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Chapter 273

Section 273.1398

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273.1398 Homestead and agricultural credit and disparity reduction aid.

Subdivision 1. Definitions. (a) In this section, the terms defined in this subdivision have the meanings given them.

(b) "Unique taxing jurisdiction" means the geographic area subject to the same set of local tax rates.

(c) "Previous net tax capacity" means the product of the appropriate net class rates for the year previous to the year in which the aid is payable, and estimated market values for the assessment two years prior to that in which aid is payable. "Total previous net tax capacity" means the previous net tax capacities for all property within the unique taxing jurisdiction. The total previous net tax capacity shall be reduced by the sum of (1) the unique taxing jurisdiction's previous net tax capacity of commercial-industrial property as defined in section 473F.02, subdivision 3, or 276A.01, subdivision 3, multiplied by the ratio determined pursuant to section 473F.08, subdivision 6, or 276A.06, subdivision 7, for the municipality, as defined in section 473F.02, subdivision 8, or 276A.01, subdivision 8, in which the unique taxing jurisdiction is located, (2) the previous net tax capacity of the captured value of tax increment financing districts as defined in section 469.177, subdivision 2, and (3) the previous net tax capacity of transmission lines deducted from a local government's total net tax capacity under section 273.425. Previous net tax capacity cannot be less than zero.

(d) "Equalized market values" are market values that have been equalized by dividing the assessor's estimated market value for the second year prior to that in which the aid is payable by the assessment sales ratios determined by class in the assessment sales ratio study conducted by the department of revenue pursuant to section 127A.48 in the second year prior to that in which the aid is payable. The equalized market values shall equal the unequalized market values divided by the assessment sales ratio.

(e) "Equalized school levies" means the amounts levied for:

(1) general education under section 126C.13, subdivision 2;

(2) supplemental revenue under section 126C.10, subdivision 10;

(3) transition revenue under section 126C.10, subdivision 20; and

(4) referendum revenue under section 126C.17.

(f) "Current local tax rate" means the quotient derived by dividing the taxes levied within a unique taxing jurisdiction for taxes payable in the year prior to that for which aids are being calculated by the total previous net tax capacity of the unique taxing jurisdiction.

(g) For purposes of calculating and allocating homestead and agricultural credit aid authorized pursuant to subdivision 2 and the disparity reduction aid authorized in subdivision 3, "gross taxes levied on all properties," "gross taxes," or "taxes levied" means the total net tax capacity based taxes levied on all properties except that levied on the captured value of tax increment districts as defined in section 469.177, subdivision 2, and that levied on the portion of commercial industrial properties' assessed value or gross tax capacity, as defined in section 473F.02, subdivision 3, subject to the areawide tax as provided in section 473F.08, subdivision 6, in a unique taxing jurisdiction. "Gross taxes" are before any reduction for disparity reduction aid but "taxes levied" are after any reduction for disparity reduction aid. Gross taxes levied or taxes levied cannot be less than zero.

"Taxes levied" excludes equalized school levies.

(h) "Household adjustment factor" means the number of households, for the year most recently determined as of July 1 in the aid calculation year, divided by the number of households for the year immediately preceding the year for which the number of households has most recently been determined as of July 1. The household adjustment factor cannot be less than one.

(i) "Growth adjustment factor" means the household adjustment factor in the case of counties. In the case of cities, towns, school districts, and special taxing districts, the growth adjustment factor equals one. The growth adjustment factor cannot be less than one.

(j) "Homestead and agricultural credit base" means the previous year's certified homestead and agricultural credit aid determined under subdivision 2 less any permanent aid reduction in the previous year to homestead and agricultural credit aid.

(k) "Net tax capacity adjustment" means (1) the tax base differential defined in subdivision 1a, multiplied by (2) the unique taxing jurisdiction's current local tax rate. The net tax capacity adjustment cannot be less than zero.

(l) "Fiscal disparity adjustment" means a taxing jurisdiction's fiscal disparity distribution levy under section 473F.08, subdivision 3, clause (a), or 276A.06, subdivision 3, clause (a), for taxes payable in the year prior to that for which aids are being calculated, multiplied by the ratio of the tax base differential percent referenced in subdivision 1a for the highest class rate for class 3 property for taxes payable in the year prior to that for which aids are being calculated to the highest class rate for class 3 property for taxes payable in the second prior year to that for which aids are being calculated. In the case of school districts, the fiscal disparity distribution levy shall exclude that part of the levy attributable to equalized school levies.

Subd. 1a. Tax base differential. (a) For aids payable in 2003, the tax base differential is:

(1) 31 percent of the assessment year 2000 net tax capacity of public utility property reported by the county on the 2000 abstract of assessment as public utility land and buildings valued up to $150,000; plus

(2) 34 percent of the assessment year 2000 net tax capacity of public utility property reported by the county on the 2000 abstract of assessment as public utility land and buildings valued over $150,000; plus

(3) 34 percent of the assessment year 2000 net tax capacity of public utility property reported by the county on the 2000 abstract of assessment as public utility machinery, systems of electric utilities-transmission, systems of electric utilities-distribution, and systems of gas utilities.

(b) Notwithstanding the computation in paragraph (a), the tax base differential shall be zero in all counties in which the sum of the net tax capacities of properties described in paragraph (a) does not exceed 40 percent of the total assessment year 2000 net tax capacity of the county.

Subd. 2. Homestead and agricultural credit aid. (a) Homestead and agricultural credit aid for each unique taxing jurisdiction equals the product of (1) the homestead and agricultural credit aid base, and (2) the growth adjustment factor, plus the net tax capacity adjustment and the fiscal disparity adjustment.

(b) For the purposes of determining the net tax capacity adjustment for aids payable in 2003, the "current local tax rate" and the "previous net tax capacity" as defined under subdivision 1 shall be determined using tax capacities and tax rates in effect for taxes payable in 2001.

Subd. 2a. Repealed, 1994 c 416 art 1 s 65

Subd. 2b. Repealed, 1990 c 604 art 4 s 21

Subd. 2c. Computation by commissioner. Notwithstanding the provisions of subdivisions 1 and 2 requiring the computation of homestead and agricultural credit aid at the unique taxing jurisdiction level, the commissioner may, upon consultation with the chairs of the house tax committee and senate committee on taxes and tax laws, compute homestead and agricultural credit aid at a higher level if it 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.

Subd. 2d. Aids determined as of June 30. For aid amounts authorized under subdivisions 2 and 3, and section 273.166: (i) if the effective date for a municipal incorporation, consolidation, annexation, detachment, dissolution, or township organization is on or before June 30 of the year preceding the aid distribution year, the change in boundaries or form of government shall be recognized for aid determinations for the aid distribution year; (ii) if the effective date for a municipal incorporation, consolidation, annexation, detachment, dissolution, or township organization is after June 30 of the year preceding the aid distribution year, the change in boundaries or form of government shall not be recognized for aid determinations until the following year.

Subd. 2e. Homestead and agricultural aid for cities, towns, and special taxing districts. Notwithstanding the provisions of subdivision 2, the amount of homestead and agricultural credit aid for a statutory or home rule charter city, town, school district, or special taxing district for aid payable in calendar year 2002 and thereafter is zero.

Subd. 3. Disparity reduction aid. (a) For taxes payable in 2003 and subsequent years, the amount of disparity aid certified for each taxing district within each unique taxing jurisdiction for taxes payable in the prior year shall be multiplied by the ratio of (1) the jurisdiction's tax capacity using the class rates for taxes payable in the year for which aid is being computed, to (2) its tax capacity using the class rates for taxes payable in the year prior to that for which aid is being computed, both based upon market values for taxes payable in the year prior to that for which aid is being computed. For the purposes of this aid determination, disparity reduction aid certified for taxes payable in the prior year for a taxing entity other than a town or school district is deemed to be county government disparity reduction aid. The amount of disparity aid certified to each taxing jurisdiction shall be reduced by any reductions required in the current year or permanent reductions required in previous years under section 477A.0132.

(b) For aid payable in 2003, in each unique taxing jurisdiction where the total tax rate for taxes payable in 2002 exceeds 135 percent of taxable net tax capacity, an amount shall be permanently added to the unique taxing jurisdiction's aid amount under paragraph (a) equal to the lesser of: (i) the amount, if any, by which 87 percent of the aid certified for 2001 exceeds the amount certified for 2002, or (ii) the amount that would be necessary to reduce the total payable 2002 tax rate for the unique taxing jurisdiction to 135 percent of taxable net tax capacity. The amount determined under this paragraph must be added before the class rate adjustment described in paragraph (a).

Subd. 3a. Disparity reduction aid to cities. Notwithstanding the provisions of subdivision 3 or section 275.08, subdivision 1d, the amount of disparity reduction aid for a city for aid payable in calendar year 1994 and thereafter is zero, and the local tax rate for taxes payable in 1994 and thereafter for a city shall not be adjusted under section 275.08, subdivision 1d. For purposes of this subdivision, city means a statutory or home rule charter city.

Subd. 4. Disparity reduction credit. (a) Beginning with taxes payable in 1989, class 4a, class 3a, and class 3b property qualifies for a disparity reduction credit if: (1) the property is located in a border city that has an enterprise zone designated pursuant to section 469.168, subdivision 4; (2) the property is located in a city with a population greater than 2,500 and less than 35,000 according to the 1980 decennial census; (3) the city is adjacent to a city in another state or immediately adjacent to a city adjacent to a city in another state; and (4) the adjacent city in the other state has a population of greater than 5,000 and less than 75,000.

(b) The credit is an amount sufficient to reduce (i) the taxes levied on class 4a property to 2.3 percent of the property's market value and (ii) the tax on class 3a and class 3b property to 2.3 percent of market value.

(c) The county auditor shall annually certify the costs of the credits to the department of revenue. The department shall reimburse local governments for the property taxes foregone as the result of the credits in proportion to their total levies.

Subd. 4a. Aid offset for court costs. (a) By July 15 of the year preceding the year in which the state assumes the cost of court administration in the judicial district as specified under section 480.183, the supreme court shall determine and certify to the commissioner of revenue for each county the county's share of the costs assumed in the judicial districts specified under section 480.183, subdivision 1, during the succeeding fiscal year.

(b) The amount certified in paragraph (a) shall be equal to the following:

(1) 103 percent of the required court administration expenditures as defined under section 480.183, subdivision 3, for calendar year 2003, as determined under subdivision 4b, paragraph (a); plus

(2) an adjustment for any cumulative percentage increase in salary expenditures as defined under section 480.183, subdivision 2, in excess of a maintenance of effort increase of six percent; less

(3) an amount equal to the county's share of transferred fines collected by the district courts in the county during the calendar year preceding certification.

The court and the county may, if both parties agree, negotiate and certify an amount higher than the amount calculated under this paragraph.

(c) For purposes of this subdivision, the adjustment in paragraph (b), clause (2), shall be equal to:

(1) the sum of the court administration expenditures as defined under section 480.183, subdivision 3, required under subdivision 4b, paragraph (a), plus the temporary aid payment under subdivision 4c; multiplied by

(2) the difference between (i) the cumulative percentage increase in actual and anticipated salary settlements for court employees from July 1, 2001, until the date of the court transfer and (ii) the percentage specified in subdivision 4b, paragraph (a).

(d) Payments to a county under subdivision 2 or section 273.166 for the calendar year in which the state assumes the cost of court administration as defined under section 480.183, subdivision 3, in the judicial district must be permanently reduced by an amount equal to 75 percent of the net cost to the state for assumption of district court costs as certified in paragraph (a).

(e) Payments to a county under subdivision 2 or section 273.166 for the calendar year after the calendar year in which the state assumes the cost of court administration as defined under section 480.183, subdivision 3, in the judicial district must be permanently reduced by an amount equal to 25 percent of the net cost to the state for assumption of district court costs as certified in paragraph (a), provided that this amount must be increased or decreased by an amount equal to the positive or negative difference between the amount of fee and fine revenue certified under paragraph (b), clause (3), and the actual amount of fee and fine revenue of the county for the calendar year when certification takes place.

(f) Payments to a county under subdivision 2 for calendar year 2001 are permanently increased by an amount equal to 7.5 percent of the county's share of transferred fines collected by the district courts in the county during calendar year 1998, as determined under paragraph (a). If the amount determined in paragraph (a) exceeds the amount of aid a county is scheduled to be paid under subdivision 2 in 2000, then the county shall not receive an aid increase under this paragraph.

(g) Payments to a county under subdivision 2 or section 273.166, for the cost of mandated services, as defined in section 480.183, subdivision 4, in the judicial district, must be permanently reduced in 2002 by an amount equal to the cost to the state for assumption of mandated court services as defined in section 480.183, subdivision 4. The supreme court shall determine the amount for each county and certify it to the commissioner of revenue by July 15, 2001.

Subd. 4b. Court expenditures; maintenance of effort. (a) Until the costs of court administration as defined under section 480.183, subdivision 3, in a county have been transferred to the state, each county in a judicial district transferring court administration costs to state funding after July 1, 2001, shall budget for the funding of these costs an amount at least equal to the certified budget amount for calendar year 2001, increased by six percent for each year from 2001 to 2003 and by eight percent from 2004 to the year of the transfer. The county shall budget, fund, and authorize expenditures not less than the amount calculated under this paragraph plus the temporary aid amount under subdivision 4c for maintenance of effort of administrative costs.

(b) By July 15, 2001, the court shall certify to each county in the judicial district its cost of court administration as defined under section 480.183, subdivision 3, based on 2001 budgets. In making that determination, the court shall exclude the budget costs of the county for the following categories:

(1) rent;

(2) examiner of titles;

(3) civil court appointed attorneys for civil matters;

(4) hospitalization costs; and

(5) cost of maintaining vital statistics.

The amount of funding provided by a county for courts that is increased by the maintenance of effort requirement may not be used by a county to pay the costs described in clauses (1) to (5).

Subd. 4c. Temporary aid; court administration costs. For calendar years 2004 and 2005, each county in a judicial district that has not been transferred to the state by January 1 of that year shall receive additional homestead and agricultural credit aid. This amount is in addition to the amount calculated under subdivision 2 and must not be included in the definition of homestead and agricultural credit base under subdivision 1, paragraph (j). The amount of additional aid is equal to the difference between (1) the amount budgeted for court administration costs in 2001 as determined under subdivision 4b, paragraph (b), multiplied by the maintenance of effort percent for the calendar year as determined under subdivision 4b, paragraph (a), and (2) the amount calculated under subdivision 4b, paragraph (a), for calendar year 2003. This additional aid must be used only to fund court administration expenditures as defined in section 480.183, subdivision 3. This amount must be added to the state court's base budget in the year when the court in that judicial district in which the county is located is transferred to the state.

Subd. 4d. Aid offset for out-of-home placement costs. For aid payable in 2004, each county's aid under subdivision 2 shall be permanently reduced by an amount equal to the county's 2004 reimbursement for nonfederal expenditures for out-of-home placements, as provided in section 245.775, provided that payments will be made under section 477A.0123 in calendar year 2004. The counties shall provide all information requested by the commissioner of human services necessary to allow the commissioner to certify the previous three years' average nonfederal costs to the commissioner of revenue by July 15, 2004. The aid reduction under this subdivision must not exceed the difference between (1) the amount of aid calculated for the county for calendar year 2004 under subdivision 2, including any addition under section 477A.07, and (2) the amount of any aid reductions for the state takeover of courts contained in Laws 2001, First Special Session chapter 5, article 5.

Subd. 5. Repealed, 1993 c 375 art 4 s 21

Subd. 5a. Repealed, 1Sp1993 c 1 art 2 s 7

Subd. 5b. Repealed, 1996 c 471 art 3 s 55

Subd. 5c. Repealed, 1Sp1993 c 1 art 2 s 7

Subd. 6. Payment. The commissioner shall certify the aids provided in subdivisions 2, 2b, 3, and 5 before September 1 of the year preceding the distribution year to the county auditor of the affected local government. The aids provided in subdivisions 2, 2b, 3, and 5 must be paid to local governments other than school districts at the times provided in section 477A.015 for payment of local government aid to taxing jurisdictions, except that the first one-half payment of disparity reduction aid provided in subdivision 3 must be paid on or before August 31. The disparity reduction credit provided in subdivision 4 must be paid to taxing jurisdictions other than school districts at the time provided in section 473H.10, subdivision 3. Aids and credit reimbursements to school districts must be certified to the commissioner of children, families, and learning and paid under section 273.1392. Payment shall not be made to any taxing jurisdiction that has ceased to levy a property tax.

Subd. 7. Repealed, 1994 c 587 art 3 s 21 para (b)

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 years 1998 and 1999 and $200,000 in fiscal year 2000 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.

HIST: 1988 c 719 art 5 s 26,84; 1989 c 277 art 2 s 33-36; 1989 c 329 art 6 s 47; 1Sp1989 c 1; art 2 s 11; art 3 s 14-21,33; art 6 s 8; 1990 c 480 art 7 s 9-13; 1990 c 604 art 3 s 20; art 4 s 2-4; 1991 c 130 s 37; 1991 c 199 art 1 s 62; 1991 c 291 art 3 s 1-4; art 12 s 10; 1991 c 292 art 7 s 22; 1992 c 499 art 12 s 29; 1992 c 511 art 1 s 8,9; art 3 s 1; art 4 s 8,27; 1993 c 224 art 1 s 28,29; art 14 s 16; 1993 c 375 art 3 s 18-20; art 4 s 3-5; 1Sp1993 c 1 art 2 s 5; 1994 c 416 art 1 s 21,22; 1994 c 587 art 3 s 8; 1995 c 264 art 3 s 11; art 16 s 10; 1Sp1995 c 3 art 16 s 13; 1996 c 471 art 3 s 13-15; art 11 s 1; 1997 c 7 art 1 s 109,110; 1997 c 31 art 3 s 7; 1997 c 231 art 11 s 6; 1998 c 254 art 1 s 75; 1998 c 389 art 2 s 15-17; 1998 c 397 art 11 s 3; 1999 c 243 art 5 s 22,23; art 11 s 2,3; 2000 c 260 s 43; 2000 c 490 art 6 s 3; 1Sp2001 c 5 art 3 s 40; art 5 s 5-8; 2002 c 377 art 4 s 20,21; art 6 s 3,4; art 10 s 8

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Revisor of Statutes