1.1 	A bill for an act
1.2 	relating to taxation; expanding limited market value
1.3 	to include certain small resorts; extending limited
1.4 	market value one additional year; providing a
1.5 	valuation deferment for certain resorts; providing a
1.6 	resort income tax investment credit; providing sales
1.7 	tax refund for certain resort expenditures; amending
1.8 	Minnesota Statutes 2004, sections 273.11, subdivision
1.9 	1a, by adding a subdivision; 273.13, subdivision 22;
1.10 	290.06, by adding a subdivision; 297A.71, by adding a
1.11 	subdivision; 297A.75; proposing coding for new law in
1.12 	Minnesota Statutes, chapter 273.
1.13 	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

1.14 	Section 1. Minnesota Statutes 2004, section 273.11,
1.15 	subdivision 1a, is amended to read:
1.16 		Subd. 1a.Limited market value.  In the case of all
1.17 	property classified as agricultural homestead or nonhomestead,
1.18 	residential homestead or nonhomestead, timber, or noncommercial
1.19 	seasonal residential recreational, or class 1c resort property,
1.20 	the assessor shall compare the value with the taxable portion of
1.21 	the value determined in the preceding assessment, except that
1.22 	for class 1c resort property for assessment year 2005, the
1.23 	assessor shall determine the limited market value as provided in
1.24 	subdivision 1b.  If any portion of the class 1c resort is not
1.25 	classified class 1c, only the portion of the value of the
1.26 	property that is classified as class 1c property qualifies under
1.27 	this section.
1.28 	For assessment year 2002, the amount of the increase shall
1.29 	not exceed the greater of (1) ten percent of the value in the
2.1 	preceding assessment, or (2) 15 percent of the difference
2.2 	between the current assessment and the preceding assessment.
2.3 	For assessment year 2003, the amount of the increase shall
2.4 	not exceed the greater of (1) 12 percent of the value in the
2.5 	preceding assessment, or (2) 20 percent of the difference
2.6 	between the current assessment and the preceding assessment.
2.7 	For assessment year years 2004 and 2005, the amount of the
2.8 	increase shall not exceed the greater of (1) 15 percent of the
2.9 	value in the preceding assessment, or (2) 25 percent of the
2.10 	difference between the current assessment and the preceding
2.11 	assessment.
2.12 	For assessment year 2005 2006, the amount of the increase
2.13 	shall not exceed the greater of (1) 15 percent of the value in
2.14 	the preceding assessment, or (2) 33 percent of the difference
2.15 	between the current assessment and the preceding assessment.
2.16 	For assessment year 2006 2007, the amount of the increase
2.17 	shall not exceed the greater of (1) 15 percent of the value in
2.18 	the preceding assessment, or (2) 50 percent of the difference
2.19 	between the current assessment and the preceding assessment.
2.20 	This limitation shall not apply to increases in value due
2.21 	to improvements.  For purposes of this subdivision, the term
2.22 	"assessment" means the value prior to any exclusion under
2.23 	subdivision 16.
2.24 	The provisions of this subdivision shall be in effect
2.25 	through assessment year 2006 2007 as provided in this
2.26 	subdivision.
2.27 	For purposes of the assessment/sales ratio study conducted
2.28 	under section 127A.48, and the computation of state aids paid
2.29 	under chapters 122A, 123A, 123B, 124D, 125A, 126C, 127A, and
2.30 	477A, market values and net tax capacities determined under this
2.31 	subdivision and subdivision 16, shall be used.
2.32 	
EFFECTIVE DATE. This section is effective for assessment
2.33 	years 2005 through 2007, for taxes payable in 2006 through 2008.

2.34 	Sec. 2. Minnesota Statutes 2004, section 273.11, is
2.35 	amended by adding a subdivision to read:
2.36 		Subd. 1b.Class 1c resorts; 2005 assessment only. For
3.1 	assessment year 2005, the valuation on class 1c resort property
3.2 	shall not exceed the greater of (1) 130 percent of the value of
3.3 	its 2002 assessment, or (2) its value for the 2002 assessment
3.4 	year plus 40 percent of the difference in value between its 2005
3.5 	assessment and its 2002 assessment.  The valuation increase on
3.6 	class 1c resort property for assessment year 2006 and thereafter
3.7 	shall be determined under subdivision 1a.
3.8 	
EFFECTIVE DATE. This section is effective the day
3.9 	following final enactment.

3.10 	Sec. 3. [273.1115] HOMESTEAD RESORTS; VALUATION AND
3.11 	DEFERMENT.
3.12 		Subdivision 1.Requirements. Real property qualifying
3.13 	for classification as class 1c under section 273.13, subdivision
3.14 	22, paragraph (c), is entitled to valuation and tax deferment
3.15 	under this section, provided that if part of a resort is not
3.16 	classified as class 1c, only that portion of the value of the
3.17 	property that is classified as class 1c property qualifies under
3.18 	this section.
3.19 		Subd. 2.Determination of value. Upon timely application
3.20 	by the owner, as provided in subdivision 4, the value of real
3.21 	property described in subdivision 1 must be determined by the
3.22 	assessor solely with reference to its value as class 1c
3.23 	property, notwithstanding sections 272.03, subdivision 8, and
3.24 	273.11.  The assessor shall not consider any added values
3.25 	resulting from other factors.
3.26 		Subd. 3.Separate determination of market value and tax.
 3.27 	The assessor shall, however, make a separate determination of
3.28 	the estimated market value of the real estate based on its
3.29 	highest and best most likely use, such as lakeshore development
3.30 	of residential single-family or multifamily homes or condominium
3.31 	units.  The assessor shall record on the property assessment
3.32 	records the tax based upon the value so determined, the
3.33 	appropriate class rate, and the appropriate local tax rate
3.34 	applicable to the property in the taxing district.
3.35 		Subd. 4.Application. Application for deferment of taxes
3.36 	and assessment under this section must be filed by May 1 of the
4.1 	year prior to the year in which the taxes are payable.  The
4.2 	application must be filed with the assessor of the taxing
4.3 	district in which the real property is located on a form
4.4 	prescribed by the commissioner of revenue.  The assessor may
4.5 	require proof by affidavit or otherwise that the property
4.6 	qualifies under subdivision 1.  An application approved by the
4.7 	assessor continues in effect for subsequent years until the
4.8 	property no longer qualifies under subdivision 1.
4.9 		Subd. 5.Additional taxes. When real property valued and
4.10 	assessed under this section no longer qualifies under
4.11 	subdivision 1, the portion no longer qualifying is subject to
4.12 	additional taxes, in the amount equal to the difference between
4.13 	the taxes determined in accordance with subdivision 2, and the
4.14 	amount determined under subdivision 3, provided, however, that
4.15 	the amount determined under subdivision 3 must not be greater
4.16 	than it would have been had the actual bona fide sale price of
4.17 	the real property at an arm's-length transaction been used in
4.18 	lieu of the market value determined under subdivision 3.  The
4.19 	additional taxes must be extended against the property on the
4.20 	tax list for the current year, except that no interest or
4.21 	penalties may be levied on the additional taxes if timely paid,
4.22 	and except that the additional taxes must only be levied with
4.23 	respect to the last seven years that the property has been
4.24 	valued and assessed under this section.
4.25 		Subd. 6.Timely paid. For purposes of this section,
4.26 	"timely paid" means paid (1) within 60 days after notification
4.27 	from the county that the property no longer qualifies, or (2)
4.28 	prior to the recording of the conveyance of the property,
4.29 	whichever is earlier.
4.30 		Subd. 7.Lien. The tax imposed by this section is a lien
4.31 	on the property assessed to the same extent and for the same
4.32 	duration as other taxes imposed on property within this state.
4.33 	The tax must be annually extended by the county auditor and when
4.34 	payable must be collected and distributed in the manner provided
4.35 	by law for the collection and distribution of other property
4.36 	taxes.
5.1 		Subd. 8.Special local assessments. The payment of
5.2 	special local assessments levied after June 30, 2005, for
5.3 	improvements made to any real property described in subdivision
5.4 	2, together with the interest thereon must, on timely
5.5 	application under subdivision 4, be deferred as long as the
5.6 	property qualifies under subdivision 1.  If special assessments
5.7 	against the property have been deferred under this subdivision,
5.8 	the governmental unit shall file with the county recorder in the
5.9 	county in which the property is located a certificate containing
5.10 	the legal description of the affected property and of the amount
5.11 	deferred.  When the property no longer qualifies under
5.12 	subdivision 1, all deferred special assessments plus interest
5.13 	are payable in equal installments spread over the time remaining
5.14 	until the last maturity date of the bonds issued to finance the
5.15 	improvement for which the assessments were levied.  The
5.16 	provisions of section 469.061, subdivision 2, apply to the
5.17 	collection of these installments.  If the bonds have matured,
5.18 	the deferred special assessments plus interest are payable
5.19 	within 60 days.  Penalty must not be levied on the special
5.20 	assessments if timely paid.
5.21 		Subd. 9.Continuation of tax treatment upon sale. When
5.22 	real property qualifying under subdivision 1 is sold, no
5.23 	additional taxes or deferred special assessments plus interest
5.24 	may be extended against the property if:
5.25 	(1) the property continues to qualify pursuant to
5.26 	subdivision 1; and 
5.27 	(2) the new owner files an application for continued
5.28 	deferment within 30 days after the sale.
5.29 		Subd. 10.Applicability of special assessment
5.30 	provisions. This section applies to special local assessments
5.31 	levied after June 30, 2005, and payable in the years thereafter,
5.32 	but shall not apply to any special assessments levied at any
5.33 	time by a county or district court under the provisions of
5.34 	chapter 116A.
5.35 	
EFFECTIVE DATE. This section is effective for taxes
5.36 	levied in 2005, payable in 2006, and thereafter.  For
6.1 	applications for the 2005 assessment for taxes payable in 2006
6.2 	only, the application deadline in subdivision 4 is extended to
6.3 	August 1, 2005.

6.4 	Sec. 4. Minnesota Statutes 2004, section 273.13,
6.5 	subdivision 22, is amended to read:
6.6 		Subd. 22.Class 1.  (a) Except as provided in subdivision
6.7 	23 and in paragraphs (b) and (c), real estate which is
6.8 	residential and used for homestead purposes is class 1a.  In the
6.9 	case of a duplex or triplex in which one of the units is used
6.10 	for homestead purposes, the entire property is deemed to be used
6.11 	for homestead purposes.  The market value of class 1a property
6.12 	must be determined based upon the value of the house, garage,
6.13 	and land.
6.14 	The first $500,000 of market value of class 1a property has
6.15 	a net class rate of one percent of its market value; and the
6.16 	market value of class 1a property that exceeds $500,000 has a
6.17 	class rate of 1.25 percent of its market value.
6.18 	(b) Class 1b property includes homestead real estate or
6.19 	homestead manufactured homes used for the purposes of a
6.20 	homestead by
6.21 	(1) any person who is blind as defined in section 256D.35,
6.22 	or the blind person and the blind person's spouse; or
6.23 	(2) any person, hereinafter referred to as "veteran," who:
6.24 	(i) served in the active military or naval service of the
6.25 	United States; and
6.26 	(ii) is entitled to compensation under the laws and
6.27 	regulations of the United States for permanent and total
6.28 	service-connected disability due to the loss, or loss of use, by
6.29 	reason of amputation, ankylosis, progressive muscular
6.30 	dystrophies, or paralysis, of both lower extremities, such as to
6.31 	preclude motion without the aid of braces, crutches, canes, or a
6.32 	wheelchair; and
6.33 	(iii) has acquired a special housing unit with special
6.34 	fixtures or movable facilities made necessary by the nature of
6.35 	the veteran's disability, or the surviving spouse of the
6.36 	deceased veteran for as long as the surviving spouse retains the
7.1 	special housing unit as a homestead; or
7.2 	(3) any person who is permanently and totally disabled.
7.3 	Property is classified and assessed under clause (3) only
7.4 	if the government agency or income-providing source certifies,
7.5 	upon the request of the homestead occupant, that the homestead
7.6 	occupant satisfies the disability requirements of this paragraph.
7.7 	Property is classified and assessed pursuant to clause (1)
7.8 	only if the commissioner of revenue certifies to the assessor
7.9 	that the homestead occupant satisfies the requirements of this
7.10 	paragraph.
7.11 	Permanently and totally disabled for the purpose of this
7.12 	subdivision means a condition which is permanent in nature and
7.13 	totally incapacitates the person from working at an occupation
7.14 	which brings the person an income.  The first $32,000 market
7.15 	value of class 1b property has a net class rate of .45 percent
7.16 	of its market value.  The remaining market value of class 1b
7.17 	property has a class rate using the rates for class 1a or class
7.18 	2a property, whichever is appropriate, of similar market value.
7.19 	(c) Class 1c property is commercial use real property that
7.20 	abuts a lakeshore line and is devoted to temporary and seasonal
7.21 	residential occupancy for recreational purposes but not devoted
7.22 	to commercial purposes for more than 250 days in the year
7.23 	preceding the year of assessment, and that includes a portion
7.24 	used as a homestead by the owner, which includes a dwelling
7.25 	occupied as a homestead by a shareholder of a corporation that
7.26 	owns the resort, a partner in a partnership that owns the
7.27 	resort, or a member of a limited liability company that owns the
7.28 	resort even if the title to the homestead is held by the
7.29 	corporation, partnership, or limited liability company.  For
7.30 	purposes of this clause, property is devoted to a commercial
7.31 	purpose on a specific day if any portion of the property,
7.32 	excluding the portion used exclusively as a homestead, is used
7.33 	for residential occupancy and a fee is charged for residential
7.34 	occupancy.  The first $500,000 of market value of class 1c
7.35 	property has a class rate of one 0.55 percent, and the remaining
7.36 	market value of class 1c property has a class rate of one
8.1 	percent, with the following limitation:  the area of the
8.2 	property must not exceed 100 feet of lakeshore footage for each
8.3 	cabin or campsite located on the property up to a total of 800
8.4 	feet and 500 feet in depth, measured away from the lakeshore.
8.5 	If any portion of the class 1c resort property is classified as
8.6 	class 4c under subdivision 25, the entire property must meet the
8.7 	requirements of subdivision 25, paragraph (d), clause (1), to
8.8 	qualify for class 1c treatment under this paragraph.
8.9 	(d) Class 1d property includes structures that meet all of
8.10 	the following criteria:
8.11 	(1) the structure is located on property that is classified
8.12 	as agricultural property under section 273.13, subdivision 23;
8.13 	(2) the structure is occupied exclusively by seasonal farm
8.14 	workers during the time when they work on that farm, and the
8.15 	occupants are not charged rent for the privilege of occupying
8.16 	the property, provided that use of the structure for storage of
8.17 	farm equipment and produce does not disqualify the property from
8.18 	classification under this paragraph;
8.19 	(3) the structure meets all applicable health and safety
8.20 	requirements for the appropriate season; and
8.21 	(4) the structure is not salable as residential property
8.22 	because it does not comply with local ordinances relating to
8.23 	location in relation to streets or roads.
8.24 	The market value of class 1d property has the same class
8.25 	rates as class 1a property under paragraph (a).
8.26 	
EFFECTIVE DATE. This section is effective for assessment
8.27 	year 2005, taxes payable in 2006, and thereafter.

8.28 	Sec. 5. Minnesota Statutes 2004, section 290.06, is
8.29 	amended by adding a subdivision to read:
8.30 		Subd. 32.Resort investment credit. (a) A seasonal
8.31 	recreational investment credit is allowed against the tax due
8.32 	under this chapter equal to ten percent of the amount paid or
8.33 	incurred by the taxpayer, on the first $300,000 of qualifying
8.34 	expenditures made in the qualifying period.
8.35 	(b) "Qualifying expenditures" means for purposes of this
8.36 	subdivision the amount spent for the acquisition, construction,
9.1 	or improvement of buildings or facilities, including land
9.2 	improvements such as sewer and water systems, docks, and
9.3 	sidewalks, or the acquisition of equipment, located at or
9.4 	acquired for use at a resort, including the following, if
9.5 	acquired for use at a resort:
9.6 	(1) appliances, carpet, and furniture;
9.7 	(2) information systems and related peripheral equipment;
9.8 	and 
9.9 	(3) generators and renewable energy equipment and systems.
9.10 	Qualifying expenditures do not include boats and other
9.11 	watercraft.  Qualifying expenditures only include amounts that
9.12 	are capitalized and deducted under either section 167 or 179 of
9.13 	the Internal Revenue Code in computing federal taxable income.
9.14 	(c) "Resort" means for purposes of this subdivision a
9.15 	resort classified as class 1c or 4c under section 273.13,
9.16 	subdivision 22 or 25, including any portion of a 1c or 4c resort
9.17 	classified as class 3 under section 273.13, subdivision 24.
9.18 	(d) The credit is limited to the liability for tax, as
9.19 	computed under this chapter for the taxable year.  If the amount
9.20 	of the credit determined under this section for any taxable year
9.21 	exceeds this limitation, the excess is a seasonal recreational
9.22 	investment credit carryover to each of the 15 succeeding taxable
9.23 	years.  The entire amount of the excess unused credit for the
9.24 	taxable year is carried first to the earliest of the taxable
9.25 	years to which the credit may be carried and then to each
9.26 	successive year to which the credit may be carried.  The amount
9.27 	of the unused credit which may be added under this paragraph
9.28 	shall not exceed the taxpayer's liability for tax less the
9.29 	seasonal recreational investment credit for the taxable year.
9.30 	(e) The qualifying period is that time after December 31,
9.31 	2005, and before January 1, 2012.
9.32 	(f) The $30,000 maximum credit applies at the entity level
9.33 	for partnerships, S corporations, trusts, and estates as well as
9.34 	at the individual level.  In the case of married individuals,
9.35 	the credit is limited to $30,000 for a married couple.
9.36 	
EFFECTIVE DATE. This section is effective for tax years
10.1 	beginning after December 31, 2005.

10.2 	Sec. 6. Minnesota Statutes 2004, section 297A.71, is
10.3 	amended by adding a subdivision to read:
10.4 		Subd. 33.Construction materials and supplies; certain
10.5 	resorts. Construction materials and supplies used or consumed
10.6 	in physically expanding or making capital improvements to a
10.7 	resort classified as class 1c or 4c, under section 273.13,
10.8 	subdivision 22 or 25, including any portion of a 1c or 4c resort
10.9 	classified as class 3 under section 273.13, subdivision 24, are
10.10 	exempt, up to a maximum refund of $10,000 in each calendar year
10.11 	for each resort.  The tax must be imposed and collected as if
10.12 	the rate under section 297A.62, subdivision 1, applied, and then
10.13 	refunded in the manner provided in section 297A.75.
10.14 	
EFFECTIVE DATE. This section is effective for sales and
10.15 	purchases made after June 30, 2005.

10.16 	Sec. 7. Minnesota Statutes 2004, section 297A.75, is
10.17 	amended to read:
10.18 	297A.75 REFUND; APPROPRIATION.
10.19 		Subdivision 1.Tax collected. The tax on the gross
10.20 	receipts from the sale of the following exempt items must be
10.21 	imposed and collected as if the sale were taxable and the rate
10.22 	under section 297A.62, subdivision 1, applied.  The exempt items
10.23 	include:
10.24 	(1) capital equipment exempt under section 297A.68,
10.25 	subdivision 5;
10.26 	(2) building materials for an agricultural processing
10.27 	facility exempt under section 297A.71, subdivision 13;
10.28 	(3) building materials for mineral production facilities
10.29 	exempt under section 297A.71, subdivision 14;
10.30 	(4) building materials for correctional facilities under
10.31 	section 297A.71, subdivision 3;
10.32 	(5) building materials used in a residence for disabled
10.33 	veterans exempt under section 297A.71, subdivision 11;
10.34 	(6) chair lifts, ramps, elevators, and associated building
10.35 	materials exempt under section 297A.71, subdivision 12;
10.36 	(7) building materials for the Long Lake Conservation
11.1 	Center exempt under section 297A.71, subdivision 17;
11.2 	(8) materials, supplies, fixtures, furnishings, and
11.3 	equipment for a county law enforcement and family service center
11.4 	under section 297A.71, subdivision 26; and 
11.5 	(9) materials and supplies for qualified low-income housing
11.6 	under section 297A.71, subdivision 23; and 
11.7 	(10) materials and supplies for qualified resorts under
11.8 	section 297A.71, subdivision 33.
11.9 		Subd. 2.Refund; eligible persons. Upon application on
11.10 	forms prescribed by the commissioner, a refund equal to the tax
11.11 	paid on the gross receipts of the exempt items must be paid to
11.12 	the applicant.  Only the following persons may apply for the
11.13 	refund:
11.14 	(1) for subdivision 1, clauses (1) to (3), the applicant
11.15 	must be the purchaser;
11.16 	(2) for subdivision 1, clauses (4), (7), and (8), the
11.17 	applicant must be the governmental subdivision;
11.18 	(3) for subdivision 1, clause (5), the applicant must be
11.19 	the recipient of the benefits provided in United States Code,
11.20 	title 38, chapter 21;
11.21 	(4) for subdivision 1, clause (6), the applicant must be
11.22 	the owner of the homestead property; and 
11.23 	(5) for subdivision 1, clause (9), the owner of the
11.24 	qualified low-income housing project; and 
11.25 	(6) for subdivision 1, clause (10), the owner of the resort.
11.26 		Subd. 3.Application. (a) The application must include
11.27 	sufficient information to permit the commissioner to verify the
11.28 	tax paid.  If the tax was paid by a contractor, subcontractor,
11.29 	or builder, under subdivision 1, clause (4), (5), (6), (7), (8),
11.30 	or (9), or (10), the contractor, subcontractor, or builder must
11.31 	furnish to the refund applicant a statement including the cost
11.32 	of the exempt items and the taxes paid on the items unless
11.33 	otherwise specifically provided by this subdivision.  The
11.34 	provisions of sections 289A.40 and 289A.50 apply to refunds
11.35 	under this section.
11.36 	(b) An applicant may not file more than two applications
12.1 	per calendar year for refunds for taxes paid on capital
12.2 	equipment exempt under section 297A.68, subdivision 5.
12.3 		Subd. 4.Interest. Interest must be paid on the refund
12.4 	at the rate in section 270.76 from 90 days after the refund
12.5 	claim is filed with the commissioner for taxes paid under
12.6 	subdivision 1.
12.7 		Subd. 5.Appropriation. The amount required to make the
12.8 	refunds is annually appropriated to the commissioner.
12.9 	
EFFECTIVE DATE. This section is effective for sales and
12.10 	purchases made after June 30, 2005.