|H.F. No. 2268 - Omnibus Tax Bill|
|Author:||Senator Thomas Bakk|
|Prepared by:||JoAnne Zoff, Senate Counsel (651/296-3803)
Michelle J. Allen, Senate Counsel (651/296-0558)
Jack Paulson, Research Analyst (651/296-4954)
|Date:||May 21, 2007|
Section 1. Property Tax Refund. Increases the maximum homeowner property tax refund across all existing income brackets. This section also reduces the maximum qualifying percentage form four percent of income to three percent.
Section 2. Property Tax Refund. Further increases the maximum homeowner property tax refund across all existing income brackets for refunds payable in 2009 and thereafter.
Section 3. Inflation Adjustment. Adjusts the income ranges and maximum refund amounts for the homeowner refund in section 2 annually for inflation, beginning in 2011.
Section 4. LGA Aid Base. Permanent city aid base adjustments are made for Taylors Falls ($30,000), Browns Valley ($100,000), and Mahnomen ($80,000). Temporary aid base adjustments are granted to Newport ($75,000 for 2008 to 2013), Crookston ($200,000 for 2008 to 2012) and Rockville ($30,000 in 2008 only).
Section 5. County Transition Aid. County transition aid is made permanent at the 2007 level. An additional $250,000 is granted to Pine County for 2008 only.
Section 6. Township Aid. Townships receive aid equal to the product of their agricultural property factor, town area factor, population factor and 0.00225. Town aid is limited to $5 million for 2008. The limit is indexed for inflation.
Section 7. LGA Formula. Eliminates the taconite aid offset from the LGA formula.
Section 8. LGA Distribution. Beginning with the 2009 distribution, volatility in the LGA distribution is reduced by averaging the city formula aid distribution in the previous year with the formula aid distribution for the current year. The maximum aid cap is increased from 10 percent of the previous year's levy to 30 percent of the levy for aid payable in 2008 only. A new minimum aid provision will prevent aid from decreasing by more than $15 per capita in one year. The current law minimum aid provisions are retained.
Section 9. LGA Appropriation. Increases the appropriation for Local Government Aid by $70 million for aids payable in 2008 and thereafter. For County Program Aid, the appropriations for tax-base equalization aid and need aid are each increased by $6.5 million for aids payable in 2008, by $7.5 million for aids payable in 2009 and are indexed thereafter.
Sections 10 and 11. LUP Lands. The PILT payment for LUP lands located entirely within a wildlife management area is increased from 75 cents to $3 per acre (as adjusted for inflation).
Section 12. Aids to Mahnomen County, City and School District. Makes permanent the 2007 appropriation of $600,000 to local governments affected by a loss of tax base due to the placement of property into trust status by the Bureau of Indian Affairs.
Section 13. Utility Property School District Tax Base. Provides that ANTCs and referendum market values for school districts will be calculated including the tax base changes resulting from the adoption of revised utility valuation rules in assessment years 2007, 2008, and 2009 one year earlier than they would be under current law.
Section 14. Utility Property Local Government Tax Base. Provides that ANTCs used for calculating county, city and town aids will be calculated including the tax base changes resulting from the adoption of revised utility valuation rules in assessment years 2007, 2008 and 2009 one year earlier than they would be under current law.
Section 15. Mahnomen County, City and School District Tax Base. Provides a tax base adjustment in calculating school district levies for the Mahnomen School District. The adjustment needs to be made for while the exemption of the casino is still in dispute. Makes the same adjustment to the tax base used in calculating city LGA and County Program Aid while the land is in dispute to allow the lost revenue to be recognized by the formula. These adjustments end after the disputed property is removed from the tax rolls.
Section 16. Grand Marais and Cook County Fire Aid. Appropriates $500,000 to the Commissioner of Revenue in fiscal years 2008 and 2009 to provide aid to the city of Grand Marais and Cook County for costs related to the Ham Lake fire of 2007.
Section 17. Study of Aids to Local Governments. Establishes a study group to examine the currant system of providing aids to local governments and makes recommendations on improving the system. A report is due by December 15, 2008.
Section 18. Repealer. Repeals the current homeowner Property Tax Refund schedule that is replaced by a new schedule in section 2.
Section 1. Township PILT Payments. Provides that in the case of a township that has been receiving payments in lieu of taxation and then is incorporated as a city in 2006 or thereafter, the new city will continue to receive payments in lieu of taxation that would have been made to the town if it had not incorporated. The PILT payments would terminate if the city passes an ordinance that bans hunting within the city limits.
Section 2. Retired Employee Health Benefits. Provides that for school districts in the taconite tax relief area, a district may levy for postretirement health benefits for employees who have retired before July 1, 1998 if a sunset clause is in effect for the current collective bargaining agreement.
Section 3. Classification for Sales Ratio. Requires that when a property is sold and the purchaser changes the use of the property, the sales ratio study must take into account the changed classification as soon as practicable.
Section 4. Utility Property Tax Cost Recovery. Provides that utilities may recover the cost of property taxes that are higher than under current law due to the class rate changes in section 21 through a rate adjustment.
Section 5. Modular Home Models. Provides an exemption from property taxes for modular homes that are used as models by dealers. The property would be exempt only if it:
was owned by a modular home dealer and located on land owned or leased by the dealer;
is a single family model home;
is not available for sale, and is used exclusively as a model;
is not permanently connected to any utilities, except electricity; and
is situated on a temporary foundation.
The exemption would be provided for up to five assessment years after the modular home becomes located on the property, as long as it meets all of the criteria. The owner of the property must notify the county assessor of the construction or location of the property, and re-notify the assessor if the home ceases to meet any of the criteria.
Section 6. Electric Generation Personal Property. Provides an exemption for attached machinery and personal property that is part of a simple-cycle combustion-turbine electric generation facility that exceeds 150 megawatts of installed capacity. The facility must use natural gas as a primary fuel, be owned by a cooperative, be located within one mile of an existing 16-inch natural gas pipeline and 69 and 230 kilowatt transmission lines. The facility must be designed to produce peaking, backup or contingency service, have received a certificate of need and received approval for the exemption from the governing bodies of the city and county where the facility will be located.
Section 7. Apprenticeship Training Facilities. Provides an exemption for property exclusively used to operate a state-approved apprenticeship program if the property is owned and operated by a nonprofit corporation and the program participants receive no compensation and it is located within the Minneapolis-St. Paul SMSA or in a city in Greater Minnesota that has a population of 10,000 or greater according to the most recent census.
Section 8. Monosloped Roofs. Provides an exemption for monosloped roofs installed over feedlot or manure storage areas.
Section 9. Certificate of Real Estate Value. Requires the certificate of real estate value to include any proposed change in the use of a property that is known to the person filing the certificate. The CRV must also indicate whether the property is being acquired as part of a like-kind exchange under section 1031 of the Internal Revenue Code.
Section 10. Green Acres. Changes the income requirement for qualifying for Green Acres. Under current law, either 33 1/3 percent of family income must be derived from agricultural production or the production income must be $300 plus $10 per tillable acre of the property. This section requires that in at least one of three preceding years, agricultural production income must be at least five percent of the agricultural land value for the county or total farm expenses must exceed 25 percent of the owner's federal adjusted gross income. Total production income means gross income reported on federal schedule F for the year preceding the assessment year plus rental income from the property. Anyone who has already qualified for Green Acres under current law will not be disqualified under the provisions of this section before assessment year 2013.
Section 11. Green Acres Agricultural Value. Requires the Commissioner of Revenue to develop a fair and uniform system of determining an agricultural value to be used in the Green Acres program for each county in the state. This section also requires that sales of agricultural property must be reviewed to determine whether the selling price was affected by nonagricultural influences. If the price is found to be influenced by nonagricultural factors, it must be excluded from the sales ratio study for agricultural property.
Section 12. Green Acres Implementation. Requires county assessors to implement the modified Green Acres provisions by assessment year 2008 unless the Commissioner of Revenue determines that the county is unable to comply. If the Commissioner makes that determination, the county must comply by the earliest assessment year determined to be feasible by the Commissioner.
Section 13. Green Acres Applications Denied by County. Requires each county (for applications filed for the 2007 and 2008 assessment years), to forward to the Department of Revenue all applications for participation in the green acres program that the county has denied, and a list of property owners who requested an application and were denied. Requires the department to compile a list of the denials along with the reasons for the denials and file an annual report by February 1, 2008, and February 1, 2009, with the chairs of the House and Senate Tax Committees.
Section 14. Property Destroyed by Arson or Vandalism. Authorizes county boards to grant property tax abatements to homeowners whose property is destroyed by arson or vandalism committed by someone other than the owner.
Section 15. Agricultural Homesteads; Minimum Size Requirement. Clarifies that the requirement to have at least 40 acres to qualify for the special homestead classification allows for adjustments made for government lots and correctional 40's. Allows property to qualify consisting of at least 20 acres if used "exclusively and intensively" for raising or cultivating agricultural products.
Section 16. Relative Homestead Registration. Requires that if the owner of property that is classified as a relative homestead or the owner's relative who occupies that property receives compensation for allowing rental of any part of that property for a period that exceeds one month during the calendar year, the recipient of the compensation must register the property with the city in which the property is located no later than 60 days after the initial rental period began. Each city is required to maintain a file of these property registrations, that would be open to the public, and to retain these registrations for one year after the date of filing. This section is effective July 1, 2007, and applies to property located in a city with a population over 25,000.
Section 17. Manufactured Homes; Storage Sheds and Decks. Increases the minimum value for a storage shed or deck constructed on property leased as a manufactured home site to become taxable from $500 to $1,000.
Section 18. 4d Classification. Changes the qualifications for low-income rental property that is classified as 4d in two ways. First, the requirement that at least 75 percent of the units in the rental housing property must meet the qualifications is reduced to 20 percent of the units. Second, the units would qualify if they are subject to rent and income restrictions under the terms of financial assistance provided to the rental housing property by a local unit of government. Under current law, property qualifies only if it is financed by the federal government or the state.
Section 19. Resorts; Definition. Reduces the class rate on class 1c resort property. Under current law, the class rate is 0.55 percent of market value up to $500,000. This section reduces the class rate to 0.5 percent on the first $600,000 of market value. This section also clarifies the definition of a resort for property tax classification purposes. This was part of a recommendation from a Department of Revenue task force required by the 2005 Legislature. Currently there is no definition in statute and one is needed for uniformity. Disabled homestead; class 1b. Increases the market value eligible for the 1b classification from $32,000 to $50,000. This class, which has a class rate of 0.45 percent, includes homestead property of persons who are blind and any person who is permanently and totally disabled. Language is stricken relating to veterans homesteads that is no longer needed because of the new veteran exemption in section 24.
Sections 20 and 23. Agricultural Property and Rural Lands. Reduces the class rate on the first tier of agricultural homestead land from 0.55 to 0.5 percent. Provides that unplatted rural land of at least ten acres which is not used for agricultural purposes will be class 2b with a class rate of one percent of market value. This section also provides a class rate of 0.65 percent for properties of less than 1,920 acres managed under a forest management plan meeting the requirements of the Sustainable Forest Incentive program, but not enrolled in the program. Property owners must annually apply to the assessor in order to receive the reduced class rate. This section includes short rotation woody crops in the definition of agricultural products.
Section 21. Utility Property Class Rate. Increases the class rate on electric generation tools, implements and machinery from 2.0 percent to 2.5 percent for taxes payable in 2009 and 3.0 percent for taxes payable in 2010 and thereafter. This section also increases the class rate on utility transmission and distribution systems from 2.0 percent to 2.15 percent for taxes payable in 2009 and 2.25 percent for taxes payable in 2010 and thereafter.
Sections 22 and 26. Commercial Seasonal Property. This section provides the same definition of resort for class 4c property as is given for class 1c property in section 19. This section also includes in class 4c real property owned by a nonprofit community service organization, provided that the organization makes qualified contributions at least equal to its property taxes payable in the previous year and the property is allowed to be used for public and community meetings at no charge. The property is subject to the state general rate for seasonal property rather than the commercial rate.
Section 24. Homestead of Disabled Veteran. (a) Provides a market value exclusion for property taxation purposes for the homestead of an honorably discharged veteran who has a military service-connected disability of 70 percent or higher, as determined by the United States Department of Veterans Affairs.
The exclusion is $150,000 for a veteran with a service-connected disability rated at 70 percent to 100 percent; and $300,000 for a veteran with a service-connected disability rated as being total and permanent. Upon the death of the veteran, the market value exclusion benefit carries over to the person's spouse, if the spouse co-owns or inherits the home. For an agricultural homestead, the market value exclusion applies to only the house, garage and surrounding one acre of land. Property qualifying for a valuation exclusion under this subdivision is not eligible for the market value credit. The property owner must apply to the assessor each year, unless the person's disability is rated as total and permanent.
Section 25. Disabled Homestead Declaration. Requires property owners seeking disabled homestead status to file an application with the county assessor on a form prescribed by the Commissioner of Revenue. The social security number and any income and medical information are classified as private data.
Section 27. Joint Public Hearings; Nonmetropolitan Counties, Cities, and School Districts. (a) Allows the county to hold a joint public TnT hearing with the governing bodies of all of the taxing authorities located wholly or partially within the county that are required to hold a public hearing. States that the primary purpose of the joint hearing is for taxpayer efficiency by allowing taxpayers to come to a single public hearing to discuss the budgets and proposed levies of most of the taxing authorities that impact their property taxes.
(b) Provides that this joint public hearing applies only to counties located outside the seven county metropolitan area. If a city or school district is located partially within the seven metro counties, that taxing jurisdiction may participate in its nonmetropolitan county's joint hearing, at its own discretion.
(c) Provides that upon adoption of a resolution by the county board to hold a joint hearing, the county shall notify each city with a population over 500 and each school district that is located wholly or partially within the county of its intention to hold the joint hearing and ask each of the taxing authorities if they wish to participate. Participation is voluntary, but is in lieu of each authority's separate hearing.
(d) Provides that the joint hearing shall be held on the first Thursday in December. (That is the regularly scheduled date for the counties to hold their initial hearing.) Additional hearings may be held if taxing authorities want them.
Provides that the county board shall obtain a meeting space to hold the hearing, preferably at a public building such as a courthouse, school, or community center, and be as centrally located in the county as possible.
The meeting shall be structured in the following general manner:
1. 30-60 minutes, discussion of county's budget and levy;
2. 30-60 minutes, discussion of city's budget and levy, each city's discussion must be held in separate room, preferably in same building;
3. 30-60 minutes, discussion of school district's levy, each school district's discussion must be held in separate room, preferably in same building;
4. the last 30 minutes, reassemble the joint meeting with all governing bodies to entertain any follow-up questions.
An attempt should be made to keep the total public hearing time within 3 hours.
(e) Requires a single newspaper advertisement for the county and any city or school district that is participating in the joint hearing. This advertisement is in lieu of the individual newspaper advertisement that is required in current law. The cost of the advertisement is apportioned between the taxing authorities.
Provides that the formal adopting of the taxing authority's levy must not be made at this joint hearing, but rather at one of the regularly scheduled meetings of the taxing authority's governing body. The amount of the levy subsequently adopted cannot exceed the amount disclosed to taxpayers at the joint public hearing.
Section 28. Special Taxing Districts; Definition. Adds airport authorities to the list of special taxing districts.
Section 29. Property Tax Statement. Eliminates a requirement that a gross property tax amount be calculated for each property by adding back education and local aids to the property tax payable on the parcel.
Section 30. 60-day Rule; Information. Itemizes what specific information is required in cases where a petitioner contests the valuation of income-producing property. It includes income and expense figures in the form of:
(1) year-end financial statements for the year prior to the assessment date;
(2) year-end financial statements for the year of the assessment date; and
(3) rent rolls on the assessment date including tenant name, lease start and end dates, option terms, base rent, square footage leased and vacant space, verified net rentable square footage of the building or buildings, and anticipated income in the form of proposed budgets.
This will make it easier for petitioners to know exactly what information must be provided to the county assessor no later than 60 days after the filing deadline.
Section 31. Confession of Judgment. Increases the maximum value for delinquent taxes on a commercial property to be composed into a confession of judgment from $200,000 to $500,000 total market value.
Section 32. Delinquent Tax Payments. Allows payment of a partial year of delinquent taxes to be paid in the inverse order that the taxes were accrued.
Section 33. Property Tax Refund Information in Income Tax Instruction Booklet. Requires the commissioner to provide a reference to property tax refunds on the cover of the individual income tax instruction booklet. Also requires information on income eligibility and maximum refund amounts within the instruction booklet.
Section 34. Property Tax Refund on Property Tax Statement. Requires that information about property tax refunds must be displayed on the front of the property tax statement.
Section 35. Sustainable Forest Incentive Payments. Increases the minimum Sustainable Forest Incentive payment from $1.50 per acre to $5 per acre.
Sections 36 through 39. Airport Authorities. Provides that municipalities may jointly form an airport authority for the purpose of acquiring, constructing, maintaining and operating air navigation facilities. An airport authority is authorized to levy taxes within the boundaries of the authority.
Section 40. Hardship Assessment Deferral; Military Persons. Extends the option to defer certain assessments to members of the National Guard and military reserves ordered into active service. Currently a county, city, or town, at its discretion may defer the payment of special assessment for any homestead property of seniors and disabled persons that it determines causes a hardship. This section adds National Guard and reserve members in active service to that authorization.
Section 41. Minneapolis Street Maintenance and Lighting. Amends special law for the city of Minneapolis relating to street maintenance and lighting to allow the city to pay from city general revenues part or all of the construction and operation, as well as maintenance, of streets and lighting.
Section 42. Cook-Orr Hospital District. Eliminates the specific limitation on the amount of the levy that may be made by the Cook-Orr Hospital District and instead makes that district's levy subject to the general law levy limitation that applies to other districts. It also eliminates the restriction that the levy, other than the portion that is levied for ambulance service expenses, may be used only for capital purposes and not for operating expenses.
Section 43. Cook County Hospital District. Modifies the levy authority of the Cook County Hospital District by eliminating the specific levy limitation on that district in its special law which was $300,000 for taxes levied in 2002, increased in subsequent years by the lesser of three percent or the amount of the increase in the Consumer Price Index. The district's levy would then be subject to the general hospital district levy limitation.
Section 44. Exchange of Tax-Forfeited Land; Private Sale; Itasca County. Exempts certain lands in Itasca County that have been acquired through an exchange from the tax-forfeited land assurance fee.
Section 45. Fiscal Disparities Study. Requires the Commissioner of Revenue to conduct a study of the metropolitan fiscal disparities program and make a report to the house and senate tax committees by February 1, 2009. The study is to consider whether the fiscal disparities program is meeting the following goals, and what changes could be made in furtherance of the goals:
(1) Reducing the extent to which the property tax system encourages inefficient development patterns.
(2) Ensuring that the benefits of economic growth are shared throughout the region.
(3) Allowing taxing jurisdictions to deliver services in proportion to their tax effort.
(4) Compensating jurisdictions for low-tax-yield properties that provide regional benefits.
(5) Promoting a fair distribution of tax burdens across the region.
(6) Reducing economic losses from competition for commercial-industrial tax base.
Section 46. City of Brooklyn Center; Participation in Crime-Free Multihousing Program. (a) Requires "qualifying property" under paragraph (b) to participate in a crime-free multi-housing program in order to receive the 4d property classification. The owners or managers are required to complete the three phases of the program and annually be certified by the police or sheriff as participating in the program.
If the property is not certified within one year after its initial 4d classification, or does not annually maintain its program certification, the city shall notify the property owner that the property must be in compliance in order to maintain its 4d classification. If it is not in compliance within one year after receiving the notice, a second notice is issued and the owner has one year to comply. If the owner is still not in compliance, the Minnesota Housing Finance Agency (MHFA) shall be notified and the property shall be removed from the list of qualified 4d properties certified to the county assessor.
Once removed from the list, the property is not eligible for class 4d until the property owner complies with this subdivision. Certification to MHFA must be made by May 15th to be effective for taxes payable in the following year.
(b) Defines "qualifying property" as property that:
(1) is located in a city that offers a crime-free multi-housing program though its city police;
(2) police calls over the preceding two-year time period, exceeded the average number of calls for multiunit rental properties in the jurisdiction, adjusted for number of units, by at least 25 percent;
(3) police department has requested in writing that the owners or managers enroll in the crime-free program, and they refused or failed to enroll within 60 days, or failed to complete all three phases of the program with a specified time; and
(4) is determined by the governing body of the city to be qualifying property.
(c) Requires property qualifying for 4d classification for taxes payable in 2007 to fulfill the requirements of this section by May 15, 2010.
Section 47. Clair A. Nelson Memorial Forest; Lake County; Temporary Suspension of Apportionment of Tax-forfeited Land Proceeds. Provides that upon approval of an affected political subdivision within Lake County, the Lake County Board may suspend the apportionment of the balance of net proceeds from the tax-forfeited lands within those subdivisions and retain those proceeds until Lake County is reimbursed for the purchase in 2006 of 6,085 acres of forest land named the Clair A. Nelson Memorial Forest. The amount is $2,200,000, plus any interest costs incurred by the county.
Section 48. Lakeview Cemetery Association. Allows any two or more of the following municipalities to enter into a joint powers agreement to create the Lakeview Cemetery Association with the powers and duties of a cemetery association: the cities of Coleraine, Bovey, Taconite, Marble, and Calumet, and the towns of Iron Range, Lawrence, Greenway, and Trout Lake. Allows the joint powers agreement to provide for each participating city or town to levy a tax on all of the property in the city or town for the association, not to exceed $200,000 per year. If levied, the tax is in addition to all other taxes on the property, including taxes permitted to be levied for cemetery purposes by the city or town and must be disregarded in the calculation of all other rate or per capita levy limitations imposed by law. The tax shall be collected by the Itasca County auditor-treasurer and paid directly to the Lakeview Cemetery Association.
Section 49. Tax-Forfeited Land Lease; Itasca County. Permits the Itasca County auditor to lease tax-forfeited land to Minnesota Steel for a period of 20 years for use as a tailings basin and buffer area. The lease is renewable.
Section 50. Ham Lake Fire Property Tax Reduction. Provides that owners of property destroyed by the Ham Lake fire may apply to the Cook County Assessor for a reduction in property taxes payable in 2007 and 2008. The reduction is granted if 50 percent or more of the structure has been destroyed and the structure is not useable. For qualifying properties, the second half property tax for payable 2007 and all of the payable 2008 property tax is reduced to zero.
Section 51. Public Awareness of Property Tax Relief Programs. Requires the Commissioner of Revenue to make efforts to improve the public's awareness of property tax refund programs.
Section 52. Repealer. Repeals Laws 1973, chapter 393, section 2, the section of special law that requires the city of Minneapolis to include the prior year's assessments for street maintenance in the calculations of aggregate receipts for purposes of levy limits if the city pays for street maintenance out of general revenues; and Laws 1994, chapter 587, article 9, section 8, subdivision 1, the existing law governing the Lakeview Cemetery Association, effective when the Association first levies under the authority granted in section 48.
Section 1. Definition of Foreign Operating Corporations. Amends the definition of foreign operating corporation (FOC). It eliminates the current law requirement that the average of the corporation's percentages of property and payrolls assigned to locations outside of the United States is 80 percent or more, and substitutes the requirement that to be an FOC at least 80 percent of a corporation's gross income from all sources in the tax year is active foreign business income.
Section 2. Corporate Additions to Federal Taxable Income. Provides for the following additions to federal taxable income for corporations:
interest and intangible expenses, losses, and costs paid, accrued, or incurred by any member of the taxpayer's unitary group, to or for the benefit of a corporation that is a member of that group that qualifies as a FOC;
interest income and income generated from intangible property received or accrued by a FOC that is a member of the taxpayer's unitary group;
dividends attributable to the income of a FOC that is a member of the taxpayer's unitary group equal to the dividends paid deduction of a real estate investment trust to the FOC;
income of a FOC that is a member of the taxpayer's unitary group in an amount that is equal to the gains derived from the sale of real or personal property that is located in the United States; and
Section 3. Foreign Royalty Subtraction. Increases the foreign royalty subtraction from 80 to 90 percent and provides that the subtraction from federal taxable income for a corporation for royalties or similar income derived from a FOC is not applicable if the income resulting from the payments is income from sources within the United States, as defined under the Internal Revenue Code.
Section 4. Accelerates by three years the current transition to a single sales factor method of apportionment from complete phase-in by 2014 to complete phase-in by 2011 and increases the sales factor apportionment in taxable year 2010 from 87 percent to 95 percent.
Section 1. Update of Tax Administration Provisions. Adopts federal tax administrative provisions made between May 18, 2006, and December 31, 2006, that Minnesota references for state tax administration purposes under chapter 289A. None of the three federal acts enacted since May 18, 2006, changed federal provisions Minnesota provisions refer to in chapter 289A.
Section 2. Information Reporting. Requires payers who federal law requires to file Form 1099 information with the IRS for contractor payments to also file a copy of the return with DOR. This applies if the payments either were made to a Minnesota resident or if the services were performed in the Minnesota. The commissioner may require the information to be filed electronically. Present law gives the commissioner of revenue authority to require this information to be filed by notice and demand to the payer.
Sections 3 and 14. Update to Federal Definition of Taxable Income. Adopts all of the federal changes to taxable income effective when the federal changes became effective, for tax years 2006 and 2007 only. The main federal changes in this area were:
1. If you are 70½ or older in age and you transfer money from your IRA to a 501(c)(3) charity, the IRA distribution of up to $100,000 will not be part of your federal adjusted gross income effective for transfers in 2006 and 2007.
2. For donations of used household items and clothes after August 17, 2006, a charitable deduction is not allowed if the value of the items is less than $500 and not in good used condition. If the donated item is valued at over $500, the taxpayer must submit an appraisal of the item by a qualified appraiser to claim a deduction.
3. For donations of stuffed or mounted animals to a charity, the charitable deduction is limited to the cost of stuffing or mounting the animal. Effective for donations after July 25, 2006.
4. For donations of fractional interests in personal property, no charitable deduction is allowed if the donor and donee charity do not own the total interest after gift. Further, if the donor makes fraction interest gifts of the property in a later year, the deductible contribution is limited to the pro rata fair market value of the property at the time of the first gift of a fractional interest after August 17, 2006. Effective for gifts after August 17, 2006.
5. The ability of a noncorporate taxpayer to deduct the cost plus 50 percent of market value over cost of food held as inventory was extended to 2006 and 2007.
6. Corporations' ability to claim an enhanced charitable deduction for donations of book inventory or computers and computer technology to schools was extended to 2006 and 2007.
7. The federal adjusted gross income limitation on charitable deductions for donations of qualified conservation easements is increased to 50 percent from the old 20 percent or 30 percent limit. The 50 percent limit is raised to 100 percent for farmers and ranchers (50 percent of taxpayer's gross income is from farming) for tax years 2006 and 2007.
8. The restrictions necessary for claiming a charitable deduction for a facade easement of a historic building were tightened on donations made after July 25, 2006.
9. In the case where an "S" corporation donates appreciated property to a charity the shareholder's basis in their "S" stock is only decreased by the tax basis of the property instead of the fair market value of the property. Effective for tax years 2006 and 2007.
10. The ability to deduct up to $2000 per taxpayer of college expenses by middle income taxpayers was extended for 2006 and 2007.
11. The ability of teachers to take a deduction against federal adjusted gross income (rather than as itemized deductions) of up to $250 of expenses they spent for classroom supplies was extended for 2006 and 2007.
12. The ability to elect to deduct sales taxes on personal purchases rather than deducting state income taxes was extended to 2006 and 2007 (this has little impact for Minnesota due to the required current Minnesota add-back of these deductions).
13. The ability to depreciate over 15 years, rather than 40 years, restaurant buildings and leasehold improvements was extended to 2006 and 2007.
14. The ability to deduct amounts placed in Archer medical savings accounts was extended to 2006 and 2007.
15. The ability to expense the cost of Brownfield cleanups was extended to 2006 and 2007.
16. Advanced mine safety equipment can be expensed up to 50 percent of its cost (remainder of cost depreciated) for equipment purchased after December 20, 2006, and before December 31, 2008.
17. A nonspousal beneficiary of an employer-sponsored retirement plan is allowed to roll over the proceeds into an IRA. However, amounts in the IRA must be distributed within 5 years of the decedent's death or starting within one year of decedent's death over the life expectancy of the new beneficiary. Prior law required a lump sum distribution at death for employer-sponsored plans going to a nonspouse. Effective for distributions after December 31, 2006.
18. Starting in 2007, the phase out, based on federal adjusted gross income, of an individual's ability to make an IRA contribution when the individual is already an active participant in another IRA will be adjusted for inflation rounded to the nearest $1000.
19. The higher deductible contribution limits for pension plans and IRAs which were enacted in 2001, and set to expire in 2011, were extended indefinitely.
20. The tax-favored status of qualified tuition savings programs (529 plans) which would have expired starting in 2011 was extended indefinitely.
21. The square footage based deduction for building energy efficient commercial buildings was extended one year through 2008.
22. Taxpayers can make a onetime tax free roll over from an IRA to health savings account (HSA) starting in 2007.
23. One of the limits on the deductible amount put in an HSA (amount of medical cost not covered by high deductible insurance coverage) was removed. Limits of $2250 for a single taxpayer and $4500 for a family still apply. Effective for tax years beginning after December 31, 2006.
24. For taxpayers with federal adjusted gross income of less than $100,000, premiums for mortgage insurance on a personal residence will be allowed as an itemized deduction for 2007 only. The 2007 deduction phases out by 10 percent for each $1000 of FAGI over $100,000.
Section 4. Additions to Federal Taxable Income. Requires businesses to add to federal taxable income the amount deducted as a business expense for fines, penalties, and fees paid to, or at the direction of, a governmental entity.
Section 5. Military and Americorps Subtractions. Clarifies that the current income tax subtraction for military compensation paid to Minnesota residents for active duty outside Minnesota applies to members of the National Guard and other reservists. Allows taxpayers to subtract from Minnesota taxable income the amount awarded for service in an approved AmeriCorps national service program.
Section 6. Update to Other References to the Internal Revenue Code. Adopts federal changes to federal adjusted gross income used for computing individual alternative minimum tax and household income which is used to compute the dependent care and K-12 education credit for tax year 2007 and following years. Laws 2007, chapter 1 (H.F. 8), adopted these same changes but for tax year 2006 only.
Section 7. Investment Tax Credit. Provides a nonrefundable income tax credit equal to 25 percent of an investment in a qualified new business venture. The maximum credit is $25,000 for an individual and $300,000 for a pass-through entity or C-corporation. If the amount of the credit exceeds the liability for tax, the excess may be carried over for up to ten succeeding taxable years. Pass-through entities and individuals may apply to the Commissioner of Employment and Economic Development for certification and the Commissioner of Employment and Economic Development is limited to issuing certificates of no more than $2,000,000.
Section 8. Active Military Credit. Increases the current refundable active duty military credit from $59 to $120 per month of service in a designated combat zone beginning with tax year 2007. Allows the decedent's estate or heirs at law to claim the credit in the event of the service member's death.
Section 9. Uniform Indexing Language. Clarifies that the income threshold for the alternative minimum tax is indexed for inflation in the same way as other indexed provisions.
Section 10. Fine, Fees, and Penalties. Prohibits businesses from deducting fines, penalties, and fees paid to, or at the direction of, a governmental entity.
Section 11. Deferred Compensation. Reforms the current law that allows a recipient to exclude from taxable income compensation that was received while a nonresident even though the income was earned while the recipient was a resident. This section will require that compensation earned while a resident is included as taxable income even when the recipient is a nonresident when it is received.
Sections 12 and 15. Payments to Persons who are not Employees. Requires contractors, or third-party bulk filers acting on their behalf, who make payments to an individual, other than an employee, for work that exceeds $600 must withhold two percent of the payment as Minnesota withholding tax. The Commissioner of Revenue must conduct a random sample audit of these withholdings and report to the legislature on the findings.
Section 13. Update of References to Internal Revenue Code in the Property Tax Refund Chapter. Adopts the federal changes that affect household income, which uses the definition of federal adjusted gross income as a starting point for taxable years 2006 and 2007 only.
Sections 1 and 2. Accelerated Payment of June Sales Tax Liability. Increases the rate of June sales and excise taxes that must be submitted early from 78 to 85 percent.
Section 3. Manufactured and Modular Homes Sourcing. Requires that for purposes of the imposition of sales tax, sales of manufactured and modular housing must be sourced to the site where the housing is first set up or installed.
Section 4. Capital Equipment Exemption. Removes the refund requirement of the capital equipment exemption for sales and purchases of capital equipment by the wood products industry.
Section 5. Materials Consumed in Agricultural Production. Exempts interior crates, calf hutches, cow mats and mattresses, and syringes and needless for livestock from the imposition of sales and use tax.
Section 6. Repair and Replacement parts. Extends the current repair and replacements part exemption for farm machinery and logging equipment to include tires.
Section 7. Fencing Exemption. Extends the fencing exemption to all fencing used for the containment of livestock.
Section 8. Commuter Rail Cars and Engines. Exempts commuter railroad cars and engines and related equipment, including repair parts. Total refunds are limited to $2.7 million for 2008-2009 and $606,000 for 2010-2011.
Section 9. Itasca County Public Safety Radio Exemption. Exempts products and services purchased by Itasca County for the purpose of constructing its portion of the statewide public safety radio communication system.
Section 10. Construction Materials for Qualified Low-income Housing Projects. Expands the existing sales tax exemption for low-income housing construction to include limited partnerships where the sole general owner is a nonprofit corporation under Minnesota law that is a 501(c)(3) or 501(c)(4) corporation. Currently it applies to projects owned by a number of different entities but it only applies to projects owned by a limited partnership if the sole general partner is either (1) a public housing agency or housing and redevelopment authority of a political subdivision, or (2) an entity in a political subdivision exercising housing and redevelopment authority. Effective for sales made after June 30, 2009.
Section 11. Legal Reference And Data Center Facility. Exempts materials and supplies used or consumed in, and capital equipment incorporated into, the construction, improvement or expansion of a legal reference and data center facility provided that: (1) the facility is engaged in development or provision of print or online versions of legal reference products and services; and (2) the total capital investment in the facility is at least $100 million. The tax must be paid at the time of purchase and will be refunded if within one year of the completion of the expansion, the owner of the facility receives certification from the department of employment and economic development that no fewer than 8,300 full time equivalent workers are employed at the facility. For each year that the employment certification is made, 25 percent of the total eligible sales tax refund must be paid until the entire refund has been paid. Effective for sales and purchases made after December 31, 2006, and before January 1, 2012.
Sections 12, 13, and 14. Provide for cross-references to the sales tax exemptions that require refunds.
Section 15. Moratorium on Local Option Sales Tax. Prevents political subdivisions from advertising, promoting, expending funds, or holding a referendum to support imposition of a local option sales tax unless authorized by a special law enacted prior to June 1, 2007. Effective June 1, 2007, through December 31, 2010.
Section 16. Motor Vehicle Exemption. Allows a charitable organization that holds a Minnesota vehicle dealer license to give a motor vehicle to an individual without the transfer being subject to the motor vehicle sales tax provided that no monetary or other consideration is expected. The Greater Twin Cities United Way is currently the only organization that would qualify. Effective for sales and purchases after June 30, 2007.
Section 17. Duluth Food and Beverage Tax. Authorizes the city of Duluth to increase, by ordinance, its sales tax on food and beverages from the current rate of one and one-half percent to two and one-quarter percent. Changes the reduction rate of the tax to allow the city council to reduce the rate by one-half percent rather than the current reduction of to one-half percent when it determines that the tax has raised revenue sufficient to pay the debt service on $8,000,000 principal of bonds issued for capital improvements to the Duluth Entertainment Center and $4,970,000 principal of bonds for capital improvements to the Great Lakes Aquarium. Adds a reduction of three-quarters of one percent when the city council determines that revenue has been raised to pay debt service on bonds in the principal amount of $33,700,000 issued for a new arena at the Duluth Entertainment and Convention Center.
Section 18. Cook County Lodging Tax. Amends Cook County's current lodging tax so that the proceeds of the tax will be used to promote tourism to the towns of Lutsen, Tofte, and Schroeder, and to fund a new Cook County Event and Visitor's Bureau.
Sections 19 through 21. Cook County Local Option Sales Tax. Extends the use of Cook County's current local option sales and use tax to include paying for the following: (1) construction and improvement to a county community center and recreation area; (2) construction and improvement to the Grand Marais pool; (3) construction and improvement to the Grand Marais Public Library; (4) debt service to retire bonds for improvements to the Superior National Golf Course; and (5) infrastructure and communications equipment for disaster mitigation and fire protections and prevention. The extension of use is only authorized after approval of the voters at a special election held before December 31, 2007. The expiration of the tax is extended to the later of 20 years or when the city council determines that the revenue raised is sufficient to pay for the authorized projects. Additional bonding not to exceed $14,000,000 is authorized to pay for the additional projects.
Sections 22 though 24. Proctor Local Option Sales Tax. Extends the use of Proctor's current local option sales and use tax to include paying for the following capital improvement projects: public utilities, including water, sanitary sewer, storm sewer, and electric; bikeways and trails; and parks and recreation. Additional bonding not to exceed $7,200,000, is authorized to pay for the additional projects.
Section 25. Bemidji Local Option Sales Tax. Extends the use of Bemidji's current local option sales and use tax to include the city's share of costs of constructing a regional event center, not to exceed $40,000,000. Additional bonding in that amount is also authorized. The expiration of the tax is extended to the time to raise sufficient revenue for the used previously authorized plus the earlier of 30 years or when the city council determines that the revenue raised is sufficient to pay for the authorized projects.
Section 26. Clearwater Local Option Sales Tax. Authorizes the city of Clearwater, pursuant to voter approval obtained at the November 7, 2006, election, to impose a sales and use tax of to one-half of one percent and a $20 motor vehicle excise tax for the purpose of paying for the costs of acquisition, construction, improvement, and development of a pedestrian bridge, and land and buildings for a community center. Bonding not to exceed $12,000,000 is authorized to pay for the projects. The tax will terminate at the earlier of 20 years or when the city council determines that sufficient revenues have been raised to finance the authorized projects.
Section 27. Cook County Lodging and Admission Taxes. Authorizes Cook County to impose an additional lodging tax of up to one percent and a three percent admissions and recreation tax on admissions to entertainment and recreational facilities and rental of recreation equipment. The proceeds from the tax must be used to fund a new Cook County Event and Visitors Bureau. The Board of Commissioners of Cook County must annually review the budget of the event and visitors bureau. The taxes will terminate 10 years after the initial imposition of the taxes.
Section 28. North Mankato Local Option Sales Tax. Authorizes the city of North Mankato, pursuant to voter approval obtained at the November 7, 2006, election, to impose a sales and use tax of up to one-half of one percent to pay for the capital costs of the following projects: (1) the local share of the Trunk Highway 14/ County State Aid Highway 41 interchange; (2) development of regional parks and hiking and biking trails; (3) expenses of the North Mankato Taylor Library; (4) lake improvement projects; and (5) riverfront development. Bonding not to exceed $6,000,000 is authorized to pay for the projects. The tax will terminate when the revenues raised meets or exceeds $6,000,000, plus the costs of the bonds.
Section 29. Minnetonka Water Treatment Facility. Retroactively exempts capital equipment used in or incorporated into the construction of a water treatment facility owned by the city of Minnetonka regardless of whether purchased by the owner, contractor, subcontractor, or builder.
Section 30. Winona Local Option Sales Tax. Authorizes the city of Winona, if approved by the voters at a special election before December 31, 2007, to impose a sales and use tax of up to one-half of one percent to pay for the city-borne costs of construction of a street connection from the city of Winona to Minnesota State Highways 61 and 43. Bonding not to exceed $8,000,000 is authorized to pay for the project. The tax will terminate at the earlier of five years after initial imposition or when the city council determines that sufficient revenues have been raised to pay for the authorized project, plus the costs of bonds.
Section 31. Sales and Use Tax Subcommittee. Creates a joint legislative subcommittee on sales and use tax. The subcommittee will consist of ten members of the legislature as follows:
The subcommittee has the following duties:
The Department of Revenue is required to assist the subcommittee in carrying out its duties by preparing a written report.
Section 1. Dairy Investment Grant Program. Provides for a grant of up to 10 percent of the first $500,000 of qualifying expenditures to a person who raises dairy animals in Minnesota. Qualifying expenditures include acquisition, construction or improvement of dairy-related facilities or acquisition of dairy animal housing. Qualifying expenditures must be at least $40,000. Grants are available until June 30, 2010.
Section 2. JOBZ Tax Benefits. Provides that tax benefits received by a qualified business in a JOBZ require the payment of prevailing wage to laborers and mechanics at the construction site.
Section 3. Historic Structure Rehabilitation Grants. Provides for grants to be awarded for the costs of rehabilitation of historic structures. Applicants must apply to the state historic preservation officer to be considered for a project grant.
Section 4. Unemployment Insurance Data; JOBZ Audits. Authorizes release of unemployment insurance data to the State Auditor to conduct audits of the JOBZ program.
Section 5. Tax Data; JOBZ Audits. Requires the commissioner of revenue to disclose tax return data to the State Auditor for purposes of conducting JOBZ audits.
Section 6. JOBZ Property Tax Exemption. Extends the requirement that JOBZ properties pay school operating referenda levies to all of these levies. Present law subjects JOBZ properties to these levies, if the voters approved the levy before the designation of the zone.
Section 7. Fergus Falls Historical Zone. Provides a property tax exemption for property located at the site of the former state regional treatment center in Fergus Falls. The exemption applies for 15 years specified by a resolution of the governing body of the city of Fergus Falls. The exemption is phased out over the last three years of the exemption period.
Section 8. Report on JOBZ Benefits. Requires each qualified business under the JOBZ program to report to the commissioner of revenue by October 15th of each year the tax benefits that it received under JOBZ for the previous year. If the report is not filed on time, the commissioner notifies the business that it must file within 60 days. The commissioner can extend this period for good cause. Failure to submit the report causes the business to lose its right to JOBZ tax benefits and triggers the requirement to repay the tax benefits for the previous two years.
Section 9. Border City Enterprise Zone Allocations. Provides for $1,500,000 in additional border city enterprise zone allocations. $750,000 would be allocated for tax reductions to border city enterprise zones in cities that are located on the western border of the state. The Commissioner of Employment and Economic Development will allocate this amount to the western border cities on a per capita basis. The amounts received by the cities may be used for tax reductions under the enterprise zone law, or for 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. The city may instead elect to use the allocation for tax reductions under the border city development zone provisions. An additional $750,000 is provided for tax reductions under the border city development zone law to cities with border city enterprise zones located on the western border of the state. This amount is also allocated among the cities on a per capita basis and may be used by the city for purposes of the tax reductions provided in the enterprise zone law.
Section 10. Redevelopment Districts. Allows satisfying the "coverage" part of the blight test using improvements that were demolished or removed before certification of the district. Present law allows a development authority to finance or agree to the removal of substandard buildings before certification of the district and still use the building to meet the blight test, if certain conditions are met (3-year time period, city financing or development agreement, and resolution approval). This expands that special rule to allow the authority to satisfy the coverage portion of the blight test.
Section 11. Renewal and Renovation District Blight Test. Adds a cross-reference to allow authorities to use the special rule described in section 12 to qualify under the blight test for renewal and renovation districts.
Section 12. TIF Plan; Election to Delay Increment Receipt. Authorizes the development authority to provide in the TIF plan (except for economic development districts) when the first increment for the district will be received. This cannot be delayed beyond four years after approval of the plan. Because there is typically a 2-year delay between approval of the TIF plan and collection of the first increment, as a practical matter, this will usually allow a delay of up to two years. (In some instances, it may be one year or none, depending upon the timing of the request for certification of the district and the construction or increases in property value.)
Section 13. Housing Districts; but-for Finding. Exempts all housing districts from the but-for test provision that requires a finding that the project will increase the district's market value. Under present law, this exemption applies only to "qualified housing districts." Section 32 repeals the definition of qualified housing districts.
Section 14. Delay receipt; Municipal Approval. Requires the municipality for the district (the city in which the district is located in most cases) to approve an election to delay receipt of the increment.
Section 15. Excess Increment. Adds a cross reference that allows transfers of increments by pre-1979 districts to offset deficits in other districts to be subtracted before determining if the pre-1979 district has excess increments. (This confirms the intent underlying the deficit and excess increment provisions.)
Section 16. Parking Facilities. Clarifies that publicly owned parking facilities, including those ancillary to public parks and social and recreational facilities, may be financed with increment revenues.
Section 17. Housing Districts. Strikes a reference to "qualified housing districts," which are now treated the same as other housing districts.
Section 18. Housing Districts; Nonhousing Uses. Clarifies the restrictions on spending of increments from housing districts for non-housing related improvements. Present law limits the square footage for non-housing uses to 20 percent of the total square footage of the buildings receiving assistance. This section allows assistance to an addition to an existing building to be treated separately for purposes of this square footage test, if the addition is constructed more than 3 years after the original building. In addition, if the original building meets the square footage test, then the addition must not have been contemplated in the original TIF plan.
Section 19. TIF in Bioscience Zones. Modifies the special pooling rules for tax increment financing districts located in bioscience zones. Present law permits expenditures of these districts' increments on public infrastructure that is outside of the district, but within the zone. This bill expands the exemption to include land acquisition and other redevelopment costs, as defined in the blight correction test. This would include pollution cleanup and remediation. These expenditures are treated as if they were made within the district.
Section 20. Certification of Original Tax Capacity. Requires county auditors to certify original tax capacity within 30 days of receiving all of the information necessary to certify the appropriate parcels. This will eliminate the practice of one county to wait with certification until the tax capacity of the district actually increases in value. Apparently all of the other counties immediately certify the district and do not wait for a value increase to occur. Since some time limits under the TIF Act run from the date of certification, this results in uneven treatment across counties. This section also makes a conforming change in the provision relating to certifying original tax capacity to implement the provisions of section 12.
Section 21. Interfund Loans. Inserts two words in the statute that were inadvertently dropped when this subdivision was last amended to specify the appropriate interest rate.
Section 22. Special Taxing Districts. Exempts all housing districts from the requirement that available increments be transferred before using the special taxing authority to eliminate deficits. (No city has used this special taxing authority.)
Section 23. JOBZ Duration Limit. Provides that qualified businesses that sign a business subsidy agreement before December 31, 2015 are entitled to claim tax benefits for the year that the business subsidy is signed and ten more years. This extended duration is not available to any business located in the 11-county metropolitan area, or in a city with a population over 50,000, or a city contiguous to such a city; this exclusion does not apply to cities that border another state.
Section 24. JOBZ; Notification and Approval of Relocations. Requires a business that intended to relocate 25 or more full-time equivalent jobs from a location in Minnesota into a JOBZ to notify the commissioner of the Department of Employment and Economic Development (DEED), the local government (i.e., the city and county where the JOBZ is located), and the city and county where the current location of the business is. The city or county in which the business is located can, then, veto the relocation by passing a resolution within 60 days after receiving the notice. The resolution must identify one or more sites for the business to locate in the unit. These sites must:
Be large enough
Have appropriate transportation access
Be served by public infrastructure (or the unit agrees to provide it)
Be owned or controlled by the business, the local unit, or be for sale
The veto may be rescinded by passage of a resolution. This procedure roughly parallels the provisions the border city development zone program.
Section 25. State Auditor; JOBZ Audit Authority. Authorizes the State Auditor to request return information from the commissioner of revenue and wage information from the commissioner of employment and economic development on JOBZ recipient taxpayers.
Sections 26 and 29. Fiscal Disparities Cross-References. Strike a cross-reference to the repayment of additional fiscal disparities distributions by the city of Bloomington and section 28 adds a reference to the new distribution in section 27. The repayment requirement is repealed in section 47.
Section 27. Bloomington Fiscal Disparities Distribution. Requires the Hennepin County auditor to calculate and certify the amount of the areawide levy generated by Phase I and Phase II of the Mall of America project as an additional distribution to the city of Bloomington from the fiscal disparities pool.
Section 28. Addition to Fiscal Disparities Areawide Levy. Requires the fiscal disparities administrative auditor to add the additional Bloomington distribution under section 27 to the areawide levy and strikes the reference to the repealed distribution.
Section 30. Brooklyn Center; TIF. Modifies a special law providing TIF authority for the city of Brooklyn Center. Under this special law, 15 percent of the increments from the district are deposited in a housing development account. This section changes the name of the account to include "remediation." This is consistent with section 26 , which expands the permitted uses of the account to include remediation costs.
Section 31. Brooklyn Center; Permitted uses of Increment. Allows the account to be used for environmental remediation and housing construction and clarifies that the housing purposes are only required to satisfy the requirement for standard housing districts, not qualified housing districts. (Other provisions of this article repeal the qualified housing district provisions.)
Section 32. Brooklyn Center; account name. Changes a reference in the law to the account to be consistent with the name change in section 30 .
Section 33. MCDA Successor Entity. Provides that throughout the law relating to housing replacement tax increment financing districts, the term "authority" would apply to successors and assigns to the Minneapolis Community Development Agency, which is currently listed as the authority for the city of Minneapolis.
Section 34. Minneapolis Housing Replacement District. Expands the authority of the city of Minneapolis to designate up to 400 parcels in the city to be included in a housing replacement district over the life of the district. Current law limits the cities of Minneapolis, St. Paul, and Duluth to 200 parcels.
Section 35. International Economic Development Zone Study. Allows the Commissioner of the Department of Employment and Economic Development to use $250,000 of funds previously appropriated for grants to businesses to be used instead for the purpose of a study to determine the economic viability of business plans for the international economic development zones.
Section 36. Bloomington TIF District Expansion; Project Requirements. Authorizes the city of Bloomington and its port authority to change the boundaries of the tax increment financing districts at the Mall of America site. A number of specified parcels will be removed from Tax Increment District No. 1-C, which is the district that includes the current Mall of America building, and placed into Tax Increment District No. 1-G, which will include the new facility, and the duration of which is extended in section 23. A public hearing on the district modification must be held at specified times, and a unanimous vote of the members of the governing body who are present at the meeting is required. Use of U.S.-made steel in the construction is required to the extent practicable. A public sector project labor agreement is required. This section also requires employers of hospitality workers in the Phase II development project to sign collective bargaining agreements with labor organizations seeking to represent such workers. Agreements must require binding arbitration and prohibit work stoppages or other economic interference during the time required for repayment of the city's indebtedness incurred for the project. This section also requires that the agreement to provide financial assistance to the Phase II development must provide for affordable access to the amusement areas of the facility. The agreement must also include a provision that requires full time employees at the facility to be paid a living wage defined as 110 percent of the federal poverty level.
Section 37. Bloomington Local Taxing Authority. Authorizes the city of Bloomington to impose a local sales tax of up to one percent, an admissions and recreation tax of up to one percent, and a food and beverage tax of up to three percent within a special taxing district that encompasses the Mall of America site. The city may also impose a lodging tax of up to one percent of lodging receipts within the city.
Section 38. Burnsville Northwest Quadrant TIF. Defines the project area for the northwest quadrant tax increment financing district as a specified geographic area in the city, and defines a soils deficiency district to mean a district that contains unusual terrain or soil deficiencies for 80 percent of the acreage in the district where the estimated cost of physical preparation of that district, excluding certain road and local improvement costs, would exceed the fair market value of the land before completion of the preparation. The special rules that apply to this district include the following:
the five-year rule that requires substantial completion of activities within a district is extended to ten years; and
the general prohibition on pooling does not apply; up to 80 percent of increments may be expended on improvements outside of the district but within the project area defined in the bill;
in the case of a soil deficiency district, increments may be collected for 20 years (general law) and may be used only to acquire parcels on which the improvements must occur, to pay for the cost of correcting the unusual terrain or soil deficiencies and the additional cost of installing public improvements that are directly caused by the deficiencies, and to pay for the administrative expenses of the authority that are applicable to that district;
increments spent for any infrastructure costs are deemed to satisfy the requirement of the laws regarding expenditures for tax increments for soil condition districts and redevelopment districts and the requirements of this act; and
The authority to approve a plan for such a district would expire at the end of 2017.
Section 39. Eagan TIF. Authorizes the city of Eagan to establish one or more economic development tax increment financing districts subject to certain special rules and specifies the area within the city in which the districts must be located.
The special rules that apply to these districts include:
the limitations on the types of expenditures that may be made from increments within an economic development district do not apply to these districts; and
authorizes expenditure of increments on surface parking, sanitary sewer, storm sewer, water and street improvements, both within and outside of the area within which the district is required to be located, if the improvements are related to development within that area; this authorization would override the pooling restrictions in general law. Expenditures may also be made from these increments for administrative expenses.
The authority to approve plans to establish tax increment districts subject to this section expires on December 31, 2008.
Section 40. Eyota TIF. Allows the city of Eyota to be considered a "small city," for purposes of the tax increment financing law, notwithstanding the existing statutory restriction that a small city must be located at least ten miles away from a Minnesota city with a population of 10,000 or more. The tax increment financing law provides that tax increment from an economic development district in a small city may be used to provide assistance for up to 15,000 square feet of any separately owned commercial facility within the small city. Cities other than small cities are restricted in the uses of tax increments from economic development districts. Those revenues may not be used to provide improvements or other assistance to developments consisting of buildings and facilities if more than 15 percent of the buildings and facilities are used for purposes other than manufacturing, warehousing, research and development related to the manufacturing or warehousing, telemarketing, tourism facilities, qualified border retail facilities or space necessary for those activities.
Section 41. Fridley TIF. This bill authorizes the city of Fridley, or its Housing and Redevelopment Authority, to establish a redevelopment tax increment financing district that would be subject to certain special rules. The district would include a number of parcels that are specified in the bill and adjacent railroad property and would be referred to as the North Star Transit Station District. The special rules include the following:
the requirements for qualifying a tax increment financing district under general law which require that the area within the district be blighted, would not apply to the parcels located within this district;
in addition to the costs currently provided under the law for expenditures of increments from a redevelopment district, eligible expenditures would include the costs of construction and land acquisition for a tunnel under the Burlington Northern Santa Fe railroad tracks.
The section authorizes the city of Fridley to expend increments generated from three existing tax increment financing district for the terminal project, as well as for costs that are permitted for expenditures of increments from redevelopment districts. These expenditures may be made outside the boundaries of the existing tax increment financing districts, but must be within the North Star Transit Station District.
The five-year rule that requires initiation of activities within a tax increment financing district under the pooling restrictions is made inapplicable to the North Start Transit Station District or to the three preexisting tax increment financing districts. The provision that governs the use of revenues beginning with the sixth year following certification of the district, that requires that revenues in excess of the cost permitted under the five-year rule must be used for purposes that will lead to decertification of the district, is also made inapplicable to the three existing districts.
Section 42. New Brighton TIF. Authorizes the city of New Brighton to expend increments generated from a specific tax increment financing district in the city to facilitate activities that are related to the clean-up of hazardous substance subdistricts. These expenditures may occur outside the boundaries of the tax increment financing district, but only within the area the city referred to as the northwest quadrant. The five-year rule is made inapplicable to these expenditures.
Section 43. Republican National Convention Expenses. Appropriates $39 million from the cash flow account to support a guarantee by the state the private money will be raised to pay the Minneapolis-St. Paul Host Committee's share of expenses for the 2008 Republican National Convention.
Section 44. Appropriation; Fergus Falls. Appropriates $200,000 for fiscal year 2008 and $200,000 for fiscal year 2009 for DEED grants to the city of Fergus Falls to market and promote development and reuse of the former regional treatment center.
Section 45. Appropriation; Dairy Investment Grants. Appropriates $300,000 for fiscal year 2008 and $200,000 for fiscal year 2009 for the dairy investment grant program established in section 1. Three percent of the appropriation may be used for administrative expenses.
Section 46. Appropriation; Minnesota Historical Society. Appropriates $3.073 million from the general fund for fiscal year 2008 to the Minnesota Historical Society for the historic rehabilitation grant program established under section 3. Up to $40,000 of this may be used for the cost of administering the grant program.
Section 47. Repealer. Repeals the following laws:
Section 1. Accrued Interest. Provides that accrued interest will not be included in the base amount with respect to which collateral must be on hand for financial institutions that are eligible to hold public funds. The interest would become subject to the collateral requirements after it is deposited in the account.
Section 2. School District Capital Equipment. Increases from five to ten years the maximum term of general obligation certificates of indebtedness or capital notes issued by school districts for capital equipment and computer hardware and software purchases.
Section 3. Market Value. Provides that levies to pay bonds that are approved by the voters after June 30, 2007, will be imposed on net tax capacity.
Section 4. Public Notices. Changes the time for publication of public notices so that the last publication of a notice about a future event must occur not more than 30 days before the event. Under current law, the notice must be published no more than 14 days before the event.
Sections 5 through 8 establish an alternative procedure for the creation of town subordinate service districts.
Section 5. Special Services Definition. Provides a definition of "special services," which are one or more governmental services or additions to town-wide services provided by the town specially for the area of the subordinate service district and financed from revenues from the area.
Section 6. Subordinate Service Districts. Authorizes a town board to establish a subordinate service district by adoption of a resolution. Under current law, the subordinate service district must be created by a petition signed by at least 50 percent of the property owners in the part of town proposed for inclusion in the district. A public hearing must be held on the proposal, with a published notice regarding the hearing that would include the nature of the special services to be provided within the district and the description of the boundaries of the district.
Section 7. Debt Issuance. Authorizes the town board to issue obligations to pay for the capital improvements necessary to operate the subordinate service district and provide the special services. The obligations would be payable primarily out of the proceeds of the taxes and service charges as well as district revenues and special assessments. The town board may pledge the full faith and credit and taxing powers of the town on the obligations. These obligations are exempt from the general law referendum requirement and the amount would not be included in determining the net debt of the town. The town board may make a covenant for the protection of the holders of the obligation and taxpayers of the town, including a covenant that the town will impose and collect charges sufficient to produce funds needed to pay the debt service when combined with other taxes or special assessments.
Section 8. Duration. Provides that if obligations have been issued for the benefit of the subordinate service district, any charges and levies that were imposed for their payments must continue until the obligations and any refunding obligations have been paid.
Section 9. County Capital Notes. Removes the July 1, 2007, sunset on the authority of county boards to issue capital notes for computer software.
Section 10. Limitations on County Capital Improvement Plan Bonds. Changes the limit on capital improvement plan bonds from .0567 percent of taxable market value to .12 percent. The special limit for Ramsey County is lifted, subjecting it to the .12 percentage rate.
Section 11. County Subordinate Service Districts. Authorizes county boards to issue obligations to pay for capital improvements necessary to operate a county subordinate service district and to provide the special services in the district. The obligations would be payable primarily out of the proceeds of the taxes and special services imposed for this purpose, together with other revenues and special assessments. The county board may also pledge the full faith and credit and taxing power of the county to insure payment of the debt service. A referendum is not required on the issuance of these obligations and they are not subject to debt limitations. The county board may make covenants for the protection of the holders of the obligations and the taxpayers, including a covenant that the county will collect whatever revenues are necessary to pay the debt service on the obligations. If the district is withdrawn or removed after obligations have been issued in connection with the subordinate service district, any charges and tax levies imposed for the payment of those obligations must continue until the obligations and any obligations issued to refund them, have been paid.
Section 12. Hennepin County Capital Equipment. Extends from five to ten years the maximum term of notes that are issued by Hennepin County for purchases of capital equipment that has an expected useful life of at least equal to the term of notes. The definition of "equipment" is extended to include computer hardware and software, in the same terms as those purchases are currently allowed for other political subdivisions.
Sections 13 and 14. Hennepin County HRA. Allows the Hennepin County Housing and Redevelopment Authority (HRA) to operate anywhere in the county.
Section 15. Capital Notes for Computer Software - Home Rule Charter City. Removes the July 1, 2007, sunset on the ability of a home rule charter city to issue capital notes for computer software.
Section 16. Capital Notes for Computer Software - Statutory City. Removes the July 1, 2007, sunset on the ability of a statutory city to issue capital notes for computer software.
Section 17. Municipal Gas Agency. Extends the definition of "city" in the municipal gas distribution law to include a city that is organized under the laws of another state or of a city charter in another state, if that city participates in a municipal gas agency with Minnesota cities.
Section 18. Postemployment Benefit Trusts. Allows a political subdivision or another public entity that creates an actuarial liability to pay postemployment benefits to retired employees to establish a trust from which to pay those benefits. The trust may be revocable or irrevocable. The trust administrator may be either the Public Employees' Retirement Association (PERA), a bank that has corporate trust powers, or an insurance company or agency which has at least five years experience in investment products and services for group retirement benefits and has a specialized department dedicated to services for retirement investment products. The political subdivision or other public entity is required to establish a trust account to be held by a trust administrator with a separate account for each participating political subdivision or public entity. The trust administrator may charge fees for the services. The administrator is required to report to the political subdivision on the returns of invested assets and on all fees and costs incurred by the trust. The bill describes the investments of the trust assets that may be made by each category of trust administrators. No more money can be put into a trust account by the political subdivision or public entity if the amount invested exceeds the entity's actuarially determined liabilities for postemployment benefits. If the account is revocable, the political subdivision or public entity may withdraw its money or terminate the trust. The amount withdrawn must be deposited in a fund to be used to pay postemployment benefits unless there have been changes in the law, demographic composition of the political subdivision's employees or in the terms of postemployment benefits, or other similar factors that have a material effect on the political subdivision's actuarially determined liabilities. If the account is in a irrevocable account, the political subdivision may withdraw money only as needed to pay postemployment benefits or when all of that liability has been defeased.
The law specifies that the legislature may not divert funds in these trust accounts for use for another purpose. The money that is held in an irrevocable trust is deemed to be not subject to claims by creditors of the state or the political subdivision or public entity or any current or former officers or employees of the political subdivision or public entity or the trust administrator.
Section 19. Transit Bonds. Authorizes the Metropolitan Council to issue up to $33.6 million in bonds or other obligations for transit capital improvement.
Section 20. Metropolitan Council Authority. Allows the Metropolitan Council to use grant anticipation financing for transportation.
Sections 21, 22, and 25. Postemployment Benefit Bonds. Authorizes a municipality to issue bonds for funding actuarial liabilities to pay post employment benefits to employees or officers after their termination of service. The issuance of bonds for this purpose is exempted from the referendum requirement.
Section 23. Grant Anticipation Financing for Transportation. Allows counties and cities to borrow and issue bonds in anticipation of receiving federal transportation grants. The bonds may be issued as revenue or general obligation bonds. The proceeds of the obligations must be used to pay the costs of transportation or transit projects relating to the federal grants being anticipating and to pay the cost of issuance or interest on the bonds.
Section 24. Net Debt Limit. Increases the net debt limit of a municipality except a school district or a city of the first class, from two to three percent.
Section 26. Municipal Street Reconstruction. Modifies the provision that enables municipalities to sell obligations for street reconstruction without a referendum. It provides that the street reconstruction plan must describe the street reconstruction that will be financed under the plan, rather than all the streets that are to be reconstructed. It further provides that the plan and the issuance of obligations must be approved by a vote of all of the members of the governing body who are present at the meeting that follows the public hearing on the issue. Under current law, the bonds must be approved by unanimous vote of all members of the governing body.
Section 27. Postemployment Trust Validation. Specifies that any trust or trust account or similar contract authorized under the Internal Revenue Code, before June 6, 2006, for the purpose of paying postemployment retirements, will be validated and may remain in effect and have continuing authority to accept new funds. A validated trust or account will have until January 1, 2008, to bring its trust documents and procedures into compliance with the requirements of Section 14.
Section 28. Crane Lake Township. Authorizes the Town Board of the town of Crane Lake in St. Louis County, to issue certificates of indebtedness in a total amount that is unspecified in the bill. The proceeds of the certificates are required to be used for property acquisition.
Section 29. City of Winsted. Authorizes the city of Winsted to issue general obligation bonds to finance the acquisition and betterment of a facility that would include a city hall, community center, and police station, as well as to pay for park improvements, including trails and an amphitheater, with related public improvements and landscaping. The bill authorizes the city to issue the bonds without an election and provides that the bonds would not be included in any debt limitation that applies to the city. The bill limits the aggregate principal amount of the bonds to $4,900,000, plus the cost of issuance of the bonds and capitalized interest.
Sections 1 and 2 provide that ore docks and power plants located at taconite facilities that will become subject to property taxation under section 6 will be included within the commercial industrial property base used in the range fiscal disparities formula.
Section 3 authorizes the Iron Range Resources and Rehabilitation Board (IRRRB) to authorize the commissioner to purchase forest lands in the taconite assistance area. The forest lands would be held in trust for the benefit of the citizens of the area as the Iron Range Miners' Memorial Forest. The board is authorized to use the lands for recreation and economic uses, and is required to deposit the proceeds from the sale of timber or removal of gravel or other minerals from these lands into an Iron Range Miners' Memorial Forest account. The money in that account may be transferred into the Douglas J. Johnson Economic Protection Trust Fund.
Section 4 changes the appointment of members of the Iron Range Higher Education Committee. Under current law, two members are appointed by the Commissioner of IRRR. This section provides that those two members are appointed by the chair of the IRRRB. The president of the Northeast Higher Education District is also added to the committee.
Section 5 limits the exemption from the production tax that currently applies to the first two years of a plant's commercial production of direct reduced ore. Under current law, the tax is phased-in over the next four years. This provision would limit the exemption and phase-in of the tax to plants for which all environmental permits have been obtained and construction has begun before January 1, 2009.
Section 6 modifies the property tax exemption that applies to taconite production facilities so that it does not apply to power plants or ore docks located at the taconite production facility.
Section 7 provides a per capita distribution of 3 cents per taxable ton to townships that are entirely located within the taconite tax relief area.
Section 8 increases the distribution of production tax proceeds to school districts by 5.5 cents per ton, with three cents per ton going from specific producers to specific school districts, and 2.5 cents per ton distributed to school districts throughout the taconite tax relief area.
Section 9 modifies the distribution of the production tax proceeds to counties by increasing by 5 cents per ton the amount that is paid into county road and bridge funds, and reducing by 5 cents per ton the general distributions to the counties where the taconite is produced.
Section 10 reduces the distribution of production tax proceeds to the property tax relief fund from 33.9 to 30.9 cents per ton.
Section 11 creates an Iron Range Higher Education Account to be used for higher education programs in the taconite assistance area. Two cents per ton of the taconite production tax will be deposited in the account.
Sections 12 and 13 permits money in the Douglas J. Johnson Economic Protection Trust Fund to be used to purchase forest land in the taconite assistance area.
Section 14 provides that after making the distribution of $2,000,000 to St. Louis County for a Pike River Road project that is required under current law, the remainder of the 2008 distribution from the grant and loan fund must be paid to the city of Virginia for extension and replacement of its water and sewer systems.
Section 15 provides that money that is set aside for the Central Iron Range Sanitary Sewer District for a 2007 distribution from the public works and local economic development fund, must bear interest to the sewer district rather than St. Louis County, which is the fiscal agent for the recipients. It also provides for distribution of ten cents per ton to the IRRRB for deposit in a new Highway 1 Corridor account to be distributed to any of the cities of Babbitt, Cook, Ely, or Tower, for economic development projects that are approved by the IRRRB. These distributions would also accrue interest.
Sections 16, 17 and 18, provides that taconite tailings, crushed rock, and architectural or dimension stone and dimension granite that are removed from taconite mines or sites of previously operated mines will be subject to the aggregate materials tax. The proceeds of the tax on these materials would be remitted to the Commissioner of Iron Range Resources and Rehabilitation for the use of the Taconite Area Environmental Protection Fund.
Section 19 authorizes the town of Scambler in Otter Tail County to impose an aggregate materials tax as long as the county does not impose a tax on aggregate materials and it approves the imposition of the tax. The proceeds of the tax must be used for the purposes for which aggregate materials taxes are currently dedicated.
Section 20 annually appropriates $500,000 of production tax proceeds to the taconite environmental protection fund and the Douglas J. Johnson Economic Protection Trust Fund to be used to retire bonds of the Mesabi East School District.
Section 21 appropriates money to the Department of Education for general education aid to compensate for the elimination of the offset against general education funding for taconite production tax distributions to school districts.
Section 22 repeals the provision under which the offset of education aids for taconite production tax proceeds paid to schools occurs.
Section 1. Estate Tax Value. Authorizes the Commissioner of Revenue to determine the value of property subject to Minnesota estate tax independently of its value for federal purposes.
Section 2. All-Terrain Vehicle Allocations. Increases the percentage of gasoline deemed to be used by all-terrain vehicles from 0.15 percent to 0.27 percent.
Sections 3 and 5. Accelerated Payment of June Sales Tax Liability. Increases the rate of June cigarette and liquor excise taxes that must be submitted early from 78 to 85 percent effective with June 2009 tax liabilities.
Section 4. Forfeited cigarettes. Requires the Commissioner of Revenue to destroy unstamped cigarettes and tobacco products on which the excise tax has not been paid. The cigarettes or tobacco products may be used for enforcing criminal provisions of federal or state law.
Under present law, the commissioner can take any of the following three actions with regard to the contraband cigarettes or tobacco products:
The section retains the commissioner's authority to sell other types of contraband (e.g., vending machines, vehicles, and so forth) recovered for nonpayment of excise tax.
Section 6. Premiums Paid to Certain Foreign Insurance Companies. Provides an exemption from the insurance premium tax for premiums paid for life insurance and accidental death and dismemberment insurance for state employees and their dependents under the state insurance plan. The exemption will apply if the premiums are paid to a foreign insurance company domiciled in a state that exempts its state employee group life insurance program from premium taxes.
Section 7. Hennepin County Deed and Mortgage Tax. Extends the current Hennepin County deed and mortgage tax five years until 2013.
Sections 8 through 10. Ramsey County Deed and Mortgage Tax. Extends the current Ramsey County deed and mortgage tax five years until 2013. Strikes an authorization for the county board to administer the fund acting as the county rail authority. Also strikes language authorizing the use of the funds for improvements to property for economic development, recreation, housing, transportation or rail traffic.
Sections 11 and 12. St. Louis County Deed and Mortgage Tax. Authorizes St. Louis County to impose a mortgage registry and deed tax of .0001 of the principal in the case of the mortgage registry tax, and .0001 of the deed amount in the case of the deed tax. Revenues must be deposited in the county's Environmental Response Fund which must be for the following purposes: (1) acquisition of property that is polluted or contaminated with hazardous substances; (2) paying the costs connected with indemnifying or holding harmless the entity that takes title to land or property from any liability arising out of the ownership, remediation, or the use of the property; (3) paying for the costs of remediating the acquired property or other properties that are polluted or contaminated with hazardous substances; or (4) paying the costs associated with remediating lands or property which are polluted or contaminated with hazardous substances. The taxing authority expires January 1, 2013.
Section 13 and 14. Dakota County Deed and Mortgage Tax. Authorizes Dakota County to impose a mortgage registry and deed tax of .0001 of the principal in the case of the mortgage registry tax, and .0001 of the deed amount in the case of the deed tax. Revenues must be deposited in the county's Environmental Response Fund which must be for the following purposes : (1) acquisition of property that is polluted or contaminated with hazardous substances; (2) paying the costs connected with indemnifying or holding harmless the entity that takes title to land or property from any liability arising out of the ownership, remediation, or the use of the property; (3) paying for the costs of remediating the acquired property or other properties that are polluted or contaminated with hazardous substances; or (4) paying the costs associated with remediating lands or property which are polluted or contaminated with hazardous substances. The taxing authority expires January 1, 2013.
Sections 15 and 16. Anoka County Deed and Mortgage Tax. Authorizes Anoka County to impose a mortgage registry and deed tax of .0001 of the principal in the case of the mortgage registry tax, and .0001 of the deed amount in the case of the deed tax. Revenues must be deposited in the county's Environmental Response Fund which must be for the following purposes: (1) acquisition of property that is polluted or contaminated with hazardous substances; (2) paying the costs connected with indemnifying or holding harmless the entity that takes title to land or property from any liability arising out of the ownership, remediation, or the use of the property; (3) paying for the costs of remediating the acquired property or other properties that are polluted or contaminated with hazardous substances; or (4) paying the costs associated with remediating lands or property which are polluted or contaminated with hazardous substances. The taxing authority expires January 1, 2013.
Section 17. Temporary Petrofund Fee Exemption for Minnesota Commercial Airlines. Extends the current exemption from paying the petroleum tank release cleanup fee two years until 2009 in order to support the efforts of a commercial airline that has its corporate headquarters in Minnesota to resolve federal bankruptcy proceedings. The ineligibility to receive reimbursement is also extended two years until 2009.
DEPARTMENT INDIVIDUAL INCOME AND FRANCHISE TAXES
Sections 1 and 14 through 17. Uniform Language for Indexing Provisions. Clarify that the indexing for the dependent credit income threshold, working family credit income threshold, the individual alternative minimum tax exemption, and threshold for being subject to Revenue Recapture, are all indexed in the same way rather than using differing base years and that the results of the indexing are all rounded to the nearest $10. Effective for tax years beginning after December 31, 2006.
Section 2. Date of Birth on Individual Return. Requires that individuals provide their date of birth on their individual Minnesota income tax returns. Effective for tax years beginning after December 31, 2006.
Section 3. Electronic Filing of Withholding Tax Returns. Requires employers who are required to withhold Minnesota individual income taxes for more than 100 of their employees to submit their Minnesota W-2 tax filings by electronic means. The 100-employee threshold drops to 50 for 2008, 25 for 2009, ten for 2010 and thereafter. Effective for wages paid after December 31, 2006.
Sections 4 and 5. Returns of Mutual Funds Paying Federal Tax-Exempt Interest Dividends. Requires mutual funds that pay federal tax exempt dividends to Minnesota residents to file a copy of the return currently required to be sent to the shareholders of the fund to the commissioner by March 15th of the year following the year the dividends were paid. Current law allows the commissioner to demand copies of the return after which the mutual fund has 60 days to provide the returns without penalty. Effective for tax years beginning after December 31, 2006.
Section 6. Penalty for Failure to Provide Correct Identification Number of Partners or Shareholders. Provides a $50 penalty for each time a partnership or S corporation lists an incorrect tax identification number for an owner which the entity reports in their Minnesota return after being notified by the commissioner that the number is incorrect. Effective for returns filed after December 31, 2007.
Section 7. Penalty for Negligence in Filing a Property Tax Refund Return. Changes the penalty from one based on ten percent of the property tax refund allowed to a penalty of ten percent of the claimed amount that is not allowed. Effective for property tax refund claims filed on or after July 1, 2007.
Section 8. Cross-Reference in the Tax Shelter Disclosure Penalty. Corrects a cross-reference. The current cross-reference is to Minnesota Statutes, section 270C.34, which does not abate a disclosure penalty. The corrected references to Minnesota Statutes, section 289A.60, subdivisions 26, paragraphs (d) and (g), identify an abatement provision that applies to tax shelter transactions. Effective the day following final enactment.
Section 9. Penalty for Tax Preparers Failing to Include Preparer Number. Adds a new subdivision which requires tax preparers who prepare Minnesota individual income tax returns to provide their federal preparer number on Minnesota individual income tax returns. Failure to provide the number results in a $50 penalty being assessed against the preparer for each failure. Effective for returns prepared for tax years beginning after December 31, 2006.
Section 10. Cross-Reference. Corrects a cross-reference.
Sections 11, 12, and 21. Modifications for Pollution Control Facilities. Amends the present addition and subtraction for the federal pollution control depreciation to federal taxable income to determine Minnesota net income. The amendments repeal the modifications to federal taxable income that are presently required. An uncodified section is enacted to permit taxpayers to deduct remaining added but not subtracted depreciation in taxable year 2007. Effective for taxable years beginning after December 31, 2006.
Section 13. Sunset of Bovine Testing Credit. Provides that bovine testing credit will not be available for calendar years after the federal government no longer requires tuberculosis testing of Minnesota cattle. Effective for tax years beginning after December 31, 2007.
Section 18. Corporate Franchise Tax Citation. Makes a technical correction to an internal citation in the section. Subdivision 7, which is cited in the present statutes, was repealed; the definition of deposits ratio used to apportion certain types of bank income was moved to subdivision 6, paragraph (n). Effective the day following final enactment.
Section 19. Definition of Dependent for Property Tax Refund. Removes unnecessary language dealing with support provided by welfare, since the test for dependency is no longer whether the taxpayer provides more than 50 percent of support but whether the individual provides more than 50 percent of their own support. Effective for property tax refunds based on rents paid after December 31, 2006, and for property tax payable after December 31, 2007.
Section 20. Valuation of Assets for Estate Tax. Allows the commissioner to challenge an estate's valuation of assets included in an estate rather than being bound by valuations accepted by the Internal Revenue Service. Retroactively effective for estates of decedents dying after December 31, 2005.
Section 1. Bad Debt Loss. Provides that a sales tax refund claim for a bad debt loss must be filed within 3-1/2 years from the date the bad debt was written off as uncollectible on the taxpayers' books and records and was either eligible to be deducted for income tax purposes or within one year from the due date the federal income tax return was timely filed claiming the bad debt loss, whichever period expires later. This section also provides that any payments on previously claimed bad debts must be first applied proportionally to the taxable price of the property or service. Effective the day following final enactment.
Sections 2 and 37. Interest on Border City Zone Refunds. Provide that interest on border city zone refunds will be computed from 90 days after the refund claim is filed with the commissioner. Currently interest is computed from the date the claim is filed with the commissioner. Effective for refund claims filed on or after July 1, 2007.
Section 3. Penalty for Failure to Properly Complete Return. Provides that the penalty for failure to properly complete a sales tax return applies to all local taxes that are reported on the sales tax return which could include lodging, restaurant, and liquor taxes. Currently the penalty only applies to local sales taxes administered by the department. Effective for returns filed after June 30, 2007.
Section 4. Penalty for Failure to Report Liquor Sales. Provides a $500 penalty on a liquor distributor for failing to file an annual report with the Commissioner of Revenue listing the amount of intoxicating liquor sold in the previous calendar year to liquor retailers. The penalty is increased to $1,000 if the failure to file the report is intentional. The first annual report is for calendar year 2007 and is due by February 28, 2008. Effective the date following final enactment.
Section 5. Sale and Purchase of Certain Services Currently Part of Telecommunication Services; Aggregate Materials and Pest Control Services.
Telecommunication Services: Provides that the following services, which are currently considered taxable as telecommunication services under the more broad definition of telecommunication service found in section 297A.61, subd. 24, are still taxable: the furnishing a guest of a lodging facility with access to telecommunication services, the furnishing of ancillary services associated with telecommunication services, the furnishing of cable television and direct satellite services, and ring tones. This is necessary to assure they remain in the tax base, since conformity with the streamlined sales tax agreement requires an amendment to the definition of telecommunication services, to exclude them from the definition of telecommunication services. Effective for sales and purchases made on or after January 1, 2008.
Aggregate Material: Excludes the delivery of aggregate material used in road construction, and delivery of concrete from the definition of taxable delivery of aggregate materials.
Pest Control Services: Clarifies that the imposition of the sales tax on exterminating services also includes pest control services. Effective for sales and purchases made after June 30, 2007.
Section 6. Resale of Telecommunication Services; Retail Sale of a Bundled Transaction, Possible Exception Based on the Products and the Books and Records of the Seller. Provides that a sale of a telecommunication service used as part of a telecommunication service to be sold in the normal course of business is a sale for resale, and to provide that a sale of a bundled transaction is a retail sale. These amendments are necessary to clarify or maintain current tax treatment, which would otherwise be altered with related amendments in this article. Adds a provision that if one of the products in the transaction is a telecommunication service, ancillary service, Internet access or audio or video programming services, and the seller has the required books and records to show the portion of the price of the distinct products, then the products will not be considered part of a bundled transaction, so that only the otherwise taxable portion will be subject to tax. Effective for sales and purchases made on or after January 1, 2008.
Section 7. Sales Price: Allocation of Delivery Charges, Bundled Transactions, Consideration Received by Seller from Third Parties. Amends the definition of "sales price," to provide as follows: as it relates to delivery charges, it includes only the percentage of the charge allocated to the taxable property, where the allocation is based on either sales price or weight; deletes language that included the value of tax exempt property when part of a bundled transaction; and includes consideration received by the seller from third parties under the specific criteria. All of these amendments are made to conform with the streamlined sales tax agreement. The provision relating to delivery charges is effective the day following final enactment, and the remaining amendments are effective for sales and purchases made on or after January 1, 2008.
Section 8. Prepaid Calling Cards. Deletes "prepaid calling cards" from the definition of tangible personal property. In conformity with the streamlined sales tax agreement, the sale of such a card will be treated instead as a sale of a prepaid calling service (a telecommunication service). This will not affect the current tax treatment. Effective for sales and purchases made on or after January 1, 2008.
Section 9. Telecommunication Services. Amends the definition of telecommunication services to conform with the streamlined sales tax agreement. Provisions that are deleted in this amendment are moved to other sections within Minnesota Statutes, chapter 297A, as needed, to maintain current law. Effective for sales and purchases made on or after January 1, 2008.
Section 10. Bundled Transaction. Defines "bundled transaction" to conform with that definition in the streamlined sales tax agreement. To meet the definition, the two or more products in the transaction must otherwise be distinct and identifiable, and be sold for one non-itemized price. The products may include tangible and intangible property, services, and digital goods, but do not include real property or services to real property. Further defines "distinct and identifiable" and "one nonitemized price," and provides exceptions from the definition using a "true object" test, a "de minimus" test, and for transactions that include food or medical products, a "50%" test. Effective for sales and purchases made on or after January 1, 2008.
Sections 11 through 17. Ancillary Services Definitions; Ring Tones Defined. Adds seven new subdivisions to define "ancillary services," "conference bridging service," "detailed telecommunications billing service," "directory assistance," "vertical service," "voice mail service," and "ring tones." All of the services listed here except for ring tones are defined as ancillary services. These items are currently taxed but would not be included under the new definition of telecommunication services. The imposition of tax on ring tones and ancillary services under present law is continued. Effective for sales and purchases made on or after January 1, 2008, except Section 17 is effective the day following final enactment.
Sections 18 and 27. Fur Clothing. Defines fur clothing for purposes of making it subject to sales and use tax, and excludes fur clothing from the definition of clothing so it is no longer exempt from sales and use tax. This is in conjunction with the repeal of the 6.5 percent gross receipts tax on fur clothing-see sections 38 and 39, paragraph (a), below. Conforms with the streamlined sales tax agreement. Effective for sales and purchases made on or after July 1, 2007.
Section 19. Imposition of Use Tax; Certain Taxable Products Purchased by Seller for $100 or More. Imposes use tax on the purchase by a seller, where the purchase price is equal to or greater than $100, of an otherwise taxable product or taxable tangible personal property that but for Minn. Stat. § 297A.61, subd. 38, paragraph (d), would be considered part of a bundled transaction. While an amendment above to Minn. Stat. § 297A.61, subd. 6, makes the sale of most bundled transactions subject to tax, the amendment to Minn. Stat. § 297A.61, at the new subd. 38, paragraph (d), excepts certain transactions from the definition of bundled transactions based on the value of the otherwise taxable products. See sections 6 and 10 above. This amendment will maintain the taxability of high priced taxable items when they are a part of a transaction that is excepted from the definition of a bundled transaction by requiring the seller to pay use tax on their cost of the taxable item when the cost is equal to or above $100. Effective for sales and purchases made on or after January 1, 2008.
Section 20. Seller Liability Relief and Exemption Certificates. Relieves the seller of liability if, within an additional 90 days after the time of sale, the seller obtains a fully completed exemption certificate or the required data elements from a purchaser; to relieve the seller of liability if, within 120 days after the Commissioner of Revenue requests substantiation, the seller obtains a fully completed exemption certificate or the information required by Minn. Stat. § 297A.72 from a purchaser or proves by other means that the transaction was not subject to tax. Conforms with the streamlined sales tax agreement. Effective for sales and purchases made on or after January 1, 2008.
Sections 21 through 24 . Definitions of Prepaid Wireless Calling Service and Postpaid Calling Service. Conforms to the streamlined sales tax agreement as follows: adds "prepaid wireless calling service" to the provision regarding sourcing of telecommunication services; amends the definition of "postpaid calling service" to clarify it does not include prepaid wireless calling services; and defines prepaid wireless calling services. Effective for sales and purchases made on or after January 1, 2008.
Section 25. Sourcing Ancillary Services. Sources ancillary services to the customer's place of primary use. "Ancillary services" is defined in section 11 above. Effective for sales and purchases made on or after January 1, 2008.
Section 26. Medical Devices. Exempts the sale of kidney dialysis equipment is exempt fro m the sales tax. This codifies current practice and is required because of changes in the definition of durable medical equipment in the streamlined sales tax agreement. Effective the day after final enactment.
Section 28. Breast Pumps. Includes breast pumps as an exempt baby product. Previously, the Department of Revenue interpreted durable medical equipment to include breast pumps, but is no longer allowed this interpretation under the streamlined sales tax agreement. Retains the current tax treatment. Effective for sales and purchases made on or after the day following final enactment.
Section 29. Advertising Materials. Provides that the exemption for advertising materials that are mailed or transferred outside the state for use solely outside the state includes all types of shipping materials, including boxes, tubes, labels, or cartons. Currently, the exemption only applies to mailing and reply envelopes and cards. The section also clarifies that materials having a primary purpose other than advertising would not qualify as advertising materials. Effective the day following final enactment.
Section 30. Packing Materials. Clarifies that the exemption for packing materials only applies to materials that remain with the customer of a for-hire carrier and to clarify that it would not include equipment that is owned or used by the for-hire carrier. The section further clarifies that the exemption only applies if the packing materials do not return to Minnesota. The section provides that the exemption does not apply to tools, pads, or equipment owned or leased by the for-hire carrier. Effective for sales and purchases made after June 30, 2007.
Section 31. Equipment Used Directly in Providing Cable Television or Direct Satellite Services. Maintain the tax exemption for machinery or equipment used directly by a cable television or direct satellite service provider primarily in the provision of cable television or direct satellite services that are to be sold at retail. Currently, the term telecommunication services includes cable television and direct satellite services, but the definition of telecommunication services will be narrowed with the amendment to the definition of Minn. Stat. § 297A.61, subd. 24. Effective for sales and purchases made on or after January 1, 2008.
Section 32. Utilities used in agricultural production. Clarifies the exemption relating to utilities used in the housing of agricultural animals.
Section 33. Hospital and Nonprofit Units. Provides that the exemption for hospitals and outpatient surgical centers applies to an entity that is composed of a licensed nonprofit hospital and a nonprofit unit provided that the nonprofit unit would have qualified as an organization exempt from the sales tax under section 297A.70, subdivision 4, and the items purchased would have qualified for the exemption. Effective the day following final enactment.
Section 34. Private Communication Services for State Lottery. Maintains the tax exemption for private communication services purchased by an agent acting on behalf of the state lottery. Currently, the term telecommunication services specifically excludes private communication services for the state lottery, but the amendment to the definition of telecommunication services will delete this exclusion, so a specific exemption is created to maintain tax treatment. Effective for sales and purchases made on or after January 1, 2008.
Section 35. Fully Completed Exemption Certificate. Conforms to the streamlined sales tax agreement regarding the elements of a fully completed exemption certificate, whether in paper or electronic form; and by adding a subdivision, subd. 3, to clarify that a purchaser is required to update exemption certificates used by the purchaser, including blanket exemption certificates, when the purchaser's information changes. Effective the day following final enactment.
Section 36. Liquor Reporting Requirements. Requires liquor distributors to file an annual report with the Commissioner of Revenue indicating the volume of intoxicating liquor sold to retailers in the previous calendar year. The first report would be due by February 28, 2008, and would apply to liquor sales made in calendar year 2007. The form and manner of the report would be prescribed by the commissioner and penalty provisions would apply for failure to file the report with the commissioner. Effective the day following final enactment.
Section 37. Sales Price. Provides that when interstate motor carriers compute their use tax under a motor carrier direct pay permit, the sales price may only be reduced by taxes that are directly imposed upon the carrier and that are separately stated on the billing or invoice that they are given. Effective the day following final enactment.
Section 38. Motor Vehicle Resale Exemption. Clarifies that the exemption from the tax under Minnesota Statutes, chapter 297B, is for motor vehicles purchased solely for resale in the ordinary course of business by licensed dealers and is not limited to vehicles bearing dealer plates. If the vehicle is not held solely for resale and is put to use by the dealer, the provisions of Minnesota Statutes, section 297B.035, subdivision 5, would apply. Effective the day following final enactment.
Section 39. Interest on Border City Zone Refunds. Provides that interest on border city zone refunds of sales tax will be computed from 90 days after the refund claim is filed with the commissioner. Under present law, interest is computed from the date the claim is filed with the commissioner. Effective for refund claims filed on or after July 1, 2007.
Section 40. Final Returns for Fur Tax. Provides for the last installment of estimated returns on July 15, 2007, and a revised date of September 15, 2007, for the consolidated annual return that would otherwise be due on March 15, 2008, for the gross receipts fur tax, Minnesota Statutes, section 295.60, in conjunction with the July 1, 2007, repeal of this tax. Conforms with the streamlined sales tax agreement. Effective July 1, 2007, for sales and purchases made prior to July 1, 2007.
Section 41. Repealer. Repeals Minnesota Statutes, section 295.60, the gross receipts tax on fur clothing. This section is no longer needed as fur clothing will be subject to sales tax. (See Sections 18 and 25.) Effective for sales and purchases made on or after July 1, 2007.
Repeals Minnesota Statutes, section 297A.61, subd. 20, which defines "prepaid telephone calling card." This term is not needed as the sale of such a card will not be treated as a sale of tangible personal property, but as a sale of prepaid wireless calling service. See section 23 above. Effective for sales and purchases made on or after January 1, 2008.
Repeals Minnesota Statutes, section 297A.668, subd. 6, which provided for multiple points of use sourcing for a digital good, service or electronically delivered computer software, which will now be sourced under § 297A.668. Effective the day following final enactment.
Repeals Minnesota Statutes, section 297A.67, subd. 22, that provides an exemption for property brought into Minnesota by persons who were nonresidents of Minnesota immediately prior to bringing the property into Minnesota for personal use. The exemption is not needed since Minnesota Statutes, section 297A.63, only imposes the use tax on a person who has purchased property for use, storage, distribution or consumption in Minnesota. Effective the day following final enactment.
Sections 1 through 8, 21 and 52. Airflight Property Tax Recodification.
Amends Minn. Stat. § 270.071, subd. 7, to clarify that taxable flight property includes computers and computer software used to operate, control, or regulate the aircraft. Effective the day following final enactment.
Amends Minn. Stat. § 270.072, subd. 2, to clarify that the taxable flight property of a company includes flight property used by it whether as owner or lessee, or flight property that is otherwise made available to it. Effective the day following final enactment.
Amends Minn. Stat. § 270.072, subd. 3, to put into the statute the current deadline for the airline company annual reports of July 1, which is the date currently fixed by the commissioner under the discretionary authority in this subdivision. Effective for reports due in 2007 for airflight taxes payable in 2008, and thereafter.
Amends Minn. Stat. § 270.072, subd. 6, relating to the lien for airflight property taxes to delete references to Minn. Stat. §§ 270C.62 and 270C.63. Those sections refer to taxes collected by the Commissioner of Revenue. The tax is credited to the state airports fund and collection decisions are made by the aeronautics division of Minnesota Department of Transportation. Effective January 2, 2007, for airflight property taxes payable in 2008, and thereafter.
Amends Minn. Stat. chapter 270, by enacting the new section 270.0725 to enact new penalties for this tax, currently not provided for: (1) a penalty for repeated instances of late filing is imposed at 10 percent of the tax eventually assessed; (2) a penalty for a frivolous annual report is imposed at 25 percent of the tax eventually assessed; and, (3) a penalty for fraudulent annual reports is imposed at 50 percent of the tax eventually assessed. All penalties are added to the tax and collected as such. Effective for annual reports due in 2007 and thereafter.
Repeals Minn. Stat. § 270.073, and enacts the new section 270.0735, to reflect that the commissioner's general examination and investigation powers in section 270C.31 - .32 apply when administering this tax; and, to eliminate the nearly-identical grant of powers to the commissioner in section 270.073, which relates only to this tax. Effective January 2, 2007, for taxes payable in 2008 and thereafter.
Amends Minn. Stat. § 270.074, subd. 3, to clarify that the reduced class rate applicable to Stage 3 "quiet" aircraft also applies to Stage 4 aircraft, which must meet even more stringent noise-attenuation standards. Effective January 2, 2007, for taxes payable in 2008 and thereafter.
Amends Minn. Stat. § 270.076, subd. 1, to clarify that the notices of net tax capacity and of tax that the commissioner is required to issue to airline companies are "orders" of the commissioner that may be appealed to Tax Court. Effective January 2, 2007, for taxes payable in 2008, and thereafter.
Amends Minn. Stat. § 270C.34, subd. 1, to empower the commissioner to abate penalties imposed because the company was late in submitting its annual report for reasonable cause or if the company is located in a presidentially declared disaster area. Effective July 1, 2007, and thereafter.
Sections 9 through 19, 24, and 25. Board of Assessors
The following sections 9 through 19, 24 and 25, all deal with the Board of Assessors and are all effective the day following final enactment.
Section 9. Purpose and Powers of Board of Assessors. Amends Minn. Stat. § 270.41, subd. 1, to strike the words "establish" and "conduct" from the list of Board of Assessors' duties because the board does not establish or conduct training courses.
Sections 10 and 15. Definition of the Term "Board." Adds a new subdivision to Minn. Stat. § 270.41 to define the term "board" to mean "Board of Assessors" and amends Minn. Stat. § 270.45 to refer to "board" instead of "Board of Assessors."
Section 11. Composition of the Board. Amends Minn. Stat. § 270.41, subd. 2, to delete an obsolete reference to the Minnesota Association of Assessors, which no longer exists. Clarifies that a member of the board who is no longer engaged in the capacity for which he or she was nominated to the board is disqualified from membership on the board, deletes a reference to the secretary and adds a reference to the vice chair.
Section 12. Basis for License Revocation. Amends Minn. Stat. § 270.41, subd. 3, to provide that the Board of Assessors may refuse to grant or renew a license or may suspend or revoke a license for failure to comply with the Code of Conduct and Ethics for Licensed Minnesota Assessors adopted by the board.
Section 13. Prohibited Activity. Amends Minn. Stat. § 270.41, subd. 5, to streamline the language by referring to "an assessor,"" deputy assessor," "assistant assessor" or "appraiser" as "a licensed assessor" because all of the other designations are licensed assessors.
Section 14. Charges for Courses, Examinations and Materials. Amends Minn. Stat. § 270.44 to delete references to fees for course challenge examinations and retests of board sponsored educational costs because the board does not conduct these courses or retests.
Section 16. Training Courses. Amends Minn. Stat. § 270.46 to make technical changes reflecting the fact that the board reviews and approves courses but does not establish courses and to expand the list of entities offering training courses that the board reviews and approves.
Section 17. Rules. Amends Minn. Stat. § 270.47 to resolve inconsistencies and redundancies with section 270.41, subd. 4, which is being repealed so that the subject of rules is dealt within one section and to strike the last two sentences that refer to giving examinations.
Section 18. Licensure of Qualified Persons. Amends Minn. Stat. § 270.48 to state that the board "may" license persons as possessing the necessary qualifications of an assessing official. Current language stated that the board "shall license?." The more correct term is "may" because the board's powers to license are discretionary. Other technical grammatical changes are made.
Section 19. Employment of Licensed Assessors. Amends Minn. Stat. § 270.50 to make a minor grammatical change and to strike sentences that require counties and local districts to pay the cost of training courses and that allow cities or towns 90 days from the date of incorporation to employ a licensed assessor because these provisions do not relate to the board's licensing function. The stricken language is being moved to Minn. Stat. chapter 273 to be near similar provisions. A sentence stating that if the governing body of a township or city fails to employ an assessor the assessment shall be made by the county assessor, is stricken because this is already provided for in Minn. Stat. § 273.05.
Sections 20 and 23. Certificates of Real Estate Value. Amends Minn. Stat. §§ 270C.306 and 272.115, subd. 1, to provide that a married person who is not an owner of record and who is signing a deed or other conveyance instrument along with their spouse solely because of the requirement in Minn. Stat. § 507.02 that spouses sign certain conveyances, is not a grantor for the purpose of the certificate of real estate value ("CRV"). The effect of this change is that these people will no longer need to provide their social security number on the CRV form. Effective for CRVs filed on or after July 1, 2007.
Section 22. JOBZ Property Tax Exemptions. Amends Minn. Stat. § 272.02, subd. 64, to require that newly qualified businesses notify the assessor by July 1 of the assessment year in order to begin receiving the property tax exemption that applies to JOBZ property. Properties already having a JOBZ exemption for taxes payable in 2007 are not affected. The new requirement only affects properties that first become exempt for taxes payable in 2008 or thereafter. Effective the day following final enactment.
Section 24. Cities and Townships; Employment of Licensed Assessors. Moves language allowing cities or towns 90 days from the date of incorporation to employ a licensed assessor that was stricken from Minn. Stat. § 270.50, to a new subdivision in Minn. Stat. § 273.05. Some minor grammatical changes are also made to the language moved.
Section 25. County or Local Assessing District to Assume Cost of Training. Moves language requiring counties and local districts to pay the cost of training courses that was stricken from Minn. Stat. § 270.50, to Minn. Stat. § 273.0535. Some minor grammatical changes are also made to the language moved.
Section 26. Green Acres. Amends Minn. Stat. § 273.111, subd. 3, to strike paragraph (c). These were transitional provisions in effect only for taxes payable in 1998-2001. This provision is not operative. Effective the day following final enactment.
Section 27. Valuation Reduction for Property Subject to a Conservation Easement. Amends Minn. Stat. § 273.117 to remove the requirement that property subject to a conservation easement is entitled to a reduced valuation. This allows the assessor to determine the value of the property subject to the easement. This section is effective the day following final enactment.
Section 28. Real Property Notice. Authorizes county assessors to provide real property valuation notices electronically upon written request of the property owner.
Sections 29 and 30. Reassessment of Damaged Homesteads. Amends Minn. Stat. § 273.123, subds. 2 and 3, to eliminate inadvertent references to property tax assessments that take place on "January 1." Since New Year's Day is a state holiday, the assessments do not take place "as of" that date. Effective the day following final enactment.
Section 31. Homesteads. Amends Minn. Stat. § 273.124, subd 13, to clarify the homestead application must contain the social security numbers of each occupying spouse of an owner or owner's relative. Also removes obsolete language. Effective the day following final enactment.
Section 32. Disparity Reduction Credit. Clarifies that the population parameters for the bordering cities in the other states are based on the 1980 census. Effective retroactively for taxes payable in 2001 and thereafter.
Sections 33 through 36. Utility Values are Recommended Rather than Ordered Values. Amends Minn. Stat. §§ 273.33, 273.37 and 273.371 to clarify that values listed and assessed by the commissioner shall be provided by order. Adds a new section 273.3711 which provides that all values not required by statute to be listed and assessed by the Commissioner of Revenue are recommended values. This section is effective the day following final enactment.
Section 37. Prohibit Members of Local Boards from Acting on Their Own Appeals. Amends Minn. Stat. § 274.01 to prohibit a local board member or the member's spouse, parent, stepparent, child, stepchild, grandparent, grandchild, brother, sister, uncle, aunt, nephew or niece from participating in any actions of the board that result in market value adjustments or classification changes to property owned by the board member or to property in which a board member has a financial interest. This section is effective the day following final enactment.
Section 38. Prohibit Members of County Boards from Acting on Their Own Appeals. Amends Minn. Stat. § 274.13, subd. 1, to prohibit a county board member or the member's spouse, parent, stepparent, child, stepchild, grandparent, grandchild, brother, sister, uncle, aunt, nephew or niece from participating in any actions of the board that result in market value adjustments or classification changes to property owned by the board member or to property in which a board member has a financial interest. This section is effective the day following final enactment.
Section 39. Training; County Boards of Appeal and Equalization. Amends Minn. Stat. chapter 274, by adding a new section 274.135 extending the current training requirements that apply to local boards to county boards of appeal. Requires the Department of Revenue to develop a handbook detailing procedures, responsibilities, and requirements for county boards of appeal and equalization by January 9, 2009. Counties that conduct county boards of appeal and equalization meetings will need to provide proof to the commissioner by December 1, 2009, and each year thereafter, that they are in compliance and that there was a quorum of voting members at each meeting. Counties that are out of compliance would be required to appoint a special board of equalization. This section is effective the day following final enactment.
Section 40. Notice of Proposed Property Taxes. Provides that the county treasurer may send the notice of proposed property taxes by electronic means upon written request of the taxpayer.
Section 41. Truth-in-Taxation Advertisement. Allows the commissioner to prescribe alternate language for the Truth-In-Taxation public advertisements so that the wheelage tax levy offsets, and other similar situations in the future, can be explained. Effective for advertisements in 2007 and thereafter for proposed taxes payable in 2008 and thereafter.
Section 42. Notification by Newly Organized Special Taxing Districts. Amends Minn. Stat. § 275.067, to require that newly organized special taxing districts notify the county auditor by July 1 of the year they are organized in order to certify a tax levy that year. Effective for taxes payable in 2008 and thereafter.
Section 43. Electronic Property Tax Statements. Amends Minn. Stat. § 276.04, by adding the new subd. 5, so that a county may send out property tax statements by electronic means upon written request by the owner of the property. Effective for tax statements for taxes payable in 2008 and thereafter.
Sections 44 and 45. Partial Payments of Property Taxes. Amends Minn. Stat. §§ 277.01, subd. 2, and 279.01, subd. 1, to provide uniform treatment for partial payments of either property tax installments or the amount due for the year. The prescribed treatment is that the payment: (a) must be applied to the oldest unpaid installment or year first; and (b) must be applied first to penalty or interest if the payment is less than the full amount due for that installment or year. Effective for payments made on or after the day following final enactment.
Section 46. Senior Citizen Property Tax Deferral Program. Amends Minn. Stat. § 290B.03, subd. 2, to prevent persons who are: (i) owners of a life estate; or (ii) purchasing the homestead under a contract for deed, from being eligible for the program. Effective for applications that are submitted on or after January 1, 2007.
Section 47. Auxiliary Forests. Amends Minn. Stat. § 290C.02, subd. 3, to add owners of land previously covered by an auxiliary forest contract to the definition of claimant and adds cross-references to the auxiliary forest provisions which currently provide that certain land previously covered by an auxiliary forest contract is automatically eligible for inclusion in the Sustainable Forest Incentive program. Owners of such land would be required to notify the Commissioner of Revenue in writing of the expiration of the auxiliary forest contract. Requires the owners to file an application by August 15 in order to receive a payment by October 1 of that same year. Effective the day following final enactment.
Sections 48 through 51. Sustainable Forest Act Appeals. Adds a new section 290C.13 to provide administrative procedures for appeals. The procedures are similar to those used for taxpayers. Appropriate cross-references are added in Minn. Stat. §§ 290C.04 and 290C.11, and language made obsolete due to the new section is stricken. Effective the day following final enactment. Amends Minn. Stat. § 290C.05 to clarify that the one-year waiting period in order to receive a payment only applies to the person who filed the first application to enroll the land in the Sustainable Forest Incentive program. Effective the day following final enactment.
Section 52. Repealer.
Paragraph (a). Repeals Minn. Stat. § 270.073 dealing with airflight property taxes because it is being replaced by references to Minn. Stat. §§ 270C.31 and 270C.32. Effective January 2, 2007 for taxes payable in 2008 and thereafter.
Paragraph (b). Repeals Minn. Stat. § 270.41, subd.4, and the language is moved to Minn. Stat. § 270.47.
Repeals Minn. Stat. § 270.43 (members of the board receive no compensation but do receive expenses) because it conflicts with Minn. Stat. § 270.42 (compensation of members shall be as provided in Minn. Stat. §§ 214.07-214.09). Minn. Stat. § 214.09 states that board members shall be paid a per diem of $55 plus expenses. The board's practice is to follow section 214.09.
Repeals Minn. Stat. § 270.51 because it is an obsolete transitional provision.
Repeals Minn. Stat. § 270.52 that deals with the cost of making assessments because the subject is now dealt with in Minn. Stat. chapter 273.
Repeals Minn. Stat. § 270.53 because it is an obsolete transitional provision.
Effective the day following final enactment.
Section 1. Deficit Assessments. Adds a statutory reference authorizing the joint underwriting association offset to the insurance premium tax. Effective for tax returns due on or after January 1, 2008.
Section 2. Reciprocal or Interinsurance Contract. Deletes reference to in lieu of all other taxes. Effective the day following final enactment.
Section 10. Insurance Policies Surcharge. Clarifies that none of the surcharges are subject to retaliation. Effective July 1, 2007, and applies to policies written or renewed on or after July 1, 2007.
Section 11. Exemptions. Clarifies that the mutual property and casualty companies that are authorized to make an election must remit the total surcharge collected, and clarifies the timelines for making the election. The requirement for certain insurers to make an election before July 1, 2007, is effective the day following final enactment. The rest of this section is effective July 1, 2007, and applies to insurance policies written or renewed on or after that date.
Section 12. Joint Underwriting Association Offset. Requires the joint underwriting offset to be used against premium tax liability for the first succeeding year to the extent that the premium tax liability for that year exceeds the amount of the allowable offset for the year. This is what is done for the guarantee association assessment offsets. Effective for tax returns due on or after January 1, 2008.
Section 13. Insurance Premiums Tax Underpayment Penalty. Amends a definition of "tax" used to calculate the underpayment of installment penalty, to include the retaliatory tax and certain credits if utilized. Effective for tax returns due on or after January 1, 2008.
Section 3. Exemption for Redeeming Debtors. Clarifies the exemption from deed tax for a debtor who redeems from a mortgage or lien foreclosure sale. The exemption currently uses the word "lienee" to describe the exempt party, but that term has undergone a change in usage in recent years. These changes ensure that the exemption only applies if a person, who used to own the property, or their assignee, heir, personal representative, or successor, redeems it. Effective the day following final enactment.
Section 4. Deeds to Governmental Subdivisions for Public Use. Provides that the deed tax on conveyances of tax-forfeited land to governmental subdivisions for authorized public uses and redevelopment purposes, without the payment of monetary consideration is $1.65. Effective the day following final enactment.
Section 5. Use Tax. Clarifies that a person that receives drugs from a nonresident pharmacy is not subject to tax. Under paragraph (b), which became effective for purchases made after July 31, 2005, the use tax is no longer imposed on purchases by individuals for personal consumption. Under paragraph (a), a person that receives prescription drugs for resale or use in Minnesota, other than from a wholesale drug distributor who is subject to tax, remains subject to the use tax. Effective the day following final enactment.
Section 6. Use Tax Collection. Clarifies that a nonresident pharmacy is not required to collect the use tax. Since individuals who purchase drugs for their own use, are no longer required to pay the use tax, nonresident pharmacies are not required to collect the tax. Effective the day following final enactment.
Section 7. Pharmacy Refund. Clarifies that the refund claimed by pharmacies for amounts paid for drugs delivered outside of Minnesota will be applied against the health care provider tax, as provided under Minn. Stat. 295.52, subd. 2. Under current law, the refund is applied against the pharmacy tax under subdivision 1b. Subdivision 1b has been repealed. Effective the day following final enactment.
Section 8. Tobacco Products Use Tax. Reduces the exemption from the tobacco products use tax from $100 to $50 provided that the products were carried into the state by the consumer. Effective for possession, use, or storage or tobacco products on or after July 1, 2007.
Section 9. Cigarette Consumer Use Tax. Requires cigarette consumer use tax on consumer use of cigarettes if the cigarette sales tax has not been paid. Provides that the tax does not apply to purchases of 200 or fewer cigarettes per month that were carried into the state by the consumer. Effective for cigarettes purchased on or after July 1, 2007.
Section 1. Duties. Changes the law governing debt collection by debt collection division in the Department of Revenue to refer to debts referred for collection under chapter 16D, rather than debts owed the state.
Section 2. Agency Participation. Requires referring agencies to refer debts to the commissioner by electronic means. Provides that before a debt is 121 days past due, a referring agency may refer the debt to the commissioner at any time after it becomes delinquent and uncontested and the debtor has no further administrative appeal. (Maintains the current law, under which a referring agency must refer the debt to the commissioner when it becomes 121 days past due.)
Section 3. Computation. Provides that when a debt is referred the amount of collection costs is 17 percent of the debt. Strikes current law, which provides that the amount is 15 percent, or 25 percent if certain enforced collection action is necessary.
Section 4. Adjustment of rate. Provides for the commissioner of revenue, rather than finance, to determine rate of collection costs. Provides a maximum of 25 percent of the debt, striking current law, which says the rate of collection costs when a debt is first referred cannot exceed three-fifths of a maximum.
Section 5. Tax Refunds Not Subject to Attachment or Garnishment. Clarifies longstanding administrative procedure that tax refunds are not assignable or subject to attachment, garnishment, or other legal process except as provided by law. Effective the day following final enactment.
Section 6. Publication of Names of Tax Preparers Knowingly Filing False Returns. Requires the commissioner to publish the name of tax preparers who have been assessed and are not challenging the assessment of over $1,000 of penalties for willfully prepared Minnesota returns that understate the Minnesota tax or overstate a claimed refund. Effective for penalties on returns filed after December 31, 2007.
Section 7. Liability imposed. Makes taxes imposed under chapters 295 (MinnesotaCare tax), 296A (motor fuels tax), 297A (sales and use tax), 297F (cigarette and tobacco tax), 297G (alcoholic beverage tax) and sections 290.92 (income tax withholding) and 297E.02 (lawful gambling taxes) subject to applicable penalties in current law for nonpayment.
Section 8. Period of limitations. Amends the law dealing with tax liens to provide that a notice of lien filed by the commissioner of revenue at the Office of Secretary of State may be transcribed to any county within 10 years after the date of its filing, but the transcription does not extend the period during which the lien is enforceable
Section 9. State reimbursement of supplemental firefighter benefits. Provides that the commissioner of revenue will transmit the state reimbursement of supplemental firefighter benefits to the applicable municipality instead of directly to the relief association. The municipality is then responsible for either timely transmitting the payment to the relief association or for delaying the payment until the association has filed its required financial report. This conforms these payments to the process currently required by statute for the other state aid payments for police and fire pensions that are paid by the commissioner. Effective for aid payments in 2007 and thereafter.
Section 1. Local Impact Notes. Modifies existing law so that agency rulemaking will not trigger the local impact note process.
Section 2. Exception to preparing local impact notes. Eliminates the cross-reference to rulemaking rendered obsolete by the previous section.
Section 3. Compilation of local impact notes. Removes the requirement to include a statewide total of local mandates as a notation in the biennial budget.
Section 4. Class B state mandate reports. Eliminates unnecessary language referring to the purposes for forwarding copies of class B state mandate reports to the Legislature.
Sections 5 and 6. Forecast parameters. Requires the forecast to include projections as a result of inflation. A general inflation estimate must not include inflation on debt service or on programs for which a statutory growth factor is already included in the forecast.
Section 7. Local Revenue. Removes a reporting requirement for the Commissioner of Revenue regarding local government units that have exceeded established revenue targets in the most recent biennium.
Sections 8. Budget Reserve. Requires the Commissioner of Finance to transfer $150 million to the budget reserve account in the general fund on July 1, 2007. The amount necessary for the transfer is appropriated from the general fund.
Section 9. Additional Revenues; Priority. Where there is a general fund balance at the close of a biennium, the priority of deposit is as follows: (1) $350,000,000 In the cash flow account; (2) the budget reserve account increases to $803,000,000; (3) $22,300,000 to the Minnesota minerals 21st century fund; (4) the tax volatility reduction account. Deletes statutory reference made obsolete by repeal of Minn. Stat. § 16A.1522.
Section 10. Tax Volatility Reduction Account. Creates a special account to reduce volatility in state revenue flows due to expected shifts in the timing of capital gains realizations because of the 2010 sunset of the current preferential federal tax rates. Present federal law provides that the maximum tax rate on most long-term capital gains will rise from 15 percent to 20 percent, effective for tax year 2011.
Sections 11 and 12. Registration or Notice Filing Fee. Removes the rebate for registration filing fees above the statutory cap.
Section 13. Revenue Recapture. Authorizes cities to be claimants under the Revenue Recapture Act for all types of claims.
Section 14. Priority of Claims. Prioritizes the claims brought by a hospital or ambulance service after restitution obligations and before other remaining debts.
Section 15. Toll-free taxpayer assistance telephone service. Requires the commissioner of revenue to maintain toll-free taxpayer assistance telephone service for calls from within Minnesota.
Section 16. Taxpayer Assistance Grants and Notification. Requires the commissioner of revenue to complete the process of making grants to nonprofit organizations to provide taxpayer assistance services by October 1 of each year and to directly notify past grant recipients each year when the grant process begins.
Section 17. Runway Safety and Airport Zoning Advisory Task Force. Establishes an advisory task force on runway safety and zoning at Minneapolis-St. Paul International Airport. Appropriates $100,000 in fiscal year 2008 to the Legislative Coordinating Commission for the administrative expenses of the task force and costs related to the production of the report required by the task force.
Section 18. Data Update. Requires the Commissioner of Revenue to update data furnished to the Tax Study Commission formed in Laws 1987, chapter 268, article 7, section 1.
Section 19. Financial Management. Requires the Commissioner of Finance to designate any positive general fund balance on June 30, 2007, as an unrestricted balance that is available for general fund appropriations authorized in fiscal years 2008 and 2009.
Section 20. Appropriations. Appropriates to the commissioner of revenue the following: (1) $150,000 in fiscal year 2008 for the fiscal disparities study in article 2; (2) $73,000 in fiscal year 2008 for the administering the 1099 reporting requirements in article 4; (3) $87,000 in fiscal year 2008 for the sales tax report required in article 5; (4) $200,000 in fiscal year 2008 for the data update required in this article; and (5) $100,000 to the commissioner of employment and economic development for a grant to the city of Austin to assist in the payment of costs related to the construction of a bioscience research facility. All of these appropriations are onetime and are not added to the agency's base budget.
Section 21. St. Paul River Centre Debt Service. Appropriates $2,000,000 to the commissioner of employment and economic development in fiscal year 2010 for a grant to the city of St. Paul to be used to pay, redeem, or refund debt service costs incurred for the River Centre Campus.
Section 22. Repealer. Repeals Minn. Stat. § 16A.1522, which requires the Governor to propose a rebate plan to the legislature when the Commissioner of Finance projects a positive unrestricted budgetary general fund balance at the close of the biennium that exceeds one-half of one percent of total general fund biennial revenues.
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