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                            CHAPTER 231-H.F.No. 2163 
                  An act relating to the financing and operation of 
                  state and local government; providing property tax 
                  class rate reform; dedicating future state revenues to 
                  property tax reform; providing a property tax rebate; 
                  providing for calculation of rent constituting 
                  property taxes; changing truth-in-taxation 
                  requirements; imposing levy limits on cities and 
                  counties for taxes levied in 1997 and 1998; 
                  authorizing deferral of property taxes by senior 
                  citizens; changing fiscal note requirements for state 
                  mandates; requiring periodic review of administrative 
                  rules; making miscellaneous property, income, and 
                  sales tax changes; changing and modifying the 
                  application of tax increment financing provisions; 
                  authorizing certain local governments to exercise 
                  certain powers; authorizing local tax levies, 
                  abatements, and assessments; modifying certain local 
                  aids; conforming certain income tax laws with changes 
                  in federal law; modifying certain income tax 
                  definitions and formulas; providing income tax 
                  credits; modifying the application of sales and excise 
                  taxes; exempting certain purchases from the sales tax; 
                  modifying waste management tax and minerals tax 
                  provisions; increasing the budget reserve; revising 
                  the law governing regional development commissions; 
                  modifying certain provisions relating to insurance 
                  companies; requiring studies; requiring reports; 
                  appropriating money; repealing an appropriation; 
                  amending Minnesota Statutes 1996, sections 6.76; 
                  16A.152, subdivision 2; 60A.075, subdivisions 1, 8, 
                  and 9; 60A.077, subdivisions 1, 2, 3, 5, 6, 7, 8, 9, 
                  10, 11, and by adding a subdivision; 69.021, 
                  subdivision 7; 93.41; 103D.905, subdivisions 4, 5, and 
                  by adding a subdivision; 115A.554; 117.155; 121.15, by 
                  adding a subdivision; 124.195, subdivisions 7 and 10; 
                  124.239, subdivision 5, and by adding subdivisions; 
                  161.45, by adding a subdivision; 216B.16, by adding a 
                  subdivision; 270.60, by adding a subdivision; 270B.01, 
                  subdivision 8; 270B.02, by adding a subdivision; 
                  270B.12, by adding a subdivision; 271.01, subdivision 
                  5; 271.19; 272.02, subdivision 1, and by adding a 
                  subdivision; 272.115; 273.11, subdivisions 1, 1a, and 
                  16; 273.111, subdivisions 3 and 6; 273.112, 
                  subdivisions 2, 3, and 4; 273.12; 273.121; 273.124, 
                  subdivision 1, and by adding a subdivision; 273.13, 
                  subdivisions 22, 23, 24, 25, 31, 32, and by adding a 
                  subdivision; 273.1393; 273.1398, subdivision 8; 
                  273.18; 274.01; 274.13, by adding subdivisions; 
                  275.065, subdivisions 1, 3, 5a, 6, 8, and by adding 
                  subdivisions; 275.07, subdivision 4; 275.16; 275.62, 
                  subdivision 1; 276.04, subdivision 2; 278.07; 281.13; 
                  281.23, subdivision 6, and by adding a subdivision; 
                  281.273; 281.276; 282.01, subdivision 8; 282.04, 
                  subdivision 1; 287.22; 289A.02, subdivision 7; 
                  289A.56, subdivision 4; 290.01, subdivisions 19, 19a, 
                  19b, 19c, 19d, 19f, 19g, 31, and by adding a 
                  subdivision; 290.014, subdivisions 2 and 3; 290.015, 
                  subdivisions 3 and 5; 290.06, subdivision 22, and by 
                  adding a subdivision; 290.067, subdivision 1; 290.068, 
                  subdivision 1; 290.0922, subdivision 1; 290.17, 
                  subdivisions 1 and 4; 290.191, subdivision 4; 290.371, 
                  subdivision 2; 290.92, by adding a subdivision; 
                  290.9725; 290.9727, subdivision 1; 290.9728, 
                  subdivision 1; 290A.03, subdivisions 7, 11, and 13; 
                  290A.04, by adding a subdivision; 290A.19; 291.005, 
                  subdivision 1; 296.141, subdivision 4; 296.18, 
                  subdivision 1; 297A.01, subdivisions 3, 4, 7, 11, and 
                  16; 297A.09; 297A.15, subdivision 7; 297A.211, 
                  subdivision 1; 297A.25, subdivisions 2, 3, 5, 7, 11, 
                  16, 56, 59, and by adding subdivisions; 297A.44, 
                  subdivision 1; 297B.01, subdivisions 7 and 8; 298.24, 
                  subdivision 1; 298.28, subdivision 9a, and by adding a 
                  subdivision; 298.296, subdivision 4; 298.2961, 
                  subdivision 1; 298.75, subdivisions 1, 4, and by 
                  adding a subdivision; 308A.705, subdivision 1; 
                  325D.33, subdivision 3; 349.154, subdivision 2; 
                  349.19, subdivision 2a; 349.191, subdivision 1b; 
                  373.40, subdivision 7; 375.192, subdivision 2; 
                  383A.75, subdivision 3; 398A.04, subdivision 1; 
                  462.381; 462.383; 462.384, subdivision 5; 462.385, 
                  subdivisions 1 and 3; 462.386, subdivision 1; 462.387; 
                  462.388; 462.389, subdivisions 1, 3, and 4; 462.39, 
                  subdivisions 2 and 3; 462.391, subdivision 5, and by 
                  adding subdivisions; 462.393; 462.394; 462.396, 
                  subdivisions 1, 3, and 4; 462.398; 465.71; 465.81, 
                  subdivisions 1 and 3; 465.82, subdivisions 1, 2, and 
                  by adding a subdivision; 465.87, subdivisions 1a and 
                  2; 465.88; 469.012, subdivision 1; 469.033, 
                  subdivision 6; 469.040, subdivision 3; 469.169, by 
                  adding a subdivision; 469.174, subdivision 10, and by 
                  adding subdivisions; 469.175, subdivision 3; 469.176, 
                  subdivisions 1b, 4c, 4j, and 5; 469.177, subdivisions 
                  1 and 3; 473.39, by adding a subdivision; 477A.011, 
                  subdivision 36; 477A.05; Laws 1992, chapter 511, 
                  article 2, section 52; Laws 1993, chapter 375, 
                  articles 7, section 29, and 9, sections 45, 
                  subdivisions 2, 3, 4, and by adding a subdivision, and 
                  46, subdivision 2; Laws 1995, chapters 255, article 3, 
                  section 2, subdivision 1, as amended, and 264, article 
                  5, sections 44, subdivision 4, as amended, and 45, 
                  subdivision 1, as amended; and Laws 1997, chapters 34, 
                  section 2, and 75, section 2; proposing coding for new 
                  law in Minnesota Statutes, chapters 3; 14; 16A; 273; 
                  275; 287; 290; 297A; 383A; 383B; 458D; 462A; 465; and 
                  469; proposing coding for new law as Minnesota 
                  Statutes, chapters 290B; and 297H; repealing Minnesota 
                  Statutes 1996, sections 3.982; 116.07, subdivision 10; 
                  121.904, subdivision 4d; 124.2134; 270B.12, 
                  subdivision 11; 273.1317; 273.1318; 276.012; 276.20; 
                  276.21; 290A.03, subdivisions 12a and 14; 290A.055; 
                  290A.26; 297A.01, subdivisions 20 and 21; 297A.02, 
                  subdivision 5; 297A.45, as amended; 462.384, 
                  subdivision 7; 462.385, subdivision 2; 462.389, 
                  subdivision 5; 462.391, subdivisions 1, 2, 3, 4, 6, 7, 
                  8, and 9; 462.392; 469.181; Laws 1995, chapter 264, 
                  article 4, as amended; and H.F. 2158, article 1, 
                  section 25, if enacted. 
        BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
                                   ARTICLE 1 
                              PROPERTY TAX REFORM 
           Section 1.  Minnesota Statutes 1996, section 124.239, is 
        amended by adding a subdivision to read: 
           Subd. 3a.  [DEBT SERVICE COSTS QUALIFYING FOR AID.] Annual 
        debt service costs up to an amount equal to the 1997 debt 
        service costs for bonds outstanding on the effective date of 
        this act qualify for alternative facilities aid under 
        subdivision 5. 
           Sec. 2.  Minnesota Statutes 1996, section 124.239, 
        subdivision 5, is amended to read: 
           Subd. 5.  [LEVY AUTHORIZED.] A district, after local board 
        approval, may levy for costs related to an approved facility 
        plan as follows:  
           (a) if the district has indicated to the commissioner that 
        bonds will be issued, the district may levy for the principal 
        and interest payments on outstanding bonds issued according to 
        subdivision 3 after reduction for any alternative facilities aid 
        received under subdivision 5; or 
           (b) if the district has indicated to the commissioner that 
        the plan will be funded through levy, the district may levy 
        according to the schedule approved in the plan. 
           Sec. 3.  Minnesota Statutes 1996, section 124.239, is 
        amended by adding a subdivision to read: 
           Subd. 5a.  [ALTERNATIVE FACILITIES AID.] A district's 
        alternative facilities aid is the amount equal to the district's 
        annual debt service costs qualifying for aid under subdivision 
        3a. 
           Sec. 4.  [273.126] [QUALIFYING LOW-INCOME RENTAL HOUSING.] 
           Subdivision 1.  [QUALIFYING RULES.] The market value of a 
        rental housing unit qualifies for assessment under class 4d if: 
           (1) it is occupied by individuals meeting the income limits 
        under subdivision 2; 
           (2) a rent restriction agreement under subdivision 3 
        applies; 
           (3) the unit meets the minimum housing quality standards 
        under subdivision 4; and 
           (4) the Minnesota housing finance agency certifies to the 
        local assessor that the unit qualifies. 
           Subd. 2.  [INCOME LIMITS.] (a) In order to qualify under 
        class 4d, a unit must be occupied by an individual or 
        individuals whose income is at or below 60 percent of the median 
        area gross income.  If the resident's income met the requirement 
        when the resident first occupied the unit, the income of the 
        resident continues to qualify.  If an individual first occupied 
        a unit before January 1, 1998, the individual's income for 
        purposes of the preceding sentence is the income for calendar 
        year 1996. 
           (b) For purposes of this section, "median area gross income"
        means the greater of (1) the median gross income for the area 
        determined under section 42 of the Internal Revenue Code of 
        1986, as amended through December 31, 1996, or (2) the median 
        gross income for the state. 
           (c) The median gross income must be adjusted for family 
        size. 
           (d) Vacant units qualify as meeting the requirements of 
        this subdivision in the same proportion that total units in the 
        building are subject to rent restriction agreements under 
        subdivision 3 and meet minimum housing standards under 
        subdivision 4.  This paragraph applies only to the extent that 
        units subject to a rent restriction agreement and meeting the 
        minimum housing quality standards are vacant. 
           (e) The owner or manager of the property may comply with 
        this subdivision by obtaining written statements from the 
        residents that their incomes are at or below the limit.  
           Subd. 3.  [RENT RESTRICTIONS.] (a) In order to qualify 
        under class 4d, a unit must be subject to a rent restriction 
        agreement with the housing finance agency for a period of at 
        least five years.  The agreement must be in effect and apply to 
        the rents to be charged for the year in which the property taxes 
        are payable.  The agreement must provide that the restrictions 
        apply to each year of the period, regardless of whether the unit 
        is occupied by an individual with qualifying income or whether 
        class 4d applies.  The rent restriction agreement must provide 
        for rents for the unit to be no higher than 30 percent of 60 
        percent of the median gross income.  The definition of median 
        gross income specified in this section applies.  "Rent" means 
        "gross rent" as defined in section 42(g)(2)(B) of the Internal 
        Revenue Code of 1986, as amended through December 31, 1996.  
           (b) Notwithstanding the maximum rent levels permitted, 20 
        percent of the units in the metropolitan area and ten percent of 
        the units in greater Minnesota qualifying under class 4d must be 
        made available to a family with a section 8 certificate. 
           (c) The rent restriction agreement runs with the land and 
        binds any successor to title to the property, without regard to 
        whether the successor had actual notice or knowledge of the 
        agreement.  The owner must promptly record the agreement in the 
        office of the county recorder or must file it in the office of 
        the registrar of titles, in the county where the property is 
        located.  If the agreement is not recorded, class 4d does not 
        apply to the property. 
           Subd. 4.  [MINIMUM HOUSING STANDARDS.] In order to qualify 
        under class 4d, a unit must be certified by the housing finance 
        agency to meet the minimum housing standards established under 
        section 462A.071. 
           Subd. 5.  [MONITORING RENT LEVELS.] The housing finance 
        agency is directed to monitor changes in rent levels and the use 
        of section 8 certificates in units qualifying under class 4d. 
           Subd. 6.  [PENALTIES.] Notwithstanding the provisions of 
        section 273.01, 274.01, or any other law, if the Minnesota 
        housing finance agency notifies the assessor that the provisions 
        of this section have not been met for any period during which a 
        unit was classified under class 4d, a penalty is imposed as 
        provided in section 462A.071, subdivision 8. 
           Sec. 5.  [273.127] [TRANSITION CLASS RATES; LOW-INCOME 
        HOUSING.] 
           Subdivision 1.  [TAXES PAYABLE IN 1998.] For taxes payable 
        in 1998, low-income housing property classified as class 4c 
        shall have a class rate of two percent, and property classified 
        as class 4d shall have a class rate of 1.9 percent. 
           Subd. 2.  [APPLICATION.] (a) The class rates under 
        subdivisions 3 and 4 apply to the market value of properties: 
           (1)(i) which were classified as class 4c or class 4d for 
        taxes payable in 1998; or 
           (ii) which are constructed or substantially rehabilitated 
        during calendar year 1997 and would have qualified as class 4c 
        or class 4d for taxes payable in 1999 absent the amendments to 
        those classes in section 8; and 
           (2) which do not qualify as class 4d property as a result 
        of the eligibility criteria specified in section 273.126.  
           (b) To qualify for the class rates under this section, the 
        building's owner must annually certify to the assessor in 
        writing that the property, building, or unit continues to 
        qualify under the laws in effect and applicable to its 
        classification for taxes payable in 1998. 
           (c) A property no longer qualifies under this section: 
           (1) if it is transferred or sold; or 
           (2) if loans, that have a principal amount equal to more 
        than 25 percent of the property's market value and that are 
        secured by the property, are refinanced. 
           Subd. 3.  [CLASS 4C PROPERTIES.] For the market value of 
        properties that meet the criteria of subdivision 2, paragraph 
        (a), and which no longer qualify as a result of the eligibility 
        criteria specified in section 273.126, a class rate of 2.4 
        percent applies for taxes payable in 1999 and a class rate of 
        2.6 percent applies for taxes payable in 2000. 
           Subd. 4.  [CLASS 4D PROPERTIES.] For the market value of 
        properties that meet the criteria of subdivision 2, paragraph 
        (a), and which no longer qualify as a result of the eligibility 
        criteria specified in section 273.126, a class rate of 2.2 
        percent applies for taxes payable in 1999 and a class rate of 
        2.5 applies for taxes payable in 2000. 
           Sec. 6.  Minnesota Statutes 1996, section 273.13, 
        subdivision 22, is amended to read:  
           Subd. 22.  [CLASS 1.] (a) Except as provided in subdivision 
        23, real estate which is residential and used for homestead 
        purposes is class 1.  The market value of class 1a property must 
        be determined based upon the value of the house, garage, and 
        land.  
           For taxes payable in 1998 and thereafter, the first 
        $72,000 $75,000 of market value of class 1a property has a net 
        class rate of one percent of its market value and a gross class 
        rate of 2.17 percent of its market value.  For taxes payable in 
        1992,; and the market value of class 1a property that 
        exceeds $72,000 but does not exceed $115,000 $75,000 has a class 
        rate of two 1.85 percent of its market value; and the market 
        value of class 1a property that exceeds $115,000 has a class 
        rate of 2.5 percent of its market value.  For taxes payable in 
        1993 and thereafter, the market value of class 1a property that 
        exceeds $72,000 has a class rate of two percent. 
           (b) Class 1b property includes homestead real estate or 
        homestead manufactured homes used for the purposes of a 
        homestead by 
           (1) any blind person, or the blind person and the blind 
        person's spouse; or 
           (2) any person, hereinafter referred to as "veteran," who: 
           (i) served in the active military or naval service of the 
        United States; and 
           (ii) is entitled to compensation under the laws and 
        regulations of the United States for permanent and total 
        service-connected disability due to the loss, or loss of use, by 
        reason of amputation, ankylosis, progressive muscular 
        dystrophies, or paralysis, of both lower extremities, such as to 
        preclude motion without the aid of braces, crutches, canes, or a 
        wheelchair; and 
           (iii) has acquired a special housing unit with special 
        fixtures or movable facilities made necessary by the nature of 
        the veteran's disability, or the surviving spouse of the 
        deceased veteran for as long as the surviving spouse retains the 
        special housing unit as a homestead; or 
           (3) any person who: 
           (i) is permanently and totally disabled and 
           (ii) receives 90 percent or more of total income from 
           (A) aid from any state as a result of that disability; or 
           (B) supplemental security income for the disabled; or 
           (C) workers' compensation based on a finding of total and 
        permanent disability; or 
           (D) social security disability, including the amount of a 
        disability insurance benefit which is converted to an old age 
        insurance benefit and any subsequent cost of living increases; 
        or 
           (E) aid under the federal Railroad Retirement Act of 1937, 
        United States Code Annotated, title 45, section 228b(a)5; or 
           (F) a pension from any local government retirement fund 
        located in the state of Minnesota as a result of that 
        disability; or 
           (G) pension, annuity, or other income paid as a result of 
        that disability from a private pension or disability plan, 
        including employer, employee, union, and insurance plans and 
           (iii) has household income as defined in section 290A.03, 
        subdivision 5, of $50,000 or less; or 
           (4) any person who is permanently and totally disabled and 
        whose household income as defined in section 290A.03, 
        subdivision 5, is 150 275 percent or less of the federal poverty 
        level. 
           Property is classified and assessed under clause (4) only 
        if the government agency or income-providing source certifies, 
        upon the request of the homestead occupant, that the homestead 
        occupant satisfies the disability requirements of this paragraph.
           Property is classified and assessed pursuant to clause (1) 
        only if the commissioner of economic security certifies to the 
        assessor that the homestead occupant satisfies the requirements 
        of this paragraph.  
           Permanently and totally disabled for the purpose of this 
        subdivision means a condition which is permanent in nature and 
        totally incapacitates the person from working at an occupation 
        which brings the person an income.  The first $32,000 market 
        value of class 1b property has a net class rate of .45 percent 
        of its market value and a gross class rate of .87 percent of its 
        market value.  The remaining market value of class 1b property 
        has a gross or net class rate using the rates for class 1 or 
        class 2a property, whichever is appropriate, of similar market 
        value.  
           (c) Class 1c property is commercial use real property that 
        abuts a lakeshore line and is devoted to temporary and seasonal 
        residential occupancy for recreational purposes but not devoted 
        to commercial purposes for more than 250 days in the year 
        preceding the year of assessment, and that includes a portion 
        used as a homestead by the owner, which includes a dwelling 
        occupied as a homestead by a shareholder of a corporation that 
        owns the resort or a partner in a partnership that owns the 
        resort, even if the title to the homestead is held by the 
        corporation or partnership.  For purposes of this clause, 
        property is devoted to a commercial purpose on a specific day if 
        any portion of the property, excluding the portion used 
        exclusively as a homestead, is used for residential occupancy 
        and a fee is charged for residential occupancy.  In order for a 
        property to be classified as class 1c, at least 40 percent of 
        the annual gross lodging receipts related to the property must 
        be from business conducted between Memorial Day weekend and 
        Labor Day weekend, and at least 60 percent of all bookings by 
        lodging guests during the year must be for periods of at least 
        two consecutive nights.  Class 1c property has a class rate of 
        one percent of total market value for taxes payable in 1993 and 
        thereafter 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.  
           (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 saleable 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). 
           Sec. 7.  Minnesota Statutes 1996, section 273.13, 
        subdivision 24, is amended to read: 
           Subd. 24.  [CLASS 3.] (a) Commercial and industrial 
        property and utility real and personal property, except class 5 
        property as identified in subdivision 31, clause (1), is class 
        3a.  It Each parcel has a class rate of three 2.7 percent of the 
        first $100,000 tier of market value for taxes payable in 1993 
        and thereafter, and 5.06 4.0 percent of the remaining market 
        value over $100,000, except that in the case of contiguous 
        parcels of commercial and industrial property owned by the same 
        person or entity, only the value equal to the first-tier value 
        of the contiguous parcels qualifies for the reduced class rate.  
        For the purposes of this subdivision, the first tier means the 
        first $150,000 of market value.  In the case of state-assessed 
        commercial, industrial, and utility property owned by one person 
        or entity, only one parcel has a reduced class rate on the first 
        $100,000 of market value.  In the case of other commercial, 
        industrial, and utility property owned by one person or entity, 
        only one parcel in each county has a reduced class rate on the 
        first $100,000 tier of market value, except that:. 
           (1) if the market value of the parcel is less than 
        $100,000, and additional parcels are owned by the same person or 
        entity in the same city or town within that county, the reduced 
        class rate shall be applied up to a combined total market value 
        of $100,000 for all parcels owned by the same person or entity 
        in the same city or town within the county; 
           (2) in the case of grain, fertilizer, and feed elevator 
        facilities, as defined in section 18C.305, subdivision 1, or 
        232.21, subdivision 8, the limitation to one parcel per owner 
        per county for the reduced class rate shall not apply, but there 
        shall be a limit of $100,000 of preferential value per site of 
        contiguous parcels owned by the same person or entity.  Only the 
        value of the elevator portion of each parcel shall qualify for 
        treatment under this clause.  For purposes of this subdivision, 
        contiguous parcels include parcels separated only by a railroad 
        or public road right-of-way; and 
           (3) in the case of property owned by a nonprofit charitable 
        organization that qualifies for tax exemption under section 
        501(c)(3) of the Internal Revenue Code of 1986, as amended 
        through December 31, 1993, if the property is used as a business 
        incubator, the limitation to one parcel per owner per county for 
        the reduced class rate shall not apply, provided that the 
        reduced rate applies only to the first $100,000 of value per 
        parcel owned by the organization.  As used in this clause, a 
        "business incubator" is a facility used for the development of 
        nonretail businesses, offering access to equipment, space, 
        services, and advice to the tenant businesses, for the purpose 
        of encouraging economic development, diversification, and job 
        creation in the area served by the organization. 
           To receive the reduced class rate on additional parcels 
        under clause (1), (2), or (3), the taxpayer must notify the 
        county assessor that the taxpayer owns more than one parcel that 
        qualifies under clause (1), (2), or (3). 
           For purposes of this paragraph, parcels are considered to 
        be contiguous even if they are separated from each other by a 
        road, street, vacant lot, waterway, or other similar intervening 
        type of property. 
           (b) Employment property defined in section 469.166, during 
        the period provided in section 469.170, shall constitute class 
        3b and has a class rate of 2.3 percent of the first $50,000 of 
        market value and 3.6 percent of the remainder, except that for 
        employment property located in a border city enterprise zone 
        designated pursuant to section 469.168, subdivision 4, paragraph 
        (c), the class rate of the first $100,000 tier of market value 
        and the class rate of the remainder is determined under 
        paragraph (a), unless the governing body of the city designated 
        as an enterprise zone determines that a specific parcel shall be 
        assessed pursuant to the first clause of this sentence.  The 
        governing body may provide for assessment under the first clause 
        of the preceding sentence only for property which is located in 
        an area which has been designated by the governing body for the 
        receipt of tax reductions authorized by section 469.171, 
        subdivision 1. 
           (c) Structures which are (i) located on property classified 
        as class 3a, (ii) constructed under an initial building permit 
        issued after January 2, 1996, (iii) located in a transit zone as 
        defined under section 473.3915, subdivision 3, (iv) located 
        within the boundaries of a school district, and (v) not 
        primarily used for retail or transient lodging purposes, shall 
        have a class rate of four equal to 85 percent of the class rate 
        of the second tier of the commercial property rate under 
        paragraph (a) on that any portion of the market value in excess 
        of $100,000 and any market value under $100,000 that does not 
        qualify for the three percent first tier class rate under 
        paragraph (a).  As used in item (v), a structure is primarily 
        used for retail or transient lodging purposes if over 50 percent 
        of its square footage is used for those purposes.  The four 
        percent rate shall also apply to improvements to existing 
        structures that meet the requirements of items (i) to (v) if the 
        improvements are constructed under an initial building permit 
        issued after January 2, 1996, even if the remainder of the 
        structure was constructed prior to January 2, 1996.  For the 
        purposes of this paragraph, a structure shall be considered to 
        be located in a transit zone if any portion of the structure 
        lies within the zone.  If any property once eligible for 
        treatment under this paragraph ceases to remain eligible due to 
        revisions in transit zone boundaries, the property shall 
        continue to receive treatment under this paragraph for a period 
        of three years. 
           Sec. 8.  Minnesota Statutes 1996, section 273.13, 
        subdivision 25, is amended to read: 
           Subd. 25.  [CLASS 4.] (a) Class 4a is residential real 
        estate containing four or more units and used or held for use by 
        the owner or by the tenants or lessees of the owner as a 
        residence for rental periods of 30 days or more.  Class 4a also 
        includes hospitals licensed under sections 144.50 to 144.56, 
        other than hospitals exempt under section 272.02, and contiguous 
        property used for hospital purposes, without regard to whether 
        the property has been platted or subdivided.  Class 4a property 
        in a city with a population of 5,000 or less, that is (1) 
        located outside of the metropolitan area, as defined in section 
        473.121, subdivision 2, or outside any county contiguous to the 
        metropolitan area, and (2) whose city boundary is at least 15 
        miles from the boundary of any city with a population greater 
        than 5,000 has a class rate of 2.3 percent of market value for 
        taxes payable in 1996 and thereafter.  All other class 4a 
        property has a class rate of 3.4 2.9 percent of market value for 
        taxes payable in 1996 and thereafter.  For purposes of this 
        paragraph, population has the same meaning given in section 
        477A.011, subdivision 3. 
           (b) Class 4b includes: 
           (1) residential real estate containing less than four units 
        that does not qualify as class 4bb, other than seasonal 
        residential, and recreational; 
           (2) manufactured homes not classified under any other 
        provision; 
           (3) a dwelling, garage, and surrounding one acre of 
        property on a nonhomestead farm classified under subdivision 23, 
        paragraph (b) containing two or three units; 
           (4) unimproved property that is classified residential as 
        determined under section 273.13, subdivision 33.  
           Class 4b property has a class rate of 2.8 percent of market 
        value for taxes payable in 1992, 2.5 percent of market value for 
        taxes payable in 1993, and 2.3 2.1 percent of market value for 
        taxes payable in 1994 and thereafter. 
           (c) Class 4bb includes: 
           (1) nonhomestead residential real estate containing one 
        unit, other than seasonal residential, and recreational; and 
           (2) a single family dwelling, garage, and surrounding one 
        acre of property on a nonhomestead farm classified under 
        subdivision 23, paragraph (b). 
           Class 4bb has a class rate of 1.9 percent on the first 
        $75,000 of market value and a class rate of 2.1 percent of its 
        market value that exceeds $75,000. 
           Property that has been classified as seasonal recreational 
        residential property at any time during which it has been owned 
        by the current owner or spouse of the current owner does not 
        qualify for class 4bb. 
           (c) (d) Class 4c property includes: 
           (1) a structure that is:  
           (i) situated on real property that is used for housing for 
        the elderly or for low- and moderate-income families as defined 
        in Title II, as amended through December 31, 1990, of the 
        National Housing Act or the Minnesota housing finance agency law 
        of 1971, as amended, or rules promulgated by the agency and 
        financed by a direct federal loan or federally insured loan made 
        pursuant to Title II of the Act; or 
           (ii) situated on real property that is used for housing the 
        elderly or for low- and moderate-income families as defined by 
        the Minnesota housing finance agency law of 1971, as amended, or 
        rules adopted by the agency pursuant thereto and financed by a 
        loan made by the Minnesota housing finance agency pursuant to 
        the provisions of the act.  
           This clause applies only to property of a nonprofit or 
        limited dividend entity.  Property is classified as class 4c 
        under this clause for 15 years from the date of the completion 
        of the original construction or substantial rehabilitation, or 
        for the original term of the loan.  
           (2) a structure that is: 
           (i) situated upon real property that is used for housing 
        lower income families or elderly or handicapped persons, as 
        defined in section 8 of the United States Housing Act of 1937, 
        as amended; and 
           (ii) owned by an entity which has entered into a housing 
        assistance payments contract under section 8 which provides 
        assistance for 100 percent of the dwelling units in the 
        structure, other than dwelling units intended for management or 
        maintenance personnel.  Property is classified as class 4c under 
        this clause for the term of the housing assistance payments 
        contract, including all renewals, or for the term of its 
        permanent financing, whichever is shorter; and 
           (3) a qualified low-income building as defined in section 
        42(c)(2) of the Internal Revenue Code of 1986, as amended 
        through December 31, 1990, that (i) receives a low-income 
        housing credit under section 42 of the Internal Revenue Code of 
        1986, as amended through December 31, 1990; or (ii) meets the 
        requirements of that section and receives public financing, 
        except financing provided under sections 469.174 to 469.179, 
        which contains terms restricting the rents; or (iii) meets the 
        requirements of section 273.1317.  Classification pursuant to 
        this clause is limited to a term of 15 years.  The public 
        financing received must be from at least one of the following 
        sources:  government issued bonds exempt from taxes under 
        section 103 of the Internal Revenue Code of 1986, as amended 
        through December 31, 1993, the proceeds of which are used for 
        the acquisition or rehabilitation of the building; programs 
        under section 221(d)(3), 202, or 236, of Title II of the 
        National Housing Act; rental housing program funds under Section 
        8 of the United States Housing Act of 1937 or the market rate 
        family graduated payment mortgage program funds administered by 
        the Minnesota housing finance agency that are used for the 
        acquisition or rehabilitation of the building; public financing 
        provided by a local government used for the acquisition or 
        rehabilitation of the building, including grants or loans from 
        federal community development block grants, HOME block grants, 
        or residential rental bonds issued under chapter 474A; or other 
        rental housing program funds provided by the Minnesota housing 
        finance agency for the acquisition or rehabilitation of the 
        building. 
           For all properties described in clauses (1), (2), and (3) 
        and in paragraph (d), the market value determined by the 
        assessor must be based on the normal approach to value using 
        normal unrestricted rents unless the owner of the property 
        elects to have the property assessed under Laws 1991, chapter 
        291, article 1, section 55.  If the owner of the property elects 
        to have the market value determined on the basis of the actual 
        restricted rents, as provided in Laws 1991, chapter 291, article 
        1, section 55, the property will be assessed at the rate 
        provided for class 4a or class 4b property, as appropriate.  
        Properties described in clauses (1)(ii), (3), and (4) may apply 
        to the assessor for valuation under Laws 1991, chapter 291, 
        article 1, section 55.  The land on which these structures are 
        situated has the class rate given in paragraph (b) if the 
        structure contains fewer than four units, and the class rate 
        given in paragraph (a) if the structure contains four or more 
        units.  This clause applies only to the property of a nonprofit 
        or limited dividend entity.  
           (4) a parcel of land, not to exceed one acre, and its 
        improvements or a parcel of unimproved land, not to exceed one 
        acre, if it is owned by a neighborhood real estate trust and at 
        least 60 percent of the dwelling units, if any, on all land 
        owned by the trust are leased to or occupied by lower income 
        families or individuals.  This clause does not apply to any 
        portion of the land or improvements used for nonresidential 
        purposes.  For purposes of this clause, a lower income family is 
        a family with an income that does not exceed 65 percent of the 
        median family income for the area, and a lower income individual 
        is an individual whose income does not exceed 65 percent of the 
        median individual income for the area, as determined by the 
        United States Secretary of Housing and Urban Development.  For 
        purposes of this clause, "neighborhood real estate trust" means 
        an entity which is certified by the governing body of the 
        municipality in which it is located to have the following 
        characteristics: 
           (a) it is a nonprofit corporation organized under chapter 
        317A; 
           (b) it has as its principal purpose providing housing for 
        lower income families in a specific geographic community 
        designated in its articles or bylaws; 
           (c) it limits membership with voting rights to residents of 
        the designated community; and 
           (d) it has a board of directors consisting of at least 
        seven directors, 60 percent of whom are members with voting 
        rights and, to the extent feasible, 25 percent of whom are 
        elected by resident members of buildings owned by the trust; and 
           (5) except as provided in subdivision 22, paragraph (c), 
        real property devoted to temporary and seasonal residential 
        occupancy for recreation purposes, including real property 
        devoted to temporary and seasonal residential occupancy for 
        recreation purposes and not devoted to commercial purposes for 
        more than 250 days in the year preceding the year of 
        assessment.  For purposes of this clause, property is devoted to 
        a commercial purpose on a specific day if any portion of the 
        property is used for residential occupancy, and a fee is charged 
        for residential occupancy.  In order for a property to be 
        classified as class 4c, seasonal recreational residential for 
        commercial purposes, at least 40 percent of the annual gross 
        lodging receipts related to the property must be from business 
        conducted between Memorial Day weekend and Labor Day weekend and 
        at least 60 percent of all bookings by lodging guests during the 
        year must be for periods of at least two consecutive nights.  
        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.  
        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 first $100,000 of the market 
        value of the remainder of the cabins or units and a 
        proportionate share of the land on which they are located shall 
        have a class rate of three percent.  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) any portion of the property is located within a county 
        that has a population of less than 50,000, or within a county 
        containing a golf course owned by a municipality or the county; 
           (ii) 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 
           (iii) 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. 
           (6) (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; 
           (7) (4) post-secondary student housing of not more than one 
        acre of land that is owned by a nonprofit corporation organized 
        under chapter 317A and is used exclusively by a student 
        cooperative, sorority, or fraternity for on-campus housing or 
        housing located within two miles of the border of a college 
        campus; and 
           (8) (5) manufactured home parks as defined in section 
        327.14, subdivision 3. 
           Class 4c property has a class rate of 2.3 2.1 percent of 
        market value, except that (i) for each parcel of seasonal 
        residential recreational property not used for commercial 
        purposes under clause (5) the first $72,000 $75,000 of market 
        value on each parcel has a class rate of 1.75 percent for taxes 
        payable in 1997 and 1.5 1.4 percent for taxes payable in 1998 
        and thereafter, and the market value of each parcel that exceeds 
        $72,000 $75,000 has a class rate of 2.5 percent, and (ii) 
        manufactured home parks assessed under clause (8) (5) have a 
        class rate of two percent for taxes payable in 1996, and 
        thereafter.  
           (d) (e) Class 4d property includes: 
           (1) a structure that is: 
           (i) situated on real property that is used for housing for 
        the elderly or for low and moderate income families as defined 
        by the Farmers Home Administration; 
           (ii) located in a municipality of less than 10,000 
        population; and 
           (iii) financed by a direct loan or insured loan from the 
        Farmers Home Administration.  Property is classified under this 
        clause for 15 years from the date of the completion of the 
        original construction or for the original term of the loan.  
           The class rates in paragraph (c), clauses (1), (2), and (3) 
        and this clause apply to the properties described in them, only 
        in proportion to occupancy of the structure by elderly or 
        handicapped persons or low and moderate income families as 
        defined in the applicable laws unless construction of the 
        structure had been commenced prior to January 1, 1984; or the 
        project had been approved by the governing body of the 
        municipality in which it is located prior to June 30, 1983; or 
        financing of the project had been approved by a federal or state 
        agency prior to June 30, 1983.  For those properties, 4c or 4d 
        classification is available only for those units meeting the 
        requirements of section 273.1318. 
           Classification under this clause is only available to 
        property of a nonprofit or limited dividend entity. 
           In the case of a structure financed or refinanced under any 
        federal or state mortgage insurance or direct loan program 
        exclusively for housing for the elderly or for housing for the 
        handicapped, a unit shall be considered occupied so long as it 
        is actually occupied by an elderly or handicapped person or, if 
        vacant, is held for rental to an elderly or handicapped person. 
           (2) For taxes payable in 1992, 1993, and 1994, only, 
        buildings and appurtenances, together with the land upon which 
        they are located, leased by the occupant under the community 
        lending model lease-purchase mortgage loan program administered 
        by the Federal National Mortgage Association, provided the 
        occupant's income is no greater than 60 percent of the county or 
        area median income, adjusted for family size and the building 
        consists of existing single family or duplex housing.  The lease 
        agreement must provide for a portion of the lease payment to be 
        escrowed as a nonrefundable down payment on the housing.  To 
        qualify under this clause, the taxpayer must apply to the county 
        assessor by May 30 of each year.  The application must be 
        accompanied by an affidavit or other proof required by the 
        assessor to determine qualification under this clause. 
           (3) Qualifying buildings and appurtenances, together with 
        the land upon which they are located, leased for a period of up 
        to five years by the occupant under a lease-purchase program 
        administered by the Minnesota housing finance agency or a 
        housing and redevelopment authority authorized under sections 
        469.001 to 469.047, provided the occupant's income is no greater 
        than 80 percent of the county or area median income, adjusted 
        for family size, and the building consists of two or less 
        dwelling units.  The lease agreement must provide for a portion 
        of the lease payment to be escrowed as a nonrefundable down 
        payment on the housing.  The administering agency shall verify 
        the occupants income eligibility and certify to the county 
        assessor that the occupant meets the income criteria under this 
        paragraph.  To qualify under this clause, the taxpayer must 
        apply to the county assessor by May 30 of each year.  For 
        purposes of this section, "qualifying buildings and 
        appurtenances" shall be defined as one or two unit residential 
        buildings which are unoccupied and have been abandoned and 
        boarded for at least six months is qualifying low-income rental 
        housing certified to the assessor by the housing finance agency 
        under sections 273.126 and 462A.071.  Class 4d includes land in 
        proportion to the total market value of the building that is 
        qualifying low-income rental housing.  For all properties 
        qualifying as class 4d, the market value determined by the 
        assessor must be based on the normal approach to value using 
        normal unrestricted rents. 
           Class 4d property has a class rate of two one percent of 
        market value except that property classified under clause (3), 
        shall have the same class rate as class 1a property. 
           (e) Residential rental property that would otherwise be 
        assessed as class 4 property under paragraph (a); paragraph (b), 
        clauses (1) and (3); paragraph (c), clause (1), (2), (3), or 
        (4), is assessed at the class rate applicable to it under 
        Minnesota Statutes 1988, section 273.13, if it is found to be a 
        substandard building under section 273.1316.  Residential rental 
        property that would otherwise be assessed as class 4 property 
        under paragraph (d) is assessed at 2.3 percent of market value 
        if it is found to be a substandard building under section 
        273.1316. 
           (f) Class 4e property consists of the residential portion 
        of any structure located within a city that was converted from 
        nonresidential use to residential use, provided that: 
           (1) the structure had formerly been used as a warehouse; 
           (2) the structure was originally constructed prior to 1940; 
           (3) the conversion was done after December 31, 1995, but 
        before January 1, 2003; and 
           (4) the conversion involved an investment of at least 
        $25,000 per residential unit. 
           Class 4e property has a class rate of 2.3 percent, provided 
        that a structure is eligible for class 4e classification only in 
        the 12 assessment years immediately following the conversion. 
           Sec. 9.  Minnesota Statutes 1996, section 273.13, 
        subdivision 31, is amended to read: 
           Subd. 31.  [CLASS 5.] Class 5 property includes:  
           (1) tools, implements, and machinery of an electric 
        generating, transmission, or distribution system or a pipeline 
        system transporting or distributing water, gas, crude oil, or 
        petroleum products or mains and pipes used in the distribution 
        of steam or hot or chilled water for heating or cooling 
        buildings, which are fixtures; 
           (2) unmined iron ore and low-grade iron-bearing formations 
        as defined in section 273.14; and 
           (3) all other property not otherwise classified. 
           Class 5 property has a class rate of 5.06 4.0 percent of 
        market value for taxes payable in 1998 and thereafter. 
           Sec. 10.  Minnesota Statutes 1996, section 273.13, 
        subdivision 32, is amended to read: 
           Subd. 32.  [TARGET CLASS RATE RATES.] (a) All classes of 
        property with a class rate of 5.06 4 percent have a target class 
        rate of four 3.5 percent.  Class 4a shall have a target class 
        rate of 2.5 percent.  Class 4bb has a target class rate of 1.25 
        percent of the first $75,000 of market value and a target class 
        rate of 1.85 percent of the market value in excess of $75,000. 
           (b) By the fourth Tuesday in January of 1998 and at the 
        time of submission of the biennial budget under section 
        16A.11 in each biennium thereafter, the governor shall must 
        recommend the effective class rate schedule for all properties 
        for taxes payable in 1999 for the schedule submitted in 1998 and 
        for the following two calendar years by designating a "phase-in 
        percentage," equal to the proportion of the effective class rate 
        that will be based on the target class rate of four percent, 
        with the remaining proportion based on the class rate of 5.06 
        percent in each biennium thereafter.  The class rate schedule 
        must include reductions in the class rates of the classes 
        designated in paragraph (a) until such time as the target class 
        rates are reached unless the governor recommends no change in 
        the class rate schedule for all properties.  As part of the 
        recommendation, the governor shall identify recommend 
        appropriation of monies from the property tax reform account 
        under section 16A.1521 and include within the budget additional 
        funding for the increased expenditures for the education 
        homestead and agricultural credit aid over the amount of 
        expenditures for homestead and agricultural credit aid provided 
        in Laws 1989, First Special Session chapter 1, that are 
        estimated to result from the recommendation.  At that time, the 
        property tax refund under chapter 290A and education aids under 
        chapters 124 and 124A to the extent those aids will be used to 
        reduce property tax levies.  The governor may propose 
        alternative programs other than homestead and agricultural 
        credit aid to prevent other taxpayers' the taxes of classes 
        other than those designated in paragraph (a) from increasing as 
        a result of the governor's recommended increase in the phase-in 
        percentage.  The effective net class rate is the sum of the 
        products of: 
           (1) the phase-in percentage adopted by the legislature 
        multiplied by four percent; and 
           (2) 100 percent minus the phase-in percentage multiplied by 
        5.06 percent. 
           The phase-in percentage in any year cannot be less than it 
        was in the prior year.  The phase-in percentage is ten percent 
        for taxes payable in 1991, 29.2 percent for taxes payable in 
        1992, 34.0 percent for taxes payable in 1993, and 43.4 percent 
        for taxes payable in 1994 and thereafter. 
           Beginning in 1991, the commissioner of revenue shall 
        annually set the effective class rate to use for taxes payable 
        in the following year as provided in this subdivision and 
        announce it by June 1.  For purposes of any aid, levy 
        limitation, debt limit, or salary limitation, and property tax 
        administration, net tax capacity must be computed with reference 
        to the effective class rate for the properties affected by this 
        subdivision class rate schedule. 
           Sec. 11.  [273.1319] [SINGLE FAMILY HOUSING; NONCOMPLIANCE; 
        MINNEAPOLIS AND ST. PAUL.] 
           (a) If the city determines that a residential rental 
        property classified as class 4bb under section 273.13, 
        subdivision 25, is not in compliance with the city's applicable 
        rental licensing requirements and housing codes, the city shall 
        notify the property owner of the specific items that are not in 
        compliance.  The owner has 60 days to correct the noncompliance 
        items identified by the city.  If they have not been corrected 
        within the 60-day time period to the satisfaction of the city, 
        the city shall notify the assessor that the property is out of 
        compliance and is no longer eligible for the class 4bb property 
        classification.  Notwithstanding any other provision of law, the 
        assessor shall reclassify the property for the current 
        assessment year, for taxes payable in the following year as 
        class 4b property.  The assessor shall notify the property owner 
        of the action. 
           (b) This section applies only to property located in the 
        cities of Minneapolis and St. Paul. 
           (c) This section is effective for each of the cities of 
        Minneapolis and St. Paul upon compliance with Minnesota 
        Statutes, section 645.021, subdivision 3, by the governing body 
        of the city. 
           Sec. 12.  [273.1382] [EDUCATION HOMESTEAD CREDIT.] 
           Subdivision 1.  [EDUCATION HOMESTEAD CREDIT.] Each year, 
        beginning with property taxes payable in 1998, the respective 
        county auditors shall determine the local tax rate for each 
        school district for the general education levy certified under 
        section 124A.23, subdivision 2 or 3.  That rate shall be the 
        general education homestead credit local tax rate for the 
        district.  The auditor shall then determine a general education 
        homestead credit for each homestead within the county equal to 
        32 percent of the general education homestead credit local tax 
        rate times the net tax capacity of the homestead for the taxes 
        payable year.  The amount of general education homestead credit 
        for a homestead may not exceed $225.  In the case of an 
        agricultural homestead, only the net tax capacity of the house, 
        garage, and surrounding one acre of land shall be used in 
        determining the property's education homestead credit. 
           Subd. 2.  [CREDIT REIMBURSEMENTS.] (a) The commissioner of 
        revenue shall determine the tax reductions allowed under this 
        section for each taxes payable year, and for each school 
        district based upon a review of the abstracts of tax lists 
        submitted by the county auditors under section 275.29, and from 
        any other information which the commissioner deems relevant.  
        The commissioner of revenue shall generally compute the tax 
        reductions at the unique taxing jurisdiction level, however the 
        commissioner may compute the tax reductions at a higher 
        geographic level if that would have a negligible impact, or if 
        changes in the composition of unique taxing jurisdictions do not 
        permit computation at the unique taxing jurisdiction level.  The 
        commissioner's determinations under this paragraph are not rules.
           (b) The commissioner of revenue shall certify the total of 
        the tax reductions granted under this section for each taxes 
        payable year within each school district to the commissioner of 
        children, families, and learning after July 1 and on or before 
        August 1 of the taxes payable year.  The commissioner of 
        children, families, and learning shall reimburse each affected 
        school district for the amount of the property tax reductions 
        allowed under this section as provided in section 273.1392.  The 
        commissioner of children, families, and learning shall treat the 
        reimbursement payments as entitlements for the same state fiscal 
        year as certified, including with each district's initial 
        payment all amounts that would have been paid up to that date, 
        computed as if 90 percent of the annual reimbursement amount for 
        the district were being paid one-twelfth in each month of the 
        fiscal year.  
           Subd. 3.  [APPROPRIATION.] An amount sufficient to make the 
        payments required by this section is annually appropriated from 
        the general fund to the commissioner of children, families, and 
        learning.  
           Sec. 13.  Minnesota Statutes 1996, section 273.1393, is 
        amended to read: 
           273.1393 [COMPUTATION OF NET PROPERTY TAXES.] 
           Notwithstanding any other provisions to the contrary, "net" 
        property taxes are determined by subtracting the credits in the 
        order listed from the gross tax:  
           (1) disaster credit as provided in section 273.123; 
           (2) powerline credit as provided in section 273.42; 
           (3) agricultural preserves credit as provided in section 
        473H.10; 
           (4) enterprise zone credit as provided in section 469.171; 
           (5) disparity reduction credit; 
           (6) conservation tax credit as provided in section 273.119; 
           (7) education homestead credit as provided in section 
        273.1382; 
           (8) taconite homestead credit as provided in section 
        273.135; and 
           (8) (9) supplemental homestead credit as provided in 
        section 273.1391.  
           The combination of all property tax credits must not exceed 
        the gross tax amount.  
           Sec. 14.  Minnesota Statutes 1996, section 290A.03, 
        subdivision 13, is amended to read: 
           Subd. 13.  [PROPERTY TAXES PAYABLE.] "Property taxes 
        payable" means the property tax exclusive of special 
        assessments, penalties, and interest payable on a claimant's 
        homestead before reductions made under section 273.13 but after 
        deductions made under sections 273.135, 273.1391, 273.1382, 
        273.42, subdivision 2, and any other state paid property tax 
        credits in any calendar year.  In the case of a claimant who 
        makes ground lease payments, "property taxes payable" includes 
        the amount of the payments directly attributable to the property 
        taxes assessed against the parcel on which the house is 
        located.  No apportionment or reduction of the "property taxes 
        payable" shall be required for the use of a portion of the 
        claimant's homestead for a business purpose if the claimant does 
        not deduct any business depreciation expenses for the use of a 
        portion of the homestead in the determination of federal 
        adjusted gross income.  For homesteads which are manufactured 
        homes as defined in section 273.125, subdivision 8, and for 
        homesteads which are park trailers taxed as manufactured homes 
        under section 168.012, subdivision 9, "property taxes payable" 
        shall also include the amount of the gross rent paid in the 
        preceding year for the site on which the homestead is located, 
        which is attributable to the net tax paid on the site.  The 
        amount attributable to property taxes shall be determined by 
        multiplying the net tax on the parcel by a fraction, the 
        numerator of which is the gross rent paid for the calendar year 
        for the site and the denominator of which is the gross rent paid 
        for the calendar year for the parcel.  When a homestead is owned 
        by two or more persons as joint tenants or tenants in common, 
        such tenants shall determine between them which tenant may claim 
        the property taxes payable on the homestead.  If they are unable 
        to agree, the matter shall be referred to the commissioner of 
        revenue whose decision shall be final.  Property taxes are 
        considered payable in the year prescribed by law for payment of 
        the taxes. 
           In the case of a claim relating to "property taxes 
        payable," the claimant must have owned and occupied the 
        homestead on January 2 of the year in which the tax is payable 
        and (i) the property must have been classified as homestead 
        property pursuant to section 273.13, subdivision 22 or 23, on or 
        before December 15 of the assessment year to which the "property 
        taxes payable" relate; or (ii) the claimant must provide 
        documentation from the local assessor that application for 
        homestead classification has been made on or before December 15 
        of the year in which the "property taxes payable" were payable 
        and that the assessor has approved the application. 
           Sec. 15.  [462A.071] [CERTIFICATION OF HOUSING QUALIFYING 
        FOR REDUCED PROPERTY TAX RATE.] 
           Subdivision 1.  [CERTIFICATION.] By June 30 of each year, 
        the agency must certify to local assessors the units of 
        low-income rental properties that qualify for class 4d under 
        sections 273.126 and 273.13.  In making these certifications, 
        the agency may rely on the application and supporting 
        information supplied by the property owner as to compliance with 
        the income limits under section 273.126, subdivision 2, and 
        satisfaction of the minimum housing quality standards under 
        subdivision 4. 
           Subd. 2.  [APPLICATION.] (a) In order to qualify for 
        certification under subdivision 1, the owner or manager of the 
        property must annually apply to the agency.  The application 
        must be in the form prescribed by the agency, contain the 
        information required by the agency, and be submitted by the date 
        and time specified by the agency. 
           (b) Each application must include: 
           (1) the property tax identification number; 
           (2) the number, type, and size of units the applicant seeks 
        to qualify as low-income housing under class 4d; 
           (3) the number, type, and size of units in the property for 
        which the applicant is not seeking qualification, if any; 
           (4) a certification that the property has been inspected by 
        a qualified inspector within the past three years and meets the 
        minimum housing quality standards or is exempt from the 
        inspection requirement under subdivision 4; 
           (5) a statement indicating the building is in compliance 
        with the income limits; 
           (6) an executed agreement to restrict rents meeting the 
        requirements specified by the agency or executed leases for the 
        units for which qualification as low-income housing as class 4d 
        under section 273.13 is sought and the rent schedule; and 
           (7) any additional information the agency deems appropriate 
        to require. 
           (c) The applicant must pay a per-unit application fee to be 
        set by the agency.  The application fee charged by the agency 
        must approximately equal the costs of processing and reviewing 
        the applications.  The fee must be deposited in the general fund.
           Subd. 3.  [AGREEMENT TO RESTRICT RENTS.] The agency may 
        prescribe one or more standard form agreements to restrict rents 
        that meet the requirements of section 273.126, subdivision 3.  
        The agreements must be in recordable form.  The agency may 
        require applicants to execute a rent restriction agreement in 
        this form as a condition of entering an agreement to restrict 
        rents. 
           Subd. 4.  [MINIMUM HOUSING QUALITY STANDARDS.] (a) To 
        qualify for taxation under class 4d under section 273.13, a unit 
        must meet both the housing maintenance code of the local unit of 
        government in which the unit is located, if such a code has been 
        adopted, and the housing quality standards adopted by the United 
        States Department of Housing and Urban Development. 
           (b) In order to meet the minimum housing quality standards, 
        a building must be inspected by an independent designated 
        inspector at least once every three years.  The inspector must 
        certify that the building complies with the minimum standards.  
        The property owner must pay the cost of the inspection. 
           (c) The agency may exempt from the inspection requirement 
        housing units that are financed by a governmental entity and 
        subject to regular inspection or other compliance checks with 
        regard to minimum housing quality.  Written certification must 
        be supplied to show that these exempt units have been inspected 
        within the last three years and comply with the requirements 
        under the public financing or local requirements. 
           Subd. 5.  [HOUSING INSPECTORS.] (a) Housing inspections 
        required by this section may be conducted only by persons 
        designated by the agency.  The agency may designate one or more 
        persons to conduct inspections for all or part of the state.  A 
        designated inspector may charge a fee for an inspection up to a 
        maximum amount approved by the agency.  The inspector must be 
        independent of the owner or manager of the inspected property. 
           (b) The agency must maintain a list of persons eligible to 
        conduct housing inspections under this section. 
           Subd. 6.  [SECTION 8 AND TAX CREDIT UNITS.] (a) The agency 
        may deem units as meeting the requirements of section 273.126 
        and this section, if the units either: 
           (1) are subject to a housing assistance payments contract 
        under section 8 of the United States Housing Act of 1937, as 
        amended; or 
           (2) are rent 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. 
           (b) The agency may certify these deemed units under 
        subdivision 1 based on a simplified application procedure that 
        verifies the unit's qualifications under paragraph (a). 
           Subd. 7.  [MONITORING COMPLIANCE.] (a) The agency must 
        monitor compliance by building owners with the requirements of 
        section 273.126 and this section.  The agency must annually 
        conduct on-site examinations of a sample of the buildings 
        receiving class 4d taxation to monitor compliance.  The agency 
        may contract with third parties to monitor compliance. 
           (b) An inspector, designated by the agency under 
        subdivision 5, shall notify the agency if, in conducting an 
        inspection under subdivision 4, the inspector finds that: 
           (1) a unit is receiving class 4d taxation; 
           (2) the unit is not in compliance with the requirements of 
        subdivision 4; and 
           (3) the owner or manager fails or refuses to cure the 
        violations within a reasonable time after receiving notification 
        of the violation. 
           Subd. 8.  [PENALTIES.] (a) The penalties provided by this 
        subdivision apply to each unit that received class 4d taxation 
        for a year and failed to meet the requirements of section 
        273.126 and this section. 
           (b) If the owner or manager does not comply with the rent 
        restriction agreement, or does not comply with the income 
        restrictions or minimum housing quality standards, a penalty 
        applies equal to the increased taxes that would have been 
        imposed if the property had not been classified under class 4d 
        for the year in which restrictions were violated. 
           (c) If the agency finds that the violations were 
        inadvertent and insubstantial, a penalty of $50 per unit per 
        year applies in lieu of the penalty specified under paragraph 
        (b).  In order to qualify under this paragraph, violations of 
        the minimum housing quality standards must be corrected within a 
        reasonable period of time and rent charged in excess of the 
        agreement must be rebated to the tenants. 
           (d) The agency may abate the penalties under this 
        subdivision for reasonable cause. 
           (e) Penalties assessed under paragraph (c) are payable to 
        the agency and must be deposited in the general fund.  If an 
        owner or manager fails to timely pay a penalty imposed under 
        paragraph (c), the agency may choose to: 
           (1) impose the penalty under paragraph (b); or 
           (2) certify the penalty under paragraph (c) to the auditor 
        for collection as additional taxes. 
        The agency shall certify to the county auditor penalties 
        assessed under paragraph (b) and clause (2).  The auditor shall 
        impose and collect the certified penalties as additional taxes 
        which will be distributed to taxing districts in the same manner 
        as property taxes on the property. 
           Subd. 9.  [TAX COURT REVIEW.] (a) An owner may appeal to 
        tax court as provided in section 271.06: 
           (1) a denial of a request for certification of a property 
        as qualifying for class 4d taxation; 
           (2) imposition of a penalty under this section; or 
           (3) denial of a request to abate a penalty. 
           (b) The county attorney shall represent the public in 
        opposing the appeal. 
           Subd. 10.  [INTERAGENCY CONTRACTING AUTHORITY.] The agency 
        may contract with the department of revenue or any other state 
        agency or a private entity to carry out administrative functions 
        under this section. 
           Subd. 11.  [RULEMAKING.] (a) The agency may adopt 
        administrative rules under chapter 14 to carry out the 
        provisions of this section, including establishing standards for 
        abating penalties, violations that are inadvertent and 
        insubstantial, selection of inspectors, selection of persons to 
        monitor compliance, and establishing rent restriction agreement 
        terms. 
           (b) Pending final rulemaking, and in order to implement 
        this section by January 1, 1998, the agency shall be allowed to 
        make determinations regarding selection of inspectors, rent 
        restriction agreement terms, fees, application information, 
        application deadlines, required documentation, exemptions from 
        inspection requirements, and deeming of eligibility.  Any 
        determinations adopted under this authority expire on January 1, 
        1999. 
           Sec. 16.  [PROPERTY TAX REBATE.] 
           (a) A credit is allowed against the tax imposed on an 
        individual under Minnesota Statutes, chapter 290 equal to 20 
        percent of the qualified property tax paid in calendar year 1997 
        for taxes assessed in 1996. 
           (b) For property owned and occupied by the taxpayer, 
        qualified tax means property taxes payable as defined in 
        Minnesota Statutes, section 290A.03, subdivision 13, assessed in 
        1996 and payable in 1997.  
           (c) For a renter, the qualified property tax means the 
        amount of rent constituting property taxes under Minnesota 
        Statutes, section 290A.03, subdivision 11, based on rent paid in 
        1997.  If two or more renters could be claimants under Minnesota 
        Statutes, chapter 290A with regard to the rent constituting 
        property taxes, the rules under Minnesota Statutes, section 
        290A.03, subdivision 8, paragraph (f), applies to determine the 
        amount of the credit for the individual. 
           (d) For an individual who both owned and rented principal 
        residences in calendar year 1997, qualified taxes are the sum of 
        the amounts under paragraphs (a) and (b). 
           (e) If the amount of the credit under this subdivision 
        exceeds the taxpayer's tax liability under this chapter, the 
        commissioner shall refund the excess. 
           (f) To claim a credit under this subdivision, the taxpayer 
        must attach a copy of the property tax statement and certificate 
        of rent paid, as applicable, and provide any additional 
        information the commissioner requires. 
           (g) An amount sufficient to pay refunds under this 
        subdivision is appropriated to the commissioner from the general 
        fund. 
           (h) This credit applies to taxable years beginning after 
        December 31, 1996, and before January 1, 1998. 
           Sec. 17.  [GENERAL EDUCATION LEVY REDUCTION.] 
           Notwithstanding the provisions of Minnesota Statutes, 
        section 124A.23, subdivision 1, the general education levy shall 
        be reduced by $93,000,000 for taxes payable in 1998 and 
        subsequent years.  The amount necessary to offset the costs of 
        the levy reductions contained in this section is annually 
        appropriated from the general fund to the commissioner of 
        children, families, and learning. 
           Sec. 18.  [TEMPORARY EXEMPTIONS FROM INSPECTION 
        REQUIREMENTS.] 
           (a) The Minnesota housing finance agency may provide a 
        temporary exemption to the inspection requirement under 
        Minnesota Statutes, sections 273.126, subdivision 4, and 
        462A.071, if the agency finds that: 
           (1) the property owner made a good faith effort to obtain 
        an inspection; and 
           (2) the owner was unable to obtain an inspection in time to 
        apply because the designated inspectors were unable to conduct 
        all the requested inspections. 
           (b) If a unit that is exempted under this section does not 
        ultimately obtain a certification from a designated inspector 
        that it is in compliance with the minimum housing quality 
        standards, the additional taxes under Minnesota Statutes, 
        section 273.126, subdivision 5, apply. 
           (c) Procedures or rules for granting exemptions under this 
        section are not subject to the administrative rulemaking under 
        Minnesota Statutes, chapter 14. 
           (d) The authority under this section expires December 31, 
        2000. 
           Sec. 19.  [TIF GRANTS; APPROPRIATIONS.] 
           Subdivision 1.  [TIF GRANTS.] (a) The commissioner of 
        revenue shall pay grants to municipalities for deficits in tax 
        increment financing districts caused by the changes in class 
        rates under this act.  Municipalities must submit applications 
        for the grants in a form prescribed by the commissioner by no 
        later than March 1 for grants payable during the calendar year.  
        The maximum grant equals the lesser of: 
           (1) for taxes payable in the year before the grant is paid, 
        the reduction in the tax increment financing district's revenues 
        derived from increment resulting from the class rate changes in 
        this article; or 
           (2) the municipality's total tax increments, including 
        unspent increments from previous years, less the amount due 
        during the calendar year to pay (i) bonds issued and sold before 
        the day following final enactment of this act and (ii) binding 
        contracts entered into before the day following final enactment 
        of this act.  
           (b) The commissioner of revenue may require applicants for 
        grants or pooling authority under this section to provide any 
        information the commissioner deems appropriate.  The 
        commissioner shall calculate the amount under paragraph (a), 
        clause (2), based on the reports for the tax increment financing 
        district or districts filed with the state auditor on or before 
        July 1 of the year before the year in which the grant is to be 
        paid. 
           (c) This subdivision applies only to deficits in tax 
        increment financing districts for which: 
           (1) the request for certification was made before the 
        enactment date of this act; and 
           (2) all timely reports have been filed with the state 
        auditor, as required by Minnesota Statutes, section 469.175. 
           (d) The commissioner shall pay the grants under this 
        subdivision by December 26 of the year. 
           (e) $2,000,000 is appropriated to the commissioner of 
        revenue to make grants under this section.  This appropriation 
        is available until expended or this section expires under 
        subdivision 3, whichever is earlier.  If the amount of grant 
        entitlements for a year exceed the appropriation, the 
        commissioner shall reduce each grant proportionately so the 
        total equals the amount available. 
           Subd. 2.  [ADDITIONAL POOLING AUTHORITY.] Notwithstanding 
        the provisions of Minnesota Statutes, section 469.1763, 
        subdivision 2, and the provisions of the tax increment financing 
        act in effect for districts for which the request for 
        certification was made before June 30, 1982, revenues derived 
        from increments may be spent on activities located outside of 
        the district to pay binding obligations entered into before the 
        day following final enactment.  The amount qualifying under this 
        subdivision to be spent outside the district is limited to an 
        amount necessary to meet a binding obligation of the other 
        district that cannot be paid by the other district because of 
        the reduction in class rates under this section.  Use of 
        increments under this authority must be approved, in writing, by 
        the commissioner of revenue. 
           Subd. 3.  [EXPIRATION.] This section expires on January 1, 
        2001. 
           Sec. 20.  [APPROPRIATION.] 
           (a) $450,000 is appropriated for fiscal year 1998 from the 
        general fund to the housing finance agency for purposes of 
        administering the certification of qualifying low-income 
        residential properties for property taxation under class 4d. 
           The cost ceiling for the Minnesota housing finance agency, 
        as otherwise provided by legislation enacted in 1997 without 
        regard to whether the legislation is enacted before or after 
        this act, is increased by $142,000 for fiscal year 1998 and by 
        $118,000 for fiscal year 1999. 
           (b) $15,300,000 is appropriated from the general fund to 
        the commissioner of children, families, and learning for fiscal 
        year 1999 for alternative facilities aid under section 3. 
           Sec. 21.  [REPEALER.] 
           (a) Minnesota Statutes, section 124.2134, is repealed. 
           (b) Minnesota Statutes, sections 273.1317; and 273.1318, 
        are repealed. 
           Sec. 22.  [EFFECTIVE DATES.] 
           Sections 1, 2, 5, 6, 7, 8, 9, 11, 12, 13, 14, 17, and 21, 
        paragraph (a), are effective for taxes levied in 1997, payable 
        in 1998 and subsequent years, except that the low-income housing 
        provisions in class 4c and 4d are effective for taxes payable in 
        1999 and thereafter and the provisions in sections 6 and 8 
        relating to class 1c and 4c seasonal residential property that 
        specify percentages of lodging receipts and bookings of at least 
        two consecutive nights are effective for taxes payable in 1999 
        and thereafter.  
           Sections 4, 15, and 21, paragraph (b), are effective for 
        taxes payable in 1999 and subsequent years. 
           Sections 3 and 20 are effective July 1, 1997. 
           Section 19 is effective for taxes payable in 1998, 1999, 
        and 2000. 
                                   ARTICLE 2 
                                  PROPERTY TAX 
           Section 1.  Minnesota Statutes 1996, section 69.021, 
        subdivision 7, is amended to read: 
           Subd. 7.  [APPORTIONMENT OF FIRE STATE AID TO 
        MUNICIPALITIES AND RELIEF ASSOCIATIONS.] (a) The commissioner 
        shall apportion the fire state aid relative to the premiums 
        reported on the Minnesota Firetown Premium Reports filed under 
        this chapter to each municipality and/or firefighters' relief 
        association.  
           (b) The commissioner shall calculate an initial fire state 
        aid allocation amount for each municipality or fire department 
        under paragraph (c) and a minimum fire state aid allocation 
        amount for each municipality or fire department under paragraph 
        (d).  The municipality or fire department must receive the 
        larger fire state aid amount. 
           (c) The initial fire state aid allocation amount is the 
        amount available for apportionment as fire state aid under 
        subdivision 5, without inclusion of any additional funding 
        amount to support a minimum fire state aid amount under section 
        423A.02, subdivision 3, allocated one-half in proportion to the 
        population as shown in the last official statewide federal 
        census for each fire town and one-half in proportion to the 
        market value of each fire town, including (1) the market value 
        of tax exempt property and (2) the market value of natural 
        resources lands receiving in lieu payments under sections 
        477A.11 to 477A.14, but excluding the market value of minerals.  
        In the case of incorporated or municipal fire departments 
        furnishing fire protection to other cities, towns, or townships 
        as evidenced by valid fire service contracts filed with the 
        commissioner, the distribution must be adjusted proportionately 
        to take into consideration the crossover fire protection 
        service.  Necessary adjustments shall be made to subsequent 
        apportionments.  In the case of municipalities or independent 
        fire departments qualifying for the aid, the commissioner shall 
        calculate the state aid for the municipality or relief 
        association on the basis of the population and the market value 
        of the area furnished fire protection service by the fire 
        department as evidenced by duly executed and valid fire service 
        agreements filed with the commissioner.  If one or more fire 
        departments are furnishing contracted fire service to a city, 
        town, or township, only the population and market value of the 
        area served by each fire department may be considered in 
        calculating the state aid and the fire departments furnishing 
        service shall enter into an agreement apportioning among 
        themselves the percent of the population and the market value of 
        each service area.  The agreement must be in writing and must be 
        filed with the commissioner. 
           (d) The minimum fire state aid allocation amount is the 
        amount in addition to the initial fire state allocation amount 
        that is derived from any additional funding amount to support a 
        minimum fire state aid amount under section 423A.02, subdivision 
        3, and allocated to municipalities with volunteer firefighter 
        relief associations based on the number of active volunteer 
        firefighters who are members of the relief association as 
        reported in the annual financial reporting for the calendar year 
        1993 to the office of the state auditor, but not to exceed 30 
        active volunteer firefighters, so that all municipalities or 
        fire departments with volunteer firefighter relief associations 
        receive in total at least a minimum fire state aid amount per 
        1993 active volunteer firefighter to a maximum of 30 
        firefighters. 
           (e) The fire state aid must be paid to the treasurer of the 
        municipality where the fire department is located and the 
        treasurer of the municipality shall, within 30 days of receipt 
        of the fire state aid, transmit the aid to the relief 
        association if the relief association has filed a financial 
        report with the treasurer of the municipality and has met all 
        other statutory provisions pertaining to the aid apportionment. 
           (f) The commissioner may make rules to permit the 
        administration of the provisions of this section.  Any 
        adjustments needed to correct prior misallocations must be made 
        to subsequent apportionments. 
           Sec. 2.  Minnesota Statutes 1996, section 103D.905, 
        subdivision 4, is amended to read: 
           Subd. 4.  [BOND FUND.] A bond fund consists of the proceeds 
        of special assessments, storm water charges, loan repayments, 
        and ad valorem tax levies pledged by the watershed district for 
        the payment of bonds or notes issued by the watershed district 
        secured by the property of the watershed district that is 
        producing or is likely to produce a regular income.  The bond 
        fund is to be used for the payment of the purchase price of the 
        property or the value of the property as determined by the court 
        in proper proceedings and for the improvement and development of 
        the property principal of, premium or administrative surcharge, 
        if any, and interest on the bonds and notes issued by the 
        watershed district and for payments required to be made to the 
        federal government under section 148(f) of the Internal Revenue 
        Code of 1986, as amended through December 31, 1996.  
           Sec. 3.  Minnesota Statutes 1996, section 103D.905, 
        subdivision 5, is amended to read: 
           Subd. 5.  [CONSTRUCTION OR IMPLEMENTATION FUND.] (a) A 
        construction or implementation fund consists of:  
           (1) the proceeds of watershed district bonds or notes or of 
        the sale of county bonds; 
           (2) construction or implementation loans from the pollution 
        control agency under sections 103F.701 to 103F.761, or from any 
        agency of the federal government; and 
           (3) special assessments, storm water charges, loan 
        repayments, and ad valorem tax levies levied or to be levied to 
        supply funds for the construction or implementation of the 
        projects of the watershed district, including reservoirs, 
        ditches, dikes, canals, channels, storm water facilities, sewage 
        treatment facilities, wells, and other works, and the expenses 
        incident to and connected with the construction or 
        implementation. 
           (b) Construction or implementation loans from the pollution 
        control agency under sections 103F.701 to 103F.761, or from an 
        agency of the federal government may be repaid from money 
        collected by the proceeds of watershed district bonds or notes 
        or from the collections of storm water charges, loan repayments, 
        ad valorem tax levies, or special assessments on properties 
        benefited by the project.  
           Sec. 4.  Minnesota Statutes 1996, section 103D.905, is 
        amended by adding a subdivision to read: 
           Subd. 9.  [PROJECT TAX LEVY.] In addition to other tax 
        levies provided in this section or in any other law, a watershed 
        district may levy a tax: 
           (1) to pay the costs of projects undertaken by the 
        watershed district which are to be funded, in whole or in part, 
        with the proceeds of grants or construction or implementation 
        loans under sections 103F.701 to 103F.761; 
           (2) to pay the principal of, or premium or administrative 
        surcharge, if any, and interest on, the bonds and notes issued 
        by the watershed district pursuant to section 103F.725; or 
           (3) to repay the construction or implementation loans under 
        sections 103F.701 to 103F.761. 
           Taxes levied with respect to payment of bonds and notes 
        shall comply with section 475.61. 
           Sec. 5.  Minnesota Statutes 1996, section 216B.16, is 
        amended by adding a subdivision to read: 
           Subd. 6d.  [WIND ENERGY; PROPERTY TAX.] An owner of a wind 
        energy conversion facility which is required to pay property 
        taxes under section 272.02, subdivision 1, paragraph (21), or a 
        public utility regulated by the public utilities commission 
        which purchases the wind generated electricity may petition the 
        commission to include in any power purchase agreement between 
        the owner of the facility and the public utility the amount of 
        property taxes paid by the owner of the facility.  The public 
        utilities commission shall require the public utility to amend 
        the power purchase agreement to include the property taxes paid 
        by the owner of the facility in the price paid by the utility 
        for wind generated electricity if the commission finds: 
           (a) the owner of the facility has paid the property taxes 
        required by this subdivision; 
           (b) the power purchase agreement between the public utility 
        and the owner does not already require the utility to pay the 
        amount of property taxes the owner has paid under this 
        subdivision; and 
           (c) the commission has approved a rate schedule containing 
        provisions for the automatic adjustment of charges for utility 
        service in direct relation to the charges ordered by the 
        commission under section 272.02, subdivision 1, paragraph (21). 
           Sec. 6.  Minnesota Statutes 1996, section 271.01, 
        subdivision 5, is amended to read: 
           Subd. 5.  [JURISDICTION.] The tax court shall have 
        statewide jurisdiction.  Except for an appeal to the supreme 
        court or any other appeal allowed under this subdivision, the 
        tax court shall be the sole, exclusive, and final authority for 
        the hearing and determination of all questions of law and fact 
        arising under the tax laws of the state, as defined in this 
        subdivision, in those cases that have been appealed to the tax 
        court and in any case that has been transferred by the district 
        court to the tax court.  The tax court shall have no 
        jurisdiction in any case that does not arise under the tax laws 
        of the state or in any criminal case or in any case determining 
        or granting title to real property or in any case that is under 
        the probate jurisdiction of the district court.  The small 
        claims division of the tax court shall have no jurisdiction in 
        any case dealing with property valuation or assessment for 
        property tax purposes until the taxpayer has appealed the 
        valuation or assessment to the county board of equalization, and 
        in those towns and cities which have not transferred their 
        duties to the county, the town or city board of equalization and 
        to the county board of equalization, except for those taxpayers 
        whose original assessments are determined by the commissioner of 
        revenue.  The tax court shall have no jurisdiction in any case 
        involving an order of the state board of equalization unless a 
        taxpayer contests the valuation of property.  Laws governing 
        taxes, aids, and related matters administered by the 
        commissioner of revenue, laws dealing with property valuation, 
        assessment or taxation of property for property tax purposes, 
        and any other laws that contain provisions authorizing review of 
        taxes, aids, and related matters by the tax court shall be 
        considered tax laws of this state subject to the jurisdiction of 
        the tax court.  This subdivision shall not be construed to 
        prevent an appeal, as provided by law, to an administrative 
        agency, board of equalization, review under section 274.13, 
        subdivision 1c, or to the commissioner of revenue.  Wherever 
        used in this chapter, the term commissioner shall mean the 
        commissioner of revenue, unless otherwise specified. 
           Sec. 7.  Minnesota Statutes 1996, section 272.02, 
        subdivision 1, is amended to read: 
           Subdivision 1.  All property described in this section to 
        the extent herein limited shall be exempt from taxation: 
           (1) All public burying grounds. 
           (2) All public schoolhouses. 
           (3) All public hospitals. 
           (4) All academies, colleges, and universities, and all 
        seminaries of learning. 
           (5) All churches, church property, and houses of worship. 
           (6) Institutions of purely public charity except parcels of 
        property containing structures and the structures described in 
        section 273.13, subdivision 25, paragraph (c), clauses (1), (2), 
        and (3), or paragraph (d), other than those that qualify for 
        exemption under clause (25). 
           (7) All public property exclusively used for any public 
        purpose. 
           (8) Except for the taxable personal property enumerated 
        below, all personal property and the property described in 
        section 272.03, subdivision 1, paragraphs (c) and (d), shall be 
        exempt.  
           The following personal property shall be taxable:  
           (a) personal property which is part of an electric 
        generating, transmission, or distribution system or a pipeline 
        system transporting or distributing water, gas, crude oil, or 
        petroleum products or mains and pipes used in the distribution 
        of steam or hot or chilled water for heating or cooling 
        buildings and structures; 
           (b) railroad docks and wharves which are part of the 
        operating property of a railroad company as defined in section 
        270.80; 
           (c) personal property defined in section 272.03, 
        subdivision 2, clause (3); 
           (d) leasehold or other personal property interests which 
        are taxed pursuant to section 272.01, subdivision 2; 273.124, 
        subdivision 7; or 273.19, subdivision 1; or any other law 
        providing the property is taxable as if the lessee or user were 
        the fee owner; 
           (e) manufactured homes and sectional structures, including 
        storage sheds, decks, and similar removable improvements 
        constructed on the site of a manufactured home, sectional 
        structure, park trailer or travel trailer as provided in section 
        273.125, subdivision 8, paragraph (f); and 
           (f) flight property as defined in section 270.071.  
           (9) Personal property used primarily for the abatement and 
        control of air, water, or land pollution to the extent that it 
        is so used, and real property which is used primarily for 
        abatement and control of air, water, or land pollution as part 
        of an agricultural operation, as a part of a centralized 
        treatment and recovery facility operating under a permit issued 
        by the Minnesota pollution control agency pursuant to chapters 
        115 and 116 and Minnesota Rules, parts 7001.0500 to 7001.0730, 
        and 7045.0020 to 7045.1260, as a wastewater treatment facility 
        and for the treatment, recovery, and stabilization of metals, 
        oils, chemicals, water, sludges, or inorganic materials from 
        hazardous industrial wastes, or as part of an electric 
        generation system.  For purposes of this clause, personal 
        property includes ponderous machinery and equipment used in a 
        business or production activity that at common law is considered 
        real property. 
           Any taxpayer requesting exemption of all or a portion of 
        any real property or any equipment or device, or part thereof, 
        operated primarily for the control or abatement of air or water 
        pollution shall file an application with the commissioner of 
        revenue.  The equipment or device shall meet standards, rules, 
        or criteria prescribed by the Minnesota pollution control 
        agency, and must be installed or operated in accordance with a 
        permit or order issued by that agency.  The Minnesota pollution 
        control agency shall upon request of the commissioner furnish 
        information or advice to the commissioner.  On determining that 
        property qualifies for exemption, the commissioner shall issue 
        an order exempting the property from taxation.  The equipment or 
        device shall continue to be exempt from taxation as long as the 
        permit issued by the Minnesota pollution control agency remains 
        in effect. 
           (10) Wetlands.  For purposes of this subdivision, 
        "wetlands" means:  (i) land described in section 103G.005, 
        subdivision 15a; (ii) land which is mostly under water, produces 
        little if any income, and has no use except for wildlife or 
        water conservation purposes, provided it is preserved in its 
        natural condition and drainage of it would be legal, feasible, 
        and economically practical for the production of livestock, 
        dairy animals, poultry, fruit, vegetables, forage and grains, 
        except wild rice; or (iii) land in a wetland preservation area 
        under sections 103F.612 to 103F.616.  "Wetlands" under items (i) 
        and (ii) include adjacent land which is not suitable for 
        agricultural purposes due to the presence of the wetlands, but 
        do not include woody swamps containing shrubs or trees, wet 
        meadows, meandered water, streams, rivers, and floodplains or 
        river bottoms.  Exemption of wetlands from taxation pursuant to 
        this section shall not grant the public any additional or 
        greater right of access to the wetlands or diminish any right of 
        ownership to the wetlands. 
           (11) Native prairie.  The commissioner of the department of
        natural resources shall determine lands in the state which are 
        native prairie and shall notify the county assessor of each 
        county in which the lands are located.  Pasture land used for 
        livestock grazing purposes shall not be considered native 
        prairie for the purposes of this clause.  Upon receipt of an 
        application for the exemption provided in this clause for lands 
        for which the assessor has no determination from the 
        commissioner of natural resources, the assessor shall refer the 
        application to the commissioner of natural resources who shall 
        determine within 30 days whether the land is native prairie and 
        notify the county assessor of the decision.  Exemption of native 
        prairie pursuant to this clause shall not grant the public any 
        additional or greater right of access to the native prairie or 
        diminish any right of ownership to it. 
           (12) Property used in a continuous program to provide 
        emergency shelter for victims of domestic abuse, provided the 
        organization that owns and sponsors the shelter is exempt from 
        federal income taxation pursuant to section 501(c)(3) of the 
        Internal Revenue Code of 1986, as amended through December 31, 
        1992, notwithstanding the fact that the sponsoring organization 
        receives funding under section 8 of the United States Housing 
        Act of 1937, as amended. 
           (13) If approved by the governing body of the municipality 
        in which the property is located, property not exceeding one 
        acre which is owned and operated by any senior citizen group or 
        association of groups that in general limits membership to 
        persons age 55 or older and is organized and operated 
        exclusively for pleasure, recreation, and other nonprofit 
        purposes, no part of the net earnings of which inures to the 
        benefit of any private shareholders; provided the property is 
        used primarily as a clubhouse, meeting facility, or recreational 
        facility by the group or association and the property is not 
        used for residential purposes on either a temporary or permanent 
        basis. 
           (14) To the extent provided by section 295.44, real and 
        personal property used or to be used primarily for the 
        production of hydroelectric or hydromechanical power on a site 
        owned by the state or a local governmental unit which is 
        developed and operated pursuant to the provisions of section 
        103G.535. 
           (15) If approved by the governing body of the municipality 
        in which the property is located, and if construction is 
        commenced after June 30, 1983:  
           (a) a "direct satellite broadcasting facility" operated by 
        a corporation licensed by the federal communications commission 
        to provide direct satellite broadcasting services using direct 
        broadcast satellites operating in the 12-ghz. band; and 
           (b) a "fixed satellite regional or national program service 
        facility" operated by a corporation licensed by the federal 
        communications commission to provide fixed satellite-transmitted 
        regularly scheduled broadcasting services using satellites 
        operating in the 6-ghz. band. 
        An exemption provided by clause (15) shall apply for a period 
        not to exceed five years.  When the facility no longer qualifies 
        for exemption, it shall be placed on the assessment rolls as 
        provided in subdivision 4.  Before approving a tax exemption 
        pursuant to this paragraph, the governing body of the 
        municipality shall provide an opportunity to the members of the 
        county board of commissioners of the county in which the 
        facility is proposed to be located and the members of the school 
        board of the school district in which the facility is proposed 
        to be located to meet with the governing body.  The governing 
        body shall present to the members of those boards its estimate 
        of the fiscal impact of the proposed property tax exemption.  
        The tax exemption shall not be approved by the governing body 
        until the county board of commissioners has presented its 
        written comment on the proposal to the governing body or 30 days 
        have passed from the date of the transmittal by the governing 
        body to the board of the information on the fiscal impact, 
        whichever occurs first. 
           (16) Real and personal property owned and operated by a 
        private, nonprofit corporation exempt from federal income 
        taxation pursuant to United States Code, title 26, section 
        501(c)(3), primarily used in the generation and distribution of 
        hot water for heating buildings and structures.  
           (17) Notwithstanding section 273.19, state lands that are 
        leased from the department of natural resources under section 
        92.46. 
           (18) Electric power distribution lines and their 
        attachments and appurtenances, that are used primarily for 
        supplying electricity to farmers at retail.  
           (19) Transitional housing facilities.  "Transitional 
        housing facility" means a facility that meets the following 
        requirements.  (i) It provides temporary housing to individuals, 
        couples, or families.  (ii) It has the purpose of reuniting 
        families and enabling parents or individuals to obtain 
        self-sufficiency, advance their education, get job training, or 
        become employed in jobs that provide a living wage.  (iii) It 
        provides support services such as child care, work readiness 
        training, and career development counseling; and a 
        self-sufficiency program with periodic monitoring of each 
        resident's progress in completing the program's goals.  (iv) It 
        provides services to a resident of the facility for at least 
        three months but no longer than three years, except residents 
        enrolled in an educational or vocational institution or job 
        training program.  These residents may receive services during 
        the time they are enrolled but in no event longer than four 
        years.  (v) It is owned and operated or under lease from a unit 
        of government or governmental agency under a property 
        disposition program and operated by one or more organizations 
        exempt from federal income tax under section 501(c)(3) of the 
        Internal Revenue Code of 1986, as amended through December 31, 
        1992.  This exemption applies notwithstanding the fact that the 
        sponsoring organization receives financing by a direct federal 
        loan or federally insured loan or a loan made by the Minnesota 
        housing finance agency under the provisions of either Title II 
        of the National Housing Act or the Minnesota housing finance 
        agency law of 1971 or rules promulgated by the agency pursuant 
        to it, and notwithstanding the fact that the sponsoring 
        organization receives funding under Section 8 of the United 
        States Housing Act of 1937, as amended. 
           (20) Real and personal property, including leasehold or 
        other personal property interests, owned and operated by a 
        corporation if more than 50 percent of the total voting power of 
        the stock of the corporation is owned collectively by:  (i) the 
        board of regents of the University of Minnesota, (ii) the 
        University of Minnesota Foundation, an organization exempt from 
        federal income taxation under section 501(c)(3) of the Internal 
        Revenue Code of 1986, as amended through December 31, 1992, and 
        (iii) a corporation organized under chapter 317A, which by its 
        articles of incorporation is prohibited from providing pecuniary 
        gain to any person or entity other than the regents of the 
        University of Minnesota; which property is used primarily to 
        manage or provide goods, services, or facilities utilizing or 
        relating to large-scale advanced scientific computing resources 
        to the regents of the University of Minnesota and others. 
           (21)(a) Small scale wind energy conversion systems, as 
        defined in section 216C.06, subdivision 12, installed after 
        January 1, 1991, and before January 2, 1995, and used as an 
        electric power source, are exempt. 
           (b) "Small scale wind energy conversion systems" are wind 
        energy conversion systems, as defined in section 216C.06, 
        subdivision 12, installed after January 1, 1995, including the 
        foundation or support pad, which are (i) used as an electric 
        power source; (ii) located within one county and owned by the 
        same owner; and (iii) produce two megawatts or less of 
        electricity as measured by nameplate ratings, are exempt. 
           (c) (b) Medium scale wind energy conversion systems, as 
        defined in section 216C.06, subdivision 12, installed after 
        January 1, 1995 1991, and used as an electric power source but 
        not exempt under item (b), are treated as follows:  (i) the 
        foundation and support pad are taxable; (ii) the associated 
        supporting and protective structures are exempt for the first 
        five assessment years after they have been constructed, and 
        thereafter, 30 percent of the market value of the associated 
        supporting and protective structures are taxable; and (iii) the 
        turbines, blades, transformers, and its related equipment, are 
        exempt.  "Medium scale wind energy conversion systems" are wind 
        energy conversion systems as defined in section 216C.06, 
        subdivision 12, including the foundation or support pad, which 
        are:  (i) used as an electric power source; (ii) located within 
        one county and owned by the same owner; and (iii) produce more 
        than two but equal to or less than 12 megawatts of energy as 
        measured by nameplate ratings. 
           (c) Large scale wind energy conversion systems installed 
        after January 1, 1991, are treated as follows:  25 percent of 
        the market value of all property is taxable, including (i) the 
        foundation and support pad; (ii) the associated supporting and 
        protective structures; and (iii) the turbines, blades, 
        transformers, and its related equipment.  "Large scale wind 
        energy conversion systems" are wind energy conversion systems as 
        defined in section 216C.06, subdivision 12, including the 
        foundation or support pad, which are:  (i) used as an electric 
        power source; and (ii) produce more than 12 megawatts of energy 
        as measured by nameplate ratings. 
           (22) Containment tanks, cache basins, and that portion of 
        the structure needed for the containment facility used to 
        confine agricultural chemicals as defined in section 18D.01, 
        subdivision 3, as required by the commissioner of agriculture 
        under chapter 18B or 18C. 
           (23) Photovoltaic devices, as defined in section 216C.06, 
        subdivision 13, installed after January 1, 1992, and used to 
        produce or store electric power. 
           (24) Real and personal property owned and operated by a 
        private, nonprofit corporation exempt from federal income 
        taxation pursuant to United States Code, title 26, section 
        501(c)(3), primarily used for an ice arena or ice rink, and used 
        primarily for youth and high school programs. 
           (25) A structure that is situated on real property that is 
        used for: 
           (i) housing for the elderly or for low- and moderate-income 
        families as defined in Title II of the National Housing Act, as 
        amended through December 31, 1990, and funded by a direct 
        federal loan or federally insured loan made pursuant to Title II 
        of the act; or 
           (ii) housing lower income families or elderly or 
        handicapped persons, as defined in Section 8 of the United 
        States Housing Act of 1937, as amended. 
           In order for a structure to be exempt under (i) or (ii), it 
        must also meet each of the following criteria: 
           (A) is owned by an entity which is operated as a nonprofit 
        corporation organized under chapter 317A; 
           (B) is owned by an entity which has not entered into a 
        housing assistance payments contract under Section 8 of the 
        United States Housing Act of 1937, or, if the entity which owns 
        the structure has entered into a housing assistance payments 
        contract under Section 8 of the United States Housing Act of 
        1937, the contract provides assistance for less than 90 percent 
        of the dwelling units in the structure, excluding dwelling units 
        intended for management or maintenance personnel; 
           (C) operates an on-site congregate dining program in which 
        participation by residents is mandatory, and provides assisted 
        living or similar social and physical support services for 
        residents; and 
           (D) was not assessed and did not pay tax under chapter 273 
        prior to the 1991 levy, while meeting the other conditions of 
        this clause. 
           An exemption under this clause remains in effect for taxes 
        levied in each year or partial year of the term of its permanent 
        financing. 
           (26) Real and personal property that is located in the 
        Superior National Forest, and owned or leased and operated by a 
        nonprofit organization that is exempt from federal income 
        taxation under section 501(c)(3) of the Internal Revenue Code of 
        1986, as amended through December 31, 1992, and primarily used 
        to provide recreational opportunities for disabled veterans and 
        their families. 
           (27) Manure pits and appurtenances, which may include 
        slatted floors and pipes, installed or operated in accordance 
        with a permit, order, or certificate of compliance issued by the 
        Minnesota pollution control agency.  The exemption shall 
        continue for as long as the permit, order, or certificate issued 
        by the Minnesota pollution control agency remains in effect. 
           (28) Notwithstanding clause (8), item (a), attached 
        machinery and other personal property which is part of a 
        facility containing a cogeneration system as described in 
        section 216B.166, subdivision 2, paragraph (a), if the 
        cogeneration system has met the following criteria:  (i) the 
        system utilizes natural gas as a primary fuel and the 
        cogenerated steam initially replaces steam generated from 
        existing thermal boilers utilizing coal; (ii) the facility 
        developer is selected as a result of a procurement process 
        ordered by the public utilities commission; and (iii) 
        construction of the facility is commenced after July 1, 1994, 
        and before July 1, 1997. 
           (29) Real property acquired by a home rule charter city, 
        statutory city, county, town, or school district under a lease 
        purchase agreement or an installment purchase contract during 
        the term of the lease purchase agreement as long as and to the 
        extent that the property is used by the city, county, town, or 
        school district and devoted to a public use and to the extent it 
        is not subleased to any private individual, entity, association, 
        or corporation in connection with a business or enterprise 
        operated for profit. 
           Sec. 8.  Minnesota Statutes 1996, section 272.02, is 
        amended by adding a subdivision to read: 
           Subd. 9.  [PERSONAL PROPERTY; BIOMASS FACILITY.] (a) 
        Notwithstanding clause (8), item (a), of subdivision 1, attached 
        machinery and other personal property, excluding transmission 
        and distribution lines, that is part of a system that generates 
        biomass electric energy that satisfies the mandate, in whole or 
        in part, established in section 216B.2424, or a system that 
        generates electric energy using waste wood, is exempt if it 
        meets the requirements of this subdivision. 
           (b) The governing bodies of the county, city or town, and 
        school district must each approve, by resolution, the exemption 
        of the personal property under this subdivision.  Each of the 
        governing bodies shall file a copy of the resolution with the 
        county auditor.  The county auditor shall publish the 
        resolutions in newspapers of general circulation within the 
        county.  The voters of the county may request a referendum on 
        the proposed exemption by filing a petition within 30 days after 
        the resolutions are published.  The petition must be signed by 
        voters who reside in the county.  The number of signatures must 
        equal at least ten percent of the number of persons voting in 
        the county in the last general election.  If such a petition is 
        timely filed, the resolutions are not effective until they have 
        been submitted to the voters residing in the county at a general 
        or special election and a majority of votes cast on the question 
        of approving the resolution are in the affirmative.  The 
        commissioner of revenue shall prepare a suggested form of 
        question to be presented at the referendum. 
           (c) The exemption under this subdivision is limited to a 
        maximum of five years, beginning with the assessment year 
        immediately following the year during which the personal 
        property is put in operation.  
           Sec. 9.  Minnesota Statutes 1996, section 272.115, is 
        amended to read: 
           272.115 [CERTIFICATE OF VALUE; FILING.] 
           Subdivision 1.  [REQUIREMENT.] Except as otherwise provided 
        in subdivision 5, whenever any real estate is sold for a 
        consideration in excess of $1,000, whether by warranty deed, 
        quitclaim deed, contract for deed or any other method of sale, 
        the grantor, grantee or the legal agent of either shall file a 
        certificate of value with the county auditor in the county in 
        which the property is located when the deed or other document is 
        presented for recording.  Contract for deeds are subject to 
        recording under section 507.235, subdivision 1.  Value shall, in 
        the case of any deed not a gift, be the amount of the full 
        actual consideration thereof, paid or to be paid, including the 
        amount of any lien or liens assumed.  The items and value of 
        personal property transferred with the real property must be 
        listed and deducted from the sale price.  The certificate of 
        value shall include the classification to which the property 
        belongs for the purpose of determining the fair market value of 
        the property.  The certificate shall include financing terms and 
        conditions of the sale which are necessary to determine the 
        actual, present value of the sale price for purposes of the 
        sales ratio study.  The commissioner of revenue shall promulgate 
        administrative rules specifying the financing terms and 
        conditions which must be included on the certificate.  Pursuant 
        to the authority of the commissioner of revenue in section 
        270.066, the certificate of value must include the social 
        security number or the federal employer identification number of 
        the grantors and grantees.  The identification numbers of the 
        grantors and grantees are private data on individuals or 
        nonpublic data as defined in section 13.02, subdivisions 9 and 
        12, but, notwithstanding that section, the private or nonpublic 
        data may be disclosed to the commissioner of revenue for 
        purposes of tax administration. 
           Subd. 2.  [FORM; INFORMATION REQUIRED.] The certificate of 
        value shall require such facts and information as may be 
        determined by the commissioner to be reasonably necessary in the 
        administration of the state education aid formulas.  The form of 
        the certificate of value shall be prescribed by the department 
        of revenue which shall provide an adequate supply of forms to 
        each county auditor. 
           Subd. 3.  [COPIES TRANSMITTED; HOMESTEAD STATUS.] The 
        county auditor shall transmit two true copies of the certificate 
        of value to the assessor who shall insert the most recent market 
        value and when available, the year of original construction of 
        each parcel of property on both copies and shall transmit one 
        copy to the department of revenue.  Upon the request of a city 
        council located within the county, a copy of each certificate of 
        value for property located in that city shall be made available 
        to the governing body of the city.  The assessor shall remove 
        the homestead classification for the following assessment year 
        from a property which is sold or transferred, unless the grantee 
        or the person to whom the property is transferred completes a 
        homestead application under section 273.124, subdivision 13, and 
        qualifies for homestead status. 
           Subd. 4.  [ELIGIBILITY FOR HOMESTEAD STATUS.] No real 
        estate sold or transferred on or after January 1, 1993, under 
        subdivision 1 shall be classified as a homestead, unless (1) a 
        certificate of value has been filed with the county auditor in 
        accordance with this section, or (2) the real estate was 
        conveyed by the federal government, the state, a political 
        subdivision of the state, or combination of them to a person 
        otherwise eligible to receive homestead classification of the 
        property. 
           This subdivision shall apply to any real estate taxes that 
        are payable the year or years following the sale or transfer of 
        the property. 
           Subd. 5.  [EXEMPTION FOR GOVERNMENT BODIES.] A certificate 
        of real estate value is not required when the real estate is 
        being conveyed to or by a public authority or agency of the 
        federal government, the state of Minnesota, a political 
        subdivision of the state, or any combination of them, provided 
        that the authority, agency, or governmental unit has agreed to 
        file a list of the real estate conveyed by or to the authority, 
        agency, or governmental unit with the commissioner of revenue by 
        June 1 of the year following the year of the conveyance. 
           Sec. 10.  Minnesota Statutes 1996, 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, or noncommercial seasonal 
        recreational residential, the assessor shall compare the value 
        with that determined in the preceding assessment.  The amount of 
        the increase entered in the current assessment shall not exceed 
        the greater of (1) ten percent of the value in the preceding 
        assessment, or (2) one-third one-fourth 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 only 
        for assessment years 1993 through 1997 2001. 
           For purposes of the assessment/sales ratio study conducted 
        under section 124.2131, and the computation of state aids paid 
        under chapters 124, 124A, and 477A, market values and net tax 
        capacities determined under this subdivision and subdivision 16, 
        shall be used. 
           Sec. 11.  Minnesota Statutes 1996, section 273.11, 
        subdivision 16, is amended to read: 
           Subd. 16.  [VALUATION EXCLUSION FOR CERTAIN IMPROVEMENTS.] 
        Improvements to homestead property made before January 2, 2003, 
        shall be fully or partially excluded from the value of the 
        property for assessment purposes provided that (1) the house is 
        at least 35 years old at the time of the improvement and (2) 
        either 
           (a) the assessor's estimated market value of the house on 
        January 2 of the current year is equal to or less than $150,000, 
        or 
           (b) if the estimated market value of the house is over 
        $150,000 market value but is less than $300,000 on January 2 of 
        the current year, the property qualifies if 
           (i) it is located in a city or town in which 50 percent or 
        more of the owner-occupied housing units were constructed before 
        1960 based upon the 1990 federal census, and 
           (ii) the city or town's median family income based upon the 
        1990 federal census is less than the statewide median family 
        income based upon the 1990 federal census, or 
           (c) if the estimated market value of the house is $300,000 
        or more on January 2 of the current year, the property qualifies 
        if 
           (i) it is located in a city or town in which 45 percent or 
        more of the homes were constructed before 1940 based upon the 
        1990 federal census, and 
           (ii) it is located in a city or town in which 45 percent or 
        more of the housing units were rental based upon the 1990 
        federal census, and 
           (iii) the city or town's median value of owner-occupied 
        housing units based upon the 1990 federal census is less than 
        the statewide median value of owner-occupied housing units based 
        upon the 1990 federal census. 
           For purposes of determining this eligibility, "house" means 
        land and buildings.  
           The age of a residence is the number of years that the 
        residence has existed at its present site since the original 
        year of its construction.  In the case of a residence that is 
        relocated, the relocation must be from a location within the 
        state and the only improvements eligible for exclusion under 
        this subdivision are (1) those for which building permits were 
        issued to the homeowner after the residence was relocated to its 
        present site, and (2) those undertaken during or after the year 
        the residence is initially occupied by the homeowner, excluding 
        any market value increase relating to basic improvements that 
        are necessary to install the residence on its foundation and 
        connect it to utilities at its present site.  In the case of an 
        owner-occupied duplex or triplex, the improvement is eligible 
        regardless of which portion of the property was improved. 
           If the property lies in a jurisdiction which is subject to 
        a building permit process, a building permit must have been 
        issued prior to commencement of the improvement.  Any 
        improvement must add at least $1,000 to the value of the 
        property to be eligible for exclusion under this subdivision.  
        Only improvements to the structure which is the residence of the 
        qualifying homesteader or construction of or improvements to no 
        more than one two-car garage per residence qualify for the 
        provisions of this subdivision.  If an improvement was begun 
        between January 2, 1992, and January 2, 1993, any value added 
        from that improvement for the January 1994 and subsequent 
        assessments shall qualify for exclusion under this subdivision 
        provided that a building permit was obtained for the improvement 
        between January 2, 1992, and January 2, 1993.  Whenever a 
        building permit is issued for property currently classified as 
        homestead, the issuing jurisdiction shall notify the property 
        owner of the possibility of valuation exclusion under this 
        subdivision.  The assessor shall require an application, 
        including documentation of the age of the house from the owner, 
        if unknown by the assessor.  The application may be filed 
        subsequent to the date of the building permit provided that the 
        application must be filed within three years of the date the 
        building permit was issued for the improvement.  If the property 
        lies in a jurisdiction which is not subject to a building permit 
        process, the application must be filed within three years of the 
        date the improvement was made.  The assessor may require proof 
        from the taxpayer of the date the improvement was made.  
        Applications must be received prior to July 1 of any year in 
        order to be effective for taxes payable in the following year. 
           No exclusion may be granted for an improvement by a local 
        board of review or county board of equalization and no abatement 
        of the taxes for qualifying improvements may be granted by the 
        county board unless (1) a building permit was issued prior to 
        the commencement of the improvement if the jurisdiction requires 
        a building permit, and (2) an application was completed. 
           The assessor shall note the qualifying value of each 
        improvement on the property's record, and the sum of those 
        amounts shall be subtracted from the value of the property in 
        each year for ten years after the improvement has been made, at 
        which time an amount equal to 20 percent of the qualifying value 
        shall be added back in each of the five subsequent assessment 
        years.  If an application is filed after the first assessment 
        date at which an improvement could have been subject to the 
        valuation exclusion under this subdivision, the ten-year period 
        during which the value is subject to exclusion is reduced by the 
        number of years that have elapsed since the property would have 
        qualified initially.  The valuation exclusion shall terminate 
        whenever (1) the property is sold, or (2) the property is 
        reclassified to a class which does not qualify for treatment 
        under this subdivision.  Improvements made by an occupant who is 
        the purchaser of the property under a conditional purchase 
        contract do not qualify under this subdivision unless the seller 
        of the property is a governmental entity.  The qualifying value 
        of the property shall be computed based upon the increase from 
        that structure's market value as of January 2 preceding the 
        acquisition of the property by the governmental entity. 
           The total qualifying value for a homestead may not exceed 
        $50,000.  The total qualifying value for a homestead with a 
        house that is less than 70 years old may not exceed $25,000.  
        The term "qualifying value" means the increase in estimated 
        market value resulting from the improvement if the improvement 
        occurs when the house is at least 70 years old, or one-half of 
        the increase in estimated market value resulting from the 
        improvement otherwise.  The $25,000 and $50,000 maximum 
        qualifying value under this subdivision may result from up to 
        three separate improvements to the homestead.  The application 
        shall state, in clear language, that if more than three 
        improvements are made to the qualifying property, a taxpayer may 
        choose which three improvements are eligible, provided that 
        after the taxpayer has made the choice and any valuation 
        attributable to those improvements has been excluded from 
        taxation, no further changes can be made by the taxpayer. 
           If 50 percent or more of the square footage of a structure 
        is voluntarily razed or removed, the valuation increase 
        attributable to any subsequent improvements to the remaining 
        structure does not qualify for the exclusion under this 
        subdivision.  If a structure is unintentionally or accidentally 
        destroyed by a natural disaster, the property is eligible for an 
        exclusion under this subdivision provided that the structure was 
        not completely destroyed.  The qualifying value on property 
        destroyed by a natural disaster shall be computed based upon the 
        increase from that structure's market value as determined on 
        January 2 of the year in which the disaster occurred.  A 
        property receiving benefits under the homestead disaster 
        provisions under section 273.123 is not disqualified from 
        receiving an exclusion under this subdivision.  If any 
        combination of improvements made to a structure after January 1, 
        1993, increases the size of the structure by 100 percent or 
        more, the valuation increase attributable to the portion of the 
        improvement that causes the structure's size to exceed 100 
        percent does not qualify for exclusion under this subdivision. 
           Sec. 12.  Minnesota Statutes 1996, section 273.111, 
        subdivision 3, is amended to read: 
           Subd. 3.  (a) Real estate consisting of ten acres or more 
        or a nursery or greenhouse, and qualifying for classification as 
        class 1b, 2a, or 2b under section 273.13, subdivision 23, 
        paragraph (d), shall be entitled to valuation and tax deferment 
        under this section only if it is actively and exclusively 
        primarily devoted to agricultural use as defined, and meets the 
        qualifications in subdivision 6, and either:  
           (1) is the homestead of the owner, or of a surviving 
        spouse, child, or sibling of the owner or is real estate which 
        is farmed with the real estate which contains the homestead 
        property; or 
           (2) has been in possession of the applicant, the 
        applicant's spouse, parent, or sibling, or any combination 
        thereof, for a period of at least seven years prior to 
        application for benefits under the provisions of this section, 
        or is real estate which is farmed with the real estate which 
        qualifies under this clause and is within two townships or 
        cities or combination thereof from the qualifying real estate; 
        or 
           (3) is the homestead of a shareholder in a family farm 
        corporation as defined in section 500.24, notwithstanding the 
        fact that legal title to the real estate may be held in the name 
        of the family farm corporation; or 
           (4) is in the possession of a nursery or greenhouse or an 
        entity owned by a proprietor, partnership, or corporation which 
        also owns the nursery or greenhouse operations on the parcel or 
        parcels. 
           (b) Valuation of real estate under this section is limited 
        to parcels the ownership of which is in noncorporate entities 
        except for:  
           (1) family farm corporations organized pursuant to section 
        500.24; and 
           (2) corporations that derive 80 percent or more of their 
        gross receipts from the wholesale or retail sale of 
        horticultural or nursery stock.  
           Corporate entities who previously qualified for tax 
        deferment pursuant to this section and who continue to otherwise 
        qualify under subdivisions 3 and 6 for a period of at least 
        three years following the effective date of Laws 1983, chapter 
        222, section 8, will not be required to make payment of the 
        previously deferred taxes, notwithstanding the provisions of 
        subdivision 9.  Special assessments are payable at the end of 
        the three-year period or at time of sale, whichever comes first. 
           (c) Land that previously qualified for tax deferment 
        pursuant to under this section and no longer qualifies because 
        it is not classified as primarily used for agricultural land 
        purposes but would otherwise qualify under subdivisions 3 and 6 
        for a period of at least three years will not be required to 
        make payment of the previously deferred taxes, notwithstanding 
        the provisions of subdivision 9.  Sale of the land prior to the 
        expiration of the three-year period requires payment of deferred 
        taxes as follows:  sale in the year the land no longer qualifies 
        requires payment of the current year's deferred taxes plus 
        payment of deferred taxes for the two prior years; sale during 
        the second year the land no longer qualifies requires payment of 
        the current year's deferred taxes plus payment of the deferred 
        taxes for the prior year; and sale during the third year the 
        land no longer qualifies requires payment of the current year's 
        deferred taxes.  Deferred taxes shall be paid even if the land 
        qualifies pursuant to subdivision 11a.  When such property is 
        sold or no longer qualifies under this paragraph, or at the end 
        of the three-year period, whichever comes first, all deferred 
        special assessments plus interest are payable in equal 
        installments spread over the time remaining until the last 
        maturity date of the bonds issued to finance the improvement for 
        which the assessments were levied.  If the bonds have matured, 
        the deferred special assessments plus interest are payable 
        within 90 days.  The provisions of section 429.061, subdivision 
        2, apply to the collection of these installments.  Penalties are 
        not imposed on any such special assessments if timely paid. 
           Sec. 13.  Minnesota Statutes 1996, section 273.111, 
        subdivision 6, is amended to read: 
           Subd. 6.  Real property qualifying under subdivision 3 
        shall be considered to be in agricultural use provided that 
        annually: 
           (1) at least 33-1/3 percent of the total family income of 
        the owner is derived therefrom, or the total production income 
        including rental from the property is $300 plus $10 per tillable 
        acre; and 
           (2) it is devoted to the production for sale of 
        agricultural products as defined in section 273.13, subdivision 
        23, paragraph (e). 
           Slough, wasteland, and woodland contiguous to or surrounded 
        by land that is entitled to valuation and tax deferment under 
        this section is considered to be in agricultural use if under 
        the same ownership and management. 
           Sec. 14.  Minnesota Statutes 1996, section 273.112, 
        subdivision 2, is amended to read: 
           Subd. 2.  The present general system of ad valorem property 
        taxation in the state of Minnesota does not provide an equitable 
        basis for the taxation of certain private outdoor recreational, 
        social, open space and park land property and has resulted in 
        excessive taxes on some of these lands.  Therefore, it is hereby 
        declared that the public policy of this state would be best 
        served by equalizing tax burdens upon private outdoor, 
        recreational, social, open space and park land within this state 
        through appropriate taxing measures to encourage private 
        development of these lands which would otherwise not occur or 
        have to be provided by governmental authority.  
           Sec. 15.  Minnesota Statutes 1996, section 273.112, 
        subdivision 3, is amended to read: 
           Subd. 3.  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, or archery or firearms range recreational use 
        or uses and other recreational or social 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 or 
        an establishment actively and exclusively devoted to indoor 
        fitness, health, social, recreational, and related uses in which 
        the establishment is owned and operated by a not-for-profit 
        corporation; 
           (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, in the case of real estate devoted to 
        golf, for use 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. 
           Sec. 16.  Minnesota Statutes 1996, section 273.112, 
        subdivision 4, is amended to read: 
           Subd. 4.  The value of any real estate described in 
        subdivision 3 shall upon timely application by the owner, in the 
        manner provided in subdivision 6, be determined solely with 
        reference to its appropriate private outdoor, 
        recreational, social, open space and park land classification 
        and value notwithstanding sections 272.03, subdivision 8, and 
        273.11.  In determining such value for ad valorem tax purposes 
        the assessor shall not consider the value such real estate would 
        have if it were converted to commercial, industrial, residential 
        or seasonal residential use. 
           Sec. 17.  Minnesota Statutes 1996, section 273.121, is 
        amended to read: 
           273.121 [VALUATION OF REAL PROPERTY, NOTICE.] 
           Any county assessor or city assessor having the powers of a 
        county assessor, valuing or classifying taxable real property 
        shall in each year notify those persons whose property is to be 
        assessed or reclassified that year if the person's address is 
        known to the assessor, otherwise the occupant of the property.  
        The notice shall be in writing and shall be sent by ordinary 
        mail at least ten days before the meeting of the local board of 
        review or equalization under section 274.01 or the review 
        process established under section 274.13, subdivision 1c.  It 
        shall contain:  (1) the market value, (2) the limited market 
        value under section 273.11, subdivision 1a, (3) the qualifying 
        amount of any improvements under section 273.11, subdivision 16, 
        (4) the market value subject to taxation after subtracting the 
        amount of any qualifying improvements, (5) the new 
        classification, (6) a note that if the property is homestead and 
        at least 35 years old, improvements made to the property may be 
        eligible for a valuation exclusion under section 273.11, 
        subdivision 16, (7) the assessor's office address, and (8) the 
        dates, places, and times set for the meetings of the local board 
        of review or equalization, the review process established under 
        section 274.13, subdivision 1c, and the county board of 
        equalization.  If the assessment roll is not complete, the 
        notice shall be sent by ordinary mail at least ten days prior to 
        the date on which the board of review has adjourned.  The 
        assessor shall attach to the assessment roll a statement that 
        the notices required by this section have been mailed.  Any 
        assessor who is not provided sufficient funds from the 
        assessor's governing body to provide such notices, may make 
        application to the commissioner of revenue to finance such 
        notices.  The commissioner of revenue shall conduct an 
        investigation and, if satisfied that the assessor does not have 
        the necessary funds, issue a certification to the commissioner 
        of finance of the amount necessary to provide such notices.  The 
        commissioner of finance shall issue a warrant for such amount 
        and shall deduct such amount from any state payment to such 
        county or municipality.  The necessary funds to make such 
        payments are hereby appropriated.  Failure to receive the notice 
        shall in no way affect the validity of the assessment, the 
        resulting tax, the procedures of any board of review or 
        equalization, or the enforcement of delinquent taxes by 
        statutory means. 
           Sec. 18.  Minnesota Statutes 1996, section 273.124, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [GENERAL RULE.] (a) Residential real estate 
        that is occupied and used for the purposes of a homestead by its 
        owner, who must be a Minnesota resident, is a residential 
        homestead.  
           Agricultural land, as defined in section 273.13, 
        subdivision 23, that is occupied and used as a homestead by its 
        owner, who must be a Minnesota resident, is an agricultural 
        homestead. 
           Dates for establishment of a homestead and homestead 
        treatment provided to particular types of property are as 
        provided in this section.  
           Property of a trustee, beneficiary, or grantor of a trust 
        is not disqualified from receiving homestead benefits if the 
        homestead requirements under this chapter are satisfied. 
           The assessor shall require proof, as provided in 
        subdivision 13, of the facts upon which classification as a 
        homestead may be determined.  Notwithstanding any other law, the 
        assessor may at any time require a homestead application to be 
        filed in order to verify that any property classified as a 
        homestead continues to be eligible for homestead status.  
        Notwithstanding any other law to the contrary, the department of 
        revenue may, upon request from an assessor, verify whether an 
        individual who is requesting or receiving homestead 
        classification has filed a Minnesota income tax return as a 
        resident for the most recent taxable year for which the 
        information is available. 
           When there is a name change or a transfer of homestead 
        property, the assessor may reclassify the property in the next 
        assessment unless a homestead application is filed to verify 
        that the property continues to qualify for homestead 
        classification. 
           (b) For purposes of this section, homestead property shall 
        include property which is used for purposes of the homestead but 
        is separated from the homestead by a road, street, lot, 
        waterway, or other similar intervening property.  The term "used 
        for purposes of the homestead" shall include but not be limited 
        to uses for gardens, garages, or other outbuildings commonly 
        associated with a homestead, but shall not include vacant land 
        held primarily for future development.  In order to receive 
        homestead treatment for the noncontiguous property, the owner 
        shall apply for it to the assessor by July 1 of the year when 
        the treatment is initially sought.  After initial qualification 
        for the homestead treatment, additional applications for 
        subsequent years are not required. 
           (c) Residential real estate that is occupied and used for 
        purposes of a homestead by a relative of the owner is a 
        homestead but only to the extent of the homestead treatment that 
        would be provided if the related owner occupied the property.  
        For purposes of this paragraph and paragraph (f) (g), "relative" 
        means a parent, stepparent, child, stepchild, grandparent, 
        grandchild, brother, sister, uncle, or aunt.  This relationship 
        may be by blood or marriage.  Property that has been classified 
        as seasonal recreational residential property at any time during 
        which it has been owned by the current owner or spouse of the 
        current owner will not be reclassified as a homestead unless it 
        is occupied as a homestead by the owner; this prohibition also 
        applies to property that, in the absence of this paragraph, 
        would have been classified as seasonal recreational residential 
        property at the time when the residence was constructed.  
        Neither the related occupant nor the owner of the property may 
        claim a property tax refund under chapter 290A for a homestead 
        occupied by a relative.  In the case of a residence located on 
        agricultural land, only the house, garage, and immediately 
        surrounding one acre of land shall be classified as a homestead 
        under this paragraph, except as provided in paragraph (d). 
           (d) Agricultural property that is occupied and used for 
        purposes of a homestead by a relative of the owner, is a 
        homestead, only to the extent of the homestead treatment that 
        would be provided if the related owner occupied the property, 
        and only if all of the following criteria are met: 
           (1) the relative who is occupying the agricultural property 
        is a son, daughter, father, or mother of the owner of the 
        agricultural property or a son or daughter of the spouse of the 
        owner of the agricultural property, 
           (2) the owner of the agricultural property must be a 
        Minnesota resident, 
           (3) the owner of the agricultural property must not receive 
        homestead treatment on any other agricultural property in 
        Minnesota, and 
           (4) the owner of the agricultural property is limited to 
        only one agricultural homestead per family under this paragraph. 
           Neither the related occupant nor the owner of the property 
        may claim a property tax refund under chapter 290A for a 
        homestead occupied by a relative qualifying under this 
        paragraph.  For purposes of this paragraph, "agricultural 
        property" means the house, garage, other farm buildings and 
        structures, and agricultural land. 
           Application must be made to the assessor by the owner of 
        the agricultural property to receive homestead benefits under 
        this paragraph.  The assessor may require the necessary proof 
        that the requirements under this paragraph have been met. 
           (e) In the case of property owned by a property owner who 
        is married, the assessor must not deny homestead treatment in 
        whole or in part if only one of the spouses occupies the 
        property and the other spouse is absent due to:  (1) marriage 
        dissolution proceedings, (2) legal separation, (3) employment or 
        self-employment in another location, or (4) residence in a 
        nursing home or boarding care facility, or (5) other personal 
        circumstances causing the spouses to live separately, not 
        including an intent to obtain two homestead classifications for 
        property tax purposes.  To qualify under clause (3), the 
        spouse's place of employment or self-employment must be at least 
        50 miles distant from the other spouse's place of employment, 
        and the homesteads must be at least 50 miles distant from each 
        other.  Homestead treatment, in whole or in part, shall not be 
        denied to the owner's spouse who previously occupied the 
        residence with the owner if the absence of the owner is due to 
        one of the exceptions provided in this paragraph. 
           (f) 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 or boarding 
        care facility 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 or boarding care facility and the property is 
        not occupied or is occupied only by the owner's spouse. 
           (g) If an individual is purchasing property with the intent 
        of claiming it as a homestead and is required by the terms of 
        the financing agreement to have a relative shown on the deed as 
        a coowner, the assessor shall allow a full homestead 
        classification.  This provision only applies to first-time 
        purchasers, whether married or single, or to a person who had 
        previously been married and is purchasing as a single individual 
        for the first time.  The application for homestead benefits must 
        be on a form prescribed by the commissioner and must contain the 
        data necessary for the assessor to determine if full homestead 
        benefits are warranted. 
           Sec. 19.  Minnesota Statutes 1996, section 273.124, is 
        amended by adding a subdivision to read: 
           Subd. 19.  [LEASE-PURCHASE PROGRAM.] Qualifying buildings 
        and appurtenances, together with the land on which they are 
        located, are classified as homesteads, if the following 
        qualifications are met: 
           (1) the property is leased for up to a five-year period by 
        the occupant under a lease-purchase program administered by the 
        Minnesota housing finance agency or a housing and redevelopment 
        authority under sections 469.001 to 469.047; 
           (2) the occupant's income is no greater than 80 percent of 
        the county or area median income, adjusted for family size; 
           (3) the building consists of one or two dwelling units; 
           (4) the lease agreement provides that part of the lease 
        payment is escrowed as a nonrefundable down payment on the 
        housing; 
           (5) the administering agency verifies the occupant's income 
        eligibility and certifies to the county assessor that the 
        occupant meets the income standards; and 
           (6) the property owner applies to the county assessor by 
        May 30 of each year. 
           For purposes of this subdivision, "qualifying buildings and 
        appurtenances" means a one- or two-unit residential building 
        which was unoccupied, abandoned, and boarded for at least six 
        months.  
           Sec. 20.  Minnesota Statutes 1996, section 273.13, 
        subdivision 23, is amended to read: 
           Subd. 23.  [CLASS 2.] (a) Class 2a property is agricultural 
        land including any improvements that is homesteaded.  The market 
        value of the house and garage and immediately surrounding one 
        acre of land has the same class rates as class 1a property under 
        subdivision 22.  The value of the remaining land including 
        improvements up to $115,000 has a net class rate of .45 0.4 
        percent of market value and a gross class rate of 1.75 percent 
        of market value.  The remaining value of class 2a property over 
        $115,000 of market value that does not exceed 320 acres has a 
        net class rate of one 0.9 percent of market value, and a gross 
        class rate of 2.25 percent of market value.  The remaining 
        property over the $115,000 market value in excess of 320 acres 
        has a class rate of 1.5 1.4 percent of market value, and a gross 
        class rate of 2.25 percent of market value.  
           (b) Class 2b property is (1) real estate, rural in 
        character and used exclusively for growing trees for timber, 
        lumber, and wood and wood products; (2) real estate that is not 
        improved with a structure and is used exclusively for growing 
        trees for timber, lumber, and wood and wood products, if the 
        owner has participated or is participating in a cost-sharing 
        program for afforestation, reforestation, or timber stand 
        improvement on that particular property, administered or 
        coordinated by the commissioner of natural resources; (3) real 
        estate that is nonhomestead agricultural land; or (4) a landing 
        area or public access area of a privately owned public use 
        airport.  Class 2b property has a net class rate of 1.5 1.4 
        percent of market value, and a gross class rate of 2.25 percent 
        of market value.  
           (c) Agricultural land as used in this section means 
        contiguous acreage of ten acres or more, primarily used during 
        the preceding year for agricultural purposes.  Agricultural use 
        may include "Agricultural purposes" as used in this section 
        means the raising or cultivation of agricultural products or 
        enrollment in the Reinvest in Minnesota program under sections 
        103F.501 to 103F.535 or the federal Conservation Reserve Program 
        as contained in Public Law Number 99-198.  Contiguous acreage on 
        the same parcel, or contiguous acreage on an immediately 
        adjacent parcel under the same ownership, may also qualify as 
        agricultural land, but only if it is pasture, timber, waste, 
        unusable wild land, and or land included in state or federal 
        farm or conservation programs.  "Agricultural purposes" as used 
        in this section means the raising or cultivation of agricultural 
        products.  Land enrolled in the Reinvest in Minnesota program 
        under sections 103F.505 to 103F.531 or the federal Conservation 
        Reserve Program as contained in Public Law Number 99-198, and 
        consisting of a minimum of ten contiguous acres, shall be 
        classified as agricultural.  Agricultural classification for 
        property shall be determined with respect to the use of the 
        whole parcel, excluding the house, garage, and immediately 
        surrounding one acre of land, and shall not be based upon the 
        market value of any residential structures on the parcel or 
        contiguous parcels under the same ownership. 
           (d) Real estate, excluding the house, garage, and 
        immediately surrounding one acre of land, of less than ten acres 
        which is exclusively and intensively used principally for 
        raising or cultivating agricultural products, shall be 
        considered as agricultural land, if it is not used primarily for 
        residential purposes. 
           Land shall be classified as agricultural even if all or a 
        portion of the agricultural use of that property is the leasing 
        to, or use by another person for agricultural purposes. 
           Classification under this subdivision is not determinative 
        for qualifying under section 273.111. 
           The property classification under this section supersedes, 
        for property tax purposes only, any locally administered 
        agricultural policies or land use restrictions that define 
        minimum or maximum farm acreage. 
           (e) The term "agricultural products" as used in this 
        subdivision includes production for sale of:  
           (1) livestock, dairy animals, dairy products, poultry and 
        poultry products, fur-bearing animals, horticultural and nursery 
        stock described in sections 18.44 to 18.61, fruit of all kinds, 
        vegetables, forage, grains, bees, and apiary products by the 
        owner; 
           (2) fish bred for sale and consumption if the fish breeding 
        occurs on land zoned for agricultural use; 
           (3) the commercial boarding of horses if the boarding is 
        done in conjunction with raising or cultivating agricultural 
        products as defined in clause (1); 
           (4) property which is owned and operated by nonprofit 
        organizations used for equestrian activities, excluding racing; 
        and 
           (5) game birds and waterfowl bred and raised for use on a 
        shooting preserve licensed under section 97A.115.  
           (f) If a parcel used for agricultural purposes is also used 
        for commercial or industrial purposes, including but not limited 
        to:  
           (1) wholesale and retail sales; 
           (2) processing of raw agricultural products or other goods; 
           (3) warehousing or storage of processed goods; and 
           (4) office facilities for the support of the activities 
        enumerated in clauses (1), (2), and (3), 
        the assessor shall classify the part of the parcel used for 
        agricultural purposes as class 1b, 2a, or 2b, whichever is 
        appropriate, and the remainder in the class appropriate to its 
        use.  The grading, sorting, and packaging of raw agricultural 
        products for first sale is considered an agricultural purpose.  
        A greenhouse or other building where horticultural or nursery 
        products are grown that is also used for the conduct of retail 
        sales must be classified as agricultural if it is primarily used 
        for the growing of horticultural or nursery products from seed, 
        cuttings, or roots and occasionally as a showroom for the retail 
        sale of those products.  Use of a greenhouse or building only 
        for the display of already grown horticultural or nursery 
        products does not qualify as an agricultural purpose.  
           The assessor shall determine and list separately on the 
        records the market value of the homestead dwelling and the one 
        acre of land on which that dwelling is located.  If any farm 
        buildings or structures are located on this homesteaded acre of 
        land, their market value shall not be included in this separate 
        determination.  
           (g) To qualify for classification under paragraph (b), 
        clause (4), a privately owned public use airport must be 
        licensed as a public airport under section 360.018.  For 
        purposes of paragraph (b), clause (4), "landing area" means that 
        part of a privately owned public use airport properly cleared, 
        regularly maintained, and made available to the public for use 
        by aircraft and includes runways, taxiways, aprons, and sites 
        upon which are situated landing or navigational aids.  A landing 
        area also includes land underlying both the primary surface and 
        the approach surfaces that comply with all of the following:  
           (i) the land is properly cleared and regularly maintained 
        for the primary purposes of the landing, taking off, and taxiing 
        of aircraft; but that portion of the land that contains 
        facilities for servicing, repair, or maintenance of aircraft is 
        not included as a landing area; 
           (ii) the land is part of the airport property; and 
           (iii) the land is not used for commercial or residential 
        purposes. 
        The land contained in a landing area under paragraph (b), clause 
        (4), must be described and certified by the commissioner of 
        transportation.  The certification is effective until it is 
        modified, or until the airport or landing area no longer meets 
        the requirements of paragraph (b), clause (4).  For purposes of 
        paragraph (b), clause (4), "public access area" means property 
        used as an aircraft parking ramp, apron, or storage hangar, or 
        an arrival and departure building in connection with the airport.
           Sec. 21.  Minnesota Statutes 1996, section 273.13, is 
        amended by adding a subdivision to read: 
           Subd. 25a.  [ELDERLY ASSISTED LIVING FACILITY 
        PROPERTY.] "Elderly assisted living facility property" means 
        residential real estate containing more than one unit held for 
        use by the tenants or lessees as a residence for periods of 30 
        days or more, along with community rooms, lounges, activity 
        rooms, and related facilities, designed to meet the housing, 
        health, and financial security needs of the elderly.  The real 
        estate may be owned by an individual, partnership, limited 
        partnership, for-profit corporation or nonprofit corporation 
        exempt from federal income taxation under United States Code, 
        title 26, section 501(c)(3) or related sections.  
           An admission or initiation fee may be required of tenants.  
        Monthly charges may include charges for the residential unit, 
        meals, housekeeping, utilities, social programs, a health care 
        alert system, or any combination of them.  On-site health care 
        may be provided by in-house staff or an outside health care 
        provider. 
           The assessor shall classify elderly assisted living 
        facility property, depending upon the property's ownership, 
        occupancy, and use.  The applicable class rates shall apply 
        based on its classification, if taxable. 
           Sec. 22.  Minnesota Statutes 1996, section 273.18, is 
        amended to read: 
           273.18 [LISTING, VALUATION, AND ASSESSMENT OF EXEMPT 
        PROPERTY BY COUNTY AUDITORS.] 
           (a) In every sixth year after the year 1926, the county 
        auditor shall enter, in a separate place in the real estate 
        assessment books, the description of each tract of real property 
        exempt by law from taxation, with the name of the owner, if 
        known, and the assessor shall value and assess the same in the 
        same manner that other real property is valued and assessed, and 
        shall designate in each case the purpose for which the property 
        is used.  
           (b) For purposes of the apportionment of fire state aid 
        under section 69.021, subdivision 7, the county auditor shall 
        include on the abstract of assessment of exempt real property 
        filed under this section, the total number of acres of all 
        natural resources lands for which in lieu payments are made 
        under sections 477A.11 to 477A.14.  The assessor shall estimate 
        its market value, provided that if the assessor is not able to 
        estimate the market value of the land on a per parcel basis, the 
        assessor shall furnish the commissioner of revenue with an 
        estimate of the average value per acre of this land within the 
        county. 
           Sec. 23.  Minnesota Statutes 1996, section 274.01, is 
        amended to read: 
           274.01 [BOARD OF REVIEW.] 
           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 review 
        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.  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.  
           If in any county, at least 25 percent of the total net tax 
        capacity of a city or town is noncommercial seasonal residential 
        recreational property classified under section 273.13, 
        subdivision 25, the county must hold two countywide 
        informational meetings on Saturdays.  The meetings will allow 
        noncommercial seasonal residential recreational taxpayers to 
        discuss their property valuation with the appropriate assessment 
        staff.  These Saturday informational meetings must be scheduled 
        to allow the owner of the noncommercial seasonal residential 
        recreational property the opportunity to attend one of the 
        meetings prior to the scheduled board of review for their city 
        or town.  The Saturday meeting dates must be contained on the 
        notice of valuation of real property under section 273.121.  
           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 of review or 
        the county board of equalization 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.  
           (c) A local board of review 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 of review without regard to the one 
        percent limitation.  
           (d) A majority of the members may act at the meeting, and 
        adjourn from day to day until they finish hearing the cases 
        presented.  The assessor shall attend, with the assessment books 
        and papers, and take part in the proceedings, but must not 
        vote.  The county assessor, or an assistant delegated by the 
        county assessor shall attend the meetings.  The board shall list 
        separately, on a form appended to the assessment book, all 
        omitted property added to the list by the board and all items of 
        property increased or decreased, with the market value of each 
        item of property, added or changed by the board, placed opposite 
        the item.  The county assessor shall enter all changes made by 
        the board in the assessment book.  
           (e) 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 equalization for a review of 
        the assessment or classification.  This paragraph does not apply 
        if an assessment was made after the 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 of review meeting.  
           (f) The board of review or the board of equalization 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 of review file written objections to an 
        assessment or classification with the county assessor.  The 
        objections must be presented to the board of review at its 
        meeting by the county assessor for its consideration. 
           Subd. 2.  [SPECIAL BOARD; DUTIES DELEGATED.] The governing 
        body of a city, including a city whose charter provides for a 
        board of equalization, may appoint a special board of review.  
        The city may delegate to the special board of review all of the 
        powers and duties in subdivision 1.  The special board of review 
        shall serve at the direction and discretion of the appointing 
        body, subject to the restrictions imposed by law.  The 
        appointing body shall determine the number of members of the 
        board, the compensation and expenses to be paid, and the term of 
        office of each member.  At least one member of the special board 
        of review must be an appraiser, realtor, or other person 
        familiar with property valuations in the assessment district. 
           Subd. 3.  [LOCAL BOARD DUTIES TRANSFERRED TO COUNTY.] The 
        town board of any town or the governing body of any home rule 
        charter or statutory city may transfer its powers and duties 
        under subdivision 1 to the county board, and no longer perform 
        the function of a local board.  Before the town board or the 
        governing body of a city transfers the powers and duties to the 
        county board, the town board or city's governing body shall give 
        public notice of the meeting at which the proposal for transfer 
        is to be considered.  The public notice shall follow the 
        procedure contained in section 471.705, subdivision 1c, 
        paragraph (b).  A transfer of duties as permitted under this 
        subdivision must be communicated to the county assessor, in 
        writing, before December 1 of any year to be effective for the 
        following year's assessment.  This transfer of duties to the 
        county may either be permanent or for a specified number of 
        years, provided that the transfer cannot be for less than three 
        years.  Its length must be stated in writing.  A town or city 
        may renew its option to transfer.  The option to transfer duties 
        under this subdivision is only available to a town or city whose 
        assessment is done by the county. 
           Sec. 24.  Minnesota Statutes 1996, section 274.13, is 
        amended by adding a subdivision to read: 
           Subd. 1b.  [ASSESSMENT CHANGES.] No changes in valuation or 
        classification that are intended to correct errors in judgment 
        by the county assessor may be made by the county assessor after 
        the county board of equalization has adjourned; however, 
        corrections of errors that are merely clerical in nature or 
        changes that extend homestead treatment to property are 
        permitted after adjournment until the tax extension date for 
        that assessment year.  The changes must be fully documented and 
        maintained in the assessor's office and must be available for 
        review by any person. 
           Sec. 25.  Minnesota Statutes 1996, section 274.13, is 
        amended by adding a subdivision to read: 
           Subd. 1c.  [ALTERNATIVE REVIEW OPTION.] The county shall 
        notify taxpayers whose town or city elected to transfer its 
        powers and duties under section 274.01 to the county.  Prior to 
        the time of the county board of equalization, the county shall 
        make available to those taxpayers a procedure for a review of 
        its assessments, including, but not limited to, open book 
        meetings.  This alternative review process shall take place in 
        April and May.  
           Sec. 26.  Minnesota Statutes 1996, section 281.13, is 
        amended to read: 
           281.13 [NOTICE OF EXPIRATION OF REDEMPTION.] 
           Every person holding a tax certificate after expiration of 
        three years, or the redemption period specified in section 
        281.17 if shorter, after the date of the tax sale under which 
        the same was issued, may present such certificate to the county 
        auditor; and thereupon the auditor shall prepare, under the 
        auditor's hand and official seal, a notice, directed to the 
        person or persons in whose name such lands are assessed, 
        specifying the description thereof, the amount for which the 
        same was sold, the amount required to redeem the same, exclusive 
        of the costs to accrue upon such notice, and the time when the 
        redemption period will expire.  If, at the time when any tax 
        certificate is so presented, such lands are assessed in the name 
        of the holder of the certificate, such notice shall be directed 
        also to the person or persons in whose name title in fee of such 
        land appears of record in the office of the county recorder.  
        The auditor shall deliver such notice to the party applying 
        therefor, who shall deliver it to the sheriff of the proper 
        county or any other person not less than 18 years of age for 
        service.  Within 20 days after receiving it, the sheriff or 
        other person serving the notice shall serve such notice upon the 
        persons to whom it is directed, if to be found in the sheriff's 
        county, in the manner prescribed for serving a summons in a 
        civil action; if not so found, then upon the person in 
        possession of the land, and make return thereof to the auditor.  
        In the case of land held in joint tenancy the notice shall be 
        served upon each joint tenant.  If one or more of the persons to 
        whom the notice is directed cannot be found in the county, and 
        there is no one in possession of the land, of each of which 
        facts the return of the sheriff or other person serving the 
        notice so specifying shall be prima facie evidence, service 
        shall be made upon those persons that can be found and service 
        shall also be made by two weeks' published notice, proof of 
        which publication shall be filed with the auditor. 
           When the records in the office of the county recorder show 
        that any lot or tract of land is encumbered by an unsatisfied 
        mortgage or other lien, and show the post office address of the 
        mortgagee or lienee, or if the same has been assigned, the post 
        office address of the assignee, the person holding such tax 
        certificate shall serve a copy of such notice upon such 
        mortgagee, lienee, or assignee by certified mail addressed to 
        such mortgagee, lienee, or assignee at the post office address 
        of the mortgagee, lienee, or assignee as disclosed by the 
        records in the office of the county recorder, at least 60 days 
        prior to the time when the redemption period will expire. 
           The notice herein provided for shall be sufficient if 
        substantially in the following form: 
                      "NOTICE OF EXPIRATION OF REDEMPTION 
           Office of the County Auditor 
           County of ......................., State of Minnesota. 
           To .............................. 
           You are hereby notified that the following described piece 
        or parcel of land, situated in the county of 
        ......................., and State of Minnesota, and known and 
        described as follows:  ......... 
        ............................................................ 
        .........., is now assessed in your name; that on the 
        ........................ day of May, ....................., at 
        the sale of land pursuant to the real estate tax judgment, duly 
        given and made in and by the district court in and for said 
        county of ......................................, on the 
        ................................. day of March, .............., 
        in proceedings to enforce the payment of taxes delinquent upon 
        real estate for the year .............. for said county of 
        ........... ......................., the above described piece 
        or parcel of land was sold for the sum of $............., and 
        the amount required to redeem such piece or parcel of land from 
        such sale, exclusive of the cost to accrue upon this notice, is 
        the sum of $............, and interest at the rate of 
        ............... percent per annum from said 
        ............................. day of ......................, 
        ..................., to the day such redemption is made, and 
        that the tax certificate has been presented to me by the holder 
        thereof, and the time for redemption of such piece or parcel of 
        land from such sale will expire 60 days after the service of 
        this notice and proof thereof has been filed in my office. 
           Witness my hand and official seal this 
        ............................  day of ................, 
        ................. 
           ................. 
           (OFFICIAL SEAL) 
           County Auditor of 
           ...................... County, Minnesota." 
           Sec. 27.  Minnesota Statutes 1996, section 281.23, is 
        amended by adding a subdivision to read: 
           Subd. 5a.  [DEFINITION.] In this section, "occupied parcel" 
        means a parcel containing a structure subject to property 
        taxation. 
           Sec. 28.  Minnesota Statutes 1996, section 281.23, 
        subdivision 6, is amended to read: 
           Subd. 6.  [SERVICE BY SHERIFF OF NOTICE.] (a) Forthwith 
        after the commencement of such publication or mailing the county 
        auditor shall deliver to the sheriff of the county or any other 
        person not less than 18 years of age a sufficient number of 
        copies of such notice of expiration of redemption for service 
        upon the persons in possession of all parcels of such land as 
        are actually occupied and documentation if the certified mail 
        notice was returned as undeliverable or the notice was not 
        mailed to the address associated with the property.  Within 30 
        days after receipt thereof, the sheriff or other person serving 
        the notice shall make such investigation as may be necessary to 
        ascertain whether or not the parcels covered by such notice are 
        actually occupied or not parcels, and shall serve a copy of such 
        notice of expiration of redemption upon the person in possession 
        of each parcel found to be so an occupied parcel, in the manner 
        prescribed for serving summons in a civil action.  The 
        sheriff or other person serving the notice shall make prompt 
        return to the auditor as to all notices so served and as to all 
        parcels found vacant and unoccupied.  Such return shall be made 
        upon a copy of such notice and shall be prima facie evidence of 
        the facts therein stated. 
           Unless compensation for such services is otherwise provided 
        by law, If the notice is served by the sheriff, the sheriff 
        shall receive from the county, in addition to other compensation 
        prescribed by law, such fees and mileage for service on persons 
        in possession as are prescribed by law for such service in other 
        cases, and shall also receive such compensation for making 
        investigation and return as to vacant and unoccupied lands as 
        the county board may fix, subject to appeal to the district 
        court as in case of other claims against the county.  As to 
        either service upon persons in possession or return as to vacant 
        lands, the sheriff shall charge mileage only for one trip if the 
        occupants of more than two tracts are served simultaneously, and 
        in such case mileage shall be prorated and charged equitably 
        against all such owners. 
           (b) The secretary of state shall receive sheriff's service 
        for all out-of-state interests. 
           Sec. 29.  Minnesota Statutes 1996, section 281.273, is 
        amended to read: 
           281.273 [EXPIRATION OF TIME OF REDEMPTION ON LANDS OWNED BY 
        PERSONS IN MILITARY SERVICE.] 
           When a county sheriff or other person serves notice of 
        expiration of the time for redemption of any parcel of real 
        property from delinquent taxes upon any occupant of the real 
        property, the sheriff or other person shall inquire of the 
        occupant and otherwise as the sheriff or other person may deem 
        proper whether the real property was owned and occupied for 
        dwelling, professional, business or agricultural purposes by a 
        person in the military service of the United States as defined 
        in the Soldiers' and Sailors' Civil Relief Act of 1940, as 
        amended, or the person's dependents at the commencement of the 
        period of military service.  On finding that the real property 
        is so owned, the sheriff or other person shall make a 
        certificate to the county auditor, setting forth the description 
        of the property, the name of the owner, the particulars of the 
        owner's military service so far as ascertained or claimed, and 
        the names and addresses of the persons of whom the sheriff or 
        other person made inquiry.  The certificate shall be filed with 
        the county auditor and shall be prima facie evidence of the 
        facts stated.  If the real property described in the certificate 
        becomes forfeited to the state, it shall be withheld from sale 
        or conveyance as tax-forfeited property in accordance with and 
        subject to the provisions of the Soldiers' and Sailors' Civil 
        Relief Act of 1940, as amended, except that the requirement in 
        United States Code, title 50, section 560, that the property be 
        occupied by the dependent or employee of the person in military 
        service does not apply.  The period of withholding from sale or 
        conveyance shall be no longer than is required by that act.  If 
        upon further investigation the sheriff or other person finds at 
        any time that the certificate is erroneous in any particular, 
        the sheriff or other person shall file a supplemental 
        certificate referring to the matter in error and stating the 
        facts as found.  The supplemental certificate shall be prima 
        facie evidence of the facts stated, and shall supersede any 
        prior certificate so far as in conflict therewith.  If it 
        appears from the supplemental certificate that the owner of the 
        real property affected is not entitled to have the same withheld 
        from sale under the Soldiers' and Sailors' Civil Relief Act of 
        1940, as amended, the property shall not be withheld from sale 
        further under this section.  
           Sec. 30.  Minnesota Statutes 1996, section 281.276, is 
        amended to read: 
           281.276 [RETURN OF SHERIFF MUST SHOW MILITARY SERVICE.] 
           Unless a sheriff's certificate showing military service is 
        filed as required by section 281.273, it shall be presumed that 
        the owner of the property described in the notice of expiration 
        of the time for redemption from delinquent taxes is not in such 
        service.  The filing of the sheriff's certificate provided for 
        in section 281.273 shall not affect the forfeiture of the real 
        property described in such notice of the expiration of the time 
        for redemption from delinquent taxes or their proceedings 
        relating thereto except as expressly herein provided. 
           Sec. 31.  Minnesota Statutes 1996, section 373.40, 
        subdivision 7, is amended to read: 
           Subd. 7.  [REPEALER.] This section is repealed effective 
        for bonds issued after July 1, 1998 2003, but continues to apply 
        to bonds issued before that date. 
           Sec. 32.  Minnesota Statutes 1996, section 375.192, 
        subdivision 2, is amended to read: 
           Subd. 2.  [PROCEDURE, CONDITIONS.] Upon written application 
        by the owner of any property, the county board may grant the 
        reduction or abatement of estimated market valuation or taxes 
        and of any costs, penalties, or interest on them as the board 
        deems just and equitable and order the refund in whole or part 
        of any taxes, costs, penalties, or interest which have been 
        erroneously or unjustly paid.  Except as provided in sections 
        469.1812 to 469.1815, no reduction or abatement may be granted 
        on the basis of providing an incentive for economic development 
        or redevelopment.  Except as provided in section 375.194, the 
        county board is authorized to consider and grant reductions or 
        abatements on applications only as they relate to taxes payable 
        in the current year and the two prior years; provided that 
        reductions or abatements for the two prior years shall be 
        considered or granted only for (i) clerical errors, or (ii) when 
        the taxpayer fails to file for a reduction or an adjustment due 
        to hardship, as determined by the county board.  The application 
        must include the social security number of the applicant.  The 
        social security number is private data on individuals as defined 
        by section 13.02, subdivision 12.  All applications must be 
        approved by the county assessor, or, if the property is located 
        in a city of the first or second class having a city assessor, 
        by the city assessor, and by the county auditor before 
        consideration by the county board, except that the part of the 
        application which is for the abatement of penalty or interest 
        must be approved by the county treasurer and county auditor.  
        Approval by the county or city assessor is not required for 
        abatements of penalty or interest.  No reduction, abatement, or 
        refund of any special assessments made or levied by any 
        municipality for local improvements shall be made unless it is 
        also approved by the board of review or similar taxing authority 
        of the municipality.  Before taking action on any reduction or 
        abatement where the reduction of taxes, costs, penalties, and 
        interest exceed $10,000, the county board shall give 20 days' 
        notice to the school board and the municipality in which the 
        property is located.  The notice must describe the property 
        involved, the actual amount of the reduction being sought, and 
        the reason for the reduction.  If the school board or the 
        municipality object to the granting of the reduction or 
        abatement, the county board must refer the abatement or 
        reduction to the commissioner of revenue with its 
        recommendation.  The commissioner shall consider the abatement 
        or reduction under section 270.07, subdivision 1.  
           An appeal may not be taken to the tax court from any order 
        of the county board made in the exercise of the discretionary 
        authority granted in this section.  
           The county auditor shall notify the commissioner of revenue 
        of all abatements resulting from the erroneous classification of 
        real property, for tax purposes, as nonhomestead property.  For 
        the abatements relating to the current year's tax processed 
        through June 30, the auditor shall notify the commissioner on or 
        before July 31 of that same year of all abatement applications 
        granted.  For the abatements relating to the current year's tax 
        processed after June 30 through the balance of the year, the 
        auditor shall notify the commissioner on or before the following 
        January 31 of all applications granted.  The county auditor 
        shall submit a form containing the social security number of the 
        applicant and such other information the commissioner prescribes.
           Sec. 33.  Minnesota Statutes 1996, section 465.71, is 
        amended to read: 
           465.71 [INSTALLMENT AND LEASE PURCHASES; CITIES; COUNTIES; 
        SCHOOL DISTRICTS.] 
           A home rule charter city, statutory city, county, town, or 
        school district may purchase personal property under an 
        installment contract, or lease real or personal property with an 
        option to purchase under a lease-purchase agreement, by which 
        contract or agreement title is retained by the seller or vendor 
        or assigned to a third party as security for the purchase price, 
        including interest, if any, but such purchases are subject to 
        statutory and charter provisions applicable to the purchase of 
        real or personal property.  For purposes of the bid requirements 
        contained in section 471.345, "the amount of the contract" shall 
        include the total of all lease payments for the entire term of 
        the lease under a lease-purchase agreement.  The obligation 
        created by a lease-purchase agreement for personal property or a 
        lease-purchase agreement for real property if the amount of the 
        contract for purchase of the real property is less than 
        $1,000,000 shall not be included in the calculation of net debt 
        for purposes of section 475.53, and shall not constitute debt 
        under any other statutory provision.  No election shall be 
        required in connection with the execution of a lease-purchase 
        agreement authorized by this section.  The city, county, town, 
        or school district must have the right to terminate a lease- 
        purchase agreement at the end of any fiscal year during its term.
           Sec. 34.  Minnesota Statutes 1996, section 465.81, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [SCOPE.] Sections 465.81 to 465.87 
        establish procedures to be used by counties, cities, or towns 
        that adopt by resolution an agreement providing a plan to 
        provide combined services during an initial cooperation period 
        that may not exceed two years and then: 
           (1) to merge into a single unit of government over the 
        succeeding two-year period; or 
           (2) to agree to apportion the entire area of at least one 
        local government unit between or among two or more local 
        government units contiguous to the unit to be apportioned, 
        resulting in the elimination of at least one local government 
        unit over the succeeding two years.  
           Sec. 35.  Minnesota Statutes 1996, section 465.81, 
        subdivision 3, is amended to read: 
           Subd. 3.  [COMBINATION REQUIREMENTS.] Counties may combine 
        with one or more other counties.  Cities may combine with one or 
        more other cities or with one or more towns.  Towns may combine 
        with one or more other towns or with one or more cities.  Units 
        that combine must be contiguous.  A county, through the adoption 
        of a resolution by all county boards that are affected by the 
        combination, may apportion its territory between or among two or 
        more counties contiguous to the county that is to be 
        apportioned.  A city, through the adoption of a resolution by 
        all city councils that are affected by the combination, may 
        apportion its territory between or among two or more cities 
        contiguous to the city that is to be apportioned.  A township, 
        through the adoption of a resolution by all town boards or city 
        councils that are affected by the combination, may apportion its 
        territory between or among two or more townships or cities 
        contiguous to the township that is to be apportioned. 
           Sec. 36.  Minnesota Statutes 1996, section 465.82, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [ADOPTION AND STATE AGENCY REVIEW.] Each 
        governing body that proposes to combine take part in a 
        combination under sections 465.81 to 465.87 must adopt by 
        resolution adopt a plan for cooperation and combination.  The 
        plan must address each item in this section.  The plan must be 
        specific for any item that will occur within three years and may 
        be general or set forth alternative proposals for an item that 
        will occur more than three years in the future.  The plan must 
        be submitted to the board of government innovation and 
        cooperation for review and comment.  For a metropolitan area 
        local government unit, the plan must also be submitted to the 
        metropolitan council for review and comment.  The council may 
        point out any resources or technical assistance it may be able 
        to provide a governing body submitting a plan under this 
        subdivision.  Significant modifications and specific resolutions 
        of items must be submitted to the board and council, if 
        appropriate, for review and comment.  In the official newspaper 
        of each local government unit proposed for proposing to take 
        part in the combination, the governing body must shall publish 
        at least a summary of the adopted plans, each significant 
        modification and resolution of items, and, if appropriate, the 
        results of each board and council, if appropriate, review and 
        comment.  If a territory of a unit is to be apportioned between 
        or among two or more units contiguous to the unit that is to be 
        apportioned, the plan must specify the area that will become a 
        part of each remaining unit. 
           Sec. 37.  Minnesota Statutes 1996, section 465.82, 
        subdivision 2, is amended to read: 
           Subd. 2.  [CONTENTS OF PLAN.] The plan must state:  
           (1) the specific cooperative activities the units will 
        engage in during the first two years of the venture; 
           (2) the steps to be taken to effect the merger of the 
        governmental units, with completion no later than four years 
        after the process begins; 
           (3) the steps by which a single governing body will be 
        created or, when the entire territory of a unit will be 
        apportioned between or among two or more units contiguous to the 
        unit that is to be apportioned, the steps to be taken by the 
        governing bodies of the remaining units to provide for 
        representation of the residents of the apportioned unit; 
           (4) changes in services provided, facilities used, and 
        administrative operations and staffing required to effect the 
        preliminary cooperative activities and the final merger, and a 
        two-, five-, and ten-year projection of expenditures for each 
        unit if it combined and if it remained separate; 
           (5) treatment of employees of the merging governmental 
        units, specifically including provisions for reassigning 
        employees, dealing with unions exclusive representatives, and 
        providing financial incentives to encourage early retirements; 
           (6) financial arrangements for the merger, specifically 
        including responsibility for debt service on outstanding 
        obligations of the merging entities units; 
           (7) one- and two-year impact analysis analyses, prepared by 
        the granting state agency at the request of the local government 
        unit, of major state aid revenues received for each unit if it 
        combined and if it remained separate.  This would also include, 
        including an impact analysis, prepared by the department of 
        revenue, of any property tax revenue implications, if any, 
        associated with tax increment financing districts and fiscal 
        disparities under chapter 276A or 473F resulting from the 
        merger; 
           (8) procedures for a referendum to be held before the 
        proposed combination to approve combining the local government 
        units, specifically stating whether a majority of those voting 
        in each district proposed for combination or a majority of those 
        voting on the question in the entire area proposed for 
        combination would be is needed to pass the referendum; and 
           (9) a time schedule for implementation. 
           Notwithstanding clause (3) or any other law to the 
        contrary, all current members of the governing bodies of the 
        local governmental government units that propose to combine 
        under sections 465.81 to 465.88 may serve on the initial 
        governing body of the combined unit until a gradual reduction in 
        membership is achieved by foregoing election of new members when 
        terms expire until the number permitted by other law is reached. 
           Sec. 38.  Minnesota Statutes 1996, section 465.82, is 
        amended by adding a subdivision to read: 
           Subd. 3.  [INTERIM GOVERNING BODY.] The plan for 
        cooperation and combination adopted in accordance with 
        subdivision 1 may establish an interim governing body to act on 
        behalf of the new local government unit before the effective 
        date of the combination.  If established, the interim governing 
        body must consist of at least a majority of the elected 
        officials from each local government unit taking part in the 
        combination.  If the plan establishes an interim governing body, 
        the governing body of each unit taking part in the combination 
        shall appoint its representatives to serve on the interim 
        governing body.  An interim governing body may not take any 
        official action on behalf of the new local government unit 
        before approval of the combination through the referendum 
        required by section 465.84.  After approval of the combination 
        through the referendum, and before the effective date of the 
        combination, an interim governing body may exercise all 
        statutory authority of the governing body of the new local 
        government unit, including the authority to enter into contracts 
        and adopt policies and local ordinances. 
           Sec. 39.  Minnesota Statutes 1996, section 465.87, 
        subdivision 1a, is amended to read: 
           Subd. 1a.  [ADDITIONAL ELIGIBILITY.] A local government 
        unit is eligible to apply for aid under this section if it has 
        combined with another unit of government in accordance with any 
        process within chapter 414 that results in the elimination of at 
        least one local government unit and a copy of the municipal 
        board's order or orders combining the two units of government is 
        forwarded to the board.  If the municipal board issues two or 
        more orders within 30 days for the annexation of the area of an 
        entire township by two or more cities contiguous to the 
        township, the cities subject to the board's order are eligible 
        to receive pro rata shares, on the basis of their populations, 
        of the total amount of cooperation and combination aid all 
        participating units of government would be eligible to receive 
        under subdivision 2.  If two units of government cooperate in 
        the orderly annexation of the entire area of a third unit of 
        government which has a population of at least 8,000 people, the 
        two units of government are each eligible for the amount of aid 
        specified in subdivision 2.  
           Sec. 40.  Minnesota Statutes 1996, section 465.87, 
        subdivision 2, is amended to read: 
           Subd. 2.  [AMOUNT OF AID.] The annual amount of aid to be 
        paid to each eligible local government unit may not exceed the 
        following per capita amounts, based on the combined population 
        of the units, as estimated by the state demographer, or 
        $100,000, whichever is less. 
              Combined Population                   Aid
               after Combination                 Per Capita
                     0 -  2,500                     $25 
                 2,500 -  5,000                      20 
                 5,000 - 20,000                      15
                    over 20,000                      10
        If two or more units are eligible for a single award under this 
        subdivision, the award must be divided among the units in pro 
        rata shares based on each unit's population.  Payments must be 
        made on the dates provided for payments of local government aid 
        under section 477A.013, beginning in the year during which 
        substantial cooperative activities under the plan initially 
        occur, unless those activities begin after July 1, in which case 
        the initial aid payment must be made in the following calendar 
        year.  Payments to a local government unit that qualifies for 
        aid under subdivision 1a must be made on the dates provided for 
        payments of local government aids under section 477A.013, 
        beginning in the calendar year during which a combination in any 
        form is expected to be ordered by the Minnesota municipal board 
        as evidenced in a resolution adopted by July 1 by the affected 
        local government units declaring their intent to combine.  The 
        resolutions must certify that the combination agreement 
        addressing all issues relative to the combination is 
        substantially complete.  The total amount of aid paid may not 
        exceed the amount appropriated to the board for purposes of this 
        section. 
           Sec. 41.  Minnesota Statutes 1996, section 465.88, is 
        amended to read: 
           465.88 [PLANNING AID FOR CONSOLIDATION STUDIES.] 
           Two or more local units of government with a combined 
        population of 2,500 30,000 or less based on the most recent 
        decennial census may apply to the board for aid to assist in the 
        study of a possible consolidation or combination.  To be 
        eligible for receipt of aid under this section, the two local 
        units of government must be subject to a municipal board motion 
        proceeding to form a consolidation commission under section 
        414.041, subdivision 2, or the governing bodies of the local 
        units of government must have approved a resolution expressing 
        their intent to develop and submit a combination plan for 
        consideration by the board.  The application must be on a form 
        prescribed by the board and must provide a proposed budget 
        detailing how the requested aid shall is to be used.  The 
        governing bodies of the local units of government must shall 
        also approve resolutions certifying that the requested aid is 
        essential for paying a portion of the costs associated with the 
        consolidation or combination study.  The board may grant up to 
        $10,000 in aid for each application received.  Two or more local 
        government units with a combined population of at least 2,500 
        but not greater than 30,000, based on the most recent decennial 
        census, must agree to provide at least $1 for the study of a 
        possible consolidation or combination for each dollar of aid 
        granted by the board under this section. 
           Sec. 42.  Minnesota Statutes 1996, section 469.012, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [SCHEDULE OF POWERS.] An authority shall be 
        a public body corporate and politic and shall have all the 
        powers necessary or convenient to carry out the purposes of 
        sections 469.001 to 469.047, except that the power to levy and 
        collect taxes or special assessments is limited to the power 
        provided in sections 469.027 to 469.033.  Its powers include the 
        following powers in addition to others granted in sections 
        469.001 to 469.047:  
           (1) to sue and be sued; to have a seal, which shall be 
        judicially noticed, and to alter it; to have perpetual 
        succession; and to make, amend, and repeal rules consistent with 
        sections 469.001 to 469.047; 
           (2) to employ an executive director, technical experts, and 
        officers, agents, and employees, permanent and temporary, that 
        it requires, and determine their qualifications, duties, and 
        compensation; for legal services it requires, to call upon the 
        chief law officer of the city or to employ its own counsel and 
        legal staff; so far as practicable, to use the services of local 
        public bodies in its area of operation, provided that those 
        local public bodies, if requested, shall make the services 
        available; 
           (3) to delegate to one or more of its agents or employees 
        the powers or duties it deems proper; 
           (4) within its area of operation, to undertake, prepare, 
        carry out, and operate projects and to provide for the 
        construction, reconstruction, improvement, extension, 
        alteration, or repair of any project or part thereof; 
           (5) subject to the provisions of section 469.026, to give, 
        sell, transfer, convey, or otherwise dispose of real or personal 
        property or any interest therein and to execute leases, deeds, 
        conveyances, negotiable instruments, purchase agreements, and 
        other contracts or instruments, and take action that is 
        necessary or convenient to carry out the purposes of these 
        sections; 
           (6) within its area of operation, to acquire real or 
        personal property or any interest therein by gifts, grant, 
        purchase, exchange, lease, transfer, bequest, devise, or 
        otherwise, and by the exercise of the power of eminent domain, 
        in the manner provided by chapter 117, to acquire real property 
        which it may deem necessary for its purposes, after the adoption 
        by it of a resolution declaring that the acquisition of the real 
        property is necessary to eliminate one or more of the conditions 
        found to exist in the resolution adopted pursuant to section 
        469.003 or to provide decent, safe, and sanitary housing for 
        persons of low and moderate income, or is necessary to carry out 
        a redevelopment project.  Real property needed or convenient for 
        a project may be acquired by the authority for the project by 
        condemnation pursuant to this section.  This includes any 
        property devoted to a public use, whether or not held in trust, 
        notwithstanding that the property may have been previously 
        acquired by condemnation or is owned by a public utility 
        corporation, because the public use in conformity with the 
        provisions of sections 469.001 to 469.047 shall be deemed a 
        superior public use.  Property devoted to a public use may be so 
        acquired only if the governing body of the municipality has 
        approved its acquisition by the authority.  An award of 
        compensation shall not be increased by reason of any increase in 
        the value of the real property caused by the assembly, clearance 
        or reconstruction, or proposed assembly, clearance or 
        reconstruction for the purposes of sections 469.001 to 469.047 
        of the real property in an area; 
           (7) within its area of operation, and without the adoption 
        of an urban renewal plan, to acquire, by all means as set forth 
        in clause (6) but without the adoption of a resolution provided 
        for in clause (6), real property, and to demolish, remove, 
        rehabilitate, or reconstruct the buildings and improvements or 
        construct new buildings and improvements thereon, or to so 
        provide through other means as set forth in Laws 1974, chapter 
        228, or to grade, fill, and construct foundations or otherwise 
        prepare the site for improvements.  The authority may dispose of 
        the property pursuant to section 469.029, provided that the 
        provisions of section 469.029 requiring conformance to an urban 
        renewal plan shall not apply.  The authority may finance these 
        activities by means of the redevelopment project fund or by 
        means of tax increments or tax increment bonds or by the methods 
        of financing provided for in section 469.033 or by means of 
        contributions from the municipality provided for in section 
        469.041, clause (9), or by any combination of those means.  Real 
        property with buildings or improvements thereon shall only be 
        acquired under this clause when the buildings or improvements 
        are substandard.  The exercise of the power of eminent domain 
        under this clause shall be limited to real property which 
        contains, or has contained within the three years immediately 
        preceding the exercise of the power of eminent domain and is 
        currently vacant, buildings and improvements which are vacated 
        and substandard.  Notwithstanding the prior sentence, in cities 
        of the first class the exercise of the power of eminent domain 
        under this clause shall be limited to real property which 
        contains, or has contained within the three years immediately 
        preceding the exercise of the power of eminent domain, buildings 
        and improvements which are substandard.  For the purpose of this 
        clause, substandard buildings or improvements mean hazardous 
        buildings as defined in section 463.15, subdivision 3, or 
        buildings or improvements that are dilapidated or obsolescent, 
        faultily designed, lack adequate ventilation, light, or sanitary 
        facilities, or any combination of these or other factors that 
        are detrimental to the safety or health of the community; 
           (8) within its area of operation, to determine the level of 
        income constituting low or moderate family income.  The 
        authority may establish various income levels for various family 
        sizes.  In making its determination, the authority may consider 
        income levels that may be established by the Department of 
        Housing and Urban Development or a similar or successor federal 
        agency for the purpose of federal loan guarantees or subsidies 
        for persons of low or moderate income.  The authority may use 
        that determination as a basis for the maximum amount of income 
        for admissions to housing development projects or housing 
        projects owned or operated by it; 
           (9) to provide in federally assisted projects any 
        relocation payments and assistance necessary to comply with the 
        requirements of the Federal Uniform Relocation Assistance and 
        Real Property Acquisition Policies Act of 1970, and any 
        amendments or supplements thereto; 
           (10) to make an agreement with the governing body or bodies 
        creating the authority which provides exemption from all ad 
        valorem real and personal property taxes levied or imposed by 
        the state, city, county, or other political subdivisions, for 
        which the authority shall make payments in lieu of taxes to the 
        state, city, county, or other political subdivisions as provided 
        in section 469.040 body or bodies creating the authority.  The 
        governing body shall agree on behalf of all the applicable 
        governing bodies affected that local cooperation as required by 
        the federal government shall be provided by the local governing 
        body or bodies in whose jurisdiction the project is to be 
        located, at no cost or at no greater cost than the same public 
        services and facilities furnished to other residents; 
           (11) to cooperate with or act as agent for the federal 
        government, the state or any state public body, or any agency or 
        instrumentality of the foregoing, in carrying out any of the 
        provisions of sections 469.001 to 469.047 or of any other 
        related federal, state, or local legislation; and upon the 
        consent of the governing body of the city to purchase, lease, 
        manage, or otherwise take over any housing project already owned 
        and operated by the federal government; 
           (12) to make plans for carrying out a program of voluntary 
        repair and rehabilitation of buildings and improvements, and 
        plans for the enforcement of laws, codes, and regulations 
        relating to the use of land and the use and occupancy of 
        buildings and improvements, and to the compulsory repair, 
        rehabilitation, demolition, or removal of buildings and 
        improvements.  The authority may develop, test, and report 
        methods and techniques, and carry out demonstrations and other 
        activities for the prevention and elimination of slums and 
        blight; 
           (13) to borrow money or other property and accept 
        contributions, grants, gifts, services, or other assistance from 
        the federal government, the state government, state public 
        bodies, or from any other public or private sources; 
           (14) to include in any contract for financial assistance 
        with the federal government any conditions that the federal 
        government may attach to its financial aid of a project, not 
        inconsistent with purposes of sections 469.001 to 469.047, 
        including obligating itself (which obligation shall be 
        specifically enforceable and not constitute a mortgage, 
        notwithstanding any other laws) to convey to the federal 
        government the project to which the contract relates upon the 
        occurrence of a substantial default with respect to the 
        covenants or conditions to which the authority is subject; to 
        provide in the contract that, in case of such conveyance, the 
        federal government may complete, operate, manage, lease, convey, 
        or otherwise deal with the project until the defaults are cured 
        if the federal government agrees in the contract to reconvey to 
        the authority the project as then constituted when the defaults 
        have been cured; 
           (15) to issue bonds for any of its corporate purposes and 
        to secure the bonds by mortgages upon property held or to be 
        held by it or by pledge of its revenues, including grants or 
        contributions; 
           (16) to invest any funds held in reserves or sinking funds, 
        or any funds not required for immediate disbursement, in 
        property or securities in which savings banks may legally invest 
        funds subject to their control or in the manner and subject to 
        the conditions provided in section 118A.04 for the deposit and 
        investment of public funds; 
           (17) within its area of operation, to determine where 
        blight exists or where there is unsafe, unsanitary, or 
        overcrowded housing; 
           (18) to carry out studies of the housing and redevelopment 
        needs within its area of operation and of the meeting of those 
        needs.  This includes study of data on population and family 
        groups and their distribution according to income groups, the 
        amount and quality of available housing and its distribution 
        according to rentals and sales prices, employment, wages, 
        desirable patterns for land use and community growth, and other 
        factors affecting the local housing and redevelopment needs and 
        the meeting of those needs; to make the results of those studies 
        and analyses available to the public and to building, housing, 
        and supply industries; 
           (19) if a local public body does not have a planning agency 
        or the planning agency has not produced a comprehensive or 
        general community development plan, to make or cause to be made 
        a plan to be used as a guide in the more detailed planning of 
        housing and redevelopment areas; 
           (20) to lease or rent any dwellings, accommodations, lands, 
        buildings, structures, or facilities included in any project 
        and, subject to the limitations contained in sections 469.001 to 
        469.047 with respect to the rental of dwellings in housing 
        projects, to establish and revise the rents or charges therefor; 
           (21) to own, hold, and improve real or personal property 
        and to sell, lease, exchange, transfer, assign, pledge, or 
        dispose of any real or personal property or any interest 
        therein; 
           (22) to insure or provide for the insurance of any real or 
        personal property or operations of the authority against any 
        risks or hazards; 
           (23) to procure or agree to the procurement of government 
        insurance or guarantees of the payment of any bonds or parts 
        thereof issued by an authority and to pay premiums on the 
        insurance; 
           (24) to make expenditures necessary to carry out the 
        purposes of sections 469.001 to 469.047; 
           (25) to enter into an agreement or agreements with any 
        state public body to provide informational service and 
        relocation assistance to families, individuals, business 
        concerns, and nonprofit organizations displaced or to be 
        displaced by the activities of any state public body; 
           (26) to compile and maintain a catalog of all vacant, open 
        and undeveloped land, or land which contains substandard 
        buildings and improvements as that term is defined in clause 
        (7), that is owned or controlled by the authority or by the 
        governing body within its area of operation and to compile and 
        maintain a catalog of all authority owned real property that is 
        in excess of the foreseeable needs of the authority, in order to 
        determine and recommend if the real property compiled in either 
        catalog is appropriate for disposal pursuant to the provisions 
        of section 469.029, subdivisions 9 and 10; 
           (27) to recommend to the city concerning the enforcement of 
        the applicable health, housing, building, fire prevention, and 
        housing maintenance code requirements as they relate to 
        residential dwelling structures that are being rehabilitated by 
        low- or moderate-income persons pursuant to section 469.029, 
        subdivision 9, for the period of time necessary to complete the 
        rehabilitation, as determined by the authority; 
           (28) to recommend to the city the initiation of municipal 
        powers, against certain real properties, relating to repair, 
        closing, condemnation, or demolition of unsafe, unsanitary, 
        hazardous, and unfit buildings, as provided in section 469.041, 
        clause (5); 
           (29) to sell, at private or public sale, at the price or 
        prices determined by the authority, any note, mortgage, lease, 
        sublease, lease purchase, or other instrument or obligation 
        evidencing or securing a loan made for the purpose of economic 
        development, job creation, redevelopment, or community 
        revitalization by a public agency to a business, for-profit or 
        nonprofit organization, or an individual; 
           (30) within its area of operation, to acquire and sell real 
        property that is benefited by federal housing assistance 
        payments, other rental subsidies, interest reduction payments, 
        or interest reduction contracts for the purpose of preserving 
        the affordability of low- and moderate-income multifamily 
        housing; 
           (31) to apply for, enter into contracts with the federal 
        government, administer, and carry out a section 8 program.  
        Authorization by the governing body creating the authority to 
        administer the program at the authority's initial application is 
        sufficient to authorize operation of the program in its area of 
        operation for which it was created without additional local 
        governing body approval.  Approval by the governing body or 
        bodies creating the authority constitutes approval of a housing 
        program for purposes of any special or general law requiring 
        local approval of section 8 programs undertaken by city, county, 
        or multicounty authorities; and 
           (32) to secure a mortgage or loan for a rental housing 
        project by obtaining the appointment of receivers or assignments 
        of rents and profits under sections 559.17 and 576.01, except 
        that the limitation relating to the minimum amounts of the 
        original principal balances of mortgages specified in sections 
        559.17, subdivision 2, clause (2); and 576.01, subdivision 2, 
        does not apply. 
           Sec. 43.  Minnesota Statutes 1996, 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 0.0131 0.0144 percent of taxable market value.  The 
        authority may levy an additional levy, not to exceed 0.0013 
        percent of taxable market value, to be used to defray costs of 
        providing informational service and relocation assistance as set 
        forth in section 469.012, subdivision 1.  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. 
           Sec. 44.  Minnesota Statutes 1996, section 469.040, 
        subdivision 3, is amended to read: 
           Subd. 3.  [STATEMENT FILED WITH ASSESSOR; PERCENTAGE TAX ON 
        RENTALS.] Notwithstanding the provisions of subdivision 1, after 
        a housing project or a housing development project carried on 
        under sections 469.016 to 469.026 has become occupied, in whole 
        or in part, an authority shall file with the assessor, on or 
        before April 15 of each year, a statement of the aggregate 
        shelter rentals of that project collected during the preceding 
        calendar year.  Unless a greater amount has been agreed upon 
        between the authority and the governing body or bodies for which 
        the authority was created, in whose jurisdiction the project is 
        located, five percent of the aggregate shelter rentals shall be 
        charged to the authority as a service charge for the services 
        and facilities to be furnished with respect to that project.  
        The service charge shall be collected from the authority in the 
        manner provided by law for the assessment and collection of 
        taxes.  The amount so collected shall be distributed to the 
        several taxing bodies in the same proportion as the tax rate of 
        each bears to the total tax rate of those taxing bodies.  The 
        governing body or bodies for which the authority has been 
        created, in whose jurisdiction the project is located, may agree 
        with the authority for the payment of a service charge for a 
        housing project or a housing development project in an amount 
        greater than five percent of the aggregate annual shelter 
        rentals of any project, upon the basis of shelter rentals or 
        upon another basis agreed upon.  The service charge may not 
        exceed the amount which would be payable in taxes were the 
        property not exempt.  If such an agreement is made, the service 
        charge so agreed upon shall be collected and distributed in the 
        manner above provided.  If the project has become occupied, or 
        if the land upon which the project is to be constructed has been 
        acquired, the agreement shall specify the location of the 
        project for which the agreement is made.  "Shelter rental" means 
        the total rentals of a housing project exclusive of any charge 
        for utilities and special services such as heat, water, 
        electricity, gas, sewage disposal, or garbage removal.  "Service 
        charge" means payment in lieu of taxes.  The records of each 
        housing project shall be open to inspection by the proper 
        assessing officer. 
           Sec. 45.  [469.1812] [DEFINITIONS.] 
           Subdivision 1.  [SCOPE.] For purposes of sections 469.1812 
        to 469.1815, the following terms have the meanings given. 
           Subd. 2.  [GOVERNING BODY.] "Governing body" means, for a 
        city, the city council; for a school district, the school board; 
        for a county, the county board; and for a town, the annual 
        meeting of the town. 
           Subd. 3.  [MUNICIPALITY.] "Municipality" means a statutory 
        or home rule charter city or a town. 
           Subd. 4.  [POLITICAL SUBDIVISION OR SUBDIVISION.] 
        "Political subdivision" or "subdivision" means a statutory or 
        home rule charter city, town, school district, or county. 
           Sec. 46.  [469.1813] [ABATEMENT AUTHORITY.] 
           Subdivision 1.  [AUTHORITY.] The governing body of a 
        political subdivision may grant an abatement of the taxes 
        imposed by the political subdivision on a parcel of property, if:
           (a) it expects the benefits to the political subdivision of 
        the proposed abatement agreement to at least equal the costs to 
        the political subdivision of the proposed agreement; and 
           (b) it finds that doing so is in the public interest 
        because it will: 
           (1) increase or preserve tax base; 
           (2) provide employment opportunities in the political 
        subdivision; 
           (3) provide or help acquire or construct public facilities; 
           (4) help redevelop or renew blighted areas; or 
           (5) help provide access to services for residents of the 
        political subdivision. 
           Subd. 2.  [ABATEMENT RESOLUTION.] The governing body of a 
        political subdivision may grant an abatement only by adopting an 
        abatement resolution, specifying the terms of the abatement.  
        The resolution must also include a specific statement as to the 
        nature and extent of the public benefits which the governing 
        body expects to result from the agreement.  The abatement may 
        reduce all or part of the property tax levied by the political 
        subdivision on the parcel.  The political subdivision may limit 
        the abatement: 
           (1) to a specific dollar amount per year or in total; 
           (2) to the increase in property taxes resulting from 
        improvement of the property; 
           (3) to the increases in property taxes resulting from 
        increases in the market value or tax capacity of the property; 
        or 
           (4) in any other manner the governing body of the 
        subdivision determines is appropriate. 
        The political subdivision may not abate tax attributable to the 
        value of the land or the areawide tax under chapter 276A or 473F.
           Subd. 3.  [SCHOOL DISTRICT ABATEMENT PROCEDURE.] 
        Notwithstanding the amounts in subdivision 2, a school district 
        that grants an abatement under this section must limit the 
        abatement for any property to not more than an amount equal to 
        the product of:  (1) the property's net tax capacity, and (2) 
        the difference between the district's total tax rate for that 
        year and one-half of the general education tax rate for that 
        year.  An abatement granted under this section is not an 
        abatement for purposes of state aid or local levy under chapter 
        124.  
           Subd. 4.  [PROPERTY LOCATED IN TAX INCREMENT FINANCING 
        DISTRICTS.] The governing body of a governmental subdivision may 
        not enter into a property tax abatement agreement under sections 
        469.1812 to 469.1815 if the property is located in a tax 
        increment financing district. 
           Subd. 5.  [NOTICE AND PUBLIC HEARING.] (a) The governing 
        body of the political subdivision may approve an abatement under 
        sections 469.1812 to 469.1815 only after holding a public 
        hearing on the abatement. 
           (b) Notice of the hearing must be published in a newspaper 
        of general circulation in the political subdivision at least 
        once more than ten days but less than 30 days before the 
        hearing.  The newspaper must be one of general interest and 
        readership in the community, and not one of limited subject 
        matter.  The newspaper must be published at least once per 
        week.  The notice must indicate that the governing body will 
        consider granting a property tax abatement, identify the 
        property or properties for which an abatement is under 
        consideration, and the total estimated amount of the abatement. 
           Subd. 6.  [DURATION LIMIT.] (a) A political subdivision 
        other than a school district may grant an abatement for a period 
        no longer than ten years.  The subdivision may specify in the 
        abatement resolution a shorter duration.  If the resolution does 
        not specify a period of time, the abatement is for eight years.  
        If an abatement has been granted to a parcel of property and the 
        period of the abatement has expired, the political subdivision 
        that granted the abatement may not grant another abatement for 
        eight years after the expiration of the first abatement.  This 
        prohibition does not apply to improvements added after and not 
        subject to the first abatement. 
           (b) A school district may grant an abatement for only one 
        year at a time.  Once a school district has authorized an 
        abatement for a property, it may reauthorize the abatement in 
        any subsequent year for the next seven years, or nine years if 
        provided in the original abatement agreement.  This prohibition 
        does not apply to improvements added after and not subject to 
        the original abatement agreement. 
           Subd. 7.  [REVIEW AND MODIFICATION OF ABATEMENTS.] The 
        political subdivision may provide in the abatement resolution 
        that the abatement may not be modified or changed during its 
        term.  If the abatement resolution does not provide that the 
        abatement may not be modified or changed, the governing body of 
        the political subdivision may review and modify the abatement 
        every second year after it was approved. 
           Subd. 8.  [LIMITATION ON ABATEMENTS.] In any year, the 
        total amount of property taxes abated by a political subdivision 
        under this section may not exceed (1) five percent of the 
        current levy, or (2) $100,000, whichever is greater. 
           Sec. 47.  [469.1814] [BONDING AUTHORITY.] 
           Subdivision 1.  [AUTHORITY.] A political subdivision may 
        issue bonds or other obligations to provide an amount equal to 
        the sum of the abatements granted for a property under section 
        469.1813.  The maximum principal amount of these bonds may not 
        exceed the estimated sum of the abatements for the property for 
        the years authorized.  The bonds may be general obligations of 
        the political subdivision if the governing body of the political 
        subdivision elects to pledge the full faith and credit of the 
        subdivision in the resolution issuing the bonds. 
           Subd. 2.  [BOND CODE APPLIES.] Chapter 475 applies to the 
        obligations authorized by this section, except bonds are 
        excluded from the calculation of the net debt limit. 
           Subd. 3.  [MUNICIPAL ISSUE FOR COMBINED ABATEMENTS.] If two 
        or more political subdivisions decide to grant abatements for 
        the same property, the municipality in which the property is 
        located may issue bonds to provide an amount equal to the sum of 
        the abatements for each of the jurisdictions that agrees.  The 
        governing body of each of the other jurisdictions must guarantee 
        and pledge to pay annually to the municipality the amount of the 
        abatement.  This pledge and guarantee is a binding obligation of 
        the political subdivision and must be included in the abatement 
        resolution. 
           Subd. 4.  [BONDED ABATEMENTS NOT SUBJECT TO REVIEW.] If 
        bonds are issued to provide advance payment of abatements under 
        this section, the amount of abatement is not subject to periodic 
        review by the political subdivision under section 469.1813, 
        subdivision 7. 
           Subd. 5.  [USE OF PROCEEDS.] The proceeds of bonds issued 
        under this section may be used to (1) pay for public 
        improvements that benefit the property, (2) to acquire and 
        convey land or other property, as provided under this section, 
        (3) to reimburse the property owner for the cost of improvements 
        made to the property, or (4) to pay the costs of issuance of the 
        bonds. 
           Sec. 48.  [469.1815] [ADMINISTRATIVE.] 
           Subdivision 1.  [INCLUSION IN PROPOSED AND FINAL 
        LEVIES.] The political subdivision must add to its levy amount 
        for the current year under sections 275.065 and 275.07 the total 
        estimated amount of all current year abatements granted.  The 
        tax amounts shown on the proposed notice under section 275.065, 
        subdivision 3, and on the property tax statement under section 
        276.04, subdivision 2, are the total amounts before the 
        reduction of any abatements that will be granted on the property.
           Subd. 2.  [PROPERTY TAXES; ABATEMENT PAYMENT.] The total 
        property taxes shall be levied on the property and shall be due 
        and payable to the county at the times provided under section 
        279.01.  The political subdivision will pay the abatement to the 
        property owner, lessee, or a representative of the bondholders, 
        as provided by the abatement resolution. 
           Sec. 49.  Minnesota Statutes 1996, section 477A.011, 
        subdivision 36, is amended to read: 
           Subd. 36.  [CITY AID BASE.] (a) Except as provided in 
        paragraphs (b) and, (c), and (d), "city aid base" means, for 
        each city, the sum of the local government aid and equalization 
        aid it was originally certified to receive in calendar year 1993 
        under Minnesota Statutes 1992, section 477A.013, subdivisions 3 
        and 5, and the amount of disparity reduction aid it received in 
        calendar year 1993 under Minnesota Statutes 1992, section 
        273.1398, subdivision 3. 
           (b) For aids payable in 1996 and thereafter, a city that in 
        1992 or 1993 transferred an amount from governmental funds to 
        its sewer and water fund, which amount exceeded its net levy for 
        taxes payable in the year in which the transfer occurred, has a 
        "city aid base" equal to the sum of (i) its city aid base, as 
        calculated under paragraph (a), and (ii) one-half of the 
        difference between its city aid distribution under section 
        477A.013, subdivision 9, for aids payable in 1995 and its city 
        aid base for aids payable in 1995. 
           (c) The city aid base for any city with a population less 
        than 500 is increased by $40,000 for aids payable in calendar 
        year 1995 and thereafter, and the maximum amount of total aid it 
        may receive under section 477A.013, subdivision 9, paragraph 
        (c), is also increased by $40,000 for aids payable in calendar 
        year 1995 only, provided that: 
           (i) the average total tax capacity rate for taxes payable 
        in 1995 exceeds 200 percent; 
           (ii) the city portion of the tax capacity rate exceeds 100 
        percent; and 
           (iii) its city aid base is less than $60 per capita. 
           (d) The city aid base for a city is increased by $20,000 in 
        1998 and thereafter and the maximum amount of total aid it may 
        receive under section 477A.013, subdivision 9, paragraph (c), is 
        also increased by $20,000 in calendar year 1998 only, provided 
        that: 
           (i) the city has a population in 1994 of 2,500 or more; 
           (ii) the city is located in a county, outside of the 
        metropolitan area, which contains a city of the first class; 
           (iii) the city's net tax capacity used in calculating its 
        1996 aid under section 477A.013 is less than $400 per capita; 
        and 
           (iv) at least four percent of the total net tax capacity, 
        for taxes payable in 1996, of property located in the city is 
        classified as railroad property. 
           Sec. 50.  Laws 1992, chapter 511, article 2, section 52, is 
        amended to read: 
           Sec. 52.  [WATERSHED DISTRICT LEVIES.] 
           (a) The Nine Mile Creek watershed district, the 
        Riley-Purgatory Bluff Creek watershed district, the Minnehaha 
        Creek watershed district, the Coon Creek watershed district, and 
        the Lower Minnesota River watershed district may levy in 1992 
        and thereafter a tax not to exceed $200,000 on property within 
        the district for the administrative fund.  The levy authorized 
        under this section is in lieu of section 103D.905, subdivision 
        3.  The administrative fund shall be used for the purposes 
        contained in Minnesota Statutes, section 103D.905, subdivision 
        3.  The board of managers shall make the levy for the 
        administrative fund in accordance with Minnesota Statutes, 
        section 103D.915. 
           (b) The Wild Rice watershed district may levy, for taxes 
        payable in 1993, 1994, 1995, 1996, and 1997, 1998, 1999, 2000, 
        2001, and 2002, an ad valorem tax not to exceed $200,000 on 
        property within the district for the administrative fund.  The 
        additional $75,000 above the amount authorized in Minnesota 
        Statutes, section 103D.905, subdivision 3, must be used for 
        costs incurred in connection with the development and 
        maintenance of cost-sharing projects with the United States Army 
        Corps of Engineers.  The board of managers shall make the levy 
        for the administrative fund in accordance with Minnesota 
        Statutes, section 103D.915. 
           Sec. 51.  Laws 1997, chapter 75, section 2, is amended to 
        read: 
           Sec. 2. [EFFECTIVE DATE; EXPIRATION.] 
           Section 1 is effective May 2, 1997, and expires January 1, 
        1998. 
           Sec. 52.  [273.11] [Subd. 19.] [VALUATION EXCLUSION FOR 
        IMPROVEMENTS TO CERTAIN 
        BUSINESS PROPERTY.] Property classified under Minnesota Statutes, 
        section 
        273.13, subdivision 24, which is eligible for the preferred 
        class rate on the market value up to $150,000, shall qualify for 
        a valuation exclusion for assessment purposes, provided all of 
        the following conditions are met: 
           (1) the building must be at least 50 years old at the time 
        of the improvement or damaged by the 1997 floods; 
           (2) the building must be located in a city or town with a 
        population of 10,000 or less that is located outside the 
        seven-county metropolitan area, as defined in section 473.121, 
        subdivision 2; 
           (3) the total estimated market value of the land and 
        buildings must be $100,000 or less prior to the improvement and 
        prior to the damage caused by the 1997 floods; 
           (4) the current year's estimated market value of the 
        property must be equal to or less than the property's estimated 
        market value in each of the two previous years' assessments; 
           (5) a building permit must have been issued prior to the 
        commencement of the improvement, or if the building is located 
        in a city or town which does not have a building permit process, 
        the property owner must notify the assessor prior to the 
        commencement of the improvement; 
           (6) the property, including its improvements, has received 
        no public assistance, grants or financing; 
           (7) the property is not receiving a property tax abatement 
        under section 469.1813; and 
           (8) the improvements are made after the effective date of 
        this act and prior to January 1, 1999. 
           The assessor shall estimate the market value of the 
        building in the assessment year immediately following the year 
        that (1) the building permit was taken out, or (2) the taxpayer 
        notified the assessor that an improvement was to be made.  If 
        the estimated market value of the building has increased over 
        the prior year's assessment, the assessor shall note the amount 
        of the increase on the property's record, and that amount shall 
        be subtracted from the value of the property in each year for 
        five years after the improvement has been made, at which time an 
        amount equal to 20 percent of the excluded value shall be added 
        back in each of the five subsequent assessment years. 
           For any property, there can be no more than two 
        improvements qualifying for exclusion under this subdivision.  
        The maximum amount of value that can be excluded from any 
        property under this subdivision is $50,000. 
           The assessor shall require an application, including 
        documentation of the age of the building from the owner, if 
        unknown by the assessor.  Applications must be received prior to 
        July 1 of any year in order to be effective for taxes payable in 
        the following year. 
           For purposes of this subdivision, "population" has the same 
        meaning given in Minnesota Statutes, section 477A.011, 
        subdivision 3. 
           Sec. 53.  [CITY OF DULUTH; REASSESSMENTS OF CANCELED 
        SPECIAL ASSESSMENTS.] 
           Subdivision 1.  [AUTHORIZATION.] Notwithstanding any law, 
        city charter provision, or ordinance to the contrary, if a 
        parcel of tax-forfeited land located in the city of Duluth is 
        returned to private ownership and the parcel is benefited by an 
        improvement for which special assessments were canceled because 
        of the forfeiture, the city council may, upon notice and hearing 
        as provided for in the original assessment, make a reassessment 
        or a new assessment as to the parcel in an amount equal to the 
        amount remaining unpaid on the original assessment. 
           Subd. 2.  [LOCAL APPROVAL REQUIRED.] This section is 
        effective upon approval by the governing body of the city of 
        Duluth and compliance with Minnesota Statutes, section 645.021, 
        subdivision 3. 
           Sec. 54.  [FLOODWOOD JOINT RECREATION BOARD TAX.] 
           Subdivision 1.  [LEVY AUTHORIZATION.] Each year, the 
        Floodwood joint recreation board may levy a tax not to exceed 
        $25,000 on the value of property situated in the territory of 
        independent school district No. 698 in accordance with this 
        section.  Property in territory in the school district may be 
        made subject to the tax permitted by this section by the 
        agreement of the governing body or town board of the city or 
        town where it is located.  The agreement may be by resolution of 
        a governing body or town board or by a joint powers agreement 
        pursuant to Minnesota Statutes, section 471.59.  If levied, the 
        tax is in addition to all other taxes on the property subject to 
        it permitted to be levied for park and recreation purposes by 
        the cities and towns other than for the support of the joint 
        recreation board.  It shall be disregarded in the calculation of 
        all other mill rate or per capita tax levy limitations imposed 
        by law or charter upon them.  A city or town may withdraw its 
        agreement to future taxes by notice to the recreation board and 
        the county auditor unless provided otherwise by a joint powers 
        agreement.  The tax shall be collected by the applicable county 
        auditor and treasurer and paid directly to the Floodwood joint 
        recreation board.  
           Subd. 2.  [LOCAL APPROVAL.] This section is effective in 
        the city of Floodwood, the towns of Arrowhead, Fine Lakes, 
        Floodwood, Halden, Van Buren, Cedar Valley, Prairie Lake, and 
        Unorganized Township 52-21 in St. Louis county, and Unorganized 
        Township 52-22 in Aitkin county the day after compliance with 
        Minnesota Statutes, section 645.021, subdivision 3, by the 
        governing body of each.  This section is effective for each 
        city, town, and unorganized township regardless of the action of 
        the others.  
           Approval of this section is not agreement to be subject to 
        the tax permitted by it.  Agreement to the tax must be by 
        separate action in accordance with subdivision 1. 
           Sec. 55.  [SAUK RIVER WATERSHED DISTRICT.] 
           Subdivision 1.  [LEVY AUTHORIZATION.] Notwithstanding 
        Minnesota Statutes, section 103D.905, subdivision 3, the Sauk 
        River watershed district may levy up to $150,000 for its 
        administrative fund for taxes levied in 1997, payable in 1998. 
           Subd. 2.  [EFFECTIVE DATE.] This section is effective the 
        day following final enactment. 
           Sec. 56.  [VIRGINIA AREA AMBULANCE DISTRICT.] 
           Subdivision 1.  [AGREEMENT; POWERS; GENERAL DESCRIPTION.] 
        (a) The cities of Virginia, Mountain Iron, and Gilbert, and the 
        towns of Pike, Clinton, McDavitt, Colvin, Sandy, Cherry, 
        Ellsburg, Wouri, Lavell, Cotton, and Embarrass, may by 
        resolution of their city councils and town boards establish the 
        Virginia area ambulance district. 
           (b) The St. Louis county board may by resolution provide 
        that property located in unorganized townships described in 
        clauses (1) to (6) may be included within the district: 
           (1) Township 61 North, Range 17 West; 
           (2) Township 59 North, Ranges 16 and 18 West; 
           (3) Township 56 North, Range 16 West; 
           (4) Township 60 North, Range 18 West; 
           (5) Township 55 North, Range 15; and 
           (6) Township 57, Range 16.  
           (c) The district shall make payments of the proceeds of the 
        tax authorized in this section to the city of Virginia, which 
        shall provide ambulance services throughout the district and may 
        exercise all the powers of the cities and towns that relate to 
        ambulance service anywhere within its territory.  
           (d) Any other contiguous town or home rule charter or 
        statutory city may join the district with the agreement of the 
        cities and towns that comprise the district at the time of its 
        application to join.  Action to join the district may be taken 
        by the city council or town board of the city or town.  
           Subd. 2.  [BOARD.] The district shall be governed by a 
        board composed of one member appointed by the city council or 
        town board of each city and town in the district.  A district 
        board member may, but is not required to, be a member of a city 
        council or town board.  Except as provided in this section, 
        members shall serve two-year terms ending the first Monday in 
        January and until their successors are appointed and qualified.  
        Of the members first appointed, as far as possible, the terms of 
        one-half shall expire on the first Monday in January in the 
        first year following appointment and one-half the first Monday 
        in January in the second year.  The terms of those initially 
        appointed must be determined by lot.  If an additional member is 
        added because an additional city or town joins the district, the 
        member's term must be fixed so that, as far as possible, the 
        terms of one-half of all the members expire on the same date. 
           Subd. 3.  [TAX.] The district may impose a property tax on 
        real and personal property in the district in an amount 
        sufficient to discharge its operating expenses and debt payable 
        in each year, but not to exceed .0528 percent of the district's 
        taxable market value.  The St. Louis county auditor shall 
        collect the tax and distribute it to the Virginia area ambulance 
        district. 
           Subd. 4.  [EXPENDITURES.] The taxes collected under 
        subdivision 3 shall be used for licensed ambulance services and 
        first responders.  Licensed ambulance services shall receive 80 
        percent of the available funds and first responders shall 
        receive 20 percent of the available funds.  The amounts 
        allocated to first responders shall be used for education, 
        training, and reimbursement for their allowable expenses.  Only 
        education and training that meets the recognized education and 
        training guidelines set by the emergency medical services 
        regulatory board under Minnesota Statutes, chapter 144E, shall 
        be reimbursable under this subdivision. 
           Subd. 5.  [PUBLIC INDEBTEDNESS.] The district may incur 
        debt in the manner provided for a municipality by Minnesota 
        Statutes, chapter 475, when necessary to accomplish a duty 
        charged to it. 
           Subd. 6.  [WITHDRAWAL.] Upon two years' notice, a city or 
        town may withdraw from the district.  Its territory shall remain 
        subject to taxation for debt incurred prior to its withdrawal 
        under Minnesota Statutes, chapter 475. 
           Subd. 7.  [EFFECTIVE DATE.] This section is effective (1) 
        in the cities of Virginia, Mountain Iron, and Gilbert, and the 
        towns of Pike, Clinton, McDavitt, Colvin, Sandy, Cherry, 
        Ellsburg, Wouri, Lavell, Cotton, and Embarrass, the day after 
        compliance with Minnesota Statutes, section 645.021, subdivision 
        2, by the governing body of each, and (2) for unorganized 
        townships described in subdivision 1, paragraph (b), clauses (1) 
        to (6), the day after compliance with Minnesota Statutes, 
        section 645.021, subdivision 2, by the St. Louis county board, 
        provided that the district must be established by September 1, 
        2000.  Any of the cities, towns, and unorganized townships 
        listed in subdivision 1 that do not join the district initially 
        may join the district after its establishment. 
           Sec. 57.  [ST. LOUIS COUNTY; UTILITY PERSONAL PROPERTY 
        EXEMPTION.] 
           (a) An electric generating facility with a capacity of 
        110,000 kilowatts located in St. Louis County whose operation is 
        integral to the development and operation of a new, adjacent 
        industrial park is exempt from property taxes on attached 
        machinery and other personal property for replacement equipment 
        and improvements installed after July 1, 1997.  If the 
        industrial park is not built by July 1, 2001, this exemption 
        expires.  
           (b) The governing bodies of the county, city or town, and 
        school district must each approve by resolution the exemption of 
        the personal property under this section.  The resolution shall 
        contain the number of years for which the exemption is granted.  
        Each of the governing bodies shall file a copy of the resolution 
        with the county auditor.  The county auditor shall publish the 
        resolutions in newspapers of general circulation within the 
        county.  The voters of the county may request a referendum on 
        the proposed exemption by filing a petition within 30 days after 
        the resolutions are published.  The petition must be signed by 
        voters who reside in the county.  The number of signatures must 
        equal at least ten percent of the number of persons voting in 
        the county in the last general election.  If such a petition is 
        timely filed, the resolutions are not effective until they have 
        been submitted to the voters residing in the county at a general 
        or special election and a majority of votes cast on the question 
        of approving the resolution are in the affirmative.  The 
        commissioner of revenue shall prepare a suggested form of 
        question to be presented at the referendum. 
           (c) The exemption under this section is limited to a 
        maximum of five years, beginning with the assessment year 
        immediately following when the personal property is put in 
        operation and expires thereafter. 
           Sec. 58.  [WASHINGTON COUNTY; LEVY TO FUND THE COUNTY 
        HOUSING AND REDEVELOPMENT AUTHORITY.] 
           Subdivision 1.  [AUTHORIZATION.] In addition to all other 
        levies authorized by law, Washington county may levy an amount 
        not to exceed $2,000,000 over a ten-year period beginning in 
        1997 for taxes payable in 1998, and transfer the proceeds of the 
        levy to the Washington county housing and redevelopment 
        authority to be used to support the activities of the authority, 
        which may include refinancing of indebtedness of the authority, 
        in the city of Landfall. 
           Subd. 2.  [LOCAL APPROVAL.] This section is effective upon 
        approval by the governing body of Washington county and 
        compliance with Minnesota Statutes, section 645.021, subdivision 
        3. 
           Sec. 59.  [BROOKLYN PARK; CERTIFICATION OF CHARGES; 
        DEFINITIONS.] 
           Subdivision 1.  [SCOPE.] For the purpose of sections 60 and 
        61, the terms defined in this section have the meanings given 
        them. 
           Subd. 2.  [ASSOCIATION.] "Association" has the meaning 
        given it in Minnesota Statutes, section 515B.1-103, paragraph 
        (4). 
           Subd. 3.  [AUTHORITY.] "Authority" means the Brooklyn Park 
        economic development authority. 
           Subd. 4.  [COMMON ELEMENTS.] "Common elements" has the 
        meaning given it in Minnesota Statutes, section 515B.1-103, 
        paragraph (7). 
           Subd. 5.  [COMMON ELEMENT IMPROVEMENTS.] "Common element 
        improvements" means any physical repair, replacement, or 
        modification of, or addition to, the common elements of a common 
        interest community. 
           Subd. 6.  [COMMON INTEREST COMMUNITY.] "Common interest 
        community" has the meaning given it in Minnesota Statutes, 
        section 515B.1-103, paragraph (10). 
           Subd. 7.  [UNIT.] "Unit" has the meaning given it in 
        Minnesota Statutes, section 515B.1-103, paragraph (33). 
           Subd. 8.  [UNIT OWNER.] "Unit owner" has the meaning given 
        it in Minnesota Statutes, section 515B.1-103, paragraph (35). 
           Sec. 60.  [BROOKLYN PARK; AUTHORITY GRANTED.] 
           If: 
           (1) the authority lends or agrees to lend funds to an 
        association for the provision or construction of common element 
        improvements; 
           (2) the association has duly levied common expense 
        assessments against the units in order to provide the 
        association with funds to: 
           (i) pay principal and interest on the loan; 
           (ii) provide coverage in excess of principal and interest 
        payments on the loan; 
           (iii) create or replenish reserve funds pledged as security 
        for the loan; or 
           (iv) pay expenses related to the loan or the assessments 
        that are identified in the loan agreement between the authority 
        and the association; 
           (3) a unit owner has become delinquent in the payment of 
        any assessment installment; and 
           (4) the association has declared the entire amount of the 
        assessment due and owing pursuant to Minnesota Statutes, section 
        515B.3-115, paragraph (k), then 
        the authority may certify the delinquent assessment, together 
        with interest and penalties, to the county auditor for 
        collection to the same extent and in the same manner provided by 
        law for the assessment and collection of real estate taxes. 
           Sec. 61.  [BROOKLYN PARK; DISCLOSURE REQUIRED.] 
           For any common interest community located in the city of 
        Brooklyn Park, the disclosure statement required under Minnesota 
        Statutes, section 515B.4-102, must include a description of the 
        potential applicability and consequences of section 60. 
           Sec. 62.  [MINNEAPOLIS UTILITY CHARGE ASSESSMENTS.] 
           Subdivision 1.  [BECOMES LIEN WHEN DELINQUENT.] An 
        assessment levied by the city of Minneapolis for delinquent 
        utility charges, and interest and penalties on the charges under 
        Minnesota Statutes, section 272.32; Laws 1969, chapter 499; Laws 
        1973, chapter 320; or Laws 1994, chapter 587, article 9, section 
        4, with accruing interest, is a lien upon all property included 
        in the assessment, concurrent with general taxes, from the date 
        the utility charges become delinquent, regardless of the date 
        the assessment is levied.  The time of effect of a lien attached 
        for delinquent utility charge assessments supersedes any 
        contrary law in Minnesota Statutes, section 272.32 or 429.061. 
           Subd. 2.  [WHEN DELINQUENT; STATEMENT REQUIRED.] Utility 
        charges become delinquent for the purposes of this section when 
        they are set forth in a statement sent by the city of 
        Minneapolis to the current billpayer of the property subject to 
        the utility charges and are not paid in full on or before the 
        due date stated in the statement.  The utility billing office of 
        the city of Minneapolis shall provide a written summary of 
        unpaid utility statements within ten business days of receipt of 
        a written request for a specified real property title 
        transaction.  If a summary is not provided by the utility 
        billing office within the requested time or a previous statement 
        charge is omitted, those charges and the lien under subdivision 
        1 are not enforceable against third parties who rely upon the 
        summary for real property transaction purposes. 
           Subd. 3.  [UTILITY CHARGES DEFINED.] "Utility charges," in 
        this section, includes all fees, taxes, special charges, or 
        other charges imposed by the city of Minneapolis in connection 
        with the provision of services for sewer, water, solid waste 
        collection and management, nuisance abatement, or other services 
        or improvements specified in Minnesota Statutes, section 
        429.101; Laws 1969, chapter 499; and Laws 1973, chapter 320.  
           Subd. 4.  [NOT CONVEYANCES.] The statement issued by the 
        city of Minneapolis for utility charges or any instrument in 
        writing created in connection with any assessment for delinquent 
        utility charges subject to this section are not conveyances as 
        defined in Minnesota Statutes, section 507.01, and are not 
        subject to the requirements of Minnesota Statutes, chapter 507, 
        regarding conveyances of real estate. 
           Sec. 63.  [BROOKLYN CENTER, RICHFIELD, AND ST. LOUIS PARK; 
        APARTMENT EXCLUSIONS.] 
           Subdivision 1.  [IMPROVEMENTS MADE TO CERTAIN 
        APARTMENTS.] (a) Notwithstanding any other provisions to the 
        contrary, the market value increase resulting from improvements 
        made after the effective date of this act and prior to January 
        1, 1999, to qualifying property located in the city of Brooklyn 
        Center, Richfield, or St. Louis Park shall be excluded for 
        assessment purposes under the conditions provided in this 
        subdivision.  
           (b) "Qualifying property" means property that meets all of 
        the following criteria: 
           (1) the building is at least 30 years old at the time of 
        the improvements; 
           (2) the building is residential real estate of four or more 
        units and is classified under Minnesota Statutes, section 
        273.13, subdivision 25, as class 4a, 4c, or 4d property; and 
           (3) the total cost of the qualifying improvements exceeds 
        $5,000 per unit. 
           (c) A building permit must have been issued prior to the 
        commencement of the improvements.  Only improvements to the 
        residential structure and garages qualify under this 
        subdivision.  The assessor shall require an application, 
        including, if unknown by the assessor, documentation of the age 
        of the building from the owner.  The application may be filed 
        subsequent to the date of the building permit provided that the 
        application is filed prior to the next assessment date. 
           (d) If the property qualifies under this subdivision, the 
        assessor shall note the qualifying value of the improvements on 
        the property's record and that amount shall be subtracted from 
        the qualifying property's market value for the five assessment 
        years immediately following the year in which the improvements 
        were completed, at which time the assessor shall determine the 
        property's estimated market value, and 20 percent of the 
        qualifying value shall be added back in each of the next five 
        subsequent assessment years.  The assessor may require from the 
        owner any documentation necessary to verify that the cost of 
        improvements exceed the $5,000 per unit minimum.  
           Subd. 2.  [EFFECTIVE DATE.] This section is effective for 
        each of the cities of Brooklyn Center, Richfield, and St. Louis 
        Park upon compliance with Minnesota Statutes, section 645.021, 
        subdivision 3, by the governing body of that city. 
           Sec. 64.  [PROPERTY TAX ABATEMENTS; FLOOD PROPERTY.] 
           Subdivision 1.  [AUTHORIZATION.] Notwithstanding the 
        requirements of Minnesota Statutes, section 375.192, the county 
        board of a qualified county may grant abatements of the full 
        amount of taxes on eligible property for taxes payable in 1997 
        as provided in this section.  The owner of the property is not 
        required to apply for the abatement. 
           Subd. 2.  [DEFINITIONS.] (a) As used in this section, the 
        terms defined in this subdivision have the meanings given them. 
           (b) "Qualified county" means any county that has been 
        designated between April 1, 1997, and May 1, 1997, by the 
        director of the Federal Emergency Management Agency as eligible 
        for federal aid due to flooding. 
           (c) "Eligible property" means a parcel of taxable property 
        located in a qualified county that contains a structure that has 
        been determined by the assessor to have lost over 50 percent of 
        its estimated market value due to flooding and flood damage.  In 
        the case of agricultural property, the abatement is limited to 
        the taxes on the parcel attributable to the value of the house, 
        garage, and surrounding one acre, if the house has lost over 50 
        percent of its estimated market value, and the tax attributable 
        to the value of any farm buildings and structures that have lost 
        over 50 percent of their estimated market value. 
           Subd. 3.  [ASSESSORS' DUTIES.] As soon as practicable, 
        local and county assessors in qualified counties shall notify 
        the county board and property owners of parcels of eligible 
        property. 
           Sec. 65.  [DISASTER AREA; DUE DATE EXTENDED FOR BUSINESS 
        PROPERTY TAXES.] 
           (a) Notwithstanding Minnesota Statutes, section 279.01, 
        subdivision 1, a penalty shall not accrue if (1) because of a 
        natural disaster, a taxpayer is unable to pay the first half of 
        the payable 1997 property taxes on class 3a or 3b property, 
        classified under Minnesota Statutes, section 273.13, subdivision 
        24, located in an area designated by the Federal Emergency 
        Management Agency pursuant to a major disaster declaration 
        issued for Minnesota by President Clinton between April 1, 1997, 
        and April 14, 1997, and (2) the taxpayer pays the first half of 
        the payable 1997 taxes by October 15, 1997. 
           (b) If the first one half payment is paid after October 15, 
        1997, then all penalties that would have occurred on the due 
        date under Minnesota Statutes, section 279.01, subdivision 1, 
        shall be charged on the amount of the unpaid tax. 
           (c) The property taxpayer shall attach to the payment a 
        statement that the property is located in a disaster area and 
        qualified for an extension under this section.  
           Sec. 66.  [DELAY OF FINANCIAL REPORT FILING; DISASTER 
        AREAS.] 
           For any city or town located in whole or in part within a 
        county that has been designated between April 1, 1997, and May 
        1, 1997, by the director of the Federal Emergency Management 
        Agency as eligible for federal aid due to flooding, the deadline 
        by which financial reports are required to be filed under 
        Minnesota Statutes, section 471.697 or 471.698, is extended by 
        90 days. 
           Sec. 67.  [LOW-INCOME HOUSING CREDITS; PRIORITY IN DISASTER 
        AREAS.] 
           For its 1998 allocation of low-income housing tax credits 
        through the greater Minnesota pool under Minnesota Statutes, 
        section 462A.222, the Minnesota housing finance agency must give 
        priority to projects located in areas that have lost low-income 
        housing due to the floods that occurred in this state during 
        1997. 
           Sec. 68.  [ELDERLY ASSISTED LIVING FACILITIES.] 
           Subdivision 1.  [APPLICATION.] To facilitate a review by 
        the 1998 legislature of the property taxation of elderly 
        assisted living facilities and the development of standards and 
        criteria for the taxation of these facilities, this section: 
           (1) requires the commissioner of revenue to conduct a 
        survey of the tax status of these facilities under subdivision 
        2; and 
           (2) prohibits changes in assessment practices and policies 
        regarding these facilities under subdivision 3. 
           Subd. 2.  [REPORT BY COMMISSIONER OF REVENUE.] The 
        commissioner of revenue shall survey all county assessors on the 
        tax status of all elderly assisted living facilities as defined 
        in Minnesota Statutes, section 273.13, subdivision 25a, located 
        in the state, and report the findings to the chairs of the house 
        and senate tax committees by February 1, 1998.  The survey must 
        include, but is not limited to, estimates of the amount of 
        charitable contributions, if any, for each elderly assisted 
        living facility and the relative portion of those charitable 
        contributions to the total operating costs of the elderly 
        assisted living facility. 
           Subd. 3.  [MORATORIUM ON CHANGES IN ASSESSMENT 
        PRACTICES.] (a) An assessor may not change the current practices 
        or policies used generally in assessing elderly assisted living 
        facilities. 
           (b) An assessor may not change the assessment of an 
        existing elderly assisted living facility, unless the change is 
        made as a result of a change in ownership, occupancy, or use of 
        the facility.  This paragraph does not apply to: 
           (1) a facility that was constructed during calendar year 
        1997; 
           (2) a facility that was converted to an elderly assisted 
        living facility during calendar year 1997; or 
           (3) a change in market value. 
           (c) This subdivision expires and no longer applies on the 
        earlier of: 
           (1) the enactment of legislation establishing criteria for 
        the property taxation of elderly assisted living facilities; or 
           (2) final adjournment of the 1998 legislature. 
           Subd. 4.  [DEFINITION.] For purposes of this section, 
        "elderly assisted living facility" has the meaning given in 
        Minnesota Statutes, section 273.13, subdivision 25a. 
           Sec. 69.  [INSTRUCTION TO THE REVISOR.] 
           The revisor of statutes shall change the phrase "implicit 
        price deflator for state and local government purchases of goods 
        and services" wherever it appears in the next edition of 
        Minnesota Statutes and Minnesota Rules to "implicit price 
        deflator for government consumption expenditures and gross 
        investment for state and local governments" unless the reference 
        is to the implicit price deflator as of a specified date before 
        January 1, 1996. 
           Sec. 70.  [REPEALER.] 
           (a) Minnesota Statutes 1996, sections 270B.12, subdivision 
        11; 276.012; 290A.055; and 290A.26; and Laws 1995, chapter 264, 
        article 4, as amended by Laws 1996, chapter 471, article 3, are 
        repealed.  Notwithstanding Minnesota Statutes, section 645.34, 
        the sections of statutes amended by the repealed Laws 1995, 
        chapter 264, article 4, as amended, remain in effect as if not 
        so amended. 
           (b) Minnesota Statutes 1996, section 469.181, is repealed. 
           (c) Minnesota Statutes 1996, sections 276.20; and 276.21, 
        are repealed. 
           Sec. 71.  [EFFECTIVE DATE.] 
           Section 1 is effective for aids distributed in 1999 and 
        thereafter.  
           Sections 2 to 4, 6, 17, 23 to 25, 32, 51, 57, 64 to 67, and 
        70, paragraph (a), are effective the day following final 
        enactment. 
           Sections 7, 8, 12 to 16, 18, 20, 21, 45 to 48, and 70, 
        paragraph (c), are effective for the 1997 assessment and 
        thereafter, for taxes payable in 1998 and thereafter. 
           Section 10 is effective beginning with the 1997 assessment. 
           Section 11 is effective beginning with the 1997 assessment 
        and ending with the 2002 assessment, for qualifying improvements 
        made after January 2, 1993, to a residence that has been 
        relocated; provided, that any residence that originally 
        qualifies in that time period is allowed to receive the benefits 
        provided under section 11 for the full ten-year time period.  In 
        order to qualify for a market value exclusion under Minnesota 
        Statutes, section 273.11, subdivision 10, for the 1997 
        assessment for improvements made to a relocated residence, a 
        homeowner must notify the assessor by July 1, 1997. 
           Section 19 is effective payable 1999 and thereafter. 
           Section 22 is effective for the abstracts of exempt real 
        property filed in 1998, and thereafter. 
           Sections 33 and 42 are effective for agreements executed on 
        or after the day following final enactment. 
           Section 44 is effective the day following final enactment 
        for all housing development projects. 
           Section 49 is effective for aids payable in 1998 and 
        thereafter.  
           Sections 59 to 61 are effective the day after the governing 
        body of Brooklyn Park complies with Minnesota Statutes, section 
        645.021, subdivision 3. 
           Section 70, paragraph (b), is effective for property tax 
        deferrals granted after June 30, 1997. 
                                   ARTICLE 3 
                                  LEVY LIMITS 
           Section 1.  Minnesota Statutes 1996, section 275.16, is 
        amended to read: 
           275.16 [COUNTY AUDITOR TO FIX AMOUNT OF LEVY.] 
           If any such municipality shall return to the county auditor 
        a levy greater than permitted by chapters 124, 124A, 124B, 136C, 
        and 136D, and sections 275.124 to 275.16, and sections 275.70 to 
        275.74, such county auditor shall extend only such amount of 
        taxes as the limitations herein prescribed will permit; 
        provided, if such levy shall include any levy for the payment of 
        bonded indebtedness or judgments, such levies for bonded 
        indebtedness or judgments shall be extended in full, and the 
        remainder of the levies shall be reduced so that the total 
        thereof, including levies for bonds and judgments, shall not 
        exceed such amount as the limitations herein prescribed will 
        permit.  
           Sec. 2.  Minnesota Statutes 1996, section 275.62, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [REPORT ON TAXES LEVIED.] The commissioner 
        of revenue shall establish procedures for the annual reporting 
        of local government levies.  Each local governmental unit shall 
        submit a report to the commissioner by December 30 of the year 
        in which the tax is levied.  The report shall include, but is 
        not limited to, information on the amount of the tax levied by 
        the governmental unit for the following purposes: 
           (1) debt, which includes taxes levied for the purposes 
        defined in Minnesota Statutes 1991 Supplement, section 275.50, 
        subdivision 5, clauses (b), (c), (d), and (e); 
           (2) social services and related programs, which include 
        taxes levied for the purposes defined in Minnesota Statutes 1991 
        Supplement, section 275.50, subdivision 5, clauses (a), (j), and 
        (v); 
           (3) libraries, which include taxes levied for the purposes 
        defined in Minnesota Statutes 1991 Supplement, section 275.50, 
        subdivision 5, clause (n); and 
           (4) for counties only, the amount of levy needed to fund 
        increased county costs associated with the welfare reform under 
        Minnesota Laws 1997, chapter 85, including increased 
        administration and program costs of the income maintenance 
        programs and also related support services as they relate 
        directly to the welfare reform; and 
           (5) other levies, which include the taxes levied for all 
        purposes not included in clause (1), (2), or (3), or (4). 
           Sec. 3.  [275.70] [LEVY LIMITATIONS; DEFINITIONS.] 
           Subdivision 1.  [APPLICATION.] For the purposes of sections 
        275.70 to 275.74, the following terms shall have the meanings 
        given them, unless provided otherwise. 
           Subd. 2.  [IMPLICIT PRICE DEFLATOR.] "Implicit price 
        deflator" means the implicit price deflator for government 
        consumption expenditures and gross investment for state and 
        local governments prepared by the bureau of economic analysis of 
        the United States Department of Commerce for the 12-month period 
        ending March 31 of the levy year. 
           Subd. 3.  [LOCAL GOVERNMENTAL UNIT.] "Local governmental 
        unit" means a county, or a statutory or home rule charter city 
        with a population greater than 2,500. 
           Subd. 4.  [POPULATION AND HOUSEHOLD ESTIMATES.] "Population"
        or "number of households" means the population or number of 
        households for the local governmental unit as established by the 
        last federal census, by a census taken under section 275.14, or 
        by an estimate made by the metropolitan council or by the state 
        demographer under section 4A.02, whichever is most recent as to 
        the stated date of the count or estimate up to and including 
        July 1 of the current levy year. 
           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) for unreimbursed expenses related to flooding that 
        occurred during the first half of calendar year 1997, as allowed 
        by the commissioner of revenue under section 275.74, paragraph 
        (b); 
           (6) for local units of government located in an area 
        designated by the Federal Emergency Management Agency pursuant 
        to a major disaster declaration issued for Minnesota by 
        President Clinton after April 1, 1997, and before April 21, 
        1997, for the amount of tax dollars lost due to abatements 
        authorized under section 273.123, subdivision 7, to the extent 
        that they are related to the major disaster; 
           (7) property taxes approved by voters which are levied 
        against the referendum market value as provided under section 
        275.61; 
           (8) 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 1997, or (ii) it is a new matching requirement 
        that didn't exist prior to 1998; and 
           (9) to pay the expenses reasonably and necessarily incurred 
        in preparing for or repairing the effects of natural disaster 
        including the occurrence or threat of widespread or severe 
        damage, injury, or loss of life or property resulting from 
        natural causes, in accordance with standards formulated by the 
        emergency services division of the state department of public 
        safety, as allowed by the commissioner of revenue under section 
        275.74, paragraph (b). 
           Sec. 4.  [275.71] [LEVY LIMITS.] 
           Subdivision 1.  [LIMIT ON LEVIES.] Notwithstanding any 
        other provision of law or municipal charter to the contrary 
        which authorize ad valorem taxes in excess of the limits 
        established by sections 275.70 to 275.74, the provision of this 
        section shall apply to local governmental units for all purposes 
        other than those for which special levies and special 
        assessments are made. 
           Subd. 2.  [LEVY LIMIT BASE.] (a) The levy limit base for a 
        local governmental unit for taxes levied in 1997 shall be equal 
        to the sum of: 
           (1) the amount the local governmental unit levied in 1996, 
        less any amount levied for debt, as reported to the department 
        of revenue under section 275.62, subdivision 1, clause (1), and 
        less any tax levied in 1996 against market value as provided for 
        in section 275.61; 
           (2) the amount of aids the local governmental unit was 
        certified to receive in calendar year 1997 under sections 
        477A.011 to 477A.03 before any reductions for state tax 
        increment financing aid under section 273.1399, subdivision 5; 
           (3) the amount of homestead and agricultural credit aid the 
        local governmental unit was certified to receive under section 
        273.1398 in calendar year 1997 before any reductions for tax 
        increment financing aid under section 273.1399, subdivision 5; 
           (4) the amount of local performance aid the local 
        governmental unit was certified to receive in calendar year 1997 
        under section 477A.05; 
           (5) the amount of any payments certified to the local 
        government unit in 1997 under sections 298.28 and 298.282; and 
           (6) the amount of any adjustments authorized under section 
        275.72. 
           If a governmental unit was not required to report under 
        section 275.62 for taxes levied in 1997, the commissioner shall 
        request information on levies used for debt from the local 
        governmental unit and adjust its levy limit base accordingly. 
           (b) The levy limit base for a local governmental unit for 
        taxes levied in 1998 is limited to its adjusted levy limit base 
        in the previous year, subject to any adjustments under section 
        275.72. 
           Subd. 3.  [ADJUSTED LEVY LIMIT BASE.] For taxes levied in 
        1997 and 1998, the adjusted levy limit is equal to the levy 
        limit base computed under subdivision 2, multiplied by: 
           (1) one plus a percentage equal to the percentage growth in 
        the implicit price deflator; and 
           (2) for all cities and for counties outside of the 
        seven-county metropolitan area, one plus a percentage equal to 
        the percentage increase in number of households, if any, for the 
        most recent 12-month period for which data is available; and 
           (3) for counties located in the seven-county metropolitan 
        area, one plus a percentage equal to the greater of the 
        percentage increase in the number of households in the county or 
        the percentage increase in the number of households in the 
        entire seven-county metropolitan area for the most recent 
        12-month period for which data is available. 
           Subd. 4.  [PROPERTY TAX LEVY LIMIT.] For taxes levied in 
        1997 and 1998, the property tax levy limit for a local 
        governmental unit is equal to its adjusted levy limit base 
        determined under subdivision 3 plus any additional levy 
        authorized under section 275.73, which is levied against net tax 
        capacity, reduced by the sum of (1) the total amount of aids 
        that the local governmental unit is certified to receive under 
        sections 477A.011 to 477A.014, (2) homestead and agricultural 
        aids it is certified to receive under section 273.1398, (3) 
        local performance aid it is certified to receive under section 
        477A.05, and (4) taconite aids under sections 298.28 and 298.282 
        including any aid which was required to be placed in a special 
        fund for expenditure in the next succeeding year. 
           Subd. 5.  [LEVIES IN EXCESS OF LEVY LIMITS.] If the levy 
        made by a city or county exceeds the levy limit provided in 
        sections 275.70 to 275.74, except when the excess levy is due to 
        the rounding of the rate in accordance with section 275.28, the 
        county auditor shall only extend the amount of taxes permitted 
        under sections 275.70 to 275.74, as provided for in section 
        275.16. 
           Sec. 5.  [275.72] [LEVY LIMIT ADJUSTMENTS FOR CONSOLIDATION 
        AND ANNEXATION.] 
           Subdivision 1.  [ADJUSTMENTS FOR CONSOLIDATION.] If all of 
        the area included in two or more local governmental units is 
        consolidated, merged, or otherwise combined to constitute a 
        single governmental unit, the levy limit base for the resulting 
        governmental unit in the first levy year in which the 
        consolidation is effective shall be equal to (1) the highest tax 
        rate in any of the merging governmental units in the previous 
        year multiplied by the net tax capacity of all the merging 
        governmental units in the previous year, minus (2) the sum of 
        all levies in the merging governmental units in the previous 
        year that qualify as special levies under section 275.70, 
        subdivision 3. 
           Subd. 2.  [ADJUSTMENTS FOR ANNEXATION.] If a local 
        governmental unit increases its tax base through annexation of 
        an area which is not the area of an entire local governmental 
        unit, the levy limit base of the local governmental unit in the 
        first year in which the annexation is effective shall be equal 
        to its adjusted levy limit base from the previous year 
        multiplied by the ratio of the net tax capacity in the local 
        governmental unit after the annexation compared to its net tax 
        capacity before the annexation. 
           Subd. 3.  [TRANSFER OF GOVERNMENTAL FUNCTIONS.] If a 
        function or service of one local governmental unit is 
        transferred to another local governmental unit, the levy limits 
        established under section 275.71 shall be adjusted by the 
        commissioner of revenue in such manner so as to fairly and 
        equitably reflect the reduced or increased property tax burden 
        resulting from the transfer.  The aggregate of the adjusted 
        limitations shall not exceed the aggregate of the limitations 
        prior to adjustment. 
           Subd. 4.  [EFFECTIVE DATE FOR LEVY LIMITS PURPOSES.] 
        Annexations, mergers, and shifts in services and functional 
        responsibilities that are effective by June 30 of the levy year 
        are included in the calculation of the levy limit for that levy 
        year.  Annexations, mergers, and shifts in services and 
        functional responsibilities that are effective after June 30 of 
        a levy year are not included in the calculation of the levy 
        limit until the subsequent levy year. 
           Sec. 6.  [275.73] [ELECTIONS FOR ADDITIONAL LEVIES.] 
           Subdivision 1.  [ADDITIONAL LEVY AUTHORIZATION.] 
        Notwithstanding the provisions of sections 275.70 to 275.72, but 
        subject to other law or charter provisions establishing other 
        limitations on the amount of property taxes a local governmental 
        unit may levy, a local governmental unit may levy an additional 
        levy in any amount which is approved by the majority of voters 
        of the governmental unit voting on the question at a general or 
        special election.  Notwithstanding section 275.61, any levy 
        authorized under this section shall be levied against net tax 
        capacity unless the levy required voter approval under another 
        general or special law or any charter provisions.  When the 
        governing body of the local governmental unit resolves to 
        increase the levy pursuant to this section, it shall provide for 
        submission of the proposition of an additional levy at a general 
        or special election.  Notice of the election shall be given in 
        the manner required by law.  The notice shall state the purpose 
        and the maximum yearly amount of the additional levy. 
           Subd. 2.  [LEVY EFFECTIVE DATE.] An additional levy 
        approved under subdivision 1 at a general or special election 
        held prior to September 1 in any levy year may be levied in that 
        same levy year and subsequent levy years.  An additional levy 
        approved under subdivision 1 at a general or special election 
        held after August 31 in any levy year shall not be levied in 
        that same levy but may be levied in subsequent levy years. 
           Sec. 7.  [275.74] [STATE REGULATION OF LEVIES.] 
           (a) The commissioner of revenue shall make all necessary 
        calculations for determining levy limits for local governmental 
        units and notify the affected governmental units of their levy 
        limits directly by August 1 of each levy year.  The local 
        governmental unit shall report by September 15, in a manner 
        prescribed by the commissioner, the maximum amount of taxes it 
        plans to levy for each of the purposes listed under special 
        levies and any additional levy authorized under section 275.73, 
        along with any necessary documentation.  The commissioner shall 
        review the proposed special levies and make any adjustments 
        needed.  The commissioner's decision is final.  The final 
        allowed special levy amounts and any levy limit adjustments 
        shall be certified back to the local governments by December 
        10.  In addition, the commissioner of revenue shall notify all 
        county auditors on or before five working days after December 20 
        of the sum of the levy limit plus the total of allowed special 
        levies for each local governmental unit located within their 
        boundaries so that they may fix the levies as required in 
        section 275.16.  The local governmental units shall provide the 
        commissioner of revenue with all information that the 
        commissioner deems necessary to make the calculations provided 
        for in sections 275.70 to 275.73. 
           (b) A local governmental unit may request authorization to 
        levy under section 275.70, subdivision 5, clause (5), if (i) the 
        governmental unit is located in an area designated by the 
        Federal Emergency Management Agency pursuant to a major disaster 
        declaration issued for Minnesota by President Clinton after 
        April 1, 1997, and before April 21, 1997, and (ii) the amount of 
        direct unreimbursed costs incurred by the governmental unit 
        related to the flooding and its clean up, including emergency 
        disaster assistance to residents, exceeds five percent of its 
        levy in 1997.  A local governmental unit may request 
        authorization to levy for unreimbursed costs for other natural 
        disasters, except the 1997 floods, under section 275.70, 
        subdivision 5, clause (9).  The local governmental unit must 
        submit a request to levy under section 275.70, subdivision 5, 
        clause (5) or (9), to the commissioner of revenue by September 
        15 of the levy year and the request must include information 
        documenting the estimated unreimbursed costs.  The commissioner 
        of revenue may grant levy authority, up to the amount requested 
        based on the documentation submitted.  All decisions of the 
        commissioner are final.  The commissioner shall send a report to 
        the chairs of the house and senate tax committees on the levies 
        authorized and levied under this provision by February 28 of the 
        year following the levy year. 
           Sec. 8.  [FARIBAULT COUNTY; CITY OF BLUE EARTH; SPECIAL 
        LEVY.] 
           The amount of taxes levied by Faribault county and by the 
        city of Blue Earth is a special levy for the purposes of levy 
        limits under Minnesota Statutes, sections 275.70 to 275.73, if 
        the levy's purpose is to raise the matching funds required to 
        receive restitution funds awarded by plea agreement in the case 
        of United States v. Darling International, Inc., for developing 
        environmental projects that will improve water quality in the 
        Blue Earth and Minnesota rivers. 
           Sec. 9.  [EFFECTIVE DATE.] 
           Sections 1 to 7 are effective for taxes levied in 1997 and 
        1998, payable in 1998 and 1999. 
           Upon compliance with Minnesota Statutes, section 645.021, 
        subdivision 3, by the governing body of Faribault county or the 
        city of Blue Earth, section 8 is effective for taxes levied in 
        1997 and 1998 in the county or city that approves it. 
                                   ARTICLE 4
                               TRUTH IN TAXATION
           Section 1.  Minnesota Statutes 1996, section 275.065, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [PROPOSED LEVY.] (a) Notwithstanding any 
        law or charter to the contrary, on or before September 15, each 
        taxing authority, other than a school district, shall adopt a 
        proposed budget and shall certify to the county auditor the 
        proposed or, in the case of a town, the final property tax levy 
        for taxes payable in the following year. 
           (b) On or before September 30, each school district shall 
        certify to the county auditor the proposed property tax levy for 
        taxes payable in the following year.  The school district may 
        shall certify the proposed levy as: 
           (1) a specific dollar amount; or the state determined 
        school levy amount as prescribed under section 124A.23, 
        subdivision 2; 
           (2) voter approved referendum and debt levies; and 
           (2) an amount equal to (3) the sum of the remaining school 
        levies, or the maximum levy limitation certified by the 
        commissioner of children, families, and learning to the county 
        auditor according to section 124.918, subdivision 1, less the 
        amounts levied under clauses (1) and (2). 
           (c) If the board of estimate and taxation or any similar 
        board that establishes maximum tax levies for taxing 
        jurisdictions within a first class city certifies the maximum 
        property tax levies for funds under its jurisdiction by charter 
        to the county auditor by September 15, the city shall be deemed 
        to have certified its levies for those taxing jurisdictions. 
           (d) For purposes of this section, "taxing authority" 
        includes all home rule and statutory cities, towns, counties, 
        school districts, and special taxing districts as defined in 
        section 275.066.  Intermediate school districts that levy a tax 
        under chapter 124 or 136D, joint powers boards established under 
        sections 124.491 to 124.495, and common school districts No. 
        323, Franconia, and No. 815, Prinsburg, are also special taxing 
        districts for purposes of this section.  
           Sec. 2.  Minnesota Statutes 1996, section 275.065, is 
        amended by adding a subdivision to read: 
           Subd. 1c.  [LEVY; SHARED, MERGED, CONSOLIDATED 
        SERVICES.] If two or more taxing authorities are in the process 
        of negotiating an agreement for sharing, merging, or 
        consolidating services between those taxing authorities at the 
        time the proposed levy is to be certified under subdivision 1, 
        each taxing authority involved in the negotiation shall certify 
        its total proposed levy as provided in that subdivision, 
        including a notification to the county auditor of the specific 
        service involved in the agreement which is not yet finalized.  
        The affected taxing authorities may amend their proposed levies 
        under subdivision 1 until October 10 for levy amounts relating 
        only to the specific service involved. 
           Sec. 3.  Minnesota Statutes 1996, section 275.065, 
        subdivision 3, is amended to read: 
           Subd. 3.  [NOTICE OF PROPOSED PROPERTY TAXES.] (a) The 
        county auditor shall prepare and the county treasurer shall 
        deliver after November 10 and on or before November 24 each 
        year, by first class mail to each taxpayer at the address listed 
        on the county's current year's assessment roll, a notice of 
        proposed property taxes and, in the case of a town, final 
        property taxes.  
           (b) The commissioner of revenue shall prescribe the form of 
        the notice. 
           (c) The notice must inform taxpayers that it contains the 
        amount of property taxes each taxing authority other than a town 
        proposes to collect for taxes payable the following year and, 
        for a town, the amount of its final levy.  It In the case of a 
        town, or in the case of the state determined portion of the 
        school district levy, the final tax amount will be its proposed 
        tax.  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 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; 
        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, school district excess referenda levy state 
        determined school tax net of the education homestead credit 
        under section 273.1382, remaining voter approved school levy, 
        other local school district levy, regional library district, if 
        in existence, the total of the metropolitan special taxing 
        districts as defined in paragraph (i) and the sum of 
        the remaining special taxing districts, and as a total of the 
        all taxing authorities, including all special taxing districts, 
        the proposed or, for a town, final net tax on the property for 
        taxes payable the following year and the actual tax for taxes 
        payable the current year: 
           (i) the actual tax for taxes payable in the current year; 
           (ii) the tax change due to spending factors, defined as the 
        proposed tax minus the constant spending tax amount; 
           (iii) the tax change due to other factors, defined as the 
        constant spending tax amount minus the actual current year tax; 
        and 
           (iv) the proposed tax amount. 
           In the case of a town or the state determined school 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 
        124A.03, subdivision 2, that a referendum will be held in the 
        school district at the November general election, the county 
        auditor must note next to the school district's proposed amount 
        that a referendum is pending and that, if approved by the 
        voters, the tax amount may be higher than shown on the 
        notice.  For the purposes of this subdivision, "school district 
        excess referenda levy" means school district taxes for operating 
        purposes approved at referendums, including those taxes based on 
        net tax capacity as well as those based on market value.  
        "School district excess referenda levy" does not include school 
        district taxes for capital expenditures approved at referendums 
        or school district taxes to pay for the debt service on bonds 
        approved at referenda.  In the case of the city of Minneapolis, 
        the levy for the Minneapolis library board and the levy for 
        Minneapolis park and recreation shall be listed separately from 
        the remaining amount of the city's levy.  In the case of a 
        parcel where tax increment or the fiscal disparities areawide 
        tax under chapter 276A or 473F applies, the proposed tax levy on 
        the captured value or the proposed tax levy on the tax capacity 
        subject to the areawide tax must each be stated separately and 
        not included in the sum of the special taxing districts; and 
           (3) the increase or decrease in the amounts in clause (2) 
        from between the total taxes payable in the current year to and 
        the total proposed or, for a town, final taxes payable the 
        following year taxes, expressed as a dollar amount and as a 
        percentage. 
           (e) The notice must clearly state that the proposed or 
        final taxes do not include the following: 
           (1) special assessments; 
           (2) levies approved by the voters after the date the 
        proposed taxes are certified, including bond referenda, school 
        district levy referenda, and levy limit increase referenda; 
           (3) amounts necessary to pay cleanup or other costs due to 
        a natural disaster occurring after the date the proposed taxes 
        are certified; 
           (4) amounts necessary to pay tort judgments against the 
        taxing authority that become final after the date the proposed 
        taxes are certified; and 
           (5) the contamination tax imposed on properties which 
        received market value reductions for contamination. 
           (f) Except as provided in subdivision 7, failure of the 
        county auditor to prepare or the county treasurer to deliver the 
        notice as required in this section does not invalidate the 
        proposed or final tax levy or the taxes payable pursuant to the 
        tax levy. 
           (g) If the notice the taxpayer receives under this section 
        lists the property as nonhomestead and the homeowner provides 
        satisfactory documentation to the county assessor that the 
        property is owned and used as the owner's homestead, the 
        assessor shall reclassify the property to homestead for taxes 
        payable in the following year. 
           (h) In the case of class 4 residential property used as a 
        residence for lease or rental periods of 30 days or more, the 
        taxpayer must either: 
           (1) mail or deliver a copy of the notice of proposed 
        property taxes to each tenant, renter, or lessee; or 
           (2) post a copy of the notice in a conspicuous place on the 
        premises of the property.  
           The notice must be mailed or posted by the taxpayer by 
        November 27 or within three days of receipt of the notice, 
        whichever is later.  A taxpayer may notify the county treasurer 
        of the address of the taxpayer, agent, caretaker, or manager of 
        the premises to which the notice must be mailed in order to 
        fulfill the requirements of this paragraph. 
           (i) For purposes of this subdivision, subdivisions 5a and 
        6, "metropolitan special taxing districts" means the following 
        taxing districts in the seven-county metropolitan area that levy 
        a property tax for any of the specified purposes listed below: 
           (1) metropolitan council under section 473.132, 473.167, 
        473.249, 473.325, 473.446, 473.521, 473.547, or 473.834; 
           (2) metropolitan airports commission under section 473.667, 
        473.671, or 473.672; and 
           (3) metropolitan mosquito control commission under section 
        473.711. 
           For purposes of this section, any levies made by the 
        regional rail authorities in the county of Anoka, Carver, 
        Dakota, Hennepin, Ramsey, Scott, or Washington under chapter 
        398A shall be included with the appropriate county's levy and 
        shall be discussed at that county's public hearing. 
           (j) For taxes levied in 1996, payable in 1997 only, in the 
        case of a statutory or home rule charter city or town that 
        exercises the local levy option provided in section 473.388, 
        subdivision 7, the notice of its proposed taxes may include a 
        statement of the amount by which its proposed tax increase for 
        taxes payable in 1997 is attributable to its exercise of that 
        option, together with a statement that the levy of the 
        metropolitan council was decreased by a similar amount because 
        of the exercise of that option. 
           Sec. 4.  Minnesota Statutes 1996, section 275.065, is 
        amended by adding a subdivision to read: 
           Subd. 3a.  [CONSTANT SPENDING LEVY AMOUNT.] (a) For 
        purposes of this section, "constant spending levy amount" for a 
        county, city, town, or special taxing district means the 
        property tax levy that the taxing authority would need to levy 
        so that the sum of (i) its levy, including its fiscal 
        disparities distribution levy under section 276A.06, subdivision 
        3, clause (a), or 473F.08, subdivision 3, clause (a), plus (ii) 
        its property tax aid amounts, would remain constant from the 
        current year to the proposed year, taking into account the 
        fiscal disparities distribution levy amounts and the property 
        tax aid amounts that have been certified for the proposed year.  
        For the purposes of this paragraph, property tax aids include 
        homestead and agricultural credit aid under section 273.1398, 
        subdivision 2, local government aid under section 477A.013, 
        local performance aid under section 477A.05, county criminal 
        justice aid under section 477A.0121, and family preservation aid 
        under section 477A.0122. 
           (b) For the state determined school tax, "constant spending 
        levy amount" is the same as the proposed tax. 
           (c) For the voter approved school levy, "constant spending 
        levy amount" is the result of the following computation:  (i) 
        compute the current year's revenue per pupil in average daily 
        membership as the ratio of the voter approved referendum and 
        debt service levy plus aid revenue to the number of pupils in 
        average daily membership, as estimated at the time of levy 
        certification the previous December; (ii) compute the proposed 
        year's levy ratio as ratio of the proposed year's levy 
        limitation for voter approved referendum and debt service 
        revenue to the maximum referendum and debt service levy plus aid 
        revenue for the proposed year, at the time of proposed levy 
        certification in September; and (iii) compute the "constant 
        spending levy amount" as the product of the current year's 
        revenue per pupil from clause (i) times the proposed year's levy 
        ratio from clause (ii) times the proposed year's pupils in 
        average daily membership. 
           (d) For the sum of all other school levies not included in 
        paragraph (b) or (c), "constant spending levy amount" is the 
        result of the following computation:  (i) compute the current 
        year's revenue per pupil in average daily membership as the 
        ratio of the levy plus associated aid revenue to the number of 
        pupils in average daily membership, as estimated at the time of 
        levy certification the previous December; (ii) compute the 
        proposed year's levy ratio as ratio of the proposed year's levy 
        limitation to the maximum levy plus associated aid revenue for 
        the proposed year, estimated at the time of proposed levy 
        certification in September; and (iii) compute the "constant 
        spending levy amount" as the product of the current year's 
        revenue per pupil from clause (i) times the proposed year's levy 
        ratio from clause (ii) times the proposed year's pupils in 
        average daily membership. 
           (e) Each year, the commissioner of children, families, and 
        learning must compute and report to the county auditor each 
        school district's constant spending levy amounts by September 
        30.  In no case shall a constant spending levy amount be less 
        than $0.  For the purposes of this subdivision, school homestead 
        and agricultural credit aid under section 273.1398, subdivision 
        2, shall be included in the other school levy category.  For 
        purposes of this subdivision, the school fiscal disparities 
        distribution levy shall be apportioned proportionately among 
        levy categories. 
           (f) For the tax increment financing tax, and the fiscal 
        disparities tax, the "constant spending levy amount" is the same 
        as the proposed tax.  
           Sec. 5.  Minnesota Statutes 1996, section 275.065, 
        subdivision 5a, is amended to read: 
           Subd. 5a.  [PUBLIC ADVERTISEMENT.] (a) A city that has a 
        population of more than 2,500, county, a metropolitan special 
        taxing district as defined in subdivision 3, paragraph (i), a 
        regional library district established under section 134.201, or 
        school district shall advertise in a newspaper a notice of its 
        intent to adopt a budget and property tax levy or, in the case 
        of a school district, to review its current budget and proposed 
        property taxes payable in the following year, at a public 
        hearing.  The notice must be published not less than two 
        business days nor more than six business days before the hearing.
           The advertisement must be at least one-eighth page in size 
        of a standard-size or a tabloid-size newspaper.  The 
        advertisement must not be placed in the part of the newspaper 
        where legal notices and classified advertisements appear.  The 
        advertisement must be published in an official newspaper of 
        general circulation in the taxing authority.  The newspaper 
        selected must be one of general interest and readership in the 
        community, and not one of limited subject matter.  The 
        advertisement must appear in a newspaper that is published at 
        least once per week.  
           For purposes of this section, the metropolitan special 
        taxing district's advertisement must only be published in the 
        Minneapolis Star and Tribune and the Saint Paul Pioneer Press. 
           (b) The advertisement for school districts, metropolitan 
        special taxing districts, and regional library districts must be 
        in the following form, except that the notice for a school 
        district may include references to the current budget in regard 
        to proposed property taxes. 
                                   "NOTICE OF
                            PROPOSED PROPERTY TAXES
                  (City/County/School District/Metropolitan
                        Special Taxing District/Regional
                         Library District) of .........
        The governing body of ........ will soon hold budget hearings 
        and vote on the property taxes for (city/county/metropolitan 
        special taxing district/regional library district services that 
        will be provided in 199_ (year)/school district services that 
        will be provided in 199_ (year) and 199_ (year)). 
                           NOTICE OF PUBLIC HEARING:
        All concerned citizens are invited to attend a public hearing 
        and express their opinions on the proposed (city/county/school 
        district/metropolitan special taxing district/regional library 
        district) budget and property taxes, or in the case of a school 
        district, its current budget and proposed property taxes, 
        payable in the following year.  The hearing will be held on 
        (Month/Day/Year) at (Time) at (Location, Address)." 
           (c) The advertisement for cities and counties must be in 
        the following form. 
                             "NOTICE OF PROPOSED
                       TOTAL BUDGET AND PROPERTY TAXES
        The (city/county) governing body or board of commissioners will 
        hold a public hearing to discuss the budget and to vote on the 
        amount of property taxes to collect for services the 
        (city/county) will provide in (year). 
           
        SPENDING:  The total budget amounts below compare 
        (city's/county's) (year) total actual budget with the amount the 
        (city/county) proposes to spend in (year). 
           
        (Year) Total          Proposed (Year)          Change from
        Actual Budget             Budget               (Year)-(Year)
           
          $.......              $.......                ...%
           
        TAXES:  The property tax amounts below compare that portion of 
        the current budget levied in property taxes in (city/county) for 
        (year) with the property taxes the (city/county) proposes to 
        collect in (year). 
           
        (Year) Property       Proposed (Year)          Change from
            Taxes              Property Taxes         (Year)-(Year)
           
          $.......              $.......                ...% 
           
                          ATTEND THE PUBLIC HEARING
        All (city/county) residents are invited to attend the public 
        hearing of the (city/county) to express your opinions on the 
        budget and the proposed amount of (year) property taxes.  The 
        hearing will be held on: 
                            (Month/Day/Year/Time)
                              (Location/Address)
        If the discussion of the budget cannot be completed, a time and 
        place for continuing the discussion will be announced at the 
        hearing.  You are also invited to send your written comments to: 
                                (City/County)
                             (Location/Address)"
           (d) For purposes of this subdivision, the budget amounts 
        listed on the advertisement mean: 
           (1) for cities, the total government fund expenditures, as 
        defined by the state auditor under section 471.6965, less any 
        expenditures for improvements or services that are specially 
        assessed or charged under chapter 429, 430, 435, or the 
        provisions of any other law or charter; and 
           (2) for counties, the total government fund expenditures, 
        as defined by the state auditor under section 375.169, less any 
        expenditures for direct payments to recipients or providers for 
        the human service aids listed below: 
           (1) aid to families with dependent children under sections 
        256.82, subdivision 1, and 256.935, subdivision 1; 
           (2) medical assistance under sections 256B.041, subdivision 
        5, and 256B.19, subdivision 1; 
           (3) general assistance medical care under section 256D.03, 
        subdivision 6; 
           (4) general assistance under section 256D.03, subdivision 
        2; 
           (5) emergency assistance under section 256.871, subdivision 
        6; 
           (6) Minnesota supplemental aid under section 256D.36, 
        subdivision 1; 
           (7) preadmission screening under section 256B.0911, and 
        alternative care grants under section 256B.0913; 
           (8) general assistance medical care claims processing, 
        medical transportation and related costs under section 256D.03, 
        subdivision 4; 
           (9) medical transportation and related costs under section 
        256B.0625, subdivisions 17 to 18a; 
           (10) group residential housing under 256I.05, subdivision 
        8, transferred from programs in clauses (4) and (6); or 
           (11) any successor programs to those listed in clauses (1) 
        to (10). 
           (c) (e) A city with a population of over 500 but not more 
        than 2,500 must advertise by posted notice as defined in section 
        645.12, subdivision 1.  The advertisement must be posted at the 
        time provided in paragraph (a).  It must be in the form required 
        in paragraph (b). 
           (d) (f) For purposes of this subdivision, the population of 
        a city is the most recent population as determined by the state 
        demographer under section 4A.02. 
           (e) (g) The commissioner of revenue, subject to the 
        approval of the chairs of the house and senate tax committees, 
        shall prescribe the form and format of the advertisement. 
           (f) For calendar year 1993, each taxing authority required 
        to publish an advertisement must include on the advertisement a 
        statement that information on the increases or decreases of the 
        total budget, including employee and independent contractor 
        compensation in the prior year, current year, and proposed 
        budget year will be discussed at the hearing. 
           (g) Notwithstanding paragraph (f), for 1993, the 
        commissioner of revenue shall prescribe the form, format, and 
        content of an advertisement comparing current and proposed 
        expense budgets for the metropolitan council, the metropolitan 
        airports commission, and the metropolitan mosquito control 
        commission.  The expense budget must include occupancy, 
        personnel, contractual and capital improvement expenses.  The 
        form, format, and content of the advertisement must be approved 
        by the chairs of the house and senate tax committees prior to 
        publication. 
           Sec. 6.  Minnesota Statutes 1996, section 275.065, 
        subdivision 6, is amended to read: 
           Subd. 6.  [PUBLIC HEARING; ADOPTION OF BUDGET AND LEVY.] 
           (a) For purposes of this section, the following terms shall 
        have the meanings given: 
           (1) "Initial hearing" means the first and primary hearing 
        held to discuss the taxing authority's proposed budget and 
        proposed property tax levy for taxes payable in the following 
        year, or, for school districts, the current budget and the 
        proposed property tax levy for taxes payable in the following 
        year. 
           (2) "Continuation hearing" means a hearing held to complete 
        the initial hearing, if the initial hearing is not completed on 
        its scheduled date. 
           (3) "Subsequent hearing" means the hearing held to adopt 
        the taxing authority's final property tax levy, and, in the case 
        of taxing authorities other than school districts, the final 
        budget, for taxes payable in the following year. 
           (b) Between November 29 and December 20, the governing 
        bodies of a city that has a population over 500, county, 
        metropolitan special taxing districts as defined in subdivision 
        3, paragraph (i), and regional library districts shall each hold 
        a an initial public hearing to discuss and seek public comment 
        on its final budget and property tax levy for taxes payable in 
        the following year, and the governing body of the school 
        district shall hold a an initial public hearing to review its 
        current budget and proposed property tax levy for taxes payable 
        in the following year.  The metropolitan special taxing 
        districts shall be required to hold only a single joint initial 
        public hearing, the location of which will be determined by the 
        affected metropolitan agencies. 
           (c) The initial hearing must be held after 5:00 p.m. if 
        scheduled on a day other than Saturday.  No initial hearing may 
        be held on a Sunday.  
           (d) At the initial hearing under this subdivision, the 
        percentage increase in property taxes proposed by the taxing 
        authority, if any, and the specific purposes for which property 
        tax revenues are being increased must be discussed.  During the 
        discussion, the governing body shall hear comments regarding a 
        proposed increase and explain the reasons for the proposed 
        increase.  The public shall be allowed to speak and to ask 
        questions.  At the public hearing, the school district must also 
        provide and discuss information on the distribution of its 
        revenues by revenue source, and the distribution of its spending 
        by program area.  
           (e) If the initial hearing is not completed on its 
        scheduled date, the taxing authority must announce, prior to 
        adjournment of the hearing, the date, time, and place for the 
        continuation of the hearing.  The continuation hearing must be 
        held at least five business days but no more than 14 business 
        days after the initial hearing.  A continuation hearing may not 
        be held later than December 20 except as provided in paragraphs 
        (f) and (g).  A continuation hearing must be held after 5:00 
        p.m. if scheduled on a day other than Saturday.  No continuation 
        hearing may be held on a Sunday. 
           (f) The governing body of a county shall hold its initial 
        hearing on the second Tuesday in December each year, and may 
        hold additional initial hearings on other dates before December 
        20 if necessary for the convenience of county residents.  If the 
        county needs a continuation of its hearing, the continuation 
        hearing shall be held on the third Tuesday in December.  If the 
        third Tuesday in December falls on December 21, the county's 
        continuation hearing shall be held on Monday, December 20.  
           (g) The metropolitan special taxing districts shall hold a 
        joint initial public hearing on the first Monday of December.  A 
        continuation hearing, if necessary, shall be held on the second 
        Monday of December even if that second Monday is after December 
        10. 
           (h) The county auditor shall provide for the coordination 
        of initial and continuation hearing dates for all school 
        districts and cities within the county to prevent conflicts 
        under clauses (i) and (j). 
           (i) By August 10, each school board and the board of the 
        regional library district shall certify to the county auditors 
        of the counties in which the school district or regional library 
        district is located the dates on which it elects to hold its 
        initial hearing and any continuation hearing.  If a school board 
        or regional library district does not certify these dates by 
        August 10, the auditor will assign the initial and continuation 
        hearing dates.  The dates elected or assigned must not conflict 
        with the initial and continuation hearing dates of the county or 
        the metropolitan special taxing districts.  
           (j) By August 20, the county auditor shall notify the 
        clerks of the cities within the county of the dates on which 
        school districts and regional library districts have elected to 
        hold their initial and continuation hearings.  At the time a 
        city certifies its proposed levy under subdivision 1 it shall 
        certify the dates on which it elects to hold its initial hearing 
        and any continuation hearing.  If a city does not certify these 
        dates by September 15, the auditor shall assign the initial and 
        continuation hearing dates.  The dates elected or assigned for 
        the initial hearing must not conflict with the initial hearing 
        dates of the county, metropolitan special taxing districts, 
        regional library districts, or school districts within which the 
        city is located.  To the extent possible, the dates of the 
        city's continuation hearing should not conflict with the 
        continuation hearing dates of the county, metropolitan special 
        taxing districts, regional library districts, or school 
        districts within which the city is located.  This paragraph does 
        not apply to cities of 500 population or less. 
           (k) The county initial hearing date and the city, 
        metropolitan special taxing district, regional library district, 
        and school district initial hearing dates must be designated on 
        the notices required under subdivision 3.  The continuation 
        hearing dates need not be stated on the notices.  
           (l) At a subsequent hearing, each county, school district, 
        city over 500 population, and metropolitan special taxing 
        district may amend its proposed property tax levy and must adopt 
        a final property tax levy.  Each county, city over 500 
        population, and metropolitan special taxing district may also 
        amend its proposed budget and must adopt a final budget at the 
        subsequent hearing.  The final property tax levy must be adopted 
        prior to adopting the final budget.  A school district is not 
        required to adopt its final budget at the subsequent hearing.  
        The subsequent hearing of a taxing authority must be held on a 
        date subsequent to the date of the taxing authority's initial 
        public hearing, or subsequent to the date of its continuation 
        hearing.  If a continuation hearing is held, the subsequent 
        hearing must be held either immediately following the 
        continuation hearing or on a date subsequent to the continuation 
        hearing.  The subsequent hearing may be held at a regularly 
        scheduled board or council meeting or at a special meeting 
        scheduled for the purposes of the subsequent hearing.  The 
        subsequent hearing of a taxing authority does not have to be 
        coordinated by the county auditor to prevent a conflict with an 
        initial hearing, a continuation hearing, or a subsequent hearing 
        of any other taxing authority.  All subsequent hearings must be 
        held prior to five working days after December 20 of the levy 
        year.  The date, time, and place of the subsequent hearing must 
        be announced at the initial public hearing or at the 
        continuation hearing. 
           (m) The property tax levy certified under section 275.07 by 
        a city of any population, county, metropolitan special taxing 
        district, regional library district, or school district must not 
        exceed the proposed levy determined under subdivision 1, except 
        by an amount up to the sum of the following amounts: 
           (1) the amount of a school district levy whose voters 
        approved a referendum to increase taxes under section 124.82, 
        subdivision 3, 124A.03, subdivision 2, or 124B.03, subdivision 
        2, after the proposed levy was certified; 
           (2) the amount of a city or county levy approved by the 
        voters after the proposed levy was certified; 
           (3) the amount of a levy to pay principal and interest on 
        bonds approved by the voters under section 475.58 after the 
        proposed levy was certified; 
           (4) the amount of a levy to pay costs due to a natural 
        disaster occurring after the proposed levy was certified, if 
        that amount is approved by the commissioner of revenue under 
        subdivision 6a; 
           (5) the amount of a levy to pay tort judgments against a 
        taxing authority that become final after the proposed levy was 
        certified, if the amount is approved by the commissioner of 
        revenue under subdivision 6a; 
           (6) the amount of an increase in levy limits certified to 
        the taxing authority by the commissioner of children, families, 
        and learning or the commissioner of revenue after the proposed 
        levy was certified; and 
           (7) the amount required under section 124.755. 
           At the hearing under this subdivision, the percentage 
        increase in property taxes proposed by the taxing authority, if 
        any, and the specific purposes for which property tax revenues 
        are being increased must be discussed.  
           During the discussion, the governing body shall hear 
        comments regarding a proposed increase and explain the reasons 
        for the proposed increase.  The public shall be allowed to speak 
        and to ask questions.  At the subsequent hearing held as 
        provided in this subdivision, the governing body, other than the 
        governing body of a school district, shall adopt its final 
        property tax levy prior to adopting its final budget. 
           If the hearing is not completed on its scheduled date, the 
        taxing authority must announce, prior to adjournment of the 
        hearing, the date, time, and place for the continuation of the 
        hearing.  The continued hearing must be held at least five 
        business days but no more than 14 business days after the 
        original hearing. 
           The hearing must be held after 5:00 p.m. if scheduled on a 
        day other than Saturday.  No hearing may be held on a Sunday.  
        The governing body of a county shall hold a hearing on the 
        second Tuesday in December each year, and may hold additional 
        hearings on other dates before December 20 if necessary for the 
        convenience of county residents.  If the county needs a 
        continuation of its hearing, the continued hearing shall be held 
        on the third Tuesday in December.  If the third Tuesday in 
        December falls on December 21, the county's continuation hearing 
        shall be held on Monday, December 20.  The county auditor shall 
        provide for the coordination of hearing dates for all cities and 
        school districts within the county. 
           The metropolitan special taxing districts shall hold a 
        joint public hearing on the first Monday of December.  A 
        continuation hearing, if necessary, shall be held on the second 
        Monday of December. 
           By August 10, each school board and the board of the 
        regional library district shall certify to the county auditors 
        of the counties in which the school district or regional library 
        district is located the dates on which it elects to hold its 
        hearings and any continuations.  If a school board or regional 
        library district does not certify the dates by August 10, the 
        auditor will assign the hearing date.  The dates elected or 
        assigned must not conflict with the hearing dates of the county 
        or the metropolitan special taxing districts.  By August 20, the 
        county auditor shall notify the clerks of the cities within the 
        county of the dates on which school districts and regional 
        library districts have elected to hold their hearings.  At the 
        time a city certifies its proposed levy under subdivision 1 it 
        shall certify the dates on which it elects to hold its hearings 
        and any continuations.  For its initial hearing and for the 
        subsequent hearing at which the final property tax levy will be 
        adopted, the city must not select dates that conflict with the 
        county hearing dates, metropolitan special taxing district 
        dates, or with those elected by or assigned to the school 
        districts or regional library district in which the city is 
        located.  For continuation hearings, the city may select dates 
        that conflict with other taxing authorities' dates if the city 
        deems it necessary. 
           The county hearing dates and the city, metropolitan special 
        taxing district, regional library district, and school district 
        hearing dates must be designated on the notices required under 
        subdivision 3.  The continuation dates need not be stated on the 
        notices.  
           (n) This subdivision does not apply to towns and special 
        taxing districts other than regional library districts and 
        metropolitan special taxing districts. 
           (o) Notwithstanding the requirements of this section, the 
        employer is required to meet and negotiate over employee 
        compensation as provided for in chapter 179A.  
           Sec. 7.  Minnesota Statutes 1996, section 275.065, is 
        amended by adding a subdivision to read: 
           Subd. 6b.  [JOINT PUBLIC HEARINGS.] Notwithstanding any 
        other provision of law, any city with a population of 10,000 and 
        over, may conduct a more comprehensive public hearing than is 
        contained in subdivision 6 by including a board member from the 
        county, a board member from the school district located within 
        the city's boundary, and a representative of the metropolitan 
        council, if the city is in the metropolitan area, as defined in 
        section 473.121, subdivision 2, at the city's public hearing.  
        All provisions regarding the public hearings under subdivision 6 
        are applicable to the joint public hearings under this 
        subdivision. 
           Upon the adoption of a resolution by the governing body of 
        the city to hold a joint hearing, the city shall notify the 
        county, the school district, and the metropolitan council if the 
        city is in the metropolitan area, of the decision to hold a 
        joint public hearing and request a board member from each of 
        those taxing authorities, and the member or the designee of the 
        metropolitan council if applicable, to be at the joint hearing.  
        If the city is located in more than one county, the city may 
        choose to request a county board member from each county or only 
        from the county containing the majority of the city's market 
        value.  If more than one school district is partially or totally 
        located within the city, the city may choose to request a school 
        district board member from each school district, or a board 
        member only from the school district containing the majority of 
        the city's market value.  If, as a result of requests under this 
        subdivision, there are not sufficient board members in the 
        county or the school district to attend the joint hearing, the 
        county or school district may send a nonelected person working 
        for its taxing authority to speak on the authority's behalf.  
        The city may also invite each state senator and representative 
        who represents the city, or a portion of the city, to come to 
        the joint hearing. 
           The primary purpose of the joint hearing is to discuss the 
        city's budget and property tax levy.  The county and school 
        district officials, and metropolitan council representative, if 
        the city is in the metropolitan area, should be prepared to 
        answer questions relevant to its budget and levy and the effect 
        that its levy has on the property owners in the city. 
           If a city conducts a hearing under this subdivision, this 
        hearing is in lieu of the initial hearing required under 
        subdivision 6.  However, the city is still required to adopt its 
        proposed property tax levy at a subsequent hearing as provided 
        under subdivision 6.  The hearings under this subdivision do not 
        relieve a county, school district, or the metropolitan council 
        of the requirement to hold its individual hearing under 
        subdivision 6. 
           Sec. 8.  Minnesota Statutes 1996, section 275.065, 
        subdivision 8, is amended to read: 
           Subd. 8.  [HEARING.] Notwithstanding any other provision of 
        law, Ramsey county, the city of St. Paul, and independent school 
        district No. 625 are authorized to and shall 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. 
           Ramsey county is authorized to hold an additional initial 
        hearing or hearings as provided under this section, provided 
        that any additional hearings must not conflict with the initial 
        or continuation hearing dates of the other taxing districts.  
        However, if Ramsey county elects not to hold such 
        additional initial hearing or hearings, the joint initial 
        hearing required by this subdivision must be held in a St. Paul 
        location convenient to residents of Ramsey county. 
           Sec. 9.  Minnesota Statutes 1996, section 275.07, 
        subdivision 4, is amended to read: 
           Subd. 4.  [REPORT TO COMMISSIONER.] (a) On or before 
        October 8 of each year, the county auditor shall report to the 
        commissioner of revenue the proposed levy certified by local 
        units of government under section 275.065, subdivision 1.  If 
        any taxing authorities have notified the county auditor that 
        they are in the process of negotiating an agreement for sharing, 
        merging, or consolidating services but that when the proposed 
        levy was certified under section 275.065, subdivision 1c, the 
        agreement was not yet finalized, the county auditor shall supply 
        that information to the commissioner when filing the report 
        under this section and shall recertify the affected levies as 
        soon as practical after October 10. 
           (b) On or before January 15 of each year, the county 
        auditor shall report to the commissioner of revenue the final 
        levy certified by local units of government under subdivision 1. 
           (c) The levies must be reported in the manner prescribed by 
        the commissioner.  The reports must show a total levy and the 
        amount of each special levy. 
           Sec. 10.  Minnesota Statutes 1996, section 276.04, 
        subdivision 2, is amended to read: 
           Subd. 2.  [CONTENTS OF TAX STATEMENTS.] (a) The treasurer 
        shall provide for the printing of the tax statements.  The 
        commissioner of revenue shall prescribe the form of the property 
        tax statement and its contents.  The statement must contain a 
        tabulated statement of the dollar amount due to each taxing 
        authority and the amount of the state determined school tax from 
        the parcel of real property for which a particular tax statement 
        is prepared.  The dollar amounts due attributable to the county, 
        the state determined school 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), school 
        district excess referenda levy, remaining school district levy, 
        and the total of other voter approved referenda levies based on 
        market value under section 275.61 must be separately stated.  
        The amounts due all other special taxing districts, if any, may 
        be aggregated.  For the purposes of this subdivision, "school 
        district excess referenda levy" means school district taxes for 
        operating purposes approved at referenda, including those taxes 
        based on net tax capacity as well as those based on market 
        value. "School district excess referenda levy" does not include 
        school district taxes for capital expenditures approved at 
        referendums or school district taxes to pay for the debt service 
        on bonds approved at referenda.  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.  The statement shall include the 
        following sentence sentences, printed in upper case letters in 
        boldface print:  "EVEN THOUGH THE STATE OF MINNESOTA DOES NOT 
        RECEIVE ANY PROPERTY TAX REVENUES, IT SETS THE AMOUNT OF THE 
        STATE-DETERMINED SCHOOL TAX LEVY.  THE STATE OF MINNESOTA 
        REDUCES YOUR PROPERTY TAX BY PAYING CREDITS AND REIMBURSEMENTS 
        TO LOCAL UNITS OF GOVERNMENT."  
           (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 multiplying the 
        property's gross tax capacity times the total local tax rate and 
        adding the property's total property tax to the result the sum 
        of the aids enumerated in clause (4); 
           (4) a total of the following aids: 
           (i) education aids payable under chapters 124 and 124A; 
           (ii) local government aids for cities, towns, and counties 
        under chapter 477A; and 
           (iii) disparity reduction aid under section 273.1398; and 
           (iv) homestead and agricultural credit aid under section 
        273.1398; 
           (5) for homestead residential and agricultural properties, 
        the education homestead and agricultural credit aid apportioned 
        to the property.  This amount is obtained by multiplying the 
        total local tax rate by the difference between the property's 
        gross and net tax capacities under section 273.13.  This amount 
        must be separately stated and identified as "homestead and 
        agricultural credit."  For purposes of comparison with the 
        previous year's amount for the statement for taxes payable in 
        1990, the statement must show the homestead credit for taxes 
        payable in 1989 under section 273.13, and the agricultural 
        credit under section 273.132 for taxes payable in 1989 under 
        section 273.1382; 
           (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 clauses (3) 
        and clause (4) that local governments will receive in the 
        following year.  In the case of a county containing a city of 
        the first class, for taxes levied in 1991, and for all counties 
        for taxes levied in 1992 and thereafter, The commissioner must 
        certify this amount by September January 1 of each year.  
           Sec. 11.  Minnesota Statutes 1996, section 383A.75, 
        subdivision 3, is amended to read: 
           Subd. 3.  [DUTIES.] The committee is authorized to and 
        shall meet from time to time to make appropriate recommendations 
        for the efficient and effective use of property tax dollars 
        raised by the jurisdictions for programs, buildings, and 
        operations.  In addition, the committee shall: 
           (1) identify trends and factors likely to be driving budget 
        outcomes over the next five years with recommendations for how 
        the jurisdictions should manage those trends and factors to 
        increase efficiency and effectiveness; 
           (2) agree, by September October 1 of each year, on the 
        appropriate level of overall property tax levy for the three 
        jurisdictions and publicly report such to the governing bodies 
        of each jurisdiction for ratification or modification by 
        resolution; 
           (3) plan for the joint truth-in-taxation hearings under 
        section 275.065, subdivision 8; and 
           (4) identify, by December 31 of each year, areas of the 
        budget to be targeted in the coming year for joint review to 
        improve services or achieve efficiencies. 
           In carrying out its duties, the committee shall consult 
        with public employees of each jurisdiction and with other 
        stakeholders of the city, county, and school district, as 
        appropriate. 
           Sec. 12.  Laws 1993, chapter 375, article 7, section 29, is 
        amended to read: 
           Sec. 29.  [EFFECTIVE DATE.] 
           Sections 1, 6 to 8, 13, 15 to 25, 27, and 28 are effective 
        for taxes levied in 1993, payable in 1994 and thereafter.  
           Section 3, subdivision 5, and the provisions of sections 9 
        to 11 relating to regional library districts are effective for 
        property taxes levied in 1994, payable in 1995, and thereafter.  
        The other provisions of sections 9 to 11 are effective for 
        property taxes levied in 1993, payable in 1994 and thereafter.  
           Sections 12 and 14 are effective the day following final 
        enactment and without local approval, as provided in Minnesota 
        Statutes, section 645.023, subdivision 1, clause (a), and shall 
        expire after December 31, 1997.  
           Section 26 is effective beginning with aids payable in 
        calendar year 1993. 
           Sec. 13.  [EXCEPTION FOR TAXES PAYABLE IN 1998.] 
           (a) Notwithstanding Minnesota Statutes, section 275.065, 
        subdivision 3, for taxes payable in 1998 only, the commissioner 
        of revenue may allow a county auditor, upon request, to prepare 
        notices of proposed property taxes that do not itemize school 
        district levies as required by that section, if the county 
        determines that it is not able to compute the separate levies 
        for the actual tax payable in 1997. 
           (b) Notwithstanding Minnesota Statutes, section 276.04, 
        subdivision 2, for taxes payable in 1998 only, the commissioner 
        of revenue may allow a county treasurer, upon request, to 
        prepare property tax statements that (i) do not itemize school 
        levies as required by that section, and (ii) do not include 
        homestead and agricultural credit aid as required by paragraph 
        (c), clause (4), if the county determines that it is not able to 
        compute the separate items for the tax payable in 1997.  
           Sec. 14.  [APPROPRIATION.] 
           $1,000,000 is appropriated for fiscal year 1998 to the 
        commissioner of revenue for distribution to the 87 counties for 
        implementing the various provisions of this act, including the 
        added expenses of the truth in taxation provisions.  The 
        commissioner shall distribute the dollars using the following 
        formula:  25 percent shall be distributed equally, 25 percent 
        shall be distributed based on population within each county, and 
        the remaining 50 percent shall be distributed based on the 
        number of property tax statements within each county. 
           Sec. 15.  [EFFECTIVE DATE.] 
           Sections 1 to 4 and 9 are effective for levies and notices 
        for taxes payable in 1998, and thereafter. 
           Section 5 is effective for newspaper advertisements 
        prepared in 1997 for taxes payable in 1998, and thereafter. 
           Sections 6 to 8 are effective for public hearings held in 
        1997, and thereafter. 
           Section 10 is effective for property tax statements 
        prepared in 1998, and thereafter. 
                                   ARTICLE 5 
                     INCOME TAXES AND PROPERTY TAX REFUNDS 
           Section 1.  Minnesota Statutes 1996, section 270B.02, is 
        amended by adding a subdivision to read: 
           Subd. 6.  [CLIENT LISTS; THIRD-PARTY BULK FILERS.] Client 
        lists required under section 290.92, subdivision 30, are 
        classified as private data on individuals or nonpublic data, as 
        defined in section 13.02, subdivisions 9 and 12. 
           Sec. 2.  Minnesota Statutes 1996, section 290.01, 
        subdivision 19b, is amended to read: 
           Subd. 19b.  [SUBTRACTIONS FROM FEDERAL TAXABLE INCOME.] For 
        individuals, estates, and trusts, there shall be subtracted from 
        federal taxable income: 
           (1) interest income on obligations of any authority, 
        commission, or instrumentality of the United States to the 
        extent includable in taxable income for federal income tax 
        purposes but exempt from state income tax under the laws of the 
        United States; 
           (2) if included in federal taxable income, the amount of 
        any overpayment of income tax to Minnesota or to any other 
        state, for any previous taxable year, whether the amount is 
        received as a refund or as a credit to another taxable year's 
        income tax liability; 
           (3) the amount paid to others not to exceed $650 for each 
        dependent in grades kindergarten to 6 and $1,000 for each 
        dependent in grades 7 to 12, for tuition, textbooks, and 
        transportation of each dependent in attending an elementary or 
        secondary school situated in Minnesota, North Dakota, South 
        Dakota, Iowa, or Wisconsin, wherein a resident of this state may 
        legally fulfill the state's compulsory attendance laws, which is 
        not operated for profit, and which adheres to the provisions of 
        the Civil Rights Act of 1964 and chapter 363.  As used in this 
        clause, "textbooks" includes books and other instructional 
        materials and equipment used in elementary and secondary schools 
        in teaching only those subjects legally and commonly taught in 
        public elementary and secondary schools in this state.  
        "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.  In order to qualify for the 
        subtraction under this clause the taxpayer must elect to itemize 
        deductions under section 63(e) of the Internal Revenue Code; 
           (4) to the extent included in federal taxable income, 
        distributions from a qualified governmental pension plan, an 
        individual retirement account, simplified employee pension, or 
        qualified plan covering a self-employed person that represent a 
        return of contributions that were included in Minnesota gross 
        income in the taxable year for which the contributions were made 
        but were deducted or were not included in the computation of 
        federal adjusted gross income.  The distribution shall be 
        allocated first to return of contributions until the 
        contributions included in Minnesota gross income have been 
        exhausted.  This subtraction applies only to contributions made 
        in a taxable year prior to 1985; 
           (5) income as provided under section 290.0802; 
           (6) the amount of unrecovered accelerated cost recovery 
        system deductions allowed under subdivision 19g; 
           (7) to the extent included in federal adjusted gross 
        income, income realized on disposition of property exempt from 
        tax under section 290.491; 
           (8) to the extent not deducted in determining federal 
        taxable income, the amount paid for health insurance of 
        self-employed individuals as determined under section 162(l) of 
        the Internal Revenue Code, except that the 25 percent limit does 
        not apply.  If the taxpayer deducted insurance payments under 
        section 213 of the Internal Revenue Code of 1986, the 
        subtraction under this clause must be reduced by the lesser of: 
           (i) the total itemized deductions allowed under section 
        63(d) of the Internal Revenue Code, less state, local, and 
        foreign income taxes deductible under section 164 of the 
        Internal Revenue Code and the standard deduction under section 
        63(c) of the Internal Revenue Code; or 
           (ii) the lesser of (A) the amount of insurance qualifying 
        as "medical care" under section 213(d) of the Internal Revenue 
        Code to the extent not deducted under section 162(1) of the 
        Internal Revenue Code or excluded from income or (B) the total 
        amount deductible for medical care under section 213(a); and 
           (9) the exemption amount allowed under Laws 1995, chapter 
        255, article 3, section 2, subdivision 3; and 
           (10) to the extent included in federal taxable income, 
        postservice benefits for youth community service under section 
        121.707 for volunteer service under United States Code, title 
        42, section 5011(d), as amended. 
           Sec. 3.  Minnesota Statutes 1996, section 290.01, 
        subdivision 19c, is amended to read: 
           Subd. 19c.  [CORPORATIONS; ADDITIONS TO FEDERAL TAXABLE 
        INCOME.] For corporations, there shall be added to federal 
        taxable income: 
           (1) the amount of any deduction taken for federal income 
        tax purposes for income, excise, or franchise taxes based on net 
        income or related minimum taxes 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 windfall profits tax deducted under 
        section 164 or 471 of the Internal Revenue Code; 
           (5) 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; 
           (6) (5) the amount of any special deductions taken for 
        federal income tax purposes under sections 241 to 247 of the 
        Internal Revenue Code; 
           (7) (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; 
           (8) (7) the amount of any capital losses deducted for 
        federal income tax purposes under sections 1211 and 1212 of the 
        Internal Revenue Code; 
           (9) (8) the amount of any charitable contributions deducted 
        for federal income tax purposes under section 170 of the 
        Internal Revenue Code; 
           (10) (9) the exempt foreign trade income of a foreign sales 
        corporation under sections 921(a) and 291 of the Internal 
        Revenue Code; 
           (11) (10) the amount of percentage depletion deducted under 
        sections 611 through 614 and 291 of the Internal Revenue Code; 
           (12) (11) 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; and 
           (13) (12) the amount of any deemed dividend from a foreign 
        operating corporation determined pursuant to section 290.17, 
        subdivision 4, paragraph (g); and 
           (13) the amount of any environmental tax paid under section 
        59(a) of the Internal Revenue Code. 
           Sec. 4.  Minnesota Statutes 1996, 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) the amount included in federal taxable income 
        attributable to the credits provided in Minnesota Statutes 1986, 
        section 273.1314, subdivision 9, or Minnesota Statutes, section 
        469.171, subdivision 6; 
           (10) 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; 
           (11) the following percentage 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: 
              Taxable Year 
              Beginning After .......... Percentage 
              December 31, 1988 ........ 50 percent 
              December 31, 1990 ........ 80 percent;    
           (12) 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; 
           (13) 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; 
           (14) 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; 
        and 
           (15) 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; and 
           (16) the amount of any refund of environmental taxes paid 
        under section 59A of the Internal Revenue Code. 
           Sec. 5.  Minnesota Statutes 1996, section 290.06, is 
        amended by adding a subdivision to read: 
           Subd. 25.  [CREDIT FOR PROPERTY TAXES PAID ON SEASONAL 
        RESIDENTIAL RECREATIONAL PROPERTY.] A taxpayer may take as a 
        credit against the tax due from the taxpayer and a spouse, if 
        any, under this chapter the credit allowed under section 
        290A.04, subdivision 2j.  The credit allowed may not exceed the 
        tax due under this chapter.  In the case of a nonresident, or a 
        part-year resident, the credit must be allocated based on the 
        ratio in subdivision 2c. 
           Sec. 6.  Minnesota Statutes 1996, 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 an aid to families with dependent children grant or 
        allowance to or on behalf of the child, or as a grant or 
        allowance to or on behalf of the child under the successor 
        program pursuant to Public Law 104-193, must not be taken into 
        account in determining whether the child received more than half 
        of the child's support from the taxpayer, and the provisions of 
        section 32(b)(1)(D) of the Internal Revenue Code do not apply. 
           (b) If a child who has not attained the age of six years at 
        the close of the taxable year is cared for at a licensed family 
        day care home operated by the child's parent, the taxpayer is 
        deemed to have paid employment-related expenses.  If the child 
        is 16 months old or younger at the close of the taxable year, 
        the amount of expenses deemed to have been paid equals the 
        maximum limit for one qualified individual under section 21(c) 
        and (d) of the Internal Revenue Code.  If the child is older 
        than 16 months of age but has not attained the age of six years 
        at the close of the taxable year, the amount of expenses deemed 
        to have been paid equals the amount the licensee would charge 
        for the care of a child of the same age for the same number of 
        hours of care.  
           (c) If a married couple: 
           (1) has a child who has not attained the age of one year at 
        the close of the taxable year; 
           (2) files a joint tax return for the taxable year; and 
           (3) does not participate in a dependent care assistance 
        program as defined in section 129 of the Internal Revenue Code, 
        in lieu of the actual employment related expenses paid for that 
        child under paragraph (a) or the deemed amount under paragraph 
        (b), the lesser of (i) the combined earned income of the couple 
        or (ii) $2,400 will be deemed to be the employment related 
        expense paid for that child.  The earned income limitation of 
        section 21(d) of the Internal Revenue Code shall not apply to 
        this deemed amount.  These deemed amounts apply regardless of 
        whether any employment-related expenses have been paid.  
           (d) If the taxpayer is not required and does not file a 
        federal individual income tax return for the tax year, no credit 
        is allowed for any amount paid to any person unless: 
           (1) the name, address, and taxpayer identification number 
        of the person are included on the return claiming the credit; or 
           (2) if the person is an organization described in section 
        501(c)(3) of the Internal Revenue Code and exempt from tax under 
        section 501(a) of the Internal Revenue Code, the name and 
        address of the person are included on the return claiming the 
        credit.  
        In the case of a failure to provide the information required 
        under the preceding sentence, the preceding sentence does not 
        apply if it is shown that the taxpayer exercised due diligence 
        in attempting to provide the information required. 
           In the case of a nonresident, part-year resident, or a 
        person who has earned income not subject to tax under this 
        chapter, the credit determined under section 21 of the Internal 
        Revenue Code must be allocated based on the ratio by which the 
        earned income of the claimant and the claimant's spouse from 
        Minnesota sources bears to the total earned income of the 
        claimant and the claimant's spouse. 
           Sec. 7.  [290.0672] [LONG-TERM CARE INSURANCE CREDIT.] 
           Subdivision 1.  [DEFINITIONS.] (a) For purposes of this 
        section, the following terms have the meanings given. 
           (b) "Long-term care insurance" means a policy that: 
           (1) qualifies for a deduction under section 213 of the 
        Internal Revenue Code, disregarding the 7.5 percent income test; 
        or meets the requirements given in section 62A.46; or provides 
        similar coverage issued under the laws of another jurisdiction; 
        and 
           (2) does not have a lifetime long-term care benefit limit 
        of less than $100,000; and 
           (3) includes inflation protection that meets or exceeds the 
        inflation protection requirements of the long-term care 
        insurance model regulation cited under section 
        7702B(g)(2)(A)(i)(x) of the Internal Revenue Code. 
           (c) "Qualified beneficiary" means the taxpayer or the 
        taxpayer's spouse.  
           (d) "Premiums deducted in determining federal taxable 
        income" means the lesser of (1) long-term care insurance 
        premiums that qualify as deductions under section 213 of the 
        Internal Revenue Code; and (2) the total amount deductible for 
        medical care under section 213 of the Internal Revenue Code. 
           Subd. 2.  [CREDIT.] A taxpayer is allowed a credit against 
        the tax imposed by this chapter for long-term care insurance 
        policy premiums paid during the tax year.  The credit for each 
        policy equals the lesser of (1) 25 percent of premiums paid to 
        the extent not deducted in determining federal taxable income; 
        or (2) $100.  A taxpayer may claim a credit for only one policy 
        for each qualified beneficiary.  Only one credit may be claimed 
        by any taxpayer for each policy.  The maximum total credit 
        allowed per year is $200 for married couples filing joint 
        returns and $100 for all other filers.  For a nonresident or 
        part-year resident, the credit determined under this section 
        must be allocated based on the percentage calculated under 
        section 290.06, subdivision 2c, paragraph (e). 
           Sec. 8.  [290.0673] [JOB TRAINING PROGRAM CREDIT.] 
           Subdivision 1.  [CREDIT ALLOWED.] (a) A credit is allowed 
        against the tax imposed by section 290.06, subdivision 1, equal 
        to the sum of: 
           (1) placement fees paid to a job training program upon 
        hiring a qualified graduate of the program; and 
           (2) retention fees paid to a job training program for 
        retention of a qualified graduate of the program. 
           (b) The maximum placement fee qualifying for a credit under 
        this section is $8,000 per qualified graduate in the year 
        hired.  The maximum retention fee qualifying for a credit under 
        this section is $6,000 per qualified graduate retained as an 
        employee per year.  Only retention fees paid in the second and 
        third years after the qualified graduate is hired qualify for 
        the credit. 
           (c) A credit is allowed only up to the dollar amount of 
        certificates, issued under subdivision 4, and provided by the 
        job training program to the taxpayer. 
           Subd. 2.  [QUALIFIED JOB TRAINING PROGRAM.] (a) To qualify 
        for credits under this section, a job training program must 
        satisfy the following requirements: 
           (1) It must be operated by a nonprofit corporation that 
        qualifies under section 501(c)(3) of the Internal Revenue Code. 
           (2) The organization must spend at least $5,000 per 
        graduate of the program. 
           (3) The program must provide education and training in: 
           (i) basic skills, such as reading, writing, mathematics, 
        and communications; 
           (ii) thinking skills, such as reasoning, creative thinking, 
        decision making, and problem solving; and 
           (iii) personal qualities, such as responsibility, 
        self-esteem, self-management, honesty, and integrity. 
           (4) The program must provide income supplements, when 
        needed, to participants for housing, counseling, tuition, and 
        other basic needs. 
           (5) The education and training course must last for at 
        least six months. 
           (6) Individuals served by the program must: 
           (i) be 18 years old or older; 
           (ii) have had federal adjusted gross income of no more than 
        $10,000 per year in the last two years; 
           (iii) have assets of no more than $5,000, excluding the 
        value of a homestead; and 
           (iv) not have been claimed as a dependent on the federal 
        tax return of another person in the previous taxable year. 
           (7) The program must charge placement and retention fees 
        that exceed the amount of credit certificates provided to the 
        employer by at least 20 percent. 
           (b) The program must be certified by the commissioner of 
        children, families, and learning as meeting the requirements of 
        this subdivision. 
           Subd. 3.  [QUALIFIED GRADUATE.] A qualified graduate is a 
        graduate of a job training program qualifying under subdivision 
        1, who is placed in a job in Minnesota that pays at least $9 per 
        hour or its equivalent.  To qualify for a credit under this 
        section for a retention fee, a job in which the graduate is 
        retained must pay at least $10 per hour at the end for the first 
        and second years of employment.  A business, other than the 
        business that originally hired the graduate, may pay a retention 
        fee for the graduate and qualify for the credit. 
           Subd. 4.  [DUTIES OF PROGRAM.] (a) Each program certified 
        by the commissioner under subdivision 2 must comply with the 
        requirements of this subdivision. 
           (b) Each program must maintain records for each graduate 
        for which the program provides a credit certificate to an 
        employer.  These records must include information sufficient to 
        verify the graduate's eligibility under this section, identify 
        the employer, describe the job including its compensation rate 
        and benefits, and determine the amount of placement and 
        retention fees received. 
           (c) Each program must report to the commissioner of revenue 
        by January 1, 1999, and by January 1, 2001, on its use of the 
        credit.  Each report must include, at least, information on: 
           (1) the number of graduates placed; 
           (2) demographic information on the graduates; 
           (3) the types of position in which each graduate is placed, 
        including compensation information; 
           (4) the tenure of each graduate at the placed position or 
        in other jobs; 
           (5) the amount of employer fees paid to the program; 
           (6) the amount of money raised by the program from other 
        sources; and 
           (7) the types and sizes of employers with which graduates 
        have been placed and retained. 
           (d) The commissioner shall compile and summarize this 
        information and report to the legislature by February 15, 1999, 
        and February 15, 2001.  
           Subd. 5.  [ISSUANCE OF CREDIT CERTIFICATES.] (a) The total 
        amount of credits under this section is limited to $1,200,000 
        for taxable years beginning after December 31, 1996, and before 
        January 1, 2002.  The commissioner may issue under paragraph (b) 
        no more than the specified amount of certificates for taxable 
        years beginning during each calendar year: 
               1997            $100,000
               1998            $200,000
               1999            $300,000
               2000            $300,000
               2001            $300,000
           Unused certificates for a taxable year carry over and may 
        be used for a later taxable year, regardless of when issued by 
        the commissioner. 
           (b) Upon application, the commissioner of children, 
        families, and learning shall issue certificates to job training 
        programs, certified under subdivision 2, up to the dollar amount 
        available for the taxable year.  The certificates must be in a 
        dollar amount that is no greater than the dollar amount applied 
        for, and reflects the commissioner's estimate of the job 
        training program's projected fees for placements and retentions 
        of qualifying graduates.  The commissioner shall issue the 
        certificates in the order in which applications are received 
        until the available authority has been issued. 
           (c) To the extent available, the job training program must 
        provide to employers of its qualified graduates certificates 
        issued by the commissioner of children, families, and learning 
        under this subdivision. 
           Subd. 6.  [NONREFUNDABLE.] The taxpayer must use the tax 
        credit for the taxable year in which the certificate is issued 
        to the employer.  The credit for the taxable year may not exceed 
        the liability for tax under section 290.06, subdivision 1, for 
        the taxable year, before reduction by the nonrefundable credits 
        allowed under this chapter. 
           Subd. 7.  [MANNER OF CLAIMING.] The commissioner shall 
        prescribe the manner in which the credit may be claimed.  This 
        may include allowing the credit only as a separately processed 
        claim for a refund. 
           Subd. 8.  [EXPIRATION.] This section expires effective for 
        taxable years beginning after December 31, 2001. 
           Sec. 9.  Minnesota Statutes 1996, section 290.191, 
        subdivision 4, is amended to read: 
           Subd. 4.  [APPORTIONMENT FORMULA FOR CERTAIN MAIL ORDER 
        BUSINESSES.] If the business of a corporation, partnership, or 
        proprietorship consists exclusively of the selling of tangible 
        personal property and services in response to orders received by 
        United States mail or, telephone, facsimile, or other electronic 
        media, and 99 percent of the taxpayer's property and payroll is 
        within Minnesota, then the taxpayer may apportion net income to 
        Minnesota based solely upon the percentage that the sales made 
        within this state in connection with its trade or business 
        during the tax period are of the total sales wherever made in 
        connection with the trade or business during the tax period.  
        Property and payroll factors are disregarded.  In determining 
        eligibility for this subdivision:  
           (1) the sale not in the ordinary course of business of 
        tangible or intangible assets used in conducting business 
        activities must be disregarded; and 
           (2) property and payroll at a distribution center outside 
        of Minnesota are disregarded if the sole activity at the 
        distribution center is the filling of orders, and no 
        solicitation of orders occurs at the distribution center. 
           Sec. 10.  Minnesota Statutes 1996, section 290.92, is 
        amended by adding a subdivision to read: 
           Subd. 30.  [REGISTRATION; THIRD-PARTY BULK FILER.] (a) For 
        purposes of this subdivision, the following terms have the 
        meanings given: 
           (1) Notwithstanding section 290.01, "person" means an 
        individual, fiduciary, partnership, corporation, limited 
        liability company, association, or other entity organized under 
        the laws of this state or any other jurisdiction. 
           (2) "Third-party bulk filer" means a person that collects 
        withholding taxes from more than one employer for the purpose of 
        filing returns and depositing the withheld taxes with the 
        commissioner.  
           (b) A person shall not act as a third-party bulk filer 
        unless the person is registered with the commissioner under this 
        subdivision. 
           (c) A person may apply to the commissioner, on a form 
        prescribed by the commissioner, for registration as a 
        third-party bulk filer under this subdivision, and the 
        commissioner shall grant the application if the application 
        indicates that the person will comply with this subdivision. 
           (d) A third-party bulk filer must: 
           (1) keep client funds held for payment of federal or state 
        withholding taxes or other client obligations in an account 
        separate from the third-party bulk filer's own funds; 
           (2) permit the commissioner to conduct scheduled or 
        unscheduled audits of the third-party bulk filer's books and 
        records relating to compliance with this subdivision and fully 
        cooperate with the audits or, at the discretion of the 
        commissioner, submit an audit conducted by a certified public 
        accountant; 
           (3) file returns electronically and make deposits 
        electronically with the commissioner in compliance with the 
        commissioner's requirements for electronic filing and 
        depositing; 
           (4) provide to the commissioner at least monthly, in the 
        form requested by the commissioner, an updated client list that 
        includes at least the name, address, tax identification number, 
        and federal deposit frequency of each client.  The address 
        listed for the client must be the client's actual street or post 
        office box address and not the third-party bulk filer's address; 
           (5) disclose in writing to prospective clients that: 
           (i) the third-party bulk filer may invest client funds 
        prior to depositing them with the commissioner and with the 
        Internal Revenue Service and that earnings from those 
        investments will be the property of the third-party bulk filer; 
           (ii) if the third-party bulk filer incurs losses on those 
        investments or uses the client's funds for other purposes, the 
        third-party bulk filer will still be liable to the client for 
        the amounts withheld but will be able to make required tax 
        deposits on behalf of the client only by using the third-party 
        bulk filer's own funds or other assets to replace the funds lost 
        through the investments or used for other purposes; and 
           (iii) no state or federal agency monitors or assumes any 
        responsibility for the financial solvency of third-party bulk 
        filers; 
           (6) timely file all returns and timely make all tax 
        deposits required under its contracts with its clients; 
           (7) upon request, provide to the commissioner, within the 
        time specified in the request, a copy of any contract with a 
        client; and 
           (8) comply with all other requirements of this section or 
        of rules adopted under this section. 
           (e) When the commissioner sends an order of assessment 
        issued under section 289A.37, in either paper or electronic 
        form, to a third-party bulk filer regarding a client, the 
        commissioner shall also send a paper copy of the order of 
        assessment to the client. 
           (f) If the commissioner determines that a required deposit 
        appears not to have been made, the commissioner shall send a 
        written notice of the delinquency, in electronic or paper form, 
        to the third-party bulk filer, and a copy to the client as 
        required under paragraph (e). 
           (g) If the commissioner determines that a required deposit 
        has not been made, and that continued operation of the 
        third-party bulk filer would present a risk of loss to its 
        clients, the commissioner may, upon ten business days' written 
        notice by certified mail to the third-party bulk filer, suspend 
        the registration of the third-party bulk filer for an indefinite 
        period, and notify the third-party bulk filer's clients that the 
        registration has been suspended.  A registration may not be 
        suspended if the failure to make a deposit was caused by the 
        client's failure to deposit funds or provide the information 
        necessary to calculate appropriate tax withholding payments.  
        The commissioner shall, upon request, provide the third-party 
        bulk filer with the opportunity for an administrative appeal 
        under section 289A.65, subdivisions 1, 4, and 10, prior to 
        suspension; the hearing, if any, on the administrative appeal 
        must occur within the ten-day period unless the commissioner, in 
        the commissioner's sole discretion, agrees to delay the 
        suspension to permit a later hearing.  The 60-day period 
        specified in section 289A.65, subdivision 4, does not apply to a 
        proceeding under this paragraph.  Within 30 days after the 
        beginning of a suspension under this paragraph, the commissioner 
        may commence a proceeding to suspend or revoke under paragraph 
        (h); if the commissioner fails to do so, the suspension under 
        this paragraph terminates. 
           (h) If the commissioner determines, in compliance with 
        paragraph (i), that a third-party bulk filer has violated this 
        section without reasonable cause or is no longer eligible for 
        registration under this subdivision, the commissioner may 
        suspend or revoke the third-party bulk filer's registration or 
        may assess a civil penalty upon the third-party bulk filer, not 
        to exceed $5,000 per violation.  A suspension of registration 
        may be for any period of less than six months and may include 
        conditions for reinstatement.  If the commissioner revokes the 
        registration, the third-party bulk filer may not apply for 
        reregistration for six months after the revocation.  If the 
        commissioner suspends or revokes a registration, the 
        commissioner shall notify the former registrant's clients that 
        the registration has been suspended or revoked.  If the 
        commissioner assesses a civil penalty, the commissioner shall 
        not notify the third-party bulk filer's clients of the 
        assessment. 
           (i) Prior to a suspension, revocation, or assessment of a 
        civil penalty under paragraph (h), the commissioner shall first 
        provide 30 days' written notice to the third-party bulk filer, 
        specifying the violations and informing the third-party bulk 
        filer that the commissioner intends, based upon those 
        violations, to take action against the third-party bulk filer as 
        permitted under this paragraph and paragraph (h).  The notice 
        shall advise the third-party bulk filer of the right to contest 
        the suspension, revocation, or assessment of a civil penalty and 
        of the general procedures for a contested case hearing under 
        chapter 14.  The notice may be served personally or by mail in 
        the manner prescribed for service of an order of assessment 
        issued under section 289A.37.  A suspension or revocation of 
        registration under this paragraph is effective when the 
        commissioner serves a notice of suspension or revocation upon 
        the third-party bulk filer after 30 days have passed following 
        the date of the notice of intent to suspend or revoke without 
        the third-party bulk filer requesting a hearing.  If a hearing 
        is timely requested and held, the suspension or revocation is 
        effective upon service by the commissioner of an order of 
        suspension or revocation under section 14.62, subdivision 1. 
           (j) A third-party bulk filer may terminate its registration 
        by written notice to the commissioner, but the termination does 
        not affect the commissioner's authority to begin or continue a 
        proceeding to take action permitted under paragraph (h).  The 
        commissioner shall notify the third-party bulk filer's clients 
        of a termination of registration under this paragraph. 
           (k) The commissioner shall remind employers at least 
        annually, through the department's regular informational 
        publications that it sends to employers, that employers may 
        telephone the department to determine whether a required filing 
        or deposit has been made by a third-party bulk filer. 
           Sec. 11.  Minnesota Statutes 1996, section 290A.03, 
        subdivision 7, is amended to read: 
           Subd. 7.  [DEPENDENT.] "Dependent" means any person who is 
        considered a dependent under sections 151 and 152 of the 
        Internal Revenue Code.  In the case of a son, stepson, daughter, 
        or stepdaughter of the claimant, amounts received as an aid to 
        families with dependent children grant, allowance to or on 
        behalf of the child, or as a grant or allowance to or on behalf 
        of the child under the successor program pursuant to Public Law 
        Number 104-193, surplus food, or other relief in kind supplied 
        by a governmental agency must not be taken into account in 
        determining whether the child received more than half of the 
        child's support from the claimant.  
           Sec. 12.  Minnesota Statutes 1996, section 290A.03, 
        subdivision 11, is amended to read: 
           Subd. 11.  [RENT CONSTITUTING PROPERTY TAXES.] "Rent 
        constituting property taxes" means the amount of gross rent 
        actually paid in cash, or its equivalent, which is attributable 
        (a) to the property tax paid on the unit or (b) to the amount 18 
        percent of the gross rent actually paid in cash, or its 
        equivalent, or the portion of rent paid in lieu of property 
        taxes, in any calendar year by a claimant for the right of 
        occupancy of the claimant's Minnesota homestead in the calendar 
        year, and which rent constitutes the basis, in the succeeding 
        calendar year of a claim for relief under this chapter by the 
        claimant.  The amount of rent attributable to property taxes 
        paid or payments in lieu made on the unit shall be determined by 
        multiplying the gross rent paid by the claimant for the calendar 
        year for the unit by a fraction, the numerator of which is the 
        net tax on the property where the unit is located and the 
        denominator of which is the total scheduled rent.  In no case 
        may the rent constituting property taxes exceed 50 percent of 
        the gross rent paid by the claimant during that calendar year.  
        In the case of a claimant who resides in a unit for which (1) a 
        rent subsidy is paid to, or for, the claimant based on the 
        income of the claimant or the claimant's family, or (2) a 
        subsidy is paid to a public housing authority that owns or 
        operates the claimant's rental unit, pursuant to United States 
        Code, title 42, section 1437c, 20 percent of gross rent actually 
        paid in cash or its equivalent shall be the claimant's "rent 
        constituting property taxes paid."  For purposes of this 
        subdivision, "rent subsidy" does not include any housing 
        assistance received under aid to families with dependent 
        children, general assistance, Minnesota supplemental assistance, 
        supplemental security income, or similar income maintenance 
        programs. 
           Sec. 13.  Minnesota Statutes 1996, section 290A.03, 
        subdivision 13, is amended to read: 
           Subd. 13.  [PROPERTY TAXES PAYABLE.] "Property taxes 
        payable" means the property tax exclusive of special 
        assessments, penalties, and interest payable on a claimant's 
        homestead before reductions made under section 273.13 but after 
        deductions made under sections 273.135, 273.1391, 273.42, 
        subdivision 2, and any other state paid property tax credits in 
        any calendar year.  In the case of a claimant who makes ground 
        lease payments, "property taxes payable" includes the amount of 
        the payments directly attributable to the property taxes 
        assessed against the parcel on which the house is located.  No 
        apportionment or reduction of the "property taxes payable" shall 
        be required for the use of a portion of the claimant's homestead 
        for a business purpose if the claimant does not deduct any 
        business depreciation expenses for the use of a portion of the 
        homestead in the determination of federal adjusted gross 
        income.  For homesteads which are manufactured homes as defined 
        in section 273.125, subdivision 8, and for homesteads which are 
        park trailers taxed as manufactured homes under section 168.012, 
        subdivision 9, "property taxes payable" shall also include the 
        amount 18 percent of the gross rent paid in the preceding year 
        for the site on which the homestead is located, which is 
        attributable to the net tax paid on the site.  The amount 
        attributable to property taxes shall be determined by 
        multiplying the net tax on the parcel by a fraction, the 
        numerator of which is the gross rent paid for the calendar year 
        for the site and the denominator of which is the gross rent paid 
        for the calendar year for the parcel.  When a homestead is owned 
        by two or more persons as joint tenants or tenants in common, 
        such tenants shall determine between them which tenant may claim 
        the property taxes payable on the homestead.  If they are unable 
        to agree, the matter shall be referred to the commissioner of 
        revenue whose decision shall be final.  Property taxes are 
        considered payable in the year prescribed by law for payment of 
        the taxes. 
           In the case of a claim relating to "property taxes 
        payable," the claimant must have owned and occupied the 
        homestead on January 2 of the year in which the tax is payable 
        and (i) the property must have been classified as homestead 
        property pursuant to section 273.13, subdivision 22 or 23 
        273.124, on or before December 15 of the assessment year to 
        which the "property taxes payable" relate; or (ii) the claimant 
        must provide documentation from the local assessor that 
        application for homestead classification has been made on or 
        before December 15 of the year in which the "property taxes 
        payable" were payable and that the assessor has approved the 
        application. 
           Sec. 14.  Minnesota Statutes 1996, section 290A.04, is 
        amended by adding a subdivision to read: 
           Subd. 2j.  [SEASONAL RESIDENTIAL RECREATIONAL CREDIT.] If 
        the net property taxes payable on a seasonal residential 
        recreational property not used for commercial purposes, 
        classified under section 273.13, subdivision 25, increase more 
        than ten percent over its net property taxes payable in the 
        previous year, and if the amount of the increase is $100 or 
        more, a claimant who is an owner of the property in both years 
        is allowed a credit under section 290.06, subdivision 25, equal 
        to 75 percent of the first $300 of the excess of the increase 
        over ten percent.  This subdivision does not apply to the 
        portion of an increase in taxes payable that are attributable to 
        improvements to the property.  
           In addition to the other proofs required by this chapter, 
        each claimant under this subdivision shall file with the 
        application a copy of the property tax statement for property 
        taxes payable in the current year and the previous year and any 
        other documents required by the commissioner. 
           For purposes of this subdivision, "net property taxes 
        payable" means property taxes payable minus credit amounts for 
        which a claimant qualify's under this subdivision for the 
        previous year. 
           The credit under this subdivision is effective for property 
        taxes payable in 1998, for credits under section 290.06, 
        subdivision 25, for tax year 1998, income tax returns filed in 
        1999; and for property taxes payable in 1999, for credits under 
        section 290.06, subdivision 25, for tax year 1999, income tax 
        returns filed in 2000. 
           Sec. 15.  Minnesota Statutes 1996, section 290A.19, is 
        amended to read: 
           290A.19 [OWNER OR MANAGING AGENT TO FURNISH RENT 
        CERTIFICATE.] 
           (a) The owner or managing agent of any property for which 
        rent is paid for occupancy as a homestead must furnish a 
        certificate of rent constituting property tax paid to a person 
        who is a renter on December 31, in the form prescribed by the 
        commissioner.  If the renter moves before December 31, the owner 
        or managing agent may give the certificate to the renter at the 
        time of moving, or mail the certificate to the forwarding 
        address if an address has been provided by the renter.  The 
        certificate must be made available to the renter before February 
        1 of the year following the year in which the rent was paid.  
        The owner or managing agent must retain a duplicate of each 
        certificate or an equivalent record showing the same information 
        for a period of three years.  The duplicate or other record must 
        be made available to the commissioner upon request.  For the 
        purposes of this section, "owner" includes a park owner as 
        defined under section 327C.01, subdivision 6, and "property" 
        includes a lot as defined under section 327C.01, subdivision 3. 
           (b) The certificate of rent constituting property taxes 
        must include the address of the property, including the county, 
        and the property tax parcel identification number and any 
        additional information that the commissioner determines is 
        appropriate. 
           (c) If the owner or managing agent fails to provide the 
        renter with a certificate of rent constituting property taxes, 
        the commissioner shall allocate the net tax on the building to 
        the unit on a square footage basis or other appropriate basis as 
        the commissioner determines.  The renter shall supply the 
        commissioner with a statement from the county treasurer that 
        gives the amount of property tax on the parcel, the address and 
        property tax parcel identification number of the property, and 
        the number of units in the building. 
           (d) By January 31 of the year following the year in which 
        the rent was collected, each owner or managing agent shall 
        report to the commissioner on a form prescribed by the 
        commissioner the net tax pertaining to the rental residential 
        part of the property, the total scheduled rent, and the fraction 
        computed under section 290A.03, subdivision 11.  A copy of the 
        property tax statement for taxes payable in that year must be 
        attached. 
           Sec. 16.  Laws 1995, chapter 255, article 3, section 2, 
        subdivision 1, as amended by Laws 1996, chapter 464, article 4, 
        section 1, is amended to read: 
           Subdivision 1.  [URBAN REVITALIZATION AND STABILIZATION 
        ZONES.] (a) By September 1, 1995, the metropolitan council shall 
        designate one or more urban revitalization and stabilization 
        zones in the metropolitan area, as defined in section 473.121, 
        subdivision 2.  The designated zones must contain no more than 
        1,000 single family homes in total.  In designating urban 
        revitalization and stabilization zones, the council shall choose 
        areas that are in transition toward blight and poverty.  The 
        council shall use indicators that evidence increasing 
        neighborhood distress such as declining residential property 
        values, declining resident incomes, declining rates of 
        owner-occupancy, and other indicators of blight and poverty in 
        determining which areas are to be urban revitalization and 
        stabilization zones. 
           (b) An urban revitalization and stabilization zone is 
        created in the geographic area composed entirely of parcels that 
        are in whole or in part located within the 1996 65Ldn contour 
        surrounding the Minneapolis-St. Paul International Airport, or 
        within one mile of the boundaries of the 1996 65Ldn contour.  
        For residents of the zone created under this paragraph, 
        eligibility for the program as provided in subdivision 2 is 
        limited to persons buying and occupying a residence in the zone 
        after June 1, 1996, who have entered into purchase agreements 
        related to those homes before July 1, 1997. 
           Sec. 17.  Laws 1997, chapter 34, section 2, is amended to 
        read: 
           Sec. 2.  [EFFECTIVE DATE.] 
           Section 1 is effective the day following final enactment 
        for time limitations which expire or due dates specified in 
        Minnesota Statutes, section 289A.20, which fall in the period 
        between March 31, 1997, and May 30, 1997. 
           Sec. 18.  [LEGISLATIVE TAX STUDIES.] 
           Subdivision 1.  [COMMISSION RESPONSIBILITIES.] (a) The 
        legislative coordinating commission shall prepare studies of 
        business taxation and the taxation of telecommunications 
        services during the 1997-98 legislative session, as provided by 
        this section.  The commission is responsible for managing any 
        contracts under this section and for preparing the studies.  It 
        may delegate any or all of its responsibilities under this 
        section to the legislative commission on planning and fiscal 
        policy. 
           (b) For the business tax study under subdivision 2, the 
        commission may appoint a formal or informal bipartisan working 
        group of house and senate members to oversee and coordinate the 
        study. 
           (c) For the study of the taxation of telecommunications 
        services under subdivision 4, the commission shall appoint a 
        bipartisan working group that includes house and senate members 
        and members of the public, at least two of whom are 
        representatives of Internet service businesses who are 
        knowledgeable about the technologies and practices of the 
        Internet and at least two of whom are the representatives of 
        businesses that conduct commerce on the Internet. 
           Subd. 2.  [BUSINESS TAX STUDY.] The study of business taxes 
        must analyze the following taxes paid by businesses: 
           (1) the corporate franchise tax; 
           (2) the sales tax on capital or other business inputs; 
           (3) the personal property tax on utility property; 
           (4) the real property tax on commercial and industrial 
        property. 
           The study must consider the impact of alternative methods 
        of taxing business and the impact of doing so on the fairness, 
        efficiency, simplicity, elasticity, and stability of revenues, 
        and competitiveness of Minnesota's taxation of business. 
           Subd. 3.  [APPROPRIATION.] $50,000 is appropriated from the 
        general fund for fiscal years 1998 and 1999 to the legislative 
        coordinating commission to study alternative methods of taxing 
        businesses.  This appropriation may be used to hire a consultant 
        or consultants to prepare all or part of the study and is fully 
        available in either fiscal year. 
           Subd. 4.  [TELECOMMUNICATIONS STUDY.] The commission and 
        the working group shall: 
           (1) study existing and emerging tax policies, both 
        federally and nationally, that apply to telecommunications and 
        computer industries and identify any inequities which may exist 
        in the current system of taxation as it applies to those 
        industries; 
           (2) identify potential for erosion of the sales tax base as 
        a result of evolving technologies in the telecommunications and 
        computer industries; 
           (3) consider methods of addressing potential impediments to 
        extension of state taxes to emerging technologies; 
           (4) suggest options for changing the tax system to maintain 
        or broaden the sales tax base and to provide equitable tax 
        treatment for users of existing and emerging technologies. 
           Subd. 5.  [STAFFING.] The department of revenue shall 
        provide administrative and staff assistance when requested by 
        the commissions or working groups. 
           Sec. 19.  [REPEALER.] 
           Minnesota Statutes 1996, section 290A.03, subdivisions 12a 
        and 14, are repealed. 
           Sec. 20.  [EFFECTIVE DATE.] 
           Sections 1, 5, 6, 11, 16, and 18 are effective the day 
        following final enactment.  
           Sections 2 to 4, and 9 are effective for taxable years 
        beginning after December 31, 1996. 
           Section 7 is effective for taxable years beginning after 
        December 31, 1998. 
           Section 8 is effective for tax credit certificates issued 
        after December 31, 1996, and used in taxable years beginning 
        after December 31, 1996. 
           Section 10 is effective January 1, 1998. 
           Sections 12, 13, 15, and 19 are effective beginning for 
        property tax refunds based on rent paid after December 31, 1996. 
           Section 17 is effective April 16, 1997. 
                                   ARTICLE 6 
                                 FEDERAL UPDATE 
           Section 1.  Minnesota Statutes 1996, section 289A.02, 
        subdivision 7, is amended to read: 
           Subd. 7.  [INTERNAL REVENUE CODE.] Unless specifically 
        defined otherwise, "Internal Revenue Code" means the Internal 
        Revenue Code of 1986, as amended through March 22 December 31, 
        1996, and includes the provisions of section 1(a) and (b) of 
        Public Law Number 104-117. 
           Sec. 2.  Minnesota Statutes 1996, section 290.01, 
        subdivision 19, is amended to read: 
           Subd. 19.  [NET INCOME.] The term "net income" means the 
        federal taxable income, as defined in section 63 of the Internal 
        Revenue Code of 1986, as amended through the date named in this 
        subdivision, incorporating any elections made by the taxpayer in 
        accordance with the Internal Revenue Code in determining federal 
        taxable income for federal income tax purposes, and with the 
        modifications provided in subdivisions 19a to 19f. 
           In the case of a regulated investment company or a fund 
        thereof, as defined in section 851(a) or 851(h) 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; and 
           (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 Internal Revenue Code of 1986, as amended through 
        December 31, 1986, shall be in effect for taxable years 
        beginning after December 31, 1986.  The provisions of sections 
        10104, 10202, 10203, 10204, 10206, 10212, 10221, 10222, 10223, 
        10226, 10227, 10228, 10611, 10631, 10632, and 10711 of the 
        Omnibus Budget Reconciliation Act of 1987, Public Law Number 
        100-203, the provisions of sections 1001, 1002, 1003, 1004, 
        1005, 1006, 1008, 1009, 1010, 1011, 1011A, 1011B, 1012, 1013, 
        1014, 1015, 1018, 2004, 3041, 4009, 6007, 6026, 6032, 6137, 
        6277, and 6282 of the Technical and Miscellaneous Revenue Act of 
        1988, Public Law Number 100-647, and the provisions of sections 
        7811, 7816, and 7831 of the Omnibus Budget Reconciliation Act of 
        1989, Public Law Number 101-239, and the provisions of sections 
        1305, 1704(r), and 1704(e)(1) of the Small Business Job 
        Protection Act, Public Law Number 104-188, shall be effective at 
        the time they become effective for federal income tax purposes.  
           The Internal Revenue Code of 1986, as amended through 
        December 31, 1987, shall be in effect for taxable years 
        beginning after December 31, 1987.  The provisions of sections 
        4001, 4002, 4011, 5021, 5041, 5053, 5075, 6003, 6008, 6011, 
        6030, 6031, 6033, 6057, 6064, 6066, 6079, 6130, 6176, 6180, 
        6182, 6280, and 6281 of the Technical and Miscellaneous Revenue 
        Act of 1988, Public Law Number 100-647, the provisions of 
        sections 7815 and 7821 of the Omnibus Budget Reconciliation Act 
        of 1989, Public Law Number 101-239, and the provisions of 
        section 11702 of the Revenue Reconciliation Act of 1990, Public 
        Law Number 101-508, shall become effective at the time they 
        become effective for federal tax purposes.  
           The Internal Revenue Code of 1986, as amended through 
        December 31, 1988, shall be in effect for taxable years 
        beginning after December 31, 1988.  The provisions of sections 
        7101, 7102, 7104, 7105, 7201, 7202, 7203, 7204, 7205, 7206, 
        7207, 7210, 7211, 7301, 7302, 7303, 7304, 7601, 7621, 7622, 
        7641, 7642, 7645, 7647, 7651, and 7652 of the Omnibus Budget 
        Reconciliation Act of 1989, Public Law Number 101-239, the 
        provision of section 1401 of the Financial Institutions Reform, 
        Recovery, and Enforcement Act of 1989, Public Law Number 101-73, 
        and the provisions of sections 11701 and 11703 of the Revenue 
        Reconciliation Act of 1990, Public Law Number 101-508, and the 
        provisions of sections 1702(g) and 1704(f)(2)(A) and (B) of the 
        Small Business Job Protection Act, Public Law Number 104-188, 
        shall become effective at the time they become effective for 
        federal tax purposes.  
           The Internal Revenue Code of 1986, as amended through 
        December 31, 1989, shall be in effect for taxable years 
        beginning after December 31, 1989.  The provisions of sections 
        11321, 11322, 11324, 11325, 11403, 11404, 11410, and 11521 of 
        the Revenue Reconciliation Act of 1990, Public Law Number 
        101-508, and the provisions of sections 13224 and 13261 of the 
        Omnibus Budget Reconciliation Act of 1993, Public Law Number 
        103-66, shall become effective at the time they become effective 
        for federal purposes.  
           The Internal Revenue Code of 1986, as amended through 
        December 31, 1990, shall be in effect for taxable years 
        beginning after December 31, 1990. 
           The provisions of section 13431 of the Omnibus Budget 
        Reconciliation Act of 1993, Public Law Number 103-66, shall 
        become effective at the time they became effective for federal 
        purposes.  
           The Internal Revenue Code of 1986, as amended through 
        December 31, 1991, shall be in effect for taxable years 
        beginning after December 31, 1991.  
           The provisions of sections 1936 and 1937 of the 
        Comprehensive National Energy Policy Act of 1992, Public Law 
        Number 102-486, and the provisions of sections 13101, 13114, 
        13122, 13141, 13150, 13151, 13174, 13239, 13301, and 13442 of 
        the Omnibus Budget Reconciliation Act of 1993, Public Law Number 
        103-66, shall become effective at the time they become effective 
        for federal purposes.  
           The Internal Revenue Code of 1986, as amended through 
        December 31, 1992, shall be in effect for taxable years 
        beginning after December 31, 1992.  
           The provisions of sections 13116, 13121, 13206, 13210, 
        13222, 13223, 13231, 13232, 13233, 13239, 13262, and 13321 of 
        the Omnibus Budget Reconciliation Act of 1993, Public Law Number 
        103-66, and the provisions of sections 1703(a), 1703(d), 
        1703(i), 1703(l), and 1703(m) of the Small Business Job 
        Protection Act, Public Law Number 104-188, shall become 
        effective at the time they become effective for federal purposes.
           The Internal Revenue Code of 1986, as amended through 
        December 31, 1993, shall be in effect for taxable years 
        beginning after December 31, 1993. 
           The provision of section 741 of Legislation to Implement 
        Uruguay Round of General Agreement on Tariffs and Trade, Public 
        Law Number 103-465, and the provisions of sections 1, 2, and 3, 
        of the Self-Employed Health Insurance Act of 1995, Public Law 
        Number 104-7, the provision of section 501(b)(2) of the Health 
        Insurance Portability and Accountability Act, Public Law Number 
        104-191, and the provisions of sections 1604 and 1704(p)(1) and 
        (2) of the Small Business Job Protection Act, Public Law Number 
        104-188, shall become effective at the time they become 
        effective for federal purposes. 
           The Internal Revenue Code of 1986, as amended through 
        December 31, 1994, shall be in effect for taxable years 
        beginning after December 31, 1994. 
           The provisions of sections 1119(a), 1120, 1121, 1202(a), 
        1444, 1449(b), 1602(a), 1610(a), 1613, and 1805 of the Small 
        Business Job Protection Act, Public Law Number 104-188, and the 
        provision of section 511 of the Health Insurance Portability and 
        Accountability Act, Public Law Number 104-191, shall become 
        effective at the time they become effective for federal purposes.
           The Internal Revenue Code of 1986, as amended through March 
        22, 1996, is in effect for taxable years beginning after 
        December 31, 1995. 
           The provisions of sections 1113(a), 1117, 1206(a), 1313(a), 
        1402(a), 1403(a), 1443, 1450, 1501(a), 1605, 1611(a), 1612, 
        1616, 1617, 1704(l), and 1704(m) of the Small Business Job 
        Protection Act, Public Law Number 104-188, and the provisions of 
        Public Law Number 104-117 become effective at the time they 
        become effective for federal purposes. 
           The Internal Revenue Code of 1986, as amended through 
        December 31, 1996, shall be in effect for taxable years 
        beginning after December 31, 1996. 
           Except as otherwise provided, references to the Internal 
        Revenue Code in subdivisions 19a to 19g mean the code in effect 
        for purposes of determining net income for the applicable year. 
           Sec. 3.  Minnesota Statutes 1996, section 290.01, 
        subdivision 19a, is amended to read: 
           Subd. 19a.  [ADDITIONS TO FEDERAL TAXABLE INCOME.] For 
        individuals, estates, and trusts, there shall be added to 
        federal taxable income: 
           (1)(i) interest income on obligations of any state other 
        than Minnesota or a political or governmental subdivision, 
        municipality, or governmental agency or instrumentality of any 
        state other than Minnesota exempt from federal income taxes 
        under the Internal Revenue Code or any other federal statute, 
        and 
           (ii) exempt-interest dividends as defined in section 
        852(b)(5) of the Internal Revenue Code, except the portion of 
        the exempt-interest dividends derived from interest income on 
        obligations of the state of Minnesota or its political or 
        governmental subdivisions, municipalities, governmental agencies 
        or instrumentalities, but only if the portion of the 
        exempt-interest dividends from such Minnesota sources paid to 
        all shareholders represents 95 percent or more of the 
        exempt-interest dividends that are paid by the regulated 
        investment company as defined in section 851(a) of the Internal 
        Revenue Code, or the fund of the regulated investment company as 
        defined in section 851(h) of the Internal Revenue Code, making 
        the payment; and 
           (iii) for the purposes of items (i) and (ii), interest on 
        obligations of an Indian tribal government described in section 
        7871(c) of the Internal Revenue Code shall be treated as 
        interest income on obligations of the state in which the tribe 
        is located; 
           (2) the amount of income taxes paid or accrued within the 
        taxable year under this chapter and income taxes paid to any 
        other state or to any province or territory of Canada, to the 
        extent allowed as a deduction under section 63(d) of the 
        Internal Revenue Code, but the addition may not be more than the 
        amount by which the itemized deductions as allowed under section 
        63(d) of the Internal Revenue Code exceeds the amount of the 
        standard deduction as defined in section 63(c) of the Internal 
        Revenue Code.  For the purpose of this paragraph, the 
        disallowance of itemized deductions under section 68 of the 
        Internal Revenue Code of 1986, income tax is the last itemized 
        deduction disallowed; 
           (3) the capital gain amount of a lump sum distribution to 
        which the special tax under section 1122(h)(3)(B)(ii) of the Tax 
        Reform Act of 1986, Public Law Number 99-514, applies; and 
           (4) the amount of income taxes paid or accrued within the 
        taxable year under this chapter and income taxes paid to any 
        other state or any province or territory of Canada, to the 
        extent allowed as a deduction in determining federal adjusted 
        gross income.  For the purpose of this paragraph, income taxes 
        do not include the taxes imposed by sections 290.0922, 
        subdivision 1, paragraph (b), 290.9727, 290.9728, and 290.9729.; 
           (5) the amount of loss or expense included in federal 
        taxable income under section 1366 of the Internal Revenue Code 
        flowing from a corporation that has a valid election in effect 
        for the taxable year under section 1362 of the Internal Revenue 
        Code, but which is not allowed to be an "S" corporation under 
        section 290.9725; and 
           (6) the amount of any distributions in cash or property 
        made to a shareholder during the taxable year by a corporation 
        that has a valid election in effect for the taxable year under 
        section 1362 of the Internal Revenue code, but which is not 
        allowed to be an "S" corporation under section 290.9725 to the 
        extent not already included in federal taxable income under 
        section 1368 of the Internal Revenue Code. 
           Sec. 4.  Minnesota Statutes 1996, section 290.01, 
        subdivision 19b, is amended to read: 
           Subd. 19b.  [SUBTRACTIONS FROM FEDERAL TAXABLE INCOME.] For 
        individuals, estates, and trusts, there shall be subtracted from 
        federal taxable income: 
           (1) interest income on obligations of any authority, 
        commission, or instrumentality of the United States to the 
        extent includable in taxable income for federal income tax 
        purposes but exempt from state income tax under the laws of the 
        United States; 
           (2) if included in federal taxable income, the amount of 
        any overpayment of income tax to Minnesota or to any other 
        state, for any previous taxable year, whether the amount is 
        received as a refund or as a credit to another taxable year's 
        income tax liability; 
           (3) the amount paid to others not to exceed $650 for each 
        dependent in grades kindergarten to 6 and $1,000 for each 
        dependent in grades 7 to 12, for tuition, textbooks, and 
        transportation of each dependent in attending an elementary or 
        secondary school situated in Minnesota, North Dakota, South 
        Dakota, Iowa, or Wisconsin, wherein a resident of this state may 
        legally fulfill the state's compulsory attendance laws, which is 
        not operated for profit, and which adheres to the provisions of 
        the Civil Rights Act of 1964 and chapter 363.  As used in this 
        clause, "textbooks" includes books and other instructional 
        materials and equipment used in elementary and secondary schools 
        in teaching only those subjects legally and commonly taught in 
        public elementary and secondary schools in this state.  
        "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.  In order to qualify for the 
        subtraction under this clause the taxpayer must elect to itemize 
        deductions under section 63(e) of the Internal Revenue Code; 
           (4) to the extent included in federal taxable income, 
        distributions from a qualified governmental pension plan, an 
        individual retirement account, simplified employee pension, or 
        qualified plan covering a self-employed person that represent a 
        return of contributions that were included in Minnesota gross 
        income in the taxable year for which the contributions were made 
        but were deducted or were not included in the computation of 
        federal adjusted gross income.  The distribution shall be 
        allocated first to return of contributions until the 
        contributions included in Minnesota gross income have been 
        exhausted.  This subtraction applies only to contributions made 
        in a taxable year prior to 1985; 
           (5) income as provided under section 290.0802; 
           (6) the amount of unrecovered accelerated cost recovery 
        system deductions allowed under subdivision 19g; 
           (7) to the extent included in federal adjusted gross 
        income, income realized on disposition of property exempt from 
        tax under section 290.491; 
           (8) to the extent not deducted in determining federal 
        taxable income, the amount paid for health insurance of 
        self-employed individuals as determined under section 162(l) of 
        the Internal Revenue Code, except that the 25 percent limit does 
        not apply.  If the taxpayer deducted insurance payments under 
        section 213 of the Internal Revenue Code of 1986, the 
        subtraction under this clause must be reduced by the lesser of: 
           (i) the total itemized deductions allowed under section 
        63(d) of the Internal Revenue Code, less state, local, and 
        foreign income taxes deductible under section 164 of the 
        Internal Revenue Code and the standard deduction under section 
        63(c) of the Internal Revenue Code; or 
           (ii) the lesser of (A) the amount of insurance qualifying 
        as "medical care" under section 213(d) of the Internal Revenue 
        Code to the extent not deducted under section 162(1) of the 
        Internal Revenue Code or excluded from income or (B) the total 
        amount deductible for medical care under section 213(a); and 
           (9) the exemption amount allowed under Laws 1995, chapter 
        255, article 3, section 2, subdivision 3.; and 
           (10) the amount of income or gain included in federal 
        taxable income under section 1366 of the Internal Revenue Code 
        flowing from a corporation that has a valid election in effect 
        for the taxable year under section 1362 of the Internal Revenue 
        Code which is not allowed to be an "S" corporation under section 
        290.9725. 
           Sec. 5.  Minnesota Statutes 1996, section 290.01, 
        subdivision 19f, is amended to read: 
           Subd. 19f.  [BASIS MODIFICATIONS AFFECTING GAIN OR LOSS ON 
        DISPOSITION OF PROPERTY.] (a) For individuals, estates, and 
        trusts, the basis of property is its adjusted basis for federal 
        income tax purposes except as set forth in paragraphs (f) and, 
        (g) and (m).  For corporations, the basis of property is its 
        adjusted basis for federal income tax purposes, without regard 
        to the time when the property became subject to tax under this 
        chapter or to whether out-of-state losses or items of tax 
        preference with respect to the property were not deductible 
        under this chapter, except that the modifications to the basis 
        for federal income tax purposes set forth in paragraphs (b) to 
        (j) are allowed to corporations, and the resulting modifications 
        to federal taxable income must be made in the year in which gain 
        or loss on the sale or other disposition of property is 
        recognized. 
           (b) The basis of property shall not be reduced to reflect 
        federal investment tax credit.  
           (c) The basis of property subject to the accelerated cost 
        recovery system under section 168 of the Internal Revenue Code 
        shall be modified to reflect the modifications in depreciation 
        with respect to the property provided for in subdivision 19e.  
        For certified pollution control facilities for which 
        amortization deductions were elected under section 169 of the 
        Internal Revenue Code of 1954, the basis of the property must be 
        increased by the amount of the amortization deduction not 
        previously allowed under this chapter. 
           (d) For property acquired before January 1, 1933, the basis 
        for computing a gain is the fair market value of the property as 
        of that date.  The basis for determining a loss is the cost of 
        the property to the taxpayer less any depreciation, 
        amortization, or depletion, actually sustained before that 
        date.  If the adjusted cost exceeds the fair market value of the 
        property, then the basis is the adjusted cost regardless of 
        whether there is a gain or loss.  
           (e) The basis is reduced by the allowance for amortization 
        of bond premium if an election to amortize was made pursuant to 
        Minnesota Statutes 1986, section 290.09, subdivision 13, and the 
        allowance could have been deducted by the taxpayer under this 
        chapter during the period of the taxpayer's ownership of the 
        property.  
           (f) For assets placed in service before January 1, 1987, 
        corporations, partnerships, or individuals engaged in the 
        business of mining ores other than iron ore or taconite 
        concentrates subject to the occupation tax under chapter 298 
        must use the occupation tax basis of property used in that 
        business. 
           (g) For assets placed in service before January 1, 1990, 
        corporations, partnerships, or individuals engaged in the 
        business of mining iron ore or taconite concentrates subject to 
        the occupation tax under chapter 298 must use the occupation tax 
        basis of property used in that business.  
           (h) In applying the provisions of sections 301(c)(3)(B), 
        312(f) and (g), and 316(a)(1) of the Internal Revenue Code, the 
        dates December 31, 1932, and January 1, 1933, shall be 
        substituted for February 28, 1913, and March 1, 1913, 
        respectively.  
           (i) In applying the provisions of section 362(a) and (c) of 
        the Internal Revenue Code, the date December 31, 1956, shall be 
        substituted for June 22, 1954.  
           (j) The basis of property shall be increased by the amount 
        of intangible drilling costs not previously allowed due to 
        differences between this chapter and the Internal Revenue Code.  
           (k) The adjusted basis of any corporate partner's interest 
        in a partnership is the same as the adjusted basis for federal 
        income tax purposes modified as required to reflect the basis 
        modifications set forth in paragraphs (b) to (j).  The adjusted 
        basis of a partnership in which the partner is an individual, 
        estate, or trust is the same as the adjusted basis for federal 
        income tax purposes modified as required to reflect the basis 
        modifications set forth in paragraphs (f) and (g).  
           (l) The modifications contained in paragraphs (b) to (j) 
        also apply to the basis of property that is determined by 
        reference to the basis of the same property in the hands of a 
        different taxpayer or by reference to the basis of different 
        property.  
           (m) If a corporation has a valid election in effect for the 
        taxable year under section 1362 of the Internal Revenue Code, 
        but is not allowed to be an "S" corporation under section 
        290.9725, and the corporation is liquidated or the individual 
        shareholder disposes of the stock and there is no capital loss 
        reflected in federal adjusted gross income because of the fact 
        that corporate losses have exhausted the shareholders' basis for 
        federal purposes, the shareholders shall be entitled to a 
        capital loss commensurate to their Minnesota basis for the stock.
           Sec. 6.  Minnesota Statutes 1996, section 290.01, 
        subdivision 19g, is amended to read: 
           Subd. 19g.  [ACRS MODIFICATION FOR INDIVIDUALS.] (a) An 
        individual is allowed a subtraction from federal taxable income 
        for the amount of accelerated cost recovery system deductions 
        that were added to federal adjusted gross income in computing 
        Minnesota gross income for taxable year 1981, 1982, 1983, or 
        1984 and that were not deducted in a later taxable year.  The 
        deduction is allowed beginning in the first taxable year after 
        the entire allowable deduction for the property has been allowed 
        under federal law or the first taxable year beginning after 
        December 31, 1987, whichever is later.  The amount of the 
        deduction is computed by deducting the amount added to federal 
        adjusted gross income in computing Minnesota gross income (less 
        any deduction allowed under Minnesota Statutes 1986, section 
        290.01, subdivision 20f) in equal annual amounts over five years.
           (b) In the event of a sale or exchange of the property, a 
        deduction is allowed equal to the lesser of (1) the remaining 
        amount that would be allowed as a deduction under paragraph (a) 
        or (2) the amount of capital gain recognized and the amount of 
        cost recovery deductions that were subject to recapture under 
        sections 1245 and 1250 of the Internal Revenue Code of 1986 for 
        the taxable year. 
           (c) In the case of a corporation electing S corporation 
        status under section 1362 of the Internal Revenue Code treated 
        as an "S" corporation under section 290.9725, the amount of the 
        corporation's cost recovery allowances that have been deducted 
        in computing federal tax, but have been added to federal taxable 
        income or not deducted in computing tax under this chapter as a 
        result of the application of subdivision 19e, paragraphs (a) and 
        (c) or Minnesota Statutes 1986, section 290.09, subdivision 7, 
        is allowed as a deduction to the shareholders under the 
        provisions of paragraph (a). 
           Sec. 7.  Minnesota Statutes 1996, section 290.01, 
        subdivision 31, is amended to read: 
           Subd. 31.  [INTERNAL REVENUE CODE.] Unless specifically 
        defined otherwise, "Internal Revenue Code" means the Internal 
        Revenue Code of 1986, as amended through March 22 December 31, 
        1996, and includes the provisions of section 1(a) and (b) of 
        Public Law Number 104-117. 
           Sec. 8.  Minnesota Statutes 1996, section 290.014, 
        subdivision 2, is amended to read: 
           Subd. 2.  [NONRESIDENT INDIVIDUALS.] Except as provided in 
        section 290.015, a nonresident individual is subject to the 
        return filing requirements and to tax as provided in this 
        chapter to the extent that the income of the nonresident 
        individual is: 
           (1) allocable to this state under section 290.17, 290.191, 
        or 290.20; 
           (2) taxed to the individual under the Internal Revenue Code 
        (or not taxed under the Internal Revenue Code by reason of its 
        character but of a character which is taxable under this 
        chapter) in the individual's capacity as a beneficiary of an 
        estate with income allocable to this state under section 290.17, 
        290.191, or 290.20 and the income, taking into account the 
        income character provisions of section 662(b) of the Internal 
        Revenue Code, would be allocable to this state under section 
        290.17, 290.191, or 290.20 if realized by the individual 
        directly from the source from which realized by the estate; 
           (3) taxed to the individual under the Internal Revenue Code 
        (or not taxed under the Internal Revenue Code by reason of its 
        character but of a character that is taxable under this chapter) 
        in the individual's capacity as a beneficiary or grantor or 
        other person treated as a substantial owner of a trust with 
        income allocable to this state under section 290.17, 290.191, or 
        290.20 and the income, taking into account the income character 
        provisions of section 652(b), 662(b), or 664(b) of the Internal 
        Revenue Code, would be allocable to this state under section 
        290.17, 290.191, or 290.20 if realized by the individual 
        directly from the source from which realized by the trust; 
           (4) taxed to the individual under the Internal Revenue Code 
        (or not taxed under the Internal Revenue Code by reason of its 
        character but of a character which is taxable under this 
        chapter) in the individual's capacity as a limited or general 
        partner in a partnership with income allocable to this state 
        under section 290.17, 290.191, or 290.20 and the income, taking 
        into account the income character provisions of section 702(b) 
        of the Internal Revenue Code, would be allocable to this state 
        under section 290.17, 290.191, or 290.20 if realized by the 
        individual directly from the source from which realized by the 
        partnership; or 
           (5) taxed to the individual under the Internal Revenue Code 
        (or not taxed under the Internal Revenue Code by reason of its 
        character but of a character which is taxable under this 
        chapter) in the individual's capacity as a shareholder of a 
        corporation having a valid election in effect under section 1362 
        of the Internal Revenue Code treated as an "S" corporation under 
        section 290.9725, and income allocable to this state under 
        section 290.17, 290.191, or 290.20 and the income, taking into 
        account the income character provisions of section 1366(b) of 
        the Internal Revenue Code, would be allocable to this state 
        under section 290.17, 290.191, or 290.20 if realized by the 
        individual directly from the source from which realized by the 
        corporation. 
           Sec. 9.  Minnesota Statutes 1996, section 290.014, 
        subdivision 3, is amended to read: 
           Subd. 3.  [TRUSTS AND ESTATES.] Except as provided in 
        section 290.015, a trust or estate, whether resident or 
        nonresident, is subject to the return filing requirements and to 
        tax as provided in this chapter to the extent that the income of 
        the trust or estate is: 
           (1) allocable to this state under section 290.17, 290.191, 
        or 290.20; 
           (2) taxed to the trust or estate under the Internal Revenue 
        Code (or not taxed under the Internal Revenue Code by reason of 
        its character but of a character which is taxable under this 
        chapter) in its capacity as a beneficiary of a trust or estate 
        with income allocable to this state under section 290.17, 
        290.191, or 290.20 and the income, taking into account the 
        income character provisions of section 662(b) of the Internal 
        Revenue Code, would be allocable to this state under section 
        290.17, 290.191, or 290.20 if realized by the trust or 
        beneficiary estate directly from the source from which realized 
        by the distributing estate; 
           (3) taxed to the trust or estate under the Internal Revenue 
        Code (or not taxed under the Internal Revenue Code by reason of 
        its character but of a character which is taxable under this 
        chapter) in its capacity as a beneficiary or grantor or other 
        person treated as a substantial owner of a trust with income 
        allocable to this state under section 290.17, 290.191, or 290.20 
        and the income, taking into account the income character 
        provisions of section 652(b), 662(b), or 664(b) of the Internal 
        Revenue Code, would be allocable to this state under section 
        290.17, 290.191, or 290.20 if realized by the beneficiary trust 
        or estate directly from the source from which realized by the 
        distributing trust; 
           (4) taxed to the trust or estate under the Internal Revenue 
        Code (or not taxed under the Internal Revenue Code by reason of 
        its character but of a character which is taxable under this 
        chapter) in its capacity as a limited or general partner in a 
        partnership with income allocable to this state under section 
        290.17, 290.191, or 290.20 and the income, taking into account 
        the income character provisions of section 702(b) of the 
        Internal Revenue Code, would be allocable to this state under 
        section 290.17, 290.191, or 290.20 if realized by the trust or 
        estate directly from the source from which realized by the 
        partnership; or 
           (5) taxed to the trust or estate under the Internal Revenue 
        Code (or not taxed under the Internal Revenue Code by reason of 
        its character but of a character which is taxable under this 
        chapter) in its capacity as a shareholder of a 
        corporation having a valid election in effect under section 1362 
        of the Internal Revenue Code treated as an "S" corporation under 
        section 290.9725, and income allocable to this state under 
        section 290.17, 290.191, or 290.20 and the income, taking into 
        account the income character provisions of section 1366(b) of 
        the Internal Revenue Code, would be allocable to this state 
        under section 290.17, 290.191, or 290.20 if realized by the 
        trust or estate directly from the source from which realized by 
        the corporation. 
           Sec. 10.  Minnesota Statutes 1996, section 290.015, 
        subdivision 3, is amended to read: 
           Subd. 3.  [EXCEPTIONS.] (a) A person is not subject to tax 
        under this chapter if the person is engaged in the business of 
        selling tangible personal property and taxation of that person 
        under this chapter is precluded by Public Law Number 86-272, 
        United States Code, title 15, sections 381 to 384, or would be 
        so precluded except for the fact that the person stored tangible 
        personal property in a state licensed facility under chapter 231.
           (b) Ownership of an interest in the following types of 
        property (including those contacts with this state reasonably 
        required to evaluate and complete the acquisition or disposition 
        of the property, the servicing of the property or the income 
        from it, the collection of income from the property, or the 
        acquisition or liquidation of collateral relating to the 
        property) shall not be a factor in determining whether the owner 
        is subject to tax under this chapter: 
           (1) an interest in a real estate mortgage investment 
        conduit, a real estate investment trust, a financial asset 
        securitization investment trust, or a regulated investment 
        company or a fund of a regulated investment company, as those 
        terms are defined in the Internal Revenue Code; 
           (2) an interest in money market instruments or securities 
        as defined in section 290.191, subdivision 6, paragraphs (c) and 
        (d); 
           (3) an interest in a loan-backed, mortgage-backed, or 
        receivable-backed security representing either:  (i) ownership 
        in a pool of promissory notes, mortgages, or receivables or 
        certificates of interest or participation in such notes, 
        mortgages, or receivables, or (ii) debt obligations or equity 
        interests which provide for payments in relation to payments or 
        reasonable projections of payments on the notes, mortgages, or 
        receivables; 
           (4) an interest acquired from a person in assets described 
        in section 290.191, subdivision 11, paragraphs (e) to (l), 
        subject to the provisions of paragraph (c), clause (2)(A); 
           (5) an interest acquired from a person in the right to 
        service, or collect income from any assets described in section 
        290.191, subdivision 11, paragraphs (e) to (l), subject to the 
        provisions of paragraph (c), clause (2)(A); 
           (6) an interest acquired from a person in a funded or 
        unfunded agreement to extend or guarantee credit whether 
        conditional, mandatory, temporary, standby, secured, or 
        otherwise, subject to the provisions of paragraph (c), clause 
        (2)(A); 
           (7) an interest of a person other than an individual, 
        estate, or trust, in any intangible, tangible, real, or personal 
        property acquired in satisfaction, whether in whole or in part, 
        of any asset embodying a payment obligation which is in default, 
        whether secured or unsecured, the ownership of an interest in 
        which would be exempt under the preceding provisions of this 
        subdivision, provided the property is disposed of within a 
        reasonable period of time; or 
           (8) amounts held in escrow or trust accounts, pursuant to 
        and in accordance with the terms of property described in this 
        subdivision. 
           (c)(1) For purposes of paragraph (b), clauses (4) to (6), 
        an interest in the type of assets or credit agreements described 
        is deemed to exist at the time the owner becomes legally 
        obligated, conditionally or unconditionally, to fund, acquire, 
        renew, extend, amend, or otherwise enter into the credit 
        arrangement. 
           (2)(A) An owner has acquired an interest from a person in 
        paragraph (b), clauses (4) to (6), assets if:  
           (i) the owner at the time of the acquisition of the asset 
        does not own, directly or indirectly, 15 percent or more of the 
        outstanding stock or in the case of a partnership 15 percent or 
        more of the capital or profit interests of the person from whom 
        it acquired the asset; 
           (ii) the person from whom the owner acquired the asset 
        regularly sells, assigns, or transfers interests in paragraph 
        (b), clauses (4) to (6), assets during the 12 calendar months 
        immediately preceding the month of acquisition to three or more 
        persons; and 
           (iii) the person from whom the owner acquired the asset 
        does not sell, assign, or transfer 75 percent or more of its 
        paragraph (b), clauses (4) to (6), assets during the 12 calendar 
        months immediately preceding the month of acquisition to the 
        owner. 
        For purposes of determining indirect ownership under item (i), 
        the owner is deemed to own all stock, capital, or profit 
        interests owned by another person if the owner directly owns 15 
        percent or more of the stock, capital, or profit interests in 
        the other person.  The owner is also deemed to own through any 
        intermediary parties all stock, capital, and profit interests 
        directly owned by a person to the extent there exists a 15 
        percent or more chain of ownership of stock, capital, or profit 
        interests between the owner, intermediary parties and the person.
           (B) If the owner of the asset is a member of the unitary 
        group, paragraph (b), clauses (4) to (8), do not apply to an 
        interest acquired from another member of the unitary group.  If 
        the interest in the asset was originally acquired from a 
        nonunitary member and at that time qualified as a section 
        290.015, subdivision 3, paragraph (b), asset, the foregoing 
        limitation does not apply. 
           Sec. 11.  Minnesota Statutes 1996, section 290.015, 
        subdivision 5, is amended to read: 
           Subd. 5.  [DETERMINATION AT ENTITY LEVEL.] Determinations 
        under this section with respect to trades or businesses 
        conducted by a partnership, trust, estate, or corporation with 
        an election in effect under section 1362 of the Internal Revenue 
        Code treated as an "S" corporation under section 290.9725, or 
        any other entity, the income of which is or may be taxed to its 
        owners or beneficiaries must be made with respect to the entity 
        carrying on the trade or business and not with respect to owners 
        or beneficiaries of the trade or business, the taxability of 
        which under this chapter must be determined under section 
        290.014.  
           Sec. 12.  Minnesota Statutes 1996, section 290.06, 
        subdivision 22, is amended to read: 
           Subd. 22.  [CREDIT FOR TAXES PAID TO ANOTHER STATE.] (a) A 
        taxpayer who is liable for taxes on or measured by net income to 
        another state or province or territory of Canada, as provided in 
        paragraphs (b) through (f), upon income allocated or apportioned 
        to Minnesota, is entitled to a credit for the tax paid to 
        another state or province or territory of Canada if the tax is 
        actually paid in the taxable year or a subsequent taxable year.  
        A taxpayer who is a resident of this state pursuant to section 
        290.01, subdivision 7, clause (2), and who is subject to income 
        tax as a resident in the state of the individual's domicile is 
        not allowed this credit unless the state of domicile does not 
        allow a similar credit. 
           (b) For an individual, estate, or trust, the credit is 
        determined by multiplying the tax payable under this chapter by 
        the ratio derived by dividing the income subject to tax in the 
        other state or province or territory of Canada that is also 
        subject to tax in Minnesota while a resident of Minnesota by the 
        taxpayer's federal adjusted gross income, as defined in section 
        62 of the Internal Revenue Code, modified by the addition 
        required by section 290.01, subdivision 19a, clause (1), and the 
        subtraction allowed by section 290.01, subdivision 19b, clause 
        (1), to the extent the income is allocated or assigned to 
        Minnesota under sections 290.081 and 290.17.  
           (c) If the taxpayer is an athletic team that apportions all 
        of its income under section 290.17, subdivision 5, paragraph 
        (c), the credit is determined by multiplying the tax payable 
        under this chapter by the ratio derived from dividing the total 
        net income subject to tax in the other state or province or 
        territory of Canada by the taxpayer's Minnesota taxable income. 
           (d) The credit determined under paragraph (b) or (c) shall 
        not exceed the amount of tax so paid to the other state or 
        province or territory of Canada on the gross income earned 
        within the other state or province or territory of Canada 
        subject to tax under this chapter, nor shall the allowance of 
        the credit reduce the taxes paid under this chapter to an amount 
        less than what would be assessed if such income amount was 
        excluded from taxable net income. 
           (e) In the case of the tax assessed on a lump sum 
        distribution under section 290.032, the credit allowed under 
        paragraph (a) is the tax assessed by the other state or province 
        or territory of Canada on the lump sum distribution that is also 
        subject to tax under section 290.032, and shall not exceed the 
        tax assessed under section 290.032.  To the extent the total 
        lump sum distribution defined in section 290.032, subdivision 1, 
        includes lump sum distributions received in prior years or is 
        all or in part an annuity contract, the reduction to the tax on 
        the lump sum distribution allowed under section 290.032, 
        subdivision 2, includes tax paid to another state that is 
        properly apportioned to that distribution. 
           (f) If a Minnesota resident reported an item of income to 
        Minnesota and is assessed tax in such other state or province or 
        territory of Canada on that same income after the Minnesota 
        statute of limitations has expired, the taxpayer shall receive a 
        credit for that year under paragraph (a), notwithstanding any 
        statute of limitations to the contrary.  The claim for the 
        credit must be submitted within one year from the date the taxes 
        were paid to the other state or province or territory of 
        Canada.  The taxpayer must submit sufficient proof to show 
        entitlement to a credit. 
           (g) For the purposes of this subdivision, a resident 
        shareholder of a corporation having a valid election in effect 
        under section 1362 of the Internal Revenue Code treated as an "S"
        corporation under section 290.9725, must be considered to have 
        paid a tax imposed on the shareholder in an amount equal to the 
        shareholder's pro rata share of any net income tax paid by the S 
        corporation to another state.  For the purposes of the preceding 
        sentence, the term "net income tax" means any tax imposed on or 
        measured by a corporation's net income. 
           (h) For the purposes of this subdivision, a resident member 
        of a limited liability company taxed as a partnership under the 
        Internal Revenue Code must be considered to have paid a tax 
        imposed on the member in an amount equal to the member's pro 
        rata share of any net income tax paid by the limited liability 
        company to a state that does not measure the income of the 
        member of the limited liability company by reference to the 
        income of the limited liability company.  For purposes of the 
        preceding sentence, the term "net income" tax means any tax 
        imposed on or measured by a limited liability company's net 
        income. 
           Sec. 13.  Minnesota Statutes 1996, section 290.068, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [CREDIT ALLOWED.] A corporation, other than 
        a corporation with a valid election in effect under section 1362 
        of the Internal Revenue Code treated as an "S" corporation under 
        section 290.9725, is allowed a credit against the portion of the 
        franchise tax computed under section 290.06, subdivision 1, for 
        the taxable year equal to: 
           (a) 5 percent of the first $2 million of the excess (if 
        any) of 
           (1) the qualified research expenses for the taxable year, 
        over 
           (2) the base amount; and 
           (b) 2.5 percent on all of such excess expenses over $2 
        million. 
           Sec. 14.  Minnesota Statutes 1996, section 290.0922, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [IMPOSITION.] (a) In addition to the tax 
        imposed by this chapter without regard to this section, the 
        franchise tax imposed on a corporation required to file under 
        section 289A.08, subdivision 3, other than a corporation having 
        a valid election in effect under section 1362 of the Internal 
        Revenue Code treated as an "S" corporation under section 
        290.9725 for the taxable year includes a tax equal to the 
        following amounts: 
             If the sum of the corporation's
        Minnesota property, payrolls, and sales
        or receipts is:                            the tax equals:
                   less than $500,000                    $0
           $   500,000 to $   999,999                  $100
           $ 1,000,000 to $ 4,999,999                  $300
           $ 5,000,000 to $ 9,999,999                $1,000 
           $10,000,000 to $19,999,999                $2,000 
           $20,000,000 or more                       $5,000 
           (b) A tax is imposed for each taxable year on a corporation 
        required to file a return under section 289A.12, subdivision 3, 
        that has a valid election in effect for the taxable year under 
        section 1362 of the Internal Revenue Code is treated as an "S" 
        corporation under section 290.9725 and on a partnership required 
        to file a return under section 289A.12, subdivision 3, other 
        than a partnership that derives over 80 percent of its income 
        from farming.  The tax imposed under this paragraph is due on or 
        before the due date of the return for the taxpayer due under 
        section 289A.18, subdivision 1.  The commissioner shall 
        prescribe the return to be used for payment of this tax.  The 
        tax under this paragraph is equal to the following amounts:  
             If the sum of the S corporation's or partnership's 
        Minnesota property, payrolls, and sales
        or receipts is:                        the tax equals:
                     less than $500,000                $0 
             $   500,000 to $   999,999              $100 
             $ 1,000,000 to $ 4,999,999              $300 
             $ 5,000,000 to $ 9,999,999            $1,000 
             $10,000,000 to $19,999,999            $2,000 
             $20,000,000 or more                   $5,000 
           Sec. 15.  Minnesota Statutes 1996, section 290.17, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [SCOPE OF ALLOCATION RULES.] (a) The income 
        of resident individuals is not subject to allocation outside 
        this state.  The allocation rules apply to nonresident 
        individuals, estates, trusts, nonresident partners of 
        partnerships, nonresident shareholders of corporations having a 
        valid election in effect under section 1362 of the Internal 
        Revenue Code treated as "S" corporations under section 290.9725, 
        and all corporations not having such an election in effect.  If 
        a partnership or corporation would not otherwise be subject to 
        the allocation rules, but conducts a trade or business that is 
        part of a unitary business involving another legal entity that 
        is subject to the allocation rules, the partnership or 
        corporation is subject to the allocation rules. 
           (b) Expenses, losses, and other deductions (referred to 
        collectively in this paragraph as "deductions") must be 
        allocated along with the item or class of gross income to which 
        they are definitely related for purposes of assignment under 
        this section or apportionment under section 290.191, 290.20, 
        290.35, or 290.36.  Deductions not definitely related to any 
        item or class of gross income are assigned to the taxpayer's 
        domicile. 
           (c) In the case of an individual who is a resident for only 
        part of a taxable year, the individual's income, gains, losses, 
        and deductions from the distributive share of a partnership, S 
        corporation, trust, or estate are not subject to allocation 
        outside this state to the extent of the distributive share 
        multiplied by a ratio, the numerator of which is the number of 
        days the individual was a resident of this state during the tax 
        year of the partnership, S corporation, trust, or estate, and 
        the denominator of which is the number of days in the taxable 
        year of the partnership, S corporation, trust, or estate. 
           Sec. 16.  Minnesota Statutes 1996, section 290.371, 
        subdivision 2, is amended to read: 
           Subd. 2.  [EXEMPTIONS.] A corporation is not required to 
        file a notice of business activities report if:  
           (1) by the end of an accounting period for which it was 
        otherwise required to file a notice of business activities 
        report under this section, it had received a certificate of 
        authority to do business in this state; 
           (2) a timely return has been filed under section 289A.08; 
           (3) the corporation is exempt from taxation under this 
        chapter pursuant to section 290.05; 
           (4) the corporation's activities in Minnesota, or the 
        interests in property which it owns, consist solely of 
        activities or property exempted from jurisdiction to tax under 
        section 290.015, subdivision 3, paragraph (b); or 
           (5) the corporation has a valid election in effect under 
        section 1362 of the Internal Revenue Code is an "S" corporation 
        under section 290.9725. 
           Sec. 17.  Minnesota Statutes 1996, section 290.9725, is 
        amended to read: 
           290.9725 [S CORPORATION.] 
           For purposes of this chapter, the term "S corporation" 
        means any corporation having a valid election in effect for the 
        taxable year under section 1362 of the Internal Revenue Code, 
        except that a corporation which either: 
           (1) is a financial institution to which either section 585 
        or section 593 of the Internal Revenue Code applies; or 
           (2) has a wholly owned subsidiary which is a financial 
        institution as described above 
        is not an "S" corporation for the purposes of this chapter.  An 
        S corporation shall not be subject to the taxes imposed by this 
        chapter, except the taxes imposed under sections 290.0922, 
        290.92, 290.9727, 290.9728, and 290.9729. 
           Sec. 18.  Minnesota Statutes 1996, section 290.9727, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [TAX IMPOSED.] For a an "S" corporation 
        electing S corporation status pursuant to section 1362 of the 
        Internal Revenue Code after December 31, 1986, and having a 
        recognized built-in gain as defined in section 1374 of the 
        Internal Revenue Code, there is imposed a tax on the taxable 
        income of such S corporation, as defined in this section, at the 
        rate prescribed by section 290.06, subdivision 1.  This 
        subdivision does not apply to any corporation having an S 
        election in effect for each of its taxable years.  An S 
        corporation and any predecessor corporation must be treated as 
        one corporation for purposes of the preceding sentence.  
           Sec. 19.  Minnesota Statutes 1996, section 290.9728, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [TAX IMPOSED.] There is imposed a tax on 
        the taxable income of a an "S" corporation that has:  
           (1) elected S corporation status pursuant to section 1362 
        of the Internal Revenue Code of 1986, as amended through 
        December 31, 1986, before January 1, 1987; 
           (2) a net capital gain for the taxable year (i) in excess 
        of $25,000 and (ii) exceeding 50 percent of the corporation's 
        federal taxable income for the taxable year; and 
           (3) federal taxable income for the taxable year exceeding 
        $25,000.  
           The tax is imposed at the rate prescribed by section 
        290.06, subdivision 1.  For purposes of this section, "federal 
        taxable income" means federal taxable income determined under 
        section 1374(4)(d) of the Internal Revenue Code.  This section 
        does not apply to an S corporation which has had an election 
        under section 1362 of the Internal Revenue Code of 1954, in 
        effect for the three immediately preceding taxable years.  This 
        section does not apply to an S corporation that has been in 
        existence for less than four taxable years and has had an 
        election in effect under section 1362 of the Internal Revenue 
        Code of 1954 for each of the corporation's taxable years.  For 
        purposes of this section, an S corporation and any predecessor 
        corporation are treated as one corporation.  
           Sec. 20.  [290.9743] [ELECTION BY FASIT.] 
           An entity having a valid election as a financial asset 
        securitization investment trust in effect for a taxable year 
        under section 860L(a) of the Internal Revenue Code shall not be 
        subject to the taxes imposed by this chapter, except the tax 
        imposed under section 290.92. 
           Sec. 21.  [290.9744] [FASIT INCOME TAXABLE TO HOLDERS OF 
        INTERESTS.] 
           The income of a financial asset securitization investment 
        trust is taxable to the holders of interests in the financial 
        asset securitization investment trust as provided in sections 
        860H to 860L of the Internal Revenue Code.  The income of the 
        holders must be computed under the provisions of this chapter. 
           Sec. 22.  Minnesota Statutes 1996, section 291.005, 
        subdivision 1, is amended to read: 
           Subdivision 1.  Unless the context otherwise clearly 
        requires, the following terms used in this chapter shall have 
        the following meanings: 
           (1) "Federal gross estate" means the gross estate of a 
        decedent as valued and otherwise determined for federal estate 
        tax purposes by federal taxing authorities pursuant to the 
        provisions of the Internal Revenue Code. 
           (2) "Minnesota gross estate" means the federal gross estate 
        of a decedent after (a) excluding therefrom any property 
        included therein which has its situs outside Minnesota and (b) 
        including therein any property omitted from the federal gross 
        estate which is includable therein, has its situs in Minnesota, 
        and was not disclosed to federal taxing authorities.  
           (3) "Personal representative" means the executor, 
        administrator or other person appointed by the court to 
        administer and dispose of the property of the decedent.  If 
        there is no executor, administrator or other person appointed, 
        qualified, and acting within this state, then any person in 
        actual or constructive possession of any property having a situs 
        in this state which is included in the federal gross estate of 
        the decedent shall be deemed to be a personal representative to 
        the extent of the property and the Minnesota estate tax due with 
        respect to the property. 
           (4) "Resident decedent" means an individual whose domicile 
        at the time of death was in Minnesota. 
           (5) "Nonresident decedent" means an individual whose 
        domicile at the time of death was not in Minnesota. 
           (6) "Situs of property" means, with respect to real 
        property, the state or country in which it is located; with 
        respect to tangible personal property, the state or country in 
        which it was normally kept or located at the time of the 
        decedent's death; and with respect to intangible personal 
        property, the state or country in which the decedent was 
        domiciled at death. 
           (7) "Commissioner" means the commissioner of revenue or any 
        person to whom the commissioner has delegated functions under 
        this chapter. 
           (8) "Internal Revenue Code" means the United States 
        Internal Revenue Code of 1986, as amended through March 22 
        December 31, 1996, and includes the provisions of section 
        1(a)(4) of Public Law Number 104-117. 
           Sec. 23.  [FEDERAL CHANGES.] 
           The changes made by sections 1118(a), 1305, 1603, 1702(e), 
        and 1702(f) of the Small Business Job Protection Act, Public Law 
        Number 104-188, sections 451(a), 451(b), 909, and 910 of the 
        Personal Responsibility and Work Opportunity Reconciliation Act, 
        Public Law Number 104-193, and the federal changes to taxable 
        income of section 2 of this article which affect the Minnesota 
        definition of wages under Minnesota Statutes, section 290.92, 
        subdivision 1, S corporation status under Minnesota Statutes, 
        section 290.9725, unrelated business income tax under Minnesota 
        Statutes, section 290.05, subdivision 3, corporate alternative 
        minimum tax under Minnesota Statutes, section 290.0921, 
        subdivision 3, estate tax under Minnesota Statutes, sections 
        291.005 and 291.03, the Minnesota working family credit under 
        Minnesota Statutes, section 290.0671, subdivision 1, and the 
        definition of income under Minnesota Statutes, section 290A.03, 
        subdivision 3, shall become effective at the same time the 
        changes become effective for federal purposes. 
           Sec. 24.  [INSTRUCTION TO REVISOR.] 
           In the next edition of Minnesota Statutes, the revisor of 
        statutes shall substitute the phrase "Internal Revenue Code of 
        1986, as amended through December 31, 1996," for the words 
        "Internal Revenue Code of 1986, as amended through April 15, 
        1995," wherever the phrase occurs in chapters 290A, 297, 298, 
        and 469. 
           Sec. 25.  [EFFECTIVE DATE.] 
           Sections 3 to 5, 7 to 20 and the provision of section 2 
        dealing with regulated investment companies are effective for 
        tax years beginning after December 31, 1996.  The remainder of 
        this article is effective at the same time and for the same 
        years as the federal changes made in 1996 were effective for 
        federal purposes. 
                                   ARTICLE 7
                            SALES AND SPECIAL TAXES
           Section 1.  Minnesota Statutes 1996, section 289A.56, 
        subdivision 4, is amended to read: 
           Subd. 4.  [CAPITAL EQUIPMENT REFUNDS; REFUNDS TO 
        PURCHASERS.] Notwithstanding subdivision 3, for refunds payable 
        under sections section 297A.15, subdivision 5, and 289A.50, 
        subdivision 2a, interest is computed from the date the refund 
        claim is filed with the commissioner.  For refunds payable under 
        section 289A.50, subdivision 2a, interest is computed from the 
        20th day of the month following the month of the invoice date 
        for the purchase which is the subject of the refund. 
           Sec. 2.  Minnesota Statutes 1996, section 296.141, 
        subdivision 4, is amended to read: 
           Subd. 4.  [CREDIT OR REFUND OF TAX PAID.] The commissioner 
        shall allow the distributor credit or refund of the tax paid on 
        gasoline and special fuel: 
           (1) exported or sold for export from the state, other than 
        in the supply tank of a motor vehicle or of an aircraft; 
           (2) sold to the United States government to be used 
        exclusively in performing its governmental functions and 
        activities or to any "cost plus a fixed fee" contractor employed 
        by the United States government on any national defense project; 
           (3) if the fuel is placed in a tank used exclusively for 
        residential heating; 
           (4) destroyed by accident while in the possession of the 
        distributor; 
           (5) in error; 
           (6) in the case of gasoline only, sold for storage in an 
        on-farm bulk storage tank, if the tax was not collected on the 
        sale; and 
           (6) (7) in such other cases as the commissioner may permit, 
        not inconsistent with the provisions of this chapter and other 
        laws relating to the gasoline and special fuel excise taxes. 
           Sec. 3.  Minnesota Statutes 1996, section 296.18, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [CLAIM; FUEL USED IN OTHER VEHICLES.] Any 
        person who shall buy and use gasoline for a qualifying purpose 
        other than use in motor vehicles, snowmobiles except as provided 
        in clause (2), or motorboats, or special fuel for a qualifying 
        purpose other than use in licensed motor vehicles, and who shall 
        have paid the Minnesota excise tax directly or indirectly 
        through the amount of the tax being included in the price of the 
        gasoline or special fuel, or otherwise, shall be reimbursed and 
        repaid the amount of the tax paid upon filing with the 
        commissioner a claim in the form and manner prescribed by the 
        commissioner, and containing the information the commissioner 
        shall require.  By signing any such claim which is false or 
        fraudulent, the applicant shall be subject to the penalties 
        provided in this section for knowingly making a false claim.  
        The claim shall set forth the total amount of the gasoline so 
        purchased and used by the applicant other than in motor 
        vehicles, or special fuel so purchased and used by the applicant 
        other than in licensed motor vehicles, and shall state when and 
        for what purpose it was used.  When a claim contains an error in 
        computation or preparation, the commissioner is authorized to 
        adjust the claim in accordance with the evidence shown on the 
        claim or other information available to the commissioner.  The 
        commissioner, on being satisfied that the claimant is entitled 
        to the payments, shall approve the claim and transmit it to the 
        commissioner of finance.  No repayment shall be made unless the 
        claim and invoice shall be filed with the commissioner within 
        one year from the date of the purchase.  The postmark on the 
        envelope in which a written claim is mailed shall determine its 
        date of filing.  The words "gasoline" or "special fuel" as used 
        in this subdivision do not include aviation gasoline or special 
        fuel for aircraft.  Gasoline or special fuel bought and used for 
        a "qualifying purpose" means: 
           (1) Gasoline or special fuel used in carrying on a trade or 
        business, used on a farm situated in Minnesota, and used for a 
        farming purpose.  "Farm" and "farming purpose" have the meanings 
        given them in section 6420(c)(2), (3), and (4) of the Internal 
        Revenue Code of 1986, as amended through December 31, 1988.  
           (2) Gasoline or special fuel used for off-highway business 
        use.  "Off-highway business use" means any use off the public 
        highway by a person in that person's trade, business, or 
        activity for the production of income.  "Off-highway business 
        use" includes: 
           (a) use of a passenger snowmobile off the public highways 
        as part of the operations of a resort as defined in section 
        157.15.; and 
           (b) use of gasoline or special fuel to operate a power 
        takeoff unit on a vehicle, but not including fuel consumed 
        during idling time. 
           "Off-highway business use" does not include use as a fuel 
        in a motor vehicle which, at the time of use, is registered or 
        is required to be registered for highway use under the laws of 
        any state or foreign country.  
           (3) Gasoline or special fuel placed in the fuel tanks of 
        new motor vehicles, manufactured in Minnesota, and shipped by 
        interstate carrier to destinations in other states or foreign 
        countries. 
           By July 1, 1998, the commissioner shall adopt rules that 
        determine the rates and percentages necessary to develop 
        formulas for calculating and administering the refund under 
        clause (2)(b). 
           Sec. 4.  Minnesota Statutes 1996, section 297A.01, 
        subdivision 3, is amended to read: 
           Subd. 3.  A "sale" and a "purchase" includes, but is not 
        limited to, each of the following transactions: 
           (a) Any transfer of title or possession, or both, of 
        tangible personal property, whether absolutely or conditionally, 
        and the leasing of or the granting of a license to use or 
        consume tangible personal property other than manufactured homes 
        used for residential purposes for a continuous period of 30 days 
        or more, for a consideration in money or by exchange or barter; 
           (b) 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; 
           (c) The furnishing, preparing, or serving for a 
        consideration of food, meals, or drinks.  "Sale" or "purchase" 
        does not include: 
           (1) meals or drinks served to patients, inmates, or persons 
        residing at hospitals, sanitariums, nursing homes, senior 
        citizens homes, and correctional, detention, and detoxification 
        facilities; 
           (2) meals or drinks purchased for and served exclusively to 
        individuals who are 60 years of age or over and their spouses or 
        to the handicapped and their spouses by governmental agencies, 
        nonprofit organizations, agencies, or churches or pursuant to 
        any program funded in whole or part through 42 USCA sections 
        3001 through 3045, wherever delivered, prepared or served; or 
           (3) meals and lunches served at public and private schools, 
        universities, or colleges. 
        Notwithstanding section 297A.25, subdivision 2, taxable food or 
        meals include, but are not limited to, the following:  
           (i) heated food or drinks; prepared by the retailer for 
        immediate consumption either on or off the retailer's premises.  
        For purposes of this subdivision, "food or drinks prepared for 
        immediate consumption" includes any food product upon which an 
        act of preparation including, but not limited to, cooking, 
        mixing, sandwich making, blending, heating, or pouring has been 
        performed by the retailer so the food product may be immediately 
        consumed by the purchaser.  For purposes of this subdivision, 
        "premises" means the total space and facilities, including 
        buildings, grounds, and parking lots that are made available or 
        that are available for use by the retailer or customer for the 
        purpose of sale or consumption of prepared food and drinks.  
        Food and drinks sold within a building or grounds which require 
        an admission charge for entrance are presumed to be sold for 
        consumption on the premises.  The premises of a caterer is the 
        place where the catered food or drinks are served; 
           (ii) sandwiches prepared by the retailer; 
           (iii) single sales of prepackaged ice cream or ice milk 
        novelties prepared by the retailer; 
           (iv) hand-prepared or dispensed ice cream or ice milk ice 
        cream, ice milk, or frozen yogurt products including novelties, 
        cones, sundaes, and snow cones, sold in single or individual 
        servings.  For purposes of this subdivision, "single or 
        individual servings" does not include products prepackaged and 
        sold in bulk containers or packaging; 
           (v) (iii) soft drinks and other beverages prepared or 
        served by the retailer; including all carbonated and 
        noncarbonated beverages or drinks sold in liquid form except 
        beverages or drinks which contain milk or milk products, 
        beverages or drinks containing 15 or more percent fruit juice, 
        or noncarbonated and noneffervescent bottled water sold in 
        individual containers of one-half gallon or more in size; 
           (vi) (iv) gum;, candy, and candy products, except when sold 
        for fundraising purposes by a nonprofit organization that 
        provides educational and social activities primarily for young 
        people 18 years of age and under; 
           (vii) (v) ice; 
           (viii) (vi) all food sold in from vending machines, 
        pushcarts, lunch carts, motor vehicles, or any other form of 
        vehicle except home delivery vehicles; 
           (ix) (vii) party trays prepared by the retailers; and 
           (x) (viii) all meals and single servings of packaged snack 
        food, single cans or bottles of pop, sold in restaurants and 
        bars; and 
           (ix) bakery products prepared by the retailer for 
        consumption on the retailer's premises; 
           (d) The granting of the privilege of admission to places of 
        amusement, recreational areas, or athletic events, except a 
        world championship football game sponsored by the national 
        football league, and the privilege of having access to and the 
        use of amusement devices, tanning facilities, reducing salons, 
        steam baths, turkish baths, health clubs, and spas or athletic 
        facilities; 
           (e) The furnishing for a consideration of lodging and 
        related services by a hotel, rooming house, tourist court, motel 
        or trailer camp and of the granting of any similar license to 
        use real property other than the renting or leasing thereof for 
        a continuous period of 30 days or more; 
           (f) The furnishing for a consideration of electricity, gas, 
        water, or steam for use or consumption within this state, or 
        local exchange telephone service, intrastate toll service, and 
        interstate toll service, if that service originates from and is 
        charged to a telephone located in this state.  Telephone service 
        does not include services purchased with prepaid telephone 
        calling cards.  Telephone service includes paging services and 
        private communication service, as defined in United States Code, 
        title 26, section 4252(d), as amended through December 31, 1991, 
        except for private communication service purchased by an agent 
        acting on behalf of the state lottery.  The furnishing for a 
        consideration of access to telephone services by a hotel to its 
        guests is a sale under this clause.  Sales by municipal 
        corporations in a proprietary capacity are included in the 
        provisions of this clause.  The furnishing of water and sewer 
        services for residential use shall not be considered a sale.  
        The sale of natural gas to be used as a fuel in vehicles 
        propelled by natural gas shall not be considered a sale for the 
        purposes of this section; 
           (g) The furnishing for a consideration of cable television 
        services, including charges for basic service, charges for 
        premium service, and any other charges for any other 
        pay-per-view, monthly, or similar television services; 
           (h) The furnishing for a consideration of parking services, 
        whether on a contractual, hourly, or other periodic basis, 
        except for parking at a meter; 
           (i) The furnishing for a consideration of services listed 
        in this paragraph: 
           (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 services, security services, burglar, fire 
        alarm, and armored car services; but not including services 
        performed within the jurisdiction they serve by off-duty 
        licensed peace officers as defined in section 626.84, 
        subdivision 1, or services provided by a nonprofit organization 
        for monitoring and electronic surveillance of persons placed on 
        in-home detention pursuant to court order or under the direction 
        of the Minnesota department of corrections; 
           (v) pet grooming services; 
           (vi) lawn care, fertilizing, mowing, spraying and sprigging 
        services; garden planting and maintenance; tree, bush, and shrub 
        pruning, bracing, spraying, and surgery; indoor plant care; 
        tree, bush, shrub and stump removal; and tree trimming for 
        public utility lines.  Services performed under a construction 
        contract for the installation of shrubbery, plants, sod, trees, 
        bushes, and similar items are not taxable; 
           (vii) mixed municipal solid waste management services as 
        described in section 297A.45; 
           (viii) 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 
           (ix) the furnishing for consideration of lodging, board and 
        care services for animals in kennels and other similar 
        arrangements, but excluding veterinary and horse boarding 
        services. 
        The services listed in this paragraph are taxable under section 
        297A.02 if the service is performed wholly within Minnesota or 
        if the service is performed partly within and partly without 
        Minnesota and the greater proportion of the service is performed 
        in Minnesota, based on the cost of performance.  In applying the 
        provisions of this chapter, the terms "tangible personal 
        property" and "sales at retail" include taxable services and the 
        provision of taxable services, unless specifically provided 
        otherwise.  Services performed by an employee for an employer 
        are not taxable under this paragraph.  Services performed by a 
        partnership or association for another partnership or 
        association are not taxable under this paragraph if one of the 
        entities owns or controls more than 80 percent of the voting 
        power of the equity interest in the other entity.  Services 
        performed between members of an affiliated group of corporations 
        are not taxable.  For purposes of this section, "affiliated 
        group of corporations" includes those entities that would be 
        classified as a member of an affiliated group under United 
        States Code, title 26, section 1504, as amended through December 
        31, 1987, and who are eligible to file a consolidated tax return 
        for federal income tax purposes; 
           (j) A "sale" and a "purchase" includes the transfer of 
        computer software, meaning information and directions that 
        dictate the function performed by data processing equipment.  A 
        "sale" and a "purchase" does not include the design, 
        development, writing, translation, fabrication, lease, or 
        transfer for a consideration of title or possession of a custom 
        computer program; and 
           (k) The granting of membership in a club, association, or 
        other organization if: 
           (1) 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 
           (2) use of the sports and athletic facilities is not made 
        available to the general public on the same basis as it is made 
        available to members.  
        Granting of membership includes both one-time initiation fees 
        and periodic membership dues.  Sports and athletic facilities 
        include golf courses, tennis, racquetball, handball and squash 
        courts, basketball and volleyball facilities, running tracks, 
        exercise equipment, swimming pools, and other similar athletic 
        or sports facilities.  The provisions of this paragraph do not 
        apply to camps or other recreation facilities owned and operated 
        by an exempt organization under section 501(c)(3) of the 
        Internal Revenue Code of 1986, as amended through December 31, 
        1992, for educational and social activities for young people 
        primarily age 18 and under.  
           Sec. 5.  Minnesota Statutes 1996, section 297A.01, 
        subdivision 4, is amended to read: 
           Subd. 4.  (a) A "retail sale" or "sale at retail" means a 
        sale for any purpose other than resale in the regular course of 
        business.  
           (b) Property utilized by the owner only by leasing such 
        property to others or by holding it in an effort to so lease it, 
        and which is put to no use by the owner other than resale after 
        such lease or effort to lease, shall be considered property 
        purchased for resale.  
           (c) Master computer software programs that are purchased 
        and used to make copies for sale or lease are considered 
        property purchased for resale.  
           (d) Sales 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 are "retail sales" or "sales at retail" in whatever 
        quantity sold and whether or not for purpose of resale in the 
        form of real property or otherwise.  
           (e) A sale of carpeting, linoleum, or other similar floor 
        covering which includes installation of the carpeting, linoleum, 
        or other similar floor covering is a contract for the 
        improvement of real property.  
           (f) A sale of shrubbery, plants, sod, trees, and similar 
        items that includes installation of the shrubbery, plants, sod, 
        trees, and similar items is a contract for the improvement of 
        real property.  
           (g) Aircraft and parts for the repair thereof purchased by 
        a nonprofit, incorporated flying club or association utilized 
        solely by the corporation by leasing such aircraft to 
        shareholders of the corporation shall be considered property 
        purchased for resale.  The leasing of the aircraft to the 
        shareholders by the flying club or association shall be 
        considered a sale.  Leasing of aircraft utilized by a lessee for 
        the purpose of leasing to others, whether or not the lessee also 
        utilizes the aircraft for flight instruction where no separate 
        charge is made for aircraft rental or for charter service, shall 
        be considered a purchase for resale; provided, however, that a 
        proportionate share of the lease payment reflecting use for 
        flight instruction or charter service is subject to tax pursuant 
        to section 297A.14. 
           (h) Tangible personal property that is awarded as prizes 
        shall not be considered property purchased for resale. 
           (i) Tangible personal property that is utilized or employed 
        in the furnishing or providing of services under section 
        297A.01, subdivision 3, paragraph (d), or in conducting lawful 
        gambling under chapter 349 or the state lottery under chapter 
        349A, including property given as promotional items, shall not 
        be considered property purchased for resale.  Machines, 
        equipment, or devices that are used to furnish, provide, or 
        dispense goods or services, including coin-operated devices, 
        shall not be considered property purchased for resale. 
           Sec. 6.  Minnesota Statutes 1996, section 297A.01, 
        subdivision 7, is amended to read: 
           Subd. 7.  "Storage" and "use" do not include the keeping, 
        or retaining or exercising of any right or power over in a 
        public warehouse of tangible personal property or tickets or 
        admissions to places of amusement or athletic events when 
        shipped or brought into Minnesota by common carrier, for the 
        purpose of subsequently being transported outside Minnesota and 
        thereafter used solely outside Minnesota, except in the course 
        of interstate commerce, or for the purpose of being processed, 
        fabricated or manufactured into, attached to or incorporated 
        into other tangible personal property to be transported outside 
        Minnesota and not thereafter returned to a point within 
        Minnesota, except in the course of interstate commerce. 
           Sec. 7.  Minnesota Statutes 1996, section 297A.01, 
        subdivision 11, is amended to read: 
           Subd. 11.  "Tangible personal property" means corporeal 
        personal property of any kind whatsoever, including property 
        which is to become real property as a result of incorporation, 
        attachment, or installation following its acquisition. 
           Personal property does not include: 
           (a) large ponderous machinery and equipment used in a 
        business or production activity which at common law would be 
        considered to be real property; 
           (b) property which is subject to an ad valorem property 
        tax; 
           (c) property described in section 272.02, subdivision 1, 
        clause (8), paragraphs (a) to (d); 
           (d) property described in section 272.03, subdivision 2, 
        clauses (3) and (5). 
           Tangible personal property includes computer software, 
        whether contained on tape, discs, cards, or other 
        devices.  Tangible personal property also includes prepaid 
        telephone calling cards. 
           Sec. 8.  Minnesota Statutes 1996, section 297A.01, 
        subdivision 16, is amended to read: 
           Subd. 16.  [CAPITAL EQUIPMENT.] (a) Capital equipment means 
        machinery and equipment purchased or leased for use in this 
        state and used by the purchaser or lessee primarily for 
        manufacturing, fabricating, mining, or refining tangible 
        personal property to be sold ultimately at retail and for 
        electronically transmitting results retrieved by a customer of 
        an on-line computerized data retrieval system.  
           (b) Capital equipment includes all machinery and equipment 
        that is essential to the integrated production process.  Capital 
        equipment includes, but is not limited to: 
           (1) machinery and equipment used or required 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; or 
           (4) materials and supplies necessary 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; or 
           (7) materials used to construct and install special purpose 
        buildings used in the production process. 
           (c) Capital equipment does not include the following: 
           (1) repair or replacement parts, including accessories, 
        whether purchased as spare parts, repair parts, or as upgrades 
        or modifications, and whether purchased before or after the 
        machinery or equipment is placed into service.  Parts or 
        accessories are treated as capital equipment only to the extent 
        that they are a part of and are essential to the operation of 
        the machinery or equipment as initially purchased; 
           (2) motor vehicles taxed under chapter 297B; 
           (3) (2) machinery or equipment used to receive or store raw 
        materials; 
           (4) (3) building materials; 
           (5) (4) machinery or equipment used for nonproduction 
        purposes, including, but not limited to, the following:  
        machinery and equipment used for plant security, fire 
        prevention, first aid, and hospital stations; machinery and 
        equipment used in support operations or for administrative 
        purposes; machinery and equipment used solely for pollution 
        control, prevention, or abatement; and machinery and equipment 
        used in plant cleaning, disposal of scrap and waste, plant 
        communications, space heating, lighting, or safety; 
           (6) (5) "farm machinery" as defined by subdivision 15, and 
        "aquaculture production equipment" as defined by subdivision 19, 
        and "replacement capital equipment" as defined by subdivision 
        20; or 
           (7) (6) 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 software, used in operating, 
        controlling, or regulating machinery and equipment; and any 
        subunit or assembly comprising a component of any machinery or 
        accessory or attachment parts of machinery, such as tools, dies, 
        jigs, patterns, and molds. 
           (2) "Fabricating" means to make, build, create, produce, or 
        assemble components or property to work in a new or different 
        manner. 
           (3) "Machinery" means mechanical, electronic, or electrical 
        devices, including computers and 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 the completion of the product, including packaging of 
        the product. 
           (4) "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. 
           (5) "Mining" means the extraction of minerals, ores, stone, 
        and peat. 
           (6) "On-line data retrieval system" means a system whose 
        cumulation of information is equally available and accessible to 
        all its customers. 
           (7) "Pollution control equipment" means machinery and 
        equipment used to eliminate, prevent, or reduce pollution 
        resulting from an activity described in paragraph (a). 
           (8) "Primarily" means machinery and equipment used 50 
        percent or more of the time in an activity described in 
        paragraph (a). 
           (9) "Refining" means the process of converting a natural 
        resource to a product, including the treatment of water to be 
        sold at retail. 
           (e) For purposes of this subdivision the requirement that 
        the machinery or equipment "must be used by the purchaser or 
        lessee" means that the person who purchases or leases the 
        machinery or equipment must be the one who uses it for the 
        qualifying purpose.  When a contractor buys and installs 
        machinery or equipment as part of an improvement to real 
        property, only the contractor is considered the purchaser. 
           (f) Notwithstanding prior provisions of this subdivision, 
        machinery and equipment purchased or leased to replace machinery 
        and equipment used in the mining or production of taconite shall 
        qualify as capital equipment. 
           Sec. 9.  Minnesota Statutes 1996, section 297A.09, is 
        amended to read: 
           297A.09 [PRESUMPTION OF TAX; BURDEN OF PROOF.] 
           For the purpose of the proper administration of sections 
        297A.01 to 297A.44 and to prevent evasion of the tax, it shall 
        be presumed that all gross receipts are subject to the tax until 
        the contrary is established.  The burden of proving that a sale 
        is not a sale at retail is upon the person who makes the sale, 
        but that person may take from the purchaser, at the time the 
        exempt purchase occurs, an exemption certificate to the effect 
        that the property purchased is for resale or that the sale is 
        otherwise exempt from the application of the tax imposed by 
        sections 297A.01 to 297A.44.  A person asserting a claim that 
        certain sales are exempt, who does not have the required 
        exemption certificates in their possession, shall acquire the 
        certificates within 60 days after receiving written notice from 
        the commissioner that the certificates are required.  If the 
        certificates are not obtained within the 60-day period, the 
        sales are deemed taxable sales under this chapter. 
           Sec. 10.  Minnesota Statutes 1996, section 297A.15, 
        subdivision 7, is amended to read: 
           Subd. 7.  [REFUND; APPROPRIATION; ADULT AND JUVENILE 
        CORRECTIONAL FACILITIES.] (a) If construction materials and 
        supplies described in paragraph (b) section 297A.25, subdivision 
        63, are purchased by a contractor, subcontractor, or builder as 
        part of a lump-sum contract or similar type of contract with a 
        price covering both labor and materials for use in the project, 
        a refund equal to 20 percent of the taxes paid by the 
        contractor, subcontractor, or builder must be paid to the 
        governmental subdivision.  The tax must be imposed and collected 
        as if the sales were taxable and the rate under section 297A.02, 
        subdivision 1, applied.  An application for refund must be 
        submitted by the governmental subdivision and must include 
        sufficient information to permit the commissioner to verify the 
        sales taxes paid for the project.  The contractor, 
        subcontractor, or builder must furnish to the governmental 
        subdivision a statement of the cost of the construction 
        materials and supplies and the sales taxes paid on them.  The 
        amount required to make the refunds is annually appropriated to 
        the commissioner.  Interest must be paid on the refund at the 
        rate in section 270.76 from 60 days after the date the refund 
        claim is filed with the commissioner. 
           (b) Construction materials and supplies qualify for the 
        refund under this section if:  (1) the materials and supplies 
        are for use in a project to construct or improve an adult or 
        juvenile correctional facility in a county, home rule charter 
        city, or statutory city, and (2) the project is mandated by 
        state or federal law, rule, or regulation.  The refund applies 
        regardless of whether the materials and supplies are purchased 
        by the city or county, or by a contractor, subcontractor, or 
        builder under a contract with the city or county. 
           Sec. 11.  Minnesota Statutes 1996, section 297A.211, 
        subdivision 1, is amended to read: 
           Subdivision 1.  Every person, as defined in this chapter, 
        who is engaged in interstate for-hire transportation of tangible 
        personal property or passengers by motor vehicle may at their 
        option, under rules prescribed by the commissioner, register as 
        retailers and pay the taxes imposed by this chapter in 
        accordance with this section.  Any taxes paid under this section 
        are deemed use taxes, except local sales taxes when no 
        corresponding local use tax is imposed.  Persons referred to 
        herein are:  (1) persons possessing a certificate or permit or 
        having completed a registration process that authorizes for-hire 
        transportation of property or passengers from the United States 
        Department of Transportation, the transportation regulation 
        board, or the department of transportation; or (2) persons 
        transporting commodities defined as "exempt" in for-hire 
        transportation in interstate commerce; or (3) persons who, 
        pursuant to contracts with persons described in clause (1) or 
        (2) above, transport tangible personal property in interstate 
        commerce.  Persons qualifying under clauses (2) and (3) must 
        maintain on a current basis the same type of mileage records 
        that are required by persons specified in clause (1) by the 
        United States Department of Transportation.  Persons who in the 
        course of their business are transporting solely their own goods 
        in interstate commerce may also register as retailers pursuant 
        to rules prescribed by the commissioner and pay the taxes 
        imposed by this chapter in accordance with this section.  
           Sec. 12.  [297A.213] [DIRECT PAYMENT BY PURCHASERS 
        PERMITTED.] 
           The commissioner may permit purchasers to pay taxes imposed 
        by this chapter directly to the commissioner.  Any taxes paid by 
        purchasers under this section are deemed use taxes, except local 
        sales taxes when no corresponding local use tax is imposed. 
           Sec. 13.  Minnesota Statutes 1996, section 297A.25, 
        subdivision 2, is amended to read: 
           Subd. 2.  [FOOD PRODUCTS.] The gross receipts from the sale 
        of food products including but not limited to cereal and cereal 
        products, butter, cheese, milk and milk products, oleomargarine, 
        meat and meat products, fish and fish products, eggs and egg 
        products, vegetables and vegetable products, fruit and fruit 
        products, spices and salt, sugar and sugar products, coffee and 
        coffee substitutes, tea, cocoa and cocoa products, and food 
        products which are not taxable pursuant to section 297A.01, 
        subdivision 3, clause (c) are exempt.  This exemption does not 
        include the following:  
           (1) candy and candy products, except when sold for 
        fundraising purposes by a nonprofit organization that provides 
        educational and social activities for young people primarily 
        aged 18 and under; 
           (2) carbonated beverages, beverages commonly referred to as 
        soft drinks containing less than 15 percent fruit juice, or 
        bottled water other than noncarbonated and noneffervescent 
        bottled water sold in individual containers of one-half gallon 
        or more in size. 
           Sec. 14.  Minnesota Statutes 1996, section 297A.25, 
        subdivision 3, is amended to read: 
           Subd. 3.  [MEDICINES; MEDICAL DEVICES.] The gross receipts 
        from the sale of prescribed drugs, prescribed medicine and 
        insulin, intended for use, internal or external, in the cure, 
        mitigation, treatment or prevention of illness or disease in 
        human beings are exempt, together with prescription glasses, 
        fever thermometers, therapeutic, and prosthetic devices.  
        "Prescribed drugs" or "prescribed medicine" includes 
        over-the-counter drugs or medicine prescribed by a licensed 
        physician.  "Therapeutic devices" includes reusable finger 
        pricking devices for the extraction of blood, blood glucose 
        monitoring machines, and other diagnostic agents used in 
        diagnosing, monitoring, or treating diabetes.  Nonprescription 
        analgesics consisting principally (determined by the weight of 
        all ingredients) of acetaminophen, acetylsalicylic acid, 
        ibuprofen, ketoprofen, naproxen, and other nonprescription 
        analgesics that are approved by the United States Food and Drug 
        Administration for internal use by human beings, or a 
        combination thereof, are exempt. 
           Sec. 15.  Minnesota Statutes 1996, section 297A.25, 
        subdivision 5, is amended to read: 
           Subd. 5.  [OUTSTATE TRANSPORT OR DELIVERY.] The gross 
        receipts from the following sales of, and storage, use, or 
        consumption of, tangible personal property are exempt:  
           (1) property which, without intermediate use, is shipped or 
        transported outside Minnesota by the purchaser and thereafter 
        used in a trade or business or is stored, processed, fabricated 
        or manufactured into, attached to or incorporated into other 
        tangible personal property transported or shipped outside 
        Minnesota and thereafter used in a trade or business outside 
        Minnesota, and which is not thereafter returned to a point 
        within Minnesota, except in the course of interstate commerce 
        (storage shall not constitute intermediate use); provided that 
        the property is not subject to tax in that state or country to 
        which it is transported for storage or use and provided further 
        that sales of tangible personal property to be used in other 
        states or countries as part of a maintenance contract shall be 
        specifically exempt; or 
           (2) property which the seller delivers to a common carrier 
        for delivery outside Minnesota, places in the United States mail 
        or parcel post directed to the purchaser outside Minnesota, or 
        delivers to the purchaser outside Minnesota by means of the 
        seller's own delivery vehicles, and which is not thereafter 
        returned to a point within Minnesota, except in the course of 
        interstate commerce. 
           Sec. 16.  Minnesota Statutes 1996, section 297A.25, 
        subdivision 7, is amended to read: 
           Subd. 7.  [PETROLEUM PRODUCTS.] The gross receipts from the 
        sale of and storage, use or consumption of the following 
        petroleum products are exempt:  
           (1) products upon which a tax has been imposed and paid 
        under the provisions of chapter 296, and no refund has been or 
        will be allowed because the buyer used the fuel for nonhighway 
        use; 
           (2) products which are used in the improvement of 
        agricultural land by constructing, maintaining, and repairing 
        drainage ditches, tile drainage systems, grass waterways, water 
        impoundment, and other erosion control structures; 
           (3) products purchased by a transit system receiving 
        financial assistance under section 174.24 or 473.384; or 
           (4) products used in a passenger snowmobile, as defined in 
        section 296.01, subdivision 27a, for off-highway business use as 
        part of the operations of a resort as provided under section 
        296.18, subdivision 1, clause (2); or 
           (5) products purchased by a state or a political 
        subdivision of a state for use in motor vehicles exempt from 
        registration under section 168.012, subdivision 1, paragraph (b).
           Sec. 17.  Minnesota Statutes 1996, section 297A.25, 
        subdivision 56, is amended to read: 
           Subd. 56.  [FIREFIGHTERS PERSONAL PROTECTIVE EQUIPMENT.] 
        The gross receipts from the sale of and storage, use, or 
        consumption of firefighters personal protective equipment are 
        exempt if purchased by, or when authorized by and for the use 
        of, an organized fire department, fire protection district, or 
        fire company, regularly charged with the responsibility of 
        providing fire protection to the state or a political 
        subdivision.  For purposes of this subdivision, "personal 
        protective equipment" includes:  helmets (including face 
        shields, chin straps, and neck liners), bunker coats and pants 
        (including pant suspenders), boots, gloves, head covers or 
        hoods, wildfire jackets, protective coveralls, goggles, 
        self-contained breathing apparatuses, canister filter masks, 
        personal alert safety systems, spanner belts, optical or thermal 
        imaging search devices, and all safety equipment required by the 
        Occupational Safety and Health Administration. 
           Sec. 18.  Minnesota Statutes 1996, section 297A.25, 
        subdivision 59, is amended to read: 
           Subd. 59.  [FARM MACHINERY.] From July 1, 1994, until June 
        30, 1997, The gross receipts from the sale of used farm 
        machinery are exempt. 
           Sec. 19.  Minnesota Statutes 1996, section 297A.25, is 
        amended by adding a subdivision to read: 
           Subd. 62.  [MATERIALS USED IN PROVIDING TAXABLE 
        SERVICES.] (a) The gross receipts from the sale of and the 
        storage, use, or consumption of all materials used or consumed 
        in providing a taxable service intended to be sold ultimately at 
        retail are exempt. 
           (b) This exemption includes, but is not limited to: 
           (1) chemicals, lubricants, packaging materials, seeds, 
        trees, fertilizers, and herbicides, used or consumed in 
        providing the taxable service; 
           (2) chemicals used to treat waste generated as a result of 
        providing the taxable service; and 
           (3) accessory tools, equipment, and other items that are 
        separate detachable units used in providing the service and that 
        have an ordinary useful life of less than 12 months. 
           (c) This exemption does not include: 
           (1) machinery, equipment, implements, tools, accessories, 
        appliances, contrivances, furniture, and fixtures used in 
        providing the taxable service; and 
           (2) fuel, electricity, gas, and steam used for space 
        heating or lighting. 
           (d) For purposes of this subdivision, "taxable services" 
        means the services listed in section 297A.01, subdivision 3, 
        paragraph (i). 
           Sec. 20.  Minnesota Statutes 1996, section 297A.25, is 
        amended by adding a subdivision to read: 
           Subd. 63.  [HOSPITALS.] The gross receipts from the sale of 
        tangible personal property to, and the storage, use, or 
        consumption of such property by, a hospital are exempt, if the 
        property purchased is to be used in providing hospital services 
        to human beings.  For purposes of this subdivision, "hospital" 
        means a hospital organized and operated for charitable purposes 
        within the meaning of section 501(c)(3) of the Internal Revenue 
        Code of 1986, as amended, and licensed under chapter 144 or by 
        any other jurisdiction.  For purposes of this subdivision, 
        "hospital services" are services authorized or required to be 
        performed by a "hospital" under chapter 144 and regulations 
        thereunder or under the applicable licensure law of any other 
        jurisdiction.  This exemption does not apply to purchases made 
        by a clinic, physician's office, or any other medical facility 
        not operating as a hospital, even though the clinic, office, or 
        facility may be owned and operated by a hospital.  Sales 
        exempted by this subdivision do not include sales under section 
        297A.01, subdivision 3, paragraphs (c) and (e).  This exemption 
        does not apply to building, construction, or reconstruction 
        materials purchased by a contractor or a subcontractor as a part 
        of a lump-sum contract or similar type of contract with a 
        guaranteed maximum price covering both labor and materials for 
        use in the construction, alteration, or repair of a hospital.  
        This exemption does not apply to construction materials to be 
        used in constructing buildings or facilities which will not be 
        used principally by a hospital.  This exemption does not apply 
        to the leasing of a motor vehicle as defined in section 297B.01, 
        subdivision 5. 
           Sec. 21.  Minnesota Statutes 1996, section 297A.25, is 
        amended by adding a subdivision to read: 
           Subd. 64.  [COPIES OF COURT REPORTER DOCUMENTS.] The gross 
        receipts from sales of, and use, storage, or consumption of, 
        transcripts or copies of transcripts of verbatim testimony 
        produced and sold by court reporters or other transcribers of 
        legal proceedings to individuals or entities that are parties to 
        or representatives of parties to the proceeding to which the 
        transcript relates, are exempt. 
           Sec. 22.  Minnesota Statutes 1996, section 297A.25, is 
        amended by adding a subdivision to read: 
           Subd. 65.  [CONSTRUCTION MATERIALS FOR CORRECTIONAL 
        FACILITIES.] The gross receipts from the sale of and storage, 
        use, or consumption of construction materials and supplies are 
        exempt from the tax imposed under this chapter if purchased for 
        use in a project to construct or improve an adult or juvenile 
        correctional facility in a county, home rule charter city, or 
        statutory city, and if the project is mandated by state or 
        federal law, rule, or regulation.  The exemption applies 
        regardless of whether the materials and supplies are purchased 
        by the city or county, or by a contractor, subcontractor, or 
        builder under a contract with the city or county. 
           Sec. 23.  Minnesota Statutes 1996, section 297A.25, is 
        amended by adding a subdivision to read: 
           Subd. 66.  [CONSTRUCTION MATERIALS; LAKE SUPERIOR 
        CENTER.] Construction materials and supplies are exempt from the 
        tax imposed under this chapter, regardless of whether purchased 
        by the owner, a contractor, subcontractor, or builder, provided 
        the materials and supplies are used or consumed in constructing 
        the Lake Superior Center. 
           Sec. 24.  Minnesota Statutes 1996, section 297A.25, is 
        amended by adding a subdivision to read: 
           Subd. 67.  [CONSTRUCTION MATERIALS; SCIENCE 
        MUSEUM.] Construction materials and supplies are exempt from the 
        tax imposed under this chapter, regardless of whether purchased 
        by the owner, a contractor, subcontractor, or builder, provided 
        the materials and supplies are used or consumed in constructing 
        the Science Museum of Minnesota. 
           Sec. 25.  Minnesota Statutes 1996, section 297A.25, is 
        amended by adding a subdivision to read: 
           Subd. 68.  [CONSTRUCTION MATERIALS; BUSINESS INCUBATOR AND 
        INDUSTRIAL PARK FACILITY.] Materials and supplies used or 
        consumed in constructing, or incorporated into the construction 
        of, an exempted facility as defined in this subdivision are 
        exempt from the taxes imposed under this chapter and from any 
        sales and use tax imposed by a local unit of government, 
        notwithstanding any ordinance or city charter provision. 
           As used in this subdivision, an "exempted facility" is a 
        facility that includes a business incubator and industrial park 
        that: 
           (1) is owned and operated by a nonprofit charitable 
        organization that qualifies for tax exemption under section 
        501(c)(3) of the Internal Revenue Code; 
           (2) is used for the development of nonretail businesses, 
        offering access to equipment, space, services, and advice to the 
        tenant businesses, for the purpose of encouraging economic 
        development and job creation in the area served by the 
        organization, and emphasizes development of businesses that 
        manufacture products from materials found in the waste stream, 
        or manufacture alternative energy and conservation systems, or 
        make use of emerging environmental technologies; 
           (3) includes in its structure systems of material and 
        energy exchanges that use waste products from one industrial 
        process as sources of energy and material for other processes; 
        and 
           (4) makes use of solar and wind energy technology and 
        incorporates salvaged materials in its construction. 
           Sec. 26.  Minnesota Statutes 1996, section 297A.25, is 
        amended by adding a subdivision to read: 
           Subd. 69.  [REGIONWIDE PUBLIC SAFETY RADIO COMMUNICATION 
        SYSTEM; PRODUCTS AND SERVICES.] The gross receipts from the sale 
        of, and the storage, use, or consumption of, products and 
        services including 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 473.891 to 
        473.905, are exempt.  For purposes of this subdivision, backbone 
        system is defined in section 473.891, subdivision 9. 
           Sec. 27.  Minnesota Statutes 1996, section 297A.25, is 
        amended by adding a subdivision to read: 
           Subd. 70.  [ALFALFA PROCESSING FACILITIES CONSTRUCTION 
        MATERIALS.] Purchases of construction materials and supplies are 
        exempt from the sales and use taxes imposed under this chapter, 
        regardless of whether purchased by the owner or a contractor, 
        subcontractor, or builder, if: 
           (1) the materials and supplies are used or consumed in 
        constructing a facility which either (i) develops market-value 
        agricultural products made from alfalfa leaf material, or (ii) 
        produces biomass energy fuel or electricity from alfalfa stems 
        in accordance with the biomass mandate imposed under section 
        216B.2424; and 
           (2) the total capital investment made in the value-added 
        agricultural products and biomass electric generation facilities 
        is at least $50,000,000; or 
           (3) the materials and supplies are used or consumed in 
        constructing, equipping or modifying a district heating and 
        cooling system cogeneration facility that: 
           (i) utilizes wood waste as a primary fuel source; and 
           (ii) satisfies the requirements of the biomass mandate in 
        section 216B.2424, subdivision 5. 
           Sec. 28.  Minnesota Statutes 1996, section 297A.25, is 
        amended by adding a subdivision to read: 
           Subd. 71.  [FIREWOOD.] The gross receipts from the sale of 
        and the storage, use, or consumption of wood used for fires for 
        heating, cooking, or any other purpose, except for the 
        generation of electricity, steam, or heat to be sold at retail, 
        are exempt. 
           Sec. 29.  Minnesota Statutes 1996, section 297A.25, is 
        amended by adding a subdivision to read: 
           Subd. 72.  [WIND ENERGY CONVERSION SYSTEMS.] The gross 
        receipts from the sale of and the storage, use, or consumption 
        of wind energy conversion systems, as defined in section 
        216C.06, subdivision 12, and the materials used to manufacture, 
        install, construct, repair, or replace them are exempt if the 
        systems are used as an electric power source. 
           Sec. 30.  [297A.48] [LOCAL SALES TAX RULES.] 
           Subdivision 1.  [AUTHORIZATION; SCOPE.] (a) A political 
        subdivision of this state may impose a general sales tax if 
        permitted by special law or if the subdivision enacted and 
        imposed the tax before the effective date of section 477A.016 
        and its predecessor provision. 
           (b) This section governs the imposition of a general sales 
        tax by the political subdivision.  The provisions of this 
        section preempt the provisions of any special law: 
           (1) enacted before its effective date, or 
           (2) enacted after its effective date that does not 
        explicitly exempt the special law provision from this section's 
        rules by reference. 
           (c) This section does not apply to or preempt a sales tax 
        on motor vehicles or a special excise tax on motor vehicles. 
           Subd. 2.  [TAX BASE.] (a) The tax applies to sales taxable 
        under this chapter that occur within the political subdivision. 
           (b) Taxable services are subject to a political 
        subdivision's sales tax, if they are performed either: 
           (1) within the political subdivision, or 
           (2) partly within and partly without the political 
        subdivision and more of the service is performed within the 
        political subdivision, based on the cost of performance. 
           Subd. 3.  [TAX RATE.] (a) The tax rate is as specified in 
        the special law authorization and as imposed by the political 
        subdivision. 
           (b) The full political subdivision rate applies to any 
        sales that are taxed at a state rate less than or more than the 
        state general sales and use tax rate. 
           Subd. 4.  [USE TAX.] A compensating use tax applies, at the 
        same rate as the sales tax, on the use, storage, distribution, 
        or consumption of tangible personal property or taxable services.
           Subd. 5.  [EXEMPTIONS.] (a) All goods or services that are 
        otherwise exempt from taxation under this chapter are exempt 
        from a political subdivision's tax. 
           (b) The gross receipts from the sale of tangible personal 
        property that meets the requirement of section 297A.25, 
        subdivision 5, are exempt, except the qualification test applies 
        based on the boundaries of the political subdivision instead of 
        the state of Minnesota. 
           (c) All mobile transportation equipment, and parts and 
        accessories attached to or to be attached to the equipment are 
        exempt, if purchased by a holder of a motor carrier direct pay 
        permit under section 297A.211.  
           Subd. 6.  [CREDIT FOR OTHER LOCAL TAXES.] If a person paid 
        sales or use tax to another political subdivision on tangible 
        personal property or another item subject to tax under this 
        section, a credit applies against the tax imposed under this 
        section.  The credit equals the tax the person paid to the other 
        political subdivision for the item.  
           Subd. 7.  [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 must refund to the taxpayer the full 
        amount of the political subdivision taxes paid on exempt sales 
        or use. 
           (c) A political subdivision that is collecting and 
        administering its own sales and use tax before January 1, 1998, 
        may elect to be exempt from this subdivision and subdivision 8. 
           Subd. 8.  [REVENUES; COST OF COLLECTION.] The commissioner 
        shall remit the proceeds of the tax, less refunds and a 
        proportionate share of the cost of collection, at least 
        quarterly, to the political subdivision.  The commissioner shall 
        deduct from the proceeds remitted an amount that equals 
           (1) the direct and indirect costs of the department to 
        administer, audit, and collect the political subdivision's tax, 
        plus 
           (2) the political subdivision's proportionate share of the 
        indirect cost of administering all taxes under this section. 
           Subd. 9.  [EFFECTIVE DATES; NOTIFICATION.] (a) A political 
        subdivision may impose a tax under this section starting only on 
        the first day of a calendar quarter.  A political subdivision 
        may repeal a tax under this section stopping only on the last 
        day of a calendar quarter. 
           (b) The political subdivision must notify the commissioner 
        of revenue at least 90 days before imposing or repealing a tax 
        under this section. 
           Subd. 10.  [APPLICATION.] This section applies to all local 
        sales taxes authorized on or after the day of enactment of this 
        act.  Starting January 1, 2000, this section applies to all 
        local sales tax that were authorized before the day of enactment 
        of this act. 
           Sec. 31.  Minnesota Statutes 1996, section 297B.01, 
        subdivision 7, is amended to read: 
           Subd. 7.  [SALE, SELLS, SELLING, PURCHASE, PURCHASED, OR 
        ACQUIRED.] "Sale," "sells," "selling," "purchase," "purchased," 
        or "acquired" means any transfer of title of any motor vehicle, 
        whether absolutely or conditionally, for a consideration in 
        money or by exchange or barter for any purpose other than resale 
        in the regular course of business.  Any motor vehicle utilized 
        by the owner only by leasing such vehicle to others or by 
        holding it in an effort to so lease it, and which is put to no 
        other use by the owner other than resale after such lease or 
        effort to lease, shall be considered property purchased for 
        resale.  The terms also shall include any transfer of title or 
        ownership of a motor vehicle by way of gift or by any other 
        manner or by any other means whatsoever, for or without 
        consideration, except that these terms shall not include: 
           (a) the acquisition of a motor vehicle by inheritance from 
        or by bequest of, a decedent who owned it; 
           (b) the transfer of a motor vehicle which was previously 
        licensed in the names of two or more joint tenants and 
        subsequently transferred without monetary consideration to one 
        or more of the joint tenants; 
           (c) the transfer of a motor vehicle by way of gift between 
        a husband and wife or parent and child; or 
           (d) the voluntary or involuntary transfer of a motor 
        vehicle between a husband and wife in a divorce proceeding.; or 
           (e) the transfer of a motor vehicle by way of a gift to an 
        organization that is exempt from federal income taxation under 
        section 501(c)(3) of the Internal Revenue Code, as amended 
        through December 31, 1996, when the motor vehicle will be used 
        exclusively for religious, charitable, or educational purposes. 
           Sec. 32.  Minnesota Statutes 1996, section 297B.01, 
        subdivision 8, is amended to read: 
           Subd. 8.  [PURCHASE PRICE.] "Purchase price" means the 
        total consideration valued in money for a sale, whether paid in 
        money or otherwise.  The purchase price excludes the amount of a 
        manufacturer's rebate paid or payable to the purchaser.  If a 
        motor vehicle is taken in trade as a credit or as part payment 
        on a motor vehicle taxable under this chapter, the credit or 
        trade-in value allowed by the person selling the motor vehicle 
        shall be deducted from the total selling price to establish the 
        purchase price of the vehicle being sold and the trade-in 
        allowance allowed by the seller shall constitute the purchase 
        price of the motor vehicle accepted as a trade-in.  The purchase 
        price in those instances where the motor vehicle is acquired by 
        gift or by any other transfer for a nominal or no monetary 
        consideration shall also include the average value of similar 
        motor vehicles, established by standards and guides as 
        determined by the motor vehicle registrar.  The purchase price 
        in those instances where a motor vehicle is manufactured by a 
        person who registers it under the laws of this state shall mean 
        the manufactured cost of such motor vehicle and manufactured 
        cost shall mean the amount expended for materials, labor and 
        other properly allocable costs of manufacture, except that in 
        the absence of actual expenditures for the manufacture of a part 
        or all of the motor vehicle, manufactured costs shall mean the 
        reasonable value of the completed motor vehicle.  
           The term "purchase price" shall not include the portion of 
        the value of a motor vehicle due solely to modifications 
        necessary to make the motor vehicle handicapped accessible.  The 
        term "purchase price" shall not include the transfer of a motor 
        vehicle by way of gift between a husband and wife or parent and 
        child, or to a nonprofit organization as provided under section 
        297B.01, paragraph (e), nor shall it include the transfer of a 
        motor vehicle by a guardian to a ward when there is no monetary 
        consideration and the title to such vehicle was registered in 
        the name of the guardian, as guardian, only because the ward was 
        a minor.  There shall not be included in "purchase price" the 
        amount of any tax imposed by the United States upon or with 
        respect to retail sales whether imposed upon the retailer or the 
        consumer.  
           The term "purchase price" shall not include the transfer of 
        a motor vehicle as a gift between a foster parent and foster 
        child.  For purposes of this subdivision, a foster relationship 
        exists, regardless of the age of the child, if (1) a foster 
        parent's home is or was licensed as a foster family home under 
        Minnesota Rules, parts 9545.0010 to 9545.0260, and (2) the 
        county verifies that the child was a state ward or in permanent 
        foster care. 
           Sec. 33.  Minnesota Statutes 1996, section 349.154, 
        subdivision 2, is amended to read: 
           Subd. 2.  [NET PROFIT REPORTS.] (a) Each licensed 
        organization must report monthly to the board on a form 
        prescribed by the board each expenditure and contribution of net 
        profits from lawful gambling.  The reports must provide for each 
        expenditure or contribution: 
           (1) the name, address, and telephone number of the 
        recipient of the expenditure or contribution; 
           (2) the date the contribution was approved by the 
        organization; 
           (3) the date, amount, and check number of the expenditure 
        or contribution; 
           (4) a brief description of how the expenditure or 
        contribution meets one or more of the purposes in section 
        349.12, subdivision 25; and 
           (5) in the case of expenditures authorized under section 
        349.12, subdivision 25, paragraph (a), clause (7), whether the 
        expenditure is for a facility or activity that primarily 
        benefits male or female participants. 
           (b) The board shall make available to the commissioners of 
        revenue and public safety copies of reports received under this 
        subdivision and requested by them. 
           (c) The report required under this subdivision must provide 
        for a separate accounting for all expenditures made from the 
        reporting organization's tax refund and or credit account 
        authorized under section 297E.02, subdivision 4, paragraph (d). 
           Sec. 34.  Minnesota Statutes 1996, section 349.19, 
        subdivision 2a, is amended to read: 
           Subd. 2a.  [TAX REFUND AND OR CREDIT ACCOUNT.] (a) Each 
        organization that receives a refund or credit under section 
        297E.02, subdivision 4, paragraph (d), must establish a separate 
        account designated as the tax and credit refund account.  The 
        organization must (1) within four business days of receiving a 
        refund under that paragraph deposit the refund in 
        the organization's gambling account, and (2) within four 
        business days of filing a tax return that claims a credit under 
        that paragraph, transfer from the separate account established 
        under subdivision 2 to the tax refund and credit account an 
        amount equal to the tax credit. 
           (b) The name and address of the bank, the account number 
        for the tax refund and credit account, and the names of 
        organization members authorized as signatories on the account 
        must be provided to the board within 30 days of the date when 
        the organization establishes the account.  Changes in the 
        information must be submitted to the board at least ten days 
        before the change is made. 
           (c) (b) The organization may expend money in the account 
        the tax refund or credit issued under section 297E.02, 
        subdivision 4, paragraph (d), only for lawful purposes, other 
        than lawful purposes described in section 349.012, subdivision 
        25, paragraph (a), clauses (8), (9), and (12).  Amounts in the 
        account received as refunds or allowed as credits must be spent 
        for qualifying lawful purposes no later than one year after the 
        refund or credit is deposited received. 
           Sec. 35.  Minnesota Statutes 1996, section 349.191, 
        subdivision 1b, is amended to read: 
           Subd. 1b.  [CREDIT AND SALES TO DELINQUENT DISTRIBUTORS.] 
        (a) If a manufacturer does not receive payment in full from a 
        distributor within 30 35 days of the delivery of gambling 
        equipment, the manufacturer must notify the board in writing of 
        the delinquency. 
           (b) If a manufacturer who has notified the board under 
        paragraph (a) has not received payment in full from the 
        distributor within 60 days of the notification under paragraph 
        (a), the manufacturer must notify the board of the continuing 
        delinquency. 
           (c) On receipt of a notice under paragraph (a), the board 
        shall order all manufacturers that until further notice from the 
        board, they may sell gambling equipment to the delinquent 
        distributor only on a cash basis with no credit extended.  On 
        receipt of a notice under paragraph (b), the board shall order 
        all manufacturers not to sell any gambling equipment to the 
        delinquent distributor. 
           (d) No manufacturer may extend credit or sell gambling 
        equipment to a distributor in violation of an order under 
        paragraph (c) until the board has authorized such credit or sale.
           Sec. 36.  Laws 1993, chapter 375, article 9, section 45, 
        subdivision 2, is amended to read: 
           Subd. 2.  [USE OF REVENUES.] (a) Revenues received from 
        taxes authorized by subdivision 1 shall be used by Cook county 
        to pay the cost of collecting the tax and to pay all or a 
        portion of the costs of expanding and improving the health care 
        facility located in the county and known as North Shore hospital.
        Authorized costs include, but are not limited to, securing or 
        paying debt service on bonds or other obligations issued to 
        finance the expansion and improvement of North Shore hospital.  
        The total capital expenditures payable from bond proceeds, 
        excluding investment earnings on bond proceeds and tax revenues, 
        shall not exceed $4,000,000. 
           (b) Additional revenues received from taxes authorized by 
        subdivision 1 may be used by Cook county to pay all or a portion 
        of the costs of betterment of North Shore care center and 
        providing additional improvements to North Shore hospital.  
        Authorized costs include, but are not limited to, securing or 
        paying debt service on bonds or other obligations issued to 
        finance the remodeling of North Shore care center and additional 
        improvements to North Shore hospital.  The total capital 
        expenditures payable from bond proceeds, excluding investment 
        earnings on bond proceeds and tax revenues, shall not exceed 
        $2,200,000. 
           Sec. 37.  Laws 1993, chapter 375, article 9, section 45, 
        subdivision 3, is amended to read: 
           Subd. 3.  [EXPIRATION OF TAXING AUTHORITY AND EXPENDITURE 
        LIMITATION.] The authority granted by subdivision 1 to Cook 
        county to impose a sales tax shall expire when the principal and 
        interest on any bonds or obligations issued under subdivision 4, 
        paragraph (a), to finance the expansion and improvement of North 
        Shore hospital described in subdivision 2, paragraph (a), have 
        been paid, or at an earlier time as the county shall, by 
        resolution, determine.  Any funds remaining after completion of 
        the improvements and retirement or redemption of the bonds may 
        be placed in the general fund of the county. 
           Sec. 38.  Laws 1993, chapter 375, article 9, section 45, 
        subdivision 4, is amended to read: 
           Subd. 4.  [BONDS.] (a) Cook county may issue general 
        obligation bonds in an amount not to exceed $4,000,000 for the 
        expansion and improvement of North Shore hospital,. 
           (b) Additionally, Cook county may issue general obligation 
        bonds in an amount not to exceed $2,200,000 for the betterment 
        of North Shore care center and additional improvements to North 
        Shore hospital.  
           (c) The bonds may be issued without election under 
        Minnesota Statutes, chapter 475, on the question of issuance of 
        the bonds or a property tax to pay them.  The debt represented 
        by the bonds issued for the expansion and improvement of North 
        Shore hospital shall not be included in computing any debt 
        limitations applicable to Cook county, and the levy of taxes 
        required by Minnesota Statutes, section 475.61, to pay principal 
        of and interest on the bonds shall not be subject to any levy 
        limitation or be included in computing or applying any levy 
        limitation applicable to the county. 
           Sec. 39.  Laws 1993, chapter 375, article 9, section 45, is 
        amended by adding a subdivision to read: 
           Subd. 5a.  [REFERENDUM.] If the governing body of Cook 
        county intends to use the sales tax proceeds as authorized by 
        subdivision 2, paragraph (b), it shall conduct a referendum on 
        the issue.  The question of so using the tax proceeds must be 
        submitted to the voters at a special or general election.  The 
        tax proceeds may not be used as provided in subdivision 2, 
        paragraph (b), unless a majority of votes cast on the question 
        are in the affirmative.  The commissioner of revenue shall 
        prepare a suggested form of question to be presented at the 
        election.  The referendum must be held at a special or general 
        election before December 1, 1997. 
           Sec. 40.  Laws 1993, chapter 375, article 9, section 46, 
        subdivision 2, 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. 
           (b) 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) the operating expenses of cultural organizations in the 
        city, provided that the amount spent under this clause may not 
        exceed ten percent of the total amount spent under this 
        paragraph. 
           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 period. 
           Sec. 41.  [CITY OF WILLMAR; TAXES.] 
           Subdivision 1.  [SALES AND USE TAX AUTHORIZED.] Pursuant to 
        the approval of the city voters at the general election held on 
        November 5, 1996, the city of Willmar may, by ordinance, impose, 
        for the purposes specified in subdivision 3, a sales and use tax 
        of up to one-half of one percent.  The provisions of Minnesota 
        Statutes, section 297A.48, 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 
        Willmar may, by ordinance, impose, 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 to pay the costs 
        of collecting the taxes, and to pay all or a part of the capital 
        and administrative costs of the acquisition, construction, and 
        improvement of public library facilities, including securing or 
        paying debt service on bonds issued for the project under 
        subdivision 4.  The total capital and administrative 
        expenditures payable from bond proceeds and revenues received 
        from the taxes authorized by subdivisions 1 and 2, excluding 
        investment earnings thereon, must not exceed $4,500,000. 
           Subd. 4.  [BONDS.] The city of Willmar, pursuant to the 
        approval of the city voters at the general election held on 
        November 5, 1996, may issue without additional election general 
        obligation bonds of the city in an amount not to exceed 
        $4,500,000 to pay capital and administrative expenses for the 
        acquisition, construction, and improvement of public library 
        facilities.  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 and interest on the 
        bonds must not be subject to any levy limitation or be 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 when the city council determines 
        that sufficient funds have been received from the taxes to 
        finance the capital and administrative costs for the 
        acquisition, construction, and improvement of public library 
        facilities and to prepay or retire at maturity the principal, 
        interest, and premium due on any bonds issued for the project 
        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.  The taxes imposed under 
        subdivisions 1 and 2 may expire at an earlier time if the city 
        so determines by ordinance.  
           Subd. 6.  [EFFECTIVE DATE.] This section is effective 
        August 1, 1997, upon compliance by the governing body of the 
        city of Willmar with Minnesota Statutes, section 645.021, 
        subdivision 3. 
           Sec. 42.  [STATEMENT OF PURPOSE.] 
           The purpose of section 5, paragraph (i), is to confirm and 
        clarify the original intent of the legislature in enacting an 
        exemption from the sales tax for property to be resold in the 
        normal course of business.  Section 5, paragraph (i), ratifies 
        the existing state interpretation that a resale requires the 
        transfer of title to the property or the complete transfer of 
        possession and control over the property.  This section does not 
        apply to litigation currently pending before the Minnesota 
        Supreme Court. 
           Sec. 43.  [RECODIFICATION.] 
           In coordination with legislative staff, the revisor of 
        statutes shall prepare a bill for introduction in the 1998 
        session of the legislature that clarifies and recodifies chapter 
        297A.  The department of revenue shall assist in the preparation 
        of the legislation as requested by the revisor.  The revisor may 
        consult professional groups and other interested persons in 
        preparing the legislation.  
           Sec. 44.  [EXPIRATION.] 
           Minnesota Statutes, section 297A.24, subdivision 3, as 
        added by Laws 1997, chapter 84, article 3, section 5, expires 
        January 1, 2000. 
           Sec. 45.  [APPLICATION.] 
           Section 26 applies in the counties of Anoka, Carver, 
        Dakota, Hennepin, Ramsey, Scott, and Washington. 
           Sec. 46.  [REPEALER.] 
           Minnesota Statutes 1996, sections 297A.01, subdivision 20; 
        and 297A.02, subdivision 5, are repealed. 
           Sec. 47.  [EFFECTIVE DATES.] 
           Section 1 is effective for refund claims filed after June 
        30, 1997. 
           Sections 2, 6, 7, 9, 13, 15, 16, 17, 18, 20, 21, 25, 31, 
        and 32 are effective for purchases, sales, storage, use, or 
        consumption occurring after June 30, 1997. 
           Section 3 is effective on July 1, 1997, or upon adoption of 
        the corresponding rules, whichever occurs earlier. 
           Section 4, paragraph (i), clause (iv), is effective for 
        purchases and sales occurring after September 30, 1987; the 
        remainder of section 4 is effective for purchases and sales 
        occurring after June 30, 1997. 
           Section 5, paragraph (h), is effective for purchases and 
        sales occurring after June 30, 1997, and paragraph (i) is 
        effective for purchases and sales occurring after December 31, 
        1992. 
           Sections 8 and 46 are effective July 1, 1998. 
           Sections 10 and 22 are effective for purchases, sales, 
        storage, use, or consumption occurring after August 31, 1996. 
           Sections 11, 12, 33, 34, and 35 are effective July 1, 1997. 
           Sections 14 and 19 are effective for purchases and sales 
        after June 30, 1999. 
           Section 23 is effective January 1, 1997. 
           Section 24 is effective for purchases, sales, storage, use, 
        or consumption occurring after April 30, 1997. 
           Sections 26 and 45 are effective for purchases, sales, 
        storage, use, or consumption occurring after July 31, 1997, and 
        before August 1, 2003. 
           Section 27 is effective for purchases, sales, storage, use, 
        or consumption occurring after May 31, 1997. 
           Section 28 is effective for sales made after December 31, 
        1989, and before January 1, 1997.  The provisions of Minnesota 
        Statutes, section 289A.50, apply to refunds claimed under 
        section 28.  Refunds claimed under section 28 must be filed by 
        the later of December 31, 1997, or the time limit under 
        Minnesota Statutes, section 289A.40, subdivision 1. 
           Section 29 is effective for sales or first use after May 
        31, 1997, and before June 1, 1998. 
           Sections 30, 42, and 43 are effective the day following 
        final enactment. 
           Sections 36 to 39 are effective the day after compliance by 
        the governing body of Cook county with Minnesota Statutes, 
        section 645.021, subdivision 3. 
           Section 40 is effective for STAR funds collected after June 
        30, 1997. 
                                   ARTICLE 8 
                                 MINERALS TAXES 
           Section 1.  Minnesota Statutes 1996, section 93.41, is 
        amended to read: 
           93.41 [STATE-OWNED IRON-BEARING MATERIALS.] 
           Subdivision 1.  [USE FOR ROAD CONSTRUCTION AND OTHER 
        PURPOSES.] In case the commissioner of natural resources shall 
        determine that any paint rock, taconite, or other iron-bearing 
        material belonging to the state and containing not more than 45 
        percent dried iron by analysis is needed and suitable for use in 
        the construction or maintenance of any road, tailings basin, 
        settling basin, dike, dam, bank fill, or other works on public 
        or private property, and that such use would be in the best 
        interests of the public, the commissioner may authorize the 
        disposal of such material therefor as hereinafter provided.  
           Subd. 2.  [MATERIALS SUBJECT TO STATE IRON ORE MINING 
        LEASE.] If such material is subject to an existing state iron 
        ore mining lease or located on property subject to an existing 
        state iron ore mining lease, the commissioner, by written 
        agreement with the holder of the lease, may authorize the use of 
        the material for any purpose specified in subdivision 1 that 
        will facilitate the mining and disposal of the iron ore therein 
        on such terms as the commissioner may prescribe consistent with 
        the interests of the state, or may authorize the holder of the 
        lease to dispose of the material otherwise for any purpose 
        specified in subdivision 1 upon payment of an amount therefor 
        equivalent to the royalty that would be payable under the terms 
        of the lease if the material were shipped or otherwise disposed 
        of as iron ore, but not less than the applicable minimum rate 
        prescribed by section 93.20.  
           Subd. 3.  [ISSUANCE OF LEASES, ROYALTIES.] If such 
        material, whether in the ground or in stockpile, is not subject 
        to an existing lease, the commissioner may issue leases for the 
        taking and removal thereof for the purposes specified in 
        subdivision 1 in like manner as provided by section 92.50 for 
        leases for the taking and removal of sand, gravel, and other 
        materials specified in said section, and subject to all the 
        provisions thereof, so far as applicable; provided, that the 
        amount payable for such material shall be at least equivalent to 
        the minimum royalty that would be payable therefor under the 
        provisions of section 93.20.  
           Subd. 4.  [SALE OF STOCKPILED IRON-BEARING MATERIAL IN 
        PLACE.] If such material is in stockpile and is not subject to 
        an existing lease, the commissioner may sell stockpiled 
        iron-bearing material in place.  The sale must be to a person 
        holding an interest in the surface of the property upon which 
        the stockpile is located or to a person holding an interest in 
        publicly or privately owned stockpiled iron-bearing material 
        located in the same stockpile.  
           Sec. 2.  Minnesota Statutes 1996, section 273.11, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [GENERALLY.] Except as provided in this 
        section or section 273.17, subdivision 1, all property shall be 
        valued at its market value.  The market value as determined 
        pursuant to this section shall be stated such that any amount 
        under $100 is rounded up to $100 and any amount exceeding $100 
        shall be rounded to the nearest $100.  In estimating and 
        determining such value, the assessor shall not adopt a lower or 
        different standard of value because the same is to serve as a 
        basis of taxation, nor shall the assessor adopt as a criterion 
        of value the price for which such property would sell at a 
        forced sale, or in the aggregate with all the property in the 
        town or district; but the assessor shall value each article or 
        description of property by itself, and at such sum or price as 
        the assessor believes the same to be fairly worth in money.  The 
        assessor shall take into account the effect on the market value 
        of property of environmental factors in the vicinity of the 
        property.  In assessing any tract or lot of real property, the 
        value of the land, exclusive of structures and improvements, 
        shall be determined, and also the value of all structures and 
        improvements thereon, and the aggregate value of the property, 
        including all structures and improvements, excluding the value 
        of crops growing upon cultivated land.  In valuing real property 
        upon which there is a mine or quarry, it shall be valued at such 
        price as such property, including the mine or quarry, would sell 
        for at a fair, voluntary sale, for cash, if the material being 
        mined or quarried is not subject to taxation under section 
        298.015 and the mine or quarry is not exempt from the general 
        property tax under section 298.25.  In valuing real property 
        which is vacant, platted property shall be assessed as provided 
        in subdivision 14.  All property, or the use thereof, which is 
        taxable under section 272.01, subdivision 2, or 273.19, shall be 
        valued at the market value of such property and not at the value 
        of a leasehold estate in such property, or at some lesser value 
        than its market value. 
           Sec. 3.  Minnesota Statutes 1996, section 273.12, is 
        amended to read: 
           273.12 [ASSESSMENT OF REAL PROPERTY.] 
           It shall be the duty of every assessor and board, in 
        estimating and determining the value of lands for the purpose of 
        taxation, to consider and give due weight to every element and 
        factor affecting the market value thereof, including its 
        location with reference to roads and streets and the location of 
        roads and streets thereon or over the same, and to take into 
        consideration a reduction in the acreage of each tract or lot 
        sufficient to cover the amount of land actually used for any 
        improved public highway and the reduction in area of land caused 
        thereby.  It shall be the duty of every assessor and board, in 
        estimating and determining the value of lands for the purpose of 
        taxation, to consider and give due weight to lands which are 
        comparable in character, quality, and location, to the end that 
        all lands similarly located and improved will be assessed upon a 
        uniform basis and without discrimination and, for agricultural 
        lands, to consider and give recognition to its earning potential 
        as measured by its free market rental rate.  
           When mineral, clay, or gravel deposits exist on a property, 
        and their extent, quality, and costs of extraction are 
        sufficiently well known so as to influence market value, such 
        deposits shall be recognized in valuing the property; except for 
        mineral and energy-resource deposits which are subject to 
        taxation under section 298.015, and except for taconite and 
        iron-sulphide deposits which are exempt from the general 
        property tax under section 298.25. 
           Sec. 4.  [273.1651] [TAXATION AND FORFEITURE OF STOCKPILED 
        METALLIC MINERALS MATERIAL.] 
           Subdivision 1.  [DEFINITION.] "Stockpiled metallic minerals 
        material" for purposes of this section, means surface 
        overburden, rock, lean ore, tailings, or other material that has 
        been removed from the ground and deposited elsewhere on the 
        surface in the process of iron ore, taconite, or other metallic 
        minerals mining, or in the process of beneficiation.  Stockpiled 
        metallic minerals material does not include processed metallic 
        minerals concentrates in the form of pellets, chips, briquettes, 
        fines, or other form which have been prepared for or are in the 
        process of shipment. 
           Subd. 2.  [PURPOSE.] The purpose of this section is to 
        clarify the ownership of stockpiled metallic minerals material 
        in this state.  Depending on the intent of the person who 
        extracted the material from the ground, stockpiled metallic 
        minerals material may or may not be owned separately and apart 
        from the fee title to the surface of the real property.  The 
        legislature finds that the uncertainty of ownership of 
        stockpiled metallic minerals material located on real property 
        that becomes tax forfeited has created a burden on the public 
        owner of the surface of the real property and an impediment to 
        productive management or use of a public resource. 
           Subd. 3.  [TAXATION AND FORFEITURE.] From and after the 
        effective date of this section, for purposes of taxation, the 
        definition of "real property," as contained in section 272.03, 
        subdivision 1, includes stockpiled metallic minerals material.  
        Nothing in this subdivision shall be construed to subject 
        stockpiled metallic minerals material to the general property 
        tax when the stockpiled metallic minerals material is exempt 
        from the general property tax pursuant to section 298.015 or 
        298.25.  If the surface of the real property forfeits for 
        delinquent taxes, stockpiled metallic minerals material located 
        on the real property forfeits with the surface of the property. 
           Subd. 4.  [PRIOR FORFEITURE.] Stockpiled metallic minerals 
        material located on real property that forfeited prior to the 
        effective date of this section or forfeits due to a judgment for 
        delinquent taxes issued prior to the effective date of this 
        section shall be assessed and taxed as real property.  The tax 
        applies only to stockpiled metallic minerals material located on 
        real property that remains in the ownership of the state or a 
        political subdivision of the state.  The tax shall be based on 
        the market value of the rental of the property for storage of 
        stockpiled metallic minerals material. 
           Subd. 5.  [EXCEPTIONS; TAX LAWS.] (a) The tax imposed 
        pursuant to this section shall not be imposed on the following: 
           (1) stockpiled metallic minerals material valued and taxed 
        under other laws relating to the taxation of minerals, gas, 
        coal, oil, or other similar interests; 
           (2) stockpiled metallic minerals material that is exempt 
        from taxation pursuant to constitutional or related statutory 
        provisions; or 
           (3) stockpiled metallic minerals material that is owned by 
        the state.  
           (b) All laws for the enforcement of taxes on real property 
        shall apply to the tax imposed pursuant to this section on 
        stockpiled metallic minerals material. 
           Subd. 6.  [FEE OWNER.] For purposes of section 276.041, the 
        owner of stockpiled metallic minerals material is a fee owner. 
           Sec. 5.  Minnesota Statutes 1996, section 282.01, 
        subdivision 8, is amended to read: 
           Subd. 8.  [MINERALS IN TAX-FORFEITED LAND AND TAX-FORFEITED 
        STOCKPILED METALLIC MINERALS MATERIAL SUBJECT TO MINING; 
        PROCEDURES.] In case the commissioner of natural resources shall 
        notify the county auditor of any county in writing that the 
        minerals in any tax-forfeited land or tax-forfeited stockpiled 
        metallic minerals material located on tax-forfeited land in such 
        county have been designated as a mining unit as provided by law, 
        or that such minerals or tax-forfeited stockpiled metallic 
        minerals material are subject to a mining permit or lease issued 
        therefor as provided by law, the surface of such tax-forfeited 
        land shall be subject to disposal and use for mining purposes 
        pursuant to such designation, permit, or lease, and shall be 
        withheld from sale or lease by the county auditor until the 
        commissioner shall notify the county auditor that such land has 
        been removed from the list of mining units or that any mining 
        permit or lease theretofore issued thereon is no longer in 
        force; provided, that the surface of such tax-forfeited land may 
        be leased by the county auditor as provided by law, with the 
        written approval of the commissioner, subject to disposal and 
        use for mining purposes as herein provided and to any special 
        conditions relating thereto that the commissioner may prescribe, 
        also subject to cancellation for mining purposes on three months 
        written notice from the commissioner to the county auditor. 
           Sec. 6.  Minnesota Statutes 1996, section 282.04, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [TIMBER SALES; LAND LEASES AND USES.] (a) 
        The county auditor may sell timber upon any tract that may be 
        approved by the natural resources commissioner.  Such sale of 
        timber shall be made for cash at not less than the appraised 
        value determined by the county board to the highest bidder after 
        not less than one week's published notice in an official paper 
        within the county.  Any timber offered at such public sale and 
        not sold may thereafter be sold at private sale by the county 
        auditor at not less than the appraised value thereof, until such 
        time as the county board may withdraw such timber from sale.  
        The appraised value of the timber and the forestry practices to 
        be followed in the cutting of said timber shall be approved by 
        the commissioner of natural resources.  
           (b) Payment of the full sale price of all timber sold on 
        tax-forfeited lands shall be made in cash at the time of the 
        timber sale, except in the case of oral or sealed bid auction 
        sales, the down payment shall be no less than 15 percent of the 
        appraised value, and the balance shall be paid prior to entry.  
        In the case of auction sales that are partitioned and sold as a 
        single sale with predetermined cutting blocks, the down payment 
        shall be no less than 15 percent of the appraised price of the 
        entire timber sale which may be held until the satisfactory 
        completion of the sale or applied in whole or in part to the 
        final cutting block.  The value of each separate block must be 
        paid in full before any cutting may begin in that block.  With 
        the permission of the county administrator the purchaser may 
        enter unpaid blocks and cut necessary timber incidental to 
        developing logging roads as may be needed to log other blocks 
        provided that no timber may be removed from an unpaid block 
        until separately scaled and paid for.  
           (c) The county board may require final settlement on the 
        basis of a scale of cut products.  Any parcels of land from 
        which timber is to be sold by scale of cut products shall be so 
        designated in the published notice of sale above mentioned, in 
        which case the notice shall contain a description of such 
        parcels, a statement of the estimated quantity of each species 
        of timber thereon and the appraised price of each specie of 
        timber for 1,000 feet, per cord or per piece, as the case may 
        be.  In such cases any bids offered over and above the appraised 
        prices shall be by percentage, the percent bid to be added to 
        the appraised price of each of the different species of timber 
        advertised on the land.  The purchaser of timber from such 
        parcels shall pay in cash at the time of sale at the rate bid 
        for all of the timber shown in the notice of sale as estimated 
        to be standing on the land, and in addition shall pay at the 
        same rate for any additional amounts which the final scale shows 
        to have been cut or was available for cutting on the land at the 
        time of sale under the terms of such sale.  Where the final 
        scale of cut products shows that less timber was cut or was 
        available for cutting under terms of such sale than was 
        originally paid for, the excess payment shall be refunded from 
        the forfeited tax sale fund upon the claim of the purchaser, to 
        be audited and allowed by the county board as in case of other 
        claims against the county.  No timber, except hardwood pulpwood, 
        may be removed from such parcels of land or other designated 
        landings until scaled by a person or persons designated by the 
        county board and approved by the commissioner of natural 
        resources.  Landings other than the parcel of land from which 
        timber is cut may be designated for scaling by the county board 
        by written agreement with the purchaser of the timber.  The 
        county board may, by written agreement with the purchaser and 
        with a consumer designated by the purchaser when the timber is 
        sold by the county auditor, and with the approval of the 
        commissioner of natural resources, accept the consumer's scale 
        of cut products delivered at the consumer's landing.  No timber 
        shall be removed until fully paid for in cash.  Small amounts of 
        timber not exceeding $3,000 in appraised valuation may be sold 
        for not less than the full appraised value at private sale to 
        individual persons without first publishing notice of sale or 
        calling for bids, provided that in case of such sale involving a 
        total appraised value of more than $200 the sale shall be made 
        subject to final settlement on the basis of a scale of cut 
        products in the manner above provided and not more than two such 
        sales, directly or indirectly to any individual shall be in 
        effect at one time. 
           (d) As directed by the county board, the county auditor may 
        lease tax-forfeited land to individuals, corporations or 
        organized subdivisions of the state at public or private vendue, 
        and at such prices and under such terms as the county board may 
        prescribe, for use as cottage and camp sites and for 
        agricultural purposes and for the purpose of taking and removing 
        of hay, stumpage, sand, gravel, clay, rock, marl, and black dirt 
        therefrom, and for garden sites and other temporary uses 
        provided that no leases shall be for a period to exceed ten 
        years; provided, further that any leases involving a 
        consideration of more than $1,500 per year, except to an 
        organized subdivision of the state shall first be offered at 
        public sale in the manner provided herein for sale of timber.  
        Upon the sale of any such leased land, it shall remain subject 
        to the lease for not to exceed one year from the beginning of 
        the term of the lease.  Any rent paid by the lessee for the 
        portion of the term cut off by such cancellation shall be 
        refunded from the forfeited tax sale fund upon the claim of the 
        lessee, to be audited and allowed by the county board as in case 
        of other claims against the county. 
           (e) As directed by the county board, the county auditor may 
        lease tax-forfeited land to individuals, corporations, or 
        organized subdivisions of the state at public or private vendue, 
        at such prices and under such terms as the county board may 
        prescribe, for the purpose of taking and removing for use for 
        road construction and other purposes tax-forfeited stockpiled 
        iron-bearing material.  The county auditor must determine that 
        the material is needed and suitable for use in the construction 
        or maintenance of a road, tailings basin, settling basin, dike, 
        dam, bank fill, or other works on public or private property, 
        and that the use would be in the best interests of the public.  
        No lease shall exceed ten years.  The use of a stockpile for 
        these purposes must first be approved by the commissioner of 
        natural resources.  The request shall be deemed approved unless 
        the requesting county is notified to the contrary by the 
        commissioner of natural resources within six months after 
        receipt of a request for approval for use of a stockpile.  Once 
        use of a stockpile has been approved, the county may continue to 
        lease it for these purposes until approval is withdrawn by the 
        commissioner of natural resources. 
           (f) The county auditor, with the approval of the county 
        board is authorized to grant permits, licenses, and leases to 
        tax-forfeited lands for the depositing of stripping, lean ores, 
        tailings, or waste products from mines or ore milling plants, 
        upon such conditions and for such consideration and for such 
        period of time, not exceeding 15 years, as the county board may 
        determine; said permits, licenses, or leases to be subject to 
        approval by the commissioner of natural resources. 
           (g) Any person who removes any timber from tax-forfeited 
        land before said timber has been scaled and fully paid for as 
        provided in this subdivision is guilty of a misdemeanor. 
           (h) The county auditor may, with the approval of the county 
        board, and without first offering at public sale, grant leases, 
        for a term not exceeding 25 years, for the removal of peat from 
        tax-forfeited lands upon such terms and conditions as the county 
        board may prescribe.  Any lease for the removal of peat from 
        tax-forfeited lands must first be reviewed and approved by the 
        commissioner of natural resources if the lease covers 320 or 
        more acres.  No lease for the removal of peat shall be made by 
        the county auditor pursuant to this section without first 
        holding a public hearing on the auditor's intention to lease.  
        One printed notice in a legal newspaper in the county at least 
        ten days before the hearing, and posted notice in the courthouse 
        at least 20 days before the hearing shall be given of the 
        hearing. 
           Sec. 7.  Minnesota Statutes 1996, section 298.24, 
        subdivision 1, is amended to read: 
           Subdivision 1.  (a) For concentrate produced in 1992, 1993, 
        1994, and 1995 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 $2.054 per gross ton of 
        merchantable iron ore concentrate produced therefrom.  
           (b) 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. 
           (c) For concentrates produced in 1996 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, provided that, for concentrates 
        produced in 1996 only, the increase in the rate of tax imposed 
        under this section over the rate imposed for the previous year 
        may not exceed four cents per ton.  "Implicit price deflator" 
        for the gross national product means the implicit price deflator 
        prepared by the bureau of economic analysis of the United States 
        Department of Commerce.  
           (c) (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.  
           (d) (e) If the tax or any part of the tax imposed by this 
        subdivision is held to be unconstitutional, a tax of $2.054 per 
        gross ton of merchantable iron ore concentrate produced shall be 
        imposed.  
           (e) (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. 
           (f) (g) (1) Notwithstanding any other provision of this 
        subdivision, for the first five years of a plant's production of 
        direct reduced ore, the rate of the tax on direct reduced ore is 
        determined under this paragraph two years of a plant's 
        production of direct reduced ore, no tax is imposed under this 
        section.  As used in this paragraph, "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 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 first 500,000 of taxable tons for the 
        production year, and 50 percent of the rate otherwise determined 
        for any remainder.  If the taxpayer had no production in the two 
        years prior to the current production year, the tonnage eligible 
        to be taxed at 25 percent of the rate otherwise determined under 
        this subdivision is the first 166,667 tons.  If the taxpayer had 
        some production in the year prior to the current production year 
        but no production in the second prior year, the tonnage eligible 
        to be taxed at 25 percent of the rate otherwise determined under 
        this subdivision is the first 333,333 tons.  For the fourth such 
        production year, the rate is 50 percent of the rate otherwise 
        determined under this subdivision; for the fifth such production 
        year, the rate is 75 percent of the rate otherwise determined 
        under this subdivision; and for all subsequent 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. 
           Sec. 8.  Minnesota Statutes 1996, section 298.28, 
        subdivision 9a, is amended to read: 
           Subd. 9a.  [TACONITE ECONOMIC DEVELOPMENT FUND.] (a) 15.4 
        cents per ton for distributions in 1996, 1998, and 1999 and 20.4 
        cents per ton for distributions in 1997, 1998, and 1999 shall be 
        paid to the taconite economic development fund.  No distribution 
        shall be made under this paragraph in any year in which total 
        industry production falls below 30 million tons. 
           (b) An amount equal to 50 percent of the tax under section 
        298.24 for concentrate sold in the form of pellet chips and 
        fines not exceeding 5/16 inch in size and not including crushed 
        pellets shall be paid to the taconite economic development 
        fund.  The amount paid shall not exceed $700,000 annually for 
        all companies.  If the initial amount to be paid to the fund 
        exceeds this amount, each company's payment shall be prorated so 
        the total does not exceed $700,000. 
           Sec. 9.  Minnesota Statutes 1996, section 298.28, is 
        amended by adding a subdivision to read: 
           Subd. 9b.  [TACONITE ENVIRONMENTAL FUND.] Five cents per 
        ton for distributions in 1998 and 1999 shall be paid to the 
        taconite environmental fund for use under section 298.2961.  No 
        distribution may be made under this paragraph in any year in 
        which total industry production falls below 30,000,000 tons. 
           Sec. 10.  Minnesota Statutes 1996, section 298.296, 
        subdivision 4, is amended to read: 
           Subd. 4.  [TEMPORARY LOAN AUTHORITY.] (a) The board may 
        recommend that up to $10,000,000 $7,500,000 from the corpus of 
        the trust may be used for loans as provided in this 
        subdivision.  The money would be available for loans for 
        construction and equipping of facilities constituting (1) a 
        value added iron products plant, which may be either a new plant 
        or a facility incorporated into an existing plant that produces 
        iron upgraded to a minimum of 75 percent iron content or any 
        iron alloy with a total minimum metallic content of 90 percent; 
        or (2) a new mine or minerals processing plant for any mineral 
        subject to the net proceeds tax imposed under section 298.015.  
        A loan under this paragraph may not exceed $5,000,000 for any 
        facility.  
           (b) Additionally, the board must reserve the first 
        $2,000,000 of the net interest, dividends, and earnings arising 
        from the investment of the trust after June 30, 1996, to be used 
        for additional grants for the purposes set forth in paragraph 
        (a).  This amount must be reserved until it is used for the 
        grants or until June 30, 1998, whichever is earlier. 
           (c) Additionally, the board may recommend that up to 
        $3,000,000 $5,500,000 from the corpus of the trust may be used 
        for additional grants for the purposes set forth in paragraph 
        (a). 
           (d) The board may require that it receive an equity 
        percentage in any project to which it contributes under this 
        section. 
           (e) The authority to make loans and grants under this 
        subdivision terminates June 30, 1998. 
           Sec. 11.  Minnesota Statutes 1996, section 298.2961, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [APPROPRIATION.] (a) $10,000,000 is 
        appropriated from the northeast Minnesota economic protection 
        trust fund to a special account in the taconite area 
        environmental protection fund for grants or loans to producers 
        on a project-by-project basis as provided in this section. 
           (b) The proceeds of the tax designated under section 
        298.28, subdivision 9b, are appropriated for grants and loans to 
        producers on a project-by-project basis as provided in this 
        section. 
           Sec. 12.  Minnesota Statutes 1996, section 298.75, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [DEFINITIONS.] Except as may otherwise be 
        provided, the following words, when used in this section, shall 
        have the meanings herein ascribed to them.  
           (1) "Aggregate material" shall mean nonmetallic natural 
        mineral aggregate including, but not limited to sand, silica 
        sand, gravel, building stone, crushed rock, limestone, and 
        granite.  Aggregate material shall not include dimension stone 
        and dimension granite.  Aggregate material must be measured or 
        weighed after it has been extracted from the pit, quarry, or 
        deposit.  
           (2) "Person" shall mean any individual, firm, partnership, 
        corporation, organization, trustee, association, or other entity.
           (3) "Operator" shall mean any person engaged in the 
        business of removing aggregate material from the surface or 
        subsurface of the soil, for the purpose of sale, either directly 
        or indirectly, through the use of the aggregate material in a 
        marketable product or service.  
           (4) "Extraction site" shall mean a pit, quarry, or deposit 
        containing aggregate material and any contiguous property to the 
        pit, quarry, or deposit which is used by the operator for 
        stockpiling the aggregate material.  
           (5) "Importer" shall mean any person who buys aggregate 
        material produced from a county not listed in paragraph (6) or 
        another state and causes the aggregate material to be imported 
        into a county in this state which imposes a tax on aggregate 
        material.  
           (6) "County" shall mean the counties of Pope, Stearns, 
        Benton, Sherburne, Carver, Scott, Dakota, Le Sueur, Kittson, 
        Marshall, Pennington, Red Lake, Polk, Norman, Mahnomen, Clay, 
        Becker, Carlton, St. Louis, Rock, Murray, Wilkin, Big Stone, 
        Sibley, Hennepin, Washington, Chisago, and Ramsey.  
           Sec. 13.  Minnesota Statutes 1996, section 298.75, 
        subdivision 4, is amended to read: 
           Subd. 4.  If the county auditor has not received the report 
        by the 15th day after the last day of each calendar quarter from 
        the operator or importer as required by subdivision 3 or has 
        received an erroneous report, the county auditor shall estimate 
        the amount of tax due and notify the operator or importer by 
        registered mail of the amount of tax so estimated within the 
        next 14 days.  An operator or importer may, within 30 days from 
        the date of mailing the notice, and upon payment of the amount 
        of tax determined to be due, file in the office of the county 
        auditor a written statement of objections to the amount of taxes 
        determined to be due.  The statement of objections shall be 
        deemed to be a petition within the meaning of chapter 278, and 
        shall be governed by sections 278.02 to 278.13. 
           Sec. 14.  Minnesota Statutes 1996, section 298.75, is 
        amended by adding a subdivision to read: 
           Subd. 8.  The county auditor or its duly authorized agent 
        may examine records, including computer records, maintained by 
        an importer or operator.  The term "record" includes, but is not 
        limited to, all accounts of an importer or operator.  The county 
        auditor must have access at all reasonable times to inspect and 
        copy all business records related to an importer's or operator's 
        collection, transportation, and disposal of aggregate to the 
        extent necessary to ensure that all aggregate material 
        production taxes required to be paid have been remitted to the 
        county.  The records must be maintained by the importer or 
        operator for no less than six years. 
           Sec. 15.  [ST. LOUIS COUNTY TOWNS.] 
           Subdivision 1.  [TAX MAY BE IMPOSED; CONDITIONS.] If the St.
        Louis county board does not approve section 12, as provided in 
        section 18, each of the following towns in St. Louis county may 
        impose the aggregate materials tax under Minnesota Statutes, 
        section 298.75:  the towns of Alden, Brevator, Canosia, Duluth, 
        Fredenberg, Gnesen, Grand Lake, Industrial, Lakewood, Midway, 
        Normanna, North Star, Rice Lake, and Solway. 
           Subd. 2.  [PROVISIONS THAT APPLY.] For purposes of 
        exercising the powers contained in Minnesota Statutes, section 
        298.75, the "town" is deemed to be the "county." 
           In those towns located in St. Louis County that impose the 
        tax under Minnesota Statutes, section 298.75, all provisions in 
        that section shall apply to those towns, except that in lieu of 
        the distribution of the tax proceeds under subdivision 7, all 
        proceeds from this tax shall be retained by each of the towns 
        that impose the tax. 
           Subd. 3.  [APPROVAL.] A tax imposed under this section is 
        effective in the town that approves it the day after compliance 
        by the town with the requirements of Minnesota Statutes, section 
        645.021, subdivision 3. 
           Sec. 16.  [USE OF PRODUCTION TAX PROCEEDS.] 
           The amount distributed to the iron range resources and 
        rehabilitation board under Minnesota Statutes, section 298.28, 
        subdivision 7, that is attributable to the tax increase due to 
        the implicit price deflator increase as provided in Minnesota 
        Statutes, section 298.24, subdivision 1, paragraph (c), for 
        concentrates produced in 1997 shall be used by the board to make 
        a grant to the city of Hoyt Lakes to be used for the 
        establishment of an industrial park in the city. 
           Sec. 17.  [SALES OF LANDS BY SCOTT COUNTY; AGGREGATE 
        MATERIALS.] 
           Minerals subject to reservation by Scott county under 
        Minnesota Statutes, section 373.01, subdivision 1, clause (1), 
        do not include minerals defined as aggregate material by 
        Minnesota Statutes, section 298.75, subdivision 1, that are 
        present in and upon the following described property: 
           All that part of the East Half of the Southwest Quarter in 
        Section 33, Township 115, Range 23, Scott County MN; which lies 
        westerly of the westerly right of way line of the Chicago, St. 
        Paul, Minneapolis, and Omaha Railway Company (Chicago and 
        NorthWestern Railway), 
           Together with all that part of the East Half of the 
        Southwest Quarter of Section 33, Township 115, Range 23, Scott 
        County, MN; lying easterly of the easterly right of way line of 
        the Chicago, St. Paul, Minneapolis and Omaha Railway Company 
        (Chicago and NorthWestern Railway); and all that part of the 
        West Half of the Southeast Quarter of said Section 33 lying 
        westerly of the westerly right of way line of the Minneapolis 
        and St. Louis Railroad; excepting therefrom the following 
        described parcel: 
           EXCEPTION: 
           Commencing at the Southwest corner of the Southeast Quarter 
           of said Section 33; thence on an assumed bearing of North 
           87 degrees 25 minutes 08 seconds East along the South line 
           of said Southeast Quarter a distance of 501.49 feet; thence 
           North 02 degrees 24 minutes 52 seconds West a distance of 
           750.00 feet; thence South 87 degrees 12 minutes 56 seconds 
           East a distance of 750.00 feet; thence South 02 degrees 34 
           minutes 52 seconds East a distance of 750.00 feet to the 
           South line of said East Half of the Southwest Quarter; 
           thence North 86 degrees 48 minutes 19 seconds East along 
           said South line of the East Half of the Southwest Quarter a 
           distance of 248.52 feet to the point of beginning. 
           Together with Tract A, Registered Land Survey Number 86; 
        and Tract C, Registered Land Survey Number 136; as filed in the 
        office of the Registrar of Titles, Scott County, Minnesota. 
           The county may sell, lease, or convey the property and 
        except the aggregate material from the mineral reservation 
        required by Minnesota Statutes, section 373.01, subdivision 1, 
        and it may lease the aggregate material upon conditions 
        different from those prescribed by that subdivision. 
           Sec. 18.  [EFFECTIVE DATE.] 
           Section 7 is effective for production years beginning after 
        December 31, 1996. 
           Section 12 is effective for Pope county the day after 
        compliance by Pope county with the requirements of Minnesota 
        Statutes, section 645.021, subdivision 3. 
           Section 12 is effective for Carlton county the day after 
        compliance by Carlton county with the requirements of Minnesota 
        Statutes, section 645.021, subdivision 3. 
           Section 12 is effective for St. Louis county the day after 
        compliance by St. Louis county with the requirements of 
        Minnesota Statutes, section 645.021, subdivision 3. 
           Sections 16 and 17 are effective the day following final 
        enactment. 
                                   ARTICLE 9 
                                 BUDGET RESERVE 
           Section 1.  Minnesota Statutes 1996, section 16A.152, 
        subdivision 2, is amended to read: 
           Subd. 2.  [ADDITIONAL REVENUES; PRIORITY.] If on the basis 
        of a forecast of general fund revenues and expenditures after 
        November 1 in an odd-numbered year, the commissioner of finance 
        determines that there will be a positive unrestricted budgetary 
        general fund balance at the close of the biennium, the 
        commissioner of finance must allocate money to the budget 
        reserve until the total amount in the account is $270,000,000.  
        An amount equal to any additional biennial unrestricted 
        budgetary general fund balance made available as the result of a 
        forecast in an odd-numbered calendar year after November 1 is 
        appropriated in January of the following year to reduce the 
        property tax levy recognition percent under section 121.904, 
        subdivision 4a, to zero before additional money beyond 
        $270,000,000 is allocated to the budget reserve account.  The 
        amount appropriated is the full amount forecast to be available 
        at the end of the biennium and is not limited to the amount 
        forecast to be available at the end of the current fiscal year 
        as follows: 
           (a) first, to the budget reserve until the total amount in 
        the account equals $522,000,000; then 
           (b) 60 percent to the property tax reform account 
        established in section 16A.1521; and 
           (c) 40 percent is an unrestricted balance in the general 
        fund. 
           The amounts necessary to meet the requirements of this 
        section are appropriated from the general fund within two weeks 
        after the forecast is released. 
           Sec. 2.  [16A.1521] [PROPERTY TAX REFORM ACCOUNT.] 
           (a) A property tax reform account is established in the 
        general fund. 
           (b) Amounts in the account are available for and may only 
        be spent to reform the property tax system by: 
           (1) reducing the class rates to the target rates specified 
        in section 273.13, subdivision 32, or to further reduce the 
        ratio of the highest class rate to lowest class rate; 
           (2) increasing state education aids to reduce property 
        taxes; 
           (3) increasing the state share of education funding to 70 
        percent; 
           (4) increasing the education homestead credit; or 
           (5) increasing the property tax refund. 
        As provided by section 273.13, subdivision 32, the governor 
        shall recommend to the legislature uses of money in the account 
        to compress class rate ratios, while mitigating the shifting of 
        relative property tax burdens from one class to another through 
        the mechanisms listed in clauses (2) through (5).  
           (c) The balance in the account does not cancel and remains 
        in the account until appropriated for property tax reform.  
        Investment earnings on the account are credited to the account. 
           Sec. 3.  Minnesota Statutes 1996, section 124.195, 
        subdivision 7, is amended to read: 
           Subd. 7.  [PAYMENTS TO SCHOOL NONOPERATING FUNDS.] Each 
        fiscal year state general fund payments for a district 
        nonoperating fund shall be made at 85 percent of the estimated 
        entitlement during the fiscal year of the entitlement, unless a 
        higher rate has been established according to section 121.904, 
        subdivision 4d.  This amount shall be paid in 12 equal monthly 
        installments.  The amount of the actual entitlement, after 
        adjustment for actual data, minus the payments made during the 
        fiscal year of the entitlement shall be paid prior to October 31 
        of the following school year.  The commissioner may make advance 
        payments of homestead and agricultural credit aid for a 
        district's debt service fund earlier than would occur under the 
        preceding schedule if the district submits evidence showing a 
        serious cash flow problem in the fund.  The commissioner may 
        make earlier payments during the year and, if necessary, 
        increase the percent of the entitlement paid to reduce the cash 
        flow problem. 
           Sec. 4.  Minnesota Statutes 1996, section 124.195, 
        subdivision 10, is amended to read: 
           Subd. 10.  [AID PAYMENT PERCENTAGE.] Except as provided in 
        subdivisions 8, 9, and 11, each fiscal year, all education aids 
        and credits in this chapter and chapters 121, 123, 124A, 124B, 
        125, 126, 134, and section 273.1392, shall be paid at 90 percent 
        for districts operating a program under section 121.585 for 
        grades 1 to 12 for all students in the district and 85 percent 
        for other districts of the estimated entitlement during the 
        fiscal year of the entitlement, unless a higher rate has been 
        established according to section 121.904, subdivision 4d.  
        Districts operating a program under section 121.585 for grades 1 
        to 12 for all students in the district shall receive 85 percent 
        of the estimated entitlement plus an additional amount of 
        general education aid equal to five percent of the estimated 
        entitlement.  For all districts, the final adjustment payment, 
        according to subdivision 6, shall be the amount of the actual 
        entitlement, after adjustment for actual data, minus the 
        payments made during the fiscal year of the entitlement. 
           Sec. 5.  [APPROPRIATIONS.] 
           Subdivision 1.  [BUDGET RESERVE.] An amount sufficient to 
        increase the budget reserve to $522,000,000 on July 1, 1997, is 
        appropriated from the general fund. 
           Subd. 2.  [PROPERTY REFORM ACCOUNT.] $46,000,000 is 
        appropriated to the property tax reform account from the general 
        fund for fiscal year 2000. 
           Sec. 6.  [REPEALER.] 
           Minnesota Statutes 1996, section 121.904, subdivision 4d, 
        is repealed. 
           Sec. 7.  [EFFECTIVE DATE.] 
           Sections 1 to 6 are effective July 1, 1997. 
                                   ARTICLE 10 
                            TAX INCREMENT FINANCING
           Section 1.  Minnesota Statutes 1996, section 469.174, 
        subdivision 10, is amended to read: 
           Subd. 10.  [REDEVELOPMENT DISTRICT.] (a) "Redevelopment 
        district" means a type of tax increment financing district 
        consisting of a project, or portions of a project, within which 
        the authority finds by resolution that one of the following 
        conditions, reasonably distributed throughout the district, 
        exists: 
           (1) parcels consisting of 70 percent of the area of the 
        district are occupied by buildings, streets, utilities, or other 
        improvements and more than 50 percent of the buildings, not 
        including outbuildings, are structurally substandard to a degree 
        requiring substantial renovation or clearance; or 
           (2) the property consists of vacant, unused, underused, 
        inappropriately used, or infrequently used railyards, rail 
        storage facilities, or excessive or vacated railroad 
        rights-of-way. 
           (b) For purposes of this subdivision, "structurally 
        substandard" shall mean containing defects in structural 
        elements or a combination of deficiencies in essential utilities 
        and facilities, light and ventilation, fire protection including 
        adequate egress, layout and condition of interior partitions, or 
        similar factors, which defects or deficiencies are of sufficient 
        total significance to justify substantial renovation or 
        clearance.  
           (c) A building is not structurally substandard if it is in 
        compliance with the building code applicable to new buildings or 
        could be modified to satisfy the building code at a cost of less 
        than 15 percent of the cost of constructing a new structure of 
        the same square footage and type on the site.  The municipality 
        may find that a building is not disqualified as structurally 
        substandard under the preceding sentence on the basis of 
        reasonably available evidence, such as the size, type, and age 
        of the building, the average cost of plumbing, electrical, or 
        structural repairs, or other similar reliable evidence.  If the 
        evidence supports a reasonable conclusion that the building is 
        not disqualified as structurally substandard, The municipality 
        may not make such a determination without an interior inspection 
        or of the property, but need not have an independent, expert 
        appraisal prepared of the cost of repair and rehabilitation of 
        the building.  An interior inspection of the property is not 
        required, if the municipality finds that (1) the municipality or 
        authority is unable to gain access to the property after using 
        its best efforts to obtain permission from the party that owns 
        or controls the property; and (2) the evidence otherwise 
        supports a reasonable conclusion that the building is 
        structurally substandard.  Items of evidence that support such a 
        conclusion include recent fire or police inspections, on-site 
        property tax appraisals or housing inspections, exterior 
        evidence of deterioration, or other similar reliable evidence.  
        Written documentation of the findings and reasons why an 
        interior inspection was not conducted must be made and retained 
        under section 469.175, subdivision 3, clause (1). 
           (d) A parcel is deemed to be occupied by a structurally 
        substandard building for purposes of the finding under paragraph 
        (a) if all of the following conditions are met: 
           (1) the parcel was occupied by a substandard building 
        within three years of the filing of the request for 
        certification of the parcel as part of the district with the 
        county auditor; 
           (2) the substandard building was demolished or removed by 
        the authority or the demolition or removal was financed by the 
        authority or was done by a developer under a development 
        agreement with the authority; 
           (3) the authority found by resolution before the demolition 
        or removal that the parcel was occupied by a structurally 
        substandard building and that after demolition and clearance the 
        authority intended to include the parcel within a district; and 
           (4) upon filing the request for certification of the tax 
        capacity of the parcel as part of a district, the authority 
        notifies the county auditor that the original tax capacity of 
        the parcel must be adjusted as provided by section 469.177, 
        subdivision 1, paragraph (h). 
           (c) (e) For purposes of this subdivision, a parcel is not 
        occupied by buildings, streets, utilities, or other improvements 
        unless 15 percent of the area of the parcel contains 
        improvements. 
           (d) (f) For districts consisting of two or more 
        noncontiguous areas, each area must qualify as a redevelopment 
        district under paragraph (a) to be included in the district, and 
        the entire area of the district must satisfy paragraph (a). 
           Sec. 2.  Minnesota Statutes 1996, section 469.174, is 
        amended by adding a subdivision to read: 
           Subd. 25.  [INCREMENT.] "Increment," "tax increment," "tax 
        increment revenues," "revenues derived from tax increment," and 
        other similar terms for a district include: 
           (1) taxes paid by the captured net tax capacity, but 
        excluding any excess taxes, as computed under section 469.177; 
           (2) the proceeds from the sale or lease of property, 
        tangible or intangible, purchased by the authority with tax 
        increments; 
           (3) repayments of loans or other advances made by the 
        authority with tax increments; and 
           (4) interest or other investment earnings on or from tax 
        increments. 
           Sec. 3.  Minnesota Statutes 1996, section 469.174, is 
        amended by adding a subdivision to read: 
           Subd. 26.  [POPULATION.] "Population" means the population 
        established as of December 31 by the most recent of the 
        following: 
           (1) the federal census; 
           (2) a special census conducted under contract with the 
        United States Bureau of the Census; 
           (3) a population estimate made by the metropolitan council; 
        and 
           (4) a population estimate made by the state demographer 
        under section 4A.02. 
           The population so established applies to the following 
        calendar year. 
           Sec. 4.  Minnesota Statutes 1996, section 469.174, is 
        amended by adding a subdivision to read: 
           Subd. 27.  [SMALL CITY.] "Small city" means any home rule 
        charter or statutory city that has a population of 5,000 or less 
        and that is located ten miles or more from a home rule charter 
        or statutory city, located in this state, with a population of 
        10,000 or more.  For purposes of this definition, the distance 
        between cities is measured by drawing a straight line from the 
        nearest boundaries of the two cities. 
           Sec. 5.  Minnesota Statutes 1996, section 469.175, 
        subdivision 3, is amended to read: 
           Subd. 3.  [MUNICIPALITY APPROVAL.] A county auditor shall 
        not certify the original net tax capacity of a tax increment 
        financing district until the tax increment financing plan 
        proposed for that district has been approved by the municipality 
        in which the district is located.  If an authority that proposes 
        to establish a tax increment financing district and the 
        municipality are not the same, the authority shall apply to the 
        municipality in which the district is proposed to be located and 
        shall obtain the approval of its tax increment financing plan by 
        the municipality before the authority may use tax increment 
        financing.  The municipality shall approve the tax increment 
        financing plan only after a public hearing thereon after 
        published notice in a newspaper of general circulation in the 
        municipality at least once not less than ten days nor more than 
        30 days prior to the date of the hearing.  The published notice 
        must include a map of the area of the district from which 
        increments may be collected and, if the project area includes 
        additional area, a map of the project area in which the 
        increments may be expended.  The hearing may be held before or 
        after the approval or creation of the project or it may be held 
        in conjunction with a hearing to approve the project.  Before or 
        at the time of approval of the tax increment financing plan, the 
        municipality shall make the following findings, and shall set 
        forth in writing the reasons and supporting facts for each 
        determination: 
           (1) that the proposed tax increment financing district is a 
        redevelopment district, a renewal or renovation district, a 
        mined underground space development district, a housing 
        district, a soils condition district, or an economic development 
        district; if the proposed district is a redevelopment district 
        or a renewal or renovation district, the reasons and supporting 
        facts for the determination that the district meets the criteria 
        of section 469.174, subdivision 10, paragraph (a), clauses (1) 
        and (2), or subdivision 10a, must be documented in writing and 
        retained and made available to the public by the authority until 
        the district has been terminated. 
           (2) that the proposed development or redevelopment, in the 
        opinion of the municipality, would not reasonably be expected to 
        occur solely through private investment within the reasonably 
        foreseeable future and that the increased market value of the 
        site that could reasonably be expected to occur without the use 
        of tax increment financing would be less than the increase in 
        the market value estimated to result from the proposed 
        development after subtracting the present value of the projected 
        tax increments for the maximum duration of the district 
        permitted by the plan.  The requirements of this clause do not 
        apply if the district is a qualified housing district, as 
        defined in section 273.1399, subdivision 1. 
           (3) that the tax increment financing plan conforms to the 
        general plan for the development or redevelopment of the 
        municipality as a whole. 
           (4) that the tax increment financing plan will afford 
        maximum opportunity, consistent with the sound needs of the 
        municipality as a whole, for the development or redevelopment of 
        the project by private enterprise. 
           (5) that the municipality elects the method of tax 
        increment computation set forth in section 469.177, subdivision 
        3, clause (b), if applicable. 
           When the municipality and the authority are not the same, 
        the municipality shall approve or disapprove the tax increment 
        financing plan within 60 days of submission by the authority, or 
        the plan shall be deemed approved.  When the municipality and 
        the authority are not the same, the municipality may not amend 
        or modify a tax increment financing plan except as proposed by 
        the authority pursuant to subdivision 4.  Once approved, the 
        determination of the authority to undertake the project through 
        the use of tax increment financing and the resolution of the 
        governing body shall be conclusive of the findings therein and 
        of the public need for the financing. 
           Sec. 6.  Minnesota Statutes 1996, section 469.176, 
        subdivision 1b, is amended to read: 
           Subd. 1b.  [DURATION LIMITS; TERMS.] (a) No tax increment 
        shall in any event be paid to the authority 
           (1) after 25 years from date of receipt by the authority of 
        the first tax increment for a mined underground space 
        development district, 
           (2) after 15 years after receipt by the authority of the 
        first increment for a renewal and renovation district, 
           (3) after 12 20 years from approval of the tax increment 
        financing plan after receipt by the authority of the first 
        increment for a soils condition district, 
           (4) after nine years from the date of the receipt, or 11 
        years from approval of the tax increment financing plan, 
        whichever is less, for an economic development district, 
           (5) for a housing district or a redevelopment district, 
        after 20 years from the date of receipt by the authority of the 
        first tax increment by the authority pursuant to section 
        469.175, subdivision 1, paragraph (b); or, if no provision is 
        made under section 469.175, subdivision 1, paragraph (b), after 
        25 years from the date of receipt by the authority of the first 
        increment. 
           (b) For purposes of determining a duration limit under this 
        subdivision or subdivision 1e that is based on the receipt of an 
        increment, any increments from taxes payable in the year in 
        which the district terminates shall be paid to the authority.  
        This paragraph does not affect a duration limit calculated from 
        the date of approval of the tax increment financing plan or 
        based on the recovery of costs or to a duration limit under 
        subdivision 1c.  This paragraph does not supersede the 
        restrictions on payment of delinquent taxes in subdivision 1f. 
           Sec. 7.  Minnesota Statutes 1996, section 469.176, 
        subdivision 4c, is amended to read: 
           Subd. 4c.  [ECONOMIC DEVELOPMENT DISTRICTS.] (a) Revenue 
        derived from tax increment from an economic development district 
        may not be used to provide improvements, loans, subsidies, 
        grants, interest rate subsidies, or assistance in any form to 
        developments consisting of buildings and ancillary facilities, 
        if more than 15 percent of the buildings and facilities 
        (determined on the basis of square footage) are used for a 
        purpose other than:  
           (1) the manufacturing or production of tangible personal 
        property, including processing resulting in the change in 
        condition of the property; 
           (2) warehousing, storage, and distribution of tangible 
        personal property, excluding retail sales; 
           (3) research and development related to the activities 
        listed in clause (1) or (2); 
           (4) telemarketing if that activity is the exclusive use of 
        the property; 
           (5) tourism facilities; or 
           (6) qualified border retail facilities; 
           (7) space necessary for and related to the activities 
        listed in clauses (1) to (5) (6).  
           (b) Notwithstanding the provisions of this subdivision, 
        revenue derived from tax increment from an economic development 
        district may be used to pay for site preparation and public 
        improvements, if the following conditions are met: 
           (1) bedrock soils conditions are present in 80 percent or 
        more of the acreage of the district; 
           (2) the estimated cost of physical preparation of the site 
        exceeds the fair market value of the land before completion of 
        the preparation; and 
           (3) revenues from tax increments are expended only for the 
        additional costs of preparing the site because of unstable soils 
        and the bedrock soils condition, the additional cost of 
        installing public improvements because of unstable soils or the 
        bedrock soils condition, and reasonable administrative costs. 
           (c) Notwithstanding the provisions of this subdivision, 
        revenues derived from tax increment from an economic development 
        district may be used to provide improvements, loans, subsidies, 
        grants, interest rate subsidies, or assistance in any form for 
        up to 15,000 square feet of any separately owned commercial 
        facility located within the municipal jurisdiction of a small 
        city, if the revenues derived from increments are spent only to 
        assist the facility directly or for administrative expenses, the 
        assistance is necessary to develop the facility, and all of the 
        increments, except those for administrative expenses, are spent 
        only for activities within the district. 
           (d) For purposes of this subdivision, a qualified border 
        retail facility is a development consisting of a shopping center 
        or one or more retail stores, if the authority finds that all of 
        the following conditions are satisfied: 
           (1) the district is in a small city located within one mile 
        or less of the border of the state; 
           (2) the development is not located in the seven county 
        metropolitan area, as defined in section 473.121, subdivision 2; 
           (3) the development will contain new buildings or will 
        substantially rehabilitate existing buildings that together 
        contain at least 25,000 square feet of retail space; and 
           (4) without the use of tax increment financing for the 
        development, the development or a similar competing development 
        will instead occur in the bordering state or province. 
           (e) A city is a small city for purposes of this subdivision 
        if the city was a small city in the year in which the request 
        for certification was made and applies for the rest of the 
        duration of the district, regardless of whether the city 
        qualifies or ceases to qualify as a small city. 
           Sec. 8.  Minnesota Statutes 1996, section 469.176, 
        subdivision 4j, is amended to read: 
           Subd. 4j.  [REDEVELOPMENT DISTRICTS.] At least 90 percent 
        of the revenues derived from tax increments from a redevelopment 
        district or renewal and renovation district must be used to 
        finance the cost of correcting conditions that allow designation 
        of redevelopment and renewal and renovation districts under 
        section 469.174.  These costs include, but are not limited to, 
        acquiring properties containing structurally substandard 
        buildings or improvements or hazardous substances, pollution, or 
        contaminants, acquiring adjacent parcels necessary to provide a 
        site of sufficient size to permit development, demolition and 
        rehabilitation of structures, clearing of the land, the removal 
        of hazardous substances or remediation necessary to development 
        of the land, and installation of utilities, roads, sidewalks, 
        and parking facilities for the site.  The allocated 
        administrative expenses of the authority, including the cost of 
        preparation of the development action response plan, may be 
        included in the qualifying costs. 
           Sec. 9.  Minnesota Statutes 1996, section 469.176, 
        subdivision 5, is amended to read: 
           Subd. 5.  [REQUIREMENT FOR AGREEMENTS.] No more than 25 
        percent, by acreage, of the property to be acquired within a 
        project which contains a redevelopment district, or ten percent, 
        by acreage, of the property to be acquired within a project 
        which contains a housing or economic development district, as 
        set forth in the tax increment financing plan, shall at any time 
        be owned by an authority as a result of acquisition with the 
        proceeds of bonds issued pursuant to section 469.178 to which 
        tax increment from the property acquired is pledged unless prior 
        to acquisition in excess of the percentages, the authority has 
        concluded an agreement for the development or redevelopment of 
        the property acquired and which provides recourse for the 
        authority should the development or redevelopment not be 
        completed.  This subdivision does not apply to a parcel of a 
        district that is a designated hazardous substance site 
        established under section 469.174, subdivision 16, or part of a 
        hazardous substance subdistrict established under section 
        469.175, subdivision 7.  
           Sec. 10.  Minnesota Statutes 1996, section 469.177, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [ORIGINAL NET TAX CAPACITY.] (a) Upon or 
        after adoption of a tax increment financing plan, the auditor of 
        any county in which the district is situated shall, upon request 
        of the authority, certify the original net tax capacity of the 
        tax increment financing district and that portion of the 
        district overlying any subdistrict as described in the tax 
        increment financing plan and shall certify in each year 
        thereafter the amount by which the original net tax capacity has 
        increased or decreased as a result of a change in tax exempt 
        status of property within the district and any subdistrict, 
        reduction or enlargement of the district or changes pursuant to 
        subdivision 4.  
           (b) In the case of a mined underground space development 
        district the county auditor shall certify the original net tax 
        capacity as zero, plus the net tax capacity, if any, previously 
        assigned to any subsurface area included in the mined 
        underground space development district pursuant to section 
        272.04. 
           (c) For districts approved under section 469.175, 
        subdivision 3, or parcels added to existing districts after May 
        1, 1988, if the classification under section 273.13 of property 
        located in a district changes to a classification that has a 
        different assessment ratio, the original net tax capacity of 
        that property must be redetermined at the time when its use is 
        changed as if the property had originally been classified in the 
        same class in which it is classified after its use is changed. 
           (d) The amount to be added to the original net tax capacity 
        of the district as a result of previously tax exempt real 
        property within the district becoming taxable equals the net tax 
        capacity of the real property as most recently assessed pursuant 
        to section 273.18 or, if that assessment was made more than one 
        year prior to the date of title transfer rendering the property 
        taxable, the net tax capacity assessed by the assessor at the 
        time of the transfer.  If substantial taxable improvements were 
        made to a parcel after certification of the district and if the 
        property later becomes tax exempt, in whole or part, as a result 
        of the authority acquiring the property through foreclosure or 
        exercise of remedies under a lease or other revenue agreement or 
        as a result of tax forfeiture, the amount to be added to the 
        original net tax capacity of the district as a result of the 
        property again becoming taxable is the amount of the parcel's 
        value that was included in original net tax capacity when the 
        parcel was first certified.  The amount to be added to the 
        original net tax capacity of the district as a result of 
        enlargements equals the net tax capacity of the added real 
        property as most recently certified by the commissioner of 
        revenue as of the date of modification of the tax increment 
        financing plan pursuant to section 469.175, subdivision 4. 
           (e) For districts approved under section 469.175, 
        subdivision 3, or parcels added to existing districts after May 
        1, 1988, if the net tax capacity of a property increases because 
        the property no longer qualifies under the Minnesota 
        agricultural property tax law, section 273.111; the Minnesota 
        open space property tax law, section 273.112; or the 
        metropolitan agricultural preserves act, chapter 473H, or 
        because platted, unimproved property is improved or three years 
        pass after approval of the plat under section 273.11, 
        subdivision 1, the increase in net tax capacity must be added to 
        the original net tax capacity.  
           (f) Each year the auditor shall also add to the original 
        net tax capacity of each economic development district an amount 
        equal to the original net tax capacity for the preceding year 
        multiplied by the average percentage increase in the market 
        value of all property included in the economic development 
        district during the five years prior to certification of the 
        district.  In computing the average percentage increase in 
        market value, the auditor shall exclude the market value, as 
        estimated by the assessor, that is attributable to new 
        construction; extension of sewer, water, roads, or other public 
        utilities; or platting of the land. 
           (g) The amount to be subtracted from the original net tax 
        capacity of the district as a result of previously taxable real 
        property within the district becoming tax exempt, or a reduction 
        in the geographic area of the district, shall be the amount of 
        original net tax capacity initially attributed to the property 
        becoming tax exempt or being removed from the district.  If the 
        net tax capacity of property located within the tax increment 
        financing district is reduced by reason of a court-ordered 
        abatement, stipulation agreement, voluntary abatement made by 
        the assessor or auditor or by order of the commissioner of 
        revenue, the reduction shall be applied to the original net tax 
        capacity of the district when the property upon which the 
        abatement is made has not been improved since the date of 
        certification of the district and to the captured net tax 
        capacity of the district in each year thereafter when the 
        abatement relates to improvements made after the date of 
        certification.  The county auditor may specify reasonable form 
        and content of the request for certification of the authority 
        and any modification thereof pursuant to section 469.175, 
        subdivision 4.  
           (h) If a parcel of property contained a substandard 
        building that was demolished or removed and if the authority 
        elects to treat the parcel as occupied by a substandard building 
        under section 469.174, subdivision 10, paragraph (b), the 
        auditor shall certify the original net tax capacity of the 
        parcel using the greater of (1) the current net tax capacity of 
        the parcel, or (2) the estimated market value of the parcel for 
        the year in which the building was demolished or removed, but 
        applying the class rates for the current year. 
           Sec. 11.  Minnesota Statutes 1996, section 469.177, 
        subdivision 3, is amended to read: 
           Subd. 3.  [TAX INCREMENT, RELATIONSHIP TO CHAPTERS 276A AND 
        473F.] (a) Unless the governing body elects pursuant to clause 
        (b) the following method of computation shall apply to a 
        district other than an economic development district for which 
        the request for certification was made after June 30, 1997: 
           (1) The original net tax capacity and the current net tax 
        capacity shall be determined before the application of the 
        fiscal disparity provisions of chapter 276A or 473F.  Where the 
        original net tax capacity is equal to or greater than the 
        current net tax capacity, there is no captured net tax capacity 
        and no tax increment determination.  Where the original net tax 
        capacity is less than the current net tax capacity, the 
        difference between the original net tax capacity and the current 
        net tax capacity is the captured net tax capacity.  This amount 
        less any portion thereof which the authority has designated, in 
        its tax increment financing plan, to share with the local taxing 
        districts is the retained captured net tax capacity of the 
        authority.  
           (2) The county auditor shall exclude the retained captured 
        net tax capacity of the authority from the net tax capacity of 
        the local taxing districts in determining local taxing district 
        tax rates.  The local tax rates so determined are to be extended 
        against the retained captured net tax capacity of the authority 
        as well as the net tax capacity of the local taxing districts.  
        The tax generated by the extension of the lesser of (A) the 
        local taxing district tax rates or (B) the original local tax 
        rate to the retained captured net tax capacity of the authority 
        is the tax increment of the authority.  
           (b) The following method of computation applies to any 
        economic development district for which the request for 
        certification was made after June 30, 1997, and to any other 
        district for which the governing body may, by resolution 
        approving the tax increment financing plan pursuant to section 
        469.175, subdivision 3, elect the following method of 
        computation elects: 
           (1) The original net tax capacity shall be determined 
        before the application of the fiscal disparity provisions of 
        chapter 276A or 473F.  The current net tax capacity shall 
        exclude any fiscal disparity commercial-industrial net tax 
        capacity increase between the original year and the current year 
        multiplied by the fiscal disparity ratio determined pursuant to 
        section 276A.06, subdivision 7, or 473F.08, subdivision 6.  
        Where the original net tax capacity is equal to or greater than 
        the current net tax capacity, there is no captured net tax 
        capacity and no tax increment determination.  Where the original 
        net tax capacity is less than the current net tax capacity, the 
        difference between the original net tax capacity and the current 
        net tax capacity is the captured net tax capacity.  This amount 
        less any portion thereof which the authority has designated, in 
        its tax increment financing plan, to share with the local taxing 
        districts is the retained captured net tax capacity of the 
        authority.  
           (2) The county auditor shall exclude the retained captured 
        net tax capacity of the authority from the net tax capacity of 
        the local taxing districts in determining local taxing district 
        tax rates.  The local tax rates so determined are to be extended 
        against the retained captured net tax capacity of the authority 
        as well as the net tax capacity of the local taxing districts.  
        The tax generated by the extension of the lesser of (A) the 
        local taxing district tax rates or (B) the original local tax 
        rate to the retained captured net tax capacity of the authority 
        is the tax increment of the authority.  
           (3) An election by the governing body pursuant to paragraph 
        (b) shall be submitted to the county auditor by the authority at 
        the time of the request for certification pursuant to 
        subdivision 1. 
           (c) The method of computation of tax increment applied to a 
        district pursuant to paragraph (a) or (b) shall remain the same 
        for the duration of the district, except that the governing body 
        may elect to change its election from the method of computation 
        in paragraph (a) to the method in paragraph (b). 
           Sec. 12.  Laws 1995, chapter 264, article 5, section 44, 
        subdivision 4, as amended by Laws 1996, chapter 471, article 7, 
        section 21, is amended to read: 
           Subd. 4.  [AUTHORITY.] For housing replacement projects in 
        the city of Crystal, "authority" means the Crystal economic 
        development authority.  For housing replacement projects in the 
        city of Fridley, "authority" means the housing and redevelopment 
        authority in and for the city of Fridley or a successor in 
        interest.  For housing replacement projects in the city of 
        Minneapolis, "authority" means the Minneapolis community 
        development agency.  For housing replacement projects in the 
        city of St. Paul, "authority" means the St. Paul housing and 
        redevelopment authority.  For housing replacement projects in 
        the city of Duluth, "authority" means the Duluth economic 
        development authority.  For housing replacement projects in the 
        city of Richfield, "authority" is the authority as defined in 
        Minnesota Statutes, section 469.174, subdivision 2, that is 
        designated by the governing body of the city of Richfield.  For 
        housing replacement projects in the city of Columbia Heights, 
        "authority" is the authority as defined in Minnesota Statutes, 
        section 469.174, subdivision 2, that is designated by the 
        governing body of the city of Columbia Heights. 
           Sec. 13.  Laws 1995, chapter 264, article 5, section 45, 
        subdivision 1, as amended by Laws 1996, chapter 471, article 7, 
        section 22, is amended to read: 
           Subdivision 1.  [CREATION OF PROJECTS.] (a) An authority 
        may create a housing replacement project under sections 44 to 
        47, as provided in this section. 
           (b) For the cities of Crystal, Fridley, and Richfield, and 
        Columbia Heights, the authority may designate up to 50 parcels 
        in the city to be included in a housing replacement district.  
        No more than ten parcels may be included in year one of the 
        district, with up to ten additional parcels added to the 
        district in each of the following nine years.  For the cities of 
        Minneapolis, St. Paul, and Duluth, each authority may designate 
        up to 100 parcels in the city to be included in a housing 
        replacement district over the life of the district.  The only 
        parcels that may be included in a district are (1) vacant sites, 
        (2) parcels containing vacant houses, or (3) parcels containing 
        houses that are structurally substandard, as defined in 
        Minnesota Statutes, section 469.174, subdivision 10.  
           (c) The city in which the authority is located must pay at 
        least 25 percent of the housing replacement project costs from 
        its general fund, a property tax levy, or other unrestricted 
        money, not including tax increments. 
           (d) The housing replacement district plan must have as its 
        sole object the acquisition of parcels for the purpose of 
        preparing the site to be sold for market rate housing.  As used 
        in this section, "market rate housing" means housing that has a 
        market value that does not exceed 150 percent of the average 
        market value of single-family housing in that municipality. 
           Sec. 14.  [CITY OF BROOKLYN CENTER; USE OF TAX INCREMENT 
        FINANCING.] 
           Subdivision 1.  [APPLICATION OF TIME LIMIT.] For tax 
        increment financing district number 3, established on December 
        19, 1994, by Brooklyn Center Resolution No. 94-273, Minnesota 
        Statutes, section 469.1763, subdivision 3, applies to the 
        district by permitting a period of ten years for commencement of 
        activities within the district. 
           Subd. 2.  [EFFECTIVE DATE.] This section is effective upon 
        approval by the governing body of the city of Brooklyn Center 
        and compliance with Minnesota Statutes, section 645.021, 
        subdivision 3. 
           Sec. 15.  [CITY OF BUFFALO LAKE; TAX INCREMENT FINANCING 
        DISTRICT.] 
           Subdivision 1.  [EXTENSION OF TIME FOR 
        CERTIFICATION.] Notwithstanding the provisions of Minnesota 
        Statutes, section 273.1399, subdivision 6, paragraph (b), clause 
        (2), tax increment financing district 1-1 in the city of Buffalo 
        Lake is an exempt district under Minnesota Statutes, section 
        273.1399, paragraph (b), if the facility is certified by the 
        commissioner of agriculture by December 31, 1998. 
           Subd. 2.  [EFFECTIVE DATE.] This section is effective upon 
        approval by the governing body of the city of Buffalo Lake and 
        compliance with Minnesota Statutes, section 645.021, subdivision 
        3. 
           Sec. 16.  [GAYLORD.] 
           Subdivision 1.  [TIF DISTRICT EXTENSION AND EXPANSION.] 
        Notwithstanding the provisions of Minnesota Statutes, section 
        469.176, subdivision 1c, the city of Gaylord may, by resolution, 
        extend the duration of a tax increment financing district 
        originally certified in 1978.  The city may not extend the 
        duration beyond December 31, 2008. 
           Subd. 2.  [EFFECTIVE DATE.] This section is effective upon 
        compliance with the requirements of Minnesota Statutes, sections 
        469.1782 and 645.021. 
           Sec. 17.  [DEFINITIONS.] 
           Subdivision 1.  [APPLICABILITY.] As used in sections 17 to 
        19, the terms defined in this section have the meanings given 
        them. 
           Subd. 2.  [AUTHORITY.] "Authority" or "authorities" means 
        the Minneapolis public housing authority and the Minneapolis 
        community development agency if and to the extent that the 
        governing body has delegated to either the powers and duties 
        hereunder pursuant to section 18, subdivision 4, paragraph (b). 
           Subd. 3.  [CAPTURED NET TAX CAPACITY.] "Captured net tax 
        capacity" means the amount by which the current net tax capacity 
        of the housing transition district exceeds the original net tax 
        capacity, including the value of property normally taxable as 
        personal property by reason of its location on or over property 
        owned by a tax exempt entity. 
           Subd. 4.  [CITY.] "City" means the city of Minneapolis, 
        Minnesota. 
           Subd. 5.  [CONSENT DECREE.] "Consent decree" means the 
        order of the United States District Court issued in connection 
        with Hollman et. al. vs. Cisneros et. al., United States 
        District Court, Civil Case 4-92-712, as may be amended from time 
        to time. 
           Subd. 6.  [COUNTY AUDITOR.] "County auditor" means the 
        county auditor of Hennepin county, Minnesota. 
           Subd. 7.  [GOVERNING BODY.] "Governing body" means the city 
        council of the city. 
           Subd. 8.  [HOUSING TRANSITION DISTRICT; DISTRICT.] "Housing 
        transition district" or "district" means a geographic area 
        designated by the governing body within boundaries commencing at 
        the intersection of Humboldt Avenue North and Plymouth Avenue 
        North, thence East along Plymouth Avenue North to Seventh Street 
        North, thence South along Seventh Street North to Lyndale 
        Avenue, thence South along Lyndale Avenue to Glenwood Avenue 
        North, thence West along Glenwood Avenue North to Girard Avenue 
        North, thence North along Girard Avenue North to Girard Terrace, 
        thence North along Girard Terrace to Olson Memorial Highway, 
        thence West along Olson Memorial Highway to Humboldt Avenue 
        North, thence North on Humboldt Avenue North to the point of 
        beginning. 
           Subd. 9.  [NONTAXABLE PARCEL.] "Nontaxable parcel" means a 
        parcel to be included within the housing transition district 
        which at the time of certification is not subject to property 
        taxation by reason of public ownership. 
           Subd. 10.  [ORIGINAL NET TAX CAPACITY.] (a) With respect to 
        nontaxable parcels within the district, "original net tax 
        capacity" means zero. 
           (b) With respect to taxable parcels within the district, 
        "original net tax capacity" means the net tax capacity of the 
        parcels as certified by the commissioner of revenue for the 
        appropriate assessment year.  For purposes of this subdivision, 
        the appropriate assessment year is the previous assessment year, 
        if a request by the authority for certification has been made to 
        the county auditor by June 30.  If the request for certification 
        is filed after June 30, the appropriate assessment year is the 
        current assessment year. 
           Subd. 11.  [PARCEL.] "Parcel" means a tract or plat of land 
        established prior to the certification of the district as a 
        single unit for purposes of assessment. 
           Subd. 12.  [PREEXISTING DISTRICT.] "Preexisting district" 
        means any tax increment district within which is located a 
        parcel proposed to be included within the housing transition 
        district. 
           Subd. 13.  [TAXABLE PARCEL.] "Taxable parcel" means a 
        parcel to be included within the housing transition district 
        which is subject to property taxation at the time of 
        certification. 
           Sec. 18.  [ESTABLISHMENT OF HOUSING TRANSITION DISTRICT.] 
           Subdivision 1.  [CREATION.] The governing body may 
        establish a housing transition district within the city.  The 
        parcels included within the district need not be contiguous but 
        must all be designated and included at the time the district is 
        initially established.  Parcels must not be added to the 
        district after its initial certification. 
           Subd. 2.  [TAX INCREMENT.] (a) Upon request of the 
        authority, the county auditor shall certify the original net tax 
        capacity of the district and shall certify in each year 
        thereafter the amount by which the original net tax capacity 
        increases as a result of the conditions described in Minnesota 
        Statutes, section 469.177, subdivision 4, or decreases as a 
        result of the conditions described in Minnesota Statutes, 
        section 469.177, subdivision 1, paragraph (g).  No other changes 
        shall be made in original net tax capacity once certified by the 
        county auditor. 
           (b) The provisions of Minnesota Statutes, section 469.177, 
        subdivisions 1a and 3 to 10, apply to the computation of tax 
        increment for the housing transition district created under 
        sections 17 to 19. 
           (c) If an authority request for certification includes 
        nontaxable parcels then within a preexisting district, the 
        county auditor shall remove the parcels from the preexisting 
        district.  If an authority request for certification includes 
        taxable parcels then within a preexisting district, the county 
        auditor shall allocate all taxes derived from the captured net 
        tax capacity attributable thereto to the preexisting district. 
           Subd. 3.  [HOUSING TRANSITION DISTRICT PLAN.] To establish 
        a housing transition district, the governing body shall adopt a 
        housing transition district plan which constitutes a tax 
        increment financing plan, as used in those provisions of 
        Minnesota Statutes, sections 469.174 to 469.1781, made 
        applicable by sections 17 to 20, and contains the following: 
           (1) a general description of the plans for development of 
        the district; 
           (2) a description of the parcels to be included in the 
        district, including such information regarding each as shall 
        establish that the district meets the conditions described in 
        section 17, subdivision 8; 
           (3) the most recent net tax capacity of each parcel 
        included in the district; 
           (4) a budget containing estimated tax increment collections 
        and expenditures as authorized or permitted by sections 17 to 
        19; 
           (5) estimates of the sources of revenue, public and 
        private, other than tax increment to pay estimated or budgeted 
        costs; 
           (6) statements of the alternate estimated impacts of the 
        housing transition district on the net tax capacities of all 
        taxing jurisdictions in which the housing transition district is 
        located in whole or in part.  For purposes of one statement, the 
        statement shall assume that the estimated captured net tax 
        capacity would be available to the taxing jurisdictions without 
        creation of the housing transition district, and for purposes of 
        the second statement, it shall be assumed that none of the 
        estimated captured net tax capacity would be available to the 
        taxing jurisdictions without creation of the housing transition 
        district. 
           Subd. 4.  [PROCEDURE.] (a) The provisions of Minnesota 
        Statutes, section 469.175, subdivisions 3, 5, 6, and 6a, apply 
        to the establishment and operation of the housing transition 
        district created under sections 17 to 19, except the 
        determinations required by Minnesota Statutes, section 469.175, 
        subdivision 3, clauses (1) and (2), are not required. 
           (b) Upon approval of the housing transition district plan, 
        the governing body shall delegate to one or both of the 
        authorities the powers and duties regarding the implementation 
        and administration of the housing transition district it 
        determines appropriate. 
           Sec. 19.  [LIMITATIONS.] 
           Subdivision 1.  [DURATION.] Tax increment generated by the 
        district must cease to be paid to the authority after 20 years 
        from the receipt by the authority of the first tax increment 
        from the district. 
           Subd. 2.  [USE.] (a) All tax increment received by the 
        authority from the district must be used in accordance with the 
        housing transition district plan. 
           (b) Tax increment may be used to pay the costs of: 
           (1) acquiring title to or an ownership interest in any 
        property within the district; 
           (2) relocating owners of or tenants in any property within 
        the district; 
           (3) demolishing all or a part of any structures or other 
        improvements within the district; 
           (4) site preparation, soil correction, and infrastructure 
        improvements within the district; 
           (5) rehabilitating or constructing any housing structures 
        or other improvements within the district; 
           (6) constructing public improvements associated with 
        development within the district; 
           (7) making loans or grants to public or private entities in 
        order to facilitate development within the district; and 
           (8) administering the creation and operation of the 
        district or the implementation of the consent decree, including 
        reimbursement for costs previously incurred or advanced and not 
        reimbursed. 
           (c) The authority may pay the costs authorized by this 
        subdivision, directly, through the issuance and sale of 
        obligations pursuant to Minnesota Statutes, section 469.178, by 
        means of loans or grants to the current or future owners of 
        property within the district, or through the exercise of any 
        authority contained in Minnesota Statutes, sections 469.001 to 
        469.047. 
           (d) Minnesota Statutes, section 469.176, subdivision 4g, 
        applies to the district.  Minnesota Statutes, section 469.176, 
        subdivision 3, applies to the district, except "15" is 
        substituted for "ten" in paragraph (a) of subdivision 3. 
           Sec. 20.  [APPLICABILITY OF OTHER LAWS.] 
           Minnesota Statutes, sections 469.174 to 469.179, apply to 
        the housing transition district or tax increment generated 
        pursuant to sections 17 to 19 only to the extent specified in 
        sections 17 to 19.  The housing transition district is a 
        redevelopment district for purposes of Minnesota Statutes, 
        section 273.1399.  The housing transition district does not have 
        a longer duration than permitted by general law for purposes of 
        Minnesota Statutes, section 469.1782. 
           Sec. 21.  [CITY OF MINNETONKA; HOUSING DEVELOPMENT 
        ACCOUNT.] 
           Subdivision 1.  [DEPOSITS IN ACCOUNT.] The Minnetonka 
        economic development authority may deposit the balance of 
        revenues derived from tax increment from housing tax increment 
        financing district No. 1 in the housing development account of 
        the authority.  These increments may be expended for housing 
        activities in accordance with the tax increment financing plan, 
        if before depositing the increments or making any expenditures 
        for housing activities under this section, the authority and 
        city: 
           (1) elect, by resolution, to decertify housing tax 
        increment financing district No. 1 as of December 31, 1997; and 
           (2) identify in the plan the housing activities that will 
        be assisted by the housing development account.  
           The election to decertify and any necessary plan amendment 
        may be approved before or after the effective date of this 
        section. 
           Subd. 2.  [PERMITTED HOUSING ACTIVITIES.] For the purposes 
        of this section, housing activities:  
           (1) may include rehabilitation, acquisition, demolition, 
        and financing of new or existing single family or multifamily 
        housing and public improvements directly related to such 
        activities, together with other related activities specified in 
        the housing action plan approved by the city or the authority in 
        compliance with Minnesota Statutes, sections 473.25 to 473.254; 
           (2) may be located anywhere within the city without regard 
        to the boundaries of any tax increment financing district or 
        project area; and 
           (3) for rental and owner-occupied housing, must meet the 
        income, rent, or sales price limitations established from time 
        to time by the metropolitan council under Minnesota Statutes, 
        sections 473.25 to 473.254. 
           Subd. 3.  [SEPARATE ACCOUNT REQUIRED.] Tax increment to be 
        expended for housing activities under this section must be 
        segregated by the authority into a special housing development 
        account on its official books and records.  The account may also 
        receive funds from other public and private sources. 
           Subd. 4.  [EFFECTIVE DATE.] This section is effective upon 
        approval by the governing body of the city of Minnetonka and 
        compliance with Minnesota Statutes, section 645.021, subdivision 
        3. 
           Sec. 22.  [EAST GRAND FORKS] 
           Subdivision 1.  [TIF EXTENSION.] The governing body of the 
        city of East Grand Forks may extend the duration of tax 
        increment financing district No. 2 (Gateway East) by up to five 
        additional years.  The district terminates no later than the end 
        of calendar year 2005. 
           Subd. 2.  [EFFECTIVE DATE.] This section is effective upon 
        compliance by the governing body of the city of East Grand Forks 
        with the provisions of Minnesota Statutes, sections 469.1782, 
        subdivision 2; and 645.021. 
           Sec. 23.  [TOWN OF WHITE; ECONOMIC DEVELOPMENT.] 
           Subdivision 1.  [AUTHORIZATION.] Notwithstanding the 
        provisions of Minnesota Statutes, section 469.176, subdivision 
        1b, upon approval of the governing body of the town of White by 
        resolution, the duration of tax increment financing districts 
        numbers 1 and 2 of the joint east range economic development 
        authority may be extended by three additional years beyond the 
        limit that otherwise applies under Minnesota Statutes, section 
        469.176, subdivision 1, to the districts.  
           Subd. 2.  [SPECIAL RULES.] (a) Tax increment financing 
        districts numbers 1 and 2 of the joint east range economic 
        development authority are subject to Minnesota Statutes, 
        sections 469.174 to 469.179, except as provided in this 
        subdivision. 
           (b) Minnesota Statutes, sections 273.1399, and 469.1782, 
        subdivision 1, do not apply. 
           (c) The application of Minnesota Statutes, section 
        469.1763, is modified to permit the use of increments from 
        either district to be used to pay any promissory notes issued in 
        connection with either district. 
           Subd. 3.  [EFFECTIVE DATE.] This section is effective upon 
        compliance by the governing bodies of the town of White, the 
        county of St. Louis, and independent school district No. 2711 
        with Minnesota Statutes, sections 469.1782, subdivision 2, and 
        645.021, subdivision 2. 
           Sec. 24.  [TASK FORCE; TIF RECODIFICATION.] 
           (a) A legislative task force is established on tax 
        increment financing and local economic development powers.  The 
        task force consists of 12 members as follows: 
           (1) six members of the house of representatives, at least 
        two of whom are members of the minority caucus, appointed by the 
        speaker; and 
           (2) six members of the senate, at least two of whom are 
        members of the minority caucus, appointed by the committee on 
        committees. 
           (b) The task force shall prepare a bill for the 1998 
        legislative session that recodifies the Tax Increment Financing 
        Act and combines the statutes providing local economic 
        development powers into one law providing a uniform set of 
        powers relative to the use of tax increment financing. 
           (c) In preparing the bill under this section, the task 
        force shall consult with and seek comments from and 
        participation by representatives of the affected local 
        governments. 
           (d) The revisor of statutes and house and senate 
        legislative staff shall staff the task force. 
           (e) This section expires on March 1, 1998. 
           Sec. 25.  [EFFECTIVE DATE.] 
           Sections 1, 3 to 6, 7, and 10, are effective for districts 
        for which the requests for certification are made after June 30, 
        1997. 
           Section 2, clauses (1) and (4), are effective for districts 
        for which the requests for certification were made after July 
        31, 1979, and for payments and investment earnings received 
        after July 1, 1997.  Section 2, clauses (2) and (3), are 
        effective for districts for which the request for certification 
        was made after June 30, 1982, and proceeds from sales and leases 
        of properties purchased by the authority after June 30, 1997, 
        and repayments of advances and loans that were made after June 
        30, 1997.  
           Sections 8 and 9 apply to all tax increment districts, 
        whenever certified, insofar as the underlying law applies to 
        them, and any uses of tax increment expended prior to the date 
        of enactment of this act which are in compliance with the 
        provisions of those sections are deemed valid. 
           Sections 12 and 13 are effective on the day the chief 
        clerical officer of the city of Columbia Heights complies with 
        Minnesota Statutes, sections 645.021, subdivision 3. 
           Sections 17 to 20 are effective the day following final 
        enactment and upon compliance by the governing body with 
        Minnesota Statutes, section 645.021, subdivision 3. 
           Section 24 is effective the day following final enactment. 
                                   ARTICLE 11 
                          INTERGOVERNMENTAL RELATIONS 
           Section 1.  [3.986] [DEFINITIONS.] 
           Subdivision 1.  [SCOPE.] The terms used in sections 3.986 
        to 3.989 have the meanings given them in this section. 
           Subd. 2.  [LOCAL FISCAL IMPACT.] (a) "Local fiscal impact" 
        means increased or decreased costs or revenues that a political 
        subdivision would incur as a result of a law enacted after June 
        30, 1997, or rule proposed after June 30, 1998: 
           (1) that mandates a new program, eliminates an existing 
        mandated program, requires an increased level of service of an 
        existing program, or permits a decreased level of service in an 
        existing mandated program; 
           (2) that implements or interprets federal law and, by its 
        implementation or interpretation, increases or decreases program 
        or service levels beyond the level required by the federal law; 
           (3) that implements or interprets a statute or amendment 
        adopted or enacted pursuant to the approval of a statewide 
        ballot measure by the voters and, by its implementation or 
        interpretation, increases or decreases program or service levels 
        beyond the levels required by the ballot measure; 
           (4) that removes an option previously available to 
        political subdivisions, or adds an option previously unavailable 
        to political subdivisions, thus requiring higher program or 
        service levels or permitting lower program or service levels, or 
        prohibits a specific activity and so forces political 
        subdivisions to use a more costly alternative to provide a 
        mandated program or service; 
           (5) that requires that an existing program or service be 
        provided in a shorter time period and thus increases the cost of 
        the program or service, or permits an existing mandated program 
        or service to be provided in a longer time period, thus 
        permitting a decrease in the cost of the program or service; 
           (6) that adds new requirements to an existing optional 
        program or service and thus increases the cost of the program or 
        service because the political subdivisions have no reasonable 
        alternative other than to continue the optional program; 
           (7) that affects local revenue collections by changes in 
        property or sales and use tax exemptions; 
           (8) that requires costs previously incurred at local option 
        that have subsequently been mandated by the state; or 
           (9) that requires payment of a new fee or increases the 
        amount of an existing fee, or permits the elimination or 
        decrease of an existing fee mandated by the state. 
           (b) When state law is intended to achieve compliance with 
        federal law or court orders, state mandates shall be determined 
        as follows: 
           (1) if the federal law or court order is discretionary, the 
        state law is a state mandate; 
           (2) if the state law exceeds what is required by the 
        federal law or court order, only the provisions of the state law 
        that exceed the federal requirements are a state mandate; and 
           (3) if the state law does not exceed what is required by 
        the federal statute or regulation or court order, the state law 
        is not a state mandate. 
           Subd. 3.  [MANDATE.] A "mandate" is a requirement imposed 
        upon a political subdivision in a law by a state agency or by 
        judicial authority that, if not complied with, results in: 
           (1) civil liability; 
           (2) criminal penalty; or 
           (3) administrative sanctions such as reduction or loss of 
        funding. 
           Subd. 4.  [POLITICAL SUBDIVISION.] A "political 
        subdivision" is a county, home rule charter or statutory city, 
        town, or other taxing district or municipal corporation. 
           Subd. 5.  [REQUIRING AN INCREASED LEVEL OF 
        SERVICE.] "Requiring an increased level of service" includes 
        requiring that an existing service be provided in a shorter time.
           Sec. 2.  [3.987] [LOCAL IMPACT TO NOTES FOR STATE-MANDATED 
        ACTIONS.] 
           Subdivision 1.  [LOCAL IMPACT NOTES.] The commissioner of 
        finance shall coordinate the development of a local impact note 
        for any proposed legislation introduced after June 30, 1997, or 
        any rule proposed after June 30, 1998, upon request of the chair 
        or the ranking minority member of either legislative tax 
        committee.  The local impact note must be prepared as provided 
        in section 3.98, subdivision 2, and made available to the public 
        upon request.  If the action is among the exceptions listed in 
        section 3.988, a local impact note need not be requested nor 
        prepared.  The commissioner shall make a reasonable and timely 
        estimate of the local fiscal impact on each type of political 
        subdivision that would result from the proposed legislation.  
        The commissioner of finance may require any political 
        subdivision or the commissioner of an administrative agency of 
        the state to supply in a timely manner any information 
        determined to be necessary to determine local fiscal impact.  
        The political subdivision, its representative association, or 
        commissioner shall convey the requested information to the 
        commissioner of finance with a signed statement to the effect 
        that the information is accurate and complete to the best of its 
        ability.  The political subdivision, its representative 
        association, or commissioner, when requested, shall update its 
        determination of local fiscal impact based on actual cost or 
        revenue figures, improved estimates, or both. 
           Subd. 2.  [MANDATE EXPLANATIONS.] Any bill introduced in 
        the legislature after June 30, 1997, that seeks to impose 
        program or financial mandates on political subdivisions must 
        include an attachment from the author that gives appropriate 
        responses to the following guidelines.  It must state and list: 
           (1) the policy goals that are sought to be attained, the 
        performance standards that are to be imposed, and an explanation 
        why the goals and standards will best be served by requiring 
        compliance by political subdivisions; 
           (2) performance standards that will allow political 
        subdivisions flexibility and innovation of method in achieving 
        those goals; 
           (3) the reasons for each prescribed standard and the 
        process by which each standard governs input such as staffing 
        and other administrative aspects of the program; 
           (4) the sources of additional revenue, in addition to 
        existing funding for similar programs, that are directly linked 
        to imposition of the mandates that will provide adequate and 
        stable funding for their requirements; 
           (5) what input has been obtained to ensure that the 
        implementing agencies have the capacity to carry out the 
        delegated responsibilities; and 
           (6) the reasons why less intrusive measures such as 
        financial incentives or voluntary compliance would not yield the 
        equity, efficiency, or desired level of statewide uniformity in 
        the proposed program. 
           Subd. 3.  [LOCAL INVOLVEMENT; LAWS.] Any bill introduced in 
        the legislature after June 30, 1997, that seeks to impose a 
        program or financial mandate on political subdivisions must 
        include an attachment prepared by the author that describes the 
        efforts put forth, if any, to involve political subdivisions in 
        the creation or development of the proposed mandate. 
           Subd. 4.  [NO MANDATE RESTRICTION.] Except as specifically 
        provided by this article, nothing in this article restricts or 
        eliminates the authority of the state to create or impose 
        programs by law upon political subdivisions. 
           Sec. 3.  [3.988] [EXCEPTIONS TO LOCAL IMPACT NOTES.] 
           Subdivision 1.  [COSTS RESULTING FROM INFLATION.] A local 
        impact note need not be prepared for increases in the cost of 
        providing an existing service if the increases result directly 
        from inflation.  "Resulting directly from inflation" means 
        attributable to maintaining an existing level of service rather 
        than increasing the level of service.  A cost-of-living increase 
        in welfare benefits is an example of a cost resulting directly 
        from inflation.  
           Subd. 2.  [COSTS NOT THE RESULT OF A NEW PROGRAM OR 
        INCREASED SERVICE.] A local impact note need not be prepared for 
        increased local costs that do not result from a new program or 
        an increased level of service. 
           Subd. 3.  [MISCELLANEOUS EXCEPTIONS.] A local impact note 
        or an attachment as provided in section 3.987, subdivision 2, 
        need not be prepared for the cost of a mandated action if the 
        law, including a rulemaking, containing the mandate:  
           (1) accommodates a specific local request; 
           (2) results in no new local government duties; 
           (3) leads to revenue losses from exemptions to taxes; 
           (4) provided only clarifying or conforming, nonsubstantive 
        charges on local government; 
           (5) imposes additional net local costs that are minor (less 
        than $200 for any single local government if the mandate does 
        not apply statewide or less than $3,000,000 if the mandate is 
        statewide) and do not cause a financial burden on local 
        government; 
           (6) is a law or executive order enacted before July 1, 
        1997, or a rule initially implementing a law enacted before July 
        1, 1997; 
           (7) implements something other than a law or executive 
        order, such as a federal, court, or voter-approved mandate; 
           (8) defines a new crime or redefines an existing crime or 
        infraction; 
           (9) results in savings that equal or exceed costs; 
           (10) requires the holding of elections; 
           (11) ensures due process or equal protection; 
           (12) provides for the notification and conduct of public 
        meetings; 
           (13) establishes the procedures for administrative and 
        judicial review of actions taken by political subdivisions; 
           (14) protects the public from malfeasance, misfeasance, or 
        nonfeasance by officials of political subdivisions; 
           (15) relates directly to financial administration, 
        including the levy, assessment, and collection of taxes; 
           (16) relates directly to the preparation and submission of 
        financial audits necessary to the administration of state laws; 
        or 
           (17) requires uniform standards to apply to public and 
        private institutions without differentiation. 
           Sec. 4.  [3.989] [REIMBURSEMENT TO LOCAL POLITICAL 
        SUBDIVISIONS FOR COSTS OF STATE MANDATES.] 
           Subdivision 1.  [DEFINITIONS.] In this section: 
           (1) "Class A state mandates" means those laws under which 
        the state mandates to political subdivisions, their 
        participation, the organizational structure of the program, and 
        the procedural regulations under which the law must be 
        administered; and 
           (2) "Class B state mandates" means those mandates that 
        allow the political subdivisions to opt for administration of a 
        law with program elements mandated beforehand and with an 
        assured revenue level from the state of at least 90 percent of 
        full program and administrative costs.  
           Subd. 2.  [REPORT.] The commissioner of finance shall 
        prepare by September 1, 1998, and by September 1 of each 
        even-numbered year thereafter, a report by political 
        subdivisions of the costs of class A state mandates established 
        after June 30, 1997.  
           The commissioner shall annually include the statewide total 
        of the statement of costs of class A mandates as a notation in 
        the state budget for the next fiscal year.  
           Subd. 3.  [CERTAIN POLITICAL SUBDIVISIONS; REPORT.] The 
        political subdivisions that have opted to administer class B 
        state mandates shall report to the commissioner of finance by 
        September 1, 1998, and by September 1 of each year thereafter, 
        identifying each instance when revenue for a class B state 
        mandate has fallen below 85 percent of the total cost of the 
        program and the political subdivision intends to cease 
        administration of the program.  
           The commissioner shall forward a copy of the report to the 
        chairs of the appropriate funding committees of the senate and 
        the house for proposed inclusion of the shortfall as a line item 
        appropriation in the state budget for the next fiscal year.  
           The political subdivision may exercise its option to cease 
        administration only if the legislature has failed to include the 
        shortfall as an appropriation in the state budget for the next 
        fiscal year.  
           Subd. 4.  [EXEMPTIONS.] Laws and executive orders 
        enumerated in section 3.988 are exempted from this section. 
           Sec. 5.  [14.431] [PERIODIC REVIEW OF ADMINISTRATIVE 
        RULES.] 
           Subdivision 1.  [DEFINITIONS.] The terms defined in section 
        3.986, subdivision 1, apply to this section. 
           Subd. 2.  [SIGNIFICANT FINANCIAL IMPACT.] The commissioner 
        of finance shall review, every five years, rules adopted after 
        June 30, 1998, that have significant financial impact upon 
        political subdivisions.  In this section, "significant financial 
        impact" means requiring local political subdivisions to expand 
        existing services, employ additional personnel, or increase 
        local expenditures.  The commissioner shall determine the costs 
        and benefits of each rulemaking and submit a report to the 
        legislative coordinating commission with its opinion, if any, 
        for the continuation, modification, or elimination of the rules 
        in the rulemaking.  
           Sec. 6.  Minnesota Statutes 1996, section 273.1398, 
        subdivision 8, is amended to read: 
           Subd. 8.  [APPROPRIATION.] (a) An amount sufficient to pay 
        the aids and credits provided under this section for school 
        districts, intermediate school districts, or any group of school 
        districts levying as a single taxing entity, is annually 
        appropriated from the general fund to the commissioner of 
        children, families, and learning.  An amount sufficient to pay 
        the aids and credits provided under this section for counties, 
        cities, towns, and special taxing districts is annually 
        appropriated from the general fund to the commissioner of 
        revenue.  A jurisdiction's aid amount may be increased or 
        decreased based on any prior year adjustments for homestead 
        credit or other property tax credit or aid programs. 
           (b) 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 only to the extent to which those 
        costs exceed those costs incurred in fiscal year 1997 and for 
        any other new costs attributable to the local impact note 
        function required by section 3.987, not to exceed $100,000 in 
        fiscal year 1998 and $200,000 in fiscal year 1999 and thereafter.
           The commissioner of revenue shall deduct the amount billed 
        under this paragraph from aid payments to be made to cities and 
        counties under subdivision 2 on a pro rata basis.  The amount 
        deducted under this paragraph is appropriated to the 
        commissioner of finance for the preparation of local impact 
        notes.  
           Sec. 7.  Minnesota Statutes 1996, section 477A.05, is 
        amended to read: 
           477A.05 [LOCAL PERFORMANCE AID.] 
           Subdivision 1.  [QUALIFICATION.] By May 15, 1996, and March 
        31 25 of each year thereafter, the commissioner shall send a 
        local performance aid qualification form to each county and city 
        in the state.  Jurisdictions that are eligible to receive the 
        aid must return the completed form by June 30 in order to 
        receive aid in the following calendar year.  For each 
        determinator specified in subdivision 2, the form shall have a 
        space for the jurisdiction to indicate that it has satisfied the 
        conditions of the determinator.  For counties, the form must be 
        signed by the chair of the county board.  For cities, the form 
        must be signed by the mayor, if the city has a mayor, and a 
        member the chair of the city council.  Applications may be filed 
        jointly by jurisdictions planning to spend the aid jointly. 
           Subd. 2.  [ELIGIBILITY DETERMINATOR.] For calendar year 
        1997 1998 and subsequent calendar years, a jurisdiction is 
        eligible to receive local performance aid if the jurisdiction 
        affirms that it (1) the aid will result in a reduction in 
        property taxes at least equal to the amount of aid received, and 
        (2) the jurisdiction will spend the aid on programs for which it 
        has developed a system of performance measures for the services 
        provided by the jurisdiction, and that these measures are will 
        allow for the measurement of continuous improvement and will be 
        regularly compiled and presented to the county board or the city 
        council at least once a year.  The jurisdiction must identify 
        the program or programs that are to be funded with the aid.  A 
        jurisdiction is also eligible for aid under this determinator if 
        it affirms that it is in the process of developing and 
        implementing a system of performance measures for the program or 
        programs for which the aid is being sought; however, eligibility 
        based upon being in the process of development may not be used 
        for more than two consecutive years aid amounts under this 
        section may not be spent on the program or programs until the 
        performance measurement system has been instituted, unless the 
        aid is being used to establish the performance measurement 
        system. 
           Subd. 3.  [DETERMINATION OF AID AMOUNT.] The commissioner 
        shall sum the populations of all jurisdictions that have met the 
        condition conditions specified in subdivision 2.  The 
        commissioner shall determine a per capita aid amount by dividing 
        the aggregate aid available under subdivision 5 by the sum of 
        the populations for all qualifying jurisdictions, separately for 
        counties and cities.  Each jurisdiction shall then be eligible 
        for aid equal to the jurisdictions's population times the per 
        capita aid amount.  For purposes of this subdivision, population 
        means the most recent population established under section 
        477A.011, subdivision 3, in the year in which the aid is 
        determined. 
           Subd. 4.  [NOTIFICATION AND PAYMENT.] Jurisdictions shall 
        be notified of their aid under this section at the same time as 
        the notification for aid under section 477A.014, subdivision 1.  
        Payments of aid under this section shall be made on the dates 
        prescribed in section 477A.015. 
           Subd. 5.  [APPROPRIATION.] (a) For payments to counties 
        under this section, there is annually appropriated from the 
        general fund to the commissioner of revenue an amount equal to 
        the sum of $558,625 plus the amount by which county aids were 
        reduced under Laws 1996, chapter 471, article 3, section 49, 
        adjusted for inflation as provided under section 477A.03, 
        subdivision 3.  For payments to cities under this section, there 
        is annually appropriated from the general fund to the 
        commissioner of revenue an amount equal to the sum of $441,735 
        plus the amount by which city aids were reduced under Laws 1996, 
        chapter 471, article 3, section 49, adjusted for inflation as 
        provided under section 477A.03, subdivision 3. 
           (b) For aids payable in 1998 under this section, an 
        additional amount of $560,000 for counties and $440,000 for 
        cities is appropriated from the general fund to the commissioner 
        of revenue. 
           Sec. 8.  [REPEALER.] 
           Minnesota Statutes 1996, section 3.982, is repealed. 
           Sec. 9.  [EFFECTIVE DATE.] 
           Section 7 is effective beginning with aids payable in 1998. 
                                   ARTICLE 12
                        REGIONAL DEVELOPMENT COMMISSIONS
           Section 1.  Minnesota Statutes 1996, section 462.381, is 
        amended to read: 
           462.381 [TITLE.] 
           Sections 462.381 to 462.398 may be cited as the "regional 
        development act of 1969."  
           Sec. 2.  Minnesota Statutes 1996, section 462.383, is 
        amended to read: 
           462.383 [PURPOSE:  GOVERNMENT COOPERATION AND 
        COORDINATION.] 
           Subdivision 1.  [LEGISLATIVE FINDINGS.] The legislature 
        finds that problems of growth and development in urban and rural 
        regions of the state so transcend the boundary lines of local 
        government units that no single unit can plan for their solution 
        without affecting other units in the region; that various 
        multicounty planning activities conducted under various laws of 
        the United States are presently being conducted in an 
        uncoordinated manner that coordination of multijurisdictional 
        activities is essential to the development and implementation of 
        effective policies and programs; that intergovernmental 
        cooperation on a regional basis is an effective means of pooling 
        the resources of local government to approach common problems; 
        and that the assistance of the state is needed to make the most 
        effective use of local, state, federal, and private programs in 
        serving the citizens of such urban and rural regions.  
           Subd. 2.  [BY CREATING REGIONAL COMMISSION.] It is the 
        purpose of sections 462.381 to 462.398 to facilitate 
        intergovernmental cooperation and to insure the orderly and 
        harmonious coordination of state, federal, and local 
        comprehensive planning and development programs for the solution 
        of economic, social, physical, and governmental problems of the 
        state and its citizens by providing for the creation of regional 
        development commissions authorize the establishment of regional 
        development commissions to work with and on behalf of local 
        units of government to develop plans or implement programs to 
        address economic, social, physical, and governmental concerns of 
        each region of the state.  The commissions may assist with, 
        develop, or implement plans or programs for individual local 
        units of government.  
           Sec. 3.  Minnesota Statutes 1996, section 462.384, 
        subdivision 5, is amended to read: 
           Subd. 5.  [DEVELOPMENT REGION, REGION.] "Development 
        region" or "region" means a geographic region composed of a 
        grouping of counties embodied in an executive order of the 
        governor or as otherwise established by sections 462.381 to 
        462.398.  
           Sec. 4.  Minnesota Statutes 1996, section 462.385, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [BY GOVERNOR'S ORDER; HEARINGS.] 
        Development regions for the state shall be those regions so 
        designated by the governor by executive order.  The order shall 
        provide for public hearings within each proposed region after 
        which any county may request assignment to a region other than 
        that proposed by the order.  If a request for reassignment is 
        unacceptable to the commissioner, the county shall remain in the 
        originally designated region until the next session of the 
        legislature for its review and final assignment. consist of the 
        following counties: 
           Region 1:  Kittson, Roseau, Marshall, Pennington, Red Lake, 
        Polk, and Norman. 
           Region 2:  Lake of the Woods, Beltrami, Mahnomen, 
        Clearwater, and Hubbard. 
           Region 3:  Koochiching, Itasca, St. Louis, Lake, Cook, 
        Aitkin, and Carlton. 
           Region 4:  Clay, Becker, Wilkin, Otter Tail, Grant, 
        Douglas, Traverse, Stevens, and Pope. 
           Region 5:  Cass, Wadena, Crow Wing, Todd, and Morrison. 
           Region 6E:  Kandiyohi, Meeker, Renville, and McLeod. 
           Region 6W:  Big Stone, Swift, Chippewa, Lac Qui Parle, and 
        Yellow Medicine. 
           Region 7E:  Mille Lacs, Kanabec, Pine, Isanti, and Chisago. 
           Region 7W:  Stearns, Benton, Sherburne, and Wright. 
           Region 8:  Lincoln, Lyon, Redwood, Pipestone, Murray, 
        Cottonwood, Rock, Nobles, and Jackson. 
           Region 9:  Sibley, Nicollet, LeSueur, Brown, Blue Earth, 
        Waseca, Watonwan, Martin, and Faribault. 
           Region 10:  Rice, Goodhue, Wabasha, Steele, Dodge, Olmsted, 
        Winona, Freeborn, Mower, Fillmore, and Houston. 
           Region 11:  Anoka, Hennepin, Ramsey, Washington, Carver, 
        Scott, and Dakota. 
           Sec. 5.  Minnesota Statutes 1996, section 462.385, 
        subdivision 3, is amended to read: 
           Subd. 3.  [ONGOING BOUNDARY STUDIES; CHANGES.] The 
        commissioner shall conduct continuous studies and analysis of 
        the boundaries of regions and shall make recommendations for 
        their modification where necessary.  Modification of regional 
        boundaries may be initiated by a county, a commission, or by the 
        commissioner and will be accomplished in accordance with this 
        section as in the case of initial designation requesting 
        assignment to a region other than that within which it is 
        designated.  If a request for reassignment is unacceptable to 
        the commission whose boundaries would be modified, the county 
        requesting reassignment shall remain in the originally 
        designated region until the legislature determines the final 
        assignment. 
           Sec. 6.  Minnesota Statutes 1996, section 462.386, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [EXCEPTION, WORKING AGREEMENTS.] All 
        coordination, planning, and development regions assisted or 
        created by the state of Minnesota or pursuant to federal 
        legislation shall conform to the regions designated by the 
        executive order except where, after review and approval by the 
        commissioner governor or designee, nonconformance is clearly 
        justified.  The commissioner governor or designee shall develop 
        working agreements with state and federal departments and 
        agencies to insure conformance with this subdivision. 
           Sec. 7.  Minnesota Statutes 1996, section 462.387, is 
        amended to read: 
           462.387 [REGIONAL DEVELOPMENT COMMISSIONS; ESTABLISHMENT.] 
           Subdivision 1.  [PETITION.] Any combination of counties or 
        municipalities representing a majority of the population of the 
        region for which a commission is proposed may petition the 
        commissioner governor or designee by formal resolution setting 
        forth its desire to establish, and the need for, the 
        establishment of a regional development commission.  For 
        purposes of this section the population of a county does not 
        include the population of a municipality within the county. 
           Subd. 1a.  [OPERATING COMMISSION.] Regional development 
        commissions shall be those organizations operating pursuant to 
        sections 462.381 to 462.398 which were formed by formal 
        resolution of local units of government and those which may 
        petition by formal resolution to establish a regional 
        development commission. 
           Subd. 3.  [ESTABLISHMENT.] Upon receipt of a petition as 
        provided in subdivision 1 a regional development commission 
        shall be established by the commissioner governor or designee 
        and the notification of all local government units within the 
        region for which the commission is proposed shall be notified.  
        The notification shall be made within 60 days of 
        the commissioner's governor's receipt of a petition under 
        subdivision 1. 
           Subd. 4.  [SELECTION OF MEMBERSHIP.] The commissioner 
        governor or designee shall call together each of the membership 
        classifications except citizen groups, defined in section 
        462.388, within 60 days of the establishment of a regional 
        development commission for the purpose of selecting the 
        commission membership. 
           Subd. 5.  [NAME OF COMMISSION.] The name of the 
        organization shall be determined by formal resolution of the 
        commission. 
           Sec. 8.  Minnesota Statutes 1996, section 462.388, is 
        amended to read: 
           462.388 [COMMISSION MEMBERSHIP.] 
           Subdivision 1.  [REPRESENTATION OF VARIOUS MEMBERS.] A 
        commission shall consist of the following members: 
           (1) one member from each county board of every county in 
        the development region; 
           (2) one additional county board member from each county of 
        over 100,000 population; 
           (3) the town clerk, town treasurer, or one member of a town 
        board of supervisors from each county containing organized 
        towns; 
           (4) one additional member selected by the county board of 
        any county containing no townships; 
           (5) one mayor or council member from a municipality of 
        under 10,000 population from each county, selected by the mayors 
        of all such municipalities in the county; 
           (6) one mayor or council member from each municipality of 
        over 10,000 in each county; 
           (7) two school board members elected by a majority of the 
        chairs of school boards in the development region; 
           (8) one member from each council of governments; 
           (9) one member appointed by each native American tribal 
        council located in each region; and 
           (10) citizens representing public interests within the 
        region including members of minority groups to be selected after 
        adoption of the bylaws of the commission; and 
           (10) the chair, who shall be selected by the commission. 
           Subd. 2.  [TERMS, SELECTION METHOD.] The terms of office 
        and method of selection of members other than the chair shall be 
        provided in the bylaws of the commission which shall not be 
        inconsistent with the provisions of subdivision 1.  The 
        commission shall adopt rules setting forth its procedures. 
           Subd. 5.  [PER DIEM; BOARD MEMBERS.] Members of the 
        regional commission may receive a per diem of not over $35 $50, 
        the amount to be determined by the commission, and shall be 
        reimbursed for their reasonable expenses as determined by the 
        commission.  The commission shall may provide for the election 
        of a board of directors, who need not be commission members, and 
        provide, at its discretion, for a per diem of not over $35 $50 a 
        day for meetings of the board and expenses.  A member of the 
        board of directors who is a member of the commission shall 
        receive only the per diem payable to board members when meetings 
        of the board of directors and the commission are held on the 
        same day. 
           Sec. 9.  Minnesota Statutes 1996, section 462.389, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [CHAIR.] The chair of the commission shall 
        have been a resident of the region for at least one year and 
        shall be a person experienced in the field of government 
        affairs.  The chair shall preside at the meetings of the 
        commission and board of directors, appoint all employees 
        thereof, subject to the approval of the commission, and be 
        responsible for carrying out all policy decisions of the 
        commission.  The chair's expense allowances shall be fixed by 
        the commission.  The term of the first chair shall be one year, 
        and the chair shall serve until a successor is selected and 
        qualifies.  At the expiration of the term of the first chair, 
        the chair shall be elected from the membership of the commission 
        according to procedures established in its bylaws.  
           Sec. 10.  Minnesota Statutes 1996, section 462.389, 
        subdivision 3, is amended to read: 
           Subd. 3.  [EXECUTIVE DIRECTOR.] Upon the recommendation of 
        the chair, The commission may appoint an executive director to 
        serve as the chief administrative officer.  The director may be 
        chosen from among the citizens of the nation at large, and shall 
        be selected on the basis of training and experience in the field 
        of government affairs. 
           Sec. 11.  Minnesota Statutes 1996, section 462.389, 
        subdivision 4, is amended to read: 
           Subd. 4.  [EMPLOYEES.] The commission may prepare, in 
        consultation with the state commissioner of employee relations, 
        and may adopt a merit personnel system for its officers and 
        employees including terms and conditions for the employment, the 
        fixing of compensation, their classification, benefits, and the 
        filing of performance and fidelity bonds, and such policies of 
        insurance as it may deem advisable, the premiums for which, 
        however, shall be paid for by the commission.  Officers and 
        employees are public employees within the meaning of chapter 
        353.  The commission shall make the employer's contributions to 
        pension funds of its employees.  
           Sec. 12.  Minnesota Statutes 1996, section 462.39, 
        subdivision 2, is amended to read: 
           Subd. 2.  [FEDERAL REGIONAL PROGRAMS.] The commission is 
        the authorized agency to receive state and federal grants public 
        and private funds for regional purposes from the following 
        programs: 
           (1) Section 403 of the Public Works and Economic 
        Development Act of 1965 (economic development districts); 
           (2) Section 701 of the Housing Act of 1954, as amended 
        (multicounty comprehensive planning); 
           (3) Omnibus Crime Control Act of 1968; 
           and for the following to the extent feasible as determined 
        by the governor: 
           (a) Economic Opportunity Act of 1964; 
           (b) Comprehensive Health Planning Act of 1965; 
           (c) Federal regional manpower planning programs; 
           (d) Resource, conservation, and development districts; or 
           (e) Any state and federal programs providing funds 
        for including, but not limited to program administration, 
        multicounty planning, coordination, and development 
        purposes.  The director shall, where consistent with state and 
        federal statutes and regulations, review applications for all 
        state and federal regional planning and development grants to a 
        commission. 
           Sec. 13.  Minnesota Statutes 1996, section 462.39, 
        subdivision 3, is amended to read: 
           Subd. 3.  [PLANNING.] The commission shall may prepare and 
        adopt submit for adoption, after appropriate study and such 
        public hearings as may be necessary, a comprehensive development 
        plan plans for local units of government, individually or 
        collectively, within the region.  The plan shall Plans may 
        consist of a compilation of policy statements, goals, standards, 
        programs, and maps prescribing guides for an orderly and 
        economic development, public and private, of the region.  The 
        comprehensive development plan within the jurisdiction subject 
        to the plan.  The plans shall recognize and incorporate planning 
        principles which encompass physical, social, or economic needs 
        of the region, and those future developments which will have an 
        impact on the entire region including but not limited to such 
        matters as land use, parks and open space land needs, access to 
        direct sunlight for solar energy systems, the necessity for and 
        location of airports, highways, transit facilities, public 
        hospitals, libraries, schools, public and private, housing, and 
        other public buildings.  In preparing the development plan plans 
        the commission shall use to the maximum extent feasible the 
        resources studies and data available from other planning 
        agencies within the region, including counties, municipalities, 
        special districts, and subregional planning agencies, and it 
        shall utilize the resources of the director state agencies to 
        the same purpose.  No development plan or portion thereof for 
        the region shall be adopted by the commission until it has been 
        submitted to the director for review and comment and a period of 
        60 days has elapsed after such submission.  When a development 
        plan has been adopted, the commission shall distribute it to all 
        local government units within the region. 
           Sec. 14.  Minnesota Statutes 1996, section 462.391, is 
        amended by adding a subdivision to read: 
           Subd. 1a.  [REVIEW OF LOCAL PLANS.] The commission may 
        review and provide comments and recommendations on local plans 
        or development proposals which in the judgment of the commission 
        have a substantial effect on regional development.  Local units 
        of government may request that a regional commission review, 
        comment, and provide advisory recommendations on local plans or 
        development proposals. 
           Sec. 15.  Minnesota Statutes 1996, section 462.391, is 
        amended by adding a subdivision to read: 
           Subd. 2a.  [STAFF SERVICES.] To avoid duplication of staff 
        for various regional bodies assisted by federal or state 
        government, the commission may provide basic administrative, 
        research, and planning services for all regional planning and 
        development bodies.  The commissions may contract to obtain or 
        perform services with state agencies, for-profit or nonprofit 
        entities, subdistricts organized as the result of federal or 
        state programs, councils of governments organized under section 
        471.59, or any other law, and with local governments. 
           Sec. 16.  Minnesota Statutes 1996, section 462.391, is 
        amended by adding a subdivision to read: 
           Subd. 3a.  [DATA AND INFORMATION.] The commission may be 
        designated as a regional data center providing data collection, 
        storage, analysis, and dissemination to be used by it and other 
        governmental and private users, and may accept gifts or grants 
        to provide this service. 
           Sec. 17.  Minnesota Statutes 1996, section 462.391, 
        subdivision 5, is amended to read: 
           Subd. 5.  [URBAN AND RURAL RESEARCH.] Where studies have 
        not been otherwise authorized by law the commission may study 
        the feasibility of programs relating including, but not limited 
        to, water, land use, economic development, minority problems 
        housing, demographics, cultural issues, governmental problems 
        issues, human and services, natural resources, 
        communication, technology, transportation, and other subjects of 
        concern to the citizens of the region, may institute 
        demonstration projects in connection therewith, and may enter 
        into contracts or accept gifts or grants for such purposes as 
        otherwise authorized in sections 462.381 to 462.398.  
           Sec. 18.  Minnesota Statutes 1996, section 462.391, is 
        amended by adding a subdivision to read: 
           Subd. 11.  [PROGRAM OPERATION.] Upon approval of the 
        appropriate authority from local, state, and federal government 
        units, commissions may be regarded as general purpose units of 
        government to receive funds and operate programs on a regional 
        or subregional basis to provide economies of scale or to enhance 
        program efficiency. 
           Sec. 19.  Minnesota Statutes 1996, section 462.391, is 
        amended by adding a subdivision to read: 
           Subd. 12.  [PROPERTY OWNERSHIP.] A commission may buy, 
        lease, acquire, own, hold, improve, and use real or personal 
        property or an interest in property, wherever located in the 
        state for purposes of housing the administrative office of the 
        regional commission. 
           Sec. 20.  Minnesota Statutes 1996, section 462.391, is 
        amended by adding a subdivision to read: 
           Subd. 13.  [PROPERTY DISPOSITION.] A commission may sell, 
        convey, mortgage, create a security interest in, lease, 
        exchange, transfer, or dispose of all or part of its real or 
        personal property or an interest in property, wherever located 
        in the state. 
           Sec. 21.  Minnesota Statutes 1996, section 462.393, is 
        amended to read: 
           462.393 [ANNUAL REPORT TO UNITS, PUBLIC, GOVERNOR, 
        LEGISLATURE.] 
           Subdivision 1.  [CONTENTS.] On or before August September 1 
        of each year, the commission shall prepare a report for the 
        governmental units, the public within the region, the 
        legislature and the governor.  The report shall include: 
           (1) A statement of the commission's receipts and 
        expenditures by category since the preceding report; 
           (2) A detailed budget for the year in which the report is 
        filed and a tentative budget for the following year including an 
        outline of its program for such period; 
           (3) A description of any comprehensive plan adopted in 
        whole or in part for the region; 
           (4) Summaries of any studies and the recommendations 
        resulting therefrom made for the region; 
           (5) A listing of all applications for federal grants or 
        loans made by governmental units within the region together with 
        the action taken by the commission in relation thereto summary 
        of significant accomplishments; 
           (6) A listing of plans of local governmental units 
        submitted to the region, and actions taken in relationship 
        thereto; 
           (7) Recommendations of the commission regarding federal and 
        state programs, cooperation, funding, and legislative needs; and 
           (8) A summary of any audit report made during the previous 
        year by the state auditor relative to the commission.  
           Subd. 2.  [ASSESSMENT EVERY 5 YEARS.] In 1981 2001 and 
        every five years thereafter the commission shall review its 
        activities and issue a report assessing its performance in 
        fulfilling the purposes of the regional development act of 
        1969.  The report shall state address whether the existence of 
        the commission is in the public welfare and interest.  The 
        report shall be included in the report required by subdivision 1.
           Sec. 22.  Minnesota Statutes 1996, section 462.394, is 
        amended to read: 
           462.394 [CITIZEN PARTICIPATION AND ADVISORY COMMITTEES.] 
           The commission may appoint advisory committees of 
        interested and affected citizens to assist in the review of 
        plans, programs, and other matters referred for review by the 
        commission.  Whenever a special advisory committee is required 
        by any federal or state regional program the commission chair 
        shall, as far as practical, appoint such committees as advisory 
        groups to the commission.  Members of the advisory committees 
        shall serve without compensation but shall be reimbursed for 
        their reasonable expenses as determined by the commission.  
           Sec. 23.  Minnesota Statutes 1996, section 462.396, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [GRANTMAKING, TAX LEVY.] The director 
        governor and the legislature shall determine the amount of state 
        assistance and designate an agency to make grants to any 
        commission created under sections 462.381 to 462.398 from 
        appropriations made available for those purposes, provided a 
        work program is submitted acceptable to the director.  Any 
        regional commission may levy a tax on all taxable property in 
        the region to provide money for the purposes of sections 462.381 
        to 462.398. 
           Sec. 24.  Minnesota Statutes 1996, section 462.396, 
        subdivision 3, is amended to read: 
           Subd. 3.  [GIFTS, GRANTS, LOANS.] The commission is a 
        special purpose unit of government which may accept gifts, apply 
        for and use grants or loans of money or other property from the 
        United States, the state, or any person, local or governmental 
        body for any commission purpose and may enter into agreements 
        required in connection therewith and may hold, use, and dispose 
        of such moneys or property in accordance with the terms of the 
        gift, grant, loan, agreement, or contract relating thereto.  
           For purposes of receipt of state or federal funds for 
        community and economic development, regional commissions shall 
        be considered general purpose units of government. 
           Sec. 25.  Minnesota Statutes 1996, section 462.396, 
        subdivision 4, is amended to read: 
           Subd. 4.  [ACCOUNTING; CHECKS; ANNUAL AUDIT.] The 
        commission shall keep an accurate account of its receipts and 
        disbursement.  Disbursements of funds of the commission shall be 
        made by check signed by the chair or vice-chair or secretary of 
        the commission and countersigned by the executive director or an 
        authorized deputy thereof after such auditing and approval of 
        the expenditure as may be provided by rules of the commission.  
        The state auditor shall may audit the books and accounts of the 
        commission once each year, or as often as funds and personnel of 
        the state auditor permit.  The commission shall pay to the state 
        the total cost and expenses of such examination, including the 
        salaries paid to the auditors while actually engaged in making 
        such examination.  The general fund shall be credited with all 
        collections made for any such examination.  In lieu of an annual 
        audit by the state auditor, the commission may shall contract 
        with a certified public accountant for the annual audit of the 
        books and accounts of the commission.  If a certified public 
        accountant performs the audit, the commission shall send a copy 
        of the audit to the state auditor. 
           Sec. 26.  Minnesota Statutes 1996, section 462.398, is 
        amended to read: 
           462.398 [TERMINATION OF COMMISSION.] 
           Subdivision 1.  [PETITION; POPULATION.] Any combination of 
        counties or municipalities representing a majority of the 
        population of the region for which a commission exists may 
        petition the director governor by formal resolution stating that 
        the existence of the commission is no longer in the public 
        welfare and interest and is not needed to accomplish the 
        purposes of the regional development act of 1969.  For purposes 
        of this section the population of a county does not include the 
        population of a municipality within the county.  Any formal 
        resolution adopted by the governing body of a county or 
        municipality for the termination of a commission shall be 
        effective for a period of one year for the purpose of 
        determining the requisite population of the region needed to 
        petition the director governor. 
           Subd. 2.  [HEARINGS; RECOMMENDATION, TERMINATION DATE.] 
        Within 35 days of the receipt filing of the petition, the 
        director governor or designee shall fix a time and place within 
        the region for a hearing.  The director shall give notice of the 
        hearing by publication once each week for two successive weeks 
        before the date of the hearing in a legal newspaper in each of 
        the counties which the commission represents.  The hearing shall 
        be conducted by members of the commission.  If the commission 
        determines that the existence of the commission is no longer in 
        the public welfare and interest and that it is not needed to 
        accomplish the purposes of the regional development act of 1969, 
        the commission shall recommend to the director governor or 
        designee that the director governor or designee terminate the 
        commission.  Within 60 days after receipt of the recommendation, 
        the director governor or designee shall terminate the commission 
        by giving notice of the termination to all government units 
        within the region for which the commission was established.  
        Unless otherwise provided by this subdivision, the hearing shall 
        be in accordance with sections 14.001 to 14.69. 
           Subd. 3.  [30 MONTHS BETWEEN PETITIONS.] The 
        director governor or designee shall not accept a petition for 
        termination more than once in 30 months for each regional 
        development commission. 
           Sec. 27.  [REPEALER.] 
           Minnesota Statutes 1996, sections 462.384, subdivision 7; 
        462.385, subdivision 2; 462.389, subdivision 5; 462.391, 
        subdivisions 1, 2, 3, 4, 6, 7, 8, and 9; and 462.392, are 
        repealed. 
                                   ARTICLE 13
                             WASTE MANAGEMENT TAXES
           Section 1.  Minnesota Statutes 1996, section 270B.01, 
        subdivision 8, is amended to read: 
           Subd. 8.  [MINNESOTA TAX LAWS.] For purposes of this 
        chapter only, "Minnesota tax laws" means the taxes administered 
        by or paid to the commissioner under chapters 289A (except taxes 
        imposed under sections 298.01, 298.015, and 298.24), 290, 290A, 
        291, and 297A, and 297H and sections 295.50 to 295.59, or any 
        similar Indian tribal tax administered by the commissioner 
        pursuant to any tax agreement between the state and the Indian 
        tribal government, and includes any laws for the assessment, 
        collection, and enforcement of those taxes.  
           Sec. 2.  Minnesota Statutes 1996, section 297A.01, 
        subdivision 3, is amended to read: 
           Subd. 3.  A "sale" and a "purchase" includes, but is not 
        limited to, each of the following transactions: 
           (a) Any transfer of title or possession, or both, of 
        tangible personal property, whether absolutely or conditionally, 
        and the leasing of or the granting of a license to use or 
        consume tangible personal property other than manufactured homes 
        used for residential purposes for a continuous period of 30 days 
        or more, for a consideration in money or by exchange or barter; 
           (b) 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; 
           (c) The furnishing, preparing, or serving for a 
        consideration of food, meals, or drinks.  "Sale" does not 
        include: 
           (1) meals or drinks served to patients, inmates, or persons 
        residing at hospitals, sanitariums, nursing homes, senior 
        citizens homes, and correctional, detention, and detoxification 
        facilities; 
           (2) meals or drinks purchased for and served exclusively to 
        individuals who are 60 years of age or over and their spouses or 
        to the handicapped and their spouses by governmental agencies, 
        nonprofit organizations, agencies, or churches or pursuant to 
        any program funded in whole or part through 42 USCA sections 
        3001 through 3045, wherever delivered, prepared or served; or 
           (3) meals and lunches served at public and private schools, 
        universities, or colleges. 
        Notwithstanding section 297A.25, subdivision 2, taxable food or 
        meals include, but are not limited to, the following:  
           (i) heated food or drinks; 
           (ii) sandwiches prepared by the retailer; 
           (iii) single sales of prepackaged ice cream or ice milk 
        novelties prepared by the retailer; 
           (iv) hand-prepared or dispensed ice cream or ice milk 
        products including cones, sundaes, and snow cones; 
           (v) soft drinks and other beverages prepared or served by 
        the retailer; 
           (vi) gum; 
           (vii) ice; 
           (viii) all food sold in vending machines; 
           (ix) party trays prepared by the retailers; and 
           (x) all meals and single servings of packaged snack food, 
        single cans or bottles of pop, sold in restaurants and bars; 
           (d) The granting of the privilege of admission to places of 
        amusement, recreational areas, or athletic events, except a 
        world championship football game sponsored by the national 
        football league, and the privilege of having access to and the 
        use of amusement devices, tanning facilities, reducing salons, 
        steam baths, turkish baths, health clubs, and spas or athletic 
        facilities; 
           (e) The furnishing for a consideration of lodging and 
        related services by a hotel, rooming house, tourist court, motel 
        or trailer camp and of the granting of any similar license to 
        use real property other than the renting or leasing thereof for 
        a continuous period of 30 days or more; 
           (f) The furnishing for a consideration of electricity, gas, 
        water, or steam for use or consumption within this state, or 
        local exchange telephone service, intrastate toll service, and 
        interstate toll service, if that service originates from and is 
        charged to a telephone located in this state.  Telephone service 
        includes paging services and private communication service, as 
        defined in United States Code, title 26, section 4252(d), except 
        for private communication service purchased by an agent acting 
        on behalf of the state lottery.  The furnishing for a 
        consideration of access to telephone services by a hotel to its 
        guests is a sale under this clause.  Sales by municipal 
        corporations in a proprietary capacity are included in the 
        provisions of this clause.  The furnishing of water and sewer 
        services for residential use shall not be considered a sale.  
        The sale of natural gas to be used as a fuel in vehicles 
        propelled by natural gas shall not be considered a sale for the 
        purposes of this section; 
           (g) The furnishing for a consideration of cable television 
        services, including charges for basic service, charges for 
        premium service, and any other charges for any other 
        pay-per-view, monthly, or similar television services; 
           (h) The furnishing for a consideration of parking services, 
        whether on a contractual, hourly, or other periodic basis, 
        except for parking at a meter; 
           (i) The furnishing for a consideration of services listed 
        in this paragraph: 
           (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 services, security services, burglar, fire 
        alarm, and armored car services not including services performed 
        within the jurisdiction they serve by off-duty licensed peace 
        officers as defined in section 626.84, subdivision 1; 
           (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; tree, bush, shrub and 
        stump removal; and tree trimming for public utility lines.  
        Services performed under a construction contract for the 
        installation of shrubbery, plants, sod, trees, bushes, and 
        similar items are not taxable; 
           (vii) mixed municipal solid waste management services as 
        described in section 297A.45; 
           (viii) 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 
           (ix) (viii) the furnishing for consideration of lodging, 
        board and care services for animals in kennels and other similar 
        arrangements, but excluding veterinary and horse boarding 
        services. 
        The services listed in this paragraph are taxable under section 
        297A.02 if the service is performed wholly within Minnesota or 
        if the service is performed partly within and partly without 
        Minnesota and the greater proportion of the service is performed 
        in Minnesota, based on the cost of performance.  In applying the 
        provisions of this chapter, the terms "tangible personal 
        property" and "sales at retail" include taxable services and the 
        provision of taxable services, unless specifically provided 
        otherwise.  Services performed by an employee for an employer 
        are not taxable under this paragraph.  Services performed by a 
        partnership or association for another partnership or 
        association are not taxable under this paragraph if one of the 
        entities owns or controls more than 80 percent of the voting 
        power of the equity interest in the other entity.  Services 
        performed between members of an affiliated group of corporations 
        are not taxable.  For purposes of this section, "affiliated 
        group of corporations" includes those entities that would be 
        classified as a member of an affiliated group under United 
        States Code, title 26, section 1504, and who are eligible to 
        file a consolidated tax return for federal income tax purposes; 
           (j) A "sale" and a "purchase" includes the transfer of 
        computer software, meaning information and directions that 
        dictate the function performed by data processing equipment.  A 
        "sale" and a "purchase" does not include the design, 
        development, writing, translation, fabrication, lease, or 
        transfer for a consideration of title or possession of a custom 
        computer program; and 
           (k) The granting of membership in a club, association, or 
        other organization if: 
           (1) 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 
           (2) use of the sports and athletic facilities is not made 
        available to the general public on the same basis as it is made 
        available to members.  
        Granting of membership includes both one-time initiation fees 
        and periodic membership dues.  Sports and athletic facilities 
        include golf courses, tennis, racquetball, handball and squash 
        courts, basketball and volleyball facilities, running tracks, 
        exercise equipment, swimming pools, and other similar athletic 
        or sports facilities.  The provisions of this paragraph do not 
        apply to camps or other recreation facilities owned and operated 
        by an exempt organization under section 501(c)(3) of the 
        Internal Revenue Code of 1986, as amended through December 31, 
        1992, for educational and social activities for young people 
        primarily age 18 and under.  
           Sec. 3.  Minnesota Statutes 1996, section 297A.25, 
        subdivision 11, is amended to read: 
           Subd. 11.  [SALES TO GOVERNMENT.] The gross receipts from 
        all sales, including sales in which title is retained by a 
        seller or a vendor or is assigned to a third party under an 
        installment sale or lease purchase agreement under section 
        465.71, of tangible personal property to, and all storage, use 
        or consumption of such property by, the United States and its 
        agencies and instrumentalities, the University of Minnesota, 
        state universities, community colleges, technical colleges, 
        state academies, the Lola and Rudy Perpich Minnesota center for 
        arts education, and school districts are exempt. 
           As used in this subdivision, "school districts" means 
        public school entities and districts of every kind and nature 
        organized under the laws of the state of Minnesota, including, 
        without limitation, school districts, intermediate school 
        districts, education districts, service cooperatives, secondary 
        vocational cooperative centers, special education cooperatives, 
        joint purchasing cooperatives, telecommunication cooperatives, 
        regional management information centers, and any instrumentality 
        of a school district, as defined in section 471.59. 
           Sales exempted by this subdivision include sales under 
        section 297A.01, subdivision 3, paragraph (f), but do not 
        include sales under section 297A.01, subdivision 3, paragraph 
        (j), clause (vii).  
           Sales to hospitals and nursing homes owned and operated by 
        political subdivisions of the state are exempt under this 
        subdivision.  
           The sales to and exclusively for the use of libraries of 
        books, periodicals, audio-visual materials and equipment, 
        photocopiers for use by the public, and all cataloguing and 
        circulation equipment, and cataloguing and circulation software 
        for library use are exempt under this subdivision.  For purposes 
        of this paragraph "libraries" means libraries as defined in 
        section 134.001, county law libraries under chapter 134A, the 
        state library under section 480.09, and the legislative 
        reference library. 
           Sales of supplies and equipment used in the operation of an 
        ambulance service owned and operated by a political subdivision 
        of the state are exempt under this subdivision provided that the 
        supplies and equipment are used in the course of providing 
        medical care.  Sales to a political subdivision of repair and 
        replacement parts for emergency rescue vehicles and fire trucks 
        and apparatus are exempt under this subdivision.  
           Sales to a political subdivision of machinery and 
        equipment, except for motor vehicles, used directly for mixed 
        municipal solid waste management services at a solid waste 
        disposal facility as defined in section 115A.03, subdivision 10, 
        are exempt under this subdivision.  
           Sales to political subdivisions of chore and homemaking 
        services to be provided to elderly or disabled individuals are 
        exempt. 
           Sales of telephone services to the department of 
        administration that are used to provide telecommunications 
        services through the intertechnologies revolving fund are exempt 
        under this subdivision. 
           This exemption shall not apply to building, construction or 
        reconstruction materials purchased by a contractor or a 
        subcontractor as a part of a lump-sum contract or similar type 
        of contract with a guaranteed maximum price covering both labor 
        and materials for use in the construction, alteration, or repair 
        of a building or facility.  This exemption does not apply to 
        construction materials purchased by tax exempt entities or their 
        contractors to be used in constructing buildings or facilities 
        which will not be used principally by the tax exempt entities. 
           This exemption does not apply to the leasing of a motor 
        vehicle as defined in section 297B.01, subdivision 5, except for 
        leases entered into by the United States or its agencies or 
        instrumentalities.  
           The tax imposed on sales to political subdivisions of the 
        state under this section applies to all political subdivisions 
        other than those explicitly exempted under this subdivision, 
        notwithstanding section 115A.69, subdivision 6, 116A.25, 
        360.035, 458A.09, 458A.30, 458D.23, 469.101, subdivision 2, 
        469.127, 473.448, 473.545, or 473.608 or any other law to the 
        contrary enacted before 1992. 
           Sales exempted by this subdivision include sales made to 
        other states or political subdivisions of other states, if the 
        sale would be exempt from taxation if it occurred in that state, 
        but do not include sales under section 297A.01, subdivision 3, 
        paragraphs (c) and (e). 
           Sec. 4.  Minnesota Statutes 1996, section 297A.25, 
        subdivision 16, is amended to read: 
           Subd. 16.  [SALES TO NONPROFIT GROUPS.] The gross receipts 
        from the sale of tangible personal property to, and the storage, 
        use or other consumption of such property by, any corporation, 
        society, association, foundation, or institution organized and 
        operated exclusively for charitable, religious, or educational 
        purposes if the property purchased is to be used in the 
        performance of charitable, religious, or educational functions, 
        or any senior citizen group or association of groups that in 
        general limits membership to persons who are either (1) age 55 
        or older, or (2) physically disabled, and is organized and 
        operated exclusively for pleasure, recreation, and other 
        nonprofit purposes, no part of the net earnings of which inures 
        to the benefit of any private shareholders, are exempt.  For 
        purposes of this subdivision, charitable purpose includes the 
        maintenance of a cemetery owned by a religious organization.  
        Sales exempted by this subdivision include sales pursuant to 
        section 297A.01, subdivision 3, paragraphs (d) and (f), but do 
        not include sales under section 297A.01, subdivision 3, 
        paragraph (j), clause (vii).  This exemption shall not apply to 
        building, construction, or reconstruction materials purchased by 
        a contractor or a subcontractor as a part of a lump-sum contract 
        or similar type of contract with a guaranteed maximum price 
        covering both labor and materials for use in the construction, 
        alteration, or repair of a building or facility.  This exemption 
        does not apply to construction materials purchased by tax exempt 
        entities or their contractors to be used in constructing 
        buildings or facilities which will not be used principally by 
        the tax exempt entities.  This exemption does not apply to the 
        leasing of a motor vehicle as defined in section 297B.01, 
        subdivision 5. 
           Sec. 5.  Minnesota Statutes 1996, section 297A.44, 
        subdivision 1, is amended to read: 
           Subdivision 1.  (a) Except as provided in paragraphs 
        (b), and (c), and (d), all revenues, including interest and 
        penalties, derived from the excise and use taxes imposed by 
        sections 297A.01 to 297A.44 shall be deposited by the 
        commissioner in the state treasury and credited to the general 
        fund.  
           (b) All excise and use taxes derived from sales and use of 
        property and services purchased for the construction and 
        operation of an agricultural resource project, from and after 
        the date on which a conditional commitment for a loan guaranty 
        for the project is made pursuant to section 41A.04, subdivision 
        3, shall be deposited in the Minnesota agricultural and economic 
        account in the special revenue fund.  The commissioner of 
        finance shall certify to the commissioner the date on which the 
        project received the conditional commitment.  The amount 
        deposited in the loan guaranty account shall be reduced by any 
        refunds and by the costs incurred by the department of revenue 
        to administer and enforce the assessment and collection of the 
        taxes.  
           (c) All revenues, including interest and penalties, derived 
        from the excise and use taxes imposed on sales and purchases 
        included in section 297A.01, subdivision 3, paragraphs (d) and 
        (l), clauses (1) and (2), must be deposited by the commissioner 
        in the state treasury, and credited as follows: 
           (1) first to the general obligation special tax bond debt 
        service account in each fiscal year the amount required by 
        section 16A.661, subdivision 3, paragraph (b); and 
           (2) after the requirements of clause (1) have been met, the 
        balance must be credited to the general fund. 
           (d) The revenues, including interest and penalties, derived 
        from the taxes imposed on solid waste collection services as 
        described in section 297A.45, shall be deposited by the 
        commissioner in the state treasury and credited to the general 
        fund to be used for funding solid waste reduction and recycling 
        programs. 
           Sec. 6.  [297H.01] [SOLID WASTE MANAGEMENT TAX 
        DEFINITIONS.] 
           Subdivision 1.  [SCOPE.] When used in this chapter, the 
        following terms have the meanings given to them in this 
        section.  For terms not defined in this section, the definitions 
        contained in chapter 115A are incorporated into this chapter. 
           Subd. 2.  [COMMERCIAL GENERATOR.] "Commercial generator" 
        means any of the following: 
           (1) an owner or operator of a business, including a 
        home-operated business, industry, church, nursing home, 
        nonprofit organization, school, or any other commercial or 
        institutional enterprise that generates mixed municipal solid 
        waste or non-mixed-municipal solid waste; or 
           (2) any other generator of taxable waste that is not a 
        residential generator defined in subdivision 8.  A commercial 
        generator does not include a self-hauler. 
           Subd. 3.  [CUBIC YARD.] "Cubic yard" means a cubic yard of 
        non-mixed-municipal solid waste that is not compacted. 
           Subd. 4.  [MARKET PRICE.] "Market price" means the lowest 
        price available in the area, assuming transactions between 
        separate parties that are willing buyers and willing sellers in 
        a market. 
           Subd. 5.  [MIXED MUNICIPAL SOLID WASTE.] "Mixed municipal 
        solid waste" means mixed municipal solid waste as defined in 
        section 115A.03, subdivision 21. 
           Subd. 6.  [NON-MIXED-MUNICIPAL SOLID 
        WASTE.] "Non-mixed-municipal solid waste" means: 
           (1) infectious waste as defined in section 116.76, 
        subdivision 12; 
           (2) pathological waste as defined in section 116.76, 
        subdivision 14; 
           (3) industrial waste as defined in section 115A.03, 
        subdivision 13a; and 
           (4) construction debris as defined in section 115A.03, 
        subdivision 7. 
           Subd. 7.  [PERIODIC WASTE COLLECTION.] "Periodic waste 
        collection" means each time a waste container is emptied by the 
        person that collects the non-mixed-municipal solid waste at the 
        point that the waste has been aggregated for collection by the 
        generator. 
           Subd. 8.  [RESIDENTIAL GENERATOR.] "Residential generator" 
        means any of the following: 
           (1) a detached single family residence that generates mixed 
        municipal solid waste or non-mixed-municipal solid waste; 
           (2) a person residing in a building or site containing 
        multiple residences that generates mixed municipal solid waste, 
        including apartment buildings, condominiums, manufactured home 
        parks, or townhomes, where each residence is separately billed 
        by the waste service provider; 
           (3) an owner of a building or site containing multiple 
        residences or an association representing residences that 
        generate mixed municipal solid waste or non-mixed-municipal 
        solid waste, including apartment buildings, condominiums, 
        manufactured home parks, or townhomes where no residence is 
        separately billed for such service by the waste management 
        service provider and the owner or association is billed directly 
        for the waste management services.  A residential generator does 
        not include a self-hauler. 
           Subd. 9.  [SALES PRICE.] "Sales price" means total 
        consideration valued in money for waste management services, 
        excluding separately stated charges for exemptions listed under 
        section 297H.06. 
           Subd. 10.  [SELF-HAULER.] "Self-hauler" means a person who 
        transports mixed municipal solid waste or non-mixed-municipal 
        solid waste generated by that person or another person without 
        compensation. 
           Subd. 11.  [WASTE MANAGEMENT SERVICE PROVIDER.] "Waste 
        management service provider" means the person who directly bills 
        the generator or self-hauler for waste management services, and 
        includes, but is not limited to, waste-haulers, waste management 
        facilities, utility services, and political subdivisions, to the 
        extent they directly bill for waste management services.  
           Subd. 12.  [WASTE MANAGEMENT SERVICES.] "Waste management 
        services" means waste collection, transportation, processing, 
        and disposal. 
           Sec. 7.  [297H.02] [RESIDENTIAL GENERATORS.] 
           Subdivision 1.  [IMPOSITION.] (a) A tax is imposed upon the 
        sales price of mixed municipal solid waste management services 
        received by a residential generator. 
           (b) The tax is imposed upon the difference between the 
        market price and the tip fee at a processing or disposal 
        facility where the tip fee is less than the market price and the 
        political subdivision subsidizes the cost of service at the 
        facility.  The political subdivision is liable for the tax. 
           (c) The tax is imposed upon the market price of waste 
        management services where a political subdivision directly bills 
        on a property tax statement for organized collection of mixed 
        municipal solid waste.  The political subdivision is liable for 
        the tax. 
           (d) The political subdivision shall, by resolution, 
        identify the market price.  The political subdivision shall 
        submit the market price to the director of the office of 
        environmental assistance for review by October 1 of the year 
        prior to the calendar year in which the market price will be in 
        effect.  The prices that the state pays for waste management 
        services in that jurisdiction or the county where the 
        jurisdiction is located must be a guideline in determining the 
        market price.  The director shall consult with the commissioner 
        of the pollution control agency in reviewing the market price 
        and shall inform the political subdivisions of any necessary 
        changes to market price by November 15 of that year.  The market 
        price shall be effective as of January 1 of the next calendar 
        year following review.  The director may consider adjustment to 
        the market price if a political subdivision submits a resolution 
        for adjustment by May 1 of any year.  The effective date of the 
        adjustment shall be July 1. 
           If the commissioner of revenue believes a market price 
        declared by resolution is not accurate, the commissioner may 
        request that the office of environmental assistance advise the 
        political subdivision to identify by resolution an updated 
        market price and submit the updated market price to the office 
        of environmental assistance for review. 
           Subd. 2.  [RATES.] The rate of tax under this section is 
        9.75 percent. 
           Subd. 3.  [SALES PRICE OF BAGS, STICKERS, OR OTHER 
        INDICIA.] When the sales price of a bag, sticker, or other 
        indicia includes mixed municipal solid waste management services 
        for residential generators, the tax on the bag, sticker, and 
        other indicia sold by vendors on behalf of a political 
        subdivision or waste hauler shall be collected when the bag, 
        sticker, or other indicia are sold to the vendor by the 
        political subdivision or waste hauler, and shall be taxed at the 
        rate imposed under subdivision 2.  The solid waste management 
        service and the solid waste management tax shall be included in 
        the sales price of the bag, sticker, or other indicia. 
           Sec. 8.  [297H.03] [MIXED MUNICIPAL SOLID WASTE COMMERCIAL 
        GENERATORS.] 
           Subdivision 1.  [IMPOSITION.] (a) A tax is imposed upon the 
        sales price of mixed municipal solid waste management services 
        received by a commercial generator. 
           (b) The tax is imposed upon the difference between the 
        market price and the tip fee at a processing or disposal 
        facility where the tip fee is less than the market price and the 
        political subdivision subsidizes the cost of service at the 
        facility.  The political subdivision is liable for the tax. 
           (c) The tax is imposed upon the market price of waste 
        management services where a political subdivision directly bills 
        on a property tax statement for organized collection of mixed 
        municipal solid waste.  The political subdivision is liable for 
        the tax. 
           (d) Section 297H.02, subdivision 1, paragraph (d), applies 
        to paragraphs (b) and (c) of this subdivision. 
           Subd. 2.  [RATE.] The rate of the tax under this section is 
        17 percent. 
           Subd. 3.  [SALES PRICE OF BAGS, STICKERS, OR OTHER 
        INDICIA.] When the sales price of a bag, sticker, or other 
        indicia includes mixed municipal solid waste management services 
        for commercial generators, the tax on the bag, sticker, and 
        other indicia sold by vendors on behalf of a political 
        subdivision or waste hauler shall be collected when the bag, 
        sticker, or other indicia are sold to the vendor by the 
        political subdivision or waste hauler, and shall be taxed at the 
        rate imposed under subdivision 2.  The solid waste management 
        service and the solid waste management tax shall be included in 
        the sales price of the bag, sticker, or other indicia. 
           Sec. 9.  [297H.04] [NON-MIXED-MUNICIPAL SOLID WASTE.] 
           Subdivision 1.  [IMPOSITION.] A tax is imposed upon the 
        volume of non-mixed-municipal solid waste that is managed. 
           Subd. 2.  [RATE.] (a) Commercial generators that generate 
        non-mixed-municipal solid waste shall pay a solid waste 
        management tax of 60 cents per noncompacted cubic yard of 
        periodic waste collection capacity purchased by the generator, 
        based on the size of the container for the non-mixed-municipal 
        solid waste, the actual volume, or the weight-to-volume 
        conversion schedule in paragraph (c).  However, the tax must be 
        calculated by the waste management service provider using the 
        same method for calculating the waste management service fee so 
        that both are calculated according to container capacity, actual 
        volume, or weight. 
           (b) Notwithstanding section 297H.02, a residential 
        generator that generates non-mixed-municipal solid waste shall 
        pay a solid waste management tax in the same manner as provided 
        in paragraph (a). 
           (c) The weight-to-volume conversion schedule for: 
           (1) construction debris as defined in section 115A.03, 
        subdivision 7, is one ton equals 3.33 cubic yards, or $2 per 
        ton; 
           (2) industrial waste as defined in section 115A.03, 
        subdivision 13a, is equal to 60 cents per cubic yard.  The 
        commissioner of revenue after consultation with the commissioner 
        of the pollution control agency, shall determine, and may 
        publish by notice, a conversion schedule for various industrial 
        wastes; and 
           (3) infectious waste as defined in section 116.76, 
        subdivision 12, and pathological waste as defined in section 
        116.76, subdivision 14, is 150 pounds equals one cubic yard, or 
        60 cents per 150 pounds. 
           Sec. 10.  [297H.05] [SELF-HAULERS.] 
           (a) A self-hauler of mixed municipal solid waste shall pay 
        the tax to the operator of the waste management facility to 
        which the waste is delivered at the rate imposed under section 
        297H.03, based on the sales price of the waste management 
        services. 
           (b) A self-hauler of non-mixed-municipal solid waste shall 
        pay the tax to the operator of the waste management facility to 
        which the waste is delivered at the rate imposed under section 
        297H.04. 
           (c) The tax imposed on the self-hauler of 
        non-mixed-municipal solid waste may be based either on the 
        capacity of the container, the actual volume, or the 
        weight-to-volume conversion schedule in paragraph (d).  However, 
        the tax must be calculated by the operator using the same method 
        for calculating the tipping fee so that both are calculated 
        according to container capacity, actual volume, or weight. 
           (d) The weight-to-volume conversion schedule for: 
           (1) construction debris as defined in section 115A.03, 
        subdivision 7, is one ton equals 3.33 cubic yards, or $2 per 
        ton; 
           (2) industrial waste as defined in section 115A.03, 
        subdivision 13a, is equal to 60 cents per cubic yard.  The 
        commissioner of revenue, after consultation with the 
        commissioner of the pollution control agency, shall determine, 
        and may publish by notice, a conversion schedule for various 
        industrial wastes; and 
           (3) infectious waste as defined in section 116.76, 
        subdivision 12, and pathological waste as defined in section 
        116.76, subdivision 14, is 150 pounds equals one cubic yard, or 
        60 cents per 150 pounds. 
           Sec. 11.  [297H.06] [EXEMPTIONS.] 
           Subdivision 1.  [CERTAIN SURCHARGES OR FEES.] The amount of 
        a surcharge, fee, or charge established pursuant to section 
        115A.919, 115A.921, 115A.923, or 473.843 is exempt from the 
        solid waste management tax.  The amount shown on a property tax 
        statement as a county charge for solid waste management service 
        or as a surcharge, fee, or charge established pursuant to 
        section 400.08, subdivision 3, or section 473.811, subdivision 
        3a, is exempt from the solid waste management tax.  The 
        exemption does not apply to the tax imposed on market price 
        under section 297H.02, subdivision 1, paragraphs (b) and (c), or 
        section 297H.03, subdivision 1, paragraphs (b) and (c). 
           Subd. 2.  [MATERIALS.] The tax is not imposed upon charges 
        to generators of mixed municipal solid waste or upon the volume 
        of non-mixed-municipal solid waste for waste management services 
        to manage the following materials: 
           (1) mixed municipal solid waste and non-mixed-municipal 
        solid waste generated outside of Minnesota; 
           (2) recyclable materials that are separated for recycling 
        by the generator, collected separately from other waste, and 
        recycled, to the extent the price of the service for handling 
        recyclable material is separately itemized; 
           (3) recyclable non-mixed-municipal solid waste that is 
        separated for recycling by the generator, collected separately 
        from other waste, delivered to a waste facility for the purpose 
        of recycling, and recycled; 
           (4) industrial waste, when it is transported to a facility 
        owned and operated by the same person that generated it; 
           (5) mixed municipal solid waste from a recycling facility 
        that separates or processes recyclable materials and reduces the 
        volume of the waste by at least 85 percent, provided that the 
        exempted waste is managed separately from other waste; 
           (6) recyclable materials that are separated from mixed 
        municipal solid waste by the generator, collected and delivered 
        to a waste facility that recycles at least 85 percent of its 
        waste, and are collected with mixed municipal solid waste that 
        is segregated in leakproof bags, provided that the mixed 
        municipal solid waste does not exceed five percent of the total 
        weight of the materials delivered to the facility and is 
        ultimately delivered to a waste facility identified as a 
        preferred waste management facility in county solid waste plans 
        under section 115A.46; 
           (7) through December 31, 2002, source-separated compostable 
        waste, if the waste is delivered to a facility exempted as 
        described in this clause.  To initially qualify for an 
        exemption, a facility must apply for an exemption in its 
        application for a new or amended solid waste permit to the 
        pollution control agency.  The first time a facility applies to 
        the agency it must certify in its application that it will 
        comply with the criteria in items (i) to (v) and the 
        commissioner of the agency shall so certify to the commissioner 
        of revenue who must grant the exemption.  For each subsequent 
        calendar year, by October 1 of the preceding year, the facility 
        must apply to the agency for certification to renew its 
        exemption for the following year.  The application must be filed 
        according to the procedures of, and contain the information 
        required by, the agency.  The commissioner of revenue shall 
        grant the exemption if the commissioner of the pollution control 
        agency finds and certifies to the commissioner of revenue that 
        based on an evaluation of the composition of incoming waste and 
        residuals and the quality and use of the product: 
           (i) generators separate materials at the source; 
           (ii) the separation is performed in a manner appropriate to 
        the technology specific to the facility that: 
           (A) maximizes the quality of the product; 
           (B) minimizes the toxicity and quantity of residuals; and 
           (C) provides an opportunity for significant improvement in 
        the environmental efficiency of the operation; 
           (iii) the operator of the facility educates generators, in 
        coordination with each county using the facility, about 
        separating the waste to maximize the quality of the waste stream 
        for technology specific to the facility; 
           (iv) process residuals do not exceed 15 percent of the 
        weight of the total material delivered to the facility; and 
           (v) the final product is accepted for use; and 
           (8) waste and waste by-products for which the tax has been 
        paid. 
           Sec. 12.  [297H.07] [BILLING.] 
           The amount of the tax imposed under this chapter shall be 
        itemized separately on the generator's bill, and shall be 
        designated as the "solid waste management tax." 
           Sec. 13.  [297H.08] [PAYMENT; REPORTING.] 
           (a) The waste management service provider, or a political 
        subdivision specified in section 297H.02, subdivision 1, and 
        section 297H.03, subdivision 1, 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 using 
        the filing cycle and due dates provided for taxes imposed under 
        chapter 297A. 
           (b) The waste hauler or political subdivision that sells 
        bags, stickers, or other indicia to vendors must report and 
        remit the tax imposed by section 297H.02, subdivision 3, and 
        section 297H.03, subdivision 3, 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 using the filing 
        cycle provided for taxes imposed under chapter 297A. 
           (c) Any partial payments received by waste management 
        service providers for waste management services shall be 
        prorated between the tax imposed under section 297H.02, 297H.03, 
        or 297H.04 and the service.  
           Sec. 14.  [297H.09] [BAD DEBTS.] 
           The remitter of the solid waste management tax may offset 
        against the tax payable, with respect to any reporting period, 
        the amount of tax imposed by this chapter previously remitted to 
        the commissioner of revenue which qualified as a bad debt under 
        section 166(a) of the Internal Revenue Code, as amended through 
        December 31, 1993, during such reporting period, but only in 
        proportion to the portion of such debt which became 
        uncollectable.  This section applies only to accrual basis 
        remitters that remit tax before it is collected and to the 
        extent they are unable to collect the tax. 
           Sec. 15.  [297H.10] [ADMINISTRATION; ENFORCEMENT; PENALTY.] 
           Subdivision 1.  [ADMINISTRATION AND ENFORCEMENT.] 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 this chapter. 
           Subd. 2.  [PENALTY.] If the form prescribed by the 
        commissioner of revenue for remitting the tax is the sales tax 
        return, a penalty is imposed on a person or political 
        subdivision who fails to separately report the amount of tax due 
        under this chapter.  The specified penalties are ten percent for 
        the first violation and 20 percent for the second and subsequent 
        violations.  The penalty applies only to that portion of the tax 
        that should have been reported on the separate lines for the tax 
        due under this chapter and that was included on other lines of 
        the sales tax return. 
           Sec. 16.  [297H.11] [REQUIREMENTS AND POTENTIAL LIABILITY 
        OF WASTE MANAGEMENT SERVICE PROVIDERS.] 
           Subdivision 1.  [REQUIREMENTS.] Waste management service 
        providers are required to: 
           (1) separately and accurately state the amount of the tax 
        in the appropriate statement of charges for waste management 
        services, or other statement if there are no charges for waste 
        management services, and in any action to enforce payment on 
        delinquent accounts; 
           (2) accurately account for and remit tax received; and 
           (3) work with the commissioner of revenue to ensure that 
        generators pay the tax. 
           Subd. 2.  [LIABILITY.] A waste management service provider 
        is liable for an amount equal to the solid waste management tax 
        that was either: 
           (1) received by the waste management service provider but 
        not timely remitted to the commissioner of revenue; or 
           (2) not received by the waste management service provider 
        and the waste management service provider failed to separately 
        and accurately state the amount of the tax in the appropriate 
        statement of charges for waste management services and in any 
        action to enforce payment on delinquent accounts. 
           Subd. 3.  [RECOVERY.] A person who is liable under 
        subdivision 2 is not prohibited from recovering from the 
        generator or self-hauler the amount of the liability paid to the 
        commissioner of revenue that is equal to the solid waste 
        management tax owed by the generator or self-hauler. 
           Sec. 17.  [297H.12] [INFORMATION REGARDING THE SOLID WASTE 
        MANAGEMENT TAX.] 
           The director of the office of environmental assistance, 
        after consulting with the commissioner of revenue, the 
        commissioner of the pollution control agency, and waste 
        management service providers, shall develop information 
        regarding the solid waste management tax for distribution to 
        waste generators in the state.  The information shall include 
        facts about the substitution of the solid waste management tax 
        for the sales tax on solid waste services and the solid waste 
        generator assessment and the purposes for which revenue from the 
        tax will be spent. 
           Sec. 18.  [297H.13] [DEPOSIT OF REVENUES; USE OF PROCEEDS; 
        FUNDING SHORTFALLS; REPORT ON RECEIPTS.] 
           Subdivision 1.  [DEPOSIT OF REVENUES.] The revenues derived 
        from the taxes imposed on waste management services under this 
        chapter, less the costs to the department of revenue for 
        administering the tax under this chapter, shall be deposited by 
        the commissioner of revenue in the state treasury. 
           The amounts retained by the department of revenue shall be 
        deposited in a separate revenue department fund which is hereby 
        created.  Money in this fund is hereby appropriated, up to a 
        maximum annual amount of $200,000, to the commissioner of 
        revenue for the costs incurred in administration of the solid 
        waste management tax under this chapter. 
           Subd. 2.  [ALLOCATION OF REVENUES.] (a) $22,000,000, or 50 
        percent, whichever is greater, of the amounts remitted under 
        this chapter must be credited to the solid waste fund 
        established in section 115B.42. 
           (b) The remainder must be deposited into the general fund. 
           Subd. 3.  [FUNDING SHORTFALLS.] If less than $22,000,000 is 
        projected to be available for new encumbrances in any fiscal 
        year after fiscal year 1999 from all existing dedicated revenue 
        sources for landfill cleanup and reimbursement costs under 
        sections 115B.39 to 115B.445, by October 1 before the next 
        fiscal year in which the shortfall is projected, the 
        commissioner of the pollution control agency shall certify to 
        the commissioner of revenue the amount of the shortfall and 
        notify persons required to collect and remit the tax.  To 
        provide for the shortfall, the commissioner of revenue shall 
        increase the tax under sections 297H.03, 297H.04, and 297H.05, 
        proportionately for both mixed municipal solid waste and 
        non-mixed-municipal solid waste, by an amount sufficient to 
        generate revenue equal to the amount of the shortfall effective 
        the following January 1 and shall provide notice of the 
        increased assessment by November 1 following certification to 
        persons who are required to collect and remit the tax under this 
        chapter. 
           Subd. 4.  [EXCESS REVENUE ADJUSTMENT.] If the total tax 
        revenues collected from the taxes imposed under this chapter in 
        fiscal year 1999 is projected to exceed $44,500,000, the 
        commissioner of revenue shall decrease proportionately the 
        amount of the tax under sections 297H.02, 297H.03, 297H.04, and 
        297H.05, by an amount sufficient to eliminate the excess 
        effective October 1, 1999, and shall provide notice of the 
        decreased tax by August 1, 1999, to waste management service 
        providers. 
           Subd. 5.  [REPORT ON RECEIPTS.] The commissioner of revenue 
        shall report to the chairs of the house and senate environment 
        and natural resources committees; the house environment and 
        natural resources finance division; the senate environment and 
        agriculture budget division; the house tax committee and the 
        senate taxes and tax laws committee; the commissioner of the 
        pollution control agency; and the director of the office of 
        environmental assistance on the total tax revenues received from 
        the taxes imposed under this chapter.  The reports shall be made 
        as follows: 
           (1) a report by May 31, 1998, based on amounts received by 
        the commissioner of revenue from January 1, 1998, through April 
        30, 1998; 
           (2) a report by September 30, 1998, based on amounts 
        received by the commissioner of revenue from May 1, 1998, 
        through August 31, 1998; and 
           (3) a report by January 31, 1999, based on amounts received 
        by the commissioner of revenue from September 1, 1998, through 
        December 31, 1998. 
           Subd. 6.  [ORGANIZED COLLECTION BILLING PRACTICES.] In 
        preparing the report required under section 115A.981, including 
        the duty to consider information filed by political subdivisions 
        under section 115A.929, the commissioner of the pollution 
        control agency shall report the extent, if any, to which the 
        solid waste management tax is not being collected on the full 
        cost of organized collection service because of billings that do 
        not reflect the full cost of service. 
           Sec. 19.  [MORATORIUM.] 
           The commissioner of revenue shall not initiate or continue 
        any action to collect any underpayment from political 
        subdivisions, or to reimburse any overpayment to any political 
        subdivisions, of use taxes on solid waste management services 
        under Minnesota Statutes, section 297A.45, for the period from 
        January 1, 1990, through December 31, 1996. 
           Sec. 20.  [REPEALER.] 
           Minnesota Statutes 1996, sections 116.07, subdivision 10; 
        297A.01, subdivision 21; and 297A.45, as amended by Laws 1997, 
        chapter 84, article 3, section 8, are repealed. 
           Sec. 21.  [EFFECTIVE DATES.] 
           Sections 1 to 18 and 20 are effective January 1, 1998. 
           Section 19 is effective the day following final enactment. 
                                   ARTICLE 14
                     SENIOR CITIZENS PROPERTY TAX DEFERRAL
           Section 1.  Minnesota Statutes 1996, section 270B.12, is 
        amended by adding a subdivision to read: 
           Subd. 12.  [PROPERTY TAX DEFERRAL.] The commissioner may 
        disclose to a county auditor and treasurer, and to their 
        designated agents or employees, the annual deferral amounts and 
        the cumulative deferral and interest as determined by the 
        commissioner under chapter 290B for each parcel of homestead 
        property in the county that is enrolled in the senior citizen 
        property tax deferral program under chapter 290B. 
           Sec. 2.  Minnesota Statutes 1996, section 275.065, 
        subdivision 3, is amended to read: 
           Subd. 3.  [NOTICE OF PROPOSED PROPERTY TAXES.] (a) The 
        county auditor shall prepare and the county treasurer shall 
        deliver after November 10 and on or before November 24 each 
        year, by first class mail to each taxpayer at the address listed 
        on the county's current year's assessment roll, a notice of 
        proposed property taxes and, in the case of a town, final 
        property taxes.  
           (b) The commissioner of revenue shall prescribe the form of 
        the notice. 
           (c) The notice must inform taxpayers that it contains the 
        amount of property taxes each taxing authority other than a town 
        proposes to collect for taxes payable the following year and, 
        for a town, the amount of its final levy.  It must clearly state 
        that each taxing authority, including regional library districts 
        established under section 134.201, and including the 
        metropolitan taxing districts as defined in paragraph (i), but 
        excluding all other special taxing districts and towns, will 
        hold a public meeting to receive public testimony on the 
        proposed budget and proposed or final property tax levy, or, in 
        case of a school district, on the current budget and proposed 
        property tax levy.  It must clearly state the time and place of 
        each taxing authority's meeting and an address where comments 
        will be received by mail.  
           (d) The notice must state for each parcel: 
           (1) the market value of the property as determined under 
        section 273.11, and used for computing property taxes payable in 
        the following year and for taxes payable in the current year; 
        and, in the case of residential property, whether the property 
        is classified as homestead or nonhomestead.  The notice must 
        clearly inform taxpayers of the years to which the market values 
        apply and that the values are final values; 
           (2) by county, city or town, school district excess 
        referenda levy, remaining school district levy, regional library 
        district, if in existence, the total of the metropolitan special 
        taxing districts as defined in paragraph (i) and the sum of the 
        remaining special taxing districts, and as a total of the taxing 
        authorities, including all special taxing districts, the 
        proposed or, for a town, final net tax on the property for taxes 
        payable the following year and the actual tax for taxes payable 
        the current year.  If a school district has certified under 
        section 124A.03, subdivision 2, that a referendum will be held 
        in the school district at the November general election, the 
        county auditor must note next to the school district's proposed 
        amount that a referendum is pending and that, if approved by the 
        voters, the tax amount may be higher than shown on the notice.  
        For the purposes of this subdivision, "school district excess 
        referenda levy" means school district taxes for operating 
        purposes approved at referendums, including those taxes based on 
        net tax capacity as well as those based on market value.  
        "School district excess referenda levy" does not include school 
        district taxes for capital expenditures approved at referendums 
        or school district taxes to pay for the debt service on bonds 
        approved at referenda.  In the case of the city of Minneapolis, 
        the levy for the Minneapolis library board and the levy for 
        Minneapolis park and recreation shall be listed separately from 
        the remaining amount of the city's levy.  In the case of a 
        parcel where tax increment or the fiscal disparities areawide 
        tax under chapter 276A or 473F applies, the proposed tax levy on 
        the captured value or the proposed tax levy on the tax capacity 
        subject to the areawide tax must each be stated separately and 
        not included in the sum of the special taxing districts; and 
           (3) the increase or decrease in the amounts in clause (2) 
        from taxes payable in the current year to proposed or, for a 
        town, final taxes payable the following year, expressed as a 
        dollar amount and as a percentage. 
           For purposes of this section, the amount of the tax on 
        homesteads qualifying under the senior citizens' property tax 
        deferral program under chapter 290B is the total amount of 
        property tax before subtraction of the deferred property tax 
        amount. 
           (e) The notice must clearly state that the proposed or 
        final taxes do not include the following: 
           (1) special assessments; 
           (2) levies approved by the voters after the date the 
        proposed taxes are certified, including bond referenda, school 
        district levy referenda, and levy limit increase referenda; 
           (3) amounts necessary to pay cleanup or other costs due to 
        a natural disaster occurring after the date the proposed taxes 
        are certified; 
           (4) amounts necessary to pay tort judgments against the 
        taxing authority that become final after the date the proposed 
        taxes are certified; and 
           (5) the contamination tax imposed on properties which 
        received market value reductions for contamination. 
           (f) Except as provided in subdivision 7, failure of the 
        county auditor to prepare or the county treasurer to deliver the 
        notice as required in this section does not invalidate the 
        proposed or final tax levy or the taxes payable pursuant to the 
        tax levy. 
           (g) If the notice the taxpayer receives under this section 
        lists the property as nonhomestead and the homeowner provides 
        satisfactory documentation to the county assessor that the 
        property is owned and used as the owner's homestead, the 
        assessor shall reclassify the property to homestead for taxes 
        payable in the following year. 
           (h) In the case of class 4 residential property used as a 
        residence for lease or rental periods of 30 days or more, the 
        taxpayer must either: 
           (1) mail or deliver a copy of the notice of proposed 
        property taxes to each tenant, renter, or lessee; or 
           (2) post a copy of the notice in a conspicuous place on the 
        premises of the property.  
           The notice must be mailed or posted by the taxpayer by 
        November 27 or within three days of receipt of the notice, 
        whichever is later.  A taxpayer may notify the county treasurer 
        of the address of the taxpayer, agent, caretaker, or manager of 
        the premises to which the notice must be mailed in order to 
        fulfill the requirements of this paragraph. 
           (i) For purposes of this subdivision, subdivisions 5a and 
        6, "metropolitan special taxing districts" means the following 
        taxing districts in the seven-county metropolitan area that levy 
        a property tax for any of the specified purposes listed below: 
           (1) metropolitan council under section 473.132, 473.167, 
        473.249, 473.325, 473.446, 473.521, 473.547, or 473.834; 
           (2) metropolitan airports commission under section 473.667, 
        473.671, or 473.672; and 
           (3) metropolitan mosquito control commission under section 
        473.711. 
           For purposes of this section, any levies made by the 
        regional rail authorities in the county of Anoka, Carver, 
        Dakota, Hennepin, Ramsey, Scott, or Washington under chapter 
        398A shall be included with the appropriate county's levy and 
        shall be discussed at that county's public hearing. 
           (j) For taxes levied in 1996, payable in 1997 only, in the 
        case of a statutory or home rule charter city or town that 
        exercises the local levy option provided in section 473.388, 
        subdivision 7, the notice of its proposed taxes may include a 
        statement of the amount by which its proposed tax increase for 
        taxes payable in 1997 is attributable to its exercise of that 
        option, together with a statement that the levy of the 
        metropolitan council was decreased by a similar amount because 
        of the exercise of that option. 
           Sec. 3.  Minnesota Statutes 1996, section 276.04, 
        subdivision 2, is amended to read: 
           Subd. 2.  [CONTENTS OF TAX STATEMENTS.] (a) The treasurer 
        shall provide for the printing of the tax statements.  The 
        commissioner of revenue shall prescribe the form of the property 
        tax statement and its contents.  The statement must contain a 
        tabulated statement of the dollar amount due to each taxing 
        authority from the parcel of real property for which a 
        particular tax statement is prepared.  The dollar amounts due 
        the county, township or municipality, the total of the 
        metropolitan special taxing districts as defined in section 
        275.065, subdivision 3, paragraph (i), school district excess 
        referenda levy, remaining school district levy, and the total of 
        other voter approved referenda levies based on market value 
        under section 275.61 must be separately stated.  The amounts due 
        all other special taxing districts, if any, may be aggregated.  
        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.  For the purposes of this 
        subdivision, "school district excess referenda levy" means 
        school district taxes for operating purposes approved at 
        referenda, including those taxes based on net tax capacity as 
        well as those based on market value.  "School district excess 
        referenda levy" does not include school district taxes for 
        capital expenditures approved at referendums or school district 
        taxes to pay for the debt service on bonds approved at 
        referenda.  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.  The statement shall include the following sentence, 
        printed in upper case letters in boldface print:  "THE STATE OF 
        MINNESOTA DOES NOT RECEIVE ANY PROPERTY TAX REVENUES.  THE STATE 
        OF MINNESOTA REDUCES YOUR PROPERTY TAX BY PAYING CREDITS AND 
        REIMBURSEMENTS TO LOCAL UNITS OF GOVERNMENT."  
           (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 multiplying the 
        property's gross tax capacity times the total local tax rate and 
        adding to the result the sum of the aids enumerated in clause 
        (4); 
           (4) a total of the following aids: 
           (i) education aids payable under chapters 124 and 124A; 
           (ii) local government aids for cities, towns, and counties 
        under chapter 477A; and 
           (iii) disparity reduction aid under section 273.1398; 
           (5) for homestead residential and agricultural properties, 
        the homestead and agricultural credit aid apportioned to the 
        property.  This amount is obtained by multiplying the total 
        local tax rate by the difference between the property's gross 
        and net tax capacities under section 273.13.  This amount must 
        be separately stated and identified as "homestead and 
        agricultural credit."  For purposes of comparison with the 
        previous year's amount for the statement for taxes payable in 
        1990, the statement must show the homestead credit for taxes 
        payable in 1989 under section 273.13, and the agricultural 
        credit under section 273.132 for taxes payable in 1989; 
           (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) any deferred property tax amount under the senior 
        citizens' property tax deferral program under chapter 290B, as 
        well as the total deferred amount plus accrued interest; and 
           (8) 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 clauses (3) 
        and (4) that local governments will receive in the following 
        year.  In the case of a county containing a city of the first 
        class, for taxes levied in 1991, and for all counties for taxes 
        levied in 1992 and thereafter, the commissioner must certify 
        this amount by September 1.  
           Sec. 4.  [290B.01] [PURPOSE.] 
           Minnesota's system of ad valorem property taxation does not 
        adequately recognize the unique financial circumstances of 
        homestead property owned and occupied by low-income senior 
        citizens.  It is therefore declared to be in the public interest 
        of this state to stabilize tax burdens on homestead property 
        owned by qualifying low-income senior citizens through a 
        deferral of certain property taxes. 
           Sec. 5.  [290B.02] [CITATION.] 
           This program shall be named the "senior citizens' property 
        tax deferral program." 
           Sec. 6.  [290B.03] [DEFERRAL OF PROPERTY TAXES.] 
           Subdivision 1.  [PROGRAM QUALIFICATIONS.] The 
        qualifications for the senior citizens' property tax deferral 
        program are as follows: 
           (1) the property must be owned and occupied as a homestead 
        by a person 65 years of age or older.  In the case of a married 
        couple, both of the spouses must be at least 65 years old at the 
        time the first property tax deferral is granted, regardless of 
        whether the property is titled in the name of one spouse or both 
        spouses, or titled in another way that permits the property to 
        have homestead status; 
           (2) the total household income of the qualifying 
        homeowners, as defined in section 290A.03, subdivision 5, for 
        the calendar year preceding the year of the initial application 
        may not exceed $30,000; 
           (3) the homestead must have been owned and occupied as the 
        homestead of at least one of the qualifying homeowners for at 
        least 15 years prior to the year the initial application is 
        filed; 
           (4) there are no delinquent property taxes, penalties, or 
        interest on the homesteaded property; 
           (5) there are no delinquent special assessments on the 
        homesteaded property; 
           (6) there are no state or federal tax liens or judgment 
        liens on the homesteaded property; 
           (7) there are no mortgages or other liens on the property 
        that secure future advances, except for those subject to credit 
        limits that result in compliance with clause (8); and 
           (8) the total unpaid balances of debts secured by mortgages 
        and other liens on the property, including unpaid special 
        assessments, but not including property taxes payable during the 
        year, does not exceed 30 percent of the assessor's estimated 
        market value for the year. 
           Subd. 2.  [QUALIFYING HOMESTEAD; DEFINED.] Qualifying 
        homestead property is defined as the dwelling occupied as the 
        homeowner's principal residence and so much of the land 
        surrounding it, not exceeding one acre, as is reasonably 
        necessary for use of the dwelling as a home and any other 
        property used for purposes of a homestead as defined in section 
        273.13, subdivisions 22 and 23.  The homestead may be part of a 
        multidwelling building and the land on which it is built. 
           Sec. 7.  [290B.04] [APPLICATION FOR DEFERRAL.] 
           Subdivision 1.  [INITIAL APPLICATION.] A taxpayer meeting 
        the program qualifications under section 290B.03 may apply to 
        the commissioner of revenue for the deferral of taxes.  
        Applications are due on or before July 1 for deferral of any of 
        the following year's property taxes.  A taxpayer may apply in 
        the year in which the taxpayer becomes 65 years old, provided 
        that no deferral of property taxes will be made until the 
        calendar year after the taxpayer becomes 65 years old.  The 
        application, which shall be prescribed by the commissioner of 
        revenue, shall include the following items and any other 
        information which the commissioner deems necessary: 
           (1) the name, address, and social security number of the 
        owner or owners; 
           (2) a copy of the property tax statement for the current 
        payable year for the homesteaded property; 
           (3) the initial year of ownership and occupancy as a 
        homestead; 
           (4) the owner's household income for the previous calendar 
        year; and 
           (5) information on any mortgage loans or other amounts 
        secured by mortgages or other liens against the property, for 
        which purpose the commissioner may require the applicant to 
        provide a copy of the mortgage note, the mortgage, or a 
        statement of the balance owing on the mortgage loan provided by 
        the mortgage holder.  The commissioner may require the 
        appropriate documents in connection with obtaining and 
        confirming information on unpaid amounts secured by other liens. 
           The application must state that program participation is 
        voluntary.  The application must also state that the deferred 
        amount depends directly on the applicant's household income, and 
        that program participation includes authorization for the 
        deferred amount for each year and the cumulative deferral and 
        interest to appear on each year's property tax statement as 
        public data. 
           Subd. 2.  [APPROVAL; RECORDING.] The commissioner shall 
        approve all initial applications that qualify under this chapter 
        and shall notify qualifying homeowners on or before December 1.  
        The commissioner may investigate the facts or require 
        confirmation in regard to an application.  The commissioner 
        shall record or file a notice of qualification for deferral, 
        including the names of the qualifying homeowners and a legal 
        description of the property, in the office of the county 
        recorder, or registrar of titles, whichever is applicable, in 
        the county where the qualifying property is located.  The notice 
        must state that it serves as a notice of lien and that it 
        includes deferrals under this section for future years.  The 
        homeowner shall pay the recording or filing fees. 
           Subd. 3.  [ANNUAL CERTIFICATION BY TAXPAYER.] Annually on 
        or before July 1, a taxpayer whose initial application has been 
        approved under subdivision 2, shall complete the certification 
        form and return it to the commissioner of revenue.  The 
        certification must state whether or not the taxpayer wishes to 
        have property taxes deferred for the following year provided the 
        taxes exceed the maximum property tax amount under section 
        290B.05.  If the taxpayer does wish to have property taxes 
        deferred, the certification must state the homeowner's total 
        household income for the previous calendar year and any other 
        information which the commissioner deems necessary.  
           Sec. 8.  [290B.05] [MAXIMUM PROPERTY TAX AMOUNT AND 
        DEFERRED PROPERTY TAX AMOUNT.] 
           Subdivision 1.  [DETERMINATION BY COMMISSIONER.] The 
        commissioner shall annually determine the qualifying homeowner's 
        "maximum property tax amount" and "maximum allowable deferral."  
        The maximum property tax amount calculated for taxes payable in 
        the following year is equal to five percent of the homeowner's 
        total household income for the previous calendar year.  No tax 
        may be deferred for any homeowner whose total household income 
        for the previous year exceeds $30,000.  No tax shall be deferred 
        in any year in which the homeowner does not meet the program 
        qualifications in section 290B.03.  The maximum allowable total 
        deferral is equal to 75 percent of the assessor's estimated 
        market value for the year, less (1) the balance of any mortgage 
        loans and other amounts secured by liens against the property at 
        the time of application, including any unpaid special 
        assessments but not including property taxes payable during the 
        year; and (2) any outstanding deferral and interest.  
           Subd. 2.  [CERTIFICATION BY COMMISSIONER.] On or before 
        December 1, the commissioner shall certify to the county auditor 
        of the county in which the qualifying homestead is located (1) 
        the maximum property tax amount; (2) the maximum allowable 
        deferral for the year; and (3) the cumulative deferral and 
        interest for all years preceding the next taxes payable year. 
           Subd. 3.  [CALCULATION OF DEFERRED PROPERTY TAX AMOUNT.] 
        When final property tax amounts for the following year have been 
        determined, the county auditor shall calculate the "deferred 
        property tax amount."  The deferred property tax amount is equal 
        to the lesser of (1) the maximum allowable deferral for the 
        year; or (2) the difference between the total amount of property 
        taxes levied upon the qualifying homestead by all taxing 
        jurisdictions and the maximum property tax amount.  Any special 
        assessments levied by any local unit of government must not be 
        included in the total tax used to calculate the deferred tax 
        amount.  No deferral of the current year's property taxes is 
        allowed if there are any delinquent property taxes or delinquent 
        special assessments for any previous year.  Any tax attributable 
        to new improvements made to the property after the initial 
        application has been approved under section 290B.04, subdivision 
        2, must be excluded when determining any subsequent deferred 
        property tax amount.  The county auditor shall annually, on or 
        before April 15, certify to the commissioner of revenue the 
        property tax deferral amounts determined under this subdivision 
        by property and by owner.  
           Subd. 4.  [LIMITATION ON TOTAL AMOUNT OF DEFERRED TAXES.] 
        On or before September 1 of each year, the commissioner shall 
        request, and each county or city assessor shall provide, the 
        current year's estimated market value of each property on the 
        list supplied by the commissioner that may be eligible for 
        deferral under this section for taxes payable in the following 
        year.  The total amount of deferred taxes and interest on a 
        property, when added to (1) the balance owing on any mortgages 
        on the property at the time of initial application; and (2) 
        other amounts secured by liens on the property at the time of 
        the initial application, may not exceed 75 percent of the 
        assessor's current estimated market value of the property. 
           Sec. 9.  [290B.06] [PROPERTY TAX REFUNDS.] 
           For purposes of qualifying for the regular property tax 
        refund or the special refund for homeowners under chapter 290A, 
        the qualifying tax is the full amount of taxes, including the 
        deferred portion of the tax.  In any year in which a program 
        participant chooses to have property taxes deferred under this 
        section, any regular or special property tax refund awarded 
        based upon those property taxes must be taken first as a 
        deduction from the amount of the deferred tax for that year, and 
        second as a deduction against any outstanding deferral from 
        previous years, rather than as a cash payment to the homeowner.  
        The commissioner shall cancel any current year's deferral or 
        previous years' deferral and interest that is offset by the 
        property tax refunds.  If the total of the regular and the 
        special property tax refund amounts exceeds the sum of the 
        deferred tax for the current year and cumulative deferred tax 
        and interest for previous years, the commissioner shall then 
        remit the excess amount to the homeowner.  On or before the date 
        on which the commissioner issues property tax refunds, the 
        commissioner shall notify program participants of any reduction 
        in the deferred amount for the current and previous years 
        resulting from property tax refunds. 
           Sec. 10.  [290B.07] [LIEN; DEFERRED PORTION.] 
           Payment by the state to the county treasurer of taxes 
        deferred under this section is deemed a loan from the state to 
        the program participant.  The commissioner must compute the 
        interest as provided in section 270.75, subdivision 5, but not 
        to exceed five percent, and maintain records of the total 
        deferred amount and interest for each participant.  Interest 
        shall accrue beginning September 1 of the payable year for which 
        the taxes are deferred.  The lien created under section 272.31 
        continues to secure payment by the taxpayer, or by the 
        taxpayer's successors or assigns, of the amount deferred, 
        including interest, with respect to all years for which amounts 
        are deferred.  The lien for deferred taxes and interest has the 
        same priority as any other lien under section 272.31, except 
        that liens, including mortgages, recorded or filed prior to the 
        recording or filing of the notice under section 290B.04, 
        subdivision 2, have priority over the lien for deferred taxes 
        and interest.  A seller's interest in a contract for deed, in 
        which a qualifying homeowner is the purchaser or an assignee of 
        the purchaser, has priority over deferred taxes and interest on 
        deferred taxes, regardless of whether the contract for deed is 
        recorded or filed.  The lien for deferred taxes and interest for 
        future years has the same priority as the lien for deferred 
        taxes and interest for the first year, which is always higher in 
        priority than any mortgages or other liens filed, recorded, or 
        created after the notice recorded or filed under section 
        290B.04, subdivision 2.  The county treasurer or auditor shall 
        maintain records of the deferred portion and shall list the 
        amount of deferred taxes for the year and the cumulative 
        deferral and interest for all previous years as a lien against 
        the property on the property tax statement.  In any 
        certification of unpaid taxes for a tax parcel, the county 
        auditor shall clearly distinguish between taxes payable in the 
        current year, deferred taxes and interest, and delinquent 
        taxes.  Payment of the deferred portion becomes due and owing at 
        the time specified in section 290B.08.  Upon receipt of the 
        payment, the commissioner shall issue a receipt for it to the 
        person making the payment upon request and shall notify the 
        auditor of the county in which the parcel is located, within ten 
        days, identifying the parcel to which the payment applies.  Upon 
        receipt by the commissioner of revenue of collected funds in the 
        amount of the deferral, the state's loan to the program 
        participant is deemed paid in full. 
           Sec. 11.  [290B.08] [TERMINATION OF DEFERRAL; PAYMENT OF 
        DEFERRED TAXES.] 
           Subdivision 1.  [TERMINATION.] (a) The deferral of taxes 
        granted under this chapter terminates when one of the following 
        occurs: 
           (1) the property is sold or transferred; 
           (2) the death of the qualifying homeowner(s); 
           (3) the homeowner notifies the commissioner in writing that 
        the homeowner desires to discontinue the deferral; or 
           (4) the property no longer qualifies as a homestead. 
           (b) A property is not terminated from the program because 
        no deferred property tax amount is determined on the homestead 
        for any given year after the homestead's initial enrollment into 
        the program. 
           Subd. 2.  [PAYMENT UPON TERMINATION.] Upon the termination 
        of the deferral under subdivision 1, the amount of deferred 
        taxes and interest plus the recording or filing fees under both 
        section 290B.04, subdivision 2, and this subdivision becomes due 
        and payable to the commissioner within 90 days of termination of 
        the deferral.  No additional interest is due on the deferral if 
        timely paid.  On receipt of payment, the commissioner shall 
        within ten days notify the auditor of the county in which the 
        parcel is located, identifying the parcel to which the payment 
        applies and shall remit the recording or filing fees under 
        section 290B.04, subdivision 2, and this subdivision to the 
        auditor.  A notice of termination of deferral, containing the 
        legal description and the recording or filing data for the 
        notice of qualification for deferral under section 290B.04, 
        subdivision 2, shall be prepared and recorded or filed by the 
        county auditor in the same office in which the notice of 
        qualification for deferral under section 290B.04, subdivision 2, 
        was recorded or filed, and the county auditor shall mail a copy 
        of the notice of termination to the property owner.  The 
        property owner shall pay the recording or filing fees.  Upon 
        recording or filing of the notice of termination of deferral, 
        the notice of qualification for deferral under section 290B.04, 
        subdivision 2, and the lien created by it are discharged.  If 
        the deferral is not timely paid, the penalty, interest, lien, 
        forfeiture, and other rules for the collection of ad valorem 
        property taxes apply. 
           Sec. 12.  [290B.09] [STATE REIMBURSEMENT.] 
           Subdivision 1.  [DETERMINATION; PAYMENT.] The commissioner 
        of revenue shall determine the deferred amount of property tax 
        in each county, basing determinations on a review of abstracts 
        of tax lists submitted by the county auditors under section 
        275.29.  The commissioner may make changes in the abstracts of 
        tax lists as deemed necessary.  The commissioner of revenue, 
        after such review, shall pay the deferred amount of property tax 
        to each county treasurer on or before August 31.  
           At least once each year, the commissioner shall report to 
        the county auditor the total cumulative amount of deferred taxes 
        and interest that constitute a lien against the property.  
           The county treasurer shall distribute as part of the 
        October settlement the funds received as if they had been 
        collected as a part of the property tax. 
           Subd. 2.  [APPROPRIATION.] An amount sufficient to pay the 
        total amount of property tax determined under subdivision 1 is 
        annually appropriated from the general fund to the commissioner 
        of revenue. 
           Sec. 13.  [DEPARTMENT OF REVENUE APPROPRIATION.] 
           There is appropriated to the commissioner of revenue 
        $33,000 for fiscal year 1999 for the purposes of administering 
        the provisions of this article. 
           Sec. 14.  [EFFECTIVE DATE.] 
           Sections 1 to 12 are effective for deferral of property 
        taxes payable in 1999, and thereafter. 
                                   ARTICLE 15 
                              INSURANCE PROVISIONS 
           Section 1.  Minnesota Statutes 1996, section 60A.075, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [DEFINITIONS.] For the purposes of this 
        section, the terms in this subdivision have the meanings given 
        them. 
           (a) "Eligible member" means a policyholder whose policy is 
        in force as of the record date, which is the date that the 
        mutual company's board of directors adopts a plan of conversion 
        or some other date specified as the record date in the plan of 
        conversion and approved by the commissioner.  Unless otherwise 
        provided in the plan, a person insured under a group policy is 
        not an eligible member, unless on the record date: 
           (1) the person is insured or covered under a group life 
        policy or group annuity contract under which funds are 
        accumulated and allocated to the respective covered persons; 
           (2) the person has the right to direct the application of 
        the funds so allocated; 
           (3) the group policyholder makes no contribution to the 
        premiums or deposits for the policy or contract; and 
           (4) the converting mutual company has the names and 
        addresses of the persons covered under the group life policy or 
        group annuity contract. 
           (b) "Reorganized company" means a Minnesota domestic stock 
        insurance company that has converted from a Minnesota domestic 
        mutual insurance company according to this section. 
           (c) "Plan of conversion" or "plan" means a plan adopted by 
        a Minnesota domestic mutual insurance company's board of 
        directors under this section to convert the mutual company into 
        a Minnesota domestic stock insurance company. 
           (d) "Policy" means a policy or contract of insurance issued 
        by a converting mutual company, including an annuity contract. 
           (e) "Commissioner" means the commissioner of commerce. 
           (f) "Converting mutual company" means a Minnesota domestic 
        mutual insurance company seeking to convert to a Minnesota 
        domestic stock insurance company according to this section. 
           (g) "Effective date of a conversion" means the date 
        determined according to subdivision 6. 
           (h) "Membership interests" means all policyholders' rights 
        as members of the converting mutual company, including but not 
        limited to, rights to vote and to participate in any 
        distributions of surplus, whether or not incident to the 
        company's liquidation. 
           (i) "Equitable surplus" means the converting mutual 
        company's surplus as regards policyholders as of the 
        effective record date of the conversion or other date approved 
        by the commissioner determined in a manner that is not unfair or 
        inequitable to policyholders. 
           (j) "Permitted issuer" means:  (1) a corporation organized 
        and owned by the converting mutual company or by any other 
        insurance company or insurance holding company for the purpose 
        of purchasing and holding all of the stock securities 
        representing a majority of voting control of the reorganized 
        company; (2) a stock insurance company owned by the converting 
        mutual company or by any other insurance company or insurance 
        holding company into which the converting mutual company will be 
        merged; or (3) any other corporation approved by the 
        commissioner. 
           Sec. 2.  Minnesota Statutes 1996, section 60A.075, 
        subdivision 8, is amended to read: 
           Subd. 8.  [SHARE CONVERSION.] A plan of conversion under 
        this subdivision shall provide for exchange of policyholders' 
        membership interests in return for shares in the reorganized 
        company, according to paragraphs (a) to (c). 
           (a) The policyholders' membership interests shall be 
        exchanged, in a manner that takes into account the estimated 
        proportionate contribution of equitable surplus of each class of 
        participating policies and contracts, for all of the common 
        shares of the reorganized company or common shares of its parent 
        company or a permitted issuer, or for a combination of the 
        common shares of the reorganized company or common shares of its 
        parent company or a permitted issuer. 
           (b) Unless the anticipated issuance within a shorter period 
        is disclosed in the plan of conversion, the issuer of common 
        shares shall not, within two years after the effective date of 
        reorganization, issue either of the following: 
           (1) any of its common shares or any securities convertible 
        with or without consideration into the common shares or carrying 
        any warrant to subscribe to or purchase common shares; and 
           (2) any warrant, right, or option to subscribe to or 
        purchase the common shares or other securities described in 
        paragraph (a), except for the issue of common shares to or for 
        the benefit of policyholders according to the plan of conversion 
        and the issue of options nontransferable subscription rights for 
        the purchase of common shares being granted to officers, 
        directors, or employees a tax qualified employee benefit plan of 
        the reorganized company or its parent company, if any, or a 
        permitted issuer, according to this section subdivision 11. 
           (c) Unless the common shares have a public market when 
        issued, the issuer shall use its best efforts to encourage and 
        assist in the establishment of a public market for the common 
        shares within two years of the effective date of the conversion 
        or a longer period as disclosed in the plan of conversion.  
        Within one year after any offering of stock other than the 
        initial distribution, but no later than six years after the 
        effective date of the conversion, the reorganized company shall 
        offer to make available to policyholders who received and 
        retained shares of common stock or securities described in 
        paragraph (b), clause (1), a procedure to dispose of those 
        shares of stock at market value without brokerage commissions or 
        similar fees. 
           Sec. 3.  Minnesota Statutes 1996, section 60A.075, 
        subdivision 9, is amended to read: 
           Subd. 9.  [SURPLUS DISTRIBUTION.] A plan of conversion 
        under this subdivision shall provide for the exchange of the 
        policyholders' membership interests in return for the operation 
        of the converting mutual company's participating policies as a 
        closed block of business and for the distribution of the 
        company's equitable surplus to policyholders, and shall provide 
        for the issuance of new shares of the reorganized company or its 
        parent corporation, each according to paragraphs (a) to (i). 
           (a) The converting mutual company's participating business, 
        comprised of its participating policies and contracts in force 
        on the effective date of the conversion or other reasonable date 
        as provided in the plan, shall be operated by the reorganized 
        company as a closed block of participating business.  However, 
        at the option of the converting mutual company, group policies 
        and group contracts may be omitted from the closed block. 
           (b) Assets of the converting mutual company must be 
        allocated to the closed block of participating business in an 
        amount equal to the reserves and liabilities for the converting 
        mutual life insurer's participating policies and contracts in 
        force on the effective date of the conversion.  The plan must be 
        accompanied by an opinion of an independent qualified actuary 
        who meets the standards set forth in the insurance laws or 
        regulations for the submission of actuarial opinions as to the 
        adequacy of reserves or assets.  The opinion must relate to the 
        adequacy of the assets allocated to support the closed block of 
        business.  The actuarial opinion must be based on methods of 
        analysis considered appropriate for those purposes by the 
        Actuarial Standards Board. 
           (c) The reorganized company shall keep a separate 
        accounting for the closed block and shall make and include in 
        the annual statement to be filed with the commissioner each year 
        a separate statement showing the gains, losses, and expenses 
        properly attributable to the closed block. 
           (d) Notwithstanding the establishment of a closed block, 
        the entire assets of the reorganized company shall be available 
        for the payment of benefits to policyholders.  Payment must 
        first be made from the assets supporting the closed block until 
        exhausted, and then from the general assets of the reorganized 
        company. 
           (e) The converting mutual company's equitable surplus shall 
        be distributed to eligible participating policyholders in a form 
        or forms selected by the converting mutual company.  The form of 
        distribution may consist of cash, securities of the reorganized 
        company, securities of another institution, a certificate of 
        contribution, additional life insurance, annuity benefits, 
        increased dividends, reduced premiums, or other equitable 
        consideration or any combination of forms of consideration.  The 
        consideration, if any, given to a class or category of 
        policyholders may differ from the consideration given to another 
        class or category of policyholders.  A certificate of 
        contribution must be repayable in ten years, be equal to 100 
        percent of the value of the policyholders' membership interest, 
        and bear interest at the highest rate charged by the reorganized 
        company for policy loans on the effective date of the conversion.
           (f) The consideration must be allocated among the 
        policyholders in a manner that is fair and equitable to the 
        policyholders. 
           (g) The reorganized company or its parent corporation shall 
        issue and sell shares of one or more classes having a total 
        price equal to the estimated value in the market of the shares 
        on the initial offering date.  The estimated value must take 
        into account all of the following: 
           (1) the pro forma market value of the reorganized company; 
           (2) the consideration to be given to policyholders 
        according to paragraph (e); 
           (3) the proceeds of the sale of the shares; and 
           (4) any additional value attributable to the shares as a 
        result of a purchaser or a group of purchasers who acted in 
        concert to obtain shares in the initial offering, attaining, 
        through such purchase, control of the reorganized company or its 
        parent corporation. 
           (h) If a purchaser or a group of purchasers acting in 
        concert is to attain control in the initial offering, the mutual 
        company shall not, directly or indirectly, pay for any of the 
        costs or expenses of conversion of the mutual company, whether 
        or not the conversion is effected, except with permission of the 
        commissioner. 
           (i) Periodically, with the commissioner's approval, the 
        reorganized company may share in the profits of the closed block 
        of participating business for the benefit of stockholders if the 
        assets allocated to the closed block are in excess of those 
        necessary to support the closed block. 
           Sec. 4.  Minnesota Statutes 1996, section 60A.077, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [FORMATION.] (a) A domestic mutual 
        insurance company, upon approval of the commissioner, may 
        reorganize by forming an insurance holding company based upon a 
        mutual plan and continuing the corporate existence of the 
        reorganizing insurance company as a stock insurance company.  
        The commissioner, if satisfied that the interests of the 
        policyholders are properly protected and that the plan of 
        reorganization is fair and equitable to the policyholders, may 
        approve the proposed plan of reorganization and may require as a 
        condition of approval the modifications of the proposed plan of 
        reorganization as the commissioner finds necessary for the 
        protection of the policyholders' interests.  The commissioner 
        shall retain jurisdiction over the mutual insurance holding 
        company according to this section and chapter 60D to assure that 
        policyholder and member interests are protected. 
           (b) All of the initial voting shares of the capital stock 
        of the reorganized insurance company must be issued to the 
        mutual insurance holding company or to an intermediate stock 
        holding company that is wholly owned by the mutual insurance 
        holding company.  The membership interests of the policyholders 
        of the reorganized insurance company become membership interests 
        in the mutual insurance holding company.  "Membership interests" 
        means those interests described in section 60A.075, subdivision 
        1, paragraph (h).  Policyholders of the reorganized insurance 
        company shall be members of the mutual insurance holding company 
        and their voting rights must be determined in accordance with 
        the articles of incorporation and bylaws of the mutual insurance 
        holding company.  The mutual insurance holding company shall, at 
        all times, directly or through an one or more intermediate stock 
        holding company companies, control a majority of the voting 
        shares of the capital stock of the reorganized insurance 
        company, taking into account any potential dilution resulting 
        from convertible securities. 
           (c) A majority of the board of directors of a mutual 
        insurance holding company must be disinterested directors.  For 
        purposes of this section, a director is disinterested if (i) the 
        director is not or has not within the past two years been an 
        officer or employee of the mutual insurance holding company or 
        any subsidiary or predecessor corporation, and (ii) the director 
        does not hold, directly or indirectly, a material ownership 
        interest in any subsidiary of the mutual insurance holding 
        company.  An ownership interest is material if it represents 
        more than one-half of one percent of the voting securities of 
        the issuer, or a larger percentage as the commissioner may 
        approve. 
           Sec. 5.  Minnesota Statutes 1996, section 60A.077, 
        subdivision 2, is amended to read: 
           Subd. 2.  [MERGER.] (a) A domestic or foreign mutual 
        insurance company, upon the approval of the commissioner, may 
        reorganize by merging its policyholders' membership interests 
        into a mutual insurance holding company formed according to 
        subdivision 1 and continuing the corporate existence of the 
        reorganizing insurance company as a stock insurance company 
        subsidiary of the mutual insurance holding company or of an 
        intermediate stock holding company.  "Membership interests" 
        means those interests described in section 60A.075, subdivision 
        1, paragraph (h).  The commissioner, if satisfied that the 
        interests of the policyholder policyholders of the reorganizing 
        company and the interests of the existing members of the mutual 
        insurance holding company are properly protected and that the 
        merger is fair and equitable to the policyholders those parties, 
        may approve the proposed merger and may require as a condition 
        of approval the modifications of the proposed merger as the 
        commissioner finds necessary for the protection of the 
        policyholders' or members' interests.  The commissioner shall 
        retain jurisdiction, under chapter 60D, over the mutual 
        insurance holding company organized according to this section to 
        assure that policyholder and member interests are protected. 
           (b) All of the initial voting shares of the capital stock 
        of the reorganized insurance company must be issued to the 
        mutual insurance holding company, or to an intermediate stock 
        holding company that is wholly owned by the mutual insurance 
        holding company.  The membership interests of the policyholders 
        of the reorganized insurance company become membership interests 
        in the mutual insurance holding company.  Policyholders of the 
        reorganized insurance company shall be members of the mutual 
        insurance holding company and their voting rights must be 
        determined according to the articles of incorporation and bylaws 
        of the mutual insurance holding company.  The mutual insurance 
        holding company shall, at all times, directly or through one or 
        more intermediate stock holding companies, control a majority of 
        the voting shares of the capital stock of the reorganized 
        insurance company, taking into account any potential dilution 
        resulting from convertible securities. 
           (c) A domestic mutual insurance holding company may merge 
        with a domestic or foreign mutual insurance holding company in 
        the manner prescribed for the merger of insurance companies set 
        forth in section 60A.16, with any exceptions or modifications 
        the commissioner may approve. 
           Sec. 6.  Minnesota Statutes 1996, section 60A.077, 
        subdivision 3, is amended to read: 
           Subd. 3.  [PLAN OF REORGANIZATION; APPROVAL BY 
        COMMISSIONER.] (a) The A reorganizing or merging insurer or a 
        merging mutual insurance holding company shall file a plan of 
        reorganization, approved, by the affirmative vote of a majority 
        of its board of directors, for review and approval by the 
        commissioner adopt a plan of reorganization or merger consistent 
        with the requirements of this section and file the plan with the 
        commissioner.  At any time before the approval of a plan by the 
        commissioner, the company, by the affirmative vote of a majority 
        of its directors, may amend or withdraw the plan.  The plan must 
        provide for the following: 
           (1) in the case of a reorganization under subdivision 1, 
        establishing a mutual insurance holding company with at least 
        one stock insurance company subsidiary, the majority of shares 
        of which must be owned, either directly or through an 
        intermediate stock holding company, by the mutual insurance 
        holding company or in the case of a reorganization under 
        subdivision 2, a description of the terms and conditions of the 
        proposed merger; 
           (2) analyzing the benefits and risks attendant to the 
        proposed reorganization, including the rationale for the 
        reorganization and analysis of the comparative benefits and 
        risks of a demutualization under section 60A.075; 
           (3) protecting the immediate and long-term interests of 
        existing policyholders; 
           (4) ensuring immediate membership in the mutual insurance 
        holding company of all existing policyholders of the 
        reorganizing domestic insurance company; 
           (5) describing a plan providing for membership interests of 
        future policyholders; 
           (6) describing the number of members of the board of 
        directors of the mutual insurance holding company required to be 
        policyholders; 
           (7) ensuring that, in the event of proceedings under 
        chapter 60B involving a stock insurance company subsidiary of 
        the mutual insurance holding company that resulted from the 
        reorganization of a domestic mutual insurance company, the 
        assets of the mutual insurance holding company will be available 
        to satisfy the policyholder obligations of the stock insurance 
        company; 
           (8) for periodic distribution of accumulated holding 
        company earnings to members describing the mutual insurance 
        holding company's plan for distributions to members or other 
        uses of accumulated mutual holding company earnings; 
           (9) (8) describing the nature and content of the annual 
        report and financial statement to be sent to each member; 
           (10) (9) a copy of the proposed mutual insurance holding 
        company's articles of incorporation and bylaws specifying all 
        membership rights; 
           (11) (10) the names, addresses, and occupational 
        information of all corporate officers and members of the 
        proposed mutual insurance holding company board of directors; 
           (12) (11) information sufficient to demonstrate that the 
        financial condition of the reorganizing or merging company will 
        not be materially diminished upon reorganization, including 
        information concerning any subsidiaries of the reorganizing or 
        merging insurers that will become subsidiaries of the mutual 
        insurance holding company or an intermediate holding company as 
        part of the reorganization; 
           (13) (12) a copy of the articles of incorporation and 
        bylaws for any proposed insurance company subsidiary or 
        intermediate holding company subsidiary; 
           (14) (13) describing any plans for the an initial sale or 
        subscription of stock for or other securities of the reorganized 
        insurance company or any intermediate holding company; and 
           (15) (14) any other information requested by the 
        commissioner or required by rule. 
           (b) The commissioner may approve the plan upon finding that 
        the requirements of this section have been fully met and the 
        plan will protect the immediate and long-term interests of 
        policyholders. 
           (c) The commissioner may retain, at the reorganizing or 
        merging mutual company's expense, any qualified experts not 
        otherwise a part of the commissioner's staff to assist in 
        reviewing the plan. 
           (d) The commissioner may, but need not, conduct a public 
        hearing regarding the proposed plan.  The hearing must be held 
        within 30 days after submission of a completed plan of 
        reorganization to the commissioner.  The commissioner shall give 
        the reorganizing mutual company at least 20 days' notice of the 
        hearing.  At the hearing, the reorganizing mutual company, its 
        policyholders, and any other person whose interest may be 
        affected by the proposed reorganization, may present evidence, 
        examine and cross-examine witnesses, and offer oral and written 
        arguments or comments according to the procedure for contested 
        cases under chapter 14.  The persons participating may conduct 
        discovery proceedings in the same manner as prescribed for the 
        district courts of this state.  All discovery proceedings must 
        be concluded no later than three days before the scheduled 
        commencement of the public hearing. 
           Sec. 7.  Minnesota Statutes 1996, section 60A.077, 
        subdivision 5, is amended to read: 
           Subd. 5.  [APPROVAL BY MEMBERS.] The plan shall be approved 
        by the members as provided in section 60A.075, subdivision 5. by 
        the eligible members described in paragraphs (a) to (c).  
           (a) In the case of a formation under subdivision 1, the 
        plan must be approved by the eligible members of the 
        reorganizing insurance company. 
           (b) In the case of a merger under subdivision 2, paragraph 
        (a), the plan must be approved by the eligible members of the 
        merging insurance company and by the eligible members of the 
        mutual insurance holding company into which the policyholders' 
        membership interests are to be merged.  The vote of the eligible 
        members of the mutual insurance holding company is not required 
        if the commissioner determines that the merger would not be 
        material to the financial condition of the mutual insurance 
        holding company. 
           (c) In the case of a merger of two mutual insurance holding 
        companies under subdivision 2, paragraph (c), the plan must be 
        approved by the eligible members of both companies.  The vote of 
        the eligible members of the surviving mutual holding company is 
        not required if the commissioner determines that the merger 
        would not be material to the financial condition of the 
        surviving company. 
           Sec. 8.  Minnesota Statutes 1996, section 60A.077, 
        subdivision 6, is amended to read: 
           Subd. 6.  [INCORPORATION.] A mutual insurance holding 
        company resulting from the reorganization of a domestic mutual 
        insurance company organized under chapter 300 shall be 
        incorporated pursuant to chapter 300.  The articles of 
        incorporation and any amendments to the articles of the mutual 
        insurance holding company are subject to approval of the 
        commissioner in the same manner as those of an insurance 
        company.  Members of a mutual insurance holding company shall be 
        entitled to vote on all matters required to be submitted to 
        members under chapter 300 and shall additionally be treated as 
        shareholders for purposes of the voting approval requirements of 
        section 300.09. 
           Sec. 9.  Minnesota Statutes 1996, section 60A.077, 
        subdivision 7, is amended to read: 
           Subd. 7.  [APPLICABILITY OF CERTAIN PROVISIONS.] (a) A In 
        the event of the insolvency of a mutual insurance holding 
        company, the mutual insurance holding company is considered to 
        be an insurer subject to chapter 60B.  and shall automatically 
        be a party to any proceeding under chapter 60B involving an 
        insurance company that, as a result of a reorganization 
        according to subdivision 1 or 2, is a subsidiary of the mutual 
        insurance holding company.  In any proceeding under chapter 60B 
        involving the reorganized insurance company, the assets of the 
        mutual insurance holding company are considered to be assets of 
        the estate of the reorganized insurance company for purposes of 
        satisfying the claims of the reorganized insurance company's 
        policyholders.  A mutual insurance holding company shall not 
        dissolve or liquidate without the approval of the commissioner 
        or as ordered by the district a court according to chapter 
        60B of competent jurisdiction. 
           (b) A mutual insurance holding company is subject to 
        chapter 60D to the extent consistent with this section. 
           (c) As a condition to approval of the plan, the 
        commissioner may require the mutual insurance holding company to 
        comply with any provision of the insurance laws necessary to 
        protect the interests of the policyholders as if the mutual 
        insurance holding company were a domestic mutual insurance 
        company.  
           (d) No person or group of persons other than the chief 
        executive officer of a mutual insurance holding company, or the 
        chief executive officer's designee, shall seek to obtain proxies 
        from the members of the mutual insurance holding company for the 
        purposes of affecting a change of control of the mutual 
        insurance holding company unless that person or persons have 
        filed with the commissioner and have sent to the mutual 
        insurance holding company a statement containing the information 
        required by section 60D.17.  Section 60D.17, subdivisions 2 to 
        7, apply in the event of a proxy solicitation regulated by this 
        paragraph. 
           (e) For purposes of this subdivision, the term "control," 
        including the terms "controlling," "controlled by," and "under 
        common control with," means the possession, direct or indirect, 
        of the power to direct or cause the direction of the management 
        and policies of a person, whether through membership voting 
        interests, by contract other than a commercial contract for 
        goods or nonmanagement services, or otherwise, unless the power 
        is the result of an official position with, corporate office 
        held by, or court appointment of, the person.  Control is 
        presumed to exist if any person, directly or indirectly, owns, 
        controls, holds with the power to vote, or holds proxies 
        representing, ten percent or more of the membership voting 
        interests of the mutual insurance holding company.  This 
        presumption may be rebutted by a showing made in the manner 
        provided by section 60D.19, subdivision 11, that control does 
        not exist in fact.  The commissioner may determine after 
        furnishing all persons in interest notice and opportunity to be 
        heard and making specific findings of fact to support the 
        determination, that control exists in fact, notwithstanding the 
        absence of a presumption to that effect. 
           Sec. 10.  Minnesota Statutes 1996, section 60A.077, 
        subdivision 8, is amended to read: 
           Subd. 8.  [APPLICABILITY OF DEMUTUALIZATION PROVISIONS.] 
        (a) Except as otherwise provided, section 60A.075 is not 
        applicable to a reorganization or merger according to this 
        section, except for section 60A.075, subdivisions 14 to 16. 
           (b) Section 60A.075 is applicable to demutualization of a 
        mutual insurance holding company that resulted from the 
        reorganization of a domestic mutual insurance company organized 
        under chapter 300 as if it were a mutual insurance company. 
           (c) Section 60A.075, subdivisions 14 to 16, are applicable 
        to a reorganization or merger under this section. 
           Sec. 11.  Minnesota Statutes 1996, section 60A.077, 
        subdivision 9, is amended to read: 
           Subd. 9.  [MEMBERSHIP INTERESTS.] A membership interest in 
        a domestic mutual insurance holding company does not constitute 
        a security as defined in section 80A.14, subdivision 18.  No 
        member of a mutual insurance holding company may transfer or 
        pledge membership in the mutual insurance holding company or any 
        right arising from the membership except as attendant to the 
        valid transfer or assignment of the member's policy in any 
        reorganized company that gave rise to the member's membership 
        interest.  A member of a mutual insurance holding company is 
        not, as a member, personally liable for the acts, debts, 
        liabilities, or obligations of the company.  No assessments of 
        any kind may be imposed upon the members of a mutual insurance 
        holding company by the directors or members, or because of any 
        liability of any company owned or controlled by the mutual 
        insurance holding company or because of any act, debt, or 
        liability of the mutual insurance holding company.  A member's 
        interest in the mutual insurance holding company shall 
        automatically terminate upon cancellation, nonrenewal, 
        expiration, or termination of the member's policy in any 
        insurance company that gave rise to the member's membership 
        interest. 
           Sec. 12.  Minnesota Statutes 1996, section 60A.077, 
        subdivision 10, is amended to read: 
           Subd. 10.  [FINANCIAL STATEMENT REQUIREMENTS.] (a) In 
        addition to any items required under chapter 60D, each mutual 
        insurance holding company shall file with the commissioner, by 
        April 1 of each year, an annual statement consisting of the 
        following: 
           (1) an income statement, balance sheet, and cashflow 
        statement prepared in accordance with generally accepted 
        accounting principles; 
           (2) complete information on the status of any closed block 
        formed as part of a plan of reorganization; 
           (3) an investment plan covering all assets; and 
           (4) a statement disclosing any intention to pledge, borrow 
        against, alienate, hypothecate, or in any way encumber the 
        assets of the mutual insurance holding company or an 
        intermediate stock holding company.  Action taken according to 
        the statement is subject to the commissioner's prior written 
        approval. 
           (b) The aggregate pledges and encumbrances of a mutual 
        insurance holding company's assets shall not affect more than 49 
        percent of the company's stock in ownership of any subsidiary 
        insurance holding company or subsidiary insurance company that 
        resulted from a reorganization or merger. 
           (c) At least 50 percent of the generally accepted 
        accounting principles (GAAP) net worth of a mutual insurance 
        holding company must be invested in insurance company 
        subsidiaries. 
           Sec. 13.  Minnesota Statutes 1996, section 60A.077, 
        subdivision 11, is amended to read: 
           Subd. 11.  [SALE OF STOCK AND PAYMENT OF DIVIDENDS.] (a) A 
        reorganized insurance company and an intermediate stock holding 
        company may issue subscription rights and may issue or grant any 
        other securities, rights, options, and similar items to the same 
        extent as any business corporation organized under chapter 
        302A.  However, except as provided in paragraphs (b) to (d), 
        no solicitation for the sale of the stock securities of the 
        reorganized insurance company, or of an intermediate stock 
        holding company of the mutual insurance holding company, that 
        directly or indirectly controls a majority of voting shares of 
        the reorganized insurance company, may be made without the 
        commissioner's prior written approval.  
           (b) A registration statement covering securities that has 
        been approved by the commissioner and filed with and declared 
        effective by the Securities and Exchange Commission under the 
        Securities Act of 1933 pursuant to any provision of that statute 
        or rule that allows registration of securities to be sold on a 
        delayed or continuous basis may be sold without further approval.
           (c) Unless the commissioner has granted the mutual 
        insurance holding company a written exemption from the 
        requirements of this paragraph, any securities which are 
        regularly traded on the New York Stock Exchange, the American 
        Stock Exchange, or another exchange approved by the 
        commissioner, or designated on the National Association of 
        Securities Dealers automated quotations (NASDAQ) national market 
        system, shall be sold according to the procedure in this 
        paragraph.  If the mutual insurance holding company, an 
        intermediate holding company, or a reorganized insurance company 
        intends to offer securities that are governed by this paragraph, 
        that entity shall deliver to the commissioner, not less than ten 
        days before the offering, a notice of the planned offering and 
        information regarding:  (1) the approximate number of shares 
        intended to be offered; (2) the target date of sale; (3) 
        evidence the security is regularly traded on one of the public 
        exchanges noted above; and (4) the recent history of the trading 
        price and trading volume of the security.  The commissioner is 
        considered to have approved the sale unless within ten days 
        following receipt of the notice, the commissioner issues an 
        objection to the sale.  If the commissioner issues an objection 
        to the sale, the security may not be sold until the commissioner 
        issues an order approving the sale. 
           (d) A reorganized insurance company or intermediate holding 
        company that has issued securities that are regularly traded on 
        one of the exchanges or markets described in paragraph (c), may 
        establish stock option, incentive, and share ownership plans 
        customary for publicly traded companies in the same or similar 
        industries.  If the reorganized insurance company or 
        intermediate holding company intends to establish a stock 
        option, incentive or share ownership plan, that entity shall 
        deliver to the commissioner, not less than 30 days before the 
        establishment of the plan, a notice of the proposed plan along 
        with any information about the proposed plan the commissioner 
        requires.  The commissioner is considered to have approved the 
        plan unless within 30 days following receipt of the notice, the 
        commissioner issues an objection to the proposed plan.  If the 
        commissioner issues an objection to the proposed plan, the plan 
        may not be established until the commissioner issues an order 
        approving the plan.  If the commissioner approves the 
        establishment of the stock option, incentive, or share ownership 
        plan, the reorganized insurance company or the intermediate 
        holding company that obtained the approval may sell or issue 
        securities according to the approved plan without further 
        approval. 
           (e) The total number of shares of capital stock issued by 
        the reorganized insurance company or an intermediate holding 
        company that may be held by directors and officers of the mutual 
        insurance holding company, any intermediate holding company, and 
        of any reorganized insurance company, and acquired according to 
        subscription rights or stock option, incentive, and share 
        ownership plans, may not exceed the percentage limits set forth 
        in section 60A.075, subdivision 11, paragraph (b).  Subject to 
        the requirements of subdivision 1, paragraph (c), nothing in 
        this section prohibits the acquisition of any securities of a 
        reorganized insurance company or intermediate stock holding 
        company through a licensed securities broker-dealer by any 
        officer or director of the reorganized company, an intermediate 
        stock holding company, or the mutual insurance holding company. 
           (f) Dividends and other distributions to the shareholders 
        of the reorganized stock insurance company or of an intermediate 
        stock holding company shall not be made except in 
        compliance must comply with section 60D.20.  Any dividends and 
        other distributions to the members of the mutual insurance 
        holding company must comply with section 60D.20 and any other 
        approval requirements contained in the mutual insurance holding 
        company's articles of incorporation. 
           (g) Unless previously approved as part of the plan of 
        reorganization, the initial offering of any voting shares to the 
        public by a reorganized company, a stock insurance company 
        subsidiary, or an intermediate holding company which holds a 
        majority of the voting shares of a reorganized insurance company 
        or stock insurance company subsidiary, must be approved by a 
        majority of votes cast at a regular or special meeting of the 
        members of the mutual insurance holding company.  Any issuer 
        repurchase program, plan of exchange, recapitalization, or 
        offering of capital securities to the public, shall, in addition 
        to any other approvals required by law or by the issuer's 
        articles of incorporation, be approved by a majority of the 
        board of directors of the mutual insurance holding company and 
        by a majority of the disinterested members of the board of 
        directors of the mutual insurance holding company. 
           Sec. 14.  Minnesota Statutes 1996, section 60A.077, is 
        amended by adding a subdivision to read: 
           Subd. 12.  [PROVISIONS IN THE EVENT OF INSURER 
        INSOLVENCY.] (a) In the event of any insolvency proceeding 
        involving an insolvent stock subsidiary, the assets of the 
        mutual insurance holding company, together with any assets of 
        any intermediate holding company that directly or indirectly 
        controls the insolvent stock subsidiary, must be available to 
        satisfy the policyholder obligations of the insolvent stock 
        subsidiary in an amount determined by the commissioner, but in 
        no event more than the total amount of nonpolicyholder dividends 
        paid by the insolvent stock subsidiary to the mutual insurance 
        holding company, or any intermediate holding company that 
        controls the insolvent stock subsidiary, during the ten-year 
        period immediately preceding the date of insolvency. 
           (b) In determining the required contribution by the mutual 
        insurance holding company or any intermediate stock holding 
        company which controls the insolvent stock subsidiary, the 
        commissioner shall take into account among other factors: 
           (1) the possible direct or indirect negative effects of any 
        required contribution on any insurance company affiliate of the 
        insolvent stock subsidiary; and 
           (2) the possible direct or indirect, long-term, or 
        short-term negative effects on the members of the mutual 
        insurance holding company, other than those members who, are, or 
        were policyholders of the insolvent stock subsidiary. 
           Nothing in this subdivision limits the powers of the 
        commissioner or the liquidator under chapter 60B. 
           (c) For purposes of this subdivision, the following terms 
        have the meanings given: 
           (1) "date of insolvency" means, as to an insolvent stock 
        subsidiary, the date established in accordance with chapter 60B 
        or comparable statute of another state governing the 
        rehabilitation or liquidation of a foreign insolvent stock 
        subsidiary; 
           (2) "insolvency proceeding" means any proceeding under 
        chapter 60B or comparable statute of another state governing the 
        rehabilitation and liquidation of a foreign insolvent stock 
        subsidiary; 
           (3) "insolvent stock subsidiary" means any stock insurance 
        company subsidiary of a mutual insurance holding company that 
        resulted from the reorganization of a domestic or foreign mutual 
        insurance company according to subdivision 1 or 2, or any other 
        stock insurance company subsidiary that is subject to an 
        insolvency proceeding, which on the date of insolvency has in 
        force policies that have given rise to membership interests in 
        the mutual insurance holding company; 
           (4) "control" has the meaning given in section 60D.15, 
        subdivision 4; and 
           (5) "dividends" include distributions of cash or any other 
        assets. 
           Sec. 15.  Minnesota Statutes 1996, section 290.01, is 
        amended by adding a subdivision to read: 
           Subd. 4c.  [MUTUAL INSURANCE HOLDING COMPANIES.] A "mutual 
        insurance holding company" is not an insurance company for 
        purposes of this chapter. 
           Sec. 16.  Minnesota Statutes 1996, section 290.17, 
        subdivision 4, is amended to read: 
           Subd. 4.  [UNITARY BUSINESS PRINCIPLE.] (a) If a trade or 
        business conducted wholly within this state or partly within and 
        partly without this state is part of a unitary business, the 
        entire income of the unitary business is subject to 
        apportionment pursuant to section 290.191.  Notwithstanding 
        subdivision 2, paragraph (c), none of the income of a unitary 
        business is considered to be derived from any particular source 
        and none may be allocated to a particular place except as 
        provided by the applicable apportionment formula.  The 
        provisions of this subdivision do not apply to farm income 
        subject to subdivision 5, paragraph (a), business income subject 
        to subdivision 5, paragraph (b) or (c), income of an insurance 
        company determined under section 290.35, or income of an 
        investment company determined under section 290.36. 
           (b) The term "unitary business" means business activities 
        or operations which are of mutual benefit, dependent upon, or 
        contributory to one another, individually or as a group.  The 
        term may be applied within a single legal entity or between 
        multiple entities and without regard to whether each entity is a 
        corporation, a partnership or a trust.  
           (c) Unity is presumed whenever there is unity of ownership, 
        operation, and use, evidenced by centralized management or 
        executive force, centralized purchasing, advertising, 
        accounting, or other controlled interaction, but the absence of 
        these centralized activities will not necessarily evidence a 
        nonunitary business. 
           (d) Where a business operation conducted in Minnesota is 
        owned by a business entity that carries on business activity 
        outside the state different in kind from that conducted within 
        this state, and the other business is conducted entirely outside 
        the state, it is presumed that the two business operations are 
        unitary in nature, interrelated, connected, and interdependent 
        unless it can be shown to the contrary.  
           (e) Unity of ownership is not deemed to exist when a 
        corporation is involved unless that corporation is a member of a 
        group of two or more business entities and more than 50 percent 
        of the voting stock of each member of the group is directly or 
        indirectly owned by a common owner or by common owners, either 
        corporate or noncorporate, or by one or more of the member 
        corporations of the group.  For this purpose, the term "voting 
        stock" shall include membership interests of mutual insurance 
        holding companies formed under section 60A.077.  
           (f) The net income and apportionment factors under section 
        290.191 or 290.20 of foreign corporations and other foreign 
        entities which are part of a unitary business shall not be 
        included in the net income or the apportionment factors of the 
        unitary business.  A foreign corporation or other foreign entity 
        which is required to file a return under this chapter shall file 
        on a separate return basis.  The net income and apportionment 
        factors under section 290.191 or 290.20 of foreign operating 
        corporations shall not be included in the net income or the 
        apportionment factors of the unitary business except as provided 
        in paragraph (g). 
           (g) The adjusted net income of a foreign operating 
        corporation shall be deemed to be paid as a dividend on the last 
        day of its taxable year to each shareholder thereof, in 
        proportion to each shareholder's ownership, with which such 
        corporation is engaged in a unitary business.  Such deemed 
        dividend shall be treated as a dividend under section 290.21, 
        subdivision 4. 
           Dividends actually paid by a foreign operating corporation 
        to a corporate shareholder which is a member of the same unitary 
        business as the foreign operating corporation shall be 
        eliminated from the net income of the unitary business in 
        preparing a combined report for the unitary business.  The 
        adjusted net income of a foreign operating corporation shall be 
        its net income adjusted as follows: 
           (1) any taxes paid or accrued to a foreign country, the 
        commonwealth of Puerto Rico, or a United States possession or 
        political subdivision of any of the foregoing shall be a 
        deduction; and 
           (2) the subtraction from federal taxable income for 
        payments received from foreign corporations or foreign operating 
        corporations under section 290.01, subdivision 19d, clause (11), 
        shall not be allowed. 
           If a foreign operating corporation incurs a net loss, 
        neither income nor deduction from that corporation shall be 
        included in determining the net income of the unitary business. 
           (h) For purposes of determining the net income of a unitary 
        business and the factors to be used in the apportionment of net 
        income pursuant to section 290.191 or 290.20, there must be 
        included only the income and apportionment factors of domestic 
        corporations or other domestic entities other than foreign 
        operating corporations that are determined to be part of the 
        unitary business pursuant to this subdivision, notwithstanding 
        that foreign corporations or other foreign entities might be 
        included in the unitary business.  
           (i) Deductions for expenses, interest, or taxes otherwise 
        allowable under this chapter that are connected with or 
        allocable against dividends, deemed dividends described in 
        paragraph (g), or royalties, fees, or other like income 
        described in section 290.01, subdivision 19d, clause (11), shall 
        not be disallowed. 
           (j) Each corporation or other entity that is part of a 
        unitary business must file combined reports as the commissioner 
        determines.  On the reports, all intercompany transactions 
        between entities included pursuant to paragraph (h) must be 
        eliminated and the entire net income of the unitary business 
        determined in accordance with this subdivision is apportioned 
        among the entities by using each entity's Minnesota factors for 
        apportionment purposes in the numerators of the apportionment 
        formula and the total factors for apportionment purposes of all 
        entities included pursuant to paragraph (h) in the denominators 
        of the apportionment formula. 
           (k) If a corporation has been divested from a unitary 
        business and is included in a combined report for a fractional 
        part of the common accounting period of the combined report:  
           (1) its income includable in the combined report is its 
        income incurred for that part of the year determined by 
        proration or separate accounting; and 
           (2) its sales, property, and payroll included in the 
        apportionment formula must be prorated or accounted for 
        separately. 
                                   ARTICLE 16 
                                 MISCELLANEOUS 
           Section 1.  Minnesota Statutes 1996, section 6.76, is 
        amended to read: 
           6.76 [LOCAL GOVERNMENTAL EXPENDITURES FOR LOBBYISTS.] 
           (a) On or before January 31, 1990, and of each year 
        thereafter, all counties, cities, school districts, metropolitan 
        agencies, regional railroad authorities, and the metropolitan 
        council shall report to the state auditor, on forms prescribed 
        by the auditor, their estimated expenditures paid for the 
        previous calendar year to a lobbyist as defined in section 
        10A.01, subdivision 11, except payments to associations of local 
        governments that are reported under paragraph (b), and to any 
        staff person not registered as a lobbyist, over 25 percent of 
        whose time is spent during the legislative session on 
        legislative matters. 
           (b) Associations of local governments subject to this 
        section shall report annually, on or before January 31, to the 
        state auditor and the association's members the proportionate 
        amount of each member's dues spent for lobbying purposes. 
           Sec. 2.  Minnesota Statutes 1996, section 115A.554, is 
        amended to read: 
           115A.554 [AUTHORITY OF SANITARY DISTRICTS.] 
           A sanitary district has the authorities and duties of 
        counties within the district's boundary for purposes of sections 
        115A.0716; 115A.46, subdivisions 4 and 5; 115A.48; 115A.551; 
        115A.552; 115A.553; 115A.919; 115A.929; 115A.93; 115A.96, 
        subdivision 6; 115A.961; 116.072; 375.18, subdivision 14; 
        400.08, except subdivision 4, paragraph (b); 400.16; and 400.161.
           Sec. 3.  Minnesota Statutes 1996, section 117.155, is 
        amended to read: 
           117.155 [PAYMENTS; PARTIAL PAYMENT PENDING APPEAL.] 
           Except as otherwise provided herein payment of damages 
        awarded may be made or tendered at any time after the filing of 
        the report; and the duty of the petitioner to pay the amount of 
        any award or final judgment upon appeal shall, for all purposes, 
        be held and construed to be full and just compensation to the 
        respective owners or the persons interested in the lands.  If 
        either the petitioner or any respondent appeals from an award, 
        the respondent or respondents, if there is more than one, except 
        encumbrancers having an interest in the award which has been 
        appealed, may demand of the petitioner a partial payment of the 
        award pending the final determination thereof, and it shall be 
        the duty of the petitioner to comply with such demand and to 
        promptly pay the amount demanded but not in excess of an amount 
        equal to three-fourths of the award of damages for the parcel 
        which has been appealed, less any payments made by petitioner 
        pursuant to section 117.042; provided, however, that the 
        petitioner may by motion after due notice to all interested 
        parties request, and the court may order, reduction in the 
        amount of the partial payment for cause shown.  If an appeal is 
        taken from an award the petitioner may, but it cannot be 
        compelled to, pay the entire amount of the award pending the 
        final determination thereof.  If any respondent or respondents 
        having an interest in the award refuses to accept such payment 
        the petitioner may pay the amount thereof to the court 
        administrator of district court to be paid out under direction 
        of the court.  A partial or full payment as herein provided 
        shall not draw interest from the condemner from the date of 
        payment or deposit, and upon final determination of any appeal 
        the total award of damages shall be reduced by the amount of the 
        partial or full payment.  If any partial or full payment exceeds 
        the amount of the award of compensation as finally determined, 
        the petitioner shall have a claim against the respondents 
        receiving such payment for the amount thereof, to be recoverable 
        in the same manner as in any civil action upon petitioner's 
        motion, final judgment must be entered in the condemnation 
        action in favor of the petitioner in the amount of the balance 
        owed to the petitioner and is recoverable within the original 
        condemnation action. 
           Sec. 4.  Minnesota Statutes 1996, section 121.15, is 
        amended by adding a subdivision to read: 
           Subd. 1a.  [PROJECT.] The construction, remodeling, or 
        improvement of a building or site of an educational facility at 
        an estimated cost exceeding $100,000 is a project under section 
        177.42, subdivision 2. 
           Sec. 5.  Minnesota Statutes 1996, section 161.45, is 
        amended by adding a subdivision to read: 
           Subd. 3.  [UTILITY INTERESTS WHEN REAL PROPERTY 
        CONVEYED.] In proceedings to vacate, transfer, turn back, or 
        otherwise convey an interest in real property owned or 
        controlled by the department, when the property is owned in fee 
        by the state, the commissioner may specify that the conveyance 
        of the department's interest does not affect a prior, existing 
        utility easement in the property or use of the property granted 
        to a utility under permit issued by the department.  In 
        addition, the commissioner may convey interests in real 
        property, including an easement, subject to the right of a 
        utility to enter upon the right-of-way to maintain, repair, 
        replace, reconstruct, improve, remove, or otherwise attend to 
        its equipment.  Where the utility had no preexisting easement 
        over the real property, this subdivision does not prohibit a 
        political subdivision, government agency, or private entity from 
        negotiating or contracting with a utility with regard to the 
        utility's easement or other interest in the property, but the 
        utility shall continue to hold the interest in the property and 
        the right of reasonable entry unless and until the utility 
        agrees in writing to relinquish its interests. 
           Sec. 6.  Minnesota Statutes 1996, section 270.60, is 
        amended by adding a subdivision to read: 
           Subd. 4.  [PAYMENTS TO COUNTIES.] (a) The commissioner 
        shall pay to a qualified county in which an Indian gaming casino 
        is located ten percent of the state share of all taxes generated 
        from activities on reservations and collected under a tax 
        agreement under this section with the tribal government for the 
        reservation located in the county.  If the tribe has casinos 
        located in more than one county, the payment must be divided 
        equally among the counties in which the casinos are located. 
           (b) A county qualifies for payments under this subdivision 
        only if one of the following conditions is met: 
           (1) the county's per capita income is less than 80 percent 
        of the state per capita personal income, based on the most 
        recent estimates made by the United States Bureau of Economic 
        Analysis; or 
           (2) 30 percent or more of the total market value of real 
        property in the county is exempt from ad valorem taxation. 
           (c) The commissioner shall make the payments required under 
        this subdivision by February 28 of the year following the year 
        the taxes are collected. 
           (d) To make the payments authorized by this subdivision, 
        $1,100,000 is annually appropriated from the general fund to the 
        commissioner.  If the authorized payments exceed the amount of 
        the appropriation, the commissioner shall proportionately reduce 
        the rate so that the total amount equals the appropriation. 
           Sec. 7.  Minnesota Statutes 1996, section 271.19, is 
        amended to read: 
           271.19 [COSTS AND DISBURSEMENTS.] 
           Upon the determination of any appeal under this chapter 
        before the tax court, or of any review hereunder by the supreme 
        court, the costs and disbursements shall be taxed and allowed in 
        favor of the prevailing party and against the losing party as in 
        civil actions or, if there has been an offer of judgment or 
        settlement by a party prior to ten days before the court hears 
        the appeal, pursuant to Minnesota Rules of Civil Procedure, rule 
        68.  In any case where a person liable for a tax or other 
        obligation has lost an appeal or review instituted by the 
        person, and the tax court or court shall determine that the 
        person instituted the same merely for the purposes of delay, or 
        that the taxpayer's position in the proceedings is frivolous, 
        additional costs, commensurate with the expense incurred and 
        services performed by the agencies of the state in connection 
        with the appeal, but not exceeding $5,000 in any case, may be 
        allowed against the taxpayer, in the discretion of the tax court 
        or court.  Costs and disbursements allowed against any such 
        person shall be added to the tax or other obligation determined 
        to be due, and shall be payable therewith.  To the extent 
        described in section 15.471, where an award of costs and 
        attorney fees is authorized under section 15.472, the costs and 
        fees shall be allowed against the state, including expenses 
        incurred by the taxpayer to administratively protest or appeal 
        to the department of revenue the order, decision, or report of 
        the commissioner that is the subject of the tax court 
        proceedings.  Costs and disbursements allowed against the state 
        or other public agencies shall be paid out of funds received 
        from taxes or other obligations of the kind involved in the 
        proceeding, or other funds of the agency concerned appropriated 
        and available therefor.  Witnesses in proceedings under this 
        chapter shall receive like fees as in the district court, to be 
        paid in the first instance by the parties by whom the witnesses 
        were called, and to be taxed and allowed as herein provided. 
           Sec. 8.  Minnesota Statutes 1996, section 278.07, is 
        amended to read: 
           278.07 [JUDGMENT; AMOUNT; COSTS.] 
           Judgment shall be for the amount of the taxes for the year 
        as the court shall determine the same, less the amount paid 
        thereon, if any.  If the tax is sustained in the full amount 
        levied or increased, costs and disbursements may, in the 
        discretion of the court, be taxed and allowed as in delinquent 
        tax proceedings and shall be included in the judgment.  If the 
        tax so determined shall be less than is decreased from the 
        amount thereof as originally levied, the court may, in its 
        discretion, award disbursements to the petitioner, which shall 
        be taxed and allowed and be deducted from the amount of the 
        taxes as determined unless there has been a previous offer of 
        reduced taxes that was rejected by the petitioner, in which case 
        the award of costs and disbursements is governed by Minnesota 
        Rules of Civil Procedure, rule 68.  If there be no judgment for 
        taxes, a judgment may be entered determining the right of the 
        parties and for the costs and disbursements as taxed and allowed.
           Sec. 9.  Minnesota Statutes 1996, section 287.22, is 
        amended to read: 
           287.22 [EXCEPTIONS.] 
           The tax imposed by section 287.21 shall not apply to: 
           A.  Any executory contract for the sale of land under which 
        the vendee is entitled to or does take possession thereof, or 
        any assignment or cancellation thereof.  
           B.  Any mortgage or any assignment, extension, partial 
        release, or satisfaction thereof.  
           C.  Any will.  
           D.  Any plat.  
           E.  Any lease.  
           F.  Any deed, instrument, or writing in which the United 
        States or any agency or instrumentality thereof is the grantor, 
        assignor, transferor, conveyor, grantee or assignee. 
           G.  Deeds for cemetery lots.  
           H.  Deeds of distribution by personal representatives.  
           I.  Deeds to or from coowners partitioning undivided 
        interests in the same piece of property. 
           J.  Any deed or other instrument of conveyance issued 
        pursuant to a land exchange under section 92.121 and related 
        laws.  
           K.  A referee's or sheriff's certificate of sale in a 
        mortgage or lien foreclosure sale. 
           L.  A referee's or sheriff's certificate of redemption from 
        a mortgage or lien foreclosure sale issued to the redeeming 
        mortgagor or lienee. 
           M.  A decree of marriage dissolution, as defined in section 
        287.01, subdivision 4, or any deed or other instrument between 
        the parties to the dissolution made pursuant to the terms of the 
        decree. 
           Sec. 10.  [287.221] [NEW RESIDENTIAL CONSTRUCTION.] 
           The commissioner of revenue may not enforce a deed tax 
        assessment on the consideration paid for an improvement in the 
        case of new residential construction if, at or before the time 
        the first residential owners of the improvement take possession, 
        the deed tax has been paid on the consideration paid for the 
        improvement. 
           Sec. 11.  Minnesota Statutes 1996, section 308A.705, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [DISTRIBUTION OF NET INCOME.] Net income in 
        excess of dividends on capital stock and additions to reserves 
        shall be distributed on the basis of patronage.  A cooperative 
        may establish allocation units, whether the units are 
        functional, divisional, departmental, geographic, or otherwise, 
        and pooling arrangements and may account for and distribute net 
        income on the basis of allocation units and pooling 
        arrangements.  A cooperative may offset the net loss of an 
        allocation unit or pooling arrangement against the net income of 
        other allocation units or pooling arrangements to the extent 
        permitted by section 1388(j) of the Internal Revenue Code of 
        1986, as amended through December 31, 1996. 
           Sec. 12.  Minnesota Statutes 1996, section 325D.33, 
        subdivision 3, is amended to read: 
           Subd. 3.  [REBATES OR CONCESSIONS.] It is unlawful for a 
        wholesaler to offer a rebate in price, to give a rebate in 
        price, to offer a concession of any kind, or to give a 
        concession of any kind in connection with the sale of 
        cigarettes.  For purposes of this chapter, the term "discount" 
        is included in the definition of a rebate.  For purposes of this 
        subdivision, the term "wholesaler" does not include a 
        manufacturer or manufacturer's representative. 
           Sec. 13.  [383A.80] [RAMSEY COUNTY DEED AND MORTGAGE TAX.] 
           Subdivision 1.  [AUTHORITY TO IMPOSE; RATE.] (a) The 
        governing body of Ramsey county may impose a mortgage registry 
        and deed tax. 
           (b) The rate of the mortgage registry tax equals one cent 
        for each $100 or fraction of the principal. 
           (c) The rate of the deed tax equals five cents for each 
        $500 or fraction of the amount. 
           Subd. 2.  [GENERAL LAW PROVISIONS APPLY.] The taxes under 
        this section apply to the same base and must be imposed, 
        collected, administered, and enforced in the same manner as 
        provided under chapter 287 for the state mortgage registry and 
        deed taxes.  All the provisions of chapter 287 apply to these 
        taxes, except the rate is as specified in subdivision 1, the 
        term "Ramsey county" must be substituted for "the state," and 
        the revenue must be deposited as provided in subdivision 3. 
           Subd. 3.  [DEPOSIT OF REVENUES.] All revenues from the tax 
        are for the use of the Ramsey county board of commissioners and 
        must be deposited in the county's environmental response fund 
        under section 383B.81. 
           Subd. 4.  [EXPIRATION.] The authority to impose the tax 
        under this section expires January 1, 2003. 
           Sec. 14.  [383A.81] [ENVIRONMENTAL RESPONSE FUND.] 
           Subdivision 1.  [CREATION.] An environmental response fund 
        is created for the purposes specified in this section.  The 
        taxes imposed by section 383B.80 must be deposited in the fund.  
        The board of county commissioners shall administer the fund 
        either as a county board, a housing and redevelopment authority, 
        or a regional rail authority. 
           Subd. 2.  [USES OF FUND.] The fund created in subdivision 1 
        must be used for the following purposes: 
           (1) acquisition through purchase or condemnation of lands 
        or property which are polluted or contaminated with hazardous 
        substances; 
           (2) paying the costs associated with indemnifying or 
        holding harmless the entity taking title to lands or property 
        from any liability arising out of the ownership, remediation, or 
        use of the land or property; 
           (3) paying for the costs of remediating the acquired land 
        or property; 
           (4) paying the costs associated with remediating lands or 
        property which are polluted or contaminated with hazardous 
        substances; or 
           (5) paying for the costs associated with improving the 
        property for economic development, recreational, housing, 
        transportation or rail traffic. 
           Subd. 3.  [MATCHING FUNDS.] In expending funds under this 
        section, the county shall seek matching funds from contamination 
        clean up funds administered by the commissioner of the 
        department of trade and economic development, the metropolitan 
        council, the federal government, the private sector, and any 
        other source. 
           Subd. 4.  [BONDS.] The county may pledge the proceeds from 
        the taxes imposed by section 383B.80 to bonds issued under this 
        chapter and chapters 398A, 462, 469, and 475. 
           Subd. 5.  [PRIORITIES.] The first priority for the use of 
        the environmental response fund created in this section is to 
        clean up the site located in the city of St. Paul known as the 
        Dale Street Shops and Maxson Steel site or other sites at or 
        near rail lines that are blighted and the clean up of which will 
        lead to living wage jobs, and to improve the land for economic 
        development. 
           Subd. 6.  [LAND SALES.] Land or property acquired under 
        this section may be resold at fair market value.  Proceeds from 
        the sale of the land must be deposited in the environmental 
        response fund. 
           Subd. 7.  [DOT ASSISTANCE.] The commissioner of 
        transportation shall collaborate with the county and any 
        affected municipality by providing technical assistance and 
        support in cleaning up a contaminated site related to a trunk 
        highway or railroad improvement. 
           Sec. 15.  [383B.80] [HENNEPIN COUNTY DEED AND MORTGAGE 
        TAX.] 
           Subdivision 1.  [AUTHORITY TO IMPOSE; RATE.] (a) The 
        governing body of Hennepin county may impose a mortgage registry 
        and deed tax. 
           (b) The rate of the mortgage registry tax equals one cent 
        for each $100 or fraction of the principal. 
           (c) The rate of the deed tax equals five cents for each 
        $500 or fraction of the amount. 
           Subd. 2.  [GENERAL LAW PROVISIONS APPLY.] The taxes under 
        this section apply to the same base and must be imposed, 
        collected, administered, and enforced in the same manner as 
        provided under Minnesota Statutes, chapter 287 for the state 
        mortgage registry and deed taxes.  All the provisions of chapter 
        287 apply to these taxes, except the rate is as specified in 
        subdivision 1, the term "Hennepin county" must be substituted 
        for the "state," and the revenue must be deposited as provided 
        in subdivision 3. 
           Subd. 3.  [DEPOSIT OF REVENUES.] All revenues from the tax 
        are for the use of the Hennepin county board of commissioners 
        and must be deposited in the county's environmental response 
        fund under section 383B.81. 
           Subd. 4.  [EXPIRATION.] The authority to impose the tax 
        under this section expires January 1, 2003. 
           Sec. 16.  [383B.81] [ENVIRONMENTAL RESPONSE FUND.] 
           Subdivision 1.  [CREATION.] An environmental response fund 
        is created for the purposes specified in this section.  The 
        taxes imposed by section 383B.80 must be deposited in the fund.  
        The board of county commissioners shall administer the fund 
        either as a county board, a housing and redevelopment authority, 
        or a regional rail authority. 
           Subd. 2.  [USES OF FUND.] The fund created in subdivision 1 
        must be used for the following purposes: 
           (1) acquisition through purchase or condemnation of lands 
        or property which are polluted or contaminated with hazardous 
        substances; 
           (2) paying the costs associated with indemnifying or 
        holding harmless the entity taking title to lands or property 
        from any liability arising out of the ownership, remediation, or 
        use of the land or property; 
           (3) paying for the costs of remediating the acquired land 
        or property; 
           (4) paying the costs associated with remediating lands or 
        property which are polluted or contaminated with hazardous 
        substances; or 
           (5) paying for the costs associated with improving the 
        property for economic development, recreational, housing, 
        transportation or rail traffic. 
           Subd. 3.  [MATCHING FUNDS.] In expending funds under this 
        section the county shall seek matching funds from contamination 
        cleanup funds administered by the commissioners of the 
        department of trade and economic development, the metropolitan 
        council, the federal government, the private sector and any 
        other source. 
           Subd. 4.  [CITY APPROVAL.] The county may not expend funds 
        under this section unless the governing body of the city in 
        which the site is located approves the project. 
           Subd. 5.  [BONDS.] The county may pledge the proceeds from 
        the taxes imposed by section 383B.80 to bonds issued under this 
        chapter and chapters 398A, 462, 469, and 475. 
           Subd. 6.  [PRIORITIES.] The first priority for the use of 
        the the environmental response fund created in this section is 
        to clean up the site located in the city of St. Louis Park known 
        as NL Industries/Tara Corporation/Golden Auto, EPA I.D. No. 
        MND097891634 and to provide adequate right-of-way for a portion 
        of the rail line to replace the 29th street line in the city of 
        Minneapolis, including making rail improvements, changing the 
        curve of the railroad track and eliminating a switching 
        facility, and improving the land for economic development.  No 
        money from the environmental response fund may be expended for 
        remediating the site until the site has been acquired through 
        purchase or condemnation. 
           Subd. 7.  [LAND SALES.] Land or property acquired under 
        this section may be resold at fair market value.  Proceeds from 
        the sale of the land must be deposited in the environmental 
        response fund. 
           Subd. 8.  [DOT ASSISTANCE.] With respect to the site 
        described in subdivision 6, the commissioner of transportation 
        shall collaborate with the county and any affected municipality 
        by providing technical assistance and support in facilitating 
        the railroad improvement and testing at that portion of the site 
        to be used for the railroad improvement. 
           Sec. 17.  Minnesota Statutes 1996, section 398A.04, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [GENERAL.] An authority may exercise all 
        the powers necessary or desirable to implement the powers 
        specifically granted in this section, and in exercising the 
        powers is deemed to be performing an essential governmental 
        function and exercising a part of the sovereign power of the 
        state, and is a local government unit and political subdivision 
        of the state.  Without limiting the generality of the foregoing, 
        the authority may: 
           (a) Sue and be sued, have a seal, which may but need not be 
        affixed to documents as directed by the board, make and perform 
        contracts, and have perpetual succession; 
           (b) Acquire real and personal property within or outside 
        its taxing jurisdiction, by purchase, gift, devise, 
        condemnation, conditional sale, lease, lease purchase, or 
        otherwise; or for purposes, including the facilitation of an 
        economic development project pursuant to section 383B.81 or 
        469.091 or 469.175, subdivision 7, that also improve rail 
        service; and 
           (c) Hold, manage, control, sell, convey, lease, mortgage, 
        or otherwise dispose of real or personal property. 
           Sec. 18.  [458D.111] [COLLECTION OF SOLID WASTE MANAGEMENT 
        SERVICE CHARGES.] 
           Subdivision 1.  [AUTHORITY.] The board shall have the 
        powers of a county as specified in section 400.08. 
           Subd. 2.  [METHOD OF COLLECTING CERTAIN SERVICE 
        CHARGES.] The board shall determine the method of collecting 
        service charges in a service area by resolution. 
           Subd. 3.  [SERVICE CHARGES ON REAL ESTATE INCLUDING EXEMPT 
        PROPERTY.] In addition to any methods provided in section 
        400.08, the board may assess and collect service charges as 
        follows.  On or before October 15 of each year, the board shall 
        certify to each county auditor an itemized list of solid waste 
        management service charges and a description of parcels of lands 
        against which the charges arise.  It shall be the duty of the 
        county auditors to include the charges upon the tax rolls of the 
        county for the taxes due and payable for the following year.  
        The solid waste management service charge shall be enforced and 
        collected in the manner provided for the enforcement and 
        collection of real property taxes.  The service charges shall be 
        subject to the same penalties, interest, and other conditions 
        provided for the collection of property taxes.  The board shall 
        reimburse each county auditor for the costs of collection of the 
        service charge. 
           Sec. 19.  [465.715] [POLITICAL SUBDIVISIONS; LEASE PURCHASE 
        AGREEMENTS.] 
           Subdivision 1.  [STATUTORY AUTHORIZATION REQUIRED.] A 
        county, home rule charter city, statutory city, town, school 
        district, or other political subdivision may not create a 
        corporation, whether for profit or not for profit, unless 
        explicitly authorized to do so by law. 
           Subd. 2.  [PRE-DECEMBER 1, 1996, LEASE PURCHASE 
        AGREEMENTS.] The validity of any lease purchase agreement 
        entered into prior to December 1, 1996, and subsequent 
        refinancings are not affected by either the amount of 
        consideration paid by a lessor for an interest in real property 
        or, in the case of lessors organized by or on behalf of the 
        city, county, town, or school district, any defect in or lack of 
        authority to organize such entity.  A nonprofit corporation 
        organized by or on behalf of a city, county, town, or school 
        district, for the purpose of a lease purchase agreement, may 
        continue in existence until the end of any lease agreement in 
        effect on December 1, 1996, but thereafter is dissolved.  During 
        its existence, the nonprofit corporation shall conduct only 
        business that is necessary and directly related to the lease 
        agreement.  The nonprofit corporation is a public corporation 
        for purposes of section 465.035 and is subject to all laws as if 
        it were a part of the city, county, town, or school district. 
           Sec. 20.  Minnesota Statutes 1996, section 469.169, is 
        amended by adding a subdivision to read: 
           Subd. 11.  [ADDITIONAL BORDER CITY ALLOCATIONS.] In 
        addition to tax reductions authorized in subdivisions 7, 8, 9, 
        and 10, the commissioner may allocate $1,500,000 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 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.  Limitations on allocations under section 469.169, 
        subdivision 7, do not apply to this allocation.  Enterprise 
        zones that receive allocations under this subdivision may 
        continue in effect for purposes of those allocations through 
        December 31, 1998. 
           Sec. 21.  Minnesota Statutes 1996, section 473.39, is 
        amended by adding a subdivision to read: 
           Subd. 1d.  [OBLIGATIONS; 1998-2000.] In addition to the 
        authority in subdivisions 1a, 1b, and 1c, the council may issue 
        certificates of indebtedness, bonds, or other obligations under 
        this section in an amount not exceeding $30,000,000, which may 
        be used for capital expenditures as prescribed in the council's 
        transit capital improvement program and for related costs, 
        including the costs of issuance and sale of the obligations. 
           Sec. 22.  [PUBLIC SAFETY TRAINING FACILITY.] 
           Subdivision 1.  [JOINT POWERS AGREEMENT; BONDS.] Each of 
        the cities of Bloomington, Chanhassen, Eden Prairie, Edina, 
        Minnetonka, and Richfield may issue general obligation bonds of 
        the city in an amount not to exceed $1,000,000 for its share of 
        the cost of the acquisition, construction, and equipping of a 
        public safety training facility to be jointly operated by a 
        joint powers association consisting of two or more municipal or 
        public corporations of which that city is a member.  The 
        issuance of the bonds is subject to Minnesota Statutes, chapter 
        475, except that no election shall be required except as 
        provided in subdivision 2. 
           Subd. 2.  [REVERSE REFERENDUM.] Before the adoption by the 
        governing body of a city of any resolution authorizing the 
        issuance of any bonds authorized by subdivision 1, the city 
        shall publish a notice in the official newspaper of the city 
        stating that the governing body of the city intends to consider 
        the authorization of the issuance of the bonds, stating the 
        amount, purpose, and, in general, the security and source of 
        payment for the bonds.  The resolution authorizing the issuance 
        of the bonds shall not be adopted by the governing body of the 
        city for at least 15 days after publication of the notice of 
        intention.  If within 15 days after publication of the notice of 
        intention a petition asking for an election on the proposition 
        that the city issue the bonds signed by the voters equal to at 
        least ten percent of the registered voters in the city is filed 
        with the clerk, no bonds may be issued by the city unless 
        approved by a majority of the voters of the city voting on the 
        question of the issuance at a regular or special election.  
           Subd. 3.  [EFFECTIVE DATE; LOCAL APPROVAL.] This section is 
        effective with respect to any of the cities of Bloomington, 
        Chanhassen, Eden Prairie, Edina, Minnetonka, and Richfield the 
        day after compliance by that city with Minnesota Statutes, 
        section 645.021, subdivision 3. 
           Sec. 23.  [CONTAMINATION CLEANUP AND RAIL IMPROVEMENT.] 
           Subdivision 1.  [CONTAMINATION CLEANUP FUNDS.] The 
        commissioner of the department of trade and economic 
        development, pursuant to Minnesota Statutes, section 116J.555, 
        subdivision 1, and the metropolitan council, pursuant to 
        Minnesota Statutes, section 473.252, subdivision 3, paragraph 
        (b), clause (1), shall designate the site located in the city of 
        St. Louis Park and known as NL Industries/Tara Corp./Golden 
        Auto, EPA ID. No. MND 097891634 to be an eligible site for 
        receipt of contamination cleanup funds from the contaminated 
        site cleanup and development account in the general fund and 
        from the tax base revitalization account in the metropolitan 
        livable communities fund.  Grants from these accounts shall be 
        available only upon confirmation from the commissioner of 
        transportation that Hennepin county and the city of St. Louis 
        Park have entered into an agreement as described in subdivision 
        2. 
           Subd. 2.  [AGREEMENT BETWEEN HENNEPIN COUNTY AND CITY OF ST.
        LOUIS PARK.] To qualify for receipt of funds under subdivision 
        1, or from the environmental response fund established in 
        Minnesota Statutes, section 383B.81, which funds are to be used 
        for the site described in subdivision 1, Hennepin county and the 
        city of St. Louis Park must, after consultation and negotiation 
        with representatives of affected neighborhoods along the 
        impacted and proposed rail lines, enter into an agreement with 
        respect to the following: 
           (1) acquisition through purchase or condemnation of the 
        entire site described in subdivision 1.  A portion of the site 
        must be used to provide adequate rights-of-way for transferring 
        railroad traffic from the Canadian Pacific railroad line from 
        Louisiana Avenue in St. Louis Park easterly to trunk highway 
        55/Hiawatha Avenue, commonly referred to as the 29th street 
        depression, to the Canadian Pacific railroad line from the 29th 
        street rail line northerly to the Burlington Northern 
        connection, entirely within the city of St. Louis Park; 
           (2) responsibility for the costs of the railroad 
        improvement, including changing the curve of the railroad track 
        and eliminating a switching facility; 
           (3) obtaining by Hennepin county and the city of St. Louis 
        Park of all applicable assurances, including, but not limited 
        to, letters of assurance, certificates of completion, and no 
        association determinations available from the United States 
        Environmental Protection Agency and the Minnesota pollution 
        control agency; 
           (4) respective responsibilities of the parties in 
        remediating the acquired property and in assuming responsibility 
        for any required matching funds; and 
           (5) entitlement to proceeds from any ultimate disposition 
        of the property consistent with any statutory restrictions 
        applicable to the source of the acquisition funds. 
           Subd. 3.  [COMMISSIONER OF TRANSPORTATION.] The 
        commissioner of transportation shall confirm that St. Louis Park 
        and Hennepin county have entered into an agreement.  The 
        commissioner of transportation shall collaborate with the city 
        and county by providing technical assistance and support in 
        facilitating the railroad improvement and testing at that 
        portion of the site to be used for the railroad improvement.  
        The project shall proceed only if the city of St. Louis Park, 
        Hennepin county, and the commissioner have entered into an 
        agreement regarding responsibility for safety and noise 
        mitigation measures to be implemented or constructed on or 
        adjacent to the Canadian Pacific railroad line from the 29th 
        street rail line northerly to the Burlington Northern 
        connection, entirely within the city of St. Louis Park. 
           Sec. 24.  [CITY OF ST. PAUL; RAINLEADER DISCONNECTION AND 
        SEWER CONNECTION PROGRAM.] 
           Subdivision 1.  [PUBLIC PURPOSE.] The legislature finds 
        that the disconnection of rainleaders and the repair of 
        defective sanitary sewer connections is a public purpose and 
        that providing financing to owners of residences and businesses 
        to disconnect rainleaders and repair defective sanitary sewer 
        connections located on their private property is a public 
        purpose. 
           Subd. 2.  [PROGRAM AUTHORIZED.] The city of Saint Paul may 
        undertake a program to disconnect rainleaders, connect buildings 
        to storm sewers, or correct defective sanitary sewer connections 
        located on private property at the written request of the owner 
        of the property.  The city may contract for the disconnection of 
        rainleaders, the connection of buildings to storm sewers, and 
        the repair of defective sanitary sewer connections, or may pay 
        or reimburse the cost for disconnection of rainleaders, the 
        connection of buildings to storm sewers, and the repair of 
        defective sanitary sewer connections for which the owner of the 
        property has entered into contracts.  As part of the program, 
        the city may identify criteria for private contractors and may 
        limit the payment or reimbursement of costs to those situations 
        in which the work has been performed by contractors whose 
        participation in the program has been approved by the city in 
        advance.  The city need not hold any hearing in connection with 
        the request of individual property owners for participation in 
        the program. 
           Subd. 3.  [CHARGES AUTHORIZED.] The city may charge the 
        cost of the program to the owners who have requested the 
        disconnection of their rainleaders, the connection of buildings 
        to storm sewers, or the repair of their sanitary sewer 
        connections.  The amount charged may include the full amount 
        paid or reimbursed, the cost of administration, and the cost of 
        financing.  The amount charged may be made payable with interest 
        at a rate determined by the city in installments over a period 
        determined by the city not to exceed 20 years and the 
        installments may be certified, added to, and collected in the 
        same manner as municipal taxes by the county department of 
        property taxation or similar department and paid over to the 
        city in the same manner as are municipal taxes.  The city may 
        certify due and unpaid installments to the county auditor along 
        with taxes against the benefited property for collection as 
        other real property taxes are collected, in which event the 
        installments may be enforced in the manner required for 
        enforcement of real property taxes in accordance with state law. 
           Subd. 4.  [CHARGES TO PROPERTY OWNERS.] Instead of charging 
        the cost of the program as provided above, the city may charge 
        the cost of the program to the owners who have requested the 
        disconnection of their rainleaders, the connection of buildings 
        to storm sewers, or the repair of their defective sanitary sewer 
        connections.  The amount charged may include the full amount 
        paid or reimbursed, the cost of administration, and the cost of 
        financing.  The amount charged must be payable with interest at 
        a rate determined by the city in installments over a period 
        determined by the city not to exceed 20 years.  All charges for 
        the program are valid and enforceable without regard to 
        valuation of the property or the benefit conferred.  After the 
        amount to be charged has been determined, whether or not the 
        work has been performed, the city must hold a public hearing on 
        the charges after notice mailed to the owner of the property to 
        be charged not less than 14 days before the published hearing.  
        Notice of the hearing is not required.  The city shall select 
        Minnesota Statutes, chapter 429, or the city charter to govern 
        the procedure for the levy and collection of the charges, and 
        except as a different procedure is provided in this section, 
        proceedings for the imposition, appeal, repeal, supplementation, 
        and collection of the charges must conform to the procedures 
        selected. 
           Subd. 5.  [NATURE OF CHARGES.] The charges, with accruing 
        interest, are a lien upon all private and public property 
        included in the charges, from the date of the resolution 
        adopting the charges, concurrent with general taxes.  All 
        charges and interest on them must be collected and paid over in 
        the same manner as municipal taxes. 
           Subd. 6.  [OBLIGATIONS AUTHORIZED.] To pay the costs of the 
        program, the city may issue general or special obligations in 
        one or more series without an election and without being subject 
        to limits on net debt, but otherwise in accordance with 
        Minnesota Statutes, chapter 475.  To the payment of the 
        obligations, the city must pledge receipts of the charges, and 
        may in addition pledge revenues or net revenues of the city's 
        sewer service fund.  The city may pledge its full faith, credit, 
        and taxing powers to pay the obligations, and may levy taxes to 
        pay the obligations. 
           Subd. 7.  [LOCAL APPROVAL.] This section is effective the 
        day after the governing body of the city of Saint Paul complies 
        with Minnesota Statutes, section 645.021, subdivision 3. 
           Sec. 25.  [MINNESOTA INVESTMENT FUND; CITY OF WORTHINGTON.] 
           Notwithstanding the grant limit contained in Minnesota 
        Statutes, section 116J.8731, subdivision 5, a grant of up to 
        $1,000,000 may be made to the city of Worthington to offset 
        severe job losses due to plant closings. 
           Sec. 26.  [DESIGNATION OF KOOCHICHING COUNTY AS AN 
        ENTERPRISE ZONE.] 
           Notwithstanding the limitation in Minnesota Statutes, 
        section 469.167, subdivision 3, the commissioner of trade and 
        economic development shall designate Koochiching county as an 
        enterprise zone under Minnesota Statutes, sections 469.166 to 
        469.173. 
           Sec. 27.  [YEAR 2000 READY.] 
           Any computer software or hardware that is purchased by the 
        state or a political subdivision with money appropriated in this 
        bill must be year 2000 ready. 
           Sec. 28.  [APPROPRIATION; PAYMENT OF CLAIMS.] 
           $16,600,000 is appropriated in fiscal year 1998 from the 
        general fund to the commissioner of revenue to pay claims filed 
        under the Cambridge Bank Judgment. 
           Sec. 29.  [APPROPRIATION; ADMINISTRATION OF ACT.] 
           $2,132,000 is appropriated from the general fund for fiscal 
        year 1998 and $48,000 is appropriated for fiscal year 1999 to 
        the commissioner of revenue to pay the costs of administering 
        the provisions of this act. 
           Sec. 30.  [REPEALER.] 
           1997 H.F. 2158, article 1, section 25, if enacted, is 
        repealed.  This section repeals 1997 H.F. 2158, article 1, 
        section 25, without regard to order of final enactment. 
           Sec. 31.  [EFFECTIVE DATE.] 
           Section 9 is effective for decrees of marriage dissolution, 
        deeds, or other instruments executed and delivered after July 1, 
        1997. 
           Section 10 is effective for assessments made on or after 
        the effective date of laws 1996, chapter 471, article 2, section 
        32. 
           Section 19 is effective the day following final enactment. 
           Presented to the governor May 29, 1997 
           Signed by the governor June 2, 1997, 2:28 p.m.

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