1.1                          A bill for an act 
  1.2             relating to taxation; property; exempting certain 
  1.3             electric utility property; amending Minnesota Statutes 
  1.4             1998, sections 272.027; and 273.13, subdivision 31. 
  1.5   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.6      Section 1.  Minnesota Statutes 1998, section 272.027, is 
  1.7   amended to read: 
  1.8      272.027 [PERSONAL PROPERTY USED TO GENERATE ELECTRICITY FOR 
  1.9   PRODUCTION AND RESALE.] 
  1.10     Subdivision 1.  [ELECTRICITY GENERATED TO PRODUCE GOODS AND 
  1.11  SERVICES.] Personal property used to generate electric power is 
  1.12  exempt from property taxation if the electric power is used to 
  1.13  manufacture or produce goods, products, or services, other than 
  1.14  electric power, by the owner of the electric generation 
  1.15  plant.  Except as provided in subdivision 2, the exemption does 
  1.16  not apply to property used to produce electric power for sale to 
  1.17  others and does not apply to real property.  In determining the 
  1.18  value subject to tax, a proportionate share of the value of the 
  1.19  generating facilities, equal to the proportion that the power 
  1.20  sold to others bears to the total generation of the plant, is 
  1.21  subject to the general property tax in the same manner as other 
  1.22  property.  Power generated in such a plant and exchanged for an 
  1.23  equivalent amount of power that is used for the manufacture or 
  1.24  production of goods, products, or services other than electric 
  1.25  power by the owner of the generating plant is considered to be 
  2.1   used by the owner of the plant. 
  2.2      Subd. 2.  [EXEMPTION FOR CUSTOMER OWNED PROPERTY 
  2.3   TRANSFERRED TO A UTILITY.] (a) Tools, implements, and machinery 
  2.4   of an electric generating facility are exempt if all the 
  2.5   following requirements are met: 
  2.6      (1) the electric generating facilities were operational and 
  2.7   met the requirements for exemption of personal property under 
  2.8   subdivision 1 on January 2, 1999; and 
  2.9      (2) the generating facility is sold to a Minnesota electric 
  2.10  utility. 
  2.11     (b) Any tools, implements, and machinery used to increase 
  2.12  generation capacity that are installed by a utility at a 
  2.13  facility at which tools, implements, and machinery are exempt 
  2.14  under paragraph (a) are also exempt under this section. 
  2.15     Sec. 2.  Minnesota Statutes 1998, section 273.13, 
  2.16  subdivision 31, is amended to read: 
  2.17     Subd. 31.  [CLASS 5.] Class 5 property includes:  
  2.18     (1) tools, implements, and machinery of an electric 
  2.19  generating, transmission, or distribution system, unless exempt 
  2.20  under section 272.027, or a pipeline system transporting or 
  2.21  distributing water, gas, crude oil, or petroleum products or 
  2.22  mains and pipes used in the distribution of steam or hot or 
  2.23  chilled water for heating or cooling buildings, which are 
  2.24  fixtures; 
  2.25     (2) unmined iron ore and low-grade iron-bearing formations 
  2.26  as defined in section 273.14; and 
  2.27     (3) all other property not otherwise classified. 
  2.28     Class 5 property has a class rate of 3.5 percent of market 
  2.29  value. 
  2.30     Sec. 3.  [EFFECTIVE DATE.] 
  2.31     Sections 1 and 2 are effective for taxes levied in 1999, 
  2.32  payable in 2000, and thereafter.