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Minnesota Legislature

Office of the Revisor of Statutes

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

                            CHAPTER 127-S.F.No. 1505 
                  An act relating to financing and operation of 
                  government in this state; making changes to income, 
                  corporate franchise, estate, property, sales and use, 
                  motor vehicle sales, gross earnings, hazardous waste 
                  generator, solid waste management, aggregate 
                  materials, insurance premiums, taconite production, 
                  and cigarette and tobacco taxes, and tax provisions; 
                  changing, providing, or abolishing tax exemptions and 
                  credits; changing property tax valuation, appraisal, 
                  homestead, assessment, classification, levy, notice, 
                  review, appeal, apportionment, distribution, and aid 
                  provisions; conforming to certain changes in the 
                  internal revenue code; modifying sales tax provisions 
                  to comply with Streamlined Sales Tax Project 
                  Agreement; providing for tax administration, 
                  collection, compromise, compliance, liens, liability, 
                  and enforcement; changing tax return, refund, 
                  interest, and payment provisions; changing or imposing 
                  certain requirements on assessors; changing provisions 
                  relating to property tax refunds, tax increment 
                  financing, border city development zones, 
                  tax-forfeited land sales, recording or registration of 
                  documents, revenue recapture, and sustainable forest 
                  management incentives; clarifying commissioner of 
                  revenue's rulemaking authority; changing taconite 
                  production tax distribution provisions; authorizing 
                  certain certificates of motor vehicle title; 
                  authorizing certain sales by limited use vehicle 
                  dealers; providing for public finance 
                  instrumentalities and instruments; authorizing, 
                  validating, expanding, limiting, and clarifying public 
                  financing and economic development structures, 
                  instruments, and procedures for local public entities; 
                  imposing certain requirements for cigarettes shipped 
                  for sale in another state; imposing a fee on 
                  cigarettes produced by certain manufacturers; 
                  authorizing a Central Lakes Region Sanitary District; 
                  changing provisions relating to Cook county hospital 
                  district; giving certain powers to the Iron Range 
                  Resources and Rehabilitation Agency; giving certain 
                  authority and powers to certain cities, towns, and 
                  counties; authorizing actions by the metropolitan 
                  mosquito control district; authorizing disclosure of 
                  data and requiring access to certain records; 
                  changing, clarifying, and imposing penalties; amending 
                  Minnesota Statutes 2002, sections 8.30; 18B.07, 
                  subdivision 2; 115B.24, subdivision 8; 168.27, 
                  subdivision 4a; 168A.03; 168A.05, subdivision 1a; 
                  216B.2424, subdivision 5; 270.059; 270.06; 270.10, 
                  subdivision 1a; 270.67, subdivision 4; 270.69, by 
                  adding a subdivision; 270.701, subdivision 2, by 
                  adding a subdivision; 270.72, subdivision 2; 270A.03, 
                  subdivision 2; 270B.12, by adding a subdivision; 
                  272.02, subdivisions 31, 47, 53, by adding 
                  subdivisions; 272.12; 273.01; 273.05, subdivision 1; 
                  273.061, by adding subdivisions; 273.08; 273.11, 
                  subdivision 1a; 273.124, subdivisions 1, 14; 273.13, 
                  subdivisions 22, 23, 25; 273.1315; 273.134; 273.135, 
                  subdivisions 1, 2; 273.1391, subdivision 2; 273.1398, 
                  subdivisions 4b, 4d; 273.372; 273.42, subdivision 2; 
                  274.01, subdivision 1; 274.13, subdivision 1; 275.025, 
                  subdivisions 1, 3, 4; 276.10; 276.11, subdivision 1; 
                  277.20, subdivision 2; 278.01, subdivision 4; 278.05, 
                  subdivision 6; 279.06, subdivision 1; 281.17; 282.01, 
                  subdivision 7a; 282.08; 289A.02, subdivision 7; 
                  289A.10, subdivision 1; 289A.18, subdivision 4; 
                  289A.19, subdivision 4; 289A.31, subdivisions 3, 4, by 
                  adding a subdivision; 289A.36, subdivision 7, by 
                  adding subdivisions; 289A.40, subdivision 2; 289A.50, 
                  subdivision 2a, by adding subdivisions; 289A.56, 
                  subdivisions 3, 4; 289A.60, subdivisions 7, 15, by 
                  adding a subdivision; 290.01, subdivisions 19, 19a, 
                  19b, 19c, 19d, 31; 290.06, subdivisions 2c, 24; 
                  290.0671, subdivision 1; 290.0675, subdivisions 2, 3; 
                  290.0679, subdivision 2; 290.0802, subdivision 1; 
                  290A.03, subdivisions 8, 15; 290C.02, subdivisions 3, 
                  7; 290C.03; 290C.07; 290C.09; 290C.10; 290C.11; 
                  291.005, subdivision 1; 291.03, subdivision 1; 295.50, 
                  subdivision 9b; 295.53, subdivision 1; 297A.61, 
                  subdivisions 3, 7, 10, 12, 17, 30, 34, by adding 
                  subdivisions; 297A.66, by adding a subdivision; 
                  297A.665; 297A.668; 297A.67, subdivisions 2, 8, by 
                  adding a subdivision; 297A.68, subdivisions 2, 5, 36, 
                  by adding a subdivision; 297A.69, subdivisions 2, 3, 
                  4; 297A.75, subdivision 4; 297A.81; 297A.85; 297A.99, 
                  subdivisions 5, 10, 12; 297A.995, by adding a 
                  subdivision; 297B.025, subdivisions 1, 2; 297B.035, 
                  subdivision 1, by adding a subdivision; 297F.01, 
                  subdivisions 21a, 23; 297F.05, subdivision 1; 297F.06, 
                  subdivision 4; 297F.08, subdivision 7, by adding a 
                  subdivision; 297F.09, subdivision 2; 297F.20, 
                  subdivisions 1, 2, 3, 6, 9; 297H.06, subdivision 1; 
                  297I.01, subdivision 9; 297I.20; 298.2211, subdivision 
                  1; 298.27; 298.28, subdivision 4; 298.292, subdivision 
                  2; 298.296, subdivision 4; 298.2961, by adding a 
                  subdivision; 298.75, subdivision 1; 352.15, 
                  subdivision 1; 353.15, subdivision 1; 354.10, 
                  subdivision 1; 354B.30; 354C.165; 373.01, subdivision 
                  3; 373.45, subdivision 1; 373.47, subdivision 1; 
                  376.009; 376.55, subdivision 3, by adding a 
                  subdivision; 376.56, subdivision 3; 410.32; 412.301; 
                  469.1731, subdivision 3; 469.174, subdivisions 3, 6, 
                  10, 25, by adding a subdivision; 469.175, subdivisions 
                  1, 3, 4, 6; 469.176, subdivisions 1c, 2, 3, 7; 
                  469.1763, subdivisions 1, 3, 6; 469.177, subdivisions 
                  1, 12; 469.1771, subdivision 4, by adding a 
                  subdivision; 469.178, subdivision 7; 469.1791, 
                  subdivision 3; 469.1792, subdivisions 1, 2, 3; 
                  469.1813, subdivision 8; 469.1815, subdivision 1; 
                  473.39, by adding a subdivision; 473.702; 473.703, 
                  subdivision 1; 473.704, subdivision 17; 473.705; 
                  473.711, subdivision 2a; 473.714, subdivision 1; 
                  473.898, subdivision 3; 473F.07, subdivision 4; 
                  474A.061, subdivision 1; 475.58, subdivision 3b; 
                  515B.1-116; Laws 1967, chapter 558, section 1, 
                  subdivision 5, as amended; Laws 1989, chapter 211, 
                  section 8, subdivisions 2, as amended, 4, as amended; 
                  Laws 1997, chapter 231, article 10, section 25; Laws 
                  2001, First Special Session chapter 5, article 3, 
                  section 61; Laws 2001, First Special Session chapter 
                  5, article 3, section 63; Laws 2001, First Special 
                  Session chapter 5, article 9, section 12; Laws 2002, 
                  chapter 377, article 6, section 4; Laws 2002, chapter 
                  377, article 7, section 3; Laws 2002, chapter 377, 
                  article 11, section 1; Laws 2002, chapter 377, article 
                  12, section 17; proposing coding for new law in 
                  Minnesota Statutes, chapters 37; 123A; 270; 273; 274; 
                  275; 276; 290C; 297A; 297F; 410; 469; repealing 
                  Minnesota Statutes 2002, sections 270.691, subdivision 
                  8; 274.04; 290.0671, subdivision 3; 290.0675, 
                  subdivision 5; 294.01; 294.02; 294.021; 294.03; 
                  294.06; 294.07; 294.08; 294.09; 294.10; 294.11; 
                  294.12; 297A.61, subdivisions 14, 15; 297A.69, 
                  subdivision 5; 297A.72, subdivision 1; 297A.97; 
                  298.24, subdivision 3; 473.711, subdivision 2b; 
                  473.714, subdivision 2; 477A.065; Laws 1984, chapter 
                  652, section 2; Laws 2002, chapter 377, article 9, 
                  section 12; Minnesota Rules, parts 8007.0300, subpart 
                  3; 8009.7100; 8009.7200; 8009.7300; 8009.7400; 
                  8092.1000; 8106.0100, subparts 11, 15, 16; 8106.0200; 
                  8125.1000; 8125.1300, subpart 1; 8125.1400; 8130.0800, 
                  subparts 5, 12; 8130.1300; 8130.1600, subpart 5; 
                  8130.1700, subparts 3, 4; 8130.4800, subpart 2; 
                  8130.7500, subpart 5; 8130.8000; 8130.8300. 
        BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 

                                   ARTICLE 1 
                                   SALES TAX 
           Section 1.  Minnesota Statutes 2002, section 168.27, 
        subdivision 4a, is amended to read: 
           Subd. 4a.  [LIMITED USED VEHICLE LICENSE.] A limited used 
        vehicle license shall be provided to a nonprofit charitable 
        organization that qualifies for tax exemption under section 
        501(c)(3) of the Internal Revenue Code whose primary business in 
        the transfer of vehicles is to raise funds for the corporation, 
        who acquires vehicles for sale through donation, and who uses a 
        licensed motor vehicle auctioneer to sell vehicles to retail 
        customers.  This license does not apply to educational 
        institutions whose primary purpose is to train students in the 
        repair, maintenance, and sale of motor vehicles.  A limited used 
        vehicle license allows the organization to accept assignment of 
        vehicles without the requirement to transfer title as provided 
        in section 168A.10 until sold to a retail customer or licensed 
        motor vehicle dealer.  Limited used vehicle license holders are 
        not entitled to dealer plates, and shall report all vehicles 
        held for resale to the department of public safety in a manner 
        and time prescribed by the department. 
           [EFFECTIVE DATE.] This section is effective for sales made 
        after June 30, 2003. 
           Sec. 2.  Minnesota Statutes 2002, section 168A.03, is 
        amended to read: 
           168A.03 [EXEMPT VEHICLES.] 
           Subdivision 1.  The registrar shall not issue a certificate 
        of title for: 
           (1) a vehicle owned by the United States; 
           (2) a vehicle owned by a manufacturer or dealer and held 
        for sale, even though incidentally moved on the highway or used 
        pursuant to section 168.27 or 168.28, or a vehicle used by a 
        manufacturer solely for testing; 
           (3) a vehicle owned by a nonresident and not required by 
        law to be registered in this state; 
           (4) (3) a vehicle owned by a nonresident and regularly 
        engaged in the interstate transportation of persons or property 
        for which a currently effective certificate of title has been 
        issued in another state; 
           (5) (4) a vehicle moved solely by animal power; 
           (6) (5) an implement of husbandry; 
           (7) (6) special mobile equipment; 
           (8) (7) a self-propelled wheelchair or invalid tricycle; 
           (9) (8) a trailer (i) having a gross weight of 4,000 pounds 
        or less unless a secured party holds an interest in the trailer 
        or a certificate of title was previously issued by this state or 
        any other state or (ii) designed primarily for agricultural 
        purposes except recreational equipment or a manufactured home, 
        both as defined in section 168.011, subdivisions 8 and 25; 
           (10) (9) a snowmobile.  
           Subd. 2.  [DEALERS.] No certificate of title need be 
        obtained for a vehicle owned by a manufacturer or dealer and 
        held for sale, even though incidentally moved on the highway or 
        used pursuant to section 168.27 or 168.28, or a vehicle used by 
        a manufacturer solely for testing. 
           [EFFECTIVE DATE.] This section is effective for sales made 
        after June 30, 2003. 
           Sec. 3.  Minnesota Statutes 2002, section 289A.18, 
        subdivision 4, is amended to read: 
           Subd. 4.  [SALES AND USE TAX RETURNS.] (a) Sales and use 
        tax returns must be filed on or before the 20th day of the month 
        following the close of the preceding reporting period, except 
        that annual use tax returns provided for under section 289A.11, 
        subdivision 1, must be filed by April 15 following the close of 
        the calendar year, in the case of individuals.  Annual use tax 
        returns of businesses, including sole proprietorships, and 
        annual sales tax returns must be filed by February 5 following 
        the close of the calendar year.  
           (b) Returns for the June reporting period filed by 
        retailers required to remit their June liability under section 
        289A.20, subdivision 4, paragraph (b), are due on or before 
        August 20.  
           (c) If a retailer has an average sales and use tax 
        liability, including local sales and use taxes administered by 
        the commissioner, equal to or less than $500 per month in any 
        quarter of a calendar year, and has substantially complied with 
        the tax laws during the preceding four calendar quarters, the 
        retailer may request authorization to file and pay the taxes 
        quarterly in subsequent calendar quarters.  The authorization 
        remains in effect during the period in which the retailer's 
        quarterly returns reflect sales and use tax liabilities of less 
        than $1,500 and there is continued compliance with state tax 
        laws. 
           (d) If a retailer has an average sales and use tax 
        liability, including local sales and use taxes administered by 
        the commissioner, equal to or less than $100 per month during a 
        calendar year, and has substantially complied with the tax laws 
        during that period, the retailer may request authorization to 
        file and pay the taxes annually in subsequent years.  The 
        authorization remains in effect during the period in which the 
        retailer's annual returns reflect sales and use tax liabilities 
        of less than $1,200 and there is continued compliance with state 
        tax laws. 
           (e) The commissioner may also grant quarterly or annual 
        filing and payment authorizations to retailers if the 
        commissioner concludes that the retailers' future tax 
        liabilities will be less than the monthly totals identified in 
        paragraphs (c) and (d).  An authorization granted under this 
        paragraph is subject to the same conditions as an authorization 
        granted under paragraphs (c) and (d). 
           (f) A taxpayer who is a materials supplier may report gross 
        receipts either on: 
           (1) the cash basis as the consideration is received; or 
           (2) the accrual basis as sales are made.  
        As used in this paragraph, "materials supplier" means a person 
        who provides materials for the improvement of real property; who 
        is primarily engaged in the sale of lumber and building 
        materials-related products to owners, contractors, 
        subcontractors, repairers, or consumers; who is authorized to 
        file a mechanics lien upon real property and improvements under 
        chapter 514; and who files with the commissioner an election to 
        file sales and use tax returns on the basis of this paragraph.  
           (g) Notwithstanding paragraphs (a) to (f), a seller that is 
        not a Model 1, 2, or 3 seller, as those terms are used in the 
        Streamlined Sales and Use Tax Agreement, that does not have a 
        legal requirement to register in Minnesota, and that is 
        registered under the agreement, must file a return by February 5 
        following the close of the calendar year in which the seller 
        initially registers, and must file subsequent returns on 
        February 5 on an annual basis in succeeding years.  
        Additionally, a return must be submitted on or before the 20th 
        day of the month following any month by which sellers have 
        accumulated state and local tax funds for the state in the 
        amount of $1,000 or more.  
           [EFFECTIVE DATE.] This section is effective for sales and 
        purchases made on or after January 1, 2004. 
           Sec. 4.  Minnesota Statutes 2002, section 289A.40, 
        subdivision 2, is amended to read: 
           Subd. 2.  [BAD DEBT LOSS.] If a claim relates to an 
        overpayment because of a failure to deduct a loss due to a bad 
        debt or to a security becoming worthless, the claim is 
        considered timely if filed within seven years from the date 
        prescribed for the filing of the return.  A claim relating to an 
        overpayment of taxes under chapter 297A must be filed within 
        3-1/2 years from the date prescribed for filing the return, plus 
        any extensions granted for filing the return, but only if filed 
        within the extended time, or within one year from the date the 
        taxpayer's federal income tax return is timely filed claiming 
        the bad debt deduction, whichever period expires later.  The 
        refund or credit is limited to the amount of overpayment 
        attributable to the loss.  "Bad debt" for purposes of this 
        subdivision, has the same meaning as that term is used in United 
        States Code, title 26, section 166, except that the following 
        are excluded from the calculation of bad debt:  financing 
        charges or interest; sales or use taxes charged on the purchase 
        price; uncollectible amounts on property that remain in the 
        possession of the seller until the full purchase price is paid; 
        expenses incurred in attempting to collect any debt; and 
        repossessed property. 
           [EFFECTIVE DATE.] This section is effective for sales and 
        purchases made on or after January 1, 2004. 
           Sec. 5.  Minnesota Statutes 2002, section 289A.50, is 
        amended by adding a subdivision to read: 
           Subd. 2b.  [CERTIFIED SERVICE PROVIDER; BAD DEBT CLAIM.] A 
        certified service provider, as defined in section 297A.995, 
        subdivision 2, may claim on behalf of a taxpayer that is its 
        client any bad debt allowance provided by section 297A.81.  The 
        certified service provider must credit or refund to its client 
        the full amount of any bad debt allowance or refund received. 
           [EFFECTIVE DATE.] This section is effective for sales and 
        purchases made on or after January 1, 2004. 
           Sec. 6.  Minnesota Statutes 2002, section 289A.50, is 
        amended by adding a subdivision to read: 
           Subd. 2c.  [NOTICE FROM PURCHASER TO VENDOR REQUESTING 
        REFUND.] (a) If a vendor has collected from a purchaser a tax on 
        a transaction that is not subject to the tax imposed by chapter 
        297A, the purchaser may seek from the vendor a return of 
        over-collected sales or use taxes as follows: 
           (1) the purchaser must provide written notice to the 
        vendor; 
           (2) the notice to the vendor must contain the information 
        necessary to determine the validity of the request; and 
           (3) no cause of action against the vendor accrues until the 
        vendor has had 60 days to respond to the written notice. 
           (b) In connection with a purchaser's request from a vendor 
        of over-collected sales or use taxes, a vendor is presumed to 
        have a reasonable business practice, if in the collection of 
        such sales or use taxes, the vendor:  (1) uses a certified 
        service provider as defined in section 297A.995, a certified 
        automated system, as defined in section 297A.995, or a 
        proprietary system that is certified by the state; and (2) has 
        remitted to the state all taxes collected less any deductions, 
        credits, or collection allowances. 
           [EFFECTIVE DATE.] This section is effective for sales and 
        purchases made on or after January 1, 2004. 
           Sec. 7.  Minnesota Statutes 2002, section 289A.56, 
        subdivision 4, is amended to read: 
           Subd. 4.  [CAPITAL EQUIPMENT AND CERTAIN BUILDING MATERIALS 
        REFUNDS; REFUNDS TO PURCHASERS.] Notwithstanding subdivision 3, 
        for refunds payable under section sections 297A.75, subdivision 
        1, clauses (1), (2), (3), and (5), interest is computed from the 
        date the refund claim is filed with the commissioner.  For 
        refunds payable under section and 289A.50, subdivision 2a, 
        interest is computed from the 20th day of the month following 
        the month of the invoice date for the purchase which is the 
        subject of the refund, if the refund claim includes a detailed 
        schedule of purchases made during each of the periods in the 
        claim.  If the refund claim submitted does not contain a 
        schedule reflecting purchases made in each period, interest is 
        computed from the date the claim was filed 90 days after the 
        refund claim is filed with the commissioner. 
           [EFFECTIVE DATE.] This section is effective for refund 
        claims filed on or after April 1, 2003. 
           Sec. 8.  Minnesota Statutes 2002, 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 prewritten computer software whether delivered 
        electronically, by load and leave, or otherwise.  
           (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 onetime 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; 
           (5) delivery of aggregate materials and concrete block by a 
        third party if the delivery would be subject to the sales tax if 
        provided by the seller of the aggregate material or 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. 
           (k) A sale and a purchase includes the rental of a vehicle 
        by a motor vehicle dealer to a customer when (1) the vehicle is 
        rented by the customer for a consideration, or (2) the motor 
        vehicle dealer is reimbursed pursuant to a service contract as 
        defined in section 65B.29, subdivision 1, clause (1). 
           [EFFECTIVE DATE.] This section, paragraph (f), and the 
        changes made to paragraph (i) are effective for sales and 
        purchases made on or after January 1, 2004.  This section, 
        paragraph (k), is effective for sales and purchases made on or 
        after July 1, 2003. 
           Sec. 9.  Minnesota Statutes 2002, section 297A.61, 
        subdivision 7, is amended to read: 
           Subd. 7.  [SALES PRICE.] (a) "Sales price" means the 
        measure subject to sales tax, and means the total amount of 
        consideration, including cash, credit, personal property, and 
        services, for which personal property or services are sold, 
        leased, or rented, valued in money, whether received in money or 
        otherwise, without any deduction for the following: 
           (1) the seller's cost of the property sold; 
           (2) the cost of materials used, labor or service cost, 
        interest, losses, all costs of transportation to the seller, all 
        taxes imposed on the seller, and any other expenses of the 
        seller; 
           (3) charges by the seller for any services necessary to 
        complete the sale, other than delivery and installation charges; 
           (4) delivery charges; 
           (5) installation charges; and 
           (6) the value of exempt property given to the purchaser 
        when taxable and exempt personal property have been bundled 
        together and sold by the seller as a single product or piece of 
        merchandise. 
           (b) Sales price does not include: 
           (1) discounts, including cash, terms, or coupons, that are 
        not reimbursed by a third party and that are allowed by the 
        seller and taken by a purchaser on a sale; 
           (2) interest, financing, and carrying charges from credit 
        extended on the sale of personal property or services, if the 
        amount is separately stated on the invoice, bill of sale, or 
        similar document given to the purchaser; and 
           (3) any taxes legally imposed directly on the consumer that 
        are separately stated on the invoice, bill of sale, or similar 
        document given to the purchaser. 
           [EFFECTIVE DATE.] This section is effective for sales and 
        purchases made on or after January 1, 2004. 
           Sec. 10.  Minnesota Statutes 2002, section 297A.61, 
        subdivision 10, is amended to read: 
           Subd. 10.  [TANGIBLE PERSONAL PROPERTY.] (a) "Tangible 
        personal property" means corporeal personal property of any 
        kind, including property that is to become real property as a 
        result of incorporation, attachment, or installation following 
        its acquisition. 
           (b) Tangible personal property includes, but is not limited 
        to: 
           (1) computer software, whether contained on tape, discs, 
        cards, or other devices; and 
           (2) prepaid telephone calling cards.  
           (c) personal property that can be seen, weighed, measured, 
        felt, or touched, or that is in any other manner perceptible to 
        the senses.  "Tangible personal property" includes, but is not 
        limited to, electricity, water, gas, steam, prewritten computer 
        software, and prepaid calling cards. 
           (b) Tangible personal property does not include: 
           (1) large ponderous machinery and equipment used in a 
        business or production activity which at common law would be 
        considered to be real property; 
           (2) property which is subject to an ad valorem property 
        tax; 
           (3) property described in section 272.02, subdivision 9, 
        clauses (a) to (d); and 
           (4) property described in section 272.03, subdivision 2, 
        clauses (3) and (5). 
           [EFFECTIVE DATE.] This section is effective for sales and 
        purchases made on or after January 1, 2004. 
           Sec. 11.  Minnesota Statutes 2002, section 297A.61, is 
        amended by adding a subdivision to read: 
           Subd. 14a.  [LEASE OR RENTAL.] (a) "Lease or rental" means 
        any transfer of possession or control of tangible personal 
        property for a fixed or indeterminate term for consideration.  A 
        lease or rental may include future options to purchase or extend.
           (b) Lease or rental does not include: 
           (1) a transfer of possession or control of property under a 
        security agreement or deferred payment plan that requires the 
        transfer of title upon completion of the required payments; 
           (2) a transfer of possession or control of property under 
        an agreement that requires the transfer of title upon completion 
        of required payments and payment of an option price does not 
        exceed the greater of $100 or one percent of the total required 
        payments; or 
           (3) providing tangible personal property along with an 
        operator for a fixed or indeterminate period of time.  A 
        condition of this exclusion is that the operator is necessary 
        for the equipment to perform as designed.  For the purpose of 
        this subdivision, an operator must do more than maintain, 
        inspect, or set up the tangible personal property. 
           (c) Lease or rental does include agreements covering motor 
        vehicles and trailers where the amount of consideration may be 
        increased or decreased by reference to the amount realized upon 
        sale or disposition of the property as defined in United States 
        Code, title 26, section 7701(h)(l). 
           (d) This definition must be used for sales and use tax 
        purposes regardless if a transaction is characterized as a lease 
        or rental under generally accepted accounting principles, the 
        Internal Revenue Code, chapter 336, or other provisions of 
        federal, state, or local law. 
           [EFFECTIVE DATE.] This section is effective for leases and 
        rentals entered into on or after January 1, 2004. 
           Sec. 12.  Minnesota Statutes 2002, section 297A.61, 
        subdivision 17, is amended to read: 
           Subd. 17.  [PREWRITTEN COMPUTER SOFTWARE.] "Prewritten 
        computer software" means a computer program, either in the form 
        of written procedures or contained on tapes, discs, cards, or 
        another device, or any required documentation or manuals 
        designed to facilitate the use of the computer program. computer 
        software, including prewritten upgrades, that is not designed 
        and developed by the author or other creator to the 
        specifications of a specific purchaser.  The combining of two or 
        more "prewritten computer software" programs or prewritten 
        portions of the programs does not cause the combination to be 
        other than "prewritten computer software."  "Prewritten computer 
        software" includes software designed and developed by the author 
        or other creator to the specifications of a specific purchaser 
        when it is sold to a person other than the purchaser.  If a 
        person modifies or enhances computer software of which the 
        person is not the author or creator, the person is deemed to be 
        the author or creator only of such person's modifications or 
        enhancements.  "Prewritten computer software" or a prewritten 
        portion of it that is modified or enhanced to any degree, if the 
        modification or enhancement is designed and developed to the 
        specifications of a specific purchaser, remains "prewritten 
        computer software"; provided, however, that if there is a 
        reasonable, separately stated charge or an invoice or other 
        statement of the price given to the purchaser for such 
        modification or enhancement, the modification or enhancement 
        does not constitute "prewritten computer software."  For 
        purposes of this subdivision: 
           (1) "computer" does not include tape-controlled automatic 
        drilling, milling, or other manufacturing machinery or equipment 
        means an electronic device that accepts information in digital 
        or similar form and manipulates it for a result based on a 
        sequence of instructions; and 
           (2) "computer program" means information and directions 
        that dictate the function performed by data processing 
        equipment.  It includes the complete plan for the solution of a 
        problem, such as the complete sequence of automatic data 
        processing equipment instructions necessary to solve a problem 
        and includes both systems and application programs and 
        subdivisions, such as assemblers, compilers, routines, 
        generators, and utility programs.  Computer program includes a 
        "canned" or prewritten computer program that is held or existing 
        for general or repeated sale or lease, even if the prewritten or 
        "canned" program was initially developed on a custom basis or 
        for in-house use. "electronic" means relating to technology 
        having electrical, digital, magnetic, wireless, optical, 
        electromagnetic, or similar capabilities; and 
           (3) "computer software" means a set of coded instructions 
        designed to cause a "computer" or automatic data processing 
        equipment to perform a task. 
           [EFFECTIVE DATE.] This section is effective for sales and 
        purchases made on or after January 1, 2004. 
           Sec. 13.  Minnesota Statutes 2002, section 297A.61, is 
        amended by adding a subdivision to read: 
           Subd. 17a.  [DELIVERED ELECTRONICALLY.] "Delivered 
        electronically" means delivered to the purchaser by means other 
        than tangible storage media. 
           [EFFECTIVE DATE.] This section is effective for sales and 
        purchases made on or after January 1, 2004. 
           Sec. 14.  Minnesota Statutes 2002, section 297A.61, is 
        amended by adding a subdivision to read: 
           Subd. 17b.  [LOAD AND LEAVE.] "Load and leave" means 
        delivered to the purchaser by use of a tangible storage media 
        where the tangible storage media is not physically transferred 
        to the purchaser. 
           [EFFECTIVE DATE.] This section is effective for sales and 
        purchases made on or after January 1, 2004. 
           Sec. 15.  Minnesota Statutes 2002, section 297A.61, 
        subdivision 30, is amended to read: 
           Subd. 30.  [DELIVERY CHARGES.] "Delivery charges" means 
        charges by the seller of personal property or services for 
        preparation and delivery to a location designated by the 
        purchaser of personal property or services including, but not 
        limited to, transportation, shipping, postage, handling, 
        crating, and packing. 
           [EFFECTIVE DATE.] This section is effective for sales and 
        purchases made on or after January 1, 2004. 
           Sec. 16.  Minnesota Statutes 2002, section 297A.61, is 
        amended by adding a subdivision to read: 
           Subd. 35.  [DIRECT MAIL.] "Direct mail" means printed 
        material delivered or distributed by United States Mail or other 
        delivery service to a mass audience or to addressees on a 
        mailing list provided by the purchaser or at the direction of 
        the purchaser when the cost of the items is not billed directly 
        to the recipients.  "Direct mail" includes tangible personal 
        property supplied directly or indirectly by the purchaser to the 
        direct mail seller for inclusion in the package containing the 
        printed material.  "Direct mail" does not include multiple items 
        of printed material delivered to a single address. 
           [EFFECTIVE DATE.] This section is effective for sales and 
        purchases made on or after January 1, 2004. 
           Sec. 17.  Minnesota Statutes 2002, section 297A.66, is 
        amended by adding a subdivision to read: 
           Subd. 5.  [WITHDRAWAL FROM STREAMLINED SALES AND USE TAX 
        AGREEMENT.] If the state has withdrawn its membership or been 
        expelled from the streamlined sales and use tax agreement, it 
        shall not use a seller's registration with the central 
        registration system and the collection of sales and use taxes in 
        the state as a factor in determining whether the seller has 
        nexus with that state for any tax at any time. 
           [EFFECTIVE DATE.] This section is effective for sales and 
        purchases made on or after January 1, 2004. 
           Sec. 18.  [297A.666] [AMNESTY FOR REGISTRATION.] 
           Subdivision 1.  [AMNESTY PROVISIONS.] Subject to the 
        limitations of subdivision 2: 
           (1) this state shall provide amnesty for uncollected or 
        unpaid sales or use tax to a seller who registers to pay or to 
        collect and remit applicable sales or use tax on sales made to 
        purchasers in this state in accordance with the terms of the 
        streamlined sales and use tax agreement, provided that the 
        seller was not so registered in this state in the 12-month 
        period preceding the effective date of the state's participation 
        in the agreement; and 
           (2) the amnesty shall preclude assessment for uncollected 
        or unpaid sales or use tax together with penalty or interest for 
        sales made during the period the seller was not registered in 
        this state, provided registration occurs within 12 months of the 
        effective date of the state's participation in the agreement. 
           Subd. 2.  [LIMITATIONS.] (a) The amnesty is not available 
        to a seller with respect to any matter or matters for which the 
        seller received notice of the commencement of an audit and the 
        audit is not yet finally resolved, including any related 
        administrative and judicial processes. 
           (b) The amnesty is not available for sales or use taxes 
        already paid or remitted to this state or to taxes collected by 
        the seller. 
           (c) The amnesty is fully effective, absent the seller's 
        fraud or intentional misrepresentation of a material fact, as 
        long as the seller continues registration and continues payment 
        or collection and remittance of applicable sales or use taxes 
        for a period of at least 36 months.  The statute of limitations 
        provisions of chapter 289A applicable to asserting a sales or 
        use tax liability must be tolled during this 36-month period. 
           (d) The amnesty is applicable only to sales or use taxes 
        due from a seller in its capacity as a seller and not to sales 
        or use taxes due from a seller in its capacity as a buyer. 
           [EFFECTIVE DATE.] This section is effective for sales and 
        purchases made on or after January 1, 2004. 
           Sec. 19.  Minnesota Statutes 2002, section 297A.668, is 
        amended to read: 
           297A.668 [SOURCING OF SALE; SITUS IN THIS STATE.] 
           Subdivision 1.  [SOURCING RULES APPLICABILITY.] (a) The 
        following provisions of this section apply regardless of the 
        characterization of a product as tangible personal property, a 
        digital good, or a service; but do not apply to 
        telecommunications services, or the sales of motor vehicles, 
        watercraft, aircraft, modular homes, manufactured homes, or 
        mobile homes.  These provisions only apply to determine a 
        seller's obligation to pay or collect and remit a sales or use 
        tax with respect to the seller's sale of a product.  These 
        provisions do not affect the obligation of a seller as purchaser 
        to remit tax on the use of the product. 
           Subd. 2.  [SOURCING RULES.] (a) The retail sale, excluding 
        lease or rental, of a product shall be sourced as required in 
        paragraphs (b) through (f). 
           (b) When the product is received by the purchaser at a 
        business location of the seller, the sale is sourced to that 
        business location. 
           (c) When the product is not received by the purchaser at a 
        business location of the seller, the sale is sourced to the 
        location where receipt by the purchaser or the donee designated 
        by the purchaser occurs, including the location indicated by 
        instructions for delivery to the purchasers or the purchaser's 
        donee, known to the seller. 
           (d) When paragraphs (b) and (c) do not apply, the sale is 
        sourced to the location indicated by an address for the 
        purchaser that is available from the business records of the 
        seller that are maintained in the ordinary course of the 
        seller's business, when use of this address does not constitute 
        bad faith. 
           (e) When paragraphs (b), (c), and (d) do not apply, the 
        sale is sourced to the location indicated by an address for the 
        purchaser obtained during the consummation of the sale, 
        including the address of a purchaser's payment instrument if no 
        other address is available, when use of this address does not 
        constitute bad faith. 
           (f) When paragraphs (b), (c), (d), and (e) do not apply, 
        including the circumstance where the seller is without 
        sufficient information to apply the previous paragraphs, then 
        the location is determined by the address from which tangible 
        personal property was shipped, from which the digital good or 
        the computer software delivered electronically was first 
        available for transmission by the seller, or from which the 
        service was provided.  For purposes of this paragraph, the 
        seller must disregard any location that merely provided the 
        digital transfer of the product sold. 
           (g) For purposes of this subdivision, the terms "receive" 
        and "receipt" mean taking possession of tangible personal 
        property, making first use of services, or taking possession or 
        making first use of digital goods or the computer software 
        delivered electronically, whichever occurs first.  The terms 
        receive and receipt do not include possession by a carrier for 
        hire on behalf of the purchaser. 
           Subd. 3.  [LEASE OR RENTAL OF TANGIBLE PERSONAL 
        PROPERTY.] The lease or rental of tangible personal property, 
        other than property identified in subdivision 4 or 5, shall be 
        sourced as required in paragraphs (a) to (c). 
           (a) For a lease or rental that requires recurring periodic 
        payments, the first periodic payment is sourced the same as a 
        retail sale in accordance with the provisions of subdivision 6.  
        Periodic payments made subsequent to the first payment are 
        sourced to the primary property location for each period covered 
        by the payment.  The primary property location must be as 
        indicated by an address for the property provided by the lessee 
        that is available to the lessor from its records maintained in 
        the ordinary course of business, when use of this address does 
        not constitute bad faith.  The property location must not be 
        altered by intermittent use at different locations, such as use 
        of business property that accompanies employees on business 
        trips and service calls. 
           (b) For a lease or rental that does not require recurring 
        periodic payments, the payment is sourced the same as a retail 
        sale in accordance with the provisions of subdivision 2. 
           (c) This subdivision does not affect the imposition or 
        computation of sales or use tax on leases or rentals based on a 
        lump sum or accelerated basis, or on the acquisition of property 
        for lease. 
           Subd. 4.  [LEASE OR RENTAL OF MOTOR VEHICLES, TRAILERS, 
        SEMITRAILERS, OR AIRCRAFT THAT DO NOT QUALIFY AS TRANSPORTATION 
        EQUIPMENT.] The lease or rental of motor vehicles, trailers, 
        semitrailers, or aircraft that do not qualify as transportation 
        equipment, as defined in subdivision 5, shall be sourced as 
        required in paragraphs (a) to (c). 
           (a) For a lease or rental that requires recurring periodic 
        payments, each periodic payment is sourced to the primary 
        property location.  The primary property location must be as 
        indicated by an address for the property provided by the lessee 
        that is available to the lessor from its records maintained in 
        the ordinary course of business, when use of this address does 
        not constitute bad faith.  This location must not be altered by 
        intermittent use at different locations. 
           (b) For a lease or rental that does not require recurring 
        periodic payments, the payment is sourced the same as a retail 
        sale in accordance with the provisions of subdivision 2. 
           (c) This subdivision does not affect the imposition or 
        computation of sales or use tax on leases or rentals based on a 
        lump sum or accelerated basis, or on the acquisition of property 
        for lease. 
           Subd. 5.  [TRANSPORTATION EQUIPMENT.] (a) The retail sale, 
        including lease or rental, of transportation equipment shall be 
        sourced the same as a retail sale in accordance with the 
        provisions of subdivision 2, notwithstanding the exclusion of 
        lease or rental in subdivision 2. 
           (b) "Transportation equipment" means any of the following: 
           (1) locomotives and railcars that are utilized for the 
        carriage of persons or property in interstate commerce; and/or 
           (2) trucks and truck-tractors with a gross vehicle weight 
        rating (GVWR) of 10,001 pounds or greater, trailers, 
        semitrailers, or passenger buses that are: 
           (i) registered through the international registration plan; 
        and 
           (ii) operated under authority of a carrier authorized and 
        certified by the United States Department of Transportation or 
        another federal authority to engage in the carriage of persons 
        or property in interstate commerce.  
           Subd. 2. 6.  [MULTIPLE POINTS OF USE.] (a) Notwithstanding 
        the provisions of subdivision 1 subdivisions 2 to 5, a business 
        purchaser that is not a holder of a direct pay permit that knows 
        at the time of its purchase of a digital good, computer software 
        delivered electronically, or a service that the digital good, 
        computer software delivered electronically, or service will be 
        concurrently available for use in more than one taxing 
        jurisdiction shall deliver to the seller in conjunction with its 
        purchase a multiple points of use exemption certificate 
        disclosing this fact.  
           (b) Upon receipt of the multiple points of use exemption 
        certificate, the seller is relieved of the obligation to 
        collect, pay, or remit the applicable tax and the purchaser is 
        obligated to collect, pay, or remit the applicable tax on a 
        direct pay basis. 
           (c) A purchaser delivering the multiple points of use 
        exemption certificate may use any reasonable, but consistent and 
        uniform, method of apportionment that is supported by the 
        purchaser's business records as they exist at the time of the 
        consummation of the sale. 
           (d) The multiple points of use exemption certificate 
        remains in effect for all future sales by the seller to the 
        purchaser until it is revoked in writing, except as to the 
        subsequent sale's specific apportionment that is governed by the 
        principle of paragraph (c) and the facts existing at the time of 
        the sale. 
           (e) A holder of a direct pay permit is not required to 
        deliver a multiple points or use exemption certificate to the 
        seller.  A direct pay permit holder shall follow the provisions 
        of paragraph (c) in apportioning the tax due on a digital good, 
        computer software delivered electronically, or a service that 
        will be concurrently available for use in more than one taxing 
        jurisdiction. 
           Subd. 3.  [DEFINITION OF TERMS.] For purposes of this 
        section, the terms "receive" and "receipt" mean taking 
        possession of tangible personal property, making first use of 
        services, or taking possession or making first use of digital 
        goods, whichever occurs first.  The terms receive and receipt do 
        not include possession by a carrier for hire on behalf of the 
        purchaser. 
           Subd. 7.  [DIRECT MAIL.] (a) Notwithstanding other 
        subdivisions of this section, a purchaser of direct mail that is 
        not a holder of a direct pay permit shall provide to the seller, 
        in conjunction with the purchase, either a direct mail form or 
        information to show the jurisdictions to which the direct mail 
        is delivered to recipients. 
           (1) Upon receipt of the direct mail form, the seller is 
        relieved of all obligations to collect, pay, or remit the 
        applicable tax and the purchaser is obligated to pay or remit 
        the applicable tax on a direct pay basis.  A direct mail form 
        remains in effect for all future sales of direct mail by the 
        seller to the purchaser until it is revoked in writing.  
           (2) Upon receipt of information from the purchaser showing 
        the jurisdictions to which the direct mail is delivered to 
        recipients, the seller shall collect the tax according to the 
        delivery information provided by the purchaser.  In the absence 
        of bad faith, the seller is relieved of any further obligation 
        to collect tax on any transaction for which the seller has 
        collected tax pursuant to the delivery information provided by 
        the purchaser. 
           (b) If the purchaser of direct mail does not have a direct 
        pay permit and does not provide the seller with either a direct 
        mail form or delivery information, as required by paragraph (a), 
        the seller shall collect the tax according to subdivision 2, 
        paragraph (f).  Nothing in this paragraph limits a purchaser's 
        obligation for sales or use tax to any state to which the direct 
        mail is delivered. 
           (c) If a purchaser of direct mail provides the seller with 
        documentation of direct pay authority, the purchaser is not 
        required to provide a direct mail form or delivery information 
        to the seller. 
           [EFFECTIVE DATE.] This section is effective for sales and 
        purchases made on or after January 1, 2004. 
           Sec. 20.  [297A.669] [TELECOMMUNICATION SOURCING.] 
           Subdivision 1.  [CALL-BY-CALL BASIS SOURCING.] Except for 
        the defined telecommunication services in subdivision 3, the 
        sale of telecommunication service sold on a call-by-call basis 
        shall be sourced to (1) each level of taxing jurisdiction where 
        the call originates and terminates in that jurisdiction; or (2) 
        each level of taxing jurisdiction where the call either 
        originates or terminates and in which the service address is 
        also located. 
           Subd. 2.  [OTHER THAN CALL-BY-CALL BASIS SOURCING.] Except 
        for the defined telecommunication services in subdivision 3, a 
        sale of telecommunications services sold on a basis other than a 
        call-by-call basis is sourced to the customer's place of primary 
        use. 
           Subd. 3.  [DEFINED TELECOMMUNICATIONS SERVICES 
        SOURCING.] The sale of the following telecommunication services 
        shall be sourced to each level of taxing jurisdiction in 
        paragraphs (a) to (d). 
           (a) A sale of mobile telecommunications services, other 
        than air-to-ground radiotelephone service and prepaid calling 
        service, is sourced to the customer's place of primary use as 
        required by the Mobile Telecommunications Sourcing Act. 
           (b) A sale of postpaid calling service is sourced to the 
        origination point of the telecommunications signal as first 
        identified by either: 
           (1) the seller's telecommunications system; or 
           (2) information received by the seller from its service 
        provider, where the system used to transport such signals is not 
        that of the seller. 
           (c) A sale of prepaid calling service is sourced in 
        accordance with section 297A.668, subdivision 2.  However, in 
        the case of a sale of mobile telecommunications service that is 
        a prepaid telecommunications service, the rule provided in 
        section 297A.668, subdivision 2, paragraph (f), shall include as 
        an option the location associated with the mobile telephone 
        number. 
           (d) A sale of a private communication service is sourced as 
        follows: 
           (1) service for a separate charge related to a customer 
        channel termination point is sourced to each level of 
        jurisdiction in which the customer channel termination point is 
        located; 
           (2) service where all customer termination points are 
        located entirely within one jurisdiction or levels of 
        jurisdiction is sourced in such jurisdiction in which the 
        customer channel termination points are located; 
           (3) service for segments of a channel between two customer 
        channel termination points located in different jurisdictions 
        and which segment of channel are separately charged is sourced 
        50 percent in each level of jurisdiction in which the customer 
        channel termination points are located; and 
           (4) service for segments of a channel located in more than 
        one jurisdiction or levels of jurisdiction and which segments 
        are not separately billed is sourced in each jurisdiction based 
        on the percentage determined by dividing the number of customer 
        channel termination points in the jurisdiction by the total 
        number of customer channel termination points. 
           Subd. 4.  [AIR-TO-GROUND RADIOTELEPHONE 
        SERVICE.] "Air-to-ground radiotelephone service," for purposes 
        of this section, means a radio service, as that term is defined 
        in Code of Federal Regulations, title 47, section 22.99, in 
        which common carriers are authorized to offer and provide radio 
        telecommunications service for hire to subscribers in aircraft. 
           Subd. 5.  [CALL-BY-CALL BASIS.] "Call-by-call basis," for 
        purposes of this section, means any method of charging for 
        telecommunications services where the price is measured by 
        individual calls. 
           Subd. 6.  [COMMUNICATIONS CHANNEL.] "Communications 
        channel," for purposes of this section, means a physical or 
        virtual path of communications over which signals are 
        transmitted between or among customer channel termination points.
           Subd. 7.  [CUSTOMER.] "Customer," for purposes of this 
        section, means the person or entity that contracts with the 
        seller of telecommunications services.  If the end user of 
        telecommunications services is not the contracting party, the 
        end user of the telecommunications service is the customer of 
        the telecommunication service, but this sentence applies only 
        for the purpose of sourcing sales of telecommunications services 
        under this section.  Customer does not include a reseller of 
        telecommunications service or for mobile telecommunications 
        service of a serving carrier under an agreement to serve the 
        customer outside the home service provider's licensed service 
        area. 
           Subd. 8.  [CUSTOMER CHANNEL TERMINATION POINT.] "Customer 
        channel termination point," for purposes of this section, means 
        the location where the customer either inputs or receives the 
        communications. 
           Subd. 9.  [END USER.] "End user," for purposes of this 
        section, means the person who utilizes the telecommunication 
        service.  In the case of an entity, end user means the 
        individual who utilizes the service on behalf of the entity. 
           Subd. 10.  [HOME SERVICE PROVIDER.] "Home service provider,"
        for purposes of this section, means the same as that term is 
        defined in Section 124(5) of Public Law 106-252 (Mobile 
        Telecommunications Sourcing Act). 
           Subd. 11.  [MOBILE TELECOMMUNICATIONS SERVICE.] "Mobile 
        telecommunications service," for purposes of this section, means 
        the same as that term is defined in Section 124(1) of Public Law 
        106-252 (Mobile Telecommunications Sourcing Act). 
           Subd. 12.  [PLACE OF PRIMARY USE.] "Place of primary use," 
        for purposes of this section, means the street address 
        representative of where the customer's use of the 
        telecommunications service primarily occurs, which must be the 
        residential street address or the primary business street 
        address of the customer.  In the case of mobile 
        telecommunications services, place of primary use must be within 
        the licensed service area of the home service provider. 
           Subd. 13.  [POSTPAID CALLING SERVICE.] "Postpaid calling 
        service," for purposes of this section, means the 
        telecommunications service obtained by making a payment on a 
        call-by-call basis either through the use of a credit card or 
        payment mechanism such as a bank card, travel card, credit card, 
        or debit card, or by a charge made to a telephone number that is 
        not associated with the origination or termination of the 
        telecommunications service.  A postpaid calling service includes 
        a telecommunications service that would be a prepaid calling 
        service except it is not exclusively a telecommunication service.
           Subd. 14.  [PREPAID CALLING SERVICE.] "Prepaid calling 
        service," for purposes of this section, means the right to 
        access exclusively telecommunications services, which must be 
        paid for in advance and which enables the origination of calls 
        using an access number or authorization code, whether manually 
        or electronically dialed, and that is sold in predetermined 
        units or dollars of which the number declines with use in a 
        known amount. 
           Subd. 15.  [PRIVATE COMMUNICATION SERVICES.] "Private 
        communication services," for purposes of this section, means the 
        same as that term is defined in section 297A.61, subdivision 26. 
           Subd. 16.  [SERVICE ADDRESS.] "Service address," for 
        purposes of this section, means: 
           (1) the location of the telecommunications equipment to 
        which a customer's call is charged and from which the call 
        originates or terminates, regardless of where the call is billed 
        or paid; 
           (2) if the location in paragraph (a) is not known, service 
        address means the origination point of the signal of the 
        telecommunications services first identified by either the 
        seller's telecommunications system or in information received by 
        the seller from its service provider, where the system used to 
        transport the signals is not that of the seller; or 
           (3) if the location in paragraphs (a) and (b) is not known, 
        the service address means the location of the customer's place 
        of primary use. 
           [EFFECTIVE DATE.] This section is effective for sales and 
        purchases made on or after January 1, 2004. 
           Sec. 21.  Minnesota Statutes 2002, section 297A.67, 
        subdivision 8, is amended to read: 
           Subd. 8.  [CLOTHING.] (a) Clothing is exempt.  For purposes 
        of this subdivision, "clothing" means all human wearing apparel 
        suitable for general use. 
           (b) Clothing includes, but is not limited to, aprons, 
        household and shop; athletic supporters; baby receiving 
        blankets; bathing suits and caps; beach capes and coats; belts 
        and suspenders; boots; coats and jackets; costumes; children and 
        adult diapers, including disposable; ear muffs; footlets; formal 
        wear; garters and garter belts; girdles; gloves and mittens for 
        general use; hats and caps; hosiery; insoles for shoes; lab 
        coats; neckties; overshoes; pantyhose; rainwear; rubber pants; 
        sandals; scarves; shoes and shoe laces; slippers; sneakers; 
        socks and stockings; steel-toed boots; underwear; uniforms, 
        athletic and nonathletic; and wedding apparel. 
           (c) Clothing does not include the following: 
           (1) belt buckles sold separately; 
           (2) costume masks sold separately; 
           (3) patches and emblems sold separately; 
           (4) sewing equipment and supplies, including but not 
        limited to, knitting needles, patterns, pins, scissors, sewing 
        machines, sewing needles, tape measures, and thimbles; 
           (5) sewing materials that become part of clothing, 
        including but not limited to, buttons, fabric, lace, thread, 
        yarn, and zippers; 
           (6) clothing accessories or equipment; 
           (7) sports or recreational equipment; and 
           (8) protective equipment. 
        Clothing also does not include apparel made from fur if a 
        uniform definition of "apparel made from fur" is developed by 
        the member states of the Streamlined Sales and Use Tax Agreement.
           For purposes of this subdivision, "clothing accessories or 
        equipment" means incidental items worn on the person or in 
        conjunction with clothing.  Clothing accessories and equipment 
        include, but are not limited to, briefcases; cosmetics; hair 
        notions, including barrettes, hair bows, and hairnets; handbags; 
        handkerchiefs; jewelry; nonprescription sunglasses; umbrellas; 
        wallets; watches; and wigs and hairpieces.  "Sports or 
        recreational equipment" means items designed for human use and 
        worn in conjunction with an athletic or recreational activity 
        that are not suitable for general use.  Sports and recreational 
        equipment includes, but is not limited to, ballet and tap shoes; 
        cleated or spiked athletic shoes; gloves, including, but not 
        limited to, baseball, bowling, boxing, hockey, and golf gloves; 
        goggles; hand and elbow guards; life preservers and vests; mouth 
        guards; roller and ice skates; shin guards; shoulder pads; ski 
        boots; waders; and wetsuits and fins.  "Protective equipment" 
        means items for human wear and designed as protection of the 
        wearer against injury or disease or as protection against damage 
        or injury of other persons or property but not suitable for 
        general use.  Protective equipment includes, but is not limited 
        to, breathing masks; clean room apparel and equipment; ear and 
        hearing protectors; face shields; finger guards; hard hats; 
        helmets; paint or dust respirators; protective gloves; safety 
        glasses and goggles; safety belts; tool belts; and welders 
        gloves and masks. 
           [EFFECTIVE DATE.] This section is effective for sales and 
        purchases made on or after January 1, 2004. 
           Sec. 22.  Minnesota Statutes 2002, section 297A.67, is 
        amended by adding a subdivision to read: 
           Subd. 31.  [SERVICE LOANER VEHICLE COVERED BY 
        WARRANTY.] The loan of a vehicle by a motor vehicle dealer to a 
        customer as a replacement for a vehicle being serviced or 
        repaired is exempt if the vehicle is loaned pursuant to a 
        warranty included in the original purchase price of the vehicle 
        being serviced or repaired. 
           [EFFECTIVE DATE.] This section is effective for vehicle 
        loans made after June 30, 2003. 
           Sec. 23.  Minnesota Statutes 2002, section 297A.68, 
        subdivision 2, is amended to read: 
           Subd. 2.  [MATERIALS CONSUMED IN INDUSTRIAL PRODUCTION.] 
        (a) Materials stored, used, or consumed in industrial production 
        of personal property intended to be sold ultimately at retail 
        are exempt, whether or not the item so used becomes an 
        ingredient or constituent part of the property produced.  
        Materials that qualify for this exemption include, but are not 
        limited to, the following: 
           (1) chemicals, including chemicals used for cleaning food 
        processing machinery and equipment; 
           (2) materials, including chemicals, fuels, and electricity 
        purchased by persons engaged in industrial production to treat 
        waste generated as a result of the production process; 
           (3) fuels, 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 the average climate control or lighting for the 
        production area, and (ii) it is necessary to produce that 
        particular product; 
           (4) petroleum products and lubricants; 
           (5) packaging materials, including returnable containers 
        used in packaging food and beverage products; 
           (6) accessory tools, equipment, and other items that are 
        separate detachable units with an ordinary useful life of less 
        than 12 months used in producing a direct effect upon the 
        product; and 
           (7) the following materials, tools, and equipment used in 
        metalcasting:  crucibles, thermocouple protection sheaths and 
        tubes, stalk tubes, refractory materials, molten metal filters 
        and filter boxes, degassing lances, and base blocks. 
           (b) This exemption does not include: 
           (1) machinery, equipment, implements, tools, accessories, 
        appliances, contrivances and furniture and fixtures, except 
        those listed in paragraph (a), clause (6); and 
           (2) petroleum and special fuels used in producing or 
        generating power for propelling ready-mixed concrete trucks on 
        the public highways of this state. 
           (c) Industrial production includes, but is not limited to, 
        research, development, design or production of any tangible 
        personal property, manufacturing, processing (other than by 
        restaurants and consumers) of agricultural products (whether 
        vegetable or animal), commercial fishing, refining, smelting, 
        reducing, brewing, distilling, printing, mining, quarrying, 
        lumbering, generating electricity and, the production of road 
        building materials, and the research, development, design, or 
        production of computer software.  Industrial production does not 
        include painting, cleaning, repairing or similar processing of 
        property except as part of the original manufacturing process.  
           [EFFECTIVE DATE.] This section is effective for sales and 
        purchases made on or after January 1, 2004. 
           Sec. 24.  Minnesota Statutes 2002, section 297A.68, 
        subdivision 5, is amended to read: 
           Subd. 5.  [CAPITAL EQUIPMENT.] (a) Capital equipment is 
        exempt.  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. 
           "Capital equipment" means machinery and equipment purchased 
        or leased, and used in this state by the purchaser or lessee 
        primarily for manufacturing, fabricating, mining, or refining 
        tangible personal property to be sold ultimately at retail if 
        the machinery and equipment are essential to the integrated 
        production process of manufacturing, fabricating, mining, or 
        refining.  Capital equipment also includes machinery and 
        equipment used to electronically transmit results retrieved by a 
        customer of an online computerized data retrieval system. 
           (b) Capital equipment includes, but is not limited to: 
           (1) machinery and equipment used to operate, control, or 
        regulate the production equipment; 
           (2) machinery and equipment used for research and 
        development, design, quality control, and testing activities; 
           (3) environmental control devices that are used to maintain 
        conditions such as temperature, humidity, light, or air pressure 
        when those conditions are essential to and are part of the 
        production process; 
           (4) materials and supplies used to construct and install 
        machinery or equipment; 
           (5) repair and replacement parts, including accessories, 
        whether purchased as spare parts, repair parts, or as upgrades 
        or modifications to machinery or equipment; 
           (6) materials used for foundations that support machinery 
        or equipment; 
           (7) materials used to construct and install special purpose 
        buildings used in the production process; and 
           (8) ready-mixed concrete trucks in which the ready-mixed 
        concrete is mixed as part of the delivery process; and 
           (9) machinery or equipment used for research, development, 
        design, or production of computer software.  
           (c) Capital equipment does not include the following: 
           (1) motor vehicles taxed under chapter 297B; 
           (2) machinery or equipment used to receive or store raw 
        materials; 
           (3) building materials, except for materials included in 
        paragraph (b), clauses (6) and (7); 
           (4) machinery or equipment used for nonproduction purposes, 
        including, but not limited to, the following:  plant security, 
        fire prevention, first aid, and hospital stations; support 
        operations or administration; pollution control; and plant 
        cleaning, disposal of scrap and waste, plant communications, 
        space heating, cooling, lighting, or safety; 
           (5) farm machinery and aquaculture production equipment as 
        defined by section 297A.61, subdivisions 12 and 13; 
           (6) machinery or equipment purchased and installed by a 
        contractor as part of an improvement to real property; or 
           (7) any other item that is not essential to the integrated 
        process of manufacturing, fabricating, mining, or refining. 
           (d) For purposes of this subdivision: 
           (1) "Equipment" means independent devices or tools separate 
        from machinery but essential to an integrated production 
        process, including computers and computer software, used in 
        operating, controlling, or regulating machinery and equipment; 
        and any subunit or assembly comprising a component of any 
        machinery or accessory or attachment parts of machinery, such as 
        tools, dies, jigs, patterns, and molds.  
           (2) "Fabricating" means to make, build, create, produce, or 
        assemble components or property to work in a new or different 
        manner. 
           (3) "Machinery" means mechanical, electronic, or electrical 
        devices, including computers and computer software, that are 
        purchased or constructed to be used for the activities set forth 
        in paragraph (a), beginning with the removal of raw materials 
        from inventory through completion of the product, including 
        packaging of the product. 
           (4) "Machinery and equipment used for pollution control" 
        means machinery and equipment used solely to eliminate, prevent, 
        or reduce pollution resulting from an activity described in 
        paragraph (a).  
           (5) "Manufacturing" means an operation or series of 
        operations where raw materials are changed in form, composition, 
        or condition by machinery and equipment and which results in the 
        production of a new article of tangible personal property.  For 
        purposes of this subdivision, "manufacturing" includes the 
        generation of electricity or steam to be sold at retail. 
           (6) "Mining" means the extraction of minerals, ores, stone, 
        or peat. 
           (7) "Online data retrieval system" means a system whose 
        cumulation of information is equally available and accessible to 
        all its customers. 
           (8) "Primarily" means machinery and equipment used 50 
        percent or more of the time in an activity described in 
        paragraph (a). 
           (9) "Refining" means the process of converting a natural 
        resource to a product, including the treatment of water to be 
        sold at retail. 
           [EFFECTIVE DATE.] This section is effective for sales and 
        purchases made on or after January 1, 2004. 
           Sec. 25.  Minnesota Statutes 2002, section 297A.68, 
        subdivision 36, is amended to read: 
           Subd. 36.  [DELIVERY OR DISTRIBUTION CHARGES; PRINTED 
        MATERIALS DIRECT MAIL.] Charges for the delivery or distribution 
        of printed materials, including individual account 
        information, direct mail 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 on an invoice or similar billing 
        document given to the purchaser. 
           [EFFECTIVE DATE.] This section is effective for purchases 
        and sales made on or after January 1, 2004. 
           Sec. 26.  Minnesota Statutes 2002, section 297A.75, 
        subdivision 4, is amended to read: 
           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), (8), and (9) 90 days after the refund 
        claim is filed with the commissioner for taxes paid under 
        subdivision 1. 
           [EFFECTIVE DATE.] This section is effective for refund 
        claims filed on or after April 1, 2003. 
           Sec. 27.  Minnesota Statutes 2002, section 297A.81, is 
        amended to read: 
           297A.81 [UNCOLLECTIBLE DEBTS; OFFSET AGAINST OTHER TAXES.] 
           Subdivision 1.  [GENERAL.] The taxpayer may offset against 
        the taxes payable for any reporting period the amount of taxes 
        imposed by this chapter previously paid as a result of any 
        transaction the consideration for which became a debt owed to 
        the taxpayer that became uncollectible during the reporting 
        period, but only in proportion to the portion of the debt that 
        became uncollectible.  Section 289A.40, subdivision 2, applies 
        to an offset under this section. 
           Subd. 2.  [MANNER OF ALLOWING DEDUCTION FOR UNCOLLECTIBLE 
        DEBT.] (a) Uncollectible debt is allowed as a deduction in the 
        manner provided in this subdivision. 
           (b) If the uncollectible debt arose with respect to a sale 
        required to be included in gross receipts, subject to a tax 
        imposed under chapter 297A, the entire amount of the debt 
        remaining uncollected is allowed as a deduction. 
           (c) If the uncollectible debt arose with respect to a sale 
        partly subject to the tax imposed under chapter 297A and partly 
        exempt, the amount of the uncollectible debt allowed as a 
        deduction is the amount derived by multiplying the uncollectible 
        debt by the percentage that the taxable sale bears to the total 
        sales. 
           (d) If the uncollectible debt arose with respect to two or 
        more sales made at successive intervals, payments made before 
        the date the debt became uncollectible must be applied first to 
        the earliest sale upon which there is an unpaid balance, and to 
        following sales in successive order. 
           (e) If the books and records of the taxpayer claiming the 
        bad debt allowance support an allocation of the bad debts among 
        the member states of the streamlined sales and use tax 
        agreement, such an allocation shall be allowed. 
           Subd. 3.  [CERTIFIED SERVICE PROVIDER.] A certified service 
        provider, as defined in section 297A.995, subdivision 2, on 
        behalf of a taxpayer who is its client, may offset against taxes 
        as provided by this section. 
           [EFFECTIVE DATE.] This section is effective for sales and 
        purchases made on or after January 1, 2004. 
           Sec. 28.  Minnesota Statutes 2002, section 297A.99, 
        subdivision 5, is amended to read: 
           Subd. 5.  [TAX RATE.] (a) The tax rate is as specified in 
        the special law authorization and as imposed by the political 
        subdivision. 
           (b) The full political subdivision rate applies to any 
        sales that are taxed at a state rate less than or more than the 
        state general sales and use tax rate., and the political 
        subdivision must not have more than one local sales tax rate or 
        more than one local use tax rate.  This paragraph does not apply 
        to sales or use taxes imposed on electricity, piped natural or 
        artificial gas, or other heating fuels delivered by the seller, 
        or the retail sale or transfer of motor vehicles, aircraft, 
        watercraft, modular homes, manufactured homes, or mobile homes. 
           [EFFECTIVE DATE.] This section is effective for sales and 
        purchases made on or after January 1, 2004. 
           Sec. 29.  Minnesota Statutes 2002, section 297A.99, 
        subdivision 10, is amended to read: 
           Subd. 10.  [USE OF ZIP CODE IN DETERMINING LOCATION OF 
        SALE.] To determine whether to impose the local tax, the 
        retailer may use zip codes if the zip code area is entirely 
        within the political subdivision.  When a zip code area is not 
        entirely within a political subdivision, the retailer shall not 
        collect the local tax if the purchaser notifies the retailer 
        that the purchaser's delivery address is outside of the 
        political subdivision, unless the retailer verifies that the 
        delivery address is in the political subdivision using a means 
        other than the zip code.  The lowest combined tax rate imposed 
        in the zip code area applies if the area includes more than one 
        tax rate in any level of taxing jurisdictions.  If a nine-digit 
        zip code designation is not available for a street address or if 
        a seller is unable to determine the nine-digit zip code 
        designation of a purchaser after exercising due diligence to 
        determine the designation, the seller may apply the rate for the 
        five-digit zip code area.  For the purposes of this subdivision, 
        there is a rebuttable presumption that a seller has exercised 
        due diligence if the seller has attempted to determine the 
        nine-digit zip code designation by utilizing software approved 
        by the governing board that makes this designation from the 
        street address and the five-digit zip code of the purchaser. 
        Notwithstanding subdivision 13, this subdivision applies to all 
        local sales taxes without regard to the date of 
        authorization.  This subdivision does not apply when the 
        purchased product is received by the purchaser at the business 
        location of the seller. 
           [EFFECTIVE DATE.] This section is effective for sales and 
        purchases made on or after January 1, 2004. 
           Sec. 30.  Minnesota Statutes 2002, section 297A.99, 
        subdivision 12, is amended to read: 
           Subd. 12.  [EFFECTIVE DATES; NOTIFICATION.] (a) A political 
        subdivision may impose a tax under this section starting only on 
        the first day of a calendar quarter.  A political subdivision 
        may repeal a tax under this section stopping only on the last 
        day of a calendar quarter. 
           (b) The political subdivision shall notify the commissioner 
        of revenue at least 90 days before imposing, changing the rate 
        of, or repealing a tax under this section. 
           (c) The political subdivision shall change the rate of tax 
        imposed under this section starting only on the first day of a 
        calendar quarter, and only after the commissioner has notified 
        sellers at least 60 days prior to the change. 
           (d) The political subdivision shall apply the rate change 
        for sales tax imposed under this section to purchases from 
        printed catalogs, wherein the purchaser computed the tax based 
        upon local tax rates published in the catalog, starting only on 
        the first day of a calendar quarter, and only after the 
        commissioner has notified sellers at least 120 days prior to the 
        change. 
           (e) The political subdivision shall apply local 
        jurisdiction boundary changes to taxes imposed under this 
        section starting only on the first day of a calendar quarter, 
        and only after the commissioner has notified sellers at least 60 
        days prior to the change. 
           [EFFECTIVE DATE.] This section is effective for sales and 
        purchases made on or after January 1, 2004. 
           Sec. 31.  Minnesota Statutes 2002, section 297A.995, is 
        amended by adding a subdivision to read: 
           Subd. 10.  [RELIEF FROM CERTAIN LIABILITY.] Notwithstanding 
        subdivision 9, sellers and certified service providers are 
        relieved from liability to the state for having charged and 
        collected the incorrect amount of sales or use tax resulting 
        from the seller or certified service provider (1) relying on 
        erroneous data provided by this state on tax rates, boundaries, 
        or taxing jurisdiction assignments, or (2) relying on erroneous 
        data provided by the state in its taxability matrix concerning 
        the taxability of products and services. 
           [EFFECTIVE DATE.] This section is effective for sales and 
        purchases made on or after January 1, 2004. 
           Sec. 32.  Minnesota Statutes 2002, section 297B.035, is 
        amended by adding a subdivision to read: 
           Subd. 5.  [USE BY DEALER.] If a motor vehicle dealer uses a 
        vehicle, purchased for resale in the ordinary course of 
        business, other than for demonstration purposes, the dealer may 
        elect to pay the motor vehicle sales tax under this chapter or 
        the use tax under chapter 297A based on the reasonable rental 
        value of the vehicle.  If the motor vehicle dealer fails to 
        report the use tax under chapter 297A, it is presumed that the 
        dealer elected to pay the motor vehicle sales tax under this 
        chapter. 
           [EFFECTIVE DATE.] This section is effective for sales made 
        after June 30, 2003. 
           Sec. 33.  [CITY OF NEWPORT; LODGING TAX.] 
           Subdivision 1.  [LODGING TAX.] Notwithstanding Minnesota 
        Statutes, section 477A.016, or any ordinance, city charter, or 
        other provision of law, the city of Newport may, by ordinance, 
        impose a tax of up to four percent upon the gross receipts from 
        the sale of lodging for periods of less than 30 days in hotels 
        and motels located in the city.  The tax does not apply to the 
        furnishing of lodging by a business having less than 25 lodging 
        rooms.  The total amount of taxes imposed under this section and 
        under Minnesota Statutes, section 469.190, shall not exceed four 
        percent. 
           Subd. 2.  [USE OF PROCEEDS.] The proceeds of any tax 
        imposed in subdivision 1 shall be used by the city to fund 
        economic development and redevelopment of the city.  Authorized 
        expenses include, but are not limited to, acquisition and 
        development costs of open space, parks, and trails. 
           Subd. 3.  [ENFORCEMENT, COLLECTION, AND 
        ADMINISTRATION.] The tax shall be collected and administered in 
        the same manner as local lodging taxes under Minnesota Statutes, 
        section 469.190. 
           [EFFECTIVE DATE.] This section is effective upon approval 
        by the Newport city council and compliance with Minnesota 
        Statutes, section 645.021, subdivision 3. 
           Sec. 34.  [REPEALER.] 
           (a) Minnesota Statutes 2002, section 297A.61, subdivisions 
        14 and 15, are repealed effective for sales and purchases made 
        on or after January 1, 2004. 
           (b) Minnesota Statutes 2002, section 297A.69, subdivision 
        5, is repealed effective January 1, 2006. 
           (c) Laws 2002, chapter 377, article 9, section 12, the 
        effective date, is repealed effective for sales and purchases 
        made on or after January 1, 2004. 

                                   ARTICLE 2
                                  PROPERTY TAX
           Section 1.  [123A.455] [REALIGNING SPLIT RESIDENTIAL 
        PARCELS.] 
           Subdivision 1.  [DEFINITIONS.] "Split residential property 
        parcel" means a parcel of real estate that is located within the 
        boundaries of more than one school district and that is 
        classified as residential property under: 
           (1) section 273.13, subdivision 22, paragraph (a) or (b); 
           (2) section 273.13, subdivision 25, paragraph (b), clause 
        (1); or 
           (3) section 273.13, subdivision 25, paragraph (c), clause 
        (1). 
           Subd. 2.  [PETITION.] The owner of a split residential 
        property parcel may petition the auditor of the county where the 
        split parcel is located to transfer that part into the adjoining 
        school district so the entire property will be located in the 
        same school district.  The petition must contain: 
           (1) a correct description of the split parcel to be 
        affected by the transfer including supporting data on location 
        and title to the land; 
           (2) a list of the school districts in which the split 
        parcels currently lie; 
           (3) the school district into which the petitioner desires 
        to have the whole split parcel transferred; and 
           (4) the district of attendance of any students currently 
        residing on the property. 
           Subd. 3.  [AUDITOR'S ORDER.] Within 60 days of receipt of 
        the petition, the auditor of the county in which the petition 
        was filed under subdivision 2 shall issue an order to transfer 
        the affected parcel to the district determined by the county 
        board.  Orders issued on or before July 1 will be effective for 
        taxes payable in the following year.  The auditor must notify 
        the affected school districts and the commissioner of the change 
        in school district boundaries. 
           Subd. 4.  [COMMISSIONER.] The commissioner shall modify the 
        records of school district boundaries to conform to the order. 
           Subd. 5.  [TAXABLE PROPERTY.] Upon the effective date of 
        the order, the whole split property parcel is transferred into a 
        single school district.  Beginning in the next subsequent taxes 
        payable year, all taxable property in the whole split parcel is: 
           (1) relieved of all school district taxes from the district 
        in which the parcel is no longer located; and 
           (2) subject to all school district taxes in the district in 
        which the whole split parcel is now located. 
           [EFFECTIVE DATE.] This section is effective for petitions 
        filed on or after the day following final enactment.  Orders 
        issued under subdivision 3 on or before September 15, 2003, are 
        effective for taxes payable in 2004.  
           Sec. 2.  Minnesota Statutes 2002, section 168A.05, 
        subdivision 1a, is amended to read: 
           Subd. 1a.  [MANUFACTURED HOME; STATEMENT OF PROPERTY TAX 
        PAYMENT.] 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 manufactured home personal property 
        taxes levied on the unit that are due from in the name of 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, 2003. 
           Sec. 3.  Minnesota Statutes 2002, section 216B.2424, 
        subdivision 5, is amended to read: 
           Subd. 5.  [MANDATE.] (a) A public utility, as defined in 
        section 216B.02, subdivision 4, that operates a nuclear-powered 
        electric generating plant within this state must construct and 
        operate, purchase, or contract to construct and operate (1) by 
        December 31, 1998, 50 megawatts of electric energy installed 
        capacity generated by farm-grown closed-loop biomass scheduled 
        to be operational by December 31, 2001; and (2) by December 31, 
        1998, an additional 75 megawatts of installed capacity so 
        generated scheduled to be operational by December 31, 2002.  
           (b) Of the 125 megawatts of biomass electricity installed 
        capacity required under this subdivision, no more than 50 
        megawatts of this capacity may be provided by a facility that 
        uses poultry litter as its primary fuel source and any such 
        facility:  
           (1) need not use biomass that complies with the definition 
        in subdivision 1; 
           (2) must enter into a contract with the public utility for 
        such capacity, that has an average purchase price per megawatt 
        hour over the life of the contract that is equal to or less than 
        the average purchase price per megawatt hour over the life of 
        the contract in contracts approved by the public utilities 
        commission before April 1, 2000, to satisfy the mandate of this 
        section, and file that contract with the public utilities 
        commission prior to September 1, 2000; and 
           (3) must schedule such capacity to be operational by 
        December 31, 2002.  
           (c) Of the total 125 megawatts of biomass electric energy 
        installed capacity required under this section, no more than 75 
        megawatts may be provided by a single project.  
           (d) Of the 75 megawatts of biomass electric energy 
        installed capacity required under paragraph (a), clause (2), no 
        more than 25 megawatts of this capacity may be provided by a St. 
        Paul district heating and cooling system cogeneration facility 
        utilizing waste wood as a primary fuel source.  The St. Paul 
        district heating and cooling system cogeneration facility need 
        not use biomass that complies with the definition in subdivision 
        1.  
           (e) The public utility must accept and consider on an equal 
        basis with other biomass proposals: 
           (1) a proposal to satisfy the requirements of this section 
        that includes a project that exceeds the megawatt capacity 
        requirements of either paragraph (a), clause (1) or (2), and 
        that proposes to sell the excess capacity to the public utility 
        or to other purchasers; and 
           (2) a proposal for a new facility to satisfy more than ten 
        but not more than 20 megawatts of the electrical generation 
        requirements by a small business-sponsored independent power 
        producer facility to be located within the northern quarter of 
        the state, which means the area located north of Constitutional 
        Route No. 8 as described in section 161.114, subdivision 2, and 
        that utilizes biomass residue wood, sawdust, bark, chipped wood, 
        or brush to generate electricity.  A facility described in this 
        clause is not required to utilize biomass complying with the 
        definition in subdivision 1, but must have the capacity required 
        by this clause operational be under construction by December 31, 
        2002 2005. 
           (f) If a public utility files a contract with the 
        commission for electric energy installed capacity that uses 
        poultry litter as its primary fuel source, the commission must 
        do a preliminary review of the contract to determine if it meets 
        the purchase price criteria provided in paragraph (b), clause 
        (2), of this subdivision.  The commission shall perform its 
        review and advise the parties of its determination within 30 
        days of filing of such a contract by a public utility.  A public 
        utility may submit by September 1, 2000, a revised contract to 
        address the commission's preliminary determination.  
           (g) The commission shall finally approve, modify, or 
        disapprove no later than July 1, 2001, all contracts submitted 
        by a public utility as of September 1, 2000, to meet the mandate 
        set forth in this subdivision.  
           (h) If a public utility subject to this section exercises 
        an option to increase the generating capacity of a project in a 
        contract approved by the commission prior to April 25, 2000, to 
        satisfy the mandate in this subdivision, the public utility must 
        notify the commission by September 1, 2000, that it has 
        exercised the option and include in the notice the amount of 
        additional megawatts to be generated under the option 
        exercised.  Any review by the commission of the project after 
        exercise of such an option shall be based on the same criteria 
        used to review the existing contract. 
           (i) A facility specified in this subdivision qualifies for 
        exemption from property taxation under section 272.02, 
        subdivision 43. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 4.  Minnesota Statutes 2002, section 270B.12, is 
        amended by adding a subdivision to read: 
           Subd. 13.  [COUNTY ASSESSORS; CLASS 1B HOMESTEADS.] The 
        commissioner may disclose to a county assessor, and to the 
        assessor's designated agents or employees, a listing of parcels 
        of property qualifying for the class 1b property tax 
        classification under section 273.13, subdivision 22. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 5.  Minnesota Statutes 2002, section 272.02, 
        subdivision 31, is amended to read: 
           Subd. 31.  [BUSINESS INCUBATOR PROPERTY.] Property owned by 
        a nonprofit charitable organization that qualifies for tax 
        exemption under section 501(c)(3) of the Internal Revenue Code 
        of 1986, as amended through December 31, 1997, that is intended 
        to be used as a business incubator in a high-unemployment 
        county, is exempt.  As used in this subdivision, a "business 
        incubator" is a facility used for the development of nonretail 
        businesses, offering access to equipment, space, services, and 
        advice to the tenant businesses, for the purpose of encouraging 
        economic development, diversification, and job creation in the 
        area served by the organization, and "high-unemployment county" 
        is a county that had an average annual unemployment rate of 7.9 
        percent or greater in 1997.  Property that qualifies for the 
        exemption under this subdivision is limited to no more than two 
        contiguous parcels and structures that do not exceed in the 
        aggregate 40,000 square feet.  This exemption expires after 
        taxes payable in 2005 2011. 
           Sec. 6.  Minnesota Statutes 2002, section 272.02, 
        subdivision 47, is amended to read: 
           Subd. 47.  [POULTRY LITTER BIOMASS 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) be designed to utilize poultry litter as a primary fuel 
        source; and 
           (2) be constructed for the purpose of generating power at 
        the facility that will be sold pursuant to a contract approved 
        by the public utilities commission in accordance with the 
        biomass mandate imposed under section 216B.2424. 
           Construction of the facility must be commenced after 
        January 1, 2000 2003, and before December 31, 2002 2003.  
        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 taxes 
        levied in 2004, payable in 2005, and thereafter. 
           Sec. 7.  Minnesota Statutes 2002, section 272.02, 
        subdivision 53, is amended 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 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. 
           Sec. 8.  Minnesota Statutes 2002, section 272.02, is 
        amended by adding a subdivision to read: 
           Subd. 56.  [ELECTRIC GENERATION FACILITY; PERSONAL 
        PROPERTY.] (a) Notwithstanding subdivision 9, clause (a), 
        attached machinery and other personal property which is part of 
        a combined-cycle combustion-turbine electric generation facility 
        that exceeds 550 megawatts of installed capacity and that meets 
        the requirements of this subdivision is exempt.  At the time of 
        construction, the facility must: 
           (1) be designed to utilize natural gas as a primary fuel; 
           (2) not be owned by a public utility as defined in section 
        216B.02, subdivision 4; 
           (3) be located within five miles of an existing natural gas 
        pipeline and within four miles of an existing electrical 
        transmission substation; 
           (4) be located outside the metropolitan area as defined 
        under section 473.121, subdivision 2; and 
           (5) be designed to provide energy and ancillary services 
        and have received a certificate of need under section 216B.243. 
           (b) Construction of the facility must be commenced after 
        January 1, 2004, and before January 1, 2007.  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 2005, taxes payable in 2006, and thereafter. 
           Sec. 9.  Minnesota Statutes 2002, section 272.02, is 
        amended by adding a subdivision to read: 
           Subd. 67.  [ELECTRIC GENERATION FACILITY; PERSONAL 
        PROPERTY.] (a) Notwithstanding subdivision 9, clause (a), 
        attached machinery and other personal property which is part of 
        a combined-cycle combustion-turbine electric generation facility 
        that exceeds 150 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 owned by an electric generation and transmission 
        cooperative; 
           (3) be located within ten miles of parallel existing 
        24-inch and 30-inch natural gas pipelines and a 345-kilovolt 
        high-voltage electric transmission line; 
           (4) be designed to provide intermediate energy and 
        ancillary services, and have received a certificate of need 
        under section 216B.243, demonstrating demand for its capacity; 
        and 
           (5) have received by resolution, the approval from the 
        governing body of the county and city in which the proposed 
        facility is to be located for the exemption of personal property 
        under this subdivision. 
           (b) Construction of the facility must be commenced after 
        January 1, 2004, and before January 1, 2009.  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. 
           (c) The exemption under this section will take effect only 
        if the owner of the facility enters into agreements with the 
        governing bodies of the county and the city in which the 
        facility is located.  The agreements may include a requirement 
        that the facility must pay a host fee to compensate the county 
        and city for hosting the facility. 
           [EFFECTIVE DATE.] This section is effective for assessment 
        year 2005, taxes payable in 2006, and thereafter. 
           Sec. 10.  Minnesota Statutes 2002, section 273.01, is 
        amended to read: 
           273.01 [LISTING AND ASSESSMENT, TIME.] 
           All real property subject to taxation shall be listed and 
        at least one-fourth one-fifth of the parcels listed shall be 
        appraised each year with reference to their value on January 2 
        preceding the assessment so that each parcel shall be 
        reappraised at maximum intervals of four five years.  All real 
        property becoming taxable in any year shall be listed with 
        reference to its value on January 2 of that year.  Except as 
        provided in this section and section 274.01, subdivision 1, all 
        real property assessments shall be completed two weeks prior to 
        the date scheduled for the local board of review or 
        equalization.  No changes in valuation or classification which 
        are intended to correct errors in judgment by the county 
        assessor may be made by the county assessor after the board of 
        review or the county board of equalization has adjourned; 
        however, corrections of errors that are merely clerical in 
        nature or changes that extend homestead treatment to property 
        are permitted after adjournment until the tax extension date for 
        that assessment year.  Any changes made by the assessor after 
        adjournment must be fully documented and maintained in a file in 
        the assessor's office and shall be available for review by any 
        person.  A copy of any changes made during this period shall be 
        sent to the county board no later than December 31 of the 
        assessment year.  In the event a valuation and classification is 
        not placed on any real property by the dates scheduled for the 
        local board of review or equalization the valuation and 
        classification determined in the preceding assessment shall be 
        continued in effect and the provisions of section 273.13 shall, 
        in such case, not be applicable, except with respect to real 
        estate which has been constructed since the previous 
        assessment.  Real property containing iron ore, the fee to which 
        is owned by the state of Minnesota, shall, if leased by the 
        state after January 2 in any year, be subject to assessment for 
        that year on the value of any iron ore removed under said lease 
        prior to January 2 of the following year.  Personal property 
        subject to taxation shall be listed and assessed annually with 
        reference to its value on January 2; and, if acquired on that 
        day, shall be listed by or for the person acquiring it.  
           [EFFECTIVE DATE.] This section is effective for assessments 
        on or after January 2, 2004. 
           Sec. 11.  Minnesota Statutes 2002, section 273.08, is 
        amended to read: 
           273.08 [ASSESSOR'S DUTIES.] 
           The assessor shall actually view, and determine the market 
        value of each tract or lot of real property listed for taxation, 
        including the value of all improvements and structures thereon, 
        at maximum intervals of four five years and shall enter the 
        value opposite each description. 
           [EFFECTIVE DATE.] This section is effective for assessments 
        on or after January 2, 2004. 
           Sec. 12.  Minnesota Statutes 2002, section 273.124, 
        subdivision 14, is amended to read: 
           Subd. 14.  [AGRICULTURAL HOMESTEADS; SPECIAL PROVISIONS.] 
        (a) Real estate of less than ten acres that is the homestead of 
        its owner must be classified as class 2a under section 273.13, 
        subdivision 23, paragraph (a), if:  
           (1) the parcel on which the house is located is contiguous 
        on at least two sides to (i) agricultural land, (ii) land owned 
        or administered by the United States Fish and Wildlife Service, 
        or (iii) land administered by the department of natural 
        resources on which in lieu taxes are paid under sections 477A.11 
        to 477A.14; 
           (2) its owner also owns a noncontiguous parcel of 
        agricultural land that is at least 20 acres; 
           (3) the noncontiguous land is located not farther than four 
        townships or cities, or a combination of townships or cities 
        from the homestead; and 
           (4) the agricultural use value of the noncontiguous land 
        and farm buildings is equal to at least 50 percent of the market 
        value of the house, garage, and one acre of land. 
           Homesteads initially classified as class 2a under the 
        provisions of this paragraph shall remain classified as class 
        2a, irrespective of subsequent changes in the use of adjoining 
        properties, as long as the homestead remains under the same 
        ownership, the owner owns a noncontiguous parcel of agricultural 
        land that is at least 20 acres, and the agricultural use value 
        qualifies under clause (4).  Homestead classification under this 
        paragraph is limited to property that qualified under this 
        paragraph for the 1998 assessment. 
           (b)(i) Agricultural property consisting of at least 40 
        acres shall be classified as the owner's homestead, to the same 
        extent as other agricultural homestead property, if all of the 
        following criteria are met: 
           (1) the owner, the owner's spouse, or the son or daughter 
        of the owner or owner's spouse, is actively farming the 
        agricultural property, either on the person's own behalf as an 
        individual or on behalf of a partnership operating a family 
        farm, family farm corporation, joint family farm venture, or 
        limited liability company of which the person is a partner, 
        shareholder, or member; 
           (2) both the owner of the agricultural property and the 
        person who is actively farming the agricultural property under 
        clause (1), are Minnesota residents; 
           (3) neither the owner nor the spouse of the owner claims 
        another agricultural homestead in Minnesota; and 
           (4) neither the owner nor the person actively farming the 
        property lives farther than four townships or cities, or a 
        combination of four townships or cities, from the agricultural 
        property, except that if the owner or the owner's spouse is 
        required to live in employer-provided housing, the owner or 
        owner's spouse, whichever is actively farming the agricultural 
        property, may live more than four townships or cities, or 
        combination of four townships or cities from the agricultural 
        property. 
           The relationship under this paragraph may be either by 
        blood or marriage. 
           (ii) Real property held by a trustee under a trust is 
        eligible for agricultural homestead classification under this 
        paragraph if the qualifications in clause (i) are met, except 
        that "owner" means the grantor of the trust. 
           (iii) Property containing the residence of an owner who 
        owns qualified property under clause (i) shall be classified as 
        part of the owner's agricultural homestead, if that property is 
        also used for noncommercial storage or drying of agricultural 
        crops. 
           (c) Noncontiguous land shall be included as part of a 
        homestead under section 273.13, subdivision 23, paragraph (a), 
        only if the homestead is classified as class 2a and the detached 
        land is located in the same township or city, or not farther 
        than four townships or cities or combination thereof from the 
        homestead.  Any taxpayer of these noncontiguous lands must 
        notify the county assessor that the noncontiguous land is part 
        of the taxpayer's homestead, and, if the homestead is located in 
        another county, the taxpayer must also notify the assessor of 
        the other county. 
           (d) Agricultural land used for purposes of a homestead and 
        actively farmed by a person holding a vested remainder interest 
        in it must be classified as a homestead under section 273.13, 
        subdivision 23, paragraph (a).  If agricultural land is 
        classified class 2a, any other dwellings on the land used for 
        purposes of a homestead by persons holding vested remainder 
        interests who are actively engaged in farming the property, and 
        up to one acre of the land surrounding each homestead and 
        reasonably necessary for the use of the dwelling as a home, must 
        also be assessed class 2a. 
           (e) Agricultural land and buildings that were class 2a 
        homestead property under section 273.13, subdivision 23, 
        paragraph (a), for the 1997 assessment shall remain classified 
        as agricultural homesteads for subsequent assessments if:  
           (1) the property owner abandoned the homestead dwelling 
        located on the agricultural homestead as a result of the April 
        1997 floods; 
           (2) the property is located in the county of Polk, Clay, 
        Kittson, Marshall, Norman, or Wilkin; 
           (3) the agricultural land and buildings remain under the 
        same ownership for the current assessment year as existed for 
        the 1997 assessment year and continue to be used for 
        agricultural purposes; 
           (4) the dwelling occupied by the owner is located in 
        Minnesota and is within 30 miles of one of the parcels of 
        agricultural land that is owned by the taxpayer; and 
           (5) the owner notifies the county assessor that the 
        relocation was due to the 1997 floods, and the owner furnishes 
        the assessor any information deemed necessary by the assessor in 
        verifying the change in dwelling.  Further notifications to the 
        assessor are not required if the property continues to meet all 
        the requirements in this paragraph and any dwellings on the 
        agricultural land remain uninhabited. 
           (f) Agricultural land and buildings that were class 2a 
        homestead property under section 273.13, subdivision 23, 
        paragraph (a), for the 1998 assessment shall remain classified 
        agricultural homesteads for subsequent assessments if: 
           (1) the property owner abandoned the homestead dwelling 
        located on the agricultural homestead as a result of damage 
        caused by a March 29, 1998, tornado; 
           (2) the property is located in the county of Blue Earth, 
        Brown, Cottonwood, LeSueur, Nicollet, Nobles, or Rice; 
           (3) the agricultural land and buildings remain under the 
        same ownership for the current assessment year as existed for 
        the 1998 assessment year; 
           (4) the dwelling occupied by the owner is located in this 
        state and is within 50 miles of one of the parcels of 
        agricultural land that is owned by the taxpayer; and 
           (5) the owner notifies the county assessor that the 
        relocation was due to a March 29, 1998, tornado, and the owner 
        furnishes the assessor any information deemed necessary by the 
        assessor in verifying the change in homestead dwelling.  For 
        taxes payable in 1999, the owner must notify the assessor by 
        December 1, 1998.  Further notifications to the assessor are not 
        required if the property continues to meet all the requirements 
        in this paragraph and any dwellings on the agricultural land 
        remain uninhabited. 
           (g) Agricultural property consisting of at least 40 acres 
        of a family farm corporation, joint family farm venture, family 
        farm limited liability company, or partnership operating a 
        family farm as described under subdivision 8 shall be classified 
        homestead, to the same extent as other agricultural homestead 
        property, if all of the following criteria are met: 
           (1) a shareholder, member, or partner of that entity is 
        actively farming the agricultural property; 
           (2) that shareholder, member, or partner who is actively 
        farming the agricultural property is a Minnesota resident; 
           (3) neither that shareholder, member, or partner, nor the 
        spouse of that shareholder, member, or partner claims another 
        agricultural homestead in Minnesota; and 
           (4) that shareholder, member, or partner does not live 
        farther than four townships or cities, or a combination of four 
        townships or cities, from the agricultural property. 
           Homestead treatment applies under this paragraph for 
        property leased to a family farm corporation, joint farm 
        venture, limited liability company, or partnership operating a 
        family farm if legal title to the property is in the name of an 
        individual who is a member, shareholder, or partner in the 
        entity. 
           (h) To be eligible for the special agricultural homestead 
        under this subdivision, an initial full application must be 
        submitted to the county assessor where the property is located.  
        Owners and the persons who are actively farming the property 
        shall be required to complete only a one-page abbreviated 
        version of the application in each subsequent year provided that 
        none of the following items have changed since the initial 
        application: 
           (1) the day-to-day operation, administration, and financial 
        risks remain the same; 
           (2) the owners and the persons actively farming the 
        property continue to live within the four townships or city 
        criteria and are Minnesota residents; 
           (3) the same operator of the agricultural property is 
        listed with the farm service agency; 
           (4) a Schedule F or equivalent income tax form was filed 
        for the most recent year; 
           (5) the property's acreage is unchanged; and 
           (6) none of the property's acres have been enrolled in a 
        federal or state farm program since the initial application. 
           The owners and any persons who are actively farming the 
        property must include the appropriate social security numbers, 
        and sign and date the application.  If any of the specified 
        information has changed since the full application was filed, 
        the owner must notify the assessor, and must complete a new 
        application to determine if the property continues to qualify 
        for the special agricultural homestead.  The commissioner of 
        revenue shall prepare a standard reapplication form for use by 
        the assessors. 
           [EFFECTIVE DATE.] This section is effective for 
        applications filed for the 2004 assessment and thereafter. 
           Sec. 13.  Minnesota Statutes 2002, 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 who is blind as defined in section 
        256D.35, 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) (3) 
        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 revenue 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, or a member of a limited liability company that owns the 
        resort even if the title to the homestead is held by the 
        corporation or, partnership, or limited liability company.  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 property 
        taxes levied in 2003, payable in 2004, and thereafter, except 
        that the amendments to paragraph (b) are effective for taxes 
        payable in 2005 and thereafter. 
           Sec. 14.  Minnesota Statutes 2002, section 273.13, 
        subdivision 23, is amended to read: 
           Subd. 23.  [CLASS 2.] (a) Class 2a property is agricultural 
        land including any improvements that is homesteaded.  The market 
        value of the house and garage and immediately surrounding one 
        acre of land has the same class rates as class 1a property under 
        subdivision 22.  The value of the remaining land including 
        improvements up to and including $600,000 market value has a net 
        class rate of 0.55 percent of market value.  The remaining 
        property over $600,000 market value has a class rate of one 
        percent of market value. 
           (b) Class 2b property is (1) real estate, rural in 
        character and used exclusively for growing trees for timber, 
        lumber, and wood and wood products; (2) real estate that is not 
        improved with a structure and is used exclusively for growing 
        trees for timber, lumber, and wood and wood products, if the 
        owner has participated or is participating in a cost-sharing 
        program for afforestation, reforestation, or timber stand 
        improvement on that particular property, administered or 
        coordinated by the commissioner of natural resources; (3) real 
        estate that is nonhomestead agricultural land; or (4) a landing 
        area or public access area of a privately owned public use 
        airport.  Class 2b property has a net class rate of one percent 
        of market value. 
           (c) Agricultural land as used in this section means 
        contiguous acreage of ten acres or more, used during the 
        preceding year for agricultural purposes.  "Agricultural 
        purposes" as used in this section means the raising or 
        cultivation of agricultural products.  "Agricultural purposes" 
        also includes or enrollment in the Reinvest in Minnesota program 
        under sections 103F.501 to 103F.535 or the federal Conservation 
        Reserve Program as contained in Public Law Number 99-198 if the 
        property was classified as agricultural (i) under this 
        subdivision for the assessment year 2002 or (ii) in the year 
        prior to its enrollment.  Contiguous acreage on the same parcel, 
        or contiguous acreage on an immediately adjacent parcel under 
        the same ownership, may also qualify as agricultural land, but 
        only if it is pasture, timber, waste, unusable wild land, or 
        land included in state or federal farm programs.  Agricultural 
        classification for property shall be determined excluding the 
        house, garage, and immediately surrounding one acre of land, and 
        shall not be based upon the market value of any residential 
        structures on the parcel or contiguous parcels under the same 
        ownership. 
           (d) Real estate, excluding the house, garage, and 
        immediately surrounding one acre of land, of less than ten acres 
        which is exclusively and intensively used for raising or 
        cultivating agricultural products, shall be considered as 
        agricultural land.  
           Land shall be classified as agricultural even if all or a 
        portion of the agricultural use of that property is the leasing 
        to, or use by another person for agricultural purposes. 
           Classification under this subdivision is not determinative 
        for qualifying under section 273.111. 
           The property classification under this section supersedes, 
        for property tax purposes only, any locally administered 
        agricultural policies or land use restrictions that define 
        minimum or maximum farm acreage. 
           (e) The term "agricultural products" as used in this 
        subdivision includes production for sale of:  
           (1) livestock, dairy animals, dairy products, poultry and 
        poultry products, fur-bearing animals, horticultural and nursery 
        stock described in sections 18.44 to 18.61, fruit of all kinds, 
        vegetables, forage, grains, bees, and apiary products by the 
        owner; 
           (2) fish bred for sale and consumption if the fish breeding 
        occurs on land zoned for agricultural use; 
           (3) the commercial boarding of horses if the boarding is 
        done in conjunction with raising or cultivating agricultural 
        products as defined in clause (1); 
           (4) property which is owned and operated by nonprofit 
        organizations used for equestrian activities, excluding racing; 
           (5) game birds and waterfowl bred and raised for use on a 
        shooting preserve licensed under section 97A.115; 
           (6) insects primarily bred to be used as food for animals; 
           (7) trees, grown for sale as a crop, and not sold for 
        timber, lumber, wood, or wood products; and 
           (8) maple syrup taken from trees grown by a person licensed 
        by the Minnesota department of agriculture under chapter 28A as 
        a food processor. 
           (f) If a parcel used for agricultural purposes is also used 
        for commercial or industrial purposes, including but not limited 
        to:  
           (1) wholesale and retail sales; 
           (2) processing of raw agricultural products or other goods; 
           (3) warehousing or storage of processed goods; and 
           (4) office facilities for the support of the activities 
        enumerated in clauses (1), (2), and (3), 
        the assessor shall classify the part of the parcel used for 
        agricultural purposes as class 1b, 2a, or 2b, whichever is 
        appropriate, and the remainder in the class appropriate to its 
        use.  The grading, sorting, and packaging of raw agricultural 
        products for first sale is considered an agricultural purpose.  
        A greenhouse or other building where horticultural or nursery 
        products are grown that is also used for the conduct of retail 
        sales must be classified as agricultural if it is primarily used 
        for the growing of horticultural or nursery products from seed, 
        cuttings, or roots and occasionally as a showroom for the retail 
        sale of those products.  Use of a greenhouse or building only 
        for the display of already grown horticultural or nursery 
        products does not qualify as an agricultural purpose.  
           The assessor shall determine and list separately on the 
        records the market value of the homestead dwelling and the one 
        acre of land on which that dwelling is located.  If any farm 
        buildings or structures are located on this homesteaded acre of 
        land, their market value shall not be included in this separate 
        determination.  
           (g) To qualify for classification under paragraph (b), 
        clause (4), a privately owned public use airport must be 
        licensed as a public airport under section 360.018.  For 
        purposes of paragraph (b), clause (4), "landing area" means that 
        part of a privately owned public use airport properly cleared, 
        regularly maintained, and made available to the public for use 
        by aircraft and includes runways, taxiways, aprons, and sites 
        upon which are situated landing or navigational aids.  A landing 
        area also includes land underlying both the primary surface and 
        the approach surfaces that comply with all of the following:  
           (i) the land is properly cleared and regularly maintained 
        for the primary purposes of the landing, taking off, and taxiing 
        of aircraft; but that portion of the land that contains 
        facilities for servicing, repair, or maintenance of aircraft is 
        not included as a landing area; 
           (ii) the land is part of the airport property; and 
           (iii) the land is not used for commercial or residential 
        purposes. 
        The land contained in a landing area under paragraph (b), clause 
        (4), must be described and certified by the commissioner of 
        transportation.  The certification is effective until it is 
        modified, or until the airport or landing area no longer meets 
        the requirements of paragraph (b), clause (4).  For purposes of 
        paragraph (b), clause (4), "public access area" means property 
        used as an aircraft parking ramp, apron, or storage hangar, or 
        an arrival and departure building in connection with the airport.
           [EFFECTIVE DATE.] This section is effective for taxes 
        payable in 2004 and thereafter. 
           Sec. 15.  Minnesota Statutes 2002, section 273.1315, is 
        amended to read: 
           273.1315 [CERTIFICATION OF 1B PROPERTY.] 
           Any property owner seeking classification and assessment of 
        the owner's homestead as class 1b property pursuant to section 
        273.13, subdivision 22, paragraph (b), clause (2) or (3), shall 
        file with the commissioner of revenue for each assessment year a 
        1b homestead declaration, on a form prescribed by the 
        commissioner.  The declaration shall contain the following 
        information:  
           (a) the information necessary to verify that the property 
        owner or the owner's spouse satisfies the requirements of 
        section 273.13, subdivision 22, paragraph (b), clause (2) or 
        (3), for 1b classification; and 
           (b) the property owner's household income, as defined in 
        section 290A.03, for the previous calendar year; and 
           (c) any additional information prescribed by the 
        commissioner.  
           The declaration shall must be filed on or before March 
        October 1 of each year to be effective for property taxes 
        payable during the succeeding calendar year.  The declaration 
        and any supplementary information received from the property 
        owner pursuant to this section shall be subject to chapter 
        270B.  If approved by the commissioner, the declaration remains 
        in effect until the property no longer qualifies under section 
        273.13, subdivision 22, paragraph (b).  Failure to notify the 
        commissioner within 30 days that the property no longer 
        qualifies under that paragraph because of a sale, change in 
        occupancy, or change in the status or condition of an occupant 
        shall result in the penalty provided in section 273.124, 
        subdivision 13, computed on the basis of the class 1b benefits 
        for the property, and the property shall lose its current class 
        1b classification. 
           The commissioner shall provide to the assessor on or before 
        April November 1 a listing of the parcels of property qualifying 
        for 1b classification.  
           [EFFECTIVE DATE.] This section is effective for taxes 
        payable in 2005 and thereafter. 
           Sec. 16.  [274.014] [LOCAL BOARDS; APPEALS AND EQUALIZATION 
        COURSE AND MEETING REQUIREMENTS.] 
           Subdivision 1.  [HANDBOOK FOR LOCAL BOARDS.] By no later 
        than January 1, 2005, the commissioner of revenue must develop a 
        handbook detailing procedures, responsibilities, and 
        requirements for local boards of appeal and equalization.  The 
        handbook must include, but need not be limited to, the role of 
        the local board in the assessment process, the legal and policy 
        reasons for fair and impartial appeal and equalization hearings, 
        local board meeting procedures that foster fair and impartial 
        assessment reviews and other best practices recommendations, 
        quorum requirements for local boards, and explanations of 
        alternate methods of appeal. 
           Subd. 2.  [APPEALS AND EQUALIZATION COURSE.] By no later 
        than January 1, 2006, and each year thereafter, there must be at 
        least one member at each meeting of a local board of appeal and 
        equalization who has attended an appeals and equalization course 
        developed or approved by the commissioner within the last four 
        years, as certified by the commissioner.  The course may be 
        offered in conjunction with a meeting of the Minnesota League of 
        Cities or the Minnesota Association of Townships.  The course 
        content must include, but need not be limited to, a review of 
        the handbook developed by the commissioner under subdivision 1. 
           Subd. 3.  [PROOF OF COMPLIANCE; TRANSFER OF DUTIES.] Any 
        city or town that does not provide proof to the county assessor 
        by December 1, 2006, and each year thereafter, that it is in 
        compliance with the requirements of subdivision 2, and that it 
        had a quorum at each meeting of the board of appeal and 
        equalization in the prior year, is deemed to have transferred 
        its board of appeal and equalization powers to the county under 
        section 274.01, subdivision 3, for the following year's 
        assessment. 
           The county shall notify the taxpayers when the board of 
        appeal and equalization for a city or town has been transferred 
        to the county under this subdivision and, prior to the meeting 
        time of the county board of equalization, the county shall make 
        available to those taxpayers a procedure for a review of the 
        assessments, including, but not limited to, open book meetings.  
        This alternate review process shall take place in April and May. 
           A local board whose powers are transferred to the county 
        under this subdivision may be reinstated by resolution of the 
        governing body of the city or town and upon proof of compliance 
        with the requirements of subdivision 2.  The resolution and 
        proofs must be provided to the county assessor by December 1 in 
        order to be effective for the following year's assessment. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 17.  [275.75] [CHARTER EXEMPTION FOR AID LOSS.] 
           Notwithstanding any other provision of a municipal charter 
        that limits ad valorem taxes to a lesser amount, or that would 
        require voter approval for any increase, the governing body of a 
        municipality may by resolution increase its levy for taxes 
        payable in 2004 and 2005 only by an amount equal to the 
        reduction in the amount of aid it is certified to receive under 
        sections 477A.011 to 477A.03 for that same payable year compared 
        to the amount certified for payment in 2003. 
           Sec. 18.  Minnesota Statutes 2002, section 278.01, 
        subdivision 4, is amended to read: 
           Subd. 4.  [FILING OF APPEAL DEADLINE; EXCEPTION.] 
        Notwithstanding the March 31 April 30 date in subdivision 1, 
        whenever the exempt status, valuation, or classification of real 
        or personal property is changed other than by an abatement or a 
        court decision, and the owner responsible for payment of the tax 
        is not given notice of the change until after January 31 
        February 28 of the year the tax is payable or after July 1 in 
        the case of property subject to section 273.125, subdivision 4, 
        an eligible petitioner, as defined and limited in subdivision 1, 
        has 60 days from the date of mailing of the notice to initiate 
        an appeal of the property's exempt status, classification, or 
        valuation change under this chapter. 
           [EFFECTIVE DATE.] This section is effective for taxes 
        payable in 2003 and thereafter. 
           Sec. 19.  Minnesota Statutes 2002, section 278.05, 
        subdivision 6, is amended to read: 
           Subd. 6.  [DISMISSAL OF PETITION; EXCLUSION OF CERTAIN 
        EVIDENCE.] (a) Information, including income and expense 
        figures, verified net rentable areas, and anticipated income and 
        expenses, for income-producing property must be provided to the 
        county assessor within 60 days after the petition has been filed 
        under this chapter no later than 60 days after the applicable 
        filing deadline contained in section 278.01, subdivision 1 or 
        4.  Failure to provide the information required in this 
        paragraph shall result in the dismissal of the petition, 
        unless (1) the failure to provide it was due to the 
        unavailability of the evidence at that the time that the 
        information was due, or (2) the petitioner was not aware of or 
        informed of the requirement to provide the information. 
        If the petitioner proves that the requirements under clause (2) 
        are met, the petitioner has an additional 30 days to provide the 
        information from the time the petitioner became aware of or was 
        informed of the requirement to provide the information, 
        otherwise the petition shall be dismissed.  
           (b) Provided that the information as contained in paragraph 
        (a) is timely submitted to the county assessor, the county 
        assessor shall furnish the petitioner at least five days before 
        the hearing under this chapter with the property's appraisal, if 
        any, which will be presented to the court at the hearing.  The 
        petitioner shall furnish to the county assessor at least five 
        days before the hearing under this chapter with the property's 
        appraisal, if any, which will be presented to the court at the 
        hearing.  An appraisal of the petitioner's property done by or 
        for the county shall not be admissible as evidence if the county 
        assessor does not comply with the provisions in this paragraph.  
        The petition shall be dismissed if the petitioner does not 
        comply with the provisions in this paragraph. 
           [EFFECTIVE DATE.] This section is effective for petitions 
        filed on or after July 1, 2003. 
           Sec. 20.  Minnesota Statutes 2002, section 290A.03, 
        subdivision 8, is amended to read: 
           Subd. 8.  [CLAIMANT.] (a) "Claimant" means a person, other 
        than a dependent, as defined under sections 151 and 152 of the 
        Internal Revenue Code disregarding section 152(b)(3) of the 
        Internal Revenue Code, who filed a claim authorized by this 
        chapter and who was a resident of this state as provided in 
        chapter 290 during the calendar year for which the claim for 
        relief was filed. 
           (b) In the case of a claim relating to rent constituting 
        property taxes, the claimant shall have resided in a rented or 
        leased unit on which ad valorem taxes or payments made in lieu 
        of ad valorem taxes, including payments of special assessments 
        imposed in lieu of ad valorem taxes, are payable at some time 
        during the calendar year covered by the claim.  
           (c) "Claimant" shall not include a resident of a nursing 
        home, intermediate care facility, or long-term residential 
        facility, or a facility that accepts group residential housing 
        payments whose rent constituting property taxes is paid pursuant 
        to the supplemental security income program under title XVI of 
        the Social Security Act, the Minnesota supplemental aid program 
        under sections 256D.35 to 256D.54, the medical assistance 
        program pursuant to title XIX of the Social Security Act, or the 
        general assistance medical care program pursuant to section 
        256D.03, subdivision 3, or the group residential housing program 
        under chapter 256I. 
        If only a portion of the rent constituting property taxes is 
        paid by these programs, the resident shall be a claimant for 
        purposes of this chapter, but the refund calculated pursuant to 
        section 290A.04 shall be multiplied by a fraction, the numerator 
        of which is income as defined in subdivision 3, paragraphs (1) 
        and (2), reduced by the total amount of income from the above 
        sources other than vendor payments under the medical assistance 
        program or the general assistance medical care program and the 
        denominator of which is income as defined in subdivision 3, 
        paragraphs (1) and (2), plus vendor payments under the medical 
        assistance program or the general assistance medical care 
        program, to determine the allowable refund pursuant to this 
        chapter. 
           (d) Notwithstanding paragraph (c), if the claimant was a 
        resident of the nursing home, intermediate care facility or, 
        long-term residential facility, or facility for which the rent 
        was paid for the claimant by the group residential housing 
        program for only a portion of the calendar year covered by the 
        claim, the claimant may compute rent constituting property taxes 
        by disregarding the rent constituting property taxes from the 
        nursing home, intermediate care facility, or long-term 
        residential facility and use only that amount of rent 
        constituting property taxes or property taxes payable relating 
        to that portion of the year when the claimant was not in the 
        facility.  The claimant's household income is the income for the 
        entire calendar year covered by the claim.  
           (e) In the case of a claim for rent constituting property 
        taxes of a part-year Minnesota resident, the income and rental 
        reflected in this computation shall be for the period of 
        Minnesota residency only.  Any rental expenses paid which may be 
        reflected in arriving at federal adjusted gross income cannot be 
        utilized for this computation.  When two individuals of a 
        household are able to meet the qualifications for a claimant, 
        they may determine among them as to who the claimant shall be. 
        If they are unable to agree, the matter shall be referred to the 
        commissioner of revenue whose decision shall be final.  If a 
        homestead property owner was a part-year Minnesota resident, the 
        income reflected in the computation made pursuant to section 
        290A.04 shall be for the entire calendar year, including income 
        not assignable to Minnesota. 
           (f) If a homestead is occupied by two or more renters, who 
        are not husband and wife, the rent shall be deemed to be paid 
        equally by each, and separate claims shall be filed by each.  
        The income of each shall be each renter's household income for 
        purposes of computing the amount of credit to be allowed. 
           [EFFECTIVE DATE.] This section is effective for claims 
        based on rent paid in 2003 and thereafter. 
           Sec. 21.  Laws 1989, chapter 211, section 8, subdivision 2, 
        as amended by Laws 2002, chapter 390, section 24, is amended to 
        read: 
           Subd. 2.  [OPERATION OF DISTRICT.] (a) A hospital district 
        created under this section shall be subject to Minnesota 
        Statutes, sections 447.32, except subdivision 1, to 447.41, and 
        except as provided otherwise in this act.  
           (b) A hospital district created under this section is a 
        municipal corporation and a political subdivision of the state. 
           [EFFECTIVE DATE.] This section is effective upon compliance 
        with Minnesota Statutes, section 645.021, subdivision 3, by the 
        governing body of the Cook county hospital district. 
           Sec. 22.  Laws 1989, chapter 211, section 8, subdivision 4, 
        as amended by Laws 2002, chapter 390, section 24, is amended to 
        read: 
           Subd. 4.  [TAX LEVY.] The tax levied under Minnesota 
        Statutes, section 447.34, shall not exceed $300,000 in any year, 
        and its for taxes levied in 2002.  For taxes levied in 2003 and 
        subsequent years, the tax must not exceed the lesser of: 
           (1) the product of the hospital district's property tax 
        levy limitation for the previous year determined under this 
        subdivision, multiplied by 103 percent; or 
           (2) the product of the hospital district's property tax 
        levy limitation for the previous year determined under this 
        subdivision multiplied by the ratio of the most recent available 
        annual medical care expenditure category of the revised Consumer 
        Price Index, U.S. citywide average, for all urban consumers 
        prepared by the United States Department of Labor to the same 
        annual index for the previous year. 
           The proceeds of the tax may be used for all purposes of the 
        hospital district. 
           [EFFECTIVE DATE.] This section is effective upon compliance 
        with Minnesota Statutes, section 645.021, subdivision 3, by the 
        governing body of the Cook county hospital district. 

                                   ARTICLE 3 
                  DEPARTMENT INCOME, CORPORATE FRANCHISE, AND 
                             ESTATE TAX INITIATIVES 
           Section 1.  Minnesota Statutes 2002, 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, if: 
           (1) a federal estate tax return is required to be filed; or 
           (2) 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, 2002. 
           Sec. 2.  Minnesota Statutes 2002, section 289A.19, 
        subdivision 4, is amended to read: 
           Subd. 4.  [ESTATE TAX RETURNS.] When in the commissioner's 
        judgment good cause exists, the commissioner may extend the time 
        for filing an estate tax return for not more than six months.  
        When an extension to file the federal estate tax return has been 
        granted under section 6081 of the Internal Revenue Code, the 
        time for filing the estate tax return is extended for that 
        period.  
           [EFFECTIVE DATE.] This section is effective for estates of 
        decedents dying after December 31, 2001. 
           Sec. 3.  Minnesota Statutes 2002, section 289A.31, is 
        amended by adding a subdivision to read: 
           Subd. 8.  [LIABILITY OF VENDOR FOR REPAYMENT OF REFUND.] If 
        an individual income tax refund resulting from claiming an 
        education credit under section 290.0674 is paid by means of 
        directly depositing the proceeds of the refund into a bank 
        account controlled by the vendor of the product or service upon 
        which the education credit is based, and the commissioner 
        subsequently disallows the credit, the commissioner may seek 
        repayment of the refund from the vendor.  The amount of the 
        repayment must be assessed and collected in the same time and 
        manner as an erroneous refund under section 289A.37, subdivision 
        2. 
           [EFFECTIVE DATE.] This section is effective for refunds 
        paid to accounts controlled by a vendor on or after the day 
        following final enactment. 
           Sec. 4.  Minnesota Statutes 2002, section 289A.56, 
        subdivision 3, is amended to read: 
           Subd. 3.  [WITHHOLDING TAX, ENTERTAINER WITHHOLDING TAX, 
        WITHHOLDING FROM PAYMENTS TO OUT-OF-STATE CONTRACTORS, ESTATE 
        TAX, AND SALES TAX OVERPAYMENTS.] When a refund is due for 
        overpayments of withholding tax, entertainer withholding tax, or 
        withholding from payments to out-of-state contractors, or estate 
        tax, interest is computed from the date of payment to the date 
        the refund is paid or credited.  For purposes of this 
        subdivision, the date of payment is the later of the date the 
        tax was finally due or was paid. 
           For the purposes of computing interest on estate tax 
        refunds, interest is paid from the later of the date of 
        overpayment, the date the estate tax return is due, or the date 
        the original estate tax return is filed to the date the refund 
        is paid. 
           For purposes of computing interest on sales and use tax 
        refunds, interest is paid from the date of payment to the date 
        the refund is paid or credited, if the refund claim includes a 
        detailed schedule reflecting the tax periods covered in the 
        claim.  If the refund claim submitted does not include a 
        detailed schedule reflecting the tax periods covered in the 
        claim, interest is computed from the date the claim was filed. 
           [EFFECTIVE DATE.] This section is effective for estates of 
        decedents dying after December 31, 2003. 
           Sec. 5.  Minnesota Statutes 2002, section 289A.60, 
        subdivision 7, is amended to read: 
           Subd. 7.  [PENALTY FOR FRIVOLOUS RETURN.] If a taxpayer 
        files what purports to be a tax return or a claim for refund but 
        which does not contain information on which the substantial 
        correctness of the purported return or claim for refund may be 
        judged or contains information that on its face shows that the 
        purported return or claim for refund is substantially incorrect 
        and the conduct is due to a position that is frivolous or a 
        desire that appears on the purported return or claim for refund 
        to delay or impede the administration of Minnesota tax laws, 
        then the individual shall pay a penalty of $500 the greater of 
        $1,000 or 25 percent of the amount of tax required to be shown 
        on the return.  In a proceeding involving the issue of whether 
        or not a person is liable for this penalty, the burden of proof 
        is on the commissioner.  
           [EFFECTIVE DATE.] This section is effective for returns 
        filed after December 31, 2003. 
           Sec. 6.  Minnesota Statutes 2002, 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; 
           (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.  For purposes of 
        this clause, if the taxpayer has an activity that in the taxable 
        year generates a deduction for depreciation under section 168(k) 
        and the activity generates a loss for the taxable year that the 
        taxpayer is not allowed to claim for the taxable year, "the 
        depreciation allowed under section 168(k)" for the taxable year 
        is limited to excess of the depreciation claimed by the activity 
        under section 168(k) over the amount of the loss from the 
        activity that is not allowed in the taxable year.  In succeeding 
        taxable years when the losses not allowed in the taxable year 
        are allowed, the depreciation under section 168(k) is allowed. 
           [EFFECTIVE DATE.] This section is effective for taxable 
        years ending after September 10, 2001. 
           Sec. 7.  Minnesota Statutes 2002, 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) income as provided under section 290.0802; 
           (5) to the extent included in federal adjusted gross 
        income, income realized on disposition of property exempt from 
        tax under section 290.491; 
           (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); 
           (7) the exemption amount allowed under Laws 1995, chapter 
        255, article 3, section 2, subdivision 3; 
           (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; 
           (9) (7) 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; 
           (10) (8) 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; 
           (11) (9) 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) (10) 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 for tax years 
        beginning after December 31, 2003. 
           Sec. 8.  Minnesota Statutes 2002, 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; 
           (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.  For purposes of 
        this clause, if the taxpayer has an activity that in the taxable 
        year generates a deduction for depreciation under section 168(k) 
        and the activity generates a loss for the taxable year that the 
        taxpayer is not allowed to claim for the taxable year, "the 
        depreciation allowed under section 168(k)" for the taxable year 
        is limited to excess of the depreciation claimed by the activity 
        under section 168(k) over the amount of the loss from the 
        activity that is not allowed in the taxable year.  In succeeding 
        taxable years when the losses not allowed in the taxable year 
        are allowed, the depreciation under section 168(k) is allowed. 
           [EFFECTIVE DATE.] This section is effective for taxable 
        years ending after September 10, 2001. 
           Sec. 9.  Minnesota Statutes 2002, 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; 
           (17) for a corporation whose foreign sales corporation, as 
        defined in section 922 of the Internal Revenue Code, constituted 
        a foreign operating corporation during any taxable year ending 
        before January 1, 1995, and a return was filed by August 15, 
        1996, claiming the deduction under this section 290.21, 
        subdivision 4, 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 the day 
        following final enactment. 
           Sec. 10.  Minnesota Statutes 2002, section 290.06, 
        subdivision 2c, is amended to read: 
           Subd. 2c.  [SCHEDULES OF RATES FOR INDIVIDUALS, ESTATES, 
        AND TRUSTS.] (a) The income taxes imposed by this chapter upon 
        married individuals filing joint returns and surviving spouses 
        as defined in section 2(a) of the Internal Revenue Code must be 
        computed by applying to their taxable net income the following 
        schedule of rates: 
           (1) On the first $25,680, 5.35 percent; 
           (2) On all over $25,680, but not over $102,030, 7.05 
        percent; 
           (3) On all over $102,030, 7.85 percent. 
           Married individuals filing separate returns, estates, and 
        trusts must compute their income tax by applying the above rates 
        to their taxable income, except that the income brackets will be 
        one-half of the above amounts.  
           (b) The income taxes imposed by this chapter upon unmarried 
        individuals must be computed by applying to taxable net income 
        the following schedule of rates: 
           (1) On the first $17,570, 5.35 percent; 
           (2) On all over $17,570, but not over $57,710, 7.05 
        percent; 
           (3) On all over $57,710, 7.85 percent. 
           (c) The income taxes imposed by this chapter upon unmarried 
        individuals qualifying as a head of household as defined in 
        section 2(b) of the Internal Revenue Code must be computed by 
        applying to taxable net income the following schedule of rates: 
           (1) On the first $21,630, 5.35 percent; 
           (2) On all over $21,630, but not over $86,910, 7.05 
        percent; 
           (3) On all over $86,910, 7.85 percent. 
           (d) In lieu of a tax computed according to the rates set 
        forth in this subdivision, the tax of any individual taxpayer 
        whose taxable net income for the taxable year is less than an 
        amount determined by the commissioner must be computed in 
        accordance with tables prepared and issued by the commissioner 
        of revenue based on income brackets of not more than $100.  The 
        amount of tax for each bracket shall be computed at the rates 
        set forth in this subdivision, provided that the commissioner 
        may disregard a fractional part of a dollar unless it amounts to 
        50 cents or more, in which case it may be increased to $1. 
           (e) An individual who is not a Minnesota resident for the 
        entire year must compute the individual's Minnesota income tax 
        as provided in this subdivision.  After the application of the 
        nonrefundable credits provided in this chapter, the tax 
        liability must then be multiplied by a fraction in which:  
           (1) the numerator is the individual's Minnesota source 
        federal adjusted gross income as defined in section 62 of the 
        Internal Revenue Code and increased by the additions required 
        under section 290.01, subdivision 19a, clauses (1), (5), and 
        (6), and reduced by the Minnesota assignable portion of the 
        subtraction for United States government interest under section 
        290.01, subdivision 19b, clause (1), after applying the 
        allocation and assignability provisions of section 290.081, 
        clause (a), or 290.17; and 
           (2) the denominator is the individual's federal adjusted 
        gross income as defined in section 62 of the Internal Revenue 
        Code of 1986, increased by the amounts specified in section 
        290.01, subdivision 19a, clauses (1), (5), and (6), and reduced 
        by the amounts specified in section 290.01, subdivision 19b, 
        clause (1). 
           [EFFECTIVE DATE.] This section is effective for tax years 
        beginning after December 31, 2002. 
           Sec. 11.  Minnesota Statutes 2002, section 290.0671, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [CREDIT ALLOWED.] (a) An individual is 
        allowed a credit against the tax imposed by this chapter equal 
        to a percentage of earned income.  To receive a credit, a 
        taxpayer must be eligible for a credit under section 32 of the 
        Internal Revenue Code.  
           (b) For individuals with no qualifying children, the credit 
        equals 1.9125 percent of the first $4,620 of earned income.  The 
        credit is reduced by 1.9125 percent of earned income or modified 
        adjusted gross income, whichever is greater, in excess of 
        $5,770, but in no case is the credit less than zero. 
           (c) For individuals with one qualifying child, the credit 
        equals 8.5 percent of the first $6,920 of earned income and 8.5 
        percent of earned income over $12,080 but less than $13,450.  
        The credit is reduced by 5.73 percent of earned income or 
        modified adjusted gross income, whichever is greater, in excess 
        of $15,080, but in no case is the credit less than zero. 
           (d) For individuals with two or more qualifying children, 
        the credit equals ten percent of the first $9,720 of earned 
        income and 20 percent of earned income over $14,860 but less 
        than $16,800.  The credit is reduced by 10.3 percent of earned 
        income or modified adjusted gross income, whichever is greater, 
        in excess of $17,890, but in no case is the credit less than 
        zero. 
           (e) For a nonresident or part-year resident, the credit 
        must be allocated based on the percentage calculated under 
        section 290.06, subdivision 2c, paragraph (e). 
           (f) For a person who was a resident for the entire tax year 
        and has earned income not subject to tax under this chapter, the 
        credit must be allocated based on the ratio of federal adjusted 
        gross income reduced by the earned income not subject to tax 
        under this chapter over federal adjusted gross income. 
           (g) For tax years beginning after December 31, 2001, and 
        before December 31, 2004, the $5,770 in paragraph (b) is 
        increased to $6,770, the $15,080 in paragraph (c) is increased 
        to $16,080, and the $17,890 in paragraph (d) is increased to 
        $18,890, after being adjusted for inflation under subdivision 7, 
        are each increased by $1,000 for married taxpayers filing joint 
        returns. 
           (h) For tax years beginning after December 31, 2004, and 
        before December 31, 2007, the $5,770 in paragraph (b) is 
        increased to $7,770, the $15,080 in paragraph (c) is increased 
        to $17,080, and the $17,890 in paragraph (d) is increased to 
        $19,890, after being adjusted for inflation under subdivision 7, 
        are each increased by $2,000 for married taxpayers filing joint 
        returns. 
           (i) For tax years beginning after December 31, 2007, and 
        before December 31, 2010, the $5,770 in paragraph (b) is 
        increased to $8,770, the $15,080 in paragraph (c) is increased 
        to $18,080, and the $17,890 in paragraph (d) is increased to 
        $20,890, after being adjusted for inflation under subdivision 7, 
        are each increased by $3,000 for married taxpayers filing joint 
        returns.  For tax years beginning after December 31, 2008, the 
        $3,000 is adjusted annually for inflation under subdivision 7. 
           (j) The commissioner shall construct tables showing the 
        amount of the credit at various income levels and make them 
        available to taxpayers.  The tables shall follow the schedule 
        contained in this subdivision, except that the commissioner may 
        graduate the transition between income brackets. 
           [EFFECTIVE DATE.] This section is effective for tax years 
        beginning after December 31, 2002. 
           Sec. 12.  Minnesota Statutes 2002, section 290.0675, 
        subdivision 2, is amended to read: 
           Subd. 2.  [CREDIT ALLOWED.] A married couple filing a joint 
        return is allowed a credit against the tax imposed under section 
        290.06.  
           The minimum taxable income for the married couple to be 
        eligible for the credit is $25,680, and the minimum earned 
        income in order for the couple to be eligible for the credit is 
        $14,250 for each spouse. 
           [EFFECTIVE DATE.] This section is effective for tax years 
        beginning after December 31, 2002. 
           Sec. 13.  Minnesota Statutes 2002, 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 and income levels in section 
        290.06, subdivision 2c, paragraph (a), as adjusted for the 
        taxable year by section 290.06, subdivision 2d, and the sum of 
        the tax under the rates and income levels of section 290.06, 
        subdivision 2c, paragraph (b), as adjusted for the taxable year 
        by section 290.06, subdivision 2d, on the earned income of the 
        lesser-earning spouse, and the tax under the rates and income 
        levels of section 290.06, subdivision 2c, paragraph (b), as 
        adjusted for the taxable year by section 290.06, subdivision 2d, 
        on the couple's joint Minnesota taxable income, minus the earned 
        income of the lesser-earning spouse. 
           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. 
           [EFFECTIVE DATE.] This section is effective for tax years 
        beginning after December 31, 2002. 
           Sec. 14.  Minnesota Statutes 2002, section 290.0679, 
        subdivision 2, is amended to read: 
           Subd. 2.  [CONDITIONS FOR ASSIGNMENT.] A qualifying 
        taxpayer may assign all or part of an anticipated refund for the 
        current and future taxable years to a financial institution or a 
        qualifying organization.  A financial institution or qualifying 
        organization accepting assignment must pay the amount secured by 
        the assignment to a third-party vendor.  The commissioner of 
        children, families, and learning shall provide a list of 
        categories of, upon request from a third-party vendor, certify 
        that the vendor's products and services that qualify for the 
        education credit to financial institutions and qualifying 
        organizations.  A denial of a certification is subject to the 
        contested case procedure under chapter 14.  A financial 
        institution or qualifying organization that accepts assignments 
        under this section must verify as part of the assignment 
        documentation that the product or service to be provided by the 
        third-party vendor qualifies has been certified by the 
        commissioner of children, families, and learning as qualifying 
        for the education credit.  The amount assigned for the current 
        and future taxable years may not exceed the maximum allowable 
        education credit for the current taxable year.  Both the 
        taxpayer and spouse must consent to the assignment of a refund 
        from a joint return. 
           [EFFECTIVE DATE.] This section is effective for assignments 
        made on or after the day following final enactment. 
           Sec. 15.  Minnesota Statutes 2002, section 290.0802, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [DEFINITIONS.] For purposes of this 
        section, the following terms have the meanings given. 
           (a) "Adjusted gross income" means federal adjusted gross 
        income as used in section 22(d) of the Internal Revenue Code for 
        the taxable year, plus a lump sum distribution as defined in 
        section 402(e)(3) of the Internal Revenue Code, and less any 
        pension, annuity, or disability benefits included in federal 
        gross income but not subject to state taxation other than the 
        subtraction allowed under section 290.01, subdivision 19b, 
        clause (4). 
           (b) "Disability income" means disability income as defined 
        in section 22(c)(2)(B)(iii) of the Internal Revenue Code. 
           (c) "Nontaxable retirement and disability benefits" means 
        the amount of pension, annuity, or disability benefits that 
        would be included in the reduction under section 22(c)(3) of the 
        Internal Revenue Code and pension, annuity, or disability 
        benefits included in federal gross income but not subject to 
        state taxation other than the subtraction allowed under section 
        290.01, subdivision 19b, clause (4). 
           (d) "Qualified individual" means a qualified individual as 
        defined in section 22(b) of the Internal Revenue Code. 
           (e) "Social security benefits above the second federal 
        threshold" means the amount of social security benefits included 
        in federal taxable income due to the provisions of section 13215 
        of the Omnibus Budget Reconciliation Act of 1993, Public Law 
        Number 103-66. 
           [EFFECTIVE DATE.] This section is effective for tax years 
        beginning after December 31, 2002. 
           Sec. 16.  Minnesota Statutes 2002, 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 2002. 
           [EFFECTIVE DATE.] This section is effective for estates of 
        decedents dying after December 31, 2002. 
           Sec. 17.  Minnesota Statutes 2002, 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 computed 
        under section 2011 of the Internal Revenue Code, as amended 
        through December 31, 2000, 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 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 federal estate tax computed under section 2001 
        of the Internal Revenue Code after the allowance of the federal 
        credits allowed under section 2010 of the Internal Revenue Code 
        of 1986, as amended through December 31, 2000.  For the purposes 
        of this section, expenses which are deducted for federal income 
        tax purposes under section 642(g) of the Internal Revenue Code 
        as amended through December 31, 2002, are not allowable in 
        computing the tax under this chapter. 
           [EFFECTIVE DATE.] This section is effective for estates of 
        decedents dying after December 31, 2002. 
           Sec. 18.  Minnesota Statutes 2002, section 352.15, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [EXEMPTION; EXCEPTIONS.] None of the money, 
        annuities, or other benefits mentioned in this chapter is 
        assignable either in law or in equity or subject to state estate 
        tax, or to execution, levy, attachment, garnishment, or other 
        legal process, except as provided in subdivision 1a or section 
        518.58, 518.581, or 518.6111.  
           [EFFECTIVE DATE.] This section is effective for estates of 
        decedents dying after December 31, 2002. 
           Sec. 19.  Minnesota Statutes 2002, section 353.15, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [EXEMPTION; EXCEPTIONS.] No money, annuity, 
        or benefit provided for in this chapter is assignable or subject 
        to any state estate tax, or to execution, levy, attachment, 
        garnishment, or legal process, except as provided in subdivision 
        2 or section 518.58, 518.581, or 518.6111.  
           [EFFECTIVE DATE.] This section is effective for estates of 
        decedents dying after December 31, 2002. 
           Sec. 20.  Minnesota Statutes 2002, section 354.10, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [EXEMPTION; EXCEPTIONS.] The right of a 
        teacher to take advantage of the benefits provided by this 
        chapter, is a personal right only and is not assignable.  All 
        money to the credit of a teacher's account in the fund or any 
        money payable to the teacher from the fund belongs to the state 
        of Minnesota until actually paid to the teacher or a beneficiary 
        under this chapter.  The association may acknowledge a properly 
        completed power of attorney form.  An assignment or attempted 
        assignment of a teacher's interest in the fund, or of the 
        beneficiary's interest in the fund, by a teacher or a 
        beneficiary is void and exempt from taxation under chapter 291 
        and from garnishment or levy under attachment or execution, 
        except as provided in subdivision 2 or 3, or section 518.58, 
        518.581, or 518.6111.  
           [EFFECTIVE DATE.] This section is effective for estates of 
        decedents dying after December 31, 2002. 
           Sec. 21.  Minnesota Statutes 2002, section 354B.30, is 
        amended to read: 
           354B.30 [PROHIBITION ON LOANS OR PRETERMINATION 
        DISTRIBUTIONS.] 
           (a) No participant may obtain a loan from the plan or 
        obtain any distribution from the plan at a time before the 
        participant terminates the employment that gave rise to plan 
        coverage. 
           (b) No amounts to the credit of the plan are assignable 
        either in law or in equity, are subject to state estate tax, or 
        are subject to execution, levy, attachment, garnishment, or 
        other legal process, except as provided in section 518.58, 
        518.581, or 518.6111.  
           [EFFECTIVE DATE.] This section is effective for estates of 
        decedents dying after December 31, 2002. 
           Sec. 22.  Minnesota Statutes 2002, section 354C.165, is 
        amended to read: 
           354C.165 [PROHIBITION ON LOANS OR PRETERMINATION 
        DISTRIBUTIONS.] 
           (a) Except as provided in paragraph (c), no participant may 
        obtain a loan or any distribution from the plan before the 
        participant terminates the employment that gave rise to plan 
        coverage. 
           (b) No amounts to the credit of the plan are assignable 
        either in law or in equity, are subject to state estate tax, or 
        are subject to execution, levy, attachment, garnishment, or 
        other legal process, except as provided in section 518.58, 
        518.581, or 518.6111.  
           (c) Unless prohibited by or subject to a penalty under 
        federal law, a teacher who is a participant in the supplemental 
        retirement plan may request, in writing, a transfer of all or a 
        portion of the funds accumulated in the person's supplemental 
        plan account to the teachers retirement association to purchase 
        service credit under sections 354.53, 354.533, 354.534, 354.535, 
        354.536, 354.537, and 354.538 or to the teachers retirement fund 
        association to purchase service credit under sections 354A.097, 
        354A.098, 354A.099, 354A.101, 354A.102, 354A.103, and 354A.104.  
        Upon receipt of a valid request, the board shall execute the 
        transfer.  The transfer must be a fund-to-fund transfer, and in 
        no event shall the participant directly receive any of the funds 
        while still employed by the board.  In no event may the board 
        transfer more than the participant's account balance.  The 
        board, in cooperation with the executive director of the 
        teachers retirement association, shall develop the forms for 
        requesting a transfer and the procedures for executing the 
        requested transfers. 
           [EFFECTIVE DATE.] This section is effective for estates of 
        decedents dying after December 31, 2002. 
           Sec. 23.  Laws 2001, First Special Session chapter 5, 
        article 9, section 12, the effective date, is amended to read: 
           [EFFECTIVE DATE.] This section is effective for assignment 
        of refunds filed with the commissioner after December 31, 2001.  
        The time period for filing assignments expires December 31, 
        2003, but assignments filed on or before that date remain in 
        effect until satisfied or canceled. 
           Sec. 24.  [REPEALER.] 
           (a) Minnesota Statutes 2002, sections 290.0671, subdivision 
        3; and 290.0675, subdivision 5, are repealed effective for tax 
        years beginning after December 31, 2002. 
           (b) Minnesota Rules, parts 8007.0300, subpart 3; 8009.7100; 
        8009.7200; 8009.7300; 8009.7400; and 8092.1000, are repealed 
        effective the day following final enactment.  

                                   ARTICLE 4 
                                 FEDERAL UPDATE 
           Section 1.  Minnesota Statutes 2002, 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 March 15 December 31, 
        2002. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 2.  Minnesota Statutes 2002, 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 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. 
           The Internal Revenue Code of 1986, as amended through 
        December 31, 2002, shall be in effect for taxable years 
        beginning after December 31, 2002. 
           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. 3.  Minnesota Statutes 2002, 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 March 15 December 31, 
        2002. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 4.  Minnesota Statutes 2002, 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 March 15 December 31, 2002. 
           [EFFECTIVE DATE.] This section is effective for refunds 
        payable for rents paid in 2003 and thereafter and property taxes 
        payable in 2004 and thereafter. 

                                   ARTICLE 5 
                      DEPARTMENT PROPERTY TAX INITIATIVES 
           Section 1.  Minnesota Statutes 2002, section 270.06, is 
        amended to read: 
           270.06 [POWERS AND DUTIES.] 
           The commissioner of revenue shall: 
           (1) have and exercise general supervision over the 
        administration of the assessment and taxation laws of the state, 
        over assessors, town, county, and city boards of review and 
        equalization, and all other assessing officers in the 
        performance of their duties, to the end that all assessments of 
        property be made relatively just and equal in compliance with 
        the laws of the state; 
           (2) confer with, advise, and give the necessary 
        instructions and directions to local assessors and local boards 
        of review throughout the state as to their duties under the laws 
        of the state; 
           (3) direct proceedings, actions, and prosecutions to be 
        instituted to enforce the laws relating to the liability and 
        punishment of public officers and officers and agents of 
        corporations for failure or negligence to comply with the 
        provisions of the laws of this state governing returns of 
        assessment and taxation of property, and cause complaints to be 
        made against local assessors, members of boards of equalization, 
        members of boards of review, or any other assessing or taxing 
        officer, to the proper authority, for their removal from office 
        for misconduct or negligence of duty; 
           (4) require county attorneys to assist in the commencement 
        of prosecutions in actions or proceedings for removal, 
        forfeiture and punishment for violation of the laws of this 
        state in respect to the assessment and taxation of property in 
        their respective districts or counties; 
           (5) require town, city, county, and other public officers 
        to report information as to the assessment of property, 
        collection of taxes received from licenses and other sources, 
        and such other information as may be needful in the work of the 
        department of revenue, in such form and upon such blanks as the 
        commissioner may prescribe; 
           (6) require individuals, copartnerships, companies, 
        associations, and corporations to furnish information concerning 
        their capital, funded or other debt, current assets and 
        liabilities, earnings, operating expenses, taxes, as well as all 
        other statements now required by law for taxation purposes; 
           (7) subpoena witnesses, at a time and place reasonable 
        under the circumstances, to appear and give testimony, and to 
        produce books, records, papers and documents for inspection and 
        copying relating to any matter which the commissioner may have 
        authority to investigate or determine; 
           (8) issue a subpoena which does not identify the person or 
        persons with respect to whose liability the subpoena is issued, 
        but only if (a) the subpoena relates to the investigation of a 
        particular person or ascertainable group or class of persons, 
        (b) there is a reasonable basis for believing that such person 
        or group or class of persons may fail or may have failed to 
        comply with any law administered by the commissioner, (c) the 
        information sought to be obtained from the examination of the 
        records (and the identity of the person or persons with respect 
        to whose liability the subpoena is issued) is not readily 
        available from other sources, (d) the subpoena is clear and 
        specific as to the information sought to be obtained, and (e) 
        the information sought to be obtained is limited solely to the 
        scope of the investigation.  Provided further that the party 
        served with a subpoena which does not identify the person or 
        persons with respect to whose tax liability the subpoena is 
        issued shall have the right, within 20 days after service of the 
        subpoena, to petition the district court for the judicial 
        district in which lies the county in which that party is located 
        for a determination as to whether the commissioner of revenue 
        has complied with all the requirements in (a) to (e), and thus, 
        whether the subpoena is enforceable.  If no such petition is 
        made by the party served within the time prescribed, the 
        subpoena shall have the force and effect of a court order; 
           (9) cause the deposition of witnesses residing within or 
        without the state, or absent therefrom, to be taken, upon notice 
        to the interested party, if any, in like manner that depositions 
        of witnesses are taken in civil actions in the district court, 
        in any matter which the commissioner may have authority to 
        investigate or determine; 
           (10) investigate the tax laws of other states and countries 
        and to formulate and submit to the legislature such legislation 
        as the commissioner may deem expedient to prevent evasions of 
        assessment and taxing laws, and secure just and equal taxation 
        and improvement in the system of assessment and taxation in this 
        state; 
           (11) consult and confer with the governor upon the subject 
        of taxation, the administration of the laws in regard thereto, 
        and the progress of the work of the department of revenue, and 
        furnish the governor, from time to time, such assistance and 
        information as the governor may require relating to tax matters; 
           (12) transmit to the governor, on or before the third 
        Monday in December of each even-numbered year, and to each 
        member of the legislature, on or before November 15 of each 
        even-numbered year, the report of the department of revenue for 
        the preceding years, showing all the taxable property in the 
        state and the value of the same, in tabulated form; 
           (13) inquire into the methods of assessment and taxation 
        and ascertain whether the assessors faithfully discharge their 
        duties, particularly as to their compliance with the laws 
        requiring the assessment of all property not exempt from 
        taxation; 
           (14) administer and enforce the assessment and collection 
        of state taxes and fees, including the use of any remedy 
        available to nongovernmental creditors, and, from time to time, 
        make, publish, and distribute rules for the administration and 
        enforcement of assessments and fees laws administered by the 
        commissioner and state tax laws.  The rules have the force of 
        law; 
           (15) prepare blank forms for the returns required by state 
        tax law and distribute them throughout the state, furnishing 
        them subject to charge on application; 
           (16) prescribe rules governing the qualification and 
        practice of agents, attorneys, or other persons representing 
        taxpayers before the commissioner.  The rules may require that 
        those persons, agents, and attorneys show that they are of good 
        character and in good repute, have the necessary qualifications 
        to give taxpayers valuable services, and are otherwise competent 
        to advise and assist taxpayers in the presentation of their case 
        before being recognized as representatives of taxpayers.  After 
        due notice and opportunity for hearing, the commissioner may 
        suspend and bar from further practice before the commissioner 
        any person, agent, or attorney who is shown to be incompetent or 
        disreputable, who refuses to comply with the rules, or who with 
        intent to defraud, willfully or knowingly deceives, misleads, or 
        threatens a taxpayer or prospective taxpayer, by words, 
        circular, letter, or by advertisement.  This clause does not 
        curtail the rights of individuals to appear in their own behalf 
        or partners or corporations' officers to appear in behalf of 
        their respective partnerships or corporations; 
           (17) appoint agents as the commissioner considers necessary 
        to make examinations and determinations.  The agents have the 
        rights and powers conferred on the commissioner to subpoena, 
        examine, and copy books, records, papers, or memoranda, subpoena 
        witnesses, administer oaths and affirmations, and take 
        testimony.  In addition to administrative subpoenas of the 
        commissioner and the agents, upon demand of the commissioner or 
        an agent, the court administrator of any district court shall 
        issue a subpoena for the attendance of a witness or the 
        production of books, papers, records, or memoranda before the 
        agent for inspection and copying.  Disobedience of a court 
        administrator's subpoena shall be punished by the district court 
        of the district in which the subpoena is issued, or in the case 
        of a subpoena issued by the commissioner or an agent, by the 
        district court of the district in which the party served with 
        the subpoena is located, in the same manner as contempt of the 
        district court; 
           (18) appoint and employ additional help, purchase supplies 
        or materials, or incur other expenditures in the enforcement of 
        state tax laws as considered necessary.  The salaries of all 
        agents and employees provided for in this chapter shall be fixed 
        by the appointing authority, subject to the approval of the 
        commissioner of administration; 
           (19) execute and administer any agreement with the 
        secretary of the treasury of the United States or a 
        representative of another state regarding the exchange of 
        information and administration of the tax laws; 
           (20) authorize the use of unmarked motor vehicles to 
        conduct seizures or criminal investigations pursuant to the 
        commissioner's authority; and 
           (21) exercise other powers and perform other duties 
        required of or imposed upon the commissioner of revenue by law.  
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 2.  Minnesota Statutes 2002, section 270.10, 
        subdivision 1a, is amended to read: 
           Subd. 1a.  [NOTIFICATION TO TAXPAYER.] At the same time 
        that notice of the assessment, determination, or order of the 
        commissioner is given to a taxpayer, the taxpayer must be 
        notified in writing of the right to appeal to the tax court, and 
        if applicable, to the small claims division.  Except in the case 
        of mathematical or clerical errors, the notice must contain a 
        description of the basis for, including applicable law and other 
        factors considered in the determination, and a listing of the 
        amounts of tax due, interest, additions to tax, and penalties.  
        Failure to provide all the required information does not 
        invalidate the notice for purposes of satisfying statutory 
        notice requirements if the notice contains sufficient 
        information to advise the taxpayer that an assessment, order, or 
        other determination has been made.  The taxpayer may request 
        further clarification within the time provided for appealing the 
        determination.  In any notice of assessment, determination, or 
        order dealing with property valuation or assessment for property 
        tax purposes by the commissioner of revenue or a local unit of 
        government, the taxpayer must be notified in writing that a 
        taxpayer must appeal to the town or city board of equalization 
        and to the county board of equalization before appealing to the 
        small claims division of the tax court, except for those 
        taxpayers whose original assessments are determined by the 
        commissioner of revenue.  
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 3.  Minnesota Statutes 2002, section 272.02, is 
        amended by adding a subdivision to read: 
           Subd. 57.  [COMPREHENSIVE HEALTH ASSOCIATION.] All property 
        owned by the comprehensive health association is exempt to the 
        extent provided in section 62E.10, subdivision 1. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 4.  Minnesota Statutes 2002, section 272.02, is 
        amended by adding a subdivision to read: 
           Subd. 58.  [PRIVATE CEMETERIES.] All property owned by 
        private cemeteries is exempt to the extent provided in section 
        307.09. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 5.  Minnesota Statutes 2002, section 272.02, is 
        amended by adding a subdivision to read: 
           Subd. 59.  [WESTERN LAKE SUPERIOR SANITARY BOARD.] All 
        property owned, leased, controlled, used, or occupied for 
        public, governmental, and municipal purposes by the Western Lake 
        Superior Sanitary Board is exempt to the extent provided in 
        section 458D.23. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 6.  Minnesota Statutes 2002, section 272.02, is 
        amended by adding a subdivision to read: 
           Subd. 60.  [UNFINISHED SALE OR RENTAL PROJECTS.] Unfinished 
        sale or rental projects are exempt to the extent provided in 
        section 469.155, subdivision 17. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 7.  Minnesota Statutes 2002, section 272.02, is 
        amended by adding a subdivision to read: 
           Subd. 61.  [SKYWAYS.] The pedestrian skyway system, 
        underground pedestrian concourse, the people mover system, and 
        publicly owned parking structures are exempt to the extent 
        provided in section 469.127. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 8.  Minnesota Statutes 2002, section 272.02, is 
        amended by adding a subdivision to read: 
           Subd. 62.  [MUNICIPAL RECREATION FACILITIES.] All property 
        acquired and used by a city is exempt to the extent provided in 
        section 471.191, subdivision 4. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 9.  Minnesota Statutes 2002, section 272.02, is 
        amended by adding a subdivision to read: 
           Subd. 63.  [WATER AND WASTEWATER TREATMENT 
        FACILITIES.] Related facilities owned by water and wastewater 
        treatment providers who have contracted with a municipality to 
        provide capital intensive public services to the municipality 
        are exempt to the extent provided in section 471A.05. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 10.  Minnesota Statutes 2002, section 272.12, is 
        amended to read: 
           272.12 [CONVEYANCES, TAXES PAID BEFORE RECORDING.] 
           When: 
           (a) a deed or other instrument conveying land, 
           (b) a plat of any town site or addition thereto, 
           (c) a survey required pursuant to section 508.47, 
           (d) a condominium plat subject to chapter 515 or 515A or a 
        declaration that contains such a plat, or 
           (e) a common interest community plat subject to chapter 
        515B or a declaration that contains such a plat, 
        is presented to the county auditor for transfer, the auditor 
        shall ascertain from the records if there be taxes delinquent 
        upon the land described therein, or if it has been sold for 
        taxes.  An assignment of a sheriff's or referee's certificate of 
        sale, when the certificate of sale describes real estate, and 
        certificates of redemption from mortgage or lien foreclosure 
        sales, when the certificate of redemption encompasses real 
        estate and is issued to a junior creditor, are considered 
        instruments conveying land for the purposes of this section and 
        section 272.121.  If there are taxes delinquent, the auditor 
        shall certify to the same; and upon payment of such taxes, or in 
        case no taxes are delinquent, shall transfer the land upon the 
        books of the auditor's office, and note upon the instrument, 
        over official signature, the words, "no delinquent taxes and 
        transfer entered," or, if the land described has been sold or 
        assigned to an actual purchaser for taxes, the words "paid by 
        sale of land described within;" and, unless such statement is 
        made upon such instrument, the county recorder or the registrar 
        of titles shall refuse to receive or record the same; provided, 
        that sheriff's or referees' certificates of sale on execution or 
        foreclosure of a lien or mortgage, certificates of redemption 
        from mortgage or lien foreclosure sales issued to the redeeming 
        mortgagor or lienee, deeds of distribution made by a personal 
        representative in probate proceedings, decrees and judgments, 
        receivers receipts, patents, and copies of town or statutory 
        city plats, in case the original plat filed in the office of the 
        county recorder has been lost or destroyed, and the instruments 
        releasing, removing and discharging reversionary and forfeiture 
        provisions affecting title to land and instruments releasing, 
        removing or discharging easement rights in land or building or 
        other restrictions, may be recorded without such certificate; 
        and, provided that instruments conveying land and, as 
        appurtenant thereto an easement over adjacent tract or tracts of 
        land, may be recorded without such certificate as to the land 
        covered by such easement; and provided further, that any 
        instrument granting an easement made in favor of any public 
        utility or pipe line for conveying gas, liquids or solids in 
        suspension, in the nature of a right-of-way over, along, across 
        or under a tract of land may be recorded without such 
        certificate as to the land covered by such easement.  Any 
        instrument amending or restating the declarations, bylaws, 
        plats, or other enabling Documents governing homeowners 
        associations of condominiums, townhouses, common interest 
        ownership communities, and other planned unit developments may 
        be recorded without the auditor's certificate to the extent 
        provided in section 515B.1-116(f). 
           A deed of distribution made by a personal representative in 
        a probate proceeding, a decree, or a judgment that conveys land 
        shall be presented to the county auditor, who shall transfer the 
        land upon the books of the auditor's office and note upon the 
        instrument, over official signature, the words, "transfer 
        entered", and the instrument may then be recorded.  A decree or 
        judgment that affects title to land but does not convey land may 
        be recorded without presentation to the auditor. 
           A violation of this section by the county recorder or the 
        registrar of titles shall be a gross misdemeanor, and, in 
        addition to the punishment therefor, the recorder or registrar 
        shall be liable to the grantee of any instrument so recorded for 
        the amount of any damages sustained. 
           When, as a condition to permitting the recording of deed or 
        other instrument affecting the title to real estate previously 
        forfeited to the state under the provisions of sections 281.16 
        to 281.25, county officials, after such real estate has been 
        purchased or repurchased, have required the payment of taxes 
        erroneously assumed to have accrued against such real estate 
        after forfeiture and before the date of purchase or repurchase, 
        the sum required to be so paid shall be refunded to the persons 
        entitled thereto out of moneys in the funds in which the sum so 
        paid was placed.  Delinquent taxes are those taxes deemed 
        delinquent under section 279.02. 
           [EFFECTIVE DATE.] This section is effective for deeds or 
        instruments accepted for recording or registration on or after 
        July 1, 2003. 
           Sec. 11.  Minnesota Statutes 2002, section 273.05, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [APPOINTMENT OF TOWN AND CITY ASSESSORS.] 
        Notwithstanding any other provision of law all town assessors 
        shall be appointed by the town board, and notwithstanding any 
        charter provisions to the contrary, all city assessors shall be 
        appointed by the city council or other appointing authority as 
        provided by law or charter.  Such assessors shall be residents 
        of the state but need not be a resident of the town or city for 
        which they are appointed.  They shall be selected and appointed 
        because of their knowledge and training in the field of property 
        taxation.  All town and statutory city assessors shall be 
        appointed for indefinite terms.  A town or statutory city 
        assessor who is an employee may be dismissed by the appointing 
        authority for cause.  The term of the town or city assessors may 
        be terminated at any time by the town board or city council on 
        charges by the commissioner of revenue of inefficiency or 
        neglect of duty.  Vacancies in the office of town or city 
        assessor shall be filled within 90 days by appointment of the 
        respective appointing authority indicated above.  If the vacancy 
        is not filled within 90 days, the office shall be terminated.  
        When a vacancy in the office of town or city assessor is not 
        filled by appointment, and it is imperative that the office of 
        assessor be filled, the county auditor shall appoint some 
        resident of the county as assessor for such town or city.  The 
        county auditor may appoint the county assessor as assessor for 
        such town or city, in which case the town or city shall pay to 
        the county treasurer the amount determined by the county auditor 
        to be due for the services performed and expenses incurred by 
        the county assessor in acting as assessor for such town or 
        city.  The term of any town or statutory city assessor in a 
        county electing in accordance with section 273.052 shall be 
        terminated as provided in section 273.055. 
           The commissioner of revenue may recommend to the state 
        board of assessors the nonrenewal, suspension, or revocation of 
        an assessor's license as provided in sections 270.41 to 270.53. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment and applies to every town or city 
        assessor whether that assessor was appointed before, on, or 
        after the effective date. 
           Sec. 12.  Minnesota Statutes 2002, section 273.061, is 
        amended by adding a subdivision to read: 
           Subd. 1a.  [COMPATIBLE OFFICES.] A person appointed as the 
        county assessor also may serve as the county auditor, county 
        treasurer, or county auditor-treasurer if those offices are 
        appointive, provided that the person in the combined appointed 
        office must not serve on the county board of appeal and 
        equalization under section 274.13.  In a county in which the 
        functions of the county assessor are combined with those of the 
        county auditor or county auditor-treasurer, the county board may 
        not delegate any authority, power, or responsibility under 
        section 375.192, subdivision 4. 
           [EFFECTIVE DATE.] This section is effective January 2, 2004.
           Sec. 13.  Minnesota Statutes 2002, section 273.061, is 
        amended by adding a subdivision to read: 
           Subd. 1b.  [COMPATIBLE OFFICES IN COUNTIES CHANGING TO 
        APPOINTED AUDITOR.] In a county in which the office of auditor, 
        treasurer, or auditor-treasurer is an elective position, a 
        person appointed as the county assessor also may serve as the 
        county auditor, county treasurer, or county auditor-treasurer if 
        a proposal to make the affected office appointive has been 
        approved as required by other law and will be effective within 
        five years. 
           [EFFECTIVE DATE.] This section is effective January 2, 2004.
           Sec. 14.  Minnesota Statutes 2002, section 273.061, is 
        amended by adding a subdivision to read: 
           Subd. 1c.  [INCOMPATIBLE OFFICES.] The person appointed as 
        the county assessor must not also be the county attorney, a 
        county board member, an elected county auditor, an elected 
        county treasurer, an elected county auditor-treasurer, a town 
        board supervisor for a town in the same county, or a city mayor 
        or council member for a city in the same county.  The person 
        appointed as the city assessor must not also be a city council 
        member or mayor for the same city.  A person appointed as the 
        town assessor must not also be a town board supervisor for the 
        same town.  Except as provided in subdivision 1b, an assessor 
        who accepts a position that is incompatible with the office of 
        assessor is deemed to have resigned from the assessor position. 
           [EFFECTIVE DATE.] This section is effective January 2, 2004.
           Sec. 15.  Minnesota Statutes 2002, section 273.11, 
        subdivision 1a, is amended to read: 
           Subd. 1a.  [LIMITED MARKET VALUE.] In the case of all 
        property classified as agricultural homestead or nonhomestead, 
        residential homestead or nonhomestead, timber, or noncommercial 
        seasonal residential recreational residential, the assessor 
        shall compare the value with the taxable portion of the value 
        determined in the preceding assessment.  
           For assessment year 2002, the amount of the increase shall 
        not exceed the greater of (1) ten percent of the value in the 
        preceding assessment, or (2) 15 percent of the difference 
        between the current assessment and the preceding assessment. 
           For assessment year 2003, the amount of the increase shall 
        not exceed the greater of (1) 12 percent of the value in the 
        preceding assessment, or (2) 20 percent of the difference 
        between the current assessment and the preceding assessment. 
           For assessment year 2004, the amount of the increase shall 
        not exceed the greater of (1) 15 percent of the value in the 
        preceding assessment, or (2) 25 percent of the difference 
        between the current assessment and the preceding assessment. 
           For assessment year 2005, the amount of the increase shall 
        not exceed the greater of (1) 15 percent of the value in the 
        preceding assessment, or (2) 33 percent of the difference 
        between the current assessment and the preceding assessment.  
           For assessment year 2006, the amount of the increase shall 
        not exceed the greater of (1) 15 percent of the value in the 
        preceding assessment, or (2) 50 percent of the difference 
        between the current assessment and the preceding assessment. 
           This limitation shall not apply to increases in value due 
        to improvements.  For purposes of this subdivision, the term 
        "assessment" means the value prior to any exclusion under 
        subdivision 16. 
           The provisions of this subdivision shall be in effect 
        through assessment year 2006 as provided in this subdivision. 
           For purposes of the assessment/sales ratio study conducted 
        under section 127A.48, and the computation of state aids paid 
        under chapters 122A, 123A, 123B, 124D, 125A, 126C, 127A, and 
        477A, market values and net tax capacities determined under this 
        subdivision and subdivision 16, shall be used. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 16.  Minnesota Statutes 2002, section 273.124, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [GENERAL RULE.] (a) Residential real estate 
        that is occupied and used for the purposes of a homestead by its 
        owner, who must be a Minnesota resident, is a residential 
        homestead.  
           Agricultural land, as defined in section 273.13, 
        subdivision 23, that is occupied and used as a homestead by its 
        owner, who must be a Minnesota resident, is an agricultural 
        homestead. 
           Dates for establishment of a homestead and homestead 
        treatment provided to particular types of property are as 
        provided in this section.  
           Property held by a trustee under a trust is eligible for 
        homestead classification if the requirements under this chapter 
        are satisfied. 
           The assessor shall require proof, as provided in 
        subdivision 13, of the facts upon which classification as a 
        homestead may be determined.  Notwithstanding any other law, the 
        assessor may at any time require a homestead application to be 
        filed in order to verify that any property classified as a 
        homestead continues to be eligible for homestead status.  
        Notwithstanding any other law to the contrary, the department of 
        revenue may, upon request from an assessor, verify whether an 
        individual who is requesting or receiving homestead 
        classification has filed a Minnesota income tax return as a 
        resident for the most recent taxable year for which the 
        information is available. 
           When there is a name change or a transfer of homestead 
        property, the assessor may reclassify the property in the next 
        assessment unless a homestead application is filed to verify 
        that the property continues to qualify for homestead 
        classification. 
           (b) For purposes of this section, homestead property shall 
        include property which is used for purposes of the homestead but 
        is separated from the homestead by a road, street, lot, 
        waterway, or other similar intervening property.  The term "used 
        for purposes of the homestead" shall include but not be limited 
        to uses for gardens, garages, or other outbuildings commonly 
        associated with a homestead, but shall not include vacant land 
        held primarily for future development.  In order to receive 
        homestead treatment for the noncontiguous property, the owner 
        must use the property for the purposes of the homestead, and 
        must apply to the assessor, both by the deadlines given in 
        subdivision 9.  After initial qualification for the homestead 
        treatment, additional applications for subsequent years are not 
        required. 
           (c) Residential real estate that is occupied and used for 
        purposes of a homestead by a relative of the owner is a 
        homestead but only to the extent of the homestead treatment that 
        would be provided if the related owner occupied the property.  
        For purposes of this paragraph and paragraph (g), "relative" 
        means a parent, stepparent, child, stepchild, grandparent, 
        grandchild, brother, sister, uncle, aunt, nephew, or niece.  
        This relationship may be by blood or marriage.  Property that 
        has been classified as seasonal residential recreational 
        residential property at any time during which it has been owned 
        by the current owner or spouse of the current owner will not be 
        reclassified as a homestead unless it is occupied as a homestead 
        by the owner; this prohibition also applies to property that, in 
        the absence of this paragraph, would have been classified as 
        seasonal residential recreational residential property at the 
        time when the residence was constructed.  Neither the related 
        occupant nor the owner of the property may claim a property tax 
        refund under chapter 290A for a homestead occupied by a 
        relative.  In the case of a residence located on agricultural 
        land, only the house, garage, and immediately surrounding one 
        acre of land shall be classified as a homestead under this 
        paragraph, except as provided in paragraph (d). 
           (d) Agricultural property that is occupied and used for 
        purposes of a homestead by a relative of the owner, is a 
        homestead, only to the extent of the homestead treatment that 
        would be provided if the related owner occupied the property, 
        and only if all of the following criteria are met: 
           (1) the relative who is occupying the agricultural property 
        is a son, daughter, grandson, granddaughter, father, or mother 
        of the owner of the agricultural property or a son, daughter, 
        grandson, or granddaughter of the spouse of the owner of the 
        agricultural property; 
           (2) the owner of the agricultural property must be a 
        Minnesota resident; 
           (3) the owner of the agricultural property must not receive 
        homestead treatment on any other agricultural property in 
        Minnesota; and 
           (4) the owner of the agricultural property is limited to 
        only one agricultural homestead per family under this paragraph. 
           Neither the related occupant nor the owner of the property 
        may claim a property tax refund under chapter 290A for a 
        homestead occupied by a relative qualifying under this 
        paragraph.  For purposes of this paragraph, "agricultural 
        property" means the house, garage, other farm buildings and 
        structures, and agricultural land. 
           Application must be made to the assessor by the owner of 
        the agricultural property to receive homestead benefits under 
        this paragraph.  The assessor may require the necessary proof 
        that the requirements under this paragraph have been met. 
           (e) In the case of property owned by a property owner who 
        is married, the assessor must not deny homestead treatment in 
        whole or in part if only one of the spouses occupies the 
        property and the other spouse is absent due to:  (1) marriage 
        dissolution proceedings, (2) legal separation, (3) employment or 
        self-employment in another location, or (4) other personal 
        circumstances causing the spouses to live separately, not 
        including an intent to obtain two homestead classifications for 
        property tax purposes.  To qualify under clause (3), the 
        spouse's place of employment or self-employment must be at least 
        50 miles distant from the other spouse's place of employment, 
        and the homesteads must be at least 50 miles distant from each 
        other.  Homestead treatment, in whole or in part, shall not be 
        denied to the owner's spouse who previously occupied the 
        residence with the owner if the absence of the owner is due to 
        one of the exceptions provided in this paragraph. 
           (f) The assessor must not deny homestead treatment in whole 
        or in part if: 
           (1) in the case of a property owner who is not married, the 
        owner is absent due to residence in a nursing home, boarding 
        care facility, or an elderly assisted living facility property 
        as defined in section 273.13, subdivision 25a, and the property 
        is not otherwise occupied; or 
           (2) in the case of a property owner who is married, the 
        owner or the owner's spouse or both are absent due to residence 
        in a nursing home, boarding care facility, or an elderly 
        assisted living facility property as defined in section 273.13, 
        subdivision 25a, and the property is not occupied or is occupied 
        only by the owner's spouse. 
           (g) If an individual is purchasing property with the intent 
        of claiming it as a homestead and is required by the terms of 
        the financing agreement to have a relative shown on the deed as 
        a coowner, the assessor shall allow a full homestead 
        classification.  This provision only applies to first-time 
        purchasers, whether married or single, or to a person who had 
        previously been married and is purchasing as a single individual 
        for the first time.  The application for homestead benefits must 
        be on a form prescribed by the commissioner and must contain the 
        data necessary for the assessor to determine if full homestead 
        benefits are warranted. 
           (h) If residential or agricultural real estate is occupied 
        and used for purposes of a homestead by a child of a deceased 
        owner and the property is subject to jurisdiction of probate 
        court, the child shall receive relative homestead classification 
        under paragraph (c) or (d) to the same extent they would be 
        entitled to it if the owner was still living, until the probate 
        is completed.  For purposes of this paragraph, "child" includes 
        a relationship by blood or by marriage. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 17.  Minnesota Statutes 2002, 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 property; 
           (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; and 
           (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 
        property; 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 recreational 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 residential 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; 
           (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, (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 the day 
        following final enactment. 
           Sec. 18.  Minnesota Statutes 2002, section 273.1398, 
        subdivision 4b, is amended to read: 
           Subd. 4b.  [COURT EXPENDITURES; MAINTENANCE OF EFFORT.] (a) 
        Until the costs of court administration as defined under section 
        480.183, subdivision 3, in a county have been transferred to the 
        state, each county in a judicial district transferring court 
        administration costs to state funding after July 1, 2001, shall 
        budget for the funding of these costs an amount at least equal 
        to the certified budget amount for calendar year 2001, increased 
        by six percent for each year from 2001 to 2003 and by eight 
        percent from 2004 to the year of the transfer.  The county shall 
        budget, fund, and authorize expenditures not less than the 
        amount calculated under this paragraph plus the temporary aid 
        amount under subdivision 4c for maintenance of effort of 
        administrative costs. 
           (b) By July 15, 2001, the court shall certify to each 
        county in the judicial district its cost of court administration 
        as defined under section 480.183, subdivision 3, based on 2001 
        budgets.  In making that determination, the court shall exclude 
        the budget costs of the county for the following categories: 
           (1) rent; 
           (2) examiner of titles; 
           (3) civil court appointed attorneys for civil matters; 
           (4) hospitalization costs; and 
           (5) cost of maintaining vital statistics. 
           The amount of funding provided by a county for courts that 
        is increased by the maintenance of effort requirement may not be 
        used by a county to pay the costs described in clauses (1) to 
        (5). 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 19.  Minnesota Statutes 2002, section 273.1398, 
        subdivision 4d, is amended to read: 
           Subd. 4d.  [AID OFFSET FOR OUT-OF-HOME PLACEMENT COSTS.] 
        For aid payable in 2004, each county's aid under subdivision 2 
        shall be permanently reduced by an amount equal to the county's 
        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 
        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, 2004 
        1, 2003.  The aid reduction under this subdivision must 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 and thereafter. 
           Sec. 20.  Minnesota Statutes 2002, section 273.372, is 
        amended to read: 
           273.372 [PROCEEDINGS AND APPEALS; UTILITY OR RAILROAD 
        VALUATIONS.] 
           An appeal by a utility or railroad company concerning the 
        exemption, valuation, or classification on of property for which 
        the commissioner of revenue has provided the city or county 
        assessor with commissioner's orders valuations by order, or for 
        which the commissioner has recommended values to the city or 
        county assessor, must be brought against the commissioner in tax 
        court or in district court of the county where the property is 
        located, and not against the county or taxing district where the 
        property is located.  If the appeal to a court is of from an 
        order of the commissioner, it must be brought under chapter 
        271.  If the appeal is from the exemption, valuation, 
        classification, or tax that results from implementation of the 
        commissioner's order or recommendation, it must be brought under 
        chapter 278, and the procedures provisions in that chapter 
        apply, except that service shall be on the commissioner only and 
        not on the county officials specified in section 278.01, 
        subdivision 1.  This provision applies to the property contained 
        under described in sections 273.33, 273.35, 273.36, and 273.37, 
        but only if the appealed values have remained unchanged from 
        those provided to the city or county by the commissioner.  If 
        the exemption, valuation, or classification being appealed has 
        been changed by the city or county, then the action must be 
        brought under chapter 278 in the county where the property is 
        located and proper service must be made upon the county 
        officials as specified in section 278.01, subdivision 1. 
           Upon filing of any appeal by a utility company or railroad 
        against the commissioner, the commissioner shall give notice by 
        first class mail to each county which would be affected by the 
        appeal. 
           Companies that submit the reports under section 270.82 or 
        273.371 by the date specified in that section, or by the date 
        specified by the commissioner in an extension, may appeal 
        administratively to the commissioner under the procedures in 
        section 270.11, subdivision 6, prior to bringing an action in 
        tax court or in district court, however, instituting an 
        administrative appeal with the commissioner does not change or 
        modify the deadline in section 271.06 for appealing an order of 
        the commissioner in tax court or the deadline in section 278.01 
        for bringing an action filing a property tax claim or objection 
        in tax court or district court. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 21.  Minnesota Statutes 2002, section 273.42, 
        subdivision 2, is amended to read: 
           Subd. 2.  Owners of land that is an agricultural or 
        nonagricultural homestead, nonhomestead agricultural land, 
        rental residential property, and both commercial and 
        noncommercial seasonal residential recreational property, as 
        those terms are defined in section 273.13 listed on records of 
        the county auditor or county treasurer over which runs a high 
        voltage transmission line as defined in section 116C.52, 
        subdivision 3 with a capacity of 200 kilovolts or more, except a 
        high voltage transmission line the construction of which was 
        commenced prior to July 1, 1974, shall receive a property tax 
        credit in an amount determined by multiplying a fraction, the 
        numerator of which is the length of high voltage transmission 
        line which runs over that parcel and the denominator of which is 
        the total length of that particular line running over all 
        property within the city or township by ten percent of the 
        transmission line tax revenue derived from the tax on that 
        portion of the line within the city or township pursuant to 
        section 273.36.  In the case of property owners in unorganized 
        townships, the property tax credit shall be determined by 
        multiplying a fraction, the numerator of which is the length of 
        the qualifying high voltage transmission line which runs over 
        the parcel and the denominator of which is the total length of 
        the qualifying high voltage transmission line running over all 
        property within all the unorganized townships within the county, 
        by the total utility property tax credit fund amount available 
        within the county for that year pursuant to subdivision 1.  
        Where a right-of-way width is shared by more than one property 
        owner, the numerator shall be adjusted by multiplying the length 
        of line on the parcel by the proportion of the total width on 
        the parcel owned by that property owner.  The amount of credit 
        for which the property qualifies shall not exceed 20 percent of 
        the total gross tax on the parcel prior to deduction of the 
        state paid agricultural credit and the state paid homestead 
        credit, provided that, if the property containing the 
        right-of-way is included in a parcel which exceeds 40 acres, the 
        total gross tax on the parcel shall be multiplied by a fraction, 
        the numerator of which is the sum of the number of acres in each 
        quarter-quarter section or portion thereof which contains a 
        right-of-way and the denominator of which is the total number of 
        acres in the parcel set forth on the tax statement, and the 
        maximum credit shall be 20 percent of the product of that 
        computation, prior to deduction of those credits.  The auditor 
        of the county in which the affected parcel is located shall 
        calculate the amount of the credit due for each parcel and 
        transmit that information to the county treasurer.  The county 
        auditor, in computing the credit received pursuant to section 
        273.135, shall reduce the gross tax by the amount of the credit 
        received pursuant to this section, unless the amount of the 
        credit would be less than $10. 
           If, after the county auditor has computed the credit to 
        those qualifying property owners in unorganized townships, there 
        is money remaining in the utility property tax credit fund, then 
        that excess amount in the fund shall be returned to the general 
        school fund of the county. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 22.  Minnesota Statutes 2002, section 274.01, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [ORDINARY BOARD; MEETINGS, DEADLINES, 
        GRIEVANCES.] (a) The town board of a town, or the council or 
        other governing body of a city, is the board of appeal and 
        equalization except (1) in cities whose charters provide for a 
        board of equalization or (2) in any city or town that has 
        transferred its local board of review power and duties to the 
        county board as provided in subdivision 3.  The county assessor 
        shall fix a day and time when the board or the board of 
        equalization shall meet in the assessment districts of the 
        county.  Notwithstanding any law or city charter to the 
        contrary, a city board of equalization shall be referred to as a 
        board of appeal and equalization.  On or before February 15 of 
        each year the assessor shall give written notice of the time to 
        the city or town clerk.  Notwithstanding the provisions of any 
        charter to the contrary, the meetings must be held between April 
        1 and May 31 each year.  The clerk shall give published and 
        posted notice of the meeting at least ten days before the date 
        of the meeting.  
           The board shall meet at the office of the clerk to review 
        the assessment and classification of property in the town or 
        city.  No changes in valuation or classification which are 
        intended to correct errors in judgment by the county assessor 
        may be made by the county assessor after the board has adjourned 
        in those cities or towns that hold a local board of review; 
        however, corrections of errors that are merely clerical in 
        nature or changes that extend homestead treatment to property 
        are permitted after adjournment until the tax extension date for 
        that assessment year.  The changes must be fully documented and 
        maintained in the assessor's office and must be available for 
        review by any person.  A copy of the changes made during this 
        period in those cities or towns that hold a local board of 
        review must be sent to the county board no later than December 
        31 of the assessment year.  
           (b) The board shall determine whether the taxable property 
        in the town or city has been properly placed on the list and 
        properly valued by the assessor.  If real or personal property 
        has been omitted, the board shall place it on the list with its 
        market value, and correct the assessment so that each tract or 
        lot of real property, and each article, parcel, or class of 
        personal property, is entered on the assessment list at its 
        market value.  No assessment of the property of any person may 
        be raised unless the person has been duly notified of the intent 
        of the board to do so.  On application of any person feeling 
        aggrieved, the board shall review the assessment or 
        classification, or both, and correct it as appears just.  The 
        board may not make an individual market value adjustment or 
        classification change that would benefit the property in cases 
        where the owner or other person having control over the property 
        will not permit the assessor to inspect the property and the 
        interior of any buildings or structures.  
           (c) A local board may reduce assessments upon petition of 
        the taxpayer but the total reductions must not reduce the 
        aggregate assessment made by the county assessor by more than 
        one percent.  If the total reductions would lower the aggregate 
        assessments made by the county assessor by more than one 
        percent, none of the adjustments may be made.  The assessor 
        shall correct any clerical errors or double assessments 
        discovered by the board without regard to the one percent 
        limitation.  
           (d) A local board does not have authority to grant an 
        exemption or to order property removed from the tax rolls. 
           (e) A majority of the members may act at the meeting, and 
        adjourn from day to day until they finish hearing the cases 
        presented.  The assessor shall attend, with the assessment books 
        and papers, and take part in the proceedings, but must not 
        vote.  The county assessor, or an assistant delegated by the 
        county assessor shall attend the meetings.  The board shall list 
        separately, on a form appended to the assessment book, all 
        omitted property added to the list by the board and all items of 
        property increased or decreased, with the market value of each 
        item of property, added or changed by the board, placed opposite 
        the item.  The county assessor shall enter all changes made by 
        the board in the assessment book.  
           (e) (f) Except as provided in subdivision 3, if a person 
        fails to appear in person, by counsel, or by written 
        communication before the board after being duly notified of the 
        board's intent to raise the assessment of the property, or if a 
        person feeling aggrieved by an assessment or classification 
        fails to apply for a review of the assessment or classification, 
        the person may not appear before the county board of appeal and 
        equalization for a review of the assessment or classification.  
        This paragraph does not apply if an assessment was made after 
        the local board meeting, as provided in section 273.01, or if 
        the person can establish not having received notice of market 
        value at least five days before the local board meeting.  
           (f) (g) The local board must complete its work and adjourn 
        within 20 days from the time of convening stated in the notice 
        of the clerk, unless a longer period is approved by the 
        commissioner of revenue.  No action taken after that date is 
        valid.  All complaints about an assessment or classification 
        made after the meeting of the board must be heard and determined 
        by the county board of equalization.  A nonresident may, at any 
        time, before the meeting of the board file written objections to 
        an assessment or classification with the county assessor.  The 
        objections must be presented to the board at its meeting by the 
        county assessor for its consideration. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 23.  Minnesota Statutes 2002, section 274.13, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [MEMBERS; MEETINGS; RULES FOR EQUALIZING 
        ASSESSMENTS.] The county commissioners, or a majority of them, 
        with the county auditor, or, if the auditor cannot be present, 
        the deputy county auditor, or, if there is no deputy, the court 
        administrator of the district court, shall form a board for the 
        equalization of the assessment of the property of the county, 
        including the property of all cities whose charters provide for 
        a board of equalization.  This board shall be referred to as the 
        county board of appeal and equalization.  The board shall meet 
        annually, on the date specified in section 274.14, at the office 
        of the auditor.  Each member shall take an oath to fairly and 
        impartially perform duties as a member.  The board shall examine 
        and compare the returns of the assessment of property of the 
        towns or districts, and equalize them so that each tract or lot 
        of real property and each article or class of personal property 
        is entered on the assessment list at its market value, subject 
        to the following rules: 
           (1) The board shall raise the valuation of each tract or 
        lot of real property which in its opinion is returned below its 
        market value to the sum believed to be its market value.  The 
        board must first give notice of intention to raise the valuation 
        to the person in whose name it is assessed, if the person is a 
        resident of the county.  The notice must fix a time and place 
        for a hearing.  
           (2) The board shall reduce the valuation of each tract or 
        lot which in its opinion is returned above its market value to 
        the sum believed to be its market value. 
           (3) The board shall raise the valuation of each class of 
        personal property which in its opinion is returned below its 
        market value to the sum believed to be its market value.  It 
        shall raise the aggregate value of the personal property of 
        individuals, firms, or corporations, when it believes that the 
        aggregate valuation, as returned, is less than the market value 
        of the taxable personal property possessed by the individuals, 
        firms, or corporations, to the sum it believes to be the market 
        value.  The board must first give notice to the persons of 
        intention to do so.  The notice must set a time and place for a 
        hearing. 
           (4) The board shall reduce the valuation of each class of 
        personal property that is returned above its market value to the 
        sum it believes to be its market value.  Upon complaint of a 
        party aggrieved, the board shall reduce the aggregate valuation 
        of the individual's personal property, or of any class of 
        personal property for which the individual is assessed, which in 
        its opinion has been assessed at too large a sum, to the sum it 
        believes was the market value of the individual's personal 
        property of that class.  
           (5) The board must not reduce the aggregate value of all 
        the property of its county, as submitted to the county board of 
        equalization, with the additions made by the auditor under this 
        chapter, by more than one percent of its whole valuation.  The 
        board may raise the aggregate valuation of real property, and of 
        each class of personal property, of the county, or of any town 
        or district of the county, when it believes it is below the 
        market value of the property, or class of property, to the 
        aggregate amount it believes to be its market value. 
           (6) The board shall change the classification of any 
        property which in its opinion is not properly classified. 
           (7) The board does not have the authority to grant an 
        exemption or to order property removed from the tax rolls. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 24.  Minnesota Statutes 2002, section 275.025, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [LEVY AMOUNT.] The state general levy is 
        levied against commercial-industrial property and 
        seasonal residential recreational property, as defined in this 
        section.  The state general levy base amount is $592,000,000 for 
        taxes payable in 2002.  For taxes payable in subsequent years, 
        the levy base amount is increased each year by multiplying the 
        levy base amount for the prior year by the sum of one plus the 
        rate of increase, if any, in the implicit price deflator for 
        government consumption expenditures and gross investment for 
        state and local governments prepared by the Bureau of Economic 
        Analysts of the United States Department of Commerce for the 
        12-month period ending March 31 of the year prior to the year 
        the taxes are payable.  The tax under this section is not 
        treated as a local tax rate under section 469.177 and is not the 
        levy of a governmental unit under chapters 276A and 473F.  
        Beginning in fiscal year 2004, and in each year thereafter, the 
        commissioner of finance shall deposit in an education reserve 
        account, which account is hereby established, the increased 
        amount of the state general levy received for deposit in the 
        general fund for that year over the amount of the state general 
        levy received for deposit in the general fund in fiscal year 
        2003.  The amounts in the education reserve account do not lapse 
        or cancel each year, but remain until appropriated by law for 
        education aid or higher education funding. 
           [EFFECTIVE DATE.] This section is effective for taxes 
        payable in 2004 and thereafter, except that the change from 
        "seasonal recreational property" to "seasonal residential 
        recreational property" is effective the day following final 
        enactment. 
           Sec. 25.  Minnesota Statutes 2002, section 275.025, 
        subdivision 3, is amended to read: 
           Subd. 3.  [SEASONAL RESIDENTIAL RECREATIONAL TAX CAPACITY.] 
        For the purposes of this section, "seasonal residential 
        recreational tax capacity" means the tax capacity of all class 
        4c(1) property under section 273.13, subdivision 25, except that 
        the first $76,000 of market value of each noncommercial class 
        4c(1) property has a tax capacity for this purpose equal to 40 
        percent of its tax capacity under section 273.13. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 26.  Minnesota Statutes 2002, section 275.025, 
        subdivision 4, is amended to read: 
           Subd. 4.  [APPORTIONMENT AND LEVY OF STATE GENERAL TAX.] 
        The state general tax must be distributed among the counties by 
        applying a uniform rate to each county's commercial-industrial 
        tax capacity and its seasonal residential recreational tax 
        capacity.  Within each county, the tax must be levied by 
        applying a uniform rate against commercial-industrial tax 
        capacity and seasonal residential recreational tax capacity.  By 
        November On or before October 1 each year, the commissioner of 
        revenue shall certify the a preliminary state general levy rate 
        to each county auditor that must be used to prepare the notices 
        of proposed property taxes for taxes payable in the following 
        year.  By January 1 of each year, the commissioner shall certify 
        the final state general levy rate to each county auditor that 
        shall be used in spreading taxes.  
           [EFFECTIVE DATE.] This section is effective for taxes 
        payable in 2004 and thereafter, except that the change from 
        "seasonal recreational tax capacity" to "seasonal residential 
        recreational tax capacity" is effective the day following final 
        enactment. 
           Sec. 27.  Minnesota Statutes 2002, section 276.10, is 
        amended to read: 
           276.10 [APPORTIONMENT AND DISTRIBUTION OF FUNDS.] 
           On the settlement day determined in section 276.09 for each 
        year, the county auditor and county treasurer shall distribute 
        all undistributed funds in the treasury.  The funds must be 
        apportioned as provided by law, and credited to the state, town, 
        city, school district, special district and each county fund.  
        Within 20 days after the distribution is completed, the county 
        auditor shall report to the state auditor in the form prescribed 
        by the state auditor.  The county auditor shall issue a warrant 
        for the payment of money in the county treasury to the credit of 
        the state, town, city, school district, or special districts on 
        application of the persons entitled to receive the payment.  The 
        county auditor may apply the local tax rate from the year before 
        the year of distribution when apportioning and distributing 
        delinquent tax proceeds, if the composition of the previous 
        year's local tax rate between taxing districts is not 
        significantly different from the local tax rate that existed for 
        the year of the delinquency.  
           [EFFECTIVE DATE.] This section is effective for taxes 
        payable in 2004 and thereafter. 
           Sec. 28.  Minnesota Statutes 2002, section 276.11, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [GENERALLY.] As soon as practical after the 
        settlement day determined in section 276.09, the county 
        treasurer shall pay to the state treasurer or the treasurer of a 
        town, city, school district, or special district, on the warrant 
        of the county auditor, all receipts of taxes levied by the 
        taxing district and deliver up all orders and other evidences of 
        indebtedness of the taxing district, taking triplicate receipts 
        for them.  The treasurer shall file one of the receipts with the 
        county auditor, and shall return one by mail on the day of its 
        receipt to the clerk of the town, city, school district, or 
        special district to which payment was made.  The clerk shall 
        keep the receipt in the clerk's office.  Upon written request of 
        the taxing district, to the extent practicable, the county 
        treasurer shall make partial payments of amounts collected 
        periodically in advance of the next settlement and 
        distribution.  A statement prepared by the county treasurer must 
        accompany each payment.  It must state the years for which taxes 
        included in the payment were collected and, for each year, the 
        amount of the taxes and any penalties on the tax.  Upon written 
        request of a taxing district, except school districts, the 
        county treasurer shall pay at least 70 percent of the estimated 
        collection within 30 days after the settlement date determined 
        in section 276.09.  Within seven business days after the due 
        date, or 28 calendar days after the postmark date on the 
        envelopes containing real or personal property tax statements, 
        whichever is latest, the county treasurer shall pay to the 
        treasurer of the school districts 50 percent of the estimated 
        collections arising from taxes levied by and belonging to the 
        school district, unless the school district elects to receive 50 
        percent of the estimated collections arising from taxes levied 
        by and belonging to the school district after making a 
        proportionate reduction to reflect any loss in collections as 
        the result of any delay in mailing tax statements.  In that 
        case, 50 percent of those adjusted, estimated collections shall 
        be paid by the county treasurer to the treasurer of the school 
        district within seven business days of the due date.  The 
        remaining 50 percent of the estimated collections must be paid 
        to the treasurer of the school district within the next seven 
        business days of the later of the dates in the preceding 
        sentence, unless the school district elects to receive the 
        remainder of its estimated collections after a proportionate 
        reduction has been made to reflect any loss in collections as 
        the result of any delay in mailing tax statements.  In that 
        case, the remaining 50 percent of those adjusted, estimated 
        collections shall be paid by the county treasurer to the 
        treasurer of the school district within 14 days of the due 
        date.  The treasurer shall pay the balance of the amounts 
        collected to the state before June 30, or to a municipal 
        corporation or other body within 60 days after the settlement 
        date determined in section 276.09.  After 45 days interest at an 
        annual rate of eight percent accrues and must be paid to the 
        taxing district.  Interest must be paid upon appropriation from 
        the general revenue fund of the county.  If not paid, it may be 
        recovered by the taxing district, in a civil action. 
           [EFFECTIVE DATE.] This section is effective for taxes 
        payable in 2004 and thereafter. 
           Sec. 29.  [276.112] [STATE PROPERTY TAXES; COUNTY 
        TREASURER.] 
           On or before January 25 each year, for the period ending 
        December 31 of the prior year, and on or before June 29 each 
        year, for the period ending on the most recent settlement day 
        determined in section 276.09, and on or before December 2 each 
        year, for the period ending November 20, the county treasurer 
        must make full settlement with the county auditor according to 
        sections 276.09, 276.10, and 276.111 for all receipts of state 
        property taxes levied under section 275.025, and must transmit 
        those receipts to the commissioner of revenue by electronic 
        means. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 30.  Minnesota Statutes 2002, section 277.20, 
        subdivision 2, is amended to read: 
           Subd. 2.  [FILING OF LIEN FOR ENFORCEABILITY.] 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 until a notice of lien has been filed by the county 
        treasurer in the office of the county recorder of the county in 
        which the property is situated, or, in the case of personal 
        property belonging to an individual who is not a resident of 
        this state, or that is a corporation, partnership, or other 
        organization, in the office of the secretary of state.  Priority 
        of a lien created under Laws 1991, chapter 291, article 15, 
        shall be determined in accordance with the provisions of section 
        507.34.  Liens filed in the office of the county recorder shall 
        be filed with the state tax liens filed pursuant to section 
        270.69, and the index shall indicate the name of the county for 
        which the lien was filed.  If the land is registered, the notice 
        of lien shall be filed in the office of the registrar of titles 
        of the county in which the property is registered.  
        Notwithstanding any other law to the contrary, the county 
        treasurer is exempt from the payment of fees when the lien is 
        offered for filing or recording; the fee for filing or recording 
        the lien must be paid at the time the release of lien is offered 
        for filing or recording.  Notwithstanding any law to the 
        contrary, the fee for filing or recording the lien or the 
        release of lien is $15.  
           [EFFECTIVE DATE.] This section is effective for liens filed 
        on or after the day following final enactment. 
           Sec. 31.  Minnesota Statutes 2002, section 279.06, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [LIST AND NOTICE.] Within five days after 
        the filing of such list, the court administrator shall return a 
        copy thereof to the county auditor, with a notice prepared and 
        signed by the court administrator, and attached thereto, which 
        may be substantially in the following form: 
           State of Minnesota        )                            
                                     ) ss.                        
           County of ............... )                            
                                                    District Court
                                     .......... Judicial District.
           The state of Minnesota, to all persons, companies, or 
        corporations who have or claim any estate, right, title, or 
        interest in, claim to, or lien upon, any of the several parcels 
        of land described in the list hereto attached: 
           The list of taxes and penalties on real property for the 
        county of ............................... remaining delinquent 
        on the first Monday in January, ......., has been filed in the 
        office of the court administrator of the district court of said 
        county, of which that hereto attached is a copy.  Therefore, 
        you, and each of you, are hereby required to file in the office 
        of said court administrator, on or before the 20th day after the 
        publication of this notice and list, your answer, in writing, 
        setting forth any objection or defense you may have to the 
        taxes, or any part thereof, upon any parcel of land described in 
        the list, in, to, or on which you have or claim any estate, 
        right, title, interest, claim, or lien, and, in default thereof, 
        judgment will be entered against such parcel of land for the 
        taxes on such list appearing against it, and for all penalties, 
        interest, and costs.  Based upon said judgment, the land shall 
        be sold to the state of Minnesota on the second Monday in May, 
        .......  The period of redemption for all lands sold to the 
        state at a tax judgment sale shall be three years from the date 
        of sale to the state of Minnesota if the land is within an 
        incorporated area unless it is: 
           (a) nonagricultural homesteaded land as defined in section 
        273.13, subdivision 22; 
           (b) homesteaded agricultural land as defined in section 
        273.13, subdivision 23, paragraph (a); 
           (c) seasonal residential recreational land as defined in 
        section 273.13, subdivisions 22, paragraph (c), and 25, 
        paragraph (c) (d), clause (5) (1), in which event the period of 
        redemption is five years from the date of sale to the state of 
        Minnesota; 
           (d) abandoned property and pursuant to section 281.173 a 
        court order has been entered shortening the redemption period to 
        five weeks; or 
           (e) vacant property as described under section 281.174, 
        subdivision 2, and for which a court order is entered shortening 
        the redemption period under section 281.174. 
           The period of redemption for all other lands sold to the 
        state at a tax judgment sale shall be five years from the date 
        of sale.  
           Inquiries as to the proceedings set forth above can be made 
        to the county auditor of ..... county whose address is ..... .  
            (Signed) ............................................., 
            Court Administrator of the District Court of the County 
            of .................................................... 
            (Here insert list.) 
           The list referred to in the notice shall be substantially 
        in the following form: 
           List of real property for the county of 
        ......................., on which taxes remain delinquent on the 
        first Monday in January, .......: 
                              Town of (Fairfield), 
                           Township (40), Range (20), 
         Names (and 
         Current Filed 
         Addresses) for 
         the Taxpayers 
         and Fee Owners 
         and in Addition 
         Those Parties 
         Who Have Filed 
         Their Addresses                            Tax 
         Pursuant to     Subdivision of            Parcel   Total Tax 
         section 276.041    Section       Section  Number  and Penalty
                                                             $ cts.
         John Jones  S.E. 1/4 of S.W. 1/4    10    23101       2.20  
         (825 Fremont  
         Fairfield, MN 
         55000) 
         Bruce Smith  That part of N.E. 1/4 
         (2059 Hand   of S.W. 1/4 desc. as 
         Fairfield,   follows:  Beg. at the 
         MN 55000)    S.E. corner of said 
         and          N.E. 1/4 of S.W. 1/4;  
         Fairfield    thence N. along the E.  
         State Bank   line of said N.E. 1/4 
         (100 Main    of S.W. 1/4 a distance 
         Street       of 600 ft.; thence W. 
         Fairfield,   parallel with the S. 
         MN 55000)    line of said N.E. 1/4 
                      of S.W. 1/4 a distance 
                      of 600 ft.; thence S. 
                      parallel with said E. 
                      line a distance of 600 
                      ft. to S. line of said 
                      N.E. 1/4 of S.W. 1/4;
                      thence E. along said S. 
                      line a distance of 600 
                      ft. to the point of 
                      beg. ...............    21    33211       3.15  
           As to platted property, the form of heading shall conform 
        to circumstances and be substantially in the following form:  
                              City of (Smithtown) 
                        Brown's Addition, or Subdivision 
         Names (and 
         Current Filed 
         Addresses) for 
         the Taxpayers 
         and Fee Owners 
         and in Addition 
         Those Parties 
         Who have Filed 
         Their Addresses                         Tax 
         Pursuant to                            Parcel      Total Tax 
         section 276.041     Lot     Block      Number     and Penalty
                                                             $ cts.
         John Jones           15         9      58243          2.20 
         (825 Fremont 
         Fairfield, 
         MN 55000) 
         Bruce Smith          16         9      58244          3.15 
         (2059 Hand 
         Fairfield, 
         MN 55000) 
         and 
         Fairfield 
         State Bank 
         (100 Main Street 
         Fairfield, 
         MN 55000) 
           The names, descriptions, and figures employed in 
        parentheses in the above forms are merely for purposes of 
        illustration. 
           The name of the town, township, range or city, and addition 
        or subdivision, as the case may be, shall be repeated at the 
        head of each column of the printed lists as brought forward from 
        the preceding column.  
           Errors in the list shall not be deemed to be a material 
        defect to affect the validity of the judgment and sale. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 32.  Minnesota Statutes 2002, section 281.17, is 
        amended to read: 
           281.17 [PERIOD FOR REDEMPTION.] 
           Except for properties for which the period of redemption 
        has been limited under sections 281.173 and 281.174, the 
        following periods for redemption apply. 
           The period of redemption for all lands sold to the state at 
        a tax judgment sale shall be three years from the date of sale 
        to the state of Minnesota if the land is within an incorporated 
        area unless it is:  (a) nonagricultural homesteaded land as 
        defined in section 273.13, subdivision 22; (b) homesteaded 
        agricultural land as defined in section 273.13, subdivision 23, 
        paragraph (a); or (c) seasonal residential recreational land as 
        defined in section 273.13, subdivision 22, paragraph (c), or 25, 
        paragraph (d), clause (1), for which the period of redemption is 
        five years from the date of sale to the state of Minnesota. 
           The period of redemption for homesteaded lands as defined 
        in section 273.13, subdivision 22, located in a targeted 
        neighborhood as defined in Laws 1987, chapter 386, article 6, 
        section 4, and sold to the state at a tax judgment sale is three 
        years from the date of sale.  The period of redemption for all 
        lands located in a targeted neighborhood as defined in Laws 
        1987, chapter 386, article 6, section 4, except (1) homesteaded 
        lands as defined in section 273.13, subdivision 22, and (2) for 
        periods of redemption beginning after June 30, 1991, but before 
        July 1, 1996, lands located in the Loring Park targeted 
        neighborhood on which a notice of lis pendens has been served, 
        and sold to the state at a tax judgment sale is one year from 
        the date of sale. 
           The period of redemption for all real property constituting 
        a mixed municipal solid waste disposal facility that is a 
        qualified facility under section 115B.39, subdivision 1, is one 
        year from the date of the sale to the state of Minnesota. 
           The period of redemption for all other lands sold to the 
        state at a tax judgment sale shall be five years from the date 
        of sale, except that the period of redemption for nonhomesteaded 
        agricultural land as defined in section 273.13, subdivision 23, 
        paragraph (b), shall be two years from the date of sale if at 
        that time that property is owned by a person who owns one or 
        more parcels of property on which taxes are delinquent, and the 
        delinquent taxes are more than 25 percent of the prior year's 
        school district levy. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 33.  Minnesota Statutes 2002, section 282.01, 
        subdivision 7a, is amended to read: 
           Subd. 7a.  [CITY SALES; ALTERNATE PROCEDURES.] Land located 
        in a home rule charter or statutory city, or in a town which 
        cannot be improved because of noncompliance with local 
        ordinances regarding minimum area, shape, frontage or access may 
        be sold by the county auditor pursuant to this subdivision if 
        the auditor determines that a nonpublic sale will encourage the 
        approval of sale of the land by the city or town and promote its 
        return to the tax rolls.  If the physical characteristics of the 
        land indicate that its highest and best use will be achieved by 
        combining it with an adjoining parcel and the city or town has 
        not adopted a local ordinance governing minimum area, shape, 
        frontage, or access, the land may also be sold pursuant to this 
        subdivision.  If the property consists of an undivided interest 
        in land or land and improvements, the property may also be sold 
        to the other owners under this subdivision.  The sale of land 
        pursuant to this subdivision shall be subject to any conditions 
        imposed by the county board pursuant to section 282.03.  The 
        governing body of the city or town may recommend to the county 
        board conditions to be imposed on the sale.  The county auditor 
        may restrict the sale to owners of lands adjoining the land to 
        be sold.  The county auditor shall conduct the sale by sealed 
        bid or may select another means of sale.  The land shall be sold 
        to the highest bidder but in no event shall the land be sold for 
        less than its appraised value.  All owners of land adjoining the 
        land to be sold shall be given a written notice at least 30 days 
        prior to the sale.  
           This subdivision shall be liberally construed to encourage 
        the sale and utilization of tax-forfeited land, to eliminate 
        nuisances and dangerous conditions and to increase compliance 
        with land use ordinances. 
           [EFFECTIVE DATE.] This section is effective for sales 
        occurring on or after the day following final enactment. 
           Sec. 34.  Minnesota Statutes 2002, section 282.08, is 
        amended to read: 
           282.08 [APPORTIONMENT OF PROCEEDS TO TAXING DISTRICTS.] 
           The net proceeds from the sale or rental of any parcel of 
        forfeited land, or from the sale of products from the forfeited 
        land, must be apportioned by the county auditor to the taxing 
        districts interested in the land, as follows: 
           (1) the amounts necessary to pay the state general tax levy 
        against the parcel for taxes payable in the year for which the 
        tax judgment was entered, and for each subsequent payable year 
        up to and including the year of forfeiture, must be apportioned 
        to the state; 
           (2) the portion required to pay any amounts included in the 
        appraised value under section 282.01, subdivision 3, as 
        representing increased value due to any public improvement made 
        after forfeiture of the parcel to the state, but not exceeding 
        the amount certified by the clerk of the municipality must be 
        apportioned to the municipal subdivision entitled to it; 
           (2) (3) the portion required to pay any amount included in 
        the appraised value under section 282.019, subdivision 5, 
        representing increased value due to response actions taken after 
        forfeiture of the parcel to the state, but not exceeding the 
        amount of expenses certified by the pollution control agency or 
        the commissioner of agriculture, must be apportioned to the 
        agency or the commissioner of agriculture and deposited in the 
        fund from which the expenses were paid; 
           (3) (4) the portion of the remainder required to discharge 
        any special assessment chargeable against the parcel for 
        drainage or other purpose whether due or deferred at the time of 
        forfeiture, must be apportioned to the municipal subdivision 
        entitled to it; and 
           (4) (5) any balance must be apportioned as follows: 
           (i) The county board may annually by resolution set aside 
        no more than 30 percent of the receipts remaining to be used for 
        timber development on tax-forfeited land and dedicated memorial 
        forests, to be expended under the supervision of the county 
        board.  It must be expended only on projects approved by the 
        commissioner of natural resources. 
           (ii) The county board may annually by resolution set aside 
        no more than 20 percent of the receipts remaining to be used for 
        the acquisition and maintenance of county parks or recreational 
        areas as defined in sections 398.31 to 398.36, to be expended 
        under the supervision of the county board. 
           (iii) Any balance remaining must be apportioned as 
        follows:  county, 40 percent; town or city, 20 percent; and 
        school district, 40 percent, provided, however, that in 
        unorganized territory that portion which would have accrued to 
        the township must be administered by the county board of 
        commissioners. 
           [EFFECTIVE DATE.] This section is effective for taxes 
        payable in 2004 and thereafter. 
           Sec. 35.  Minnesota Statutes 2002, section 290C.02, 
        subdivision 3, is amended to read: 
           Subd. 3.  [CLAIMANT.] "Claimant" means a person, as that 
        term is defined in section 290.01, subdivision 2, who owns 
        forest land in Minnesota and files an application authorized by 
        the Sustainable Forest Incentive Act.  For purposes of section 
        290C.11, claimant also includes any person bound by the covenant 
        required in section 290C.04.  No more than one claimant is 
        entitled to a payment under this chapter with respect to any 
        tract, parcel, or piece of land enrolled under this chapter that 
        has been assigned the same parcel identification number.  When 
        enrolled forest land is owned by two or more persons, the owners 
        must determine between them which person may claim the payments 
        provided under sections 290C.01 to 290C.11. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 36.  Minnesota Statutes 2002, section 290C.02, 
        subdivision 7, is amended to read: 
           Subd. 7.  [FOREST MANAGEMENT PLAN.] "Forest management 
        plan" means a written document providing a framework for 
        site-specific healthy, productive, and sustainable forest 
        resources.  A forest management plan must include at least the 
        following:  (i) owner-specific forest management goals for the 
        property land; (ii) a reliable field inventory of the individual 
        forest cover types, their age, and density; (iii) a description 
        of the soil type and quality; (iv) an aerial photo and/or map of 
        the vegetation and other natural features of the property land 
        clearly indicating the boundaries of the property land and of 
        the forest land; (v) the proposed future conditions of the 
        property land; (vi) prescriptions to meet proposed future 
        conditions of the property land; (vii) a recommended timetable 
        for implementing the prescribed activities; and (viii) a legal 
        description of the parcels land encompassing the parcels 
        included in the plan.  All management activities prescribed in a 
        plan must be in accordance with the recommended timber 
        harvesting and forest management guidelines.  The commissioner 
        of natural resources shall provide a framework for plan content 
        and updating and revising plans. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 37.  Minnesota Statutes 2002, section 290C.03, is 
        amended to read: 
           290C.03 [ELIGIBILITY REQUIREMENTS.] 
           (a) Property Land may be enrolled in the sustainable forest 
        incentive program under this chapter if all of the following 
        conditions are met: 
           (1) property the land consists of at least 20 contiguous 
        acres and at least 50 percent of the land must meet the 
        definition of forest land in section 88.01, subdivision 7, 
        during the enrollment; 
           (2) a forest management plan for the property land must be 
        prepared by an approved plan writer and implemented during the 
        period in which the land is enrolled; 
           (3) timber harvesting and forest management guidelines must 
        be used in conjunction with any timber harvesting or forest 
        management activities conducted on the land during the period in 
        which the land is enrolled; 
           (4) the property land must be enrolled for a minimum of 
        eight years; 
           (5) there are no delinquent property taxes on the property 
        land; and 
           (6) claimants enrolling more than 1,920 acres in the 
        sustainable forest incentive program must allow year-round, 
        nonmotorized access to fish and wildlife resources on enrolled 
        land except within one-fourth mile of a permanent dwelling or 
        during periods of high fire hazard as determined by the 
        commissioner of natural resources. 
           (b) Claimants required to allow access under paragraph (a), 
        clause (6), do not by that action: 
           (1) extend any assurance that the land is safe for any 
        purpose; 
           (2) confer upon the person the legal status of an invitee 
        or licensee to whom a duty of care is owed; or 
           (3) assume responsibility for or incur liability for any 
        injury to the person or property caused by an act or omission of 
        the person. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 38.  Minnesota Statutes 2002, section 290C.07, is 
        amended to read: 
           290C.07 [CALCULATION OF INCENTIVE PAYMENT.] 
           An approved claimant under the sustainable forest incentive 
        program is eligible to receive an annual payment.  The payment 
        shall equal the greater of: 
           (1) the difference between the property tax that would be 
        paid on the property land using the previous year's statewide 
        average total township tax rate and the class rate for class 2b 
        timberland under section 273.13, subdivision 23, paragraph (b), 
        if the property land were valued at (i) the average statewide 
        timberland market value per acre calculated under section 
        290C.06, and (ii) the average statewide timberland current use 
        value per acre calculated under section 290C.02, subdivision 5; 
           (2) two-thirds of the property tax amount determined by 
        using the previous year's statewide average total township tax 
        rate, the estimated market value per acre as calculated in 
        section 290C.06, and the class rate for 2b timberland under 
        section 273.13, subdivision 23, paragraph (b); or 
           (3) $1.50 per acre for each acre enrolled in the 
        sustainable forest incentive program. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 39.  Minnesota Statutes 2002, section 290C.09, is 
        amended to read: 
           290C.09 [REMOVAL FOR PROPERTY TAX DELINQUENCY.] 
           The commissioner shall immediately remove any property land 
        enrolled in the sustainable forest incentive program for which 
        taxes are determined to be delinquent as provided in chapter 279 
        and shall notify the claimant of such action.  Lands terminated 
        from the sustainable forest incentive program under this section 
        are not entitled to any payments provided in this chapter and 
        are subject to removal penalties prescribed in section 290C.11.  
        The claimant has 60 days from the receipt of notice from the 
        commissioner under this section to pay the delinquent taxes.  If 
        the delinquent taxes are paid within this 60-day period, the 
        lands shall be reinstated in the program as if they had not been 
        withdrawn and without the payment of a penalty. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 40.  Minnesota Statutes 2002, section 290C.10, is 
        amended to read: 
           290C.10 [WITHDRAWAL PROCEDURES.] 
           An approved claimant under the sustainable forest incentive 
        program for a minimum of four years may notify the commissioner 
        of the intent to terminate enrollment.  Within 90 days of 
        receipt of notice to terminate enrollment, the commissioner 
        shall inform the claimant in writing, acknowledging receipt of 
        this notice and indicating the effective date of termination 
        from the sustainable forest incentive program.  Termination of 
        enrollment in the sustainable forest incentive program occurs on 
        January 1 of the fifth calendar year that begins after receipt 
        by the commissioner of the termination notice.  After the 
        commissioner issues an effective date of termination, a claimant 
        wishing to continue the property's land's enrollment in the 
        sustainable forest incentive program beyond the termination date 
        must apply for enrollment as prescribed in section 290C.04.  A 
        claimant who withdraws a parcel of land from this program may 
        not reenroll the parcel for a period of three years.  Within 90 
        days after the termination date, the commissioner shall execute 
        and acknowledge a document releasing the land from the covenant 
        required under this chapter.  The document must be mailed to the 
        claimant and is entitled to be recorded.  The commissioner may 
        allow early withdrawal from the Sustainable Forest Incentive Act 
        without penalty in cases of condemnation for a public purpose 
        notwithstanding the provisions of this section. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 41.  Minnesota Statutes 2002, section 290C.11, is 
        amended to read: 
           290C.11 [PENALTIES FOR REMOVAL.] 
           (a) If the commissioner determines that property land 
        enrolled in the sustainable forest incentive program is in 
        violation of the conditions for enrollment as specified in 
        section 290C.03, the commissioner shall notify the claimant of 
        the intent to remove all enrolled land from the sustainable 
        forest incentive program.  The claimant has 60 days to appeal 
        this determination. The appeal must be made in writing to the 
        commissioner, who shall, within 60 days, notify the claimant as 
        to the outcome of the appeal.  Within 60 days after the 
        commissioner denies an appeal, or within 120 days after the 
        commissioner received a written appeal if the commissioner has 
        not made a determination in that time, the owner may appeal to 
        tax court under chapter 271 as if the appeal is from an order of 
        the commissioner. 
           (b) If the commissioner determines the property land is to 
        be removed from the sustainable forest incentive program, the 
        claimant is liable for payment to the commissioner in the amount 
        equal to the payments received under this chapter for the 
        previous four-year period, plus interest.  The claimant has 90 
        days to satisfy the payment for removal of land from the 
        sustainable forest incentive program under this section.  If the 
        penalty is not paid within the 90-day period under this 
        paragraph, the commissioner shall certify the amount to the 
        county auditor for collection as a part of the general ad 
        valorem real property taxes on the land in the following taxes 
        payable year.  
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 42.  [290C.12] [DEATH OF CLAIMANT.] 
           Within one year after the death of the claimant, the 
        claimant's heir, devisee, or estate must either: 
           (1) notify the commissioner of election to terminate 
        enrollment in the sustainable forest incentive program; or 
           (2) make an application under this chapter to continue 
        enrollment of the land in the program.  
           Upon notification under clause (1), the commissioner shall 
        terminate the enrollment and issue a document releasing the land 
        from the covenant as provided in section 290C.04, paragraph 
        (c).  Penalties under section 290C.11 shall not apply.  If the 
        application under clause (2) is approved, the land is enrolled 
        in the program without a break.  If the commissioner does not 
        receive notification within one year after the date of death, 
        enrollment in the program shall be terminated and penalties 
        under section 290C.11 shall not apply. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment, except in the case of claimants dying 
        prior to the day following final enactment, heirs, devisees, or 
        estates may make the election either six months after the 
        effective date of this provision or one year after the death of 
        the claimant, whichever is later. 
           Sec. 43.  Minnesota Statutes 2002, section 469.1792, 
        subdivision 3, is amended to read: 
           Subd. 3.  [ACTIONS AUTHORIZED.] (a) An authority with a 
        district qualifying under this section may take either or both 
        of the following actions for any or all of its preexisting 
        districts: 
           (1) the authority may elect that the original local tax 
        rate under section 469.177, subdivision 1a, does not apply to 
        the district; and 
           (2) the authority may elect the fiscal disparities 
        contribution will be computed under section 469.177, subdivision 
        3, paragraph (a), regardless of the election that was made for 
        the district. 
           (b) The authority may take action under this subdivision 
        only after the municipality approves the action, by resolution, 
        after notice and public hearing in the manner provided under 
        section 469.175, subdivision 2.  To be effective for taxes 
        payable in the following year, the resolution must be adopted 
        and the county auditor must be notified of the adoption on or 
        before July 1. 
           [EFFECTIVE DATE.] This section is effective for taxes 
        payable in 2004 and thereafter. 
           Sec. 44.  Minnesota Statutes 2002, section 473F.07, 
        subdivision 4, is amended to read: 
           Subd. 4.  [DISTRIBUTION NET TAX CAPACITY.] The 
        administrative auditor shall determine the proportion which the 
        index of each municipality bears to the sum of the indices of 
        all municipalities and shall then multiply this proportion in 
        the case of each municipality, by the areawide net tax capacity, 
        provided that if the distribution net tax capacity for a 
        municipality is less than 95 percent of the municipality's 
        previous year distribution net tax capacity, and more than ten 
        percent of the municipality's fiscal capacity consists of 
        manufactured home property, the municipality's distribution net 
        tax capacity will be increased to 95 percent of the previous 
        year net tax capacity and the distribution net tax capacity of 
        other municipalities in the area will be proportionately reduced.
           [EFFECTIVE DATE.] This section is effective for taxes 
        payable in 2004 and subsequent years. 
           Sec. 45.  Minnesota Statutes 2002, section 515B.1-116, is 
        amended to read: 
           515B.1-116 [RECORDING.] 
           (a) A declaration, bylaws, any amendment to a declaration 
        or bylaws, and any other instrument affecting a common interest 
        community shall be entitled to be recorded.  In those counties 
        which have a tract index, the county recorder shall enter the 
        declaration in the tract index for each unit affected.  The 
        registrar of titles shall file the declaration in accordance 
        with section 508.351 or 508A.351. 
           (b) The recording officer shall upon request promptly 
        assign a number (CIC number) to a common interest community to 
        be formed or to a common interest community resulting from the 
        merger of two or more common interest communities. 
           (c) Documents recorded pursuant to this chapter shall in 
        the case of registered land be filed, and references to the 
        recording of documents shall mean filed in the case of 
        registered land. 
           (d) Subject to any specific requirements of this chapter, 
        if a recorded document relating to a common interest community 
        purports to require a certain vote or signatures approving any 
        restatement or amendment of the document by a certain number or 
        percentage of unit owners or secured parties, and if the 
        amendment or restatement is to be recorded pursuant to this 
        chapter, an affidavit of the president or secretary of the 
        association stating that the required vote or signatures have 
        been obtained shall be attached to the document to be recorded 
        and shall constitute prima facie evidence of the representations 
        contained therein. 
           (e) If a common interest community is located on registered 
        land, the recording fee for any document affecting two or more 
        units shall be the then-current fee for registering the document 
        on the certificates of title for the first ten affected 
        certificates and one-third of the then-current fee for each 
        additional affected certificate.  This provision shall not apply 
        to recording fees for deeds of conveyance, with the exception of 
        deeds given pursuant to sections 515B.2-119 and 515B.3-112. 
           (f) Except as permitted under this subsection, a recording 
        officer shall not file or record a declaration creating a new 
        common interest community, unless the county treasurer has 
        certified that the property taxes payable in the current year 
        for the real estate included in the proposed common interest 
        community have been paid.  This certification is in addition to 
        the certification for delinquent taxes required by section 
        272.12.  In the case of preexisting common interest communities, 
        the recording officer shall accept, file, and record the 
        following instruments, without requiring a certification as to 
        the current or delinquent taxes on any of the units in the 
        common interest community:  (i) a declaration subjecting the 
        common interest community to this chapter; (ii) a declaration 
        changing the form of a common interest community pursuant to 
        section 515B.2-123; or (iii) an amendment to or restatement of 
        the declaration, bylaws, or CIC plat.  In order for the 
        instruments an instrument to be accepted and recorded under the 
        preceding sentence, the assessor must certify or otherwise 
        inform the recording officer that, for taxes payable in the 
        current year, the assessor has allocated taxable values to each 
        unit or has separately assessed each unit instrument must not 
        create or change unit or common area boundaries. 
           [EFFECTIVE DATE.] This section is effective for deeds or 
        instruments accepted for recording or registration on or after 
        July 1, 2003. 
           Sec. 46.  Laws 2001, First Special Session chapter 5, 
        article 3, section 61, the effective date, is amended to read: 
           [EFFECTIVE DATE.] This section is effective August 1, 2001, 
        for deeds issued on or after August 1, 2001.  This section is 
        effective August 1, 2006, for deeds issued before August 1, 2001.
           Sec. 47.  Laws 2001, First Special Session chapter 5, 
        article 3, section 63, the effective date, is amended to read: 
           [EFFECTIVE DATE.] This section is effective August 1, 2001, 
        for deeds issued on or after August 1, 2001.  This section is 
        effective August 1, 2006, for deeds issued before August 1, 2001.
           Sec. 48.  Laws 2002, chapter 377, article 6, section 4, the 
        effective date, is amended to read: 
           [EFFECTIVE DATE.] This section is effective for aids 
        payable in 2004 May 16, 2002, and thereafter. 
           Sec. 49.  [PRE-1940 HOUSING PERCENTAGE.] 
           For the purposes of determining local government aid 
        payment amounts for aids payable in 2003, the "pre-1940 housing 
        percentage" factor shall be based upon the 1990 federal census, 
        notwithstanding Minnesota Statutes 2002, section 477A.011, 
        subdivision 30. 
           [EFFECTIVE DATE.] This section is effective for aids 
        payable in 2003 only. 
           Sec. 50.  [REPEALER.] 
           (a) Minnesota Statutes 2002, section 274.04, is repealed. 
           (b) Minnesota Statutes 2002, section 477A.065, is repealed 
        effective for aid payable in 2004 and thereafter. 
           (c) Minnesota Rules, parts 8106.0100, subparts 11, 15, and 
        16; and 8106.0200, are repealed effective the day following 
        final enactment. 

                                   ARTICLE 6 
                    DEPARTMENT SALES AND USE TAX INITIATIVES 
           Section 1.  Minnesota Statutes 2002, section 289A.50, 
        subdivision 2a, is amended to read: 
           Subd. 2a.  [REFUND OF SALES TAX TO PURCHASERS.] (a) If a 
        vendor has collected from a purchaser a tax on a transaction 
        that is not subject to the tax imposed by chapter 297A, the 
        purchaser may apply directly to the commissioner for a refund 
        under this section if: 
           (a) (1) the purchaser is currently registered or was 
        registered during the period of the claim, to collect and remit 
        the sales tax or to remit the use tax; and 
           (2) either 
           (b) (i) the amount of the refund to be applied for exceeds 
        $500, or 
           (ii) the amount of the refund to be applied for does not 
        exceed $500, but the purchaser also applies for a capital 
        equipment claim at the same time, and the total of the two 
        refunds exceeds $500. 
           (b) The purchaser may not file more than two applications 
        for refund under this subdivision in a calendar year. 
           [EFFECTIVE DATE.] This section is effective for claims 
        filed on or after the day following final enactment. 
           Sec. 2.  Minnesota Statutes 2002, section 289A.60, 
        subdivision 15, is amended to read: 
           Subd. 15.  [ACCELERATED PAYMENT OF JUNE SALES TAX 
        LIABILITY; PENALTY FOR UNDERPAYMENT.] If a vendor is required by 
        law to submit an estimation of June sales tax liabilities and 62 
        75 percent payment by a certain date, the vendor shall pay a 
        penalty equal to ten percent of the amount of actual June 
        liability required to be paid in June less the amount remitted 
        in June.  The penalty must not be imposed, however, if the 
        amount remitted in June equals the lesser of 62 75 percent of 
        the preceding May's liability or 62 75 percent of the average 
        monthly liability for the previous calendar year. 
           [EFFECTIVE DATE.] This section is effective for payments 
        due after December 31, 2002. 
           Sec. 3.  Minnesota Statutes 2002, section 289A.60, is 
        amended by adding a subdivision to read: 
           Subd. 25.  [PENALTY FOR FAILURE TO PROPERLY COMPLETE SALES 
        TAX RETURN.] A person who fails to report local sales tax on a 
        sales tax return or who fails to report local sales tax on 
        separate tax lines on the sales tax return is subject to a 
        penalty of five percent of the amount of tax not properly 
        reported on the return.  A person who files a consolidated tax 
        return but fails to report location information is subject to a 
        $500 penalty for each return not containing location 
        information.  In addition, the commissioner may revoke the 
        privilege for a taxpayer to file consolidated returns and may 
        require the taxpayer to separately register each location and to 
        file a tax return for each location. 
           [EFFECTIVE DATE.] This section is effective for returns 
        filed after June 30, 2003. 
           Sec. 4.  Minnesota Statutes 2002, 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) nonresidential 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 onetime 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; 
           (5) delivery of aggregate materials and concrete block by a 
        third party if the delivery would be subject to the sales tax if 
        provided by the seller of the aggregate material or 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 listed in clause (6), items (i) to (vi) and 
        (viii) and the provision of these 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 the preceding sentence, "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 telecommunications 
        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 telecommunications 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 telecommunications 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 the day 
        following final enactment. 
           Sec. 5.  Minnesota Statutes 2002, section 297A.61, 
        subdivision 12, is amended to read: 
           Subd. 12.  [FARM MACHINERY.] (a) "Farm machinery" means new 
        or used machinery, equipment, implements, accessories, and 
        contrivances used directly and principally in the agricultural 
        production for sale, but not including the processing, of 
        livestock, dairy animals, dairy products, poultry and poultry 
        products, fruits, vegetables, trees and shrubs, plants, forage, 
        grains, and bees and apiary products.  
           (b) Farm machinery includes including, but not limited to: 
           (1) machinery for the preparation, seeding, or cultivation 
        of soil for growing agricultural crops and sod, for the 
        harvesting and threshing of agricultural products, or for the 
        harvesting or mowing of sod; 
           (2) barn cleaners, milking systems, grain dryers, feeding 
        systems including stationary feed bunks, and similar 
        installations, whether or not the equipment is installed by the 
        seller and becomes part of the real property; and 
           (3) irrigation equipment sold for exclusively agricultural 
        use, including pumps, pipe fittings, valves, sprinklers, and 
        other equipment necessary to the operation of an irrigation 
        system when sold as part of an irrigation system, whether or not 
        the equipment is installed by the seller and becomes part of the 
        real property;. 
           (4) logging equipment, including chain saws used for 
        commercial logging; 
           (5) fencing used for the containment of farmed cervidae, as 
        defined in section 17.451, subdivision 2; 
           (6) primary and backup generator units used to generate 
        electricity for the purpose of operating farm machinery, as 
        defined in this subdivision, or providing light or space heating 
        necessary for the production of livestock, dairy animals, dairy 
        products, or poultry and poultry products; 
           (7) aquaculture production equipment as defined in 
        subdivision 13; and 
           (8) equipment used for maple syrup harvesting.  
           (c) (b) Farm machinery does not include: 
           (1) repair or replacement parts; 
           (2) tools, shop equipment, grain bins, fencing material 
        except fencing material covered by paragraph (b), clause (5), 
        communication equipment, and other farm supplies; 
           (3) motor vehicles taxed under chapter 297B; 
           (4) snowmobiles or snow blowers; or 
           (5) lawn mowers except those used in the production of sod 
        for sale, or garden-type tractors or garden tillers; or 
           (6) machinery, equipment, implements, accessories, and 
        contrivances used directly in the production of horses not 
        raised for slaughter, fur-bearing animals, or research animals. 
           [EFFECTIVE DATE.] This section is effective for sales and 
        purchases made after June 30, 2003. 
           Sec. 6.  Minnesota Statutes 2002, section 297A.61, 
        subdivision 34, is amended to read: 
           Subd. 34.  [FOOD SOLD THROUGH VENDING MACHINES.] "Food sold 
        through vending machines" means food dispensed from a machine or 
        other mechanical device that accepts payment including honor 
        payments. 
           [EFFECTIVE DATE.] This section is effective for sales and 
        purchases made on or after the day following final enactment. 
           Sec. 7.  Minnesota Statutes 2002, section 297A.61, is 
        amended by adding a subdivision to read: 
           Subd. 36.  [AGRICULTURAL PRODUCTION.] "Agricultural 
        production" includes, but is not limited to, horticulture, 
        silviculture, floriculture, maple syrup harvesting, and the 
        raising of pets, livestock as defined in section 17A.03, 
        subdivision 5, poultry, dairy and poultry products, bees and 
        apiary products, the raising and harvesting of agricultural 
        crops, sod, fur-bearing animals, research animals, and horses. 
           [EFFECTIVE DATE.] This section is effective for sales and 
        purchases made after June 30, 2003. 
           Sec. 8.  Minnesota Statutes 2002, section 297A.665, is 
        amended to read: 
           297A.665 [PRESUMPTION OF TAX; BURDEN OF PROOF.] 
           (a) For the purpose of the proper administration of this 
        chapter and to prevent evasion of the tax, until the contrary is 
        established, it is presumed that:  
           (1) all gross receipts are subject to the tax; and 
           (2) all retail sales for delivery in Minnesota are for 
        storage, use, or other consumption in Minnesota.  
           (b) The burden of proving that a sale is not a taxable 
        retail sale is on the seller.  However, the seller may take from 
        the purchaser at the time of the sale an a fully completed 
        exemption certificate claiming that the property purchased is 
        for resale or that the sale is otherwise exempt from the tax 
        imposed by this chapter which conclusively relieves the seller 
        from collecting and remitting the tax.  This relief from 
        liability does not apply to a seller who fraudulently fails to 
        collect the tax or solicits purchasers to participate in the 
        unlawful claim of an exemption.  If a seller claiming that 
        certain sales are exempt, who does is not possess in possession 
        of the required exemption certificates, must acquire the 
        certificates within 60 days after receiving written notice from 
        the commissioner that the certificates are required, deductions 
        claimed by the seller that required delivery of the certificates 
        must be disallowed.  If the certificates are not 
        obtained delivered to the commissioner within the 60-day period, 
        the sales are considered taxable sales under this 
        chapter. commissioner may verify the reason or basis for the 
        exemption claimed in the certificates before allowing any 
        deductions.  A deduction must not be granted on the basis of 
        certificates delivered to the commissioner after the 60-day 
        period. 
           (c) A purchaser of tangible personal property or any items 
        listed in section 297A.63 that are shipped or brought to 
        Minnesota by the purchaser has the burden of proving that the 
        property was not purchased from a retailer for storage, use, or 
        consumption in Minnesota.  
           [EFFECTIVE DATE.] This section is effective for exemption 
        certificates received for sales occurring after June 30, 2003. 
           Sec. 9.  Minnesota Statutes 2002, section 297A.67, 
        subdivision 2, is amended to read: 
           Subd. 2.  [FOOD AND FOOD INGREDIENTS.] Food and food 
        ingredients are exempt.  For purposes of this subdivision, 
        "food" and "food ingredients" mean substances, whether in 
        liquid, concentrated, solid, frozen, dried, or dehydrated form, 
        that are sold for ingestion or chewing by humans and are 
        consumed for their taste or nutritional value.  Food and food 
        ingredients exempt under this subdivision do not include candy, 
        soft drinks, food sold through vending machines, and prepared 
        foods.  Food and food ingredients do not include alcoholic 
        beverages, dietary supplements, and tobacco.  For purposes of 
        this subdivision, "alcoholic beverages" means beverages that are 
        suitable for human consumption and contain one-half of one 
        percent or more of alcohol by volume.  For purposes of this 
        subdivision, "tobacco" means cigarettes, cigars, chewing or pipe 
        tobacco, or any other item that contains tobacco.  For purposes 
        of this subdivision, "dietary supplements" means any product, 
        other than tobacco, intended to supplement the diet that: 
           (1) contains one or more of the following dietary 
        ingredients: 
           (i) a vitamin; 
           (ii) a mineral; 
           (iii) an herb or other botanical; 
           (iv) an amino acid; 
           (v) a dietary substance for use by humans to supplement the 
        diet by increasing the total dietary intake; and 
           (vi) a concentrate, metabolite, constituent, extract, or 
        combination of any ingredient described in items (i) to (v); 
           (2) is intended for ingestion in tablet, capsule, powder, 
        softgel, gelcap, or liquid form, or if not intended for 
        ingestion in such form, is not represented as conventional food 
        and is not represented for use as a sole item of a meal or of 
        the diet; and 
           (3) is required to be labeled as a dietary supplement, 
        identifiable by the supplement facts box found on the label and 
        as required pursuant to Code of Federal Regulations, title 21, 
        section 101.36. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 10.  Minnesota Statutes 2002, section 297A.68, 
        subdivision 5, is amended to read: 
           Subd. 5.  [CAPITAL EQUIPMENT.] (a) Capital equipment is 
        exempt.  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. 
           "Capital equipment" means machinery and equipment purchased 
        or leased, and used in this state by the purchaser or lessee 
        primarily for manufacturing, fabricating, mining, or refining 
        tangible personal property to be sold ultimately at retail if 
        the machinery and equipment are essential to the integrated 
        production process of manufacturing, fabricating, mining, or 
        refining.  Capital equipment also includes machinery and 
        equipment used to electronically transmit results retrieved by a 
        customer of an online computerized data retrieval system. 
           (b) Capital equipment includes, but is not limited to: 
           (1) machinery and equipment used to operate, control, or 
        regulate the production equipment; 
           (2) machinery and equipment used for research and 
        development, design, quality control, and testing activities; 
           (3) environmental control devices that are used to maintain 
        conditions such as temperature, humidity, light, or air pressure 
        when those conditions are essential to and are part of the 
        production process; 
           (4) materials and supplies used to construct and install 
        machinery or equipment; 
           (5) repair and replacement parts, including accessories, 
        whether purchased as spare parts, repair parts, or as upgrades 
        or modifications to machinery or equipment; 
           (6) materials used for foundations that support machinery 
        or equipment; 
           (7) materials used to construct and install special purpose 
        buildings used in the production process; and 
           (8) ready-mixed concrete trucks equipment in which the 
        ready-mixed concrete is mixed as part of the delivery 
        process regardless if mounted on a chassis and leases of 
        ready-mixed concrete trucks. 
           (c) Capital equipment does not include the following: 
           (1) motor vehicles taxed under chapter 297B; 
           (2) machinery or equipment used to receive or store raw 
        materials; 
           (3) building materials, except for materials included in 
        paragraph (b), clauses (6) and (7); 
           (4) machinery or equipment used for nonproduction purposes, 
        including, but not limited to, the following:  plant security, 
        fire prevention, first aid, and hospital stations; support 
        operations or administration; pollution control; and plant 
        cleaning, disposal of scrap and waste, plant communications, 
        space heating, cooling, lighting, or safety; 
           (5) farm machinery and aquaculture production equipment as 
        defined by section 297A.61, subdivisions 12 and 13; 
           (6) machinery or equipment purchased and installed by a 
        contractor as part of an improvement to real property; or 
           (7) any other item that is not essential to the integrated 
        process of manufacturing, fabricating, mining, or refining. 
           (d) For purposes of this subdivision: 
           (1) "Equipment" means independent devices or tools separate 
        from machinery but essential to an integrated production 
        process, including computers and computer software, used in 
        operating, controlling, or regulating machinery and equipment; 
        and any subunit or assembly comprising a component of any 
        machinery or accessory or attachment parts of machinery, such as 
        tools, dies, jigs, patterns, and molds.  
           (2) "Fabricating" means to make, build, create, produce, or 
        assemble components or property to work in a new or different 
        manner. 
           (3) "Integrated production process" means a process or 
        series of operations through which tangible personal property is 
        manufactured, fabricated, mined, or refined.  For purposes of 
        this clause, (i) manufacturing begins with the removal of raw 
        materials from inventory and ends when the last process prior to 
        loading for shipment has been completed; (ii) fabricating begins 
        with the removal from storage or inventory of the property to be 
        assembled, processed, altered, or modified and ends with the 
        creation or production of the new or changed product; (iii) 
        mining begins with the removal of overburden from the site of 
        the ores, minerals, stone, peat deposit, or surface materials 
        and ends when the last process before stockpiling is completed; 
        and (iv) refining begins with the removal from inventory or 
        storage of a natural resource and ends with the conversion of 
        the item to its completed form. 
           (4) "Machinery" means mechanical, electronic, or electrical 
        devices, including computers and computer software, that are 
        purchased or constructed to be used for the activities set forth 
        in paragraph (a), beginning with the removal of raw materials 
        from inventory through completion of the product, including 
        packaging of the product. 
           (4) (5) "Machinery and equipment used for pollution control"
        means machinery and equipment used solely to eliminate, prevent, 
        or reduce pollution resulting from an activity described in 
        paragraph (a).  
           (5) (6) "Manufacturing" means an operation or series of 
        operations where raw materials are changed in form, composition, 
        or condition by machinery and equipment and which results in the 
        production of a new article of tangible personal property.  For 
        purposes of this subdivision, "manufacturing" includes the 
        generation of electricity or steam to be sold at retail. 
           (6) (7) "Mining" means the extraction of minerals, ores, 
        stone, or peat. 
           (7) (8) "Online data retrieval system" means a system whose 
        cumulation of information is equally available and accessible to 
        all its customers. 
           (8) (9) "Primarily" means machinery and equipment used 50 
        percent or more of the time in an activity described in 
        paragraph (a). 
           (9) (10) "Refining" means the process of converting a 
        natural resource to a an intermediate or finished product, 
        including the treatment of water to be sold at retail. 
           [EFFECTIVE DATE.] This section is effective for sales and 
        purchases made after December 31, 2003. 
           Sec. 11.  Minnesota Statutes 2002, section 297A.68, is 
        amended by adding a subdivision to read: 
           Subd. 39.  [PREEXISTING BIDS OR CONTRACTS.] (a) The sale of 
        tangible personal property or services is exempt from tax for a 
        period of six months from the effective date of the law change 
        that results in the imposition of the tax under this chapter if: 
           (1) the act imposing the tax does not have transitional 
        effective date language for existing construction contracts and 
        construction bids; and 
           (2) the requirements of paragraph (b) are met. 
           (b) A sale is tax exempt under paragraph (a) if it meets 
        the requirements of either clause (1) or (2): 
           (1) For a construction contract: 
           (i) the goods or services sold must be used for the 
        performance of a bona fide written lump sum or fixed price 
        construction contract; 
           (ii) the contract must be entered into before the date the 
        goods or services become subject to the sales tax; 
           (iii) the contract must not provide for allocation of 
        future taxes; and 
           (iv) for each qualifying contract the contractor must give 
        the seller documentation of the contract on which an exemption 
        is to be claimed. 
           (2) For a bid: 
           (i) the goods or services sold must be used pursuant to an 
        obligation of a bid or bids; 
           (ii) the bid or bids must be submitted and accepted before 
        the date the goods or services became subject to the sales tax; 
           (iii) the bid or bids must not be able to be withdrawn, 
        modified, or changed without forfeiting a bond; and 
           (iv) for each qualifying bid, the contractor must give the 
        seller documentation of the bid on which an exemption is to be 
        claimed. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 12.  Minnesota Statutes 2002, section 297A.69, 
        subdivision 2, is amended to read: 
           Subd. 2.  [MATERIALS CONSUMED IN AGRICULTURAL PRODUCTION.] 
        (a) Materials stored, used, or consumed in agricultural 
        production of personal property intended to be sold ultimately 
        at retail are exempt, whether or not the item becomes an 
        ingredient or constituent part of the property produced.  
        Materials that qualify for this exemption include, but are not 
        limited to, the following: 
           (1) feeds, seeds, trees, fertilizers, and herbicides, 
        including when purchased for use by farmers in a federal or 
        state farm or conservation program; 
           (2) materials sold to a veterinarian to be used or consumed 
        in the care, medication, and treatment of agricultural 
        production animals and horses; 
           (3) chemicals, including chemicals used for cleaning food 
        processing machinery and equipment; 
           (4) materials, including chemicals, fuels, and electricity 
        purchased by persons engaged in agricultural production to treat 
        waste generated as a result of the production process; 
           (5) fuels, 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 the average climate control or lighting for the 
        production area, and (ii) it is necessary to produce that 
        particular product; 
           (6) petroleum products and lubricants; 
           (7) packaging materials, including returnable containers 
        used in packaging food and beverage products; and 
           (8) accessory tools and equipment that are separate 
        detachable units with an ordinary useful life of less than 12 
        months used in producing a direct effect upon the product. 
        Machinery, equipment, implements, tools, accessories, 
        appliances, contrivances, and furniture and fixtures, except 
        those listed in this clause are not included within this 
        exemption. 
           (b) For purposes of this subdivision, "agricultural 
        production" includes, but is not limited to, horticulture, 
        floriculture, maple syrup harvesting, and the raising of pets, 
        fur-bearing animals, research animals, horses, farmed cervidae 
        as defined in section 17.451, subdivision 2, llamas as defined 
        in section 17.455, subdivision 2, and ratitae as defined in 
        section 17.453, subdivision 3. 
           [EFFECTIVE DATE.] This section is effective for sales and 
        purchases made after December 31, 2003. 
           Sec. 13.  Minnesota Statutes 2002, section 297A.69, 
        subdivision 3, is amended to read: 
           Subd. 3.  [FARM MACHINERY REPAIR AND REPLACEMENT PARTS.] 
        Repair and replacement parts, except tires, used for maintenance 
        or repair of farm machinery, logging equipment, and aquaculture 
        production equipment are exempt, if the part replaces a farm 
        machinery part assigned a specific or generic part number by the 
        manufacturer of the farm machinery.  
           [EFFECTIVE DATE.] This section is effective for sales and 
        purchases made after June 30, 2003. 
           Sec. 14.  Minnesota Statutes 2002, section 297A.69, 
        subdivision 4, is amended to read: 
           Subd. 4.  [FARM MACHINERY, EQUIPMENT, AND FENCING.] The 
        following machinery, equipment, and fencing is exempt: 
           (1) farm machinery is exempt.; 
           (2) logging equipment, including chain saws used for 
        commercial logging; 
           (3) fencing used for the containment of farmed cervidae, as 
        defined in section 17.451, subdivision 2; 
           (4) primary and backup generator units used to generate 
        electricity for the purpose of operating farm machinery, 
        aquacultural production equipment, or logging equipment, or 
        providing light or space heating necessary for the production of 
        livestock, dairy animals, dairy products, or poultry and poultry 
        products; and 
           (5) aquaculture production equipment.  
           [EFFECTIVE DATE.] This section is effective for sales and 
        purchases made after June 30, 2003. 
           Sec. 15.  Minnesota Statutes 2002, section 297B.025, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [NONCOLLECTOR VEHICLE.] Purchase or use of 
        a passenger automobile as defined in section 168.011, 
        subdivision 7, shall be taxed pursuant to section 297B.02, 
        subdivision 2, if the passenger automobile is (1) is in the 
        tenth or subsequent year of vehicle life, and (2) is not an 
        above-market automobile as designated by the registrar of motor 
        vehicles does not have a resale value of $3,000 or more, as 
        determined using nationally recognized sources of information on 
        automobile resale values, as designated by the registrar of 
        motor vehicles. 
           The registrar of motor vehicles shall prepare, and 
        distribute to all deputy motor vehicle registrars by July 15, 
        1985, a listing by make, model, and year of above-market 
        automobiles.  Except as provided by subdivision 2, the registrar 
        must include in the list all automobiles with a resale value of 
        $3,000 or more, as determined using nationally recognized 
        sources of information on automobile resale values.  The 
        registrar shall revise the list by February 1 of each year.  The 
        initial list and all subsequent revisions must include only 
        those automobiles which are in the tenth or subsequent year of 
        vehicle life.  
           [EFFECTIVE DATE.] This section is effective for vehicles 
        purchased after June 30, 2003. 
           Sec. 16.  Minnesota Statutes 2002, section 297B.025, 
        subdivision 2, is amended to read: 
           Subd. 2.  [COLLECTOR VEHICLE.] A passenger automobile that 
        is registered under section 168.10, subdivision 1a, 1b, 1c, 1d, 
        or 1h, or a fire truck registered under section 168.10, 
        subdivision 1c, shall be taxed under section 297B.02, 
        subdivision 3, and the registrar shall not designate as an 
        above-market automobile a passenger automobile or a fire truck 
        registered under those subdivisions.  If the vehicle is 
        subsequently registered in another class not under section 
        168.10, subdivision 1a, 1b, 1c, 1d, or 1h, within one year of 
        the date of registration under those subdivisions, it shall be 
        subject to the full excise tax imposed under subdivision 1. 
           [EFFECTIVE DATE.] This section is effective for vehicles 
        purchased after December 31, 2003. 
           Sec. 17.  Minnesota Statutes 2002, section 297B.035, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [ORDINARY COURSE OF BUSINESS.] Except as 
        provided in this section, motor vehicles purchased for resale in 
        the ordinary course of business or used by any motor vehicle 
        dealer, as defined in section 168.011, subdivision 21, who is 
        licensed under section 168.27, subdivision 2 or 3, which bear 
        dealer plates as authorized by section 168.27, subdivision 16, 
        shall be exempt from the provisions of this chapter. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 18.  [REPEALER.] 
           (a) Minnesota Statutes 2002, section 297A.72, subdivision 
        1, is repealed effective for exemption certificates received for 
        sales occurring after June 30, 2003. 
           (b) Minnesota Statutes 2002, section 297A.97, is repealed 
        effective for sales and purchases occurring after December 31, 
        2003. 
           (c) Minnesota Rules, parts 8130.0800, subparts 5 and 12; 
        8130.1300; 8130.1600, subpart 5; 8130.1700, subparts 3 and 4; 
        8130.4800, subpart 2; 8130.7500, subpart 5; 8130.8000; and 
        8130.8300, are repealed effective the day following final 
        enactment. 

                                   ARTICLE 7 
                      DEPARTMENT SPECIAL TAXES INITIATIVES 
           Section 1.  Minnesota Statutes 2002, section 115B.24, 
        subdivision 8, is amended to read: 
           Subd. 8.  [PENALTIES; ENFORCEMENT.] The audit, penalty and 
        enforcement provisions applicable to corporate franchise taxes 
        imposed under chapter 290 apply to the taxes imposed under 
        section 115B.22 and those provisions shall be administered by 
        the commissioner.  
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 2.  Minnesota Statutes 2002, section 295.50, 
        subdivision 9b, is amended to read: 
           Subd. 9b.  [PATIENT SERVICES.] (a) "Patient services" means 
        inpatient and outpatient services and other goods and services 
        provided by hospitals, surgical centers, or health care 
        providers.  They include the following health care goods and 
        services provided to a patient or consumer: 
           (1) bed and board; 
           (2) nursing services and other related services; 
           (3) use of hospitals, surgical centers, or health care 
        provider facilities; 
           (4) medical social services; 
           (5) drugs, biologicals, supplies, appliances, and 
        equipment; 
           (6) other diagnostic or therapeutic items or services; 
           (7) medical or surgical services; 
           (8) items and services furnished to ambulatory patients not 
        requiring emergency care; 
           (9) emergency services; and 
           (10) covered services listed in section 256B.0625 and in 
        Minnesota Rules, parts 9505.0170 to 9505.0475. 
           (b) "Patient services" does not include:  
           (1) services provided to nursing homes licensed under 
        chapter 144A; and 
           (2) examinations for purposes of utilization reviews, 
        insurance claims or eligibility, litigation, and employment, 
        including reviews of medical records for those purposes; 
           (3) services provided by community residential mental 
        health facilities licensed under Minnesota Rules, parts 
        9520.0500 to 9520.0690; 
           (4) services provided by community support programs and 
        family community support programs approved under Minnesota 
        Rules, parts 9535.1700 to 9535.1760; 
           (5) services provided by community mental health centers as 
        defined in section 245.62, subdivision 2; 
           (6) services provided by assisted living programs and 
        congregate housing programs; and 
           (7) hospice care services. 
           [EFFECTIVE DATE.] This section is effective for gross 
        revenues received after December 31, 2002. 
           Sec. 3.  Minnesota Statutes 2002, 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 295.57 295.59: 
           (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) (17); 
           (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) (17); 
           (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 otherwise exempt under this chapter; 
           (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) (14) government payments received by a regional 
        treatment center; 
           (16) payments received for hospice care services; 
           (17) (15) payments received by a health care provider for 
        hearing aids and related equipment or prescription eyewear 
        delivered outside of Minnesota; 
           (18) (16) 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; 
        and 
           (19) payments received for services provided by:  assisted 
        living programs and congregate housing programs; and 
           (20) (17) 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 gross 
        revenues received after December 31, 2002. 
           Sec. 4.  Minnesota Statutes 2002, section 297F.01, 
        subdivision 21a, is amended to read: 
           Subd. 21a.  [UNLICENSED SELLER.] "Unlicensed seller" means 
        anyone who is not licensed under section 297F.03 or 461.12 to 
        sell the particular product to the purchaser or possessor of the 
        product. 
           [EFFECTIVE DATE.] This section is effective July 1, 2003. 
           Sec. 5.  Minnesota Statutes 2002, section 297F.01, 
        subdivision 23, is amended to read: 
           Subd. 23.  [WHOLESALE SALES PRICE.] "Wholesale sales price" 
        means the established price stated on the price list in effect 
        at the time of sale for which a manufacturer or person sells a 
        tobacco product to a distributor, exclusive of any discount, 
        promotional offer, or other reduction.  For purposes of this 
        subdivision, "price list" means the manufacturer's price at 
        which tobacco products are made available for sale to all 
        distributors on an ongoing basis. 
           [EFFECTIVE DATE.] This section is effective July 1, 2003. 
           Sec. 6.  Minnesota Statutes 2002, section 297F.06, 
        subdivision 4, is amended to read: 
           Subd. 4.  [TOBACCO PRODUCTS USE TAX.] The tobacco products 
        use tax does not apply to the possession, use, or storage of 
        tobacco products in quantities of: that have an aggregate cost 
        in any calendar month to the consumer of $100 or less. 
           (1) not more than 50 cigars; 
           (2) not more than ten ounces snuff or snuff powder; 
           (3) not more than one pound smoking or chewing tobacco or 
        any other tobacco product in the possession of any one consumer. 
           [EFFECTIVE DATE.] This section is effective July 1, 2003. 
           Sec. 7.  Minnesota Statutes 2002, section 297F.20, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [PENALTIES FOR FAILURE TO FILE OR PAY.] (a) 
        A person or consumer required to file a return, report, or other 
        document with the commissioner who fails to do so is guilty of a 
        misdemeanor. 
           (b) A person or consumer required to pay or to collect and 
        remit a tax under this chapter, who fails to do so when 
        required, is guilty of a misdemeanor. 
           [EFFECTIVE DATE.] This section is effective for acts 
        committed on or after July 1, 2003. 
           Sec. 8.  Minnesota Statutes 2002, section 297F.20, 
        subdivision 2, is amended to read: 
           Subd. 2.  [PENALTIES FOR KNOWING FAILURE TO FILE OR PAY.] 
        (a) A person or consumer required to file a return, report, or 
        other document with the commissioner, who knowingly, rather than 
        accidentally, inadvertently, or negligently, fails to file it 
        when required, is guilty of a gross misdemeanor.  
           (b) A person or consumer required to pay or to collect and 
        remit a tax under this chapter, who knowingly, rather than 
        accidentally, inadvertently, or negligently, fails to file it 
        when required, is guilty of a gross misdemeanor. 
           [EFFECTIVE DATE.] This section is effective for acts 
        committed on or after July 1, 2003. 
           Sec. 9.  Minnesota Statutes 2002, section 297F.20, 
        subdivision 3, is amended to read: 
           Subd. 3.  [FALSE OR FRAUDULENT RETURNS; PENALTIES.] (a) A 
        person or consumer who files with the commissioner a return, 
        report, or other document, or who maintains or provides invoices 
        subject to review by the commissioner under this chapter, known 
        by the person or consumer to be fraudulent or false concerning a 
        material matter, is guilty of a felony. 
           (b) A person or consumer who knowingly aids or assists in, 
        or advises in the preparation or presentation of a return, 
        report, invoice, or other document that is fraudulent or false 
        concerning a material matter, whether or not the falsity or 
        fraud is committed with the knowledge or consent of the 
        person or consumer authorized or required to present the return, 
        report, invoice, or other document, is guilty of a felony. 
           [EFFECTIVE DATE.] This section is effective for acts 
        committed on or after July 1, 2003. 
           Sec. 10.  Minnesota Statutes 2002, section 297F.20, 
        subdivision 6, is amended to read: 
           Subd. 6.  [UNSTAMPED CIGARETTES; UNTAXED TOBACCO PRODUCTS.] 
        (a) A person, other than a licensed distributor or a consumer, 
        who possesses, receives, or transports more than 200 but fewer 
        than 5,000 unstamped cigarettes, or up to $100 $350 worth of 
        untaxed tobacco products is guilty of a misdemeanor. 
           (b) A person, other than a licensed distributor or a 
        consumer, who possesses, receives, or transports 5,000 or more, 
        but fewer than 20,001 unstamped cigarettes, or up to $500 more 
        than $350 but less than $1,400 worth of untaxed tobacco products 
        is guilty of a gross misdemeanor. 
           (c) A person, other than a licensed distributor or a 
        consumer, who possesses, receives, or transports more than 
        20,000 unstamped cigarettes, or $500 $1,400 or more worth of 
        untaxed tobacco products is guilty of a felony. 
           (d) For purposes of this subdivision, an individual in 
        possession of more than 4,999 unstamped cigarettes, or more than 
        $350 worth of untaxed tobacco products, is presumed not to be a 
        consumer. 
           [EFFECTIVE DATE.] This section is effective for acts 
        committed on or after July 1, 2003. 
           Sec. 11.  Minnesota Statutes 2002, section 297F.20, 
        subdivision 9, is amended to read: 
           Subd. 9.  [PURCHASES FROM UNLICENSED SELLERS.] (a) No 
        retailer or subjobber shall purchase cigarettes or tobacco 
        products from any person who is not licensed under section 
        297F.03 as a licensed distributor or subjobber. 
           (b) A retailer, or subjobber, or consumer who purchases 
        from an unlicensed seller more than 200 but fewer than 5,000 
        cigarettes or up to $100 $350 worth of tobacco products is 
        guilty of a misdemeanor. 
           (b) (c) A retailer, or subjobber, or consumer who 
        purchases from an unlicensed seller 5,000 or more, but fewer 
        than 20,001 cigarettes or up to $500 more than $350 but less 
        than $1,400 worth of untaxed tobacco products is guilty of a 
        gross misdemeanor. 
           (c) (d) A retailer, or subjobber, or consumer who 
        purchases from an unlicensed seller more than 20,000 cigarettes 
        or $500 $1,400 or more worth of tobacco products is guilty of a 
        felony. 
           [EFFECTIVE DATE.] This section is effective for acts 
        committed on or after July 1, 2003. 
           Sec. 12.  Minnesota Statutes 2002, section 297I.01, 
        subdivision 9, is amended to read: 
           Subd. 9.  [GROSS PREMIUMS.] "Gross premiums" means total 
        premiums paid by policyholders and applicants of policies, 
        whether received in the form of money or other valuable 
        consideration, on property, persons, lives, interests and other 
        risks located, resident, or to be performed in this state, but 
        excluding consideration and premiums for reinsurance assumed 
        from other insurance companies.  The term "gross premiums" 
        includes the total consideration paid to bail bond agents for 
        bail bonds.  For title insurance companies, "gross premiums" 
        means the charge for title insurance made by a title insurance 
        company or its agents according to the company's rate filing 
        approved by the commissioner of commerce without a deduction for 
        commissions paid to or retained by the agent.  Gross premiums of 
        a title insurance company does not include any other charge or 
        fee for abstracting, searching, or examining the title, or 
        escrow, closing, or other related services.  The term "gross 
        premiums" includes any workers' compensation special 
        compensation fund premium surcharge pursuant to section 176.129. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 13.  Minnesota Statutes 2002, section 297I.20, is 
        amended to read: 
           297I.20 [GUARANTY ASSOCIATION ASSESSMENT OFFSET OFFSETS 
        AGAINST PREMIUM TAXES.] 
           Subdivision 1.  [GUARANTY ASSOCIATION ASSESSMENT OFFSETS.] 
        (a) An insurance company may offset against its premium tax 
        liability to this state any amount paid for assessments made for 
        insolvencies which occur after July 31, 1994, under sections 
        60C.01 to 60C.22; and any amount paid for assessments made after 
        July 31, 1994, under Minnesota Statutes 1992, sections 61B.01 to 
        61B.16, or under sections 61B.18 to 61B.32 as follows: 
           (1) Each such assessment shall give rise to an amount of 
        offset equal to 20 percent of the amount of the assessment for 
        each of the five calendar years following the year in which the 
        assessment was paid. 
           (2) The amount of offset initially determined for each 
        taxable year is the sum of the amounts determined under clause 
        (1) for that taxable year. 
           (b)(1) Each year the commissioner shall compare total 
        guaranty association assessments levied over the preceding five 
        calendar years to the sum of all premium tax and corporate 
        franchise tax revenues collected from insurance companies, 
        without reduction for any guaranty association assessment offset 
        in the preceding calendar year, referred to in this subdivision 
        as "preceding year insurance tax revenues." 
           (2) If total guaranty association assessments levied over 
        the preceding five years exceed the preceding year insurance tax 
        revenues, insurance companies must be allowed only a 
        proportionate part of the premium tax offset calculated under 
        paragraph (a) for the current calendar year. 
           (3) The proportionate part of the premium tax offset 
        allowed in the current calendar year is determined by 
        multiplying the amount calculated under paragraph (a) by a 
        fraction.  The numerator of the fraction equals the preceding 
        year insurance tax revenues, and its denominator equals total 
        guaranty association assessments levied over the preceding 
        five-year period. 
           (4) The proportionate part of the premium tax offset that 
        is not allowed must be carried forward to subsequent tax years 
        and added to the amount of premium tax offset calculated under 
        paragraph (a) prior to application of the limitation imposed by 
        this paragraph. 
           (5) Any amount carried forward from prior years must be 
        allowed before allowance of the offset for the current year 
        calculated under paragraph (a). 
           (6) The premium tax offset limitation must be calculated 
        separately for (i) insurance companies subject to assessment 
        under sections 60C.01 to 60C.22, and (ii) insurance companies 
        subject to assessment under Minnesota Statutes 1992, sections 
        61B.01 to 61B.16, or 61B.18 to 61B.32. 
           (7) When the premium tax offset is limited by this 
        provision, the commissioner shall notify affected insurance 
        companies on a timely basis for purposes of completing premium 
        and corporate franchise tax returns.  
           (8) The guaranty associations created under sections 60C.01 
        to 60C.22, Minnesota Statutes 1992, sections 61B.01 to 61B.16, 
        and 61B.18 to 61B.32, shall provide the commissioner with the 
        necessary information on guaranty association assessments. 
           (c)(1) If the offset determined by the application of 
        paragraphs (a) and (b) exceeds the insurance company's premium 
        tax liability under this section prior to allowance of the 
        credit for premium taxes, then the insurance company may carry 
        forward the excess, referred to in this subdivision as the 
        "carryforward credit" to subsequent taxable years. 
           (2) The carryforward credit is allowed as an offset against 
        premium tax liability for the first succeeding year to the 
        extent that the premium tax liability for that year exceeds the 
        amount of the allowable offset for the year determined under 
        paragraphs (a) and (b). 
           (3) The carryforward credit must be reduced, but not below 
        zero, by the amount of the carryforward credit allowed as an 
        offset against the premium tax under this paragraph.  The 
        remainder, if any, of the carryforward credit must be carried 
        forward to succeeding taxable years until the entire 
        carryforward credit has been credited against the insurance 
        company's liability for premium tax under this chapter if 
        applicable for that taxable year. 
           (d) When an insurer has offset against taxes its payment of 
        an assessment of the Minnesota life and health guaranty 
        association, and the association pays the insurer a refund with 
        respect to the assessment under Minnesota Statutes 1992, section 
        61B.07, subdivision 6, or 61B.24, subdivision 6, then the refund 
        reduces the insurer's carryforward credit under paragraph (c).  
        If the refund exceeds the amount of the carryforward credit, the 
        excess amount must be repaid to the state by the insurers to the 
        extent of the offset in the manner the commissioner requires. 
           Subd. 2.  [JOINT UNDERWRITING ASSOCIATION OFFSET.] An 
        assessment made pursuant to section 62I.06, subdivision 6, shall 
        be deductible by the member from past or future premium taxes 
        due the state. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 14.  [REVISOR'S INSTRUCTION.] 
           In the next edition of Minnesota Rules, the revisor shall 
        delete any references to the sections repealed in section 15, 
        paragraph (a). 
           Sec. 15.  [REPEALER.] 
           (a) Minnesota Statutes 2002, sections 294.01; 294.02; 
        294.021; 294.03; 294.06; 294.07; 294.08; 294.09; 294.10; 294.11; 
        and 294.12, are repealed effective the day following final 
        enactment. 
           (b) Minnesota Rules, parts 8125.1000; 8125.1300, subpart 1; 
        and 8125.1400, are repealed effective the day following final 
        enactment. 

                                   ARTICLE 8 
               DEPARTMENT COLLECTIONS AND COMPLIANCE INITIATIVES 
           Section 1.  [270.278] [PENALTY FOR FILING CERTAIN DOCUMENTS 
        AGAINST DEPARTMENT OF REVENUE EMPLOYEES.] 
           Subdivision 1.  [DEFINITIONS.] (a) "Recording office" means 
        a county recorder, registrar of titles, or secretary of state in 
        this state or another state. 
           (b) "Filing party" means the person or persons requesting 
        or causing another person to request that the recording office 
        accept documents or instruments for recording or filing. 
           Subd. 2.  [INVALID DOCUMENTS NAMING THE COMMISSIONER OR 
        DEPARTMENT OF REVENUE EMPLOYEES.] Filing a document, including a 
        nonconsensual common law lien under section 514.99, that 
        purports to create a claim against the commissioner of revenue 
        or an employee of the department of revenue based on performance 
        or nonperformance of duties by the commissioner or employee is 
        invalid unless accompanied by a specific order from a court of 
        competent jurisdiction authorizing the filing of the document or 
        unless a specific statute authorizes the filing of the document. 
           Subd. 3.  [CIVIL PENALTY.] If a filing party causes a 
        document described in subdivision 2 to be recorded in a 
        recording office, the commissioner may assess a penalty against 
        the filing party of $1,000 per document filed, payable to the 
        general fund.  An order assessing a penalty under this section 
        is reviewable administratively under section 289A.65 and is 
        appealable to tax court under chapter 271.  The penalty is 
        collected and paid in the same manner as income tax.  The 
        penalty is in addition to any other remedy available to the 
        commissioner of revenue or to an employee of the department of 
        revenue against whom the document has been filed.  
           [EFFECTIVE DATE.] This section is effective for documents 
        filed on or after July 1, 2003. 
           Sec. 2.  Minnesota Statutes 2002, section 270.69, is 
        amended by adding a subdivision to read: 
           Subd. 16.  [ATTACHMENT TO PROCEEDS OF PROPERTY.] Any lien 
        imposed under this section attaches to the proceeds of property 
        with the same priority that the lien has with respect to the 
        property itself.  "Proceeds of property" means proceeds from the 
        sale, lease, license, exchange, or other disposition of the 
        property, including insurance proceeds arising from the loss or 
        destruction of the property. 
           [EFFECTIVE DATE.] This section is effective for all liens, 
        whether imposed prior to, on, or after the day following final 
        enactment. 
           Sec. 3.  Minnesota Statutes 2002, section 270.701, 
        subdivision 2, is amended to read: 
           Subd. 2.  [NOTICE OF SALE.] The commissioner shall as soon 
        as practicable after the seizure of the property give notice of 
        sale of the property to the owner, in the manner of service 
        prescribed in subdivision 1.  In the case of personal property, 
        the notice shall be served at least 10 days prior to the sale.  
        In the case of real property, the notice shall be served at 
        least four weeks prior to the sale.  The commissioner shall also 
        cause public notice of each sale to be made.  In the case of 
        personal property, notice shall be posted at least 10 days prior 
        to the sale at the county courthouse for the county where the 
        seizure is made, and in not less than two other public 
        places.  For purposes of this requirement, the Internet is a 
        public place for posting the information.  In the case of real 
        property, six weeks' published notice shall be given prior to 
        the sale, in a newspaper published or generally circulated in 
        the county.  The notice of sale provided in this subdivision 
        shall specify the property to be sold, and the time, place, 
        manner and conditions of the sale.  Whenever levy is made 
        without regard to the 30-day period provided in section 270.70, 
        subdivision 2, public notice of sale of the property seized 
        shall not be made within the 30-day period unless section 
        270.702 (relating to sale of perishable goods) is applicable.  
           [EFFECTIVE DATE.] This section is effective for notices of 
        sales posted on or after the day following final enactment. 
           Sec. 4.  Minnesota Statutes 2002, section 270.701, is 
        amended by adding a subdivision to read: 
           Subd. 7.  [SALE OF SEIZED SECURITIES.] (a) At the time of 
        levy on securities, the commissioner shall provide notice to the 
        taxpayer that the securities may be sold after ten days from the 
        date of seizure.  
           (b) If the commissioner levies upon nonexempt publicly 
        traded securities and the value of the securities is less than 
        or equal to the total obligation for which the levy is done, 
        after ten days the person who possesses or controls the 
        securities shall liquidate the securities in a commercially 
        reasonable manner.  After liquidation, the person shall transfer 
        the proceeds to the commissioner, less any applicable 
        commissions or fees, or both, which are charged in the normal 
        course of business.  
           (c) If the commissioner levies upon nonexempt publicly 
        traded securities and the value of the securities exceeds the 
        total amount of the levy, the owner of the securities may, 
        within seven days after receipt of the department's notice of 
        levy given pursuant to subdivision 1, instruct the person who 
        possesses or controls the securities which securities are to be 
        sold to satisfy the obligation.  If the owner does not provide 
        instructions for liquidation, the person who possesses or 
        controls the securities shall liquidate the securities in an 
        amount sufficient to pay the obligation, plus any applicable 
        commissions or fees, or both, which are charged in the normal 
        course of business, beginning with the nonexempt securities 
        purchased most recently.  After liquidation, the person who 
        possesses or controls the securities shall transfer to the 
        commissioner the amount of money needed to satisfy the levy. 
           [EFFECTIVE DATE.] This section is effective for sales of 
        securities seized on or after the day following final enactment. 
           Sec. 5.  Minnesota Statutes 2002, section 270.72, 
        subdivision 2, is amended to read: 
           Subd. 2.  [DEFINITIONS.] For purposes of this section, the 
        following terms have the meanings given.  
           (a) "Taxes" are mean all taxes payable to the commissioner 
        including penalties and interest due on the taxes. 
           (b) "Delinquent taxes" do not include a tax liability if 
        (i) an administrative or court action which contests the amount 
        or validity of the liability has been filed or served, (ii) the 
        appeal period to contest the tax liability has not expired, or 
        (iii) the applicant has entered into a payment agreement and is 
        current with the payments.  
           (c) "Applicant" means an individual if the license is 
        issued to or in the name of an individual or the corporation or 
        partnership if the license is issued to or in the name of a 
        corporation or partnership.  "Applicant" also means an officer 
        of a corporation, a member of a partnership, or an individual 
        who is liable for delinquent taxes, either for the entity for 
        which the license is at issue or for another entity for which 
        the liability was incurred, or personally as a licensee.  In the 
        case of a license transfer, "applicant" also means both the 
        transferor and the transferee of the license.  "Applicant" also 
        means any holder of a license. 
           (d) "License" includes means any permit, registration, 
        certification, or other form of approval authorized by statute 
        or rule to be issued by the state or a political subdivision of 
        the state as a condition of doing business or conducting a 
        trade, profession, or occupation in Minnesota, specifically 
        including, but not limited to, a contract for space rental at 
        the Minnesota state fair and authorization to operate 
        concessions or rides at county and local fairs, festivals, or 
        events. 
           (e) "Licensing authority" includes the Minnesota state fair 
        board and county and local boards or governing bodies. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 6.  Minnesota Statutes 2002, section 270A.03, 
        subdivision 2, is amended to read: 
           Subd. 2.  [CLAIMANT AGENCY.] "Claimant agency" means any 
        state agency, as defined by section 14.02, subdivision 2, the 
        regents of the University of Minnesota, any district court of 
        the state, any county, any statutory or home rule charter city 
        presenting a claim for a municipal hospital or a public library 
        or a municipal ambulance service, a hospital district, a private 
        nonprofit hospital that leases its building from the county in 
        which it is located, any public agency responsible for child 
        support enforcement, any public agency responsible for the 
        collection of court-ordered restitution, and any public agency 
        established by general or special law that is responsible for 
        the administration of a low-income housing program, and the 
        Minnesota collection enterprise as defined in section 16D.02, 
        subdivision 8, for the purpose of collecting the costs imposed 
        under section 16D.11. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 7.  Minnesota Statutes 2002, section 289A.31, 
        subdivision 3, is amended to read: 
           Subd. 3.  [TRANSFEREES AND FIDUCIARIES.] The amounts of the 
        following liabilities are, except as otherwise provided in 
        section 289A.38, subdivision 13, assessed, collected, and paid 
        in the same manner and subject to the same provisions and 
        limitations as a deficiency in a tax imposed by chapter 290, 
        including any provisions of law for the collection of taxes: 
           (1) the liability, at law or in equity, of a transferee of 
        property of a taxpayer for tax or overpayment of a refund, 
        including interest, additional amounts, and additions to the tax 
        or overpayment provided by law, imposed upon the taxpayer by 
        chapter 290 or provided for in chapter 290A; and 
           (2) the liability of a fiduciary under subdivision 4 for 
        the payment of tax from the estate of the taxpayer.  The 
        liability may reflect the amount of tax shown on the return or 
        any deficiency in tax.  
           [EFFECTIVE DATE.] This section is effective for refunds 
        paid on or after the day following final enactment. 
           Sec. 8.  Minnesota Statutes 2002, section 289A.31, 
        subdivision 4, is amended to read: 
           Subd. 4.  [TAX AS A PERSONAL DEBT OF A FIDUCIARY.] The A 
        tax imposed by chapter 290 and an overpayment of a refund 
        provided for in chapter 290A, and interest and penalties, is a 
        personal debt of the taxpayer from the time the liability 
        arises, regardless of when the time for discharging the 
        liability by payment occurs.  The debt is, in the case of the 
        personal representative of the estate of a decedent and in the 
        case of any fiduciary, that of the individual in the 
        individual's official or fiduciary capacity only, unless the 
        individual has voluntarily distributed the assets held in that 
        capacity without reserving sufficient assets to pay the tax, 
        interest, and penalties, in which event the individual is 
        personally liable for the deficiency.  
           [EFFECTIVE DATE.] This section is effective for taxes 
        imposed and property tax refunds claimed on or after the day 
        following final enactment. 
           Sec. 9.  Minnesota Statutes 2002, section 289A.36, 
        subdivision 7, is amended to read: 
           Subd. 7.  [APPLICATION TO COURT FOR ENFORCEMENT OF 
        SUBPOENA.] (a) Disobedience of subpoenas issued under this 
        section shall be punished by the district court of the district 
        in which the party served with the subpoena is located, in the 
        same manner as contempt of the district court.  
           (b) Disobedience of a subpoena issued under subdivision 9 
        shall be punished by the district court for Ramsey county in the 
        same manner as contempt of the district court.  In addition to 
        contempt remedies, the court may issue any order the court deems 
        reasonably necessary to enforce compliance with the subpoena. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 10.  Minnesota Statutes 2002, section 289A.36, is 
        amended by adding a subdivision to read: 
           Subd. 9.  [ACCESS TO RECORDS IN CONNECTION WITH EXAMINATION 
        OF BUSINESSES LOCATED OUTSIDE THE STATE.] (a) In order to 
        determine whether a business located outside the state of 
        Minnesota is required to file a return under this chapter, the 
        commissioner may examine the relevant records and files of the 
        business. 
           (b) To the full extent permitted by the Minnesota and 
        United States constitutions, the commissioner may compel 
        production of those relevant records and files by subpoena.  The 
        subpoena may be served on the secretary of state along with the 
        address to which service of the subpoena is to be sent and a fee 
        of $50.  The secretary of state shall forward a copy of the 
        subpoena to the business using the procedures for service of 
        process in section 5.25, subdivision 6.  
           (c) The commissioner shall pay the reasonable cost of 
        producing records subject to subpoena under this subdivision if: 
           (1) the subpoenaed party cannot produce the records without 
        undue burden; and 
           (2) the examination made pursuant to paragraph (a) shows 
        that the subpoenaed party is not required to file a return under 
        this chapter. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 11.  Minnesota Statutes 2002, section 289A.36, is 
        amended by adding a subdivision to read: 
           Subd. 10.  [PENALTY.] In addition to sanctions imposed 
        under subdivision 7, a penalty of $250 per day is imposed on any 
        business that is in violation of a court order to comply with a 
        subpoena that is seeking information necessary for the 
        commissioner to be able to determine whether the business is 
        required to file a return or pay a tax.  The maximum penalty is 
        $25,000.  Upon the request of the commissioner, the court shall 
        determine the amount of the penalty and enter it as a judgment 
        in favor of the commissioner.  The penalty is not payable until 
        the judgment is entered. 
           [EFFECTIVE DATE.] This section is effective for violations 
        of court orders to enforce subpoenas issued on or after the day 
        following final enactment. 
           Sec. 12.  Minnesota Statutes 2002, section 297A.85, is 
        amended to read: 
           297A.85 [CANCELLATION OF PERMITS.] 
           The commissioner may cancel a permit if one of the 
        following conditions occurs: 
           (1) the permit holder has not filed a sales or use tax 
        return for at least one year; 
           (2) the permit holder has not reported any sales or use tax 
        liability on the permit holder's returns for at least two years; 
        or 
           (3) the permit holder requests cancellation of the permit; 
        or 
           (4) the permit is subject to cancellation pursuant to 
        section 297A.86, subdivision 2, paragraph (a). 
           [EFFECTIVE DATE.] This section is effective for 
        cancellations of permits done on or after the day following 
        final enactment. 
           Sec. 13.  [REPEALER.] 
           Minnesota Statutes 2002, section 270.691, subdivision 8, is 
        repealed effective the day following final enactment. 

                                   ARTICLE 9 
                     CENTRAL LAKES REGION SANITARY DISTRICT 
           Section 1.  [DEFINITIONS.] 
           Subdivision 1.  [APPLICATION.] The terms defined in this 
        section shall have the meaning given them unless otherwise 
        provided or indicated by the context.  
           Subd. 2.  [ACQUISITION AND BETTERMENT.] "Acquisition" and 
        "betterment" shall have the meanings given them in Minnesota 
        Statutes, section 475.51.  
           Subd. 3.  [AGENCY.] "Agency" means the Minnesota pollution 
        control agency created and established by Minnesota Statutes, 
        chapter 116.  
           Subd. 4.  [AGRICULTURAL PROPERTY.] "Agricultural property" 
        means land as is classified agricultural land within the meaning 
        of Minnesota Statutes, section 273.13, subdivision 23.  
           Subd. 5.  [CURRENT COSTS OF ACQUISITION, BETTERMENT, AND 
        DEBT SERVICE.] "Current costs of acquisition, betterment, and 
        debt service" means interest and principal estimated to be due 
        during the budget year on bonds issued to finance the 
        acquisition and betterment and all other costs of acquisition 
        and betterment estimated to be paid during the budget year from 
        funds other than bond proceeds and federal or state grants. 
           Subd. 6.  [DISTRICT DISPOSAL SYSTEM.] "District disposal 
        system" means any and all of the interceptors or treatment works 
        owned, constructed, or operated by the board unless designated 
        by the board as local sanitary sewer facilities.  
           Subd. 7.  [CENTRAL LAKES REGION SANITARY DISTRICT AND 
        DISTRICT.] "Central Lakes Region Sanitary District" and 
        "district" mean the area over which the sanitary sewer board has 
        jurisdiction, including those parts of the Douglas county 
        townships of Carlos, Brandon, La Grand, Leaf Valley, Miltona, 
        and Moe, as more particularly described by metes and bounds in 
        the comprehensive plan adopted under section 4.  
           Subd. 8.  [INTERCEPTOR.] "Interceptor" means any sewer and 
        necessary appurtenances to it, including but not limited to, 
        mains, pumping stations, and sewage flow regulating and 
        measuring stations, that is designed for or used to conduct 
        sewage originating in more than one local government unit, or 
        that is designed or used to conduct all or substantially all the 
        sewage originating in a single local government unit from a 
        point of collection in that unit to an interceptor or treatment 
        works outside that unit, or that is determined by the board to 
        be a major collector of sewage used or designed to serve a 
        substantial area in the district.  
           Subd. 9.  [LOCAL GOVERNMENT UNIT OR GOVERNMENT 
        UNIT.] "Local government unit" or "government unit" means any 
        municipal or public corporation or governmental or political 
        subdivision or agency located in whole or in part in the 
        district, authorized by law to provide for the collection and 
        disposal of sewage. 
           Subd. 10.  [LOCAL SANITARY SEWER FACILITIES.] "Local 
        sanitary sewer facilities" means all or any part of any disposal 
        system in the district other than the district disposal system.  
           Subd. 11.  [MUNICIPALITY.] "Municipality" means any 
        statutory or home rule charter city or town located in whole or 
        in part in the district.  
           Subd. 12.  [PERSON.] "Person" means any individual, 
        partnership, corporation, limited liability company, 
        cooperative, or other organization or entity, public or private. 
           Subd. 13.  [POLLUTION AND SEWER SYSTEM.] "Pollution" and 
        "sewer system" have the meanings given them in Minnesota 
        Statutes, section 115.01.  
           Subd. 14.  [SANITARY SEWER BOARD OR BOARD.] "Sanitary sewer 
        board" or "board" means the sanitary sewer board established for 
        the Central Lakes Region Sanitary District as provided in 
        section 2.  
           Subd. 15.  [SEWAGE.] "Sewage" means all liquid or 
        water-carried waste products from whatever sources derived, 
        together with the groundwater infiltration and surface water 
        that may be present.  
           Subd. 16.  [TOTAL COSTS OF ACQUISITION AND BETTERMENT AND 
        COSTS OF ACQUISITION AND BETTERMENT.] "Total costs of 
        acquisition and betterment" and "costs of acquisition and 
        betterment" mean all acquisition and betterment expenses that 
        are permitted to be financed out of bond proceeds issued in 
        accordance with section 12, subdivision 4, whether or not the 
        expenses are in fact financed out of the bond proceeds.  
           Subd. 17.  [TREATMENT WORKS AND DISPOSAL 
        SYSTEM.] "Treatment works" and "disposal system" have the 
        meanings given them in Minnesota Statutes, section 115.01. 
           Sec. 2.  [SANITARY SEWER BOARD.] 
           Subdivision 1.  [ESTABLISHMENT.] A sanitary sewer board 
        with jurisdiction in the Central Lakes Region Sanitary District 
        is established as a public corporation and political subdivision 
        of the state with perpetual succession and all the rights, 
        powers, privileges, immunities, and duties that may be validly 
        granted to or imposed upon a municipal corporation, as provided 
        in this article.  
           Subd. 2.  [MEMBERS AND SELECTION.] The number of board 
        members and method by which they are selected is as follows:  
        The governing body of any municipality located in whole or part 
        within the district must each separately select one member.  
        Upon the board's ordering of a project to construct a sanitary 
        sewer, the governing body of any municipality must appoint one 
        additional member for each full 800 special assessments included 
        in the ordered project to be levied against property located in 
        the municipality.  The term of each member is subject to the 
        approval of the voting members of the city council or town board.
           Subd. 3.  [TIME LIMIT; ALTERNATIVE APPOINTMENT.] The 
        initial board members must be selected as provided in 
        subdivision 2 within 60 days after this article is effective.  A 
        successor must be selected at any time within 60 days before the 
        expiration of the predecessor's term in the same manner as the 
        predecessor was selected.  Any vacancy on the board must be 
        filled within 60 days after it occurs.  If a selection is not 
        made as provided within the time prescribed, the chief judge of 
        the seventh judicial district of the Minnesota district court, 
        on application by any interested person, shall appoint an 
        eligible person to the board. 
           Subd. 4.  [VACANCIES.] If the office of any board member 
        becomes vacant, the vacancy shall be filled for the unexpired 
        term in the manner as provided for selection of the member who 
        vacated the office.  The office shall be deemed vacant under the 
        conditions specified in Minnesota Statutes, section 351.02.  
           Subd. 5.  [TERMS OF OFFICE.] The terms of all board members 
        shall be for one, two, three, or four calendar years to be 
        determined in accordance with subdivision 2 by the governing 
        body selecting such member.  Terms shall expire on January 1 of 
        a calendar year, except that each member shall serve until a 
        successor has been duly selected and qualified.  
           Subd. 6.  [REMOVAL.] A board member may be removed by the 
        unanimous vote of the appointing governing body with or without 
        cause.  
           Subd. 7.  [QUALIFICATIONS.] Each board member may, but need 
        not be a resident of the district and may, but need not be an 
        elected public official.  
           Subd. 8.  [CERTIFICATES OF SELECTION; OATH OF OFFICE.] A 
        certificate of selection to a seat of every board member, 
        stating the seat's term, must be made by the respective 
        municipal clerk.  The certificate, with the approval attached by 
        other authority, if required, must be filed with the secretary 
        of state.  A copy must be furnished to the board member and the 
        secretary of the board.  Each member must qualify by taking and 
        subscribing to the oath of office prescribed by the Minnesota 
        Constitution, article V, section 6.  The oath, duly certified by 
        the official administering the same, must be filed with the 
        secretary of state and the secretary of the board. 
           Subd. 9.  [COMPENSATION OF BOARD MEMBERS.] Each board 
        member may be paid a per diem compensation to attend meetings 
        and for other services in an amount as may be specifically 
        authorized by the board from time to time.  Per diem 
        compensation must not exceed $4,000 for any member in any one 
        year.  All members of the board may be reimbursed for all 
        reasonable expenses incurred in the performance of their duties 
        as determined by the board.  
           Sec. 3.  [GENERAL PROVISION FOR ORGANIZATION AND OPERATION 
        OF BOARD.] 
           Subdivision 1.  [OFFICERS MEETINGS; SEAL.] A majority of 
        the members is a quorum at all meetings of the board, but a 
        lesser number may meet and adjourn from time to time and compel 
        the attendance of absent members.  The board must meet regularly 
        at the time and place as the board by resolution designates.  
        Special meetings may be held at any time upon call of the chair 
        or any two members, upon written notice sent by mail to each 
        member at least three days before the meeting, or upon the 
        notice as the board by resolution may provide, or without notice 
        if each member is present or files with the secretary a written 
        consent to the meeting either before or after the meeting.  
        Except as otherwise provided in this article, any action within 
        the authority of the board may be taken by the affirmative vote 
        of a majority of the board at a regular or adjourned regular 
        meeting or at a duly held special meeting, but in any case only 
        if a quorum is present.  All meetings of the board must be open 
        to the public as provided in Minnesota Statutes, chapter 13D.  
           Subd. 2.  [CHAIR.] The board must elect a chair from its 
        membership.  The term of the chair expires on January 1 of each 
        year.  The chair presides at all meetings of the board, if 
        present, and must perform all other duties and functions usually 
        incumbent upon the officer, and all administrative functions 
        assigned to the chair by the board.  The board must elect a 
        vice-chair from its membership to act for the chair during a 
        temporary absence or disability.  
           Subd. 3.  [SECRETARY AND TREASURER.] The board must select 
        one or more persons who may, but need not be a member of the 
        board, to act as its secretary and treasurer.  The secretary and 
        treasurer hold office at the pleasure of the board, subject to 
        the terms of any contract of employment that the board may enter 
        into with the secretary or treasurer.  The secretary must record 
        the minutes of all meetings of the board, and is custodian of 
        all books and records of the board except those the board 
        entrusts to the custody of a designated employee.  The board may 
        appoint a deputy to perform any and all functions of either the 
        secretary or the treasurer.  A secretary or treasurer or a 
        deputy of either who is not a member of the board shall not have 
        any right to vote.  
           Subd. 4.  [GENERAL MANAGER.] The board may appoint a 
        general manager who shall be selected solely upon the basis of 
        training, experience, and other qualifications.  The general 
        manager serves at the pleasure of the board and at a 
        compensation to be determined by the board.  The general manager 
        need not be a resident of the district and may also be selected 
        by the board to serve as either secretary or treasurer, or both, 
        of the board.  The general manager must attend all meetings of 
        the board but must not vote.  The general manager must:  
           (1) see that all resolutions, rules, regulations, or orders 
        of the board are enforced; 
           (2) appoint and remove, upon the basis of merit and 
        fitness, all subordinate officers and regular employees of the 
        board except the secretary and the treasurer and their deputies; 
           (3) present to the board plans, studies, and other reports 
        prepared for board purposes and recommend to the board for 
        adoption such measures as the general manager considers 
        necessary to enforce or carry out the powers and duties of the 
        board, or for the efficient administration of the affairs of the 
        board; 
           (4) keep the board fully advised as to its financial 
        condition, and prepare and submit to the board, and to the 
        governing bodies of the local government units, the board's 
        annual budget and other financial information the board 
        requests; 
           (5) recommend to the board for adoption rules recommended 
        as necessary for the efficient operation of a district disposal 
        system and all local sanitary sewer facilities over which the 
        board may assume responsibility as provided in section 17; and 
           (6) perform other duties as may be prescribed by the board. 
           Subd. 5.  [PUBLIC EMPLOYEES.] The general manager and all 
        persons employed by the general manager and public employees, 
        and have all the rights and duties conferred on public employees 
        under the Minnesota Public Employment Labor Relations Act.  The 
        compensation and conditions of employment of the employees is 
        not governed by any rule applicable to state employees in the 
        classified service or by Minnesota Statutes, chapter 15A, except 
        as specifically authorized by law. 
           Subd. 6.  [PROCEDURES.] The board must adopt resolutions or 
        bylaws establishing procedures for board action, personnel 
        administration, record keeping, investment policy, approving 
        claims, authorizing or making disbursements, safekeeping funds, 
        and audit of all financial operations of the board.  
           Subd. 7.  [SURETY BONDS AND INSURANCE.] The board may 
        procure surety bonds for its officers and employees in such 
        amounts as are considered necessary to assure proper performance 
        of their duties and proper accounting for funds in their custody.
        It may buy insurance against risks to property and liability of 
        the board and its officers, agents, and employees for personal 
        injuries or death and property damage and destruction in the 
        amounts as it considers necessary or desirable, with the force 
        and effect stated in Minnesota Statutes, chapter 466.  
           Sec. 4.  [COMPREHENSIVE PLAN.] 
           Subdivision 1.  [BOARD PLAN AND PROGRAM.] The board shall 
        adopt a comprehensive plan for the collection, treatment, and 
        disposal of sewage in the district for designated periods that 
        the board considers proper and reasonable.  The board must 
        prepare and adopt subsequent comprehensive plans for the 
        collection, treatment, and disposal of sewage in the district 
        for each succeeding designated period as the board considers 
        proper and reasonable.  The plan must take into account the 
        preservation and best and most economic use of water and other 
        natural resources in the area; the preservation, use, and 
        potential for use of lands adjoining waters of the state to be 
        used for the disposal of sewage; and the impact such a disposal 
        system will have on present and future land use in the affected 
        area.  The plans shall include the following: 
           (1) the exact legal description of the boundaries of the 
        district; 
           (2) the general location of needed interceptors and 
        treatment works; 
           (3) a description of the area that is to be served by the 
        various interceptors and treatment works; 
           (4) a long-range capital improvements program; and 
           (5) such other details as the board deems appropriate. 
        In developing the plans, the board shall consult with persons 
        designated by the governing bodies of any municipal or public 
        corporation or governmental or political subdivision or agency 
        within or without the district to represent such entities and 
        shall consider the data, resources, and input offered to the 
        board by such entities and any planning agency acting on behalf 
        of one or more such entities.  Each plan, when adopted, must be 
        followed in the district and may be revised as often as the 
        board considers necessary.  
           Subd. 2.  [REPORT TO DOUGLAS COUNTY.] Upon adoption of any 
        comprehensive plan that establishes or reestablishes the 
        boundaries of the district, the board must supply the 
        appropriate Douglas county offices with the boundaries of the 
        district.  
           Subd. 3.  [COMPREHENSIVE PLANS; HEARING.] Before adopting 
        any later comprehensive plan, the board must hold a public 
        hearing on the proposed plan at the time and place in the 
        district it determines.  The hearing may be continued from time 
        to time.  Not less than 45 days before the hearing, the board 
        must publish notice of it in a newspaper or newspapers having 
        general circulation in the district stating the date, time, and 
        place of the hearing, and the place where the proposed plan may 
        be examined by any interested person.  At the hearing, all 
        interested persons must be permitted to present their views on 
        the plan.  
           Subd. 4.  [MUNICIPAL PLANS AND PROGRAMS; COORDINATION WITH 
        BOARD'S RESPONSIBILITIES.] Before undertaking the construction 
        of new sewers or other disposal facilities or the substantial 
        alteration or improvement of any existing sewers or other 
        disposal facilities, each local government unit may, and must if 
        the construction or alteration of any sewage disposal facilities 
        is contemplated by the government unit, adopt a comprehensive 
        plan and program for the collection, treatment, and disposal of 
        sewage for which the local government unit is responsible, 
        coordinated with the board's comprehensive plan, and may revise 
        the plan as often as deemed necessary.  Each local plan or 
        revision must be submitted to the board for review and is 
        subject to the approval of the board as to those features of the 
        plan affecting the board's responsibilities as determined by the 
        board.  Any features disapproved by the board must be modified 
        in accordance with the board's recommendations.  No construction 
        project involving those features may be undertaken by the local 
        government unit unless its governing body first finds the 
        project to be in accordance with the government unit's 
        comprehensive plan and program as approved by the board.  Before 
        approval by the board of the comprehensive plan and program of 
        any local government unit in the district, no construction 
        project may be undertaken by the government unit unless approval 
        of the project is first gotten from the board as to those 
        features of the project affecting the board's responsibilities 
        as determined by the board.  
           Sec. 5.  [SEWER SERVICE FUNCTION.] 
           Subdivision 1.  [DUTY OF BOARD; ACQUISITION OF EXISTING 
        FACILITIES; NEW FACILITIES.] At any time after the board has 
        become organized, it must assume ownership of all existing 
        interceptors and treatment works that are needed to implement 
        the board's comprehensive plan for the collection, treatment, 
        and disposal of sewage in the district, in the manner and 
        subject to the conditions prescribed in subdivision 2, and must 
        design, acquire, construct, better, equip, operate, and maintain 
        all additional interceptors and treatment works that will be 
        needed for this purpose.  The board must assume ownership of all 
        treatment works owned by a local government unit if any part of 
        those treatment works are so needed. 
           Subd. 2.  [METHOD OF ACQUISITION; EXISTING DEBT.] The board 
        may require any local government unit to transfer to the board 
        all of its right, title, and interest in any interceptors or 
        treatment works and all necessary appurtenances to them owned by 
        the local government unit that will be needed for the purpose 
        stated in subdivision 1.  Appropriate instruments of conveyance 
        for all the property must be executed and delivered to the board 
        by the proper officers of each local government unit concerned.  
        The board, upon assuming ownership of any of the interceptors or 
        treatment works, is obligated to pay to the local government 
        unit amounts sufficient to pay, when due, all remaining 
        principal of and interest on bonds issued by the local 
        government unit for the acquisition or betterment of the 
        interceptors or treatment works.  The board must also assume the 
        same obligation with respect to any other existing disposal 
        system owned by a local government unit that the board 
        determines to have been replaced or rendered useless by the 
        district disposal system.  The amounts to be paid under this 
        subdivision may be offset against any amount to be paid to the 
        board by the local government unit as provided in section 8.  
        The board is not obligated to pay the local government unit 
        anything in addition to the assumption of debt provided for in 
        this subdivision.  
           Subd. 3.  [EXISTING JOINT POWERS BOARD.] Effective December 
        31, 2004, or an earlier date as determined by the board, the 
        corporate existence of the joint powers board created by 
        agreement among local government units under Minnesota Statutes, 
        section 471.59, to provide the financing, acquisition, 
        construction, improvement, extension, operation, and maintenance 
        of facilities for the collection, treatment, and disposal of 
        sewage is terminated.  All persons regularly employed by the 
        joint powers board on that date become employees of the board, 
        and may at their option become members of the retirement system 
        applicable to persons employed directly by the board or may 
        continue as members of a public retirement association under any 
        other law, to which they belonged before that date, and retain 
        all pension rights that they may have the other law and all 
        other rights to which they are entitled by contract or law.  The 
        board must make the employer's contributions to pension funds of 
        its employees.  The employees must perform duties as may be 
        prescribed by the board.  On December 31, 2004, or the earlier 
        date, all funds of the joint powers board and all later 
        collections of taxes, special assessments, or service charges, 
        or any other sums due the joint powers board, or levied or 
        imposed by or for the joint powers board, must be transferred to 
        or made payable to the sanitary sewer board and the county 
        auditor must remit the sums to the board.  The local government 
        units otherwise entitled to the cash, taxes, assessments, or 
        service charges must be credited with the amounts, and the 
        credits must be offset against any amounts to be paid by them to 
        the board as provided in section 8.  On December 31, 2004, or 
        the earlier chosen date, the board shall succeed to and become 
        vested with all right, title, and interest in and to any 
        property, real or personal, owned or operated by the joint 
        powers board.  Before that date, the proper officers of the 
        joint powers board must execute and deliver to the sanitary 
        sewer board all deeds, conveyances, bills of sale, and other 
        documents or instruments required to vest in the board good and 
        marketable title to all the real or personal property, but this 
        article operates as the transfer and conveyance to the board of 
        the real or personal property, if not transferred, as may be 
        required under the law or under the circumstances.  On December 
        31, 2004, or the earlier chosen date, the board is obligated to 
        pay or assume all outstanding bonds or other debt and all 
        contracts or obligations incurred by the joint powers board, and 
        all bonds, obligations, or debts of the joint powers board 
        outstanding on the date this article is effective, are validated.
           Subd. 4.  [CONTRACTS BETWEEN LOCAL GOVERNMENT UNITS.] The 
        board may terminate, upon 60 days' mailed notice to the 
        contracting parties, any existing contract between or among 
        local government units requiring payments by a local government 
        unit to any other local government unit for the use of a 
        disposal system, or as reimbursement of capital costs of a 
        disposal system, all or part of which are needed to implement 
        the board's comprehensive plan.  All contracts between or among 
        local government units for use of a disposal system entered into 
        after the date on which this article becomes effective must be 
        submitted to the board for approval as to those features 
        affecting the board's responsibilities as determined by the 
        board and are not effective until the approval is given.  
           Sec. 6.  [SEWAGE COLLECTION AND DISPOSAL; POWERS.] 
           Subdivision 1.  [POWERS.] In addition to all other powers 
        conferred upon the board in this article, the board has the 
        powers specified in this section. 
           Subd. 2.  [DISCHARGE OF TREATED SEWAGE.] The board may 
        discharge the effluent from any treatment works operated by it 
        into any waters of the state, subject to approval of the agency 
        if required and in accordance with any effluent or water quality 
        standards lawfully adopted by the agency, any interstate agency, 
        or any federal agency having jurisdiction.  
           Subd. 3.  [USE OF DISTRICT SYSTEM.] The board may require 
        any person or local government unit to provide for the discharge 
        of any sewage, directly or indirectly, into the district 
        disposal system, or to connect any disposal system or a part of 
        it with the district disposal system wherever reasonable 
        opportunity is provided; may regulate the manner in which the 
        connections are made; may require any person or local government 
        unit discharging sewage into the disposal system to provide 
        preliminary treatment for it; may prohibit the discharge into 
        the district disposal system of any substance it determines will 
        or may be harmful to the system or any persons operating it; may 
        prohibit any extraneous flow into the system; and may require 
        any local government unit to discontinue the acquisition, 
        betterment, or operation of any facility for the unit's disposal 
        system wherever and so far as adequate service is or will be 
        provided by the district disposal system.  
           Sec. 7.  [BUDGET.] 
           Except as otherwise specifically provided in this article, 
        the board is subject to Minnesota Statutes, section 275.065.  
        The board shall prepare and adopt, on or before September 15 of 
        each year, a budget showing for the following calendar year or 
        other fiscal year determined by the board, sometimes referred to 
        in this article as the budget year, estimated receipts of money 
        from all sources, including but not limited to, payments by each 
        local government unit, federal or state grants, taxes on 
        property, and funds on hand at the beginning of the year, and 
        estimated expenditures for:  
           (1) costs of operation, administration, and maintenance of 
        the district disposal system; 
           (2) cost acquisition and betterment of the district 
        disposal system; and 
           (3) debt service, including principal and interest, on 
        general obligation bonds and certificates issued under section 
        12, obligations and debts assumed under section 5, subdivisions 
        2 and 3, and any money judgments entered by a court of competent 
        jurisdiction.  Expenditures within these general categories, and 
        others that the board may from time to time determine, must be 
        itemized in the detail the board prescribes.  The board and its 
        officers, agents, and employees must not spend money for any 
        purpose other than debt service without having set forth the 
        expense in the budget, nor may they spend in excess of the 
        amount in the budget, and an excess expenditure or one for an 
        unauthorized purpose is enforceable except as the obligation of 
        the person incurring it; but the board may amend the budget at 
        any time by transferring from one budgetary purpose to another 
        any sums, except money for debt service and bond proceeds, or by 
        increasing expenditures in any amount by which cash receipts 
        during the budget year actually exceed the total amounts 
        designated in the original budget.  The creation of any 
        obligation pursuant to section 12 or the receipts of any federal 
        or state grant is a sufficient budget designation of the 
        proceeds for the purpose for which it is authorized, and of the 
        tax or other revenue pledged to pay the obligation and interest 
        on it, whether or not specifically included in any annual budget.
           Sec. 8.  [ALLOCATION OF COSTS.] 
           Subdivision 1.  [DEFINITION OF CURRENT COSTS.] The 
        estimated cost of administration, operation, maintenance, and 
        debt service of the district disposal system to be paid by the 
        board in each fiscal year and the estimated costs of acquisition 
        and betterment of the system that are to be paid during the year 
        from funds other than state or federal grants and bond proceeds 
        and all other previously unallocated payments made by the board 
        under this article in the fiscal year are referred to as current 
        costs.  
           Subd. 2.  [COLLECTION OF CURRENT COSTS.] Current costs 
        shall be collected as described in paragraphs (a) and (b).  
           (a) Current costs may be allocated to local government 
        units in the district on an equitable basis as the board may 
        from time to time determine by resolution to be fair and 
        reasonable and in the best interests of the district.  In making 
        the allocation, the board may provide for the deferment of 
        payment of all or part of current costs, the reallocation of 
        deferred costs, and the reimbursement of reallocated deferred 
        costs on an equitable basis as the board may from time to time 
        determine by resolution to be fair and reasonable and in the 
        best interests of the district.  The adoption or revision of a 
        method of allocation, deferment, reallocation, or reimbursement 
        used by the board shall be made by the affirmative vote of at 
        least two-thirds of the members of the board.  
           (b) Upon approval of at least two-thirds of the members of 
        the board, the board may provide for direct collection of 
        current costs by monthly or other periodic billing of sewer 
        users.  
           Sec. 9.  [GOVERNMENT UNITS; PAYMENTS TO BOARD.] 
           Subdivision 1.  [OBLIGATIONS OF GOVERNMENT UNITS TO THE 
        BOARD.] Each government unit must pay to the board all sums 
        charged to it as provided in section 8, at the times and in the 
        manner determined by the board.  The governing body of each 
        government unit must take all action necessary to provide the 
        funds required for the payments and to make the payments when 
        due.  
           Subd. 2.  [AMOUNTS DUE BOARD; WHEN PAYABLE.] Charges 
        payable to the board by local government units may be made 
        payable at the times during each year as the board determines, 
        after it has taken into account the dates on which taxes, 
        assessments, revenue collections, and other funds become 
        available to the government unit required to pay such charges.  
           Subd. 3.  [GENERAL POWERS OF GOVERNMENT UNITS; LOCAL TAX 
        LEVIES.] To accomplish any duty imposed on it by the board, the 
        governing body of every government unit may, in addition to the 
        powers granted in this article and in any other law or charter, 
        exercise the powers granted any municipality by Minnesota 
        Statutes, chapters 117, 412, 429, and 475, and sections 115.46, 
        444.075, and 471.59, with respect to the area of the government 
        unit located in the district.  In addition, the governing body 
        of every government unit located in whole or in part within the 
        district may levy taxes upon all taxable property in that part 
        of the government unit located in this district for all or a 
        part of the amount payable to the board.  If the levy is for 
        only part of the amount payable to the board, the governing body 
        of the government unit may levy additional taxes on the entire 
        net tax capacity of all taxable property of the government unit 
        for all or a part of the balance remaining payable.  The taxes 
        levied under this subdivision must be assessed and extended as a 
        tax upon the taxable property by the county auditor for the next 
        calendar year, free from any limit of rate or amount imposed by 
        law or charter.  The tax must be collected and remitted in the 
        same manner as other general taxes of the government unit. 
           Subd. 4.  [ALTERNATE LEVY.] Instead of levying taxes on all 
        taxable property under subdivision 3, the governing body of the 
        government unit may elect to levy taxes upon the net tax 
        capacity of all taxable property, except agricultural property, 
        and upon only 25 percent of the net tax capacity of all 
        agricultural property, in that part of the government unit 
        located in the district for all or a part of the amount payable 
        to the board.  If the levy is for only part of the amount 
        payable to the board, the governing body may levy additional 
        taxes on the entire net tax capacity of all the property, 
        including agricultural property, for all or a part of the 
        balance.  The taxes must be assessed and extended as a tax upon 
        the taxable property by the county auditor for the next calendar 
        year, free from any limit of rate or amount imposed by law or 
        charter, and must be collected and remitted in the same manner 
        as other general taxes of the government unit.  In computing the 
        tax capacity under this subdivision, the county auditor must 
        include only 25 percent of the net tax capacity of all taxable 
        agricultural property and 100 percent of the net tax capacity of 
        all other taxable property in that part of the government unit 
        located within the district and, in spreading the levy, the 
        auditor must apply the tax rate upon the same percentages of 
        agricultural and nonagricultural taxable property.  If the 
        government unit elects to levy taxes under this subdivision and 
        any of the taxable agricultural property is reclassified so as 
        to no longer qualify as agricultural property, it is subject to 
        additional taxes.  The additional taxes must be in an amount 
        which, together with any additional taxes previously levied and 
        the estimated collection of additional taxes subsequently levied 
        on any other reclassified property, is determined by the 
        governing body of the government unit to be at least sufficient 
        to reimburse each other government unit for any excess current 
        costs reallocated to it as a result of the board deferring any 
        current cost under section 8 on account of the difference 
        between the amount of the current costs initially allocated to 
        each government unit based on the total net tax capacity of all 
        taxable property in the district and the amount of the current 
        costs reallocated to each government unit based on 25 percent of 
        the net tax capacity of agricultural property and 100 percent of 
        the net tax capacity of all other taxable property in the 
        district.  Any reimbursement must be made on terms which the 
        board determines to be just and reasonable.  These additional 
        taxes may be levied in any greater amount as the governing body 
        of the government unit determines to be appropriate, but the 
        total amount of the additional taxes must not exceed the 
        difference between: 
           (1) the total amount of taxes that would have been levied 
        upon the reclassified property to help pay current costs charged 
        in each year to the government unit by the board if that part of 
        the costs, if any, initially allocated by the board solely on 
        the basis of 100 percent of the net tax capacity of all taxable 
        property in the district and then reallocated on the basis of 
        inclusion of only 25 percent of the net tax capacity of 
        agricultural property in the district was not reallocated and if 
        the amount of taxes levied by the government unit each year 
        under this subdivision to pay current costs had been based on 
        the initial allocation and had been imposed upon 100 percent of 
        the net tax capacity of all taxable property, including 
        agricultural property, in that part of the government unit 
        located in the district; and 
           (2) the amount of taxes levied each year under this 
        subdivision upon reclassified property, plus interest on the 
        cumulative amount of the difference accruing each year at the 
        approximate average annual rate borne by bonds issued by the 
        board and outstanding at the beginning of the year or, if no 
        bonds are then outstanding, at a rate of interest which may be 
        determined by the board, but not exceeding the maximum rate of 
        interest that may then be paid on bonds issued by the board.  
        The additional taxes are a lien upon the reclassified property 
        assessed in the same manner and for the same duration as all 
        other ad valorem taxes levied upon the property.  The additional 
        taxes must be extended against the reclassified property on the 
        tax list for the current year and must be collected and remitted 
        in the same manner as other general taxes of the government 
        unit.  No penalties or additional interest may be levied on the 
        additional taxes if timely paid. 
           Subd. 5.  [DEBT LIMIT.] Any ad valorem taxes levied under 
        subdivision 3, by the governing body of a government unit to pay 
        any sums charged to it by the board pursuant to this article are 
        not subject to, or counted toward, any limit imposed by law on 
        the levy of taxes upon taxable property within any governmental 
        unit. 
           Subd. 6.  [DEFICIENCY TAX LEVIES.] If the local government 
        unit fails to make a payment to the board when due, the board 
        may certify to the Douglas county auditor the amount required 
        for payment, with interest at not more than the maximum rate per 
        year authorized at that time on assessments under Minnesota 
        Statutes, section 429.061, subdivision 2.  The auditor must levy 
        and extend the amount as a tax upon all taxable property in that 
        part of the government unit located in the district, for the 
        next calendar year, free from any limits imposed by law or 
        charter.  The tax must be collected in the same manner as other 
        general taxes of the government unit, and the proceeds, when 
        collected, shall be paid by the county treasurer to the 
        treasurer of the board and credited to the government unit for 
        which the tax was levied. 
           Sec. 10.  [PUBLIC HEARING AND SPECIAL ASSESSMENTS.] 
           Subdivision 1.  [PUBLIC HEARING REQUIREMENT ON SPECIFIC 
        PROJECT.] Before the board orders any project involving the 
        acquisition or betterment of any interceptor or treatment works, 
        all or a part of the cost of which will be allocated to local 
        government units under section 8 as current costs, the board 
        must hold a public hearing on the proposed project following two 
        publications in a newspaper or newspapers having general 
        circulation in the district, stating the time and place of the 
        hearing, the general nature and location of the project, the 
        estimated total cost of acquisition and betterment, that portion 
        of costs estimated to be paid out of federal and state grants, 
        and that portion of costs estimated to be allocated to each 
        local government unit affected.  The two publications must be a 
        week apart and the hearing must be at least three days after the 
        last publication.  Not less than 45 days before the hearing, 
        notice must also be mailed to each clerk of all local government 
        units in the district, but failure to give mailed notice of any 
        defects in the notice does not invalidate the proceedings.  The 
        project may include all or part of one or more interceptors or 
        treatment works.  A hearing is not required with respect to a 
        project, no part of the costs of which are to be allocated to 
        local government units as the current cost of acquisition, 
        betterment, and debt service.  
           Subd. 2.  [NOTICE TO BENEFITED PROPERTY OWNERS.] If the 
        governing body of a local government unit in the district 
        proposes to assess against benefited property within units, all 
        or any part of the allocable costs of the project as provided in 
        subdivision 5, the governing body must, not less than ten days 
        before the hearing provided for in subdivision 1 mail a notice 
        of the hearing to the owner of each parcel within the area 
        proposed to be specially assessed and must also give one week's 
        published notice of the hearing.  The notice of hearing must 
        contain the same information provided in the notice published by 
        the board under subdivision 1, and in addition, a description of 
        the area proposed to be assessed by the local government unit.  
        To give mailed notice, owners must be those shown to be on the 
        records of the county auditor or, in a county where tax 
        statements are mailed by the county treasurer, on the records of 
        the county treasurer; but other appropriate records may be used 
        for this purpose.  However, for properties that are tax exempt 
        or subject to taxation on a gross earnings basis and are not 
        listed on the records of the county auditor or the county 
        treasurer, the owners may be ascertained by any practicable 
        means and mailed notice must be given to them.  Failure to give 
        mailed notice or any defects in the notice does not invalidate 
        the proceedings of the board or the local governing body.  
           Subd. 3.  [BOARD PROCEEDINGS PERTAINING TO HEARING.] Before 
        adoption of the resolution calling for the hearing, the board 
        shall get from the district engineer, or other competent person 
        of the board's selection, a preliminary report advising whether 
        the proposed project is feasible, necessary, and cost-effective, 
        and whether it should best be made as proposed or in connection 
        with another project, and the estimated costs of the project as 
        recommended.  No error or omission in the report invalidates the 
        proceeding.  The board may also take steps before the hearing 
        that will, in its judgment, provide helpful information in 
        determining the desirability and feasibility of the project 
        including, but not limited to, preparation of plans and 
        specifications and advertisement for bids.  The hearing may be 
        adjourned from time to time and a resolution ordering the 
        project may be adopted at any time within six months after the 
        date of hearing.  In ordering the project, the board may reduce 
        but not increase the extent of the project as stated in the 
        notice of hearing, unless another hearing is held, and must find 
        that the project as ordered is in accordance with the 
        comprehensive plan and program adopted by the board under 
        section 4.  
           Subd. 4.  [EMERGENCY ACTION.] If the board by resolution 
        adopted by the affirmative vote of not less than two-thirds of 
        its members determines that an emergency exists requiring the 
        immediate purchase of materials or supplies or the making of 
        emergency repairs, it may order the purchase of the supplies and 
        materials and the making of the repairs before any hearing 
        required under this section.  But the board must set as early a 
        date as practicable for that hearing at the time it declares the 
        emergency.  All other provisions of this section must be 
        followed in giving notice of and conducting a hearing.  This 
        subdivision does not prevent the board or its agents from 
        purchasing maintenance supplies or incurring maintenance costs 
        without regard to the requirements of this section.  
           Subd. 5.  [POWER OF GOVERNMENT UNIT TO SPECIALLY ASSESS.] A 
        local government unit may specially assess all or part of the 
        costs of acquisition and betterment of any project ordered by 
        the board under this section.  A special assessment must be 
        levied in accordance with Minnesota Statutes, sections 429.051 
        to 429.081, except as otherwise provided in this subdivision.  
        No other provisions of Minnesota Statutes, chapter 429, apply.  
        For purposes of levying special assessments, the hearing on the 
        project required in subdivision 1 must serve as the hearing on 
        the making of the original improvement provided for by Minnesota 
        Statutes, section 429.051.  The area assessed may be less than 
        but must not exceed the area proposed to be assessed as stated 
        in the notice of hearing on the project provided for in 
        subdivision 2.  To determine the allocable cost of the project 
        to the local government units, the government unit may adopt one 
        of the procedures in paragraph (a) or (b).  
           (a) At any time after a contract is let for the project, 
        the local government unit may get from the board a current 
        written estimate, on the basis of historical and reasonably 
        projected data, of that part of the total cost of acquisition 
        and betterment of the project or of some part of the project 
        that will be allocated to the local government unit and the 
        number of years over which such costs will be allocated as 
        current costs of acquisition, betterment, and debt service under 
        section 8.  The board is not bound by this estimate for 
        allocating the costs of the project to local government units. 
           (b) The governing body may get from the board a written 
        statement showing, for the prior period that the governing body 
        designates, that part of the costs previously allocated to the 
        local government unit as current costs of acquisition, 
        betterment, and debt service only, of all or any part of the 
        project designated by the governing body.  In addition to the 
        allocable costs, the local government unit may include in the 
        total expense, as a basis for levying assessments, all other 
        expenses incurred directly by the local government unit in 
        connection with the project.  Special assessments levied by the 
        government unit with respect to previously allocated costs 
        ascertained under this paragraph are payable in equal annual 
        installments extending over a period not exceeding by more than 
        one year the number of years that the costs have been allocated 
        to the local government unit or the estimated useful life of the 
        project, or part of the project, whichever number of years is 
        the lesser.  No limit is placed on the number of times the 
        governing body of a local government unit may assess the 
        previously allocated costs not previously assessed by the 
        government unit.  The power to specially assess provided for in 
        this section is in addition and supplemental to all other powers 
        of local government units to levy special assessments. 
           Sec. 11.  [INITIAL COSTS.] 
           Subdivision 1.  [CONTRIBUTIONS OR ADVANCES FROM LOCAL 
        GOVERNMENT UNITS.] The board may, at the time it considers 
        necessary and proper, request from a local government unit 
        necessary money to defray the costs of any obligations assumed 
        under section 5 and the costs of administration, operation, and 
        maintenance.  Before making a request, the board must, by formal 
        resolution, determine the necessity for the money, setting forth 
        the purposes for which the money is needed and the estimated 
        amount for each purpose.  Upon receiving a request, the 
        governing body of each local government unit may provide for 
        payment of the amount requested as it considers fair and 
        reasonable.  The money may be paid out of general revenue funds 
        or any other available funds of any local government unit and 
        its governing body thereof may levy taxes to provide funds, free 
        from any existing limit imposed by law or charter.  Money may be 
        provided by government units with or without interest, but if 
        interest is charged it must not exceed five percent per year.  
        The board must credit the local government unit for the payments 
        in allocating current costs under section 8, on the terms and at 
        the times as are agreed to with the local government unit. 
           Subd. 2.  [LIMITED TAX LEVY.] The board may levy ad valorem 
        taxes on all taxable property in the district to defray any of 
        the costs described in subdivision 1, provided the costs have 
        not been defrayed by contribution under subdivision 1.  Before 
        certifying a levy to the county auditor, the board must 
        determine the need for the money to be derived from the levy by 
        formal resolution setting forth the purposes for which the tax 
        money will be used and the amount proposed to be used for each 
        purpose.  In allocating current costs under section 8, the board 
        must credit the government units for taxes collected under the 
        levy made under this subdivision on the terms and at the time 
        the board considers fair and reasonable and on terms consistent 
        with section 8, subdivision 2. 
           Sec. 12.  [BONDS CERTIFICATES AND OTHER OBLIGATIONS.] 
           Subdivision 1.  [BUDGET ANTICIPATION CERTIFICATES OF 
        INDEBTEDNESS.] (a) Before adopting its annual budget and in 
        anticipation of the collection of tax and other revenues 
        estimated and set forth by the board in the budget, the board 
        may by resolution, authorize the issuance, negotiation, and sale 
        in accordance with subdivision 5 in such form and manner and 
        upon such terms as it may determine of its negotiable general 
        obligation certificates of indebtedness in aggregate principal 
        amounts not exceeding 50 percent of the total amount of such tax 
        collections and other revenues and maturing not later than three 
        months after the close of the budget year in which issued.  
        Revenues listed in clauses (1) to (3) must not be anticipated 
        for this purpose: 
           (1) taxes already anticipated by the issuance of 
        certificates under subdivision 2; 
           (2) deficiency taxes levied pursuant to this subdivision; 
        and 
           (3) taxes levied for the payment of certificates issued 
        pursuant to subdivision 3. 
           (b) The proceeds of the sale of the certificates must be 
        used only for the purposes for which tax collections and other 
        revenues are to be expended under the budget. 
           (c) All tax collections and other revenues included in the 
        budget for the budget year, after the expenditures of tax 
        collections and other revenues in accordance with the budget, 
        must be irrevocably pledged and appropriated to a special fund 
        to pay the principal and interest on the certificates when due.  
           (d) If for any reason the tax collections and other 
        revenues are insufficient to pay the certificates and interest 
        when due, the board must levy a tax in the amount of the 
        deficiency on all taxable property in the district and must 
        appropriate this amount when received to the special fund.  
           Subd. 2.  [TAX LEVY ANTICIPATION CERTIFICATES OF 
        INDEBTEDNESS.] After a tax is levied by the board under section 
        11, subdivision 2, and certified to the county auditors in 
        anticipation of the collection of the tax, if the tax has not 
        been anticipated by the issuance of certificates under 
        subdivision 1, the board may, by resolution, authorize the 
        issuance, negotiation, and sale in accordance with subdivision 5 
        in the form and manner and on the terms and conditions as it 
        determines its negotiable general obligation tax levy 
        anticipation certificates of indebtedness in aggregate principal 
        amounts not exceeding 50 percent of the uncollected tax for 
        which no penalty for nonpayment or delinquency has been 
        attached.  The certificates must mature not later than April 1 
        in the year after the year in which the tax is collectible.  The 
        proceeds of the tax in anticipation of which the certificates 
        were issued and other funds that may become available must be 
        applied to the extent necessary to repay the certificates.  
           Subd. 3.  [EMERGENCY CERTIFICATES OF INDEBTEDNESS.] If in 
        any budget year the receipts of tax and other revenues for some 
        unforeseen cause become insufficient to pay the board's current 
        expenses, or if any calamity or other public emergency subjects 
        it to the necessity of making extraordinary expenditures, the 
        board may by resolution authorize the issuance, negotiation, and 
        sale in accordance with subdivision 5 in the form and manner and 
        on the terms and conditions as it may determine of its 
        negotiable general obligation certificates of indebtedness in an 
        amount sufficient to meet the deficiency, and the board must 
        levy on all taxable property in the district a tax sufficient to 
        pay the certificates and interest and shall appropriate all 
        collections of the tax to a special fund created for the payment 
        of the certificates and interest. 
           Subd. 4.  [GENERAL OBLIGATION BONDS.] The board may by 
        resolution authorize the issuance of general obligation bonds 
        maturing serially in one or more annual or semiannual 
        installments for the acquisition or betterment of any part of 
        the district disposal system, including but not limited to, the 
        payment of interest during construction and for a reasonable 
        period thereafter, or for the refunding of outstanding bonds, 
        certificates of indebtedness, or judgments.  The board must 
        pledge its full faith and credit and taxing power for the 
        payment of the bonds and shall provide for the issuance and sale 
        and for the security of the bonds in the manner provided in 
        Minnesota Statutes, chapter 475, and must have the same powers 
        and duties as a municipality issuing bonds under that law.  An 
        election is not required to authorize the issuance of bonds and 
        the debt limit of Minnesota Statutes, chapter 475, do not apply 
        to the bonds.  The board may also pledge for the payment of the 
        bonds and deduct from the amount of any tax levy required under 
        Minnesota Statutes, section 475.61, subdivision 1, any sums 
        receivable under section 9 or any state and federal grants 
        anticipated by the board and may covenant to refund the bonds if 
        and when and to the extent that for any reason the revenues, 
        together with other funds properly available and appropriated 
        for the purpose, are not sufficient to pay all principal and 
        interest due or about to become due; if the revenues have not 
        been anticipated by the issuance of certificates under 
        subdivision 1.  All bonds that have been or shall hereafter be 
        issued and sold in conformity with the provisions of this 
        subdivision, and otherwise in conformity with law, are hereby 
        authorized, legalized, and validated. 
           Subd. 5.  [MANNER OF SALE AND ISSUANCE OF 
        CERTIFICATES.] Certificates issued under subdivisions 1, 2, and 
        3 may be issued and sold by negotiation, without public sale, 
        and may be sold at a price equal to the percentage of their par 
        value, plus accrued interest, and bearing interest at the rate 
        or rates as may be determined by the board.  No election is 
        required to authorize the issuance of certificates.  
        Certificates must bear the same rate of interest after maturity 
        as before and the full faith and credit and taxing power of the 
        board must be pledged to the payment of the certificates.  
           Sec. 13.  [TAX LEVIES.] 
           The board may levy taxes to pay the bonds or other 
        obligations assumed by the district under section 5 and for debt 
        service of the district disposal system authorized in section 12 
        upon all taxable property within the district without limit of 
        rate or amount and without affecting the amount or rate of taxes 
        that may be levied by the board for other purposes or by any 
        local government unit in the district.  No other provision of 
        law relating to debt limit shall restrict or in any way limit 
        the power of the board to issue the bonds and certificates 
        authorized in section 12.  The board may also levy taxes as 
        provided in sections 9 and 11.  The county auditor must annually 
        assess and extend upon the tax rolls the part of the taxes 
        levied by the board in each year that is certified to the 
        auditor by the board.  The county treasurer must collect and 
        make settlement of the taxes with the treasurer of the board. 
           Sec. 14.  [DEPOSITORIES.] 
           The board must from time to time designate one or more 
        national or state banks or trust companies authorized to do a 
        banking business as official depositories for money of the 
        board, and must require the treasurer to deposit all or a part 
        of the money in those institutions.  The designation must be in 
        writing and must set forth all the terms and conditions on which 
        the deposits are made, and must be signed by the chair and 
        treasurer, and made a part of the minutes of the board.  A 
        designated bank or trust company must qualify as a depository by 
        furnishing a corporate surety bond or collateral in the amount 
        required by Minnesota Statutes, section 118A.03.  But, no bond 
        or collateral is required to secure any deposit insofar as it is 
        insured under federal law. 
           Sec. 15.  [MONEY; ACCOUNTS AND INVESTMENTS.] 
           Subdivision 1.  [RECEIPT AND APPLICATION.] All money 
        received by the board must be deposited or invested by the 
        treasurer and disposed of as the board directs in accordance 
        with its budget.  But any money that has been pledged or 
        dedicated by the board to the payment of obligations or interest 
        on them or expenses incident to them, or for any other specific 
        purpose authorized by law, must be paid by the treasurer into 
        the fund to which they have been pledged.  
           Subd. 2.  [FUNDS AND ACCOUNTS.] The board's treasurer must 
        establish funds and accounts as necessary or convenient to 
        handle the receipts and disbursements of the board in an orderly 
        fashion.  
           Subd. 3.  [DEPOSIT AND INVESTMENT.] The money on hand in 
        the board's funds and accounts may be deposited in the official 
        depositories of the board or invested as provided in this 
        subdivision.  The amount not currently needed or required by law 
        to be kept in cash on deposit may be invested in obligations 
        authorized by law for the investment of municipal sinking 
        funds.  The money may also be held under certificates of deposit 
        issued by any official depository of the board.  All investments 
        by the board must conform to an investment policy adopted by the 
        board as amended from time to time.  
           Subd. 4.  [BOND PROCEEDS.] The use of proceeds of all bonds 
        issued by the board for the acquisition and betterment of the 
        district disposal system, and the use, other than investment, of 
        all money on hand in any sinking fund or funds of the board must 
        be governed by Minnesota Statutes, chapter 475, this article, 
        and the resolutions authorizing the issuance of the bonds.  The 
        bond proceeds, when received, must be transferred to the 
        treasurer of the board for safekeeping, investment, and payment 
        of the costs for which they were issued.  
           Subd. 5.  [AUDIT.] The board must provide for and pay the 
        cost of an independent annual audit of its official books and 
        records by the state auditor or a certified public accountant.  
           Sec. 16.  [GENERAL POWERS OF BOARD.] 
           Subdivision 1.  [ALL NECESSARY OR CONVENIENT POWERS.] The 
        board has powers necessary or convenient to discharge the duties 
        imposed upon it by law.  The powers include those specified in 
        this article, but the express grant or enumeration of powers 
        does not limit the generality or scope of the grant of power in 
        this subdivision. 
           Subd. 2.  [LAWSUITS.] The board may sue or be sued.  
           Subd. 3.  [CONTRACTS.] The board may enter into any 
        contract necessary or proper for the exercise of its powers or 
        the accomplishment of its purposes.  
           Subd. 4.  [RULES.] The board may adopt rules relating to 
        the board's responsibilities and may provide penalties not 
        exceeding the maximum penalty specified for a misdemeanor, and 
        the cost of prosecution may be added to the penalties imposed.  
        Any rule prescribing a penalty for violation must be published 
        at least once in a newspaper having general circulation in the 
        district.  A violation may be prosecuted before any court in the 
        district having jurisdiction of misdemeanor, and every court has 
        jurisdiction of violations.  A peace officer of any municipality 
        in the district may make arrests for violations committed 
        anywhere in the district in the manner and with the effect as 
        for violations of municipal ordinances or for statutory 
        misdemeanors.  All fines collected must be deposited in the 
        treasury of the board, or may be allocated between the board and 
        the municipality in which the prosecution occurs on terms agreed 
        to by the board and the municipality.  
           Subd. 5.  [GIFTS; GRANTS.] The board may accept gifts, may 
        apply for and accept grants or loans of money or other property 
        from the United States, the state, or any person for any of its 
        purposes, may enter into any agreement required to get the gift, 
        grant, loan, or other property; and may hold, use, and dispose 
        of money or property in accordance with the terms of the gift, 
        grant, loan or agreement.  With respect to any loans or grants 
        of funds or real or personal property or other assistance from 
        any state or federal government or any agency or instrumentality 
        of the government, the board may contract to do and perform all 
        acts and things required as a condition or consideration under 
        state or federal law or rule or regulation, whether or not 
        included among the powers expressly granted to the board in this 
        article.  
           Subd. 6.  [JOINT POWERS.] The board may act under Minnesota 
        Statutes, section 471.59, or any other appropriate law providing 
        for joint or cooperative action between government units.  
           Subd. 7.  [RESEARCH; HEARINGS; INVESTIGATIONS; ADVISE.] The 
        board may conduct research studies and programs, collect and 
        analyze data, prepare reports, maps, charts, and tables, and 
        conduct all necessary hearings and investigations in connection 
        with the design, construction, and operation of the district 
        disposal system, and may advise and assist other government 
        units on system planning matters within the scope of its powers, 
        duties, and objectives, and may provide at the request of any 
        governmental unit other technical and administrative assistance 
        as the board considers appropriate for the government unit to 
        carry out the powers and duties vested in the government unit 
        under this article or imposed on or by the board.  
           Subd. 8.  [EMPLOYEES; CONTRACTORS; INSURANCE.] The board 
        may employ on the terms it considers advisable, persons or firms 
        performing engineering, legal, or other services of a 
        professional nature; require any employee to get and file with 
        it an individual bond or fidelity insurance policy; and procure 
        insurance in the amounts it considers necessary against 
        liability of the board or its officers or both, for personal 
        injury or death and property damage or destruction, with the 
        force and effect stated in Minnesota Statutes, chapter 466, and 
        against risks of damage to or destruction of any of its 
        facilities, equipment, or other property as it considers 
        necessary.  
           Subd. 9.  [PROPERTY.] The board may acquire by purchase, 
        lease, condemnation, gift, or grant, real or personal property 
        including positive and negative easements and water and air 
        rights, and it may construct, enlarge, improve, replace, repair, 
        maintain, and operate any interceptor, treatment works, or water 
        facility determined to be necessary or convenient for the 
        collection and disposal of sewage in the district.  Any local 
        government unit and the commissioners of transportation and 
        natural resources may convey to or permit the use of these 
        facilities owned or controlled by the board, subject to the 
        rights of the holders of any bonds issued with respect to them 
        with or without compensation and without an election or approval 
        by any other government unit or agency.  All powers conferred by 
        this subdivision may be exercised both within or outside the 
        district as may be necessary for the exercise by the board of 
        its powers or the accomplishment of its purposes.  The board may 
        hold, lease, convey, or otherwise dispose of such property for 
        its purposes, upon the terms and in the manner it deems 
        advisable.  Unless otherwise provided, the right to acquire 
        lands and property rights by condemnation must be exercised in 
        accordance with Minnesota Statutes, chapter 117, and must apply 
        to any property or interest in property owned by any local 
        government unit.  Property devoted to an actual public use at 
        the time, or held to be devoted to such use within a reasonable 
        time, must not be so acquired unless a court of competent 
        jurisdiction determines that the use proposed by the board is 
        paramount.  In case of property in actual public use, the board 
        may take possession of any property of which condemnation 
        proceedings have begun at any time after the issuance of a court 
        order appointing commissioners for its condemnation.  
           Subd. 10.  [RIGHTS-OF-WAY.] The board may construct or 
        maintain its systems or facilities in, along, on, under, over, 
        or through public waters, streets, bridges, viaducts, and other 
        public right-of-way without first getting a franchise from any 
        county or local government unit having jurisdiction over them.  
        The facilities must be constructed and maintained in accordance 
        with the ordinances and resolutions of the county or government 
        unit relating to construction, installation, and maintenance of 
        similar facilities on public properties and must not 
        unnecessarily obstruct the public use of the rights-of-way. 
           Subd. 11.  [DISPOSAL OF PROPERTY.] The board may sell, 
        lease, or otherwise dispose of any real or personal property 
        acquired by it that is no longer required to accomplish its 
        purposes.  The property may be sold in the manner provided by 
        Minnesota Statutes, section 469.065, insofar as practical.  The 
        board may give notice of sale it considers appropriate.  When 
        the board determines that any property or any part of the 
        district disposal system that has been acquired from a local 
        government unit without compensation is no longer required, but 
        is required as a local facility by the government unit from 
        which is was acquired, the board may by resolution transfer it 
        to the government unit.  
           Subd. 12.  [JOINT OPERATIONS.] The board may contract with 
        the United States or an agency of it, any state or agency of it, 
        or any regional public planning body in the state with 
        jurisdiction over any part of the district, or any other 
        municipal or public corporation, or governmental subdivision in 
        any state, for the joint use of any facility owned by the board 
        or the entity, for the operation by the entity of any system or 
        facility of the board, or for the performance on the board's 
        behalf of any service including, but not limited to, planning, 
        on the terms that may be agreed to by the contracting parties.  
        Unless designated by the board as a local sanitary sewer 
        facility, any treatment works or interceptor jointly used, or 
        operated on behalf of the board, as provided in this 
        subdivision, must be considered to be operated by the board to 
        include the facilities in the district disposal system.  
           Sec. 17.  [LOCAL FACILITIES.] 
           Subdivision 1.  [SANITARY SEWER FACILITIES.] Except as 
        otherwise provided in this article, local government units must 
        retain responsibility for the planning, design, acquisition, 
        betterment, operation, administration, and maintenance of all 
        local sanitary sewer facilities as provided by law.  
           Subd. 2.  [ASSUMPTION OF RESPONSIBILITY OVER LOCAL SANITARY 
        SEWER FACILITIES.] The board must upon request of any government 
        unit assume, either alone or jointly with the local government 
        unit, all or any part of the responsibility of the local 
        government unit described in subdivision 1.  Except as provided 
        in subdivision 4 and to exercise the responsibility, the board 
        has all the powers and duties elsewhere conferred in this 
        article with the same force and effect as if the local sanitary 
        sewer facilities were a part of the district disposal system.  
           Subd. 3.  [WATER AND STREET FACILITIES.] The board may, on 
        request of any governmental unit, enter into an agreement under 
        which the board may assume, either alone or jointly with such 
        unit, the responsibility to get and construct water and street 
        facilities in conjunction with any project for the acquisition 
        or betterment of the district disposal system or any project 
        undertaken by the board under subdivision 2.  Except as provided 
        in subdivision 4, and to exercise any responsibilities under 
        this subdivision, the board has all the powers and duties 
        elsewhere conferred in this article with the same force and 
        effect as if the water or street facilities were a part of the 
        district disposal system.  
           Subd. 4.  [ALLOCATION OF CURRENT COSTS.] All current costs 
        attributable to responsibilities assumed by the board over local 
        sanitary sewer facilities and water and street facilities as 
        provided in this section must be allocated solely to the local 
        unit for or with whom the responsibilities are assumed on the 
        terms and over a period as the board determines to be equitable 
        and in the best interest of the district.  If two or more 
        government units form a region in accordance with this section 
        all or part of the current costs attributable to the region 
        must, at the request of its joint board, be allocated to the 
        region and provided in the agreement establishing the region.  
           Subd. 5.  [PART OF DISTRICT SYSTEM.] This section or any 
        other part of this article does not prevent the board from 
        including, where appropriate, treatment works or interceptors, 
        previously designated or treated as local sanitary sewer 
        facilities, as a part of the district disposal system. 
           Sec. 18.  [SERVICE CONTRACTS WITH GOVERNMENTS OUTSIDE 
        DISTRICT.] 
           The board may contract with the United States or any agency 
        of it, any state or any agency of it, or any municipal or public 
        corporation, governmental subdivision or agency, or political 
        subdivision in any state, outside the jurisdiction of the board, 
        for furnishing to the entities any services which the board may 
        furnish to local government units in the district under this 
        article including, but not limited to, planning for and the 
        acquisition, betterment, operation, administration, and 
        maintenance of any or all interceptors, treatment works, and 
        local sanitary sewer facilities; if the board may further 
        include as one of the terms of the contract that the entity also 
        pay to the board an amount as may be agreed upon as a reasonable 
        estimate of the proportionate share properly allocable to the 
        entity of costs of acquisition, betterment, and debt service 
        previously allocated to local government units in the district.  
        When the payments are made by the entities to the board, they 
        must be applied in reduction of the total amount of costs 
        allocated after that to each local government unit in the 
        district, on the equitable basis the board considers to be in 
        the best interest of the district.  Any municipality in the 
        state may enter into the contract and perform all acts and 
        things required as a condition or consideration for it 
        consistent with the purpose of this article, whether or not 
        included among the powers otherwise granted to the municipality 
        by law or charter. 
           Sec. 19.  [CONSTRUCTION, MATERIALS, SUPPLIES, EQUIPMENT; 
        CONTRACTS.] 
           Subdivision 1.  [PLANS AND SPECIFICATIONS.] When the board 
        orders a project involving the acquisition or betterment of a 
        part of the district disposal system, it must cause plans and 
        specifications of this project to be made, or if previously 
        made, to be modified, if necessary, and to be approved by the 
        agency if required, and after any required approval by the 
        agency, one or more contracts for work and materials called for 
        by the plans and specification may be awarded as provided in 
        this section.  
           Subd. 2.  [UNIFORM MUNICIPAL CONTRACTING LAW.] All 
        contracts for work to be done or for purchases of materials, 
        supplies, or equipment must be done in accordance with Minnesota 
        Statutes, section 471.345.  
           Sec. 20.  [ANNEXATION, WITHDRAWAL OF TERRITORY.] 
           Subdivision 1.  [ANNEXATION.] Any municipality in Douglas 
        county, upon resolution adopted by a four-fifths vote of its 
        governing body, may petition the board for annexation to the 
        district of the area then comprising the municipality or any 
        part of it and, if accepted by the board, the area must be 
        considered annexed to the district and subject to the 
        jurisdiction of the board under the terms and provisions of this 
        article.  The territory so annexed is subject to taxation and 
        assessment under this article and is subject to taxation by the 
        board like other property in the district for the payment of 
        principal and interest thereafter becoming due on general 
        obligations of the board, whether authorized or issued before or 
        after the annexation.  The board may condition approval of the 
        annexation upon the contribution, by or on behalf of the 
        municipality petitioning for annexation, to the board of an 
        amount as may be agreed upon as being a reasonable estimate of 
        the proportionate share, properly allocable to the municipality, 
        of cost or acquisition, betterment, and debt service previously 
        allocated to local government units in the district, on the 
        terms as may be agreed upon and in place of or in addition to 
        further conditions as the board deems in the best interests of 
        the district.  Notwithstanding any other provisions of this 
        article to the contrary, the conditions established for 
        annexation may include the requirement that the annexed 
        municipality pay for, contract for, and oversee the construction 
        of local sanitary sewer facilities and interceptor sewers.  To 
        pay the contribution or satisfy any other condition established 
        by the board, the municipality petitioning annexation may 
        exercise the powers conferred in section 9.  When the 
        contributions are made by the municipality to the board, they 
        must be applied to reduce the total amount of costs thereafter 
        allocated to each local government unit in the district, on the 
        equitable basis as the board considers to be in the best 
        interests of the district, applying so far as practicable and 
        appropriate the criteria set forth in section 8, subdivision 2.  
        On annexation of the territory, the secretary of the board must 
        certify to the auditor and treasurer of the county in which the 
        municipality is located the fact of the annexation and a legal 
        description of the territory annexed.  
           Subd. 2.  [WITHDRAWALS.] A municipality may withdraw from 
        the district by resolution of its governing body.  The 
        municipality must notify the board of the district of the 
        withdrawal by providing a copy of the resolution at least two 
        years in advance of the proposed withdrawal.  Unless the 
        district and the withdrawing member agree otherwise by action of 
        their governing bodies, the taxable property of the withdrawing 
        member is subject to its required property tax levies under this 
        article for two taxes payable years following the notification 
        of the withdrawal and the withdrawing member retains any rights, 
        obligations, and liabilities obtained or incurred during its 
        participation. 
           Sec. 21.  [PROPERTY EXEMPT FROM TAXATION.] 
           Any properties, real or personal, owned, leased, 
        controlled, used, or occupied by the sanitary sewer board for 
        any purpose under this article are declared to be acquired, 
        owned, leased, controlled, used, and occupied for public, 
        governmental, and municipal purposes, and are exempt from 
        taxation by the state or any political subdivision of the state; 
        but the properties are subject to special assessments levied by 
        a political subdivision for a local improvement in amounts 
        proportionate to and not exceeding the special benefit received 
        by the properties from the improvement.  No possible use of any 
        of the properties in any manner different from their use as part 
        of the disposal system at the time may be considered in 
        determining the special benefit received by the properties.  All 
        of the assessments are subject to final approval by the board, 
        whose determination of the benefits is conclusive upon the 
        political subdivision levying the assessment. 
           Sec. 22.  [RELATION TO EXISTING LAWS.] 
           This article prevails over any law or charter inconsistent 
        with it.  The powers conferred on the board under this article 
        do not diminish or supersede the powers conferred on the agency 
        by Minnesota Statutes, chapters 115 and 116.  
           Sec. 23.  [APPLICATION; EFFECTIVE DATE; LOCAL APPROVAL; OPT 
        IN OR OUT.] 
           Subdivision 1.  [APPLICATION.] This article applies to the 
        townships of Brandon, Carlos, LaGrand, Leaf Valley, Miltona, and 
        Moe, all in Douglas county. 
           Subd. 2.  [EFFECTIVE DATE; LOCAL APPROVAL.] This article is 
        effective the day after a fourth township of the six listed in 
        subdivision 1 has timely completed compliance with Minnesota 
        Statutes, section 645.021, subdivisions 2 and 3.  For any other 
        township listed in subdivision 1, the article is effective the 
        day after timely completing compliance with Minnesota Statutes, 
        section 645.021, subdivisions 2 and 3.  A township listed in 
        subdivision 1 that fails to timely complete compliance with 
        Minnesota Statutes, section 645.021, subdivisions 2 and 3, may 
        petition for annexation to the district at a later time, as 
        provided in this article. 

                                   ARTICLE 10 
                            TAX INCREMENT FINANCING 
           Section 1.  Minnesota Statutes 2002, section 469.174, 
        subdivision 3, is amended to read: 
           Subd. 3.  [BONDS.] (a) "Bonds" means any bonds, including 
        refunding bonds, notes, interim certificates, debentures, 
        interfund loans or advances, or other obligations issued: 
           (1) by an authority under section 469.178; or which were 
        issued 
           (2) in aid of a project under any other law, except revenue 
        bonds issued pursuant to sections 469.152 to 469.165, prior to 
        August 1, 1979. 
           (b) Bonds or other obligations include: 
           (1) refunding bonds; 
           (2) notes; 
           (3) interim certificates; 
           (4) debentures; and 
           (5) interfund loans or advances qualifying under section 
        469.178, subdivision 7. 
           [EFFECTIVE DATE.] This section is effective at the same 
        time as provided by Laws 2001, First Special Session chapter 5, 
        article 15, section 3. 
           Sec. 2.  Minnesota Statutes 2002, section 469.174, 
        subdivision 6, is amended to read: 
           Subd. 6.  [MUNICIPALITY.] "Municipality" means any the 
        city, however organized, and with respect to in which the 
        district is located, with the following exceptions: 
           (1) for a project undertaken pursuant to sections 469.152 
        to 469.165, "municipality" has the meaning given in sections 
        469.152 to 469.165, and with respect to; and 
           (2) for a project undertaken pursuant to sections 469.142 
        to 469.151, or a county or multicounty project undertaken 
        pursuant to sections 469.004 to 469.008, "municipality" also 
        includes any means the county in which the district is located. 
           [EFFECTIVE DATE.] This section is effective for districts 
        for which the request for certification was made after July 31, 
        1979. 
           Sec. 3.  Minnesota Statutes 2002, section 469.174, 
        subdivision 10, is amended to read: 
           Subd. 10.  [REDEVELOPMENT DISTRICT.] (a) "Redevelopment 
        district" means a type of tax increment financing district 
        consisting of a project, or portions of a project, within which 
        the authority finds by resolution that one or more of the 
        following conditions, reasonably distributed throughout the 
        district, exists: 
           (1) parcels consisting of 70 percent of the area of the 
        district are occupied by buildings, streets, utilities, paved or 
        gravel parking lots, or other similar structures and more than 
        50 percent of the buildings, not including outbuildings, are 
        structurally substandard to a degree requiring substantial 
        renovation or clearance; or 
           (2) the property consists of vacant, unused, underused, 
        inappropriately used, or infrequently used railyards, rail 
        storage facilities, or excessive or vacated railroad 
        rights-of-way; or 
           (3) tank facilities, or property whose immediately previous 
        use was for tank facilities, as defined in section 115C.02, 
        subdivision 15, if the tank facilities: 
           (i) have or had a capacity of more than 1,000,000 gallons; 
           (ii) are located adjacent to rail facilities; and 
           (iii) have been removed or are unused, underused, 
        inappropriately used, or infrequently used. 
           (b) For purposes of this subdivision, "structurally 
        substandard" shall mean containing defects in structural 
        elements or a combination of deficiencies in essential utilities 
        and facilities, light and ventilation, fire protection including 
        adequate egress, layout and condition of interior partitions, or 
        similar factors, which defects or deficiencies are of sufficient 
        total significance to justify substantial renovation or 
        clearance. 
           (c) A building is not structurally substandard if it is in 
        compliance with the building code applicable to new buildings or 
        could be modified to satisfy the building code at a cost of less 
        than 15 percent of the cost of constructing a new structure of 
        the same square footage and type on the site.  The municipality 
        may find that a building is not disqualified as structurally 
        substandard under the preceding sentence on the basis of 
        reasonably available evidence, such as the size, type, and age 
        of the building, the average cost of plumbing, electrical, or 
        structural repairs, or other similar reliable evidence.  The 
        municipality may not make such a determination without an 
        interior inspection of the property, but need not have an 
        independent, expert appraisal prepared of the cost of repair and 
        rehabilitation of the building.  An interior inspection of the 
        property is not required, if the municipality finds that (1) the 
        municipality or authority is unable to gain access to the 
        property after using its best efforts to obtain permission from 
        the party that owns or controls the property; and (2) the 
        evidence otherwise supports a reasonable conclusion that the 
        building is structurally substandard.  Items of evidence that 
        support such a conclusion include recent fire or police 
        inspections, on-site property tax appraisals or housing 
        inspections, exterior evidence of deterioration, or other 
        similar reliable evidence.  Written documentation of the 
        findings and reasons why an interior inspection was not 
        conducted must be made and retained under section 469.175, 
        subdivision 3, clause (1).  Failure of a building to be 
        disqualified under the provisions of this paragraph is a 
        necessary, but not a sufficient, condition to determining that 
        the building is substandard.  
           (d) A parcel is deemed to be occupied by a structurally 
        substandard building for purposes of the finding under paragraph 
        (a) if all of the following conditions are met: 
           (1) the parcel was occupied by a substandard building 
        within three years of the filing of the request for 
        certification of the parcel as part of the district with the 
        county auditor; 
           (2) the substandard building was demolished or removed by 
        the authority or the demolition or removal was financed by the 
        authority or was done by a developer under a development 
        agreement with the authority; 
           (3) the authority found by resolution before the demolition 
        or removal that the parcel was occupied by a structurally 
        substandard building and that after demolition and clearance the 
        authority intended to include the parcel within a district; and 
           (4) upon filing the request for certification of the tax 
        capacity of the parcel as part of a district, the authority 
        notifies the county auditor that the original tax capacity of 
        the parcel must be adjusted as provided by section 469.177, 
        subdivision 1, paragraph (h) (f). 
           (e) For purposes of this subdivision, a parcel is not 
        occupied by buildings, streets, utilities, paved or gravel 
        parking lots, or other similar structures unless 15 percent of 
        the area of the parcel contains buildings, streets, utilities, 
        paved or gravel parking lots, or other similar structures. 
           (f) For districts consisting of two or more noncontiguous 
        areas, each area must qualify as a redevelopment district under 
        paragraph (a) to be included in the district, and the entire 
        area of the district must satisfy paragraph (a). 
           [EFFECTIVE DATE.] The amendment to Minnesota Statutes, 
        section 469.174, subdivision 10, paragraph (c), confirms the 
        intent of the legislature with regard to the original provisions 
        of the language contained in Minnesota Statutes 2002, section 
        469.174, subdivision 10, paragraph (c), and is retroactive to 
        the effective date of the original language.  The amendment to 
        Minnesota Statutes, section 469.174, subdivision 10, paragraph 
        (d), is effective for districts for which the request for 
        certification was received by the county after June 30, 2002. 
           Sec. 4.  Minnesota Statutes 2002, section 469.174, 
        subdivision 25, is amended to read: 
           Subd. 25.  [INCREMENT.] "Increment," "tax increment," "tax 
        increment revenues," "revenues derived from tax increment," and 
        other similar terms for a district include: 
           (1) taxes paid by the captured net tax capacity, but 
        excluding any excess taxes, as computed under section 469.177; 
           (2) the proceeds from the sale or lease of property, 
        tangible or intangible, purchased by the authority with tax 
        increments; 
           (3) repayments of principal and interest received on loans 
        or other advances made by the authority with tax increments; and 
           (4) interest or other investment earnings on or from tax 
        increments. 
           [EFFECTIVE DATE.] This section is effective for districts 
        for which the request for certification was made after June 30, 
        1982, and payments of principal and interest received on loans 
        or other advances that were made after June 30, 1997. 
           Sec. 5.  Minnesota Statutes 2002, section 469.174, is 
        amended by adding a subdivision to read: 
           Subd. 29.  [QUALIFIED HOUSING DISTRICT.] "Qualified housing 
        district" means: 
           (1) a housing district for a residential rental project or 
        projects in which the only properties receiving assistance from 
        revenues derived from tax increments from the district meet the 
        rent restriction requirements and the low-income occupancy test 
        for a qualified low-income housing project under section 42(g) 
        of the Internal Revenue Code of 1986, as amended through 
        December 31, 2002, regardless of whether the project actually 
        receives a low-income housing credit; or 
           (2) a housing district for a single-family homeownership 
        project or projects, if 95 percent or more of the homes 
        receiving assistance from tax increments from the district are 
        purchased by qualified purchasers.  A qualified purchaser means 
        the first purchaser of a home after the tax increment assistance 
        is provided whose income is at or below 85 percent of the median 
        gross income for a family of the same size as the purchaser.  
        Median gross income is the greater of (i) area median gross 
        income, or (ii) the statewide median gross income, as determined 
        by the secretary of Housing and Urban Development. 
           [EFFECTIVE DATE.] This section applies to all districts for 
        which the request for certification was made on or after January 
        1, 2002, and to all districts to which the definition of 
        qualified housing districts under Minnesota Statutes 2000, 
        section 273.1399, applied. 
           Sec. 6.  Minnesota Statutes 2002, section 469.175, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [TAX INCREMENT FINANCING PLAN.] A tax 
        increment financing plan shall contain:  
           (1) a statement of objectives of an authority for the 
        improvement of a project; 
           (2) a statement as to the development program for the 
        project, including the property within the project, if any, that 
        the authority intends to acquire; 
           (3) a list of any development activities that the plan 
        proposes to take place within the project, for which contracts 
        have been entered into at the time of the preparation of the 
        plan, including the names of the parties to the contract, the 
        activity governed by the contract, the cost stated in the 
        contract, and the expected date of completion of that activity; 
           (4) identification or description of the type of any other 
        specific development reasonably expected to take place within 
        the project, and the date when the development is likely to 
        occur; 
           (5) estimates of the following:  
           (i) cost of the project, including administration 
        administrative expenses, except that if part of the cost of the 
        project is paid or financed with increment from the tax 
        increment financing district, the tax increment financing plan 
        for the district must contain an estimate of the amount of the 
        cost of the project, including administrative expenses, that 
        will be paid or financed with tax increments from the district; 
           (ii) amount of bonded indebtedness to be incurred; 
           (iii) sources of revenue to finance or otherwise pay public 
        costs; 
           (iv) the most recent net tax capacity of taxable real 
        property within the tax increment financing district and within 
        any subdistrict; 
           (v) the estimated captured net tax capacity of the tax 
        increment financing district at completion; and 
           (vi) the duration of the tax increment financing district's 
        and any subdistrict's existence; 
           (6) statements of the authority's alternate estimates of 
        the impact of tax increment financing on the net tax capacities 
        of all taxing jurisdictions in which the tax increment financing 
        district is located in whole or in part.  For purposes of one 
        statement, the authority shall assume that the estimated 
        captured net tax capacity would be available to the taxing 
        jurisdictions without creation of the district, and for purposes 
        of the second statement, the authority shall assume that none of 
        the estimated captured net tax capacity would be available to 
        the taxing jurisdictions without creation of the district or 
        subdistrict; 
           (7) identification and description of studies and analyses 
        used to make the determination set forth in subdivision 3, 
        clause (2); and 
           (8) identification of all parcels to be included in the 
        district or any subdistrict. 
           [EFFECTIVE DATE.] This section applies to districts for 
        which the request for certification was made after July 31, 
        1979, and is effective for tax increment financing plans and 
        modifications approved after June 30, 2003. 
           Sec. 7.  Minnesota Statutes 2002, section 469.175, 
        subdivision 3, is amended to read: 
           Subd. 3.  [MUNICIPALITY APPROVAL.] (a) A county auditor 
        shall not certify the original net tax capacity of a tax 
        increment financing district until the tax increment financing 
        plan proposed for that district has been approved by the 
        municipality in which the district is located.  If an authority 
        that proposes to establish a tax increment financing district 
        and the municipality are not the same, the authority shall apply 
        to the municipality in which the district is proposed to be 
        located and shall obtain the approval of its tax increment 
        financing plan by the municipality before the authority may use 
        tax increment financing.  The municipality shall approve the tax 
        increment financing plan only after a public hearing thereon 
        after published notice in a newspaper of general circulation in 
        the municipality at least once not less than ten days nor more 
        than 30 days prior to the date of the hearing.  The published 
        notice must include a map of the area of the district from which 
        increments may be collected and, if the project area includes 
        additional area, a map of the project area in which the 
        increments may be expended.  The hearing may be held before or 
        after the approval or creation of the project or it may be held 
        in conjunction with a hearing to approve the project.  
           (b) Before or at the time of approval of the tax increment 
        financing plan, the municipality shall make the following 
        findings, and shall set forth in writing the reasons and 
        supporting facts for each determination: 
           (1) that the proposed tax increment financing district is a 
        redevelopment district, a renewal or renovation district, a 
        housing district, a soils condition district, or an economic 
        development district; if the proposed district is a 
        redevelopment district or a renewal or renovation district, the 
        reasons and supporting facts for the determination that the 
        district meets the criteria of section 469.174, subdivision 10, 
        paragraph (a), clauses (1) and (2), or subdivision 10a, must be 
        documented in writing and retained and made available to the 
        public by the authority until the district has been terminated; 
           (2) that the proposed development or redevelopment, in the 
        opinion of the municipality,: 
           (i) the proposed development or redevelopment would not 
        reasonably be expected to occur solely through private 
        investment within the reasonably foreseeable future; and that 
           (ii) the increased market value of the site that could 
        reasonably be expected to occur without the use of tax increment 
        financing would be less than the increase in the market value 
        estimated to result from the proposed development after 
        subtracting the present value of the projected tax increments 
        for the maximum duration of the district permitted by the plan.  
        The requirements of this clause item do not apply if the 
        district is a qualified housing district, as defined in section 
        273.1399, subdivision 1; 
           (3) that the tax increment financing plan conforms to the 
        general plan for the development or redevelopment of the 
        municipality as a whole; 
           (4) that the tax increment financing plan will afford 
        maximum opportunity, consistent with the sound needs of the 
        municipality as a whole, for the development or redevelopment of 
        the project by private enterprise; 
           (5) that the municipality elects the method of tax 
        increment computation set forth in section 469.177, subdivision 
        3, clause (b), if applicable. 
           (c) When the municipality and the authority are not the 
        same, the municipality shall approve or disapprove the tax 
        increment financing plan within 60 days of submission by the 
        authority.  When the municipality and the authority are not the 
        same, the municipality may not amend or modify a tax increment 
        financing plan except as proposed by the authority pursuant to 
        subdivision 4.  Once approved, the determination of the 
        authority to undertake the project through the use of tax 
        increment financing and the resolution of the governing body 
        shall be conclusive of the findings therein and of the public 
        need for the financing. 
           (d) For a district that is subject to the requirements of 
        paragraph (b), clause (2), item (ii), the municipality's 
        statement of reasons and supporting facts must include all of 
        the following: 
           (1) an estimate of the amount by which the market value of 
        the site will increase without the use of tax increment 
        financing; 
           (2) an estimate of the increase in the market value that 
        will result from the development or redevelopment to be assisted 
        with tax increment financing; and 
           (3) the present value of the projected tax increments for 
        the maximum duration of the district permitted by the tax 
        increment financing plan. 
           (e) For purposes of this subdivision, "site" means the 
        parcels on which the development or redevelopment to be assisted 
        with tax increment financing will be located. 
           [EFFECTIVE DATE.] This section is effective for 
        determinations made after June 30, 2003, except the provisions 
        of paragraph (e) apply to requests for certification of tax 
        increment districts made after June 30, 1995. 
           Sec. 8.  Minnesota Statutes 2002, section 469.175, 
        subdivision 4, is amended to read: 
           Subd. 4.  [MODIFICATION OF PLAN.] (a) A tax increment 
        financing plan may be modified by an authority, provided that. 
           (b) The authority may make the following modifications only 
        upon the notice and after the discussion, public hearing, and 
        findings required for approval of the original plan: 
           (1) any reduction or enlargement of geographic area of the 
        project or tax increment financing district, that does not meet 
        the requirements of paragraph (e); 
           (2) increase in amount of bonded indebtedness to be 
        incurred, including; 
           (3) a determination to capitalize interest on the debt if 
        that determination was not a part of the original plan, or to 
        increase or decrease the amount of interest on the debt to be 
        capitalized,; 
           (4) increase in the portion of the captured net tax 
        capacity to be retained by the authority,; 
           (5) increase in total estimated tax increment 
        expenditures the estimate of the cost of the project, including 
        administrative expenses, that will be paid or financed with tax 
        increment from the district; or 
           (6) designation of additional property to be acquired by 
        the authority shall be approved upon the notice and after the 
        discussion, public hearing, and findings required for approval 
        of the original plan; provided that. 
           (c) If an authority changes the type of district from 
        housing, redevelopment, or economic development to another type 
        of district, this change shall is not be considered a 
        modification but shall require requires the authority to follow 
        the procedure set forth in sections 469.174 to 469.179 for 
        adoption of a new plan, including certification of the net tax 
        capacity of the district by the county auditor.  
           (d) If a redevelopment district or a renewal and renovation 
        district is enlarged, the reasons and supporting facts for the 
        determination that the addition to the district meets the 
        criteria of section 469.174, subdivision 10, paragraph (a), 
        clauses (1) and (2), or subdivision 10a, must be documented.  
           (e) The requirements of this paragraph (b) do not apply if 
        (1) the only modification is elimination of parcels from the 
        project or district and (2)(A) the current net tax capacity of 
        the parcels eliminated from the district equals or exceeds the 
        net tax capacity of those parcels in the district's original net 
        tax capacity or (B) the authority agrees that, notwithstanding 
        section 469.177, subdivision 1, the original net tax capacity 
        will be reduced by no more than the current net tax capacity of 
        the parcels eliminated from the district.  The authority must 
        notify the county auditor of any modification that reduces or 
        enlarges the geographic area of a district or a project area.  
           (b) (f) The geographic area of a tax increment financing 
        district may be reduced, but shall not be enlarged after five 
        years following the date of certification of the original net 
        tax capacity by the county auditor or after August 1, 1984, for 
        tax increment financing districts authorized prior to August 1, 
        1979. 
           [EFFECTIVE DATE.] This section applies to districts for 
        which the request for certification was made after June 30, 
        2003.  The development authority may elect to have this section 
        apply to a tax increment financing plan or modification that was 
        approved before July 1, 2003, by adopting before January 1, 
        2004, a modification of the plan that states the amount of the 
        cost of the project, including administrative expenses, that 
        will be paid or financed with tax increments from the district.  
        Section 469.175, subdivision 4, paragraph (b), does not apply to 
        a modification adopted under this section if the modification is 
        exclusively for the purpose of stating the amount of the cost of 
        the project, including administrative expenses, that will be 
        paid or financed with tax increment from the district.  For 
        districts for which the request for certification was made after 
        July 31, 1979, and for which this section is not effective, the 
        total estimated tax increment expenditures are determined by 
        considering all of the information in the tax increment 
        financing plan and exhibits to the plan about estimated sources 
        and uses of funds. 
           For districts for which certification was requested after 
        June 30, 1982, and before July 1, 2003, and for which the plan 
        has not been amended after July 1, 2003, the limit on 
        administrative expenses equals the greater of (1) nine percent 
        of the increments for the district or (2) the amount determined 
        under section 469.176, subdivision 3, and the tax increment 
        financing plan. 
           Sec. 9.  Minnesota Statutes 2002, section 469.175, 
        subdivision 6, is amended to read: 
           Subd. 6.  [ANNUAL FINANCIAL REPORTING.] (a) The state 
        auditor shall develop a uniform system of accounting and 
        financial reporting for tax increment financing districts.  The 
        system of accounting and financial reporting shall, as nearly as 
        possible: 
           (1) provide for full disclosure of the sources and uses of 
        public funds in the district; 
           (2) permit comparison and reconciliation with the affected 
        local government's accounts and financial reports; 
           (3) permit auditing of the funds expended on behalf of a 
        district, including a single district that is part of a 
        multidistrict project or that is funded in part or whole through 
        the use of a development account funded with tax increments from 
        other districts or with other public money; 
           (4) be consistent with generally accepted accounting 
        principles. 
           (b) The authority must annually submit to the state auditor 
        a financial report in compliance with paragraph (a).  Copies of 
        the report must also be provided to the county auditor and to 
        the governing body of the municipality, if the authority is not 
        the municipality.  To the extent necessary to permit compliance 
        with the requirement of financial reporting, the county and any 
        other appropriate local government unit or private entity must 
        provide the necessary records or information to the authority or 
        the state auditor as provided by the system of accounting and 
        financial reporting developed pursuant to paragraph (a).  The 
        authority must submit the annual report for a year on or before 
        August 1 of the next year. 
           (c) The annual financial report must also include the 
        following items: 
           (1) the original net tax capacity of the district and any 
        subdistrict under section 469.177, subdivision 1; 
           (2) the net tax capacity for the reporting period of the 
        district and any subdistrict; 
           (3) the captured net tax capacity of the district; 
           (4) any fiscal disparity deduction from the captured net 
        tax capacity under section 469.177, subdivision 3; 
           (5) the captured net tax capacity retained for tax 
        increment financing under section 469.177, subdivision 2, 
        paragraph (a), clause (1); 
           (6) any captured net tax capacity distributed among 
        affected taxing districts under section 469.177, subdivision 2, 
        paragraph (a), clause (2); 
           (7) the type of district; 
           (8) the date the municipality approved the tax increment 
        financing plan and the date of approval of any modification of 
        the tax increment financing plan, the approval of which requires 
        notice, discussion, a public hearing, and findings under 
        subdivision 4, paragraph (a); 
           (9) the date the authority first requested certification of 
        the original net tax capacity of the district and the date of 
        the request for certification regarding any parcel added to the 
        district; 
           (10) the date the county auditor first certified the 
        original net tax capacity of the district and the date of 
        certification of the original net tax capacity of any parcel 
        added to the district; 
           (11) the month and year in which the authority has received 
        or anticipates it will receive the first increment from the 
        district; 
           (12) the date the district must be decertified; 
           (13) for the reporting period and prior years of the 
        district, the actual amount received from, at least, the 
        following categories: 
           (i) tax increments paid by the captured net tax capacity 
        retained for tax increment financing under section 469.177, 
        subdivision 2, paragraph (a), clause (1), but excluding any 
        excess taxes; 
           (ii) tax increments that are interest or other investment 
        earnings on or from tax increments; 
           (iii) tax increments that are proceeds from the sale or 
        lease of property, tangible or intangible, purchased by the 
        authority with tax increments; 
           (iv) tax increments that are repayments of loans or other 
        advances made by the authority with tax increments; 
           (v) bond or loan proceeds; 
           (vi) special assessments; 
           (vii) grants; and 
           (viii) transfers from funds not exclusively associated with 
        the district; 
           (14) for the reporting period and for the prior years of 
        the district, the amount budgeted under the tax increment 
        financing plan, and the actual amount expended for, at least, 
        the following categories: 
           (i) acquisition of land and buildings through condemnation 
        or purchase; 
           (ii)  site improvements or preparation costs; 
           (iii) installation of public utilities, parking facilities, 
        streets, roads, sidewalks, or other similar public improvements; 
           (iv) administrative costs, including the allocated cost of 
        the authority; 
           (v) public park facilities, facilities for social, 
        recreational, or conference purposes, or other similar public 
        improvements; and 
           (vi) transfers to funds not exclusively associated with the 
        district; 
           (15) for properties sold to developers, the total cost of 
        the property to the authority and the price paid by the 
        developer; 
           (16) the amount of any payments and the value of any 
        in-kind benefits, such as physical improvements and the use of 
        building space, that are paid or financed with tax increments 
        and are provided to another governmental unit other than the 
        municipality during the reporting period; 
           (17) the amount of any payments for activities and 
        improvements located outside of the district that are paid for 
        or financed with tax increments; 
           (18) the amount of payments of principal and interest that 
        are made during the reporting period on any nondefeased: 
           (i) general obligation tax increment financing bonds; 
           (ii) other tax increment financing bonds; and 
           (iii) notes and pay-as-you-go contracts; 
           (19) the principal amount, at the end of the reporting 
        period, of any nondefeased: 
           (i) general obligation tax increment financing bonds; 
           (ii) other tax increment financing bonds; and 
           (iii) notes and pay-as-you-go contracts; 
           (20) the amount of principal and interest payments that are 
        due for the current calendar year on any nondefeased: 
           (i) general obligation tax increment financing bonds; 
           (ii) other tax increment financing bonds; and 
           (iii) notes and pay-as-you-go contracts; 
           (21) if the fiscal disparities contribution under chapter 
        276A or 473F for the district is computed under section 469.177, 
        subdivision 3, paragraph (a), the amount of increased property 
        taxes imposed on other properties in the municipality that 
        approved the tax increment financing plan as a result of the 
        fiscal disparities contribution; 
           (22) whether the tax increment financing plan or other 
        governing document permits increment revenues to be expended: 
           (i) to pay bonds, the proceeds of which were or may be 
        expended on activities outside of the district; 
           (ii) for deposit into a common bond fund from which money 
        may be expended on activities located outside of the district; 
        or 
           (iii) to otherwise finance activities located outside of 
        the tax increment financing district; and 
           (23) the estimate, if any, contained in the tax increment 
        financing plan of the amount of the cost of the project, 
        including administrative expenses, that will be paid or financed 
        with tax increment; and 
           (24) any additional information the state auditor may 
        require. 
           (d) The commissioner of revenue shall prescribe the method 
        of calculating the increased property taxes under paragraph (c), 
        clause (21), and the form of the statement disclosing this 
        information on the annual statement under subdivision 5. 
           (e) The reporting requirements imposed by this subdivision 
        apply to districts certified before, on, and after August 1, 
        1979. 
           [EFFECTIVE DATE.] This section is effective beginning with 
        the reports due in calendar year 2004. 
           Sec. 10.  Minnesota Statutes 2002, section 469.176, 
        subdivision 1c, is amended to read: 
           Subd. 1c.  [DURATION LIMITS; PRE-1979 DISTRICTS.] (a) For 
        tax increment financing districts created prior to August 1, 
        1979, no tax increment shall be paid to the authority after 
        April 1, 2001, or the term of a nondefeased bond or obligation 
        outstanding on April 1, 1990, secured by increments from the 
        district or project area, whichever time is greater, provided 
        that in no case will a tax increment be paid to an authority 
        after August 1, 2009, from such a district.  If a district's 
        termination date is extended beyond April 1, 2001, because bonds 
        were outstanding on April 1, 1990, with maturities extending 
        beyond April 1, 2001, the following restrictions apply.  No 
        increment collected from the district may be expended after 
        April 1, 2001, except to pay or defease (i) repay: 
           (1) bonds issued before April 1, 1990, or (ii); 
           (2) bonds issued to refund the principal of the outstanding 
        bonds and pay associated issuance costs, provided the average 
        maturity of the refunding bonds does not exceed the bonds 
        refunded; 
           (3) administrative expenses of the district required to be 
        paid under section 469.176, subdivision 4h, paragraph (a); 
           (4) transfers of increment permitted under section 
        469.1763, subdivision 6; and 
           (5) any advance or payment made by the municipality or the 
        authority after June 1, 2002, to pay any bonds listed in clause 
        (1) or (2). 
           (b) Each year, any increments from a district subject to 
        this subdivision must be first applied to pay obligations listed 
        under paragraph (a), clauses (1) and (2), and administrative 
        expenses under paragraph (a), clause (3).  Any remaining 
        increments may be used for transfers of increments permitted 
        under section 469.1763, subdivision 6, and to make payments 
        under paragraph (a), clause (5). 
           (c) When sufficient money has been received to pay in full 
        or defease obligations under paragraph (a), clauses (1), (2), 
        and (5), the tax increment project or district must be 
        decertified. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment and applies to tax increment financing 
        districts for which the request for certification was made 
        before August 1, 1979. 
           Sec. 11.  Minnesota Statutes 2002, section 469.176, 
        subdivision 2, is amended to read: 
           Subd. 2.  [EXCESS TAX INCREMENTS.] In any year in which the 
        tax increment exceeds the amount necessary to pay the costs 
        authorized by the tax increment financing plan, including the 
        amount necessary to cancel any tax levy as provided in section 
        475.61, subdivision 3, (a) The authority shall annually 
        determine the amount of excess increments for a district, if 
        any.  This determination must be based on the tax increment 
        financing plan in effect on December 31 of the year and the 
        increments and other revenues received as of December 31 of the 
        year. 
           (b) For purposes of this subdivision, "excess increments" 
        equals the excess of: 
           (1) total increments collected from the district since its 
        certification, reduced by any excess increments paid under 
        paragraph (c), clause (4), for a prior year, over 
           (2) the total costs authorized by the tax increment 
        financing plan to be paid with increments from the district, 
        reduced, but not below zero, by the sum of: 
           (i) the amounts of those authorized costs that have been 
        paid from sources other than tax increments from the district; 
           (ii) revenues, other than tax increments from the district, 
        that are dedicated for or otherwise required to be used to pay 
        those authorized costs and that the authority has received and 
        that are not included in item (i); and 
           (iii) the amount of principal and interest obligations due 
        on outstanding bonds after December 31 of the year and not 
        prepaid under paragraph (c) in a prior year. 
           (c) The authority shall use the excess amount to do any 
        of excess increment only to do one or more of the following:  
           (1) prepay any outstanding bonds,; 
           (2) discharge the pledge of tax increment therefor, for any 
        outstanding bonds; 
           (3) pay into an escrow account dedicated to the payment of 
        such bond, any outstanding bonds; or 
           (4) return the excess amount to the county auditor who 
        shall distribute the excess amount to the municipality city or 
        town, county, and school district in which the tax increment 
        financing district is located in direct proportion to their 
        respective local tax rates.  
           (d) The county auditor must report to the commissioner of 
        children, families, and learning the amount of any excess tax 
        increment distributed to a school district within 30 days of the 
        distribution. 
           [EFFECTIVE DATE.] This section is effective for all tax 
        increment financing districts, regardless of whether the request 
        for certification was made before, on, or after August 1, 1979, 
        and applies after August 1, 2003, except the amendment to 
        paragraph (c), clause (4), applies retroactively to August 1, 
        1979. 
           Sec. 12.  Minnesota Statutes 2002, section 469.176, 
        subdivision 3, is amended to read: 
           Subd. 3.  [LIMITATION ON ADMINISTRATIVE EXPENSES.] (a) For 
        districts for which certification was requested before August 1, 
        1979, or after June 30, 1982 and before August 1, 2001, no tax 
        increment shall be used to pay any administrative expenses for a 
        project which exceed ten percent of the total estimated tax 
        increment expenditures authorized by the tax increment financing 
        plan or the total tax increment expenditures for the project, 
        whichever is less.  
           (b) For districts for which certification was requested 
        after July 31, 1979, and before July 1, 1982, no tax increment 
        shall be used to pay administrative expenses, as defined in 
        Minnesota Statutes 1980, section 273.73, for a district which 
        exceeds five percent of the total tax increment expenditures 
        authorized by the tax increment financing plan or the 
        total estimated tax increment expenditures for the district, 
        whichever is less. 
           (c) For districts for which certification was requested 
        after July 31, 2001, no tax increment may be used to pay any 
        administrative expenses for a project which exceed ten percent 
        of total estimated tax increment expenditures authorized by the 
        tax increment financing plan or the total tax increments, as 
        defined in section 469.174, subdivision 25, clause (1), from the 
        district, whichever is less. 
           [EFFECTIVE DATE.] This section is effective for districts 
        for which the request for certification was made before, on, or 
        after August 1, 1979. 
           Sec. 13.  Minnesota Statutes 2002, section 469.176, 
        subdivision 7, is amended to read: 
           Subd. 7.  [PARCELS NOT INCLUDABLE IN DISTRICTS.] (a) The 
        authority may request inclusion in a tax increment financing 
        district and the county auditor may certify the original tax 
        capacity of a parcel or a part of a parcel that qualified under 
        the provisions of section 273.111 or 273.112 or chapter 473H for 
        taxes payable in any of the five calendar years before the 
        filing of the request for certification only for: 
           (1) a district in which 85 percent or more of the planned 
        buildings and facilities (determined on the basis of square 
        footage) are a qualified manufacturing facility or a qualified 
        distribution facility or a combination of both; or 
           (2) a qualified housing district as defined in section 
        273.1399, subdivision 1. 
           (b)(1) A distribution facility means buildings and other 
        improvements to real property that are used to conduct 
        activities in at least each of the following categories: 
           (i) to store or warehouse tangible personal property; 
           (ii) to take orders for shipment, mailing, or delivery; 
           (iii) to prepare personal property for shipment, mailing, 
        or delivery; and 
           (iv) to ship, mail, or deliver property. 
           (2) A manufacturing facility includes space used for 
        manufacturing or producing tangible personal property, including 
        processing resulting in the change in condition of the property, 
        and space necessary for and related to the manufacturing 
        activities. 
           (3) To be a qualified facility, the owner or operator of a 
        manufacturing or distribution facility must agree to pay and pay 
        90 percent or more of the employees of the facility at a rate 
        equal to or greater than 160 percent of the federal minimum wage 
        for individuals over the age of 20. 
           [EFFECTIVE DATE.] This section applies to all districts for 
        which the request for certification was made on or after January 
        1, 2002, and to all districts to which the definition of 
        qualified housing districts under Minnesota Statutes 2000, 
        section 273.1399, applied. 
           Sec. 14.  Minnesota Statutes 2002, section 469.1763, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [DEFINITIONS.] (a) For purposes of this 
        section, the following terms have the meanings given. 
           (b) "Activities" means acquisition of property, clearing of 
        land, site preparation, soils correction, removal of hazardous 
        waste or pollution, installation of utilities, construction of 
        public or private improvements, and other similar activities, 
        but only to the extent that tax increment revenues may be spent 
        for such purposes under other law.  
           (c) "Third party" means an entity other than (1) the person 
        receiving the benefit of assistance financed with tax 
        increments, or (2) the municipality or the development authority 
        or other person substantially under the control of the 
        municipality. 
           (d) "Revenues derived from tax increments paid by 
        properties in the district" means only tax increment as defined 
        in section 469.174, subdivision 25, clause (1), and does not 
        include tax increment as defined in section 469.174, subdivision 
        25, clauses (2), (3), and (4). 
           [EFFECTIVE DATE.] This section is effective for districts 
        for which the request for certification was made after April 30, 
        1990. 
           Sec. 15.  Minnesota Statutes 2002, section 469.1763, 
        subdivision 3, is amended to read: 
           Subd. 3.  [FIVE-YEAR RULE.] (a) Revenues derived from tax 
        increments are considered to have been expended on an activity 
        within the district under subdivision 2 only if one of the 
        following occurs: 
           (1) before or within five years after certification of the 
        district, the revenues are actually paid to a third party with 
        respect to the activity; 
           (2) bonds, the proceeds of which must be used to finance 
        the activity, are issued and sold to a third party before or 
        within five years after certification, the revenues are spent to 
        repay the bonds, and the proceeds of the bonds either are, on 
        the date of issuance, reasonably expected to be spent before the 
        end of the later of (i) the five-year period, or (ii) a 
        reasonable temporary period within the meaning of the use of 
        that term under section 148(c)(1) of the Internal Revenue Code, 
        or are deposited in a reasonably required reserve or replacement 
        fund; 
           (3) binding contracts with a third party are entered into 
        for performance of the activity before or within five years 
        after certification of the district and the revenues are spent 
        under the contractual obligation; or 
           (4) costs with respect to the activity are paid before or 
        within five years after certification of the district and the 
        revenues are spent to reimburse a party for payment of the 
        costs, including interest on unreimbursed costs; or 
           (5) expenditures are made for housing purposes as permitted 
        by subdivision 2, paragraph (b). 
           (b) For purposes of this subdivision, bonds include 
        subsequent refunding bonds if the original refunded bonds meet 
        the requirements of paragraph (a), clause (2). 
           [EFFECTIVE DATE.] This section is effective for 
        expenditures made after June 30, 2003. 
           Sec. 16.  Minnesota Statutes 2002, 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) (2) 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 retroactively 
        to January 2, 2002, and thereafter. 
           Sec. 17.  Minnesota Statutes 2002, section 469.177, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [ORIGINAL NET TAX CAPACITY.] (a) Upon or 
        after adoption of a tax increment financing plan, the auditor of 
        any county in which the district is situated shall, upon request 
        of the authority, certify the original net tax capacity of the 
        tax increment financing district and that portion of the 
        district overlying any subdistrict as described in the tax 
        increment financing plan and shall certify in each year 
        thereafter the amount by which the original net tax capacity has 
        increased or decreased as a result of a change in tax exempt 
        status of property within the district and any subdistrict, 
        reduction or enlargement of the district or changes pursuant to 
        subdivision 4.  
           (b) For districts approved under section 469.175, 
        subdivision 3, or parcels added to existing districts after May 
        1, 1988, If the classification under section 273.13 of property 
        located in a district changes to a classification that has a 
        different assessment ratio, the original net tax capacity of 
        that property must be redetermined at the time when its use is 
        changed as if the property had originally been classified in the 
        same class in which it is classified after its use is changed. 
           (c) The amount to be added to the original net tax capacity 
        of the district as a result of previously tax exempt real 
        property within the district becoming taxable equals the net tax 
        capacity of the real property as most recently assessed pursuant 
        to section 273.18 or, if that assessment was made more than one 
        year prior to the date of title transfer rendering the property 
        taxable, the net tax capacity assessed by the assessor at the 
        time of the transfer.  If improvements are made to tax exempt 
        property after certification of the district and before the 
        parcel becomes taxable, the assessor shall, at the request of 
        the authority, separately assess the estimated market value of 
        the improvements.  If the property becomes taxable, the county 
        auditor shall add to original net tax capacity, the net tax 
        capacity of the parcel, excluding the separately assessed 
        improvements.  If substantial taxable improvements were made to 
        a parcel after certification of the district and if the property 
        later becomes tax exempt, in whole or part, as a result of the 
        authority acquiring the property through foreclosure or exercise 
        of remedies under a lease or other revenue agreement or as a 
        result of tax forfeiture, the amount to be added to the original 
        net tax capacity of the district as a result of the property 
        again becoming taxable is the amount of the parcel's value that 
        was included in original net tax capacity when the parcel was 
        first certified.  The amount to be added to the original net tax 
        capacity of the district as a result of enlargements equals the 
        net tax capacity of the added real property as most recently 
        certified by the commissioner of revenue as of the date of 
        modification of the tax increment financing plan pursuant to 
        section 469.175, subdivision 4. 
           (d) For districts approved under section 469.175, 
        subdivision 3, or parcels added to existing districts after May 
        1, 1988, If the net tax capacity of a property increases because 
        the property no longer qualifies under the Minnesota 
        Agricultural Property Tax Law, section 273.111; the Minnesota 
        Open Space Property Tax Law, section 273.112; or the 
        Metropolitan Agricultural Preserves Act, chapter 473H, or 
        because platted, unimproved property is improved or three years 
        pass after approval of the plat under section 273.11, 
        subdivision 1, the increase in net tax capacity must be added to 
        the original net tax capacity.  
           (e) The amount to be subtracted from the original net tax 
        capacity of the district as a result of previously taxable real 
        property within the district becoming tax exempt, or a reduction 
        in the geographic area of the district, shall be the amount of 
        original net tax capacity initially attributed to the property 
        becoming tax exempt or being removed from the district.  If the 
        net tax capacity of property located within the tax increment 
        financing district is reduced by reason of a court-ordered 
        abatement, stipulation agreement, voluntary abatement made by 
        the assessor or auditor or by order of the commissioner of 
        revenue, the reduction shall be applied to the original net tax 
        capacity of the district when the property upon which the 
        abatement is made has not been improved since the date of 
        certification of the district and to the captured net tax 
        capacity of the district in each year thereafter when the 
        abatement relates to improvements made after the date of 
        certification.  The county auditor may specify reasonable form 
        and content of the request for certification of the authority 
        and any modification thereof pursuant to section 469.175, 
        subdivision 4.  
           (f) If a parcel of property contained a substandard 
        building that was demolished or removed and if the authority 
        elects to treat the parcel as occupied by a substandard building 
        under section 469.174, subdivision 10, paragraph (b), the 
        auditor shall certify the original net tax capacity of the 
        parcel using the greater of (1) the current net tax capacity of 
        the parcel, or (2) the estimated market value of the parcel for 
        the year in which the building was demolished or removed, but 
        applying the class rates for the current year. 
           [EFFECTIVE DATE.] This section applies to all districts, 
        regardless of whether the request for certification was made 
        before, on, or after August 1, 1979, beginning for taxes payable 
        in 2004.  This section requires adjustment of the original tax 
        capacity under Minnesota Statutes, section 469.177, subdivision 
        7, of all parcels for class rate changes enacted after May 1, 
        1988, regardless of whether the classification of the property 
        has changed after the certification of the district.  This 
        section requires adjustment of original tax capacity for changes 
        in the classification of the property, only if the change in use 
        occurs after December 31, 2002. 
           Sec. 18.  Minnesota Statutes 2002, section 469.177, 
        subdivision 12, is amended to read: 
           Subd. 12.  [DECERTIFICATION OF TAX INCREMENT FINANCING 
        DISTRICT.] The county auditor shall decertify a tax increment 
        financing district when the earliest of the following times is 
        reached: 
           (1) the applicable maximum duration limit under section 
        469.176, subdivisions 1a to 1g; 
           (2) the maximum duration limit, if any, provided by the 
        municipality pursuant to section 469.176, subdivision 1; 
           (3) the time of decertification specified in section 
        469.1761, subdivision 4, if the commissioner of revenue issues 
        an order of noncompliance and the maximum duration limit for 
        economic development districts has been exceeded; 
           (4) upon completion of the required actions to allow 
        decertification under section 469.1763, subdivision 4; or 
           (5) upon the later of receipt by the county auditor of a 
        written request for decertification from the authority that 
        requested certification of the original net tax capacity of the 
        district or its successor or the decertification date specified 
        in the request. 
           [EFFECTIVE DATE.] This section is effective for all 
        districts regardless of whether the request for certification 
        was made before, on, or after August 1, 1979. 
           Sec. 19.  Minnesota Statutes 2002, section 469.1771, 
        subdivision 4, is amended to read: 
           Subd. 4.  [LIMITATIONS.] (a) If the increments are pledged 
        to repay bonds that were issued before the lawsuit was filed 
        under this section, the damages under this section may not 
        exceed the greater of (1) ten percent of the expenditures or 
        revenues derived from increment, or (2) the amount of available 
        revenues after paying debt services due on the bonds.  
           (b) The court may abate all or part of the amount if it 
        determines the unauthorized action or failure to perform the 
        required action was taken in good faith and the payment would 
        work an undue hardship on the authority or municipality. 
           [EFFECTIVE DATE.] This section is effective for violations 
        occurring after December 31, 1990. 
           Sec. 20.  Minnesota Statutes 2002, section 469.1771, is 
        amended by adding a subdivision to read: 
           Subd. 7.  [LIMITATIONS ON ACTIONS.] An action under 
        subdivision 1, paragraph (a), contesting the validity of a 
        determination by an authority under section 469.175, subdivision 
        3, must be commenced within the later of: 
           (1) 180 days after the municipality's approval under 
        section 469.175, subdivision 3; or 
           (2) 90 days after the request for certification of the 
        district is filed with the county auditor under section 469.177, 
        subdivision 1. 
           [EFFECTIVE DATE.] This section is effective for actions 
        filed after the day following final enactment. 
           Sec. 21.  Minnesota Statutes 2002, section 469.178, 
        subdivision 7, is amended to read: 
           Subd. 7.  [INTERFUND LOANS.] The authority or municipality 
        may advance or loan money to finance expenditures under section 
        469.176, subdivision 4, from its general fund or any other fund 
        under which it has legal authority to do so.  The loan or 
        advance must be approved authorized, by resolution of the 
        governing body, before money is transferred, advanced, or spent, 
        whichever is earliest.  The resolution may generally grant to 
        the authority the power to make interfund loans under one or 
        more tax increment financing plans or for one or more 
        districts.  The terms and conditions for repayment of the loan 
        must be provided in writing and include, at a minimum, the 
        principal amount, the interest rate, and maximum term.  The 
        maximum rate of interest permitted to be charged is limited to 
        the greater of the rates specified under section 270.75 or 
        549.09 as of the date or advance is made, unless the written 
        agreement states that the maximum interest rate will fluctuate 
        as the interest rates specified under section 270.75 or 549.09 
        are from time to time adjusted. 
           [EFFECTIVE DATE.] This section is effective for loans and 
        advances made after July 31, 2001, and for districts for which 
        the request for certification was made after July 31, 1979. 
           Sec. 22.  Minnesota Statutes 2002, section 469.1791, 
        subdivision 3, is amended to read: 
           Subd. 3.  [PRECONDITIONS TO ESTABLISH DISTRICT.] (a) A city 
        may establish a special taxing district within a tax increment 
        financing district under this section only if the conditions 
        under paragraphs (b) and (c) are met or if the city elects to 
        exercise the authority under paragraph (d). 
           (b) The city has determined that: 
           (1) total tax increments from the district, including 
        unspent increments from previous years and increments 
        transferred under paragraph (c), will be insufficient to pay the 
        amounts due in a year on preexisting obligations; and 
           (2) this insufficiency of increments resulted from the 
        reduction in property tax class rates enacted in the 1997 and 
        1998 legislative sessions. 
           (c) The city has agreed to transfer any available 
        increments from other tax increment financing districts in the 
        city to pay the preexisting obligations of the district under 
        section 469.1763, subdivision 6.  This requirement does not 
        apply to any available increments of a qualified housing 
        district, as defined in section 273.1399, subdivision 1.  
           (d) If a tax increment financing district does not qualify 
        under paragraphs (b) and (c), the governing body may elect to 
        establish a special taxing district under this section.  If the 
        city elects to exercise this authority, increments from the tax 
        increment financing district and the proceeds of the tax imposed 
        under this section may only be used to pay preexisting 
        obligations and reasonable administrative expenses of the 
        authority for the tax increment financing district.  The tax 
        increment financing district must be decertified when all 
        preexisting obligations have been paid.  
           [EFFECTIVE DATE.] This section applies to all districts for 
        which the request for certification was made on or after January 
        1, 2002, and to all districts to which the definition of 
        qualified housing districts under Minnesota Statutes 2000, 
        section 273.1399, applied. 
           Sec. 23.  Minnesota Statutes 2002, 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) 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 
           (2)(i) the development authority has a binding contract, 
        entered into before August 1, 2001, 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 
           (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. 
           [EFFECTIVE DATE.] This section is effective retroactively 
        to the effective date of the original enactment of section 
        469.1792, subdivision 1, and applies to all districts for which 
        the request for certification was made after July 1, 1979. 
           Sec. 24.  Minnesota Statutes 2002, section 469.1792, 
        subdivision 2, is amended to read: 
           Subd. 2.  [DEFINITIONS.] (a) For purposes of this section, 
        the following terms have the meanings given. 
           (b) "Preexisting district" means a tax increment financing 
        district for which the request for certification was made before 
        August 1, 2001. 
           (c) "Preexisting obligation" means a bond or binding 
        contract that: 
           (1)(i) was issued or approved before August 1, 2001, or was 
        issued pursuant to a binding contract entered into before August 
        July 1, 2001; or 
           (ii) was issued to refinance an obligation under item (i), 
        if the refinancing does not increase the present value of the 
        debt service; and 
           (2) is secured by increments from a preexisting district. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment and applies to districts for which the 
        request for certification was made on, before, or after August 
        1, 1979, and before August 1, 2001. 
           Sec. 25.  Minnesota Statutes 2002, section 469.1792, 
        subdivision 3, is amended to read: 
           Subd. 3.  [ACTIONS AUTHORIZED.] (a) An authority with a 
        district qualifying under this section may take either or both 
        of the following actions for any or all of its preexisting 
        districts: 
           (1) the authority may elect that the original local tax 
        rate under section 469.177, subdivision 1a, does not apply to 
        the district; and 
           (2) the authority may elect the fiscal disparities 
        contribution will be computed under section 469.177, subdivision 
        3, paragraph (a), regardless of the election that was made for 
        the district or if the district is an economic development 
        district for which the request for certification was made after 
        June 30, 1997. 
           (b) The authority may take action under this subdivision 
        only after the municipality approves the action, by resolution, 
        after notice and public hearing in the manner provided under 
        section 469.175, subdivision 2 3. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment and applies to districts for which the 
        request for certification was made on, before, or after August 
        1, 1979, and before August 1, 2001. 
           Sec. 26.  Minnesota Statutes 2002, section 469.1813, 
        subdivision 8, is amended to read: 
           Subd. 8.  [LIMITATION ON ABATEMENTS.] In any year, the 
        total amount of property taxes abated by a political subdivision 
        under this section may not exceed (1) five percent of the 
        current levy, or (2) $100,000, whichever is greater.  The limit 
        under this subdivision does not apply to an uncollected 
        abatement from a prior year that is added to the abatement levy. 
           [EFFECTIVE DATE.] This section is effective beginning with 
        property taxes levied in 2003, payable in 2004. 
           Sec. 27.  Minnesota Statutes 2002, section 469.1815, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [INCLUSION IN PROPOSED AND FINAL LEVIES.] 
        The political subdivision must add to its levy amount for the 
        current year under sections 275.065 and 275.07 the total 
        estimated amount of all current year abatements granted.  If all 
        or a portion of an abatement levy for a prior year was 
        uncollected, the political subdivision may add the uncollected 
        amount to its abatement levy for the current year.  The tax 
        amounts shown on the proposed notice under section 275.065, 
        subdivision 3, and on the property tax statement under section 
        276.04, subdivision 2, are the total amounts before the 
        reduction of any abatements that will be granted on the property.
           [EFFECTIVE DATE.] This section is effective beginning with 
        property taxes levied in 2003, payable in 2004. 
           Sec. 28.  Laws 1997, chapter 231, article 10, section 25, 
        is amended to read: 
           Sec. 25.  [EFFECTIVE DATE.] 
           Sections 1, 3 to 6, 7, and 10, are effective for districts 
        for which the requests for certification are made after June 30, 
        1997. 
           Section 2, clauses clause (1) and is effective for all 
        districts, regardless of whether the request for certification 
        was made before, on, or after August 1, 1979.  Section 2, 
        clause (4), are is effective for districts for which the 
        requests for certification were made after July 31, 1979, and 
        for payments and investment earnings received after July 1, 
        1997.  Section 2, clauses (2) and (3), are effective for 
        districts for which the request for certification was made after 
        June 30, 1982, and proceeds from sales and leases of properties 
        purchased by the authority after June 30, 1997, and repayments 
        of advances and loans that were made after June 30, 1997.  
           Sections 8 and 9 apply to all tax increment districts, 
        whenever certified, insofar as the underlying law applies to 
        them, and any uses of tax increment expended prior to the date 
        of enactment of this act which are in compliance with the 
        provisions of those sections are deemed valid. 
           Sections 12 and 13 are effective on the day the chief 
        clerical officer of the city of Columbia Heights complies with 
        Minnesota Statutes, sections 645.021, subdivision 3. 
           Sections 17 to 20 are effective the day following final 
        enactment and upon compliance by the governing body with 
        Minnesota Statutes, section 645.021, subdivision 3. 
           Section 24 is effective the day following final enactment. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 29.  Laws 2002, chapter 377, article 7, section 3, the 
        effective date, is amended to read: 
           [EFFECTIVE DATE.] This section is effective for increments 
        payable in 2002 deficits occurring in calendar year 2000 and 
        thereafter.  
           Sec. 30.  Laws 2002, chapter 377, article 11, section 1, is 
        amended to read: 
           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 and increments from the district 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, and administrative 
        expenses.  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 2010. 
           [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. 31.  [HOPKINS TAX INCREMENT FINANCING DISTRICT.] 
           Subdivision 1.  [DISTRICT EXTENSION.] (a) The governing 
        body of the city of Hopkins may elect to extend the duration of 
        its redevelopment tax increment financing district 2-11 by up to 
        four additional years. 
           (b) Notwithstanding any law to the contrary, effective upon 
        approval of this subdivision, no increments may be spent on 
        activities located outside of the area of the district, other 
        than to pay administrative expenses. 
           Subd. 2.  [FIVE-YEAR RULE.] The requirements of Minnesota 
        Statutes, section 469.1763, subdivision 3, that activities must 
        be undertaken within a five-year period from the date of 
        certification of tax increment financing district must be 
        considered to be met for the city of Hopkins redevelopment tax 
        increment district 2-11, if the activities are undertaken within 
        nine years from the date of certification of the district. 
           [EFFECTIVE DATE.] Subdivision 1 is effective upon 
        compliance with the provisions of Minnesota Statutes, sections 
        469.1782, subdivision 2, and 645.021.  Subdivision 2 is 
        effective upon compliance by the governing body of the city of 
        Hopkins with the provisions of Minnesota Statutes, section 
        645.021. 

                                   ARTICLE 11 
                                 MINERALS TAXES 
           Section 1.  Minnesota Statutes 2002, section 273.134, is 
        amended to read: 
           273.134 [TACONITE AND IRON ORE AREAS; TAX RELIEF AREA; 
        DEFINITIONS.] 
           (a) For purposes of this section and section sections 
        273.135 and 273.1391, "municipality" means any city, however 
        organized, or town, and which meets the following qualifications:
           (1) it is a municipality in which the assessed valuation of 
        unmined iron ore on May 1, 1941, was not less than 40 percent of 
        the assessed valuation of all real property; or 
           (2) it is a municipality in which, on January 1, 1977, or 
        the applicable assessment date, there is a taconite 
        concentrating plant or where taconite is mined or quarried or 
        where there is located an electric generating plant which 
        qualifies as a taconite facility. 
           "The applicable assessment date" is the date as of which 
        property is listed and assessed for the tax in question. 
           (b) For the purposes of section 273.135, "tax relief area" 
        means the geographic area contained within the boundaries of a 
        school district on January 2, 2000, which contains a 
        municipality which meets the following qualifications: 
           (1) it is a municipality school district in which the 
        assessed valuation of unmined iron ore on May 1, 1941, was not 
        less than 40 percent of the assessed valuation of all real 
        property and whose boundaries are within 20 miles of a taconite 
        mine or plant; or 
           (2) it is a municipality school district in which, on 
        January 1, 1977 or the applicable assessment date, there is a 
        taconite concentrating plant or where taconite is mined or 
        quarried or where there is located an electric generating plant 
        which qualifies as a taconite facility. 
           For purposes of this paragraph, a "tax relief area" does 
        not include a school district whose boundaries are more than 20 
        miles from a taconite mine or plant or in which the assessed 
        valuation of unmined iron ore on May 1, 1941, was less than 40 
        percent of the assessed valuation of all real property. 
           (b) For purposes of section 273.1391, subdivision 2, 
        paragraph (c), and chapter 298, "tax relief area" means the 
        geographic area contained within the boundaries of a school 
        district which contains a municipality that meets the following 
        qualifications: 
           (1) it is a municipality in which the assessed valuation of 
        unmined iron ore on May 1, 1941, was not less than 40 percent of 
        the assessed valuation of all real property; or 
           (2) it is a municipality in which, on January 1, 1977, or 
        the applicable assessment date, there is a taconite 
        concentrating plant or where taconite is mined or quarried or 
        where there is located an electric generating plant which 
        qualifies as a taconite facility. 
           [EFFECTIVE DATE.] This section is effective for taxes 
        payable in 2004 and thereafter. 
           Sec. 2.  [273.1341] [TACONITE ASSISTANCE AREA.] 
           A "taconite assistance area" means the geographic area that 
        falls within the boundaries of a school district that contains a 
        municipality in which the assessed valuation of unmined iron ore 
        on May 1, 1941, was not less than 40 percent of the assessed 
        valuation of all real property. 
           [EFFECTIVE DATE.] This section is effective for taxes 
        payable in 2004 and thereafter. 
           Sec. 3.  Minnesota Statutes 2002, section 273.135, 
        subdivision 1, is amended to read: 
           Subdivision 1.  The property tax to be paid in respect to 
        property taxable within a tax relief area as defined in section 
        273.134, paragraph (a) (b), on homestead property, as otherwise 
        determined by law and regardless of the market value of the 
        property, for all purposes shall be reduced in the amount 
        prescribed by subdivision 2, subject to the limitations 
        contained therein. 
           [EFFECTIVE DATE.] This section is effective for taxes 
        payable in 2004 and thereafter. 
           Sec. 4.  Minnesota Statutes 2002, section 273.135, 
        subdivision 2, is amended to read: 
           Subd. 2.  The amount of the reduction authorized by 
        subdivision 1 shall be: 
           (a) In the case of property located within a tax relief 
        area municipality as defined under section 273.134, paragraph 
        (a), that is within the boundaries of a municipality which meets 
        the qualifications prescribed in section 273.134, paragraph (a), 
        66 percent of the tax, provided that the reduction shall not 
        exceed the maximum amounts specified in paragraph (c).  
           (b) In the case of property located within the boundaries 
        of a school district which qualifies as a tax relief area under 
        section 273.134, paragraph (a) (b), but which is outside the 
        boundaries of a municipality which meets the qualifications 
        prescribed in section 273.134, paragraph (a), 57 percent of the 
        tax, provided that the reduction shall not exceed the maximum 
        amounts specified in paragraph (c).  
           (c) The maximum reduction of the tax is $315.10 on property 
        described in paragraph (a) and $289.80 on property described in 
        paragraph (b). 
           [EFFECTIVE DATE.] This section is effective for taxes 
        payable in 2004 and thereafter. 
           Sec. 5.  Minnesota Statutes 2002, section 273.1391, 
        subdivision 2, is amended to read: 
           Subd. 2.  The amount of the reduction authorized by 
        subdivision 1 shall be: 
           (a) In the case of property located within a school 
        district which does not meet the qualifications of section 
        273.134, paragraph (b), as a tax relief area, but which is 
        located in a county with a population of less than 100,000 in 
        which taconite is mined or quarried and wherein a school 
        district is located which does meet the qualifications of a tax 
        relief area, and provided that at least 90 percent of the area 
        of the school district which does not meet the qualifications of 
        section 273.134, paragraph (b), lies within such county, 57 
        percent of the tax on qualified property located in the school 
        district that does not meet the qualifications of section 
        273.134, paragraph (b), provided that the amount of said 
        reduction shall not exceed the maximum amounts specified in 
        paragraph (d).  The reduction provided by this paragraph shall 
        only be applicable to property located within the boundaries of 
        the county described therein.  
           (b) In the case of property located within a school 
        district which does not meet the qualifications of section 
        273.134, paragraph (b), as a tax relief area, but which is 
        located in a school district in a county containing a city of 
        the first class and a qualifying municipality as defined in 
        section 273.134, paragraph (a), but not in a school district 
        containing a city of the first class or adjacent to a school 
        district containing a city of the first class unless the school 
        district so adjacent contains a qualifying municipality as 
        defined in section 273.134, paragraph (a), 57 percent of the 
        tax, but not to exceed the maximums specified in paragraph (d). 
           (c) In the case of property located within the boundaries 
        of a municipality that meets the qualifications in section 
        273.134, paragraph (b) (a), but not the qualifications of a tax 
        relief area in section 273.134, paragraph (a) (b), 66 percent of 
        the tax, provided that the reduction shall not exceed $315.10.  
        In the case of property located within the boundaries of a 
        school district which qualifies as a tax relief taconite 
        assistance area under section 273.134, paragraph (b) 273.1341, 
        but does not qualify as a tax relief area under section 273.134, 
        paragraph (a) (b), but which is outside the boundaries of a 
        municipality which meets the qualifications of the preceding 
        sentence, 57 percent of the tax, provided that the reduction 
        shall not exceed the maximum amounts specified in paragraph (d). 
           (d) Except as otherwise provided in this section, the 
        maximum reduction of the tax is $289.80.  
           [EFFECTIVE DATE.] This section is effective for taxes 
        payable in 2004 and thereafter.  
           Sec. 6.  Minnesota Statutes 2002, section 298.2211, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [PURPOSE; GRANT OF AUTHORITY.] In order to 
        accomplish the legislative purposes specified in sections 
        469.142 to 469.165 and chapter 462C, within tax relief areas as 
        defined in section 273.134, the commissioner of iron range 
        resources and rehabilitation may exercise the following powers:  
        (1) all powers conferred upon a rural development financing 
        authority under sections 469.142 to 469.149; (2) all powers 
        conferred upon a city under chapter 462C; (3) all powers 
        conferred upon a municipality or a redevelopment agency under 
        sections 469.152 to 469.165; (4) all powers provided by sections 
        469.142 to 469.151 to further any of the purposes and objectives 
        of chapter 462C and sections 469.152 to 469.165; and (5) apply 
        for, borrow, receive, and expend grant and loan money made 
        available from federal sources and from federally funded 
        programs; and (6) all powers conferred upon a municipality or an 
        authority under sections 469.174 to 469.177, 469.178, except 
        subdivision 2 thereof, and 469.179, subject to compliance with 
        the provisions of section 469.175, subdivisions 1, 2, and 3; 
        provided that any tax increments derived by the commissioner 
        from the exercise of this authority may be used only to finance 
        or pay premiums or fees for insurance, letters of credit, or 
        other contracts guaranteeing the payment when due of net rentals 
        under a project lease or the payment of principal and interest 
        due on or repurchase of bonds issued to finance a project or 
        program, to accumulate and maintain reserves securing the 
        payment when due on bonds issued to finance a project or 
        program, or to provide an interest rate reduction program 
        pursuant to section 469.012, subdivision 7.  Tax increments and 
        earnings thereon remaining in any bond reserve account after 
        payment or discharge of any bonds secured thereby shall be used 
        within one year thereafter in furtherance of this section or 
        returned to the county auditor of the county in which the tax 
        increment financing district is located.  If returned to the 
        county auditor, the county auditor shall immediately allocate 
        the amount among all government units which would have shared 
        therein had the amount been received as part of the other ad 
        valorem taxes on property in the district most recently paid, in 
        the same proportions as other taxes were distributed, and shall 
        immediately distribute it to the government units in accordance 
        with the allocation. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 7.  Minnesota Statutes 2002, 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 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.] This section is effective for taxes 
        payable in 2004 and thereafter. 
           Sec. 8.  Minnesota Statutes 2002, section 298.28, 
        subdivision 4, is amended to read: 
           Subd. 4.  [SCHOOL DISTRICTS.] (a) 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) 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) 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 qualify as a tax relief area under section 273.134, 
        paragraph (b), or in which there is a qualifying municipality as 
        defined by section 273.134, paragraph (b) (a), 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 for the distribution in 2003 only, five 
        percent of the distributions to school districts under 
        paragraphs (b), (c), and (e); subdivision 6, paragraph (c); 
        subdivision 11; and section 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 northeast Minnesota economic 
        protection trust fund created in section 298.292.  Fifty percent 
        of the amount distributed to the northeast Minnesota Douglas J. 
        Johnson 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. 
           [EFFECTIVE DATE.] This section is effective for 
        distributions in 2004 and thereafter.  
           Sec. 9.  Minnesota Statutes 2002, section 298.292, 
        subdivision 2, is amended to read: 
           Subd. 2.  [USE OF MONEY.] Money in the northeast Minnesota 
        economic protection trust fund may be used for the following 
        purposes:  
           (1) to provide loans, loan guarantees, interest buy-downs 
        and other forms of participation with private sources of 
        financing, but a loan to a private enterprise shall be for a 
        principal amount not to exceed one-half of the cost of the 
        project for which financing is sought, and the rate of interest 
        on a loan to a private enterprise shall be no less than the 
        lesser of eight percent or an interest rate three percentage 
        points less than a full faith and credit obligation of the 
        United States government of comparable maturity, at the time 
        that the loan is approved; 
           (2) to fund reserve accounts established to secure the 
        payment when due of the principal of and interest on bonds 
        issued pursuant to section 298.2211; 
           (3) to pay in periodic payments or in a lump sum payment 
        any or all of the interest on bonds issued pursuant to chapter 
        474 for the purpose of constructing, converting, or retrofitting 
        heating facilities in connection with district heating systems 
        or systems utilizing alternative energy sources; and 
           (4) to invest in a venture capital fund or enterprise that 
        will provide capital to other entities that are engaging in, or 
        that will engage in, projects or programs that have the purposes 
        set forth in subdivision 1.  No investments may be made in a 
        venture capital fund or enterprise unless at least two other 
        unrelated investors make investments of at least $500,000 in the 
        venture capital fund or enterprise, and the investment by the 
        northeast Minnesota economic protection trust fund may not 
        exceed the amount of the largest investment by an unrelated 
        investor in the venture capital fund or enterprise.  For 
        purposes of this subdivision, an "unrelated investor" is a 
        person or entity that is not related to the entity in which the 
        investment is made or to any individual who owns more than 40 
        percent of the value of the entity, in any of the following 
        relationships:  spouse, parent, child, sibling, employee, or 
        owner of an interest in the entity that exceeds ten percent of 
        the value of all interests in it.  For purposes of determining 
        the limitations under this clause, the amount of investments 
        made by an investor other than the northeast Minnesota economic 
        protection trust fund is the sum of all investments made in the 
        venture capital fund or enterprise during the period beginning 
        one year before the date of the investment by the northeast 
        Minnesota economic protection trust fund.  
           Money from the trust fund shall be expended only in or for 
        the benefit of the tax relief area defined in section 273.134, 
        paragraph (b). 
           [EFFECTIVE DATE.] This section is effective for loans 
        executed on or after the day following final enactment. 
           Sec. 10.  Minnesota Statutes 2002, section 298.296, 
        subdivision 4, is amended to read: 
           Subd. 4.  [TEMPORARY LOAN AUTHORITY.] (a) The board may 
        recommend that up to $7,500,000 from the corpus of the trust may 
        be used for loans, loan guarantees, grants, or equity 
        investments as provided in this subdivision.  The money would be 
        available for loans for construction and equipping of facilities 
        constituting (1) a value added iron products plant, which may be 
        either a new plant or a facility incorporated into an existing 
        plant that produces iron upgraded to a minimum of 75 percent 
        iron content or any iron alloy with a total minimum metallic 
        content of 90 percent; or (2) a new mine or minerals processing 
        plant for any mineral subject to the net proceeds tax imposed 
        under section 298.015.  A loan or loan guarantee under this 
        paragraph may not exceed $5,000,000 for any facility.  
           (b) Additionally, the board must reserve the first 
        $2,000,000 of the net interest, dividends, and earnings arising 
        from the investment of the trust after June 30, 1996, to be used 
        for additional grants, loans, loan guarantees, or equity 
        investments for the purposes set forth in paragraph (a).  This 
        amount must be reserved until it is used for the grants as 
        described in this subdivision. 
           (c) Additionally, the board may recommend that up to 
        $5,500,000 from the corpus of the trust may be used for 
        additional grants, loans, loan guarantees, or equity investments 
        for the purposes set forth in paragraph (a). 
           (d) The board may require that it receive an equity 
        percentage in any project to which it contributes under this 
        section. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 11.  Minnesota Statutes 2002, section 298.2961, is 
        amended by adding a subdivision to read: 
           Subd. 3.  [REDISTRIBUTION.] (a) If a taconite production 
        facility is sold after operations at the facility had ceased, 
        any money remaining in the taconite environmental fund for the 
        former producer may be released to the purchaser of the facility 
        on the terms otherwise applicable to the former producer under 
        this section. 
           (b) Any portion of the taconite environmental fund that is 
        not released by the commissioner within three years of its 
        deposit in the taconite environmental fund shall be divided 
        between the taconite environmental protection fund created in 
        section 298.223 and the Douglas J. Johnson economic protection 
        trust fund created in section 298.292 for placement in their 
        respective special accounts.  Two-thirds of the unreleased funds 
        must be distributed to the taconite environmental protection 
        fund and one-third to the Douglas J. Johnson economic protection 
        trust fund. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 12.  [REVISOR INSTRUCTION.] 
           The revisor of statutes shall change the phrase "Northeast 
        Minnesota Economic Protection Trust Fund" or a similar phrase 
        referring to the fund, to the "Douglas J. Johnson Economic 
        Protection Trust Fund" wherever it appears in Minnesota Statutes.
           Sec. 13.  [REPEALER.] 
           Minnesota Statutes 2002, section 298.24, subdivision 3, is 
        repealed effective for concentrates produced after January 1, 
        2003. 

                                   ARTICLE 12 
                                 PUBLIC FINANCE 
           Section 1.  [37.31] [ISSUANCE OF BONDS.] 
           Subdivision 1.  [BONDING AUTHORITY.] The society may issue 
        negotiable bonds in a principal amount that the society 
        determines necessary to provide sufficient money for achieving 
        its purposes, including the payment of interest on bonds of the 
        society, the establishment of reserves to secure its bonds, the 
        payment of fees to a third party providing credit enhancement, 
        and the payment of all other expenditures of the society 
        incident to and necessary or convenient to carry out its 
        corporate purposes and powers.  Bonds of the society may be 
        issued as bonds or notes or in any other form authorized by 
        law.  The principal amount of bonds issued and outstanding under 
        this section at any time may not exceed $20,000,000, excluding 
        bonds for which refunding bonds or crossover refunding bonds 
        have been issued.  
           Subd. 2.  [REFUNDING OF BONDS.] The society may issue bonds 
        to refund outstanding bonds of the society, to pay any 
        redemption premiums on those bonds, and to pay interest accrued 
        or to accrue to the redemption date next succeeding the date of 
        delivery of the refunding bonds.  The society may apply the 
        proceeds of any refunding bonds to the purchase or payment at 
        maturity of the bonds to be refunded, or to the redemption of 
        outstanding bonds on the redemption date next succeeding the 
        date of delivery of the refunding bonds and may, pending the 
        application, place the proceeds in escrow to be applied to the 
        purchase, retirement, or redemption of the bonds.  Pending use, 
        escrowed proceeds may be invested and reinvested in obligations 
        issued or guaranteed by the state or the United States or by any 
        agency or instrumentality of the state or the United States, or 
        in certificates of deposit or time deposits secured in a manner 
        determined by the society, maturing at a time appropriate to 
        assure the prompt payment of the principal and interest and 
        redemption premiums, if any, on the bonds to be refunded.  The 
        income realized on any investment may also be applied to the 
        payment of the bonds to be refunded.  After the terms of the 
        escrow have been fully satisfied, any balance of the proceeds 
        and any investment income may be returned to the society for use 
        by it in any lawful manner.  All refunding bonds issued under 
        this subdivision must be issued and secured in the manner 
        provided by resolution of the society. 
           Subd. 3.  [KIND OF BONDS.] Bonds issued under this section 
        must be negotiable investment securities within the meaning and 
        for all purposes of the Uniform Commercial Code, subject only to 
        the provisions of the bonds for registration.  The bonds issued 
        must be limited obligations of the society not secured by its 
        full faith and credit and payable solely from specified sources 
        or assets.  
           Subd. 4.  [RESOLUTION AND TERMS OF SALE.] The bonds of the 
        society must be authorized by a resolution or resolutions 
        adopted by the society.  The bonds must bear the date or dates, 
        mature at the time or times, bear interest at a fixed or 
        variable rate, including a rate varying periodically at the time 
        or times and on the terms determined by the society, or any 
        combination of fixed and variable rates, be in the 
        denominations, be in the form, carry the registration 
        privileges, be executed in the manner, be payable in lawful 
        money of the United States, at the place or places within or 
        without the state, and be subject to the terms of redemption or 
        purchase before maturity as the resolutions or certificates 
        provide.  If, for any reason existing at the date of issue of 
        the bonds or existing at the date of making or purchasing any 
        loan or securities from the proceeds or after that date, the 
        interest on the bonds is or becomes subject to federal income 
        taxation, this fact does not affect the validity or the 
        provisions made for the security of the bonds.  The society may 
        make covenants and take or have taken actions that are in its 
        judgment necessary or desirable to comply with conditions 
        established by federal law or regulations for the exemption of 
        interest on its obligations.  The society may refrain from 
        compliance with those conditions if in its judgment this would 
        serve the purposes and policies set forth in this chapter with 
        respect to any particular issue of bonds, unless this would 
        violate covenants made by the society.  The maximum maturity of 
        a bond, whether or not issued for the purpose of refunding, must 
        be 30 years from its date.  The bonds of the society may be sold 
        at public or private sale, at a price or prices determined by 
        the society; provided that: 
           (1) the aggregate price at which an issue of bonds is 
        initially offered by underwriters to investors, as stated in the 
        authority's official statement with respect to the offering, 
        must not exceed by more than three percent the aggregate price 
        paid by the underwriters to the society at the time of delivery; 
           (2) the commission paid by the society to an underwriter 
        for placing an issue of bonds with investors must not exceed 
        three percent of the aggregate price at which the issue is 
        offered to investors as stated in the society's offering 
        statement; and 
           (3) the spread or commission must be an amount determined 
        by the society to be reasonable in light of the risk assumed and 
        the expenses of issuance, if any, required to be paid by the 
        underwriters.  
           Subd. 5.  [EXEMPTION.] The notes and bonds of the society 
        are not subject to sections 16C.03, subdivision 4, and 16C.05. 
           Subd. 6.  [RESERVES; FUNDS; ACCOUNTS.] The society may 
        establish reserves, funds, or accounts necessary to carry out 
        the purposes of the society or to comply with any agreement made 
        by or any resolution passed by the society. 
           Subd. 7.  [APPROVAL; COMMISSIONER OF FINANCE.] Before 
        issuing bonds under this section, the society must obtain the 
        approval, in writing, of the commissioner of finance. 
           Subd. 8.  [EXPIRATION.] The authority to issue bonds, other 
        than bonds to refund outstanding bonds, under this section 
        expires July 1, 2009. 
           Sec. 2.  [37.32] [TENDER OPTION.] 
           An obligation may be issued giving its owner the right to 
        tender or the society to demand tender of the obligation to the 
        society or another person designated by it, for purchase at a 
        specified time or times, if the society has first entered into 
        an agreement with a suitable financial institution obligating 
        the financial institution to provide funds on a timely basis for 
        purchase of bonds tendered.  The obligation is not considered to 
        mature on any tender date and the purchase of a tendered 
        obligation is not considered a payment or discharge of the 
        obligation by the society.  Obligations tendered for purchase 
        may be remarketed by or on behalf of the society or another 
        purchaser.  The society may enter into agreements it considers 
        appropriate to provide for the purchase and remarketing of 
        tendered obligations, including: 
           (1) provisions under which undelivered obligations may be 
        considered tendered for purchase and new obligations may be 
        substituted for them; 
           (2) provisions for the payment of charges of tender agents, 
        remarketing agents, and financial institutions extending lines 
        of credit or letters of credit assuring repurchase; and 
           (3) provisions for reimbursement of advances under letters 
        of credit that may be paid from the proceeds of the obligations 
        or from tax and other revenues appropriated for the payment and 
        security of the obligations and similar or related provisions. 
           Sec. 3.  [37.33] [BOND FUND.] 
           Subdivision 1.  [CREATION AND CONTENTS.] The society may 
        establish a special fund or funds for the security of one or 
        more or all series of its bonds.  The funds must be known as 
        debt service reserve funds.  The society may pay into each debt 
        service reserve fund: 
           (1) the proceeds of sale of bonds to the extent provided in 
        the resolution or indenture authorizing the issuance of them; 
           (2) money directed to be transferred by the society to the 
        debt service reserve fund; and 
           (3) other money made available to the society from any 
        other source only for the purpose of the fund. 
           Subd. 2.  [USE OF FUNDS.] Except as provided in this 
        section, the money credited to each debt service reserve fund 
        must be used only for the payment of the principal of bonds of 
        the society as they mature, the purchase of the bonds, the 
        payment of interest on them, or the payment of any premium 
        required when the bonds are redeemed before maturity.  Money in 
        a debt service reserve fund must not be withdrawn at a time and 
        in an amount that reduces the amount of the fund to less than 
        the amount the society determines to be reasonably necessary for 
        the purposes of the fund.  However, money may be withdrawn to 
        pay principal or interest due on bonds secured by the fund if 
        other money of the society is not available. 
           Subd. 3.  [INVESTMENT.] Money in a debt service reserve 
        fund not required for immediate use may be invested in 
        accordance with section 37.07. 
           Subd. 4.  [MINIMUM AMOUNT OF RESERVE AT ISSUANCE.] If the 
        society establishes a debt service reserve fund for the security 
        of any series of bonds, it shall not issue additional bonds that 
        are similarly secured if the amount of any of the debt service 
        reserve funds at the time of issuance does not equal or exceed 
        the minimum amount required by the resolution creating the fund, 
        unless the society deposits in each fund at the time of 
        issuance, from the proceeds of the bonds, or otherwise, an 
        amount that when added together with the amount then in the fund 
        will be at least the minimum amount required. 
           Subd. 5.  [TRANSFER OF EXCESS.] To the extent consistent 
        with the resolutions and indentures securing outstanding bonds, 
        the society may at the close of a fiscal year transfer to any 
        other fund or account from any debt service reserve fund any 
        excess in that reserve fund over the amount determined by the 
        society to be reasonably necessary for the purpose of the 
        reserve fund. 
           Sec. 4.  [37.34] [MONEY OF THE SOCIETY.] 
           The society may contract with the holders of any of its 
        bonds as to the custody, collection, securing, investment, and 
        payment of money of the society or money held in trust or 
        otherwise for the payment of bonds, and to carry out the 
        contract.  Money held in trust or otherwise for the payment of 
        bonds or in any way to secure bonds and deposits of the money 
        may be secured in the same manner as money of the society, and 
        all banks and trust companies are authorized to give security 
        for the deposits.  
           Sec. 5.  [37.35] [NONLIABILITY.] 
           Subdivision 1.  [NONLIABILITY OF INDIVIDUALS.] No member of 
        the society or other person executing the bonds is liable 
        personally on the bonds or is subject to any personal liability 
        or accountability by reason of their issuance.  
           Subd. 2.  [NONLIABILITY OF STATE.] The state is not liable 
        on bonds of the society issued under section 37.31 and those 
        bonds are not a debt of the state.  The bonds must contain on 
        their face a statement to that effect. 
           Sec. 6.  [37.36] [PURCHASE AND CANCELLATION BY SOCIETY.] 
           Subject to agreements with bondholders that may then exist, 
        the society may purchase out of money available for the purpose, 
        bonds of the society which shall then be canceled, at a price 
        not exceeding the following amounts: 
           (1) if the bonds are then redeemable, the redemption price 
        then applicable plus accrued interest to the next interest 
        payment date of the bonds; or 
           (2) if the bonds are not redeemable, the redemption price 
        applicable on the first date after the purchase upon which the 
        bonds become subject to redemption plus accrued interest to that 
        date. 
           Sec. 7.  [37.37] [STATE PLEDGE AGAINST IMPAIRMENT OF 
        CONTRACTS.] 
           The state pledges and agrees with the holders of bonds 
        issued under section 37.31 that the state will not limit or 
        alter the rights vested in the society to fulfill the terms of 
        any agreements made with the bondholders or in any way impair 
        the rights and remedies of the holders until the bonds, together 
        with interest on them, with interest on any unpaid installments 
        of interest, and all costs and expenses in connection with any 
        action or proceeding by or on behalf of the bondholders, are 
        fully met and discharged.  The society may include this pledge 
        and agreement of the state in any agreement with the holders of 
        bonds issued under section 37.31. 
           Sec. 8.  Minnesota Statutes 2002, section 373.01, 
        subdivision 3, is amended to read: 
           Subd. 3.  [CAPITAL NOTES.] A county board may, by 
        resolution and without referendum, issue capital notes subject 
        to the county debt limit to purchase capital equipment useful 
        for county purposes that has an expected useful life at least 
        equal to the term of the notes.  The notes shall be payable in 
        not more than five years and shall be issued on terms and in a 
        manner the board determines.  A tax levy shall be made for 
        payment of the principal and interest on the notes, in 
        accordance with section 475.61, as in the case of bonds.  For 
        purposes of this subdivision, "capital equipment" means public 
        safety, ambulance, road construction or maintenance, and medical 
        , and data processing equipment, and computer hardware and 
        original operating system software.  The authority to issue 
        capital notes for original operating systems software expires on 
        July 1, 2005. 
           Sec. 9.  Minnesota Statutes 2002, section 373.45, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [DEFINITIONS.] (a) As used in this section, 
        the following terms have the meanings given. 
           (b) "Authority" means the Minnesota public facilities 
        authority. 
           (c) "Commissioner" means the commissioner of finance. 
           (d) "Debt obligation" means a general obligation bond 
        issued by a county, or a bond payable from a county lease 
        obligation under section 641.24, to provide funds for the 
        construction of: 
           (1) jails; 
           (2) correctional facilities; 
           (3) law enforcement facilities; 
           (4) social services and human services facilities; or 
           (5) solid waste facilities. 
           Sec. 10.  Minnesota Statutes 2002, section 373.47, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [AUTHORITY TO INCUR DEBT.] (a) Subject to 
        prior approval by the public safety radio system planning 
        committee under section 473.907, the governing body of a county 
        may finance the cost of designing, constructing, and acquiring 
        public safety communication system infrastructure and equipment 
        for use on the statewide, shared public safety radio system by 
        issuing: 
           (1) capital improvement bonds under section 373.40, as if 
        the infrastructure and equipment qualified as a "capital 
        improvement" within the meaning of section 373.40, subdivision 
        1, paragraph (b); and 
           (2) capital notes under the provisions of section 373.01, 
        subdivision 3, as if the equipment qualified as "capital 
        equipment" within the meaning of section 373.01, subdivision 3. 
           (b) For purposes of this section, "county" means the 
        following counties:  Anoka, Benton, Carver, Chisago, Dakota, 
        Dodge, Fillmore, Freeborn, Goodhue, Hennepin, Houston, Isanti, 
        Mower, Olmsted, Ramsey, Rice, Scott, Sherburne, Steele, Wabasha, 
        Washington, Wright, and Winona. 
           (c) The authority to incur debt under this section is not 
        effective until July 1, 2003, for the following counties:  
        Benton, Dodge, Fillmore, Freeborn, Goodhue, Houston, Mower, 
        Olmsted, Rice, Sherburne, Steele, Wabasha, Wright, and Winona. 
           Sec. 11.  Minnesota Statutes 2002, section 376.009, is 
        amended to read: 
           376.009 [COUNTY HOSPITAL DEFINED; MAY HAVE MANY BUILDINGS, 
        SITES.] 
           For the purposes of sections 376.01 to 376.06, "county 
        hospital" means any hospital owned or operated by a county which 
        may consist of any number of buildings at one location or any 
        number of buildings at different locations within the 
        county.  The county board of any county that has not established 
        a county hospital may by resolution authorize a statutory or 
        home rule charter city in the county and its city council to 
        exercise the powers of a county and the county board under 
        sections 376.01 to 376.07, in which case references in sections 
        376.01 to 376.07 to "county" and "county board" refer to the 
        city so designated and its governing body, respectively. 
           Sec. 12.  Minnesota Statutes 2002, section 376.55, 
        subdivision 3, is amended to read: 
           Subd. 3.  [FINANCING.] The county board may transfer 
        surplus funds from any fund except the road and bridge, sinking 
        or drainage ditch funds for the purpose of 
        establishing, acquiring, maintaining, enlarging, or adding to a 
        county nursing home.  When surplus funds are not available for 
        transfer, a county board may issue bonds to pay the cost of 
        establishing, acquiring, equipping, furnishing, enlarging, or 
        adding to a county nursing home, subject to section 376.56. 
           Sec. 13.  Minnesota Statutes 2002, section 376.55, is 
        amended by adding a subdivision to read: 
           Subd. 7.  [CITY POWERS.] The county board of any county 
        that has not established a nursing home may by resolution 
        authorize a statutory or home rule charter city within the 
        county to exercise the powers of a county under sections 376.55 
        to 376.60.  A city so designated may exercise within its 
        boundaries all the powers of a county under sections 376.55 to 
        376.60. 
           Sec. 14.  Minnesota Statutes 2002, section 376.56, 
        subdivision 3, is amended to read: 
           Subd. 3.  [CHAPTER 475 BONDS.] Bonds issued under section 
        376.55, subdivision 3, may be general obligations of the county 
        and may be issued and sold, and taxes levied for their payment 
        as provided under chapter 475.  No election shall be required to 
        authorize the bond issue for acquiring, improving, remodeling, 
        or replacing an existing nursing home without increasing the 
        total number of accommodations for residents in all nursing 
        homes in the county.  The revenues of the nursing home shall 
        also be pledged for the payment of the bonds and for any 
        interest and premium.  Part of the proceeds may be deposited in 
        the debt service fund for the issue, to capitalize interest and 
        create a reserve to reduce or eliminate the tax otherwise 
        required by section 475.61 to be levied before issuing the 
        bonds.  The remaining proceeds from the sale of the bonds and 
        any surplus funds transferred under section 376.55, subdivision 
        3 must be credited to and deposited in the county nursing home 
        building fund of the county in which the nursing home is located.
           Sec. 15.  Minnesota Statutes 2002, section 410.32, is 
        amended to read: 
           410.32 [CITIES MAY ISSUE CAPITAL NOTES TO BUY CAPITAL 
        EQUIPMENT.] 
           Notwithstanding any contrary provision of other law or 
        charter, a home rule charter city may, by resolution and without 
        public referendum, issue capital notes subject to the city debt 
        limit to purchase public safety equipment, ambulance and other 
        medical equipment, road construction and maintenance equipment, 
        and other capital equipment having and computer hardware and 
        original operating system software, provided the equipment or 
        software has an expected useful life at least as long as the 
        term of the notes.  The authority to issue capital notes for 
        original operating system software expires on July 1, 2005.  The 
        notes shall be payable in not more than five years and be issued 
        on terms and in the manner the city determines.  The total 
        principal amount of the capital notes issued in a fiscal year 
        shall not exceed 0.03 percent of the market value of taxable 
        property in the city for that year.  A tax levy shall be made 
        for the payment of the principal and interest on the notes, in 
        accordance with section 475.61, as in the case of bonds.  Notes 
        issued under this section shall require an affirmative vote of 
        two-thirds of the governing body of the city.  Notwithstanding a 
        contrary provision of other law or charter, a home rule charter 
        city may also issue capital notes subject to its debt limit in 
        the manner and subject to the limitations applicable to 
        statutory cities pursuant to section 412.301. 
           Sec. 16.  [475.521] [CAPITAL IMPROVEMENT BONDS.] 
           Subdivision 1.  [DEFINITIONS.] For purposes of this 
        section, the following terms have the meanings given. 
           (a) "Bonds" mean an obligation defined under section 475.51.
           (b) "Capital improvement" means acquisition or betterment 
        of public lands, buildings or other improvements for the purpose 
        of a city hall, public safety facility, and public works 
        facility.  An improvement must have an expected useful life of 
        five years or more to qualify.  Capital improvement does not 
        include light rail transit or any activity related to it, or a 
        park, library, road, bridge, administrative building other than 
        a city hall, or land for any of those facilities. 
           (c) "City" means a home rule charter or statutory city. 
           Subd. 2.  [ELECTION REQUIREMENT.] (a) Bonds issued by a 
        city to finance capital improvements under an approved capital 
        improvements plan are not subject to the election requirements 
        of section 475.58.  The bonds are subject to the net debt limits 
        under section 475.53.  The bonds must be approved by an 
        affirmative vote of three-fifths of the members of a five-member 
        city council.  In the case of a city council having more than 
        five members, the bonds must be approved by a vote of at least 
        two-thirds of the city council. 
           (b) Before the issuance of bonds qualifying under this 
        section, the city must publish a notice of its intention to 
        issue the bonds and the date and time of the hearing to obtain 
        public comment on the matter.  The notice must be published in 
        the official newspaper of the city or in a newspaper of general 
        circulation in the city.  Additionally, the notice may be posted 
        on the official Web site, if any, of the city.  The notice must 
        be published at least 14 but not more than 28 days before the 
        date of the hearing. 
           (c) A city may issue the bonds only after obtaining the 
        approval of a majority of the voters voting on the question of 
        issuing the obligations, if a petition requesting a vote on the 
        issuance is signed by voters equal to five percent of the votes 
        cast in the city in the last general election and is filed with 
        the city clerk within 30 days after the public hearing.  The 
        commissioner of revenue shall prepare a suggested form of the 
        question to be presented at the election. 
           Subd. 3.  [CAPITAL IMPROVEMENT PLAN.] (a) A city may adopt 
        a capital improvement plan.  The plan must cover at least a 
        five-year period beginning with the date of its adoption.  The 
        plan must set forth the estimated schedule, timing, and details 
        of specific capital improvements by year, together with the 
        estimated cost, the need for the improvement, and sources of 
        revenue to pay for the improvement.  In preparing the capital 
        improvement plan, the city council must consider for each 
        project and for the overall plan: 
           (1) the condition of the city's existing infrastructure, 
        including the projected need for repair or replacement; 
           (2) the likely demand for the improvement; 
           (3) the estimated cost of the improvement; 
           (4) the available public resources; 
           (5) the level of overlapping debt in the city; 
           (6) the relative benefits and costs of alternative uses of 
        the funds; 
           (7) operating costs of the proposed improvements; and 
           (8) alternatives for providing services most efficiently 
        through shared facilities with other cities or local government 
        units. 
           (b) The capital improvement plan and annual amendments to 
        it must be approved by the city council after public hearing. 
           Subd. 4.  [LIMITATIONS ON AMOUNT.] A city may not issue 
        bonds under this section if the maximum amount of principal and 
        interest to become due in any year on all the outstanding bonds 
        issued under this section, including the bonds to be issued, 
        will equal or exceed 0.05367 percent of taxable market value of 
        property in the county.  Calculation of the limit must be made 
        using the taxable market value for the taxes payable year in 
        which the obligations are issued and sold.  This section does 
        not limit the authority to issue bonds under any other special 
        or general law. 
           Subd. 5.  [APPLICATION OF CHAPTER 475.] Bonds to finance 
        capital improvements qualifying under this section must be 
        issued under the issuance authority in chapter 475 and the 
        provisions of chapter 475 apply, except as otherwise 
        specifically provided in this section. 
           Sec. 17.  Minnesota Statutes 2002, section 412.301, is 
        amended to read: 
           412.301 [FINANCING PURCHASE OF CERTAIN EQUIPMENT.] 
           The council may issue certificates of indebtedness or 
        capital notes subject to the city debt limits to purchase public 
        safety equipment, ambulance equipment, road construction or 
        maintenance equipment, and other capital equipment having and 
        computer hardware and original operating system software, 
        provided the equipment or software has an expected useful life 
        at least as long as the terms of the certificates or notes.  The 
        authority to issue capital notes for original operating system 
        software expires on July 1, 2005.  Such certificates or notes 
        shall be payable in not more than five years and shall be issued 
        on such terms and in such manner as the council may determine.  
        If the amount of the certificates or notes to be issued to 
        finance any such purchase exceeds 0.25 percent of the market 
        value of taxable property in the city, they shall not be issued 
        for at least ten days after publication in the official 
        newspaper of a council resolution determining to issue them; and 
        if before the end of that time, a petition asking for an 
        election on the proposition signed by voters equal to ten 
        percent of the number of voters at the last regular municipal 
        election is filed with the clerk, such certificates or notes 
        shall not be issued until the proposition of their issuance has 
        been approved by a majority of the votes cast on the question at 
        a regular or special election.  A tax levy shall be made for the 
        payment of the principal and interest on such certificates or 
        notes, in accordance with section 475.61, as in the case of 
        bonds.  
           Sec. 18.  [469.0772] [KOOCHICHING COUNTY; PORT AUTHORITY.] 
           Subdivision 1.  [AUTHORITY TO ESTABLISH.] The governing 
        body of the county of Koochiching may establish a port authority 
        that has the same powers as a port authority established under 
        section 469.049.  If the county establishes a port authority, 
        the governing body of the county shall exercise all powers 
        granted to a city by sections 469.048 to 469.068 or other law.  
        Any city in Koochiching county may participate in the activities 
        of the county port authority under terms jointly agreed to by 
        the city and county. 
           Subd. 2.  [FOREIGN TRADE ZONE.] Koochiching county or any 
        city, town, or other political subdivision located in 
        Koochiching county may apply to the board defined in United 
        States Code, title 19, section 81a, for the right to use the 
        powers provided in United States Code, title 19, sections 81a 
        and 81u.  If the right is granted the city, town, or other 
        political subdivision may use the powers within or outside of a 
        port district.  The county, a city, town, or other political 
        subdivision may apply jointly with any other city, town, or 
        political subdivision located in Koochiching county. 
           Sec. 19.  Minnesota Statutes 2002, section 469.1813, 
        subdivision 8, is amended to read: 
           Subd. 8.  [LIMITATION ON ABATEMENTS.] In any year, the 
        total amount of property taxes abated by a political subdivision 
        under this section may not exceed (1) five ten percent of the 
        current levy, or (2) $100,000 $200,000, whichever is greater. 
           Sec. 20.  Minnesota Statutes 2002, section 473.39, is 
        amended by adding a subdivision to read: 
           Subd. 1j.  [OBLIGATIONS.] After July 1, 2003, in addition 
        to the authority in subdivisions 1a, 1b, 1c, 1d, 1e, 1g, 1h, and 
        1i, the council may issue certificates of indebtedness, bonds, 
        or other obligations under this section in an amount not 
        exceeding $45,000,000 for capital expenditures as prescribed in 
        the council's regional transit master plan and transit capital 
        improvement program and for related costs, including the costs 
        of issuance and sale of the obligations.  
           [APPLICATION.] This section applies to the counties of 
        Anoka, Carver, Dakota, Hennepin, Ramsey, Scott, and Washington. 
           Sec. 21.  Minnesota Statutes 2002, section 473.898, 
        subdivision 3, is amended to read: 
           Subd. 3.  [LIMITATIONS.] (a) The principal amount of the 
        bonds issued pursuant to subdivision 1, exclusive of any 
        original issue discount, shall not exceed the amount of 
        $10,000,000 plus the amount the council determines necessary to 
        pay the costs of issuance, fund reserves, debt service, and pay 
        for any bond insurance or other credit enhancement. 
           (b) In addition to the amount authorized under paragraph 
        (a), the council may issue bonds under subdivision 1 in a 
        principal amount of $3,306,300, plus the amount the council 
        determines necessary to pay the cost of issuance, fund reserves, 
        debt service, and any bond insurance or other credit 
        enhancement.  The proceeds of bonds issued under this paragraph 
        may not be used to finance portable or subscriber radio sets. 
           (c) In addition to the amount authorized under paragraphs 
        (a) and (b), the council may issue bonds under subdivision 1 in 
        a principal amount of $12,000,000, plus the amount the council 
        determines necessary to pay the costs of issuance, fund 
        reserves, debt service, and any bond insurance or other credit 
        enhancement.  The proceeds of bonds issued under this paragraph 
        must be used to pay up to 30 percent of the cost to a local 
        government unit of building a subsystem and may not be used to 
        finance portable or subscriber radio sets.  The bond proceeds 
        may be used to make improvements to an existing 800 MHz radio 
        system that will interoperate with the regionwide public safety 
        radio communication system, provided that the improvements 
        conform to the board's plan and technical standards.  The 
        council must time the sale and issuance of the bonds so that the 
        debt service on the bonds can be covered by the additional 
        revenue that will become available in the fiscal year ending 
        June 30, 2005, generated under section 403.11 and appropriated 
        under section 473.901. 
           Sec. 22.  Minnesota Statutes 2002, section 474A.061, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [ALLOCATION APPLICATION.] (a) An issuer may 
        apply for an allocation under this section by submitting to the 
        department an application on forms provided by the department, 
        accompanied by (1) a preliminary resolution, (2) a statement of 
        bond counsel that the proposed issue of obligations requires an 
        allocation under this chapter and the Internal Revenue Code, (3) 
        the type of qualified bonds to be issued, (4) an application 
        deposit in the amount of one percent of the requested allocation 
        before the last Monday in July, or in the amount of two percent 
        of the requested allocation on or after the last Monday in July, 
        (5) a public purpose scoring worksheet for manufacturing project 
        and enterprise zone facility project applications, and (6) for 
        residential rental projects, a statement from the applicant or 
        bond counsel as to whether the project preserves existing 
        federally subsidized housing for residential rental project 
        applications and whether the project is restricted to persons 
        who are 55 years of age or older.  The issuer must pay the 
        application deposit by a check made payable to the department of 
        finance.  The Minnesota housing finance agency, the Minnesota 
        rural finance authority, and the Minnesota higher education 
        services office may apply for and receive an allocation under 
        this section without submitting an application deposit. 
           (b) An entitlement issuer may not apply for an allocation 
        from the housing pool or from the public facilities pool unless 
        it has either permanently issued bonds equal to the amount of 
        its entitlement allocation for the current year plus any amount 
        of bonding authority carried forward from previous years or 
        returned for reallocation all of its unused entitlement 
        allocation.  An entitlement issuer may not apply for an 
        allocation from the housing pool unless it either has 
        permanently issued bonds equal to any amount of bonding 
        authority carried forward from a previous year or has returned 
        for reallocation all of its unused entitlement allocation.  For 
        purposes of this subdivision, its entitlement allocation 
        includes an amount obtained under section 474A.04, subdivision 
        6.  This paragraph does not apply to an application from the 
        Minnesota housing finance agency for an allocation under 
        subdivision 2a for cities who choose to have the agency issue 
        bonds on their behalf.  
           (c) If an application is rejected under this section, the 
        commissioner must notify the applicant and return the 
        application deposit to the applicant within 30 days unless the 
        applicant requests in writing that the application be 
        resubmitted.  The granting of an allocation of bonding authority 
        under this section must be evidenced by a certificate of 
        allocation.  
           Sec. 23.  Minnesota Statutes 2002, section 475.58, 
        subdivision 3b, is amended to read: 
           Subd. 3b.  [STREET RECONSTRUCTION.] (a) A municipality may, 
        without regard to the election requirement under subdivision 1, 
        issue and sell obligations for street reconstruction, if the 
        following conditions are met: 
           (1) the streets are reconstructed under a street 
        reconstruction plan that describes the streets to be 
        reconstructed, the estimated costs, and any planned 
        reconstruction of other streets in the municipality over the 
        next five years, and the plan and issuance of the obligations 
        has been approved by a vote of all of the members of the 
        governing body following a public hearing for which notice has 
        been published in the official newspaper at least ten days but 
        not more than 28 days prior to the hearing; and 
           (2) if a petition requesting a vote on the issuance is 
        signed by voters equal to five percent of the votes cast in the 
        last municipal general election and is filed with the municipal 
        clerk within 30 days of the public hearing, the municipality may 
        issue the bonds only after obtaining the approval of a majority 
        of the voters voting on the question of the issuance of the 
        obligations. 
           (b) Obligations issued under this subdivision are subject 
        to the debt limit of the municipality and are not excluded from 
        net debt under section 475.51, subdivision 4. 
        For purposes of this subdivision, street reconstruction includes 
        utility replacement and relocation and other activities 
        incidental to the street reconstruction, but does not include 
        the portion of project cost allocable to widening a street or 
        adding curbs and gutters where none previously existed. 
           Sec. 24.  Laws 1967, chapter 558, section 1, subdivision 5, 
        as amended by Laws 1979, chapter 135, section 1, and Laws 1985, 
        chapter 98, section 2, is amended to read:  
           Subd. 5.  Promotion of tourist, agricultural and industrial 
        developments.  The amount to be spent annually for the purposes 
        of this subdivision shall not exceed one dollar five dollars per 
        capita of the county's population.  
           [EFFECTIVE DATE; LOCAL APPROVAL.] This section is effective 
        the day after the governing body of Beltrami county and its 
        chief clerical officer timely complete their compliance with 
        Minnesota Statutes, section 645.021, subdivisions 2 and 3. 
           Sec. 25.  [BONDS ISSUANCE VALIDATED.] 
           The provisions of Minnesota Statutes, sections 373.47, 
        subdivision 1, and 473.907, subdivision 3, requiring prior 
        review and approval by the public radio safety planning 
        committee do not apply to the general obligation bonds issued by 
        Anoka county in a principal amount of $10,500,000 on November 
        20, 2002. 
           [EFFECTIVE DATE.] This section is effective upon compliance 
        by the governing body of Anoka county with the provisions of 
        Minnesota Statutes, section 645.021. 
           Sec. 26.  [BUFFALO; CITY BONDS FOR HIGHWAY 55.] 
           The city of Buffalo may issue up to $1,300,000 of its 
        general obligation bonds to pay for the city's share of costs of 
        reconstruction and upgrading of that part of Minnesota trunk 
        highway marked 55 that lies within the city of Buffalo. 
           The bonds must be issued and sold in accordance with 
        Minnesota Statutes, chapter 475, except that the debt need not 
        be included within any limit on net debt imposed by Minnesota 
        Statutes, chapter 475, and no election is required to authorize 
        the bond issue. 
           Notwithstanding any other law, including any law enacted 
        during the 2003 legislative session whether enacted before or 
        after the enactment of this act, the debt or debt service on 
        bonds issued under this section is excluded from any levy or 
        other taxing limits and is not spending or revenue for purposes 
        of calculating local government aids or local government aids 
        reductions. 
           [EFFECTIVE DATE.] This section is effective the day after 
        the governing body of Buffalo and its chief clerical officer 
        timely complete their compliance with Minnesota Statutes, 
        section 645.021, subdivisions 2 and 3. 
           Sec. 27.  [CORPORATE STATUS FOR CERTAIN FEDERAL TAX LAW.] 
           For purposes of section 1.103-1 of the federal income tax 
        regulations, Lewis and Clark Rural Water System, Inc. is hereby 
        recognized as a corporation authorized to act on behalf of its 
        members, including its Minnesota member governmental units, to 
        provide drinking water to their communities and to issue debt 
        obligations in its own name on behalf of some or all of its 
        members, provided that Minnesota member governmental units are 
        not liable for the payment of principal of or interest on such 
        obligations. 
           Sec. 28.  [NURSING HOME BONDS AUTHORIZED.] 
           Itasca county may issue bonds under Minnesota Statutes, 
        sections 376.55 and 376.56, to finance the construction of a 
        35-bed nursing home facility to replace an existing 35-bed 
        private facility located in the county.  The bonds issued under 
        this section must be payable solely from revenues and may not be 
        general obligations of the county. 
           [EFFECTIVE DATE.] This section is effective the day after 
        the governing body of Itasca county and its chief clerical 
        officer timely complete their compliance with Minnesota 
        Statutes, section 645.021, subdivisions 2 and 3. 
           Sec. 29.  [VALIDATION OF APPROVAL.] 
           Notwithstanding Minnesota Statutes, section 645.021, 
        subdivision 3, Laws 1980, chapter 569, sections 2 through 8, 
        approved by the board of directors of local government 
        information systems by resolution adopted on July 30, 1980, are 
        effective as of July 1, 1980, and apply to obligations issued by 
        local government information systems after April 1, 2003. 
           Sec. 30.  [KANDIYOHI COUNTY AND CITY OF WILLMAR.] 
           Subdivision 1.  [POWERS.] Notwithstanding Minnesota 
        Statutes, sections 469.090 and 469.1082, Kandiyohi county may 
        exercise the powers of a city under Minnesota Statutes, sections 
        469.090 to 469.107.  Kandiyohi county and the city of Willmar 
        may enter into a joint powers agreement under Minnesota 
        Statutes, section 471.59, to jointly or cooperatively exercise 
        any of the powers common to both the county and the city under 
        Minnesota Statutes, sections 469.090 to 469.107, in a manner to 
        be determined by a majority of the Kandiyohi county board and 
        the Willmar city council.  
           Subd. 2.  [SPECIAL TAXING DISTRICT.] A joint powers entity 
        created under subdivision 1 is a political subdivision of the 
        state and a special taxing district as defined by Minnesota 
        Statutes, section 275.066, clause (24), with the power to adopt 
        and certify a property tax levy to the county auditor.  The 
        maximum allowable levy limit for this special taxing district is 
        the same levy limit as provided under Minnesota Statutes, 
        section 469.107, subdivision 1, and, to the extent levied, shall 
        replace the levy authorized under subdivision 1 for Kandiyohi 
        county and the city of Willmar.  
           Subd. 3.  [EFFECTIVE DATE; NO LOCAL APPROVAL REQUIRED.] 
        This section is effective the day after final enactment. 
           Sec. 31.  [MINNEAPOLIS COMMUNITY PLANNING AND ECONOMIC 
        DEVELOPMENT DEPARTMENT.] 
           Subdivision 1.  Notwithstanding a contrary provision of 
        law, the charter of the city of Minneapolis, or its civil 
        service rules, the city council of the city of Minneapolis may, 
        by ordinance: 
           (1) establish a department of the city to be designated as 
        the community planning and economic development department, or 
        another name as the city designates by ordinance.  The term "the 
        department" as used in sections 31 to 33 means the community 
        planning and economic development department established under 
        this subdivision; 
           (2) transfer to the department the community development 
        and planning duties and functions of any other department or 
        office of the city of Minneapolis, including the employees 
        performing those duties and functions.  If the duties and 
        functions of the city planning department are transferred to the 
        department, the department must perform the administrative 
        duties that were formerly performed by the city's planning 
        department on behalf of or at the request of the city's planning 
        commission; 
           (3) transfer any positions of the Minneapolis community 
        development agency to the city of Minneapolis.  The ordinance 
        may provide the process for establishing, classifying, and 
        describing the duties for the transferred positions.  Employees 
        of the Minneapolis community development agency who are not in 
        the classified service of the city of Minneapolis may be 
        transferred to the city of Minneapolis, and the city council may 
        transfer the employees into the classified service of the city 
        of Minneapolis and into positions for which the employees are 
        qualified, as determined by the city council; 
           (4) establish the position of director of the department in 
        the unclassified service of the city, and establish other 
        unclassified positions as necessary.  Unclassified positions, 
        other than the director, must meet the following criteria: 
           (i) the person occupying the position must report to the 
        director or a deputy director; 
           (ii) the person occupying the position must be part of the 
        director's management team; 
           (iii) the duties of the position must involve significant 
        discretion and substantial involvement in the development, 
        interpretation, or implementation of city or department policy; 
           (iv) the duties of the position must not primarily require 
        technical expertise where continuity in the position would be 
        significant; and 
           (v) the person occupying the position must be accountable 
        to, loyal to, and compatible with the mayor, the city council, 
        and the director; and 
           (5) establish the terms and conditions of employment for 
        employees of the department. 
           Subd. 2.  The employees of the department are employees of 
        the city of Minneapolis for the purposes of membership in the 
        public employees retirement association.  An employee 
        transferred from the Minneapolis community development agency to 
        the city of Minneapolis must elect within six months of the 
        effective date of the transfer to either continue as a member of 
        the retirement program in which the employee participated on the 
        date of the employee's transfer to the city of Minneapolis or to 
        become a member of the public employees retirement association.  
        This election is irrevocable.  An employee who was a member of 
        the Minneapolis employees retirement fund on the date of the 
        employee's transfer to the city of Minneapolis may continue as a 
        member of that fund retaining all vested rights, constructive 
        time, and employee and employer contributions made on the 
        employee's behalf to that fund. The city of Minneapolis must 
        make the required employer contributions to the elected 
        retirement program.  An employee electing to become a member of 
        the public employees retirement association may enroll in the 
        association with vested rights based upon the employee's current 
        tenure as an employee of the Minneapolis community development 
        agency, but that tenure does not constitute allowable service 
        for purposes of determining benefits. 
           Subd. 3.  The terms of a collective bargaining agreement 
        that is in effect between the Minneapolis community development 
        agency and its employees, some or all of whom may be transferred 
        to the city of Minneapolis, are binding upon the city of 
        Minneapolis and the employees for the term of the contract. 
           Subd. 4.  An employee electing under subdivision 2 to 
        become a member of the public employees retirement association 
        may purchase allowable service credit from the association by 
        paying to the association an amount calculated under Minnesota 
        Statutes, section 356.55.  The service credit that is 
        purchasable is a period or periods of employment by the 
        Minneapolis community development agency that would have been 
        eligible service for coverage by the general employees 
        retirement plan of the public employees retirement association 
        if the service had been rendered after the effective date of 
        this article.  A person electing to purchase service credit 
        under this subdivision must provide any documentation of prior 
        service required by the executive director of the public 
        employees retirement association.  Notwithstanding any provision 
        of Minnesota Statutes, section 356.55, to the contrary, the 
        prior service credit purchase payment may be made in whole or in 
        part on an institution-to-institution basis from a plan 
        qualified under the federal Internal Revenue Code, section 
        401(a), 401(k), or 414(h), or from an annuity qualified under 
        the federal Internal Revenue Code, section 403, or from a 
        deferred compensation plan under the federal Internal Revenue 
        Code, section 457, to the extent permitted by federal law.  In 
        no event may a prior service credit purchase transfer be paid 
        directly to the person purchasing the service. 
           Sec. 32.  [AUTHORITY.] 
           Subdivision 1.  Notwithstanding a contrary law or provision 
        of the Minneapolis city charter, the city council may exercise 
        the powers granted by Minnesota Statutes, sections 469.001 to 
        469.134, and 469.152 to 469.1799, and any other powers granted 
        to a city of the first class, except for powers relating to 
        public housing.  In exercising the powers authorized by this 
        section, the city of Minneapolis shall be the authority, agency, 
        or redevelopment agency referred to in Minnesota Statutes, 
        sections 469.001 to 469.134, and 469.152 to 469.1799, and the 
        city council of the city of Minneapolis shall be the governing 
        body or board of commissioners of the authority, agency, or 
        redevelopment agency.  The city council may exercise the powers 
        authorized by this subdivision; by Laws 1980, chapter 595, as 
        amended; by Laws 1990, chapter 604, article 7, section 29, as 
        amended by Laws 1991, chapter 291, article 10, section 20; and 
        may exercise any other development or redevelopment powers 
        authorized by law, independently, or in conjunction with each 
        other, as though all of the authorized powers had been granted 
        to a single entity.  But a program, project, or district 
        authorized by the city under Minnesota Statutes, sections 
        469.001 to 469.134, and 469.152 to 469.l799, is subject to the 
        limitations of the program, project, or district imposed by 
        Minnesota Statutes, sections 469.001 to 469.134, and 469.152 to 
        469.1799. 
           Subd. 2.  The city council may delegate to the department 
        any of the powers granted to the city of Minneapolis under 
        subdivision 1, except the power to tax and the power to issue 
        bonds, notes, or other obligations of the city of Minneapolis. 
           Subd. 3.  Notwithstanding a contrary law or provision of 
        the Minneapolis city charter, money, investments, real property, 
        personal property, assets, programs, projects, districts, 
        developments, or obligations of the Minneapolis community 
        development agency may be transferred by resolution of the city 
        council to the city of Minneapolis and be made subject to the 
        control, authority, and operation of the department.  If a 
        transfer is made, the city of Minneapolis is bound by the 
        contractual obligations of the Minneapolis community development 
        agency with respect to the money, investments, real estate, 
        personal property, assets, programs, projects, districts, 
        developments, or obligations, including the obligations of any 
        bonds, notes, or other debt obligations of the Minneapolis 
        community development agency.  The pledge of the full faith and 
        credit of the Minneapolis community development agency to any 
        bonds, notes, or other debt obligations of the Minneapolis 
        community development agency that are transferred to the city of 
        Minneapolis shall not be secured by the full faith and credit of 
        the city of Minneapolis and shall not be secured by the taxing 
        powers of the city of Minneapolis but only by the assets pledged 
        by the Minneapolis community development agency to the payment 
        of the bonds, notes, or other debt obligations.  The city 
        council is granted the powers necessary to perform the 
        contractual obligations transferred to the city of Minneapolis. 
           Subd. 4.  The city council may pledge to the payment of 
        bonds, notes, or other obligations of the city of Minneapolis 
        revenues, assets, reserves, or other property transferred to the 
        city of Minneapolis under this section. 
           Subd. 5.  The city council may pledge to the payment of 
        bonds, notes, or other obligations of the city of Minneapolis 
        the full faith and credit of the city of Minneapolis, or the 
        taxing power of the city of Minneapolis, to finance programs, 
        projects, districts, developments, facilities, or activities 
        undertaken by the department. 
           Subd. 6.  Unless prohibited by other law or a contractual 
        obligation including a pledge to the owners of bonds, notes, or 
        other indebtedness, the money and investments of the Minneapolis 
        community development agency transferred to the city of 
        Minneapolis under this section may be deposited in any fund or 
        account of the city of Minneapolis. 
           Subd. 7.  If all money, investments, real property, 
        personal property, assets, programs, projects, districts, 
        developments, or obligations of the Minneapolis community 
        development agency are transferred to the city of Minneapolis, 
        the city council may, by resolution, dissolve the Minneapolis 
        community development agency.  Any rights, duties, claims, 
        awards, grants, or liabilities that may arise after the 
        dissolution of the Minneapolis community development agency 
        shall constitute rights, duties, claims, awards, grants, or 
        liabilities of the city of Minneapolis.  The pledge of the full 
        faith and credit of the Minneapolis community development agency 
        to any bonds, notes, or other debt obligations of the 
        Minneapolis community development agency that are transferred to 
        the city of Minneapolis shall not be secured by the full faith 
        and credit or the taxing powers of the city of Minneapolis but 
        shall be secured only by the assets pledged by the Minneapolis 
        community development agency to the payment of the bonds, notes, 
        or other debt obligations. 
           Subd. 8.  If the city of Minneapolis exercises its powers 
        for industrial development or establishes industrial development 
        districts under Minnesota Statutes, sections 469.048 to 469.068, 
        the term "industrial," when used in relation to industrial 
        development, includes economic and economic development and 
        housing and housing development. 
           Sec. 33.  [LIMITATIONS.] 
           Subdivision 1.  Bonds, notes, or other obligations issued 
        to finance or refinance a program, project, district, 
        development, facility, or activity of the department must be 
        issued by the city council, or, at the request of the city 
        council, by the board of estimate and taxation of the city of 
        Minneapolis.  The limitations of this section must not be 
        applied in a manner that impairs the security of bonds, notes, 
        or other obligations issued before the imposition of the 
        limitations. 
           Subd. 2.  Unless otherwise provided in sections 31 to 33, 
        all actions of the city council under sections 31 to 33 are 
        actions within chapter 3, section 1, of the charter of the city 
        of Minneapolis. 
           Sec. 34.  [EFFECTIVE DATE; LOCAL APPROVAL.] 
           Sections 31 to 33 are effective the day after the governing 
        body of the city of Minneapolis and its chief clerical officer 
        timely complete their compliance with Minnesota Statutes, 
        section 645.021, subdivisions 2 and 3. 
           Sec. 35.  [DEFINITIONS.] 
           Subdivision 1.  [DEFINITIONS.] For the purposes of sections 
        35 to 41, the terms defined in this section have the following 
        meanings. 
           Subd. 2.  [LAKES AREA ECONOMIC DEVELOPMENT 
        AUTHORITY.] "Lakes area economic development authority" or 
        "authority" means the lakes area economic authority established 
        as provided in section 36. 
           Subd. 3.  [PERSON.] "Person" means an individual, 
        partnership, corporation, cooperative, or other organization or 
        entity, public or private. 
           Subd. 4.  [MEMBER.] "Member" means the city of Alexandria 
        or Garfield or the township of Alexandria or La Grand, or any 
        other municipality, the geographic area of which is included 
        within the jurisdiction of the authority. 
           Subd. 5.  [MUNICIPALITY.] "Municipality" means a statutory 
        or home rule charter city or town located in Douglas county. 
           Sec. 36.  [LAKES AREA ECONOMIC DEVELOPMENT AUTHORITY.] 
           Subdivision 1.  [ESTABLISHMENT.] A lakes area economic 
        development authority with jurisdiction over the geographic area 
        of its members is established as a public corporation and 
        political subdivision of the state with perpetual succession and 
        all the rights, powers, privileges, immunities, and duties that 
        may be validly granted to or imposed upon a municipal 
        corporation, as provided in sections 35 to 41. 
           Subd. 2.  [BOARD OF COMMISSIONERS.] The authority is 
        governed by a board of commissioners to be selected as follows:  
        the mayor of each member city, and the chair of the town board 
        of each member town shall appoint one commissioner, subject to 
        the approval of the respective city council or town board.  The 
        terms of the commissioner are as provided in subdivision 5. 
           Subd. 3.  [TIME LIMITS FOR SELECTION, ALTERNATIVE 
        APPOINTMENT BY DISTRICT JUDGE.] The initial appointment of 
        commissioners must be made no later than 60 days after sections 
        35 to 41 become effective.  Subsequent appointments must be made 
        within 60 days before the expiration of a term in the same 
        manner as the predecessor was selected.  A vacancy on the board 
        must be filled within 60 days after it occurs.  If a selection 
        is not made within the prescribed time, the chief judge of the 
        seventh judicial district of the Minnesota district court on 
        application by an interested person shall appoint an eligible 
        person to the board. 
           Subd. 4.  [VACANCIES.] If a vacancy occurs in the office of 
        commissioner, the vacancy must be filled for the unexpired term 
        in a like manner as provided for selection of the commissioner 
        who vacated the office.  The office must be considered vacant 
        under the conditions specified in Minnesota Statutes, section 
        351.02. 
           Subd. 5.  [TERMS OF OFFICE.] The terms of the initial 
        appointees to the board of commissioners are for three, four, 
        five, and six years and must be established by lot among the 
        initial four commissioners.  The mayor or town board chair of 
        any new member added under section 39 shall designate the term, 
        not to exceed six years, of the first commissioner selected to 
        represent the member.  Succeeding terms of all commissioners are 
        six years, except that each commissioner serves until a 
        successor has been duly selected and qualified. 
           Subd. 6.  [REMOVAL.] A commissioner may be removed by the 
        unanimous vote of the appointing governing body, with or without 
        cause. 
           Subd. 7.  [QUALIFICATIONS.] A commissioner may, but need 
        not, be a resident of the territory of the member appointing 
        that commissioner. 
           Subd. 8.  [COMPENSATION.] A commissioner must be paid a per 
        diem compensation for attending a regular or special meeting in 
        an amount determined by the board.  A commissioner must be 
        reimbursed for all reasonable expenses incurred in the 
        performance of the commissioner's duties as determined by the 
        board. 
           Sec. 37.  [POWERS; APPLICATION OF EDA LAW.] 
           Subdivision 1.  [USE OF EDA POWERS.] Except as otherwise 
        provided in sections 35 to 41, the authority may exercise any of 
        the powers of an economic development authority (EDA) provided 
        by Minnesota Statutes, sections 469.090 to 469.1082, and for 
        this purpose the term "city" means a member.  Minnesota 
        Statutes, sections 469.096 to 469.101, 469.103 to 469.106, and 
        469.108 to 469.1081, apply to the authority, except that the 
        authority's fiscal year is the calendar year.  
           Subd. 2.  [LAW THAT IS NOT APPLICABLE.] The provisions in: 
           (1) Minnesota Statutes, section 469.091, subdivision 1, 
        expressly relating to: 
           (i) the adoption of an enabling resolution; 
           (ii) Minnesota Statutes, section 469.092; or 
           (iii) housing and redevelopment authorities; and 
           (2) Minnesota Statutes, sections 469.093, 469.095, 469.102, 
        and 469.107; 
        do not apply to the authority. 
           Sec. 38.  [MEMBERS MUST LEVY TAXES FOR AUTHORITY.] 
           (a) A member shall, at the request of the authority, levy a 
        tax in any year for the benefit of the authority.  The tax is, 
        for each member, a pro rata portion of the total amount of tax 
        requested by the authority based on the taxable market value 
        within a member's jurisdiction, but in no event may the tax in 
        any year exceed 0.01813 percent of taxable market value.  For 
        purposes of this section, "taxable market value" has the meaning 
        as given in Minnesota Statutes, section 273.032. 
           (b) The treasurer of each member city or town shall, within 
        15 days after receiving the property tax settlements from the 
        county treasurer, pay to the treasurer of the authority the 
        amount collected for this purpose.  The money must be used by 
        the authority for the purposes provided by sections 35 to 41. 
           Sec. 39.  [ADDITION AND WITHDRAWAL OF MEMBERS.] 
           Subdivision 1.  [ADDITIONS.] A municipality upon a 
        resolution adopted by a four-fifths vote of all of its governing 
        body may petition the authority to be included within the 
        jurisdiction of the authority and, if approved by the authority, 
        the geographic area of the municipality must be included within 
        the jurisdiction of the authority and subject to the 
        jurisdiction of the authority under sections 35 to 41. 
           Subd. 2.  [WITHDRAWALS.] A municipality may withdraw from 
        the authority by resolution of its governing body.  The 
        municipality must notify the board of commissioners of the 
        authority of the withdrawal by providing a copy of the 
        resolution at least two years in advance of the proposed 
        withdrawal.  Unless the authority and the withdrawing member 
        agree otherwise by action of their governing bodies, the taxable 
        property of the withdrawing member is subject to the property 
        tax levy under section 38 for two taxes payable years following 
        the notification of the withdrawal and the withdrawing member 
        retains any rights, obligations, and liabilities obtained or 
        incurred during its participation. 
           Sec. 40.  [CONTRACTS WITH NONPROFIT CORPORATIONS.] 
           The authority may enter into contracts with one or more 
        nonprofit corporations to make, from funds of and under 
        guidelines set by the authority, loans or grants for projects 
        the authority may undertake under sections 35 to 41.  Minnesota 
        Statutes, section 465.719, does not apply so long as the 
        nonprofit corporation is not described in Minnesota Statutes, 
        section 465.719, subdivision 1, paragraph (b), item (i), or (b), 
        item (ii). 
           Sec. 41.  [RELATION TO EXISTING LAWS.] 
           Sections 35 to 41 must be given full effect notwithstanding 
        any law or charter that is inconsistent with them. 
           Sec. 42.  [LOCAL APPROVAL; EFFECTIVE DATE.] 
           Sections 35 to 41 are only effective as to all affected 
        governing bodies on the day after the last of the governing 
        bodies or town boards of the cities of Alexandria and Garfield 
        and the towns of Alexandria and La Grand in Douglas county and 
        the chief clerical officer of each of them timely complete their 
        compliance with Minnesota Statutes, section 645.021, 
        subdivisions 2 and 3. 

                                   ARTICLE 13
                           MOSQUITO CONTROL DISTRICT
           Section 1.  Minnesota Statutes 2002, section 18B.07, 
        subdivision 2, is amended to read: 
           Subd. 2.  [PROHIBITED PESTICIDE USE.] (a) A person may not 
        use, store, handle, distribute, or dispose of a pesticide, 
        rinsate, pesticide container, or pesticide application equipment 
        in a manner: 
           (1) that is inconsistent with a label or labeling as 
        defined by FIFRA; 
           (2) that endangers humans, damages agricultural products, 
        food, livestock, fish, or wildlife; or 
           (3) that will cause unreasonable adverse effects on the 
        environment.  
           (b) A person may not direct a pesticide onto property 
        beyond the boundaries of the target site.  A person may not 
        apply a pesticide resulting in damage to adjacent property. 
           (c) A person may not directly apply a pesticide on a human 
        by overspray or target site spray, except when: 
           (1) the pesticide is intended for use on a human; 
           (2) the pesticide application is for mosquito control 
        operations conducted before June 30, 2003, in compliance with 
        paragraph (d), clauses (1) and (2); 
           (3) the pesticide application is for control of gypsy moth, 
        forest tent caterpillar, or other pest species, as determined by 
        the commissioner, and the pesticide used is a biological agent; 
        or 
           (4) the pesticide application is for a public health risk, 
        as determined by the commissioner of health, and the 
        commissioner of health, in consultation with the commissioner of 
        agriculture, determines that the application is warranted based 
        on the commissioner's balancing of the public health risk with 
        the risk that the pesticide application poses to the health of 
        the general population, with special attention to the health of 
        children. 
           (d) For pesticide applications under paragraph (c), clause 
        (2), the following conditions apply: 
           (1) no practicable and effective alternative method of 
        control exists; 
           (2) the pesticide is among the least toxic available for 
        control of the target pest; and 
           (3) notification to residents in the area to be treated is 
        provided at least 24 hours before application through direct 
        notification, posting daily on the treating organization's Web 
        site, and by sending a broadcast e-mail to those persons who 
        request notification of such, of those areas to be treated by 
        adult mosquito control techniques during the next calendar day.  
        For control operations related to human disease, notice under 
        this paragraph may be given less than 24 hours in advance. 
           (e) For pesticide applications under paragraph (c), clauses 
        (3) and (4), the following conditions apply: 
           (1) no practicable and effective alternative method of 
        control exists; 
           (2) the pesticide is among the least toxic available for 
        control of the target pest; and 
           (3) notification of residents in the area to be treated is 
        provided by direct notification and through publication in a 
        newspaper of general circulation within the affected area. 
           (e) (f) For purposes of this subdivision, "direct 
        notification" may include mailings, public meetings, posted 
        placards, neighborhood newsletters, or other means of contact 
        designed to reach as many residents as possible. 
           (f) (g) A person may not apply a pesticide in a manner so 
        as to expose a worker in an immediately adjacent, open field. 
           Sec. 2.  Minnesota Statutes 2002, section 473.702, is 
        amended to read: 
           473.702 [ESTABLISHMENT OF DISTRICT; PURPOSE; AREA; 
        GOVERNING BODY.] 
           A metropolitan mosquito control district is created to 
        control mosquitoes, disease vectoring ticks, and black gnats 
        (Simuliidae) in the metropolitan area.  The area of the district 
        is the metropolitan area defined in section 473.121.  The area 
        of the district is the metropolitan area excluding the part of 
        Carver county west of the west line of township 116N, range 24W, 
        township 115N, range 24W, and township 114N, range 24W.  The 
        metropolitan mosquito control commission is created as the 
        governing body of the district, composed and exercising the 
        powers as prescribed in sections 473.701 to 473.716. 
           Sec. 3.  Minnesota Statutes 2002, section 473.703, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [METRO COUNTY COMMISSIONERS.] The district 
        shall be operated by a commission which shall consist of three 
        members from Anoka county, one member two members from Carver 
        county, three members from Dakota county, three members from 
        Hennepin county, three members from Ramsey county, two members 
        from Scott county, and two members from Washington county.  
        Commissioners shall be members of the board of county 
        commissioners of their respective counties, and shall be 
        appointed by their respective boards of county commissioners.  
           Sec. 4.  Minnesota Statutes 2002, section 473.704, 
        subdivision 17, is amended to read: 
           Subd. 17.  [ENTRY TO PROPERTY.] (a) Members of the 
        commission, its officers, and employees, while on the business 
        of the commission, may enter upon any property within or outside 
        the district at reasonable times to determine the need for 
        control programs.  They may take all necessary and proper steps 
        for the control programs on property within the district as the 
        director of the commission may designate.  Subject to the 
        paramount control of the county and state authorities, 
        commission members and officers and employees of the commission 
        may enter upon any property and clean up any stagnant pool of 
        water, the shores of lakes and streams, and other breeding 
        places for mosquitoes within the district.  The commission may 
        apply insecticides approved by the director to any area within 
        or outside the district that is found to be a breeding place for 
        mosquitoes.  The commission shall give reasonable notification 
        to the governing body of the local unit of government prior to 
        applying insecticides outside of the district on land located 
        within the jurisdiction of the local unit of government.  The 
        commission shall not enter upon private property if the owner 
        objects except to monitor for disease-bearing mosquitoes, ticks, 
        or black gnats or for control of disease bearing mosquito 
        encephalitis outbreaks mosquito species capable of carrying a 
        human disease in the local area of a human disease outbreak 
        regardless of whether there has been an occurrence of the 
        disease in a human being. 
           (b) The commissioner of natural resources must approve 
        mosquito control plans or make modifications as the commissioner 
        of natural resources deems necessary for the protection of 
        public water, wild animals, and natural resources before control 
        operations are started on state lands administered by the 
        commissioner of natural resources.  Until July 1, 2002, approval 
        may, if the commissioner of natural resources considers it 
        necessary, be denied, modified, or revoked by the commissioner 
        of natural resources at any time upon written notice to the 
        commission. 
           Sec. 5.  Minnesota Statutes 2002, section 473.705, is 
        amended to read: 
           473.705 [CONTRACTS FOR MATERIALS, SUPPLIES AND EQUIPMENT.] 
           No contract Contracts for the purchase of materials, 
        supplies, and equipment costing more than $5,000 shall be made 
        must comply with and be governed by the Minnesota uniform 
        municipal contracting law, section 471.345.  A sealed bid 
        solicitation must not be done by the commission without 
        publishing the notice once in the official newspaper of each of 
        the counties in the district that bids or proposals will be 
        received.  The notice shall be published at least ten days 
        before bids are opened.  Such notice shall state the nature of 
        the work or purchase and the terms and conditions upon which the 
        contract is to be awarded, naming therein a time and place where 
        such bids will be received, opened, and read publicly.  After 
        such bids have been duly received, opened, read publicly, and 
        recorded, the commission shall award such contract to the lowest 
        responsible bidder or it may reject all bids.  Each contract 
        shall be duly executed in writing and the party to whom the 
        contract is awarded may be required to give sufficient bond to 
        the commission for the faithful performance of the contract.  If 
        no satisfactory bid is received the commission may readvertise.  
        The commission shall have the right to set qualifications and 
        specifications and to require bids to meet such qualifications 
        and specifications before bids are accepted.  If the commission 
        by an affirmative vote of five-sixths of the voting power of the 
        commission shall declare that an emergency exists requiring the 
        immediate purchase of materials or supplies at a cost in excess 
        of $5,000 but not to exceed $10,000 in amount, or in making 
        emergency repairs, it shall not be necessary to advertise for 
        bids, but such material, equipment, and supplies may be 
        purchased in the open market at the lowest price available 
        without securing formal competitive bids.  An emergency as used 
        in this section shall be an unforeseen circumstance or condition 
        which results in placing life or property in jeopardy.  All 
        contracts involving employment of labor shall stipulate terms 
        thereof and such conditions as the commission deems reasonable 
        as to hours and wages.  
           Sec. 6.  Minnesota Statutes 2002, section 473.711, 
        subdivision 2a, is amended to read: 
           Subd. 2a.  [TAX LEVY.] (a) The commission may levy a tax on 
        all taxable property in the district as defined in section 
        473.702 to provide funds for the purposes of sections 473.701 to 
        473.716.  The tax shall not exceed the property tax levy 
        limitation determined in this subdivision.  A participating 
        county may agree to levy an additional tax to be used by the 
        commission for the purposes of sections 473.701 to 473.716 but 
        the sum of the county's and commission's taxes may not exceed 
        the county's proportionate share of the property tax levy 
        limitation determined under this subdivision based on the ratio 
        of its total net tax capacity to the total net tax capacity of 
        the entire district as adjusted by section 270.12, subdivision 3.
        The auditor of each county in the district shall add the amount 
        of the levy made by the district to other taxes of the county 
        for collection by the county treasurer with other taxes.  When 
        collected, the county treasurer shall make settlement of the tax 
        with the district in the same manner as other taxes are 
        distributed to political subdivisions.  No county shall levy any 
        tax for mosquito, disease vectoring tick, and black gnat 
        (Simuliidae) control except under this section.  The levy shall 
        be in addition to other taxes authorized by law. 
           (b) The property tax levied by the metropolitan mosquito 
        control commission shall not exceed the following amount for the 
        years specified: 
           (1) for taxes payable in 1996, the product of (i) the 
        commission's property tax levy limitation for taxes payable in 
        1995 determined under this subdivision minus 50 percent of the 
        amount actually levied for taxes payable in 1995, multiplied by 
        (ii) an index for market valuation changes equal to the total 
        market valuation of all taxable property located within the 
        district for the current taxes payable year divided by the total 
        market valuation of all taxable property located within the 
        district for the previous taxes payable year; 
           (2) for taxes payable in 1997 and subsequent years, the 
        product of (i) the commission's property tax levy limitation for 
        the previous year determined under this subdivision multiplied 
        by (ii) an index for market valuation changes equal to the total 
        market valuation of all taxable property for the current tax 
        payable year located within the district for the current taxes 
        payable year plus any area that has been added to the district 
        since the previous year, divided by the total market valuation 
        of all taxable property located within the district for the 
        previous taxes payable year; and. 
           (3) (c) For the purpose of determining the commission's 
        property tax levy limitation under this subdivision, "total 
        market valuation" means the total market valuation of all 
        taxable property within the district without valuation 
        adjustments for fiscal disparities (chapter 473F), tax increment 
        financing (sections 469.174 to 469.179), and high voltage 
        transmission lines (section 273.425). 
           [EFFECTIVE DATE.] This section is effective for taxes 
        payable in 2004 and thereafter. 
           Sec. 7.  Minnesota Statutes 2002, section 473.714, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [COMPENSATION.] Except as provided in 
        subdivision 2, Each commissioner, including the officers of the 
        commission shall, may be reimbursed for actual and necessary 
        expenses incurred in the performance of duties.  The chair shall 
        be paid a per diem for attending meetings, monthly, executive, 
        and special, and each commissioner shall be paid a per diem for 
        attending meetings, monthly, executive, and special, which per 
        diem shall be established by the commission.  A commissioner who 
        receives a per diem from the commissioner's county shall not be 
        paid a per diem for the same day by the commission for attending 
        meetings of the commission.  The annual budget of the commission 
        shall provide as a separate account anticipated expenditures for 
        per diem, travel and associated expenses for the chair and 
        members, and compensation or reimbursement shall be made to the 
        chair or members only when budgeted.  No commissioner may be 
        paid a per diem. 
           Sec. 8.  [TRANSITIONAL AUTHORITY.] 
           The metropolitan mosquito control district and the Carver 
        county board of commissioners may enter into an agreement for 
        the district to provide its services to the part of Carver 
        county added to the district by this article until the proceeds 
        of the levy from that part of Carver county are available for 
        those services.  During this period the services may be provided 
        on the terms and for fees that are mutually agreed to by the 
        parties. 
           Sec. 9.  [REPEALER.] 
           Minnesota Statutes 2002, sections 473.711, subdivision 2b, 
        and 473.714, subdivision 2, are repealed. 
           Sec. 10.  [EFFECTIVE DATE.] 
           Sections 1 to 9 are effective the day following final 
        enactment. 

                                   ARTICLE 14
                                 MISCELLANEOUS
           Section 1.  Minnesota Statutes 2002, section 8.30, is 
        amended to read: 
           8.30 [COMPROMISE OF TAX AND FEE CLAIMS.] 
           Notwithstanding any other provisions of law to the 
        contrary, the attorney general shall have authority to 
        compromise taxes, fees, surcharges, assessments, penalties, and 
        interest in any case referred to the attorney general by the 
        commissioner of revenue all cases, whether reduced to judgment 
        or not, where the debt is being reduced by an amount exceeding 
        $50,000 and, in the attorney general's opinion, it shall be in 
        the best interests of the state to do so.  Such a compromise 
        must be in a form prescribed by the attorney general and shall 
        be in writing signed by the attorney general, the taxpayer or 
        taxpayer's representative, and the commissioner of 
        revenue.  Compromises of such debts in cases where the debt is 
        being reduced by an amount of $50,000 or less are governed by 
        section 16D.15.  
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 2.  Minnesota Statutes 2002, section 270.059, is 
        amended to read: 
           270.059 [REVENUE DEPARTMENT SERVICE AND RECOVERY SPECIAL 
        REVENUE FUND.] 
           A revenue department service and recovery special revenue 
        fund is created for the purpose of recovering the costs of 
        furnishing public government data and related services or 
        products, as well as recovering costs associated with collecting 
        local taxes on sales.  All money collected under this section is 
        deposited in the revenue department service and recovery special 
        revenue fund.  Money in the fund is appropriated to the 
        commissioner of revenue to reimburse the department of revenue 
        for the costs incurred in administering the tax law or providing 
        the data, service, or product.  Any monies paid to the 
        department as a criminal fine for a tax law violation that are 
        designated by the court to fund tax law enforcement are 
        appropriated to this fund. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 3.  Minnesota Statutes 2002, section 270.67, 
        subdivision 4, is amended to read: 
           Subd. 4.  [OFFER-IN-COMPROMISE AND INSTALLMENT PAYMENT 
        PROGRAM.] (a) In implementing the authority provided in 
        subdivision 2 or in section sections 8.30 and 16D.15 to accept 
        offers of installment payments or offers-in-compromise of tax 
        liabilities, the commissioner of revenue shall prescribe 
        guidelines for employees of the department of revenue to 
        determine whether an offer-in-compromise or an offer to make 
        installment payments is adequate and should be accepted to 
        resolve a dispute.  In prescribing the guidelines, the 
        commissioner shall develop and publish schedules of national and 
        local allowances designed to provide that taxpayers entering 
        into a compromise or payment agreement have an adequate means to 
        provide for basic living expenses.  The guidelines must provide 
        that the taxpayer's ownership interest in a motor vehicle, to 
        the extent of the value allowed in section 550.37, will not be 
        considered as an asset; in the case of an offer related to a 
        joint tax liability of spouses, that value of two motor vehicles 
        must be excluded.  The guidelines must provide that employees of 
        the department shall determine, on the basis of the facts and 
        circumstances of each taxpayer, whether the use of the schedules 
        is appropriate and that employees must not use the schedules to 
        the extent the use would result in the taxpayer not having 
        adequate means to provide for basic living expenses.  The 
        guidelines must provide that: 
           (1) an employee of the department shall not reject an 
        offer-in-compromise or an offer to make installment payments 
        from a low-income taxpayer solely on the basis of the amount of 
        the offer; and 
           (2) in the case of an offer-in-compromise which relates 
        only to issues of liability of the taxpayer: 
           (i) the offer must not be rejected solely because the 
        commissioner is unable to locate the taxpayer's return or return 
        information for verification of the liability; and 
           (ii) the taxpayer shall not be required to provide an 
        audited, reviewed, or compiled financial statement. 
           (b) The commissioner shall establish procedures: 
           (1) that require presentation of a counteroffer or a 
        written rejection of the offer by the commissioner if the amount 
        offered by the taxpayer in an offer-in-compromise or an offer to 
        make installment payments is not accepted by the commissioner; 
           (2) for an administrative review of any written rejection 
        of a proposed offer-in-compromise or installment agreement made 
        by a taxpayer under this section before the rejection is 
        communicated to the taxpayer; 
           (3) that allow a taxpayer to request reconsideration of any 
        written rejection of the offer or agreement to the commissioner 
        of revenue to determine whether the rejection is reasonable and 
        appropriate under the circumstances; and 
           (4) that provide for notification to the taxpayer when an 
        offer-in-compromise has been accepted, and issuance of 
        certificates of release of any liens imposed under section 
        270.69 related to the liability which is the subject of the 
        compromise. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 4.  Minnesota Statutes 2002, section 290.06, 
        subdivision 24, is amended to read: 
           Subd. 24.  [CREDIT FOR JOB CREATION.] (a) A corporation 
        that leases and operates a heavy maintenance base for aircraft 
        that is owned by the state of Minnesota or one of its political 
        subdivisions, or an engine repair facility described in section 
        116R.02, subdivision 6, or both, may take a credit against the 
        tax due under this chapter.  
           (b) For the first taxable year when the facility has been 
        in operation for at least three consecutive months, the credit 
        is equal to $5,000 multiplied by the number of persons employed 
        by the corporation on a full-time basis at the facility on the 
        last day of the taxable year, not to exceed the number of 
        persons employed by the corporation on a full-time basis at the 
        facility on the date 90 days before the last day of the taxable 
        year.  For each of the succeeding four taxable years, the credit 
        is equal to $5,000 multiplied by the number of persons employed 
        by the corporation on a full-time basis at the facility on the 
        last day of the taxable year, not to exceed the number of 
        persons employed by the corporation on a full-time basis at the 
        facility on the date 90 days before the last day of the taxable 
        year.  
           (c) For the first taxable year in which the credit is 
        allowed for the facility, the credit must not exceed 80 percent 
        of the wages paid to or incurred for persons employed by the 
        taxpayer at the facility during the taxable year.  For the 
        succeeding four taxable years, the credit must not exceed 20 
        percent of the wages paid to or incurred for persons employed by 
        the taxpayer at the facility during the taxable year.  For 
        purposes of this section, "wages" has the meaning given under 
        section 3121(b) of the Internal Revenue Code, except the 
        limitation to the contribution and benefit base does not apply. 
           (d) If the credit provided under this subdivision exceeds 
        the tax liability of the corporation for the taxable year, the 
        excess amount of the credit may be carried over to each of the 
        ten 20 taxable years succeeding the taxable year.  The entire 
        amount of the credit must be carried to the earliest taxable 
        year to which the amount may be carried.  The unused portion of 
        the credit must be carried to the following taxable year.  No 
        credit may be carried to a taxable year more than ten 20 years 
        after the taxable year in which the credit was earned. 
           (e) If an unused portion of the credit remains at the end 
        of the carryover period under paragraph (d), the commissioner 
        shall refund the unused portion to the taxpayer.  The provisions 
        of this paragraph do not apply if the corporation that earned 
        the credit under this subdivision or a successor in interest to 
        the corporation filed for bankruptcy protection. 
           [EFFECTIVE DATE.] This section is effective for taxable 
        years beginning after December 31, 2003. 
           Sec. 5.  Minnesota Statutes 2002, section 297F.05, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [RATES; CIGARETTES.] A tax is imposed upon 
        the sale of cigarettes in this state, upon having cigarettes in 
        possession in this state with intent to sell, upon any person 
        engaged in business as a distributor, and upon the use or 
        storage by consumers, at the following rates, subject to the 
        discount provided in this chapter: 
           (1) on cigarettes weighing not more than three pounds per 
        thousand, 24 mills on each such cigarette; and 
           (2) on cigarettes weighing more than three pounds per 
        thousand, 48 mills on each such cigarette. 
           [EFFECTIVE DATE.] This section is effective for sales of 
        stamps made after June 30, 2003. 
           Sec. 6.  Minnesota Statutes 2002, section 297F.08, 
        subdivision 7, is amended to read: 
           Subd. 7.  [PRICE OF STAMPS.] The commissioner shall sell 
        stamps to any person licensed as a distributor at a discount of 
        1.0 percent from the face amount of the stamps for the first 
        $1,500,000 of such stamps purchased in any fiscal year; and at a 
        discount of 0.6 percent on the remainder of such stamps 
        purchased in any fiscal year.  The commissioner shall not sell 
        stamps to any other person.  The commissioner may prescribe the 
        method of shipment of the stamps to the distributor as well as 
        the quantities of stamps purchased. 
           [EFFECTIVE DATE.] This section is effective for sales of 
        stamps made after June 30, 2003. 
           Sec. 7.  Minnesota Statutes 2002, section 297F.08, is 
        amended by adding a subdivision to read: 
           Subd. 12.  [CIGARETTES IN INTERSTATE COMMERCE.] (a) A 
        person may not transport or cause to be transported from this 
        state cigarettes for sale in another state without first 
        affixing to the cigarettes the stamp required by the state in 
        which the cigarettes are to be sold or paying any other excise 
        tax on the cigarettes imposed by the state in which the 
        cigarettes are to be sold. 
           (b) A person may not affix to cigarettes the stamp required 
        by another state or pay any other excise tax on the cigarettes 
        imposed by another state if the other state prohibits stamps 
        from being affixed to the cigarettes, prohibits the payment of 
        any other excise tax on the cigarettes, or prohibits the sale of 
        the cigarettes. 
           (c) Not later than 15 days after the end of each calendar 
        quarter, a person who transports or causes to be transported 
        from this state cigarettes for sale in another state shall 
        submit to the commissioner a report identifying the quantity and 
        style of each brand of the cigarettes transported or caused to 
        be transported in the preceding calendar quarter, and the name 
        and address of each recipient of the cigarettes. 
           (d) For purposes of this section, "person" has the meaning 
        given in section 297F.01, subdivision 12.  Person does not 
        include any common or contract carrier, or public warehouse that 
        is not owned, in whole or in part, directly or indirectly by 
        such person. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 8.  Minnesota Statutes 2002, section 297F.09, 
        subdivision 2, is amended to read: 
           Subd. 2.  [MONTHLY RETURN; TOBACCO PRODUCTS DISTRIBUTOR.] 
        On or before the 18th day of each calendar month, a distributor 
        with a place of business in this state shall file a return with 
        the commissioner showing the quantity and wholesale sales price 
        of each tobacco product: 
           (1) brought, or caused to be brought, into this state for 
        sale; and 
           (2) made, manufactured, or fabricated in this state for 
        sale in this state, during the preceding calendar month.  
        Every licensed distributor outside this state shall in like 
        manner file a return showing the quantity and wholesale sales 
        price of each tobacco product shipped or transported to 
        retailers in this state to be sold by those retailers, during 
        the preceding calendar month.  Returns must be made in the form 
        and manner prescribed by the commissioner and must contain any 
        other information required by the commissioner.  The return must 
        be accompanied by a remittance for the full tax liability shown, 
        less 1.5 percent of the liability as compensation to reimburse 
        the distributor for expenses incurred in the administration of 
        this chapter.  
           [EFFECTIVE DATE.] This section is effective for sales made 
        after June 30, 2003. 
           Sec. 9.  [297F.24] [FEE IN LIEU OF SETTLEMENT.] 
           Subdivision 1.  [FEE IMPOSED.] (a) A fee is imposed upon 
        the sale of nonsettlement cigarettes in this state, upon having 
        nonsettlement cigarettes in possession in this state with intent 
        to sell, upon any person engaged in business as a distributor, 
        and upon the use or storage by consumers of nonsettlement 
        cigarettes.  The fee equals a rate of 1.75 cents per cigarette. 
           (b) The purpose of this fee is to: 
           (1) ensure that manufacturers of nonsettlement cigarettes 
        pay fees to the state that are comparable to costs attributable 
        to the use of the cigarettes; 
           (2) prevent manufacturers of nonsettlement cigarettes from 
        undermining the state's policy of discouraging underage smoking 
        by offering nonsettlement cigarettes at prices substantially 
        below the cigarettes of other manufacturers; and 
           (3) fund such other purposes as the legislature determines 
        appropriate. 
           Subd. 2.  [NONSETTLEMENT CIGARETTES.] For purposes of this 
        section, a "nonsettlement cigarette" means a cigarette 
        manufactured by a person other than a manufacturer that: 
           (1) is making annual payments to the state of Minnesota 
        under a settlement of the lawsuit styled as State v. Philip 
        Morris Inc., No. C1-94-8565 (Minnesota District Court, Second 
        Judicial District), if the style of cigarettes is included in 
        computation of the payments under the agreement; or 
           (2) has voluntarily entered into an agreement with the 
        state of Minnesota, approved by the attorney general, agreeing 
        to terms similar to those contained in the settlement agreement, 
        identified in clause (1) including making annual payments to the 
        state, with respect to its national sales of the style of 
        cigarettes, equal to at least 75 percent of the payments that 
        would apply if the manufacturer was one of the four original 
        parties to the settlement agreement required to make annual 
        payments to the state. 
           Subd. 3.  [COLLECTION AND ADMINISTRATION.] The commissioner 
        shall administer the fee under this section in the same manner 
        as the excise tax imposed under section 297F.05 and all of the 
        provisions of this chapter apply as if the fee were a tax 
        imposed under section 297F.05.  The commissioner shall deposit 
        the proceeds of the fee in the general fund. 
           [EFFECTIVE DATE.] This section is effective for sales of 
        nonsettlement cigarettes made after June 30, 2003. 
           Sec. 10.  Minnesota Statutes 2002, section 297H.06, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [CERTAIN SURCHARGES OR FEES.] The amount of 
        a surcharge, fee, or charge established pursuant to section 
        115A.919, 115A.921, 115A.923, 400.08, 473.811, or 473.843 is 
        exempt from the solid waste management tax.  The amount shown on 
        a property tax statement as a county charge for solid waste 
        management service or as a surcharge, fee, or charge established 
        pursuant to section 400.08, subdivision 3, or section 473.811, 
        subdivision 3a, is exempt from the solid waste management tax.  
        The exemption does not apply to the tax imposed on market price 
        under section 297H.02, subdivision 1, paragraphs (b) and (c), or 
        section 297H.03, subdivision 1, paragraphs (b) and (c). 
           [EFFECTIVE DATE.] This section is effective April 1, 2003. 
           Sec. 11.  Minnesota Statutes 2002, section 298.75, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [DEFINITIONS.] Except as may otherwise be 
        provided, the following words, when used in this section, shall 
        have the meanings herein ascribed to them.  
           (1) "Aggregate material" shall mean nonmetallic natural 
        mineral aggregate including, but not limited to sand, silica 
        sand, gravel, crushed rock, limestone, granite, and borrow, but 
        only if the borrow is transported on a public road, street, or 
        highway.  Aggregate material shall not include dimension stone 
        and dimension granite.  Aggregate material must be measured or 
        weighed after it has been extracted from the pit, quarry, or 
        deposit.  
           (2) "Person" shall mean any individual, firm, partnership, 
        corporation, organization, trustee, association, or other entity.
           (3) "Operator" shall mean any person engaged in the 
        business of removing aggregate material from the surface or 
        subsurface of the soil, for the purpose of sale, either directly 
        or indirectly, through the use of the aggregate material in a 
        marketable product or service.  
           (4) "Extraction site" shall mean a pit, quarry, or deposit 
        containing aggregate material and any contiguous property to the 
        pit, quarry, or deposit which is used by the operator for 
        stockpiling the aggregate material.  
           (5) "Importer" shall mean any person who buys aggregate 
        material produced from a county not listed in paragraph (6) or 
        another state and causes the aggregate material to be imported 
        into a county in this state which imposes a tax on aggregate 
        material.  
           (6) "County" shall mean the counties of Pope, Stearns, 
        Benton, Sherburne, Carver, Scott, Dakota, Le Sueur, Kittson, 
        Marshall, Pennington, Red Lake, Polk, Norman, Mahnomen, Clay, 
        Becker, Carlton, St. Louis, Rock, Murray, Wilkin, Big Stone, 
        Sibley, Hennepin, Washington, Chisago, and Ramsey.  County also 
        means any other county whose board has voted after a public 
        hearing to impose the tax under this section and has notified 
        the commissioner of revenue of the imposition of the tax. 
           (7) "Borrow" shall mean granular borrow, consisting of 
        durable particles of gravel and sand, crushed quarry or mine 
        rock, crushed gravel or stone, or any combination thereof, the 
        ratio of the portion passing the (#200) sieve divided by the 
        portion passing the (1 inch) sieve may not exceed 20 percent by 
        mass. 
           [EFFECTIVE DATE.] This section is effective for borrow 
        removed and transported on a public road, street, or highway on 
        or after July 1, 2003. 
           Sec. 12.  Minnesota Statutes 2002, section 469.1731, 
        subdivision 3, is amended to read: 
           Subd. 3.  [FILING.] The city must file a copy of the 
        resolution and development plan with the commissioner of trade 
        and economic development.  The designation takes effect for the 
        first calendar year that begins more than 90 30 days after the 
        filing. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 13.  Laws 2002, chapter 377, article 12, section 17, 
        is amended to read: 
           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. 14.  [ADVANCE COLLECTION PROGRAM.] 
           Subdivision 1.  [PROGRAM ESTABLISHED.] The commissioner of 
        revenue shall establish an advance collection program to collect 
        tax, interest, and penalty obligations that otherwise would not 
        be collected. 
           Subd. 2.  [POLICIES.] The commissioner of revenue shall 
        implement and operate the program in a manner that: 
           (1) minimizes the impact of the program on the incentive 
        for taxpayers to comply with Minnesota taxes; and 
           (2) emphasizes collecting as large a portion of the 
        department's account receivables that are unlikely otherwise to 
        be collected. 
           Subd. 3.  [AUTHORITY.] (a) The authority under this section 
        applies only to obligations on the department of revenue's 
        accounts receivable system for which the original debt was more 
        than two years old on the date of enactment of this section.  
        The commissioner of revenue shall select the debts on the 
        accounts receivable system to which this program applies and may 
        exclude any debt or debts as the commissioner deems appropriate, 
        because inclusion, in the sole opinion of the commissioner, may: 
           (1) adversely affect tax compliance; 
           (2) reduce the amount the state likely will collect in the 
        future; 
           (3) delay resolution of an issue of the meaning or 
        application of the tax or other law; 
           (4) be inconsistent with tax administration and collection 
        policies; 
           (5) not be justified because of the taxpayer's conduct or 
        past actions; or 
           (6) not be in the interest of the state for any reason the 
        commissioner solely determines. 
           (b) To implement this program, the commissioner shall 
        exercise authority under Minnesota Statutes, section 270.67, to 
        accept as a partial or discounted payment of the obligation as 
        full payment.  The commissioner shall set the discount rate for 
        each debt at the level the commissioner determines appropriate, 
        given the provisions of this section.  For obligations that are 
        four or more years old on the date of enactment, the 
        commissioner may offer a reduction or discount of up to 50 
        percent; for obligations that are more than two years old upon 
        the date of enactment, the commissioner may offer a reduction or 
        discount of up to 35 percent.  The commissioner may apply the 
        appropriate discount to all or part of an obligation, regardless 
        of the age of the obligation, if the taxpayer has an obligation 
        that meets the minimum age requirement on the date of 
        enactment.  The commissioner shall notify taxpayers or other 
        debtors qualifying under the program established under this 
        section in any way the commissioner determines appropriate. 
           (c) This section does not limit the commissioner's 
        authority under Minnesota Statutes, section 270.67. 
           Sec. 15.  [CITY OF DULUTH; TAX INCREMENT FINANCING 
        DISTRICT.] 
           Subdivision 1.  [AUTHORIZATION.] Upon approval of the 
        governing body of the city of Duluth, the Duluth economic 
        development authority may create an economic development tax 
        increment financing district for aircraft related facilities.  
        The authority may establish a district only after entering a 
        development agreement, which provides for construction of an 
        aircraft maintenance facility with a minimum square footage of 
        150,000 and requires employment of a minimum of 200 individuals 
        with average annual compensation in excess of $30,000.  Except 
        as otherwise provided in this section, the provisions of 
        Minnesota Statutes, sections 469.174 to 469.179 apply to the 
        district. 
           Subd. 2.  [SPECIAL RULES.] (a) Notwithstanding the 
        provisions of Minnesota Statutes, section 469.176, subdivision 
        1b, paragraph (a), clause (3), no tax increment shall be paid to 
        the authority after 25 years after receipt by the authority of 
        the first tax increment for the district authorized by this 
        section. 
           (b) The development in the district authorized by this 
        section shall be deemed to be a purpose authorized under 
        Minnesota Statutes, section 469.176, subdivision 4c, paragraph 
        (a). 
           (c) For purposes of Minnesota Statutes, section 469.177, 
        subdivision 12, the applicable maximum duration limit of the 
        district authorized by this section shall be as set forth in 
        paragraph (a). 
           [EFFECTIVE DATE.] This section is effective upon compliance 
        with the requirements of Minnesota Statutes, sections 469.1782 
        and 645.021. 
           Sec. 16.  [REPEALER.] 
           Laws 1984, chapter 652, section 2, is repealed. 
           [EFFECTIVE DATE.] This section is effective for Benton 
        county the day after the governing body of Benton county and its 
        chief clerical officer timely complete their compliance with 
        Minnesota Statutes, section 645.021, subdivisions 2 and 3.  
           This section is effective for Stearns county the day after 
        the governing body of Stearns county and its chief clerical 
        officer timely complete their compliance with Minnesota 
        Statutes, section 645.021, subdivisions 2 and 3. 
           Presented to the governor May 24, 2003 
           Signed by the governor May 25, 2003, 10:49 p.m.