and 
           (5) to the extent not included in federal alternative 
        minimum taxable income, the amount of interest income as 
        provided by section 290.01, subdivision 19a, clause (1); and 
           (6) the amount of addition required by section 290.01, 
        subdivision 19a, clause (7); 
           less the sum of the amounts determined under the following: 
           (1) interest income as defined in section 290.01, 
        subdivision 19b, clause (1); 
           (2) an overpayment of state income tax as provided by 
        section 290.01, subdivision 19b, clause (2), to the extent 
        included in federal alternative minimum taxable income; 
           (3) the amount of investment interest paid or accrued 
        within the taxable year on indebtedness to the extent that the 
        amount does not exceed net investment income, as defined in 
        section 163(d)(4) of the Internal Revenue Code.  Interest does 
        not include amounts deducted in computing federal adjusted gross 
        income; and 
           (4) amounts subtracted from federal taxable income as 
        provided by section 290.01, subdivision 19b, clause (4) (12). 
           In the case of an estate or trust, alternative minimum 
        taxable income must be computed as provided in section 59(c) of 
        the Internal Revenue Code. 
           (b) "Investment interest" means investment interest as 
        defined in section 163(d)(3) of the Internal Revenue Code. 
           (c) "Tentative minimum tax" equals 6.4 percent of 
        alternative minimum taxable income after subtracting the 
        exemption amount determined under subdivision 3. 
           (d) "Regular tax" means the tax that would be imposed under 
        this chapter (without regard to this section and section 
        290.032), reduced by the sum of the nonrefundable credits 
        allowed under this chapter.  
           (e) "Net minimum tax" means the minimum tax imposed by this 
        section. 
           (f) "Minnesota charitable contribution deduction" means a 
        charitable contribution deduction under section 170 of the 
        Internal Revenue Code to or for the use of an entity described 
        in Minnesota Statutes 2000, section 290.21, subdivision 3, 
        clauses (a) to (e).  When the federal deduction for charitable 
        contributions is limited under section 170(b) of the Internal 
        Revenue Code, the allowable contributions in the year of 
        contribution are deemed to be first contributions to entities 
        described in Minnesota Statutes 2000, section 290.21, 
        subdivision 3, clauses (a) to (e). 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment, except that clause (6) is effective 
        for tax years ending after September 10, 2001. 
           Sec. 11.  Minnesota Statutes 2001 Supplement, section 
        290.0921, subdivision 3, is amended to read: 
           Subd. 3.  [ALTERNATIVE MINIMUM TAXABLE INCOME.] 
        "Alternative minimum taxable income" is Minnesota net income as 
        defined in section 290.01, subdivision 19, and includes the 
        adjustments and tax preference items in sections 56, 57, 58, and 
        59(d), (e), (f), and (h) of the Internal Revenue Code.  If a 
        corporation files a separate company Minnesota tax return, the 
        minimum tax must be computed on a separate company basis.  If a 
        corporation is part of a tax group filing a unitary return, the 
        minimum tax must be computed on a unitary basis.  The following 
        adjustments must be made. 
           (1) For purposes of the depreciation adjustments under 
        section 56(a)(1) and 56(g)(4)(A) of the Internal Revenue Code, 
        the basis for depreciable property placed in service in a 
        taxable year beginning before January 1, 1990, is the adjusted 
        basis for federal income tax purposes, including any 
        modification made in a taxable year under section 290.01, 
        subdivision 19e, or Minnesota Statutes 1986, section 290.09, 
        subdivision 7, paragraph (c). 
           For taxable years beginning after December 31, 2000, the 
        amount of any remaining modification made under section 290.01, 
        subdivision 19e, or Minnesota Statutes 1986, section 290.09, 
        subdivision 7, paragraph (c), not previously deducted is a 
        depreciation allowance in the first taxable year after December 
        31, 2000. 
           (2) The portion of the depreciation deduction allowed for 
        federal income tax purposes under section 168(k) of the Internal 
        Revenue Code that is required as an addition under section 
        290.01, subdivision 19c, clause (16), is disallowed in 
        determining alternative minimum taxable income. 
           (3) The subtraction for depreciation allowed under section 
        290.01, subdivision 19d, clause (19), is allowed as a 
        depreciation deduction in determining alternative minimum 
        taxable income. 
           (4) The alternative tax net operating loss deduction under 
        sections 56(a)(4) and 56(d) of the Internal Revenue Code does 
        not apply. 
           (3) (5) The special rule for certain dividends under 
        section 56(g)(4)(C)(ii) of the Internal Revenue Code does not 
        apply. 
           (4) (6) The special rule for dividends from section 936 
        companies under section 56(g)(4)(C)(iii) does not apply. 
           (5) (7) The tax preference for depletion under section 
        57(a)(1) of the Internal Revenue Code does not apply. 
           (6) (8) The tax preference for intangible drilling costs 
        under section 57(a)(2) of the Internal Revenue Code must be 
        calculated without regard to subparagraph (E) and the 
        subtraction under section 290.01, subdivision 19d, clause (4). 
           (7) (9) The tax preference for tax exempt interest under 
        section 57(a)(5) of the Internal Revenue Code does not apply.  
           (8) (10) The tax preference for charitable contributions of 
        appreciated property under section 57(a)(6) of the Internal 
        Revenue Code does not apply. 
           (9) (11) For purposes of calculating the tax preference for 
        accelerated depreciation or amortization on certain property 
        placed in service before January 1, 1987, under section 57(a)(7) 
        of the Internal Revenue Code, the deduction allowable for the 
        taxable year is the deduction allowed under section 290.01, 
        subdivision 19e. 
           For taxable years beginning after December 31, 2000, the 
        amount of any remaining modification made under section 290.01, 
        subdivision 19e, not previously deducted is a depreciation or 
        amortization allowance in the first taxable year after December 
        31, 2000 2004. 
           (10) (12) For purposes of calculating the adjustment for 
        adjusted current earnings in section 56(g) of the Internal 
        Revenue Code, the term "alternative minimum taxable income" as 
        it is used in section 56(g) of the Internal Revenue Code, means 
        alternative minimum taxable income as defined in this 
        subdivision, determined without regard to the adjustment for 
        adjusted current earnings in section 56(g) of the Internal 
        Revenue Code. 
           (11) (13) For purposes of determining the amount of 
        adjusted current earnings under section 56(g)(3) of the Internal 
        Revenue Code, no adjustment shall be made under section 56(g)(4) 
        of the Internal Revenue Code with respect to (i) the amount of 
        foreign dividend gross-up subtracted as provided in section 
        290.01, subdivision 19d, clause (1), (ii) the amount of refunds 
        of income, excise, or franchise taxes subtracted as provided in 
        section 290.01, subdivision 19d, clause (10), or (iii) the 
        amount of royalties, fees or other like income subtracted as 
        provided in section 290.01, subdivision 19d, clause (11). 
           Items of tax preference must not be reduced below zero as a 
        result of the modifications in this subdivision. 
           [EFFECTIVE DATE.] This section is effective for tax years 
        ending after September 10, 2001. 
           Sec. 12.  Minnesota Statutes 2001 Supplement, section 
        290A.03, subdivision 15, is amended to read: 
           Subd. 15.  [INTERNAL REVENUE CODE.] "Internal Revenue Code" 
        means the Internal Revenue Code of 1986, as amended through June 
        15, 2001 March 15, 2002. 
           [EFFECTIVE DATE.] This section is effective at the same 
        time and manner as the changes to federal adjusted gross income 
        made by the Victims of Terrorism Tax Relief Act of 2001, Public 
        Law Number 107-134, and by the Job Creation and Worker 
        Assistance Act of 2002, Public Law Number 107-147, become 
        effective. 

                                   ARTICLE 3
                              SALES AND USE TAXES
           Section 1.  Minnesota Statutes 2000, section 270.60, 
        subdivision 4, is amended to read: 
           Subd. 4.  [PAYMENTS TO COUNTIES.] (a) The commissioner 
        shall pay to a county in which an Indian gaming casino is 
        located ten percent of the state share of all taxes generated 
        from activities on reservations and collected under a tax 
        agreement under this section with the tribal government for the 
        reservation located in the county.  If the tribe has casinos 
        located in more than one county, the payment must be divided 
        equally among the counties in which the casinos are located. 
           (b) A county is a qualified county under this subdivision 
        if one of the following conditions is met: 
           (1) the county's per capita income is less than 80 percent 
        of the state per capita personal income, based on the most 
        recent estimates made by the United States Bureau of Economic 
        Analysis; or 
           (2) 30 percent or more of the total market value of real 
        property in the county is exempt from ad valorem taxation. 
           (c) The commissioner shall make the payments required under 
        this subdivision by February 28 of the year following the year 
        the taxes are collected. 
           (d) (c) An amount sufficient to make the payments 
        authorized by this subdivision, not to exceed $1,100,000 in any 
        fiscal year, is annually appropriated from the general fund to 
        the commissioner.  If the authorized payments exceed the amount 
        of the appropriation, the commissioner shall first 
        proportionately reduce the payments to counties other than 
        qualified counties so that the total amount equals the 
        appropriation.  If the authorized payments to qualified counties 
        also exceed the amount of the appropriation, the commissioner 
        shall then proportionately reduce the rate so that the total 
        amount to be paid to qualified counties equals the appropriation.
           [EFFECTIVE DATE.] This section is effective for payments 
        made after December 31, 2002. 
           Sec. 2.  Minnesota Statutes 2001 Supplement, section 
        289A.20, subdivision 4, is amended to read: 
           Subd. 4.  [SALES AND USE TAX.] (a) The taxes imposed by 
        chapter 297A are due and payable to the commissioner monthly on 
        or before the 20th day of the month following the month in which 
        the taxable event occurred, or following another reporting 
        period as the commissioner prescribes or as allowed under 
        section 289A.18, subdivision 4, paragraph (f), except that use 
        taxes due on an annual use tax return as provided under section 
        289A.11, subdivision 1, are payable by April 15 following the 
        close of the calendar year. 
           (b) For a fiscal year ending before July 1, 2002, a vendor 
        having a liability of $120,000 or more during a fiscal year 
        ending June 30 must remit the June liability for the next year 
        in the following manner: 
           (1) Two business days before June 30 of the year, the 
        vendor must remit 62 75 percent of the estimated June liability 
        to the commissioner.  
           (2) On or before August 20 of the year, the vendor must pay 
        any additional amount of tax not remitted in June. 
           (c) A vendor having a liability of $120,000 or more during 
        a fiscal year ending June 30 must remit all liabilities on 
        returns due for periods beginning in the subsequent calendar 
        year by electronic means on or before the 20th day of the month 
        following the month in which the taxable event occurred, or on 
        or before the 20th day of the month following the month in which 
        the sale is reported under section 289A.18, subdivision 4, 
        except for 62 75 percent of the estimated June liability, which 
        is due two business days before June 30.  The remaining amount 
        of the June liability is due on August 20.  
           [EFFECTIVE DATE.] This section is effective for June 2002 
        and June 2003 tax liabilities. 
           Sec. 3.  Minnesota Statutes 2001 Supplement, section 
        297A.61, subdivision 3, is amended to read: 
           Subd. 3.  [SALE AND PURCHASE.] (a) "Sale" and "purchase" 
        include, but are not limited to, each of the transactions listed 
        in this subdivision. 
           (b) Sale and purchase include: 
           (1) any transfer of title or possession, or both, of 
        tangible personal property, whether absolutely or conditionally, 
        for a consideration in money or by exchange or barter; and 
           (2) the leasing of or the granting of a license to use or 
        consume, for a consideration in money or by exchange or barter, 
        tangible personal property, other than a manufactured home used 
        for residential purposes for a continuous period of 30 days or 
        more. 
           (c) Sale and purchase include the production, fabrication, 
        printing, or processing of tangible personal property for a 
        consideration for consumers who furnish either directly or 
        indirectly the materials used in the production, fabrication, 
        printing, or processing. 
           (d) Sale and purchase include the preparing for a 
        consideration of food.  Notwithstanding section 297A.67, 
        subdivision 2, taxable food includes, but is not limited to, the 
        following: 
           (1) prepared food sold by the retailer; 
           (2) soft drinks; 
           (3) candy; and 
           (4) all food sold through vending machines. 
           (e) A sale and a purchase includes the furnishing for a 
        consideration of electricity, gas, water, or steam for use or 
        consumption within this state. 
           (f) A sale and a purchase includes the transfer for a 
        consideration of computer software.  
           (g) A sale and a purchase includes the furnishing for a 
        consideration of the following services: 
           (1) the privilege of admission to places of amusement, 
        recreational areas, or athletic events, and the making available 
        of amusement devices, tanning facilities, reducing salons, steam 
        baths, turkish baths, health clubs, and spas or athletic 
        facilities; 
           (2) lodging and related services by a hotel, rooming house, 
        resort, campground, motel, or trailer camp and the granting of 
        any similar license to use real property other than the renting 
        or leasing of it for a continuous period of 30 days or more; 
           (3) parking services, whether on a contractual, hourly, or 
        other periodic basis, except for parking at a meter; 
           (4) the granting of membership in a club, association, or 
        other organization if: 
           (i) the club, association, or other organization makes 
        available for the use of its members sports and athletic 
        facilities, without regard to whether a separate charge is 
        assessed for use of the facilities; and 
           (ii) use of the sports and athletic facility is not made 
        available to the general public on the same basis as it is made 
        available to members.  
        Granting of membership means both one-time initiation fees and 
        periodic membership dues.  Sports and athletic facilities 
        include golf courses; tennis, racquetball, handball, and squash 
        courts; basketball and volleyball facilities; running tracks; 
        exercise equipment; swimming pools; and other similar athletic 
        or sports facilities; and 
           (5) delivery of aggregate materials and concrete block; and 
           (6) services as provided in this clause: 
           (i) laundry and dry cleaning services including cleaning, 
        pressing, repairing, altering, and storing clothes, linen 
        services and supply, cleaning and blocking hats, and carpet, 
        drapery, upholstery, and industrial cleaning.  Laundry and dry 
        cleaning services do not include services provided by coin 
        operated facilities operated by the customer; 
           (ii) motor vehicle washing, waxing, and cleaning services, 
        including services provided by coin operated facilities operated 
        by the customer, and rustproofing, undercoating, and towing of 
        motor vehicles; 
           (iii) building and residential cleaning, maintenance, and 
        disinfecting and exterminating services; 
           (iv) detective, security, burglar, fire alarm, and armored 
        car services; but not including services performed within the 
        jurisdiction they serve by off-duty licensed peace officers as 
        defined in section 626.84, subdivision 1, or services provided 
        by a nonprofit organization for monitoring and electronic 
        surveillance of persons placed on in-home detention pursuant to 
        court order or under the direction of the Minnesota department 
        of corrections; 
           (v) pet grooming services; 
           (vi) lawn care, fertilizing, mowing, spraying and sprigging 
        services; garden planting and maintenance; tree, bush, and shrub 
        pruning, bracing, spraying, and surgery; indoor plant care; 
        tree, bush, shrub, and stump removal; and tree trimming for 
        public utility lines.  Services performed under a construction 
        contract for the installation of shrubbery, plants, sod, trees, 
        bushes, and similar items are not taxable; 
           (vii) massages, except when provided by a licensed health 
        care facility or professional or upon written referral from a 
        licensed health care facility or professional for treatment of 
        illness, injury, or disease; and 
           (viii) the furnishing of lodging, board, and care services 
        for animals in kennels and other similar arrangements, but 
        excluding veterinary and horse boarding services. 
           In applying the provisions of this chapter, the terms 
        "tangible personal property" and "sales at retail" include 
        taxable services and the provision of taxable services, unless 
        specifically provided otherwise.  Services performed by an 
        employee for an employer are not taxable.  Services performed by 
        a partnership or association for another partnership or 
        association are not taxable if one of the entities owns or 
        controls more than 80 percent of the voting power of the equity 
        interest in the other entity.  Services performed between 
        members of an affiliated group of corporations are not taxable.  
        For purposes of this section, "affiliated group of corporations" 
        includes those entities that would be classified as members of 
        an affiliated group under United States Code, title 26, section 
        1504, and that are eligible to file a consolidated tax return 
        for federal income tax purposes. 
           (h) A sale and a purchase includes the furnishing for a 
        consideration of tangible personal property or taxable services 
        by the United States or any of its agencies or 
        instrumentalities, or the state of Minnesota, its agencies, 
        instrumentalities, or political subdivisions. 
           (i) A sale and a purchase includes the furnishing for a 
        consideration of telecommunications services, including cable 
        television services and direct satellite services.  
        Telecommunications services are taxed to the extent allowed 
        under federal law if those services: 
           (1) either (i) originate and terminate in this state; or 
        (ii) originate in this state and terminate outside the state and 
        the service is charged to a telephone number customer located in 
        this state or to the account of any transmission instrument in 
        this state; or (iii) originate outside this state and terminate 
        in this state and the service is charged to a telephone number 
        customer located in this state or to the account of any 
        transmission instrument in this state; or 
           (2) are rendered by providing a private communications 
        service for which the customer has one or more locations within 
        Minnesota connected to the service and the service is charged to 
        a telephone number customer located in this state or to the 
        account of any transmission instrument in this state. 
           All charges for mobile telecommunications services, as 
        defined in United States Code, title 4, section 124, are deemed 
        to be provided by the customer's home service provider and 
        sourced to the customer's place of primary use and are subject 
        to tax based upon the customer's place of primary use in 
        accordance with the Mobile Telecommunications Sourcing Act, 
        United States Code, title 4, sections 116 to 126.  All other 
        definitions and provisions of the Mobile Telecommunications 
        Sourcing Act as provided in United States Code, title 4, are 
        hereby adopted. 
           (j) A sale and a purchase includes the furnishing for a 
        consideration of installation if the installation charges would 
        be subject to the sales tax if the installation were provided by 
        the seller of the item being installed. 
           [EFFECTIVE DATE.] This section is effective for sales made 
        after June 30, 2002. 
           Sec. 4.  Minnesota Statutes 2001 Supplement, section 
        297A.61, subdivision 31, is amended to read: 
           Subd. 31.  [PREPARED FOOD.] "Prepared food" means (i) food 
        that meets either of the following conditions: 
           (1) the food is sold with eating utensils provided by the 
        seller, including plates, knives, forks, spoons, glasses, cups, 
        napkins, or straws; or 
           (2) the food is sold in a heated state or heated by the 
        seller; (ii) or two or more food ingredients are mixed or 
        combined by the seller for sale as a single item; or (iii) food 
        sold with eating utensils provided by the seller, including 
        plates, knives, forks, spoons, glasses, cups, napkins, or 
        straws.  Prepared food does not include, except for: 
           (i) bakery items, including, but not limited to, bread, 
        rolls, buns, biscuits, bagels, croissants, pastries, donuts, 
        danish, cakes, tortes, pies, tarts, muffins, bars, cookies, 
        tortillas; 
           (ii) ready-to-eat meat and seafood in an unheated state 
        sold by weight; 
           (iii) eggs, fish, meat, poultry, and foods containing these 
        raw animal foods requiring cooking by the consumer as 
        recommended by the Food and Drug Administration in chapter 3, 
        part 401.11 of its food code so as to prevent food borne 
        illnesses; or 
           (iv) food that is only sliced, repackaged, or pasteurized 
        by the seller. 
           [EFFECTIVE DATE.] With the exception of clause (2), item 
        (ii), this section is effective for sales and purchases made 
        after June 30, 2002.  Clause (2), item (ii), is effective for 
        sales and purchases made after June 30, 2002, and before January 
        1, 2006. 
           Sec. 5.  Minnesota Statutes 2001 Supplement, section 
        297A.66, subdivision 1, is amended to read: 
           Subdivision 1.  [DEFINITIONS.] (a) To the extent allowed by 
        the United States Constitution and the laws of the United 
        States, "retailer maintaining a place of business in this 
        state," or a similar term, means a retailer: 
           (1) having or maintaining within this state, directly or by 
        a subsidiary or an affiliate, an office, place of distribution, 
        sales or sample room or place, warehouse, or other place of 
        business; or 
           (2) having a representative, including, but not limited to, 
        an affiliate agent, salesperson, canvasser, or solicitor 
        operating in this state under the authority of the retailer or 
        its subsidiary, for any purpose, including the repairing, 
        selling, delivering, installing, or soliciting of orders for the 
        retailer's goods or services, or the leasing of tangible 
        personal property located in this state, whether the place of 
        business or agent, representative, affiliate, salesperson, 
        canvasser, or solicitor is located in the state permanently or 
        temporarily, or whether or not the retailer or, subsidiary, or 
        affiliate is authorized to do business in this state. 
           (b) "Destination of a sale" means the location to which the 
        retailer makes delivery of the property sold, or causes the 
        property to be delivered, to the purchaser of the property, or 
        to the agent or designee of the purchaser.  The delivery may be 
        made by any means, including the United States Postal Service or 
        a for-hire carrier. 
           [EFFECTIVE DATE.] (a) This section is effective the day 
        following final enactment and is intended to confirm the 
        original intent of the legislature in enacting Minnesota 
        Statutes, section 297A.66, and its predecessor provisions. 
           (b) A retailer may elect that the provisions of this 
        section apply only to sales it made after August 31, 2002, by 
        notifying the commissioner and by applying for a permit under 
        Minnesota Statutes, section 297A.84, by August 15, 2002, to 
        collect the tax imposed under Minnesota Statutes, chapter 297A.  
        A retailer qualifies under this paragraph only if it: 
           (1) did not maintain an office, place of distribution, 
        sales or sample room or place, warehouse, or other place of 
        business in Minnesota except through an affiliate or did not 
        have a representative, agent, salesperson, canvasser, or 
        solicitor in Minnesota except through an affiliate; and 
           (2) has not registered to collect tax under Minnesota 
        Statutes, chapter 297A, as of the date of enactment of this 
        section. 
           Sec. 6.  Minnesota Statutes 2000, section 297A.66, is 
        amended by adding a subdivision to read: 
           Subd. 4.  [AFFILIATED ENTITIES.] (a) An entity is an 
        "affiliate" of the retailer for purposes of subdivision 1, 
        paragraph (a), if: 
           (1) the entity uses its facilities or employees in this 
        state to advertise, promote, or facilitate the establishment or 
        maintenance of a market for sales of items by the retailer to 
        purchasers in this state or for the provision of services to the 
        retailer's purchasers in this state, such as accepting returns 
        of purchases for the retailer, providing assistance in resolving 
        customer complaints of the retailer, or providing other 
        services; and 
           (2) the retailer and the entity are related parties. 
           (b) Two entities are related parties under this section if 
        one of the entities meets at least one of the following tests 
        with respect to the other entity: 
           (1) one or both entities is a corporation, and one entity 
        and any party related to that entity in a manner that would 
        require an attribution of stock from the corporation to the 
        party or from the party to the corporation under the attribution 
        rules of section 318 of the Internal Revenue Code owns directly, 
        indirectly, beneficially, or constructively at least 50 percent 
        of the value of the corporation's outstanding stock; 
           (2) one or both entities is a partnership, estate, or trust 
        and any partner or beneficiary, and the partnership, estate, or 
        trust and its partners or beneficiaries own directly, 
        indirectly, beneficially, or constructively, in the aggregate, 
        at least 50 percent of the profits, capital, stock, or value of 
        the other entity or both entities; or 
           (3) an individual stockholder and the members of the 
        stockholder's family (as defined in section 318 of the Internal 
        Revenue Code) owns directly, indirectly, beneficially, or 
        constructively, in the aggregate, at least 50 percent of the 
        value of both entities' outstanding stock. 
           (c) An entity is an affiliate under the provisions of this 
        subdivision if the requirements of paragraphs (a) and (b) are 
        met during any part of the 12-month period ending on the first 
        day of the month before the month in which the sale was made. 
           [EFFECTIVE DATE.] (a) This section is effective the day 
        following final enactment and is intended to confirm the 
        original intent of the legislature in enacting Minnesota 
        Statutes, section 297A.66, and its predecessor provisions. 
           (b) A retailer may elect that the provisions of this 
        section apply only to sales it made after August 31, 2002, by 
        notifying the commissioner and by applying for a permit under 
        Minnesota Statutes, section 297A.84, by August 15, 2002, to 
        collect the tax imposed under Minnesota Statutes, chapter 297A. 
        A retailer qualifies under this paragraph only if it: 
           (1) did not maintain an office, place of distribution, 
        sales or sample room or place, warehouse, or other place of 
        business in Minnesota except through an affiliate or did not 
        have a representative, agent, salesperson, canvasser, or 
        solicitor in Minnesota except through an affiliate; and 
           (2) has not registered to collect tax under Minnesota 
        Statutes, chapter 297A, as of the date of enactment of this 
        section. 
           Sec. 7.  Minnesota Statutes 2000, section 297A.67, 
        subdivision 5, is amended to read: 
           Subd. 5.  [EXEMPT MEALS AT SCHOOLS.] Meals and lunches 
        served at public and private elementary, middle, or secondary 
        schools, universities, or colleges as defined in section 120A.05 
        are exempt.  Meals and lunches served to students at a college, 
        university, or private career school under a board contract are 
        exempt.  For purposes of this subdivision, "meals and lunches" 
        does not include sales from vending machines. 
           [EFFECTIVE DATE.] This section is effective for sales and 
        purchases made after June 30, 2002.  However, for vending 
        machine contracts entered into by a school, as defined in 
        section 120A.05, prior to May 30, 2002, food sales from vending 
        machines continue to be exempt under this subdivision for one 
        year after the effective date of the contract. 
           Sec. 8.  Minnesota Statutes 2000, section 297A.67, is 
        amended by adding a subdivision to read: 
           Subd. 13a.  [INSTRUCTIONAL MATERIALS.] Instructional 
        materials, other than textbooks, that are prescribed for use in 
        conjunction with a course of study in a post-secondary school, 
        college, university, or private career school to students who 
        are regularly enrolled at such institutions are exempt.  For 
        purposes of this subdivision, "instructional materials" means 
        materials required to be used directly in the completion of the 
        course of study, including, but not limited to, interactive CDs, 
        tapes, and computer software. 
           Instructional materials do not include general reference 
        works or other items incidental to the instructional process 
        such as pens, pencils, paper, folders, or computers.  For 
        purposes of this subdivision, "school" and "private career 
        school" have the meanings given in subdivision 13. 
           [EFFECTIVE DATE.] This section is effective for sales after 
        June 30, 2003. 
           Sec. 9.  Minnesota Statutes 2001 Supplement, section 
        297A.67, subdivision 25, is amended to read: 
           Subd. 25.  [MAINTENANCE OF CEMETERY GROUNDS.] Lawn care and 
        related services used in the maintenance of cemetery grounds are 
        exempt.  For purposes of this subdivision, "lawn care and 
        related services" means the services listed in section 297A.61, 
        subdivision 3, paragraph (g), clause (5) (6), item (vi), and 
        "cemetery" means a cemetery for human burial. 
           Sec. 10.  Minnesota Statutes 2001 Supplement, section 
        297A.67, subdivision 29, is amended to read: 
           Subd. 29.  [ENERGY EFFICIENT PRODUCTS.] (a) A residential 
        lighting fixture or a compact fluorescent bulb is exempt if it 
        has an energy star label. 
           (b) The following products are exempt if they have an 
        energyguide label that indicates that the product meets or 
        exceeds the standards listed below: 
           (1) an electric heat pump hot water heater with an energy 
        factor of at least 1.9; 
           (2) a natural gas water heater with an energy factor of at 
        least 0.62; and 
           (3) a propane gas or fuel oil water heater with an energy 
        factor of at least 0.62; 
           (4) a natural gas furnace with an annual fuel utilization 
        efficiency greater than 92 percent; and 
           (5) a propane gas or fuel oil furnace with an annual fuel 
        utilization efficiency greater than 92 percent. 
           (c) A photovoltaic device is exempt.  For purposes of this 
        subdivision, "photovoltaic device" means a solid-state 
        electrical device, such as a solar module, that converts light 
        directly into direct current electricity of voltage-current 
        characteristics that are a function of the characteristics of 
        the light source and the materials in and design of the device.  
        A "solar module" is a photovoltaic device that produces a 
        specified power output under defined test conditions, usually 
        composed of groups of solar cells connected in series, in 
        parallel, or in series-parallel combinations. 
           (d) For purposes of this subdivision, "energy star label" 
        means the label granted to certain products that meet United 
        States Environmental Protection Agency and United States 
        Department of Energy criteria for energy efficiency.  For 
        purposes of this subdivision, "energyguide label" means the 
        label that the United States Federal Trade Commissioner requires 
        manufacturers to apply to certain appliances under United States 
        Code, title 16, part 305. 
           [EFFECTIVE DATE.] This section is effective for sales and 
        purchases made on or after the day following final enactment and 
        before August 1, 2005. 
           Sec. 11.  Minnesota Statutes 2001 Supplement, section 
        297A.68, subdivision 3, is amended to read: 
           Subd. 3.  [MATERIALS USED IN PROVIDING CERTAIN TAXABLE 
        SERVICES.] (a) Materials stored, used, or consumed in providing 
        a taxable service listed in section 297A.61, subdivision 3, 
        paragraph (g), clause (5) (6), intended to be sold ultimately at 
        retail are exempt. 
           (b) This exemption includes, but is not limited to: 
           (1) chemicals, lubricants, packaging materials, seeds, 
        trees, fertilizers, and herbicides, if these items are used or 
        consumed in providing the taxable service; 
           (2) chemicals used to treat waste generated as a result of 
        providing the taxable service; 
           (3) accessory tools, equipment, and other items that are 
        separate detachable units used in providing the service and that 
        have an ordinary useful life of less than 12 months; and 
           (4) fuel, electricity, gas, and steam used or consumed in 
        the production process, except that electricity, gas, or steam 
        used for space heating, cooling, or lighting is exempt if (i) it 
        is in excess of average climate control or lighting, and (ii) it 
        is necessary to produce that particular service. 
           (c) This exemption does not include machinery, equipment, 
        implements, tools, accessories, appliances, contrivances, 
        furniture, and fixtures used in providing the taxable service. 
           Sec. 12.  Minnesota Statutes 2001 Supplement, section 
        297A.70, subdivision 10, is amended to read: 
           Subd. 10.  [NONPROFIT TICKETS OR ADMISSIONS.] (a) Tickets 
        or admissions to an event are exempt if all the gross receipts 
        are recorded as such, in accordance with generally accepted 
        accounting principles, on the books of one or more organizations 
        that provide an opportunity for citizens of the state to 
        participate in the creation, performance, or appreciation of the 
        arts, and provided that each organization is either:  
           (1) an organization described in section 501(c)(3) of the 
        Internal Revenue Code in which voluntary contributions make up 
        at least the following percent of the organization's annual 
        revenue in its most recently completed 12-month fiscal year, or 
        in the current year if the organization has not completed a 
        12-month fiscal year: 
           (i) for sales made after July 31, 2001, and before July 1, 
        2002, for the organization's fiscal year completed in calendar 
        year 2000, three percent; 
           (ii) for sales made on or after July 1, 2002, and on or 
        before June 30, 2003, for the organization's fiscal year 
        completed in calendar year 2001, three percent; 
           (iii) for sales made on or after July 1, 2003, and on or 
        before June 30, 2004, for the organization's fiscal year 
        completed in calendar year 2002, four percent; and 
           (iv) for sales made in each 12-month period, beginning on 
        July 1, 2004, and each subsequent year, for the organization's 
        fiscal year completed in the preceding calendar year, five 
        percent; or 
           (2) a municipal board that promotes cultural and arts 
        activities; or 
           (3) the University of Minnesota, provided that the event is 
        held at a university-owned facility.  
        The exemption only applies if the entire proceeds, after 
        reasonable expenses, are used solely to provide opportunities 
        for citizens of the state to participate in the creation, 
        performance, or appreciation of the arts. 
           (b) Tickets or admissions to the premises of the Minnesota 
        zoological garden are exempt, provided that the exemption under 
        this paragraph does not apply to tickets or admissions to 
        performances or events held on the premises unless the 
        performance or event is sponsored and conducted exclusively by 
        the Minnesota zoological board or employees of the Minnesota 
        zoological garden. 
           [EFFECTIVE DATE.] This section is effective for tickets and 
        admissions to events held after July 31, 2001, but does not 
        apply to events for which sales of tickets or admissions were 
        made prior to August 1, 2001. 
           Sec. 13.  Minnesota Statutes 2001 Supplement, section 
        297A.71, subdivision 23, is amended to read: 
           Subd. 23.  [CONSTRUCTION MATERIALS FOR QUALIFIED LOW-INCOME 
        HOUSING PROJECTS.] (a) Purchases of materials and supplies used 
        or consumed in and equipment incorporated into the construction, 
        improvement, or expansion of qualified low-income housing 
        projects are exempt from the tax imposed under this chapter if 
        the owner of the qualified low-income housing project is: 
           (1) the public housing agency or housing and redevelopment 
        authority of a political subdivision; 
           (2) an entity exercising the powers of a housing and 
        redevelopment authority within a political subdivision; 
           (3) a limited partnership in which the sole general partner 
        is an authority under clause (1) or an entity under clause (2); 
        or 
           (4) a nonprofit corporation subject to the provisions of 
        chapter 317A, and qualifying under section 501(c)(3) or 
        501(c)(4) of the Internal Revenue Code of 1986, as amended; or 
           (5) an owner entity, as defined in Code of Federal 
        Regulations, title 24, part 941.604, for a qualified low-income 
        housing project described in paragraph (b), clause (5). 
           This exemption applies regardless of whether the purchases 
        are made by the owner of the facility or a contractor.  
           (b) For purposes of this exemption, "qualified low-income 
        housing project" means: 
           (1) a housing or mixed use project in which at least 20 
        percent of the residential units are qualifying low-income 
        rental housing units as defined in section 273.126; 
           (2) a federally assisted low-income housing project 
        financed by a mortgage insured or held by the United States 
        Department of Housing and Urban Development under United States 
        Code, title 12, section 1701s, 1715l(d)(3), 1715l(d)(4), or 
        1715z-1; United States Code, title 42, section 1437f; the Native 
        American Housing Assistance and Self-Determination Act, United 
        States Code, title 25, section 4101 et seq.; or any similar 
        successor federal low-income housing program; 
           (3) a qualified low-income housing project as defined in 
        United States Code, title 26, section 42(g), meeting all of the 
        requirements for a low-income housing credit under section 42 of 
        the Internal Revenue Code regardless of whether the project 
        actually applies for or receives a low-income housing credit; or 
           (4) a project that will be operated in compliance with 
        Internal Revenue Service revenue procedure 96-32; or 
           (5) a housing or mixed use project in which all or a 
        portion of the residential units are subject to the requirements 
        of section 5 of the United States Housing Act of 1937. 
           (c) For a project, a portion of which is not used for 
        low-income housing units, the amount of purchases that are 
        exempt under this subdivision must be determined by multiplying 
        the total purchases, as specified in paragraph (a), by the ratio 
        of: 
           (1) the total gross square footage of units subject to the 
        income limits under section 273.126, the financing for the 
        project, the federal low-income housing tax credit, revenue 
        procedure 96-32, or section 5 of the United States Housing Act 
        of 1937, as applicable to the project; and 
           (2) the total gross square footage of all units in the 
        project. 
           (d) The tax must be imposed and collected as if the rate 
        under section 297A.62, subdivision 1, applied, and then refunded 
        in the manner provided in section 297A.75. 
           [EFFECTIVE DATE.] Paragraph (a), clause (5), and paragraph 
        (b), clause (5), are effective retroactive for sales and 
        purchases made after July 31, 2001.  For sales and purchases 
        made after July 31, 2001, and before July 1, 2002, an owner 
        entity under this section must apply to the commissioner of 
        revenue for a refund of the tax paid on the exempt amount as 
        determined under this section.  The rest of the section is 
        effective for sales made after June 30, 2002. 
           Sec. 14.  Minnesota Statutes 2000, section 297A.71, is 
        amended by adding a subdivision to read: 
           Subd. 28.  [CONSTRUCTION MATERIALS AND EQUIPMENT; 
        REPLACEMENT AGRICULTURAL PROCESSING FACILITY.] Materials and 
        supplies used or consumed in, and machinery and equipment 
        incorporated into, the construction of a meat-packing or 
        meat-processing facility are exempt if: 
           (1) the cost of the project exceeds $75,000,000; and 
           (2) the facility replaces a facility that was destroyed by 
        fire. 
           [EFFECTIVE DATE.] This section is effective for sales and 
        purchases made after March 31, 2002, and before January 1, 2005. 
           Sec. 15.  Minnesota Statutes 2000, section 297A.71, is 
        amended by adding a subdivision to read: 
           Subd. 29.  [HYDROELECTRIC GENERATING FACILITY.] Materials 
        and supplies used or consumed in the construction of a 
        hydroelectric generating facility that meets the requirements of 
        this subdivision are exempt.  To qualify for the exemption under 
        this subdivision, a hydroelectric generating facility must: 
           (1) utilize two turbine generators at a dam site existing 
        on March 31, 1994; 
           (2) be located on publicly owned land and within 2,500 feet 
        of a 13.8 kilovolt distribution circuit; and 
           (3) be eligible to receive a renewable energy production 
        incentive payment under section 216C.41. 
           [EFFECTIVE DATE.] This section is effective for sales made 
        after August 31, 2002, and on or before December 31, 2003. 
           Sec. 16.  Minnesota Statutes 2000, section 297A.71, is 
        amended by adding a subdivision to read: 
           Subd. 30.  [NONPROFIT ARTS ORGANIZATION.] Materials, 
        equipment, and supplies incorporated into the construction or 
        renovation of a state bond financed facility funded in 2002 
        which is owned or operated by a nonprofit arts organization are 
        exempt. 
           [EFFECTIVE DATE.] This section is effective for sales and 
        purchases made the day after final enactment and before July 1, 
        2007. 
           Sec. 17.  Minnesota Statutes 2001 Supplement, section 
        297A.75, is amended to read: 
           297A.75 [REFUND; APPROPRIATION.] 
           Subdivision 1.  [TAX COLLECTED.] The tax on the gross 
        receipts from the sale of the following exempt items must be 
        imposed and collected as if the sale were taxable and the rate 
        under section 297A.62, subdivision 1, applied.  The exempt items 
        include: 
           (1) capital equipment exempt under section 297A.68, 
        subdivision 5; 
           (2) building materials for an agricultural processing 
        facility exempt under section 297A.71, subdivision 13; 
           (3) building materials for mineral production facilities 
        exempt under section 297A.71, subdivision 14; 
           (4) building materials for correctional facilities under 
        section 297A.71, subdivision 3; 
           (5) building materials used in a residence for disabled 
        veterans exempt under section 297A.71, subdivision 11; 
           (6) chair lifts, ramps, elevators, and associated building 
        materials exempt under section 297A.71, subdivision 12; 
           (7) building materials for the Long Lake Conservation 
        Center exempt under section 297A.71, subdivision 17; and 
           (8) materials, supplies, fixtures, furnishings, and 
        equipment for a county law enforcement and family service center 
        under section 297A.71, subdivision 26; and 
           (9) materials and supplies for qualified low-income housing 
        under section 297A.71, subdivision 23. 
           Subd. 2.  [REFUND; ELIGIBLE PERSONS.] Upon application on 
        forms prescribed by the commissioner, a refund equal to the tax 
        paid on the gross receipts of the exempt items must be paid to 
        the applicant.  Only the following persons may apply for the 
        refund: 
           (1) for subdivision 1, clauses (1) to (3), the applicant 
        must be the purchaser; 
           (2) for subdivision 1, clauses (4), (7), and (8), the 
        applicant must be the governmental subdivision; 
           (3) for subdivision 1, clause (5), the applicant must be 
        the recipient of the benefits provided in United States Code, 
        title 38, chapter 21; and 
           (4) for subdivision 1, clause (6), the applicant must be 
        the owner of the homestead property; and 
           (5) for subdivision 1, clause (9), the owner of the 
        qualified low-income housing project. 
           Subd. 3.  [APPLICATION.] (a) The application must include 
        sufficient information to permit the commissioner to verify the 
        tax paid.  If the tax was paid by a contractor, subcontractor, 
        or builder, under subdivision 1, clause (4), (5), (6), 
        (7), or (8), or (9), the contractor, subcontractor, or builder 
        must furnish to the refund applicant a statement including the 
        cost of the exempt items and the taxes paid on the items unless 
        otherwise specifically provided by this subdivision.  The 
        provisions of sections 289A.40 and 289A.50 apply to refunds 
        under this section. 
           (b) An applicant may not file more than two applications 
        per calendar year for refunds for taxes paid on capital 
        equipment exempt under section 297A.68, subdivision 5.  
           Subd. 4.  [INTEREST.] Interest must be paid on the refund 
        at the rate in section 270.76 from the date the refund claim is 
        filed for taxes paid under subdivision 1, clauses (1) to (3), 
        and (5), and from 60 days after the date the refund claim is 
        filed with the commissioner for claims filed under subdivision 
        1, clauses (4), (6), (7), and (8), and (9). 
           Subd. 5.  [APPROPRIATION.] The amount required to make the 
        refunds is annually appropriated to the commissioner. 
           [EFFECTIVE DATE.] This section is effective for sales made 
        after June 30, 2002. 
           Sec. 18.  Minnesota Statutes 2000, section 297A.96, is 
        amended to read: 
           297A.96 [LOCAL ADMISSIONS AND AMUSEMENT TAXES; EXEMPTION 
        FOR ARTS ORGANIZATIONS.] 
           If an event is sponsored by a nonprofit arts organization, 
        then Amounts charged for admission to the an event or to the 
        organization's premises described in section 297A.70, 
        subdivision 10, paragraph (a), are not subject to a tax imposed 
        by a local unit of government or imposed on sales taking place 
        in a single named local unit of government on sales of 
        admissions or amusements, under a law other than a general sales 
        tax law. 
           [EFFECTIVE DATE.] This section is effective for tickets and 
        admissions to events held after July 31, 2001, but does not 
        apply to events for which sales of tickets or admissions were 
        made prior to August 1, 2001. 
           Sec. 19.  Minnesota Statutes 2001 Supplement, section 
        297A.995, subdivision 4, is amended to read: 
           Subd. 4.  [AUTHORITY TO ENTER AGREEMENT.] The commissioner 
        of revenue is authorized and directed to enter into the 
        agreement with one or more states to simplify and modernize 
        sales and use tax administration in order to substantially 
        reduce the burden of tax compliance for all sellers and for all 
        types of commerce.  In furtherance of the agreement, the 
        commissioner is authorized to act jointly with other states that 
        are members of the agreement to establish standards for 
        certification of a certified service provider and certified 
        automated system and establish performance standards for 
        multistate sellers. 
           The commissioner of revenue is further directed to 
        negotiate the agreement with the express intention of ensuring 
        uniform sales and use taxation as applied to like-kind 
        transactions.  
           The commissioner is further authorized to take other 
        actions reasonably required to implement the provisions set 
        forth in this article.  Other actions authorized by this section 
        include, but are not limited to, the adoption of rules and 
        regulations and the joint procurement, with other member states, 
        of goods and services in furtherance of the cooperative 
        agreement. 
           The commissioner or the commissioner's designee is 
        following officials are authorized to represent this state 
        before the other states that are signatories to the agreement: 
           (1) the commissioner or the commissioner's designee; 
           (2) the chair of the house committee with jurisdiction over 
        taxes or the house chair's designee; and 
           (3) the chair of the senate committee with jurisdiction 
        over taxes or the senate chair's designee. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 20.  Laws 1990, chapter 604, article 6, section 9, 
        subdivision 1, as amended by Laws 1991, chapter 291, article 8, 
        section 25, is amended to read:  
           Subdivision 1.  [AUTHORIZATION.] Notwithstanding Minnesota 
        Statutes, section 469.190, 477A.016, or other law, in addition 
        to the tax authorized in Laws 1986, chapter 391, section 4, the 
        governing body of the city of Bloomington may impose a tax of up 
        to one two percent on the gross receipts from the furnishing for 
        consideration of lodging at a hotel, motel, rooming house, 
        tourist court, or resort, other than the renting or leasing of 
        it for a continuous period of 30 days or more, located in the 
        city.  The city may agree with the commissioner of revenue that 
        a tax imposed under this section shall be collected by the 
        commissioner together with the tax imposed by Minnesota 
        Statutes, chapter 297A, and subject to the same interest, 
        penalties, and other rules and that its proceeds, less the cost 
        of collection, shall be remitted to the city.  The proceeds of 
        the tax must be used by the Bloomington convention bureau only 
        to market and promote the city as a tourist or convention 
        center.  If the duties of the convention bureau as they existed 
        on January 1, 1991, are assigned to another agency, the tax 
        shall cease.  
           [EFFECTIVE DATE; LOCAL APPROVAL.] This section takes effect 
        the day after the governing body of the city of Bloomington 
        complies with Minnesota Statutes, section 645.021, subdivision 3.
           Sec. 21.  Laws 1998, chapter 389, article 8, section 37, 
        subdivision 2, is amended to read: 
           Subd. 2.  [APPOINTMENT OF MEMBERS.] The citizen review 
        panel must consist of 17 members, each of whom represents one of 
        the district councils consists of three residents from each of 
        the seven city council wards, for a total of 21 members.  The 
        mayor must appoint the members, and the appointments are subject 
        to confirmation by a majority vote of the city council.  Members 
        serve for a term of four years.  Elected officials and employees 
        of the city are ineligible to serve as members of the panel. 
           [EFFECTIVE DATE.] This section is effective upon approval 
        by the governing body of the city of St. Paul and compliance 
        with Minnesota Statutes, section 645.021. 
           Sec. 22.  Laws 2001, First Special Session chapter 5, 
        article 12, section 11, the effective date, is amended to read: 
           [EFFECTIVE DATE.] This section is effective January 1, 
        2002, however, for contracts entered into before January 1, 
        2002, the sale price for aggregate materials and concrete block 
        does not include delivery charges until January 1, 2005. 
           Sec. 23.  Laws 2001, First Special Session chapter 5, 
        article 12, section 82, the effective date, is amended to read: 
           [EFFECTIVE DATE.] This section is effective January 1, 2003 
        for sales and purchases made after December 31, 2005. 
           Sec. 24.  Laws 2001, First Special Session chapter 5, 
        article 12, section 95, is amended to read: 
           Sec. 95.  [REPEALER.] 
           (a) Minnesota Statutes 2000, sections 297A.61, subdivision 
        16; 297A.68, subdivision 21; and 297A.71, subdivisions 
        subdivision 2 and 16, are repealed effective for sales and 
        purchases occurring after June 30, 2001, except that the repeal 
        of section 297A.61, subdivision 16, paragraph (d), is effective 
        for sales and purchases occurring after July 31, 2001. 
           (b) Minnesota Statutes 2000, sections 297A.62, subdivision 
        2, and 297A.64, subdivision 1, are repealed effective for sales 
        and purchases made after December 31, 2005. 
           (c) Minnesota Statutes 2000, section 297A.71, subdivision 
        15, is repealed effective for sales and purchases made after 
        June 30, 2002. 
           (d) Minnesota Statutes 2000, section 289A.60, subdivision 
        15, is repealed effective for liabilities after January 1, 
        2003 2004. 
           (e) Minnesota Statutes 2000, section 297A.71, subdivision 
        16, is repealed effective for sales and purchases occurring 
        after December 31, 2002. 
           [EFFECTIVE DATE.] Paragraph (d) is effective the day after 
        final enactment.  Paragraphs (a) and (e) are effective for sales 
        and purchases made on or after June 30, 2001, for projects begun 
        prior to June 30, 2001. 
           Sec. 25.  [ROCHESTER LODGING TAX.] 
           Subdivision 1.  [AUTHORIZATION.] Notwithstanding Minnesota 
        Statutes, section 469.190 or 477A.016, or any other law, the 
        city of Rochester may impose an additional tax of one percent on 
        the gross receipts from the furnishing for consideration of 
        lodging at a hotel, motel, rooming house, tourist court, or 
        resort, other than the renting or leasing of it for a continuous 
        period of 30 days or more. 
           Subd. 2.  [DISPOSITION OF PROCEEDS.] The gross proceeds 
        from any tax imposed under subdivision 1 must be used by the 
        city to fund a local convention or tourism bureau for the 
        purpose of marketing and promoting the city as a tourist or 
        convention center.  
           [EFFECTIVE DATE.] This section is effective for lodging 
        furnished on or after July 1, 2002. 
           Sec. 26.  [REPEALER.] 
           Minnesota Statutes 2000, section 297A.68, subdivision 26, 
        is repealed effective for sales and purchases made after June 
        30, 2002. 

                                   ARTICLE 4 
                                 PROPERTY TAXES 
           Section 1.  Minnesota Statutes 2000, section 168A.05, is 
        amended by adding a subdivision to read: 
           Subd. 1a.  [MANUFACTURED HOMES; PROPERTY TAXES MUST BE 
        PAID.] In the case of a manufactured home as defined in section 
        327.31, subdivision 6, the department shall not issue a 
        certificate of title unless the application under section 
        168A.04 is accompanied with a statement from the county auditor 
        or county treasurer where the manufactured home is presently 
        located, stating that all personal property taxes levied on the 
        unit that are due from the current owner at the time of transfer 
        for which the application applies, have been paid. 
           [EFFECTIVE DATE.] This section is effective for 
        certificates of title issued by the department on or after July 
        1, 2002. 
           Sec. 2.  Minnesota Statutes 2000, section 168A.05, is 
        amended by adding a subdivision to read: 
           Subd. 1b.  [EXEMPTION.] The provisions of subdivision 1a 
        shall not apply to:  (i) a manufactured home which is sold or 
        otherwise disposed of pursuant to section 504B.271 by the owner 
        of a manufactured home park as defined in section 327.14, 
        subdivision 3, or (ii) a manufactured home which is sold 
        pursuant to section 504B.265 by the owner of a manufactured home 
        park. 
           [EFFECTIVE DATE.] This section is effective for 
        certificates of title issued by the department on or after July 
        1, 2002. 
           Sec. 3.  Minnesota Statutes 2001 Supplement, section 
        216B.1646, is amended to read: 
           216B.1646 [RATE REDUCTION; PROPERTY TAX REDUCTION.] 
           (a) The commission shall, by any method the commission 
        finds appropriate, reduce the amounts rates each electric 
        utility subject to rate regulation by the commission charges its 
        customers to reflect, on an ongoing basis, the amount by which 
        each utility's property tax on the personal property of its 
        electric generation, transmission, or distribution system from 
        taxes payable in 2001 to taxes payable in 2002 is reduced.  The 
        commission must ensure that, to the extent feasible, each dollar 
        of personal property tax reduction allocated to Minnesota 
        consumers retroactive to January 1, 2002, results in a dollar of 
        savings to the utility's customers.  A utility may voluntarily 
        pass on any additional property tax savings in the same manner 
        as approved by the commission under this paragraph. 
           (b) By April 10, 2002, each utility shall submit a filing 
        to the commission containing: 
           (1) certified information regarding the utility's property 
        tax savings allocated to Minnesota retail customers; and 
           (2) a proposed method of passing these savings on to 
        Minnesota retail customers. 
           The utility shall provide the information in clause (1) to 
        the commissioner of revenue at the same time.  The commissioner 
        shall notify the commission within 30 days as to the accuracy of 
        the property tax data submitted by the utility. 
           (c)  For purposes of this section, "personal property" 
        means tools, implements, and machinery of the generating plant.  
        It does not apply to transformers, transmission lines, 
        distribution lines, or any other tools, implements, and 
        machinery that are part of an electric substation, wherever 
        located. 
           [EFFECTIVE DATE.] This section is effective retroactive to 
        July 1, 2001. 
           Sec. 4.  Minnesota Statutes 2001 Supplement, section 
        271.01, subdivision 5, is amended to read: 
           Subd. 5.  [JURISDICTION.] The tax court shall have 
        statewide jurisdiction.  Except for an appeal to the supreme 
        court or any other appeal allowed under this subdivision, the 
        tax court shall be the sole, exclusive, and final authority for 
        the hearing and determination of all questions of law and fact 
        arising under the tax laws of the state, as defined in this 
        subdivision, in those cases that have been appealed to the tax 
        court and in any case that has been transferred by the district 
        court to the tax court.  The tax court shall have no 
        jurisdiction in any case that does not arise under the tax laws 
        of the state or in any criminal case or in any case determining 
        or granting title to real property or in any case that is under 
        the probate jurisdiction of the district court.  The small 
        claims division of the tax court shall have no jurisdiction in 
        any case dealing with property valuation or assessment for 
        property tax purposes until the taxpayer has appealed the 
        valuation or assessment to the county board of equalization, and 
        in those towns and cities which have not transferred their 
        duties to the county, the town or city board of equalization, 
        except for:  (i) those taxpayers whose original assessments are 
        determined by the commissioner of revenue; (ii) those taxpayers 
        appealing a denial of a current year application for the 
        homestead classification for their property and the denial was 
        not reflected on a valuation notice issued in the year; and 
        (iii) any case dealing with property valuation, assessment, or 
        taxation for property tax purposes and meeting the 
        jurisdictional requirements of section 271.21, subdivision 2, 
        paragraph (c) only as provided in section 271.21, subdivision 2. 
        The tax court shall have no jurisdiction in any case involving 
        an order of the state board of equalization unless a taxpayer 
        contests the valuation of property.  Laws governing taxes, aids, 
        and related matters administered by the commissioner of revenue, 
        laws dealing with property valuation, assessment or taxation of 
        property for property tax purposes, and any other laws that 
        contain provisions authorizing review of taxes, aids, and 
        related matters by the tax court shall be considered tax laws of 
        this state subject to the jurisdiction of the tax court.  This 
        subdivision shall not be construed to prevent an appeal, as 
        provided by law, to an administrative agency, board of 
        equalization, review under section 274.13, subdivision 1c, or to 
        the commissioner of revenue.  Wherever used in this chapter, the 
        term commissioner shall mean the commissioner of revenue, unless 
        otherwise specified. 
           [EFFECTIVE DATE.] This section is effective for petitions 
        filed pertaining to the 2002 assessment, and thereafter. 
           Sec. 5.  Minnesota Statutes 2001 Supplement, section 
        271.21, subdivision 2, is amended to read: 
           Subd. 2.  [JURISDICTION.] At the election of the taxpayer, 
        the small claims division shall have jurisdiction only in the 
        following matters: 
           (a) cases involving valuation, assessment, or taxation of 
        real or personal property, if the taxpayer has satisfied the 
        requirements of section 271.01, subdivision 5, and:  
           (i) the issue is a denial of a current year application for 
        the homestead classification for the taxpayer's property and the 
        denial was not reflected on a valuation notice issued in the 
        year; or 
           (ii) in the case of nonhomestead property, only one parcel 
        is included in the petition, the entire parcel is classified as 
        homestead class 1a or 1b under section 273.13 and the parcel 
        contains no more than one dwelling unit; 
           (iii) the entire property is classified as agricultural 
        homestead class 2a or 1b under section 273.13; or 
           (iv) the assessor's estimated market value of the property 
        included in the petition is less than $100,000 $300,000; or 
           (b) any other case concerning the tax laws as defined in 
        section 271.01, subdivision 5, not involving valuation, 
        assessment, or taxation of real and personal property in which 
        the amount in controversy does not exceed $5,000, including 
        penalty and interest; or. 
           (c) cases involving valuation, assessment, or taxation of 
        real or personal property if: 
           (i) the issue is a denial of a current year application for 
        the homestead classification for the taxpayer's property; 
           (ii) only one parcel is included in the petition, the 
        entire parcel is classified as homestead 1a or 1b pursuant to 
        section 273.13, and the parcel contains no more than one 
        dwelling unit; or 
           (iii) the assessor's estimated market value of the property 
        included in the petition is less than $300,000. 
           [EFFECTIVE DATE.] This section is effective for petitions 
        filed pertaining to the 2002 assessment, and thereafter. 
           Sec. 6.  Minnesota Statutes 2001 Supplement, section 
        272.02, subdivision 22, is amended to read: 
           Subd. 22.  [WIND ENERGY CONVERSION SYSTEMS.] (a) Small 
        scale wind energy conversion systems installed after January 1, 
        1991, and used as an electric power source are exempt. 
           "Small scale wind energy conversion systems" are wind 
        energy conversion systems, as defined in section 216C.06, 
        subdivision 12, including the foundation or support pad, which 
        (i) are used as an electric power source; (ii) are located 
        within one county and owned by the same owner; and (iii) produce 
        two megawatts or less of electricity as measured by nameplate 
        ratings. 
           (b) Medium scale wind energy conversion systems installed 
        after January 1, 1991, are treated as follows:  (i) the 
        foundation and support pad are taxable; (ii) the associated 
        supporting and protective structures are exempt for the first 
        five assessment years after they have been constructed, and 
        thereafter, 30 percent of the market value of the associated 
        supporting and protective structures are taxable; and (iii) the 
        turbines, blades, transformers, and its related equipment, are 
        exempt.  "Medium scale wind energy conversion systems" are wind 
        energy conversion systems as defined in section 216C.06, 
        subdivision 12, including the foundation or support pad, which:  
        (i) are used as an electric power source; (ii) are located 
        within one county and owned by the same owner; and (iii) produce 
        more than two but equal to or less than 12 megawatts of energy 
        as measured by nameplate ratings. 
           (c) Large scale wind energy conversion systems installed 
        after January 1, 1991, are treated as follows:  25 percent of 
        the market value of all property is taxable, including (i) the 
        foundation and support pad; (ii) the associated supporting and 
        protective structures; and (iii) the turbines, blades, 
        transformers, and its related equipment.  "Large scale wind 
        energy conversion systems" are wind energy conversion systems as 
        defined in section 216C.06, subdivision 12, including the 
        foundation or support pad, which (i) are used as an electric 
        power source; and (ii) produce more than 12 megawatts of energy 
        as measured by nameplate ratings. 
           (d) The total size of a wind energy conversion system under 
        this subdivision shall be determined according to this paragraph.
        Unless the systems are interconnected with different 
        distribution systems, the nameplate capacity of one wind energy 
        conversion system shall be combined with the nameplate capacity 
        of any other wind energy conversion system that is: 
           (1) located within five miles of the wind energy conversion 
        system; 
           (2) constructed within the same calendar year as the wind 
        energy conversion system; and 
           (3) under common ownership.  
           In the case of a dispute, the commissioner of commerce 
        shall determine the total size of the system, and shall draw all 
        reasonable inferences in favor of combining the systems. 
           (e) In making a determination under paragraph (d), the 
        commissioner of commerce may determine that two wind energy 
        conversion systems are under common ownership when the 
        underlying ownership structure contains similar persons or 
        entities, even if the ownership shares differ between the two 
        systems.  Wind energy conversion systems are not under common 
        ownership solely because the same person or entity provided 
        equity financing for the systems.  All real and personal 
        property of a wind energy conversion system as defined in 
        section 272.029, subdivision 2, is exempt from property tax 
        except that the land on which the property is located remains 
        taxable. 
           [EFFECTIVE DATE.] This section is effective for taxes 
        payable in 2003 and thereafter. 
           Sec. 7.  Minnesota Statutes 2000, section 272.02, is 
        amended by adding a subdivision to read: 
           Subd. 51.  [ELECTRIC GENERATION FACILITY; PERSONAL 
        PROPERTY.] Notwithstanding subdivision 9, clause (a), attached 
        machinery and other personal property which is part of a 
        combined cycle natural gas turbine electric generation facility 
        of between 43 and 46 megawatts of installed capacity and that 
        meets the requirements of this subdivision is exempt.  At the 
        time of construction, the facility must: 
           (1) utilize a combined cycle gas turbine generator fueled 
        by natural gas; 
           (2) be connected to an existing 115-kilovolt high-voltage 
        electric transmission line that is within one mile of the 
        facility; 
           (3) be located on an underground natural gas storage 
        aquifer; 
           (4) be designed as an intermediate load facility; and 
           (5) have received, by resolution, the approval from the 
        governing body of the county for the exemption of personal 
        property under this subdivision. 
           Construction of the facility must be commenced after 
        January 1, 2002, and before January 1, 2004.  Property eligible 
        for this exemption does not include electric transmission lines 
        and interconnections or gas pipelines and interconnections 
        appurtenant to the property or the facility. 
           [EFFECTIVE DATE.] This section is effective for assessment 
        year 2002 and thereafter. 
           Sec. 8.  Minnesota Statutes 2000, section 272.02, is 
        amended by adding a subdivision to read: 
           Subd. 52.  [ELECTRIC GENERATION FACILITY; PERSONAL 
        PROPERTY.] Notwithstanding subdivision 9, clause (a), attached 
        machinery and other personal property which is part of a 
        simple-cycle combustion-turbine electric generation facility of 
        more than 40 megawatts and less than 50 megawatts of installed 
        capacity and that meets the requirements of this subdivision is 
        exempt.  At the time of construction, the facility must: 
           (1) utilize natural gas as a primary fuel; 
           (2) be located within two miles of parallel existing 
        36-inch natural gas pipelines and an existing 115-kilovolt 
        high-voltage electric transmission line; 
           (3) be designed to provide peaking, emergency backup, or 
        contingency services; and 
           (4) satisfy a resource deficiency identified in an approved 
        integrated resource plan filed under section 216B.2422. 
           Construction of the facility must be commenced after 
        January 1, 2001, and before January 1, 2005.  Property eligible 
        for this exemption does not include electric transmission lines 
        and interconnections or gas pipelines and interconnections 
        appurtenant to the property or the facility. 
           [EFFECTIVE DATE.] This section is effective for assessment 
        year 2002 and thereafter. 
           Sec. 9.  Minnesota Statutes 2000, section 272.02, is 
        amended by adding a subdivision to read: 
           Subd. 53.  [ELECTRIC GENERATION FACILITY; PERSONAL 
        PROPERTY.] Notwithstanding subdivision 9, clause (a), attached 
        machinery and other personal property which is part of a 3.2 
        megawatt run-of-the-river hydroelectric generation facility and 
        that meets the requirements of this subdivision is exempt.  At 
        the time of construction, the facility must: 
           (1) utilize two turbine generators at a dam site existing 
        on March 31, 1994; 
           (2) be located on publicly owned land and within 1,500 feet 
        of a 13.8 kilovolt distribution substation; and 
           (3) be eligible to receive a renewable energy production 
        incentive payment under section 216C.41. 
           Construction of the facility must be commenced after 
        January 1, 2002, and before January 1, 2004.  Property eligible 
        for this exemption does not include electric transmission lines 
        and interconnections or gas pipelines and interconnections 
        appurtenant to the property or the facility. 
           [EFFECTIVE DATE.] This section is effective for assessment 
        year 2002 and thereafter. 
           Sec. 10.  Minnesota Statutes 2000, section 272.02, is 
        amended by adding a subdivision to read: 
           Subd. 54.  [SMALL BIOMASS ELECTRIC GENERATION FACILITY; 
        PERSONAL PROPERTY.] Notwithstanding subdivision 9, clause (a), 
        attached machinery and other personal property which is part of 
        an electrical generating facility that meets the requirements of 
        this subdivision is exempt.  At the time of construction the 
        facility must: 
           (1) have a generation capacity of less than 25 megawatts; 
           (2) provide process heating needs in addition to electrical 
        generation; and 
           (3) utilize agricultural by-products from the malting 
        process and other biomass fuels as its primary fuel source.  
           Construction of the facility must be commenced after 
        January 1, 2002, and before January 1, 2006.  Property eligible 
        for this exemption does not include electric transmission lines 
        and interconnections or gas pipelines and interconnections 
        appurtenant to the property or facility. 
           [EFFECTIVE DATE.] This section is effective for assessment 
        year 2003 and thereafter. 
           Sec. 11.  Minnesota Statutes 2000, section 272.02, is 
        amended by adding a subdivision to read: 
           Subd. 55.  [ELECTRIC GENERATION FACILITY; PERSONAL 
        PROPERTY.] Notwithstanding subdivision 9, clause (a), attached 
        machinery and other personal property which is part of an 
        electric generating facility that meets the requirements of this 
        subdivision is exempt.  At the time of construction, the 
        facility must be sited on an energy park that (i) is located on 
        an active mining site, or on a former mining or industrial site 
        where mining or industrial operations have terminated, (ii) is 
        within a tax relief area as defined in section 273.134, (iii) 
        has on-site access to existing railroad infrastructure, (iv) has 
        direct rail access to a Great Lakes port, (v) has sufficient 
        private water resources on site, and (vi) is designed to host at 
        least 500 megawatts of electrical generation.  
           Construction of the first 250 megawatts of the facility 
        must be commenced after January 1, 2002, and before January 1, 
        2005.  Construction of up to an additional 750 megawatts of 
        generation must be commenced before January 1, 2010.  Property 
        eligible for this exemption does not include electric 
        transmission lines and interconnections or gas pipelines and 
        interconnections appurtenant to the property or the facility. 
           [EFFECTIVE DATE.] This section is effective for assessment 
        year 2003 and thereafter. 
           Sec. 12.  Minnesota Statutes 2001 Supplement, section 
        272.028, is amended to read: 
           272.028 [PAYMENT IN LIEU OF PERSONAL PROPERTY PRODUCTION 
        TAX; WIND GENERATION FACILITIES.] 
           A developer of a new or existing medium or large scale wind 
        energy conversion system, as defined under section 272.02, 
        subdivision 22, paragraphs (b) and (c), 272.029, subdivision 2, 
        may negotiate with the city or town and the county where the 
        wind energy conversion system is located to establish a payment 
        in lieu of tax on personal property used to generate electric 
        power the wind energy production tax imposed under section 
        272.029.  The in lieu payment is to provide fees or compensation 
        to the host jurisdictions to maintain public infrastructure and 
        services.  A host jurisdiction includes a city or town and the 
        county in which a facility is located.  The payment in lieu of 
        personal property the wind energy production tax may be based on 
        production capacity, historical production, or other factors 
        agreed upon by the parties.  The payment in lieu of tax 
        agreement must be signed by the parties and filed with the 
        commissioner of revenue and the county recorder.  Upon execution 
        and filing of the agreement, the personal property to which the 
        in lieu payment applies shall be deemed exempt from tax under 
        section 272.02, subdivision 22, paragraphs (b) and (c).  This 
        Exemption from the tax under section 272.029 shall be 
        effective for the assessment year in which the in lieu payment 
        is agreed upon and shall remain exempt for the same duration as 
        the in lieu payments under this section are in effect. 
           Sec. 13.  [272.029] [WIND ENERGY PRODUCTION TAX.] 
           Subdivision 1.  [PRODUCTION TAX.] A tax is imposed on the 
        production of electricity from a wind energy conversion system 
        installed after January 1, 1991, and used as an electric power 
        source. 
           Subd. 2.  [DEFINITIONS.] (a) For the purposes of this 
        section, the term: 
           (1) "wind energy conversion system" has the meaning given 
        it in section 216C.06, subdivision 12; 
           (2) "large scale wind energy conversion system" means a 
        wind energy conversion system of more than 12 megawatts, as 
        measured by the nameplate capacity of the system or as combined 
        with other systems as provided in paragraph (b); 
           (3) "medium scale wind energy conversion system" means a 
        wind energy conversion system of over two and not more than 12 
        megawatts, as measured by the nameplate capacity of the system 
        or as combined with other systems as provided in paragraph (b); 
        and 
           (4) "small scale wind energy conversion system" means a 
        wind energy conversion system of two megawatts and under, as 
        measured by the nameplate capacity of the system or as combined 
        with other systems as provided in paragraph (b). 
           (b) For systems installed and contracted for after January 
        1, 2002, the total size of a wind energy conversion system under 
        this subdivision shall be determined according to this paragraph.
        Unless the systems are interconnected with different 
        distribution systems, the nameplate capacity of one wind energy 
        conversion system shall be combined with the nameplate capacity 
        of any other wind energy conversion system that is: 
           (1) located within five miles of the wind energy conversion 
        system; 
           (2) constructed within the same calendar year as the wind 
        energy conversion system; and 
           (3) under common ownership.  
           In the case of a dispute, the commissioner of commerce 
        shall determine the total size of the system, and shall draw all 
        reasonable inferences in favor of combining the systems. 
           (c) In making a determination under paragraph (b), the 
        commissioner of commerce may determine that two wind energy 
        conversion systems are under common ownership when the 
        underlying ownership structure contains similar persons or 
        entities, even if the ownership shares differ between the two 
        systems.  Wind energy conversion systems are not under common 
        ownership solely because the same person or entity provided 
        equity financing for the systems. 
           Subd. 3.  [RATE OF TAX.] (a) The owner of a wind energy 
        conversion system shall pay a tax based on the following 
        schedule: 
           (1) for a large scale wind energy conversion system, .12 
        cents per kilowatt-hour of electricity produced by the system; 
           (2) for a medium scale wind energy conversion system, .036 
        cents per kilowatt-hour of electricity produced by the system; 
        and 
           (3) for a small scale wind energy conversion system of two 
        megawatts or less, but greater than .25 megawatts capacity, .012 
        cents per kilowatt-hour of electricity produced by the system. 
           (b) Small scale wind energy conversion systems with the 
        capacity of .25 megawatts or less, and small scale wind energy 
        conversion systems with a capacity of two megawatts or less that 
        are owned by a political subdivision, are exempt from the wind 
        energy production tax. 
           Subd. 4.  [REPORTS.] (a) An owner of a wind energy 
        conversion system subject to tax under subdivision 3 shall file 
        a report with the commissioner of revenue annually on or before 
        March 1 detailing the amount of electricity in kilowatt-hours 
        that was produced by the wind energy conversion system for the 
        previous calendar year.  The commissioner shall prescribe the 
        form of the report.  The report must contain the information 
        required by the commissioner to determine the tax due to each 
        county under this section for the current year.  If an owner of 
        a wind energy conversion system subject to taxation under this 
        section fails to file the report by the due date, the 
        commissioner of revenue shall determine the tax based upon the 
        nameplate capacity of the system multiplied by a capacity factor 
        of 40 percent. 
           (b) On or before March 31, the commissioner of revenue 
        shall notify the owner of the wind energy conversion systems of 
        the tax due to each county for the current year and shall 
        certify to the county auditor of each county in which the 
        systems are located the tax due from each owner for the current 
        year. 
           Subd. 5.  [PAYMENT OF TAX; COLLECTION.] The amount of 
        production tax determined under subdivision 4 must be paid to 
        the county treasurer at the time and in the manner provided for 
        payment of property taxes under section 277.01, subdivision 3, 
        and, if unpaid, is subject to the same enforcement, collection, 
        and interest and penalties as delinquent personal property 
        taxes.  Except to the extent inconsistent with this section, the 
        provisions of sections 277.01 to 277.24 and 278.01 to 278.13 
        apply to the taxes imposed under this section, and for purposes 
        of those provisions, the taxes imposed under this section are 
        considered personal property taxes. 
           Subd. 6.  [DISTRIBUTION OF REVENUES.] Revenues from the 
        taxes imposed under subdivision 5 must be part of the settlement 
        between the county treasurer and the county auditor under 
        section 276.09.  The revenue must be distributed by the county 
        auditor or the county treasurer to all taxing jurisdictions in 
        which the wind energy conversion system is located, in the same 
        proportion that each of the taxing jurisdiction's current year's 
        net tax capacity based tax rate is to the current year's total 
        net tax capacity based rate. 
           [EFFECTIVE DATE.] This section is effective for all energy 
        produced by wind energy conversion systems after December 31, 
        2002. 
           Sec. 14.  Minnesota Statutes 2001 Supplement, section 
        273.124, subdivision 11, is amended to read: 
           Subd. 11.  [LIMITATION ON HOMESTEAD REDUCTIONS 
        TREATMENT.] (a) For taxes payable in 2003 through 2005 only, if 
        the assessor has classified a property as both homestead and 
        nonhomestead, the greater of: 
           (1) the value attributable to the portion of the property 
        used as a homestead; or 
           (2) the homestead value amount determined under paragraph 
        (b), is entitled to assessment as a homestead under section 
        273.13, subdivision 22 or 23. 
           (b) For taxes payable in 2003 only, the homestead value 
        amount is $60,000.  For taxes payable in 2004 only, the 
        homestead value amount is $45,000.  For taxes payable in 2005 
        only, the homestead value amount is $30,000. 
           (c) If the assessor has classified a property as both 
        homestead and nonhomestead, the reductions in tax provided under 
        sections 273.135 and 273.1391 apply to the value of both the 
        homestead and the nonhomestead portions of the property. 
           Sec. 15.  Minnesota Statutes 2000, section 273.125, 
        subdivision 3, is amended to read: 
           Subd. 3.  [TAX STATEMENTS; PENALTIES; COLLECTIONS.] Not 
        later than July 15 in the year of assessment the county 
        treasurer shall mail to the taxpayer a statement of tax due on a 
        manufactured home.  The taxes are due on the last day of August, 
        or 20 days after the postmark date on the envelope containing 
        the property tax statement, whichever is later, except that if 
        the tax exceeds $50, one-half of the amount due may be paid on 
        August 31, or 20 days after the postmark date on the envelope 
        containing the property tax statement, whichever is later, and 
        the remainder on November 15.  Taxes remaining unpaid after the 
        due date are delinquent, and a penalty of eight percent must be 
        assessed and collected as part of the unpaid taxes.  The tax 
        statement must contain a sentence notifying the taxpayer that 
        the title to the manufactured home cannot be transferred unless 
        the property taxes are paid. 
           [EFFECTIVE DATE.] This section is effective for tax 
        statements issued in 2003 and thereafter. 
           Sec. 16.  Minnesota Statutes 2001 Supplement, section 
        273.13, subdivision 22, is amended to read: 
           Subd. 22.  [CLASS 1.] (a) Except as provided in subdivision 
        23 and in paragraphs (b) and (c), real estate which is 
        residential and used for homestead purposes is class 1a.  In the 
        case of a duplex or triplex in which one of the units is used 
        for homestead purposes, the entire property is deemed to be used 
        for homestead purposes.  The market value of class 1a property 
        must be determined based upon the value of the house, garage, 
        and land.  
           The first $500,000 of market value of class 1a property has 
        a net class rate of one percent of its market value; and the 
        market value of class 1a property that exceeds $500,000 has a 
        class rate of 1.25 percent of its market value. 
           (b) Class 1b property includes homestead real estate or 
        homestead manufactured homes used for the purposes of a 
        homestead by 
           (1) any blind person, or the blind person and the blind 
        person's spouse; or 
           (2) any person, hereinafter referred to as "veteran," who: 
           (i) served in the active military or naval service of the 
        United States; and 
           (ii) is entitled to compensation under the laws and 
        regulations of the United States for permanent and total 
        service-connected disability due to the loss, or loss of use, by 
        reason of amputation, ankylosis, progressive muscular 
        dystrophies, or paralysis, of both lower extremities, such as to 
        preclude motion without the aid of braces, crutches, canes, or a 
        wheelchair; and 
           (iii) has acquired a special housing unit with special 
        fixtures or movable facilities made necessary by the nature of 
        the veteran's disability, or the surviving spouse of the 
        deceased veteran for as long as the surviving spouse retains the 
        special housing unit as a homestead; or 
           (3) any person who: 
           (i) is permanently and totally disabled and 
           (ii) receives 90 percent or more of total household income, 
        as defined in section 290A.03, subdivision 5, from 
           (A) aid from any state as a result of that disability; or 
           (B) supplemental security income for the disabled; or 
           (C) workers' compensation based on a finding of total and 
        permanent disability; or 
           (D) social security disability, including the amount of a 
        disability insurance benefit which is converted to an old age 
        insurance benefit and any subsequent cost of living increases; 
        or 
           (E) aid under the federal Railroad Retirement Act of 1937, 
        United States Code Annotated, title 45, section 228b(a)5; or 
           (F) a pension from any local government retirement fund 
        located in the state of Minnesota as a result of that 
        disability; or 
           (G) pension, annuity, or other income paid as a result of 
        that disability from a private pension or disability plan, 
        including employer, employee, union, and insurance plans and 
           (iii) has household income as defined in section 290A.03, 
        subdivision 5, of $50,000 or less; or 
           (4) any person who is permanently and totally disabled and 
        whose household income as defined in section 290A.03, 
        subdivision 5, is 275 percent or less of the federal poverty 
        level. 
           Property is classified and assessed under clause (4) only 
        if the government agency or income-providing source certifies, 
        upon the request of the homestead occupant, that the homestead 
        occupant satisfies the disability requirements of this paragraph.
           Property is classified and assessed pursuant to clause (1) 
        only if the commissioner of economic security certifies to the 
        assessor that the homestead occupant satisfies the requirements 
        of this paragraph.  
           Permanently and totally disabled for the purpose of this 
        subdivision means a condition which is permanent in nature and 
        totally incapacitates the person from working at an occupation 
        which brings the person an income.  The first $32,000 market 
        value of class 1b property has a net class rate of .45 percent 
        of its market value.  The remaining market value of class 1b 
        property has a class rate using the rates for class 1a or class 
        2a property, whichever is appropriate, of similar market value.  
           (c) Class 1c property is commercial use real property that 
        abuts a lakeshore line and is devoted to temporary and seasonal 
        residential occupancy for recreational purposes but not devoted 
        to commercial purposes for more than 250 days in the year 
        preceding the year of assessment, and that includes a portion 
        used as a homestead by the owner, which includes a dwelling 
        occupied as a homestead by a shareholder of a corporation that 
        owns the resort or a partner in a partnership that owns the 
        resort, even if the title to the homestead is held by the 
        corporation or partnership.  For purposes of this clause, 
        property is devoted to a commercial purpose on a specific day if 
        any portion of the property, excluding the portion used 
        exclusively as a homestead, is used for residential occupancy 
        and a fee is charged for residential occupancy.  The first 
        $500,000 of market value of class 1c property has a class rate 
        of one percent, and the remaining market value of class 1c 
        property has a class rate of one percent, with the following 
        limitation:  the area of the property must not exceed 100 feet 
        of lakeshore footage for each cabin or campsite located on the 
        property up to a total of 800 feet and 500 feet in depth, 
        measured away from the lakeshore.  If any portion of the class 
        1c resort property is classified as class 4c under subdivision 
        25, the entire property must meet the requirements of 
        subdivision 25, paragraph (d), clause (1), to qualify for class 
        1c treatment under this paragraph. 
           (d) Class 1d property includes structures that meet all of 
        the following criteria: 
           (1) the structure is located on property that is classified 
        as agricultural property under section 273.13, subdivision 23; 
           (2) the structure is occupied exclusively by seasonal farm 
        workers during the time when they work on that farm, and the 
        occupants are not charged rent for the privilege of occupying 
        the property, provided that use of the structure for storage of 
        farm equipment and produce does not disqualify the property from 
        classification under this paragraph; 
           (3) the structure meets all applicable health and safety 
        requirements for the appropriate season; and 
           (4) the structure is not salable as residential property 
        because it does not comply with local ordinances relating to 
        location in relation to streets or roads. 
           The market value of class 1d property has the same class 
        rates as class 1a property under paragraph (a). 
           [EFFECTIVE DATE.] This section is effective for taxes 
        payable in 2003 and subsequent years. 
           Sec. 17.  Minnesota Statutes 2001 Supplement, section 
        273.13, subdivision 25, is amended to read: 
           Subd. 25.  [CLASS 4.] (a) Class 4a is residential real 
        estate containing four or more units and used or held for use by 
        the owner or by the tenants or lessees of the owner as a 
        residence for rental periods of 30 days or more.  Class 4a also 
        includes hospitals licensed under sections 144.50 to 144.56, 
        other than hospitals exempt under section 272.02, and contiguous 
        property used for hospital purposes, without regard to whether 
        the property has been platted or subdivided.  The market value 
        of class 4a property has a class rate of 1.8 percent for taxes 
        payable in 2002, 1.5 percent for taxes payable in 2003, and 1.25 
        percent for taxes payable in 2004 and thereafter, except that 
        class 4a property consisting of a structure for which 
        construction commenced after June 30, 2001, has a class rate of 
        1.25 percent of market value for taxes payable in 2003 and 
        subsequent years. 
           (b) Class 4b includes: 
           (1) residential real estate containing less than four units 
        that does not qualify as class 4bb, other than seasonal 
        residential, and recreational; 
           (2) manufactured homes not classified under any other 
        provision; 
           (3) a dwelling, garage, and surrounding one acre of 
        property on a nonhomestead farm classified under subdivision 23, 
        paragraph (b) containing two or three units; 
           (4) unimproved property that is classified residential as 
        determined under subdivision 33.  
           The market value of class 4b property has a class rate of 
        1.5 percent for taxes payable in 2002, and 1.25 percent for 
        taxes payable in 2003 and thereafter. 
           (c) Class 4bb includes: 
           (1) nonhomestead residential real estate containing one 
        unit, other than seasonal residential, and recreational; and 
           (2) a single family dwelling, garage, and surrounding one 
        acre of property on a nonhomestead farm classified under 
        subdivision 23, paragraph (b). 
           Class 4bb property has the same class rates as class 1a 
        property under subdivision 22. 
           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 does not 
        qualify for class 4bb. 
           (d) Class 4c property includes: 
           (1) except as provided in subdivision 22, paragraph (c), 
        real property devoted to temporary and seasonal residential 
        occupancy for recreation purposes, including real property 
        devoted to temporary and seasonal residential occupancy for 
        recreation purposes and not devoted to commercial purposes for 
        more than 250 days in the year preceding the year of 
        assessment.  For purposes of this clause, property is devoted to 
        a commercial purpose on a specific day if any portion of the 
        property is used for residential occupancy, and a fee is charged 
        for residential occupancy.  In order for a property to be 
        classified as class 4c, seasonal recreational residential for 
        commercial purposes, at least 40 percent of the annual gross 
        lodging receipts related to the property must be from business 
        conducted during 90 consecutive days and either (i) at least 60 
        percent of all paid bookings by lodging guests during the year 
        must be for periods of at least two consecutive nights; or (ii) 
        at least 20 percent of the annual gross receipts must be from 
        charges for rental of fish houses, boats and motors, 
        snowmobiles, downhill or cross-country ski equipment, or charges 
        for marina services, launch services, and guide services, or the 
        sale of bait and fishing tackle.  For purposes of this 
        determination, a paid booking of five or more nights shall be 
        counted as two bookings.  Class 4c also includes commercial use 
        real property used exclusively for recreational purposes in 
        conjunction with class 4c property devoted to temporary and 
        seasonal residential occupancy for recreational purposes, up to 
        a total of two acres, provided the property is not devoted to 
        commercial recreational use for more than 250 days in the year 
        preceding the year of assessment and is located within two miles 
        of the class 4c property with which it is used.  Class 4c 
        property classified in this clause also includes the remainder 
        of class 1c resorts provided that the entire property including 
        that portion of the property classified as class 1c also meets 
        the requirements for class 4c under this clause; otherwise the 
        entire property is classified as class 3.  Owners of real 
        property devoted to temporary and seasonal residential occupancy 
        for recreation purposes and all or a portion of which was 
        devoted to commercial purposes for not more than 250 days in the 
        year preceding the year of assessment desiring classification as 
        class 1c or 4c, must submit a declaration to the assessor 
        designating the cabins or units occupied for 250 days or less in 
        the year preceding the year of assessment by January 15 of the 
        assessment year.  Those cabins or units and a proportionate 
        share of the land on which they are located will be designated 
        class 1c or 4c as otherwise provided.  The remainder of the 
        cabins or units and a proportionate share of the land on which 
        they are located will be designated as class 3a.  The owner of 
        property desiring designation as class 1c or 4c property must 
        provide guest registers or other records demonstrating that the 
        units for which class 1c or 4c designation is sought were not 
        occupied for more than 250 days in the year preceding the 
        assessment if so requested.  The portion of a property operated 
        as a (1) restaurant, (2) bar, (3) gift shop, and (4) other 
        nonresidential facility operated on a commercial basis not 
        directly related to temporary and seasonal residential occupancy 
        for recreation purposes shall not qualify for class 1c or 4c; 
           (2) qualified property used as a golf course if: 
           (i) it is open to the public on a daily fee basis.  It may 
        charge membership fees or dues, but a membership fee may not be 
        required in order to use the property for golfing, and its green 
        fees for golfing must be comparable to green fees typically 
        charged by municipal courses; and 
           (ii) it meets the requirements of section 273.112, 
        subdivision 3, paragraph (d). 
           A structure used as a clubhouse, restaurant, or place of 
        refreshment in conjunction with the golf course is classified as 
        class 3a property; 
           (3) real property up to a maximum of one acre of land owned 
        by a nonprofit community service oriented organization; provided 
        that the property is not used for a revenue-producing activity 
        for more than six days in the calendar year preceding the year 
        of assessment and the property is not used for residential 
        purposes on either a temporary or permanent basis.  For purposes 
        of this clause, a "nonprofit community service oriented 
        organization" means any corporation, society, association, 
        foundation, or institution organized and operated exclusively 
        for charitable, religious, fraternal, civic, or educational 
        purposes, and which is exempt from federal income taxation 
        pursuant to section 501(c)(3), (10), or (19) of the Internal 
        Revenue Code of 1986, as amended through December 31, 1990.  For 
        purposes of this clause, "revenue-producing activities" shall 
        include but not be limited to property or that portion of the 
        property that is used as an on-sale intoxicating liquor or 3.2 
        percent malt liquor establishment licensed under chapter 340A, a 
        restaurant open to the public, bowling alley, a retail store, 
        gambling conducted by organizations licensed under chapter 349, 
        an insurance business, or office or other space leased or rented 
        to a lessee who conducts a for-profit enterprise on the 
        premises.  Any portion of the property which is used for 
        revenue-producing activities for more than six days in the 
        calendar year preceding the year of assessment shall be assessed 
        as class 3a.  The use of the property for social events open 
        exclusively to members and their guests for periods of less than 
        24 hours, when an admission is not charged nor any revenues are 
        received by the organization shall not be considered a 
        revenue-producing activity; 
           (4) post-secondary student housing of not more than one 
        acre of land that is owned by a nonprofit corporation organized 
        under chapter 317A and is used exclusively by a student 
        cooperative, sorority, or fraternity for on-campus housing or 
        housing located within two miles of the border of a college 
        campus; 
           (5) manufactured home parks as defined in section 327.14, 
        subdivision 3; 
           (6) real property that is actively and exclusively devoted 
        to indoor fitness, health, social, recreational, and related 
        uses, is owned and operated by a not-for-profit corporation, and 
        is located within the metropolitan area as defined in section 
        473.121, subdivision 2; and 
           (7) a leased or privately owned noncommercial aircraft 
        storage hangar not exempt under section 272.01, subdivision 2, 
        and the land on which it is located, provided that: 
           (i) the land is on an airport owned or operated by a city, 
        town, county, metropolitan airports commission, or group 
        thereof; and 
           (ii) the land lease, or any ordinance or signed agreement 
        restricting the use of the leased premise, prohibits commercial 
        activity performed at the hangar. 
           If a hangar classified under this clause is sold after June 
        30, 2000, a bill of sale must be filed by the new owner with the 
        assessor of the county where the property is located within 60 
        days of the sale; and 
           (8) residential real estate, a portion of which is used by 
        the owner for homestead purposes, and that is also a place of 
        lodging, if all of the following criteria are met: 
           (i) rooms are provided for rent to transient guests that 
        generally stay for periods of 14 or fewer days; 
           (ii) meals are provided to persons who rent rooms, the cost 
        of which is incorporated in the basic room rate; 
           (iii) meals are not provided to the general public except 
        for special events on fewer than seven days in the calendar year 
        preceding the year of the assessment; and 
           (iv) the owner is the operator of the property. 
        The market value subject to the 4c classification under this 
        clause is limited to five rental units.  Any rental units on the 
        property in excess of five, must be valued and assessed as class 
        3a.  The portion of the property used for purposes of a 
        homestead by the owner must be classified as class 1a property 
        under subdivision 22. 
           Class 4c property has a class rate of 1.5 percent of market 
        value, except that (i) each parcel of seasonal residential 
        recreational property not used for commercial purposes has the 
        same class rates as class 4bb property, (ii) manufactured home 
        parks assessed under clause (5) have the same class rate as 
        class 4b property, (iii) commercial-use seasonal residential 
        recreational property has a class rate of one percent for the 
        first $500,000 of market value, which includes any market value 
        receiving the one percent rate under subdivision 22, and 1.25 
        percent for the remaining market value, (iv) the market value of 
        property described in clause (4) has a class rate of one 
        percent, and (v) the market value of property described in 
        clauses (2) and (6) has a class rate of 1.25 percent, and (vi) 
        that portion of the market value of property in clause (8) 
        qualifying for class 4c property has a class rate of 1.25 
        percent.  
           (e) Class 4d property is qualifying low-income rental 
        housing certified to the assessor by the housing finance agency 
        under sections 273.126 and 462A.071.  Class 4d includes land in 
        proportion to the total market value of the building that is 
        qualifying low-income rental housing.  For all properties 
        qualifying as class 4d, the market value determined by the 
        assessor must be based on the normal approach to value using 
        normal unrestricted rents. 
           Class 4d property has a class rate of 0.9 percent for taxes 
        payable in 2002, and one percent for taxes payable in 2003 and 
        1.25 percent for taxes payable in 2004 and thereafter.  
           [EFFECTIVE DATE.] This section is effective for assessment 
        year 2002 and thereafter, for taxes payable in 2003 and 
        thereafter. 
           Sec. 18.  Minnesota Statutes 2001 Supplement, section 
        273.1384, subdivision 1, is amended to read: 
           Subdivision 1.  [RESIDENTIAL HOMESTEAD MARKET VALUE 
        CREDIT.] Each county auditor shall determine a homestead credit 
        for each class 1a, 1b, 1c, and 2a homestead property within the 
        county equal to 0.4 percent of the market value of the 
        property.  The amount of homestead credit for a homestead may 
        not exceed $304 and is reduced by .09 percent of the market 
        value in excess of $76,000.  In the case of an agricultural or 
        resort homestead, only the market value of the house, garage, 
        and immediately surrounding one acre of land is eligible in 
        determining the property's homestead credit.  In the case of a 
        property which is classified as part homestead and part 
        nonhomestead, the credit shall apply only to the homestead 
        portion of the property. 
           [EFFECTIVE DATE.] This section is effective for taxes 
        payable in 2003 and subsequent years. 
           Sec. 19.  Minnesota Statutes 2001 Supplement, section 
        273.1384, subdivision 2, is amended to read: 
           Subd. 2.  [AGRICULTURAL HOMESTEAD MARKET VALUE CREDIT.] 
        Property classified as class 2a agricultural homestead is 
        eligible for an agricultural credit.  The credit is equal to 0.2 
        0.3 percent of the first $115,000 of the property's market 
        value.  The credit under this subdivision is limited 
        to $230 $345 for each homestead.  The credit is reduced by .05 
        percent of the market value in excess of $115,000, subject to a 
        maximum reduction of $115.  
           [EFFECTIVE DATE.] This section is effective for taxes 
        payable in 2003 and thereafter. 
           Sec. 20.  Minnesota Statutes 2000, section 273.1398, 
        subdivision 1a, is amended to read: 
           Subd. 1a.  [TAX BASE DIFFERENTIAL.] (a) For aids payable in 
        2000 2003, the tax base differential is: 
           (1) 0.45 percent of the assessment year 1998 taxable market 
        value of class 2a agricultural homestead property, excluding the 
        house, garage, and surrounding one acre of land, between 
        $115,000 and $600,000 and over 320 acres, minus the value over 
        $600,000 that is less than 320 acres 31 percent of the 
        assessment year 2000 net tax capacity of public utility property 
        reported by the county on the 2000 abstract of assessment as 
        public utility land and buildings valued up to $150,000; plus 
           (2) 0.5 percent of the assessment year 1998 taxable market 
        value of noncommercial seasonal recreational residential 
        property over $75,000 in value 34 percent of the assessment year 
        2000 net tax capacity of public utility property reported by the 
        county on the 2000 abstract of assessment as public utility land 
        and buildings valued over $150,000; plus 
           (3) for purposes of computing the fiscal disparity 
        adjustment only, 0.2 percent of the assessment year 1998 taxable 
        market value of class 3 commercial-industrial property over 
        $150,000 34 percent of the assessment year 2000 net tax capacity 
        of public utility property reported by the county on the 2000 
        abstract of assessment as public utility machinery, systems of 
        electric utilities-transmission, systems of electric 
        utilities-distribution, and systems of gas utilities. 
           (b) For the purposes of the distribution of homestead and 
        agricultural credit aid for aids payable in 2000, the 
        commissioner of revenue shall use the best information available 
        as of June 30, 1999, to make an estimate of the value described 
        in paragraph (a), clause (1).  The commissioner shall adjust the 
        distribution of homestead and agricultural credit aid for aids 
        payable in 2001 and subsequent years if new information 
        regarding the value described in paragraph (a), clause (1), 
        becomes available after June 30, 1999 Notwithstanding the 
        computation in paragraph (a), the tax base differential shall be 
        zero in all counties in which the sum of the net tax capacities 
        of properties described in paragraph (a) does not exceed 40 
        percent of the total assessment year 2000 net tax capacity of 
        the county. 
           Sec. 21.  Minnesota Statutes 2000, section 273.1398, 
        subdivision 2, is amended to read: 
           Subd. 2.  [HOMESTEAD AND AGRICULTURAL CREDIT AID.] (a) 
        Homestead and agricultural credit aid for each unique taxing 
        jurisdiction equals the product of (1) the homestead and 
        agricultural credit aid base, and (2) the growth adjustment 
        factor, plus the net tax capacity adjustment and the fiscal 
        disparity adjustment.  
           (b) For the purposes of determining the net tax capacity 
        adjustment for aids payable in 2003, the "current local tax 
        rate" and the "previous net tax capacity" as defined under 
        subdivision 1 shall be determined using tax capacities and tax 
        rates in effect for taxes payable in 2001. 
           Sec. 22.  Minnesota Statutes 2001 Supplement, 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.  
           (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 proposes to 
        collect for taxes payable the following year.  In the case of a 
        town, or in the case of the state determined portion of the 
        school district levy general tax, the final tax amount will be 
        its proposed tax.  In the case of taxing authorities required to 
        hold a public meeting under subdivision 6, the notice 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, a 
        telephone number for the taxing authority that taxpayers may 
        call if they have questions related to the notice, 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) the items listed below, shown separately by county, 
        city or town, and state determined school general tax, net of 
        the education residential and agricultural homestead credit 
        under section 273.1382 273.1384, voter approved school levy, 
        other local school levy, and the sum of the special taxing 
        districts, and as a total of all taxing authorities:  
           (i) the actual tax for taxes payable in the current year; 
           (ii) the tax change due to spending factors, defined as the 
        proposed tax minus the constant spending tax amount; 
           (iii) the tax change due to other factors, defined as the 
        constant spending tax amount minus the actual current year tax; 
        and 
           (iv) the proposed tax amount. 
           If the county levy under clause (2) includes an amount for 
        a lake improvement district as defined under sections 103B.501 
        to 103B.581, the amount attributable for that purpose must be 
        separately stated from the remaining county levy amount.  
           In the case of a town or the state determined school 
        general tax, the final tax shall also be its proposed tax unless 
        the town changes its levy at a special town meeting under 
        section 365.52.  If a school district has certified under 
        section 126C.17, subdivision 9, 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.  
        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 between the total taxes 
        payable in the current year and the total proposed taxes, 
        expressed as a percentage. 
           For purposes of this section, the amount of the tax on 
        homesteads qualifying under the senior citizens' property tax 
        deferral program under chapter 290B is the total amount of 
        property tax before subtraction of the deferred property tax 
        amount. 
           (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 satisfactory 
        documentation is provided to the county assessor by the 
        applicable deadline, and the property 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) If a statutory or home rule charter city or a town has 
        exercised the local levy option provided by section 473.388, 
        subdivision 7, it may include in the notice of its proposed 
        taxes the amount of its proposed taxes attributable to its 
        exercise of the option.  In the first year of the city or town's 
        exercise of this option, the statement shall include an estimate 
        of the reduction of the metropolitan council's tax on the parcel 
        due to exercise of that option.  The metropolitan council's levy 
        shall be adjusted accordingly. 
           [EFFECTIVE DATE.] This section is effective for notices of 
        proposed property taxes prepared in 2002, for taxes payable in 
        2003, and thereafter.  
           Sec. 23.  Minnesota Statutes 2001 Supplement, section 
        276.04, subdivision 2, is amended to read: 
           Subd. 2.  [CONTENTS OF TAX STATEMENTS.] (a) The treasurer 
        shall provide for the printing of the tax statements.  The 
        commissioner of revenue shall prescribe the form of the property 
        tax statement and its contents.  The statement must contain a 
        tabulated statement of the dollar amount due to each taxing 
        authority and the amount of the state tax from the parcel of 
        real property for which a particular tax statement is prepared.  
        The dollar amounts attributable to the county, the state tax, 
        the voter approved school tax, the other local school tax, the 
        township or municipality, and the total of the metropolitan 
        special taxing districts as defined in section 275.065, 
        subdivision 3, paragraph (i), must be separately stated.  The 
        amounts due all other special taxing districts, if any, may be 
        aggregated.  If the county levy under this paragraph includes an 
        amount for a lake improvement district as defined under sections 
        103B.501 to 103B.581, the amount attributable for that purpose 
        must be separately stated from the remaining county levy 
        amount.  The amount of the tax on homesteads qualifying under 
        the senior citizens' property tax deferral program under chapter 
        290B is the total amount of property tax before subtraction of 
        the deferred property tax amount.  The amount of the tax on 
        contamination value imposed under sections 270.91 to 270.98, if 
        any, must also be separately stated.  The dollar amounts, 
        including the dollar amount of any special assessments, may be 
        rounded to the nearest even whole dollar.  For purposes of this 
        section whole odd-numbered dollars may be adjusted to the next 
        higher even-numbered dollar.  The amount of market value 
        excluded under section 273.11, subdivision 16, if any, must also 
        be listed on the tax statement. 
           (b) The property tax statements for manufactured homes and 
        sectional structures taxed as personal property shall contain 
        the same information that is required on the tax statements for 
        real property.  
           (c) Real and personal property tax statements must contain 
        the following information in the order given in this paragraph.  
        The information must contain the current year tax information in 
        the right column with the corresponding information for the 
        previous year in a column on the left: 
           (1) the property's estimated market value under section 
        273.11, subdivision 1; 
           (2) the property's taxable market value after reductions 
        under section 273.11, subdivisions 1a and 16; 
           (3) the property's gross tax, calculated by adding the 
        property's total property tax to the sum of the aids enumerated 
        in clause (4); 
           (4) a total of the following aids: 
           (i) education aids payable under chapters 122A, 123A, 123B, 
        124D, 125A, 126C, and 127A; 
           (ii) local government aids for cities, towns, and counties 
        under chapter 477A; 
           (iii) disparity reduction aid under section 273.1398; and 
           (iv) homestead and agricultural credit aid under section 
        273.1398; 
           (5) for homestead residential and agricultural properties, 
        the credits under section 273.1384; 
           (6) any credits received under sections 273.119; 273.123; 
        273.135; 273.1391; 273.1398, subdivision 4; 469.171; and 
        473H.10, except that the amount of credit received under section 
        273.135 must be separately stated and identified as "taconite 
        tax relief"; and 
           (7) the net tax payable in the manner required in paragraph 
        (a). 
           (d) If the county uses envelopes for mailing property tax 
        statements and if the county agrees, a taxing district may 
        include a notice with the property tax statement notifying 
        taxpayers when the taxing district will begin its budget 
        deliberations for the current year, and encouraging taxpayers to 
        attend the hearings.  If the county allows notices to be 
        included in the envelope containing the property tax statement, 
        and if more than one taxing district relative to a given 
        property decides to include a notice with the tax statement, the 
        county treasurer or auditor must coordinate the process and may 
        combine the information on a single announcement.  
           The commissioner of revenue shall certify to the county 
        auditor the actual or estimated aids enumerated in clause (4) 
        that local governments will receive in the following year.  The 
        commissioner must certify this amount by January 1 of each year. 
           [EFFECTIVE DATE.] This section is effective for property 
        tax statements prepared in 2003 and thereafter. 
           Sec. 24.  Laws 1998, chapter 389, article 3, section 42, is 
        amended to read: 
           Sec. 42.  [TRANSFER OF PROPERTY; PAYMENT OF DEFERRED 
        TAXES.] 
           Subdivision 1.  [ADDITIONAL TAX.] The assessor shall make a 
        separate determination of the market value and net tax capacity 
        of a property qualifying under section 38 as if sections 39 and 
        40 did not apply.  The tax based upon the appropriate local tax 
        rate applicable to such property in the taxing district shall be 
        recorded on the property assessment records. 
           Subd. 2.  [RECAPTURE.] (a) Property or any portion thereof 
        qualifying under section 38 is subject to additional taxes if: 
           (1) ownership of the property is transferred to anyone 
        other than the spouse or child of the current owner, or; 
           (2) the current owner or the spouse or child of the current 
        owner has not conveyed or entered into a contract before July 1, 
        2002 2007, to convey the property to a nonprofit foundation or 
        corporation created to own and operate operating the property as 
        an art park providing the services included in section 38, 
        clauses (2) to (5); or 
           (3) the nonprofit foundation or corporation to which the 
        property was transferred ceases to provide the services included 
        in section 38, clauses (2) to (5), earlier than ten years 
        following the effective date of the conveyance or of the 
        execution of the contract to convey. 
           (b) The additional taxes are imposed at the earlier of (1) 
        the year following transfer of ownership to anyone other than 
        the spouse or child of the current owner or a nonprofit 
        foundation or corporation created to own and operate operating 
        the property as an art park, or (2) for taxes payable in 2003 
        2008, or in the event the nonprofit foundation or corporation to 
        which the property was conveyed ceases to provide the required 
        services within ten years after the conveyance, for taxes 
        payable in the year following the year when it ceased to do so.  
        The additional taxes are equal to the difference between the 
        taxes determined under sections 39 and 40 and the amount 
        determined under subdivision 1 for all years that the property 
        qualified under section 38.  The additional taxes must be 
        extended against the property on the tax list for the current 
        year; provided, however, that no interest or penalties may be 
        levied on the additional taxes if timely paid. 
           Subd. 3.  [CURRENT OWNER.] For purposes of this section, 
        "current owner" means the owner of property qualifying under 
        section 38 on the date of final enactment of this act or that 
        owner's spouse or child.  
           Subd. 4.  [NONPROFIT FOUNDATION OR CORPORATION.] For 
        purposes of this act, "nonprofit foundation or corporation" 
        means a nonprofit entity created to own and operate as defined 
        under section 501(c)(3) of the Internal Revenue Code that is 
        operating the property as an art park providing the services 
        included in section 38, clauses (2) to (5). 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 25.  [COOK COUNTY; EXPENDITURE OF ROAD AND BRIDGE 
        LEVY.] 
           Notwithstanding Minnesota Statutes, section 163.06, 
        subdivisions 4 and 5, the county board of Cook county, by 
        resolution, may expend the proceeds of the levy under Minnesota 
        Statutes, section 163.06, in any organized or unorganized 
        township or portion thereof in the county. 
           [EFFECTIVE DATE.] This section is effective the day after 
        the governing body of Cook county and its chief clerical officer 
        timely complete their compliance with Minnesota Statutes, 
        section 645.021, subdivisions 2 and 3. 
           Sec. 26.  [REPEALER.] 
           Laws 2001, First Special Session chapter 5, article 3, 
        section 88, is repealed effective July 1, 2002. 

                                   ARTICLE 5
                         EDUCATION LEVIES AND REVENUES
           Section 1.  Minnesota Statutes 2001 Supplement, section 
        124D.86, subdivision 3, is amended to read: 
           Subd. 3.  [INTEGRATION REVENUE.] Integration revenue equals 
        the following amounts: 
           (1) for independent school district No. 709, Duluth, $207 
        times the adjusted pupil units for the school year; 
           (2) for independent school district No. 625, St. Paul, and 
        for special school district No. 1, Minneapolis, $446 times the 
        adjusted pupil units for the school year; 
           (3) for special school district No. 1, Minneapolis, the sum 
        of $446 times the adjusted pupil units for the school year and 
        an additional $35 times the adjusted pupil units for the school 
        year that is provided entirely through a local levy; 
           (4) for a district not listed in clause (1) or, (2), or 
        (3), that must implement a plan under Minnesota Rules, parts 
        3535.0100 to 3535.0180, where the district's enrollment of 
        protected students, as defined under Minnesota Rules, part 
        3535.0110, exceeds 15 percent, the lesser of (i) the actual cost 
        of implementing the plan during the fiscal year minus the aid 
        received under subdivision 6, or (ii) $130 times the adjusted 
        pupil units for the school year; 
           (4) (5) for a district not listed in clause (1), (2), 
        or (3), or (4), that is required to implement a plan according 
        to the requirements of Minnesota Rules, parts 3535.0100 to 
        3535.0180, the lesser of 
           (i) the actual cost of implementing the plan during the 
        fiscal year minus the aid received under subdivision 6, or 
           (ii) $93 times the adjusted pupil units for the school year.
           Any money received by districts in clauses (1) to (3) (4) 
        which exceeds the amount received in fiscal year 2000 shall be 
        subject to the budget requirements in subdivision 1a; and 
           (5) (6) for a member district of a multidistrict 
        integration collaborative that files a plan with the 
        commissioner, but is not contiguous to a racially isolated 
        district, integration revenue equals the amount defined in 
        clause (4) (5). 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment for revenue for fiscal year 2003. 
           Sec. 2.  Minnesota Statutes 2001 Supplement, section 
        126C.40, subdivision 1, is amended to read: 
           Subdivision 1.  [TO LEASE BUILDING OR LAND.] (a) When a an 
        independent or a special school district or a group of 
        independent or special school districts finds it economically 
        advantageous to rent or lease a building or land for any 
        instructional purposes or for school storage or furniture 
        repair, and it determines that the operating capital revenue 
        authorized under section 126C.10, subdivision 13, is 
        insufficient for this purpose, it may apply to the commissioner 
        for permission to make an additional capital expenditure levy 
        for this purpose.  An application for permission to levy under 
        this subdivision must contain financial justification for the 
        proposed levy, the terms and conditions of the proposed lease, 
        and a description of the space to be leased and its proposed use.
           (b) The criteria for approval of applications to levy under 
        this subdivision must include:  the reasonableness of the price, 
        the appropriateness of the space to the proposed activity, the 
        feasibility of transporting pupils to the leased building or 
        land, conformity of the lease to the laws and rules of the state 
        of Minnesota, and the appropriateness of the proposed lease to 
        the space needs and the financial condition of the district.  
        The commissioner must not authorize a levy under this 
        subdivision in an amount greater than the cost to the district 
        of renting or leasing a building or land for approved purposes.  
        The proceeds of this levy must not be used for custodial or 
        other maintenance services.  A district may not levy under this 
        subdivision for the purpose of leasing or renting a 
        district-owned building or site to itself. 
           (c) For agreements finalized after July 1, 1997, a district 
        may not levy under this subdivision for the purpose of leasing:  
        (1) a newly constructed building used primarily for regular 
        kindergarten, elementary, or secondary instruction; or (2) a 
        newly constructed building addition or additions used primarily 
        for regular kindergarten, elementary, or secondary instruction 
        that contains more than 20 percent of the square footage of the 
        previously existing building. 
           (d) Notwithstanding paragraph (b), a district may levy 
        under this subdivision for the purpose of leasing or renting a 
        district-owned building or site to itself only if the amount is 
        needed by the district to make payments required by a lease 
        purchase agreement, installment purchase agreement, or other 
        deferred payments agreement authorized by law, and the levy 
        meets the requirements of paragraph (c).  A levy authorized for 
        a district by the commissioner under this paragraph may be in 
        the amount needed by the district to make payments required by a 
        lease purchase agreement, installment purchase agreement, or 
        other deferred payments agreement authorized by law, provided 
        that any agreement include a provision giving the school 
        districts the right to terminate the agreement annually without 
        penalty. 
           (e) The total levy under this subdivision for a district 
        for any year must not exceed $100 times the resident pupil units 
        for the fiscal year to which the levy is attributable. 
           (f) For agreements for which a review and comment have been 
        submitted to the department of children, families, and learning 
        after April 1, 1998, the term "instructional purpose" as used in 
        this subdivision excludes expenditures on stadiums. 
           (g) The commissioner of children, families, and learning 
        may authorize a school district to exceed the limit in paragraph 
        (e) if the school district petitions the commissioner for 
        approval.  The commissioner shall grant approval to a school 
        district to exceed the limit in paragraph (e) for not more than 
        five years if the district meets the following criteria: 
           (1) the school district has been experiencing pupil 
        enrollment growth in the preceding five years; 
           (2) the purpose of the increased levy is in the long-term 
        public interest; 
           (3) the purpose of the increased levy promotes colocation 
        of government services; and 
           (4) the purpose of the increased levy is in the long-term 
        interest of the district by avoiding over construction of school 
        facilities. 
           (h) A school district that is a member of an intermediate 
        school district may include in its authority under this section 
        the costs associated with leases of administrative and classroom 
        space for intermediate school district programs.  This authority 
        must not exceed $25 times the adjusted marginal cost pupil units 
        of the member districts.  This authority is in addition to any 
        other authority authorized under this section. 
           (i) In addition to the allowable capital levies in 
        paragraph (a), a district that is a member of the "Technology 
        and Information Education Systems" data processing joint board, 
        that finds it economically advantageous to enter into a lease 
        purchase agreement for a building for a group of school 
        districts or special school districts for staff development 
        purposes, may levy for its portion of lease costs attributed to 
        the district within the total levy limit in paragraph (e). 
           [EFFECTIVE DATE.] This section is effective for taxes 
        payable in 2003. 
           Sec. 3.  Minnesota Statutes 2001 Supplement, section 
        126C.43, subdivision 3, is amended to read: 
           Subd. 3.  [TAX LEVY FOR JUDGMENT.] A district may levy the 
        amounts necessary to pay judgments against the district under 
        section 123B.25 that became final after the date the district 
        certified its proposed levy in the previous year.  With the 
        approval of the commissioner, a district may spread this levy 
        over a period not to exceed three years.  Upon approval through 
        the adoption of a resolution by each of an intermediate 
        district's member school district boards, a member school 
        district may include its proportionate share of the costs of a 
        judgment against an intermediate school district that became 
        final under section 123B.25 after the date that the earliest 
        member school district certified its proposed levy in the 
        previous year.  With the approval of the commissioner, an 
        intermediate school district member school district may spread 
        this levy over a period not to exceed three years. 
           [EFFECTIVE DATE.] This section is effective for taxes 
        payable in 2003. 
           Sec. 4.  Minnesota Statutes 2000, section 126C.44, is 
        amended to read: 
           126C.44 [CRIME-RELATED COSTS SAFE SCHOOLS LEVY.] 
           Each district may make a levy on all taxable property 
        located within the district for the purposes specified in this 
        section.  The maximum amount which may be levied for all costs 
        under this section shall be equal to $11 $30 multiplied by the 
        district's adjusted marginal cost pupil units for the school 
        year.  The proceeds of the levy must be used for directly 
        funding the following purposes or for reimbursing the cities and 
        counties who contract with the district for the following 
        purposes:  (1) to pay the costs incurred for the salaries, 
        benefits, and transportation costs of peace officers and 
        sheriffs for liaison in services in the district's schools; (2) 
        to pay the costs for a drug abuse prevention program as defined 
        in section 609.101, subdivision 3, paragraph (e), in the 
        elementary schools; (3) to pay the costs for a gang resistance 
        education training curriculum in the district's schools; (4) to 
        pay the costs for security in the district's schools and on 
        school property; or (5) to pay the costs for other crime 
        prevention, drug abuse, student and staff safety, and violence 
        prevention measures taken by the school district.  The district 
        must initially attempt to contract for services to be provided 
        by peace officers or sheriffs with the police department of each 
        city or the sheriff's department of the county within the 
        district containing the school receiving the services.  If a 
        local police department or a county sheriff's department does 
        not wish to provide the necessary services, the district may 
        contract for these services with any other police or sheriff's 
        department located entirely or partially within the school 
        district's boundaries.  The levy authorized under this section 
        is not included in determining the school district's levy 
        limitations. 
           [EFFECTIVE DATE.] This section is effective for taxes 
        payable in 2003. 
           Sec. 5.  Laws 2001, First Special Session chapter 6, 
        article 1, section 53, is amended to read: 
           Sec. 53.  [REFERENDUM CONVERSION ADJUSTMENT FOR INTEREST 
        EARNED.] 
           (a) The commissioner of children, families, and learning 
        shall calculate the change in estimated net interest earnings 
        for each district attributable to the repeal of the general 
        education levy as provided in this section. 
           (b) The interest calculations must assume an annual 
        interest rate of five percent, and must be based on the amount 
        by which the district's cumulative net general education levy 
        receipts for taxes payable in 2000, based on the assumptions 
        specified in Minnesota Statutes, section 127A.45, subdivision 8, 
        exceeds the cumulative amount that would have been guaranteed 
        for each payment in fiscal year 2001, as defined in Minnesota 
        Statutes, section 127A.45, subdivisions 2 and 3, calculated 
        using data as of the June 20, 2001, payment, and assuming that 
        the repeal of the general education levy was effective for 
        fiscal year 2001.  The commissioner shall divide the interest 
        revenue in fiscal year 2001 by the number of resident marginal 
        cost pupil units in fiscal year 2001.  The interest calculations 
        must assume an annual interest rate of five percent, and must be 
        based on the difference between (1) the district's estimated aid 
        payments and levy receipts for fiscal year 2003, based upon the 
        payment schedule specified in Minnesota Statutes, section 
        127A.45, and (2) the amount that the district's estimated aid 
        payments and levy receipts for fiscal year 2003 would have been 
        had the general education levy for fiscal year 2003 been set at 
        the amount of the district's general education levy for taxes 
        payable in 2001.  For the purposes of this section, the general 
        education levy must not include the education homestead credit 
        or the education agricultural credit. 
           (c) The amount calculated in paragraph (a) may be converted 
        to an additional referendum allowance according to Minnesota 
        Statutes, section 126C.17, subdivision 11.  The amount 
        calculated in paragraph (b), less any interest conversion 
        revenue calculated for the district under Laws 2001, First 
        Special Session chapter 6, article 1, section 53, is added to 
        the district's levy limitation for taxes payable in 2003 through 
        2006. 
           (d) Any additional referendum allowance as a result of a 
        conversion under paragraph (b) shall be included in the 
        referendum conversion allowance used to determine the referendum 
        allowance limit under Minnesota Statutes, section 126C.17, 
        subdivision 2.  If the state total levy under paragraph (c) 
        exceeds $3,000,000, the commissioner shall reduce the levy 
        authority proportionately for each eligible district such that 
        the state total levy equals $3,000,000. 
           (e) The commissioner must calculate an adjustment for taxes 
        payable in 2002 for each school district as though this section 
        were in effect for that tax year. 
           [EFFECTIVE DATE.] This section is effective for revenue for 
        taxes payable in 2003 and later. 
           Sec. 6.  Laws 2001, First Special Session chapter 6, 
        article 4, section 25, is amended to read: 
           Sec. 25.  [INTERACTIVE WEB-BASED AND INDEPENDENT STUDY 
        PROGRAMS.] 
           Subdivision 1.  [PUPIL REVENUE.] (a) General education 
        revenue for an eligible pupil in an approved interactive 
        Web-based program offered by a school district or a charter 
        school, or an approved alternative program that has an 
        independent study component offered by a charter school, under 
        the supervision of a teacher with a Minnesota license, must be 
        paid for each hour of completed coursework needed for grade 
        progression, credit, or alignment with state graduation 
        standards.  For purposes of this section, an eligible pupil is a 
        public school pupil concurrently enrolled in the district or 
        charter school or concurrently enrolled in another district or 
        charter school and participating in the program by agreement 
        with the district or charter school of enrollment.  The course 
        of study must be approved by the commissioner of children, 
        families, and learning for alignment with the state graduation 
        standards and compliance with Minnesota Statutes, chapter 125A.  
        An alternative program that has an independent study component 
        must also meet the requirements of Minnesota Statutes, section 
        126C.05, subdivision 15, paragraph (b), clauses (i) and (iv).  
        Average daily membership for a pupil shall equal the number of 
        hours of coursework completed divided by the number of hours 
        required for a full-time student in the district or charter 
        school.  Pupils enrolled in the program must not be counted as 
        more than 1.0 pupil in average daily membership.  A school 
        district or charter school is not required to provide a pupil 
        enrolled in the program with access to a computer or to the 
        Internet. 
           (b) Notwithstanding paragraph (a), pupils enrolled in a 
        Web-based public alternative program approved by the 
        commissioner before June 1, 2001, are not required to be 
        concurrently enrolled in the district and may be counted as more 
        than 1.0 pupil in average daily membership under Minnesota 
        Statutes, section 126C.05, subdivision 15. 
           (c) Notwithstanding paragraph (a), pupils enrolled in a 
        charter school with a Web-based program, approved by the 
        commissioner before June 1, 2001, are not required to be 
        concurrently enrolled in the charter school. 
           (d) Notwithstanding paragraph (a), pupils enrolled in a 
        charter school with an alternative program that has an 
        independent study component, approved by the commissioner for 
        fiscal year 2001, may be counted as more than 1.0 pupil in 
        average daily membership under Minnesota Statutes, section 
        126C.05, subdivision 15, paragraph (b), clause (iii). 
           Subd. 2.  [REIMBURSEMENT.] Notwithstanding Minnesota 
        Statutes, section 126C.19, subdivision 4, for fiscal year years 
        2002 and 2003 only, the commissioner shall establish a process 
        for providing additional revenue to school districts or charter 
        schools for: 
           (1) an eligible pupil in an approved interactive Web-based 
        program under subdivision 1, paragraph (a), that may be counted 
        as more than 1.0 pupil in average daily membership; or 
           (2) a nonpublic pupil in an approved interactive Web-based 
        program in a public school under subdivision 1, paragraph (a).  
        The commissioner may award additional general education revenue 
        to school districts and charter schools up to the amount 
        appropriated for this section.  The amount of additional revenue 
        awarded to a school district under this section shall be based 
        on additional pupils in average daily membership that are 
        generated according to this subdivision with the prior approval 
        from the commissioner.  The commissioner shall establish a 
        process to prioritize the awards under this subdivision based on 
        the estimated number of students the school district or charter 
        school expects to serve under this section. 
           [EFFECTIVE DATE.] This section is effective for revenue for 
        fiscal year 2003 only. 
           Sec. 7.  Laws 2001, First Special Session chapter 6, 
        article 4, section 27, subdivision 9, is amended to read: 
           Subd. 9.  [REIMBURSEMENT FOR WEB-BASED AND INDEPENDENT 
        STUDY COURSES.] For grants to school districts and charter 
        schools for additional pupils taking on-line courses according 
        to section 25: 
             $100,000     .....     2002 
           This appropriation is available until June 30, 2003. 
           Sec. 8.  [DISABLED ACCESS LEVY AUTHORITY; WESTBROOK-WALNUT 
        GROVE.] 
           Notwithstanding the time limit in Minnesota Statutes, 
        section 123B.58, subdivision 3, independent school district No. 
        2898, Westbrook-Walnut Grove, may levy its remaining disabled 
        access levy authority over five or fewer years. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 9.  [DISABLED ACCESS LEVY AUTHORITY; PINE CITY.] 
           Notwithstanding the time limits in Minnesota Statutes, 
        section 123B.58, subdivision 3, independent school district No. 
        578, Pine City, may levy its remaining disabled access levy 
        authority over five or fewer years.  
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 

                                   ARTICLE 6
                                AIDS AND LEVIES
           Section 1.  Minnesota Statutes 2000, section 69.77, is 
        amended by adding a subdivision to read: 
           Subd. 11a.  [APPLICATION OF OTHER LAWS TO CONTRIBUTION 
        RATE.] In the absence of any specific provision to the contrary, 
        no general or special law previously enacted may be construed as 
        reducing the levy amount or rate of contribution to a police or 
        firefighters relief association to which subdivision 1a applies, 
        by a municipality or member of the association, which is 
        required as a condition for the use of public funds or the levy 
        of taxes for the support of the association.  Each association, 
        the municipality in which it is organized, and the officers of 
        each, are authorized to do all things required by this section 
        as a condition for the use of public funds or the levy of taxes 
        for the support of the association. 
           Sec. 2.  [126C.445] [TREE GROWTH REPLACEMENT REVENUE.] 
           For taxes payable in 2003 and later, a school district may 
        levy an amount not to exceed its miscellaneous revenue for tree 
        growth revenue for taxes payable in 2001.  
           [EFFECTIVE DATE.] This section is effective beginning with 
        taxes levied in 2002, payable in 2003.  
           Sec. 3.  Minnesota Statutes 2000, section 273.1398, 
        subdivision 3, is amended to read: 
           Subd. 3.  [DISPARITY REDUCTION AID.] (a) For taxes payable 
        in 1995, 2003 and subsequent years, the amount of disparity aid 
        certified for each taxing district within each unique taxing 
        jurisdiction for taxes payable in the prior year shall be 
        multiplied by the ratio of (1) the jurisdiction's tax capacity 
        using the class rates for taxes payable in the year for which 
        aid is being computed, to (2) its tax capacity using the class 
        rates for taxes payable in the year prior to that for which aid 
        is being computed, both based upon market values for taxes 
        payable in the year prior to that for which aid is being 
        computed.  For the purposes of this aid determination, disparity 
        reduction aid certified for taxes payable in the prior year for 
        a taxing entity other than a town or school district is deemed 
        to be county government disparity reduction aid.  For taxes 
        payable in 1992 and subsequent years, The amount of disparity 
        aid certified to each taxing jurisdiction shall be reduced by 
        any reductions required in the current year or permanent 
        reductions required in previous years under section 477A.0132. 
           (b) For aid payable in 2003, in each unique taxing 
        jurisdiction where the total tax rate for taxes payable in 2002 
        exceeds 135 percent of taxable net tax capacity, an amount shall 
        be permanently added to the unique taxing jurisdiction's aid 
        amount under paragraph (a) equal to the lesser of:  (i) the 
        amount, if any, by which 87 percent of the aid certified for 
        2001 exceeds the amount certified for 2002, or (ii) the amount 
        that would be necessary to reduce the total payable 2002 tax 
        rate for the unique taxing jurisdiction to 135 percent of 
        taxable net tax capacity.  The amount determined under this 
        paragraph must be added before the class rate adjustment 
        described in paragraph (a). 
           [EFFECTIVE DATE.] This section is effective for aids 
        payable in 2003 and subsequent years. 
           Sec. 4.  Minnesota Statutes 2001 Supplement, section 
        273.1398, subdivision 4d, is amended to read: 
           Subd. 4d.  [AID OFFSET FOR OUT-OF-HOME PLACEMENT COSTS.] 
        For aid payable in 2003 2004, each county's aid under 
        subdivision 2 shall be permanently reduced by an amount equal to 
        the county's 2003 2004 reimbursement for nonfederal expenditures 
        for out-of-home placements, as provided in section 245.775, 
        provided that payments will be made under section 477A.0123 in 
        calendar year 2003 2004.  The counties shall provide all 
        information requested by the commissioner of human services 
        necessary to allow the commissioner to certify the previous 
        three years' average nonfederal costs to the commissioner of 
        revenue by July 15, 2003 2004.  The aid reduction under this 
        subdivision must be made prior to not exceed the difference 
        between (1) the amount of aid calculated for the county for 
        calendar year 2004 under subdivision 2, including any addition 
        under section 477A.07, and (2) the amount of any aid reductions 
        for the state takeover of courts contained in Laws 2001, First 
        Special Session chapter 5, article 5. 
           [EFFECTIVE DATE.] This section is effective for aids 
        payable in 2004.  
           Sec. 5.  Minnesota Statutes 2001 Supplement, section 
        275.70, subdivision 5, is amended to read: 
           Subd. 5.  [SPECIAL LEVIES.] "Special levies" means those 
        portions of ad valorem taxes levied by a local governmental unit 
        for the following purposes or in the following manner: 
           (1) to pay the costs of the principal and interest on 
        bonded indebtedness or to reimburse for the amount of liquor 
        store revenues used to pay the principal and interest due on 
        municipal liquor store bonds in the year preceding the year for 
        which the levy limit is calculated; 
           (2) to pay the costs of principal and interest on 
        certificates of indebtedness issued for any corporate purpose 
        except for the following: 
           (i) tax anticipation or aid anticipation certificates of 
        indebtedness; 
           (ii) certificates of indebtedness issued under sections 
        298.28 and 298.282; 
           (iii) certificates of indebtedness used to fund current 
        expenses or to pay the costs of extraordinary expenditures that 
        result from a public emergency; or 
           (iv) certificates of indebtedness used to fund an 
        insufficiency in tax receipts or an insufficiency in other 
        revenue sources; 
           (3) to provide for the bonded indebtedness portion of 
        payments made to another political subdivision of the state of 
        Minnesota; 
           (4) to fund payments made to the Minnesota state armory 
        building commission under section 193.145, subdivision 2, to 
        retire the principal and interest on armory construction bonds; 
           (5) property taxes approved by voters which are levied 
        against the referendum market value as provided under section 
        275.61; 
           (6) to fund matching requirements needed to qualify for 
        federal or state grants or programs to the extent that either 
        (i) the matching requirement exceeds the matching requirement in 
        calendar year 2001, or (ii) it is a new matching requirement 
        that didn't exist prior to 2002; 
           (7) to pay the expenses reasonably and necessarily incurred 
        in preparing for or repairing the effects of natural disaster 
        including the occurrence or threat of widespread or severe 
        damage, injury, or loss of life or property resulting from 
        natural causes, in accordance with standards formulated by the 
        emergency services division of the state department of public 
        safety, as allowed by the commissioner of revenue under section 
        275.74, paragraph (b); 
           (8) pay amounts required to correct an error in the levy 
        certified to the county auditor by a city or county in a levy 
        year, but only to the extent that when added to the preceding 
        year's levy it is not in excess of an applicable statutory, 
        special law or charter limitation, or the limitation imposed on 
        the governmental subdivision by sections 275.70 to 275.74 in the 
        preceding levy year; 
           (9) to pay an abatement under section 469.1815; 
           (10) to pay any costs attributable to increases in the 
        employer contribution rates under chapter 353 that are effective 
        after June 30, 2001; 
           (11) to pay the operating or maintenance costs of a county 
        jail as authorized in section 641.01 or 641.262, or of a 
        correctional facility as defined in section 241.021, subdivision 
        1, paragraph (5), to the extent that the county can demonstrate 
        to the commissioner of revenue that the amount has been included 
        in the county budget as a direct result of a rule, minimum 
        requirement, minimum standard, or directive of the department of 
        corrections, or to pay the operating or maintenance costs of a 
        regional jail as authorized in section 641.262.  For purposes of 
        this clause, a district court order is not a rule, minimum 
        requirement, minimum standard, or directive of the department of 
        corrections.  If the county utilizes this special levy, any 
        amount levied by the county in the previous levy year for the 
        purposes specified under this clause and included in the 
        county's previous year's levy limitation computed under section 
        275.71, shall be deducted from the levy limit base under section 
        275.71, subdivision 2, when determining the county's current 
        year levy limitation.  The county shall provide the necessary 
        information to the commissioner of revenue for making this 
        determination; 
           (12) to pay for operation of a lake improvement district, 
        as authorized under section 103B.555.  If the county utilizes 
        this special levy, any amount levied by the county in the 
        previous levy year for the purposes specified under this clause 
        and included in the county's previous year's levy limitation 
        computed under section 275.71 shall be deducted from the levy 
        limit base under section 275.71, subdivision 2, when determining 
        the county's current year levy limitation.  The county shall 
        provide the necessary information to the commissioner of revenue 
        for making this determination; 
           (13) to repay a state or federal loan used to fund the 
        direct or indirect required spending by the local government due 
        to a state or federal transportation project or other state or 
        federal capital project.  This authority may only be used if the 
        project is not a local government initiative; 
           (14) for counties only, to pay the costs reasonably 
        expected to be incurred in 2002 related to the redistricting of 
        election districts and establishment of election precincts under 
        sections 204B.135 and 204B.14, the notice required by section 
        204B.14, subdivision 4, and the reassignment of voters in the 
        statewide registration system, not to exceed $1 per capita, 
        provided that the county shall distribute a portion of the 
        amount levied under this clause equal to 25 cents times the 
        population of the city to all cities in the county with a 
        population of 30,000 or more; and 
           (15) to pay for court administration costs as required 
        under section 273.1398, subdivision 4b, less the county's share 
        of transferred fines and fees collected by the district courts 
        in the county for calendar year 2001; however, for taxes levied 
        to pay for these costs in the year in which the court financing 
        is transferred to the state, the amount under this section is 
        limited to one-third of the aid reduction under section 
        273.1398, subdivision 4a; and 
           (16) to fund a police or firefighters relief association as 
        required under section 69.77 to the extent that the required 
        amount exceeds the amount levied for this purpose in 2001. 
           [EFFECTIVE DATE.] This section is effective for taxes 
        levied beginning in 2002. 
           Sec. 6.  Minnesota Statutes 2001 Supplement, section 
        275.71, subdivision 2, is amended to read: 
           Subd. 2.  [LEVY LIMIT BASE.] (a) The levy limit base for a 
        local governmental unit for taxes levied in 2001 is equal to the 
        greater of: 
           (1) the sum of its adjusted levy limit base for taxes 
        levied in 1999 plus the amount it levied in 1999 under Minnesota 
        Statutes 1999 Supplement, section 275.70, subdivision 5, clauses 
        (8) and (13), multiplied by: 
           (i) one plus the percentage growth in the implicit price 
        deflator for the 12-month period ending March 30, 2000; 
           (ii) one plus a percentage equal to the annual percentage 
        increase in the estimated number of households, if any, for the 
        most recent 12-month period that was available on July 1, 2000; 
        and 
           (iii) one plus a percentage equal to 50 percent of the 
        percentage increase in the taxable market value of the 
        jurisdiction due to new construction of class 3 property, as 
        defined in section 273.13, subdivision 24, except for 
        state-assessed utility and railroad operating property, for the 
        most recent year for which data was available as of July 1, 
        2000; or 
           (2) an amount equal to: 
           (i) the sum of the amount it levied in 2000 plus the amount 
        of aids it was certified to receive in calendar year 2001 under 
        sections 273.1398, 298.282, 477A.011 to 477A.03, prior to any 
        aid reductions under section 273.1399, subdivision 5, 477A.06, 
        and 477A.065; less 
           (ii) the amount it levied in 2000 that would qualify as 
        special levies under section 275.70, subdivision 6, for taxes 
        levied in 2001.  The local governmental unit shall provide the 
        commissioner of revenue with sufficient information to make this 
        calculation. 
           (b) If the governmental unit was not subject to levy limits 
        for taxes levied in 1999, its levy limit base for taxes levied 
        in 2001 is equal to the amount calculated under paragraph (a), 
        clause (2). 
           (c) The levy limit base for a local governmental unit for 
        taxes levied in 2002 is equal to its adjusted levy limit base in 
        the previous year, plus the amount of tree growth tax it 
        received in calendar year 2001 under sections 270.31 to 270.39, 
        and plus, in the case of a city, the amount it was certified to 
        receive in calendar year 2001 under section 273.166, subject to 
        any adjustments under section 275.72. 
           [EFFECTIVE DATE.] This section is effective for taxes 
        levied in 2002, payable in 2003. 
           Sec. 7.  Minnesota Statutes 2001 Supplement, section 
        275.71, subdivision 3, is amended to read: 
           Subd. 3.  [ADJUSTMENTS FOR STATE TAKEOVERS.] (a) The levy 
        limit base for each local unit of government shall be adjusted 
        to reflect the assumption by the state of financing for certain 
        government functions as indicated in this subdivision. 
           (b) For a county in a judicial district for which financing 
        has not been transferred to the state by January 1, 2001, the 
        levy limit base for 2001 is permanently reduced by the amount of 
        the county's 2001 budget for court administration costs, as 
        certified under section 273.1398, subdivision 4b, paragraph (b), 
        net of the county's share of transferred fines and fees 
        collected by the district courts in the county for the same 
        budget period. 
           (c) For a governmental unit which levied a tax in 2000 
        under section 473.388, subdivision 7, the levy limit base for 
        2001 is permanently reduced by an amount equal to the sum of the 
        governmental unit's taxes payable 2001 nondebt transit services 
        levy plus the portion of its 2001 homestead and agricultural 
        credit aid under section 273.1398, subdivision 2, attributable 
        to nondebt transit services. 
           (d) For counties in a judicial district in which the state 
        assumed financing of mandated services costs as defined in 
        section 480.181, subdivision 4, on July 1, 2001, the levy limit 
        base for taxes levied in 2001 is permanently reduced by an 
        amount equal to one-half of the aid reduction under section 
        273.1398, subdivision 4a, paragraph (g). 
           [EFFECTIVE DATE.] This section is effective retroactively 
        for taxes payable in 2002 and 2003. 
           Sec. 8.  Minnesota Statutes 2001 Supplement, section 
        275.71, subdivision 6, is amended to read: 
           Subd. 6.  [LEVIES IN EXCESS OF LEVY LIMITS.] (a) If the 
        levy made by a city or county exceeds the levy limit provided in 
        sections 275.70 to 275.74, except when the excess levy is due to 
        the rounding of the rate in accordance with section 275.28, the 
        county auditor shall only extend the amount of taxes permitted 
        under sections 275.70 to 275.74, as provided for in section 
        275.16. 
           (b) For taxes levied in 2002, payable in 2003 only, if an 
        error was made in calculating the levy limit adjustment related 
        to a special levy for jails authorized under section 275.70, 
        subdivision 5, clause (11), in the previous year, the following 
        adjustments must be made: 
           (1) the county's levy limit base for taxes levied in 2002 
        must be based on the corrected adjusted levy limit base for 
        taxes levied in 2001; and 
           (2) the county's final levy limit for taxes levied in 2002, 
        payable in 2003, must also be temporarily reduced by an amount 
        equal to the amount of county levy spread in the previous year 
        in excess of the total recalculated levy limit plus authorized 
        special levies for taxes levied in 2001, payable in 2002. 
           (c) The commissioner of revenue shall inform counties 
        affected by paragraph (b) of the levy error and levy adjustments 
        required under this provision by June 15, 2002.  The county may 
        provide additional information to the commissioner indicating 
        why these adjustments may be in error by July 15, 2002.  The 
        commissioner shall certify the final levy adjustment to the 
        affected counties by August 1, 2002.  The levy reduction imposed 
        under paragraph (b), clause (2), may be spread over a period not 
        to exceed three years, upon agreement between the county and the 
        commissioner. 
           [EFFECTIVE DATE.] This section is effective for taxes 
        levied in 2002, payable in 2003 only. 
           Sec. 9.  Minnesota Statutes 2001 Supplement, section 
        477A.011, subdivision 36, is amended to read: 
           Subd. 36.  [CITY AID BASE.] (a) Except as otherwise 
        provided in paragraphs (b) to (o) this subdivision, "city aid 
        base" means, for each city, the sum of the local government aid 
        and equalization aid it was originally certified to receive in 
        calendar year 1993 under Minnesota Statutes 1992, section 
        477A.013, subdivisions 3 and 5, and the amount of disparity 
        reduction aid it received in calendar year 1993 under Minnesota 
        Statutes 1992, section 273.1398, subdivision 3. 
           (b) For aids payable in 1996 and thereafter, a city that in 
        1992 or 1993 transferred an amount from governmental funds to 
        its sewer and water fund, which amount exceeded its net levy for 
        taxes payable in the year in which the transfer occurred, has a 
        "city aid base" equal to the sum of (i) its city aid base, as 
        calculated under paragraph (a), and (ii) one-half of the 
        difference between its city aid distribution under section 
        477A.013, subdivision 9, for aids payable in 1995 and its city 
        aid base for aids payable in 1995. 
           (c) The city aid base for any city with a population less 
        than 500 is increased by $40,000 for aids payable in calendar 
        year 1995 and thereafter, and the maximum amount of total aid it 
        may receive under section 477A.013, subdivision 9, paragraph 
        (c), is also increased by $40,000 for aids payable in calendar 
        year 1995 only, provided that: 
           (i) the average total tax capacity rate for taxes payable 
        in 1995 exceeds 200 percent; 
           (ii) the city portion of the tax capacity rate exceeds 100 
        percent; and 
           (iii) its city aid base is less than $60 per capita. 
           (d) The city aid base for a city is increased by $20,000 in 
        1998 and thereafter and the maximum amount of total aid it may 
        receive under section 477A.013, subdivision 9, paragraph (c), is 
        also increased by $20,000 in calendar year 1998 only, provided 
        that: 
           (i) the city has a population in 1994 of 2,500 or more; 
           (ii) the city is located in a county, outside of the 
        metropolitan area, which contains a city of the first class; 
           (iii) the city's net tax capacity used in calculating its 
        1996 aid under section 477A.013 is less than $400 per capita; 
        and 
           (iv) at least four percent of the total net tax capacity, 
        for taxes payable in 1996, of property located in the city is 
        classified as railroad property. 
           (e) The city aid base for a city is increased by $200,000 
        in 1999 and thereafter and the maximum amount of total aid it 
        may receive under section 477A.013, subdivision 9, paragraph 
        (c), is also increased by $200,000 in calendar year 1999 only, 
        provided that: 
           (i) the city was incorporated as a statutory city after 
        December 1, 1993; 
           (ii) its city aid base does not exceed $5,600; and 
           (iii) the city had a population in 1996 of 5,000 or more. 
           (f) The city aid base for a city is increased by $450,000 
        in 1999 to 2008 and the maximum amount of total aid it may 
        receive under section 477A.013, subdivision 9, paragraph (c), is 
        also increased by $450,000 in calendar year 1999 only, provided 
        that: 
           (i) the city had a population in 1996 of at least 50,000; 
           (ii) its population had increased by at least 40 percent in 
        the ten-year period ending in 1996; and 
           (iii) its city's net tax capacity for aids payable in 1998 
        is less than $700 per capita. 
           (g) Beginning in 2002 2004, the city aid base for a city is 
        equal to the sum of its city aid base in 2001 2003 and the 
        amount of additional aid it was certified to receive under 
        section 477A.06 in 2001 2003.  For 2002 2004 only, the maximum 
        amount of total aid a city may receive under section 477A.013, 
        subdivision 9, paragraph (c), is also increased by the amount it 
        was certified to receive under section 477A.06 in 2001 2003. 
           (h) The city aid base for a city is increased by $150,000 
        for aids payable in 2000 and thereafter, and the maximum amount 
        of total aid it may receive under section 477A.013, subdivision 
        9, paragraph (c), is also increased by $150,000 in calendar year 
        2000 only, provided that: 
           (1) the city has a population that is greater than 1,000 
        and less than 2,500; 
           (2) its commercial and industrial percentage for aids 
        payable in 1999 is greater than 45 percent; and 
           (3) the total market value of all commercial and industrial 
        property in the city for assessment year 1999 is at least 15 
        percent less than the total market value of all commercial and 
        industrial property in the city for assessment year 1998. 
           (i) The city aid base for a city is increased by $200,000 
        in 2000 and thereafter, and the maximum amount of total aid it 
        may receive under section 477A.013, subdivision 9, paragraph 
        (c), is also increased by $200,000 in calendar year 2000 only, 
        provided that: 
           (1) the city had a population in 1997 of 2,500 or more; 
           (2) the net tax capacity of the city used in calculating 
        its 1999 aid under section 477A.013 is less than $650 per 
        capita; 
           (3) the pre-1940 housing percentage of the city used in 
        calculating 1999 aid under section 477A.013 is greater than 12 
        percent; 
           (4) the 1999 local government aid of the city under section 
        477A.013 is less than 20 percent of the amount that the formula 
        aid of the city would have been if the need increase percentage 
        was 100 percent; and 
           (5) the city aid base of the city used in calculating aid 
        under section 477A.013 is less than $7 per capita. 
           (j) The city aid base for a city is increased by $225,000 
        in calendar years 2000 to 2002 and the maximum amount of total 
        aid it may receive under section 477A.013, subdivision 9, 
        paragraph (c), is also increased by $225,000 in calendar year 
        2000 only, provided that: 
           (1) the city had a population of at least 5,000; 
           (2) its population had increased by at least 50 percent in 
        the ten-year period ending in 1997; 
           (3) the city is located outside of the Minneapolis-St. Paul 
        metropolitan statistical area as defined by the United States 
        Bureau of the Census; and 
           (4) the city received less than $30 per capita in aid under 
        section 477A.013, subdivision 9, for aids payable in 1999. 
           (k) The city aid base for a city is increased by $102,000 
        in 2000 and thereafter, and the maximum amount of total aid it 
        may receive under section 477A.013, subdivision 9, paragraph 
        (c), is also increased by $102,000 in calendar year 2000 only, 
        provided that: 
           (1) the city has a population in 1997 of 2,000 or more; 
           (2) the net tax capacity of the city used in calculating 
        its 1999 aid under section 477A.013 is less than $455 per 
        capita; 
           (3) the net levy of the city used in calculating 1999 aid 
        under section 477A.013 is greater than $195 per capita; and 
           (4) the 1999 local government aid of the city under section 
        477A.013 is less than 38 percent of the amount that the formula 
        aid of the city would have been if the need increase percentage 
        was 100 percent. 
           (l) The city aid base for a city is increased by $32,000 in 
        2001 and thereafter, and the maximum amount of total aid it may 
        receive under section 477A.013, subdivision 9, paragraph (c), is 
        also increased by $32,000 in calendar year 2001 only, provided 
        that: 
           (1) the city has a population in 1998 that is greater than 
        200 but less than 500; 
           (2) the city's revenue need used in calculating aids 
        payable in 2000 was greater than $200 per capita; 
           (3) the city net tax capacity for the city used in 
        calculating aids available in 2000 was equal to or less than 
        $200 per capita; 
           (4) the city aid base of the city used in calculating aid 
        under section 477A.013 is less than $65 per capita; and 
           (5) the city's formula aid for aids payable in 2000 was 
        greater than zero. 
           (m) The city aid base for a city is increased by $7,200 in 
        2001 and thereafter, and the maximum amount of total aid it may 
        receive under section 477A.013, subdivision 9, paragraph (c), is 
        also increased by $7,200 in calendar year 2001 only, provided 
        that: 
           (1) the city had a population in 1998 that is greater than 
        200 but less than 500; 
           (2) the city's commercial industrial percentage used in 
        calculating aids payable in 2000 was less than ten percent; 
           (3) more than 25 percent of the city's population was 60 
        years old or older according to the 1990 census; 
           (4) the city aid base of the city used in calculating aid 
        under section 477A.013 is less than $15 per capita; and 
           (5) the city's formula aid for aids payable in 2000 was 
        greater than zero. 
           (n) The city aid base for a city is increased by $45,000 in 
        2001 and thereafter and by an additional $50,000 in calendar 
        years 2002 to 2011, and the maximum amount of total aid it may 
        receive under section 477A.013, subdivision 9, paragraph (c), is 
        also increased by $45,000 in calendar year 2001 only, and by 
        $50,000 in calendar year 2002 only, provided that: 
           (1) the net tax capacity of the city used in calculating 
        its 2000 aid under section 477A.013 is less than $810 per 
        capita; 
           (2) the population of the city declined more than two 
        percent between 1988 and 1998; 
           (3) the net levy of the city used in calculating 2000 aid 
        under section 477A.013 is greater than $240 per capita; and 
           (4) the city received less than $36 per capita in aid under 
        section 477A.013, subdivision 9, for aids payable in 2000. 
           (o) The city aid base for a city with a population of 
        10,000 or more which is located outside of the seven-county 
        metropolitan area is increased in 2002 and thereafter, and the 
        maximum amount of total aid it may receive under section 
        477A.013, subdivision 9, paragraph (b) or (c), is also increased 
        in calendar year 2002 only, by an amount equal to the lesser of: 
           (1)(i) the total population of the city, as determined by 
        the United States Bureau of the Census, in the 2000 census, (ii) 
        minus 5,000, (iii) times 60; or 
           (2) $2,500,000. 
           (p) The city aid base is increased by $50,000 in 2002 and 
        thereafter, and the maximum amount of total aid it may receive 
        under section 477A.013, subdivision 9, paragraph (c), is also 
        increased by $50,000 in calendar year 2002 only, provided that: 
           (1) the city is located in the seven-county metropolitan 
        area; 
           (2) its population in 2000 is between 10,000 and 20,000; 
        and 
           (3) its commercial industrial percentage, as calculated for 
        city aid payable in 2001, was greater than 25 percent. 
           (q) The city aid base for a city is increased by $150,000 
        in calendar years 2002 to 2011 and the maximum amount of total 
        aid it may receive under section 477A.013, subdivision 9, 
        paragraph (c), is also increased by $150,000 in calendar year 
        2002 only, provided that: 
           (1) the city had a population of at least 3,000 but no more 
        than 4,000 in 1999; 
           (2) its home county is located within the seven-county 
        metropolitan area; 
           (3) its pre-1940 housing percentage is less than 15 
        percent; and 
           (4) its city net tax capacity per capita for taxes payable 
        in 2000 is less than $900 per capita. 
           (r) The city aid base for a city is increased by $200,000 
        beginning in calendar year 2003 and the maximum amount of total 
        aid it may receive under section 477A.013, subdivision 9, 
        paragraph (c), is also increased by $200,000 in calendar year 
        2003 only, provided that the city qualified for an increase in 
        homestead and agricultural credit aid under Laws 1995, chapter 
        264, article 8, section 18. 
           [EFFECTIVE DATE.] This section is effective for aid payable 
        in 2002 and thereafter, except that paragraph (r) is effective 
        beginning with aid payable in 2003. 
           Sec. 10.  Minnesota Statutes 2001 Supplement, section 
        477A.0123, is amended to read: 
           477A.0123 [REIMBURSEMENT OF COUNTY FOR CERTAIN OUT-OF-HOME 
        PLACEMENT.] 
           Subdivision 1.  [AID PAYMENTS.] (a) In calendar year 2003 
        2004 and thereafter, the commissioner of revenue shall reimburse 
        each county for a portion of the nonfederal share of the cost of 
        out-of-home placement provided the commissioner of human 
        services, in consultation with the commissioner of corrections, 
        certifies to the commissioner of revenue that accurate data is 
        available to make the aid determination under this section.  The 
        amount of reimbursement is a percent of the county's average 
        nonfederal share of the cost for out-of-home placement for the 
        most recent three calendar years for which data is available.  
        The commissioner shall pay the aid under the schedule used for 
        local government aid payments under section 477A.015. 
           (b) For aids payable in calendar year 2003 2004, the 
        percent of reimbursement in paragraph (a) shall be equal to the 
        maximum percentage possible, up to 30 percent, that does not 
        cause the payment to any county in the seven county metropolitan 
        area to exceed the difference between (1) the amount of aid it 
        is scheduled to receive calculated for the county in calendar 
        year 2003 2004 under section 273.1398, prior to the offset under 
        section 273.1398, subdivision 4d, and any aid offset under 
        section 273.1398, subdivision 4a, that is scheduled to occur 
        after July 1, 2003 subdivision 2, including any addition 
        determined under section 477A.07, and (2) the amount of any aid 
        reductions for the state takeover of courts contained in Laws 
        2001, First Special Session chapter 5, article 5.  For aids 
        payable in 2004 2005 and thereafter, the percent of 
        reimbursement under paragraph (a) shall be equal to the percent 
        of reimbursement determined for calendar year 2003 2004, 
        adjusted so that the total payments under this section do not 
        exceed the appropriation under section 477A.03, subdivision 2, 
        paragraph (e). 
           (c) For purposes of this section, "out-of-home placement" 
        means the placement of a child in a child caring institution or 
        shelter licensed under Minnesota Rules, parts 9545.0905 to 
        9545.1125, in a group home licensed under Minnesota Rules, parts 
        9545.1400 to 9545.1480, in family foster care or group family 
        foster care licensed under Minnesota Rules, parts 9545.0010 to 
        9545.0260, or a correctional facility pursuant to a court order 
        under which a county social services agency or a county 
        correctional agency has been assigned responsibility for the 
        placement. 
           Subd. 2.  [DETERMINATION OF NONFEDERAL SHARE OF COSTS.] (a) 
        By January 1, 2002, each county shall report the following 
        information to the commissioners of human services and 
        corrections, the separate amounts paid out of its social service 
        agency budget and its corrections budget for out-of-home 
        placement in calendar years 1998, 1999, and 2000, along with the 
        number of case days associated with the expenditures from each 
        budget.  By March 15, 2002, the commissioner of human services, 
        in consultation with the commissioner of corrections, shall 
        certify to the commissioner of revenue and to the legislative 
        committees responsible for local government aids and out-of-home 
        placement funding, whether the data reported under this 
        subdivision accurately reflects total expenditures by counties 
        for out-of-home placement costs. 
           (b) By January 1 of calendar year 2004 2003 and thereafter, 
        each county shall report to the commissioners of human services 
        and corrections the separate amounts paid out of its social 
        service agency budget and its corrections budget for out-of-home 
        placement in the calendar years year two years before the 
        current calendar year along with the number of case days 
        associated with the expenditures from each budget. 
           (c) Until either the commissioner of human services or 
        corrections develops another mechanism for collecting and 
        verifying data on out-of-home placements, and the legislature 
        authorizes the use of that data, the data collected under this 
        subdivision shall be used to calculate payments under 
        subdivision 1.  The commissioner of human services shall certify 
        the information to the commissioner of revenue by July 1 of the 
        year prior to the aid payment. 
           Sec. 11.  Minnesota Statutes 2001 Supplement, section 
        477A.03, subdivision 2, is amended to read: 
           Subd. 2.  [ANNUAL APPROPRIATION.] (a) A sum sufficient to 
        discharge the duties imposed by sections 477A.011 to 477A.014 is 
        annually appropriated from the general fund to the commissioner 
        of revenue.  
           (b) Aid payments to counties under section 477A.0121 are 
        limited to $20,265,000 in 1996.  Aid payments to counties under 
        section 477A.0121 are limited to $27,571,625 in 1997.  For aid 
        payable in 1998 and thereafter, the total aids paid under 
        section 477A.0121 are the amounts certified to be paid in the 
        previous year, adjusted for inflation as provided under 
        subdivision 3. 
           (c)(i) For aids payable in 1998 and thereafter, the total 
        aids paid to counties under section 477A.0122 are the amounts 
        certified to be paid in the previous year, adjusted for 
        inflation as provided under subdivision 3. 
           (ii) Aid payments to counties under section 477A.0122 in 
        2000 are further increased by an additional $20,000,000 in 2000. 
           (d) Aid payments to cities in 2002 under section 477A.013, 
        subdivision 9, are limited to the amounts certified to be paid 
        in the previous year, adjusted for inflation as provided in 
        subdivision 3, and increased by $140,000,000.  For aids payable 
        in 2003, the total aids paid under section 477A.013, subdivision 
        9, are the amounts certified to be paid in the previous year, 
        adjusted for inflation as provided under subdivision 3.  For 
        aids payable in 2004, the total aids paid under section 
        477A.013, subdivision 9, are the amounts certified to be paid in 
        the previous year, adjusted for inflation as provided under 
        subdivision 3, and increased by the amount certified to be paid 
        in 2003 under section 477A.06.  For aids payable in 2005 and 
        thereafter, the total aids paid under section 477A.013, 
        subdivision 9, are the amounts certified to be paid in the 
        previous year, adjusted for inflation as provided under 
        subdivision 3.  The additional amount authorized under 
        subdivision 4 is not included when calculating the appropriation 
        limits under this paragraph. 
           (e) Reimbursements made to counties under section 477A.0123 
        in calendar year 2004 2005 and thereafter are limited to an 
        amount equal to the maximum allowed appropriation under this 
        section in the previous year, multiplied by a percent to be 
        established by law.  If no percent is established by law, the 
        appropriation is limited to the total amount appropriated for 
        this purpose in the previous year. 
           [EFFECTIVE DATE.] This section is effective beginning with 
        aids payable in 2004.  
           Sec. 12.  Minnesota Statutes 2001 Supplement, section 
        477A.07, subdivision 2, is amended to read: 
           Subd. 2.  [COUNTY AID.] Each county's aid amount for 2003 
        determined under subdivision 1 must be permanently added to the 
        county's 2003 homestead and agricultural credit aid base 
        determined under section 273.1398 for aid payable, subdivision 
        2, and paid in 2003 as part of the county's homestead and 
        agricultural credit aid.  It then becomes a permanent part of 
        the county's homestead and agricultural credit aid base for aid 
        payable in 2004.  Each county's aid amount for 2004 determined 
        under subdivision 1 must be permanently added to the county's 
        2004 homestead and agricultural credit aid base for aid payable 
        determined under section 273.1398, subdivision 2, and paid in 
        2004 as part of the county's homestead and agricultural credit 
        aid.  It then becomes a permanent part of the county's homestead 
        and agricultural credit aid base for aid payable in 2005. 
           [EFFECTIVE DATE.] This section is effective beginning with 
        aids payable in 2003. 

                                   ARTICLE 7 
                              ECONOMIC DEVELOPMENT 
           Section 1.  Minnesota Statutes 2000, section 272.0212, 
        subdivision 4, is amended to read: 
           Subd. 4.  [DEFINITIONS.] (a) For purposes of this section, 
        the following terms have the meanings given. 
           (b) "Qualified property" means class 3 and class 1, 3, 4, 
        and 5 property as defined in section 273.13 that is located in a 
        zone and is newly constructed after the zone was designated, 
        including the land that contains the improvements. 
           (c) "Zone" means a border city development zone designated 
        under the provisions of section 469.1731. 
           [EFFECTIVE DATE.] This section is effective beginning for 
        assessment year 2003. 
           Sec. 2.  Minnesota Statutes 2001 Supplement, section 
        469.1734, subdivision 6, is amended to read: 
           Subd. 6.  [SALES TAX EXEMPTION; EQUIPMENT; CONSTRUCTION 
        MATERIALS.] (a) The gross receipts from the sale of machinery 
        and equipment and repair parts are exempt from taxation under 
        chapter 297A, if the machinery and equipment: 
           (1) are used in connection with a trade or business; 
           (2) are placed in service in a city that is authorized to 
        designate a zone under section 469.1731, regardless of whether 
        the machinery and equipment are used in a zone; and 
           (3) have a useful life of 12 months or more. 
           (b) The gross receipts from the sale of construction 
        materials are exempt, if they are used to construct: 
           (1) a facility for use in a trade or business located in a 
        city that is authorized to designate a zone under section 
        469.1731, regardless of whether the facility is located in a 
        zone; or 
           (2) housing that is located in a zone.  
        The exemptions under this paragraph apply regardless of whether 
        the purchase is made by the owner, the user, or a contractor. 
           (c) A purchaser may claim an exemption under this 
        subdivision for tax on the purchases up to, but not exceeding: 
           (1) the amount of the tax credit certificates received from 
        the city, less 
           (2) any tax credit certificates used under the provisions 
        of subdivisions 4 and 5, and section 469.1732, subdivision 2. 
           (d) The tax on sales of items exempted under this 
        subdivision shall be imposed and collected as if the applicable 
        rate under section 297A.62 applied.  Upon application by the 
        purchaser, on forms prescribed by the commissioner, a refund 
        equal to the tax paid shall be paid to the purchaser.  The 
        application must include sufficient information to permit the 
        commissioner to verify the sales tax paid and the eligibility of 
        the claimant to receive the credit.  No more than two 
        applications for refunds may be filed under this subdivision in 
        a calendar year.  The provisions of section 289A.40 apply to the 
        refunds payable under this subdivision.  There is annually 
        appropriated to the commissioner of revenue the amount required 
        to make the refunds, which must be deducted from the amount of 
        the city's allocation under section 469.169, subdivision 12, 
        that remains available and its limitation under section 469.1735.
        The amount to be refunded shall bear interest at the rate in 
        section 270.76 from the date the refund claim is filed with the 
        commissioner. 
           [EFFECTIVE DATE.] This section is effective for sales made 
        after June 30, 2002. 
           Sec. 3.  Minnesota Statutes 2001 Supplement, section 
        469.1763, subdivision 6, is amended to read: 
           Subd. 6.  [POOLING PERMITTED FOR DEFICITS.] (a) This 
        subdivision applies only to districts for which the request for 
        certification was made before August 1, 2001, and without regard 
        to whether the request for certification was made prior to 
        August 1, 1979. 
           (b) The municipality for the district may transfer 
        available increments from another tax increment financing 
        district located in the municipality, if the transfer is 
        necessary to eliminate a deficit in the district to which the 
        increments are transferred.  A deficit in the district for 
        purposes of this subdivision means the lesser of the following 
        two amounts: 
           (1)(i) the amount due during the calendar year to pay 
        preexisting obligations of the district; minus 
           (ii) the total increments to be collected from properties 
        located within the district that are available for the calendar 
        year; plus 
           (iii) total increments from properties located in other 
        districts in the municipality that are available to be used to 
        meet the district's obligations under this section, excluding 
        this subdivision, or other provisions of law (but excluding a 
        special tax under section 469.1791 and the grant program under 
        Laws 1997, chapter 231, article 1, section 19, or Laws 2001, 
        First Special Session chapter 5); or 
           (2) the reduction in increments collected from properties 
        located in the district for the calendar year as a result of the 
        changes in class rates in Laws 1997, chapter 231, article 1; 
        Laws 1998, chapter 389, article 2; and Laws 1999, chapter 243, 
        and Laws 2001, First Special Session chapter 5, or the 
        elimination of the general education tax levy under Laws 2001, 
        First Special Session chapter 5. 
           (c) A preexisting obligation means: 
           (1) bonds issued and sold before August 1, 2001, or bonds 
        issued pursuant to a binding contract requiring the issuance of 
        bonds entered into before July 1, 2001, and bonds issued to 
        refund such bonds or to reimburse expenditures made in 
        conjunction with a signed contractual agreement entered into 
        before August 1, 2001, to the extent that the bonds are secured 
        by a pledge of increments from the tax increment financing 
        district; and 
           (2) binding contracts entered into before August 1, 2001, 
        to the extent that the contracts require payments secured by a 
        pledge of increments from the tax increment financing district. 
           (d) The municipality may require a development authority, 
        other than a seaway port authority, to transfer available 
        increments for any of its tax increment financing districts in 
        the municipality to make up an insufficiency in another district 
        in the municipality, regardless of whether the district was 
        established by the development authority or another development 
        authority.  This authority applies notwithstanding any law to 
        the contrary, but applies only to a development authority that: 
           (1) was established by the municipality; or 
           (2) the governing body of which is appointed, in whole or 
        part, by the municipality or an officer of the municipality or 
        which consists, in whole or part, of members of the governing 
        body of the municipality.  The municipality may use this 
        authority only after it has first used all available increments 
        of the receiving development authority to eliminate the 
        insufficiency and exercised any permitted action under section 
        469.1792, subdivision 3, for preexisting districts of the 
        receiving development authority to eliminate the insufficiency. 
           (e) The authority under this subdivision to spend tax 
        increments outside of the area of the district from which the 
        tax increments were collected: 
           (1) may only be exercised after obtaining approval of the 
        use of the increments, in writing, by the commissioner of 
        revenue; 
           (2) is an exception to the restrictions under section 
        469.176, subdivision 4i, and the other provisions of this 
        section, and the percentage restrictions under subdivision 2 
        must be calculated after deducting increments spent under this 
        subdivision from the total increments for the district; and 
           (3) applies notwithstanding the provisions of the Tax 
        Increment Financing Act in effect for districts for which the 
        request for certification was made before June 30, 1982, or any 
        other law to the contrary. 
           (f) If a preexisting obligation requires the development 
        authority to pay an amount that is limited to the increment from 
        the district or a specific development within the district and 
        if the obligation requires paying a higher amount to the extent 
        that increments are available, the municipality may determine 
        that the amount due under the preexisting obligation equals the 
        higher amount and may authorize the transfer of increments under 
        this subdivision to pay up to the higher amount.  The existence 
        of a guarantee of obligations by the individual or entity that 
        would receive the payment under this paragraph is disregarded in 
        the determination of eligibility to pool under this 
        subdivision.  The authority to transfer increments under this 
        paragraph may only be used to the extent that the payment of all 
        other preexisting obligations in the municipality due during the 
        calendar year have been satisfied. 
           [EFFECTIVE DATE.] This section is effective for increments 
        payable in 2002 and thereafter. 
           Sec. 4.  Minnesota Statutes 2001 Supplement, section 
        469.1792, subdivision 1, is amended to read: 
           Subdivision 1.  [SCOPE.] This section applies only to an 
        authority with a preexisting district for which: 
           (1)(i) the increments from the district were insufficient 
        to pay preexisting obligations as a result of the class rate 
        changes or the elimination of the state-determined general 
        education property tax levy under this act, or both; or 
           (ii) (2)(i) the development authority has a binding 
        contract with a person requiring the authority to pay to the 
        person an amount that may not exceed the increment from the 
        district or a specific development within the district and as a 
        result of the reduction in increment because of the class rate 
        changes or the elimination of the state-determined general 
        education property tax levy under this act, or both,; and 
           (ii) the authority is unable to pay the full amount under 
        the contract from the pledged increments or other increments 
        from the district that would have been due if the class rate 
        changes or elimination of the state-determined general education 
        property tax levy or both had not been made under Laws 2001, 
        First Special Session chapter 5; and 
           (2) the municipality exercised its full authority to pool 
        under section 469.1763, subdivision 6, and the transfer of 
        increments did not eliminate the insufficiency under clause (1), 
        item (i), or the inability to pay the full amount under clause 
        (1), item (ii). 
           [EFFECTIVE DATE.] This section is effective for actions 
        taken and resolutions approved after June 30, 2002. 
           Sec. 5.  Minnesota Statutes 2000, section 469.1813, is 
        amended by adding a subdivision to read: 
           Subd. 6b.  [EXTENDED DURATION LIMIT.] (a) Notwithstanding 
        the provisions of subdivision 6, a political subdivision may 
        grant an abatement for a period of up to 20 years, if the 
        abatement is for a qualified business. 
           (b) To be a qualified business for purposes of this 
        subdivision, at least 50 percent of the payroll of the 
        operations of the business that qualify for the abatement must 
        be for employees engaged in one of the following lines of 
        business or any combination of them: 
           (1) manufacturing; 
           (2) agricultural processing; 
           (3) mining; 
           (4) research and development; 
           (5) warehousing; or 
           (6) qualified high technology. 
           (c)(1) "Manufacturing" means the material staging and 
        production of tangible personal property by procedures commonly 
        regarded as manufacturing, processing, fabrication, or 
        assembling which changes some existing material into new shapes, 
        new qualities, or new combinations. 
           (2) "Mining" has the meaning given in section 613(c) of the 
        Internal Revenue Code of 1986. 
           (3) "Agricultural processing" means transforming, 
        packaging, sorting, or grading livestock or livestock products, 
        agricultural commodities, or plants or plant products into goods 
        that are used for intermediate or final consumption including 
        goods for nonfood use. 
           (4) "Research and development" means qualified research as 
        defined in section 41(d) of the Internal Revenue Code of 1986. 
           (5) "Qualified high technology" means one or more of the 
        following activities: 
           (i) advanced computing, which is any technology used in the 
        design and development of any of the following: 
           (A) computer hardware and software; 
           (B) data communications; and 
           (C) information technologies; 
           (ii) advanced materials, which are materials with 
        engineered properties created through the development of 
        specialized process and synthesis technology; 
           (iii) biotechnology, which is any technology that uses 
        living organisms, cells, macromolecules, microorganisms, or 
        substances from living organisms to make or modify a product, 
        improve plants or animals, or develop microorganisms for useful 
        purposes; 
           (iv) electronic device technology, which is any technology 
        that involves microelectronics, semiconductors, electronic 
        equipment, and instrumentation, radio frequency, microwave, and 
        millimeter electronics, and optical and optic-electrical 
        devices, or data and digital communications and imaging devices; 
           (v) engineering or laboratory testing related to the 
        development of a product; 
           (vi) technology that assists in the assessment or 
        prevention of threats or damage to human health or the 
        environment, including, but not limited to, environmental 
        cleanup technology, pollution prevention technology, or 
        development of alternative energy sources; 
           (vii) medical device technology, which is any technology 
        that involves medical equipment or products other than a 
        pharmaceutical product that has therapeutic or diagnostic value 
        and is regulated; or 
           (viii) advanced vehicles technology which is any technology 
        that involves electric vehicles, hybrid vehicles, or alternative 
        fuel vehicles, or components used in the construction of 
        electric vehicles, hybrid vehicles, or alternative fuel 
        vehicles.  An electric vehicle is a road vehicle that draws 
        propulsion energy only from an on-board source of electrical 
        energy.  A hybrid vehicle is a road vehicle that can draw 
        propulsion energy from both a consumable fuel and a rechargeable 
        energy storage system.  
           (d) The authority to grant new abatements under this 
        subdivision expires on July 1, 2004.  
           Sec. 6.  Laws 1995, chapter 264, article 5, section 45, 
        subdivision 1, as amended by Laws 1996, chapter 471, article 7, 
        section 22, and Laws 1997, chapter 231, article 10, section 13, 
        is amended to read: 
           Subdivision 1.  [CREATION OF PROJECTS.] (a) An authority 
        may create a housing replacement project under sections 44 to 
        47, as provided in this section. 
           (b) For the cities of Crystal, Fridley, Richfield, and 
        Columbia Heights, the authority may designate up to 50 parcels 
        in the city to be included in a housing replacement district.  
        No more than ten parcels may be included in year one of the 
        district, with up to ten additional parcels added to the 
        district in each of the following nine years.  For the cities of 
        Minneapolis, St. Paul, and Duluth, each authority may designate 
        up to 100 not more than 200 parcels in the city to be included 
        in a housing replacement district over the life of the 
        district.  The only parcels that may be included in a district 
        are (1) vacant sites, (2) parcels containing vacant houses, or 
        (3) parcels containing houses that are structurally substandard, 
        as defined in Minnesota Statutes, section 469.174, subdivision 
        10.  
           (c) The city in which the authority is located must pay at 
        least 25 percent of the housing replacement project costs from 
        its general fund, a property tax levy, or other unrestricted 
        money, not including tax increments. 
           (d) The housing replacement district plan must have as its 
        sole object the acquisition of parcels for the purpose of 
        preparing the site to be sold for market rate housing.  As used 
        in this section, "market rate housing" means housing that has a 
        market value that does not exceed 150 percent of the average 
        market value of single-family housing in that municipality. 
           Sec. 7.  [CITY OF ALBERT LEA; TAX INCREMENT FINANCING 
        DISTRICT.] 
           Subdivision 1.  [AUTHORIZATION.] The governing body of the 
        city of Albert Lea may create a redevelopment tax increment 
        financing district as provided in this section.  The city or its 
        port authority may be the "authority" for the purposes of 
        Minnesota Statutes, sections 469.174 to 469.179. 
           Subd. 2.  [DEFINITIONS.] (a) For the purposes of this 
        section, the terms defined in this subdivision have the meanings 
        given them. 
           (b) "Redevelopment parcel" means the property in the city 
        of Albert Lea bounded by Main Street, Garfield Avenue, Front 
        Street, the Union Pacific railway line, and Albert Lea lake. 
           (c) "Reconstruction parcel" means the property in the city 
        of Albert Lea described as lot 1, block 5, Habben First Addition.
           Subd. 3.  [SPECIAL RULES.] (a) The district established 
        under this section is subject to the provisions of Minnesota 
        Statutes, sections 469.174 to 469.179, except as provided in 
        this subdivision. 
           (b) The district may consist of the redevelopment parcel 
        and the reconstruction parcel. 
           (c) Minnesota Statutes, section 469.174, subdivision 10, 
        paragraph (f), does not apply to the district, and if the city 
        finds that the redevelopment parcel meets the criteria described 
        in Minnesota Statutes, section 469.174, subdivision 10, 
        paragraph (a), clause (1), then both the redevelopment parcel 
        and the reconstruction parcel and the district as a whole are 
        considered to meet those criteria. 
           (d) Expenditures for activities, as defined in Minnesota 
        Statutes, section 469.1763, subdivision 1, paragraph (b), 
        anywhere within the district are considered costs of correcting 
        conditions that allow designation of redevelopment districts 
        within the meaning of Minnesota Statutes, section 469.176, 
        subdivision 4j. 
           (e) For the purposes of Minnesota Statutes, section 
        469.1763, subdivision 3, expenditures on the redevelopment 
        parcel are considered to have been expended on an activity 
        within the district if a qualifying action occurs within ten 
        years after certification of the district. 
           [EFFECTIVE DATE.] This section is effective upon local 
        approval in compliance with the requirements of Minnesota 
        Statutes, section 645.021. 
           Sec. 8.  [RUSHFORD TAX INCREMENT FINANCING EXTENSION.] 
           The governing body of the city of Rushford may elect to 
        extend the duration of its downtown redevelopment tax increment 
        financing district by up to two additional years. 
           [EFFECTIVE DATE.] This section is effective upon compliance 
        with the requirements of Minnesota Statutes, sections 469.1782, 
        subdivision 2; and 645.021. 
           Sec. 9.  [CITY OF MINNEAPOLIS TAX INCREMENT DISTRICT; 
        DURATION EXTENSION.] 
           (a) Upon approval of the city council of the city of 
        Minneapolis, the Minneapolis community development agency may, 
        notwithstanding Minnesota Statutes, section 469.176, subdivision 
        1b, extend the duration of the east Hennepin and University tax 
        increment district for a period of up to seven years, or until 
        all amounts payable to the developers and to the agency to 
        reimburse the agency's provision of $1,100,000 of city of 
        Minneapolis HOME funds to assist low-income housing are repaid, 
        whichever is shorter.  
           (b) The amount of additional increment which may be paid to 
        the district as a result of this section may not exceed: 
           (1) the increment that would have been collected if the 
        class rate changes and elimination of the state-determined 
        general education property tax levy had not been made under Laws 
        2001, First Special Session chapter 5, for the term of the 
        district under general law and if the provisions of section 4 
        did not apply, less 
           (2) the actual increments collected for the term of the 
        district under general law. 
           (c) Notwithstanding any law to the contrary, effective upon 
        approval of this section, no increments may be spent on 
        activities located outside of the area of the district, other 
        than to pay administrative expenses.  
           (d) This section is effective upon compliance with the 
        requirements of Minnesota Statutes, sections 469.1782, 
        subdivision 2, and 645.021.  
           Sec. 10.  [CITY OF MINNEAPOLIS TAX INCREMENT DISTRICT; 
        DURATION EXTENSION.] 
           (a) Upon approval of the city council of the city of 
        Minneapolis, the Minneapolis community development agency may, 
        with respect to the southeast Minneapolis industrial area 
        redevelopment area phase 4 tax increment financing district, 
        notwithstanding Minnesota Statutes, section 469.176, subdivision 
        1b, extend the duration of the district for a period of up to 
        six years. 
           (b) The amount of additional increment which may be paid to 
        the district as a result of this section may not exceed:  
           (1) the increment that would have been collected if the 
        class rate changes and elimination of the state-determined 
        general education property tax levy had not been made under Laws 
        2001, First Special Session chapter 5, for the term of the 
        district under general law and if the provisions of section 4 
        did not apply, less 
           (2) the actual increments collected for the term of the 
        district under general law. 
           (c) Notwithstanding any law to the contrary, effective upon 
        approval of this section, no increments may be spent on 
        activities located outside of the area of the district, other 
        than to pay administrative expenses.  
           (d) Upon payment in full of the Minneapolis community 
        development agency amended and restated tax increment revenue 
        note, in the original face amount of $1,000,000, issued December 
        4, 1997, the district terminates and the authority granted under 
        this section terminates.  
           (e) This section is effective upon compliance with the 
        requirements of Minnesota Statutes, sections 469.1782, 
        subdivision 2, and 645.021.  
           Sec. 11.  [GRANT TO WASHBURN-CROSBY PROJECT.] 
           Notwithstanding the requirements of Minnesota Statutes, 
        section 469.1794, the commissioner of revenue shall pay a 
        one-time grant of $2,600,000 to the Minneapolis community 
        development agency for the Washburn-Crosby Mill City Museum 
        project of the historical society as described in Laws 2001, 
        First Special Session chapter 5, article 15, section 39.  The 
        grant must be disbursed on July 1, 2002.  $2,600,000 is 
        appropriated from the general fund to the commissioner of 
        revenue to make the grant under this section. 
           Sec. 12.  [DAKOTA COUNTY TAX INCREMENT DISTRICT EXTENSION.] 
           (a) The governing body of Dakota county may elect to extend 
        the duration of its C.D.A. South Robert Street redevelopment tax 
        increment financing district number 4 by up to five additional 
        years. 
           (b) The amount of additional increment which may be paid to 
        the district as a result of this section may not exceed: 
           (1) the increment that would have been collected if the 
        class rate changes and elimination of the state-determined 
        general education property tax levy had not been made under Laws 
        2001, First Special Session chapter 5, for the term of the 
        district under general law and if the provisions of section 4 
        did not apply, less 
           (2) the actual increments collected for the term of the 
        district under general law.  
           [EFFECTIVE DATE.] This section is effective upon compliance 
        with Minnesota Statutes, sections 469.1782, subdivision 2, and 
        645.021. 
           Sec. 13.  [REPEALER.] 
           Minnesota Statutes 2001 Supplement, section 469.176, 
        subdivision 1h, is repealed. 
           [EFFECTIVE DATE.] This section is effective retroactive to 
        July 1, 2001, and any early decertification of a tax increment 
        financing district made after July 1, 2001, is ratified. 

                                   ARTICLE 8 
                                 MINERALS TAXES 
           Section 1.  Minnesota Statutes 2001 Supplement, section 
        126C.21, subdivision 4, is amended to read: 
           Subd. 4.  [TACONITE DEDUCTIONS.] (1) Notwithstanding any 
        provisions of any other law to the contrary, the adjusted net 
        tax capacity used in calculating general education aid may 
        include only that property that is currently taxable in the 
        district.  
           (2) For districts that received payments under sections 
        298.018; 298.225; 298.28; 298.34 to 298.39; 298.391 to 298.396; 
        and 298.405, or any law imposing a tax upon severed mineral 
        values; or recognized revenue under section 477A.15; the general 
        education aid must be reduced in the final adjustment payment by 
        the difference between the dollar amount of the payments 
        received pursuant to those sections, or revenue recognized under 
        section 477A.15 in the fiscal year to which the final adjustment 
        is attributable and the amount that was calculated, pursuant to 
        section 126C.48, subdivision 8, as a reduction of the levy 
        attributable to the fiscal year to which the final adjustment is 
        attributable.  If the final adjustment of a district's general 
        education aid for a fiscal year is a negative amount because of 
        this clause, the next fiscal year's general education aid to 
        that district must be reduced by this negative amount in the 
        following manner:  there must be withheld from each scheduled 
        general education aid payment due the district in such fiscal 
        year, 15 percent of the total negative amount, until the total 
        negative amount has been withheld.  The amount reduced from 
        general education aid pursuant to this clause must be recognized 
        as revenue in the fiscal year to which the final adjustment 
        payment is attributable. 
           Sec. 2.  Minnesota Statutes 2001 Supplement, section 
        126C.48, subdivision 8, is amended to read: 
           Subd. 8.  [TACONITE PAYMENT AND OTHER REDUCTIONS.] (1) 
        Reductions in levies pursuant to sections 126C.48, subdivision 
        1, and 273.138, must be made prior to the reductions in clause 
        (2). 
           (2) Notwithstanding any other law to the contrary, 
        districts which received payments pursuant to sections 298.018; 
        298.225; 298.28, except an amount distributed under section 
        298.28, subdivision 4, paragraph (c), clause (ii); 298.34 to 
        298.39; 298.391 to 298.396; 298.405; and any law imposing a tax 
        upon severed mineral values; or recognized revenue under section 
        477A.15 must not include a portion of these aids in their 
        permissible levies pursuant to those sections, but instead must 
        reduce the permissible levies authorized by this chapter and 
        chapters 120B, 122A, 123A, 123B, 124A, 124D, 125A, and 127A by 
        the greater of the following: 
           (a) an amount equal to 50 percent of the total dollar 
        amount of the payments received pursuant to those sections or 
        revenue recognized under section 477A.15 in the previous fiscal 
        year; or 
           (b) an amount equal to the total dollar amount of the 
        payments received pursuant to those sections or revenue 
        recognized under section 477A.15 in the previous fiscal year 
        less the product of the same dollar amount of payments or 
        revenue times five percent. 
           For levy year 2002 only, 77 percent of the amounts 
        distributed under section 298.225 and 298.28, and 100 percent of 
        the amounts distributed under sections 298.018; 298.34 to 
        298.39; 298.391 to 298.396; 298.405; and any law imposing a tax 
        upon severed mineral values, or recognized revenue under section 
        477A.15, shall be used for purposes of the calculations under 
        this paragraph.  For levy year 2003 only, the levy reductions 
        under this subdivision must be calculated as if section 298.28, 
        subdivision 4, paragraph (f), did not apply for the 2003 
        distribution. 
           (3) The amount of any increased levy authorized by 
        referendum pursuant to section 126C.17, subdivision 9, voter 
        approved referendum, facilities down payment, and debt levies 
        shall not be reduced pursuant to by more than 50 percent under 
        this subdivision.  The amount of any levy authorized by section 
        126C.43, to make payments for bonds issued and for interest 
        thereon, shall not be reduced pursuant to this subdivision.  In 
        administering this paragraph, the commissioner shall first 
        reduce the nonvoter approved levies of a district; then, if any 
        payments, severed mineral value tax revenue or recognized 
        revenue under paragraph (2) remains, the commissioner shall 
        reduce any voter approved referendum levies authorized under 
        section 126C.17; then, if any payments, severed mineral value 
        tax revenue or recognized revenue under paragraph (2) remains, 
        the commissioner shall reduce any voter approved facilities down 
        payment levies authorized under section 123B.63 and then, if any 
        payments, severed mineral value tax revenue or recognized 
        revenue under paragraph (2) remains, the commissioner shall 
        reduce any voter approved debt levies.  
           (4) Before computing the reduction pursuant to this 
        subdivision of the health and safety levy authorized by sections 
        123B.57 and 126C.40, subdivision 5, the commissioner shall 
        ascertain from each affected school district the amount it 
        proposes to levy under each section or subdivision.  The 
        reduction shall be computed on the basis of the amount so 
        ascertained. 
           (5) Notwithstanding any law to the contrary, any amounts 
        received by districts in any fiscal year pursuant to sections 
        298.018; 298.34 to 298.39; 298.391 to 298.396; 298.405; or any 
        law imposing a tax on severed mineral values; and not deducted 
        from general education aid pursuant to section 126C.21, 
        subdivision 4, clause (2), and not applied to reduce levies 
        pursuant to this subdivision shall be paid by the district to 
        the St. Louis county auditor in the following amount by March 15 
        of each year, the amount required to be subtracted from the 
        previous fiscal year's general education aid pursuant to section 
        126C.21, subdivision 4, which is in excess of the general 
        education aid earned for that fiscal year.  The county auditor 
        shall deposit any amounts received pursuant to this clause in 
        the St. Louis county treasury for purposes of paying the 
        taconite homestead credit as provided in section 273.135. To the 
        extent the levy reduction calculated under paragraph (2) exceeds 
        the limitation in paragraph (3), an amount equal to the excess 
        must be distributed from the school district's distribution 
        under sections 298.225, 298.28, and 477A.15 in the following 
        year to the cities and townships within the school district in 
        the proportion that their taxable net tax capacity within the 
        school district bears to the taxable net tax capacity of the 
        school district for property taxes payable in the year prior to 
        distribution.  No city or township shall receive a distribution 
        greater than its levy for taxes payable in the year prior to 
        distribution.  The commissioner of revenue shall certify the 
        distributions of cities and towns under this paragraph to the 
        county auditor by September 30 of the year preceding 
        distribution.  The county auditor shall reduce the proposed and 
        final levies of cities and towns receiving distributions by the 
        amount of their distribution.  Distributions to the cities and 
        towns shall be made at the times provided under section 298.27. 
           Sec. 3.  Minnesota Statutes 2001 Supplement, section 
        298.01, subdivision 3b, is amended to read: 
           Subd. 3b.  [DEDUCTIONS.] (a) For purposes of determining 
        taxable income under subdivision 3, the deductions from gross 
        income include only those expenses necessary to convert raw ores 
        to marketable quality.  Such expenses include costs associated 
        with refinement but do not include expenses such as 
        transportation, stockpiling, marketing, or marine insurance that 
        are incurred after marketable ores are produced, unless the 
        expenses are included in gross income. 
           (b) The provisions of section 290.01, subdivisions 19c, 
        clauses (6) and (10) (9), and 19d, clauses (7) and (11), are not 
        used to determine taxable income. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 4.  Minnesota Statutes 2001 Supplement, section 
        298.01, subdivision 4c, is amended to read: 
           Subd. 4c.  [SPECIAL DEDUCTIONS; NET OPERATING LOSS.] (a) 
        For purposes of determining taxable income under subdivision 
        4, the following modifications are allowed: 
           (1) the provisions of section 290.01, subdivisions 19c, 
        clauses (6) and (10) (9), and 19d, clauses (7) and (11), are not 
        used to determine taxable income; and. 
           (2) for assets placed in service before January 1, 1990, 
        the deduction for depreciation will be the same amount allowed 
        under chapter 290, except that after an asset has been fully 
        depreciated for federal income tax purposes any remaining 
        depreciable basis is allowed as a deduction using the 
        straight-line method over the following number of years: 
           (i) three-year property, one year; 
           (ii) five- and seven-year property, two years; 
           (iii) ten-year property, five years; and 
           (iv) all other property, seven years. 
           No deduction is allowed if an asset is fully depreciated 
        for occupation tax purposes before January 1990. 
           (b) For purposes of determining the deduction allowed under 
        paragraph (a), clause (2), the remaining depreciable basis of 
        property placed in service before January 1, 1990, is calculated 
        as follows: 
           (1) the adjusted basis of the property on December 31, 
        1989, which was used to calculate the hypothetical corporate 
        franchise tax under Minnesota Statutes 1988, section 298.40, 
        including salvage value; less 
           (2) deductions for depreciation allowed under section 
        290.01, subdivision 19e. 
           (c) The basis for determining gain or loss on sale or 
        disposition of assets placed in service before January 1, 1990, 
        is the basis determined under paragraph (b), less the deductions 
        allowed under paragraph (a), clause (2). 
           (d) (b) The amount of net operating loss incurred in a 
        taxable year beginning before January 1, 1990, that may be 
        carried over to a taxable year beginning after December 31, 
        1989, is the amount of net operating loss carryover determined 
        in the calculation of the hypothetical corporate franchise tax 
        under Minnesota Statutes 1988, sections 298.40 and 298.402. 
           [EFFECTIVE DATE.] This section is effective for taxes 
        payable May 1, 2002, and thereafter. 
           Sec. 5.  Minnesota Statutes 2001 Supplement, section 
        298.225, subdivision 1, is amended to read: 
           Subdivision 1.  (a) The distribution of the taconite 
        production tax as provided in section 298.28, subdivisions 3 to 
        5, 6, paragraph (b), 7, and 8, shall equal the lesser of the 
        following amounts:  
           (1) the amount distributed pursuant to this section and 
        section 298.28, with respect to 1983 production if the 
        production for the year prior to the distribution year is no 
        less than 42,000,000 taxable tons.  If the production is less 
        than 42,000,000 taxable tons, the amount of the distributions 
        shall be reduced proportionately at the rate of two percent for 
        each 1,000,000 tons, or part of 1,000,000 tons by which the 
        production is less than 42,000,000 tons; or 
           (2)(i) for the distributions made pursuant to section 
        298.28, subdivisions 4, paragraphs (b) and (c), and 6, paragraph 
        (c), 40.5 31.2 percent of the amount distributed pursuant to 
        this section and section 298.28, with respect to 1983 
        production; 
           (ii) for the distributions made pursuant to section 298.28, 
        subdivision 5, paragraphs (b) and (d), 75 percent of the amount 
        distributed pursuant to this section and section 298.28, with 
        respect to 1983 production.  
           (b) The distribution of the taconite production tax as 
        provided in section 298.28, subdivision 2, shall equal the 
        following amount: 
           (1) if the production for the year prior to the 
        distribution year is at least 42,000,000 taxable tons, the 
        amount distributed pursuant to this section and section 298.28 
        with respect to 1999 production; or 
           (2) if the production for the year prior to the 
        distribution year is less than 42,000,000 taxable tons, the 
        amount distributed pursuant to this section and section 298.28 
        with respect to 1999 production, reduced proportionately at the 
        rate of two percent for each 1,000,000 tons or part of 1,000,000 
        tons by which the production is less than 42,000,000 tons. 
           Sec. 6.  Minnesota Statutes 2000, section 298.27, is 
        amended to read: 
           298.27 [COLLECTION AND PAYMENT OF TAX.] 
           The taxes provided by section 298.24 shall be paid directly 
        to each eligible county and the iron range resources and 
        rehabilitation board.  The commissioner of revenue shall notify 
        each producer of the amount to be paid each recipient prior to 
        February 15.  Every person subject to taxes imposed by section 
        298.24 shall file a correct report covering the preceding year.  
        The report must contain the information required by the 
        commissioner.  The report shall be filed by each producer on or 
        before February 1.  A remittance equal to 50 percent of the 
        total tax required to be paid hereunder in 2003 and 100 percent 
        of the total tax required to be paid hereunder in 2004 and 
        thereafter shall be paid on or before February 24.  A remittance 
        equal to the remaining total tax required to be paid hereunder 
        in 2003 shall be paid on or before August 24.  On or before 
        February 25, and in 2003, August 25, the county auditor shall 
        make distribution of the payment payments previously received by 
        the county in the manner provided by section 298.28.  Reports 
        shall be made and hearings held upon the determination of the 
        tax in accordance with procedures established by the 
        commissioner of revenue.  The commissioner of revenue shall have 
        authority to make reasonable rules as to the form and manner of 
        filing reports necessary for the determination of the tax 
        hereunder, and by such rules may require the production of such 
        information as may be reasonably necessary or convenient for the 
        determination and apportionment of the tax.  All the provisions 
        of the occupation tax law with reference to the assessment and 
        determination of the occupation tax, including all provisions 
        for appeals from or review of the orders of the commissioner of 
        revenue relative thereto, but not including provisions for 
        refunds, are applicable to the taxes imposed by section 298.24 
        except in so far as inconsistent herewith.  If any person 
        subject to section 298.24 shall fail to make the report provided 
        for in this section at the time and in the manner herein 
        provided, the commissioner of revenue shall in such case, upon 
        information possessed or obtained, ascertain the kind and amount 
        of ore mined or produced and thereon find and determine the 
        amount of the tax due from such person.  There shall be added to 
        the amount of tax due a penalty for failure to report on or 
        before February 1, which penalty shall equal ten percent of the 
        tax imposed and be treated as a part thereof. 
           If any person responsible for making a tax payment at the 
        time and in the manner herein provided fails to do so, there 
        shall be imposed a penalty equal to ten percent of the amount so 
        due, which penalty shall be treated as part of the tax due. 
           In the case of any underpayment of the tax payment required 
        herein, there may be added and be treated as part of the tax due 
        a penalty equal to ten percent of the amount so underpaid. 
           A person having a liability of $120,000 or more during a 
        calendar year must remit all liabilities by means of a funds 
        transfer as defined in section 336.4A-104, paragraph (a).  The 
        funds transfer payment date, as defined in section 336.4A-401, 
        must be on or before the date the tax is due.  If the date the 
        tax is due is not a funds transfer business day, as defined in 
        section 336.4A-105, paragraph (a), clause (4), the payment date 
        must be on or before the funds transfer business day next 
        following the date the tax is due. 
           [EFFECTIVE DATE.] Except as otherwise provided, this 
        section is effective for years beginning after December 31, 2001.
           Sec. 7.  Minnesota Statutes 2001 Supplement, section 
        298.28, subdivision 4, is amended to read: 
           Subd. 4.  [SCHOOL DISTRICTS.] (a) 22.28 17.15 cents per 
        taxable ton plus the increase provided in paragraph (d) must be 
        allocated to qualifying school districts to be distributed, 
        based upon the certification of the commissioner of revenue, 
        under paragraphs (b) and (c), except as otherwise provided in 
        paragraph (f). 
           (b) 4.46 3.43 cents per taxable ton must be distributed to 
        the school districts in which the lands from which taconite was 
        mined or quarried were located or within which the concentrate 
        was produced.  The distribution must be based on the 
        apportionment formula prescribed in subdivision 2. 
           (c)(i) 17.82 13.72 cents per taxable ton, less any amount 
        distributed under paragraph (e), shall be distributed to a group 
        of school districts comprised of those school districts in which 
        the taconite was mined or quarried or the concentrate produced 
        or in which there is a qualifying municipality as defined by 
        section 273.134, paragraph (b), in direct proportion to school 
        district indexes as follows:  for each school district, its 
        pupil units determined under section 126C.05 for the prior 
        school year shall be multiplied by the ratio of the average 
        adjusted net tax capacity per pupil unit for school districts 
        receiving aid under this clause as calculated pursuant to 
        chapters 122A, 126C, and 127A for the school year ending prior 
        to distribution to the adjusted net tax capacity per pupil unit 
        of the district.  Each district shall receive that portion of 
        the distribution which its index bears to the sum of the indices 
        for all school districts that receive the distributions.  
           (ii) Notwithstanding clause (i), each school district that 
        receives a distribution under sections 298.018; 298.23 to 
        298.28, exclusive of any amount received under this clause; 
        298.34 to 298.39; 298.391 to 298.396; 298.405; or any law 
        imposing a tax on severed mineral values after reduction for any 
        portion distributed to cities and towns under section 126C.48, 
        subdivision 8, paragraph (5), that is less than the amount of 
        its levy reduction under section 126C.48, subdivision 8, for the 
        second year prior to the year of the distribution shall receive 
        a distribution equal to the difference; the amount necessary to 
        make this payment shall be derived from proportionate reductions 
        in the initial distribution to other school districts under 
        clause (i).  
           (d) Any school district described in paragraph (c) where a 
        levy increase pursuant to section 126C.17, subdivision 9, was 
        authorized by referendum for taxes payable in 2001, shall 
        receive a distribution from a fund that receives a distribution 
        in 1998 of 21.3 cents per ton.  On July 15 of 1999, and each 
        year thereafter, the increase over the amount established for 
        the prior year shall be determined according to the increase in 
        the implicit price deflator as provided in section 298.24, 
        subdivision 1.  Each district shall receive $175 times the pupil 
        units identified in section 126C.05, subdivision 1, enrolled in 
        the second previous year or the 1983-1984 school year, whichever 
        is greater, less the product of 1.8 percent times the district's 
        taxable net tax capacity in the second previous year. 
           If the total amount provided by paragraph (d) is 
        insufficient to make the payments herein required then the 
        entitlement of $175 per pupil unit shall be reduced uniformly so 
        as not to exceed the funds available.  Any amounts received by a 
        qualifying school district in any fiscal year pursuant to 
        paragraph (d) shall not be applied to reduce general education 
        aid which the district receives pursuant to section 126C.13 or 
        the permissible levies of the district.  Any amount remaining 
        after the payments provided in this paragraph shall be paid to 
        the commissioner of iron range resources and rehabilitation who 
        shall deposit the same in the taconite environmental protection 
        fund and the northeast Minnesota economic protection trust fund 
        as provided in subdivision 11. 
           Each district receiving money according to this paragraph 
        shall reserve $25 times the number of pupil units in the 
        district.  It may use the money for early childhood programs or 
        for outcome-based learning programs that enhance the academic 
        quality of the district's curriculum.  The outcome-based 
        learning programs must be approved by the commissioner of 
        children, families, and learning. 
           (e) There shall be distributed to any school district the 
        amount which the school district was entitled to receive under 
        section 298.32 in 1975. 
           (f) Effective with for the distribution in 2003 and 
        thereafter only, five percent of the distributions to school 
        districts under paragraphs (b), (c), and (e); subdivision 6, 
        paragraph (c); subdivision 11; and section 477A.15 298.225, 
        shall be distributed to the general fund.  The remainder less 
        any portion distributed to cities and towns under section 
        126C.48, subdivision 8, paragraph (5), shall be distributed to 
        the cities and townships within each school district in the 
        proportion that their taxable net tax capacity within the school 
        district bears to the taxable net tax capacity of the school 
        district for property taxes payable in the year prior to 
        distribution.  No city or township shall receive a distribution 
        greater than its levy for taxes payable in the year prior to 
        distribution northeast Minnesota economic protection trust fund 
        created in section 298.292.  Fifty percent of the amount 
        distributed to the northeast Minnesota economic protection trust 
        fund shall be made available for expenditure under section 
        298.293 as governed by section 298.296.  Effective in 2003 only, 
        100 percent of the distributions to school districts under 
        section 477A.15 less any portion distributed to cities and towns 
        under section 126C.48, subdivision 8, paragraph (5), shall be 
        distributed to the general fund. 
           Sec. 8.  Minnesota Statutes 2000, section 298.28, 
        subdivision 5, is amended to read: 
           Subd. 5.  [COUNTIES.] (a) 16.5 26.05 cents per taxable ton 
        is allocated to counties to be distributed, based upon 
        certification by the commissioner of revenue, under paragraphs 
        (b) to (d). 
           (b) 13 20.525 cents per taxable ton shall be distributed to 
        the county in which the taconite is mined or quarried or in 
        which the concentrate is produced, less any amount which is to 
        be distributed pursuant to paragraph (c).  The apportionment 
        formula prescribed in subdivision 2 is the basis for the 
        distribution. 
           (c) If an electric power plant owned by and providing the 
        primary source of power for a taxpayer mining and concentrating 
        taconite is located in a county other than the county in which 
        the mining and the concentrating processes are conducted, one 
        cent per taxable ton of the tax distributed to the counties 
        pursuant to paragraph (b) and imposed on and collected from such 
        taxpayer shall be paid to the county in which the power plant is 
        located. 
           (d) 3.5 5.525 cents per taxable ton shall be paid to the 
        county from which the taconite was mined, quarried or 
        concentrated to be deposited in the county road and bridge 
        fund.  If the mining, quarrying and concentrating, or separate 
        steps in any of those processes are carried on in more than one 
        county, the commissioner shall follow the apportionment formula 
        prescribed in subdivision 2. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 9.  Minnesota Statutes 2001 Supplement, section 
        298.28, subdivision 6, is amended to read: 
           Subd. 6.  [PROPERTY TAX RELIEF.] (a) In 2002 and 
        thereafter, 35.9 33.9 cents per taxable ton, less any amount 
        required to be distributed under paragraphs (b) and (c), and 
        less any amount required to be deducted under paragraph (d), 
        must be allocated to St. Louis county acting as the counties' 
        fiscal agent, to be distributed as provided in sections 273.134 
        to 273.136. 
           (b) If an electric power plant owned by and providing the 
        primary source of power for a taxpayer mining and concentrating 
        taconite is located in a county other than the county in which 
        the mining and the concentrating processes are conducted, .1875 
        cent per taxable ton of the tax imposed and collected from such 
        taxpayer shall be paid to the county. 
           (c) If an electric power plant owned by and providing the 
        primary source of power for a taxpayer mining and concentrating 
        taconite is located in a school district other than a school 
        district in which the mining and concentrating processes are 
        conducted, .7282 .4541 cent per taxable ton of the tax imposed 
        and collected from the taxpayer shall be paid to the school 
        district. 
           (d) Two cents per taxable ton must be deducted from the 
        amount allocated to the St. Louis county auditor under paragraph 
        (a). 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 10.  Minnesota Statutes 2001 Supplement, section 
        298.28, subdivision 9a, is amended to read: 
           Subd. 9a.  [TACONITE ECONOMIC DEVELOPMENT FUND.] (a) 30.1 
        cents per ton for distributions in 2002 and thereafter must be 
        paid to the taconite economic development fund.  No distribution 
        shall be made under this paragraph in 2004 or any subsequent 
        year in which total industry production falls below 30 million 
        tons.  Distribution shall only be made to a taconite producer's 
        fund under section 298.227 if the producer timely pays its tax 
        under section 298.24 by the dates provided under section 298.27, 
        or pursuant to the due dates provided by an administrative 
        agreement with the commissioner. 
           (b) An amount equal to 50 percent of the tax under section 
        298.24 for concentrate sold in the form of pellet chips and 
        fines not exceeding 5/16 inch in size and not including crushed 
        pellets shall be paid to the taconite economic development 
        fund.  The amount paid shall not exceed $700,000 annually for 
        all companies.  If the initial amount to be paid to the fund 
        exceeds this amount, each company's payment shall be prorated so 
        the total does not exceed $700,000. 
           Sec. 11.  Minnesota Statutes 2000, section 298.28, 
        subdivision 9b, is amended to read: 
           Subd. 9b.  [TACONITE ENVIRONMENTAL FUND.] Five cents per 
        ton for distributions in 1999, 2000, 2001, and 2002, and 2003 
        must be paid to the taconite environmental fund for use under 
        section 298.2961.  No distribution may be made under this 
        paragraph in any year in which total industry production falls 
        below 30,000,000 tons. 
           Sec. 12.  Minnesota Statutes 2001 Supplement, section 
        298.28, subdivision 10, is amended to read: 
           Subd. 10.  [INCREASE.] Beginning with distributions in 
        2000, the amount determined under subdivision 9 shall be 
        increased in the same proportion as the increase in the implicit 
        price deflator as provided in section 298.24, subdivision 1.  
        Beginning with distributions in 2003, the amount determined 
        under subdivision 6, paragraph (a), shall be increased in the 
        same proportion as the increase in the implicit price deflator 
        as provided in section 298.24, subdivision 1.  
           The distributions per ton determined under subdivisions 5, 
        paragraphs (b) and (d), and 6, paragraph (b), for distribution 
        in 1988 and subsequent years shall be the distribution per ton 
        determined for distribution in 1987.  The distribution per ton 
        under subdivision 6, paragraph (c), for distribution in 2000 and 
        subsequent years shall be 81 percent of the distribution per ton 
        determined for distribution in 1987. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 13.  Minnesota Statutes 2000, section 298.28, 
        subdivision 11, is amended to read: 
           Subd. 11.  [REMAINDER.] (a) The proceeds of the tax imposed 
        by section 298.24 which remain after the distributions and 
        payments in subdivisions 2 to 10a, as certified by the 
        commissioner of revenue, and paragraphs (b), (c), and (d), and 
        (e) have been made, together with interest earned on all money 
        distributed under this section prior to distribution, shall be 
        divided between the taconite environmental protection fund 
        created in section 298.223 and the northeast Minnesota economic 
        protection trust fund created in section 298.292 as follows:  
        Two-thirds to the taconite environmental protection fund and 
        one-third to the northeast Minnesota economic protection trust 
        fund.  The proceeds shall be placed in the respective special 
        accounts. 
           (b) There shall be distributed to each city, town, and 
        county the amount that it received under section 294.26 in 
        calendar year 1977; provided, however, that the amount 
        distributed in 1981 to the unorganized territory number 2 of 
        Lake county and the town of Beaver Bay based on the 
        between-terminal trackage of Erie Mining Company will be 
        distributed in 1982 and subsequent years to the unorganized 
        territory number 2 of Lake county and the towns of Beaver Bay 
        and Stony River based on the miles of track of Erie Mining 
        Company in each taxing district. 
           (c) There shall be distributed to the iron range resources 
        and rehabilitation board the amounts it received in 1977 under 
        section 298.22.  The amount distributed under this paragraph 
        shall be expended within or for the benefit of the tax relief 
        area defined in section 273.134. 
           (d) There shall be distributed to each school district 81 
        62 percent of the amount that it received under section 294.26 
        in calendar year 1977. 
           (e) In 2003 only, $100,000 must be distributed to a 
        township located in a taconite tax relief area as defined in 
        section 273.134, paragraph (a), that received $119,259 of 
        homestead and agricultural credit aid and $182,014 in local 
        government aid in 2001. 
           Sec. 14.  Minnesota Statutes 2000, section 298.291, is 
        amended to read: 
           298.291 [CITATION.] 
           Sections 298.291 to 298.294 shall be known as the 
        "Northeast Minnesota Douglas J. Johnson Economic Protection 
        Trust Fund Act.  
           Sec. 15.  Minnesota Statutes 2001 Supplement, section 
        298.296, subdivision 2, is amended to read: 
           Subd. 2.  [EXPENDITURE OF FUNDS.] (a) Before January 1, 
        2003 2028, funds may be expended on projects and for 
        administration of the trust fund only from the net interest, 
        earnings, and dividends arising from the investment of the trust 
        at any time, including net interest, earnings, and dividends 
        that have arisen prior to July 13, 1982, plus $10,000,000 made 
        available for use in fiscal year 1983, except that any amount 
        required to be paid out of the trust fund to provide the 
        property tax relief specified in Laws 1977, chapter 423, article 
        X, section 4, and to make school bond payments and payments to 
        recipients of taconite production tax proceeds pursuant to 
        section 298.225, may be taken from the corpus of the trust.  
           (b) Additionally, upon recommendation by the board, up to 
        $13,000,000 from the corpus of the trust may be made available 
        for use as provided in subdivision 4, and up to $10,000,000 from 
        the corpus of the trust may be made available for use as 
        provided in section 298.2961.  
           (c) On and after January 1, 2003, Funds may be expended on 
        projects and for administration from any assets of the 
        trust. Additionally, an amount equal to 20 percent of the value 
        of the corpus of the trust on the date of enactment of this act, 
        not including the funds authorized in paragraph (b), plus the 
        amounts made available under sections 7 and 17, may be expended 
        on projects.  Funds may be expended for projects under this 
        paragraph only if the project: 
           (1) is for the purposes established under section 298.292, 
        subdivision 1, clause (1) or (2); and 
           (2) is approved by the board upon an affirmative vote of at 
        least ten of its members. 
        No money made available under this paragraph or paragraph (d) 
        can be used for administrative or operating expenses of the iron 
        range resources and rehabilitation board or expenses relating to 
        any facilities owned or operated by the board on the effective 
        date of this act. 
           (d) Upon recommendation by a unanimous vote of all members 
        of the board, amounts in addition to those authorized under 
        paragraphs (a), (b), and (c) may be expended on projects 
        described in section 298.292, subdivision 1. 
           (e) Annual administrative costs, not including detailed 
        engineering expenses for the projects, shall not exceed five 
        percent of the net interest, dividends, and earnings arising 
        from the trust in the preceding fiscal year.  
           (f) Principal and interest received in repayment of loans 
        made pursuant to this section, and earnings on other investments 
        made under section 298.292, subdivision 2, clause (4), shall be 
        deposited in the state treasury and credited to the trust.  
        These receipts are appropriated to the board for the purposes of 
        sections 298.291 to 298.298. 
           [EFFECTIVE DATE.] This section is effective January 1, 2003.
           Sec. 16.  Minnesota Statutes 2000, section 477A.15, is 
        amended to read: 
           477A.15 [TACONITE AID REIMBURSEMENT.] 
           Any school district in which is located property which had 
        been entitled to a reduction of tax pursuant to Minnesota 
        Statutes 1978, section 273.135, subdivision 2, clause (c), shall 
        receive in 1981 and subsequent years an amount equal to the 
        amount it received in 1980 pursuant to Minnesota Statutes 1978, 
        section 298.28, subdivision 1, clause (3)(b).  Payments shall be 
        made pursuant to this section and section 126C.48, subdivision 
        8, paragraph (5), by the commissioner of revenue to the taxing 
        jurisdictions on the date in each calendar year when the first 
        installment is paid under section 477A.015. 
           [EFFECTIVE DATE.] This section is effective for payments in 
        2003 and subsequent years. 
           Sec. 17.  [ADDITIONAL DISTRIBUTION.] 
           The difference between the distribution to school districts 
        under Minnesota Statutes, sections 298.225 and 298.28, as 
        amended by this act, and the amount the districts would have 
        received under Minnesota Statutes 2000, sections 298.225 and 
        298.28 for distributions in 2004 only, shall be added to the 
        sums available for expenditure under Minnesota Statutes, section 
        298.293, as governed by Minnesota Statutes, section 298.296. 
           Sec. 18.  [INSTRUCTION TO THE REVISOR.] 
           In the next edition of Minnesota Statutes, the revisor of 
        statutes shall change the phrase "Northeast Minnesota Economic 
        Protection Trust Fund Act" to "Douglas J. Johnson Economic 
        Protection Trust Fund Act" wherever it appears in Minnesota 
        Statutes. 

                                   ARTICLE 9 
                    DEPARTMENT OF REVENUE POLICY PROVISIONS
           Section 1.  Minnesota Statutes 2000, section 270.063, 
        subdivision 4, is amended to read: 
           Subd. 4.  [FEDERAL TAX REFUND OFFSET FEES; TIME LIMIT FOR 
        SUBMITTING CLAIMS FOR OFFSET.] For fees charged by the 
        department of the treasury of the United States for the offset 
        of federal tax refunds that are deducted from the refund amounts 
        remitted to the commissioner, the unpaid debts of the taxpayers 
        whose refunds are being offset to satisfy the debts are reduced 
        only by the actual amount of the refund payments received by the 
        commissioner.  Notwithstanding any other provision of law to the 
        contrary, a claim for the offset of a federal tax refund must be 
        submitted to the department of the treasury of the United States 
        within ten years after the date of the assessment of the tax 
        owed by the taxpayer whose refund is to be offset to satisfy the 
        debt. 
           [EFFECTIVE DATE.] This section is effective for claims for 
        offset that were submitted before and are pending on the date of 
        final enactment, and for claims submitted on or after the day 
        following final enactment. 
           Sec. 2.  Minnesota Statutes 2001 Supplement, section 
        270.691, subdivision 8, is amended to read: 
           Subd. 8.  [EXPIRATION DATE.] The program authorized under 
        this section terminates on June 30, 2002 2003. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 3.  Minnesota Statutes 2000, section 273.125, 
        subdivision 4, is amended to read: 
           Subd. 4.  [PETITIONS OF GRIEVANCE.] A person who claims 
        that the person's manufactured home has been unfairly or 
        unequally assessed, or that the property has been assessed at a 
        valuation greater than its real or actual value, or that the tax 
        levied against it is illegal, in whole or in part, or has been 
        paid, or that the property is exempt from the tax so levied, may 
        have the validity of the claim, defense, or objection determined 
        in court.  The determination must be made by the district court 
        of the county in which the tax is levied or by the tax court.  A 
        person can request the determination by filing a petition for it 
        in the office of the court administrator of the district court 
        on or before September October 1 of the year in which the tax 
        becomes payable.  A petition for determination under this 
        section may be transferred by the district court to the tax 
        court. 
           [EFFECTIVE DATE.] This section is effective for taxes 
        payable in 2003 and thereafter. 
           Sec. 4.  Minnesota Statutes 2000, section 278.01, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [DETERMINATION OF VALIDITY.] (a) Any person 
        having personal property, or any estate, right, title, or 
        interest in or lien upon any parcel of land, who claims that 
        such property has been partially, unfairly, or unequally 
        assessed in comparison with other property in the (1) city, or 
        (2) county, or (3) in the case of a county containing a city of 
        the first class, the portion of the county excluding the first 
        class city, or that the parcel has been assessed at a valuation 
        greater than its real or actual value, or that the tax levied 
        against the same is illegal, in whole or in part, or has been 
        paid, or that the property is exempt from the tax so levied, may 
        have the validity of the claim, defense, or objection determined 
        by the district court of the county in which the tax is levied 
        or by the tax court by serving one copy of a petition for such 
        determination upon the county auditor, one copy on the county 
        attorney, one copy on the county treasurer, and three copies on 
        the county assessor.  The county assessor shall immediately 
        forward one copy of the petition to the appropriate governmental 
        authority in a home rule charter or statutory city or town in 
        which the property is located if that city or town employs its 
        own certified assessor.  A copy of the petition shall also be 
        forwarded by the assessor to the school board of the school 
        district in which the property is located. 
           (b) In counties where the office of county treasurer has 
        been combined with the office of county auditor, the county may 
        elect to require the petitioner to serve the number of copies as 
        determined by the county.  The county assessor shall immediately 
        forward one copy of the petition to the appropriate governmental 
        authority in a home rule charter or statutory city or town in 
        which the property is located if that city or town employs its 
        own certified assessor.  A list of petitioned properties, 
        including the name of the petitioner, the identification number 
        of the property, and the estimated market value, shall be sent 
        on or before the first day of July by the county 
        auditor/treasurer to the school board of the school district in 
        which the property is located. 
           (c) For all counties, the petitioner must file the copies 
        with proof of service, in the office of the court administrator 
        of the district court on or before March 31 April 30 of the year 
        in which the tax becomes payable.  A petition for determination 
        under this section may be transferred by the district court to 
        the tax court.  An appeal may also be taken to the tax court 
        under chapter 271 at any time following receipt of the valuation 
        notice required by section 273.121 but prior to April May 1 of 
        the year in which the taxes are payable. 
           [EFFECTIVE DATE.] This section is effective for taxes 
        payable in 2003 and thereafter. 
           Sec. 5.  Minnesota Statutes 2000, section 279.01, 
        subdivision 3, is amended to read: 
           Subd. 3.  [AGRICULTURAL PROPERTY.] In the case of class 1b 
        agricultural homestead, class 2a agricultural homestead 
        property, and class 2b(3) agricultural nonhomestead property, no 
        penalties shall attach to the second one-half property tax 
        payment as provided in this section if paid by November 15.  
        Thereafter for class 1b agricultural homestead and class 2a 
        homestead property, on November 16 following, a penalty of six 
        percent shall accrue and be charged on all such unpaid taxes and 
        on December 1 following, an additional two percent shall be 
        charged on all such unpaid taxes.  Thereafter for class 2b(3) 
        agricultural nonhomestead property, on November 16 following, a 
        penalty of eight percent shall accrue and be charged on all such 
        unpaid taxes and on December 1 following, an additional four 
        percent shall be charged on all such unpaid taxes. 
           If the owner of class 1b agricultural homestead, class 2a, 
        or class 2b(3) agricultural property receives a consolidated 
        property tax statement that shows only an aggregate of the taxes 
        and special assessments due on that property and on other 
        property not classified as class 1b agricultural homestead, 
        class 2a, or class 2b(3) agricultural property, the aggregate 
        tax and special assessments shown due on the property by the 
        consolidated statement will be due on November 15 provided that 
        at least 50 percent of the property's market value is classified 
        class 1b agricultural, class 2a, or class 2b(3) agricultural. 
           [EFFECTIVE DATE.] This section is effective for taxes 
        payable in 2003 and thereafter. 
           Sec. 6.  Minnesota Statutes 2000, 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 
        entertainment tax 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.  The 
        commissioner shall grant an automatic extension of six months to 
        file a partnership, "S" corporation, or fiduciary income tax 
        return if all of the taxes imposed on the entity for the year by 
        chapter 290 and section 289A.08, subdivision 7, have been paid 
        by the date prescribed by section 289A.18, subdivision 1. 
           [EFFECTIVE DATE.] This section is effective for returns due 
        after December 31, 2002. 
           Sec. 7.  Minnesota Statutes 2000, 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), (10), (13), or (20); 
           (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), (10), (13), or (20); 
           (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) otherwise exempt under chapter 295; 
           (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; 
           (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 
        hearing aids and related equipment or prescription eyewear 
        delivered outside of Minnesota; 
           (18) payments received by an 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; 
           (19) payments received for services provided by:  assisted 
        living programs and congregate housing programs; and 
           (20) payments received under the federal Employees Health 
        Benefits Act, United States Code, title 5, section 8909(f), as 
        amended by the Omnibus Reconciliation Act of 1990. 
           (b) Payments received by wholesale drug distributors for 
        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. 
           [EFFECTIVE DATE.] This section is effective for payments 
        received after December 31, 2001. 
           Sec. 8.  Minnesota Statutes 2000, section 295.57, is 
        amended by adding a subdivision to read: 
           Subd. 5.  [EXEMPTION FOR AMOUNTS PAID FOR LEGEND DRUGS.] If 
        a hospital or health care provider cannot determine the actual 
        cost or reimbursement of legend drugs under the exemption 
        provided in section 295.53, subdivision 1, paragraph (a), clause 
        (6), the following method must be used: 
           A hospital or health care provider must determine the 
        amount paid for legend drugs used during the month or quarter 
        and multiply that amount by a ratio, the numerator of which is 
        the total amount received for taxable patient services, and the 
        denominator of which is the total amount received for all 
        patient services, including amounts exempt under section 295.53, 
        subdivision 1.  The result represents the allowable exemption 
        for the monthly or quarterly cost of drugs. 
           [EFFECTIVE DATE.] This section is effective for payments 
        received on or after July 1, 2002. 
           Sec. 9.  Minnesota Statutes 2001 Supplement, section 
        295.60, subdivision 2, is amended to read: 
           Subd. 2.  [DEFINITIONS.] (a) For purposes of this section, 
        the following terms have the meanings given. 
           (b) "Commissioner" means the commissioner of revenue. 
           (c) "Furrier" means a retailer that sells clothing made of 
        fur. 
           (d) "Clothing made of fur" means articles of clothing made 
        of fur on the hide or pelt, and articles of clothing of which 
        such fur is the component material of chief value, but only if 
        such value is more than three times the value of the next most 
        valuable material.  
           (e) "Retail sale" has the meaning given in section 297A.61, 
        subdivision 4. 
           (f) "Delivered outside of Minnesota" means fur clothing 
        which the furrier delivers to a common carrier for delivery 
        outside Minnesota, places in the United States mail or parcel 
        post directed to the purchaser outside Minnesota, or delivers to 
        the purchaser outside Minnesota by means of the seller's own 
        delivery vehicles, and which is not returned to a point within 
        Minnesota, except in the course of interstate commerce. 
           [EFFECTIVE DATE.] This section is effective January 1, 2002.
           Sec. 10.  Minnesota Statutes 2001 Supplement, section 
        295.60, is amended by adding a subdivision to read: 
           Subd. 2a.  [EXEMPTIONS.] Payments received by a furrier for 
        clothing made of fur delivered outside of Minnesota are exempt 
        from gross revenues subject to the fur clothing tax. 
           [EFFECTIVE DATE.] This section is effective for payments 
        received on or after January 1, 2002. 
           Sec. 11.  Minnesota Statutes 2001 Supplement, section 
        297A.61, subdivision 26, is amended to read: 
           Subd. 26.  [PRIVATE COMMUNICATION SERVICE.] "Private 
        communication service" means a communication telecommunication 
        service furnished to a subscriber which that entitles the 
        subscriber customer to:  
           (1) exclusive or priority use of any a communication 
        channel or group of channels; 
           (2) the use of an intercommunication system for the 
        subscriber's stations, or regardless of whether the channel, 
        group of channels, or intercommunication system may be connected 
        through switching; 
           (3) the between or among termination points, regardless of 
        the manner in which the channel or channels are connected, and 
        includes switching capacity, extension lines and, stations, 
        or and any other associated services that are provided in 
        connection with, and are necessary or unique to the use of, the 
        use of the channel or channels or systems described in clause 
        (1); or 
           (4) any combination of tunneling, encryption, 
        authentication, and access control technologies and services 
        used to carry traffic over the Internet, a managed Internet 
        provider network or provider's backbone. 
           [EFFECTIVE DATE.] This section is effective retroactively 
        for sales and purchases occurring after July 31, 2001. 
           Sec. 12.  Minnesota Statutes 2000, section 297A.68, is 
        amended by adding a subdivision to read: 
           Subd. 36.  [DELIVERY OR DISTRIBUTION CHARGES; PRINTED 
        MATERIALS.] Charges for the delivery or distribution of printed 
        materials, including individual account information, are exempt 
        if (1) the charges are separately stated, (2) the delivery or 
        distribution is to a mass audience or to a mailing list provided 
        at the direction of the customer, and (3) the cost of the 
        materials is not billed directly to the recipients. 
           [EFFECTIVE DATE.] This section is effective retroactive to 
        delivery charges on sales and purchases made after December 31, 
        2001, and before January 1, 2006. 
           Sec. 13.  Minnesota Statutes 2000, section 297G.07, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [EXEMPTIONS.] The following are not subject 
        to the excise tax: 
           (1) Sales by a manufacturer, brewer, or wholesaler for 
        shipment outside the state in interstate commerce. 
           (2) Alcoholic beverages sold or transferred between 
        Minnesota wholesalers. 
           (3) Sales to common carriers engaged in interstate 
        transportation of passengers, except as provided in this chapter.
           (4) Malt beverages served by a brewery for on-premise 
        consumption at no charge, or distributed to brewery employees 
        for on-premise consumption under a labor contract. 
           (5) Shipments of wine to Minnesota residents under section 
        340A.417. 
           (6) Fruit juices naturally fermented or beer naturally 
        brewed in the home for family use. 
           (7) Sales of wine for sacramental purposes under section 
        340A.316. 
           (8) Alcoholic beverages sold to authorized manufacturers of 
        food products or pharmaceutical firms.  The alcoholic beverage 
        must be used exclusively in the manufacture of food products or 
        medicines.  For purposes of this clause, "manufacturer" means a 
        person who manufactures food products intended for sale to 
        wholesalers or retailers for ultimate sale to the consumer. 
           (9) Liqueur-filled candy. 
           (10) Sales to a federal agency, that the state of Minnesota 
        is prohibited from taxing under the constitution or laws of the 
        United States or under the constitution of Minnesota. 
           (11) Sales to Indian tribes as defined in section 297G.08. 
           (12) Shipments of intoxicating liquor from foreign 
        countries to diplomatic personnel of foreign countries assigned 
        to service in this state. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 14.  Minnesota Statutes 2001 Supplement, section 
        469.1763, subdivision 6, is amended to read: 
           Subd. 6.  [POOLING PERMITTED FOR DEFICITS.] (a) This 
        subdivision applies only to districts for which the request for 
        certification was made before August 1, 2001, and without regard 
        to whether the request for certification was made prior to 
        August 1, 1979. 
           (b) The municipality for the district may transfer 
        available increments from another tax increment financing 
        district located in the municipality, if the transfer is 
        necessary to eliminate a deficit in the district to which the 
        increments are transferred.  A deficit in the district for 
        purposes of this subdivision means the lesser of the following 
        two amounts: 
           (1)(i) the amount due during the calendar year to pay 
        preexisting obligations of the district; minus 
           (ii) the total increments collected or to be collected from 
        properties located within the district that are available for 
        the calendar year including amounts collected in prior years 
        that are currently available; plus 
           (iii) total increments from properties located in other 
        districts in the municipality including amounts collected in 
        prior years that are available to be used to meet the district's 
        obligations under this section, excluding this subdivision, or 
        other provisions of law (but excluding a special tax under 
        section 469.1791 and the grant program under Laws 1997, chapter 
        231, article 1, section 19, or Laws 2001, First Special Session 
        chapter 5); or 
           (2) the reduction in increments collected from properties 
        located in the district for the calendar year as a result of the 
        changes in class rates in Laws 1997, chapter 231, article 1; 
        Laws 1998, chapter 389, article 2; and Laws 1999, chapter 243, 
        and Laws 2001, First Special Session chapter 5, or the 
        elimination of the general education tax levy under Laws 2001, 
        First Special Session chapter 5. 
           (c) A preexisting obligation means: 
           (1) bonds issued and sold before August 1, 2001, or bonds 
        issued pursuant to a binding contract requiring the issuance of 
        bonds entered into before July 1, 2001, and bonds issued to 
        refund such bonds or to reimburse expenditures made in 
        conjunction with a signed contractual agreement entered into 
        before August 1, 2001, to the extent that the bonds are secured 
        by a pledge of increments from the tax increment financing 
        district; and 
           (2) binding contracts entered into before August 1, 2001, 
        to the extent that the contracts require payments secured by a 
        pledge of increments from the tax increment financing district. 
           (d) The municipality may require a development authority, 
        other than a seaway port authority, to transfer available 
        increments including amounts collected in prior years that are 
        currently available for any of its tax increment financing 
        districts in the municipality to make up an insufficiency in 
        another district in the municipality, regardless of whether the 
        district was established by the development authority or another 
        development authority.  This authority applies notwithstanding 
        any law to the contrary, but applies only to a development 
        authority that: 
           (1) was established by the municipality; or 
           (2) the governing body of which is appointed, in whole or 
        part, by the municipality or an officer of the municipality or 
        which consists, in whole or part, of members of the governing 
        body of the municipality.  The municipality may use this 
        authority only after it has first used all available increments 
        of the receiving development authority to eliminate the 
        insufficiency and exercised any permitted action under section 
        469.1792, subdivision 3, for preexisting districts of the 
        receiving development authority to eliminate the insufficiency. 
           (e) The authority under this subdivision to spend tax 
        increments outside of the area of the district from which the 
        tax increments were collected: 
           (1) may only be exercised after obtaining approval of the 
        use of the increments, in writing, by the commissioner of 
        revenue; 
           (2) is an exception to the restrictions under section 
        469.176, subdivision 4i, and the other provisions of this 
        section, and the percentage restrictions under subdivision 2 
        must be calculated after deducting increments spent under this 
        subdivision from the total increments for the district; and 
           (3) applies notwithstanding the provisions of the Tax 
        Increment Financing Act in effect for districts for which the 
        request for certification was made before June 30, 1982, or any 
        other law to the contrary. 
           (f) If a preexisting obligation requires the development 
        authority to pay an amount that is limited to the increment from 
        the district or a specific development within the district and 
        if the obligation requires paying a higher amount to the extent 
        that increments are available, the municipality may determine 
        that the amount due under the preexisting obligation equals the 
        higher amount and may authorize the transfer of increments under 
        this subdivision to pay up to the higher amount.  The authority 
        to transfer increments under this paragraph may only be used to 
        the extent that the payment of all other preexisting obligations 
        in the municipality due during the calendar year have been 
        satisfied. 
           [EFFECTIVE DATE.] This section is effective retroactively 
        to January 2, 2002, and thereafter. 

                                   ARTICLE 10 
                   DEPARTMENT OF REVENUE TECHNICAL PROVISIONS
           Section 1.  Minnesota Statutes 2001 Supplement, section 
        69.021, subdivision 5, is amended to read: 
           Subd. 5.  [CALCULATION OF STATE AID.] (a) The amount of 
        fire state aid available for apportionment, before the addition 
        of the minimum fire state aid allocation amount under 
        subdivision 7, is equal to 107 percent of the amount of premium 
        taxes paid to the state upon the fire, lightning, sprinkler 
        leakage, and extended coverage premiums reported to the 
        commissioner by insurers on the Minnesota Firetown Premium 
        Report.  This amount shall be reduced by the amount required to 
        pay the state auditor's costs and expenses of the audits or 
        exams of the firefighters relief associations. 
           The total amount for apportionment in respect to fire state 
        aid must not be less than two percent of the premiums reported 
        to the commissioner by insurers on the Minnesota Firetown 
        Premium Report after subtracting the following amounts: 
           (1) the amount required to pay the state auditor's costs 
        and expenses of the audits or exams of the firefighters relief 
        associations; and 
           (2) one percent of the premiums reported by town and 
        farmers' mutual insurance companies and mutual property and 
        casualty companies with total assets of $5,000,000 or less.  
           (b) The total amount for apportionment as police state aid 
        is equal to 104 percent of the amount of premium taxes paid to 
        the state on the premiums reported to the commissioner by 
        insurers on the Minnesota Aid to Police Premium Report, plus the 
        payment amounts received under section 297I.05, subdivision 8, 
        since the last aid apportionment, and reduced by the amount 
        required to pay the costs and expenses of the state auditor for 
        audits or exams of police relief associations.  The total amount 
        for apportionment in respect to the police state aid program 
        must not be less than two percent of the amount of premiums 
        reported to the commissioner by insurers on the Minnesota Aid to 
        Police Premium Report after subtracting the amount required to 
        pay the state auditor's cost and expenses of the audits or exams 
        of the police relief associations.  
           (c) The commissioner shall calculate the percentage of 
        increase or decrease reflected in the apportionment over or 
        under the previous year's available state aid using the same 
        premiums as a basis for comparison. 
           (d) The amount for apportionment in respect to peace 
        officer state aid under paragraph (b) must be further reduced by 
        $1,779,000 in fiscal year 1999, $2,077,000 in fiscal year 2000, 
        and $2,404,000 in fiscal year 2001.  These reductions in this 
        paragraph cancel to the general fund. 
           (e) In addition to the amount for apportionment of police 
        state aid under paragraph (b) is annually increased by an amount 
        equal to the revenues under the tax on automobile risk 
        self-insurance under Minnesota Statutes 2000, section 297I.05, 
        subdivision 8, that were collected in fiscal year 2001, each 
        year $100,000 shall be apportioned for police state aid.  An 
        amount sufficient to pay this increase is annually appropriated 
        from the general fund. 
           [EFFECTIVE DATE.] This section is effective beginning with 
        fiscal year 2003. 
           Sec. 2.  Minnesota Statutes 2001 Supplement, section 
        126C.17, subdivision 7a, is amended to read: 
           Subd. 7a.  [REFERENDUM TAX BASE REPLACEMENT AID.] For each 
        school district that had a referendum allowance for fiscal year 
        2002 exceeding $415, for each separately authorized referendum 
        levy, the commissioner of revenue, in consultation with the 
        commissioner of children, families, and learning, shall certify 
        the amount of the referendum levy in taxes payable year 2001 
        attributable to the portion of the referendum allowance 
        exceeding $415 levied against property classified as class 2, 
        noncommercial 4c(1), or 4c(4), under section 273.13, excluding 
        the portion of the tax paid by the portion of class 2a property 
        consisting of the house, garage, and surrounding one acre of 
        land.  The resulting amount must be used to reduce the 
        district's referendum levy amount otherwise determined, and must 
        be paid to the district each year that the referendum authority 
        remains in effect.  The aid payable under this subdivision must 
        be subtracted from the district's referendum equalization aid 
        under subdivision 7.  The referendum equalization aid after the 
        subtraction must not be less than zero. 
           For the purposes of this subdivision, the referendum levy 
        with the latest year of expiration is assumed to be at the 
        highest level of equalization, and the referendum levy with the 
        earliest year of expiration is assumed to be at the lowest level 
        of equalization. 
           [EFFECTIVE DATE.] This section is effective for taxes 
        payable in 2002 and thereafter. 
           Sec. 3.  Minnesota Statutes 2001 Supplement, section 
        270.69, subdivision 2, is amended to read: 
           Subd. 2.  [FILING OF LIENS NECESSARY FOR ENFORCEABILITY 
        AGAINST CERTAIN PERSONS; METHODS OF FILING; FEES.] (a) The lien 
        imposed by subdivision 1 is not enforceable against any 
        purchaser, mortgagee, pledgee, holder of a Uniform Commercial 
        Code security interest, mechanic's lienor, or judgment lien 
        creditor whose interest has been duly perfected or is a 
        conveyance or interest entitled to protection against judgments 
        and attachments under section 507.34 or under any other 
        applicable provisions of state law, until a notice of lien has 
        been filed by the commissioner of revenue in the office of the 
        county recorder of the county in which real property is 
        situated, or in the case of personal property belonging to an 
        individual who is not a resident of this state or to a 
        corporation, partnership, or other organization, in the office 
        of the secretary of state, or in the case of personal property 
        belonging to a resident individual, in the office of the county 
        recorder of the county of residence of the individual. 
           (b)(1) Notices of liens, and lien releases, transcriptions, 
        and renewals, in a form prescribed by the commissioner of 
        revenue, may be filed with the county recorder or the secretary 
        of state by mail, personal delivery, or by electronic 
        transmission by the commissioner or a delegate into the 
        computerized filing system of the secretary of state.  The 
        secretary of state shall transmit the notice electronically to 
        the office of the county recorder, if that is the place of 
        filing, in the county or counties shown on the computer entry.  
        The filing officer, whether the county recorder or the secretary 
        of state, shall endorse and index a printout of the notice in 
        the same manner as if the notice had been mailed or delivered.  
           (2) County recorders and the secretary of state shall enter 
        information relative to lien notices, transcriptions, renewals, 
        and releases filed in their offices into the central database of 
        the secretary of state.  For notices filed electronically with 
        the county recorders, the date and time of receipt of the notice 
        and county recorder's file number, and for notices filed 
        electronically with the secretary of state, the secretary of 
        state's recording information, must be entered by the filing 
        officer into the central database before the close of the 
        working day following the day of the original data entry by the 
        department of revenue.  
           The filing and indexing of all notices must be in 
        accordance with the filing and indexing of notices of federal 
        liens, certificates of release, and refiled notices under 
        section 272.483.  
           (c) Notwithstanding any other law to the contrary, the 
        department of revenue is exempt from payment of fees when a 
        lien, lien renewal, or lien transcription is offered for 
        recording.  The recording fees must be paid along with the 
        release fee at the end of the month in which the release of lien 
        is recorded, after receipt of a monthly statement from a county 
        recorder or the secretary of state.  The department of revenue 
        shall add the recording fees to the delinquent tax liability of 
        the taxpayer.  Notwithstanding any other law to the contrary, 
        the fee for filing or recording a notice of lien, or lien 
        release, transcription, or renewal is $15.  
           (d) There is appropriated to the commissioner of revenue an 
        amount representing the cost of payment of recording fees to the 
        county recorders and the secretary of state.  The commissioner 
        shall keep a separate accounting of the costs and of payments 
        for recording fees remitted by taxpayers, and make the records 
        available to the legislature upon request.  
           [EFFECTIVE DATE.] As to the protection of interests in 
        property of third parties, this section is effective for liens 
        of record and enforceable as of the day following final 
        enactment, and for liens filed thereafter.  As to the place of 
        filing of liens against personal property, this section is 
        effective for liens filed on or after the day following final 
        enactment. 
           Sec. 4.  Minnesota Statutes 2000, section 272.02, 
        subdivision 15, is amended to read: 
           Subd. 15.  [PROPERTY USED TO GENERATE HYDROELECTRIC OR 
        HYDROMECHANICAL POWER.] To the extent provided by section 295.44 
        Notwithstanding the provisions of subdivision 39, and sections 
        272.01, subdivision 2, and 273.19, subdivision 1, real and 
        personal property used or to be used primarily for the 
        production of hydroelectric or hydromechanical power on a site 
        owned by the federal government, the state, or a local 
        governmental unit which is and developed and operated pursuant 
        to the provisions of section 103G.535 is exempt from property 
        tax for all years during which the site is developed and 
        operated under the terms of a lease or agreement authorized by 
        section 103G.535. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 5.  Minnesota Statutes 2001 Supplement, section 
        273.121, is amended to read: 
           273.121 [VALUATION OF REAL PROPERTY, NOTICE.] 
           Any county assessor or city assessor having the powers of a 
        county assessor, valuing or classifying taxable real property 
        shall in each year notify those persons whose property is to be 
        included on the assessment roll that year if the person's 
        address is known to the assessor, otherwise the occupant of the 
        property.  The notice shall be in writing and shall be sent by 
        ordinary mail at least ten days before the meeting of the local 
        board of appeal and equalization under section 274.01 or the 
        review process established under section 274.13, subdivision 
        1c.  It shall contain:  (1) the market value for the current and 
        prior assessment, (2) the limited market value under section 
        273.11, subdivision 1a, for the current and prior assessment, (3)
        the qualifying amount of any improvements under section 273.11, 
        subdivision 16, for the current assessment, (4) the market value 
        subject to taxation after subtracting the amount of any 
        qualifying improvements for the current assessment, (5) the 
        classification of the property for the current and prior 
        assessment, (6) a note that if the property is homestead and at 
        least 35 45 years old, improvements made to the property may be 
        eligible for a valuation exclusion under section 273.11, 
        subdivision 16, (7) the assessor's office address, and (8) the 
        dates, places, and times set for the meetings of the local board 
        of appeal and equalization, the review process established under 
        section 274.13, subdivision 1c, and the county board of appeal 
        and equalization.  The commissioner of revenue shall specify the 
        form of the notice.  The assessor shall attach to the assessment 
        roll a statement that the notices required by this section have 
        been mailed.  Any assessor who is not provided sufficient funds 
        from the assessor's governing body to provide such notices, may 
        make application to the commissioner of revenue to finance such 
        notices.  The commissioner of revenue shall conduct an 
        investigation and, if satisfied that the assessor does not have 
        the necessary funds, issue a certification to the commissioner 
        of finance of the amount necessary to provide such notices.  The 
        commissioner of finance shall issue a warrant for such amount 
        and shall deduct such amount from any state payment to such 
        county or municipality.  The necessary funds to make such 
        payments are hereby appropriated.  Failure to receive the notice 
        shall in no way affect the validity of the assessment, the 
        resulting tax, the procedures of any board of review or 
        equalization, or the enforcement of delinquent taxes by 
        statutory means. 
           [EFFECTIVE DATE.] This section is effective for notices 
        required to be mailed in 2002 and thereafter. 
           Sec. 6.  Minnesota Statutes 2001 Supplement, section 
        273.13, subdivision 24, is amended to read: 
           Subd. 24.  [CLASS 3.] (a) Commercial and industrial 
        property and utility real and personal property is class 3a.  
           (1) Except as otherwise provided, each parcel of 
        commercial, industrial, or utility real property has a class 
        rate of 1.5 percent of the first tier of market value, and 2.0 
        percent of the remaining market value.  In the case of 
        contiguous parcels of property owned by the same person or 
        entity, only the value equal to the first-tier value of the 
        contiguous parcels qualifies for the reduced class rate, except 
        that contiguous parcels owned by the same person or entity shall 
        be eligible for the first-tier value class rate on each separate 
        business operated by the owner of the property, provided the 
        business is housed in a separate structure.  For the purposes of 
        this subdivision, the first tier means the first $150,000 of 
        market value.  Real property owned in fee by a utility for 
        transmission line right-of-way shall be classified at the class 
        rate for the higher tier.  
           For purposes of this subdivision, parcels are considered to 
        be contiguous even if they are separated from each other by a 
        road, street, waterway, or other similar intervening type of 
        property.  Connections between parcels that consist of power 
        lines or pipelines do not cause the parcels to be contiguous.  
        Property owners who have contiguous parcels of property that 
        constitute separate businesses that may qualify for the 
        first-tier class rate shall notify the assessor by July 1, for 
        treatment beginning in the following taxes payable year.  
           (2) All railroad operating property and All personal 
        property that is:  (i) part of an electric generation, 
        transmission, or distribution system; or (ii) part of a pipeline 
        system transporting or distributing water, gas, crude oil, or 
        petroleum products; and (iii) not described in clause (3), and 
        all railroad operating property has a class rate as provided 
        under clause (1) for the first tier of market value and the 
        remaining market value.  In the case of multiple parcels in one 
        county that are owned by one person or entity, only one first 
        tier amount is eligible for the reduced rate.  
           (3) The entire market value of personal property that is:  
        (i) tools, implements, and machinery of an electric generation, 
        transmission, or distribution system; (ii) tools, implements, 
        and machinery of a pipeline system transporting or distributing 
        water, gas, crude oil, or petroleum products; or (iii) the mains 
        and pipes used in the distribution of steam or hot or chilled 
        water for heating or cooling buildings, has a class rate as 
        provided under clause (1) for the remaining market value in 
        excess of the first tier. 
           (b) Employment property defined in section 469.166, during 
        the period provided in section 469.170, shall constitute class 
        3b.  The class rates for class 3b property are determined under 
        paragraph (a). 
           [EFFECTIVE DATE.] This section is effective for taxes 
        payable in 2002 and thereafter. 
           Sec. 7.  Minnesota Statutes 2001 Supplement, 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 
        and agricultural credits under section 273.1384; 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 127A.45, subdivisions 9 and 13. 
           [EFFECTIVE DATE.] This section is effective for aids and 
        credits payable in 2002 and thereafter. 
           Sec. 8.  Minnesota Statutes 2001 Supplement, section 
        273.1398, subdivision 4c, is amended to read: 
           Subd. 4c.  [TEMPORARY AID; COURT ADMINISTRATION COSTS.] For 
        calendar years 2004 and 2005, each county in a judicial district 
        that has not been transferred to the state by January 1 of that 
        year shall receive additional homestead and agricultural credit 
        aid.  This amount is in addition to the amount calculated under 
        subdivision 2 and must not be included in the definition of 
        homestead and agricultural credit base under subdivision 1, 
        paragraph (j).  The amount of additional aid is equal to the 
        difference between (1) the amount budgeted for court 
        administration costs in 2001 as determined under subdivision 4b, 
        paragraph (c) (b), multiplied by the maintenance of effort 
        percent for the calendar year as determined under subdivision 
        4b, paragraph (d) (a), and (2) the amount calculated under 
        subdivision 4b, paragraph (a), for calendar year 2003.  This 
        additional aid must be used only to fund court administration 
        expenditures as defined in section 480.183, subdivision 3.  This 
        amount must be added to the state court's base budget in the 
        year when the court in that judicial district in which the 
        county is located is transferred to the state. 
           [EFFECTIVE DATE.] This section is effective retroactively 
        to July 1, 2001, and thereafter. 
           Sec. 9.  Minnesota Statutes 2001 Supplement, section 
        275.74, subdivision 2, is amended to read: 
           Subd. 2.  [AUTHORIZATION FOR SPECIAL LEVIES.] A local 
        governmental unit may request authorization to levy for 
        unreimbursed costs for other natural disasters under section 
        275.70, subdivision 5, clause (6) (7).  The local governmental 
        unit shall submit a request to levy under section 275.70, 
        subdivision 5, clause (6) (7), to the commissioner of revenue by 
        September 30 of the levy year and the request must include 
        information documenting the estimated unreimbursed costs.  The 
        commissioner of revenue may grant levy authority, up to the 
        amount requested based on the documentation submitted.  All 
        decisions of the commissioner are final. 
           [EFFECTIVE DATE.] This section is effective for taxes 
        payable in 2002 and 2003. 
           Sec. 10.  Minnesota Statutes 2001 Supplement, section 
        289A.60, subdivision 2, is amended to read: 
           Subd. 2.  [PENALTY FOR FAILURE TO MAKE AND FILE RETURN.] If 
        a taxpayer fails to make and file a tax return within the time 
        prescribed, including an extension, or fails to file an 
        individual income tax return within six months after the due 
        date, a penalty of five percent of the amount of tax not paid by 
        the end of that period is added to the tax.  
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 11.  Minnesota Statutes 2000, section 290.067, 
        subdivision 2a, is amended to read: 
           Subd. 2a.  [INCOME.] (a) For purposes of this section, 
        "income" means the sum of the following: 
           (1) federal adjusted gross income as defined in section 62 
        of the Internal Revenue Code; and 
           (2) the sum of the following amounts to the extent not 
        included in clause (1): 
           (i) all nontaxable income; 
           (ii) the amount of a passive activity loss that is not 
        disallowed as a result of section 469, paragraph (i) or (m) of 
        the Internal Revenue Code and the amount of passive activity 
        loss carryover allowed under section 469(b) of the Internal 
        Revenue Code; 
           (iii) an amount equal to the total of any discharge of 
        qualified farm indebtedness of a solvent individual excluded 
        from gross income under section 108(g) of the Internal Revenue 
        Code; 
           (iv) cash public assistance and relief; 
           (v) any pension or annuity (including railroad retirement 
        benefits, all payments received under the federal Social 
        Security Act, supplemental security income, and veterans 
        benefits), which was not exclusively funded by the claimant or 
        spouse, or which was funded exclusively by the claimant or 
        spouse and which funding payments were excluded from federal 
        adjusted gross income in the years when the payments were made; 
           (vi) interest received from the federal or a state 
        government or any instrumentality or political subdivision 
        thereof; 
           (vii) workers' compensation; 
           (viii) nontaxable strike benefits; 
           (ix) the gross amounts of payments received in the nature 
        of disability income or sick pay as a result of accident, 
        sickness, or other disability, whether funded through insurance 
        or otherwise; 
           (x) a lump sum distribution under section 402(e)(3) of the 
        Internal Revenue Code; 
           (xi) contributions made by the claimant to an individual 
        retirement account, including a qualified voluntary employee 
        contribution; simplified employee pension plan; self-employed 
        retirement plan; cash or deferred arrangement plan under section 
        401(k) of the Internal Revenue Code; or deferred compensation 
        plan under section 457 of the Internal Revenue Code; and 
           (xii) nontaxable scholarship or fellowship grants. 
           In the case of an individual who files an income tax return 
        on a fiscal year basis, the term "federal adjusted gross income" 
        means federal adjusted gross income reflected in the fiscal year 
        ending in the next calendar year.  Federal adjusted gross income 
        may not be reduced by the amount of a net operating loss 
        carryback or carryforward or a capital loss carryback or 
        carryforward allowed for the year. 
           (b) "Income" does not include: 
           (1) amounts excluded pursuant to the Internal Revenue Code, 
        sections 101(a) and 102; 
           (2) amounts of any pension or annuity that were exclusively 
        funded by the claimant or spouse if the funding payments were 
        not excluded from federal adjusted gross income in the years 
        when the payments were made; 
           (3) surplus food or other relief in kind supplied by a 
        governmental agency; 
           (4) relief granted under chapter 290A; and 
           (5) child support payments received under a temporary or 
        final decree of dissolution or legal separation; and 
           (6) restitution payments received by eligible individuals 
        and excludable interest as defined in section 803 of the 
        Economic Growth and Tax Relief Reconciliation Act of 2001, 
        Public Law Number 107-16. 
           [EFFECTIVE DATE.] This section is effective for tax years 
        beginning after December 31, 2000. 
           Sec. 12.  Minnesota Statutes 2001 Supplement, section 
        290.0675, subdivision 1, is amended to read: 
           Subdivision 1.  [DEFINITIONS.] (a) For purposes of this 
        section the following terms have the meanings given. 
           (b) "Earned income" means the sum of the following, to the 
        extent included in Minnesota taxable income: 
           (1) earned income as defined in section 32(c)(2) of the 
        Internal Revenue Code; 
           (2) income received from a retirement pension, 
        profit-sharing, stock bonus, or annuity plan; and 
           (3) social security benefits as defined in section 86(d)(1) 
        of the Internal Revenue Code. 
           (c) "Taxable income" means net income as defined in section 
        290.01, subdivision 19. 
           (d) "Earned income of lesser-earning spouse" means the 
        earned income of the spouse with the lesser amount of earned 
        income as defined in paragraph (b) for the taxable year minus 
        the sum of (i) the amount for one exemption under section 151(d) 
        of the Internal Revenue Code and (ii) one-half the amount of the 
        standard deduction under section 63(c)(2)(A) and (4) of the 
        Internal Revenue Code.  
           [EFFECTIVE DATE.] This section is effective for tax years 
        beginning after December 31, 2000. 
           Sec. 13.  Minnesota Statutes 2001 Supplement, section 
        290.0675, subdivision 3, is amended to read: 
           Subd. 3.  [CREDIT AMOUNT.] The credit amount is the 
        difference between the tax on the couple's joint Minnesota 
        taxable income under the rates in section 290.06, subdivision 
        2c, paragraph (a), and the sum of the tax under the rates of 
        section 290.06, subdivision 2c, paragraph (b), on the earned 
        income of the lesser-earning spouse, and the tax under the rates 
        of section 290.06, subdivision 2c, paragraph (b), on the 
        couple's joint Minnesota taxable income, minus the earned income 
        of the lesser-earning spouse. 
           For taxable years beginning after December 31, 2001, The 
        commissioner of revenue shall prepare and make available to 
        taxpayers a comprehensive table showing the credit under this 
        section at brackets of earnings of the lesser-earning spouse and 
        joint taxable income.  The brackets of earnings shall not be 
        more than $2,000. 
           For taxable years beginning after December 31, 2002, the 
        commissioner shall update the table as necessary to provide a 
        credit that reflects the relationship between the marginal tax 
        rates imposed under section 290.06, subdivision 2c. 
           [EFFECTIVE DATE.] This section is effective for tax years 
        beginning after December 31, 2000. 
           Sec. 14.  Minnesota Statutes 2001 Supplement, section 
        290.0921, subdivision 2, is amended to read: 
           Subd. 2.  [DEFINITIONS.] (a) For purposes of this section, 
        the following terms have the meanings given them. 
           (b) "Alternative minimum taxable net income" is alternative 
        minimum taxable income, 
           (1) less the exemption amount, and 
           (2) apportioned or allocated to Minnesota under section 
        290.17, 290.191, or 290.20. 
           (c) The "exemption amount" is $40,000, reduced, but not 
        below zero, by 25 percent of the excess of alternative minimum 
        taxable income over $150,000. 
           (d) "Minnesota alternative minimum taxable income" is 
        alternative minimum taxable net income, less the deductions for 
        alternative tax net operating loss under subdivision 4; 
        charitable contributions under subdivision 5; and dividends 
        received under subdivision 6.  The sum of the deductions under 
        this paragraph may not exceed 90 percent of alternative minimum 
        taxable net income.  This limitation does not apply to a 
        deduction for dividends paid to or received from a corporation 
        which is subject to tax under section 290.36 and which is a 
        member of an affiliated group of corporations as defined by the 
        Internal Revenue Code. 
           [EFFECTIVE DATE.] This section is effective for taxable 
        years beginning after December 31, 2001. 
           Sec. 15.  Minnesota Statutes 2000, 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), (a)(3), and (a)(4), 
        income from wages as defined in section 3401(a) and (f) of the 
        Internal Revenue Code is assigned to this state if, and to the 
        extent that, the work of the employee is 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.  For purposes 
        of this paragraph, off-season training activities, unless 
        conducted at the team's facilities as part of a team imposed 
        program, are not included in the total number of duty days.  
        Bonuses earned as a result of play during the regular season or 
        for participation in championship, play-off, or all-star games 
        must be allocated under the formula.  Signing bonuses are not 
        subject to allocation under the formula if they are not 
        conditional on playing any games for the team, are payable 
        separately from any other compensation, and are nonrefundable; 
        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 as "retirement income" as defined in section (b)(1) 
        of the State Income Taxation of Pension Income Act, Public Law 
        Number 104-95, are not considered income derived from carrying 
        on a trade or business or from wages or other compensation for 
        work an employee performed in Minnesota, and are not taxable 
        under this chapter.  
           (4) Wages, otherwise assigned to this state under clause 
        (1) and not qualifying under clause (3), are not taxable under 
        this chapter if the following conditions are met: 
           (i) the recipient was not a resident of this state for any 
        part of the taxable year in which the wages were received; and 
           (ii) the wages are for work performed while the recipient 
        was a resident of this state. 
           (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 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 a bet made by an individual while in Minnesota is assigned 
        to this state.  In this paragraph, "bet" has the meaning given 
        in section 609.75, subdivision 2, as limited by section 609.75, 
        subdivision 3, clauses (1), (2), and (3).  
           (e) All items of gross income not covered in paragraphs (a) 
        to (d) and not part of the taxpayer's income from a trade or 
        business shall be assigned to the taxpayer's domicile. 
           (f) For the purposes of this section, working as an 
        employee shall not be considered to be conducting a trade or 
        business. 
           [EFFECTIVE DATE.] This section is effective for tax years 
        beginning after December 31, 2001. 
           Sec. 16.  Minnesota Statutes 2000, section 290.17, 
        subdivision 3, is amended to read: 
           Subd. 3.  [TRADE OR BUSINESS INCOME; GENERAL RULE.] All 
        income of a trade or business is subject to apportionment except 
        nonbusiness income.  Income derived from carrying on a trade or 
        business must be assigned to this state if the trade or business 
        is conducted wholly within this state, assigned outside this 
        state if conducted wholly without this state and apportioned 
        between this state and other states and countries under this 
        subdivision if conducted partly within and partly without this 
        state.  For purposes of determining whether a trade or business 
        is carried on exclusively within or without this state:  
           (a) A trade or business physically located exclusively 
        within this state is nevertheless carried on partly within and 
        partly without this state if any of the principles set forth in 
        section 290.191 for the allocation of sales or receipts within 
        or without this state when applied to the taxpayer's situation 
        result in the allocation of any sales or receipts without this 
        state.  
           (b) A trade or business physically located exclusively 
        without this state is nevertheless carried on partly within and 
        partly without this state if any of the principles set forth in 
        section 290.191 for the allocation of sales or receipts within 
        or without this state when applied to the taxpayer's situation 
        result in the allocation of any sales or receipts without within 
        this state.  The jurisdiction to tax such a business under this 
        chapter must be determined in accordance with sections 290.014 
        and 290.015. 
           [EFFECTIVE DATE.] This section is effective for tax years 
        beginning after December 31, 2001. 
           Sec. 17.  Minnesota Statutes 2000, section 290A.03, 
        subdivision 3, is amended to read: 
           Subd. 3.  [INCOME.] (1) "Income" means the sum of the 
        following:  
           (a) federal adjusted gross income as defined in the 
        Internal Revenue Code; and 
           (b) the sum of the following amounts to the extent not 
        included in clause (a):  
           (i) all nontaxable income; 
           (ii) the amount of a passive activity loss that is not 
        disallowed as a result of section 469, paragraph (i) or (m) of 
        the Internal Revenue Code and the amount of passive activity 
        loss carryover allowed under section 469(b) of the Internal 
        Revenue Code; 
           (iii) an amount equal to the total of any discharge of 
        qualified farm indebtedness of a solvent individual excluded 
        from gross income under section 108(g) of the Internal Revenue 
        Code; 
           (iv) cash public assistance and relief; 
           (v) any pension or annuity (including railroad retirement 
        benefits, all payments received under the federal Social 
        Security Act, supplemental security income, and veterans 
        benefits), which was not exclusively funded by the claimant or 
        spouse, or which was funded exclusively by the claimant or 
        spouse and which funding payments were excluded from federal 
        adjusted gross income in the years when the payments were made; 
           (vi) interest received from the federal or a state 
        government or any instrumentality or political subdivision 
        thereof; 
           (vii) workers' compensation; 
           (viii) nontaxable strike benefits; 
           (ix) the gross amounts of payments received in the nature 
        of disability income or sick pay as a result of accident, 
        sickness, or other disability, whether funded through insurance 
        or otherwise; 
           (x) a lump sum distribution under section 402(e)(3) of the 
        Internal Revenue Code; 
           (xi) contributions made by the claimant to an individual 
        retirement account, including a qualified voluntary employee 
        contribution; simplified employee pension plan; self-employed 
        retirement plan; cash or deferred arrangement plan under section 
        401(k) of the Internal Revenue Code; or deferred compensation 
        plan under section 457 of the Internal Revenue Code; and 
           (xii) nontaxable scholarship or fellowship grants.  
           In the case of an individual who files an income tax return 
        on a fiscal year basis, the term "federal adjusted gross income" 
        shall mean federal adjusted gross income reflected in the fiscal 
        year ending in the calendar year.  Federal adjusted gross income 
        shall not be reduced by the amount of a net operating loss 
        carryback or carryforward or a capital loss carryback or 
        carryforward allowed for the year.  
           (2) "Income" does not include:  
           (a) amounts excluded pursuant to the Internal Revenue Code, 
        sections 101(a) and 102; 
           (b) amounts of any pension or annuity which was exclusively 
        funded by the claimant or spouse and which funding payments were 
        not excluded from federal adjusted gross income in the years 
        when the payments were made; 
           (c) surplus food or other relief in kind supplied by a 
        governmental agency; 
           (d) relief granted under this chapter; 
           (e) child support payments received under a temporary or 
        final decree of dissolution or legal separation; or 
           (f) holocaust settlement payments as defined in section 
        290.01, subdivision 32 restitution payments received by eligible 
        individuals and excludable interest as defined in section 803 of 
        the Economic Growth and Tax Relief Reconciliation Act of 2001, 
        Public Law Number 107-16.  
           (3) The sum of the following amounts may be subtracted from 
        income:  
           (a) for the claimant's first dependent, the exemption 
        amount multiplied by 1.4; 
           (b) for the claimant's second dependent, the exemption 
        amount multiplied by 1.3; 
           (c) for the claimant's third dependent, the exemption 
        amount multiplied by 1.2; 
           (d) for the claimant's fourth dependent, the exemption 
        amount multiplied by 1.1; 
           (e) for the claimant's fifth dependent, the exemption 
        amount; and 
           (f) if the claimant or claimant's spouse was disabled or 
        attained the age of 65 on or before December 31 of the year for 
        which the taxes were levied or rent paid, the exemption amount.  
           For purposes of this subdivision, the "exemption amount" 
        means the exemption amount under section 151(d) of the Internal 
        Revenue Code for the taxable year for which the income is 
        reported.  
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 18.  Minnesota Statutes 2001 Supplement, section 
        290A.04, subdivision 2h, is amended to read: 
           Subd. 2h.  [ADDITIONAL REFUND.] (a) Beginning with gross 
        property taxes payable in 2003, If the gross property taxes 
        payable on a homestead increase more than 12 percent over the 
        property taxes payable in the prior year on the same property 
        that is owned and occupied by the same owner on January 2 of 
        both years, and the amount of that increase is $100 or more, a 
        claimant who is a homeowner shall be allowed an additional 
        refund equal to 60 percent of the amount of the increase over 
        the greater of 12 percent of the prior year's property taxes 
        payable or $100.  This subdivision shall not apply to any 
        increase in the gross property taxes payable attributable to 
        improvements made to the homestead after the assessment date for 
        the prior year's taxes.  This subdivision shall not apply to any 
        increase in the gross property taxes payable attributable to the 
        termination of valuation exclusions under section 273.11, 
        subdivision 16. 
           The maximum refund allowed under this subdivision is $1,000.
           (b) For purposes of this subdivision "gross property taxes 
        payable" means property taxes payable determined without regard 
        to the refund allowed under this subdivision. 
           (c) In addition to the other proofs required by this 
        chapter, each claimant under this subdivision shall file with 
        the property tax refund return a copy of the property tax 
        statement for taxes payable in the preceding year or other 
        documents required by the commissioner. 
           (d) Upon request, the appropriate county official shall 
        make available the names and addresses of the property taxpayers 
        who may be eligible for the additional property tax refund under 
        this section.  The information shall be provided on a magnetic 
        computer disk.  The county may recover its costs by charging the 
        person requesting the information the reasonable cost for 
        preparing the data.  The information may not be used for any 
        purpose other than for notifying the homeowner of potential 
        eligibility and assisting the homeowner, without charge, in 
        preparing a refund claim. 
           [EFFECTIVE DATE.] This section is effective beginning with 
        refunds based on gross property taxes payable in 2002. 
           Sec. 19.  Minnesota Statutes 2001 Supplement, section 
        295.60, is amended by adding a subdivision to read: 
           Subd. 1a.  [USE TAX; CREDIT FOR TAXES PAID.] (a) A person 
        that receives fur clothing for use or storage in Minnesota, 
        other than from a furrier that paid the tax under subdivision 1, 
        is subject to tax at the rate imposed under subdivision 1.  
        Liability for the tax is incurred when the person has possession 
        of the fur clothing in Minnesota.  The tax must be remitted to 
        the commissioner in the manner prescribed by subdivision 3. 
           (b) A person that has paid taxes to another jurisdiction on 
        the same transaction and is subject to tax under this section is 
        entitled to a credit for the tax legally due and paid to another 
        jurisdiction to the extent of the lesser of (1) the tax actually 
        paid to the other jurisdiction, or (2) the amount of tax imposed 
        by Minnesota on the transaction subject to tax in the other 
        jurisdiction. 
           [EFFECTIVE DATE.] This section is effective for fur 
        clothing purchased and brought into Minnesota on or after 
        January 1, 2002. 
           Sec. 20.  Minnesota Statutes 2001 Supplement, section 
        295.60, is amended by adding a subdivision to read: 
           Subd. 1b.  [TAX COLLECTION REQUIRED.] A furrier with nexus 
        in Minnesota, who is not subject to tax under subdivision 1, is 
        required to collect the tax imposed under subdivision 1a from 
        the purchaser of the clothing made from fur and give the 
        purchaser a receipt for the tax paid.  The tax collected must be 
        remitted to the commissioner in the manner prescribed by 
        subdivision 3. 
           [EFFECTIVE DATE.] This section is effective for fur 
        clothing purchased and brought into Minnesota on or after 
        January 1, 2002. 
           Sec. 21.  Minnesota Statutes 2001 Supplement, section 
        295.60, is amended by adding a subdivision to read: 
           Subd. 1c.  [TAXES PAID TO ANOTHER JURISDICTION; CREDIT.] A 
        furrier that has paid taxes to another jurisdiction measured by 
        gross revenue and is subject to tax under this section on the 
        same gross revenues is entitled to a credit for the tax legally 
        due and paid to another jurisdiction to the extent of the lesser 
        of (1) the tax actually paid to the other jurisdiction, or (2) 
        the amount of tax imposed by Minnesota on the gross revenues 
        subject to tax in the other taxing jurisdictions. 
           [EFFECTIVE DATE.] This section is effective for gross 
        revenues received on or after January 1, 2002. 
           Sec. 22.  Minnesota Statutes 2001 Supplement, section 
        295.60, subdivision 7, is amended to read: 
           Subd. 7.  [APPLICATION OF OTHER CHAPTERS.] Unless 
        specifically provided otherwise by this section, the 
        enforcement, interest, and penalty provisions under chapter 294, 
        appeal provisions in sections 289A.43 and 289A.65, criminal 
        penalties in section 289A.63, and refunds provisions in section 
        289A.50 chapter 289A, civil penalty provisions applicable to 
        withholding and sales taxes under section 289A.60, and 
        collection and rulemaking provisions under chapter 270, apply to 
        a liability for the taxes imposed under this section. 
           [EFFECTIVE DATE.] This section is effective January 1, 2002.
           Sec. 23.  Minnesota Statutes 2000, section 296A.18, 
        subdivision 8, is amended to read: 
           Subd. 8.  [AVIATION FUEL TAX STATE AIRPORTS FUND.] The 
        revenues derived from the excise taxes on aviation gasoline and 
        on special fuel received, sold, stored, or withdrawn from 
        storage as substitutes for aviation gasoline, shall be paid into 
        the state treasury and credited to the aviation fuel tax state 
        airports fund.  There is hereby appropriated such sums as are 
        needed to carry out the provisions of this subdivision. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 24.  Minnesota Statutes 2001 Supplement, section 
        297A.70, subdivision 3, is amended to read: 
           Subd. 3.  [SALES OF CERTAIN GOODS AND SERVICES TO 
        GOVERNMENT.] (a) The following sales to or use by the specified 
        governments and political subdivisions of the state are exempt: 
           (1) repair and replacement parts for emergency rescue 
        vehicles, fire trucks, and fire apparatus to a political 
        subdivision; 
           (2) 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; 
           (3) chore and homemaking services to a political 
        subdivision of the state to be provided to elderly or disabled 
        individuals; 
           (4) telephone services to the department of administration 
        that are used to provide telecommunications services through the 
        intertechnologies revolving fund; 
           (5) firefighter personal protective equipment as defined in 
        paragraph (b), if purchased or authorized by and for the use of 
        an organized fire department, fire protection district, or fire 
        company regularly charged with the responsibility of providing 
        fire protection to the state or a political subdivision; 
           (6) bullet-resistant body armor that provides the wearer 
        with ballistic and trauma protection, 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; 
           (7) motor vehicles purchased or leased by political 
        subdivisions of the state if the vehicles are exempt from 
        registration under section 168.012, subdivision 1, paragraph 
        (b), exempt from taxation under section 473.448, or exempt from 
        the motor vehicle sales tax under section 297B.03, clause (12); 
           (8) equipment designed to process, dewater, and recycle 
        biosolids for wastewater treatment facilities of political 
        subdivisions, and materials incidental to installation of that 
        equipment; and materials used to construct buildings to house 
        the equipment, if the materials are purchased after June 30, 
        1998, and before July 1, 2001; and 
           (9) sales to a town of gravel and of machinery, equipment, 
        and accessories, except motor vehicles, used exclusively for 
        road and bridge maintenance, and leases by a town of motor 
        vehicles exempt from tax under section 297B.03, clause (10). 
           (b) For purposes of this subdivision, "firefighters 
        personal protective equipment" means helmets, including face 
        shields, chin straps, and neck liners; bunker coats and pants, 
        including pant suspenders; boots; gloves; head covers or hoods; 
        wildfire jackets; protective coveralls; goggles; self-contained 
        breathing apparatus; canister filter masks; personal alert 
        safety systems; spanner belts; optical or thermal imaging search 
        devices; and all safety equipment required by the Occupational 
        Safety and Health Administration. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 25.  Minnesota Statutes 2000, section 297I.05, 
        subdivision 11, is amended to read: 
           Subd. 11.  [RETALIATORY PROVISIONS.] (a) If any other state 
        or country imposes any taxes, fines, deposits, penalties, 
        licenses, or fees upon any insurance companies of this state and 
        their agents doing business in another state or country that are 
        in addition to or in excess of those imposed by the laws of this 
        state upon foreign insurance companies and their agents doing 
        business in this state, the same taxes, fines, deposits, 
        penalties, licenses, and fees are imposed upon every similar 
        insurance company of that state or country and their agents 
        doing or applying to do business in this state. 
           (b) If any conditions precedent to the right to do business 
        in any other state or country are imposed by the laws of that 
        state or country, beyond those imposed upon foreign companies by 
        the laws of this state, the same conditions precedent are 
        imposed upon every similar insurance company of that state or 
        country and their agents doing or applying to do business in 
        that state. 
           (c) For purposes of this subdivision, "taxes, fines, 
        deposits, penalties, licenses, or fees" means an amount of money 
        that is deposited in the general revenue fund of the state or 
        other similar fund in another state or country and is not 
        dedicated to a special purpose or use or money deposited in the 
        general revenue fund of the state or other similar fund in 
        another state or country and appropriated to the commissioner of 
        commerce or insurance for the operation of the department of 
        commerce or other similar agency with jurisdiction over 
        insurance.  Taxes, fines, deposits, penalties, licenses, or fees 
        do not include: 
           (1) special purpose obligations or assessments imposed in 
        connection with particular kinds of insurance, including but not 
        limited to assessments imposed in connection with residual 
        market mechanisms; or 
           (2) assessments made by the insurance guaranty association, 
        life and health guarantee association, or similar association. 
           (d) This subdivision applies to taxes imposed under 
        subdivisions 1, 3, 4, 6, and 12, paragraph (a), clauses (1) and 
        (3) (2). 
           (e) This subdivision does not apply to insurance companies 
        organized or domiciled in a state or country, the laws of which 
        do not impose retaliatory taxes, fines, deposits, penalties, 
        licenses, or fees or which grant, on a reciprocal basis, 
        exemptions from retaliatory taxes, fines, deposits, penalties, 
        licenses, or fees to insurance companies domiciled in this state.
           [EFFECTIVE DATE.] This section is effective retroactively 
        to tax years beginning on or after January 1, 2001. 
           Sec. 26.  Minnesota Statutes 2000, section 477A.011, 
        subdivision 20, is amended to read: 
           Subd. 20.  [CITY NET TAX CAPACITY.] "City net tax capacity" 
        means (1) the net tax capacity computed using the net tax 
        capacity rates in section 273.13 for taxes payable in the year 
        of the aid distribution, and the market values for taxes payable 
        in the year prior to the aid distribution plus (2) a city's 
        fiscal disparities distribution tax capacity under section 
        276A.06, subdivision 2, paragraph (b), or 473F.08, subdivision 
        2, paragraph (b), for taxes payable in the year prior to that 
        for which aids are being calculated.  The market value utilized 
        in computing city net tax capacity shall be reduced by the sum 
        of (1) a city's market value of commercial industrial property 
        as defined in section 276A.01, subdivision 3, or 473F.02, 
        subdivision 3, multiplied by the ratio determined pursuant to 
        section 276A.06, subdivision 2, paragraph (a), or 473F.08, 
        subdivision 2, paragraph (a), (2) the market value of the 
        captured value of tax increment financing districts as defined 
        in section 469.177, subdivision 2, and (3) the market value of 
        transmission lines deducted from a city's total net tax capacity 
        under section 273.425.  The city net tax capacity will be 
        computed using equalized market values.  
           [EFFECTIVE DATE.] This section is effective for aid payable 
        in 2002 and thereafter. 
           Sec. 27.  Minnesota Statutes 2001 Supplement, section 
        477A.013, subdivision 9, is amended to read: 
           Subd. 9.  [CITY AID DISTRIBUTION.] (a) In calendar year 
        2002 and thereafter, each city shall receive an aid distribution 
        equal to the sum of (1) the city formula aid under subdivision 
        8, and (2) its city aid base. 
           (b) The percentage increase for a first class city in 
        calendar year 1995 and thereafter, except for 2002, shall not 
        exceed the percentage increase in the sum of the aid to all 
        cities under this section in the current calendar year compared 
        to the sum of the aid to all cities in the previous year.  For 
        aids payable in 2002 only, the amount of the aid paid to a first 
        class city shall not exceed the sum of its aid amount for 
        calendar year 2001 under this section and its aid payment in 
        calendar year 2001 under section 273.1398, subdivision 2, by 
        more than 2.5 percent. 
           (c) For aids payable in all years except 2002, the total 
        aid for any city, except a first class city, shall not exceed 
        the sum of (1) ten percent of the city's net levy for the year 
        prior to the aid distribution plus (2) its total aid in the 
        previous year before any increases or decreases under sections 
        16A.711, subdivision 5, and 477A.0132.  For aids payable in 2002 
        only, the total aid for any city, except a first class city, 
        shall not exceed 40 percent of the sum of (1) 40 percent of the 
        city's net levy for taxes payable in the year prior to the aid 
        distribution plus (2) 40 percent of its total aid in the 
        previous year under section 273.1398, subdivision 2, before any 
        increases or decreases under sections 16A.711, subdivision 5, 
        and 477A.0132 plus (3) its total aid in the previous year under 
        this section. 
           [EFFECTIVE DATE.] This section is effective for aid payable 
        in 2002 and thereafter. 
           Sec. 28.  Minnesota Statutes 2001 Supplement, section 
        477A.07, subdivision 1, is amended to read: 
           Subdivision 1.  [AID AMOUNT.] (a) For aid payable in 2003, 
        each county and city is eligible for aid equal to the amount by 
        which (i) 0.3 percent of the assessment year 2001 taxable market 
        value of class 4a property, plus 0.25 percent of the assessment 
        year 2001 market value of class 4b property, as defined in 
        section 273.13, subdivision 25, multiplied by the jurisdiction's 
        average tax rate for taxes payable in 2002, exceeds (ii) 0.4 
        percent of the jurisdiction's total taxable net tax capacity for 
        taxes payable in 2002, multiplied by the jurisdiction's average 
        tax rate for taxes payable in 2002. 
           (b) For aid payable in 2004, each county and city is 
        eligible for aid equal to the amount by which (i) 0.25 percent 
        of the assessment year 2002 taxable market value of class 4a 
        property, as defined in section 273.13, subdivision 
        25, multiplied by the jurisdiction's average tax rate for taxes 
        payable in 2003, exceeds (ii) 0.4 percent of the jurisdiction's 
        total taxable net tax capacity for taxes payable in 2003, 
        multiplied by the jurisdiction's average tax rate for taxes 
        payable in 2003. 
           [EFFECTIVE DATE.] This section is effective for aid payable 
        in 2003 and thereafter. 
           Sec. 29.  Minnesota Statutes 2001 Supplement, section 
        477A.07, subdivision 3, is amended to read: 
           Subd. 3.  [CITY AID.] Each city's 2003 aid amount 
        determined under subdivision 1 must be permanently added to its 
        city aid base under section 477A.011, subdivision 36, and the 
        maximum amount of total aid it may receive under section 
        477A.013, subdivision 9, paragraph (b) or (c), is increased by 
        the same amount for aid payable in 2003.  Each city's 2004 aid 
        amount determined under subdivision 1 must be permanently added 
        to its city aid base under section 477A.011, subdivision 36, and 
        the maximum amount of total aid it may receive under section 
        477A.013, subdivision 9, paragraph (b) or _(c), is increased by 
        the same amount for aid payable in 2004. 
           [EFFECTIVE DATE.] This section is effective for aids 
        payable in calendar years 2003 and 2004. 
           Sec. 30.  Laws 1993, chapter 375, article 5, section 42, is 
        amended to read: 
           Sec. 42. [REPORT TO LEGISLATURE.] 
           By February March 1 of each year, the commissioner of 
        revenue shall make a report to the legislature on the use of 
        limited market value under section 273.13, subdivision 1a, and 
        the valuation exclusion under section 273.13, subdivision 16.  
        For the limited market value provision, the report shall include 
        the total value excluded from taxation by type of property for 
        each city and town.  For the valuation exclusion provision, the 
        report shall include the total market value excluded from 
        taxation for each city and town, as well as a breakdown of the 
        excluded improvement amounts by age and value of the property 
        being improved and the amount of the qualifying improvement.  
        The county assessors shall provide the information necessary for 
        the commissioner to compile the report in a manner prescribed by 
        the commissioner. 
           Sec. 31.  Laws 2001, First Special Session chapter 5, 
        article 9, section 3, the effective date, is amended to read: 
           [EFFECTIVE DATE.] This section is effective for tax years 
        beginning after December 31, 2001, except that the amendment 
        to clause clauses (3) is and (12) are effective for tax years 
        beginning after December 31, 2000. 
           Sec. 32.  [REPEALER.] 
           (a) Minnesota Statutes 2000, sections 272.02, subdivision 
        40; 290.01, subdivisions 19g and 32; and 295.44, are repealed 
        effective the day following final enactment. 
           (b) Minnesota Statutes 2000, section 290.0921, subdivision 
        5, is repealed effective for taxable years beginning after 
        December 31, 2001. 
           (c) Minnesota Rules, parts 8130.1400; 8130.2100; 8130.2350; 
        8130.2600; 8130.3000; 8130.3850; and 8130.5000, are repealed 
        effective the day following final enactment. 

                                   ARTICLE 11 
                                   LOCAL LAWS 
           Section 1.  [CITY OF MOORHEAD; TAX LEVY AUTHORIZED.] 
           (a) Each year the city of Moorhead may impose a tax on all 
        class 3a and class 3b property located in the city in an amount 
        which the city determines is equal to the reduction in revenues 
        from increment from all tax increment financing districts in the 
        city resulting from the class rate changes and the elimination 
        of the state-determined general education property levy under 
        Laws 2001, First Special Session chapter 5.  The proceeds of 
        this tax may only be used to pay preexisting obligations as 
        defined in Minnesota Statutes, section 469.1763, subdivision 6, 
        whether general obligations or payable wholly from tax 
        increments.  The tax must be levied and collected in the same 
        manner and as part of the property tax levied by the city and is 
        subject to the same administrative, penalty, and enforcement 
        provisions.  A tax imposed under this section is a special levy 
        and is not subject to levy limitations under Minnesota Statutes, 
        section 275.71. 
           (b) This section expires December 31, 2005. 
           [EFFECTIVE DATE.] This section is effective upon approval 
        by and compliance with Minnesota Statutes, section 645.021, 
        subdivision 3, by the governing body of the city of Moorhead. 
           Sec. 2.  [ST. CLOUD AREA CITIES; TAXES AUTHORIZED.] 
           Subdivision 1.  [SALES AND USE TAX.] (a) Notwithstanding 
        Minnesota Statutes, section 477A.016, or any other provision of 
        law, ordinance, or city charter, the following cities may, by 
        ordinance, impose a sales and use tax of one-half of one percent 
        for the purposes specified in subdivision 2: 
           (1) the city of St. Cloud, pursuant to the approval of the 
        city voters at the general election held on November 7, 2000; 
           (2) the city of Sartell, pursuant to the approval of the 
        city voters at an election held in November 1999; and 
           (3) each of the cities of Sauk Rapids, Waite Park, St. 
        Joseph, and St. Augusta, pursuant to the approval of the voters 
        of that city at the next general election following the date of 
        final enactment of this act, as provided for in subdivision 3. 
           (b) The provisions of Minnesota Statutes, section 297A.99, 
        govern the imposition, administration, collection, and 
        enforcement of the taxes authorized under this subdivision. 
           (c) The tax in Sartell must be used for the purposes listed 
        in subdivision 2, notwithstanding other purposes listed in the 
        referendum, and are not subject to the requirements of Minnesota 
        Statutes, section 297A.99, subdivision 3.  
           Subd. 2.  [USE OF REVENUES.] (a) Revenues received from the 
        taxes authorized under subdivision 1 must be used for the cost 
        of collecting and administering the taxes and to pay all or part 
        of the capital or administrative costs of the acquisition, 
        construction, and improvement of the main runway improvements to 
        the St. Cloud Regional Airport, as provided for in the city of 
        St. Cloud capital improvement program 2000 to 2005, adopted by 
        the St. Cloud planning commission on July 14, 1999.  Authorized 
        expenses include, but are not limited to, acquiring property, 
        paying construction expenses related to the development of these 
        facilities, and securing and paying debt service on bonds or 
        other obligations issued to finance construction or improvement 
        of the authorized facility. 
           (b) If revenues collected from the taxes imposed under 
        subdivision 1 are greater than the amount needed to meet 
        obligations under paragraph (a) in any year, the surplus may be 
        returned to the cities in a manner agreed upon by the 
        participating cities under this section, to be used by the 
        cities for projects of regional significance, limited to:  the 
        acquisition and improvement of park land and open space; the 
        purchase, renovation, and construction of public buildings and 
        land primarily used for the arts, libraries, and community 
        centers; major roadway improvements; and for debt service on 
        bonds issued for these purposes.  Authorized expenses include, 
        but are not limited to, acquiring property, paying construction 
        expenses related to the development of these facilities, and 
        securing and paying debt service on bonds or other obligations 
        issued to finance construction or improvement of the authorized 
        facility.  The distribution of surplus revenues raised by the 
        tax must be determined by an applicable joint powers agreement. 
        The revenues returned to each city may only be used to fund 
        projects that have been approved by voters at the referendum 
        authorizing the tax. 
           (c) Pursuant to the approval of the St. Cloud voters at the 
        general election held on November 7, 2000, the surplus returned 
        to St. Cloud under paragraph (b) must be used for the following 
        projects: 
           (1) intersection improvements to the 25th Avenue and trunk 
        highway No. 23, I-94 interchange at county road 75, 10th Street 
        South improvements, the West Metro corridor improvements, and 
        other regionally significant road projects; and 
           (2) park and nature land purchase, trail development, and 
        improvements and expansions of existing regional park 
        facilities, as provided for in the city of St. Cloud capital 
        improvement program 2000 to 2005, adopted by the St. Cloud 
        planning commission on July 14, 1999. 
           (d) Pursuant to approval of the Sartell voters at the 
        election held in November 1999, the surplus returned to the city 
        of Sartell under paragraph (b) must be used to fund 
        construction, expansion, and improvements to a community center 
        and for park land acquisition and improvement. 
           Subd. 3.  [SEPARATE REFERENDA REQUIRED.] Notwithstanding 
        Minnesota Statutes, section 297A.99, subdivision 3, each city 
        listed in subdivision 1, clause (3), shall have a separate vote 
        on each project that it proposes to fund with the surplus tax 
        revenues it receives under subdivision 2, paragraph (b).  For 
        these cities, the cost of each project to be funded by the taxes 
        authorized in subdivision 1 must be listed.  Revenue may be used 
        to repay debt for a project that the city has already funded if 
        the project meets one of the authorized uses listed in 
        subdivision 2, paragraph (b), and the referenda states the 
        maximum amount of debt that will be repaid from the revenue.  
        The referendum must state that approval of using the tax 
        authorized in subdivision 1 for any project shall also indicate 
        approval to share the revenues collected from the tax with the 
        other cities in the area which have also passed a sales tax.  
        The sharing must be done in a manner agreed upon by all affected 
        cities under a joint powers agreement. 
           Subd. 4.  [IMPOSITION AND TERMINATION OF TAX.] The tax 
        authorized by each city under subdivision 1 shall be imposed 
        beginning January 1, 2003, and shall expire December 31, 2005. 
           [EFFECTIVE DATE.] This section is effective July 1, 2002, 
        with respect to any city listed in subdivision 1, upon 
        compliance of the governing body of that city with Minnesota 
        Statutes, section 645.021, subdivision 3. 

                                   ARTICLE 12 
                                 MISCELLANEOUS 
           Section 1.  Minnesota Statutes 2000, section 16A.152, is 
        amended by adding a subdivision to read:  
           Subd. 1b.  [BUDGET RESERVE INCREASE.] On June 30, 2003, the 
        commissioner of finance shall transfer $3,900,000 to the budget 
        reserve account in the general fund.  On June 30, 2004, the 
        commissioner of finance shall transfer $12,300,000 to the budget 
        reserve account in the general fund.  On June 30, 2005, the 
        commissioner of finance shall transfer $12,000,000 to the budget 
        reserve account in the general fund.  The amounts necessary for 
        this purpose are appropriated from the general fund. 
           Sec. 2.  Minnesota Statutes 2000, section 40A.151, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [ESTABLISHMENT.] The Minnesota conservation 
        fund is established as an account in the state treasury.  Money 
        from counties under section 40A.152 must be deposited in the 
        state treasury and credited one-half to the Minnesota 
        conservation fund account and one-half to the general fund. 
           [EFFECTIVE DATE.] This section is effective for money from 
        counties deposited in the state treasury after June 30, 2002. 
           Sec. 3.  Minnesota Statutes 2000, section 40A.152, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [FEE.] A county that is a metropolitan 
        county under section 473.121, subdivision 4, has allowed 
        exclusive agricultural zones to be created under this chapter, 
        or has elected to become an agricultural land preservation pilot 
        county, shall impose an additional fee of $5 per transaction on 
        the recording or registration of a mortgage subject to the tax 
        under section 287.05 and an additional $5 on the recording or 
        registration of a deed subject to the tax under section 287.21.  
        One-half of the fee must be deposited in a special conservation 
        account to be created in the county general revenue fund and 
        one-half must be transferred to the commissioner of revenue for 
        deposit in the state treasury and credited to the Minnesota 
        conservation fund pursuant to section 40A.151, subdivision 1. 
           [EFFECTIVE DATE.] This section is effective July 1, 2002, 
        and thereafter. 
           Sec. 4.  Minnesota Statutes 2000, section 40A.152, 
        subdivision 3, is amended to read: 
           Subd. 3.  [TRANSFER TO STATE FUND.] Money in the county 
        conservation account that is not encumbered by the county within 
        one year of deposit in the account must be transferred to the 
        commissioner of revenue for deposit in the Minnesota 
        conservation fund state treasury pursuant to section 40A.151, 
        subdivision 1. 
           Sec. 5.  Minnesota Statutes 2000, section 270B.01, 
        subdivision 8, is amended to read: 
           Subd. 8.  [MINNESOTA TAX LAWS.] For purposes of this 
        chapter only, unless expressly stated otherwise, "Minnesota tax 
        laws" means the taxes, refunds, and fees administered by or paid 
        to the commissioner under chapters 115B (except taxes imposed 
        under sections 115B.21 to 115B.24), 289A (except taxes imposed 
        under sections 298.01, 298.015, and 298.24), 290, 290A, 
        291, 295, 297A, and 297H and sections 295.50 to 295.59, or any 
        similar Indian tribal tax administered by the commissioner 
        pursuant to any tax agreement between the state and the Indian 
        tribal government, and includes any laws for the assessment, 
        collection, and enforcement of those taxes, refunds, and fees. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 6.  Minnesota Statutes 2001 Supplement, section 
        270B.02, subdivision 3, is amended to read: 
           Subd. 3.  [CONFIDENTIAL DATA ON INDIVIDUALS; PROTECTED 
        NONPUBLIC DATA.] (a) Except as provided in paragraph (b), the 
        name or existence of an informer, informer letters, and other 
        data, in whatever form, given to the department of revenue by a 
        person, other than the data subject, who informs that a specific 
        taxpayer person is not or may not be in compliance with tax 
        laws, or nontax laws administered by the department of revenue, 
        including laws other than those relating to property taxes not 
        listed in section 270B.01, subdivision 8, are confidential data 
        on individuals or protected nonpublic data as defined in section 
        13.02, subdivisions 3 and 13. 
           (b) Data under paragraph (a) may be disclosed with the 
        consent of the informer or upon a written finding by a court 
        that the information provided by the informer was false and that 
        there is evidence that the information was provided in bad 
        faith.  This subdivision does not alter disclosure 
        responsibilities or obligations under the rules of criminal 
        procedure. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 7.  Minnesota Statutes 2000, section 270B.02, 
        subdivision 4, is amended to read: 
           Subd. 4.  [PUBLIC DATA.] Information required to be filed 
        by exempt individuals, corporations, organizations, estates, and 
        trusts under section 290.05, subdivisions 1 and 4, or that 
        relates to exempt status under section 290.05, subdivision 2, is 
        public data on individuals or public data not on individuals, as 
        defined in section 13.02, subdivisions 14 and 15.  The 
        commissioner may publish a list of organizations exempt from 
        taxation under section 290.05, except that the name or address 
        of any contributor to any organization that is or was exempt, or 
        that has applied for tax exempt status, or any other information 
        that could not be disclosed under section 6104 of the Internal 
        Revenue Code of 1986, as amended through December 31, 1988, is 
        classified as private data on individuals or nonpublic data as 
        defined in section 13.02, subdivisions 9 and 12. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 8.  Minnesota Statutes 2001 Supplement, section 
        270B.08, subdivision 2, is amended to read: 
           Subd. 2.  [REVOCATION.] When a taxpayer's sales tax permit 
        has been revoked under section 297A.86, the commissioner may 
        disclose data identifying the holder of the revoked permit and, 
        stating the basis for the revocation, and stating whether the 
        permit has been reinstated. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 9.  Minnesota Statutes 2000, section 270B.14, 
        subdivision 8, is amended to read: 
           Subd. 8.  [EXCHANGE BETWEEN DEPARTMENTS OF LABOR AND 
        INDUSTRY AND REVENUE.] The departments of labor and industry and 
        revenue may exchange information as follows:  
           (1) data used in determining whether a business is an 
        employer or a contracting agent; 
           (2) taxpayer identity information relating to employers and 
        employees for purposes of supporting tax administration and 
        chapter chapters 176, 177, and 181; and 
           (3) data to the extent provided in and for the purpose set 
        out in section 176.181, subdivision 8. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 10.  Minnesota Statutes 2000, 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 if the federal gross estate 
        exceeds $700,000 for estates of decedents dying after December 
        31, 2001, and before January 1, 2004; $850,000 for estates of 
        decedents dying after December 31, 2003, and before January 1, 
        2005; $950,000 for estates of decedents dying after December 31, 
        2004, and before January 1, 2006; and $1,000,000 for estates of 
        decedents dying after December 31, 2005. 
           The return must contain a computation of the Minnesota 
        estate tax due.  The return must be signed by the personal 
        representative. 
           [EFFECTIVE DATE.] This section is effective for estates of 
        decedents dying after December 31, 2001. 
           Sec. 11.  Minnesota Statutes 2001 Supplement, section 
        291.005, subdivision 1, is amended to read: 
           Subdivision 1.  Unless the context otherwise clearly 
        requires, the following terms used in this chapter shall have 
        the following meanings: 
           (1) "Federal gross estate" means the gross estate of a 
        decedent as valued and otherwise determined for federal estate 
        tax purposes by federal taxing authorities pursuant to the 
        provisions of the Internal Revenue Code. 
           (2) "Minnesota gross estate" means the federal gross estate 
        of a decedent after (a) excluding therefrom any property 
        included therein which has its situs outside Minnesota and 
        pensions exempt from tax under this chapter pursuant to section 
        352.15, subdivision 1; 353.15, subdivision 1; 354.10, 
        subdivision 1; 354B.30; or 354C.165, and (b) including therein 
        any property omitted from the federal gross estate which is 
        includable therein, has its situs in Minnesota, and was not 
        disclosed to federal taxing authorities.  
           (3) "Personal representative" means the executor, 
        administrator or other person appointed by the court to 
        administer and dispose of the property of the decedent.  If 
        there is no executor, administrator or other person appointed, 
        qualified, and acting within this state, then any person in 
        actual or constructive possession of any property having a situs 
        in this state which is included in the federal gross estate of 
        the decedent shall be deemed to be a personal representative to 
        the extent of the property and the Minnesota estate tax due with 
        respect to the property. 
           (4) "Resident decedent" means an individual whose domicile 
        at the time of death was in Minnesota. 
           (5) "Nonresident decedent" means an individual whose 
        domicile at the time of death was not in Minnesota. 
           (6) "Situs of property" means, with respect to real 
        property, the state or country in which it is located; with 
        respect to tangible personal property, the state or country in 
        which it was normally kept or located at the time of the 
        decedent's death; and with respect to intangible personal 
        property, the state or country in which the decedent was 
        domiciled at death. 
           (7) "Commissioner" means the commissioner of revenue or any 
        person to whom the commissioner has delegated functions under 
        this chapter. 
           (8) "Internal Revenue Code" means the United States 
        Internal Revenue Code of 1986, as amended through December 31, 
        2000. 
           [EFFECTIVE DATE.] This section is effective for estates of 
        decedents dying after December 31, 2001. 
           Sec. 12.  Minnesota Statutes 2000, section 291.03, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [TAX AMOUNT.] The tax imposed shall be an 
        amount equal to the proportion of the maximum credit 
        allowable computed under section 2011 of the Internal Revenue 
        Code for state death taxes as the Minnesota gross estate bears 
        to the value of the federal gross estate.  For a resident 
        decedent, the tax shall be the maximum credit allowable computed 
        under section 2011 of the Internal Revenue Code reduced by the 
        amount of the death tax paid the other state and credited 
        against the federal estate tax if this results in a larger 
        amount of tax than the proportionate amount of the credit.  The 
        tax determined under this paragraph shall not be greater than 
        the maximum credit allowable under section 2011 of the Internal 
        Revenue Code federal estate tax computed under section 2001 of 
        the Internal Revenue Code after the allowance of the federal 
        credits allowed under sections 2010, 2012, 2013, and 2015 of the 
        Internal Revenue Code of 1986, as amended through December 31, 
        2000.  
           [EFFECTIVE DATE.] This section is effective for estates of 
        decedents dying after December 31, 2001. 
           Sec. 13.  Minnesota Statutes 2000, section 297H.06, 
        subdivision 2, is amended to read: 
           Subd. 2.  [MATERIALS.] The tax is not imposed upon charges 
        to generators of mixed municipal solid waste or upon the volume 
        of non-mixed-municipal solid waste for waste management services 
        to manage the following materials: 
           (1) mixed municipal solid waste and non-mixed-municipal 
        solid waste generated outside of Minnesota; 
           (2) recyclable materials that are separated for recycling 
        by the generator, collected separately from other waste, and 
        recycled, to the extent the price of the service for handling 
        recyclable material is separately itemized; 
           (3) recyclable non-mixed-municipal solid waste that is 
        separated for recycling by the generator, collected separately 
        from other waste, delivered to a waste facility for the purpose 
        of recycling, and recycled; 
           (4) industrial waste, when it is transported to a facility 
        owned and operated by the same person that generated it; 
           (5) mixed municipal solid waste from a recycling facility 
        that separates or processes recyclable materials and reduces the 
        volume of the waste by at least 85 percent, provided that the 
        exempted waste is managed separately from other waste; 
           (6) recyclable materials that are separated from mixed 
        municipal solid waste by the generator, collected and delivered 
        to a waste facility that recycles at least 85 percent of its 
        waste, and are collected with mixed municipal solid waste that 
        is segregated in leakproof bags, provided that the mixed 
        municipal solid waste does not exceed five percent of the total 
        weight of the materials delivered to the facility and is 
        ultimately delivered to a waste facility identified as a 
        preferred waste management facility in county solid waste plans 
        under section 115A.46; 
           (7) through December 31, 2002, source-separated compostable 
        waste, if the waste is delivered to a facility exempted as 
        described in this clause.  To initially qualify for an 
        exemption, a facility must apply for an exemption in its 
        application for a new or amended solid waste permit to the 
        pollution control agency.  The first time a facility applies to 
        the agency it must certify in its application that it will 
        comply with the criteria in items (i) to (v) and the 
        commissioner of the agency shall so certify to the commissioner 
        of revenue who must grant the exemption.  For each subsequent 
        calendar year, by October 1 of the preceding year, the facility 
        must apply to the agency for certification to renew its 
        exemption for the following year.  The application must be filed 
        according to the procedures of, and contain the information 
        required by, the agency.  The commissioner of revenue shall 
        grant the exemption if the commissioner of the pollution control 
        agency finds and certifies to the commissioner of revenue that 
        based on an evaluation of the composition of incoming waste and 
        residuals and the quality and use of the product: 
           (i) generators separate materials at the source; 
           (ii) the separation is performed in a manner appropriate to 
        the technology specific to the facility that: 
           (A) maximizes the quality of the product; 
           (B) minimizes the toxicity and quantity of residuals; and 
           (C) provides an opportunity for significant improvement in 
        the environmental efficiency of the operation; 
           (iii) the operator of the facility educates generators, in 
        coordination with each county using the facility, about 
        separating the waste to maximize the quality of the waste stream 
        for technology specific to the facility; 
           (iv) process residuals do not exceed 15 percent of the 
        weight of the total material delivered to the facility; and 
           (v) the final product is accepted for use; 
           (8) waste and waste by-products for which the tax has been 
        paid; and 
           (9) daily cover for landfills that has been approved in 
        writing by the Minnesota pollution control agency. 
           Sec. 14.  Minnesota Statutes 2001 Supplement, section 
        349.12, subdivision 25, is amended to read: 
           Subd. 25.  [LAWFUL PURPOSE.] (a) "Lawful purpose" means one 
        or more of the following:  
           (1) any expenditure by or contribution to a 501(c)(3) or 
        festival organization, as defined in subdivision 15a, provided 
        that the organization and expenditure or contribution are in 
        conformity with standards prescribed by the board under section 
        349.154, which standards must apply to both types of 
        organizations in the same manner and to the same extent; 
           (2) a contribution to an individual or family suffering 
        from poverty, homelessness, or physical or mental disability, 
        which is used to relieve the effects of that poverty, 
        homelessness, or disability; 
           (3) a contribution to an individual for treatment for 
        delayed posttraumatic stress syndrome or a contribution to a 
        program recognized by the Minnesota department of human services 
        for the education, prevention, or treatment of compulsive 
        gambling; 
           (4) a contribution to or expenditure on a public or private 
        nonprofit educational institution registered with or accredited 
        by this state or any other state; 
           (5) a contribution to a scholarship fund for defraying the 
        cost of education to individuals where the funds are awarded 
        through an open and fair selection process; 
           (6) activities by an organization or a government entity 
        which recognize humanitarian or military service to the United 
        States, the state of Minnesota, or a community, subject to rules 
        of the board, provided that the rules must not include mileage 
        reimbursements in the computation of the per occasion 
        reimbursement limit and must impose no aggregate annual limit on 
        the amount of reasonable and necessary expenditures made to 
        support: 
           (i) members of a military marching or color guard unit for 
        activities conducted within the state; 
           (ii) members of an organization solely for services 
        performed by the members at funeral services; or 
           (iii) members of military marching, color guard, or honor 
        guard units may be reimbursed for participating in color guard, 
        honor guard, or marching unit events within the state or states 
        contiguous to Minnesota at a per participant rate of up to $35 
        per occasion; 
           (7) recreational, community, and athletic facilities and 
        activities intended primarily for persons under age 21, provided 
        that such facilities and activities do not discriminate on the 
        basis of gender and the organization complies with section 
        349.154; 
           (8) payment of local taxes authorized under this chapter, 
        taxes imposed by the United States on receipts from lawful 
        gambling, the taxes imposed by section 297E.02, subdivisions 1, 
        4, 5, and 6, and the tax imposed on unrelated business income by 
        section 290.05, subdivision 3; 
           (9) payment of real estate taxes and assessments on 
        permitted gambling premises wholly owned by the licensed 
        organization paying the taxes, or wholly leased by a licensed 
        veterans organization under a national charter organized under 
        section 501(c)(19) of the Internal Revenue Code, not to exceed: 
           (i) for premises used for bingo, the amount that an 
        organization may expend under board rules on rent for bingo; and 
           (ii) $35,000 per year for premises used for other forms of 
        lawful gambling; 
           (10) a contribution to the United States, this state or any 
        of its political subdivisions, or any agency or instrumentality 
        thereof other than a direct contribution to a law enforcement or 
        prosecutorial agency; 
           (11) a contribution to or expenditure by a nonprofit 
        organization which is a church or body of communicants gathered 
        in common membership for mutual support and edification in 
        piety, worship, or religious observances; 
           (12) payment of the reasonable costs of an audit required 
        in section 297E.06, subdivision 4, provided the annual audit is 
        filed in a timely manner with the department of revenue; 
           (13) a contribution to or expenditure on a wildlife 
        management project that benefits the public at-large, provided 
        that the state agency with authority over that wildlife 
        management project approves the project before the contribution 
        or expenditure is made; 
           (14) expenditures, approved by the commissioner of natural 
        resources, by an organization for grooming and maintaining 
        snowmobile trails and all-terrain vehicle trails that are (1) 
        grant-in-aid trails established under section 85.019, or (2) 
        other trails open to public use, including purchase or lease of 
        equipment for this purpose; or 
           (15) conducting nutritional programs, food shelves, and 
        congregate dining programs primarily for persons who are age 62 
        or older or disabled; or 
           (16) a contribution to a community arts organization, or an 
        expenditure to sponsor arts programs in the community, including 
        but not limited to visual, literary, performing, or musical arts.
           (b) Notwithstanding paragraph (a), "lawful purpose" does 
        not include: 
           (1) any expenditure made or incurred for the purpose of 
        influencing the nomination or election of a candidate for public 
        office or for the purpose of promoting or defeating a ballot 
        question; 
           (2) any activity intended to influence an election or a 
        governmental decision-making process; 
           (3) the erection, acquisition, improvement, expansion, 
        repair, or maintenance of real property or capital assets owned 
        or leased by an organization, unless the board has first 
        specifically authorized the expenditures after finding that (i) 
        the real property or capital assets will be used exclusively for 
        one or more of the purposes in paragraph (a); (ii) with respect 
        to expenditures for repair or maintenance only, that the 
        property is or will be used extensively as a meeting place or 
        event location by other nonprofit organizations or community or 
        service groups and that no rental fee is charged for the use; 
        (iii) with respect to expenditures, including a mortgage payment 
        or other debt service payment, for erection or acquisition only, 
        that the erection or acquisition is necessary to replace with a 
        comparable building, a building owned by the organization and 
        destroyed or made uninhabitable by fire or natural disaster, 
        provided that the expenditure may be only for that part of the 
        replacement cost not reimbursed by insurance; (iv) with respect 
        to expenditures, including a mortgage payment or other debt 
        service payment, for erection or acquisition only, that the 
        erection or acquisition is necessary to replace with a 
        comparable building a building owned by the organization that 
        was acquired from the organization by eminent domain or sold by 
        the organization to a purchaser that the organization reasonably 
        believed would otherwise have acquired the building by eminent 
        domain, provided that the expenditure may be only for that part 
        of the replacement cost that exceeds the compensation received 
        by the organization for the building being replaced; or (v) with 
        respect to an expenditure to bring an existing building into 
        compliance with the Americans with Disabilities Act under item 
        (ii), an organization has the option to apply the amount of the 
        board-approved expenditure to the erection or acquisition of a 
        replacement building that is in compliance with the Americans 
        with Disabilities Act; 
           (4) an expenditure by an organization which is a 
        contribution to a parent organization, foundation, or affiliate 
        of the contributing organization, if the parent organization, 
        foundation, or affiliate has provided to the contributing 
        organization within one year of the contribution any money, 
        grants, property, or other thing of value; 
           (5) a contribution by a licensed organization to another 
        licensed organization unless the board has specifically 
        authorized the contribution.  The board must authorize such a 
        contribution when requested to do so by the contributing 
        organization unless it makes an affirmative finding that the 
        contribution will not be used by the recipient organization for 
        one or more of the purposes in paragraph (a); or 
           (6) a contribution to a statutory or home rule charter 
        city, county, or town by a licensed organization with the 
        knowledge that the governmental unit intends to use the 
        contribution for a pension or retirement fund. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 15. Laws 2001, First Special Session chapter 6, 
        article 5, section 12, is amended to read: 
           Sec. 12.  [SCHOOL DISTRICT FORMULA ADJUSTMENTS.] 
           Subdivision 1.  [TAX RATE ADJUSTMENT.] The commissioner of 
        children, families, and learning must adjust each tax rate 
        established under Minnesota Statutes, chapters 120A to 127A, by 
        multiplying the rate by the ratio of the statewide net tax 
        capacity as calculated using the class rates in effect for 
        assessment year 2000 to the statewide total net tax capacity as 
        calculated using the class rates in effect for assessment year 
        2001, in both cases using taxable market values for assessment 
        year 2000. 
           Subd. 2.  [EQUALIZING FACTORS.] The commissioner of 
        children, families, and learning must adjust each equalizing 
        factor based upon adjusted net tax capacity per actual pupil 
        unit established under Minnesota Statutes, chapters 120A to 
        127A, by multiplying the equalizing factor by the ratio of the 
        statewide net tax capacity as calculated using the class rates 
        in effect for assessment year 2001 to the statewide total net 
        tax capacity as calculated using the class rates in effect for 
        assessment year 2000, in both cases using taxable market values 
        for assessment year 2000. 
           Subd. 3.  [DEBT SERVICE TAX RATES AND EQUALIZING FACTORS.] 
        The provisions in subdivisions 1 and 2 do not apply to the 
        equalizing factors and tax rates of the debt service 
        equalization aid program under Minnesota Statutes, section 
        123B.53. 
           Subd. 4.  [SCHOOL DISTRICT BONDS.] The commissioner of 
        children, families, and learning must adjust the net debt limit 
        percentage for special school district No. 1, Minneapolis, based 
        upon net tax capacity established under Minnesota Statutes, 
        section 128D.11, subdivision 8, by multiplying the net debt 
        limit percentage by the ratio of the district's net tax capacity 
        as calculated using the class rates in effect for assessment 
        year 2000 to the district's total net tax capacity as calculated 
        using the class rates in effect for assessment year 2001, in 
        both cases using taxable market values for assessment year 2000. 
           [EFFECTIVE DATE.] This section is effective retroactively 
        for bonds issued after July 1, 2001. 
           Sec. 16.  [CITY OF THIEF RIVER FALLS; NONPROFIT 
        CORPORATION.] 
           Subdivision 1.  [NONPROFIT CORPORATION MAY BE ESTABLISHED.] 
        The city of Thief River Falls may incorporate or authorize the 
        incorporation of a nonprofit corporation to operate a community 
        or regional center in the city.  
           Subd. 2.  [BOARD OF DIRECTORS.] The corporation must be 
        governed by a board of five directors.  The directors must be 
        named by the Thief River Falls city council.  No more than three 
        of the directors may be persons currently serving on the Thief 
        River Falls city council.  Board members must not be compensated 
        for their services but may be reimbursed for reasonable expenses 
        incurred in connection with their duties as board members.  
           Subd. 3.  [ARTICLES AND BYLAWS.] The entity must be 
        incorporated under Minnesota Statutes, chapter 317A, and 
        otherwise must comply with Minnesota Statutes, chapter 317A, 
        except to the extent Minnesota Statutes, chapter 317A, is 
        inconsistent with this section.  
           Subd. 4.  [EMPLOYEES.] Persons employed by the nonprofit 
        corporation are not public employees and must not participate in 
        retirement, deferred compensation, insurance, or other plans 
        that apply to public employees generally.  
           Subd. 5.  [STATUTORY COMPLIANCE.] The nonprofit corporation 
        must comply with Minnesota Statutes, section 465.719, 
        subdivisions 9, 10, 11, 12, 13, and 14. 
           Sec. 17.  [APPROPRIATION.] 
           (a) $585,000 in fiscal year 2002 and $7,015,000 in fiscal 
        year 2003 are appropriated to the commissioner of revenue from 
        the general fund for tax compliance activities, including 
        identification and collection of tax liabilities from 
        individuals and businesses that currently do not pay all taxes 
        owed, and audit and collection activity in the income tax, sales 
        tax, lawful gambling, insurance, and corporate areas.  The base 
        funding for these activities in fiscal years 2004 and 2005 is 
        increased by $4,750,000 each year. 
           (b) The commissioner must include these tax compliance 
        activities in the report required by Laws 2001, First Special 
        Session chapter 10, article 1, section 16, subdivision 2, 
        paragraph (c). 
           (c) Laws 2002, chapter 220, article 10, section 38, does 
        not apply to the positions necessary to carry out the compliance 
        activities identified in this section. 
           (d) If the legislative auditor determines that: 
           (1) actual revenue collections generated from tax 
        compliance activities funded by Laws 2001, First Special Session 
        chapter 10, article 1, section 16, subdivision 2, paragraphs (a) 
        and (b), will not generate at least $52,000,000 in additional 
        general fund revenue for the biennium ending June 30, 2003; or 
           (2) actual revenue collections generated from new tax 
        compliance activities funded by the appropriation in this 
        section will not generate at least $7,600,000 in additional 
        general fund revenue for the biennium ending June 30, 2003; 
        then the commissioner of finance must cancel from the budget 
        reserve account to the general fund the difference between the 
        $52,000,000 or the $7,600,000 and the actual additional general 
        fund revenue.  The legislative auditor's determination under 
        this paragraph must be made in the February 1, 2003, report to 
        the legislature required by Laws 2001, First Special Session 
        chapter 10, article 1, section 16. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 18.  [REPEALER.] 
           Minnesota Statutes 2000, section 291.03, subdivision 2, is 
        repealed effective for estates of decedents dying after December 
        31, 2001. 
           Presented to the governor May 15, 2002 
           Became law without the governor's signature May 18, 2002

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