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2005 Minnesota Session Laws

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

                             CHAPTER 3-H.F.No. 138 
                  An act relating to financing and operation of 
                  government in this state; changing income, corporate 
                  franchise, withholding, property, sales and use, deed, 
                  health care gross revenues, fuels, cigarette and 
                  tobacco products, occupation, net proceeds, 
                  production, liquor, insurance, rented vehicles, and 
                  other taxes and tax-related provisions; making 
                  technical, clarifying, collection, enforcement, 
                  refund, and administrative changes to certain taxes 
                  and tax-related provisions; changing fiscal 
                  disparities provisions, business subsidy provisions, 
                  and payments in lieu of taxes; changing local 
                  government and property tax aids and credits; updating 
                  references to the Internal Revenue Code; changing 
                  property tax exemptions, homesteads, assessment, 
                  valuation, classification, class rates, levies, 
                  exclusions, review and equalization, appeals, notices 
                  and statements, and other property tax-related 
                  provisions; requiring state contracts be with vendors 
                  registered to collect use taxes; modifying and 
                  authorizing local sales and lodging taxes; changing 
                  the taxation of liquor and cigarettes and tobacco 
                  products; imposing tobacco product delivery sales 
                  requirements; requiring registration of tax shelters 
                  and providing for a voluntary compliance initiative; 
                  providing for an international economic development 
                  zone; conveying certain powers and providing tax 
                  incentives in the zone; changing job opportunity 
                  building zones, border city development zones, and 
                  biotechnology and health sciences industry zone 
                  provisions; changing provisions relating to economic 
                  development and housing and redevelopment authorities; 
                  providing for training and conduct of assessors; 
                  changing and imposing powers and duties on the 
                  commissioner of revenue and other state agencies and 
                  departments and on certain political subdivisions and 
                  certain officials; imposing certain duties on tax 
                  preparers; changing provisions relating to 
                  certificates of title on manufactured homes; changing 
                  electronic filing requirements; authorizing the 
                  issuance of certain state bonds; specifying the status 
                  of certain trusts; changing and imposing civil and 
                  criminal penalties; requiring studies and reports; 
                  allocating and transferring funds; appropriating 
                  money; amending Minnesota Statutes 2004, sections 
                  16C.03, by adding a subdivision; 116J.993, by adding a 
                  subdivision; 116J.994, subdivisions 4, 5, 9, by adding 
                  a subdivision; 168A.05, by adding a subdivision; 
                  270C.02, subdivision 2, as added; 270C.27, subdivision 
                  1, as added; 270C.28, subdivision 2, as added; 
                  270C.445, as added, by adding a subdivision; 272.02, 
                  subdivisions 7, 22, 64, as amended, 73, as added, by 
                  adding subdivisions; 273.0755; 273.11, subdivision 1a, 
                  by adding subdivisions; 273.112, subdivision 3; 
                  273.124, subdivision 1; 273.125, subdivision 8; 
                  273.13, subdivisions 22, 25, as amended; 274.01, 
                  subdivision 1; 275.025, subdivisions 3, 4; 275.065, 
                  subdivisions 1a, 3, by adding subdivisions; 275.70, 
                  subdivision 5, as amended; 276.04, subdivision 2, as 
                  amended; 287.20, subdivisions 2, 9, by adding a 
                  subdivision; 287.21, subdivision 1; 289A.02, 
                  subdivision 7; 289A.08, subdivisions 1, 7, 13; 
                  289A.11, subdivision 1; 289A.20, subdivisions 2, 4; 
                  289A.26, subdivision 2a; 289A.38, by adding a 
                  subdivision; 289A.56, by adding a subdivision; 
                  289A.60, subdivisions 4, 6, as amended, 20, by adding 
                  subdivisions; 290.01, subdivisions 6b, 7, 19, as 
                  amended, 19a, as amended, 19b, as amended, 19c, as 
                  amended, 19d, 29, 31; 290.032, subdivisions 1, 2; 
                  290.06, subdivisions 2c, by adding a subdivision; 
                  290.067, subdivisions 1, 2a; 290.0671, subdivision 1; 
                  290.0674, subdivision 2; 290.0675, subdivision 1; 
                  290.091, subdivision 2; 290.0921, subdivision 3; 
                  290.0922, subdivisions 2, 3; 290.191, subdivisions 2, 
                  3; 290.9705, subdivision 1; 290A.03, subdivisions 3, 
                  15; 295.50, subdivision 3, by adding a subdivision; 
                  295.52, subdivision 4; 295.53, subdivision 1; 295.55, 
                  subdivision 4; 296A.09, by adding a subdivision; 
                  297A.61, subdivisions 3, as amended, 4, as amended; 
                  297A.67, subdivisions 6, 29, by adding a subdivision; 
                  297A.68, subdivisions 2, as amended, 5, as amended, 
                  35, 37, 38, by adding subdivisions; 297A.70, 
                  subdivisions 8, 10; 297A.71, by adding subdivisions; 
                  297A.75, subdivisions 1, as amended, 2, 3; 297A.99, 
                  subdivision 9, by adding a subdivision; 297F.01, by 
                  adding a subdivision; 297F.09, by adding a 
                  subdivision; 297F.10, subdivision 1; 297I.01, 
                  subdivision 13a, as added, by adding a subdivision; 
                  297I.05, subdivision 4, by adding a subdivision; 
                  298.01, subdivisions 3, 4; 298.24, subdivision 1, as 
                  amended; 469.033, subdivision 6; 469.1082, by adding a 
                  subdivision; 469.169, by adding a subdivision; 
                  469.310, subdivision 11, as amended, by adding a 
                  subdivision; 469.316; 469.317; 469.337; 473F.02, 
                  subdivision 2; 473F.08, subdivision 3a; 477A.011, 
                  subdivision 36, as amended; 477A.013, subdivision 8; 
                  477A.03, subdivisions 2a, 2b, as amended; 477A.11, 
                  subdivision 4, by adding a subdivision; 477A.12, 
                  subdivisions 1, 2; 477A.14, subdivision 1; 501B.895, 
                  as added; Laws 1991, chapter 291, article 8, section 
                  27, subdivision 4, by adding a subdivision; Laws 1993, 
                  chapter 375, article 9, section 46, subdivisions 2, as 
                  amended, 3, as amended; Laws 1994, chapter 587, 
                  article 9, section 8, subdivision 1; Laws 1998, 
                  chapter 389, article 8, section 43, subdivisions 3, 4, 
                  5; Laws 2001, First Special Session chapter 5, article 
                  12, sections 44, 67, 95, as amended; Laws 2002, 
                  chapter 377, article 3, section 4; Laws 2002, chapter 
                  377, article 11, section 2, subdivisions 1, 4; 
                  proposing coding for new law in Minnesota Statutes, 
                  chapters 174; 270C; 273; 289A; 295; 297A; 297F; 325F; 
                  469; repealing Minnesota Statutes 2004, sections 
                  272.02, subdivision 65; 477A.08. 
        BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 

                                   ARTICLE 1 
                                 PROPERTY TAXES 
           Section 1.  Minnesota Statutes 2004, section 168A.05, is 
        amended by adding a subdivision to read: 
           Subd. 1c.  [MANUFACTURED HOME; EXEMPTION FOR 
        DESTRUCTION.] The provisions of subdivision 1a do not apply if 
        title is to be transferred to an owner of a manufactured home 
        park as defined in section 327.14, subdivision 3, who provides 
        to the county auditor or treasurer a notarized statement that 
        the manufactured home is to be destroyed or moved to a site and 
        destroyed. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 2.  [174.11] [COMMISSIONER TO NOTIFY COUNTY AUDITOR OF 
        PROPERTY ACQUISITIONS.] 
           Upon acquisition of any taxable real property, the 
        commissioner must notify the county auditor of the county where 
        the property is located that the property has been acquired. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 3.  Minnesota Statutes 2004, section 272.02, 
        subdivision 7, is amended to read: 
           Subd. 7.  [INSTITUTIONS OF PUBLIC CHARITY.] Institutions of 
        purely public charity are exempt except parcels of property 
        containing structures and the structures described in section 
        273.13, subdivision 25, paragraph (e), other than those that 
        qualify for exemption under subdivision 26.  In determining 
        whether rental housing property qualifies for exemption under 
        this subdivision, the following are not gifts or donations to 
        the owner of the rental housing: 
           (1) rent assistance provided by the government to or on 
        behalf of tenants; and 
           (2) financing assistance or tax credits provided by the 
        government to the owner on condition that specific units or a 
        specific quantity of units be set aside for persons or families 
        with certain income characteristics. 
           [EFFECTIVE DATE.] This section is effective for taxes 
        payable in 2004 and thereafter. 
           Sec. 4.  Minnesota Statutes 2004, section 272.02, 
        subdivision 22, is amended to read: 
           Subd. 22.  [WIND ENERGY CONVERSION SYSTEMS.] All real and 
        personal property of a wind energy conversion system as defined 
        in section 272.029, subdivision 2, is exempt from property tax 
        except that the land on which the property is located remains 
        taxable.  If approved by the county where the property is 
        located, the value of the land on which the wind energy 
        conversion system is located shall be valued in the same manner 
        as similar land that has not been improved with a wind energy 
        conversion system.  The land shall be classified based on the 
        most probable use of the property if it were not improved with a 
        wind energy conversion system. 
           [EFFECTIVE DATE.] This section is effective for assessment 
        year 2005 and thereafter, for taxes payable in 2006 and 
        thereafter. 
           Sec. 5.  Minnesota Statutes 2004, section 272.02, 
        subdivision 73, as added by Laws 2005, chapter 151, article 5, 
        section 6, is amended to read: 
           Subd. 73.  [PROPERTY SUBJECT TO TACONITE PRODUCTION TAX OR 
        NET PROCEEDS TAX.] (a) Real and personal property described in 
        section 298.25 is exempt to the extent the tax on taconite and 
        iron sulphides under section 298.24 is described in section 
        298.25 as being in lieu of other taxes on such property.  This 
        exemption applies for taxes payable in each year that the tax 
        under section 298.24 is payable with respect to such property. 
           (b) Deposits of mineral, metal, or energy resources the 
        mining of which is subject to taxation under section 298.015 are 
        exempt.  This exemption applies for taxes payable in each year 
        that the tax under section 298.015 is payable with respect to 
        such property. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 6.  Minnesota Statutes 2004, section 272.02, is 
        amended by adding a subdivision to read: 
           Subd. 82.  [BIOMASS ELECTRIC GENERATION FACILITY; PERSONAL 
        PROPERTY.] (a) Notwithstanding subdivision 9, clause (a), 
        attached machinery and other personal property which is a part 
        of an electric generation facility, including remote boilers 
        that comprise part of the district heating system, generating up 
        to 30 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 a minimum 90 percent waste 
        biomass as a fuel; 
           (2) not be owned by a public utility as defined in section 
        216B.02, subdivision 4; 
           (3) be located within a city of the first class and have 
        its primary location at a former garbage transfer station; and 
           (4) be designed to have capability to provide baseload 
        energy and district heating. 
           (b) Construction of the facility must be commenced after 
        January 1, 2004, and before January 1, 2008.  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. 7.  Minnesota Statutes 2004, section 273.0755, is 
        amended to read: 
           273.0755 [TRAINING AND EDUCATION OF PROPERTY TAX 
        PERSONNEL.] 
           (a) Beginning with the four-year period starting on July 1, 
        2000, every person licensed by the state Board of Assessors at 
        the Accredited Minnesota Assessor level or higher, shall 
        successfully complete a week-long Minnesota laws course 
        sponsored by the Department of Revenue at least once in every 
        four-year period.  An assessor need not attend the course if 
        they successfully pass the test for the course. 
           (b) The commissioner of revenue may require that each 
        county, and each city for which the city assessor performs the 
        duties of county assessor, have (i) a person on the assessor's 
        staff who is certified by the Department of Revenue in sales 
        ratio calculations, (ii) an officer or employee who is certified 
        by the Department of Revenue in tax calculations, and (iii) an 
        officer or employee who is certified by the Department of 
        Revenue in the proper preparation of abstracts of assessment.  
        The commissioner of revenue may require that each county have an 
        officer or employee who is certified by the Department of 
        Revenue in the proper preparation of abstracts of tax lists. 
           (c) Beginning with the four-year educational licensing 
        period starting on July 1, 2004, every Minnesota assessor 
        licensed by the State Board of Assessors must attend and 
        participate in a seminar that focuses on ethics, professional 
        conduct and the need for standardized assessment practices 
        developed and presented by the commissioner of revenue.  This 
        requirement must be met at least once in every subsequent 
        four-year period.  This requirement applies to all assessors 
        licensed for one year or more in the four-year period. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 8.  Minnesota Statutes 2004, 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, 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 years 2004, 2005, and 2006, 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 2007, 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 2008, 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 2008 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 for assessment 
        years 2005 through 2008, for taxes payable in 2006 through 2009. 
           Sec. 9.  Minnesota Statutes 2004, section 273.11, is 
        amended by adding a subdivision to read: 
           Subd. 21.  [VALUATION REDUCTION FOR HOMESTEAD PROPERTY 
        DAMAGED BY MOLD.] (a) The owner of homestead property may apply 
        in writing to the assessor for a reduction in the market value 
        of the property that has been damaged by mold.  The notification 
        must include the estimated cost to cure the mold condition 
        provided by a licensed contractor.  The estimated cost must be 
        at least $20,000.  Upon completion of the work, the owner must 
        file an application on a form prescribed by the commissioner of 
        revenue, accompanied by a copy of the contractor's estimate. 
           (b) If the conditions in paragraph (a) are met, the county 
        board must grant a reduction in the market value of the 
        homestead dwelling equal to the estimated cost to cure the mold 
        condition.  If a property owner applies for a reduction under 
        this subdivision between January 1 and June 30 of any year, the 
        reduction applies for taxes payable in the following year.  If a 
        property owner applies for a reduction under this subdivision 
        between July 1 and December 31 of any year, the reduction 
        applies for taxes payable in the second following year. 
           (c) A denial of a reduction under this section by the 
        county board may be appealed to the tax court.  If the county 
        board takes no action on the application within 90 days after 
        its receipt, it is considered an approval. 
           (d) For purposes of subdivision 1a, in the assessment year 
        following the assessment year when a valuation reduction has 
        occurred under this section, any market value added by the 
        assessor to the property resulting from curing the mold 
        condition must be considered an increase in value due to new 
        construction. 
           [EFFECTIVE DATE.] This section is effective for 
        applications filed on September 1, 2005, and thereafter. 
           Sec. 10.  Minnesota Statutes 2004, section 273.11, is 
        amended by adding a subdivision to read: 
           Subd. 22.  [LEAD HAZARD MARKET VALUE REDUCTION.] Owners of 
        property classified as class 1a, 1b, 1c, 2a, 4b, 4bb, or 4d 
        under section 273.13 may apply for a lead hazard valuation 
        reduction, provided that the property is located in a city which 
        has authorized valuation reductions under this subdivision.  A 
        city that authorizes reductions under this subdivision must 
        establish guidelines for qualifying lead hazard reduction 
        projects and must designate an agency within the city to issue 
        certificates of completion of qualifying projects.  For purposes 
        of this subdivision, "lead hazard reduction" has the same 
        meaning as in section 144.9501, subdivision 17. 
           The property owner must obtain a certificate from the 
        agency stating (1) that the project has been completed and (2) 
        the total cost incurred by the owner, which must be at least 
        $3,000.  Only projects originating after July 1, 2005, and 
        completed before July 1, 2010, qualify for a reduction under 
        this subdivision.  The property owner shall apply for the 
        valuation reduction to the assessor on a form prescribed by the 
        assessor accompanied by a copy of the certificate of completion 
        from the agency. 
           A qualifying property is eligible for a one-year valuation 
        reduction equal to the actual cost incurred, to a maximum of 
        $20,000.  If a property owner applies to the assessor for the 
        valuation reduction under this subdivision between January 1 and 
        June 30 of any year, the reduction applies for taxes payable in 
        the following year.  If a property owner applies to the assessor 
        for the valuation reduction under this subdivision between July 
        1 and December 31, the reduction applies for taxes payable in 
        the second following year.  For purposes of subdivision 1a, any 
        additional market value resulting from the lead hazard removal 
        must be considered an increase in value due to new construction. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 11.  Minnesota Statutes 2004, section 273.112, 
        subdivision 3, is amended to read: 
           Subd. 3.  [REQUIREMENTS.] Real estate shall be entitled to 
        valuation and tax deferment under this section only if it is: 
           (a) actively and exclusively devoted to golf, skiing, lawn 
        bowling, croquet, polo, or archery or firearms range 
        recreational use or other recreational uses carried on at the 
        establishment; 
           (b) five acres in size or more, except in the case of a 
        lawn bowling or croquet green or an archery or firearms range; 
           (c)(1) operated by private individuals or, in the case of a 
        lawn bowling or croquet green, by private individuals or 
        corporations, and open to the public; or 
           (2) operated by firms or corporations for the benefit of 
        employees or guests; or 
           (3) operated by private clubs having a membership of 50 or 
        more or open to the public, provided that the club does not 
        discriminate in membership requirements or selection on the 
        basis of sex or marital status; and 
           (d) made available for use in the case of real estate 
        devoted to golf without discrimination on the basis of sex 
        during the time when the facility is open to use by the public 
        or by members, except that use for golf may be restricted on the 
        basis of sex no more frequently than one, or part of one, 
        weekend each calendar month for each sex and no more than two, 
        or part of two, weekdays each week for each sex.  
           If a golf club membership allows use of golf course 
        facilities by more than one adult per membership, the use must 
        be equally available to all adults entitled to use of the golf 
        course under the membership, except that use may be restricted 
        on the basis of sex as permitted in this section.  Memberships 
        that permit play during restricted times may be allowed only if 
        the restricted times apply to all adults using the membership.  
        A golf club may not offer a membership or golfing privileges to 
        a spouse of a member that provides greater or less access to the 
        golf course than is provided to that person's spouse under the 
        same or a separate membership in that club, except that the 
        terms of a membership may provide that one spouse may have no 
        right to use the golf course at any time while the other spouse 
        may have either limited or unlimited access to the golf course.  
           A golf club may have or create an individual membership 
        category which entitles a member for a reduced rate to play 
        during restricted hours as established by the club.  The club 
        must have on record a written request by the member for such 
        membership.  
           A golf club that has food or beverage facilities or 
        services must allow equal access to those facilities and 
        services for both men and women members in all membership 
        categories at all times.  Nothing in this paragraph shall be 
        construed to require service or access to facilities to persons 
        under the age of 21 years or require any act that would violate 
        law or ordinance regarding sale, consumption, or regulation of 
        alcoholic beverages. 
           For purposes of this subdivision and subdivision 7a, 
        discrimination means a pattern or course of conduct and not 
        linked to an isolated incident. 
           [EFFECTIVE DATE.] This section is effective for taxes 
        levied in 2005, payable in 2006, and thereafter. 
           Sec. 12.  Minnesota Statutes 2004, 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 
        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 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 co-owner, 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. 
           (i) If a single family home, duplex, or triplex classified 
        as either residential homestead or agricultural homestead is 
        also used to provide licensed child care, the portion of the 
        property used for licensed child care must be classified as a 
        part of the homestead property. 
           [EFFECTIVE DATE.] This section is effective in assessment 
        year 2005 and thereafter, for taxes payable in 2006, and 
        thereafter. 
           Sec. 13.  Minnesota Statutes 2004, section 273.125, 
        subdivision 8, is amended to read: 
           Subd. 8.  [MANUFACTURED HOMES; SECTIONAL STRUCTURES.] (a) 
        In this section, "manufactured home" means a structure 
        transportable in one or more sections, which is built on a 
        permanent chassis, and designed to be used as a dwelling with or 
        without a permanent foundation when connected to the required 
        utilities, and contains the plumbing, heating, air conditioning, 
        and electrical systems in it.  Manufactured home includes any 
        accessory structure that is an addition or supplement to the 
        manufactured home and, when installed, becomes a part of the 
        manufactured home.  
           (b) Except as provided in paragraph (c), a manufactured 
        home that meets each of the following criteria must be valued 
        and assessed as an improvement to real property, the appropriate 
        real property classification applies, and the valuation is 
        subject to review and the taxes payable in the manner provided 
        for real property:  
           (1) the owner of the unit holds title to the land on which 
        it is situated; 
           (2) the unit is affixed to the land by a permanent 
        foundation or is installed at its location in accordance with 
        the Manufactured Home Building Code in sections 327.31 to 
        327.34, and rules adopted under those sections, or is affixed to 
        the land like other real property in the taxing district; and 
           (3) the unit is connected to public utilities, has a well 
        and septic tank system, or is serviced by water and sewer 
        facilities comparable to other real property in the taxing 
        district.  
           (c) A manufactured home that meets each of the following 
        criteria must be assessed at the rate provided by the 
        appropriate real property classification but must be treated as 
        personal property, and the valuation is subject to review and 
        the taxes payable in the manner provided in this section: 
           (1) the owner of the unit is a lessee of the land under the 
        terms of a lease, or the unit is located in a manufactured home 
        park but is not the homestead of the park owner; 
           (2) the unit is affixed to the land by a permanent 
        foundation or is installed at its location in accordance with 
        the Manufactured Home Building Code contained in sections 327.31 
        to 327.34, and the rules adopted under those sections, or is 
        affixed to the land like other real property in the taxing 
        district; and 
           (3) the unit is connected to public utilities, has a well 
        and septic tank system, or is serviced by water and sewer 
        facilities comparable to other real property in the taxing 
        district.  
           (d) Sectional structures must be valued and assessed as an 
        improvement to real property if the owner of the structure holds 
        title to the land on which it is located or is a qualifying 
        lessee of the land under section 273.19.  In this paragraph 
        "sectional structure" means a building or structural unit that 
        has been in whole or substantial part manufactured or 
        constructed at an off-site location to be wholly or partially 
        assembled on-site alone or with other units and attached to a 
        permanent foundation.  
           (e) The commissioner of revenue may adopt rules under the 
        Administrative Procedure Act to establish additional criteria 
        for the classification of manufactured homes and sectional 
        structures under this subdivision. 
           (f) A storage shed, deck, or similar improvement 
        constructed on property that is leased or rented as a site for a 
        manufactured home, sectional structure, park trailer, or travel 
        trailer is taxable as provided in this section.  In the case of 
        property that is leased or rented as a site for a travel 
        trailer, a storage shed, deck, or similar improvement on the 
        site that is considered personal property under this paragraph 
        is taxable only if its total estimated market value is over 
        $500.  The property is taxable as personal property to the 
        lessee of the site if it is not owned by the owner of the site.  
        The property is taxable as real estate if it is owned by the 
        owner of the site.  As a condition of permitting the owner of 
        the manufactured home, sectional structure, park trailer, or 
        travel trailer to construct improvements on the leased or rented 
        site, the owner of the site must obtain the permanent home 
        address of the lessee or user of the site.  The site owner must 
        provide the name and address to the assessor upon request. 
           [EFFECTIVE DATE.] For purposes of Minnesota Statutes, 
        sections 272.12 and 272.121, this section is effective the day 
        following final enactment.  For all other purposes, this section 
        is effective beginning with taxes payable in 2006, except that 
        for any property treated as real property under this section for 
        the 2005 assessment that will be treated as personal property 
        under this section for the 2006 assessment, an adjustment must 
        be made to the 2005 assessment roll on or before September 1, 
        2005, to reflect those changes.  
           Sec. 14.  [273.128] [CERTIFICATION OF LOW-INCOME RENTAL 
        PROPERTY.] 
           Subdivision 1.  [REQUIREMENT.] Low-income rental property 
        classified as class 4d under section 273.13, subdivision 25, is 
        entitled to valuation under this section if at least 75 percent 
        of the units in the rental housing property meet any of the 
        following qualifications: 
           (1) the units are subject to a housing assistance payments 
        contract under section 8 of the United States Housing Act of 
        1937, as amended; 
           (2) the units are rent-restricted and income-restricted 
        units of a qualified low-income housing project receiving tax 
        credits under section 42(g) of the Internal Revenue Code of 
        1986, as amended; 
           (3) the units are financed by the Rural Housing Service of 
        the United States Department of Agriculture and receive payments 
        under the rental assistance program pursuant to section 521(a) 
        of the Housing Act of 1949, as amended; or 
           (4) the units are subject to rent and income restrictions 
        under the terms of financial assistance provided to the rental 
        housing property by the federal government or the state of 
        Minnesota as evidenced by a document recorded against the 
        property. 
           The restrictions must require assisted units to be occupied 
        by residents whose household income at the time of initial 
        occupancy does not exceed 60 percent of the greater of area or 
        state median income, adjusted for family size, as determined by 
        the United States Department of Housing and Urban Development.  
        The restriction must also require the rents for assisted units 
        to not exceed 30 percent of 60 percent of the greater of area or 
        state median income, adjusted for family size, as determined by 
        the United States Department of Housing and Urban Development. 
           Subd. 2.  [APPLICATION.] (a) Application for certification 
        under this section must be filed by March 31 of the levy year, 
        or at a later date if the Housing Finance Agency deems 
        practicable.  The application must be filed with the Housing 
        Finance Agency, on a form prescribed by the agency, and must 
        contain the information required by the Housing Finance Agency. 
           (b) Each application must include: 
           (1) the property tax identification number; and 
           (2) evidence that the property meets the requirements of 
        subdivision 1. 
           (c) The Housing Finance Agency may charge an application 
        fee approximately equal to the costs of processing and reviewing 
        the applications but not to exceed $10 per unit.  If imposed, 
        the applicant must pay the application fee to the Housing 
        Finance Agency.  The fee must be deposited in the housing 
        development fund. 
           Subd. 3.  [CERTIFICATION.] By June 1 of each levy year, the 
        Housing Finance Agency must certify to the appropriate county or 
        city assessors, the specific properties that are qualified under 
        this section and the number of units in the building that 
        qualify.  In making the certification, the Housing Finance 
        Agency may rely on the application and any other supporting 
        information that the agency deems necessary from the property 
        owner. 
           [EFFECTIVE DATE.] This section is effective for taxes 
        payable in 2006 and subsequent years, except that the 
        application date in subdivision 2 is extended to August 31, 
        2005, and the certification date in subdivision 3 is extended to 
        September 30, 2005. 
           Sec. 15.  Minnesota Statutes 2004, 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 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 is permanently and totally disabled. 
           Property is classified and assessed under clause (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 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, 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, 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 portion of the property used as a homestead by 
        the owner has the same class rates as class 1a property under 
        paragraph (a).  The remainder of the property is classified as 
        follows:  the first $500,000 of market value of class 1c 
        property has a class rate of one percent, and is tier I, the 
        remaining next $1,700,000 of 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. is tier II, and any remaining market value is 
        tier III.  The class rates for class 1c are:  tier I, 0.55 
        percent; tier II, 1.0 percent; and tier III, 1.25 percent.  If 
        any portion of the a class 1c resort property is classified as 
        class 4c under subdivision 25 has any market value in tier III, 
        the entire property must meet the requirements of subdivision 
        25, paragraph (d), clause (1), to qualify for class 1c treatment 
        under this paragraph. 
           (d) Class 1d property includes structures that meet all of 
        the following criteria: 
           (1) the structure is located on property that is classified 
        as agricultural property under section 273.13, subdivision 23; 
           (2) the structure is occupied exclusively by seasonal farm 
        workers during the time when they work on that farm, and the 
        occupants are not charged rent for the privilege of occupying 
        the property, provided that use of the structure for storage of 
        farm equipment and produce does not disqualify the property from 
        classification under this paragraph; 
           (3) the structure meets all applicable health and safety 
        requirements for the appropriate season; and 
           (4) the structure is not salable as residential property 
        because it does not comply with local ordinances relating to 
        location in relation to streets or roads. 
           The market value of class 1d property has the same class 
        rates as class 1a property under paragraph (a). 
           [EFFECTIVE DATE.] This section is effective for taxes 
        levied in 2005, payable in 2006, and thereafter. 
           Sec. 16.  Minnesota Statutes 2004, section 273.13, 
        subdivision 25, as amended by Laws 2005, chapter 151, article 3, 
        section 12, 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, excluding 
        property qualifying for class 4d.  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 1.25 percent. 
           (b) Class 4b includes: 
           (1) residential real estate containing less than four units 
        that does not qualify as class 4bb, other than seasonal 
        residential 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 
        1.25 percent. 
           (c) Class 4bb includes: 
           (1) nonhomestead residential real estate containing one 
        unit, other than seasonal residential 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 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 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) postsecondary 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; 
           (8) a 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 abuts a public airport; and 
           (ii) the owner of the aircraft storage hangar provides the 
        assessor with a signed agreement restricting the use of the 
        premises, prohibiting commercial use or activity performed at 
        the hangar; and 
           (9) 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) (9) 
        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 section 273.128, subdivision 3.  If only a portion of the 
        units in the building qualify as low-income rental housing units 
        as certified under section 273.128, subdivision 3, only the 
        proportion of qualifying units to the total number of units in 
        the building qualify for class 4d.  The remaining portion of the 
        building shall be classified by the assessor based upon its 
        use.  Class 4d also includes the same proportion of land as the 
        qualifying low-income rental housing units are to the total 
        units in the building.  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 0.75 percent. 
           [EFFECTIVE DATE.] This section is effective for taxes 
        payable in 2006 and subsequent years. 
           Sec. 17.  [273.1321] [VACANT COMMERCIAL INDUSTRIAL 
        PROPERTIES.] 
           Subdivision 1.  [AUTHORITY.] A city may establish, by 
        ordinance, a program to encourage redevelopment, provide for 
        better utilization of commercial-industrial property, and 
        eliminate blighting influences by revoking the eligibility of 
        individual commercial-industrial properties to receive the 
        credit authorized under section 273.1398, subdivision 4.  The 
        program may revoke eligibility of a property only if: 
           (1) the property has been vacant, as defined in subdivision 
        3, clause (1), (2), or (3), for three or more consecutive years 
        prior to the current assessment year; or 
           (2) the property has been vacant as defined under 
        subdivision 3, clause (4), for five or more consecutive years 
        prior to the current assessment year. 
           Subd. 2.  [MINIMUM PROGRAM REQUIREMENTS.] The program must 
        provide: 
           (1) standards for determining whether a property is vacant; 
           (2) written assessment notice by the city or county to the 
        property owner informing the owner that the property's 
        eligibility will be revoked; 
           (3) opportunity for the property owner to appeal the 
        revocation at the local and county board of appeal and 
        equalization; 
           (4) timely notice to the county assessor of the property's 
        eligibility revocation, or if the city has a city assessor and 
        the city assessor has revoked the property's eligibility; and 
           (5) any other provisions the city determines are necessary 
        or appropriate to the operation of the program to achieve its 
        purposes. 
           Subd. 3.  [DEFINITION OF VACANT.] A program established 
        under this section may provide that a property is vacant if the 
        property is: 
           (1) condemned, dangerous, or having multiple building code 
        violations; 
           (2) condemned and illegally occupied; 
           (3) either occupied or unoccupied, during which time the 
        enforcement officer for the municipality has issued multiple 
        orders to correct nuisance conditions; or 
           (4) unoccupied and not utilized for a commercial or 
        industrial purpose.  
           Subd. 4.  [NOTICE TO PROPERTY OWNER.] The municipality 
        shall give notice to the property owner stating that the 
        property may cease to be eligible for the credit under section 
        273.1398, subdivision 4, unless the property is occupied, the 
        conditions in subdivision 3, clauses (1) to (3), are remedied, 
        and the property is used for a commercial or industrial purpose 
        for at least 180 days during the next 12-month period. 
           [EFFECTIVE DATE.] This section is effective for assessment 
        year 2006 and thereafter, for taxes payable in 2007 and 
        thereafter. 
           Sec. 18.  Minnesota Statutes 2004, 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 if the owner or other person having control over the 
        property will not permit the assessor has refused the assessor 
        access to inspect the property and the interior of any buildings 
        or structures as provided in section 273.20.  
           (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.  
           (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.  
           (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 for the 2006 
        assessment and thereafter. 
           Sec. 19.  Minnesota Statutes 2004, 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 tier III of 
        class 1c under section 273.13, subdivision 22, and 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 for taxes 
        levied in 2005, payable in 2006, and thereafter. 
           Sec. 20.  Minnesota Statutes 2004, section 275.025, 
        subdivision 4, is amended to read: 
           Subd. 4.  [APPORTIONMENT AND LEVY OF STATE GENERAL TAX.] 
        Ninety-five percent of the state general tax must be distributed 
        among the counties levied by applying a uniform rate to each 
        county's all commercial-industrial tax capacity and its five 
        percent of the state general tax must be levied by applying a 
        uniform rate to all 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.  On 
        or before October 1 each year, the commissioner of revenue shall 
        certify a the preliminary state general levy rate rates 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 2006 and thereafter. 
           Sec. 21.  Minnesota Statutes 2004, section 275.065, 
        subdivision 1a, is amended to read: 
           Subd. 1a.  [OVERLAPPING JURISDICTIONS.] In the case of a 
        taxing authority lying in two or more counties, the home county 
        auditor shall certify the proposed levy and the proposed local 
        tax rate to the other county auditor by September 20 October 5.  
        The home county auditor must estimate the levy or rate in 
        preparing the notices required in subdivision 3, if the other 
        county has not certified the appropriate information.  If 
        requested by the home county auditor, the other county auditor 
        must furnish an estimate to the home county auditor. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 22.  Minnesota Statutes 2004, section 275.065, 
        subdivision 3, is amended to read: 
           Subd. 3.  [NOTICE OF PROPOSED PROPERTY TAXES.] (a) The 
        county auditor shall prepare and the county treasurer shall 
        deliver after November 10 and on or before November 24 each 
        year, by first class mail to each taxpayer at the address listed 
        on the county's current year's assessment roll, a notice of 
        proposed property taxes.  
           (b) The commissioner of revenue shall prescribe the form of 
        the notice. 
           (c) The notice must inform taxpayers that it contains the 
        amount of property taxes each taxing authority proposes to 
        collect for taxes payable the following year.  In the case of a 
        town, or in the case of the state general tax, the final tax 
        amount will be its proposed tax.  In the case of taxing 
        authorities required to hold a public meeting under subdivision 
        6, the notice must clearly state that each taxing authority, 
        including regional library districts established under section 
        134.201, and including the metropolitan taxing districts as 
        defined in paragraph (i), but excluding all other special taxing 
        districts and towns, will hold a public meeting to receive 
        public testimony on the proposed budget and proposed or final 
        property tax levy, or, in case of a school district, on the 
        current budget and proposed property tax levy.  It must clearly 
        state the time and place of each taxing authority's meeting, a 
        telephone number for the taxing authority that taxpayers may 
        call if they have questions related to the notice, and an 
        address where comments will be received by mail.  
           (d) The notice must state for each parcel: 
           (1) the market value of the property as determined under 
        section 273.11, and used for computing property taxes payable in 
        the following year and for taxes payable in the current year as 
        each appears in the records of the county assessor on November 1 
        of the current year; and, in the case of residential property, 
        whether the property is classified as homestead or 
        nonhomestead.  The notice must clearly inform taxpayers of the 
        years to which the market values apply and that the values are 
        final values; 
           (2) the items listed below, shown separately by county, 
        city or town, and state general tax, net of the residential and 
        agricultural homestead credit under section 273.1384, voter 
        approved school levy, other local school levy, and the sum of 
        the special taxing districts, and as a total of all taxing 
        authorities:  
           (i) the actual tax for taxes payable in the current year; 
        and 
           (ii) the proposed tax amount. 
           If the county levy under clause (2) includes an amount for 
        a lake improvement district as defined under sections 103B.501 
        to 103B.581, the amount attributable for that purpose must be 
        separately stated from the remaining county levy amount.  
           In the case of a town or the state general tax, the final 
        tax shall also be its proposed tax unless the town changes its 
        levy at a special town meeting under section 365.52.  If a 
        school district has certified under section 126C.17, subdivision 
        9, that a referendum will be held in the school district at the 
        November general election, the county auditor must note next to 
        the school district's proposed amount that a referendum is 
        pending and that, if approved by the voters, the tax amount may 
        be higher than shown on the notice.  In the case of the city of 
        Minneapolis, the levy for the Minneapolis Library Board and the 
        levy for Minneapolis Park and Recreation shall be listed 
        separately from the remaining amount of the city's levy.  In the 
        case of the city of St. Paul, the levy for the St. Paul Library 
        Agency must be listed separately from the remaining amount of 
        the city's levy.  In the case of Ramsey County, any amount 
        levied under section 134.07 may be listed separately from the 
        remaining amount of the county's levy.  In the case of a parcel 
        where tax increment or the fiscal disparities areawide tax under 
        chapter 276A or 473F applies, the proposed tax levy on the 
        captured value or the proposed tax levy on the tax capacity 
        subject to the areawide tax must each be stated separately and 
        not included in the sum of the special taxing districts; and 
           (3) the increase or decrease between the total taxes 
        payable in the current year and the total proposed taxes, 
        expressed as a percentage. 
           For purposes of this section, the amount of the tax on 
        homesteads qualifying under the senior citizens' property tax 
        deferral program under chapter 290B is the total amount of 
        property tax before subtraction of the deferred property tax 
        amount. 
           (e) The notice must clearly state that the proposed or 
        final taxes do not include the following: 
           (1) special assessments; 
           (2) levies approved by the voters after the date the 
        proposed taxes are certified, including bond referenda and 
        school district levy referenda; 
           (3) a levy limit increase approved by the voters by the 
        first Tuesday after the first Monday in November of the levy 
        year as provided under section 275.73; 
           (4) amounts necessary to pay cleanup or other costs due to 
        a natural disaster occurring after the date the proposed taxes 
        are certified; 
           (5) amounts necessary to pay tort judgments against the 
        taxing authority that become final after the date the proposed 
        taxes are certified; and 
           (6) the contamination tax imposed on properties which 
        received market value reductions for contamination. 
           (f) Except as provided in subdivision 7, failure of the 
        county auditor to prepare or the county treasurer to deliver the 
        notice as required in this section does not invalidate the 
        proposed or final tax levy or the taxes payable pursuant to the 
        tax levy. 
           (g) If the notice the taxpayer receives under this section 
        lists the property as nonhomestead, and satisfactory 
        documentation is provided to the county assessor by the 
        applicable deadline, and the property qualifies for the 
        homestead classification in that assessment year, the assessor 
        shall reclassify the property to homestead for taxes payable in 
        the following year. 
           (h) In the case of class 4 residential property used as a 
        residence for lease or rental periods of 30 days or more, the 
        taxpayer must either: 
           (1) mail or deliver a copy of the notice of proposed 
        property taxes to each tenant, renter, or lessee; or 
           (2) post a copy of the notice in a conspicuous place on the 
        premises of the property.  
           The notice must be mailed or posted by the taxpayer by 
        November 27 or within three days of receipt of the notice, 
        whichever is later.  A taxpayer may notify the county treasurer 
        of the address of the taxpayer, agent, caretaker, or manager of 
        the premises to which the notice must be mailed in order to 
        fulfill the requirements of this paragraph. 
           (i) For purposes of this subdivision, subdivisions 5a and 
        6, "metropolitan special taxing districts" means the following 
        taxing districts in the seven-county metropolitan area that levy 
        a property tax for any of the specified purposes listed below: 
           (1) Metropolitan Council under section 473.132, 473.167, 
        473.249, 473.325, 473.446, 473.521, 473.547, or 473.834; 
           (2) Metropolitan Airports Commission under section 473.667, 
        473.671, or 473.672; and 
           (3) Metropolitan Mosquito Control Commission under section 
        473.711. 
           For purposes of this section, any levies made by the 
        regional rail authorities in the county of Anoka, Carver, 
        Dakota, Hennepin, Ramsey, Scott, or Washington under chapter 
        398A shall be included with the appropriate county's levy and 
        shall be discussed at that county's public hearing. 
           (j) The governing body of a county, city, or school 
        district may, with the consent of the county board, include 
        supplemental information with the statement of proposed property 
        taxes about the impact of state aid increases or decreases on 
        property tax increases or decreases and on the level of services 
        provided in the affected jurisdiction.  This supplemental 
        information may include information for the following year, the 
        current year, and for as many consecutive preceding years as 
        deemed appropriate by the governing body of the county, city, or 
        school district.  It may include only information regarding: 
           (1) the impact of inflation as measured by the implicit 
        price deflator for state and local government purchases; 
           (2) population growth and decline; 
           (3) state or federal government action; and 
           (4) other financial factors that affect the level of 
        property taxation and local services that the governing body of 
        the county, city, or school district may deem appropriate to 
        include. 
           The information may be presented using tables, written 
        narrative, and graphic representations and may contain 
        instruction toward further sources of information or opportunity 
        for comment. 
           [EFFECTIVE DATE.] This section is effective for notices for 
        property taxes levied in 2005, payable in 2006, and thereafter. 
           Sec. 23.  Minnesota Statutes 2004, section 275.065, is 
        amended by adding a subdivision to read: 
           Subd. 9.  [AITKIN COUNTY AND SCHOOL DISTRICT 
        HEARING.] Notwithstanding any other law, Aitkin County and 
        Independent School District No. 1, and the city of Aitkin, or 
        any two of them, may hold their initial public hearing jointly.  
        The hearing must be held on the second Tuesday of December each 
        year.  The advertisement required in subdivision 5a may be a 
        joint advertisement.  The hearing is otherwise subject to the 
        requirements of this section. 
           [EFFECTIVE DATE.] This section is effective for hearings 
        conducted in 2005 and subsequent years. 
           Sec. 24.  Minnesota Statutes 2004, section 275.065, is 
        amended by adding a subdivision to read: 
           Subd. 10.  [NOBLES COUNTY; JOINT INITIAL PUBLIC 
        HEARING.] Notwithstanding any other law, Nobles County, the city 
        of Worthington, and Independent School District No. 518, 
        Worthington, or any two of them, may hold their initial public 
        hearing jointly.  The hearing must be held on the second Tuesday 
        of December each year.  The advertisement required in 
        subdivision 5a may be a joint advertisement.  The hearing is 
        otherwise subject to the requirements of this section. 
           [EFFECTIVE DATE.] This section is effective for hearings 
        conducted in 2005 and subsequent years. 
           Sec. 25.  Minnesota Statutes 2004, section 275.70, 
        subdivision 5, as amended by Laws 2005, chapter 152, article 1, 
        section 3, is amended to read: 
           Subd. 5.  [SPECIAL LEVIES.] "Special levies" means those 
        portions of ad valorem taxes levied by a local governmental unit 
        for the following purposes or in the following manner: 
           (1) to pay the costs of the principal and interest on 
        bonded indebtedness or to reimburse for the amount of liquor 
        store revenues used to pay the principal and interest due on 
        municipal liquor store bonds in the year preceding the year for 
        which the levy limit is calculated; 
           (2) to pay the costs of principal and interest on 
        certificates of indebtedness issued for any corporate purpose 
        except for the following: 
           (i) tax anticipation or aid anticipation certificates of 
        indebtedness; 
           (ii) certificates of indebtedness issued under sections 
        298.28 and 298.282; 
           (iii) certificates of indebtedness used to fund current 
        expenses or to pay the costs of extraordinary expenditures that 
        result from a public emergency; or 
           (iv) certificates of indebtedness used to fund an 
        insufficiency in tax receipts or an insufficiency in other 
        revenue sources; 
           (3) to provide for the bonded indebtedness portion of 
        payments made to another political subdivision of the state of 
        Minnesota; 
           (4) to fund payments made to the Minnesota State Armory 
        Building Commission under section 193.145, subdivision 2, to 
        retire the principal and interest on armory construction bonds; 
           (5) property taxes approved by voters which are levied 
        against the referendum market value as provided under section 
        275.61; 
           (6) to fund matching requirements needed to qualify for 
        federal or state grants or programs to the extent that either 
        (i) the matching requirement exceeds the matching requirement in 
        calendar year 2001, or (ii) it is a new matching requirement 
        that did not exist prior to 2002; 
           (7) to pay the expenses reasonably and necessarily incurred 
        in preparing for or repairing the effects of natural disaster 
        including the occurrence or threat of widespread or severe 
        damage, injury, or loss of life or property resulting from 
        natural causes, in accordance with standards formulated by the 
        Emergency Services Division of the state Department of Public 
        Safety, as allowed by the commissioner of revenue under section 
        275.74, subdivision 2; 
           (8) pay amounts required to correct an error in the levy 
        certified to the county auditor by a city or county in a levy 
        year, but only to the extent that when added to the preceding 
        year's levy it is not in excess of an applicable statutory, 
        special law or charter limitation, or the limitation imposed on 
        the governmental subdivision by sections 275.70 to 275.74 in the 
        preceding levy year; 
           (9) to pay an abatement under section 469.1815; 
           (10) to pay any costs attributable to increases in the 
        employer contribution rates under chapter 353 that are effective 
        after June 30, 2001; 
           (11) to pay the operating or maintenance costs of a county 
        jail as authorized in section 641.01 or 641.262, or of a 
        correctional facility as defined in section 241.021, subdivision 
        1, paragraph (f), to the extent that the county can demonstrate 
        to the commissioner of revenue that the amount has been included 
        in the county budget as a direct result of a rule, minimum 
        requirement, minimum standard, or directive of the Department of 
        Corrections, or to pay the operating or maintenance costs of a 
        regional jail as authorized in section 641.262.  For purposes of 
        this clause, a district court order is not a rule, minimum 
        requirement, minimum standard, or directive of the Department of 
        Corrections.  If the county utilizes this special levy, except 
        to pay operating or maintenance costs of a new regional jail 
        facility under sections 641.262 to 641.264 which will not 
        replace an existing jail facility, any amount levied by the 
        county in the previous levy year for the purposes specified 
        under this clause and included in the county's previous year's 
        levy limitation computed under section 275.71, shall be deducted 
        from the levy limit base under section 275.71, subdivision 2, 
        when determining the county's current year levy limitation.  The 
        county shall provide the necessary information to the 
        commissioner of revenue for making this determination; 
           (12) to pay for operation of a lake improvement district, 
        as authorized under section 103B.555.  If the county utilizes 
        this special levy, any amount levied by the county in the 
        previous levy year for the purposes specified under this clause 
        and included in the county's previous year's levy limitation 
        computed under section 275.71 shall be deducted from the levy 
        limit base under section 275.71, subdivision 2, when determining 
        the county's current year levy limitation.  The county shall 
        provide the necessary information to the commissioner of revenue 
        for making this determination; 
           (13) to repay a state or federal loan used to fund the 
        direct or indirect required spending by the local government due 
        to a state or federal transportation project or other state or 
        federal capital project.  This authority may only be used if the 
        project is not a local government initiative; 
           (14) to pay for court administration costs as required 
        under section 273.1398, subdivision 4b, less the (i) county's 
        share of transferred fines and fees collected by the district 
        courts in the county for calendar year 2001 and (ii) the aid 
        amount certified to be paid to the county in 2004 under section 
        273.1398, subdivision 4c; however, for taxes levied to pay for 
        these costs in the year in which the court financing is 
        transferred to the state, the amount under this clause is 
        limited to the amount of aid the county is certified to receive 
        under section 273.1398, subdivision 4a; 
           (15) to fund a police or firefighters relief association as 
        required under section 69.77 to the extent that the required 
        amount exceeds the amount levied for this purpose in 2001; and 
           (16) for purposes of a storm sewer improvement district, 
        pursuant to under section 444.20; and 
           (17) to pay for the maintenance and support of a city or 
        county society for the prevention of cruelty to animals under 
        section 343.11.  If the city or county uses this special levy, 
        any amount levied by the city or county in the previous levy 
        year for the purposes specified in this clause and included in 
        the city's or county's previous year's levy limit computed under 
        section 275.71, must be deducted from the levy limit base under 
        section 275.71, subdivision 2, in determining the city's or 
        county's current year levy limit. 
           [EFFECTIVE DATE.] This section is effective for taxes 
        levied in 2005, payable in 2006, and thereafter. 
           Sec. 26.  Minnesota Statutes 2004, section 276.04, 
        subdivision 2, as amended by Laws 2005, chapter 10, article 1, 
        section 60, is amended to read: 
           Subd. 2.  [CONTENTS OF TAX STATEMENTS.] (a) The treasurer 
        shall provide for the printing of the tax statements.  The 
        commissioner of revenue shall prescribe the form of the property 
        tax statement and its contents.  The statement must contain a 
        tabulated statement of the dollar amount due to each taxing 
        authority and the amount of the state tax from the parcel of 
        real property for which a particular tax statement is prepared.  
        The dollar amounts attributable to the county, the state tax, 
        the voter approved school tax, the other local school tax, the 
        township or municipality, and the total of the metropolitan 
        special taxing districts as defined in section 275.065, 
        subdivision 3, paragraph (i), must be separately stated.  The 
        amounts due all other special taxing districts, if any, may be 
        aggregated except that any levies made by the regional rail 
        authorities in the county of Anoka, Carver, Dakota, Hennepin, 
        Ramsey, Scott, or Washington under chapter 398A shall be listed 
        on a separate line directly under the appropriate county's 
        levy.  If the county levy under this paragraph includes an 
        amount for a lake improvement district as defined under sections 
        103B.501 to 103B.581, the amount attributable for that purpose 
        must be separately stated from the remaining county levy 
        amount.  In the case of Ramsey County, if the county levy under 
        this paragraph includes an amount for public library service 
        under section 134.07, the amount attributable for that purpose 
        may be separated from the remaining county levy amount.  The 
        amount of the tax on homesteads qualifying under the senior 
        citizens' property tax deferral program under chapter 290B is 
        the total amount of property tax before subtraction of the 
        deferred property tax amount.  The amount of the tax on 
        contamination value imposed under sections 270.91 to 270.98, if 
        any, must also be separately stated.  The dollar amounts, 
        including the dollar amount of any special assessments, may be 
        rounded to the nearest even whole dollar.  For purposes of this 
        section whole odd-numbered dollars may be adjusted to the next 
        higher even-numbered dollar.  The amount of market value 
        excluded under section 273.11, subdivision 16, if any, must also 
        be listed on the tax statement. 
           (b) The property tax statements for manufactured homes and 
        sectional structures taxed as personal property shall contain 
        the same information that is required on the tax statements for 
        real property.  
           (c) Real and personal property tax statements must contain 
        the following information in the order given in this paragraph.  
        The information must contain the current year tax information in 
        the right column with the corresponding information for the 
        previous year in a column on the left: 
           (1) the property's estimated market value under section 
        273.11, subdivision 1; 
           (2) the property's taxable market value after reductions 
        under section 273.11, subdivisions 1a and 16; 
           (3) the property's gross tax, calculated by adding the 
        property's total property tax to the sum of the aids enumerated 
        in clause (4); 
           (4) a total of the following aids: 
           (i) education aids payable under chapters 122A, 123A, 123B, 
        124D, 125A, 126C, and 127A; 
           (ii) local government aids for cities, towns, and counties 
        under chapter 477A sections 477A.011 to 477A.04; and 
           (iii) disparity reduction aid under section 273.1398; 
           (5) for homestead residential and agricultural properties, 
        the credits under section 273.1384; 
           (6) any credits received under sections 273.119; 273.123; 
        273.135; 273.1391; 273.1398, subdivision 4; 469.171; and 
        473H.10, except that the amount of credit received under section 
        273.135 must be separately stated and identified as "taconite 
        tax relief"; and 
           (7) the net tax payable in the manner required in paragraph 
        (a). 
           (d) If the county uses envelopes for mailing property tax 
        statements and if the county agrees, a taxing district may 
        include a notice with the property tax statement notifying 
        taxpayers when the taxing district will begin its budget 
        deliberations for the current year, and encouraging taxpayers to 
        attend the hearings.  If the county allows notices to be 
        included in the envelope containing the property tax statement, 
        and if more than one taxing district relative to a given 
        property decides to include a notice with the tax statement, the 
        county treasurer or auditor must coordinate the process and may 
        combine the information on a single announcement.  
           The commissioner of revenue shall certify to the county 
        auditor the actual or estimated aids enumerated in paragraph 
        (c), clause (4), that local governments will receive in the 
        following year.  The commissioner must certify this amount by 
        January 1 of each year. 
           [EFFECTIVE DATE.] This section is effective for property 
        tax statements for taxes payable in 2006 and thereafter. 
           Sec. 27.  Minnesota Statutes 2004, section 298.24, 
        subdivision 1, as amended by Laws 2005, chapter 151, article 8, 
        section 18, is amended to read: 
           Subdivision 1.  (a) For concentrate produced in 2001, 2002, 
        and 2003, there is imposed upon taconite and iron sulphides, and 
        upon the mining and quarrying thereof, and upon the production 
        of iron ore concentrate therefrom, and upon the concentrate so 
        produced, a tax of $2.103 per gross ton of merchantable iron ore 
        concentrate produced therefrom.  For concentrates produced in 
        2005, the tax rate is the same rate imposed for concentrates 
        produced in 2004.  
           (b) For concentrates produced in 2004 2006 and subsequent 
        years, the tax rate shall be equal to the preceding year's tax 
        rate plus an amount equal to the preceding year's tax rate 
        multiplied by the percentage increase in the implicit price 
        deflator from the fourth quarter of the second preceding year to 
        the fourth quarter of the preceding year.  "Implicit price 
        deflator" means the implicit price deflator for the gross 
        domestic product prepared by the Bureau of Economic Analysis of 
        the United States Department of Commerce.  
           (c) On concentrates produced in 1997 and thereafter, an 
        additional tax is imposed equal to three cents per gross ton of 
        merchantable iron ore concentrate for each one percent that the 
        iron content of the product exceeds 72 percent, when dried at 
        212 degrees Fahrenheit. 
           (d) The tax shall be imposed on the average of the 
        production for the current year and the previous two years.  The 
        rate of the tax imposed will be the current year's tax rate.  
        This clause shall not apply in the case of the closing of a 
        taconite facility if the property taxes on the facility would be 
        higher if this clause and section 298.25 were not applicable.  
           (e) If the tax or any part of the tax imposed by this 
        subdivision is held to be unconstitutional, a tax of $2.103 per 
        gross ton of merchantable iron ore concentrate produced shall be 
        imposed.  
           (f) Consistent with the intent of this subdivision to 
        impose a tax based upon the weight of merchantable iron ore 
        concentrate, the commissioner of revenue may indirectly 
        determine the weight of merchantable iron ore concentrate 
        included in fluxed pellets by subtracting the weight of the 
        limestone, dolomite, or olivine derivatives or other basic flux 
        additives included in the pellets from the weight of the 
        pellets.  For purposes of this paragraph, "fluxed pellets" are 
        pellets produced in a process in which limestone, dolomite, 
        olivine, or other basic flux additives are combined with 
        merchantable iron ore concentrate.  No subtraction from the 
        weight of the pellets shall be allowed for binders, mineral and 
        chemical additives other than basic flux additives, or moisture. 
           (g)(1) Notwithstanding any other provision of this 
        subdivision, for the first two years of a plant's commercial 
        production of direct reduced ore, no tax is imposed under this 
        section.  As used in this paragraph, "commercial production" is 
        production of more than 50,000 tons of direct reduced ore in the 
        current year or in any prior year, "noncommercial production" is 
        production of 50,000 tons or less of direct reduced ore in any 
        year, and "direct reduced ore" is ore that results in a product 
        that has an iron content of at least 75 percent.  For the third 
        year of a plant's commercial production of direct reduced ore, 
        the rate to be applied to direct reduced ore is 25 percent of 
        the rate otherwise determined under this subdivision.  For the 
        fourth commercial production year, the rate is 50 percent of the 
        rate otherwise determined under this subdivision; for the fifth 
        commercial production year, the rate is 75 percent of the rate 
        otherwise determined under this subdivision; and for all 
        subsequent commercial production years, the full rate is imposed.
           (2) Subject to clause (1), production of direct reduced ore 
        in this state is subject to the tax imposed by this section, but 
        if that production is not produced by a producer of taconite or 
        iron sulfides, the production of taconite or iron sulfides 
        consumed in the production of direct reduced iron in this state 
        is not subject to the tax imposed by this section on taconite or 
        iron sulfides. 
           (3) Notwithstanding any other provision of this 
        subdivision, no tax is imposed on direct reduced ore under this 
        section during the facility's noncommercial production of direct 
        reduced ore.  The taconite or iron sulphides consumed in the 
        noncommercial production of direct reduced ore is subject to the 
        tax imposed by this section on taconite and iron sulphides.  
        Three-year average production of direct reduced ore does not 
        include production of direct reduced ore in any noncommercial 
        year.  Three-year average production for a direct reduced ore 
        facility that has noncommercial production is the average of the 
        commercial production of direct reduced ore for the current year 
        and the previous two commercial years.  
           Sec. 28.  Minnesota Statutes 2004, section 469.033, 
        subdivision 6, is amended to read: 
           Subd. 6.  [OPERATION AREA AS TAXING DISTRICT, SPECIAL TAX.] 
        All of the territory included within the area of operation of 
        any authority shall constitute a taxing district for the purpose 
        of levying and collecting special benefit taxes as provided in 
        this subdivision.  All of the taxable property, both real and 
        personal, within that taxing district shall be deemed to be 
        benefited by projects to the extent of the special taxes levied 
        under this subdivision.  Subject to the consent by resolution of 
        the governing body of the city in and for which it was created, 
        an authority may levy a tax upon all taxable property within 
        that taxing district.  The tax shall be extended, spread, and 
        included with and as a part of the general taxes for state, 
        county, and municipal purposes by the county auditor, to be 
        collected and enforced therewith, together with the penalty, 
        interest, and costs.  As the tax, including any penalties, 
        interest, and costs, is collected by the county treasurer it 
        shall be accumulated and kept in a separate fund to be known as 
        the "housing and redevelopment project fund."  The money in the 
        fund shall be turned over to the authority at the same time and 
        in the same manner that the tax collections for the city are 
        turned over to the city, and shall be expended only for the 
        purposes of sections 469.001 to 469.047.  It shall be paid out 
        upon vouchers signed by the chair of the authority or an 
        authorized representative.  The amount of the levy shall be an 
        amount approved by the governing body of the city, but shall not 
        exceed 0.0144 percent of taxable market value for the current 
        levy year, notwithstanding section 273.032.  The authority shall 
        each year formulate and file a budget in accordance with the 
        budget procedure of the city in the same manner as required of 
        executive departments of the city or, if no budgets are required 
        to be filed, by August 1.  The amount of the tax levy for the 
        following year shall be based on that budget. 
           [EFFECTIVE DATE.] This section is effective for taxes 
        payable in 2006 and thereafter. 
           Sec. 29.  Minnesota Statutes 2004, section 473F.02, 
        subdivision 2, is amended to read: 
           Subd. 2.  [AREA.] "Area" means the territory included 
        within the boundaries of Anoka, Carver, Dakota excluding the 
        city of Northfield, Hennepin, Ramsey, Scott excluding the city 
        of New Prague, and Washington Counties, excluding lands 
        constituting a major or an intermediate airport as defined under 
        section 473.625. 
           [EFFECTIVE DATE.] This section is effective for taxes 
        payable in 2006 and subsequent years.  
           Sec. 30.  Minnesota Statutes 2004, section 473F.08, 
        subdivision 3a, is amended to read: 
           Subd. 3a.  [BLOOMINGTON COMPUTATION.] Beginning in 1987 and 
        each subsequent year through 1998, the city of Bloomington shall 
        determine the interest payments for that year for the bonds 
        which have been sold for the highway improvements pursuant to 
        Laws 1986, chapter 391, section 2, paragraph (g).  Effective for 
        property taxes payable in 1988 through property taxes payable in 
        1999, after the Hennepin County auditor has computed the 
        areawide portion of the levy for the city of Bloomington 
        pursuant to subdivision 3, clause (a), the auditor shall 
        annually add a dollar amount to the city of Bloomington's 
        areawide portion of the levy equal to the amount which has been 
        certified to the auditor by the city of Bloomington for the 
        interest payments for that year for the bonds which were sold 
        for highway improvements.  The total areawide portion of the 
        levy for the city of Bloomington including the additional amount 
        for interest repayment certified pursuant to this subdivision 
        shall be certified by the Hennepin County auditor to the 
        administrative auditor pursuant to subdivision 5.  The Hennepin 
        County auditor shall distribute to the city of Bloomington the 
        additional areawide portion of the levy computed pursuant to 
        this subdivision at the same time that payments are made to the 
        other counties pursuant to subdivision 7a.  For property taxes 
        payable from the year 2006 2009 through 2015 2018, the Hennepin 
        County auditor shall adjust Bloomington's contribution to the 
        areawide gross tax capacity upward each year by a value equal to 
        ten percent of the total additional areawide levy distributed to 
        Bloomington under this subdivision from 1988 to 1999, divided by 
        the areawide tax rate for taxes payable in the previous year. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 31.  Minnesota Statutes 2004, section 477A.11, 
        subdivision 4, is amended to read: 
           Subd. 4.  [OTHER NATURAL RESOURCES LAND.] "Other natural 
        resources land" means:  
           (1) any other land presently owned in fee title by the 
        state and administered by the commissioner, or any tax-forfeited 
        land, other than platted lots within a city or those lands 
        described under subdivision 3, clause (2), which is owned by the 
        state and administered by the commissioner or by the county in 
        which it is located; and 
           (2) land leased by the state from the United States of 
        America through the United States Secretary of Agriculture 
        pursuant to Title III of the Bankhead Jones Farm Tenant Act, 
        which land is commonly referred to as land utilization project 
        land that is administered by the commissioner. 
           [EFFECTIVE DATE.] This section is effective for aids paid 
        in calendar year 2006 and thereafter. 
           Sec. 32.  Minnesota Statutes 2004, section 477A.11, is 
        amended by adding a subdivision to read: 
           Subd. 5.  [LAND UTILIZATION PROJECT LAND.] "Land 
        utilization project land" means land that is leased by the state 
        from the United States through the United States Secretary of 
        Agriculture according to Title III of the Bankhead Jones Farm 
        Tenant Act and that is administered by the commissioner. 
           [EFFECTIVE DATE.] This section is effective for aids paid 
        in calendar year 2006 and thereafter. 
           Sec. 33.  Minnesota Statutes 2004, section 477A.12, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [TYPES OF LAND; PAYMENTS.] (a) As an offset 
        for expenses incurred by counties and towns in support of 
        natural resources lands, the following amounts are annually 
        appropriated to the commissioner of natural resources from the 
        general fund for transfer to the commissioner of revenue.  The 
        commissioner of revenue shall pay the transferred funds to 
        counties as required by sections 477A.11 to 477A.145.  The 
        amounts are: 
           (1) for acquired natural resources land, $3, as adjusted 
        for inflation under section 477A.145, multiplied by the total 
        number of acres of acquired natural resources land or, at the 
        county's option three-fourths of one percent of the appraised 
        value of all acquired natural resources land in the county, 
        whichever is greater; 
           (2) 75 cents, as adjusted for inflation under section 
        477A.145, multiplied by the number of acres of 
        county-administered other natural resources land; and 
           (3) 75 cents, as adjusted for inflation under section 
        477A.145, multiplied by the total number of acres of land 
        utilization project land; 
           (3) (4) 37.5 cents, as adjusted for inflation under section 
        477A.145, multiplied by the number of acres of 
        commissioner-administered other natural resources land located 
        in each county as of July 1 of each year prior to the payment 
        year. 
           (b) The amount determined under paragraph (a), clause (1), 
        is payable for land that is acquired from a private owner and 
        owned by the Department of Transportation for the purpose of 
        replacing wetland losses caused by transportation projects, but 
        only if the county contains more than 500 acres of such land at 
        the time the certification is made under subdivision 2. 
           [EFFECTIVE DATE.] This section is effective for aids paid 
        in calendar year 2006 and thereafter. 
           Sec. 34.  Minnesota Statutes 2004, section 477A.12, 
        subdivision 2, is amended to read: 
           Subd. 2.  [PROCEDURE.] Lands for which payments in lieu are 
        made pursuant to section 97A.061, subdivision 3, and Laws 1973, 
        chapter 567, shall not be eligible for payments under this 
        section.  Each county auditor shall certify to the Department of 
        Natural Resources during July of each year prior to the payment 
        year the number of acres of county-administered other natural 
        resources land within the county.  The Department of Natural 
        resources may, in addition to the certification of acreage, 
        require descriptive lists of land so certified.  The 
        commissioner of natural resources shall determine and certify to 
        the commissioner of revenue by March 1 of the payment year:  
           (1) the number of acres and most recent appraised value of 
        acquired natural resources land within each county; 
           (2) the number of acres of commissioner-administered 
        natural resources land within each county; and 
           (3) the number of acres of county-administered other 
        natural resources land within each county, based on the reports 
        filed by each county auditor with the commissioner of natural 
        resources; and 
           (4) the number of acres of land utilization project land 
        within each county. 
           The commissioner of transportation shall determine and 
        certify to the commissioner of revenue by March 1 of the payment 
        year the number of acres of land and the appraised value of the 
        land described in subdivision 1, paragraph (b), but only if it 
        exceeds 500 acres. 
           The commissioner of revenue shall determine the 
        distributions provided for in this section using the number of 
        acres and appraised values certified by the commissioner of 
        natural resources and the commissioner of transportation by 
        March 1 of the payment year. 
           [EFFECTIVE DATE.] This section is effective for aids paid 
        in calendar year 2006 and thereafter. 
           Sec. 35.  Minnesota Statutes 2004, section 477A.14, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [GENERAL DISTRIBUTION.] Except as provided 
        in subdivision 2 or in section 97A.061, subdivision 5, 40 
        percent of the total payment to the county shall be deposited in 
        the county general revenue fund to be used to provide property 
        tax levy reduction.  The remainder shall be distributed by the 
        county in the following priority:  
           (a) 37.5 cents, as adjusted for inflation under section 
        477A.145, for each acre of county-administered other natural 
        resources land shall be deposited in a resource development fund 
        to be created within the county treasury for use in resource 
        development, forest management, game and fish habitat 
        improvement, and recreational development and maintenance of 
        county-administered other natural resources land.  Any county 
        receiving less than $5,000 annually for the resource development 
        fund may elect to deposit that amount in the county general 
        revenue fund; 
           (b) From the funds remaining, within 30 days of receipt of 
        the payment to the county, the county treasurer shall pay each 
        organized township 30 cents, as adjusted for inflation under 
        section 477A.145, for each acre of acquired natural resources 
        land and each acre of land described in section 477A.12, 
        subdivision 1, paragraph (b), and 7.5 cents, as adjusted for 
        inflation under section 477A.145, for each acre of other natural 
        resources land and each acre of land utilization project land 
        located within its boundaries.  Payments for natural resources 
        lands not located in an organized township shall be deposited in 
        the county general revenue fund.  Payments to counties and 
        townships pursuant to this paragraph shall be used to provide 
        property tax levy reduction, except that of the payments for 
        natural resources lands not located in an organized township, 
        the county may allocate the amount determined to be necessary 
        for maintenance of roads in unorganized townships.  Provided 
        that, if the total payment to the county pursuant to section 
        477A.12 is not sufficient to fully fund the distribution 
        provided for in this clause, the amount available shall be 
        distributed to each township and the county general revenue fund 
        on a pro rata basis; and 
           (c) Any remaining funds shall be deposited in the county 
        general revenue fund.  Provided that, if the distribution to the 
        county general revenue fund exceeds $35,000, the excess shall be 
        used to provide property tax levy reduction. 
           [EFFECTIVE DATE.] This section is effective for aids paid 
        in calendar year 2006 and thereafter. 
           Sec. 36.  Laws 1994, chapter 587, article 9, section 8, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [TAX LEVIES.] Notwithstanding Minnesota 
        Statutes, section 471.24, each of the following cities or towns 
        is authorized to levy a tax and make an appropriation not to 
        exceed $15,000 $25,000 annually to the Lakeview Cemetery 
        Association, operated by the town of Iron Range, for cemetery 
        purposes:  the city of Coleraine, the city of Bovey, and each 
        town which is a member of the cemetery association. 
           [EFFECTIVE DATE.] This section is effective for taxes 
        levied in 2005, payable in 2006, and thereafter. 
           Sec. 37.  [REPORTS; STANDARDIZED ASSESSMENT AND 
        CLASSIFICATION STANDARDS.] 
           (a) Recognizing the importance of uniform and professional 
        property tax assessment and classification practices, the 
        commissioner of revenue, in consultation with appropriate 
        stakeholder groups, shall develop and issue two reports to the 
        chairs of the house and senate tax committees.  The reports 
        shall include an analysis of existing practices and provide 
        recommendations, where necessary, for achieving higher quality 
        and uniform assessments and consistency of property 
        classifications.  
           (b) The first report will be issued by February 1, 2006, 
        and will address the following property types: 
           (1) agricultural land including land enrolled in the green 
        acres and agricultural preserve programs (both high and low 
        values); 
           (2) rural woodlands including timber, seasonal residential 
        recreational, agricultural and residential property, and lands 
        used for the production of short rotation woody crops; and 
           (3) resort property including class 1c and class 4c 
        seasonal residential recreational resorts. 
           (c) The second report will be issued by February 1, 2007, 
        and will address the following property types: 
           (1) class 4d low-income rental housing property; 
           (2) lands enrolled in state or federal conservation 
        programs including the Conservation Reserve Program (CRP), 
        Reinvest in Minnesota (RIM) program, and Conservation Reserve 
        Enhancement Program (CREP); 
           (3) residential use properties including seasonal 
        residential recreational and residential homestead and 
        nonhomestead property; and 
           (4) commercial/industrial property. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 38.  [CODE OF CONDUCT AND ETHICS; ASSESSORS.] 
           The commissioner of revenue is directed to develop a code 
        of conduct and ethics for Minnesota assessors to ensure public 
        confidence in property assessment.  The commissioner shall 
        consult with representatives of the Minnesota Association of 
        Assessing Officers, the State Board of Assessors, and any other 
        groups that the commissioner deems appropriate.  The code must 
        include language that promotes fairness and uniformity and 
        recommends assessment practices that do not promote the 
        perception of a conflict of interest.  The code must be 
        completed and recommended to the Minnesota State Board of 
        Assessors for adopting by January 1, 2006.  This code must be 
        presented as part of the course required by Minnesota Statutes, 
        section 273.0755, paragraph (c). 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 39.  [DEVELOPMENT AUTHORIZED.] 
           Dakota County Regional Railroad Authority may exercise the 
        powers conferred by Minnesota Statutes, section 398A.04, to 
        plan, establish, acquire, develop, construct, purchase, enlarge, 
        extend, improve, maintain, equip, operate, regulate, and protect 
        a bus rapid transit system located within the Cedar Avenue 
        transitway corridor within Dakota County.  The authority may 
        levy for this purpose under Minnesota Statutes, section 398A.04, 
        subdivision 8, to the extent the levy authority under that 
        subdivision is not required to be used for that levy year for 
        railroad purposes. 
           [EFFECTIVE DATE.] Pursuant to Minnesota Statutes, section 
        645.023, subdivision 1, paragraph (a), this section is effective 
        without local approval the day following final enactment. 
           Sec. 40.  [ASSESSMENT; ASSISTED LIVING FACILITIES.] 
           The Department of Revenue shall inform assessors of the 
        provisions under Minnesota Statutes, section 272.02, subdivision 
        7, and shall monitor changes that may occur in the assessment of 
        assisted living facilities in assessment years 2005 and 2006. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 

                                   ARTICLE 2 
                         PROPERTY TAX AIDS AND CREDITS 
           Section 1.  Minnesota Statutes 2004, section 477A.011, 
        subdivision 36, as amended by Laws 2005, chapter 38, section 1, 
        and Laws 2005, chapter 151, article 4, section 8, is amended to 
        read: 
           Subd. 36.  [CITY AID BASE.] (a) Except as otherwise 
        provided in this subdivision, "city aid base" is zero. 
           (b) The city aid base for any city with a population less 
        than 500 is increased by $40,000 for aids payable in calendar 
        year 1995 and thereafter, and the maximum amount of total aid it 
        may receive under section 477A.013, subdivision 9, paragraph 
        (c), is also increased by $40,000 for aids payable in calendar 
        year 1995 only, provided that: 
           (i) the average total tax capacity rate for taxes payable 
        in 1995 exceeds 200 percent; 
           (ii) the city portion of the tax capacity rate exceeds 100 
        percent; and 
           (iii) its city aid base is less than $60 per capita. 
           (c) The city aid base for a city is increased by $20,000 in 
        1998 and thereafter and the maximum amount of total aid it may 
        receive under section 477A.013, subdivision 9, paragraph (c), is 
        also increased by $20,000 in calendar year 1998 only, provided 
        that: 
           (i) the city has a population in 1994 of 2,500 or more; 
           (ii) the city is located in a county, outside of the 
        metropolitan area, which contains a city of the first class; 
           (iii) the city's net tax capacity used in calculating its 
        1996 aid under section 477A.013 is less than $400 per capita; 
        and 
           (iv) at least four percent of the total net tax capacity, 
        for taxes payable in 1996, of property located in the city is 
        classified as railroad property. 
           (d) The city aid base for a city is increased by $200,000 
        in 1999 and thereafter and the maximum amount of total aid it 
        may receive under section 477A.013, subdivision 9, paragraph 
        (c), is also increased by $200,000 in calendar year 1999 only, 
        provided that: 
           (i) the city was incorporated as a statutory city after 
        December 1, 1993; 
           (ii) its city aid base does not exceed $5,600; and 
           (iii) the city had a population in 1996 of 5,000 or more. 
           (e) The city aid base for a city is increased by $450,000 
        in 1999 to 2008 and the maximum amount of total aid it may 
        receive under section 477A.013, subdivision 9, paragraph (c), is 
        also increased by $450,000 in calendar year 1999 only, provided 
        that: 
           (i) the city had a population in 1996 of at least 50,000; 
           (ii) its population had increased by at least 40 percent in 
        the ten-year period ending in 1996; and 
           (iii) its city's net tax capacity for aids payable in 1998 
        is less than $700 per capita. 
           (f) The city aid base for a city is increased by $150,000 
        for aids payable in 2000 and thereafter, and the maximum amount 
        of total aid it may receive under section 477A.013, subdivision 
        9, paragraph (c), is also increased by $150,000 in calendar year 
        2000 only, provided that: 
           (1) the city has a population that is greater than 1,000 
        and less than 2,500; 
           (2) its commercial and industrial percentage for aids 
        payable in 1999 is greater than 45 percent; and 
           (3) the total market value of all commercial and industrial 
        property in the city for assessment year 1999 is at least 15 
        percent less than the total market value of all commercial and 
        industrial property in the city for assessment year 1998. 
           (g) The city aid base for a city is increased by $200,000 
        in 2000 and thereafter, and the maximum amount of total aid it 
        may receive under section 477A.013, subdivision 9, paragraph 
        (c), is also increased by $200,000 in calendar year 2000 only, 
        provided that: 
           (1) the city had a population in 1997 of 2,500 or more; 
           (2) the net tax capacity of the city used in calculating 
        its 1999 aid under section 477A.013 is less than $650 per 
        capita; 
           (3) the pre-1940 housing percentage of the city used in 
        calculating 1999 aid under section 477A.013 is greater than 12 
        percent; 
           (4) the 1999 local government aid of the city under section 
        477A.013 is less than 20 percent of the amount that the formula 
        aid of the city would have been if the need increase percentage 
        was 100 percent; and 
           (5) the city aid base of the city used in calculating aid 
        under section 477A.013 is less than $7 per capita. 
           (h) The city aid base for a city is increased by $102,000 
        in 2000 and thereafter, and the maximum amount of total aid it 
        may receive under section 477A.013, subdivision 9, paragraph 
        (c), is also increased by $102,000 in calendar year 2000 only, 
        provided that: 
           (1) the city has a population in 1997 of 2,000 or more; 
           (2) the net tax capacity of the city used in calculating 
        its 1999 aid under section 477A.013 is less than $455 per 
        capita; 
           (3) the net levy of the city used in calculating 1999 aid 
        under section 477A.013 is greater than $195 per capita; and 
           (4) the 1999 local government aid of the city under section 
        477A.013 is less than 38 percent of the amount that the formula 
        aid of the city would have been if the need increase percentage 
        was 100 percent. 
           (i) The city aid base for a city is increased by $32,000 in 
        2001 and thereafter, and the maximum amount of total aid it may 
        receive under section 477A.013, subdivision 9, paragraph (c), is 
        also increased by $32,000 in calendar year 2001 only, provided 
        that: 
           (1) the city has a population in 1998 that is greater than 
        200 but less than 500; 
           (2) the city's revenue need used in calculating aids 
        payable in 2000 was greater than $200 per capita; 
           (3) the city net tax capacity for the city used in 
        calculating aids available in 2000 was equal to or less than 
        $200 per capita; 
           (4) the city aid base of the city used in calculating aid 
        under section 477A.013 is less than $65 per capita; and 
           (5) the city's formula aid for aids payable in 2000 was 
        greater than zero. 
           (j) The city aid base for a city is increased by $7,200 in 
        2001 and thereafter, and the maximum amount of total aid it may 
        receive under section 477A.013, subdivision 9, paragraph (c), is 
        also increased by $7,200 in calendar year 2001 only, provided 
        that: 
           (1) the city had a population in 1998 that is greater than 
        200 but less than 500; 
           (2) the city's commercial industrial percentage used in 
        calculating aids payable in 2000 was less than ten percent; 
           (3) more than 25 percent of the city's population was 60 
        years old or older according to the 1990 census; 
           (4) the city aid base of the city used in calculating aid 
        under section 477A.013 is less than $15 per capita; and 
           (5) the city's formula aid for aids payable in 2000 was 
        greater than zero. 
           (k) The city aid base for a city is increased by $45,000 in 
        2001 and thereafter and by an additional $50,000 in calendar 
        years 2002 to 2011, and the maximum amount of total aid it may 
        receive under section 477A.013, subdivision 9, paragraph (c), is 
        also increased by $45,000 in calendar year 2001 only, and by 
        $50,000 in calendar year 2002 only, provided that: 
           (1) the net tax capacity of the city used in calculating 
        its 2000 aid under section 477A.013 is less than $810 per 
        capita; 
           (2) the population of the city declined more than two 
        percent between 1988 and 1998; 
           (3) the net levy of the city used in calculating 2000 aid 
        under section 477A.013 is greater than $240 per capita; and 
           (4) the city received less than $36 per capita in aid under 
        section 477A.013, subdivision 9, for aids payable in 2000. 
           (l) The city aid base for a city with a population of 
        10,000 or more which is located outside of the seven-county 
        metropolitan area is increased in 2002 and thereafter, and the 
        maximum amount of total aid it may receive under section 
        477A.013, subdivision 9, paragraph (b) or (c), is also increased 
        in calendar year 2002 only, by an amount equal to the lesser of: 
           (1)(i) the total population of the city, as determined by 
        the United States Bureau of the Census, in the 2000 census, (ii) 
        minus 5,000, (iii) times 60; or 
           (2) $2,500,000. 
           (m) The city aid base is increased by $50,000 in 2002 and 
        thereafter, and the maximum amount of total aid it may receive 
        under section 477A.013, subdivision 9, paragraph (c), is also 
        increased by $50,000 in calendar year 2002 only, provided that: 
           (1) the city is located in the seven-county metropolitan 
        area; 
           (2) its population in 2000 is between 10,000 and 20,000; 
        and 
           (3) its commercial industrial percentage, as calculated for 
        city aid payable in 2001, was greater than 25 percent. 
           (n) The city aid base for a city is increased by $150,000 
        in calendar years 2002 to 2011 and the maximum amount of total 
        aid it may receive under section 477A.013, subdivision 9, 
        paragraph (c), is also increased by $150,000 in calendar year 
        2002 only, provided that: 
           (1) the city had a population of at least 3,000 but no more 
        than 4,000 in 1999; 
           (2) its home county is located within the seven-county 
        metropolitan area; 
           (3) its pre-1940 housing percentage is less than 15 
        percent; and 
           (4) its city net tax capacity per capita for taxes payable 
        in 2000 is less than $900 per capita. 
           (o) The city aid base for a city is increased by $200,000 
        beginning in calendar year 2003 and the maximum amount of total 
        aid it may receive under section 477A.013, subdivision 9, 
        paragraph (c), is also increased by $200,000 in calendar year 
        2003 only, provided that the city qualified for an increase in 
        homestead and agricultural credit aid under Laws 1995, chapter 
        264, article 8, section 18. 
           (p) The city aid base for a city is increased by $200,000 
        in 2004 only and the maximum amount of total aid it may receive 
        under section 477A.013, subdivision 9, is also increased by 
        $200,000 in calendar year 2004 only, if the city is the site of 
        a nuclear dry cask storage facility. 
           (q) The city aid base for a city is increased by $10,000 in 
        2004 and thereafter and the maximum total aid it may receive 
        under section 477A.013, subdivision 9, is also increased by 
        $10,000 in calendar year 2004 only, if the city was included in 
        a federal major disaster designation issued on April 1, 1998, 
        and its pre-1940 housing stock was decreased by more than 40 
        percent between 1990 and 2000. 
           (r) The city aid base for a city is increased by $25,000 in 
        2006 only and the maximum total aid it may receive under section 
        477A.013, subdivision 9, is also increased by $25,000 in 
        calendar year 2006 only if the city had a population in 2003 of 
        at least 1,000 and has a state park for which the city provides 
        rescue services and which comprised at least 14 percent of the 
        total geographic area included within the city boundaries in 
        2000. 
           (s) The city aid base for a city with a population less 
        than 5,000 is increased in 2006 and thereafter and the minimum 
        and maximum amount of total aid it may receive under this 
        section is also increased in calendar year 2006 only by an 
        amount equal to $6 multiplied by its population. 
           [EFFECTIVE DATE.] This section is effective for aids 
        payable in 2006 and thereafter. 
           Sec. 2.  Minnesota Statutes 2004, section 477A.013, 
        subdivision 8, is amended to read: 
           Subd. 8.  [CITY FORMULA AID.] In calendar year 2004 and 
        subsequent years, the formula aid for a city is equal to the 
        need increase percentage multiplied by the difference between 
        (1) the city's revenue need multiplied by its population, and 
        (2) the sum of the city's net tax capacity multiplied by the tax 
        effort rate, and; the taconite aids under sections 298.28 and 
        298.282 to any city except a city directly impacted by a 
        taconite mine or plant, multiplied by the following percentages: 
           (i) zero percent for aids payable in 2004; 
           (ii) 25 percent for aids payable in 2005; 
           (iii) 50 percent for aids payable in 2006; 
           (iv) 75 percent for aids payable in 2007; and 
           (v) 100 percent for aids payable in 2008 and thereafter.  
           For purposes of this subdivision, "a city directly impacted 
        by a taconite mine or plant" means:  (1) Babbit, (2) Eveleth, 
        (3) Hibbing, (4) Keewatin, (5) Mountain Iron, (6) Silver Bay, or 
        (7) Virginia. 
        No city may have a formula aid amount less than zero.  The need 
        increase percentage must be the same for all cities.  
           The applicable need increase percentage must be calculated 
        by the Department of Revenue so that the total of the aid under 
        subdivision 9 equals the total amount available for aid under 
        section 477A.03 after the subtraction under section 477A.014, 
        subdivisions 4 and 5. 
           [EFFECTIVE DATE.] This section is effective beginning with 
        aids payable in 2006. 
           Sec. 3.  Minnesota Statutes 2004, section 477A.03, 
        subdivision 2a, is amended to read: 
           Subd. 2a.  [CITIES.] For aids payable in 2004, the total 
        aids paid under section 477A.013, subdivision 9, are limited to 
        $429,000,000.  For aids payable in 2005 and thereafter, the 
        total aids paid under section 477A.013, subdivision 9, 
        are increased limited to $437,052,000.  For aids payable in 2006 
        and thereafter, the total aids paid under section 477A.013, 
        subdivision 9, is limited to $485,052,000. 
           [EFFECTIVE DATE.] This section is effective beginning with 
        aids payable in 2006. 
           Sec. 4.  Minnesota Statutes 2004, section 477A.03, 
        subdivision 2b, as amended by Laws 2005, chapter 151, article 4, 
        section 12, is amended to read: 
           Subd. 2b.  [COUNTIES.] (a) For aids payable in calendar 
        year 2005 and thereafter, the total aids paid to counties under 
        section 477A.0124, subdivision 3, are limited to $100,500,000.  
        Each calendar year, $500,000 shall be retained by the 
        commissioner of revenue to make reimbursements to the 
        commissioner of finance for payments made under section 611.27.  
        For calendar year 2004, the amount shall be in addition to the 
        payments authorized under section 477A.0124, subdivision 1.  For 
        calendar year 2005 and subsequent years, the amount shall be 
        deducted from the appropriation under this paragraph.  The 
        reimbursements shall be to defray the additional costs 
        associated with court-ordered counsel under section 611.27.  Any 
        retained amounts not used for reimbursement in a year shall be 
        included in the next distribution of county need aid that is 
        certified to the county auditors for the purpose of property tax 
        reduction for the next taxes payable year. 
           (b) For aids payable in 2005 and 2006, the total aids under 
        section 477A.0124, subdivision 4, are limited to $105,000,000.  
        For aids payable in 2007 2006 and thereafter, the total aid 
        under section 477A.0124, subdivision 4, is limited to 
        $105,132,923.  The commissioner of finance shall bill the 
        commissioner of revenue for the cost of preparation of local 
        impact notes as required by section 3.987, not to exceed 
        $207,000 in fiscal year 2004 and thereafter.  The commissioner 
        of education shall bill the commissioner of revenue for the cost 
        of preparation of local impact notes for school districts as 
        required by section 3.987, not to exceed $7,000 in fiscal year 
        2004 and thereafter.  The commissioner of revenue shall deduct 
        the amounts billed under this paragraph from the appropriation 
        under this paragraph.  The amounts deducted are appropriated to 
        the commissioner of finance and the commissioner of education 
        for the preparation of local impact notes. 
           [EFFECTIVE DATE.] This section is effective for aids 
        payable in 2006 and thereafter. 
           Sec. 5.  [2005 AND 2006 CITY AID PAYMENTS.] 
           In 2005 and 2006, market value credit reimbursements for 
        each city payable under Minnesota Statutes, section 273.1384, 
        are reduced by the dollar amount of the 2003 reduction in market 
        value credit reimbursements for that city due to Laws 2003, 
        First Special Session chapter 21, article 5, section 12.  No 
        city's 2005 or 2006 market value credit reimbursements are 
        reduced to less than zero under this section.  To the extent 
        sufficient information is available on each payment date, the 
        commissioner shall pay the annual 2005 and 2006 market value 
        credit reimbursement amounts, after reduction under this 
        section, to cities in equal installments on the dates specified 
        in Minnesota Statutes, section 273.1384. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 

                                   ARTICLE 3 
                           INCOME AND FRANCHISE TAXES 
           Section 1.  Minnesota Statutes 2004, section 289A.08, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [GENERALLY; INDIVIDUALS.] (a) A taxpayer 
        must file a return for each taxable year the taxpayer is 
        required to file a return under section 6012 of the Internal 
        Revenue Code, except that: 
           (1) an individual who is not a Minnesota resident for any 
        part of the year is not required to file a Minnesota income tax 
        return if the individual's gross income derived from Minnesota 
        sources as determined under sections 290.081, paragraph (a), and 
        290.17, is less than the filing requirements for a single 
        individual who is a full year resident of Minnesota; and 
           (2) an individual who is a Minnesota resident is not 
        required to file a Minnesota income tax return if the 
        individual's gross income derived from Minnesota sources as 
        determined under section 290.17, less the amount of the 
        individual's gross income that consists of compensation paid to 
        members of the armed forces of the United States or United 
        Nations for active duty performed outside Minnesota, is less 
        than the filing requirements for a single individual who is a 
        full-year resident of Minnesota. 
           (b) The decedent's final income tax return, and other 
        income tax returns for prior years where the decedent had gross 
        income in excess of the minimum amount at which an individual is 
        required to file and did not file, must be filed by the 
        decedent's personal representative, if any.  If there is no 
        personal representative, the return or returns must be filed by 
        the transferees, as defined in section 289A.38, subdivision 13, 
        who receive property of the decedent. 
           (c) The term "gross income," as it is used in this section, 
        has the same meaning given it in section 290.01, subdivision 20. 
           [EFFECTIVE DATE.] This section is effective for taxable 
        years beginning after December 31, 2004. 
           Sec. 2.  Minnesota Statutes 2004, section 289A.08, 
        subdivision 7, is amended to read: 
           Subd. 7.  [COMPOSITE INCOME TAX RETURNS FOR NONRESIDENT 
        PARTNERS, SHAREHOLDERS, AND BENEFICIARIES.] (a) The commissioner 
        may allow a partnership with nonresident partners to file a 
        composite return and to pay the tax on behalf of nonresident 
        partners who have no other Minnesota source income.  This 
        composite return must include the names, addresses, Social 
        Security numbers, income allocation, and tax liability for the 
        nonresident partners electing to be covered by the composite 
        return.  
           (b) The computation of a partner's tax liability must be 
        determined by multiplying the income allocated to that partner 
        by the highest rate used to determine the tax liability for 
        individuals under section 290.06, subdivision 2c.  Nonbusiness 
        deductions, standard deductions, or personal exemptions are not 
        allowed. 
           (c) The partnership must submit a request to use this 
        composite return filing method for nonresident partners.  The 
        requesting partnership must file a composite return in the form 
        prescribed by the commissioner of revenue.  The filing of a 
        composite return is considered a request to use the composite 
        return filing method. 
           (d) The electing partner must not have any Minnesota source 
        income other than the income from the partnership and other 
        electing partnerships.  If it is determined that the electing 
        partner has other Minnesota source income, the inclusion of the 
        income and tax liability for that partner under this provision 
        will not constitute a return to satisfy the requirements of 
        subdivision 1.  The tax paid for the individual as part of the 
        composite return is allowed as a payment of the tax by the 
        individual on the date on which the composite return payment was 
        made.  If the electing nonresident partner has no other 
        Minnesota source income, filing of the composite return is a 
        return for purposes of subdivision 1. 
           (e) This subdivision does not negate the requirement that 
        an individual pay estimated tax if the individual's liability 
        would exceed the requirements set forth in section 289A.25.  A 
        composite estimate may, however, be filed in a manner similar to 
        and containing the information required under paragraph (a). 
           (f) If an electing partner's share of the partnership's 
        gross income from Minnesota sources is less than the filing 
        requirements for a nonresident under this subdivision, the tax 
        liability is zero.  However, a statement showing the partner's 
        share of gross income must be included as part of the composite 
        return. 
           (g) The election provided in this subdivision is not only 
        available to any a partner other than who has no other Minnesota 
        source income and who is either (1) a full-year nonresident 
        individual who has no other Minnesota source income or (2) a 
        trust or estate that does not claim a deduction under either 
        section 651 or 661 of the Internal Revenue Code. 
           (h) A corporation defined in section 290.9725 and its 
        nonresident shareholders may make an election under this 
        paragraph.  The provisions covering the partnership apply to the 
        corporation and the provisions applying to the partner apply to 
        the shareholder. 
           (i) Estates and trusts distributing current income only and 
        the nonresident individual beneficiaries of the estates or 
        trusts may make an election under this paragraph.  The 
        provisions covering the partnership apply to the estate or 
        trust.  The provisions applying to the partner apply to the 
        beneficiary.  
           (j) For the purposes of this subdivision, "income" means 
        the partner's share of federal adjusted gross income from the 
        partnership modified by the additions provided in section 
        290.01, subdivision 19a, clauses (6) to (9) and (11), and the 
        subtractions provided in:  (i) section 290.01, subdivision 19b, 
        clause (9), to the extent the amount is assignable or allocable 
        to Minnesota under section 290.17; and (ii) article 4, section 
        4, clause (11).  The subtraction allowed under section 290.01, 
        subdivision 19b, clause (9), is only allowed on the composite 
        tax computation to the extent the electing partner would have 
        been allowed the subtraction. 
           [EFFECTIVE DATE.] This section is effective for tax years 
        ending after December 31, 2004. 
           Sec. 3.  Minnesota Statutes 2004, section 289A.08, 
        subdivision 13, is amended to read: 
           Subd. 13.  [LONG AND SHORT FORMS.] The commissioner shall 
        provide a long form individual income tax return and may provide 
        a short form individual income tax return.  The returns shall be 
        in a form that is consistent with the provisions of chapter 290, 
        notwithstanding any other law to the contrary.  The nongame 
        wildlife checkoff provided in section 290.431 and the dependent 
        care credit provided in section 290.067 must be included on the 
        short form.  The commissioner must provide information on local 
        use taxes in the individual income tax instruction booklet.  The 
        commissioner must provide this information in the same section 
        of the booklet that provides information on the state use tax. 
           [EFFECTIVE DATE.] This section is effective for taxable 
        years beginning after December 31, 2004. 
           Sec. 4.  Minnesota Statutes 2004, section 289A.20, 
        subdivision 2, is amended to read: 
           Subd. 2.  [WITHHOLDING FROM WAGES, ENTERTAINER WITHHOLDING, 
        WITHHOLDING FROM PAYMENTS TO OUT-OF-STATE CONTRACTORS, AND 
        WITHHOLDING BY PARTNERSHIPS AND SMALL BUSINESS CORPORATIONS.] 
        (a) A tax required to be deducted and withheld during the 
        quarterly period must be paid on or before the last day of the 
        month following the close of the quarterly period, unless an 
        earlier time for payment is provided.  A tax required to be 
        deducted and withheld from compensation of an entertainer and 
        from a payment to an out-of-state contractor must be paid on or 
        before the date the return for such tax must be filed under 
        section 289A.18, subdivision 2.  Taxes required to be deducted 
        and withheld by partnerships and, S corporations, and trusts 
        must be paid on or before the date the return must be filed 
        under section 289A.18, subdivision 2 a quarterly basis as 
        estimated taxes under section 289A.25 for partnerships and 
        trusts and under section 289A.26 for S corporations. 
           (b) An employer who, during the previous quarter, withheld 
        more than $1,500 of tax under section 290.92, subdivision 2a or 
        3, or 290.923, subdivision 2, must deposit tax withheld under 
        those sections with the commissioner within the time allowed to 
        deposit the employer's federal withheld employment taxes under 
        Code of Federal Regulations, title 26, section 31.6302-1, as 
        amended through December 31, 2001, without regard to the safe 
        harbor or de minimis rules in subparagraph (f) or the one-day 
        rule in subsection (c), clause (3).  Taxpayers must submit a 
        copy of their federal notice of deposit status to the 
        commissioner upon request by the commissioner. 
           (c) The commissioner may prescribe by rule other return 
        periods or deposit requirements.  In prescribing the reporting 
        period, the commissioner may classify payors according to the 
        amount of their tax liability and may adopt an appropriate 
        reporting period for the class that the commissioner judges to 
        be consistent with efficient tax collection.  In no event will 
        the duration of the reporting period be more than one year. 
           (d) If less than the correct amount of tax is paid to the 
        commissioner, proper adjustments with respect to both the tax 
        and the amount to be deducted must be made, without interest, in 
        the manner and at the times the commissioner prescribes.  If the 
        underpayment cannot be adjusted, the amount of the underpayment 
        will be assessed and collected in the manner and at the times 
        the commissioner prescribes. 
           (e) If the aggregate amount of the tax withheld during a 
        fiscal year ending June 30 under section 290.92, subdivision 2a 
        or 3, is equal to or exceeds the amounts established for 
        remitting federal withheld taxes pursuant to the regulations 
        promulgated under section 6302(h) of the Internal Revenue Code, 
        the employer must remit each required deposit for wages paid in 
        the subsequent calendar year by electronic means. 
           (f) A third-party bulk filer as defined in section 290.92, 
        subdivision 30, paragraph (a), clause (2), who remits 
        withholding deposits must remit all deposits by electronic means 
        as provided in paragraph (e), regardless of the aggregate amount 
        of tax withheld during a fiscal year for all of the employers.  
           [EFFECTIVE DATE.] This section is effective for tax years 
        beginning after December 31, 2005. 
           Sec. 5.  Minnesota Statutes 2004, section 290.01, 
        subdivision 6b, is amended to read: 
           Subd. 6b.  [FOREIGN OPERATING CORPORATION.] The term 
        "foreign operating corporation," when applied to a corporation, 
        means a domestic corporation with the following characteristics: 
           (1) it is part of a unitary business at least one member of 
        which is taxable in this state; 
           (2) it is not a foreign sales corporation under section 922 
        of the Internal Revenue Code, as amended through December 31, 
        1999, for the taxable year; and 
           (3) either (i) the average of the percentages of its 
        property and payrolls, including the pro rata share of its 
        unitary partnerships' property and payrolls, assigned to 
        locations inside outside the United States and the District of 
        Columbia, excluding the commonwealth of Puerto Rico and 
        possessions of the United States, where the United States 
        includes the District of Columbia and excludes the commonwealth 
        of Puerto Rico and possessions of the United States, as 
        determined under section 290.191 or 290.20, is 20 80 percent or 
        less more; or (ii) it has in effect a valid election under 
        section 936 of the Internal Revenue Code; and 
           (4) it has $1,000,000 of payroll and $2,000,000 of 
        property, as determined under section 290.191 or 290.20, that 
        are located outside the United States.  If the domestic 
        corporation does not have payroll as determined under section 
        290.191 or 290.20, but it or its partnerships have paid 
        $1,000,000 for work, performed directly for the domestic 
        corporation or the partnerships, outside the United States, then 
        paragraph (3)(i) shall not require payrolls to be included in 
        the average calculation. 
           [EFFECTIVE DATE.] This section is effective for tax years 
        beginning after December 31, 2004. 
           Sec. 6.  Minnesota Statutes 2004, section 290.01, 
        subdivision 7, is amended to read: 
           Subd. 7.  [RESIDENT.] (a) The term "resident" means any 
        individual domiciled in Minnesota, except that an individual is 
        not a "resident" for the period of time that the individual is 
        either: 
           (1) on active duty stationed outside of Minnesota while in 
        the armed forces of the United States or the United Nations; or 
           (2) a "qualified individual" as defined in section 
        911(d)(1) of the Internal Revenue Code, if the qualified 
        individual notifies the county within three months of moving out 
        of the country that homestead status be revoked for the 
        Minnesota residence of the qualified individual, and the 
        property is not classified as a homestead while the individual 
        remains a qualified individual. 
           (b) "Resident" also means any individual domiciled outside 
        the state who maintains a place of abode in the state and spends 
        in the aggregate more than one-half of the tax year in 
        Minnesota, unless: 
           (1) the individual or the spouse of the individual is in 
        the armed forces of the United States; or 
           (2) the individual is covered under the reciprocity 
        provisions in section 290.081. 
           For purposes of this subdivision, presence within the state 
        for any part of a calendar day constitutes a day spent in the 
        state.  Individuals shall keep adequate records to substantiate 
        the days spent outside the state. 
           The term "abode" means a dwelling maintained by an 
        individual, whether or not owned by the individual and whether 
        or not occupied by the individual, and includes a dwelling place 
        owned or leased by the individual's spouse. 
           (c) Neither the commissioner nor any court shall consider 
        charitable contributions made by an individual within or without 
        the state in determining if the individual is domiciled in 
        Minnesota. 
           [EFFECTIVE DATE.] This section is effective for tax years 
        beginning after December 31, 2004. 
           Sec. 7.  Minnesota Statutes 2004, section 290.01, 
        subdivision 19b, as amended by Laws 2005, chapter 151, article 
        6, section 13, 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) net 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 363A.  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 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; 
           (7) 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; 
           (8) 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; 
           (9) in each of the five tax years immediately following the 
        tax year in which an addition is required under subdivision 19a, 
        clause (7), or 19c, clause (15), in the case of a shareholder of 
        a corporation that is an S corporation, 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), or 
        subdivision 19c, clause (15), in the case of a shareholder of an 
        S corporation, 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; and 
           (10) job opportunity building zone income as provided under 
        section 469.316.; 
           (11) the amount of compensation paid to members of the 
        Minnesota National Guard or other reserve components of the 
        United States military for active service performed in 
        Minnesota, excluding compensation for services performed under 
        the Active Guard Reserve (AGR) program.  For purposes of this 
        clause, "active service" means (i) state active service as 
        defined in section 190.05, subdivision 5a, clause (1); (ii) 
        federally funded state active service as defined in section 
        190.05, subdivision 5b; or (iii) federal active service as 
        defined in section 190.05, subdivision 5c, but "active service" 
        excludes services performed exclusively for purposes of basic 
        combat training, advanced individual training, annual training, 
        and periodic inactive duty training; special training 
        periodically made available to reserve members; and service 
        performed in accordance with section 190.08, subdivision 3; 
           (12) the amount of compensation paid to Minnesota residents 
        who are members of the armed forces of the United States or 
        United Nations for active duty performed outside Minnesota; and 
           (13) an amount, not to exceed $10,000, equal to qualified 
        expenses related to a qualified donor's donation, while living, 
        of one or more of the qualified donor's organs to another person 
        for human organ transplantation.  For purposes of this clause, 
        "organ" means all or part of an individual's liver, pancreas, 
        kidney, intestine, lung, or bone marrow; "human organ 
        transplantation" means the medical procedure by which transfer 
        of a human organ is made from the body of one person to the body 
        of another person; "qualified expenses" means unreimbursed 
        expenses for both the individual and the qualified donor for (i) 
        travel, (ii) lodging, and (iii) lost wages net of sick pay, 
        except that such expenses may be subtracted under this clause 
        only once; and "qualified donor" means the individual or the 
        individual's dependent, as defined in section 152 of the 
        Internal Revenue Code.  An individual may claim the subtraction 
        in this clause for each instance of organ donation for 
        transplantation during the taxable year in which the qualified 
        expenses occur. 
           [EFFECTIVE DATE.] This section is effective for tax years 
        beginning after December 31, 2004. 
           Sec. 8.  Minnesota Statutes 2004, section 290.067, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [AMOUNT OF CREDIT.] (a) A taxpayer may take 
        as a credit against the tax due from the taxpayer and a spouse, 
        if any, under this chapter an amount equal to the dependent care 
        credit for which the taxpayer is eligible pursuant to the 
        provisions of section 21 of the Internal Revenue Code subject to 
        the limitations provided in subdivision 2 except that in 
        determining whether the child qualified as a dependent, income 
        received as a Minnesota family investment program grant or 
        allowance to or on behalf of the child must not be taken into 
        account in determining whether the child received more than half 
        of the child's support from the taxpayer, and the provisions of 
        section 32(b)(1)(D) of the Internal Revenue Code do not apply. 
           (b) If a child who has not attained the age of six years at 
        the close of the taxable year is cared for at a licensed family 
        day care home operated by the child's parent, the taxpayer is 
        deemed to have paid employment-related expenses.  If the child 
        is 16 months old or younger at the close of the taxable year, 
        the amount of expenses deemed to have been paid equals the 
        maximum limit for one qualified individual under section 21(c) 
        and (d) of the Internal Revenue Code.  If the child is older 
        than 16 months of age but has not attained the age of six years 
        at the close of the taxable year, the amount of expenses deemed 
        to have been paid equals the amount the licensee would charge 
        for the care of a child of the same age for the same number of 
        hours of care.  
           (c) If a married couple: 
           (1) has a child who has not attained the age of one year at 
        the close of the taxable year; 
           (2) files a joint tax return for the taxable year; and 
           (3) does not participate in a dependent care assistance 
        program as defined in section 129 of the Internal Revenue Code, 
        in lieu of the actual employment related expenses paid for that 
        child under paragraph (a) or the deemed amount under paragraph 
        (b), the lesser of (i) the combined earned income of the couple 
        or (ii) the amount of the maximum limit for one qualified 
        individual under section 21(c) and (d) of the Internal Revenue 
        Code will be deemed to be the employment related expense paid 
        for that child.  The earned income limitation of section 21(d) 
        of the Internal Revenue Code shall not apply to this deemed 
        amount.  These deemed amounts apply regardless of whether any 
        employment-related expenses have been paid.  
           (d) If the taxpayer is not required and does not file a 
        federal individual income tax return for the tax year, no credit 
        is allowed for any amount paid to any person unless: 
           (1) the name, address, and taxpayer identification number 
        of the person are included on the return claiming the credit; or 
           (2) if the person is an organization described in section 
        501(c)(3) of the Internal Revenue Code and exempt from tax under 
        section 501(a) of the Internal Revenue Code, the name and 
        address of the person are included on the return claiming the 
        credit.  
        In the case of a failure to provide the information required 
        under the preceding sentence, the preceding sentence does not 
        apply if it is shown that the taxpayer exercised due diligence 
        in attempting to provide the information required. 
           In the case of a nonresident, part-year resident, or a 
        person who has earned income not subject to tax under this 
        chapter including earned income excluded pursuant to section 
        290.01, subdivision 19b, clause (11) (10), the credit determined 
        under section 21 of the Internal Revenue Code must be allocated 
        based on the ratio by which the earned income of the claimant 
        and the claimant's spouse from Minnesota sources bears to the 
        total earned income of the claimant and the claimant's spouse. 
           For residents of Minnesota, the subtractions for military 
        pay under section 290.01, subdivision 19b, clauses (11) and 
        (12), are not considered "earned income not subject to tax under 
        this chapter." 
           [EFFECTIVE DATE.] This section is effective for tax years 
        beginning after December 31, 2004. 
           Sec. 9.  Minnesota Statutes 2004, 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, 
        including income excluded under section 290.01, subdivision 19b, 
        clause (11) (10), 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.  For purposes of this paragraph, the 
        subtractions for military pay under section 290.01, subdivision 
        19b, clauses (11) and (12), are not considered "earned income 
        not subject to tax under this chapter." 
           (g) For tax years beginning after December 31, 2001, and 
        before December 31, 2004, the $5,770 in paragraph (b), the 
        $15,080 in paragraph (c), and the $17,890 in paragraph (d), 
        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), the 
        $15,080 in paragraph (c), and the $17,890 in paragraph (d), 
        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), the 
        $15,080 in paragraph (c), and the $17,890 in paragraph (d), 
        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, 2004. 
           Sec. 10.  Minnesota Statutes 2004, section 290.0674, 
        subdivision 2, is amended to read: 
           Subd. 2.  [LIMITATIONS.] (a) For claimants with income not 
        greater than $33,500, the maximum credit allowed for a family is 
        $1,000 per qualifying child and $2,000 per family multiplied by 
        the number of qualifying children in kindergarten through grade 
        12 in the family.  No credit is allowed for education-related 
        expenses for claimants with income greater than $37,500.  The 
        maximum credit per child for families with one qualifying child 
        in kindergarten through grade 12 is reduced by $1 for each $4 of 
        household income over $33,500, and the maximum credit per family 
        for families with two or more qualifying children in 
        kindergarten through grade 12 is reduced by $2 for each $4 of 
        household income over $33,500, but in no case is the credit less 
        than zero. 
           For purposes of this section "income" has the meaning given 
        in section 290.067, subdivision 2a.  In the case of a married 
        claimant, a credit is not allowed unless a joint income tax 
        return is filed. 
           (b) For a nonresident or part-year resident, the credit 
        determined under subdivision 1 and the maximum credit amount in 
        paragraph (a) must be allocated using the percentage calculated 
        in section 290.06, subdivision 2c, paragraph (e). 
           [EFFECTIVE DATE.] This section is effective for taxable 
        years beginning after December 31, 2004. 
           Sec. 11.  Minnesota Statutes 2004, section 290.091, 
        subdivision 2, is amended to read: 
           Subd. 2.  [DEFINITIONS.] For purposes of the tax imposed by 
        this section, the following terms have the meanings given: 
           (a) "Alternative minimum taxable income" means the sum of 
        the following for the taxable year: 
           (1) the taxpayer's federal alternative minimum taxable 
        income as defined in section 55(b)(2) of the Internal Revenue 
        Code; 
           (2) the taxpayer's itemized deductions allowed in computing 
        federal alternative minimum taxable income, but excluding: 
           (i) the charitable contribution deduction under section 170 
        of the Internal Revenue Code: 
           (A) for taxable years beginning before January 1, 2006, to 
        the extent that the deduction exceeds 1.0 percent of adjusted 
        gross income, as defined; 
           (B) for taxable years beginning after December 31, 2005, to 
        the full extent of the deduction. 
           For purposes of this clause, "adjusted gross income" has 
        the meaning given in section 62 of the Internal Revenue Code; 
           (ii) the medical expense deduction; 
           (iii) the casualty, theft, and disaster loss deduction; and 
           (iv) the impairment-related work expenses of a disabled 
        person; 
           (3) for depletion allowances computed under section 613A(c) 
        of the Internal Revenue Code, with respect to each property (as 
        defined in section 614 of the Internal Revenue Code), to the 
        extent not included in federal alternative minimum taxable 
        income, the excess of the deduction for depletion allowable 
        under section 611 of the Internal Revenue Code for the taxable 
        year over the adjusted basis of the property at the end of the 
        taxable year (determined without regard to the depletion 
        deduction for the taxable year); 
           (4) to the extent not included in federal alternative 
        minimum taxable income, the amount of the tax preference for 
        intangible drilling cost under section 57(a)(2) of the Internal 
        Revenue Code determined without regard to subparagraph (E); 
           (5) to the extent not included in federal alternative 
        minimum taxable income, the amount of interest income as 
        provided by section 290.01, subdivision 19a, clause (1); and 
           (6) the amount of addition required by section 290.01, 
        subdivision 19a, clause (7); 
           less the sum of the amounts determined under the following: 
           (1) interest income as defined in section 290.01, 
        subdivision 19b, clause (1); 
           (2) an overpayment of state income tax as provided by 
        section 290.01, subdivision 19b, clause (2), to the extent 
        included in federal alternative minimum taxable income; 
           (3) the amount of investment interest paid or accrued 
        within the taxable year on indebtedness to the extent that the 
        amount does not exceed net investment income, as defined in 
        section 163(d)(4) of the Internal Revenue Code.  Interest does 
        not include amounts deducted in computing federal adjusted gross 
        income; and 
           (4) amounts subtracted from federal taxable income as 
        provided by section 290.01, subdivision 19b, clauses (10) and 
        (11) (9) to (13). 
           In the case of an estate or trust, alternative minimum 
        taxable income must be computed as provided in section 59(c) of 
        the Internal Revenue Code. 
           (b) "Investment interest" means investment interest as 
        defined in section 163(d)(3) of the Internal Revenue Code. 
           (c) "Tentative minimum tax" equals 6.4 percent of 
        alternative minimum taxable income after subtracting the 
        exemption amount determined under subdivision 3. 
           (d) "Regular tax" means the tax that would be imposed under 
        this chapter (without regard to this section and section 
        290.032), reduced by the sum of the nonrefundable credits 
        allowed under this chapter.  
           (e) "Net minimum tax" means the minimum tax imposed by this 
        section. 
           [EFFECTIVE DATE.] This section is effective for taxable 
        years beginning after December 31, 2004. 
           Sec. 12.  Minnesota Statutes 2004, section 290.0922, 
        subdivision 2, is amended to read: 
           Subd. 2.  [EXEMPTIONS.] The following entities are exempt 
        from the tax imposed by this section: 
           (1) corporations exempt from tax under section 290.05; 
           (2) real estate investment trusts; 
           (3) regulated investment companies or a fund thereof; and 
           (4) entities having a valid election in effect under 
        section 860D(b) of the Internal Revenue Code; 
           (5) town and farmers' mutual insurance companies; 
           (6) cooperatives organized under chapter 308A or 308B that 
        provide housing exclusively to persons age 55 and over and are 
        classified as homesteads under section 273.124, subdivision 3; 
        and 
           (7) an entity, if for the taxable year all of its property 
        is located in a job opportunity building zone designated under 
        section 469.314 and all of its payroll is a job opportunity 
        building zone payroll under section 469.310. 
           Entities not specifically exempted by this subdivision are 
        subject to tax under this section, notwithstanding section 
        290.05.  
           [EFFECTIVE DATE.] This section is effective for tax years 
        beginning after December 31, 2004. 
           Sec. 13.  Minnesota Statutes 2004, section 290.191, 
        subdivision 2, is amended to read: 
           Subd. 2.  [APPORTIONMENT FORMULA OF GENERAL APPLICATION.] 
        (a) Except for those trades or businesses required to use a 
        different formula under subdivision 3 or section 290.36, and for 
        those trades or businesses that receive permission to use some 
        other method under section 290.20 or under subdivision 4, a 
        trade or business required to apportion its net income must 
        apportion its income to this state on the basis of the 
        percentage obtained by taking the sum of:  
           (1) 75 the percent for the sales factor under paragraph (b) 
        of the percentage which the sales made within this state in 
        connection with the trade or business during the tax period are 
        of the total sales wherever made in connection with the trade or 
        business during the tax period; 
           (2) 12.5 the percent for the property factor under 
        paragraph (b) of the percentage which the total tangible 
        property used by the taxpayer in this state in connection with 
        the trade or business during the tax period is of the total 
        tangible property, wherever located, used by the taxpayer in 
        connection with the trade or business during the tax period; and 
           (3) 12.5 the percent for the payroll factor under paragraph 
        (b) of the percentage which the taxpayer's total payrolls paid 
        or incurred in this state or paid in respect to labor performed 
        in this state in connection with the trade or business during 
        the tax period are of the taxpayer's total payrolls paid or 
        incurred in connection with the trade or business during the tax 
        period.  
           (b) For purposes of paragraph (a) and subdivision 3, the 
        following percentages apply for the taxable years specified: 
        Taxable years        Sales factor     Property     Payroll
        beginning            percent          factor       factor
        during calendar                       percent      percent
        year 
             2007                78             11           11 
             2008                81              9.5          9.5 
             2009                84              8            8 
             2010                87              6.5          6.5 
             2011                90              5            5 
             2012                93              3.5          3.5 
             2013                96              2            2 
             2014 and later     100              0            0
              calendar years 
           [EFFECTIVE DATE.] This section is effective for tax years 
        beginning after December 31, 2006. 
           Sec. 14.  Minnesota Statutes 2004, section 290.191, 
        subdivision 3, is amended to read: 
           Subd. 3.  [APPORTIONMENT FORMULA FOR FINANCIAL 
        INSTITUTIONS.] Except for an investment company required to 
        apportion its income under section 290.36, a financial 
        institution that is required to apportion its net income must 
        apportion its net income to this state on the basis of the 
        percentage obtained by taking the sum of:  
           (1) 75 the percent for the sales factor under subdivision 
        2, paragraph (b), of the percentage which the receipts from 
        within this state in connection with the trade or business 
        during the tax period are of the total receipts in connection 
        with the trade or business during the tax period, from wherever 
        derived; 
           (2) 12.5 the percent for the property factor under 
        subdivision 2, paragraph (b), of the percentage which the sum of 
        the total tangible property used by the taxpayer in this state 
        and the intangible property owned by the taxpayer and attributed 
        to this state in connection with the trade or business during 
        the tax period is of the sum of the total tangible property, 
        wherever located, used by the taxpayer and the intangible 
        property owned by the taxpayer and attributed to all states in 
        connection with the trade or business during the tax period; and 
           (3) 12.5 the percent for the payroll factor under 
        subdivision 2, paragraph (b), of the percentage which the 
        taxpayer's total payrolls paid or incurred in this state or paid 
        in respect to labor performed in this state in connection with 
        the trade or business during the tax period are of the 
        taxpayer's total payrolls paid or incurred in connection with 
        the trade or business during the tax period. 
           [EFFECTIVE DATE.] This section is effective for tax years 
        beginning after December 31, 2006. 
           Sec. 15.  Minnesota Statutes 2004, section 290.9705, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [WITHHOLDING OF PAYMENTS TO OUT-OF-STATE 
        CONTRACTORS.] (a) In this section, "person" means a person, 
        corporation, or cooperative, the state of Minnesota and its 
        political subdivisions, and a city, county, and school district 
        in Minnesota. 
           (b) A person who in the regular course of business is 
        hiring, contracting, or having a contract with a nonresident 
        person or foreign corporation, as defined in Minnesota Statutes 
        1986, section 290.01, subdivision 5, to perform construction 
        work in Minnesota, shall deduct and withhold eight percent of 
        every payment cumulative calendar year payments to the 
        contractor if the contract exceeds or can reasonably be expected 
        to exceed $100,000 which exceed $50,000. 
           [EFFECTIVE DATE.] This section is effective for payments 
        made after December 31, 2005. 
           Sec. 16.  Minnesota Statutes 2004, section 298.01, 
        subdivision 3, is amended to read: 
           Subd. 3.  [OCCUPATION TAX; OTHER ORES.] Every person 
        engaged in the business of mining or producing ores in this 
        state, except iron ore or taconite concentrates, shall pay an 
        occupation tax to the state of Minnesota as provided in this 
        subdivision.  The tax is determined in the same manner as the 
        tax imposed by section 290.02, except that sections 290.05, 
        subdivision 1, clause (a), and 290.17, subdivision 4, and 
        290.191, subdivision 2, do not apply.  A person subject to 
        occupation tax under this section shall apportion its net income 
        on the basis of the percentage obtained by taking the sum of: 
           (1) 75 percent of the percentage which the sales made 
        within this state in connection with the trade or business 
        during the tax period are of the total sales wherever made in 
        connection with the trade or business during the tax period; 
           (2) 12.5 percent of the percentage which the total tangible 
        property used by the taxpayer in this state in connection with 
        the trade or business during the tax period is of the total 
        tangible property, wherever located, used by the taxpayer in 
        connection with the trade or business during the tax period; and 
           (3) 12.5 percent of the percentage which the taxpayer's 
        total payrolls paid or incurred in this state or paid in respect 
        to labor performed in this state in connection with the trade or 
        business during the tax period are of the taxpayer's total 
        payrolls paid or incurred in connection with the trade or 
        business during the tax period.  
           The tax is in addition to all other taxes. 
           [EFFECTIVE DATE.] This section is effective for tax years 
        beginning after December 31, 2006. 
           Sec. 17.  Minnesota Statutes 2004, section 298.01, 
        subdivision 4, is amended to read: 
           Subd. 4.  [OCCUPATION TAX; IRON ORE; TACONITE 
        CONCENTRATES.] A person engaged in the business of mining or 
        producing of iron ore, taconite concentrates or direct reduced 
        ore in this state shall pay an occupation tax to the state of 
        Minnesota.  The tax is determined in the same manner as the tax 
        imposed by section 290.02, except that sections 290.05, 
        subdivision 1, clause (a), and 290.17, subdivision 4, and 
        290.191, subdivision 2, do not apply.  A person subject to 
        occupation tax under this section shall apportion its net income 
        on the basis of the percentage obtained by taking the sum of: 
           (1) 75 percent of the percentage which the sales made 
        within this state in connection with the trade or business 
        during the tax period are of the total sales wherever made in 
        connection with the trade or business during the tax period; 
           (2) 12.5 percent of the percentage which the total tangible 
        property used by the taxpayer in this state in connection with 
        the trade or business during the tax period is of the total 
        tangible property, wherever located, used by the taxpayer in 
        connection with the trade or business during the tax period; and 
           (3) 12.5 percent of the percentage which the taxpayer's 
        total payrolls paid or incurred in this state or paid in respect 
        to labor performed in this state in connection with the trade or 
        business during the tax period are of the taxpayer's total 
        payrolls paid or incurred in connection with the trade or 
        business during the tax period.  
           The tax is in addition to all other taxes. 
           [EFFECTIVE DATE.] This section is effective for tax years 
        beginning after December 31, 2006. 

                                   ARTICLE 4 
                                 FEDERAL UPDATE 
           Section 1.  Minnesota Statutes 2004, section 289A.02, 
        subdivision 7, is amended to read: 
           Subd. 7.  [INTERNAL REVENUE CODE.] Unless specifically 
        defined otherwise, "Internal Revenue Code" means the Internal 
        Revenue Code of 1986, as amended through June 15, 2003 April 15, 
        2005. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 2.  Minnesota Statutes 2004, section 290.01, 
        subdivision 19, as amended by Laws 2005, chapter 1, section 1, 
        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 the federal effective dates of 
        changes to the Internal Revenue Code and 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 104-188, the provisions of Public Law 
        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 
        105-34, the provisions of section 6010 of the Internal Revenue 
        Service Restructuring and Reform Act of 1998, Public Law 
        105-206, the provisions of section 4003 of the Omnibus 
        Consolidated and Emergency Supplemental Appropriations Act, 
        1999, Public Law 105-277, and the provisions of section 318 of 
        the Consolidated Appropriation Act of 2001, Public Law 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 April 15, 2005, 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 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 105-206, the provisions of 
        section 3001 of the Omnibus Consolidated and Emergency 
        Supplemental Appropriations Act, 1999, Public Law 105-277, the 
        provisions of section 3001 of the Miscellaneous Trade and 
        Technical Corrections Act of 1999, Public Law 106-36, and the 
        provisions of section 316 of the Consolidated Appropriation Act 
        of 2001, Public Law 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 105-206, the provisions of section 9010 of the 
        Transportation Equity Act for the 21st Century, Public Law 
        105-178, the provisions of sections 1004, 4002, and 5301 of the 
        Omnibus Consolidation and Emergency Supplemental Appropriations 
        Act, 1999, Public Law 105-277, the provision of section 303 of 
        the Ricky Ray Hemophilia Relief Fund Act of 1998, Public Law 
        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 106-170, the provisions of the Installment Tax 
        Correction Act of 2000, Public Law 106-573, and the provisions 
        of section 309 of the Consolidated Appropriation Act of 2001, 
        Public Law 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 106-519, and the 
        provision of section 412 of the Job Creation and Worker 
        Assistance Act of 2002, Public Law 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 106-554, and the provision of section 632(b)(2)(A) of 
        the Economic Growth and Tax Relief Reconciliation Act of 2001, 
        Public Law 107-16, and provisions of sections 101 and 402 of the 
        Job Creation and Worker Assistance Act of 2002, Public Law 
        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 107-16, the provisions of 
        sections 104, 105, and 111 of the Victims of Terrorism Tax 
        Relief Act of 2001, Public Law 107-134, and the provisions of 
        sections 201, 403, 413, and 606 of the Job Creation and Worker 
        Assistance Act of 2002, Public Law 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 107-134, shall 
        become effective at the same time it becomes effective for 
        federal purposes. 
           The Internal Revenue Code of 1986, as amended through June 
        15, 2003, shall be in effect for taxable years beginning after 
        December 31, 2002.  The provisions of section 201 of the Jobs 
        and Growth Tax Relief and Reconciliation Act of 2003, H.R. 2, if 
        it is enacted into law, are effective at the same time it became 
        effective for federal purposes.  The provisions of the Act of 
        January 7, 2005, Public Law 109-1, to accelerate the income tax 
        benefits for charitable cash contributions for the relief of 
        victims of the Indian Ocean tsunami, are effective at the same 
        time it became effective for federal purposes and apply to the 
        subtraction under subdivision 19b, clause (7). 
           Except as otherwise provided, references to the Internal 
        Revenue Code in subdivisions 19a 19 to 19g 19f 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 2004, section 290.01, 
        subdivision 19a, as amended by Laws 2005, chapter 151, article 
        6, section 12, 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 or sales and use taxes paid or 
        accrued within the taxable year under this chapter and the 
        amount of taxes based on net income paid or sales and use 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 (i) the standard deduction as defined in section 63(c) 
        of the Internal Revenue Code minus (ii) any addition required 
        under clause (10).  For the purpose of this paragraph, the 
        disallowance of itemized deductions under section 68 of the 
        Internal Revenue Code of 1986, income or sales and use 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 99-514, applies; 
           (4) the amount of income taxes paid or accrued within the 
        taxable year under this chapter and taxes based on net income 
        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 other than expenses or interest used 
        in computing net interest income for the subtraction allowed 
        under subdivision 19b, clause (1); 
           (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; 
           (8) 80 percent of the amount by which the deduction allowed 
        by section 179 of the Internal Revenue Code exceeds the 
        deduction allowable by section 179 of the Internal Revenue Code 
        of 1986, as amended through December 31, 2003; 
           (9) to the extent deducted in computing federal taxable 
        income, the amount of the deduction allowable under section 199 
        of the Internal Revenue Code; 
           (10) for tax years beginning after December 31, 2004, to 
        the extent deducted in computing federal taxable income, the 
        amount by which the standard deduction allowed under section 
        63(c) of the Internal Revenue Code exceeds the standard 
        deduction allowable under section 63(c) of the Internal Revenue 
        Code of 1986, as amended through December 31, 2003; and 
           (11) the exclusion allowed under section 139A of the 
        Internal Revenue Code for federal subsidies for prescription 
        drug plans. 
           [EFFECTIVE DATE.] This section is effective for tax years 
        beginning after December 31, 2004, except the changes in clause 
        (2) are effective for tax years beginning after December 31, 
        2003. 
           Sec. 4.  Minnesota Statutes 2004, section 290.01, 
        subdivision 19b, as amended by Laws 2005, chapter 151, article 
        6, section 13, 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) net 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 363A.  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 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 
        over $500 allowable as a deduction for the taxable year under 
        section 170(a) of the Internal Revenue Code over $500 and under 
        the provisions of Public Law 109-1; 
           (7) 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; 
           (8) 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; 
           (9) in each of the five tax years immediately following the 
        tax year in which an addition is required under subdivision 19a, 
        clause (7), or 19c, clause (15), in the case of a shareholder of 
        a corporation that is an S corporation, 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), or 
        subdivision 19c, clause (15), in the case of a shareholder of an 
        S corporation, 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; and 
           (10) job opportunity building zone income as provided under 
        section 469.316.; 
           (11) in each of the five tax years immediately following 
        the tax year in which an addition is required under subdivision 
        19a, clause (8), or 19c, clause (16), in the case of a 
        shareholder of a corporation that is an S corporation, an amount 
        equal to one-fifth of the addition made by the taxpayer under 
        subdivision 19a, clause (8), or 19c, clause (16), in the case of 
        a shareholder of a corporation that is an S corporation, 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.  If the net operating loss exceeds the addition for 
        the tax year, a subtraction is not allowed under this clause; 
        and 
           (12) to the extent included in federal taxable income, 
        compensation paid to a nonresident who is a service member as 
        defined in United States Code, title 10, section 101(a)(5), for 
        military service as defined in the Service Member Civil Relief 
        Act, Public Law 108-189, section 101(2). 
           [EFFECTIVE DATE.] This section is effective for tax years 
        beginning after December 31, 2004, except the change to clause 
        (6) is effective for tax years beginning after December 31, 2003.
           Sec. 5.  Minnesota Statutes 2004, section 290.01, 
        subdivision 19c, as amended by Laws 2005, chapter 151, article 
        6, section 14, 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 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; 
           (13) the amount of net income excluded under section 114 of 
        the Internal Revenue Code; 
           (14) 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 107-147; and 
           (15) 80 percent of the depreciation deduction allowed under 
        section 168(k)(1)(A) and (k)(4)(A) 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)(1)(A) and (k)(4)(A) 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)(1)(A) and (k)(4)(A)" for the 
        taxable year is limited to excess of the depreciation claimed by 
        the activity under section 168(k)(1)(A) and (k)(4)(A) 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)(1)(A) and (k)(4)(A) is allowed; 
           (16) 80 percent of the amount by which the deduction 
        allowed by section 179 of the Internal Revenue Code exceeds the 
        deduction allowable by section 179 of the Internal Revenue Code 
        of 1986, as amended through December 31, 2003; 
           (17) to the extent deducted in computing federal taxable 
        income, the amount of the deduction allowable under section 199 
        of the Internal Revenue Code; and 
           (18) the exclusion allowed under section 139A of the 
        Internal Revenue Code for federal subsidies for prescription 
        drug plans. 
           [EFFECTIVE DATE.] This section is effective for tax years 
        beginning after December 31, 2004. 
           Sec. 6.  Minnesota Statutes 2004, 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 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 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) (15), 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) (15).  The resulting 
        delayed depreciation cannot be less than zero; and 
           (20) 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 amount of 
        the addition. 
           [EFFECTIVE DATE.] This section is effective for tax years 
        beginning after December 31, 2004. 
           Sec. 7.  Minnesota Statutes 2004, section 290.01, 
        subdivision 31, is amended to read: 
           Subd. 31.  [INTERNAL REVENUE CODE.] Unless specifically 
        defined otherwise, "Internal Revenue Code" means the Internal 
        Revenue Code of 1986, as amended through June 15, 2003 April 15, 
        2005. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment except the changes incorporated by 
        federal changes are effective at the same times as the changes 
        were effective for federal purposes. 
           Sec. 8.  Minnesota Statutes 2004, section 290.032, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [IMPOSITION.] There is hereby imposed as an 
        addition to the annual income tax for a taxable year of a 
        taxpayer in the classes described in section 290.03 a tax with 
        respect to any distribution received by such taxpayer that is 
        treated as a lump sum distribution under section 402(d) of the 
        Internal Revenue Code 1401(c)(2) of the Small Business Job 
        Protection Act, Public Law 104-188 and that is subject to tax 
        for such taxable year under section 402(d) of the Internal 
        Revenue Code 1401(c)(2) of the Small Business Job Protection 
        Act, Public Law 104-188. 
           [EFFECTIVE DATE.] This section is effective for tax years 
        beginning after December 31, 1999. 
           Sec. 9.  Minnesota Statutes 2004, section 290.032, 
        subdivision 2, is amended to read: 
           Subd. 2.  [COMPUTATION.] The amount of tax imposed by 
        subdivision 1 shall be computed in the same way as the tax 
        imposed under section 402(d) of the Internal Revenue Code of 
        1986, as amended through December 31, 1995, except that the 
        initial separate tax shall be an amount equal to five times the 
        tax which would be imposed by section 290.06, subdivision 2c, if 
        the recipient was an unmarried individual, and the taxable net 
        income was an amount equal to one-fifth of the excess of 
           (i) the total taxable amount of the lump sum distribution 
        for the year, over 
           (ii) the minimum distribution allowance, and except that 
        references in section 402(d) of the Internal Revenue Code of 
        1986, as amended through December 31, 1995, to paragraph (1)(A) 
        thereof shall instead be references to subdivision 1, and the 
        excess, if any, of the subtraction base amount over federal 
        taxable income for a qualified individual as provided under 
        section 290.0802, subdivision 2. 
           [EFFECTIVE DATE.] This section is effective for tax years 
        beginning after December 31, 1999. 
           Sec. 10.  Minnesota Statutes 2004, 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), (7), (8), and (9), and reduced by the subtraction under 
        section 290.01, subdivision 19b, clause (11), and the Minnesota 
        assignable portion of the subtraction for United States 
        government interest under section 290.01, subdivision 19b, 
        clause (1), and the subtractions under section 290.01, 
        subdivision 19b, clauses (9), (10), (11), and (12), 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), (7), (8), 
        and (9), and reduced by the amounts specified in section 290.01, 
        subdivision 19b, clauses (1) and, (9), (10), (11), and (12). 
           [EFFECTIVE DATE.] This section is effective for tax years 
        beginning after December 31, 2004. 
           Sec. 11.  Minnesota Statutes 2004, section 290.067, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [AMOUNT OF CREDIT.] (a) A taxpayer may take 
        as a credit against the tax due from the taxpayer and a spouse, 
        if any, under this chapter an amount equal to the dependent care 
        credit for which the taxpayer is eligible pursuant to the 
        provisions of section 21 of the Internal Revenue Code subject to 
        the limitations provided in subdivision 2 except that in 
        determining whether the child qualified as a dependent, income 
        received as a Minnesota family investment program grant or 
        allowance to or on behalf of the child must not be taken into 
        account in determining whether the child received more than half 
        of the child's support from the taxpayer, and the provisions of 
        section 32(b)(1)(D) of the Internal Revenue Code do not apply. 
           (b) If a child who has not attained the age of six years at 
        the close of the taxable year is cared for at a licensed family 
        day care home operated by the child's parent, the taxpayer is 
        deemed to have paid employment-related expenses.  If the child 
        is 16 months old or younger at the close of the taxable year, 
        the amount of expenses deemed to have been paid equals the 
        maximum limit for one qualified individual under section 21(c) 
        and (d) of the Internal Revenue Code.  If the child is older 
        than 16 months of age but has not attained the age of six years 
        at the close of the taxable year, the amount of expenses deemed 
        to have been paid equals the amount the licensee would charge 
        for the care of a child of the same age for the same number of 
        hours of care.  
           (c) If a married couple: 
           (1) has a child who has not attained the age of one year at 
        the close of the taxable year; 
           (2) files a joint tax return for the taxable year; and 
           (3) does not participate in a dependent care assistance 
        program as defined in section 129 of the Internal Revenue Code, 
        in lieu of the actual employment related expenses paid for that 
        child under paragraph (a) or the deemed amount under paragraph 
        (b), the lesser of (i) the combined earned income of the couple 
        or (ii) the amount of the maximum limit for one qualified 
        individual under section 21(c) and (d) of the Internal Revenue 
        Code will be deemed to be the employment related expense paid 
        for that child.  The earned income limitation of section 21(d) 
        of the Internal Revenue Code shall not apply to this deemed 
        amount.  These deemed amounts apply regardless of whether any 
        employment-related expenses have been paid.  
           (d) If the taxpayer is not required and does not file a 
        federal individual income tax return for the tax year, no credit 
        is allowed for any amount paid to any person unless: 
           (1) the name, address, and taxpayer identification number 
        of the person are included on the return claiming the credit; or 
           (2) if the person is an organization described in section 
        501(c)(3) of the Internal Revenue Code and exempt from tax under 
        section 501(a) of the Internal Revenue Code, the name and 
        address of the person are included on the return claiming the 
        credit.  
        In the case of a failure to provide the information required 
        under the preceding sentence, the preceding sentence does not 
        apply if it is shown that the taxpayer exercised due diligence 
        in attempting to provide the information required. 
           In the case of a nonresident, part-year resident, or a 
        person who has earned income not subject to tax under this 
        chapter including earned income excluded pursuant to section 
        290.01, subdivision 19b, clause (11) (10), the credit determined 
        under section 21 of the Internal Revenue Code must be allocated 
        based on the ratio by which the earned income of the claimant 
        and the claimant's spouse from Minnesota sources bears to the 
        total earned income of the claimant and the claimant's spouse. 
           For residents of Minnesota, the exclusion of combat pay 
        under section 112 of the Internal Revenue Code is not considered 
        "earned income not subject to tax under this chapter." 
           [EFFECTIVE DATE.] This section is effective for tax years 
        beginning after December 31, 2003. 
           Sec. 12.  Minnesota Statutes 2004, section 290.067, 
        subdivision 2a, is amended to read: 
           Subd. 2a.  [INCOME.] (a) For purposes of this section, 
        "income" means the sum of the following: 
           (1) federal adjusted gross income as defined in section 62 
        of the Internal Revenue Code; and 
           (2) the sum of the following amounts to the extent not 
        included in clause (1): 
           (i) all nontaxable income; 
           (ii) the amount of a passive activity loss that is not 
        disallowed as a result of section 469, paragraph (i) or (m) of 
        the Internal Revenue Code and the amount of passive activity 
        loss carryover allowed under section 469(b) of the Internal 
        Revenue Code; 
           (iii) an amount equal to the total of any discharge of 
        qualified farm indebtedness of a solvent individual excluded 
        from gross income under section 108(g) of the Internal Revenue 
        Code; 
           (iv) cash public assistance and relief; 
           (v) any pension or annuity (including railroad retirement 
        benefits, all payments received under the federal Social 
        Security Act, supplemental security income, and veterans 
        benefits), which was not exclusively funded by the claimant or 
        spouse, or which was funded exclusively by the claimant or 
        spouse and which funding payments were excluded from federal 
        adjusted gross income in the years when the payments were made; 
           (vi) interest received from the federal or a state 
        government or any instrumentality or political subdivision 
        thereof; 
           (vii) workers' compensation; 
           (viii) nontaxable strike benefits; 
           (ix) the gross amounts of payments received in the nature 
        of disability income or sick pay as a result of accident, 
        sickness, or other disability, whether funded through insurance 
        or otherwise; 
           (x) a lump sum distribution under section 402(e)(3) of the 
        Internal Revenue Code of 1986, as amended through December 31, 
        1995; 
           (xi) contributions made by the claimant to an individual 
        retirement account, including a qualified voluntary employee 
        contribution; simplified employee pension plan; self-employed 
        retirement plan; cash or deferred arrangement plan under section 
        401(k) of the Internal Revenue Code; or deferred compensation 
        plan under section 457 of the Internal Revenue Code; and 
           (xii) nontaxable scholarship or fellowship grants; 
           (xiii) the amount of deduction allowed under section 199 of 
        the Internal Revenue Code; and 
           (xiv) the amount of deduction allowed under section 220 or 
        223 of the Internal Revenue Code. 
           In the case of an individual who files an income tax return 
        on a fiscal year basis, the term "federal adjusted gross income" 
        means federal adjusted gross income reflected in the fiscal year 
        ending in the next calendar year.  Federal adjusted gross income 
        may not be reduced by the amount of a net operating loss 
        carryback or carryforward or a capital loss carryback or 
        carryforward allowed for the year. 
           (b) "Income" does not include: 
           (1) amounts excluded pursuant to the Internal Revenue Code, 
        sections 101(a) and 102; 
           (2) amounts of any pension or annuity that were exclusively 
        funded by the claimant or spouse if the funding payments were 
        not excluded from federal adjusted gross income in the years 
        when the payments were made; 
           (3) surplus food or other relief in kind supplied by a 
        governmental agency; 
           (4) relief granted under chapter 290A; 
           (5) child support payments received under a temporary or 
        final decree of dissolution or legal separation; and 
           (6) restitution payments received by eligible individuals 
        and excludable interest as defined in section 803 of the 
        Economic Growth and Tax Relief Reconciliation Act of 2001, 
        Public Law 107-16. 
           [EFFECTIVE DATE.] This section is effective for tax years 
        beginning after December 31, 2003. 
           Sec. 13.  Minnesota Statutes 2004, 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, 
        including income excluded under section 290.01, subdivision 19b, 
        clause (11) (10), 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.  For the purposes of this paragraph, the 
        exclusion of combat pay under section 112 of the Internal 
        Revenue Code is not considered "earned income not subject to tax 
        under this chapter." 
           (g) For tax years beginning after December 31, 2001, and 
        before December 31, 2004, the $5,770 in paragraph (b), the 
        $15,080 in paragraph (c), and the $17,890 in paragraph (d), 
        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), the 
        $15,080 in paragraph (c), and the $17,890 in paragraph (d), 
        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), the 
        $15,080 in paragraph (c), and the $17,890 in paragraph (d), 
        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, 2003. 
           Sec. 14.  Minnesota Statutes 2004, section 290.0675, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [DEFINITIONS.] (a) For purposes of this 
        section the following terms have the meanings given. 
           (b) "Earned income" means the sum of the following, to the 
        extent included in Minnesota taxable income: 
           (1) earned income as defined in section 32(c)(2) of the 
        Internal Revenue Code; 
           (2) income received from a retirement pension, 
        profit-sharing, stock bonus, or annuity plan; and 
           (3) Social Security benefits as defined in section 86(d)(1) 
        of the Internal Revenue Code. 
           (c) "Taxable income" means net income as defined in section 
        290.01, subdivision 19. 
           (d) "Earned income of lesser-earning spouse" means the 
        earned income of the spouse with the lesser amount of earned 
        income as defined in paragraph (b) for the taxable year minus 
        the sum of (i) the amount for one exemption under section 151(d) 
        of the Internal Revenue Code and (ii) one-half the amount of the 
        standard deduction under section 63(c)(2)(A) and (4) of the 
        Internal Revenue Code minus one-half of any addition required 
        under section 290.01, subdivision 19a, clause (10). 
           [EFFECTIVE DATE.] This section is effective for tax years 
        beginning after December 31, 2004. 
           Sec. 15.  Minnesota Statutes 2004, section 290.091, 
        subdivision 2, is amended to read: 
           Subd. 2.  [DEFINITIONS.] For purposes of the tax imposed by 
        this section, the following terms have the meanings given: 
           (a) "Alternative minimum taxable income" means the sum of 
        the following for the taxable year: 
           (1) the taxpayer's federal alternative minimum taxable 
        income as defined in section 55(b)(2) of the Internal Revenue 
        Code; 
           (2) the taxpayer's itemized deductions allowed in computing 
        federal alternative minimum taxable income, but excluding: 
           (i) the charitable contribution deduction under section 170 
        of the Internal Revenue Code to the extent that the deduction 
        exceeds 1.0 percent of adjusted gross income, as defined in 
        section 62 of the Internal Revenue Code; 
           (ii) the medical expense deduction; 
           (iii) the casualty, theft, and disaster loss deduction; and 
           (iv) the impairment-related work expenses of a disabled 
        person; 
           (3) for depletion allowances computed under section 613A(c) 
        of the Internal Revenue Code, with respect to each property (as 
        defined in section 614 of the Internal Revenue Code), to the 
        extent not included in federal alternative minimum taxable 
        income, the excess of the deduction for depletion allowable 
        under section 611 of the Internal Revenue Code for the taxable 
        year over the adjusted basis of the property at the end of the 
        taxable year (determined without regard to the depletion 
        deduction for the taxable year); 
           (4) to the extent not included in federal alternative 
        minimum taxable income, the amount of the tax preference for 
        intangible drilling cost under section 57(a)(2) of the Internal 
        Revenue Code determined without regard to subparagraph (E); 
           (5) to the extent not included in federal alternative 
        minimum taxable income, the amount of interest income as 
        provided by section 290.01, subdivision 19a, clause (1); and 
           (6) the amount of addition required by section 290.01, 
        subdivision 19a, clause clauses (7), (8), and (9); 
           less the sum of the amounts determined under the following: 
           (1) interest income as defined in section 290.01, 
        subdivision 19b, clause (1); 
           (2) an overpayment of state income tax as provided by 
        section 290.01, subdivision 19b, clause (2), to the extent 
        included in federal alternative minimum taxable income; 
           (3) the amount of investment interest paid or accrued 
        within the taxable year on indebtedness to the extent that the 
        amount does not exceed net investment income, as defined in 
        section 163(d)(4) of the Internal Revenue Code.  Interest does 
        not include amounts deducted in computing federal adjusted gross 
        income; and 
           (4) amounts subtracted from federal taxable income as 
        provided by section 290.01, subdivision 19b, clauses 
        (9), (10) and, (11), and (12). 
           In the case of an estate or trust, alternative minimum 
        taxable income must be computed as provided in section 59(c) of 
        the Internal Revenue Code. 
           (b) "Investment interest" means investment interest as 
        defined in section 163(d)(3) of the Internal Revenue Code. 
           (c) "Tentative minimum tax" equals 6.4 percent of 
        alternative minimum taxable income after subtracting the 
        exemption amount determined under subdivision 3. 
           (d) "Regular tax" means the tax that would be imposed under 
        this chapter (without regard to this section and section 
        290.032), reduced by the sum of the nonrefundable credits 
        allowed under this chapter.  
           (e) "Net minimum tax" means the minimum tax imposed by this 
        section. 
           [EFFECTIVE DATE.] This section is effective for tax years 
        beginning after December 31, 2004. 
           Sec. 16.  Minnesota Statutes 2004, section 290A.03, 
        subdivision 3, is amended to read: 
           Subd. 3.  [INCOME.] (1) "Income" means the sum of the 
        following:  
           (a) federal adjusted gross income as defined in the 
        Internal Revenue Code; and 
           (b) the sum of the following amounts to the extent not 
        included in clause (a):  
           (i) all nontaxable income; 
           (ii) the amount of a passive activity loss that is not 
        disallowed as a result of section 469, paragraph (i) or (m) of 
        the Internal Revenue Code and the amount of passive activity 
        loss carryover allowed under section 469(b) of the Internal 
        Revenue Code; 
           (iii) an amount equal to the total of any discharge of 
        qualified farm indebtedness of a solvent individual excluded 
        from gross income under section 108(g) of the Internal Revenue 
        Code; 
           (iv) cash public assistance and relief; 
           (v) any pension or annuity (including railroad retirement 
        benefits, all payments received under the federal Social 
        Security Act, supplemental security income, and veterans 
        benefits), which was not exclusively funded by the claimant or 
        spouse, or which was funded exclusively by the claimant or 
        spouse and which funding payments were excluded from federal 
        adjusted gross income in the years when the payments were made; 
           (vi) interest received from the federal or a state 
        government or any instrumentality or political subdivision 
        thereof; 
           (vii) workers' compensation; 
           (viii) nontaxable strike benefits; 
           (ix) the gross amounts of payments received in the nature 
        of disability income or sick pay as a result of accident, 
        sickness, or other disability, whether funded through insurance 
        or otherwise; 
           (x) a lump sum distribution under section 402(e)(3) of the 
        Internal Revenue Code of 1986, as amended through December 31, 
        1995; 
           (xi) contributions made by the claimant to an individual 
        retirement account, including a qualified voluntary employee 
        contribution; simplified employee pension plan; self-employed 
        retirement plan; cash or deferred arrangement plan under section 
        401(k) of the Internal Revenue Code; or deferred compensation 
        plan under section 457 of the Internal Revenue Code; and 
           (xii) nontaxable scholarship or fellowship grants; 
           (xiii) the amount of deduction allowed under section 199 of 
        the Internal Revenue Code; and 
           (xiv) the amount of deduction allowed under section 220 or 
        223 of the Internal Revenue Code.  
           In the case of an individual who files an income tax return 
        on a fiscal year basis, the term "federal adjusted gross income" 
        shall mean federal adjusted gross income reflected in the fiscal 
        year ending in the calendar year.  Federal adjusted gross income 
        shall not be reduced by the amount of a net operating loss 
        carryback or carryforward or a capital loss carryback or 
        carryforward allowed for the year.  
           (2) "Income" does not include:  
           (a) amounts excluded pursuant to the Internal Revenue Code, 
        sections 101(a) and 102; 
           (b) amounts of any pension or annuity which was exclusively 
        funded by the claimant or spouse and which funding payments were 
        not excluded from federal adjusted gross income in the years 
        when the payments were made; 
           (c) surplus food or other relief in kind supplied by a 
        governmental agency; 
           (d) relief granted under this chapter; 
           (e) child support payments received under a temporary or 
        final decree of dissolution or legal separation; or 
           (f) restitution payments received by eligible individuals 
        and excludable interest as defined in section 803 of the 
        Economic Growth and Tax Relief Reconciliation Act of 2001, 
        Public Law 107-16.  
           (3) The sum of the following amounts may be subtracted from 
        income:  
           (a) for the claimant's first dependent, the exemption 
        amount multiplied by 1.4; 
           (b) for the claimant's second dependent, the exemption 
        amount multiplied by 1.3; 
           (c) for the claimant's third dependent, the exemption 
        amount multiplied by 1.2; 
           (d) for the claimant's fourth dependent, the exemption 
        amount multiplied by 1.1; 
           (e) for the claimant's fifth dependent, the exemption 
        amount; and 
           (f) if the claimant or claimant's spouse was disabled or 
        attained the age of 65 on or before December 31 of the year for 
        which the taxes were levied or rent paid, the exemption amount.  
           For purposes of this subdivision, the "exemption amount" 
        means the exemption amount under section 151(d) of the Internal 
        Revenue Code for the taxable year for which the income is 
        reported.  
           [EFFECTIVE DATE.] This section is effective for property 
        tax refunds based on household income for 2004 and thereafter. 
           Sec. 17.  Minnesota Statutes 2004, section 290A.03, 
        subdivision 15, is amended to read: 
           Subd. 15.  [INTERNAL REVENUE CODE.] "Internal Revenue Code" 
        means the Internal Revenue Code of 1986, as amended through June 
        15, 2003 April 15, 2005. 
           [EFFECTIVE DATE.] This section is effective for property 
        tax refunds based on property taxes payable on or after December 
        31, 2004, and rent paid on or after December 31, 2003. 

                                   ARTICLE 5 
                              SALES AND USE TAXES 
           Section 1.  Minnesota Statutes 2004, section 16C.03, is 
        amended by adding a subdivision to read: 
           Subd. 18.  [CONTRACTS WITH FOREIGN VENDORS.] (a) The 
        commissioner and other agencies to which this section applies 
        and the legislative branch of government shall, subject to 
        paragraph (d), cancel a contract for goods or services from a 
        vendor or an affiliate of a vendor or suspend or debar a vendor 
        or an affiliate of a vendor from future contracts upon 
        notification from the commissioner of revenue that the vendor or 
        an affiliate of the vendor has not registered to collect the 
        sales and use tax imposed under chapter 297A on its sales in 
        Minnesota or to a destination in Minnesota.  This subdivision 
        shall not apply to state colleges and universities, the courts, 
        and any agency in the judicial branch of government.  For 
        purposes of this subdivision, the term "affiliate" means any 
        person or entity that is controlled by, or is under common 
        control of, a vendor through stock ownership or other 
        affiliation. 
           (b) Beginning January 1, 2006, each vendor or affiliate of 
        a vendor selling goods or services, subject to tax under chapter 
        297A, to an agency or the legislature must provide its Minnesota 
        sales and use tax business identification number, upon request, 
        to show that the vendor is registered to collect Minnesota sales 
        or use tax. 
           (c) The commissioner of revenue shall periodically provide 
        to the commissioner and the legislative branch a list of vendors 
        who have not registered to collect Minnesota sales and use tax 
        and who are subject to being suspended or debarred as vendors or 
        having their contracts canceled. 
           (d) The provisions of this subdivision may be waived by the 
        commissioner or the legislative branch when the vendor is the 
        single source of such goods or services, in the event of an 
        emergency, or when it is in the best interests of the state as 
        determined by the commissioner in consultation with the 
        commissioner of revenue.  Such consultation is not a disclosure 
        violation under chapter 270B. 
           [EFFECTIVE DATE.] This section is effective for all 
        contracts entered into after December 31, 2005. 
           Sec. 2.  Minnesota Statutes 2004, section 289A.11, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [RETURN REQUIRED.] Except as provided in 
        section 289A.18, subdivision 4, for the month in which taxes 
        imposed by chapter 297A are payable, or for which a return is 
        due, a return for the preceding reporting period must be filed 
        with the commissioner in the form and manner the commissioner 
        prescribes.  A person making sales at retail at two or more 
        places of business may file a consolidated return subject to 
        rules prescribed by the commissioner.  In computing the dollar 
        amount of items on the return, the amounts are rounded off to 
        the nearest whole dollar, disregarding amounts less than 50 
        cents and increasing amounts of 50 cents to 99 cents to the next 
        highest dollar. 
           Notwithstanding this subdivision, a person who is not 
        required to hold a sales tax permit under chapter 297A and who 
        makes annual purchases, for use in a trade or business, of less 
        than $18,500, or a person who is not required to hold a sales 
        tax permit and who makes purchases for personal use, that are 
        subject to the use tax imposed by section 297A.63, may file an 
        annual use tax return on a form prescribed by the commissioner.  
        If a person who qualifies for an annual use tax reporting period 
        is required to obtain a sales tax permit or makes use tax 
        purchases, for use in a trade or business, in excess of $18,500 
        during the calendar year, the reporting period must be 
        considered ended at the end of the month in which the permit is 
        applied for or the purchase in excess of $18,500 is made and a 
        return must be filed for the preceding reporting period. 
           [EFFECTIVE DATE.] This section is effective for returns 
        filed after December 31, 2005. 
           Sec. 3.  Minnesota Statutes 2004, section 297A.61, 
        subdivision 3, as amended by Laws 2005, chapter 151, article 7, 
        section 6, 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; 
           (4) dietary supplements; and 
           (5) 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 in a specific facility, 
        other than the renting or leasing of it for a continuous period 
        of 30 days or more under an enforceable written agreement that 
        may not be terminated without prior notice; 
           (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, except when performed as 
        part of a land clearing contract as defined in section 297A.68, 
        subdivision 41; 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 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.  
           (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 is effective for sales and 
        purchases made after October 28, 2002, but for land clearing 
        contracts entered into after October 28, 2002, no refunds may be 
        claimed under Minnesota Statutes, section 289A.50, for sales 
        taxes collected and remitted to the state on the land clearing 
        contracts. 
           Sec. 4.  Minnesota Statutes 2004, section 297A.61, 
        subdivision 4, as amended by Laws 2005, chapter 151, article 7, 
        section 7, is amended to read: 
           Subd. 4.  [RETAIL SALE.] (a) A "retail sale" means any 
        sale, lease, or rental for any purpose, other than resale, 
        sublease, or subrent of items by the purchaser in the normal 
        course of business as defined in subdivision 21.  
           (b) A sale of property used by the owner only by leasing it 
        to others or by holding it in an effort to lease it, and put to 
        no use by the owner other than resale after the lease or effort 
        to lease, is a sale of property for resale.  
           (c) A sale of master computer software that is purchased 
        and used to make copies for sale or lease is a sale of property 
        for resale.  
           (d) A sale of building materials, supplies, and equipment 
        to owners, contractors, subcontractors, or builders for the 
        erection of buildings or the alteration, repair, or improvement 
        of real property is a retail sale in whatever quantity sold, 
        whether the sale is for purposes of resale in the form of real 
        property or otherwise.  
           (e) A sale of carpeting, linoleum, or similar floor 
        covering to a person who provides for installation of the floor 
        covering is a retail sale and not a sale for resale since a sale 
        of floor covering which includes installation is a contract for 
        the improvement of real property. 
           (f) A sale of shrubbery, plants, sod, trees, and similar 
        items to a person who provides for installation of the items is 
        a retail sale and not a sale for resale since a sale of 
        shrubbery, plants, sod, trees, and similar items that includes 
        installation is a contract for the improvement of real property. 
           (g) A sale of tangible personal property that is awarded as 
        prizes is a retail sale and is not considered a sale of property 
        for resale. 
           (h) A sale of tangible personal property utilized or 
        employed in the furnishing or providing of services under 
        subdivision 3, paragraph (g), clause (1), including, but not 
        limited to, property given as promotional items, is a retail 
        sale and is not considered a sale of property for resale. 
           (i) A sale of tangible personal property used in conducting 
        lawful gambling under chapter 349 or the state lottery under 
        chapter 349A, including, but not limited to, property given as 
        promotional items, is a retail sale and is not considered a sale 
        of property for resale. 
           (j) A sale of machines, equipment, or devices that are used 
        to furnish, provide, or dispense goods or services, including, 
        but not limited to, coin-operated devices, is a retail sale and 
        is not considered a sale of property for resale. 
           (k) In the case of a lease, a retail sale occurs (1) when 
        an obligation to make a lease payment becomes due under the 
        terms of the agreement or the trade practices of the lessor or 
        (2) in the case of a lease of a motor vehicle, as defined in 
        section 297B.01, subdivision 5, but excluding vehicles with a 
        manufacturer's gross vehicle weight rating greater than 10,000 
        pounds and rentals of vehicles for not more than 28 days, at the 
        time the lease is executed. 
           (l) In the case of a conditional sales contract, a retail 
        sale occurs upon the transfer of title or possession of the 
        tangible personal property. 
           [EFFECTIVE DATE.] This section is effective for leases 
        entered into after September 30, 2005. 
           Sec. 5.  Minnesota Statutes 2004, section 297A.67, 
        subdivision 6, is amended to read: 
           Subd. 6.  [OTHER EXEMPT MEALS.] (a) Meals or drinks 
        purchased for and served exclusively to individuals who are 60 
        years of age or over and their spouses or to handicapped persons 
        and their spouses by governmental agencies, nonprofit 
        organizations, or churches, or pursuant to any program funded in 
        whole or in part through United States Code, title 42, sections 
        3001 through 3045, wherever delivered, prepared, or served, are 
        exempt.  
           (b) Meals or drinks purchased for and served exclusively to 
        children who are less than 14 years of age or disabled children 
        who are less than 16 years of age and who are attending a child 
        care or early childhood education program, are exempt if they 
        are: 
           (1) purchased by a nonprofit child care facility that is 
        exempt under section 297A.70, subdivision 4, and that primarily 
        serves families with income of 250 percent or less of federal 
        poverty guidelines; and 
           (2) prepared at the site of the child care facility. 
           [EFFECTIVE DATE.] This section is effective for sales after 
        December 31, 1997. 
           Sec. 6.  Minnesota Statutes 2004, section 297A.67, 
        subdivision 29, is amended to read: 
           Subd. 29.  [SOLAR ENERGY EFFICIENT PRODUCTS.] (a) A 
        residential lighting fixture or a compact fluorescent bulb is 
        exempt if it has an energy star label. 
           (b) The following products are exempt if they have an 
        energyguide label that indicates that the product meets or 
        exceeds the standards listed below: 
           (1) an electric heat pump hot water heater with an energy 
        factor of at least 1.9; 
           (2) a natural gas water heater with an energy factor of at 
        least 0.62; 
           (3) a propane gas or fuel oil water heater with an energy 
        factor of at least 0.62; 
           (4) a natural gas furnace with an annual fuel utilization 
        efficiency greater than 92 percent; and 
           (5) a propane gas or fuel oil furnace with an annual fuel 
        utilization efficiency greater than 92 percent. 
           (c) A photovoltaic device solar energy system, as defined 
        in section 216C.06, subdivision 17, is exempt.  For purposes of 
        this subdivision, "photovoltaic device" means a solid-state 
        electrical device, such as a solar module, that converts light 
        directly into direct current electricity of voltage-current 
        characteristics that are a function of the characteristics of 
        the light source and the materials in and design of the device.  
        A "solar module" is a photovoltaic device that produces a 
        specified power output under defined test conditions, usually 
        composed of groups of solar cells connected in series, in 
        parallel, or in series-parallel combinations. 
           (d) For purposes of this subdivision, "energy star label" 
        means the label granted to certain products that meet United 
        States Environmental Protection Agency and United States 
        Department of Energy criteria for energy efficiency.  For 
        purposes of this subdivision, "energyguide label" means the 
        label that the United States Federal Trade Commissioner requires 
        manufacturers to apply to certain appliances under United States 
        Code, title 16, part 305. 
           [EFFECTIVE DATE.] This section is effective for sales and 
        purchases made on or after August 1, 2005. 
           Sec. 7.  Minnesota Statutes 2004, section 297A.67, is 
        amended by adding a subdivision to read: 
           Subd. 32.  [CIGARETTES.] Cigarettes upon which a tax has 
        been imposed under section 297F.25 are exempt. 
           [EFFECTIVE DATE.] This section is effective for sales and 
        purchases made after July 31, 2005. 
           Sec. 8.  Minnesota Statutes 2004, section 297A.68, 
        subdivision 2, as amended by Laws 2005, chapter 151, article 7, 
        section 14, 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, 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.  
           (d) Industrial production does not include: 
           (1) the furnishing of services listed in section 297A.61, 
        subdivision 3, paragraph (g), clause (6), items (i) to (vi) and 
        (viii); or 
           (2) the transportation, transmission, or distribution of 
        petroleum, liquefied gas, natural gas, water, or steam, in, by, 
        or through pipes, lines, tanks, mains, or other means of 
        transporting those products.  For purposes of this paragraph, 
        "transportation, transmission, or distribution" does not include 
        blending of petroleum or biodiesel fuel as defined in section 
        239.77. 
           [EFFECTIVE DATE.] This section is effective for sales and 
        purchases made after July 31, 2005. 
           Sec. 9.  Minnesota Statutes 2004, section 297A.68, 
        subdivision 5, as amended by Laws 2005, chapter 151, article 7, 
        section 15, 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 primarily to electronically transmit results 
        retrieved by a customer of an on-line 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; 
           (8) ready-mixed concrete equipment in which the ready-mixed 
        concrete is mixed as part of the delivery process regardless if 
        mounted on a chassis, repair parts for ready-mixed concrete 
        trucks, and leases of ready-mixed concrete trucks; 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; 
           (7) machinery and equipment used by restaurants in the 
        furnishing, preparing, or serving of prepared foods as defined 
        in section 297A.61, subdivision 31; 
           (8) machinery and equipment used to furnish the services 
        listed in section 297A.61, subdivision 3, paragraph (g), clause 
        (6), items (i) to (vi) and (viii); or 
           (9) machinery or equipment used in the transportation, 
        transmission, or distribution of petroleum, liquefied gas, 
        natural gas, water, or steam, in, by, or through pipes, lines, 
        tanks, mains, or other means of transporting those products.  
        This clause does not apply to machinery or equipment used to 
        blend petroleum or biodiesel fuel as defined in section 239.77; 
        or 
           (10) 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. 
           (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).  
           (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. 
           (7) "Mining" means the extraction of minerals, ores, stone, 
        or peat. 
           (8) "On-line data retrieval system" means a system whose 
        cumulation of information is equally available and accessible to 
        all its customers. 
           (9) "Primarily" means machinery and equipment used 50 
        percent or more of the time in an activity described in 
        paragraph (a). 
           (10) "Refining" means the process of converting a natural 
        resource to an intermediate or finished product, including the 
        treatment of water to be sold at retail. 
           (11) This subdivision does not apply to telecommunications 
        equipment as provided in subdivision 35, and does not apply to 
        wire, cable, fiber, poles, or conduit for telecommunications 
        services. 
           [EFFECTIVE DATE.] This section is effective for sales and 
        purchases made after July 31, 2005. 
           Sec. 10.  Minnesota Statutes 2004, section 297A.68, 
        subdivision 35, is amended to read: 
           Subd. 35.  [TELECOMMUNICATIONS EQUIPMENT.] (a) 
        Telecommunications machinery and equipment purchased or leased 
        for use directly by a telecommunications service provider 
        primarily in the provision of telecommunications services that 
        are ultimately to be sold at retail are exempt, regardless of 
        whether purchased by the owner, a contractor, or a subcontractor.
           (b) For purposes of this subdivision, "telecommunications 
        machinery and equipment" includes, but is not limited to: 
           (1) machinery, equipment, and fixtures utilized in 
        receiving, initiating, amplifying, processing, transmitting, 
        retransmitting, recording, switching, or monitoring 
        telecommunications services, such as computers, transformers, 
        amplifiers, routers, bridges, repeaters, multiplexers, and other 
        items performing comparable functions; 
           (2) machinery, equipment, and fixtures used in the 
        transportation of telecommunications services, radio 
        transmitters and receivers, satellite equipment, microwave 
        equipment, and other transporting media, but not wire, cable, 
        fiber, poles, or conduit; 
           (3) ancillary machinery, equipment, and fixtures that 
        regulate, control, protect, or enable the machinery in clauses 
        (1) and (2) to accomplish its intended function, such as 
        auxiliary power supply, test equipment, towers, heating, 
        ventilating, and air conditioning equipment necessary to the 
        operation of the telecommunications equipment; and software 
        necessary to the operation of the telecommunications equipment; 
        and 
           (4) repair and replacement parts, including accessories, 
        whether purchased as spare parts, repair parts, or as upgrades 
        or modifications to qualified machinery or equipment. 
           (c) For purposes of this subdivision, "telecommunications 
        services" means telecommunications services as defined in 
        section 297A.61, subdivision 24, paragraph paragraphs (a), only 
        (c), and (d). 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 11.  Minnesota Statutes 2004, section 297A.68, is 
        amended by adding a subdivision to read: 
           Subd. 40.  [LAND CLEARING.] Tree, bush, shrub, and stump 
        removal are exempt when sold to contractors or subcontractors as 
        part of a land clearing contract.  For purposes of this 
        subdivision, "land clearing contract" means a contract for the 
        removal of trees, bushes, and shrubs, including the removal of 
        roots and stumps, to develop a site.  This exemption does not 
        apply to land clearing of a portion of a site to allow for 
        remodeling, improvement, or expansion of an existing structure. 
           [EFFECTIVE DATE.] This section is effective for sales and 
        purchases made after October 28, 2002, but for land clearing 
        contracts entered into after October 28, 2002, no refunds may be 
        claimed under Minnesota Statutes, section 289A.50, for sales 
        taxes collected and remitted to the state on the land clearing 
        contracts. 
           Sec. 12.  Minnesota Statutes 2004, section 297A.70, 
        subdivision 8, is amended to read: 
           Subd. 8.  [REGIONWIDE PUBLIC SAFETY RADIO COMMUNICATION 
        SYSTEM; PRODUCTS AND SERVICES.] Products and services including, 
        but not limited to, end user equipment used for construction, 
        ownership, operation, maintenance, and enhancement of the 
        backbone system of the regionwide public safety radio 
        communication system established under sections 403.21 to 
        403.34, are exempt.  For purposes of this subdivision, backbone 
        system is defined in section 403.21, subdivision 9.  This 
        subdivision is effective for purchases, sales, storage, use, or 
        consumption occurring before August 1, 2005, in the counties of 
        Anoka, Carver, Dakota, Hennepin, Ramsey, Scott, and 
        Washington for use in the first and second phases of the system, 
        as defined in section 403.21, subdivisions 3, 10, and 11, and 
        that portion of the third phase of the system that is located in 
        the southeast district of the State Patrol and the counties of 
        Benton, Sherburne, Stearns, and Wright. 
           [EFFECTIVE DATE.] This section is effective for sales after 
        April 30, 2005. 
           Sec. 13.  Minnesota Statutes 2004, section 297A.70, 
        subdivision 10, is amended to read: 
           Subd. 10.  [NONPROFIT TICKETS OR ADMISSIONS.] (a) Tickets 
        or admissions to an event are exempt if all the gross receipts 
        are recorded as such, in accordance with generally accepted 
        accounting principles, on the books of one or more organizations 
        whose primary mission is to provide an opportunity for citizens 
        of the state to participate in the creation, performance, or 
        appreciation of the arts, and provided that each organization is:
           (1) an organization described in section 501(c)(3) of the 
        Internal Revenue Code in which voluntary contributions make up 
        at least the following percent of the organization's annual 
        revenue in its most recently completed 12-month fiscal year, or 
        in the current year if the organization has not completed a 
        12-month fiscal year: 
           (i) for sales made after July 31, 2001, and before July 1, 
        2002, for the organization's fiscal year completed in calendar 
        year 2000, three percent; 
           (ii) for sales made on or after July 1, 2002, and on or 
        before June 30, 2003, for the organization's fiscal year 
        completed in calendar year 2001, three percent; 
           (iii) for sales made on or after July 1, 2003, and on or 
        before June 30, 2004, for the organization's fiscal year 
        completed in calendar year 2002, four percent; and 
           (iv) for sales made in each 12-month period, beginning on 
        July 1, 2004, and each subsequent year, for the organization's 
        fiscal year completed in the preceding calendar year, five 
        percent; 
           (2) a municipal board that promotes cultural and arts 
        activities; or 
           (3) the University of Minnesota, a state college and 
        university, or a private nonprofit college or university 
        provided that the event is held at a university-owned facility 
        owned by the educational institution holding the event.  
        The exemption only applies if the entire proceeds, after 
        reasonable expenses, are used solely to provide opportunities 
        for citizens of the state to participate in the creation, 
        performance, or appreciation of the arts. 
           (b) Tickets or admissions to the premises of the Minnesota 
        Zoological Garden are exempt, provided that the exemption under 
        this paragraph does not apply to tickets or admissions to 
        performances or events held on the premises unless the 
        performance or event is sponsored and conducted exclusively by 
        the Minnesota Zoological Board or employees of the Minnesota 
        Zoological Garden. 
           [EFFECTIVE DATE.] This section is effective for tickets and 
        admissions to events held on or after August 1, 2005, but does 
        not apply to events for which sales of tickets or admissions 
        were made prior to August 1, 2005. 
           Sec. 14.  Minnesota Statutes 2004, section 297A.71, is 
        amended by adding a subdivision to read: 
           Subd. 33.  [HYDROELECTRIC GENERATING FACILITY.] Materials 
        and supplies used or consumed in the construction of a 
        hydroelectric generating facility that meets the requirements of 
        this subdivision are exempt.  To qualify for the exemption under 
        this subdivision, a hydroelectric generating facility must: 
           (1) utilize two turbine generators at a dam site existing 
        on March 31, 1994; 
           (2) be located on land within 1,500 feet of a 13.8 kilovolt 
        distribution circuit; and 
           (3) be eligible to receive a renewable energy production 
        incentive payment under section 216C.41. 
           [EFFECTIVE DATE.] This section is effective for sales made 
        after December 31, 2004, and on or before December 31, 2007. 
           Sec. 15.  Minnesota Statutes 2004, section 297A.71, is 
        amended by adding a subdivision to read: 
           Subd. 34.  [WASTE RECOVERY FACILITY.] Materials and 
        supplies used or consumed in, and equipment incorporated into, 
        the construction, improvement, or expansion of a waste-to-energy 
        resource recovery facility are exempt if the facility uses 
        biomass or mixed municipal solid waste as a primary fuel to 
        generate steam or electricity. 
           [EFFECTIVE DATE.] This section is effective for sales and 
        purchases made after July 31, 2005. 
           Sec. 16.  Minnesota Statutes 2004, section 297A.71, is 
        amended by adding a subdivision to read: 
           Subd. 35.  [MUNICIPAL UTILITIES.] Materials and supplies 
        used or consumed in, and equipment incorporated into, the 
        construction, improvement, or expansion of electric generation 
        and related facilities used pursuant to a joint power purchase 
        agreement to meet the biomass energy mandate in section 
        216B.2424 are exempt if the owner or owners of the facilities 
        are a municipal electric utility or utilities or a joint venture 
        of municipal electric utilities.  The tax must be imposed and 
        collected as if the rate under section 297A.62, subdivision 1, 
        applied and then refunded under section 297A.75. 
           [EFFECTIVE DATE.] This section is effective for sales and 
        purchases made after December 31, 2004. 
           Sec. 17.  Minnesota Statutes 2004, section 297A.71, is 
        amended by adding a subdivision to read: 
           Subd. 36.  [CHATFIELD WASTEWATER TREATMENT 
        FACILITY.] Materials and supplies used in and equipment 
        incorporated into the construction, improvement, or expansion of 
        a wastewater treatment facility owned by the city of Chatfield 
        are exempt.  This exemption is effective for purchases made 
        before December 31, 2007. 
           [EFFECTIVE DATE.] This section is effective for sales and 
        purchases made on or after July 31, 2005. 
           Sec. 18.  Minnesota Statutes 2004, section 297A.75, 
        subdivision 1, as amended by Laws 2005, chapter 151, article 7, 
        section 19, is amended to read: 
           Subdivision 1.  [TAX COLLECTED.] The tax on the gross 
        receipts from the sale of the following exempt items must be 
        imposed and collected as if the sale were taxable and the rate 
        under section 297A.62, subdivision 1, applied.  The exempt items 
        include: 
           (1) capital equipment exempt under section 297A.68, 
        subdivision 5; 
           (2) building materials for an agricultural processing 
        facility exempt under section 297A.71, subdivision 13; 
           (3) building materials for mineral production facilities 
        exempt under section 297A.71, subdivision 14; 
           (4) building materials for correctional facilities under 
        section 297A.71, subdivision 3; 
           (5) building materials used in a residence for disabled 
        veterans exempt under section 297A.71, subdivision 11; 
           (6) elevators and building materials exempt under section 
        297A.71, subdivision 12; 
           (7) building materials for the Long Lake Conservation 
        Center exempt under section 297A.71, subdivision 17; 
           (8) materials, supplies, fixtures, furnishings, and 
        equipment for a county law enforcement and family service center 
        under section 297A.71, subdivision 26; and 
           (9) materials and supplies for qualified low-income housing 
        under section 297A.71, subdivision 23; and 
           (10) materials, supplies, and equipment for municipal 
        electric utility facilities under section 297A.71, subdivision 
        35. 
           [EFFECTIVE DATE.] This section is effective for purchases 
        made after December 31, 2004. 
           Sec. 19.  Minnesota Statutes 2004, section 297A.75, 
        subdivision 2, is amended to read: 
           Subd. 2.  [REFUND; ELIGIBLE PERSONS.] Upon application on 
        forms prescribed by the commissioner, a refund equal to the tax 
        paid on the gross receipts of the exempt items must be paid to 
        the applicant.  Only the following persons may apply for the 
        refund: 
           (1) for subdivision 1, clauses (1) to (3), the applicant 
        must be the purchaser; 
           (2) for subdivision 1, clauses (4), (7), and (8), the 
        applicant must be the governmental subdivision; 
           (3) for subdivision 1, clause (5), the applicant must be 
        the recipient of the benefits provided in United States Code, 
        title 38, chapter 21; 
           (4) for subdivision 1, clause (6), the applicant must be 
        the owner of the homestead property; and 
           (5) for subdivision 1, clause (9), the owner of the 
        qualified low-income housing project; and 
           (6) for subdivision 1, clause (10), the applicant must be a 
        municipal electric utility or a joint venture of municipal 
        electric utilities. 
           [EFFECTIVE DATE.] This section is effective for purchases 
        made after December 31, 2004. 
           Sec. 20.  Minnesota Statutes 2004, section 297A.75, 
        subdivision 3, is amended to read: 
           Subd. 3.  [APPLICATION.] (a) The application must include 
        sufficient information to permit the commissioner to verify the 
        tax paid.  If the tax was paid by a contractor, subcontractor, 
        or builder, under subdivision 1, clause (4), (5), (6), (7), (8), 
        or (9), or (10), the contractor, subcontractor, or builder must 
        furnish to the refund applicant a statement including the cost 
        of the exempt items and the taxes paid on the items unless 
        otherwise specifically provided by this subdivision.  The 
        provisions of sections 289A.40 and 289A.50 apply to refunds 
        under this section. 
           (b) An applicant may not file more than two applications 
        per calendar year for refunds for taxes paid on capital 
        equipment exempt under section 297A.68, subdivision 5.  
           [EFFECTIVE DATE.] This section is effective for sales and 
        purchases made after December 31, 2004. 
           Sec. 21.  [297A.815] [MOTOR VEHICLE LEASES.] 
           Subdivision 1.  [MOTOR VEHICLE LEASE PRICE; PAYMENT.] (a) 
        In the case of a lease of a motor vehicle as provided in section 
        297A.61, subdivision 4, paragraph (k), clause (2), the tax is 
        imposed on the total amount to be paid by the lessee under the 
        lease agreement.  The lessor shall collect the tax in full at 
        the time the lease is executed or, if the tax is included in the 
        lease and the lease is assigned, the tax is due from the 
        original lessor at the time the lease is assigned.  The total 
        amount to be paid by the lessee under the lease agreement equals 
        the agreed-upon value of the vehicle less manufacturer's 
        rebates, the stated residual value of the leased vehicle, and 
        the total value allowed for a vehicle owned by the lessee taken 
        in trade by the lessor, plus the price of any taxable goods and 
        services included in the lease and the rent charge as provided 
        by Code of Federal Regulations, title 12, section 213.4, 
        excluding any rent charge related to the capitalization of the 
        tax. 
           (b) If the total amount paid by the lessee for use of the 
        leased vehicle includes amounts that are not calculated at the 
        time the lease is executed, the tax is imposed and must be 
        collected by the lessor at the time the amounts are paid by the 
        lessee.  In the case of a lease which by its terms may be 
        renewed, the sales tax is due and payable on the total amount to 
        be paid during the initial term of the lease, and then for each 
        subsequent renewal period on the total amount to be paid during 
        the renewal period. 
           (c) If a lease is canceled or rescinded on or before 90 
        days of its execution or if a vehicle is returned to the 
        manufacturer under section 325F.665, the lessor may file a claim 
        for a refund of the total tax paid minus the amount of tax due 
        for the period the vehicle is used by the lessee. 
           (d) If a lessee's obligation to make payments on a lease is 
        canceled more than 90 days after its execution, a credit is 
        allowed against sales tax or motor vehicles sales tax due on a 
        subsequent lease or purchase of a motor vehicle if that lease or 
        purchase is consummated within 30 days of the date the prior 
        lease was canceled.  The amount of the credit is equal to (1) 
        the sales tax paid at the inception of the lease, multiplied by 
        (2) the ratio of the number of full months remaining in the 
        lease at the time of termination compared to the term of the 
        lease used in calculating sales tax paid at the inception of the 
        lease. 
           Subd. 2.  [LEASE ORIGINATING IN ANOTHER STATE.] When the 
        lease of a motor vehicle as defined in section 297A.61, 
        subdivision 4, paragraph (k), clause (2), originates in another 
        state, the sales tax under subdivision 1 shall be calculated by 
        the lessor on the total amount that is due under the lease 
        agreement after the vehicle is required to be registered in 
        Minnesota.  If the total amount to be paid by the lessee under 
        the lease agreement has already been subjected to tax by another 
        state, a credit for taxes paid in the other state is allowed as 
        provided in section 297A.80. 
           [EFFECTIVE DATE.] Subdivision 1 of this section is 
        effective for leases entered into after September 30, 2005.  
        Subdivision 2 of this section is effective for vehicles 
        registering in Minnesota after September 30, 2005. 
           Sec. 22.  Minnesota Statutes 2004, section 297A.99, 
        subdivision 9, is amended to read: 
           Subd. 9.  [ENFORCEMENT; COLLECTION; AND ADMINISTRATION.] 
        (a) The commissioner of revenue shall collect the taxes subject 
        to this section.  The commissioner may collect the tax with the 
        state sales and use tax.  All taxes under this section are 
        subject to the same penalties, interest, and enforcement 
        provisions as apply to the state sales and use tax. 
           (b) A request for a refund of state sales tax paid in 
        excess of the amount of tax legally due includes a request for a 
        refund of the political subdivision taxes paid on the goods or 
        services.  The commissioner shall refund to the taxpayer the 
        full amount of the political subdivision taxes paid on exempt 
        sales or use. 
           (c) A political subdivision shall incur a legal debt to the 
        state for refunds of local sales taxes made by the commissioner 
        after a tax has terminated when the amount of the refunds 
        exceeds the amount of local sales taxes collected for but not 
        remitted to the political subdivision.  The commissioner of 
        revenue shall bill the political subdivision for this difference.
        The commissioner shall deposit the money in the state treasury 
        and credit it to the general fund. 
           [EFFECTIVE DATE.] This section is effective for all refunds 
        made on or after the day following final enactment. 
           Sec. 23.  Minnesota Statutes 2004, section 297A.99, is 
        amended by adding a subdivision to read: 
           Subd. 12a.  [NOTIFICATION OF USE TAX.] Any political 
        subdivision imposing a local sales and use tax, which maintains 
        an official web site, must display on its main home page a link 
        to a notice that residents and businesses in the political 
        subdivision may owe a local use tax on purchases of goods and 
        services made outside of the political subdivision limits.  The 
        notice must provide information, including a link to any 
        relevant Department of Revenue Web site, on how the taxpayer may 
        get information and forms necessary for calculating and paying 
        the tax.  If the political subdivision provides and bills for 
        sewer, water, garbage collection, or other public utility 
        services, the billing statement must also include at least once 
        per year a notice that residents and businesses may owe a local 
        use tax on purchases made outside of the political subdivision 
        limits and provide information on how the taxpayer may get 
        information and forms necessary for calculating and paying the 
        tax. 
           [EFFECTIVE DATE.] This section is effective January 1, 2006.
           Sec. 24.  Laws 1991, chapter 291, article 8, section 27, is 
        amended by adding a subdivision to read: 
           Subd. 3a.  [LIMITATIONS ON USE.] Notwithstanding any other 
        provision of this section, the city may use up to $1,500,000 
        annually, of the revenues collected from the taxes imposed in 
        subdivisions 1 and 2, to fund operation, maintenance, and 
        improvements for the Riverfront 2000 and related facilities.  
        This amount may only be used if sufficient revenues remain to 
        meet the annual debt obligations for the bonds paid from these 
        revenue sources.  This authority to spend money for operation, 
        maintenance, and improvements expires April 1, 2007, unless 
        approved by the voters at a special or general election held by 
        December 31, 2006. 
           [EFFECTIVE DATE.] This section is effective upon compliance 
        by the governing body of the city of Mankato with Minnesota 
        Statutes, section 645.021, subdivision 3. 
           Sec. 25.  Laws 1991, chapter 291, article 8, section 27, 
        subdivision 4, is amended to read: 
           Subd. 4.  [EXPIRATION OF TAXING AUTHORITY AND EXPENDITURE 
        LIMITATION.] The authority granted by subdivisions 1 and 2 to 
        the city to impose a sales tax and an excise tax shall expire 
        when the principal and interest on on December 31, 2015, unless 
        sufficient revenues are not available to defease any bonds or 
        obligations issued to finance construction of Riverfront 2000 
        and related facilities have been paid or at an earlier time as 
        the city shall, by ordinance, determine.  The total capital, 
        administrative, and operating expenditures payable from bond 
        proceeds and revenues received from the taxes authorized by 
        subdivisions 1 and 2, excluding investment earnings on bond 
        proceeds and revenues, shall not exceed $25,000,000 for 
        Riverfront 2000 and related facilities.  If sufficient funds are 
        not available to defease the bonds, the tax expires December 31, 
        2018, but all revenues from taxes imposed after December 31, 
        2015, must be used to defease the bonds.  The city may, by 
        ordinance, terminate the tax at an earlier date. 
           [EFFECTIVE DATE.] This section is effective upon compliance 
        by the governing body of the city of Mankato with Minnesota 
        Statutes, section 645.021, subdivision 3. 
           Sec. 26.  Laws 1993, chapter 375, article 9, section 46, 
        subdivision 2, as amended by Laws 1997, chapter 231, article 7, 
        section 40, and Laws 1998, chapter 389, article 8, section 30, 
        and Laws 2003, First Special Session chapter 21, article 8, 
        section 13, is amended to read: 
           Subd. 2.  [USE OF REVENUES.] Revenues received from the tax 
        authorized by subdivision 1 may only be used by the city to pay 
        the cost of collecting the tax, and to pay for the following 
        projects or to secure or pay any principal, premium, or interest 
        on bonds issued in accordance with subdivision 3 for the 
        following projects.  
           (a) To pay all or a portion of the capital expenses of 
        construction, equipment and acquisition costs for the expansion 
        and remodeling of the St. Paul Civic Center complex, including 
        the demolition of the existing arena and the construction and 
        equipping of a new arena. 
           (b) Except as provided in paragraphs (e) and (f), the 
        remainder of the funds must be spent for: 
           (1) capital projects to further residential, cultural, 
        commercial, and economic development in both downtown St. Paul 
        and St. Paul neighborhoods; and 
           (2) capital and operating expenses of cultural 
        organizations in the city, provided that the amount spent under 
        this clause must equal ten percent of the total amount spent 
        under this paragraph in any year.  
           (c) The amount apportioned under paragraph (b) shall be no 
        less than 60 percent of the revenues derived from the tax each 
        year, except to the extent that a portion of that amount is 
        required to pay debt service on (1) bonds issued for the 
        purposes of paragraph (a) prior to March 1, 1998; or (2) bonds 
        issued for the purposes of paragraph (a) after March 1, 1998, 
        but only if the city council determines that 40 percent of the 
        revenues derived from the tax together with other revenues 
        pledged to the payment of the bonds, including the proceeds of 
        definitive bonds, is expected to exceed the annual debt service 
        on the bonds. 
           (d) If in any year more than 40 percent of the revenue 
        derived from the tax authorized by subdivision 1 is used to pay 
        debt service on the bonds issued for the purposes of paragraph 
        (a) and to fund a reserve for the bonds, the amount of the debt 
        service payment that exceeds 40 percent of the revenue must be 
        determined for that year.  In any year when 40 percent of the 
        revenue produced by the sales tax exceeds the amount required to 
        pay debt service on the bonds and to fund a reserve for the 
        bonds under paragraph (a), the amount of the excess must be made 
        available for capital projects to further residential, cultural, 
        commercial, and economic development in the neighborhoods and 
        downtown until the cumulative amounts determined for all years 
        under the preceding sentence have been made available under this 
        sentence.  The amount made available as reimbursement in the 
        preceding sentence is not included in the 60 percent determined 
        under paragraph (c). 
           (e) In each of calendar years 2006, 2007, 2008, and 2009, 
        revenue not to exceed $3,500,000 may be used to pay the 
        principal of bonds issued for capital projects of the city.  
        After December 31, 2009, revenue from the tax imposed under 
        subdivision 1 may not be used for this purpose. 
           (f) By January 15 of each odd-numbered year, the mayor and 
        the city council must report to the legislature on the use of 
        sales tax revenues during the preceding two-year one-year period.
           Sec. 27.  Laws 1993, chapter 375, article 9, section 46, 
        subdivision 3, as amended by Laws 1998, chapter 389, article 8, 
        section 31, is amended to read: 
           Subd. 3.  [BONDS.] The city may issue general obligation 
        bonds or special revenue bonds to finance all or a portion of 
        the cost for projects authorized in subdivision 2, paragraph (a) 
        or (b).  The debt represented by the bonds shall not be included 
        in computing any debt limitations applicable to the city.  The 
        bonds may be paid from or secured by any funds available to the 
        city, including the tax authorized under subdivision 1, any 
        revenues derived from the project, tax increments from the tax 
        increment district that includes the project, and revenue from 
        any lodging tax imposed under Laws 1982, chapter 523, article 
        25, section 1.  The bonds may be issued in one or more series 
        and sold without election on the question of issuance of the 
        bonds or a property tax to pay them.  Except as otherwise 
        provided in this section, the bonds must be issued, sold, and 
        secured in the manner provided in Minnesota Statutes, chapter 
        475.  The aggregate principal amount of bonds issued under this 
        subdivision for projects authorized in subdivision 2, paragraph 
        (a), may not exceed $65 million, provided that the city may 
        issue additional bonds under this subdivision for projects 
        authorized in subdivision 2, paragraph (a), as long as the total 
        principal amount of the additional bonds together with the 
        outstanding principal amount of the bonds previously issued 
        under this subdivision for projects authorized in subdivision 2, 
        paragraph (a), does not exceed $130 million.  The bonds 
        authorized by this subdivision shall not be included in local 
        general obligation debt as defined in Laws 1971, chapter 773, as 
        amended, including Laws 1992, chapter 511, and shall not affect 
        the amount of capital improvement bonds authorized to be issued 
        by the city of St. Paul.  Bonds to pay for projects authorized 
        in subdivision 2, paragraph (b), may be issued if the city 
        council first determines that 20 percent of the revenues derived 
        from the tax authorized under section 1 together with other 
        revenues pledged to payment of the bonds, including the proceeds 
        of definitive bonds, is expected to exceed the annual debt 
        service on the bonds.  
           Sec. 28.  Laws 1998, chapter 389, article 8, section 43, 
        subdivision 3, is amended to read: 
           Subd. 3.  [USE OF REVENUES.] Revenues received from the 
        taxes authorized by subdivisions 1 and 2 must be used by the 
        city to pay for the cost of collecting and administering the 
        taxes and to pay for the following projects: 
           (1) transportation infrastructure improvements including 
        both regional highway and airport improvements; 
           (2) improvements to the civic center complex; 
           (3) a municipal water, sewer, and storm sewer project 
        necessary to improve regional ground water quality; and 
           (4) construction of a regional recreation and sports center 
        and associated other higher education facilities available for 
        both community and student use, located at or adjacent to the 
        Rochester center. 
        The total amount of capital expenditures or bonds for these 
        projects that may be paid from the revenues raised from the 
        taxes authorized in this section may not exceed 
        $71,500,000 $111,500,000.  The total amount of capital 
        expenditures or bonds for the project in clause (4) that may be 
        paid from the revenues raised from the taxes authorized in this 
        section may not exceed $20,000,000 $28,000,000. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 29.  Laws 1998, chapter 389, article 8, section 43, 
        subdivision 4, is amended to read: 
           Subd. 4.  [BONDING AUTHORITY.] (a) The city may issue bonds 
        under Minnesota Statutes, chapter 475, to finance the capital 
        expenditure and improvement projects.  An election to approve 
        the up to $71,500,000 in bonds under Minnesota Statutes, section 
        475.58, may be held in combination with the election to 
        authorize imposition of the tax under subdivision 1.  Whether to 
        permit imposition of the tax and issuance of bonds may be posed 
        to the voters as a single question.  The question must state 
        that the sales tax revenues are pledged to pay the bonds, but 
        that the bonds are general obligations and will be guaranteed by 
        the city's property taxes.  An election to approve up to an 
        additional $40,000,000 of bonds under Minnesota Statutes, 
        section 475.58, may be held in combination with the election to 
        authorize extension of the tax under subdivision 5, paragraph 
        (b). 
           The city may enter into an agreement with Olmsted County 
        under which the city and the county agree to jointly undertake 
        and finance certain roadway infrastructure improvements.  The 
        agreement may provide that the city will make available to the 
        county a portion of the sales tax revenues collected pursuant to 
        the authority granted in this section and the bonding authority 
        provided in this subdivision.  The county may, pursuant to the 
        agreement, issue its general obligation bonds in a principal 
        amount not exceeding the amount authorized by its agreement with 
        the city payable primarily from the sales tax revenues from the 
        city under the agreement.  The county's bonds must be issued in 
        accordance with the provisions of Minnesota Statutes, chapter 
        475, except that no election is required for the issuance of the 
        bonds and the bonds are not included in the net debt of the 
        county.  
           (b) The issuance of bonds under this subdivision is not 
        subject to Minnesota Statutes, section 275.60. 
           (c) The bonds are not included in computing any debt 
        limitation applicable to the city, and the levy of taxes under 
        Minnesota Statutes, section 475.61, to pay principal of and 
        interest on the bonds is not subject to any levy limitation. 
        The aggregate principal amount of bonds, plus the aggregate of 
        the taxes used directly to pay eligible capital expenditures and 
        improvements may not exceed $71,500,000 $111,500,000, plus an 
        amount equal to the costs related to issuance of the bonds. 
           (d) The taxes may be pledged to and used for the payment of 
        the bonds and any bonds issued to refund them, only if the bonds 
        and any refunding bonds are general obligations of the city. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 30.  Laws 1998, chapter 389, article 8, section 43, 
        subdivision 5, is amended to read: 
           Subd. 5.  [TERMINATION OF TAXES.] (a) The taxes imposed 
        under subdivisions 1 and 2 expire at the later of (1) December 
        31, 2009, or (2) when the city council determines that 
        sufficient funds have been received from the taxes to finance 
        the projects and to first $71,500,000 of capital expenditures 
        and bonds for the projects authorized in subdivision 3, 
        including the amount to prepay or retire at maturity the 
        principal, interest, and premium due on any bonds issued for the 
        projects under subdivision 4, unless the taxes are extended as 
        allowed in paragraph (b).  Any funds remaining after completion 
        of the project and retirement or redemption of the bonds may be 
        placed in the general fund of the city shall also be used to 
        fund the projects under subdivision 3.  The taxes imposed under 
        subdivisions 1 and 2 may expire at an earlier time if the city 
        so determines by ordinance. 
           (b) Notwithstanding Minnesota Statutes, sections 297A.99 
        and 477A.016, or any other contrary provision of law, ordinance, 
        or city charter, the city of Rochester may, by ordinance, extend 
        the taxes authorized in subdivisions 1 and 2 beyond December 31, 
        2009, if approved by the voters of the city at a special 
        election in 2005 or the general election in 2006.  The question 
        put to the voters must indicate that an affirmative vote would 
        allow up to an additional $40,000,000 of sales tax revenues be 
        raised and up to $40,000,000 of bonds to be issued above the 
        amount authorized in the June 23, 1998, referendum for the 
        projects specified in subdivision 3.  If the taxes authorized in 
        subdivisions 1 and 2 are extended under this paragraph, the 
        taxes expire when the city council determines that sufficient 
        funds have been received from the taxes to finance the projects 
        and to prepay or retire at maturity the principal, interest, and 
        premium due on any bonds issued for the projects under 
        subdivision 4.  Any funds remaining after completion of the 
        project and retirement or redemption of the bonds may be placed 
        in the general fund of the city. 
           [EFFECTIVE DATE.] This section is effective the day after 
        compliance by the governing body of the city of Rochester with 
        Minnesota Statutes, section 645.021, subdivision 3. 
           Sec. 31.  Laws 2001, First Special Session chapter 5, 
        article 12, section 44, the effective date, is amended to read: 
           [EFFECTIVE DATE.] This section is effective for sales and 
        purchases made after July 31, 2001, and before August 1, 2005. 
           Sec. 32.  Laws 2001, First Special Session chapter 5, 
        article 12, section 67, the effective date, is amended to read: 
           [EFFECTIVE DATE.] This section is effective for purchases 
        and sales made after June 30, 2001, and before January 1, 2003 
        July 1, 2007. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 33.  Laws 2001, First Special Session chapter 5, 
        article 12, section 95, as amended by Laws 2002, chapter 377, 
        article 3, section 24, and Laws 2003, First Special Session 
        chapter 21, article 8, section 15, is amended to read:  
           Sec. 95.  [REPEALER.] 
           (a) Minnesota Statutes 2000, sections 297A.61, subdivision 
        16; 297A.68, subdivision 21; and 297A.71, subdivision 2, are 
        repealed effective for sales and purchases occurring after June 
        30, 2001, except that the repeal of section 297A.61, subdivision 
        16, paragraph (d), is effective for sales and purchases 
        occurring after July 31, 2001. 
           (b) Minnesota Statutes 2000, sections section 297A.62, 
        subdivision 2, and 297A.64, subdivision 1, are is repealed 
        effective for sales and purchases made after December 31, 2005. 
           (c) Minnesota Statutes 2000, section 297A.71, subdivision 
        15, is repealed effective for sales and purchases made after 
        June 30, 2002. 
           (d) Minnesota Statutes 2000, section 297A.71, subdivision 
        16, is repealed effective for sales and purchases occurring 
        after December 31, 2002. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 34.  Laws 2002, chapter 377, article 3, section 4, the 
        effective date, is amended to read: 
           [EFFECTIVE DATE.] With the exception of clause (2), item 
        (ii), This section is effective for sales and purchases made 
        after June 30, 2002.  Clause (2), item (ii), is effective for 
        sales and purchases made after June 30, 2002, and before January 
        1, 2006. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 35.  Laws 2002, chapter 377, article 11, section 2, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [SALES AND USE TAX.] (a) Notwithstanding 
        Minnesota Statutes, section 477A.016, or any other provision of 
        law, ordinance, or city charter, the following cities may, by 
        ordinance, impose a sales and use tax of one-half of one percent 
        for the purposes specified in subdivision 2: 
           (1) the city of St. Cloud, pursuant to the approval of the 
        city voters at the general election held on November 7, 2000; 
           (2) the city of Sartell, pursuant to the approval of the 
        city voters at an election held in November 1999; and 
           (3) each of the cities of Sauk Rapids, Waite Park, St. 
        Joseph, and St. Augusta, pursuant to the approval of the voters 
        of that city at the next general election following the date of 
        final enactment of this act, as provided for in subdivision 3; 
        and 
           (4) the city of Waite Park pursuant to the approval of the 
        voters at the general election held November 4, 2003. 
           (b) The provisions of Minnesota Statutes, section 297A.99, 
        govern the imposition, administration, collection, and 
        enforcement of the taxes authorized under this subdivision. 
           (c) The tax in Sartell must be used for the purposes listed 
        in subdivision 2, notwithstanding other purposes listed in the 
        referendum, and are not subject to the requirements of Minnesota 
        Statutes, section 297A.99, subdivision 3.  
           [EFFECTIVE DATE.] This section is effective the day after 
        compliance by the governing body of the city of Waite Park with 
        Minnesota Statutes, section 645.021, subdivision 3. 
           Sec. 36.  Laws 2002, chapter 377, article 11, section 2, 
        subdivision 4, is amended to read: 
           Subd. 4.  [IMPOSITION AND TERMINATION OF TAX.] The tax 
        authorized by each city under subdivision 1 shall be imposed 
        beginning January 1, 2003, or on the first day of a calendar 
        quarter after the city has been approved at a referendum and 
        authorized by city ordinance, and shall expire December 31, 2005 
        March 31, 2007, unless another local sales tax is imposed under 
        another law, in which case this tax will expire when the other 
        tax is imposed.  The tax may expire at an earlier time if the 
        city so determines by ordinance. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 37.  [ST. CLOUD AREA CITIES; SALES AND USE TAX 
        AUTHORIZED.] 
           Subdivision 1.  [SALES AND USE TAX 
        AUTHORIZED.] Notwithstanding Minnesota Statutes, sections 
        297A.99, subdivision 3, paragraph (d), and 477A.016, or any 
        other provision of law, ordinance, or city charter, the 
        following cities may, by ordinance, impose a sales and use tax 
        of one-half of one percent for the purposes specified in 
        subdivision 2: 
           (1) the cities of St. Cloud and St. Joseph, pursuant to the 
        approval of the city voters at the general election held on 
        November 2, 2004; and 
           (2) the cities of St. Augusta, Sartell, Sauk Rapids, and 
        Waite Park pursuant to the approval of the voters of that city 
        at the next general election. 
           The provisions of Minnesota Statutes, section 297A.99, 
        except subdivision 3, paragraph (d), govern the imposition, 
        administration, collection, and enforcement of the tax 
        authorized under this section, unless specifically provided for 
        otherwise in another subdivision. 
           Subd. 2.  [USE OF REVENUES.] (a) Revenues received from the 
        tax authorized by subdivision 1 by the city of St. Cloud must be 
        used for the cost of collecting and administering the tax and to 
        pay all or part of the capital or administrative costs of the 
        development, acquisition, construction, improvement, and 
        securing and paying debt service on bonds or other obligations 
        issued to finance the following regional projects as approved by 
        the voters and specifically detailed in the referendum 
        authorizing the tax: 
           (1) St. Cloud Regional Airport; 
           (2) regional transportation improvements; 
           (3) community and aquatics centers; 
           (4) regional public libraries; and 
           (5) acquisition and improvement of regional park land and 
        open space. 
           (b) Revenues received from the tax authorized by 
        subdivision 1 by the cities of St. Joseph, Waite Park, Sartell, 
        Sauk Rapids, and St. Augusta must be used for the cost of 
        collecting and administering the tax and to pay all or part of 
        the capital or administrative costs of the development, 
        acquisition, construction, improvement, and securing and paying 
        debt service on bonds or other obligations issued to fund the 
        projects specifically approved by the voters at the referendum 
        authorizing the tax.  The portion of revenues from the city 
        going to fund the regional airport or regional library located 
        in the city of St. Cloud will be as required under the 
        applicable joint powers agreement. 
           (c) The use of revenues received from the taxes authorized 
        in subdivision 1 for projects allowed under paragraphs (a) and 
        (b) are limited to the amount authorized for each project under 
        the enabling referendum. 
           Subd. 3.  [ST. CLOUD BONDING AUTHORIZED.] (a) The city of 
        St. Cloud may issue general obligation bonds of up to 
        $30,000,000 to pay for the costs of the regional public library 
        pursuant to the approval of the projects by the city voters at 
        the election held on November 2, 2004.  
           (b) Each city may issue general obligation bonds for 
        another project authorized under subdivision 2 without separate 
        bonding approval at a referendum only if the issuance of bonds 
        for that project was included in the authorizing question.  The 
        amount of bonds issued for a project is limited to the maximum 
        amount of local sales tax revenues that may be spent on the 
        project under the authorizing question.  
           (c) The debt represented by the bonds authorized under this 
        subdivision must not be included in computing any debt 
        limitations applicable to the city, and the levy of taxes 
        required by Minnesota Statutes, section 475.61, to pay the 
        principal or any interest on the bonds must not be subject to 
        any levy limitations or be included in computing or applying any 
        levy limitation applicable to the city. 
           Subd. 4.  [TERMINATION OF TAX.] The tax imposed in the 
        cities of St. Joseph, St. Cloud, St. Augusta, Sartell, Sauk 
        Rapids, and Waite Park under subdivision 1 expires when the city 
        council determines that sufficient funds have been collected 
        from the tax to retire or redeem the bonds and obligations 
        authorized under subdivision 2, paragraph (a), but no later than 
        December 31, 2018. 
           [EFFECTIVE DATE.] This section is effective for the city 
        that approves it the day after compliance by the governing body 
        of each city with Minnesota Statutes, section 645.021, 
        subdivision 3, for sales and purchases made on and after January 
        1, 2006.  Agreements and contracts for spending may not be 
        entered into and spending may not occur for the purposes 
        authorized in subdivision 2 nor may bonds be issued under 
        subdivision 3 until January 1, 2006. 
           Sec. 38.  [CITY OF ALBERT LEA; SALES AND USE TAX.] 
           Subdivision 1.  [SALES AND USE TAX 
        AUTHORIZED.] Notwithstanding Minnesota Statutes, section 
        477A.016, or any other provision of law, ordinance, or city 
        charter, the city of Albert Lea may, by ordinance, impose a 
        sales and use tax of one-half of one percent for the purposes 
        specified in subdivision 2.  The provisions of Minnesota 
        Statutes, section 297A.99, govern the imposition, 
        administration, collection, and enforcement of the tax 
        authorized under this subdivision. 
           Subd. 2.  [USE OF REVENUES.] The proceeds of the tax 
        imposed under this section shall be used to pay for lake 
        improvement projects as detailed in the Shell Rock River 
        watershed plan. 
           Subd. 3.  [REFERENDUM.] If the Albert Lea City Council 
        proposes to impose the tax authorized by this section, the 
        question of imposing the tax must be submitted to the voters at 
        the next general election. 
           Subd. 4.  [TERMINATION OF TAXES.] The taxes imposed under 
        this section expire at the earlier of (1) ten years after the 
        taxes are first imposed, or (2) when the city council first 
        determines that the amount of revenues raised to pay for the 
        projects under subdivision 2, shall meet or exceed the sum of 
        $15,000,000.  Any funds remaining after completion of the 
        projects may be placed in the general fund of the city. 
           [EFFECTIVE DATE.] This section is effective the day after 
        compliance by the governing body of the city of Albert Lea with 
        Minnesota Statutes, section 645.021, subdivision 3. 
           Sec. 39.  [CITY OF BEMIDJI.] 
           Subdivision 1.  [SALES AND USE TAX AUTHORIZED.] 
        Notwithstanding Minnesota Statutes, section 477A.016, or any 
        other provision of law, ordinance, or city charter, pursuant to 
        the approval of the city voters at the general election held on 
        November 5, 2002, the city of Bemidji may impose by ordinance a 
        sales and use tax of one-half of one percent for the purposes 
        specified in subdivision 2.  The provisions of Minnesota 
        Statutes, section 297A.99, govern the imposition, 
        administration, collection, and enforcement of the tax 
        authorized under this subdivision. 
           Subd. 2.  [USE OF REVENUES.] Revenues received from the tax 
        authorized by subdivision 1 must be used for the cost of 
        collecting and administering the tax and to pay all or part of 
        the capital or administrative costs of the acquisition, 
        construction, and improvement of parks and trails within the 
        city, as provided for in the city of Bemidji's parks, open 
        space, and trail system plan, adopted by the Bemidji City 
        Council on November 21, 2001.  Authorized expenses include, but 
        are not limited to, acquiring property, paying construction 
        expenses related to the development of these facilities and 
        improvements, and securing and paying debt service on bonds or 
        other obligations issued to finance acquisition, construction, 
        improvement, or development of parks and trails within the city 
        of Bemidji. 
           Subd. 3.  [BONDS.] Pursuant to the approval of the city 
        voters at the general election held on November 5, 2002, the 
        city of Bemidji may issue, without an additional election, 
        general obligation bonds of the city in an amount not to exceed 
        $9,826,000 to pay capital and administrative expenses for the 
        acquisition, construction, improvement, and development of parks 
        and trails as specified in subdivision 2.  The debt represented 
        by the bonds must not be included in computing any debt 
        limitations applicable to the city, and the levy of taxes 
        required by Minnesota Statutes, section 475.61, to pay the 
        principal of any interest on the bonds must not be subject to 
        any levy limitations or be included in computing or applying any 
        levy limitation applicable to the city. 
           Subd. 4.  [TERMINATION OF TAX.] The tax imposed under 
        subdivision 1 expires when the Bemidji City Council determines 
        that the amount described in subdivision 3 has been received 
        from the tax to finance the capital and administrative costs for 
        acquisition, construction, improvement, and development of parks 
        and trails and to repay or retire at maturity the principal, 
        interest, and premium due on any bonds issued for the park and 
        trail improvements under subdivision 3.  Any funds remaining 
        after completion of the park and trail improvements and 
        retirement or redemption of the bonds may be placed in the 
        general fund of the city.  The tax imposed under subdivision 1 
        may expire at an earlier time if the city so determines by 
        ordinance. 
           [EFFECTIVE DATE.] This section is effective the day after 
        compliance by the governing body of the city of Bemidji with 
        Minnesota Statutes, section 645.021, subdivision 3. 
           Sec. 40.  [LODGING TAX; HUBBARD COUNTY AUTHORITY.] 
           Notwithstanding Minnesota Statutes, section 469.190, 
        subdivisions 1 and 4, Hubbard County may impose the local 
        lodging tax authorized in that section in all towns and 
        unorganized territories within the county, and no town located 
        in the county may impose the local lodging tax.  Any local 
        lodging tax imposed by a town in Hubbard County prior to the 
        effective date of this section expires the day that a county tax 
        is imposed under this section. 
           If the county board exercises the authority under this 
        section, it must determine by resolution that imposition of the 
        tax is in the county's interest.  The resolution is subject to 
        the notice and reverse referendum requirements that would apply 
        under Minnesota Statutes, section 469.190, subdivision 5, if the 
        county was imposing the tax in an unorganized territory.  The 
        provisions of Minnesota Statutes, section 469.190, subdivisions 
        2, 3, 6, and 7, apply to a tax imposed under this section. 
           [EFFECTIVE DATE.] This section is effective the day after 
        the governing body of Hubbard County and its chief clerical 
        officer comply with Minnesota Statutes, section 645.021, 
        subdivisions 2 and 3. 
           Sec. 41.  [CITY OF PROCTOR; LODGING TAX.] 
           The city of Proctor may use up to ten percent of the 
        revenues received from the lodging tax imposed by the city under 
        Minnesota Statutes, section 469.190, for preservation of the 
        Caboose and the Baldwin Locomotive, Class M3 Mallet, Number 225, 
        donated to the city by the Duluth, Missabe and Iron Range 
        Railway Company, and the F-101F aircraft, serial number 59-0407, 
        donated to the city by the Department of the Air Force. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 42.  [CITY OF WILLMAR.] 
           Subdivision 1.  [SALES AND USE TAX AUTHORIZED.] 
        Notwithstanding Minnesota Statutes, section 477A.016, or any 
        other provision of law, ordinance, or city charter, pursuant to 
        the approval of the city voters at the general election held on 
        November 2, 2004, the city of Willmar may impose by ordinance a 
        sales and use tax of one-half of one percent for the purposes 
        specified in subdivision 2.  The provisions of Minnesota 
        Statutes, section 297A.99, govern the imposition, 
        administration, collection, and enforcement of the tax 
        authorized under this subdivision. 
           Subd. 2.  [USE OF REVENUES.] Revenues received from the tax 
        authorized by subdivision 1 must be used for the cost of 
        collecting and administering the tax and to pay all or part of 
        the capital or administrative costs of the development, 
        acquisition, construction, and improvement of the following 
        projects: 
           (1) completion and expansion of the airport/industrial 
        park; 
           (2) hiking and biking trails; 
           (3) connection of the Blue Line and Civic Center buildings; 
        and 
           (4) purchase of that portion of the Willmar Regional 
        Treatment Center campus located west of Marked Trunk Highway 71. 
           Authorized expenses include, but are not limited to, 
        acquiring property, paying construction expenses related to the 
        development of these facilities and improvements, and securing 
        and paying debt service on bonds or other obligations issued to 
        finance acquisition, construction, improvement, or development 
        of these projects. 
           Subd. 3.  [BONDS.] The city of Willmar may issue without an 
        additional election general obligation bonds of the city in an 
        amount not to exceed $8,000,000 to pay capital and 
        administrative expenses for the acquisition, construction, 
        improvement, and development of the projects listed in 
        subdivision 2.  The debt represented by the bonds must not be 
        included in computing any debt limitations applicable to the 
        city, and the levy of taxes required by Minnesota Statutes, 
        section 475.61, to pay the principal or any interest on the 
        bonds, and must not be subject to any levy limitations or be 
        included in computing or applying any levy limitation applicable 
        to the city. 
           Subd. 4.  [TERMINATION OF TAX.] The tax imposed under 
        subdivision 1 expires at the later of (1) seven years after the 
        date the tax is first imposed, or (2) when the Willmar City 
        Council determines that the amount described in subdivision 3 
        has been received from the tax to finance the capital and 
        administrative costs, and to repay or retire at maturity the 
        principal, interest, and premium due on any bonds issued under 
        subdivision 3.  Any funds remaining after completion of the 
        projects listed in subdivision 2 and retirement or redemption of 
        the bonds may be placed in the general fund of the city.  The 
        tax imposed under subdivision 1 may expire at an earlier time if 
        the city so determines by ordinance. 
           [EFFECTIVE DATE.] This section is effective the day after 
        compliance by the governing body of the city of Willmar with 
        Minnesota Statutes, section 645.021, subdivision 3. 
           Sec. 43.  [CITY OF WINONA; TAXES AUTHORIZED.] 
           Subdivision 1.  [SALES AND USE TAX 
        AUTHORIZED.] Notwithstanding Minnesota Statutes, section 
        477A.016, or any other provision of law, ordinance, or city 
        charter, if approved by the voters pursuant to Minnesota 
        Statutes, section 297A.99, the city of Winona may impose by 
        ordinance a sales and use tax of one-half of one percent for the 
        purposes specified in subdivision 3.  The provisions of 
        Minnesota Statutes, section 297A.99, govern the imposition, 
        administration, collection, and enforcement of the tax 
        authorized under this subdivision. 
           Subd. 2.  [EXCISE TAX AUTHORIZED.] Notwithstanding 
        Minnesota Statutes, section 477A.016, or any other contrary 
        provision of law, ordinance, or city charter, the city of Winona 
        may impose by ordinance, for the purposes specified in 
        subdivision 3, an excise tax of up to $20 per motor vehicle, as 
        defined by ordinance, purchased or acquired from any person 
        engaged within the city in the business of selling motor 
        vehicles at retail. 
           Subd. 3.  [USE OF REVENUES.] Revenues received from the 
        taxes authorized by subdivisions 1 and 2 must be used to pay all 
        or part of the capital costs of transportation contained in the 
        Minnesota Department of Transportation's Winona Intermodal study 
        dated June 2002 and in the resolution approved by the city 
        council on January 3, 2005, including securing or paying debt 
        service on bonds issued under subdivision 4, for the 
        transportation projects and to pay the cost of collecting and 
        administering the tax.  Authorized costs include, but are not 
        limited to, acquiring property and paying construction and 
        engineering costs related to the projects. 
           Subd. 4.  [BONDS.] The city of Winona, if approved by 
        voters pursuant to Minnesota Statutes, section 297A.99, may 
        issue general obligation bonds of the city, in one or more 
        series, in the aggregate principal amount not to exceed 
        $20,000,000 to pay capital and administrative costs of the 
        transportation projects.  The debt represented by the bonds is 
        not included in computing any debt limitations applicable to the 
        city, and the levy of taxes required by Minnesota Statutes, 
        section 475.61, to pay the principal of and interest on the 
        bonds is not subject to any levy limitation or included in 
        computing or applying any levy limitation applicable to the city.
           Subd. 5.  [TERMINATION OF TAXES.] The taxes imposed under 
        subdivisions 1 and 2 expire at the later of 15 years after the 
        imposition of the tax or when the Winona city council determines 
        that sufficient funds have been received from the taxes to 
        prepay or retire at maturity the principal, interest, and 
        premium due on any bonds issued for the projects under 
        subdivision 4.  Any funds remaining after expiration of the 
        taxes and retirement of the bonds may be placed in a capital 
        project fund of the city.  The taxes imposed under subdivisions 
        1 and 2 may expire at an earlier time if the city so determines 
        by ordinance. 
           [EFFECTIVE DATE.] This section is effective the day after 
        compliance by the governing body of the city of Winona with 
        Minnesota Statutes, section 645.021, subdivision 3. 
           Sec. 44.  [CITY OF WORTHINGTON; TAXES AUTHORIZED.] 
           Subdivision 1.  [SALES AND USE TAX.] Notwithstanding 
        Minnesota Statutes, section 477A.016, or any other provision of 
        law, ordinance, or city charter, if approved by the voters 
        pursuant to Minnesota Statutes, section 297A.99, at the next 
        general election, the city of Worthington may impose by 
        ordinance a sales and use tax of up to one-half of one percent 
        for the purpose specified in subdivision 3.  Except as otherwise 
        provided in this section, the provisions of Minnesota Statutes, 
        section 297A.99, govern the imposition, administration, 
        collection, and enforcement of the tax authorized under this 
        subdivision. 
           Subd. 2.  [EXCISE TAX AUTHORIZED.] Notwithstanding 
        Minnesota Statutes, section 477A.016, or any other provision of 
        law, ordinance, or city charter, the city of Worthington may 
        impose by ordinance, for the purposes specified in subdivision 
        3, an excise tax of up to $20 per motor vehicle, as defined by 
        ordinance, purchased or acquired from any person engaged within 
        the city in the business of selling motor vehicles at retail. 
           Subd. 3.  [USE OF REVENUES.] Revenues received from taxes 
        authorized by subdivisions 1 and 2 must be used by the city to 
        pay the cost of collecting and administering the taxes and to 
        pay for the costs of a community center complex and to make 
        renovations to the Memorial Auditorium.  Authorized expenses 
        include, but are not limited to, acquiring property and paying 
        construction expenses related to these improvements, and paying 
        debt service on bonds or other obligations issued to finance 
        acquisition and construction of these improvements. 
           Subd. 4.  [BONDING AUTHORITY.] (a) If the tax authorized 
        under subdivision 1 is approved by the voters, the city may 
        issue bonds under Minnesota Statutes, chapter 475, to pay 
        capital and administrative expenses for the improvements 
        described in subdivision 3 in an amount that does not exceed 
        $6,000,000.  An election to approve the bonds under Minnesota 
        Statutes, section 475.58, is not required. 
           (b) The debt represented by the bonds is not included in 
        computing any debt limitation applicable to the city, and any 
        levy of taxes under Minnesota Statutes, section 475.61, to pay 
        principal of and interest on the bonds is not subject to any 
        levy limitation.  
           Subd. 5.  [TERMINATION OF TAXES.] The taxes imposed under 
        subdivisions 1 and 2 expire at the earlier of (1) ten years, or 
        (2) when the city council determines that the amount of revenue 
        received from the taxes to pay for the projects under 
        subdivision 3 equals or exceeds $6,000,000 plus the additional 
        amount needed to pay the costs related to issuance of bonds 
        under subdivision 4, including interest on the bonds.  Any funds 
        remaining after completion of the project and retirement or 
        redemption of the bonds shall be placed in a capital project 
        fund of the city.  The taxes imposed under subdivisions 1 and 2 
        may expire at an earlier time if the city so determines by 
        ordinance. 
           [EFFECTIVE DATE.] This section is effective the day after 
        the governing body of the city of Worthington and its chief 
        clerical officer timely comply with Minnesota Statutes, section 
        645.021, subdivisions 2 and 3. 

                                   ARTICLE 6 
                                 SPECIAL TAXES 
           Section 1.  Minnesota Statutes 2004, section 287.20, 
        subdivision 2, is amended to read: 
           Subd. 2.  [CONSIDERATION.] (a) "Consideration" means 
        generally the total monetary value that is given in return for a 
        conveyance of real property in this state and includes all 
        lump-sum payments, all prior or future installment payments that 
        are required under the agreement between the parties, and the 
        fair market value of any property taken, or to be taken, in 
        exchange. 
           (b) Consideration does not include the reasonable and 
        lawful amounts of interest paid for the privilege of paying the 
        purchase price in installments and the fair market value of any 
        items of intangible personal property that are conveyed by the 
        taxable instrument. 
           (c) Consideration does not include the amount paid for the 
        personal property located on the real property being conveyed 
        and transferred as a part of the total consideration, except 
        that the amount paid for the personal property located on the 
        real property being conveyed must be included if the real 
        property being conveyed is a one-, two-, or three-unit 
        residential structure. 
           (d) When a conveyance of real property is made pursuant to 
        a contract for deed, the consideration is the price for the real 
        property reflected in the contract; except that, subject to the 
        limitations under section 287.221, if the contract for deed, or 
        other agreement entered into as a condition to the seller 
        executing the contract, requires the property to be improved 
        during the term of the contract and the price of the real 
        property as reflected in the contract does not include the 
        consideration for the required improvements, then the 
        consideration is the price for the real property as reflected in 
        the contract and the consideration for the required improvements 
        added during the term of the contract.  
           (e) "Total consideration" has the same meaning as 
        consideration. 
           (f) "Consideration, exclusive of the value of any lien or 
        encumbrance remaining at the time of sale" or "net 
        consideration" means the amount of consideration as reduced by 
        the amount outstanding under any lien that attached to the real 
        property prior to the time of sale and that is not released or 
        satisfied as a result of the sale. 
           (g) Except in the case of a gift, when the amount of the 
        consideration for a conveyance includes something other than 
        money or promises to pay money, the consideration for that 
        conveyance is rebuttably presumed to equal the fair market value 
        of the real property being conveyed. 
           [EFFECTIVE DATE.] This section is effective for deeds that 
        are both executed and recorded after July 31, 2005. 
           Sec. 2.  Minnesota Statutes 2004, section 287.20, is 
        amended by adding a subdivision to read: 
           Subd. 3a.  [DESIGNATED TRANSFER.] "Designated transfer" 
        means any of the following: 
           (1) a transfer between (i) an entity owned by a sole owner, 
        and (ii) that sole owner; 
           (2) a transfer between (i) an entity in which a husband, a 
        wife, or both are the sole owners, and (ii) the husband, wife, 
        or both; 
           (3) a transfer between (i) an entity with multiple 
        co-owners, and (ii) all of the co-owners, so long as each of the 
        co-owners maintains the same percentage ownership interest in 
        the transferred real property, whether directly or through 
        ownership of a percentage of the entity; 
           (4) a transfer between (i) a revocable trust, and (ii) the 
        grantor or grantors of the revocable trust; or 
           (5) a transfer of substantially all of the assets of one or 
        more entities pursuant to a reorganization, as defined in 
        section 287.20, subdivision 9. 
        For purposes of this definition of designated transfer, an 
        interest in an entity that is owned, directly or indirectly, by 
        or for another entity shall be considered as being owned 
        proportionately by or for the owners of the other entity under 
        provisions similar to those of section 267(c)(1) and (5) of the 
        Internal Revenue Code of 1986, as amended through December 31, 
        2004. 
           [EFFECTIVE DATE.] This section is effective August 1, 2005. 
           Sec. 3.  Minnesota Statutes 2004, section 287.20, 
        subdivision 9, is amended to read: 
           Subd. 9.  [REORGANIZATION.] "Reorganization" means the 
        transfer of substantially all of the assets of a corporation, a 
        limited liability company, or a partnership not in the usual or 
        regular course of business if at the time of the transfer the 
        transfer qualifies as:  (i) a corporate reorganization under 
        section 368(a) of the Internal Revenue Code of 1986, as amended 
        through December 31, 2000 2004; or (ii) a transfer pursuant to 
        the from a partnership to another partnership when the 
        transferee is treated as a continuation of an existing 
        partnership the transferor under section 708 of the Internal 
        Revenue Code of 1986, as amended through December 31, 2000 2004. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 4.  Minnesota Statutes 2004, section 287.21, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [DETERMINATION OF TAX.] (a) A tax is 
        imposed on each deed or instrument by which any real property in 
        this state is granted, assigned, transferred, or otherwise 
        conveyed.  The tax applies against the net consideration.  For 
        purposes of the tax, the conversion of a corporation to a 
        limited liability company, a limited liability company to a 
        corporation, a partnership to a limited partnership, a limited 
        partnership to another limited partnership or other entity, or a 
        similar conversion of one entity to another does not grant, 
        assign, transfer, or convey real property. 
           (b) The tax is determined in the following manner:  (1) 
        when transfers are made by instruments pursuant to (i) 
        consolidations or mergers, consolidations, or (ii) sales, or 
        transfers of substantially all of the assets of the entities as 
        defined in section 287.20, subdivision 9, pursuant to plans of 
        reorganization designated transfers, the tax is $1.65; (2) when 
        there is no consideration or when the consideration, exclusive 
        of the value of any lien or encumbrance remaining thereon at the 
        time of sale, is $500 or less, the tax is $1.65; or (3) when the 
        consideration, exclusive of the value of any lien or encumbrance 
        remaining at the time of sale, exceeds $500, the tax is .0033 of 
        the net consideration. 
           (c) If, within six months from the date of a designated 
        transfer, an ownership interest in the grantee entity is 
        transferred by an initial owner to any person or entity with the 
        result that the designated transfer would not have been a 
        designated transfer if made to the grantee entity with its 
        subsequent ownership, then a tax is imposed at .0033 of the net 
        consideration for the designated transfer.  If the subsequent 
        transfer of ownership interests was reasonably expected at the 
        time of the designated transfer, the applicable penalty under 
        section 287.31, subdivision 1, must be paid.  The deed tax 
        imposed under this paragraph is due within 30 days of the 
        subsequent transfer that caused the tax to be imposed under this 
        paragraph.  Involuntary transfers of ownership shall not be 
        considered transfers of ownership under this paragraph.  The 
        commissioner may adopt rules defining the types of transfers to 
        be considered involuntary. 
           (d) The tax is due at the time a taxable deed or instrument 
        is presented for recording, except as provided in paragraph 
        (c).  The commissioner may require the tax to be documented in a 
        manner prescribed by the commissioner, and may require that the 
        documentation be attached to and recorded as part of the deed or 
        instrument.  The county recorder or registrar of titles shall 
        accept the attachment for recording as part of the deed or 
        instrument and may not require, as a condition of recording a 
        deed or instrument, evidence that a transfer is a designated 
        transfer in addition to that required by the commissioner.  Such 
        an attachment shall not, however, provide actual or constructive 
        notice of the information contained therein for purposes of 
        determining any interest in the real property.  The commissioner 
        shall prescribe the manner in which the tax due under paragraph 
        (c) is to be paid and may require grantees of designated 
        transfers to file with the commissioner subsequent statements 
        verifying that the tax provided under paragraph (c) does not 
        apply. 
           [EFFECTIVE DATE.] This section is effective for deeds that 
        are both executed and recorded after July 31, 2005. 
           Sec. 5.  Minnesota Statutes 2004, section 295.50, is 
        amended by adding a subdivision to read: 
           Subd. 1a.  [BLOOD COMPONENTS.] "Blood components" means the 
        parts of the blood that are separated from blood by physical or 
        mechanical means and are intended for transfusion.  Blood 
        components do not include blood derivatives. 
           [EFFECTIVE DATE.] This section is effective for gross 
        revenues received after December 31, 2004. 
           Sec. 6.  Minnesota Statutes 2004, section 295.50, 
        subdivision 3, is amended to read: 
           Subd. 3.  [GROSS REVENUES.] "Gross revenues" are total 
        amounts received in money or otherwise by: 
           (1) a hospital for patient services; 
           (2) a surgical center for patient services; 
           (3) a health care provider, other than a staff model health 
        carrier, for patient services; 
           (4) a wholesale drug distributor for sale or distribution 
        of legend drugs that are delivered in Minnesota by the wholesale 
        drug distributor, by common carrier, or by mail, unless the 
        legend drugs are delivered to another wholesale drug distributor 
        who sells legend drugs exclusively at wholesale.  Legend drugs 
        do not include nutritional products as defined in Minnesota 
        Rules, part 9505.0325, and blood and blood components; and 
           (5) a staff model health plan company as gross premiums for 
        enrollees, co-payments, deductibles, coinsurance, and fees for 
        patient services. 
           [EFFECTIVE DATE.] This section is effective for gross 
        revenues received after December 31, 2004. 
           Sec. 7.  Minnesota Statutes 2004, section 295.52, 
        subdivision 4, is amended to read: 
           Subd. 4.  [USE TAX; PRESCRIPTION DRUGS.] (a) A person that 
        receives prescription drugs for resale or use in Minnesota, 
        other than from a wholesale drug distributor that is subject to 
        tax under subdivision 3, is subject to a tax equal to the price 
        paid to the wholesale drug distributor multiplied by the tax 
        percentage specified in this section.  Liability for the tax is 
        incurred when prescription drugs are received or delivered in 
        Minnesota by the person. 
           (b) A person that receives prescription drugs for use in 
        Minnesota from a nonresident pharmacy required to be registered 
        under section 151.19 is subject to a tax equal to the price paid 
        by the nonresident pharmacy to the wholesale drug distributor or 
        the price received by the nonresident pharmacy, whichever is 
        lower, multiplied by the tax percentage specified in this 
        section.  Liability for the tax is incurred when prescription 
        drugs are received in Minnesota by the person.  
           (c) A tax imposed under this subdivision does not apply to 
        purchases by an individual for personal consumption. 
           [EFFECTIVE DATE.] This section is effective for purchases 
        made after July 31, 2005. 
           Sec. 8.  Minnesota Statutes 2004, 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 295.59: 
           (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 co-payments, whether paid by the Medicare 
        enrollee or by a Medicare supplemental coverage as defined in 
        section 62A.011, subdivision 3, clause (10), or by Medicaid 
        payments under title XIX of the federal Social Security Act.  
        Payments for services not covered by Medicare are taxable; 
           (2) payments received for home health care services; 
           (3) 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), (7), (10), or (14); 
           (4) 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), (7), (10), or (14); 
           (5) amounts paid for legend drugs, other than nutritional 
        products and blood and blood components, 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; 
           (6) payments received by a health care provider or the 
        wholly owned subsidiary of a health care provider for care 
        provided outside Minnesota; 
           (7) payments received from the chemical dependency fund 
        under chapter 254B; 
           (8) payments received in the nature of charitable donations 
        that are not designated for providing patient services to a 
        specific individual or group; 
           (9) 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; 
           (10) 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 or 
        payments made by the government for services provided under 
        general assistance medical care, the MinnesotaCare program, or 
        the medical assistance program governed by title XIX of the 
        federal Social Security Act, United States Code, title 42, 
        sections 1396 to 1396v; 
           (11) government payments received by the commissioner of 
        human services for state-operated services; 
           (12) payments received by a health care provider for 
        hearing aids and related equipment or prescription eyewear 
        delivered outside of Minnesota; 
           (13) payments received by an educational institution from 
        student tuition, student activity fees, health care service 
        fees, government appropriations, donations, or grants, and for 
        services identified in and provided under an individualized 
        education plan as defined in section 256B.0625 or Code of 
        Federal Regulations, chapter 34, section 300.340(a).  Fee for 
        service payments and payments for extended coverage are taxable; 
        and 
           (14) 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.  Enrollee 
        deductibles, coinsurance, and co-payments are subject to tax; 
        and 
           (15) payments received under the federal Tricare program, 
        Code of Federal Regulations, title 32, section 199.17(a)(7).  
        Enrollee deductibles, coinsurance, and co-payments are subject 
        to tax. 
           (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.] The change made to paragraph (a), clause 
        (5), of this section is effective for amounts paid for blood and 
        blood components after December 31, 2004.  The change made to 
        paragraph (a), clause (14), of this section is effective for 
        enrollee deductibles, coinsurance, and co-payments received 
        under the federal Employees Health Benefits Act on or after the 
        day following final enactment.  Paragraph (a), clause (15), is 
        effective for gross revenues received under the federal Tricare 
        program after December 31, 2004. 
           Sec. 9.  [295.75] [LIQUOR GROSS RECEIPTS TAX.] 
           Subdivision 1.  [DEFINITIONS.] (a) For purposes of this 
        section, the following terms have the meanings given. 
           (b) "Commissioner" means the commissioner of revenue.  
           (c) "Gross receipts" means the total amount received, in 
        money or by barter or exchange, for all liquor sales at retail 
        as measured by the sales price, but does not include any taxes 
        imposed directly on the consumer that are separately stated on 
        the invoice, bill of sale, or similar document given to the 
        purchaser. 
           (d) "Liquor" means:  
           (1) intoxicating liquor, as defined in section 340A.101, 
        subdivision 14; 
           (2) beverage containing intoxicating liquor; and 
           (3) 3.2 percent malt liquor, as defined in section 
        340A.101, subdivision 19, when sold at an on-sale or off-sale 
        municipal liquor store or other establishment licensed to sell 
        any type of intoxicating liquor. 
           (e) "Liquor retailer" means a retailer that sells liquor.  
           (f) "Retail sale" has the meaning given in section 297A.61, 
        subdivision 4.  
           Subd. 2.  [GROSS RECEIPTS TAX IMPOSED.] A tax is imposed on 
        each liquor retailer equal to 2.5 percent of gross receipts from 
        retail sales in Minnesota of liquor.  
           Subd. 3.  [USE TAX IMPOSED; CREDIT FOR TAXES PAID.] (a) A 
        person that receives liquor for use or storage in Minnesota, 
        other than from a liquor retailer that paid the tax under 
        subdivision 2, is subject to tax at the rate imposed under 
        subdivision 2.  Liability for the tax is incurred when the 
        person has possession of the liquor in Minnesota.  The tax must 
        be remitted to the commissioner in the same manner prescribed 
        for the taxes imposed under chapter 297A. 
           (b) A person that has paid taxes to another jurisdiction on 
        the same transaction and is subject to tax under this section is 
        entitled to a credit for the tax legally due and paid to another 
        jurisdiction to the extent of the lesser of (1) the tax actually 
        paid to the other jurisdiction, or (2) the amount of tax imposed 
        by Minnesota on the transaction subject to tax in the other 
        jurisdiction. 
           Subd. 4.  [TAX COLLECTION REQUIRED.] A liquor retailer with 
        nexus in Minnesota, who is not subject to tax under subdivision 
        2, is required to collect the tax imposed under subdivision 3 
        from the purchaser of the liquor and give the purchaser a 
        receipt for the tax paid.  The tax collected must be remitted to 
        the commissioner in the same manner prescribed for the taxes 
        imposed under chapter 297A.  
           Subd. 5.  [TAXES PAID TO ANOTHER JURISDICTION; CREDIT.] A 
        liquor retailer that has paid taxes to another jurisdiction 
        measured by gross receipts and is subject to tax under this 
        section on the same gross receipts is entitled to a credit for 
        the tax legally due and paid to another jurisdiction to the 
        extent of the lesser of (1) the tax actually paid to the other 
        jurisdiction, or (2) the amount of tax imposed by Minnesota on 
        the gross receipts subject to tax in the other taxing 
        jurisdictions. 
           Subd. 6.  [EXEMPTIONS.] All of the exemptions applicable to 
        the taxes imposed under chapter 297A are applicable to the taxes 
        imposed under this section. 
           Subd. 7.  [SOURCING OF SALES.] All of the provisions of 
        section 297A.668 apply to the taxes imposed by this section. 
           Subd. 8.  [PAYMENT; REPORTING.] A liquor retailer shall 
        report the tax on a return prescribed by the commissioner of 
        revenue, and shall remit the tax with the return.  The return 
        and the tax must be filed and paid using the filing cycle and 
        due dates provided for taxes imposed under chapter 297A. 
           Subd. 9.  [ADMINISTRATION.] Unless specifically provided 
        otherwise by this section, the audit, assessment, refund, 
        penalty, interest, enforcement, collection remedies, appeal, and 
        administrative provisions of chapters 270 and 289A that are 
        applicable to taxes imposed under chapter 297A apply to taxes 
        imposed under this section.  
           Subd. 10.  [INTEREST ON OVERPAYMENTS.] Interest must be 
        paid on an overpayment refunded or credited to the taxpayer from 
        the date of payment of the tax until the date the refund is paid 
        or credited.  For purposes of this subdivision, the date of 
        payment is the due date of the return or the date of actual 
        payment of the tax, whichever is later. 
           Subd. 11.  [DEPOSIT OF REVENUES.] The commissioner shall 
        deposit all revenues, including penalties and interest, derived 
        from the tax imposed by this section in the general fund. 
           [EFFECTIVE DATE.] This section is effective for sales and 
        purchases occurring on or after January 1, 2006. 
           Sec. 10.  Minnesota Statutes 2004, section 296A.09, is 
        amended by adding a subdivision to read: 
           Subd. 6.  [EXEMPTIONS.] The provisions of subdivisions 1 
        and 2 do not apply to aviation gasoline or jet fuel purchased by 
        an ambulance service licensed under chapter 144E. 
           [EFFECTIVE DATE.] This section is effective for purchases 
        made on or after July 1, 2005. 
           Sec. 11.  Minnesota Statutes 2004, section 297F.01, is 
        amended by adding a subdivision to read: 
           Subd. 10a.  [OUT-OF-STATE RETAILER.] "Out-of-state retailer"
        means a person engaged outside of this state in the business of 
        selling, or offering to sell, cigarettes or tobacco products to 
        consumers located in this state. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 12.  [297F.031] [REGISTRATION REQUIREMENT.] 
           Prior to making delivery sales or shipping cigarettes or 
        tobacco products in connection with any sales, an out-of-state 
        retailer shall file with the Department of Revenue a statement 
        setting forth the out-of-state retailer's name, trade name, and 
        the address of the out-of-state retailer's principal place of 
        business and any other place of business. 
           [EFFECTIVE DATE.] This section is effective August 1, 2005. 
           Sec. 13.  Minnesota Statutes 2004, section 297F.09, is 
        amended by adding a subdivision to read: 
           Subd. 4a.  [REPORTING REQUIREMENTS.] No later than the 18th 
        day of each calendar month, an out-of-state retailer that has 
        made a delivery of cigarettes or tobacco products or shipped or 
        delivered cigarettes or tobacco products into the state in a 
        delivery sale in the previous calendar month shall file with the 
        Department of Revenue reports in the form and in the manner 
        prescribed by the commissioner of revenue that provides for each 
        delivery sale, the name and address of the purchaser and the 
        brand or brands and quantity of cigarettes or tobacco products 
        sold.  A tobacco retailer that meets the requirements of United 
        States Code, title 15, section 375 et seq. satisfies the 
        requirements of this subdivision. 
           [EFFECTIVE DATE.] This section is effective August 1, 2005. 
           Sec. 14.  Minnesota Statutes 2004, section 297F.10, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [TAX AND USE TAX ON CIGARETTES.] Revenue 
        received from cigarette taxes, as well as related penalties, 
        interest, license fees, and miscellaneous sources of revenue 
        shall be deposited by the commissioner in the state treasury and 
        credited as follows: 
           (1) the revenue produced by 3.25 mills of the tax on 
        cigarettes weighing not more than three pounds a thousand and 
        6.5 mills of the tax on cigarettes weighing more than three 
        pounds a thousand $22,220,000 for fiscal year 2006 and 
        $22,250,000 for fiscal year 2007 and each year thereafter must 
        be credited to the Academic Health Center special revenue fund 
        hereby created and is annually appropriated to the Board of 
        Regents at the University of Minnesota for Academic Health 
        Center funding at the University of Minnesota; and 
           (2) the revenue produced by 1.25 mills of the tax on 
        cigarettes weighing not more than three pounds a thousand and 
        2.5 mills of the tax on cigarettes weighing more than three 
        pounds a thousand $8,553,000 for fiscal year 2006 and $8,550,000 
        for fiscal year 2007 and each year thereafter must be credited 
        to the medical education and research costs account hereby 
        created in the special revenue fund and is annually appropriated 
        to the commissioner of health for distribution under section 
        62J.692, subdivision 4; and 
           (3) the balance of the revenues derived from taxes, 
        penalties, and interest (under this chapter) and from license 
        fees and miscellaneous sources of revenue shall be credited to 
        the general fund. 
           [EFFECTIVE DATE.] This section is effective for revenue 
        received on or after June 30, 2005. 
           Sec. 15.  [297F.25] [CIGARETTE SALES TAX.] 
           Subdivision 1.  [IMPOSITION.] A tax is imposed on 
        distributors on the sale of cigarettes by a cigarette 
        distributor to a retailer or cigarette subjobber for resale in 
        this state.  The tax is equal to 6.5 percent of the weighted 
        average retail price.  The weighted average retail price must be 
        expressed in cents per pack when rounded to the nearest 
        one-tenth of a cent.  The weighted average retail price must be 
        determined annually, with new rates published by May 1, and 
        effective for sales on or after August 1.  The weighted average 
        retail price must be established by surveying cigarette 
        retailers statewide in a manner and time determined by the 
        commissioner.  The determination of the commissioner pursuant to 
        this subdivision is not a "rule" and is not subject to the 
        Administrative Procedure Act contained in chapter 14.  As of 
        August 1, 2005, the tax is 25.5 cents per pack of 20 cigarettes. 
        For packs of cigarettes with other than 20 cigarettes, the tax 
        must be adjusted proportionally. 
           Subd. 2.  [PAYMENT.] Each taxpayer must remit payments of 
        the taxes to the commissioner on the same dates prescribed under 
        section 297F.09, subdivision 1, for cigarette tax returns, 
        including the accelerated remittance of the June liability. 
           Subd. 3.  [RETURN.] A taxpayer must file a return with the 
        commissioner on the same dates prescribed under section 297F.09, 
        subdivision 1, for cigarette tax returns.  Notwithstanding any 
        other provisions of this chapter, the tax due on the return is 
        based upon actual stamps purchased during the reporting period. 
           Subd. 4.  [FORM OF RETURN.] The return must contain the 
        information and be in the form prescribed by the commissioner. 
           Subd. 5.  [TAX AS DEBT.] The tax that is required to be 
        paid by the distributor is a debt from the retailer or cigarette 
        subjobber to the distributor recoverable at law in the same 
        manner as other debts.  A cigarette retailer or subjobber must 
        pay the tax imposed under subdivision 1 to the distributor 
        before the 12th day of the month following the month in which 
        the cigarettes were purchased from the distributor. 
           Subd. 6.  [SALES TAX STAMP.] Payment of the tax imposed 
        under section 297F.05 and by this section must be evidenced by a 
        dual-purpose single stamp affixed to each package. 
           Subd. 7.  [ADMINISTRATION.] The stamping, audit, 
        assessment, interest, penalty, appeal, refund, and collection 
        provisions applicable to the taxes imposed under this chapter 
        apply to taxes imposed under this section. 
           Subd. 8.  [DEPOSIT OF REVENUES.] Notwithstanding the 
        provisions of section 297F.10, the commissioner shall deposit 
        all revenues, including penalties and interest, derived from the 
        tax imposed by this section, in the general fund. 
           [EFFECTIVE DATE.] This section is effective for all sales 
        made on or after August 1, 2005. 
           Sec. 16.  Minnesota Statutes 2004, section 297I.01, is 
        amended by adding a subdivision to read: 
           Subd. 6a.  [DIRECT BUSINESS.] (a) "Direct business" means 
        all insurance provided by an insurance company or its agents, 
        and specifically includes stop-loss insurance purchased in 
        connection with a self-insurance plan for employee health 
        benefits or for other purposes, but excludes: 
           (1) reinsurance in which an insurance company assumes the 
        liability of another insurance company; and 
           (2) self-insurance. 
           (b) For purposes of this subdivision, an insurance company 
        includes a nonprofit health service corporation, health 
        maintenance organization, and community integrated service 
        network. 
           [EFFECTIVE DATE.] This section is effective for insurance 
        premiums received after December 31, 2005. 
           Sec. 17.  Minnesota Statutes 2004, section 297I.01, 
        subdivision 13a, as added by Laws 2005, chapter 151, article 8, 
        section 16, is amended to read: 
           Subd. 13a.  [REINSURANCE.] "Reinsurance" is insurance 
        whereby an insurance company, for a consideration, agrees to 
        indemnify another insurance company as defined under section 
        297I.01, subdivisions 5 and 6a, paragraph (b), to the extent 
        taxable under section 297I.05, against all or part of the loss 
        which the latter may sustain under the policy or policies which 
        it has issued. 
           [EFFECTIVE DATE.] This section is effective June 3, 2005. 
           Sec. 18.  Minnesota Statutes 2004, section 297I.05, 
        subdivision 4, is amended to read: 
           Subd. 4.  [MUTUAL PROPERTY AND CASUALTY COMPANIES WITH 
        TOTAL ASSETS LESS THAN $1,600,000,000 ON DECEMBER 31, 1989.] A 
        tax is imposed on: 
           (1) mutual insurance companies that sell both property and 
        casualty companies insurance that had total assets greater than 
        $5,000,000 at the end of the calendar year but that had total 
        assets less than $1,600,000,000 on December 31, 1989; and 
           (2) a mutual insurance company created pursuant to Laws 
        1983, chapter 287, article 2, that sells only casualty insurance.
           The rate of tax is equal to: 
           (1) two percent of gross premiums less return premiums on 
        all direct business received by the insurer or agents of the 
        insurer in Minnesota for life insurance, in cash or otherwise, 
        during the year; and 
           (2) 1.26 percent of gross premiums less return premiums on 
        all other direct business received by the insurer or agents of 
        the insurer in Minnesota, in cash or otherwise, during the year. 
           [EFFECTIVE DATE.] This section is effective for premiums 
        received after December 31, 2005. 
           Sec. 19.  Minnesota Statutes 2004, section 297I.05, is 
        amended by adding a subdivision to read: 
           Subd. 14.  [LIFE INSURANCE.] A tax is imposed on life 
        insurance.  The rate of tax equals a percentage of gross 
        premiums less return premiums on all direct business received by 
        the insurer or agents of the insurer in Minnesota for life 
        insurance, in cash or otherwise, during the year.  For premiums 
        received after December 31, 2005, but before January 1, 2007, 
        the rate of tax is 1.875 percent.  For premiums received after 
        December 31, 2006, but before January 1, 2008, the rate of tax 
        is 1.75 percent.  For premiums received after December 31, 2007, 
        but before January 1, 2009, the rate of tax is 1.625 percent.  
        For premiums received after December 31, 2008, the rate of tax 
        is 1.5 percent. 
           [EFFECTIVE DATE.] This section is effective for premiums 
        received after December 31, 2005. 
           Sec. 20.  [325F.781] [REQUIREMENTS; TOBACCO PRODUCT 
        DELIVERY SALES.] 
           Subdivision 1.  [DEFINITIONS.] (a) For purposes of this 
        section, the following terms have the meanings given, unless the 
        language or context clearly provides otherwise. 
           (b) "Consumer" means an individual who purchases, receives, 
        or possesses tobacco products for personal consumption and not 
        for resale. 
           (c) "Delivery sale" means: 
           (1) a sale of tobacco products to a consumer in this state 
        when: 
           (i) the purchaser submits the order for the sale by means 
        of a telephonic or other method of voice transmission, the mail 
        or any other delivery service, or the Internet or other on-line 
        service; or 
           (ii) the tobacco products are delivered by use of the mail 
        or other delivery service; or 
           (2) a sale of tobacco products that satisfies the criteria 
        in clause (1), item (i), regardless of whether the seller is 
        located inside or outside of the state. 
           A sale of tobacco products to an individual in this state 
        must be treated as a sale to a consumer, unless the individual 
        is licensed as a distributor or retailer of tobacco products. 
           (d) "Delivery service" means a person, including the United 
        States Postal Service, that is engaged in the commercial 
        delivery of letters, packages, or other containers. 
           (e) "Distributor" means a person, whether located inside or 
        outside of this state, other than a retailer, who sells or 
        distributes tobacco products in the state.  Distributor does not 
        include a tobacco products manufacturer, export warehouse 
        proprietor, or importer with a valid permit under United States 
        Code, title 26, section 5712 (1997), if the person sells or 
        distributes tobacco products in this state only to distributors 
        who hold valid and current licenses under the laws of a state, 
        or to an export warehouse proprietor or another manufacturer.  
        Distributor does not include a common or contract carrier that 
        is transporting tobacco products under a proper bill of lading 
        or freight bill that states the quantity, source, and 
        destination of tobacco products, or a person who ships tobacco 
        products through this state by common or contract carrier under 
        a bill of lading or freight bill. 
           (f) "Retailer" means a person, whether located inside or 
        outside this state, who sells or distributes tobacco products to 
        a consumer in this state. 
           (g) "Tobacco products" means: 
           (1) cigarettes, as defined in section 297F.01, subdivision 
        3; and 
           (2) smokeless tobacco as defined in section 325F.76. 
           Subd. 2.  [REQUIREMENTS FOR ACCEPTING ORDER FOR DELIVERY 
        SALE.] (a) This subdivision applies to acceptance of an order 
        for a delivery sale of tobacco products. 
           (b) When accepting the first order for a delivery sale from 
        a consumer, the tobacco retailer shall obtain the following 
        information from the person placing the order: 
           (1) a copy of a valid government-issued document that 
        provides the person's name, current address, photograph, and 
        date of birth; and 
           (2) an original written statement signed by the person 
        documenting that the person: 
           (i) is of legal age to purchase tobacco products in the 
        state; 
           (ii) has made a choice whether to receive mailings from a 
        tobacco retailer; 
           (iii) understands that providing false information may be a 
        violation of law; and 
           (iv) understands that it is a violation of law to purchase 
        tobacco products for subsequent resale or for delivery to 
        persons who are under the legal age to purchase tobacco products.
           (c) If an order is made as a result of advertisement over 
        the Internet, the tobacco retailer shall request the e-mail 
        address of the purchaser and shall receive payment by credit 
        card or check prior to shipping. 
           (d) Prior to shipping the tobacco products, the tobacco 
        retailer shall verify the information provided under paragraph 
        (b) against a commercially available database.  Any such 
        database or databases may also include age and identity 
        information from other government or validated commercial 
        sources, if that additional information is regularly used by 
        government and businesses for the purpose of identity 
        verification and authentication, and if the additional 
        information is used only to supplement and not to replace the 
        government-issued identification data in the age and identity 
        verification process. 
           Subd. 3.  [REQUIREMENTS FOR SHIPPING A DELIVERY SALE.] (a) 
        This subdivision applies to a tobacco retailer shipping tobacco 
        products pursuant to a delivery sale. 
           (b) The tobacco retailer shall clearly mark the outside of 
        the package of tobacco products to be shipped "tobacco products -
        adult signature required" and to show the name of the tobacco 
        retailer. 
           (c) The tobacco retailer shall utilize a delivery service 
        that imposes the following requirements: 
           (1) an adult must sign for the delivery; and 
           (2) the person signing for the delivery must show valid 
        government-issued identification that contains a photograph of 
        the person signing for the delivery and indicates that the 
        person signing for the delivery is of legal age to purchase 
        tobacco products and resides at the delivery address. 
           (d) The retailer must provide delivery instructions that 
        clearly indicate the requirements of this subdivision and must 
        declare that state law requires compliance with the requirements.
           (e) No criminal penalty may be imposed on a person for a 
        violation of this section other than a violation described in 
        paragraph (f) or (g).  Whenever it appears to the commissioner 
        that any person has engaged in any act or practice constituting 
        a violation of this section, and the violation is not within two 
        years of any previous violation of this section, the 
        commissioner shall issue and cause to be served upon the person 
        an order requiring the person to cease and desist from violating 
        this section.  The order must give reasonable notice of the 
        rights of the person to request a hearing and must state the 
        reason for the entry of the order.  Unless otherwise agreed 
        between the parties, a hearing shall be held not later than 
        seven days after the request for the hearing is received by the 
        commissioner after which and within 20 days after the receipt of 
        the administrative law judge's report and subsequent exceptions 
        and argument, the commissioner shall issue an order vacating the 
        cease and desist order, modifying it, or making it permanent as 
        the facts require.  If no hearing is requested within 30 days of 
        the service of the order, the order becomes final and remains in 
        effect until modified or vacated by the commissioner.  All 
        hearings shall be conducted in accordance with the provisions of 
        chapter 14.  If the person to whom a cease and desist order is 
        issued fails to appear at the hearing after being duly notified, 
        the person shall be deemed in default, and the proceeding may be 
        determined against the person upon consideration of the cease 
        and desist order, the allegations of which may be deemed to be 
        true. 
           (f) Any person who violates this section within two years 
        of a violation for which a cease and desist order was issued 
        under paragraph (e), is guilty of a misdemeanor. 
           (g) Any person who commits a third or subsequent violation 
        of this section, including a violation for which a cease and 
        desist order was issued under paragraph (c), within any 
        subsequent two-year period is guilty of a gross misdemeanor. 
           Subd. 4.  [COMMON CARRIERS.] This section may not be 
        construed as imposing liability upon any common carrier, or 
        officers or employees of the common carrier, when acting within 
        the scope of business of the common carrier. 
           Subd. 5.  [REGISTRATION REQUIREMENT.] Prior to making 
        delivery sales or shipping tobacco products in connection with 
        any sales, an out-of-state retailer must meet the requirements 
        of section 297F.031. 
           Subd. 6.  [COLLECTION OF TAXES.] (a) Prior to shipping any 
        tobacco products to a purchaser in this state, the out-of-state 
        retailer shall comply with all requirements of chapter 297F and 
        shall ensure that all state excise taxes and fees that apply to 
        such tobacco products have been collected and paid to the state 
        and that all related state excise tax stamps or other indicators 
        of state excise tax payment have been properly affixed to those 
        tobacco products. 
           (b) In addition to any penalties under chapter 297F, a 
        distributor who fails to pay any tax due according to paragraph 
        (a) shall pay, in addition to any other penalty, a penalty of 50 
        percent of the tax due but unpaid. 
           Subd. 7.  [APPLICATION OF STATE LAWS.] All state laws that 
        apply to in-state tobacco product retailers shall apply to 
        Internet and mail-order sellers that sell into this state. 
           Subd. 8.  [FORFEITURE.] Any tobacco product sold or 
        attempted to be sold in a delivery sale that does not meet the 
        requirements of this section is deemed to be contraband and is 
        subject to forfeiture in the same manner as and in accordance 
        with the provisions of section 297F.21. 
           Subd. 9.  [CIVIL PENALTIES.] A tobacco retailer or 
        distributor who violates this section or rules adopted under 
        this section is subject to the following fines: 
           (1) for the first violation, a fine of not more than 
        $1,000; and 
           (2) for the second and any subsequent violation, a fine of 
        not more than $5,000. 
           Subd. 10.  [ENFORCEMENT.] The attorney general may bring an 
        action to enforce this section and may seek injunctive relief, 
        including a preliminary or final injunction, and fines, 
        penalties, and equitable relief and may seek to prevent or 
        restrain actions in violation of this section by any person or 
        any person controlling such person.  In addition, a violation of 
        this section is a violation of the Unlawful Trade Practices Act, 
        sections 325D.09 to 325D.16. 
           [EFFECTIVE DATE.] This section is effective August 1, 2005, 
        except that the criminal penalties in subdivision 3 and the 
        civil penalties in subdivision 9 are effective for violations 
        occurring on or after August 1, 2005. 
           Sec. 21.  [FLOOR STOCKS TAX.] 
           Subdivision 1.  [CIGARETTES.] A floor stocks cigarette 
        sales tax is imposed on every person engaged in the business in 
        this state as a distributor, retailer, subjobber, vendor, 
        manufacturer, or manufacturer's representative of cigarettes, on 
        the stamped cigarettes and unaffixed stamps in the person's 
        possession or under the person's control at 12:01 a.m. on August 
        1, 2005.  The tax is imposed at the rate of 25.5 cents per pack 
        of 20 cigarettes.  For packs of cigarettes with other than 20 
        cigarettes, the tax shall be adjusted proportionally. 
           Each distributor, by August 10, 2005, shall file a return 
        with the commissioner, in the form the commissioner prescribes, 
        showing the stamped cigarettes and unaffixed stamps on hand at 
        12:01 a.m. on August 1, 2005, and the amount of tax due on the 
        cigarettes and unaffixed stamps.  The tax imposed by this 
        section is due and payable by September 7, 2005, and after that 
        date bears interest at the rate of one percent a month. 
           Each retailer, subjobber, vendor, manufacturer, or 
        manufacturer's representative, by August 10, 2005, shall file a 
        return with the commissioner, in the form the commissioner 
        prescribes, showing the cigarettes on hand at 12:01 a.m. on 
        August 1, 2005, and the amount of tax due on the cigarettes.  
        The tax imposed by this section is due and payable by September 
        7, 2005, and after that date bears interest at the rate of one 
        percent a month. 
           Subd. 2.  [AUDIT AND ENFORCEMENT.] The tax imposed by this 
        section is subject to the audit, assessment, penalty, and 
        collection provisions applicable to the taxes imposed under 
        Minnesota Statutes, chapter 297F.  The commissioner may require 
        a distributor to receive and maintain copies of floor stocks tax 
        returns filed by all persons requesting a credit for returned 
        cigarettes. 
           Subd. 3.  [DEPOSIT OF PROCEEDS.] The revenue from the tax 
        imposed under this section shall be deposited by the 
        commissioner in the state treasury and credited to the general 
        fund. 
           [EFFECTIVE DATE.] This section is effective August 1, 2005. 

                                   ARTICLE 7 
                              ECONOMIC DEVELOPMENT
           Section 1.  Minnesota Statutes 2004, section 116J.993, is 
        amended by adding a subdivision to read: 
           Subd. 6a.  [RESIDENCE.] "Residence" means the place where 
        an individual has established a permanent home from which the 
        individual has no present intention of moving. 
           [EFFECTIVE DATE.] This section is effective August 1, 2005. 
           Sec. 2.  Minnesota Statutes 2004, section 116J.994, 
        subdivision 4, is amended to read: 
           Subd. 4.  [WAGE AND JOB GOALS.] The subsidy agreement, in 
        addition to any other goals, must include:  (1) goals for the 
        number of jobs created, which may include separate goals for the 
        number of part-time or full-time jobs, or, in cases where job 
        loss is specific and demonstrable, goals for the number of jobs 
        retained; (2) wage goals for any jobs created or retained; and 
        (3) wage goals for any jobs to be enhanced through increased 
        wages.  After a public hearing, if the creation or retention of 
        jobs is determined not to be a goal, the wage and job goals may 
        be set at zero.  The goals for the number of jobs to be created 
        or retained must result in job creation or retention by the 
        recipient within the granting jurisdiction overall. 
           In addition to other specific goal time frames, the wage 
        and job goals must contain specific goals to be attained within 
        two years of the benefit date. 
           [EFFECTIVE DATE.] This section is effective August 1, 2005, 
        and applies to subsidy agreements entered into on or after that 
        date. 
           Sec. 3.  Minnesota Statutes 2004, section 116J.994, 
        subdivision 5, is amended to read: 
           Subd. 5.  [PUBLIC NOTICE AND HEARING.] (a) Before granting 
        a business subsidy that exceeds $500,000 for a state government 
        grantor and $100,000 for a local government grantor, the grantor 
        must provide public notice and a hearing on the subsidy.  A 
        public hearing and notice under this subdivision is not required 
        if a hearing and notice on the subsidy is otherwise required by 
        law. 
           (b) Public notice of a proposed business subsidy under this 
        subdivision by a state government grantor, other than the Iron 
        Range Resources and Rehabilitation Board, must be published in 
        the State Register.  Public notice of a proposed business 
        subsidy under this subdivision by a local government grantor or 
        the Iron Range Resources and Rehabilitation Board must be 
        published in a local newspaper of general circulation.  The 
        public notice must identify the location at which information 
        about the business subsidy, including a summary of the terms of 
        the subsidy, is available.  Published notice should be 
        sufficiently conspicuous in size and placement to distinguish 
        the notice from the surrounding text.  The grantor must make the 
        information available in printed paper copies and, if possible, 
        on the Internet.  The government agency must provide at least a 
        ten-day notice for the public hearing. 
           (c) The public notice must include the date, time, and 
        place of the hearing. 
           (d) The public hearing by a state government grantor other 
        than the Iron Range Resources and Rehabilitation Board must be 
        held in St. Paul. 
           (e) If more than one nonstate grantor provides a business 
        subsidy to the same recipient, the nonstate grantors may 
        designate one nonstate grantor to hold a single public hearing 
        regarding the business subsidies provided by all nonstate 
        grantors.  For the purposes of this paragraph, "nonstate 
        grantor" includes the iron range resources and rehabilitation 
        board. 
           (f) The public notice of any public meeting about a 
        business subsidy agreement, including those required by this 
        subdivision and by subdivision 4, must include notice that a 
        person with residence in or the owner of taxable property in the 
        granting jurisdiction may file a written complaint with the 
        grantor if the grantor fails to comply with sections 116J.993 to 
        116J.995, and that no action may be filed against the grantor 
        for the failure to comply unless a written complaint is filed. 
           [EFFECTIVE DATE.] This section is effective August 1, 2005. 
           Sec. 4.  Minnesota Statutes 2004, section 116J.994, 
        subdivision 9, is amended to read: 
           Subd. 9.  [COMPILATION AND SUMMARY REPORT.] The Department 
        of Employment and Economic Development must publish a 
        compilation and summary of the results of the reports for the 
        previous two calendar years by December 1 of 2004 and every 
        other year thereafter.  The reports of the government agencies 
        to the department and the compilation and summary report of the 
        department must be made available to the public.  The 
        commissioner must make copies of all business subsidy reports 
        submitted by local and state granting agencies available on the 
        department's Web site by October 1 of the year in which they 
        were submitted. 
           The commissioner must coordinate the production of reports 
        so that useful comparisons across time periods and across 
        grantors can be made.  The commissioner may add other 
        information to the report as the commissioner deems necessary to 
        evaluate business subsidies.  Among the information in the 
        summary and compilation report, the commissioner must include: 
           (1) total amount of subsidies awarded in each development 
        region of the state; 
           (2) distribution of business subsidy amounts by size of the 
        business subsidy; 
           (3) distribution of business subsidy amounts by time 
        category; 
           (4) distribution of subsidies by type and by public 
        purpose; 
           (5) percent of all business subsidies that reached their 
        goals; 
           (6) percent of business subsidies that did not reach their 
        goals by two years from the benefit date; 
           (7) total dollar amount of business subsidies that did not 
        meet their goals after two years from the benefit date; 
           (8) percent of subsidies that did not meet their goals and 
        that did not receive repayment; 
           (9) list of recipients that have failed to meet the terms 
        of a subsidy agreement in the past five years and have not 
        satisfied their repayment obligations; 
           (10) number of part-time and full-time jobs within separate 
        bands of wages; and 
           (11) benefits paid within separate bands of wages.  
           [EFFECTIVE DATE.] This section is effective August 1, 2005. 
           Sec. 5.  Minnesota Statutes 2004, section 116J.994, is 
        amended by adding a subdivision to read: 
           Subd. 11.  [ENFORCEMENT.] (a) A person with residence in or 
        an owner of taxable property located in the jurisdiction of the 
        grantor may bring an action for equitable relief arising out of 
        the failure of the grantor to comply with sections 116J.993 to 
        116J.995.  The court may award a prevailing party in an action 
        under this subdivision costs and reasonable attorney fees. 
           (b) Prior to bringing an action, the party must file a 
        written complaint with the grantor stating the alleged violation 
        and proposing a remedy.  The grantor has up to 30 days to reply 
        to the complaint in writing and may take action to comply with 
        sections 116J.993 to 116J.995. 
           (c) The written complaint under this subdivision for 
        failure to comply with subdivisions 1 to 5, must be filed with 
        the grantor within 180 days after approval of the subsidy 
        agreement under subdivision 3, paragraph (d).  An action under 
        this subdivision must be commenced within 30 days following 
        receipt of the grantor's reply, or within 180 days after 
        approval of the subsidy agreement under subdivision 3, paragraph 
        (d), whichever is later. 
           [EFFECTIVE DATE.] This section is effective August 1, 2005, 
        and applies to subsidy agreements entered into on or after that 
        date. 
           Sec. 6.  Minnesota Statutes 2004, section 272.02, 
        subdivision 64, as amended by Laws 2005, chapter 152, article 2, 
        section 2, is amended to read: 
           Subd. 64.  [JOB OPPORTUNITY BUILDING ZONE PROPERTY.] (a) 
        Improvements to real property, and personal property, classified 
        under section 273.13, subdivision 24, and located within a job 
        opportunity building zone, designated under section 469.314, are 
        exempt from ad valorem taxes levied under chapter 275. 
           (b) Improvements to real property, and tangible personal 
        property, of an agricultural production facility located within 
        an agricultural processing facility zone, designated under 
        section 469.314, is exempt from ad valorem taxes levied under 
        chapter 275. 
           (c) For property to qualify for exemption under paragraph 
        (a), the occupant must be a qualified business, as defined in 
        section 469.310. 
           (d) The exemption applies beginning for the first 
        assessment year after designation of the job opportunity 
        building zone by the commissioner of employment and economic 
        development.  The exemption applies to each assessment year that 
        begins during the duration of the job opportunity building zone 
        and to property.  To be exempt, the property must be occupied by 
        July 1 of the assessment year by a qualified business that has 
        signed the business subsidy agreement and relocation agreement, 
        if required, by July 1 of the assessment year.  This exemption 
        does not apply to: 
           (1) the levy under section 475.61 or similar levy 
        provisions under any other law to pay general obligation bonds; 
        or 
           (2) a levy under section 126C.17, if the levy was approved 
        by the voters before the designation of the job opportunity 
        building zone. 
           (e) This subdivision does not apply to captured net tax 
        capacity in a tax increment financing district to the extent 
        necessary to meet the debt repayment obligations of the 
        authority if the property is also located within an agricultural 
        processing zone. 
           [EFFECTIVE DATE.] This section is effective for taxes 
        payable in 2006 and thereafter, except that the stricken 
        paragraph (e) is effective the day following final enactment. 
           Sec. 7.  Minnesota Statutes 2004, section 289A.56, is 
        amended by adding a subdivision to read: 
           Subd. 7.  [BIOTECHNOLOGY AND HEALTH SCIENCES INDUSTRY ZONE 
        REFUNDS.] Notwithstanding subdivision 3, for refunds payable 
        under section 297A.68, subdivision 38, interest is computed from 
        90 days after the refund claim is filed with the commissioner. 
           [EFFECTIVE DATE.] This section is effective for refund 
        claims filed on or after August 1, 2005. 
           Sec. 8.  Minnesota Statutes 2004, section 297A.68, 
        subdivision 37, is amended to read: 
           Subd. 37.  [JOB OPPORTUNITY BUILDING ZONES.] (a) Purchases 
        of tangible personal property or taxable services by a qualified 
        business, as defined in section 469.310, are exempt if the 
        property or services are primarily used or consumed in a job 
        opportunity building zone designated under section 469.314.  For 
        purposes of this subdivision, an aerial camera package, 
        including any camera, computer, and navigation device contained 
        in the package, that is used in an aircraft that is operated 
        under a Federal Aviation Administration Restricted Airworthiness 
        Certificate according to Code of Federal Regulations, title 14, 
        part 21, section 21.25(b)(3), relating to aerial surveying, and 
        that is based, maintained, and dispatched from a job opportunity 
        building zone, qualifies as primarily used or consumed in a job 
        opportunity building zone if the imagery acquired from the 
        aerial camera package is returned to the job opportunity 
        building zone for processing.  The exemption for an aerial 
        camera package is limited to $50,000 in taxes and 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. 
           (b) Purchase and use of construction materials and, 
        supplies for, or equipment used or consumed in the construction 
        of improvements to real property in a job opportunity building 
        zone are exempt if the improvements after completion of 
        construction are to be used in the conduct of a qualified 
        business, as defined in section 469.310.  This exemption applies 
        regardless of whether the purchases are made by the business or 
        a contractor.  
           (c) The exemptions under this subdivision apply to a local 
        sales and use tax regardless of whether the local sales tax is 
        imposed on the sales taxable as defined under this chapter. 
           (d) This subdivision applies to sales, if the purchase was 
        made and delivery received during the duration of the zone. 
           (e) Notwithstanding the restriction in paragraph (a), which 
        requires items purchased to be primarily used or consumed in the 
        zone, purchases by a qualified business that is an electrical 
        cooperative located in Meeker County of equipment and materials 
        used for the generation, transmission, and distribution of 
        electrical energy are exempt under this subdivision, except that:
           (1) the exemption for materials and equipment used or 
        consumed outside the zone must not exceed $200,000 in taxes; and 
           (2) no sales and use tax exemption is allowed for equipment 
        purchased for resale. 
        For purposes of this paragraph, the tax must be imposed and 
        collected as if the rate under section 297A.62, subdivision 1, 
        applied and then refunded in the manner provided in section 
        297A.75. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 9.  Minnesota Statutes 2004, section 297A.68, 
        subdivision 38, is amended to read: 
           Subd. 38.  [BIOTECHNOLOGY AND HEALTH SCIENCES INDUSTRY 
        ZONE.] (a) Purchases of tangible personal property or taxable 
        services by a qualified business, as defined in section 469.330, 
        are exempt if the property or services are primarily used or 
        consumed in a biotechnology and health sciences industry zone 
        designated under section 469.334. 
           (b) Purchase and use of construction materials and, 
        supplies for, or equipment used or consumed in the construction 
        of improvements to real property in a biotechnology and health 
        sciences industry zone are exempt if the improvements after 
        completion of construction are to be used in the conduct of a 
        qualified business, as defined in section 469.330.  This 
        exemption applies regardless of whether the purchases are made 
        by the business or a contractor. 
           (c) The exemptions under this subdivision apply to a local 
        sales and use tax regardless of whether the local sales tax is 
        imposed on the sales taxable as defined under this chapter. 
           (d)(1) The tax on sales of goods or services exempted under 
        this subdivision are imposed and collected as if the applicable 
        rate under section 297A.62 applied.  Upon application by the 
        purchaser, on forms prescribed by the commissioner, a refund 
        equal to the tax paid must be paid to the purchaser.  The 
        application must include sufficient information to permit the 
        commissioner to verify the sales tax paid and the eligibility of 
        the claimant to receive the credit.  No more than two 
        applications for refunds may be filed under this subdivision in 
        a calendar year.  The provisions of section 289A.40 apply to the 
        refunds payable under this subdivision. 
           (2) The amount required to make the refunds is annually 
        appropriated to the commissioner of revenue. 
           (3) The aggregate amount refunded to a qualified business 
        must not exceed the amount allocated to the qualified business 
        under section 469.335. 
           (e) This subdivision applies only to sales made during the 
        duration of the designation of the zone. 
           [EFFECTIVE DATE.] This section is effective for sales made 
        after December 31, 2003. 
           Sec. 10.  Minnesota Statutes 2004, section 469.1082, is 
        amended by adding a subdivision to read: 
           Subd. 8.  [NINE-MEMBER BOARDS AUTHORIZED.] In addition to 
        the board options under section 469.095, a county economic 
        development authority may have a nine-member board.  If the 
        authority has a nine-member board, at least two members must be 
        county commissioners appointed by the county board.  Of the 
        county economic development authority board members initially 
        appointed, two each shall be appointed for terms of one, two, or 
        three years, respectively, and one each for terms of four, five, 
        or six years, respectively.  Thereafter, all authority members 
        shall be appointed for six-year terms. 
           Sec. 11.  Minnesota Statutes 2004, section 469.169, is 
        amended by adding a subdivision to read: 
           Subd. 17.  [ADDITIONAL BORDER CITY ALLOCATIONS.] (a) In 
        addition to tax reductions authorized in subdivisions 7 to 16, 
        the commissioner shall allocate $750,000 for tax reductions to 
        border city enterprise zones in cities located on the western 
        border of the state.  The commissioner shall make allocations to 
        zones in cities on the western border on a per capita basis.  
        Allocations made under this subdivision may be used for tax 
        reductions as provided in section 469.171, or for other offsets 
        of taxes imposed on or remitted by businesses located in the 
        enterprise zone, but only if the municipality determines that 
        the granting of the tax reduction or offset is necessary in 
        order to retain a business within or attract a business to the 
        zone.  Any portion of the allocation provided in this paragraph 
        may alternatively be used for tax reductions under section 
        469.1732 or 469.1734. 
           (b) The commissioner shall allocate $750,000 for tax 
        reductions under section 469.1732 or 469.1734 to cities with 
        border city enterprise zones located on the western border of 
        the state.  The commissioner shall allocate this amount among 
        the cities on a per capita basis.  Any portion of the allocation 
        provided in this paragraph may alternatively be used for tax 
        reductions as provided in section 469.171.  
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 12.  Minnesota Statutes 2004, section 469.310, 
        subdivision 11, as amended by Laws 2005, First Special Session 
        chapter 1, article 4, section 107, is amended to read: 
           Subd. 11.  [QUALIFIED BUSINESS.] (a) A person carrying on a 
        trade or business at a place of business located within a job 
        opportunity building zone is a qualified business for the 
        purposes of sections 469.310 to 469.320 according to the 
        criteria in paragraphs (b) to (f).  
           (b) A person is a qualified business only on those parcels 
        of land for which the person has entered into a business subsidy 
        agreement, as required under section 469.313, with the 
        appropriate local government unit in which the parcels are 
        located. 
           (c) Prior to execution of the business subsidy agreement, 
        the local government unit must consider the following factors: 
           (1) how wages compare to the regional industry average; 
           (2) the number of jobs that will be provided relative to 
        overall employment in the community; 
           (3) the economic outlook for the industry the business will 
        engage in; 
           (4) sales that will be generated from outside the state of 
        Minnesota; 
           (5) how the business will build on existing regional 
        strengths or diversify the regional economy; 
           (6) how the business will increase capital investment in 
        the zone; and 
           (7) any other criteria the commissioner deems necessary. 
           (d) A person that relocates a trade or business from 
        outside a job opportunity building zone into a zone is not a 
        qualified business unless the business meets all of the 
        requirements of paragraphs (b) and (c) and: 
           (1) increases full-time employment in the first full year 
        of operation within the job opportunity building zone by a 
        minimum of five jobs or 20 percent, whichever is greater, 
        measured relative to the operations that were relocated and 
        maintains the required level of employment for each year the 
        zone designation applies; and 
           (2) enters a binding written agreement with the 
        commissioner that: 
           (i) pledges the business will meet the requirements of 
        clause (1); 
           (ii) provides for repayment of all tax benefits enumerated 
        under section 469.315 to the business under the procedures in 
        section 469.319, if the requirements of clause (1) are not met 
        for the taxable year or for taxes payable during the year in 
        which the requirements were not met; and 
           (iii) contains any other terms the commissioner determines 
        appropriate. 
           (e) The commissioner may waive the requirements under 
        paragraph (d), clause (1), if the commissioner determines that 
        the qualified business will substantially achieve the factors 
        under this subdivision. 
           (f) A business is not a qualified business if, at its 
        location or locations in the zone, the business is primarily 
        engaged in making retail sales to purchasers who are physically 
        present at the business's zone location. 
           (g) A qualifying business must pay each employee 
        compensation, including benefits not mandated by law, that on an 
        annualized basis is equal to at least 110 percent of the federal 
        poverty level for a family of four. 
           (h) A public utility, as defined in section 300.111, is not 
        a qualified business. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment and applies to any business entering a 
        business subsidy agreement for a job opportunity development 
        zone after that date. 
           Sec. 13.  Minnesota Statutes 2004, section 469.310, is 
        amended by adding a subdivision to read: 
           Subd. 13.  [RELOCATION PAYROLL PERCENTAGE.] "Relocation 
        payroll percentage" is a fraction, the numerator of which is the 
        zone payroll of the business for the tax year minus the payroll 
        from the relocated operations in the last full year of 
        operations prior to the relocation, and the denominator of which 
        is the zone payroll of the business for the tax year.  The 
        relocation payroll percentage of a business that is not a 
        relocating business is 100 percent. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment but applies only to qualified 
        businesses with business subsidy agreements that are fully 
        executed after August 31, 2005. 
           Sec. 14.  Minnesota Statutes 2004, section 469.316, is 
        amended to read: 
           469.316 [INDIVIDUAL INCOME TAX EXEMPTION.] 
           Subdivision 1.  [APPLICATION.] An individual, estate, or 
        trust operating a trade or business in a job opportunity 
        building zone, and an individual, estate, or trust making a 
        qualifying investment in a qualified business operating in a job 
        opportunity building zone qualifies for the exemptions from 
        taxes imposed under chapter 290, as provided in this section.  
        The exemptions provided under this section apply only to the 
        extent that the income otherwise would be taxable under chapter 
        290.  Subtractions under this section from federal taxable 
        income, alternative minimum taxable income, or any other base 
        subject to tax are limited to the amount that otherwise would be 
        included in the tax base absent the exemption under this 
        section.  This section applies only to taxable years beginning 
        during the duration of the job opportunity building zone. 
           Subd. 2.  [RENTS.] An individual, estate, or trust is 
        exempt from the taxes imposed under chapter 290 on net rents 
        derived from real or tangible personal property used by a 
        qualified business and located in a zone for a taxable year in 
        which the zone was designated a job opportunity building zone.  
        If tangible personal property was used both within and outside 
        of the zone by the qualified business, the exemption amount for 
        the net rental income must be multiplied by a fraction, the 
        numerator of which is the number of days the property was used 
        in the zone and the denominator of which is the total days the 
        property is rented by the qualified business. 
           Subd. 3.  [BUSINESS INCOME.] An individual, estate, or 
        trust is exempt from the taxes imposed under chapter 290 on net 
        income from the operation of a qualified business in a job 
        opportunity building zone.  If the trade or business is carried 
        on within and without the zone and the individual is not a 
        resident of Minnesota, or the taxpayer is an estate or trust, 
        the exemption must be apportioned based on the zone percentage 
        and the relocation payroll percentage for the taxable year.  If 
        the trade or business is carried on within and without the zone 
        and the individual is a resident of Minnesota, the exemption 
        must be apportioned based on the zone percentage and the 
        relocation payroll percentage for the taxable year, except the 
        ratios under section 469.310, subdivision 7, clause (1), items 
        (i) and (ii), must use the denominators of the property and 
        payroll factors determined under section 290.191.  No 
        subtraction is allowed under this section in excess of 20 
        percent of the sum of the job opportunity building zone payroll 
        and the adjusted basis of the property at the time that the 
        property is first used in the job opportunity building zone by 
        the business. 
           Subd. 4.  [CAPITAL GAINS.] (a) An individual, estate, or 
        trust is exempt from the taxes imposed under chapter 290 on: 
           (1) net gain derived on a sale or exchange of real property 
        located in the zone and used by a qualified business.  If the 
        property was held by the individual, estate, or trust during a 
        period when the zone was not designated, the gain must be 
        prorated based on the percentage of time, measured in calendar 
        days, that the real property was held by the individual, estate, 
        or trust during the period the zone designation was in effect to 
        the total period of time the real property was held by the 
        individual; 
           (2) net gain derived on a sale or exchange of tangible 
        personal property used by a qualified business in the zone.  If 
        the property was held by the individual, estate, or trust during 
        a period when the zone was not designated, the gain must be 
        prorated based on the percentage of time, measured in calendar 
        days, that the property was held by the individual, estate, or 
        trust during the period the zone designation was in effect to 
        the total period of time the property was held by the 
        individual.  If the tangible personal property was used outside 
        of the zone during the period of the zone's designation, the 
        exemption must be multiplied by a fraction, the numerator of 
        which is the number of days the property was used in the zone 
        during the time of the designation and the denominator of which 
        is the total days the property was held during the time of the 
        designation; and 
           (3) net gain derived on a sale of an ownership interest in 
        a qualified business operating in the job opportunity building 
        zone, meeting the requirements of paragraph (b).  The exemption 
        on the gain must be multiplied by the zone percentage of the 
        business for the taxable year prior to the sale. 
           (b) A qualified business meets the requirements of 
        paragraph (a), clause (3), if it is a corporation, an S 
        corporation, or a partnership, and for the taxable year its job 
        opportunity building zone percentage exceeds 25 percent.  For 
        purposes of paragraph (a), clause (3), the zone percentage must 
        be calculated by modifying the ratios under section 469.310, 
        subdivision 7, clause (1), items (i) and (ii), to use the 
        denominators of the property and payroll factors determined 
        under section 290.191.  Upon the request of an individual, 
        estate, or trust holding an ownership interest in the entity, 
        the entity must certify to the owner, in writing, the job 
        opportunity building zone percentage needed to determine the 
        exemption. 
           [EFFECTIVE DATE.] This section is effective for tax years 
        beginning after December 31, 2003, except that changes in 
        subdivision 3 relating to the relocation payroll percentage are 
        effective the day following final enactment and apply only to 
        qualified businesses with business subsidy agreements that are 
        fully executed after August 31, 2005. 
           Sec. 15.  Minnesota Statutes 2004, section 469.317, is 
        amended to read: 
           469.317 [CORPORATE FRANCHISE TAX EXEMPTION.] 
           (a) A qualified business is exempt from taxation under 
        section 290.02, the alternative minimum tax under section 
        290.0921, and the minimum fee under section 290.0922, on the 
        portion of its income attributable to operations within the 
        zone.  This exemption is determined as follows: 
           (1) for purposes of the tax imposed under section 290.02, 
        by multiplying its taxable net income by its zone percentage and 
        by its relocation payroll percentage and subtracting the result 
        in determining taxable income; 
           (2) for purposes of the alternative minimum tax under 
        section 290.0921, by multiplying its alternative minimum taxable 
        income by its zone percentage and by its relocation payroll 
        percentage and reducing alternative minimum taxable income by 
        this amount; and 
           (3) for purposes of the minimum fee under section 290.0922, 
        by excluding property and payroll in the zone from the 
        computations of the fee or by exempting the entity under section 
        290.0922, subdivision 2, clause (7). 
           (b) No subtraction is allowed under this section in excess 
        of 20 percent of the sum of the corporation's job opportunity 
        building zone payroll and the adjusted basis of the property at 
        the time that the property is first used in the job opportunity 
        building zone by the corporation. 
           (c) This section applies only to taxable years beginning 
        during the duration of the job opportunity building zone. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment but applies only to qualified 
        businesses with business subsidy agreements that are fully 
        executed after August 31, 2005. 
           Sec. 16.  Minnesota Statutes 2004, section 469.337, is 
        amended to read: 
           469.337 [CORPORATE FRANCHISE TAX EXEMPTION.] 
           (a) A qualified business is exempt from taxation under 
        section 290.02, the alternative minimum tax under section 
        290.0921, and the minimum fee under section 290.0922, on the 
        portion of its income attributable to operations of a qualified 
        business within the biotechnology and health sciences industry 
        zone.  This exemption is determined as follows: 
           (1) for purposes of the tax imposed under section 290.02, 
        by multiplying its taxable net income by its zone percentage and 
        subtracting the result in determining taxable income; 
           (2) for purposes of the alternative minimum tax under 
        section 290.0921, by multiplying its alternative minimum taxable 
        income by its zone percentage and reducing alternative minimum 
        taxable income by this amount; and 
           (3) for purposes of the minimum fee under section 290.0922, 
        by excluding zone property and payroll in the zone from the 
        computations of the fee.  The qualified business is exempt from 
        the minimum fee if all of its property is located in the zone 
        and all of its payroll is zone payroll. 
           (b) No subtraction is allowed under this section in excess 
        of 20 percent of the sum of the corporation's biotechnology and 
        health sciences industry zone payroll and the adjusted basis of 
        the property at the time that the property is first used in the 
        biotechnology and health sciences industry zone by the 
        corporation. 
           (c) No reduction in tax is allowed in excess of the amount 
        allocated under section 469.335. 
           [EFFECTIVE DATE.] This section is effective for tax years 
        beginning after December 31, 2003. 
           Sec. 17.  [CITY OF RAMSEY; HOUSING TAX INCREMENT DISTRICT.] 
           Subdivision 1.  [AUTHORIZATION.] The governing body of the 
        city of Ramsey may create a housing tax increment financing 
        district as provided in this section.  The city or its economic 
        development authority may be the "authority" for the purposes of 
        Minnesota Statutes, sections 469.174 to 469.179. 
           Subd. 2.  [DEVELOPMENT PARCEL.] (a) For the purposes of 
        this section, "development parcel" means the property in the 
        city of Ramsey generally described as the easterly 4.1 acres of 
        Outlot AA, Ramsey Town Center Addition. 
           Subd. 3.  [SPECIAL RULES.] (a) The district established 
        under this section is subject to the provisions of Minnesota 
        Statutes, sections 469.174 to 469.179, except as provided in 
        this subdivision. 
           (b) The district may consist of all or a portion of the 
        development parcel. 
           (c) The housing district shall be as described in Minnesota 
        Statutes, section 469.174, subdivision 11.  All improvements 
        constructed within the district shall be considered to be made 
        for the benefit of low and moderate income persons, if at least 
        20 percent of the housing units in the district are reserved for 
        persons with incomes of 50 percent or less of the metropolitan 
        area median income and that home care and supportive services 
        are available to residents of all housing units in the district. 
           (d) Minnesota Statutes, section 469.176, subdivision 7, 
        does not apply to the housing district authorized in this 
        section. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment, upon compliance with Minnesota 
        Statutes, section 645.021. 
           Sec. 18.  [RURAL FINANCE AUTHORITY.] 
           Subdivision 1.  [APPROPRIATION.] $18,000,000 is 
        appropriated from the bond proceeds fund for the purposes set 
        forth in the Minnesota Constitution, article XI, section 5, 
        clause (h), to the Rural Finance Authority to purchase 
        participation interests in or to make direct agricultural loans 
        to farmers under Minnesota Statutes, chapter 41B.  This 
        appropriation is for the beginning farmer program under 
        Minnesota Statutes, section 41B.039; the loan restructuring 
        program under Minnesota Statutes, section 41B.04; the 
        seller-sponsored program under Minnesota Statutes, section 
        41B.042; the agricultural improvement loan program under 
        Minnesota Statutes, section 41B.043; and the livestock expansion 
        loan program under Minnesota Statutes, section 41B.045.  All 
        debt service on bond proceeds used to finance this appropriation 
        must be repaid by the Rural Finance Authority under Minnesota 
        Statutes, section 16A.643.  Loan participations must be priced 
        to provide full interest and principal coverage and a reserve 
        for potential losses.  Priority for loans must be given first to 
        basic beginning farmer loans; second, to seller-sponsored loans; 
        and third, to agricultural improvement loans. 
           Subd. 2.  [BOND SALE.] To provide the money appropriated in 
        this section from the bond proceeds fund, the commissioner of 
        finance shall sell and issue bonds of the state in an amount up 
        to $18,000,000 in the manner, upon the terms, and with the 
        effect prescribed by Minnesota Statutes, sections 16A.631 to 
        16A.675, and by the Minnesota Constitution, article XI, sections 
        4 to 7. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 19.  [JOBZ EXPENDITURE LIMITATIONS; AUDITS.] 
           Subdivision 1.  [DETERMINATION OF TAX EXPENDITURES.] By 
        September 1, 2005, the commissioner of revenue, with the 
        assistance of the commissioner of employment and economic 
        development, must estimate the total amount of tax expenditures 
        projected to have been obligated for all job opportunity 
        building zone projects that have been approved before June 1, 
        2005.  If the commissioner of revenue determines that the 
        estimated amount of tax expenditures for fiscal years 2005-2007 
        exceeds $13,780,000, the commissioner of revenue must inform the 
        chairs of the house of representatives and senate tax committees.
           Subd. 2.  [AUDITS.] The Tax Increment Financing, Investment 
        and Finance Division of the Office of the State Auditor must 
        annually audit the creation and operation of all job opportunity 
        building zones and business subsidy agreements entered into 
        under Minnesota Statutes, sections 469.310 to 469.320. 
           Sec. 20.  [REPEALER.] 
           Minnesota Statutes 2004, section 272.02, subdivision 65, is 
        repealed effective for taxes payable in 2006 and thereafter.  
        Minnesota Statutes 2004, section 477A.08, is repealed effective 
        for aid payable in 2005 and thereafter. 

                                   ARTICLE 8 
                                  TAX SHELTERS 
           Section 1.  [270C.449] [EQUITABLE ACTIONS.] 
           (a) The commissioner may bring a civil action to enjoin any 
        person from taking action or failing to take action that is 
        subject to penalty under section 289A.60, subdivisions 20, 20a, 
        and 26. 
           (b) In any action under paragraph (a), the court may enjoin 
        the person from engaging in the conduct, if the court finds that:
           (1) the person has engaged in the specified conduct; and 
           (2) injunctive relief is appropriate to prevent recurrence 
        of the conduct. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 2.  [289A.121] [TAX SHELTERS; SPECIAL RULES.] 
           Subdivision 1.  [SCOPE.] The provisions of this section 
        apply to a tax shelter that: 
           (1) is organized in this state; 
           (2) is doing business in this state; 
           (3) is deriving income from sources in this state; or 
           (4) has one or more investors that are Minnesota taxpayers 
        under chapter 290. 
           Subd. 2.  [DEFINITIONS.] (a) For purposes of this section, 
        the definitions under sections 6111, 6112, and 6707A of the 
        Internal Revenue Code, including the regulations under those 
        sections, apply. 
           (b) The term "tax shelter" means any reportable transaction 
        as defined under section 6707A(c)(1) of the Internal Revenue 
        Code. 
           Subd. 3.  [REGISTRATION.] (a) Any material advisor required 
        to register a tax shelter under section 6111 of the Internal 
        Revenue Code must register the shelter with the commissioner. 
           (b) A material advisor subject to this subdivision must 
        send a duplicate of the federal registration information, along 
        with any other information the commissioner requires, to the 
        commissioner not later than the day on which interests in that 
        tax shelter are first offered for sale to Minnesota taxpayers. 
           (c) In addition to the requirements under paragraph (b), 
        any listed transaction must be registered with the commissioner 
        by the latest of: 
           (1) 60 days after entering into the transaction; 
           (2) 60 days after the transaction becomes a listed 
        transaction; or 
           (3) October 15, 2005. 
           Subd. 4.  [REGISTRATION NUMBER.] (a) Any person required to 
        register under section 6111 of the Internal Revenue Code who 
        receives a tax registration number from the Secretary of the 
        Treasury must file, within 30 days after requested by the 
        commissioner, a statement of the registration number with the 
        commissioner. 
           (b) Any person who sells or otherwise transfers an interest 
        in a tax shelter must, in the same time and manner required 
        under section 6111(b) of the Internal Revenue Code, furnish to 
        each investor who purchases or otherwise acquires an interest in 
        the tax shelter the identification number assigned under federal 
        law to the tax shelter. 
           (c) Any person claiming any deduction, credit, or other tax 
        benefit by reason of a tax shelter must include on the return on 
        which the deduction, credit, or other benefit is claimed the 
        identification number assigned under federal law to the tax 
        shelter. 
           Subd. 5.  [REPORTABLE TRANSACTIONS.] (a) For each taxable 
        year in which a taxpayer must make a return or a statement under 
        Code of Federal Regulations, title 26, section 1.6011-4, for a 
        reportable transaction, including a listed transaction, in which 
        the taxpayer participated in a taxable year for which a return 
        is required under chapter 290, the taxpayer must file a copy of 
        the disclosure with the commissioner. 
           (b) Any taxpayer that is a member of a unitary business 
        group that includes any person that must make a disclosure 
        statement under Code of Federal Regulations, title 26, section 
        1.6011-4, must file a disclosure under this subdivision. 
           (c) Disclosure under this subdivision is required for any 
        transaction entered into after December 31, 2001, that the 
        Internal Revenue Service determines is a listed transaction at 
        any time, and must be made in the manner prescribed by the 
        commissioner.  For transactions in which the taxpayer 
        participated for taxable years ending before December 31, 2005, 
        disclosure must be made by the due date of the first return 
        required under chapter 290 that occurs 60 days or more after the 
        enactment of this section.  With respect to transactions in 
        which the taxpayer participated for taxable years ending on and 
        after December 31, 2005, disclosure must be made in the time and 
        manner prescribed in Code of Federal Regulations, title 26, 
        section 1.6011-4(e). 
           (d) Notwithstanding paragraphs (a) to (c), no disclosure is 
        required for transactions entered into after December 31, 2001, 
        and before January 1, 2006, if (1) the taxpayer has filed an 
        amended income tax return which reverses the tax benefits of the 
        tax shelter transaction, or (2) as a result of a federal audit 
        the Internal Revenue Service has determined the tax treatment of 
        the transaction and an amended return has been filed to reflect 
        the federal treatment. 
           Subd. 6.  [LISTS OF INVESTORS.] (a) Any person required to 
        maintain a list under section 6112 of the Internal Revenue Code 
        with respect to any reportable transaction must furnish the list 
        to the commissioner no later than when required under federal 
        law.  The list required under this subdivision must include the 
        same information required with respect to a reportable 
        transaction under section 6112 of the Internal Revenue Code, and 
        any other information the commissioner requires. 
           (b) For transactions entered into on or after December 31, 
        2001, that become listed transactions at any time, the list must 
        be furnished to the commissioner by the latest of: 
           (1) 60 days after entering into the transaction; 
           (2) 60 days after the transaction becomes a listed 
        transaction; or 
           (3) October 15, 2005. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 3.  Minnesota Statutes 2004, section 289A.38, is 
        amended by adding a subdivision to read: 
           Subd. 16.  [REPORTABLE TRANSACTIONS.] (a) If a taxpayer 
        fails to include on any return or statement for any taxable year 
        any information with respect to a reportable transaction, as 
        required by federal law and under section 289A.121, the 
        commissioner may recompute the tax, including a refund, within 
        the later of: 
           (1) six years after the return is filed with respect to the 
        taxable year in which the taxpayer participated in the 
        reportable transaction; or 
           (2) for a listed transaction, as defined in section 
        289A.121, for which the taxpayer fails to include on any return 
        or statement for any taxable year any information that is 
        required under section 289A.121, one year after the earlier of: 
           (i) the date the taxpayer furnishes the required 
        information to the commissioner; or 
           (ii) the date that a material advisor, as defined in 
        section 289A.121, meets the requirements of section 289A.121, 
        relating to the transaction with respect to the taxpayer.  
           (b) If tax is assessable solely because of this section, 
        the assessable deficiency is limited to the items that were not 
        disclosed as required under section 289A.121. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 4.  Minnesota Statutes 2004, section 289A.60, 
        subdivision 4, is amended to read: 
           Subd. 4.  [SUBSTANTIAL UNDERSTATEMENT OF LIABILITY; 
        PENALTY.] (a) The commissioner of revenue shall impose a penalty 
        for substantial understatement of any tax payable to the 
        commissioner, except a tax imposed under chapter 297A. 
           (b) There must be added to the tax an amount equal to 20 
        percent of the amount of any underpayment attributable to the 
        understatement.  There is a substantial understatement of tax 
        for the period if the amount of the understatement for the 
        period exceeds the greater of:  
           (1) ten percent of the tax required to be shown on the 
        return for the period; or 
           (2)(a)(i) $10,000 in the case of a mining company or a 
        corporation, other than an S corporation as defined in section 
        290.9725, when the tax is imposed by chapter 290 or section 
        298.01 or 298.015, or 
           (b)(ii) $5,000 in the case of any other taxpayer, and in 
        the case of a mining company or a corporation any tax not 
        imposed by chapter 290 or section 298.01 or 298.015.  
           (c) For a corporation, other than an S corporation, there 
        is also a substantial understatement of tax for any taxable year 
        if the amount of the understatement for the taxable year exceeds 
        the lesser of: 
           (1) ten percent of the tax required to be shown on the 
        return for the taxable year (or, if greater, $10,000); or 
           (2) $10,000,000. 
           (d) The term "understatement" means the excess of the 
        amount of the tax required to be shown on the return for the 
        period, over the amount of the tax imposed that is shown on the 
        return.  The excess must be determined without regard to items 
        to which subdivision 27 applies.  The amount of the 
        understatement shall be reduced by that part of the 
        understatement that is attributable to the tax treatment of any 
        item by the taxpayer if (1) there is or was substantial 
        authority for the treatment, or (2)(i) any item with respect to 
        which the relevant facts affecting the item's tax treatment are 
        adequately disclosed in the return or in a statement attached to 
        the return and (ii) there is a reasonable basis for the tax 
        treatment of the item.  The exception for substantial authority 
        under clause (1) does not apply to positions listed by the 
        Secretary of the Treasury under section 6662(d)(3) of the 
        Internal Revenue Code.  A corporation does not have a reasonable 
        basis for its tax treatment of an item attributable to a 
        multiple-party financing transaction if the treatment does not 
        clearly reflect the income of the corporation within the meaning 
        of section 6662(d)(2)(B) of the Internal Revenue Code.  The 
        special rules in cases involving tax shelters provided in 
        section 6662(d)(2)(C) of the Internal Revenue Code shall apply 
        and shall apply to a tax shelter the principal purpose of which 
        is the avoidance or evasion of state taxes.  
           (e) The commissioner may abate all or any part of the 
        addition to the tax provided by this section on a showing by the 
        taxpayer that there was reasonable cause for the understatement, 
        or part of it, and that the taxpayer acted in good faith.  The 
        additional tax and penalty shall bear interest at the rate 
        specified in section 270.75 from the time the tax should have 
        been paid until paid. 
           [EFFECTIVE DATE.] This section is effective for taxable 
        years beginning after December 31, 2004.  
           Sec. 5.  Minnesota Statutes 2004, section 289A.60, 
        subdivision 20, is amended to read: 
           Subd. 20.  [PENALTY FOR PROMOTING ABUSIVE TAX SHELTERS.] 
        (a) Any person who: 
           (1)(i) organizes or assists in the organization of a 
        partnership or other entity, an investment plan or arrangement, 
        or any other plan or arrangement, or (ii) participates in the 
        sale of any interest in an entity or plan or arrangement 
        referred to in clause (i); and 
           (2) makes or furnishes in connection with the organization 
        or sale a statement with respect to the allowability of a 
        deduction or credit, the excludability of income, or the 
        securing of any other tax benefit by reason of holding an 
        interest in the entity or participating in the plan or 
        arrangement that the person knows or has reason to know is false 
        or fraudulent concerning any material matter, shall pay a 
        penalty equal to the greater of $1,000 or 20 percent of the 
        gross income derived or to be derived by the person from the 
        activity. 
           The penalty imposed by this subdivision is in addition to 
        any other penalty provided by this section.  The penalty must be 
        collected in the same manner as any delinquent income tax.  In a 
        proceeding involving the issue of whether or not any person is 
        liable for this penalty, the burden of proof is upon the 
        commissioner. 
           (b) If an activity for which a penalty imposed under this 
        subdivision involves a statement that a material advisor, as 
        defined in section 289A.121, has reason to know is false or 
        fraudulent as to any material matter, the amount of the penalty 
        equals the greater of: 
           (1) the amount determined under paragraph (a); or 
           (2) 50 percent of the gross income derived or to be derived 
        from the activity. 
           [EFFECTIVE DATE.] This section is effective for 
        transactions entered into after the day following final 
        enactment. 
           Sec. 6.  Minnesota Statutes 2004, section 289A.60, is 
        amended by adding a subdivision to read: 
           Subd. 20a.  [AIDING AND ABETTING UNDERSTATING OF TAX 
        LIABILITY.] (a) A penalty in the amount specified under 
        paragraph (b) for each document is imposed on each person who: 
           (1) aids or assists in, procures, or advises with respect 
        to, the preparation or presentation of any portion of a return, 
        affidavit, claim, or other document; 
           (2) knows or has reason to believe that the portion of a 
        return, affidavit, claim, or other document will be used in 
        connection with any material matter arising under the Minnesota 
        individual income or corporate franchise tax; and 
           (3) knows that the portion, if so used, would result in an 
        understatement of the liability for tax of another person. 
           (b)(1) Except as provided in clause (2), the amount of the 
        penalty imposed by this subdivision is $1,000. 
           (2) If the return, affidavit, claim, or other document 
        relates to the tax liability of a corporation, the amount of the 
        penalty imposed by paragraph (a) is $10,000. 
           (3) If any person is subject to a penalty under paragraph 
        (a) for any document relating to any taxpayer for any taxable 
        period or taxable event, the person is not subject to a penalty 
        under paragraph (a) for any other document relating to the 
        taxpayer for the taxable period or event. 
           (c) For purposes of this subdivision, "procures" includes 
        (1) ordering or otherwise causing any other person to do an act, 
        and (2) knowing of, and not attempting to prevent, participation 
        by any other person in an act. 
           (d) In a proceeding involving the issue of whether or not 
        any person is liable for this penalty, the burden of proof is 
        upon the commissioner.  The penalty applies whether or not the 
        understatement is with the knowledge or consent of the persons 
        authorized or required to present the return, affidavit, claim, 
        or other document. 
           (e) For purposes of paragraph (a), clause (1), a person 
        furnishing typing, reproducing, or other mechanical assistance 
        with respect to a document is not treated as having aided or 
        assisted in the preparation of the document by reason of the 
        assistance. 
           (f)(1) Except as provided by clause (2), the penalty 
        imposed by this section is in addition to any other penalty 
        provided by law. 
           (2) No penalty applies under subdivision 20 to any person 
        for any document for which a penalty is assessed on the person 
        under this subdivision. 
           [EFFECTIVE DATE.] This section is effective for documents 
        prepared after the day following final enactment that relate to 
        taxable years beginning after December 31, 2004, or to returns 
        filed after the day following final enactment. 
           Sec. 7.  Minnesota Statutes 2004, section 289A.60, is 
        amended by adding a subdivision to read: 
           Subd. 26.  [TAX SHELTER PENALTIES; REGISTRATION AND 
        LISTING.] (a) For purposes of this subdivision, "material 
        advisor" has the meaning given it under section 6111(b)(1) of 
        the Internal Revenue Code. 
           (b) The penalties in this subdivision apply in connection 
        with the use of tax shelters, as defined under section 289A.121, 
        and the definitions under that section apply for the purposes of 
        this subdivision. 
           (c) A material advisor who fails to register a tax shelter, 
        including providing all of the required information under 
        section 289A.121, on or before the date prescribed or who files 
        false or incomplete information with respect to the transaction 
        is subject to a penalty of $50,000.  If the tax shelter is a 
        listed transaction, a penalty applies equal to the greater of: 
           (1) $200,000; 
           (2) 50 percent of the gross income that the material 
        advisor derived from that activity; or 
           (3) 75 percent of the gross income that the material 
        advisor derived from that activity if the material advisor 
        intentionally failed to act. 
           (d)(1) Any person who fails to include on a return or 
        statement any information with respect to a reportable 
        transaction as required under section 289A.121 is subject to a 
        penalty equal to: 
           (i) $10,000 in the case of an individual and $50,000 in any 
        other case; or 
           (ii) with respect to a listed transaction, $100,000 in the 
        case of an individual and $200,000 in any other case. 
           (2) For a unitary business in which more than one member 
        fails to include information on its return or statement for the 
        same reportable transaction, the penalty under clause (1) for 
        each additional member that fails to include the required 
        information on its return or statement for the reportable 
        transaction is limited to the following amount: 
           (i) $500 for each member, subject to a maximum additional 
        penalty of $25,000; and 
           (ii) with respect to a listed transaction, $1,000 for each 
        member, subject to a maximum additional penalty of $100,000. 
           (e) A material advisor required to maintain or provide a 
        list under section 289A.121, subdivision 6, is subject to a 
        penalty equal to $10,000 for each day after the 20th day that 
        the material advisor failed to make the list available to the 
        commissioner after written request for that list was made.  No 
        penalty applies for a failure on any day if the failure is due 
        to reasonable cause. 
           (f) The penalty imposed by this subdivision is in addition 
        to any other penalty imposed under this section. 
           (g) Notwithstanding section 270C.34, the commissioner may 
        abate all or any portion of any penalty imposed by paragraphs 
        (c) and (d) for any violation, only if all of the following 
        apply: 
           (1) the violation is for a reportable transaction, other 
        than a listed transaction; and 
           (2) abating the penalty would promote compliance with the 
        requirements of chapter 290. 
           (h) Notwithstanding any other law or rule, a determination 
        under paragraph (g) may not be reviewed in any judicial 
        proceeding. 
           [EFFECTIVE DATE.] This section is effective for taxable 
        years beginning after December 31, 2000.  For taxable years 
        beginning before January 1, 2005, paragraphs (c) and (d) apply 
        only if disclosure or registration was not made by October 15, 
        2005. 
           Sec. 8.  Minnesota Statutes 2004, section 289A.60, is 
        amended by adding a subdivision to read: 
           Subd. 27.  [REPORTABLE TRANSACTION UNDERSTATEMENT.] (a) If 
        a taxpayer has a reportable transaction understatement for any 
        taxable year, an amount equal to 20 percent of the amount of the 
        reportable transaction understatement must be added to the tax. 
           (b)(1) For purposes of this subdivision, "reportable 
        transaction understatement" means the product of: 
           (i) the amount of the increase, if any, in taxable income 
        that results from a difference between the proper tax treatment 
        of an item to which this section applies and the taxpayer's 
        treatment of that item as shown on the taxpayer's tax return; 
        and 
           (ii) the highest rate of tax imposed on the taxpayer under 
        section 290.06 determined without regard to the understatement. 
           (2) For purposes of clause (1)(i), any reduction of the 
        excess of deductions allowed for the taxable year over gross 
        income for that year, and any reduction in the amount of capital 
        losses which would, without regard to section 1211 of the 
        Internal Revenue Code, be allowed for that year, must be treated 
        as an increase in taxable income. 
           (c) This subdivision applies to any item that is 
        attributable to: 
           (1) any listed transaction under section 289A.121; and 
           (2) any reportable transaction, other than a listed 
        transaction, if a significant purpose of that transaction is the 
        avoidance or evasion of federal income tax liability.  
           (d) Paragraph (a) applies by substituting "30 percent" for 
        "20 percent" with respect to the portion of any reportable 
        transaction understatement with respect to which the disclosure 
        requirements of section 289A.121, subdivision 5, and section 
        6664(d)(2)(A) of the Internal Revenue Code are not met. 
           (e)(1) No penalty applies under this subdivision with 
        respect to any portion of a reportable transaction 
        understatement if the taxpayer shows that there was reasonable 
        cause for the portion and that the taxpayer acted in good faith 
        with respect to the portion.  This paragraph applies only if: 
           (i) the relevant facts affecting the tax treatment of the 
        item are adequately disclosed as required under section 
        289A.121; 
           (ii) there is or was substantial authority for the 
        treatment; and 
           (iii) the taxpayer reasonably believed that the treatment 
        was more likely than not the proper treatment. 
           (2) A taxpayer who did not adequately disclose under 
        section 289A.121 meets the requirements of clause (1)(i), if the 
        commissioner abates the penalty under section 270C.34. 
           (3) For purposes of clause (1)(iii), a taxpayer is treated 
        as having a reasonable belief with respect to the tax treatment 
        of an item only if the belief: 
           (i) is based on the facts and law that exist when the 
        return of tax which includes the tax treatment is filed; and 
           (ii) relates solely to the taxpayer's chances of success on 
        the merits of the treatment and does not take into account the 
        possibility that a return will not be audited, the treatment 
        will not be raised on audit, or the treatment will be resolved 
        through settlement if it is raised. 
           (4) An opinion of a tax advisor may not be relied upon to 
        establish the reasonable belief of a taxpayer if: 
           (i) the tax advisor: 
           (A) is a material advisor, as defined in section 289A.121, 
        and participates in the organization, management, promotion, or 
        sale of the transaction or is related (within the meaning of 
        section 267(b) or 707(b)(1) of the Internal Revenue Code) to any 
        person who so participates; 
           (B) is compensated directly or indirectly by a material 
        advisor with respect to the transaction; 
           (C) has a fee arrangement with respect to the transaction 
        which is contingent on all or part of the intended tax benefits 
        from the transaction being sustained; or 
           (D) has a disqualifying financial interest with respect to 
        the transaction, as determined under United States Treasury 
        regulations prescribed to implement the provisions of section 
        6664(d)(3)(B)(ii)(IV) of the Internal Revenue Code; or 
           (ii) the opinion: 
           (A) is based on unreasonable factual or legal assumptions, 
        including assumptions as to future events; 
           (B) unreasonably relies on representations, statements, 
        findings, or agreements of the taxpayer or any other person; 
           (C) does not identify and consider all relevant facts; or 
           (D) fails to meet any other requirement as the Secretary of 
        the Treasury may prescribe under federal law. 
           (f) The penalty imposed by this subdivision applies in lieu 
        of the penalty imposed under subdivision 4. 
           [EFFECTIVE DATE.] This section is effective for taxable 
        years beginning after December 31, 2000.  For taxable years 
        beginning before January 1, 2005, it applies only if disclosure 
        was not made by October 15, 2005, as required by Minnesota 
        Statutes, section 289A.121. 
           Sec. 9.  [VOLUNTARY COMPLIANCE INITIATIVE.] 
           Subdivision 1.  [ESTABLISHMENT.] The commissioner of 
        revenue shall establish and administer a voluntary compliance 
        initiative for eligible taxpayers under subdivision 3.  
           Subd. 2.  [TIME PERIOD; SCOPE.] (a) The commissioner shall 
        conduct the voluntary compliance initiative from August 1, 2005, 
        to January 31, 2006, under Minnesota Statutes, sections 270C.03 
        and 270C.34. 
           (b) The voluntary compliance initiative applies to tax 
        liabilities and penalties attributable to an abusive tax 
        avoidance transaction for taxable years beginning before January 
        1, 2005.  An abusive tax avoidance transaction means a listed 
        transaction, a potentially abusive tax shelter, or a reportable 
        transaction as those terms are defined in Minnesota Statutes, 
        section 289A.121. 
           Subd. 3.  [ELIGIBILITY.] (a) No person may participate in 
        the voluntary compliance initiative if: 
           (1) the taxpayer was convicted of a crime in connection 
        with an abusive tax avoidance transaction or transactions; 
           (2) a criminal complaint was filed against the taxpayer in 
        connection with an abusive tax avoidance transaction or 
        transactions; 
           (3) the taxpayer is the subject of a criminal investigation 
        in connection with an abusive tax avoidance transaction or 
        transactions; 
           (4) the taxpayer was eligible to participate in the 
        Internal Revenue Service's Offshore Voluntary Compliance 
        Initiative, as set forth in Revenue Procedure 2003-11, and did 
        not participate; 
           (5) the taxpayer was eligible to participate in the 
        Internal Revenue Service's Son of Boss Settlement Initiative 
        promulgated in Internal Revenue Service, Announcement 2004-46, 
        for transactions described in Internal Revenue Service Notice 
        2000-44, 2000-2 Cumulative Bulletin 255, and did not 
        participate; or 
           (6) the taxpayer does not meet other eligibility conditions 
        established by the commissioner as a condition for participating 
        in the initiative. 
           (b) A person not disqualified under paragraph (a) may 
        participate in the voluntary compliance initiative. 
           Subd. 4.  [ELECTION; COMMISSIONER AUTHORITY.] (a) An 
        eligible taxpayer that meets the requirements of subdivision 3 
        with respect to any taxable year may elect to participate in the 
        voluntary compliance program under either subdivision 5 or 6 for 
        a particular tax avoidance period.  The election must be made 
        separately for each taxable year and in the form and manner 
        prescribed by the commissioner, and once made is irrevocable. 
           (b) The commissioner of revenue may issue forms and 
        instructions and take other actions necessary, including the use 
        of agreements under Minnesota Statutes, section 270C.52, to 
        implement the voluntary compliance initiative. 
           (c) The provisions of this section do not restrict the 
        authority of the commissioner to abate penalties under Minnesota 
        Statutes, section 270C.34, for eligible taxpayers who do not 
        participate in the voluntary compliance initiative. 
           Subd. 5.  [PARTICIPATION WITHOUT RIGHT OF APPEAL.] (a) A 
        person participating in the voluntary compliance initiative 
        under this subdivision waives the right to an administrative 
        appeal, to a claim for refund, or to file an action in district 
        court or tax court.  The person participating must: 
           (1) file an amended return for each taxable year for which 
        the taxpayer has filed a tax return using an abusive tax 
        avoidance transaction to underreport the taxpayer's tax 
        liability for the taxable year.  Each amended return must report 
        all income from all sources, without regard to the abusive tax 
        avoidance transactions; and 
           (2) pay taxes and interest due in full, except that the 
        commissioner of revenue may enter into an installment payment 
        agreement under Minnesota Statutes, section 270C.52, before the 
        taxpayer files an amended return. 
           (b) The commissioner of revenue shall abate all penalties 
        imposed under Minnesota Statutes, chapter 289A, which could have 
        been assessed in connection with the use of an abusive tax 
        avoidance transaction, for each taxable year for which the 
        taxpayer elects to participate in the voluntary compliance 
        initiative under this subdivision, to the extent those penalties 
        are a result of underreporting of tax liabilities attributable 
        to the use of abusive tax avoidance transactions, for which a 
        participating person files an amended return in compliance with 
        paragraph (a). 
           (c) No criminal action may be brought against a taxpayer 
        for the taxable years reported under the voluntary compliance 
        initiative with respect to the issues for which a taxpayer 
        voluntarily complies under this section. 
           (d) A person filing an amended return under this 
        subdivision of the voluntary compliance initiative may not file 
        a claim for refund, an administrative appeal, or an action in 
        district court or tax court with regard to the amount of taxes 
        or interest paid with the amended return.  Nothing in this 
        subdivision precludes a taxpayer from filing a claim for credit 
        or refund for the same taxable year in which a tax avoidance 
        transaction was reported if the credit or refund is not 
        attributable to the tax avoidance transaction. 
           Subd. 6.  [PARTICIPATION WITH RIGHT OF APPEAL.] (a) A 
        person participating in the voluntary compliance initiative who 
        does not waive the right to an administrative appeal, a claim 
        for refund, or an action in district court or tax court must: 
           (1) file an amended return for each taxable year for which 
        the taxpayer has filed a tax return using an abusive tax 
        avoidance transaction to underreport the taxpayer's tax 
        liability for that taxable year.  Each amended return must 
        report all income from all sources, without regard to the 
        abusive tax avoidance transactions; and 
           (2) pay taxes and interest due in full, except that the 
        commissioner of revenue may enter into an installment payment 
        agreement pursuant to Minnesota Statutes, section 270C.52, prior 
        to the taxpayer filing an amended return. 
           (b) The commissioner of revenue shall abate all penalties 
        imposed under Minnesota Statutes, chapter 289A, except for the 
        penalty for substantial understatement of tax liability under 
        Minnesota Statutes, section 289A.60, subdivision 4, which could 
        have been assessed in connection with the use of an abusive tax 
        avoidance transaction, for each taxable year for which the 
        taxpayer elects to participate in the voluntary compliance 
        initiative under this subdivision, to the extent those penalties 
        apply to underreporting of tax liabilities attributable to the 
        use of abusive tax avoidance transactions for which a 
        participating person files an amended return in compliance with 
        paragraph (a).  The taxpayer may subsequently file a claim for 
        refund or credit under Minnesota Statutes, section 289A.50.  
           (c) No criminal action may be brought against a taxpayer 
        for the taxable years reported under the voluntary compliance 
        initiative with respect to the issues for which a taxpayer 
        voluntarily complies under this section. 
           (d) The taxpayer may file an administrative appeal or an 
        action in district court or tax court only after the earlier of 
        the following occurs: 
           (1) the date the commissioner of revenue takes action on 
        the claim for refund for the taxable year; 
           (2) 180 days after the date of a final determination by the 
        Internal Revenue Service with respect to the transaction or 
        transactions to which Minnesota Statutes, chapter 290, applies; 
        or 
           (3) four years after the date the claim for refund was 
        filed. 
           (e)(1) The taxpayer is subject to the substantial 
        understatement penalty under Minnesota Statutes, section 
        289A.60, subdivision 4.  The penalty may be assessed: 
           (i) when the commissioner of revenue takes action on the 
        claim for refund; or 
           (ii) when a federal determination becomes final for the 
        same issue, in which case the penalty must be assessed, and may 
        not be abated, if the penalty was assessed at the federal level. 
           (2) In determining the amount of the underpayment of tax, 
        Code of Federal Regulations, title 26, section 1.6664-2(c)(2), 
        relating to qualified amended returns, applies.  The 
        underpayment is the difference between the amount of tax on the 
        original return or the qualified amended return and the correct 
        amount of tax for the taxable year.  Except in cases covered by 
        clause (1)(ii), where the amount of the federal determination 
        governs, the underpayment must not be less than the amount of 
        the claim for refund filed by the taxpayer that was denied. 
           (3) The penalty is due and payable upon notice and demand 
        by the commissioner of revenue.  Only after the taxpayer has 
        paid all amounts due, including the penalty, and the claim is 
        denied in whole or in part, may the taxpayer file an appeal 
        under Minnesota Statutes, section 270C.34, subdivision 2, which 
        may be filed in conjunction with the appeal under paragraph (d). 
           Subd. 7.  [COMMISSIONER ORDERS AND PENALTIES.] After 
        January 31, 2006, the commissioner of revenue may: 
           (1) issue an order of assessment within the time period 
        permitted under Minnesota Statutes, section 289A.38, upon an 
        amended return filed under this section for an underreported 
        amount of tax; 
           (2) impose penalties on an underreported amount of tax on 
        an amended return filed under this section; or 
           (3) seek initiation of a criminal action against any person 
        based on any underreported amount of tax on an amended return 
        filed under this section. 
           Subd. 8.  [PENALTY RELIEF; EXCEPTION.] For purposes of this 
        section, if the commissioner subsequently determines that the 
        correct amount of Minnesota income tax was not paid for the 
        taxable year for a participant in the voluntary compliance 
        initiative, then the penalty relief under this section does not 
        apply to any portion of the underpayment of tax attributable to 
        a tax avoidance transaction not paid to the state. 
           Subd. 9.  [SPECIAL RULES; QUALIFIED FEDERAL INITIATIVE] (a) 
        Notwithstanding any provision of this section to the contrary, a 
        taxpayer who elected to accept a settlement offer under a 
        qualified federal initiative and was subject to federal 
        penalties under the terms of the qualified federal initiative, 
        may participate in the voluntary compliance initiative under 
        subdivision 5 only and is not eligible to participate under 
        subdivision 6.  In addition to the requirements of subdivision 5 
        and any other applicable provision of this section, the taxpayer 
        must pay a penalty equal to one-half of the federal penalty rate 
        that applied under the closing agreement entered into by the 
        taxpayer under the qualified federal initiative multiplied by 
        the Minnesota underpayment attributable to the transaction. 
           (b) "Qualified federal initiative" means: 
           (1) the Internal Revenue Service's Son of Boss Settlement 
        Initiative promulgated in Internal Revenue Service, Announcement 
        2004-46, for transactions described in Internal Revenue Service 
        Notice 2000-44, 2000-2 Cumulative Bulletin 255; and 
           (2) the Internal Revenue Service's Offshore Voluntary 
        Compliance Initiative, as set forth in Revenue Procedure, 
        2003-11. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 

                                   ARTICLE 9 
                   DEPARTMENT OF REVENUE ELECTRONIC PAYMENTS 
           Section 1.  Minnesota Statutes 2004, section 289A.20, 
        subdivision 2, is amended to read: 
           Subd. 2.  [WITHHOLDING FROM WAGES, ENTERTAINER WITHHOLDING, 
        WITHHOLDING FROM PAYMENTS TO OUT-OF-STATE CONTRACTORS, AND 
        WITHHOLDING BY PARTNERSHIPS AND SMALL BUSINESS CORPORATIONS.] 
        (a) A tax required to be deducted and withheld during the 
        quarterly period must be paid on or before the last day of the 
        month following the close of the quarterly period, unless an 
        earlier time for payment is provided.  A tax required to be 
        deducted and withheld from compensation of an entertainer and 
        from a payment to an out-of-state contractor must be paid on or 
        before the date the return for such tax must be filed under 
        section 289A.18, subdivision 2.  Taxes required to be deducted 
        and withheld by partnerships and S corporations must be paid on 
        or before the date the return must be filed under section 
        289A.18, subdivision 2. 
           (b) An employer who, during the previous quarter, withheld 
        more than $1,500 of tax under section 290.92, subdivision 2a or 
        3, or 290.923, subdivision 2, must deposit tax withheld under 
        those sections with the commissioner within the time allowed to 
        deposit the employer's federal withheld employment taxes under 
        Code of Federal Regulations, title 26, section 31.6302-1, as 
        amended through December 31, 2001, without regard to the safe 
        harbor or de minimis rules in subparagraph (f) or the one-day 
        rule in subsection (c), clause (3).  Taxpayers must submit a 
        copy of their federal notice of deposit status to the 
        commissioner upon request by the commissioner. 
           (c) The commissioner may prescribe by rule other return 
        periods or deposit requirements.  In prescribing the reporting 
        period, the commissioner may classify payors according to the 
        amount of their tax liability and may adopt an appropriate 
        reporting period for the class that the commissioner judges to 
        be consistent with efficient tax collection.  In no event will 
        the duration of the reporting period be more than one year. 
           (d) If less than the correct amount of tax is paid to the 
        commissioner, proper adjustments with respect to both the tax 
        and the amount to be deducted must be made, without interest, in 
        the manner and at the times the commissioner prescribes.  If the 
        underpayment cannot be adjusted, the amount of the underpayment 
        will be assessed and collected in the manner and at the times 
        the commissioner prescribes. 
           (e) If the aggregate amount of the tax withheld during a 
        fiscal year ending June 30 under section 290.92, subdivision 2a 
        or 3, is equal to or exceeds the amounts established for 
        remitting federal withheld taxes pursuant to the regulations 
        promulgated under section 6302(h) of the Internal Revenue Code,: 
           (1) $20,000 or more in the fiscal year ending June 30, 
        2005; or 
           (2) $10,000 or more in the fiscal year ending June 30, 
        2006, and fiscal years thereafter, 
        the employer must remit each required deposit for wages paid in 
        the subsequent calendar year by electronic means. 
           (f) A third-party bulk filer as defined in section 290.92, 
        subdivision 30, paragraph (a), clause (2), who remits 
        withholding deposits must remit all deposits by electronic means 
        as provided in paragraph (e), regardless of the aggregate amount 
        of tax withheld during a fiscal year for all of the employers.  
           Sec. 2.  Minnesota Statutes 2004, section 289A.20, 
        subdivision 4, is amended to read: 
           Subd. 4.  [SALES AND USE TAX.] (a) The taxes imposed by 
        chapter 297A are due and payable to the commissioner monthly on 
        or before the 20th day of the month following the month in which 
        the taxable event occurred, or following another reporting 
        period as the commissioner prescribes or as allowed under 
        section 289A.18, subdivision 4, paragraph (f) or (g), except 
        that use taxes due on an annual use tax return as provided under 
        section 289A.11, subdivision 1, are payable by April 15 
        following the close of the calendar year. 
           (b) A vendor having a liability of $120,000 or more during 
        a fiscal year ending June 30 must remit the June liability for 
        the next year in the following manner: 
           (1) Two business days before June 30 of the year, the 
        vendor must remit 85 percent of the estimated June liability to 
        the commissioner.  
           (2) On or before August 20 of the year, the vendor must pay 
        any additional amount of tax not remitted in June. 
           (c) A vendor having a liability of $120,000 or more during 
        a fiscal year ending June 30: 
           (1) $20,000 or more in the fiscal year ending June 30, 
        2005; or 
           (2) $10,000 or more in the fiscal year ending June 30, 
        2006, and fiscal years thereafter, 
        must remit all liabilities on returns due for periods beginning 
        in the subsequent calendar year by electronic means on or before 
        the 20th day of the month following the month in which the 
        taxable event occurred, or on or before the 20th day of the 
        month following the month in which the sale is reported under 
        section 289A.18, subdivision 4, except for 85 percent of the 
        estimated June liability, which is due two business days before 
        June 30.  The remaining amount of the June liability is due on 
        August 20.  
           Sec. 3.  Minnesota Statutes 2004, section 289A.26, 
        subdivision 2a, is amended to read: 
           Subd. 2a.  [ELECTRONIC PAYMENTS.] If the aggregate amount 
        of estimated tax payments made during a calendar year is equal 
        to or exceeds $20,000,: 
           (1) $20,000 or more in the fiscal year ending June 30, 
        2005; or 
           (2) $10,000 or more in the fiscal year ending June 30, 
        2006, and fiscal years thereafter, 
        all estimated tax payments in the subsequent calendar year must 
        be paid by electronic means. 
           Sec. 4.  Minnesota Statutes 2004, section 295.55, 
        subdivision 4, is amended to read: 
           Subd. 4.  [ELECTRONIC PAYMENTS.] A taxpayer with an 
        aggregate tax liability of $120,000 or more during a fiscal year 
        ending June 30: 
           (1) $20,000 or more in the fiscal year ending June 30, 
        2005; or 
           (2) $10,000 or more in the fiscal year ending June 30, 
        2006, and fiscal years thereafter, 
        must remit all liabilities by electronic means in the subsequent 
        calendar year. 
           Sec. 5.  [EFFECTIVE DATE.] 
           This article is effective for payments due in calendar year 
        2006, and in calendar years thereafter, based upon liabilities 
        incurred in the fiscal year ending June 30, 2005, and in fiscal 
        years thereafter. 

                                   ARTICLE 10 
                    INTERNATIONAL ECONOMIC DEVELOPMENT ZONE 
           Section 1.  Minnesota Statutes 2004, section 272.02, is 
        amended by adding a subdivision to read: 
           Subd. 83.  [INTERNATIONAL ECONOMIC DEVELOPMENT ZONE 
        PROPERTY.] (a) Improvements to real property, and personal 
        property, classified under section 273.13, subdivision 24, and 
        located within the international economic development zone 
        designated under section 469.322, are exempt from ad valorem 
        taxes levied under chapter 275, if the improvements are: 
           (1) part of a regional distribution center as defined in 
        section 469.321; or 
           (2) occupied by a qualified business as defined in section 
        469.321, that uses the improvements primarily in freight 
        forwarding operations. 
           (b) The exemption applies beginning for the first 
        assessment year after designation of the international economic 
        development zone.  The exemption applies to each assessment year 
        that begins during the duration of the international economic 
        development zone.  To be exempt under paragraph (a), clause (2), 
        the property must be occupied by July 1 of the assessment year 
        by a qualified business that has signed the business subsidy 
        agreement by July 1 of the assessment year. 
           [EFFECTIVE DATE.] This section is effective beginning for 
        property taxes payable in 2008. 
           Sec. 2.  Minnesota Statutes 2004, section 290.01, 
        subdivision 19b, as amended by Laws 2005, chapter 151, article 
        6, section 13, 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) net 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 363A.  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 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 ; 
           (7) 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; 
           (8) 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; 
           (9) in each of the five tax years immediately following the 
        tax year in which an addition is required under subdivision 19a, 
        clause (7), or 19c, clause (15), in the case of a shareholder of 
        a corporation that is an S corporation, 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), or 
        subdivision 19c, clause (15), in the case of a shareholder of an 
        S corporation, 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; and 
           (10) job opportunity building zone income as provided under 
        section 469.316; and 
           (11) international economic development zone income as 
        provided under section 469.325. 
           [EFFECTIVE DATE.] This section is effective for tax years 
        beginning after December 31, 2006. 
           Sec. 3.  Minnesota Statutes 2004, section 290.01, 
        subdivision 29, is amended to read: 
           Subd. 29.  [TAXABLE INCOME.] The term "taxable income" 
        means:  
           (1) for individuals, estates, and trusts, the same as 
        taxable net income; 
           (2) for corporations, the taxable net income less 
           (i) the net operating loss deduction under section 290.095; 
           (ii) the dividends received deduction under section 290.21, 
        subdivision 4; 
           (iii) the exemption for operating in a job opportunity 
        building zone under section 469.317; and 
           (iv) the exemption for operating in a biotechnology and 
        health sciences industry zone under section 469.337; and 
           (v) the exemption for operating in an international 
        economic development zone under section 469.326. 
           [EFFECTIVE DATE.] This section is effective for tax years 
        beginning after December 31, 2006. 
           Sec. 4.  Minnesota Statutes 2004, 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 subtraction under section 290.01, 
        subdivision 19b, clause clauses (10) and (11), and 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, 
        clauses (1), (10), and (11). 
           [EFFECTIVE DATE.] This section is effective for tax years 
        beginning after December 31, 2006. 
           Sec. 5.  Minnesota Statutes 2004, section 290.06, is 
        amended by adding a subdivision to read: 
           Subd. 32.  [INTERNATIONAL ECONOMIC DEVELOPMENT ZONE JOB 
        CREDIT.] A taxpayer that is a qualified business, as defined in 
        section 469.321, subdivision 6, is allowed a credit as 
        determined under section 469.327 against the tax imposed by this 
        chapter. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 6.  Minnesota Statutes 2004, section 290.067, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [AMOUNT OF CREDIT.] (a) A taxpayer may take 
        as a credit against the tax due from the taxpayer and a spouse, 
        if any, under this chapter an amount equal to the dependent care 
        credit for which the taxpayer is eligible pursuant to the 
        provisions of section 21 of the Internal Revenue Code subject to 
        the limitations provided in subdivision 2 except that in 
        determining whether the child qualified as a dependent, income 
        received as a Minnesota family investment program grant or 
        allowance to or on behalf of the child must not be taken into 
        account in determining whether the child received more than half 
        of the child's support from the taxpayer, and the provisions of 
        section 32(b)(1)(D) of the Internal Revenue Code do not apply. 
           (b) If a child who has not attained the age of six years at 
        the close of the taxable year is cared for at a licensed family 
        day care home operated by the child's parent, the taxpayer is 
        deemed to have paid employment-related expenses.  If the child 
        is 16 months old or younger at the close of the taxable year, 
        the amount of expenses deemed to have been paid equals the 
        maximum limit for one qualified individual under section 21(c) 
        and (d) of the Internal Revenue Code.  If the child is older 
        than 16 months of age but has not attained the age of six years 
        at the close of the taxable year, the amount of expenses deemed 
        to have been paid equals the amount the licensee would charge 
        for the care of a child of the same age for the same number of 
        hours of care.  
           (c) If a married couple: 
           (1) has a child who has not attained the age of one year at 
        the close of the taxable year; 
           (2) files a joint tax return for the taxable year; and 
           (3) does not participate in a dependent care assistance 
        program as defined in section 129 of the Internal Revenue Code, 
        in lieu of the actual employment related expenses paid for that 
        child under paragraph (a) or the deemed amount under paragraph 
        (b), the lesser of (i) the combined earned income of the couple 
        or (ii) the amount of the maximum limit for one qualified 
        individual under section 21(c) and (d) of the Internal Revenue 
        Code will be deemed to be the employment related expense paid 
        for that child.  The earned income limitation of section 21(d) 
        of the Internal Revenue Code shall not apply to this deemed 
        amount.  These deemed amounts apply regardless of whether any 
        employment-related expenses have been paid.  
           (d) If the taxpayer is not required and does not file a 
        federal individual income tax return for the tax year, no credit 
        is allowed for any amount paid to any person unless: 
           (1) the name, address, and taxpayer identification number 
        of the person are included on the return claiming the credit; or 
           (2) if the person is an organization described in section 
        501(c)(3) of the Internal Revenue Code and exempt from tax under 
        section 501(a) of the Internal Revenue Code, the name and 
        address of the person are included on the return claiming the 
        credit.  
        In the case of a failure to provide the information required 
        under the preceding sentence, the preceding sentence does not 
        apply if it is shown that the taxpayer exercised due diligence 
        in attempting to provide the information required. 
           In the case of a nonresident, part-year resident, or a 
        person who has earned income not subject to tax under this 
        chapter including earned income excluded pursuant to section 
        290.01, subdivision 19b, clause (10) or (11), the credit 
        determined under section 21 of the Internal Revenue Code must be 
        allocated based on the ratio by which the earned income of the 
        claimant and the claimant's spouse from Minnesota sources bears 
        to the total earned income of the claimant and the claimant's 
        spouse. 
           [EFFECTIVE DATE.] This section is effective for tax years 
        beginning after December 31, 2006. 
           Sec. 7.  Minnesota Statutes 2004, 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, 
        including income excluded under section 290.01, subdivision 19b, 
        clause (10) or (11), 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), the 
        $15,080 in paragraph (c), and the $17,890 in paragraph (d), 
        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), the 
        $15,080 in paragraph (c), and the $17,890 in paragraph (d), 
        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), the 
        $15,080 in paragraph (c), and the $17,890 in paragraph (d), 
        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, 2006. 
           Sec. 8.  Minnesota Statutes 2004, section 290.091, 
        subdivision 2, is amended to read: 
           Subd. 2.  [DEFINITIONS.] For purposes of the tax imposed by 
        this section, the following terms have the meanings given: 
           (a) "Alternative minimum taxable income" means the sum of 
        the following for the taxable year: 
           (1) the taxpayer's federal alternative minimum taxable 
        income as defined in section 55(b)(2) of the Internal Revenue 
        Code; 
           (2) the taxpayer's itemized deductions allowed in computing 
        federal alternative minimum taxable income, but excluding: 
           (i) the charitable contribution deduction under section 170 
        of the Internal Revenue Code to the extent that the deduction 
        exceeds 1.0 percent of adjusted gross income, as defined in 
        section 62 of the Internal Revenue Code; 
           (ii) the medical expense deduction; 
           (iii) the casualty, theft, and disaster loss deduction; and 
           (iv) the impairment-related work expenses of a disabled 
        person; 
           (3) for depletion allowances computed under section 613A(c) 
        of the Internal Revenue Code, with respect to each property (as 
        defined in section 614 of the Internal Revenue Code), to the 
        extent not included in federal alternative minimum taxable 
        income, the excess of the deduction for depletion allowable 
        under section 611 of the Internal Revenue Code for the taxable 
        year over the adjusted basis of the property at the end of the 
        taxable year (determined without regard to the depletion 
        deduction for the taxable year); 
           (4) to the extent not included in federal alternative 
        minimum taxable income, the amount of the tax preference for 
        intangible drilling cost under section 57(a)(2) of the Internal 
        Revenue Code determined without regard to subparagraph (E); 
           (5) to the extent not included in federal alternative 
        minimum taxable income, the amount of interest income as 
        provided by section 290.01, subdivision 19a, clause (1); and 
           (6) the amount of addition required by section 290.01, 
        subdivision 19a, clause (7); 
           less the sum of the amounts determined under the following: 
           (1) interest income as defined in section 290.01, 
        subdivision 19b, clause (1); 
           (2) an overpayment of state income tax as provided by 
        section 290.01, subdivision 19b, clause (2), to the extent 
        included in federal alternative minimum taxable income; 
           (3) the amount of investment interest paid or accrued 
        within the taxable year on indebtedness to the extent that the 
        amount does not exceed net investment income, as defined in 
        section 163(d)(4) of the Internal Revenue Code.  Interest does 
        not include amounts deducted in computing federal adjusted gross 
        income; and 
           (4) amounts subtracted from federal taxable income as 
        provided by section 290.01, subdivision 19b, clauses (9), (10), 
        and (11). 
           In the case of an estate or trust, alternative minimum 
        taxable income must be computed as provided in section 59(c) of 
        the Internal Revenue Code. 
           (b) "Investment interest" means investment interest as 
        defined in section 163(d)(3) of the Internal Revenue Code. 
           (c) "Tentative minimum tax" equals 6.4 percent of 
        alternative minimum taxable income after subtracting the 
        exemption amount determined under subdivision 3. 
           (d) "Regular tax" means the tax that would be imposed under 
        this chapter (without regard to this section and section 
        290.032), reduced by the sum of the nonrefundable credits 
        allowed under this chapter.  
           (e) "Net minimum tax" means the minimum tax imposed by this 
        section. 
           [EFFECTIVE DATE.] This section is effective for tax years 
        beginning after December 31, 2006. 
           Sec. 9.  Minnesota Statutes 2004, section 290.0921, 
        subdivision 3, is amended to read: 
           Subd. 3.  [ALTERNATIVE MINIMUM TAXABLE INCOME.] 
        "Alternative minimum taxable income" is Minnesota net income as 
        defined in section 290.01, subdivision 19, and includes the 
        adjustments and tax preference items in sections 56, 57, 58, and 
        59(d), (e), (f), and (h) of the Internal Revenue Code.  If a 
        corporation files a separate company Minnesota tax return, the 
        minimum tax must be computed on a separate company basis.  If a 
        corporation is part of a tax group filing a unitary return, the 
        minimum tax must be computed on a unitary basis.  The following 
        adjustments must be made. 
           (1) For purposes of the depreciation adjustments under 
        section 56(a)(1) and 56(g)(4)(A) of the Internal Revenue Code, 
        the basis for depreciable property placed in service in a 
        taxable year beginning before January 1, 1990, is the adjusted 
        basis for federal income tax purposes, including any 
        modification made in a taxable year under section 290.01, 
        subdivision 19e, or Minnesota Statutes 1986, section 290.09, 
        subdivision 7, paragraph (c). 
           For taxable years beginning after December 31, 2000, the 
        amount of any remaining modification made under section 290.01, 
        subdivision 19e, or Minnesota Statutes 1986, section 290.09, 
        subdivision 7, paragraph (c), not previously deducted is a 
        depreciation allowance in the first taxable year after December 
        31, 2000. 
           (2) The portion of the depreciation deduction allowed for 
        federal income tax purposes under section 168(k) of the Internal 
        Revenue Code that is required as an addition under section 
        290.01, subdivision 19c, clause (16), is disallowed in 
        determining alternative minimum taxable income. 
           (3) The subtraction for depreciation allowed under section 
        290.01, subdivision 19d, clause (19), is allowed as a 
        depreciation deduction in determining alternative minimum 
        taxable income. 
           (4) The alternative tax net operating loss deduction under 
        sections 56(a)(4) and 56(d) of the Internal Revenue Code does 
        not apply. 
           (5) The special rule for certain dividends under section 
        56(g)(4)(C)(ii) of the Internal Revenue Code does not apply. 
           (6) The special rule for dividends from section 936 
        companies under section 56(g)(4)(C)(iii) does not apply. 
           (7) The tax preference for depletion under section 57(a)(1) 
        of the Internal Revenue Code does not apply. 
           (8) The tax preference for intangible drilling costs under 
        section 57(a)(2) of the Internal Revenue Code must be calculated 
        without regard to subparagraph (E) and the subtraction under 
        section 290.01, subdivision 19d, clause (4). 
           (9) The tax preference for tax exempt interest under 
        section 57(a)(5) of the Internal Revenue Code does not apply.  
           (10) The tax preference for charitable contributions of 
        appreciated property under section 57(a)(6) of the Internal 
        Revenue Code does not apply. 
           (11) For purposes of calculating the tax preference for 
        accelerated depreciation or amortization on certain property 
        placed in service before January 1, 1987, under section 57(a)(7) 
        of the Internal Revenue Code, the deduction allowable for the 
        taxable year is the deduction allowed under section 290.01, 
        subdivision 19e. 
           For taxable years beginning after December 31, 2000, the 
        amount of any remaining modification made under section 290.01, 
        subdivision 19e, not previously deducted is a depreciation or 
        amortization allowance in the first taxable year after December 
        31, 2004. 
           (12) For purposes of calculating the adjustment for 
        adjusted current earnings in section 56(g) of the Internal 
        Revenue Code, the term "alternative minimum taxable income" as 
        it is used in section 56(g) of the Internal Revenue Code, means 
        alternative minimum taxable income as defined in this 
        subdivision, determined without regard to the adjustment for 
        adjusted current earnings in section 56(g) of the Internal 
        Revenue Code. 
           (13) For purposes of determining the amount of adjusted 
        current earnings under section 56(g)(3) of the Internal Revenue 
        Code, no adjustment shall be made under section 56(g)(4) of the 
        Internal Revenue Code with respect to (i) the amount of foreign 
        dividend gross-up subtracted as provided in section 290.01, 
        subdivision 19d, clause (1), (ii) the amount of refunds of 
        income, excise, or franchise taxes subtracted as provided in 
        section 290.01, subdivision 19d, clause (10), or (iii) the 
        amount of royalties, fees or other like income subtracted as 
        provided in section 290.01, subdivision 19d, clause (11). 
           (14) Alternative minimum taxable income excludes the income 
        from operating in a job opportunity building zone as provided 
        under section 469.317. 
           (15) Alternative minimum taxable income excludes the income 
        from operating in a biotechnology and health sciences industry 
        zone as provided under section 469.337. 
           (16) Alternative minimum taxable income excludes the income 
        from operating in an international economic development zone as 
        provided under section 469.326. 
           Items of tax preference must not be reduced below zero as a 
        result of the modifications in this subdivision. 
           [EFFECTIVE DATE.] This section is effective for tax years 
        beginning after December 31, 2006. 
           Sec. 10.  Minnesota Statutes 2004, section 290.0922, 
        subdivision 2, is amended to read: 
           Subd. 2.  [EXEMPTIONS.] The following entities are exempt 
        from the tax imposed by this section: 
           (1) corporations exempt from tax under section 290.05; 
           (2) real estate investment trusts; 
           (3) regulated investment companies or a fund thereof; and 
           (4) entities having a valid election in effect under 
        section 860D(b) of the Internal Revenue Code; 
           (5) town and farmers' mutual insurance companies; 
           (6) cooperatives organized under chapter 308A that provide 
        housing exclusively to persons age 55 and over and are 
        classified as homesteads under section 273.124, subdivision 3; 
        and 
           (7) an entity, if for the taxable year all of its property 
        is located in a job opportunity building zone designated under 
        section 469.314 and all of its payroll is a job opportunity 
        building zone payroll under section 469.310; and 
           (8) an entity, if for the taxable year all of its property 
        is located in an international economic development zone 
        designated under section 469.322, and all of its payroll is 
        international economic development zone payroll under section 
        469.321. 
           Entities not specifically exempted by this subdivision are 
        subject to tax under this section, notwithstanding section 
        290.05.  
           [EFFECTIVE DATE.] This section is effective for tax years 
        beginning after December 31, 2006. 
           Sec. 11.  Minnesota Statutes 2004, section 290.0922, 
        subdivision 3, is amended to read: 
           Subd. 3.  [DEFINITIONS.] (a) "Minnesota sales or receipts" 
        means the total sales apportioned to Minnesota pursuant to 
        section 290.191, subdivision 5, the total receipts attributed to 
        Minnesota pursuant to section 290.191, subdivisions 6 to 8, 
        and/or the total sales or receipts apportioned or attributed to 
        Minnesota pursuant to any other apportionment formula applicable 
        to the taxpayer. 
           (b) "Minnesota property" means total Minnesota tangible 
        property as provided in section 290.191, subdivisions 9 to 11, 
        any other tangible property located in Minnesota, but does not 
        include property located in a job opportunity building zone 
        designated under section 469.314, or property of a qualified 
        business located in a biotechnology and health sciences industry 
        zone designated under section 469.334, or property of a 
        qualified business located in the international economic 
        development zone designated under section 469.322.  Intangible 
        property shall not be included in Minnesota property for 
        purposes of this section.  Taxpayers who do not utilize tangible 
        property to apportion income shall nevertheless include 
        Minnesota property for purposes of this section.  On a return 
        for a short taxable year, the amount of Minnesota property 
        owned, as determined under section 290.191, shall be included in 
        Minnesota property based on a fraction in which the numerator is 
        the number of days in the short taxable year and the denominator 
        is 365.  
           (c) "Minnesota payrolls" means total Minnesota payrolls as 
        provided in section 290.191, subdivision 12, but does not 
        include job opportunity building zone payrolls under section 
        469.310, subdivision 8, or biotechnology and health sciences 
        industry zone payroll payrolls under section 469.330, 
        subdivision 8, or international economic development zone 
        payrolls under section 469.321, subdivision 9.  Taxpayers who do 
        not utilize payrolls to apportion income shall nevertheless 
        include Minnesota payrolls for purposes of this section. 
           [EFFECTIVE DATE.] This section is effective for tax years 
        beginning after December 31, 2006. 
           Sec. 12.  Minnesota Statutes 2004, section 297A.68, is 
        amended by adding a subdivision to read: 
           Subd. 41.  [INTERNATIONAL ECONOMIC DEVELOPMENT ZONES.] (a) 
        Purchases of tangible personal property or taxable services by a 
        qualified business, as defined in section 469.321, are exempt if 
        the property or services are primarily used or consumed in the 
        international economic development zone designated under section 
        469.322. 
           (b) Purchase and use of construction materials, supplies, 
        and equipment incorporated into the construction of improvements 
        to real property in the international economic development zone 
        are exempt if the improvements after completion of construction 
        are to be used as a regional distribution center as defined in 
        section 469.321 or otherwise used in the conduct of freight 
        forwarding activities of a qualified business as defined in 
        section 469.321.  This exemption applies regardless of whether 
        the purchases are made by the business or a contractor. 
           (c) The exemptions under this subdivision apply to a local 
        sales and use tax, regardless of whether the local tax is 
        imposed on sales taxable under this chapter or in another law, 
        ordinance, or charter provision. 
           (d) The exemption in paragraph (a) applies to sales during 
        the duration of the zone and after June 30, 2007, if the 
        purchase was made and delivery received after the business signs 
        the business subsidy agreement required under chapter 469.  
           (e) For purchases made for improvements to real property to 
        be occupied by a business that has not signed a business subsidy 
        agreement at the time of the purchase, 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 beginning in fiscal year 2008.  The taxpayer must attach 
        to the claim for refund information sufficient for the 
        commissioner to be able to determine that the improvements are 
        being occupied by a business that has signed a business subsidy 
        agreement. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 13.  [469.321] [DEFINITIONS.] 
           Subdivision 1.  [SCOPE.] For purposes of sections 469.321 
        to 469.328, the following terms have the meanings given. 
           Subd. 2.  [FOREIGN TRADE ZONE.] "Foreign trade zone" means 
        a foreign trade zone designated pursuant to United States Code, 
        title 19, section 81a, for the right to use the powers provided 
        in United States Code, title 19, sections 81a to 81u, or a 
        subzone authorized by the foreign trade zone. 
           Subd. 3.  [FOREIGN TRADE ZONE AUTHORITY.] "Foreign trade 
        zone authority" means the Greater Metropolitan Foreign Trade 
        Zone Commission number 119, a joint powers authority created by 
        the county of Hennepin, the cities of Minneapolis and 
        Bloomington, and the Metropolitan Airports Commission, under the 
        authority of section 469.059, 469.101, or 471.59, and includes 
        any other political subdivisions that enter into the authority 
        after its creation, as well as the county in which the zone is 
        located.  Notwithstanding Minnesota Statutes, section 471.59, 
        the members of the authority are not required to have separate 
        authority to establish or operate a foreign trade zone. 
           Subd. 4.  [INTERNATIONAL ECONOMIC DEVELOPMENT ZONE OR 
        ZONE.] An "international economic development zone" or "zone" is 
        a zone so designated under section 469.322. 
           Subd. 5.  [PERSON.] "Person" includes an individual, 
        corporation, partnership, limited liability company, 
        association, or any other entity. 
           Subd. 6.  [QUALIFIED BUSINESS.] "Qualified business" means 
        a person who has signed a business subsidy agreement as required 
        under sections 116J.993 to 116J.995 and 469.323, subdivision 4, 
        carrying on a trade or business at a place of business located 
        within the international economic development zone that is: 
           (1)(i) engaged in the furtherance of international export 
        or import of goods as a freight forwarder; and (ii) certified by 
        the foreign trade zone authority as a trade or business that 
        furthers the purpose of developing international distribution 
        capacity and capability; or 
           (2) the owner or operator of a regional distribution center.
           Subd. 7.  [REGIONAL DISTRIBUTION CENTER.] A "regional 
        distribution center" is a distribution center developed within a 
        foreign trade zone.  The regional distribution center must have 
        as its primary purpose, the facilitation of the gathering of 
        freight for the purpose of centralizing the functions necessary 
        for the shipment of freight in international commerce, 
        including, but not limited to, security and customs functions. 
           Subd. 8.  [INTERNATIONAL ECONOMIC DEVELOPMENT ZONE 
        PERCENTAGE OR ZONE PERCENTAGE.] "International economic 
        development zone percentage" or "zone percentage" means the 
        following fraction reduced to a percentage: 
           (1) the numerator of the fraction is: 
           (i) the ratio of the taxpayer's property factor under 
        section 290.191 located in the zone for the taxable year which 
        is land, buildings, machinery and equipment, inventories, and 
        other tangible personal property that is a regional distribution 
        center or is used in the furtherance of the taxpayer's freight 
        forwarding operations over the property factor numerator 
        determined under section 290.191, plus 
           (ii) the ratio of the taxpayer's international economic 
        development zone payroll factor under subdivision 9 over the 
        payroll factor numerator determined under section 290.191; and 
           (2) the denominator of the fraction is two. 
           When calculating the zone percentage for a business that is 
        part of a unitary business as defined under section 290.17, 
        subdivision 4, the denominator of the payroll and property 
        factors is the Minnesota payroll and property of the unitary 
        business as reported on the combined report under section 
        290.17, subdivision 4, paragraph (j). 
           Subd. 9.  [INTERNATIONAL ECONOMIC DEVELOPMENT ZONE PAYROLL 
        FACTOR OR INTERNATIONAL ECONOMIC DEVELOPMENT ZONE PAYROLL.] 
        "International economic development zone payroll factor" or 
        "international economic development zone payroll" is that 
        portion of the payroll factor under section 290.191 used to 
        operate a regional distribution center, or used in the 
        furtherance of the taxpayer's freight forwarding operations that 
        represents: 
           (1) wages or salaries paid to an individual for services 
        performed in the international economic development zone; or 
           (2) wages or salaries paid to individuals working from 
        offices within the international economic development zone, if 
        their employment requires them to work outside the zone and the 
        work is incidental to the work performed by the individual 
        within the zone.  However, in no case does zone payroll include 
        wages paid for work performed outside the zone of an employee 
        who performs more than ten percent of total services for the 
        employer outside the zone. 
           Subd. 10.  [FREIGHT FORWARDER.] "Freight forwarder" is a 
        business that, for compensation, ensures that goods produced or 
        sold by another business move from point of origin to point of 
        destination. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 14.  [469.3215] [APPLICATION FOR DESIGNATION.] 
           Subdivision 1.  [WHO MAY APPLY.] One or more local 
        government units, or a joint powers board under section 471.59, 
        acting on behalf of two or more units, may apply for designation 
        of an area as an international economic development zone.  All 
        or part of the area proposed for designation as a zone must be 
        located within the boundaries of each of the governmental 
        units.  A local government unit may not submit or have submitted 
        on its behalf more than one application for designation of an 
        international economic development zone. 
           Subd. 2.  [APPLICATION CONTENT.] (a) The application must 
        include: 
           (1) a resolution or ordinance adopted by each of the cities 
        or towns and the counties in which the zone is located, agreeing 
        to provide all of the local tax exemptions provided under 
        section 469.315; 
           (2) an agreement by the applicant to treat incentives 
        provided under the zone designation as business subsidies under 
        sections 116J.993 to 116J.995 and to comply with the 
        requirements of that law; and 
           (3) supporting evidence to allow the authority to evaluate 
        the application. 
           (b) Applications must be submitted to the authority no 
        later than December 31, 2005. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 15.  [469.322] [DESIGNATION OF INTERNATIONAL ECONOMIC 
        DEVELOPMENT ZONE.] 
           (a) An area designated as a foreign trade zone may be 
        designated by the foreign trade zone authority as an 
        international economic development zone if within the zone a 
        regional distribution center is being developed pursuant to 
        section 469.323.  The zone must consist of contiguous area of 
        not less than 500 acres and not more than 1,000 acres.  The 
        designation authority under this section is limited to one zone. 
           (b) In making the designation, the foreign trade zone 
        authority, in consultation with the Minnesota Department of 
        Transportation and the Metropolitan Council, shall consider 
        access to major transportation routes, consistency with current 
        state transportation and air cargo planning, adequacy of the 
        size of the site, access to airport facilities, present and 
        future capacity at the designated airport, the capability to 
        meet integrated present and future air cargo, security, and 
        inspection services, and access to other infrastructure and 
        financial incentives.  The border of the international economic 
        development zone must be no more than 60 miles distant or 90 
        minutes drive time from the border of the Minneapolis-St. Paul 
        International Airport.  
           (c) Final zone designation must be made by June 30, 2006. 
           (d) Duration of the zone is a 12-year period beginning on 
        January 1, 2007. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 16.  [469.323] [FOREIGN TRADE ZONE AUTHORITY POWERS.] 
           Subdivision 1.  [DEVELOPMENT OF REGIONAL DISTRIBUTION 
        CENTER.] The foreign trade zone authority is responsible for 
        creating and implementing a development plan for the regional 
        distribution center.  The regional distribution center must be 
        developed with the purpose of expanding, on a regional basis, 
        international distribution capacity and capability.  The foreign 
        trade zone authority shall consult only with municipalities that 
        have indicated to the authority an interest in locating the 
        international economic development zone within their boundaries, 
        as well as interested businesses, potential financiers, and 
        appropriate state and federal agencies. 
           Subd. 2.  [BUSINESS PLAN.] Before designation of an 
        international economic development zone under section 469.322, 
        the governing body of the foreign trade zone authority shall 
        prepare a business plan.  The plan must include an analysis of 
        the economic feasibility of the regional distribution center 
        once it becomes operational and of the operations of freight 
        forwarders and other businesses that choose to locate within the 
        boundaries of the zone.  The analysis must provide profitability 
        models that: 
           (1) include the benefits of the incentives; 
           (2) estimate the amount of time needed to achieve 
        profitability; and 
           (3) analyze the length of time incentives will be necessary 
        to the economic viability of the regional distribution center. 
           If the governing body of the foreign trade authority 
        determines that the models do not establish the economic 
        feasibility of the project, the regional distribution center 
        does not meet the development requirements of this section and 
        section 469.322. 
           Subd. 3.  [PORT AUTHORITY POWERS.] The governing body of 
        the foreign trade zone authority may establish a port authority 
        that has the same powers as a port authority established under 
        section 469.049.  If the foreign trade zone authority 
        establishes a port authority, the governing body of the foreign 
        trade zone authority may exercise all powers granted to a city 
        by sections 469.048 to 469.068 within the area of the 
        international economic development zone, except it may not 
        impose or request imposition of a property tax levy under 
        section 469.053 by any city. 
           Subd. 4.  [BUSINESS SUBSIDY LAW.] Tax exemptions and job 
        credits provided under this section are business subsidies and 
        the foreign trade zone authority is the local government agency 
        for the purpose of sections 116J.871 and 116J.993 to 116J.995. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 17.  [469.324] [TAX INCENTIVES IN INTERNATIONAL 
        ECONOMIC DEVELOPMENT ZONE.] 
           Subdivision 1.  [AVAILABILITY.] Qualified businesses that 
        operate in an international economic development zone, 
        individuals who invest in a regional distribution center or 
        qualified businesses that operate in an international economic 
        development zone, and property located in an international 
        economic development zone qualify for: 
           (1) exemption from individual income taxes as provided 
        under section 469.325; 
           (2) exemption from corporate franchise taxes as provided 
        under section 469.326; 
           (3) exemption from the state sales and use tax and any 
        local sales and use taxes on qualifying purchases as provided in 
        section 297A.68, subdivision 41; 
           (4) exemption from the property tax as provided in section 
        272.02, subdivision 68; and 
           (5) the jobs credit allowed under section 469.327. 
           Sec. 18.  [469.325] [INDIVIDUAL INCOME TAX EXEMPTION.] 
           Subdivision 1.  [APPLICATION.] An individual, estate, or 
        trust operating a trade or business in the international 
        economic development zone, and an individual making a qualifying 
        investment in a qualified business operating in the 
        international economic development zone, qualifies for the 
        exemptions from taxes imposed under chapter 290, as provided in 
        this section.  The exemptions provided under this section apply 
        only to the extent that the income otherwise would be taxable 
        under chapter 290.  Subtractions under this section from federal 
        taxable income, alternative minimum taxable income, or any other 
        base subject to tax are limited to the amount that otherwise 
        would be included in the tax base absent the exemption under 
        this section.  This section applies only to tax years beginning 
        during the duration of the zone.  
           Subd. 2.  [BUSINESS INCOME.] An individual, estate, or 
        trust is exempt from the taxes imposed under chapter 290 on net 
        income from the operation of a qualified business in the 
        international economic development zone.  If the trade or 
        business is carried on within and outside of the zone and the 
        individual is not a resident of Minnesota, the exemption must be 
        apportioned based on the zone percentage for the taxable year.  
        If the trade or business is carried on within or outside of the 
        zone and the individual is a resident of Minnesota, the 
        exemption must be apportioned based on the zone percentage for 
        the taxable year, except the ratios under section 469.321, 
        subdivision 8, clause (1), items (i) and (ii), must use the 
        denominators of the property and payroll factors determined 
        under section 290.191.  No subtraction is allowed under this 
        section in excess of 20 percent of the sum of the international 
        economic development zone payroll and the adjusted basis of the 
        property at the time that the property is first used in the 
        international economic development zone by the business. 
           [EFFECTIVE DATE.] This section is effective for tax years 
        beginning after December 31, 2006. 
           Sec. 19.  [469.326] [CORPORATE FRANCHISE TAX EXEMPTION.] 
           (a) A qualified business is exempt from taxation under 
        section 290.02, the alternative minimum tax under section 
        290.0921, and the minimum fee under section 290.0922, on the 
        portion of its income attributable to operations within the 
        international economic development zone.  This exemption is 
        determined as follows: 
           (1) for purposes of the tax imposed under section 290.02, 
        by multiplying its taxable net income by its zone percentage and 
        subtracting the result in determining taxable income; 
           (2) for purposes of the alternative minimum tax under 
        section 290.0921, by multiplying its alternative minimum taxable 
        income by its zone percentage and reducing alternative minimum 
        taxable income by this amount; and 
           (3) for purposes of the minimum fee under section 290.0922, 
        by excluding property and payroll in the zone from the 
        computations of the fee or by exempting the entity under section 
        290.0922, subdivision 2, clause (8). 
           (b) No subtraction is allowed under this section in excess 
        of 20 percent of the sum of the corporation's international 
        economic development zone payroll and the adjusted basis of the 
        zone property at the time that the property is first used in the 
        international economic development zone by the corporation. 
           (c) This section applies only to tax years beginning during 
        the duration of the international economic development zone. 
           [EFFECTIVE DATE.] This section is effective for tax years 
        beginning after December 31, 2006. 
           Sec. 20.  [469.327] [JOBS CREDIT.] 
           Subdivision 1.  [CREDIT ALLOWED.] A qualified business is 
        allowed a credit against the taxes imposed under chapter 290.  
        The credit equals seven percent of the: 
           (1) lesser of: 
           (i) zone payroll for the taxable year, less the zone 
        payroll for the base year; or 
           (ii) total Minnesota payroll for the taxable year, less 
        total Minnesota payroll for the base year; minus 
           (2) $30,000 multiplied by the number of full-time 
        equivalent employees that the qualified business employs in the 
        international economic development zone for the taxable year, 
        minus the number of full-time equivalent employees the business 
        employed in the zone in the base year, but not less than zero. 
           Subd. 2.  [DEFINITIONS.] (a) For purposes of this section, 
        the following terms have the meanings given. 
           (b) "Base year" means the taxable year beginning during the 
        calendar year in which the zone designation was made under 
        section 469.322, paragraph (d). 
           (c) "Full-time equivalent employees" means the equivalent 
        of annualized expected hours of work equal to 2,080 hours. 
           (d) "Minnesota payroll" means the wages or salaries 
        attributed to Minnesota under section 290.191, subdivision 12, 
        for the qualified business or the unitary business of which the 
        qualified business is a part, whichever is greater. 
           (e) "Zone payroll" means wages or salaries used to 
        determine the zone payroll factor for the qualified business, 
        less the amount of compensation attributable to any employee 
        that exceeds $70,000. 
           Subd. 3.  [INFLATION ADJUSTMENT.] For taxable years 
        beginning after December 31, 2006, the dollar amounts in 
        subdivisions 1, clause (2); and 2, paragraph (e), are annually 
        adjusted for inflation.  The commissioner of revenue shall 
        adjust the amounts by the percentage determined under section 
        290.06, subdivision 2d, for the taxable year. 
           Subd. 4.  [REFUNDABLE.] If the amount of the credit exceeds 
        the liability for tax under chapter 290, the commissioner of 
        revenue shall refund the excess to the qualified business. 
           Subd. 5.  [APPROPRIATION.] An amount sufficient to pay the 
        refunds authorized by this section is appropriated to the 
        commissioner of revenue from the general fund. 
           [EFFECTIVE DATE.] This section is effective for tax years 
        beginning after December 31, 2006. 
           Sec. 21.  [469.328] [REPAYMENT OF TAX BENEFITS.] 
           Subdivision 1.  [REPAYMENT OBLIGATION.] A person must repay 
        the amount of the tax reduction received under section 469.324, 
        subdivision 1, clauses (1) to (5), or credit received under 
        section 469.327, during the two years immediately before it 
        ceased to operate in the zone as a qualified business, if the 
        person ceased to operate its facility located within the zone, 
        ceased to be in compliance with the terms of the business 
        subsidy agreement, or otherwise ceases to be or is not a 
        qualified business. 
           Subd. 2.  [DISPOSITION OF REPAYMENT.] The repayment must be 
        paid to the state to the extent it represents a state tax 
        reduction and to the county to the extent it represents a 
        property tax reduction.  Any amount repaid to the state must be 
        deposited in the general fund.  Any amount repaid to the county 
        for the property tax exemption must be distributed to the local 
        governments with authority to levy taxes in the zone in the same 
        manner provided for distribution of payment of delinquent 
        property taxes.  Any repayment of local sales or use taxes must 
        be repaid to the jurisdiction imposing the local sales or use 
        tax. 
           Subd. 3.  [REPAYMENT PROCEDURES.] (a) For the repayment of 
        taxes imposed under chapter 290 or 297A or local taxes collected 
        pursuant to section 297A.99, a person must file an amended 
        return with the commissioner of revenue and pay any taxes 
        required to be repaid within 30 days after ceasing to be a 
        qualified business.  The amount required to be repaid is 
        determined by calculating the tax for the period for which 
        repayment is required without regard to the tax reductions and 
        credits allowed under section 469.324. 
           (b) For the repayment of property taxes, the county auditor 
        shall prepare a tax statement for the person, applying the 
        applicable tax extension rates for each payable year and provide 
        a copy to the business.  The person must pay the taxes to the 
        county treasurer within 30 days after receipt of the tax 
        statement.  The taxpayer may appeal the valuation and 
        determination of the property tax to the tax court within 30 
        days after receipt of the tax statement. 
           (c) The provisions of chapters 270 and 289A relating to the 
        commissioner of revenue's authority to audit, assess, and 
        collect the tax and to hear appeals are applicable to the 
        repayment required under paragraphs (a) and (b).  The 
        commissioner may impose civil penalties as provided in chapter 
        289A, and the additional tax and penalties are subject to 
        interest at the rate provided in section 270.75, from 30 days 
        after ceasing to do business in the zone until the date the tax 
        is paid. 
           (d) If a property tax is not repaid under paragraph (c), 
        the county treasurer shall add the amount required to be repaid 
        to the property taxes assessed against the property for payment 
        in the year following the year in which the treasurer discovers 
        that the person ceased to operate in the international economic 
        development zone. 
           (e) For determining the tax required to be repaid, a tax 
        reduction is deemed to have been received on the date that the 
        tax would have been due if the person had not been entitled to 
        the tax reduction. 
           (f) The commissioner of revenue may assess the repayment of 
        taxes under paragraph (d) at any time within two years after the 
        person ceases to be a qualified business, or within any period 
        of limitations for the assessment of tax under section 289A.38, 
        whichever is later. 
           Subd. 4.  [WAIVER AUTHORITY.] The commissioner of revenue 
        may waive all or part of a repayment, if, in consultation with 
        the foreign trade zone authority and appropriate officials from 
        the state and local government units, including the commissioner 
        of employment and economic development, determines that 
        requiring repayment of the tax is not in the best interest of 
        the state or local government and the business ceased operating 
        as a result of circumstances beyond its control, including, but 
        not limited to: 
           (1) a natural disaster; 
           (2) unforeseen industry trends; or 
           (3) loss of a major supplier or customer. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 22.  [469.329] [REPORTING REQUIREMENTS.] 
           (a) An applicant receiving designation of an international 
        economic development zone under section 469.322 must annually 
        report to the commissioner of employment and economic 
        development on its progress in meeting the zone performance 
        goals under the business plan for the zone and the applicant's 
        compliance with the business subsidy law under sections 116J.993 
        to 116J.995.  
           (b) The commissioner must report on its Web site 
        information on (1) the estimated amount of the tax expenditures 
        for the zone, (2) the business subsidy agreements with qualified 
        businesses in the zone, (3) the estimated number of new jobs 
        created in the zone and investment made, and (4) other 
        information similar to the information that the commissioner 
        reports on the job opportunity building zone program on the 
        department's Web site. 
           [EFFECTIVE DATE.] This section is effective January 1, 2007.
           Sec. 23.  [GRANTS TO QUALIFYING BUSINESSES.] 
           $750,000 is appropriated in fiscal year 2006 from the 
        general fund to the commissioner of employment and economic 
        development to be distributed to the foreign trade zone 
        authority to provide grants to qualified businesses as 
        determined by the authority, subject to Minnesota Statutes, 
        sections 116J.993 to 116J.995, to provide incentives for the 
        businesses to locate their operations in an international 
        economic development zone.  If the money is not distributed 
        during fiscal year 2006, it remains available for distribution 
        under this section during fiscal year 2007. 

                                   ARTICLE 11 
                                 MISCELLANEOUS 
           Section 1.  Minnesota Statutes 2004, section 270C.02, 
        subdivision 2, as added by Laws 2005, chapter 151, article 1, 
        section 2, is amended to read: 
           Subd. 2.  [POWER TO APPOINT STAFF.] (a) The commissioner 
        may organize the department as the commissioner deems necessary, 
        and appoint one deputy commissioner, a department secretary, 
        directors of divisions, and such other officers, employees, and 
        agents, as the commissioner deems necessary to carry out the 
        duties, responsibilities, and authority entrusted to the 
        commissioner.  The commissioner may define the duties of such 
        officers, employees, and agents, and delegate to them any of the 
        commissioner's powers or duties, subject to the commissioner's 
        control and under such conditions as the commissioner may 
        prescribe.  Appointments to exercise delegated power to sign 
        documents which require the signature of the commissioner or a 
        delegate by law shall be by written order filed with the 
        secretary of state.  The delegations of authority granted by the 
        commissioner remain in effect until revoked by the commissioner 
        or a successor commissioner. 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 2.  Minnesota Statutes 2004, section 270C.27, 
        subdivision 1, as added by Laws 2005, chapter 151, article 1, 
        section 24, is amended to read:  
           Subdivision 1.  [IN GENERAL.] (a) A taxpayer may bring a 
        civil action for damages against the commissioner in district 
        court when an employee or the department has knowingly or 
        negligently: 
           (1) failed to release a lien as required by section 
        270C.63, subdivision 11 15; or 
           (2) failed to release a lien within 30 days after 
        satisfaction of the liability on which the lien is based. 
           (b) An action under paragraph (a), clause (2), must be 
        preceded by 30 days' written notice by the taxpayer to the 
        commissioner and the taxpayer's rights advocate that the lien 
        has not been released.  An action under paragraph (a) must be 
        commenced within two years after the date the right of action 
        accrued. 
           [EFFECTIVE DATE.] This section is effective August 1, 2005. 
           Sec. 3.  Minnesota Statutes 2004, section 270C.28, 
        subdivision 2, as added by Laws 2005, chapter 151, article 1, 
        section 26, is amended to read: 
           Subd. 2.  [DISTRIBUTION.] The appropriate statement 
        prepared in accordance with subdivision 1 must be distributed by 
        the commissioner to all taxpayers contacted with respect to the 
        determination or collection of a tax, other than the providing 
        of tax forms.  Failure to receive the statement does not 
        invalidate the determination or collection action, nor does it 
        affect, modify, or alter any statutory time limits applicable to 
        the determination or collection action, including the time limit 
        for filing a claim for refund.  
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment except that for claims for refund, it 
        is effective for claims filed after October 31, 2005. 
           Sec. 4.  Minnesota Statutes 2004, section 270C.445, as 
        added by Laws 2005, chapter 151, article 1, section 54, is 
        amended by adding a subdivision to read: 
           Subd. 5a.  [NONGAME WILDLIFE CHECKOFF.] A tax preparer must 
        give written notice of the option to contribute to the nongame 
        wildlife management account in section 290.431 to corporate 
        clients that file an income tax return and to individual clients 
        who file an income tax return or property tax refund claim 
        form.  This notification must be included with information sent 
        to the client at the same time as the preliminary worksheets or 
        other documents used in preparing the client's return and must 
        include a line for displaying contributions. 
           [EFFECTIVE DATE.] This section is effective for returns 
        prepared for taxable years beginning after December 31, 2004. 
           Sec. 5.  Minnesota Statutes 2004, section 289A.60, 
        subdivision 6, as amended by Laws 2005, chapter 151, article 6, 
        section 8, is amended to read: 
           Subd. 6.  [PENALTY FOR FAILURE TO FILE, FALSE OR FRAUDULENT 
        RETURN, EVASION.] (a) If a person, with intent to evade or 
        defeat a tax or payment of tax, fails to file a return, files a 
        false or fraudulent return, or attempts in any other manner to 
        evade or defeat a tax or payment of tax, there is imposed on the 
        person a penalty equal to 50 percent of the tax, less amounts 
        paid by the person on the basis of the false or fraudulent 
        return, if any, due for the period to which the return related.  
           (b) If a person files a false or fraudulent return that 
        includes a claim for refund, there is imposed on the person a 
        penalty equal to 50 percent of the portion of any refund claimed 
        that is attributable to fraud.  The penalty under this paragraph 
        is in addition to any penalty imposed under paragraph (a). 
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 6.  Minnesota Statutes 2004, section 501B.895, as 
        added by Laws 2005, chapter 155, article 3, section 7, is 
        amended to read: 
           [501B.895] [PUBLIC HEALTH CARE PROGRAMS AND CERTAIN 
        TRUSTS.] 
           (a) It is the public policy of this state that individuals 
        use all available resources to pay for the cost of long-term 
        care services, as defined in section 256B.0595, before turning 
        to Minnesota health care program funds, and that trust 
        instruments should not be permitted to shield available 
        resources of an individual or an individual's spouse from such 
        use.  
           (b) When a state or local agency makes a determination on 
        an application by the individual or the individual's spouse for 
        payment of long-term care services through a Minnesota public 
        health care program pursuant to chapter 256B, any irrevocable 
        inter-vivos trust or any legal instrument, device, or 
        arrangement similar to an irrevocable inter-vivos trust created 
        on or after July 1, 2005, containing assets or income of an 
        individual or an individual's spouse, including those created by 
        a person, court, or administrative body with legal authority to 
        act in place of, at the direction of, upon the request of, or on 
        behalf of the individual or individual's spouse, becomes shall 
        be treated as if it were revocable for the sole purpose of that 
        determination.  For purposes of this section, any inter-vivos 
        trust and any legal instrument, device, or arrangement similar 
        to an inter-vivos trust: 
           (1) shall be deemed to be located in and subject to the 
        laws of this state; and 
           (2) is created as of the date it is fully executed by or on 
        behalf of all of the settlors or others.  
           (c) For purposes of this section, a legal instrument, 
        device, or arrangement similar to an irrevocable inter-vivos 
        trust means any instrument, device, or arrangement which 
        involves a grantor who transfers or whose property is 
        transferred by another including, but not limited to, any court, 
        administrative body, or anyone else with authority to act on 
        their behalf or at their direction, to an individual or entity 
        with fiduciary, contractual, or legal obligations to the grantor 
        or others to be held, managed, or administered by the individual 
        or entity for the benefit of the grantor or others.  These legal 
        instruments, devices, or other arrangements are irrevocable 
        inter-vivos trusts for purposes of this section. 
           (d) In the event of a conflict between this section and the 
        provisions of an irrevocable trust created on or after July 1, 
        2005, this section shall control. 
           (e) This section does not apply to trusts that qualify as 
        supplemental needs trusts under section 501B.89 or to trusts 
        meeting the criteria of United States Code, title 42, section 
        1396p (d)(4)(a) and (c) for purposes of eligibility for medical 
        assistance. 
           (f) This section applies to all trusts first created on or 
        after July 1, 2005, as permitted under United States Code, title 
        42, section 1396p, and to all interests in real or personal 
        property regardless of the date on which the interest was 
        created, reserved, or acquired.  
           [EFFECTIVE DATE.] This section is effective the day 
        following final enactment. 
           Sec. 7.  [FEE STUDIES.] 
           Subdivision 1.  [STATE AGENCY FEES.] The commissioner of 
        each state agency that imposes any fee on individuals or 
        businesses in this state must report to the commissioner of 
        revenue by January 15, 2006, on the type and amount of fees 
        imposed, amount and type of fee increases since January 1, 2003, 
        the revenues derived from each fee for each of the most recent 
        four fiscal years, and the use of the revenues from the fees.  
        The commissioner of revenue shall compile this information and 
        provide a comprehensive report on all state agency fees to the 
        finance and tax committees of the senate and the appropriations 
        and tax committees of the house of representatives by February 
        15, 2006. 
           Subd. 2.  [SCHOOL FEES.] By January 15, 2006, the 
        Department of Education shall provide the house and senate 
        education finance divisions and tax committees with a report 
        that examines the total annual fees collected under Minnesota 
        Public School Fee Law, Minnesota Statutes, sections 123B.34 to 
        123B.39, in fiscal years 2002 to 2005.  The report must detail 
        all different types of fees charged to Minnesota students under 
        the law.  The report must report total fees statewide as well as 
        by school district and charter school. 
           Subd. 3.  [CITY FEES.] Each home rule charter or statutory 
        city must report to the commissioner of revenue by January 15, 
        2006, on the type and amount of fees it imposes, amount and type 
        of fee increases since January 1, 2003, the revenues derived 
        from each fee for each of the most recent four calendar years, 
        and the use of the revenues from the fees.  The commissioner of 
        revenue shall compile this information and provide a 
        comprehensive report on all city fees to the finance and tax 
        committees of the senate and the appropriations and tax 
        committees of the house of representatives by February 15, 2006. 
           Sec. 8.  [TRANSFER.] 
           The commissioner of finance shall transfer up to 
        $20,000,000 from the tax relief account under Minnesota 
        Statutes, section 16A.1522, subdivision 4, to the general fund 
        when accounts for the 2004-2005 biennium are closed. 
           Sec. 9.  [TAXPAYER ASSISTANCE SERVICES; APPROPRIATION.] 
           (a) $125,000 in fiscal year 2006 and $125,000 in fiscal 
        year 2007 are appropriated from the general fund to the 
        commissioner of revenue to make grants to one or more nonprofit 
        organizations, qualifying under section 501(c)(3) of the 
        Internal Revenue Code of 1986, to coordinate, facilitate, 
        encourage, and aid in the provision of taxpayer assistance 
        services.  
           (b) "Taxpayer assistance services" mean accounting and tax 
        preparation services provided by volunteers to low-income and 
        disadvantaged Minnesota residents to help them file federal and 
        state income tax returns and Minnesota property tax refund 
        claims and may include provision of personal representation 
        before the Department of Revenue and Internal Revenue Service. 
           Sec. 10.  [VETERANS SERVICES; APPROPRIATION.] 
           $125,000 is appropriated in fiscal year 2006 from the 
        general fund to the commissioner of veterans affairs for a grant 
        to the Vinland Center.  This is a onetime appropriation and does 
        not become part of the base. 
           Sec. 11.  [OTTER TAIL COUNTY DISASTER RELIEF; 
        APPROPRIATION.] 
           $500,000 is appropriated from the general fund to the 
        commissioner of the Department of Employment and Economic 
        Development for fiscal year 2006 for grants to local units of 
        government for locally administered programs for businesses and 
        property owners in Otter Tail County directly and adversely 
        affected by the high winds during the week of June 19, 2005.  
        Criteria and requirements for grants must be locally established 
        with approval by the department. 
           Sec. 12.  [DEPARTMENT OF REVENUE; APPROPRIATION.] 
           $545,000 is appropriated for fiscal year 2006 and $545,000 
        is appropriated for fiscal year 2007 from the general fund to 
        the commissioner of revenue to administer this act. 
           Sec. 13.  [REVISOR INSTRUCTION.] 
           Notwithstanding any law to the contrary, if a provision of 
        a section of Minnesota Statutes repealed by Laws 2005, chapter 
        151, article 1, is amended or repealed during the 2005 First 
        Special Session, the amendment or repealer shall supersede the 
        provisions of Laws 2005, chapter 151, article 1, and the revisor 
        shall codify the amendment or repealer consistent with the 
        recodification of the affected section by Laws 2005, chapter 
        151, article 1.  In addition, the revisor shall code new 
        sections or subdivisions enacted during the 2005 First Special 
        Session consistent with the recodification of Laws 2005, chapter 
        151, article 1. 
           [EFFECTIVE DATE.] This section is effective August 1, 2005. 
           Sec. 14.  [EFFECTIVE DATE; RELATIONSHIP TO OTHER 
        APPROPRIATIONS.] 
           Appropriations in this act are effective retroactively from 
        July 1, 2005, and supersede and replace funding authorized by 
        order of the Ramsey County District Court in Case No. 
        C9-05-5928, as well as by Laws 2005, First Special Session 
        chapter 2, which provided temporary funding through July 14, 
        2005. 
           Presented to the governor July 13, 2005 
           Signed by the governor July 13, 2005, 9:33 p.m.

700 State Office Building, 100 Rev. Dr. Martin Luther King Jr. Blvd., St. Paul, MN 55155 ♦ Phone: (651) 296-2868 ♦ TTY: 1-800-627-3529 ♦ Fax: (651) 296-0569