1.1                          A bill for an act 
  1.2             relating to taxation; providing for an assessment on 
  1.3             environmental emissions; providing for an education 
  1.4             property tax levy reduction; providing for a 
  1.5             refundable FICA credit; providing rulemaking 
  1.6             authority; appropriating money; proposing coding for 
  1.7             new law in Minnesota Statutes, chapters 273; and 290; 
  1.8             proposing coding for new law as Minnesota Statutes, 
  1.9             chapter 216E. 
  1.10  BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.11     Section 1.  [CITATION.] 
  1.12     This act may be cited as the "Economic Efficiency and 
  1.13  Pollution Reduction Act (EEPRA)." 
  1.14     Sec. 2.  [216E.01] [DEFINITIONS.] 
  1.15     Subdivision 1.  [SCOPE.] The definitions in this section 
  1.16  apply to this chapter.  
  1.17     Subd. 2.  [COAL.] "Coal" means bituminous coal, 
  1.18  subbituminous coal, lignite, and coke. 
  1.19     Subd. 3.  [COMMISSIONER.] "Commissioner" means the 
  1.20  commissioner of revenue. 
  1.21     Subd. 4.  [LIQUID FUELS.] "Liquid fuels" means gasoline, 
  1.22  liquefied petroleum gas, aviation gasoline, fuel oil and 
  1.23  kerosene, diesel fuel, methanol from nonplant sources, and 
  1.24  kerosene. 
  1.25     Subd. 5.  [NATURAL GAS.] "Natural gas" means a naturally 
  1.26  occurring mixture of hydrocarbons and nonhydrocarbon gases found 
  1.27  in porous geologic formations beneath the earth's surface, the 
  2.1   principal constituent of which is methane. 
  2.2      Subd. 6.  [PERSON.] "Person" includes an individual, 
  2.3   partnership, corporation, association, governmental unit or 
  2.4   agency, or other public or private organization. 
  2.5      Subd. 7.  [PRIMARY CARBON-BASED FUELS.] "Primary 
  2.6   carbon-based fuels" means coal, mixed municipal solid waste and 
  2.7   refuse-derived fuel, natural gas, and liquid fuels. 
  2.8      Sec. 3.  [216E.02] [ENVIRONMENTAL EMISSIONS ASSESSMENT.] 
  2.9      Subdivision 1.  [ASSESSED FUELS.] (a) The use of primary 
  2.10  carbon-based fuels and the sale of electricity to provide for 
  2.11  in-state energy consumption are subject to an environmental 
  2.12  emissions assessment under this section.  
  2.13     (b) Ethanol, methanol from plant materials, wood, wood 
  2.14  wastes, agricultural crops, crop residues, sludge, solvents, 
  2.15  waste oil, hazardous waste, medical waste, and hydro-electricity 
  2.16  are not subject to the assessment under this chapter. 
  2.17     (c) The assessment does not apply to: 
  2.18     (1) the use of coal, natural gas, or a petroleum product 
  2.19  for combustion in the generating facility of an electric 
  2.20  utility; or 
  2.21     (2) the use of liquid fuel as a physical component of a 
  2.22  manufactured product. 
  2.23     Subd. 2.  [CALCULATION OF ASSESSMENT.] (a) The 
  2.24  environmental emissions assessment applies to carbon content of 
  2.25  the fuel prior to burning.  Calculation of the amount of carbon 
  2.26  must be based on the estimated carbon content of the fuel 
  2.27  according to fuel type or subtype.  The department of public 
  2.28  service shall set the estimates of carbon content to be used in 
  2.29  the calculation.  Subject to subdivision 3, the final assessment 
  2.30  rates at the end of the five-year period shall be $50 per ton of 
  2.31  carbon content of the fuel. 
  2.32     (b) The interim assessments for the period beginning 
  2.33  January 1, 1997, for gasoline, fuel oil, natural gas, coal, and 
  2.34  electricity are: 
  2.35  (1) gasoline                           $2.6 cents/gallon
  2.36  (2) fuel oil (including diesel fuel)   $2.9 cents/gallon
  3.1   (3) natural gas                        $ .15/thousand cubic feet;
  3.2   (4) coal having a heating value
  3.3    over 11,500 BTU per pound             $6.00/ton of coal; and
  3.4   (5) coal having a heat value less
  3.5    than 11,500 BTU per pound             $4.60/ton.
  3.6   (6) coal fired electricity             $ .361 cents per kwh
  3.7   (7) gas fired electricity              $ .157 cents per kwh
  3.8      (c) The assessment rate for electricity sold for 
  3.9   consumption within the state shall be determined by the 
  3.10  commissioner for each electric utility in mills per kilowatt 
  3.11  hour of electricity sold.  Each utility's final assessment rate 
  3.12  is based on the total mix of fuels used in the generating 
  3.13  facilities of the utility, or in the generating facilities of 
  3.14  the power plants from which the Minnesota utility purchases 
  3.15  electricity.  The assessment on each fuel shall be equal to the 
  3.16  assessments provided under paragraphs (a) and (b). 
  3.17     For the purposes of this paragraph, the generating 
  3.18  facilities of a utility include facilities that are owned in 
  3.19  whole or in part by the utility, or provide firm capacity or 
  3.20  energy by contract to the utility for a term of at least one 
  3.21  year. 
  3.22     If a utility shares a generating facility, the utility's 
  3.23  share of the fuel used in and kilowatt hours of electricity 
  3.24  produced by the facility shall be calculated in proportion to 
  3.25  the utility's share of ownership or use of the facility. 
  3.26     The assessment rate determined under this paragraph must be 
  3.27  applied to all electricity sold by a utility for consumption in 
  3.28  the state, whether or not the electricity was generated at 
  3.29  facilities of the utility. 
  3.30     (d) The assessment rate for nuclear generated electricity 
  3.31  will be equal to the average assessment on all assessable 
  3.32  nonnuclear generated electricity sold to Minnesota customers. 
  3.33     Subd. 3.  [PHASE-IN OF RATES.] (a) The department of public 
  3.34  service shall set the assessment rates for primary carbon-based 
  3.35  fuels as follows: 
  3.36     (1) for the first full calendar year, the assessment rates 
  4.1   shall be set at $10 per ton of carbon content of the fuel; 
  4.2      (2) for the second full calendar year, the assessment rates 
  4.3   shall be set at $20 per ton of carbon content of the fuel; 
  4.4      (3) for the third full calendar year, the assessment rates 
  4.5   shall be set at $30 per ton of carbon content of the fuel; 
  4.6      (4) for the fourth full calendar year, the assessment rates 
  4.7   shall be set at $40 per ton of carbon content of the fuel; and 
  4.8      (5) for the fifth full calendar year, and for all 
  4.9   subsequent years, the assessment rates shall be set at $50 per 
  4.10  ton of carbon content of the fuel. 
  4.11     (b) The department of public service shall set the 
  4.12  assessment rates for electricity as follows:  
  4.13     (1) for the first full calendar year, the assessment rates 
  4.14  shall be set at 20 percent of the final assessment rate for 
  4.15  electricity specified in subdivision 2, paragraph (c); 
  4.16     (2) for the second full calendar year, the assessment rates 
  4.17  shall be set at 40 percent of the final assessment rate for 
  4.18  electricity specified in subdivision 2, paragraph (c); 
  4.19     (3) for the third full calendar year, the assessment rates 
  4.20  shall be set at 60 percent of the final assessment rates for 
  4.21  electricity specified in subdivision 2, paragraph (c); 
  4.22     (4) for the fourth full calendar year, the assessment rates 
  4.23  shall be set at 80 percent of the final assessment rate for 
  4.24  electricity specified in subdivision 2, paragraph (c); and 
  4.25     (5) for the fifth full calendar year, and for all 
  4.26  subsequent years, the assessment rates shall be set at the rate 
  4.27  specified in subdivision 2, paragraph (c). 
  4.28     Subd. 4.  [DEPOSIT OF ASSESSMENTS.] The assessments 
  4.29  collected under this section must be credited to the general 
  4.30  fund. 
  4.31     Sec. 4.  [216E.03] [ASSESSMENT PROCEDURE.] 
  4.32     Subdivision 1.  [COAL.] The carbon content of coal is 
  4.33  assessed upon the first receipt of coal in the state for 
  4.34  burning.  Liability for the assessment is on the person who 
  4.35  receives coal for burning.  A person who receives coal shipped 
  4.36  or brought into Minnesota has the burden of proving that the 
  5.1   coal was not received for burning in Minnesota. 
  5.2      Subd. 2.  [NATURAL GAS.] The carbon content of natural gas 
  5.3   is assessed upon the first receipt of natural gas in the state.  
  5.4   Liability for the assessment is on the person in the state who 
  5.5   first receives natural gas from outside of the state.  A person 
  5.6   who receives natural gas piped, shipped, or otherwise brought 
  5.7   into Minnesota has the burden of proving that the natural gas 
  5.8   was not received for consumption in Minnesota. 
  5.9      Subd. 3.  [WASTE AND REFUSE-DERIVED FUEL.] The carbon 
  5.10  content of mixed municipal solid waste and refuse-derived fuel 
  5.11  is assessed upon incineration of the fuel in the state.  
  5.12  Liability for the assessment is on the person who burns mixed 
  5.13  municipal solid waste and refuse-derived fuel in the state. 
  5.14     Subd. 4.  [LIQUID FUELS.] The carbon content of liquid 
  5.15  fuels is assessed when first withdrawn from storage at a 
  5.16  pipeline terminal, river terminal, refinery, other storage 
  5.17  facility, or otherwise first distributed in this state. 
  5.18     Subd. 5.  [ELECTRICITY.] Electricity is assessed at the 
  5.19  time of its sale by the electric utility to the consumer billed 
  5.20  for the electricity.  Liability for the assessment is on the 
  5.21  consumer who is billed, but the electric utility is liable for 
  5.22  collection and payment of the assessment. 
  5.23     Sec. 5.  [216E.04] [REFUNDS.] 
  5.24     Subdivision 1.  [HIGH IMPACT REFUND.] If the amount of the 
  5.25  environmental emissions assessment paid under section 216E.02 by 
  5.26  any person conducting a trade or business in this state 
  5.27  excluding utilities, less the estimated value of the tax 
  5.28  reductions accruing to the person under sections 273.1382 and 
  5.29  290.98, exceeds an amount equal to one percent of the person's 
  5.30  total sales wherever made in connection with the trade or 
  5.31  business in this state as determined for purposes of section 
  5.32  290.191, the person may apply for a refund under this 
  5.33  subdivision.  The amount of the refund is equal to the amount by 
  5.34  which the net assessment paid during the person's taxable year, 
  5.35  exceeds one percent of that person's total sales during the 
  5.36  taxable year. 
  6.1      Subd. 2.  [LIQUID FUEL USED AS MATERIAL COMPONENT.] A 
  6.2   person who uses liquid fuel that is exempt from the assessment 
  6.3   under section 216E.02, subdivision 1, paragraph (c), may apply 
  6.4   for a refund of the assessment paid on the fuel.  
  6.5      Subd. 3.  [APPLICATION.] Application for a refund under 
  6.6   this section must be made on a form prescribed by the 
  6.7   commissioner and is subject to sections 289A.40 and 289A.50. 
  6.8      Sec. 6.  [216E.05] [ADMINISTRATION AND ENFORCEMENT.] 
  6.9      Subdivision 1.  [ANNUAL RETURNS.] A person subject to the 
  6.10  assessment must file a return relating to the assessment due for 
  6.11  the preceding calendar year with the commissioner by April 15 
  6.12  each year on a form prescribed by the commissioner.  Payment of 
  6.13  the assessment to the extent not paid in full under subdivision 
  6.14  3 must be submitted with the return. 
  6.15     Subd. 2.  [DECLARATION OF ESTIMATED ASSESSMENT.] A person 
  6.16  required to pay an assessment under this chapter must make a 
  6.17  declaration of estimated assessment due for the calendar year if 
  6.18  it can reasonably be expected to be in excess of $1,000.  The 
  6.19  amount of estimated assessment with respect to which a 
  6.20  declaration is required must be paid in four equal installments 
  6.21  on or before the 15th day of March, June, September, and 
  6.22  December. 
  6.23     An amendment of a declaration may be filed between 
  6.24  installment dates but only one amendment may be filed in each 
  6.25  interval.  If an amendment of a declaration is filed, the amount 
  6.26  of each remaining installment must be determined in a manner 
  6.27  established by rule. 
  6.28     The commissioner may grant a reasonable extension of time 
  6.29  of up to six months for filing a declaration.  
  6.30     Subd. 3.  [FAILURE TO PAY ESTIMATED ASSESSMENT.] Section 
  6.31  115B.24, subdivision 3, applies to failure of a person to pay an 
  6.32  estimated assessment due under this chapter. 
  6.33     Subd. 4.  [REFUNDS.] Section 289A.50 applies to the refunds 
  6.34  claimed and made under this chapter.  Refunds of overpayments of 
  6.35  an estimated assessment must be made as provided in section 
  6.36  289A.56, subdivision 2. 
  7.1      Subd. 5.  [EXCHANGE OF INFORMATION.] Notwithstanding 
  7.2   sections 13.68 and 116.075, the department of public service may 
  7.3   provide the commissioner with information necessary for the 
  7.4   enforcement of this chapter.  The information disclosed must 
  7.5   retain its nonpublic nature to the extent that it was so 
  7.6   classified prior to disclosure to the commissioner.  Information 
  7.7   obtained in the course of an audit of the taxpayer by the 
  7.8   commissioner is nonpublic or private data to the extent it is 
  7.9   not directly divulged in a return. 
  7.10     Subd. 6.  [DUTIES OF THE COMMISSIONERS.] The commissioner 
  7.11  of public service shall provide to the commissioner the names 
  7.12  and addresses of all persons known by them to be subject to 
  7.13  assessments under this chapter, together with any information 
  7.14  concerning the amount of carbon to be assessed.  Upon request by 
  7.15  the commissioner, those commissioners shall examine returns and 
  7.16  reports filed with the commissioner and notify the commissioner 
  7.17  of any suspected inaccurate or fraudulent declaration or 
  7.18  return.  The commissioner of public service may assist in 
  7.19  auditing a person subject to the assessment under this chapter 
  7.20  when requested by the commissioner. 
  7.21     Subd. 7.  [RULES.] The commissioner may adopt rules 
  7.22  necessary to administer this chapter. 
  7.23     Subd. 8.  [ENFORCEMENT.] The following audit, penalty, and 
  7.24  enforcement provisions apply to assessments under this chapter:  
  7.25  sections 289A.35 to 289A.37; 289A.38, subdivisions 1, 2, 5, and 
  7.26  6; 289A.40, subdivision 1; 289A.41; 289A.42, subdivision 1; 
  7.27  289A.55; 289A.60, subdivisions 1 to 10, 13, 18, and 19; 289A.63, 
  7.28  subdivisions 1, 2, and 7 to 10; and 289A.65. 
  7.29     Sec. 7.  [216E.06] [USE OF ASSESSMENT REVENUES.] 
  7.30     Revenue from the environmental emissions assessments must 
  7.31  be used as provided by this section.  By August 1 of each year, 
  7.32  the commissioner of public service, shall estimate the amount of 
  7.33  revenues to be collected in the next calendar year from the 
  7.34  assessment.  The revenues must be used, in equal amounts, to 
  7.35  fund (a) a reduction in property taxes as provided by section 
  7.36  273.1382 and (b) a refundable payroll tax rebate as provided in 
  8.1   section 290.98. 
  8.2      Sec. 8.  [273.1382] [ENVIRONMENTAL ASSESSMENT; PROPERTY TAX 
  8.3   REDUCTION.] 
  8.4      Subdivision 1.  [EDUCATION LEVY REDUCTION.] By August 15 of 
  8.5   each year, the commissioner of revenue shall certify to the 
  8.6   commissioner of children, families, and learning the amount of 
  8.7   the environmental emissions available for property tax 
  8.8   reductions.  The commissioner of children, families, and 
  8.9   learning shall deduct this amount from the general education 
  8.10  levy under section 124A.23 for taxes payable in the next 
  8.11  calendar year. 
  8.12     Subd. 2.  [COMMERCIAL/INDUSTRIAL CLASS RATE ADJUSTMENT.] By 
  8.13  August 31 of each year, the commissioner of revenue shall adjust 
  8.14  the class rates for class 3a and class 5 property under section 
  8.15  273.13, for taxes payable in the following year, as follows: 
  8.16     (a) determine the general education levy under section 
  8.17  124A.23 using only one-half of the adjustment in subdivision 1; 
  8.18     (b) estimate the statewide average total tax rate for taxes 
  8.19  payable in the next year using the class rates specified in 
  8.20  section 273.13 and the general education levy determined in step 
  8.21  (a); 
  8.22     (c) determine the percentage reduction in class rates to 
  8.23  class 3a and class 5 property necessary to yield the same 
  8.24  estimated statewide average total tax rate using the general 
  8.25  education levy determined in subdivision 1; 
  8.26     (d) reduce class rates by the percentage yielded in step 
  8.27  (c), so that the resulting class rates are specified to the 
  8.28  nearest 0.05 percent of market value. 
  8.29     Sec. 9.  [290.98] [REBATE OF PAYROLL TAXES.] 
  8.30     Subdivision 1.  [REBATE TO EMPLOYERS.] (a) Subject to 
  8.31  subdivision 3, one-half of the amount determined under section 
  8.32  216E.06, clause (b), must be paid as a rebate to employers who 
  8.33  make payments of Federal Insurance Contributions Act taxes under 
  8.34  section 3111 of the Internal Revenue Code. 
  8.35     (b) The rebate is determined for each employer as follows: 
  8.36     (1) multiply the amount of the tax paid by an employer 
  9.1   under section 3111 of the Internal Revenue Code by a percentage 
  9.2   equal to the percentage of the employer's total payroll that is 
  9.3   determined to be Minnesota payroll for purposes of section 
  9.4   290.191; and 
  9.5      (2) multiply the amount determined under clause (1) by a 
  9.6   percentage determined by dividing the amount specified in 
  9.7   paragraph (a) for the employer by the aggregate of the amounts 
  9.8   determined under clause (1) for all employers who apply for the 
  9.9   rebate for the taxable year. 
  9.10     Subd. 2.  [REBATE TO EMPLOYEES.] (a) Subject to subdivision 
  9.11  3, one-half of the amount determined under section 216E.06, 
  9.12  clause (b), must be paid as a rebate to employees who make 
  9.13  payments of Federal Insurance Contributions Act taxes under 
  9.14  section 3101 of the Internal Revenue Code.  
  9.15     (b) The rebate is determined for each employee as follows:  
  9.16  multiply the amount of the tax paid by the employee under 
  9.17  section 3101 of the Internal Revenue Code for Minnesota 
  9.18  employment by a percentage determined by dividing the amount 
  9.19  specified in paragraph (a) by the aggregate of the taxes paid 
  9.20  under section 3101 of the Internal Revenue Code for Minnesota 
  9.21  employment by all employees who apply for the rebate for the 
  9.22  taxable year. 
  9.23     Subd. 3.  [REBATE TO INDIVIDUALS PAYING SELF-EMPLOYMENT 
  9.24  TAXES.] The commissioner shall annually determine the proportion 
  9.25  of self-employment tax paid by Minnesota residents under section 
  9.26  1401 of the Internal Revenue Code, and deduct from the amount 
  9.27  determined under section 216E.06, clause (b), an amount that is 
  9.28  proportionate to the amount of taxes paid by Minnesota residents 
  9.29  under section 1401 of the Internal Revenue Code to the total of 
  9.30  taxes paid under that section plus the taxes described in 
  9.31  subdivision 1, paragraph (b), clause (1), and the taxes 
  9.32  described in subdivision 2, paragraph (b).  The rebate for a 
  9.33  Minnesota resident who pays self-employment tax is determined by 
  9.34  multiplying the amount of tax paid during the calendar year by a 
  9.35  percentage that is the average of the percentages determined 
  9.36  under subdivision 1, paragraph (b), clause (2), and subdivision 
 10.1   2, paragraph (b).  One-half of the amount determined to be 
 10.2   necessary to pay the rebate under this subdivision is deducted 
 10.3   from the amounts to be made available under subdivisions 1 and 2.
 10.4      Subd. 4.  [PAYMENT OF REBATES.] The rebate must be claimed 
 10.5   in the form provided on the income tax return and paid by the 
 10.6   commissioner. 
 10.7      Subd. 5.  [APPROPRIATION.] The amount necessary to pay the 
 10.8   rebates provided in this section is annually appropriated from 
 10.9   the general fund to the commissioner of revenue. 
 10.10     Sec. 10.  [APPROPRIATION.] 
 10.11     For fiscal year 1997, $20,000,000 is appropriated to the 
 10.12  commissioner of economic security for the low-income 
 10.13  weatherization program and $60,000,000 is appropriated to the 
 10.14  commissioner of economic security for the low-income home energy 
 10.15  assistance program.  These appropriations are part of the 
 10.16  department's permanent budget base for these programs. 
 10.17     Sec. 11.  [EFFECTIVE DATE.] 
 10.18     Sections 2 to 6 are effective January 1, 1997, and apply to 
 10.19  coal and natural gas first received, mixed municipal solid 
 10.20  waste, and refuse-derived fuel first burned and liquid fuels 
 10.21  first withdrawn or distributed in this state on and after that 
 10.22  date and to electricity sold after that date.  Sections 7 to 9 
 10.23  are effective July 1, 1997.