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Minnesota Session Laws - 2005, 1st Special Session
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.
Official Publication of the State of Minnesota
Revisor of Statutes