|S.F. No. 2074 - Omnibus Tax Bill - Second Engrossment|
|Author:||Senator Thomas Bakk|
|Prepared by:||JoAnne Zoff, Senate Counsel (651/296-3803)|
|Date:||April 27, 2009|
Insurance Premium Taxes
Section 1. Minnesota Business Investment Company tax credit. This section proposes a new section in chapter 116 for a Minnesota Business Investment Company tax credit. The language proposes a credit against the insurance premiums tax for insurance companies that invest in Minnesota small business investment companies. These businesses must be certified by the Commissioner of the Department of Employment and Economic Development (DEED) as meeting the requirements of the law. The certification includes a nonrefundable application fee of $7,500 and an audited balance sheet stating the applicants has an equity capitalization of $500,000 or more. Qualifying businesses must have their headquarters and 80 percent of their employees in Minnesota. When certified by DEED, they must have no more than 100 employees and cannot be engaged in a list of types of businesses, such as providing professional services, banking, real estate development, insurance, oil and gas exploration, gambling, retail sales, or lending money to affiliates. This language changes the amount of the annual management fee from two to one percent of designated capital on an annual basis. The credit equals 80 percent of the qualifying investment. It is limited to the amount of the premiums tax. Qualifying for the credit also exempts the insurance company for the retaliatory tax equal to the credit. The bill caps the total credits at $150 million. The credits are allowed beginning for investments made in tax year 2010, but could not be claimed until the time period outside of the budget window.
Section 2. Addition to federal taxable income - qualified residence interest for a second residence. Amends Minn. St. § 290.01, subdivision 19a, additions to federal taxable income for individuals, trusts and estates. Adds a clause to the end of the subdivision requiring these taxpayers to add back any mortgage interest on a second residence taken as an itemized deduction on their federal return.
Section 3. Income subtraction - active pass-through income. Amends Minnesota Statutes, section 290.01, subdivision 19b. Provides a subtraction from federal taxable income of ten percent of a taxpayer's total Minnesota nonpassive net income. This is for taxpayer's pass-through income only.
Section 4. Individual income tax - nexus rules. Amends Minn. St. § 290.014, subdivision 2. Provides that for a single-member Limited Liability Company (LLC), which the owner has elected to disregarded status for individual income tax purposes and that has income that is assigned to Minnesota, the income is taxed as though it was received directly by the individual, rather than by the LLC. This parallels the similar treatment of ownership interests in partnerships (which includes multi-member LLCs) and S corporations.
Section 5. Individual income tax rates. Amends Minn. St. § 290.06, subdivision 2c, related to income tax brackets and rates for individuals, estates and trusts. Adjusts the current three brackets and rates and adds a fourth tier bracket and rate. The new rates are for tax years 2009 through 2013, with a return to current rates in one of the expiration years defined in this section. There are four expiration years tied to each of the four tax brackets. Each expiration year allows a new rate to return to the current rate after a February forecast projects a positive general fund balance by the end of fiscal year 2013 that equals or exceeds the amount of tax revenue produced by the new rate. The new rates would return to current rates in numerical order, from lowest to highest. More than one new rate could be eliminated if the positive balance is sufficient to cover the revenue produced by each of the rate increases. The current rates are changed as follows: 5.35 percent to 6.00 percent, 7.05 percent to 7.70 percent, 7.85 percent to 8.50 percent. The income brackets are changed to reflect the inflation adjustment for 2009 as the new base year. The new fourth tier rate is 9.25 percent, and it begins at the following taxable net income levels: $250,000 for married individuals filing joint returns ($125,000 for married filing separately), $141,250 for unmarried individuals, and $212,500 for unmarried individuals qualifying as head of household.
Section 6. Inflation adjustment. Amends Minn. § 290.06, subdivision 2d. This section changes the inflation adjustment language to reflect 2009 as the new base year.
Section 7. Investment tax credit. Amends Minn. St. § 290.06 by adding a subdivision. This section provides for a 25 percent tax credit for qualified taxpayers' investment in a qualified high technology, biotechnology or medical device, or green manufacturing business. There is also a list of activities where the business must not be engaged. The business must also have at least 80 percent of its employees and payroll in the state, have less than 25 employees (each paid a certain minimum wage), have gross receipts less than $2 million, and be in operation for less than ten years. The section provides a ceiling on maximum amount of tax credits that can be issued at $10,000,000 per fiscal year. The tax credit can be claimed in the fourth year after the credit certificate is awarded. The credit applies both to the individual income tax and the corporate franchise tax. The maximum credit is $50,000 for an individual who is not part of a partnership, and the maximum credit is $100,000 for a C corporation or a pass-through entity. Unused tax credits can be carried forward ten years.
Section 8. Historic structure rehabilitation credit. Proposes a new section in chapter 290, giving a tax credit for new historic structure rehabilitation projects. These projects are rehabilitation of properties which are either certified historic structures or structures in a certified historic district, and includes national historic landmarks. A taxpayer who incurs costs can take a tax credit equal to 20 percent of the total costs of rehabilitation. The costs are based on definition of qualified rehabilitation expenditures in the Internal Revenue Code, and must not exceed 50 percent of the total basis in the property. The unused credit may be carried forward for up to ten years, and the credits are assignable. Taxpayers must start the application for the credits before the project begins. The section allows for a mortgage credit certificate in lieu of the tax credit. This certificate can be transferred to a lending institution in connection with a loan that is secured by the building, and the proceeds of which may not be used for any purpose other than the acquisition of rehabilitation of the building. The net amount of the mortgage credit certificate must be applied to either the principal of the loan, the rate of interest on the loan, or the taxpayer's cost of purchasing the building. The lending institution can get a tax credit equal to the amount specified in the certificate, and may carry forward all unused credits until exhausted. If the amount of the discount retained by the lender exceeds the amount by which their federal tax liability is increased, the excess is refunded to the borrower with interest at the rate prescribed the State Historic Preservation Office. Lending institutions are not required to accept a historic rehabilitation certificate from any person. The Minnesota Historical Society must annually determine the economic impact to the state from the rehabilitation of eligible property that tax credits are provided for. The impact report must be presented to the taxes committees in the senate and in the house.
Section 9. Film production investment credit. Proposes a new subdivision in chapter 290 that gives a credit for film production investment. Provides a 25 percent carry forward credit against income taxes of the qualified investment in a qualifying film production. A qualifying film production is a motion picture that is certified by the Minnesota Film and TV Board as made wholly in Minnesota. The maximum amount of credits that can be certified is $1 million per year. A qualifying investment means cash used to pay qualifying production expenses that is provided by an investor with no financial interest in the picture or production company responsible for filming the picture.
Section 10. Alternative minimum tax rate. Amends Minn. St. § 290.091, subdivision 1, related to the alternative minimum tax for individual, trusts, and estates. The rate is changed to 7.0 percent for tax years 2009 to 2013, with one rate decreasing to 6.8, 6.6, 6.5, and 6.4 percent, if the same contingencies for the expiration years listed in section 5 occur.
Section 11. Alternative minimum tax-definitions. Amends Minnesota Statutes, section 290.091, subdivision 2. Adds one reference to the subtraction for pass-through income in section 3 to the calculation of alternative minimum taxable income.
Section 12. Surtax on certain interest income. Proposes a new section in chapter 290, providing surtax on certain interest income. Any person or organization who conducts a trade or business subject to Federal Regulation Z, and who charges interest on the credit issued is subject to the surtax. A transferee or assignee of a transaction is also subject to the tax. The rate is 30 percent of any income attributable to interest collected from the portion of an annual percentage rate that exceeds 15 percent on these transactions.
Section 13. Income tax, assignment or allocation rules. Amends Minn. St. § 290.17, subdivision 2. Clarifies that capital gain realized on the sale of a single-member LLC that is disregarded for federal income tax purposes is allocated to Minnesota and taxed as if the LLC did not exist. This parallels the similar treatment of ownership interests in partnership (which includes multi-member LLCs) and S corporations. Effective the day following final enactment.
Section 14. Apportionment of net income. Amends Minn. St. § 290.191, subdivision 2, related to the apportionment of net income. This section freezes the apportionment formula for tax years beginning in 2009 at the 2008 level. The sales factor is 81 percent, the property factor is 9.5 percent, and the payroll factor is 9.5 percent.
Section 15. Minnesota Business Investment Company insurance premiums tax credit. Proposes a new section in chapter 297I related to the Minnesota Business Investment Company tax credit. This section authorizes a participating investor to earn a credit against the insurance tax equal to 80 percent of the investment of designated capital in a Minnesota business investment company. It specifies the schedule for claiming the credit, which can be taken starting in tax year 2014, and over the next five tax years.
Section 16. Repealer. Repeals sections 290.06, subdivision 34, and 297A.815, subdivision 3, that repeals the low-income motor fuels credit, and the section dedicating the revenue from the motor vehicle lease sales tax.
Section 1. Update of administrative tax provisions. Adopts federal tax administrative provisions made between December 31, 2008, and March 31, 2009, that Minnesota references for state tax administration purposes under chapter 289A. The 2009 federal stimulus law was the only federal law enacted in that time period, and did not change federal provisions that Minnesota provisions refer to in chapter 289A.
Section 2. 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 year 2009, and following years. The one new federal law and important changes were:
The American Recovery and Reinvestment Act of 2009, Public Law 111-5, enacted
February 17, 2009, made the following major changes:
Allows deferral of discharge of indebtedness income resulting from reacquisition
of business indebtedness in 2009 and 2010. Instead of being recognized in the tax
year in which it is received, the income is deferred and recognized in equal parts
from 2014 to 2019 (Minnesota would not conform to this deferral; instead
additions to taxable income for individuals and corporations would be required
under sections 3 and 5, and corresponding subtractions allowed under sections 4
Allows deduction of the first $2,400 of unemployment compensation.
Allows deduction of motor vehicle sales taxes as an itemized deduction for
individuals who choose to deduct state income taxes, and as an additional
standard deduction for nonitemizers, for purchases from February 17, 2009,
through December 31, 2009 (Minnesota would not conform to this deduction;
instead an addition to taxable income would be required under section 3).
Extends 50 percent bonus depreciation amounts to tax year 2009 (Minnesota
would not conform to the extension of bonus depreciation but would retain its
current law requirement that taxpayers add-back to taxable income 80 percent of
the additional depreciation amount in the first tax year, and then subtract one-fifth
of the amount added back in each of the five following tax years).
Extends the increased section 179 expensing amount to tax year 2009 (allows $250,000 of property to be claimed as section 179 expensing, with the allowance phased out dollar-for-dollar for businesses that place more than $800,000 of qualifying property in service during the tax year).
Extends the carryback period for 2008 net-operating losses for businesses with
gross receipts of $15 million or less from two years to five years.
Reduces the holding period for assets of S corporations that converted from C
corporations from ten years to seven years, for tax years 2009 and 2010 only,
allowing S corporations to sell assets held more than seven years without being
taxed on built-in gains.
Increases from 50 percent to 75 percent the exclusion for the gain on sale of
qualified small business stock held for more than five years for stock acquired
between February 18, 2009, and December 31, 2010.
Extends the definition of qualified higher education expenses that can be paid
from section 529 plans to include computer equipment and software for tax years
2009 and 2010 only (excludes software designed for sports, games, or hobbies
unless it is predominantly educational in nature).
Increases the maximum amount of benefit that an employer may exclude from
gross income for employee transit and van pool expenses to equal the amount
allowed to be excluded for employee parking expenses, for tax years 2009 and
Removes the limitation on net operating loss carryforwards and use of built-in
losses in the case of an ownership change for manufacturing firms if the ownership change is required under a loan agreement or line of credit entered into with the Treasury Department under the Emergency Economic Stabilization Act of 2008.
Expands availability of industrial development bonds and tribal economic
development bonds, modifies rules relating to interest expenses of financial
institutions for tax-exempt income, and exempts private activity bond interest
from alternative minimum taxable income (generally for bonds issued in 2009
Reverses IRS Notice 2008-83, which allowed an acquiring bank to use the built-in
losses of an acquired bank to reduce its taxable income without regard to the limits in section 382 of the Internal Revenue Code.
Section 3. Additions to federal taxable income (FTI) for individuals. Requires the following items to be added to FTI, subjecting this income to Minnesota tax: Motor vehicle sales taxes allowed as an itemized deduction in computing FTI and the additional standard deduction amount for motor vehicle sales tax, deferred income from the discharge of indebtedness resulting from reacquisition of business indebtedness.
Section 4. Subtractions from FTI for individuals. Allows a subtraction of discharge of indebtedness income included in federal taxable income that was included in Minnesota taxable income in an earlier year as a result of the addition required in section 3.
Section 5. Additions to FTI for corporations. Requires the addition of deferred income from the discharge of indebtedness resulting from reacquisition of business indebtedness.
Section 6. Subtractions from FTI for corporations. Allows a subtraction of discharge of indebtedness resulting from reacquisition of business indebtedness.
Section 7. Update to other references to the Internal Revenue Code in chapter 290. Adopts federal changes to federal adjusted gross income used for computing individual alternative minimum tax and determining withholding on wages. FAGI also is the starting point for calculating household income which is used to compute the dependent care and K-12 education credit for tax year 2009 and following years. The main changes to federal adjusted gross income are described in section 2.
Section 8. Conforming changes. Makes conforming changes to the calculation of the ratio used by nonresidents and part-year residents to apportion tax to Minnesota to reflect new additions and subtractions in response to federal changes.
Section 9. Alternative minimum taxable income. Adjusts the calculation of alternative minimum taxable income to include the new Minnesota addition and subtraction for the federal deferral of discharge of indebtedness.
Section 10. Update of references to the 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.
Section 11. Federal update; estate tax. Changes the date through which Minnesota incorporates the federal estate tax from December 31, 2008, to March 31, 2009. Since there have not been any federal changes to the estate tax since the last update, this change does not have any substantive effect.
Sales and Excise Taxes
Section 1. Short-term motor vehicle rental - fee exemption. Amends Minn. St. § 297A.64, subdivision 2, related to the fee imposed on leases or rentals of vehicles. The five percent fee would not apply to the vehicles of a nonprofit organization if it: owns or leases vehicles to members at intervals of one hour or less; parks its vehicles at unstaffed/self-service locations available 24 hours a day; maintains, insures, and purchases fuel for the vehicles; and does not charge usage rates that decline on a per unit basis, whether based on distance or time.
Section 2. Solicitor. Amends Minn. St. § 297A.66 to define a "solicitor" as a person who enters into a contract to directly or indirectly refer potential customers to a business or the Web site of the business. The language states that a business is presumed to have a solicitor in this state, and therefore has a duty to collect the state sales tax, if it has at least $10,000 annually of sales into Minnesota based on referrals from residents of this state or businesses with a physical presence in the state. The language provides for a rebuttal of that presumption. Effective beginning with sales made after June 30, 2009.
Section 3. Upfront sales tax exemption - capital equipment. Amends Minn. St. § 297A.68, subdivision 5. This is part of the changes required to give an upfront sales tax exemption for capital equipment.
Section 4. Sales tax exemption-meat processing facility. Adds a subdivision to Minnesota Statutes, section 297A.71, providing a sales tax exemption for construction materials related to a meat processing facility built to replace one destroyed by a fire this year and employed more than 200 people. The refunds issued for this exemption will be refunded after June 30, 2011.
Section 5. Sales tax exemptions. Amends Minn. St. § 297A.75, subdivision 1, related to sales tax collection for exempt items. This is part of the changes required to give an upfront stales tax exemption for capital equipment, and one exemption for a meat processing facility in section 4.
Section 6. Sales tax - refunds of exempt items. Amends Minn. St. § 297A.75, subdivision 2, related to refunds of exempt items. Also part of the upfront sales tax exemption for capital equipment, and one exemption for a meat processing facility in section 4.
Section 7. Sales tax refund applications. Amends Minn. St. § 297A.75, subdivision 3, related to application for refunds of exempt items. Final part of the upfront sales tax exemption for capital equipment.
Section 8. Minneapolis downtown taxing area. Amends session law changes related to the Minneapolis downtown taxing area. Adds language excluding property from the area that is contained in chapter 546 of the Minneapolis Zoning Code of Ordinances, where a restaurant or liquor establishment is operated. The effective date is for sales made after July 31, 2012, provided that the proceeds of the tax collected between July 1, 2009, and July 31, 2012, by a restaurant or liquor establishment excluded in this section are deposited in the general fund.
Section 9. Mankato local sales tax - use of revenues . Amends session law changes related to the use of local sales tax revenues by the city of Mankato. The language adjusts the location of where the Southern Minnesota Women's Hockey Exposition Center can be located.
Section 10. St. Paul local sales tax - use of revenues. Amends session laws changes related to the local sales tax revenues collected by the city of St. Paul. The language extends the number of years that the city can use revenue to pay the principal of bonds issued for capital projects from 2009 to 2014.
Section 11. St. Paul local sales tax - unexpended funds and interest. Adds a subdivision to the session laws related to local sales tax revenues collected by the city of St. Paul. The language states that any interest from loan repayments or returned funds from revenues must be made available only for projects that qualify as capital projects for the neighborhood STAR program.
Section 12. St. Paul local sales tax - requirement. Amends a session law related to the civilian review panel of the city of St. Paul's neighborhood STAR program. The panel must ensure the application process for all proposals if open, fair, and competitive. This section also requires that all proposals must be reviewed by the panel prior to presentation of the proposal to the city council.
Section 13. Rochester lodging tax. This section increases the existing Rochester lodging tax of 1 percent by another 1 percent. The revenues from the increased tax must be used to pay for renovation and expansion of the Mayo Civic Center Complex and related bonds. The tax may only be increased if the city approves a total financing package. The authority for the increased tax expires when revenues raised are sufficient to fund the project and pay associated bonds, or earlier if the city desires.
Section 14. Owatonna local sales tax revenue uses. Amends session laws related to use of local sales revenues by the city of Owatonna. This section allows the city to transfer up to $1,500,000 of the revenue from the Alexander Street to 39th Avenue Southwest project to the reconstruction of 18th Street Southwest from 24th Avenue Southwest to 39th Avenue West.
Section 15. Mankato local restaurant and entertainment taxes. Amends sessions laws related to the use of proceeds from these taxes by the city of Mankato. Allows the city to adjust the location of where the Southern Minnesota Women's Hockey Exposition Center can be located.
Section 16. Cook County local sales tax revenue uses. Eliminates the use for construction and improvement of a county community center and recreation area and replaces it with authority to use it for construction or additions to multiple community centers and public recreation areas. Also adds construction and improvement of a high speed communications infrastructure (Internet) and construction and improvement of a district energy plant for public facilities in Grand Marais to the allowed uses. Increases the amount of revenue that the county can issue for authorized projects from $14 million to $20 million.
Section 17. Cook County bond limits. Increases the amount of bonds that Cook County can issue for authorized projects from $14 million to $20 million. The extra authority may delay the expiration date for the tax since the tax does not expire until the later of (1) 20 years, or (2) when revenues are sufficient to repay the bonds.
Section 18. Rochester food and beverage tax. This section allows the city of Rochester to impose a food and beverage tax of 1 percent. The revenues from the tax must be used to pay for renovation and expansion of the Mayo Civic Center Complex and related bonds. The tax may only be imposed if the city approves a total financing package. The tax expires when revenues raised are sufficient to fund the project and pay associated bonds, or earlier if the city desires.
Section 1. Truth in taxation hearings. Strikes a reference to truth in taxation hearings which are eliminated in section 25.
Section 2. Interdistrict cooperation. Provides that school districts with career and technical programs that are part of an interdistrict cooperation agreement must allocate the levy for the program among the participating districts.
Section 3. Referendum market value; seasonal recreational property. Provides that noncommercial seasonal recreational property, such as cabins, will no longer be excluded from "referendum market value." The effect of this is to make this property subject to school referendum levies.
Section 4. Retired employee health benefits. Clarifies the effective date for school levies for retired employee health benefits.
Section 5. Emergency Medical Services Taxing District Board. Provides that in cases where only part of a township participates in the medical services district, all partial townships in the district will be represented by a single member on the taxing district board.
Section 6. Purely public charities. Refines the definition of institutions of purely public charity, the property of which is exempt from property taxation. This section specifies that the institutions of purely public charity must be exempt from federal income taxation under Section 501(c)(3) of the Internal Revenue Code. In determining whether property of a charity is exempt the assessor must consider the following factors:
whether the stated purpose of the undertaking is to be helpful to others without immediate expectation of material reward;
whether the charity is supported by material donations, gifts, or government grants for services to the public;
whether a material number of the recipients of the charity receive benefits or services at reduced or no cost, or whether the organization provides services to the public that alleviate burdens or responsibilities that would otherwise be borne by the government;
whether the income received, including gifts and donations, produces a profit to the charitable institution that is distributed to private interests;
whether the beneficiaries of the charity are restricted or unrestricted and if restricted whether the class of persons to whom the charity is made available is one that has a reasonable relationship to the charitable objectives; and
whether dividends or assets upon dissolution are available to private interests.
A charity is typically required to satisfy all six factors for its property to be exempt, but if there is a reasonable justification for missing the factors in clauses 2, 3, or 5, an organization may still qualify as an exempt charity. After an exemption has been granted under this subdivision in accordance with the rules, it will remain in effect unless there is a material change in facts.
Section 7. Utility pollution control property tax exemption. Requires the Commissioner of Revenue to submit the advice of the Pollution Control Agency regarding a requested personal property tax exemption for electric generation pollution control equipment to the municipality and the county where the property is located for their approval. The local governments must submit their approval or disapproval to the Commissioner of Revenue within 90 days, or the exemption is deemed to be approved.
Section 8. Apprenticeship training facilities; property tax exemption. Provides that the current law property tax exemption for apprenticeship training facilities extends to the land on which the building is located, not to exceed five acres. Parking areas on the exempt land are exempt to the extent that they are used for the purposes of the training facility.
Section 9. Electric generation personal property exemption. Provides that the personal property of a described electric generation facility will be exempt from property taxation for three years. The exemption is phased out over the following three years. To qualify for the exemption, the facility must:
exceed 150 megawatts of installed capacity, but not exceed 780 megawatts of summer capacity;
be designed to utilize natural gas as a primary fuel;
not be owned by a public utility;
be located within five miles of at least two interstate natural gas pipelines, and within one mile of an existing electrical transmission substation with certain specified voltages;
be designed to provide electrical capacity, energy and ancillary services, and has satisfied all the requirements of the provision relating to certificate of need for large energy facilities; and
execute an interconnection agreement with the Midwest Independent System Operator that does not require acquisition of more than one mile of new electric transmission right-of-way.
Construction of the facility must begin between March 1, 2010 and March 1, 2014. The exemption does not include electric transmission lines and interconnections or gas pipelines, and interconnections that are appurtenant to the property.
Section 10. Electric generation personal property exemption. Provides that the personal property of a described electric generation facility will be exempt from property taxation for three years. The exemption is phased out over the following three years. To qualify for the exemption, the facility must:
exceed 40 megawatts of installed capacity, but not exceed 125 megawatts of installed capacity;
utilize natural gas as a primary fuel;
be located within two miles of parallel existing 36-inch natural gas pipelines and an existing 115-kilovolt electric transmission line;
be designed to provide peaking, emergency backup or contingency services; and
satisfy a resource deficiency identified in an approved integrated resource plan.
Section 11. Phaseout of exemptions for electric generation personal property. Provides that exemptions for electric generation personal property will be allowed in full for three years and the exemption will be phased out by one-third each year over the following three years. Existing exemptions that have been in place for more than three years will be phased out beginning with the 2009 assessment year.
Section 12. Elderly living facility exemption. Provides a property tax exemption for an elderly living facility that meets the following requirements:
the facility consists of no more than 75 living units;
it is located in a city with a population of more than 350,000;
it is owned and operated by a nonprofit corporation;
the owner of the facility is an affiliate of entities that own and operate assisted living and skilled nursing facilities that are located across a street from the facility, are adjacent to a church, include a congregate dining program, and provide assisted living or similar social and physical support;
the residents of the facility must be at least 62 years of age or handicapped;
at least 30 percent of the units in the facility must be occupied by persons whose annual income does not exceed 50 percent of the median family income from the area; and
before the effective date of the subdivision, the facility has received certain approvals from the city.
The exemption from property taxes would extend for the longer of 25 years or the term of the facility's initial permanent financing.
Section 13. Nursing home property tax exemption. Provides that licensed nursing homes or boarding care homes certified as a nursing facility are exempt from property tax if they are certified to participate in the Medical Assistance program or if they certify to the Commissioner of Revenue that they do not discharge residents due to inability to pay.
Section 14. Railroad wye connection. Provides an exemption for a railroad wye connection if it is publicly owned, is at least partly funded by state grants, is within the metropolitan area, includes a single tract segment no longer than 2,500 feet, connects intersecting rail lines, and is constructed after January 1, 2009.
Section 15. Leased seasonal recreational land. Modifies the property tax exemption that applies to the leased seasonal recreational property. It removes the requirement that a county board must approve the exemption as well as the requirement that the particular parcel was exempt from taxation for property taxes payable in 2008.
Section 16. Bovine tuberculosis credit definitions. Modifies the definitions that apply to this program. The definition of the zone is no longer referred to as a "proposed" zone, but instead means the modified accredited zone that has been designated by the Board of Animal Health. The reference to "located within" means that the herd is kept in the area for at least part of calendar years 2006, 2007, or 2008. Current law is limited to 2007 and a new definition of "animal" is added to mean cattle, bison, goats, and farmed cervidae.
Section 17. Bovine tuberculosis credit calculation. Clarifies the application of the credit to rural vacant land as well as agricultural land. The amount of the credit will be determined as the greater of $5.00 per acre on the first 160 acres of property where the herd had been located or an amount equal to $5.00 per acre, times five acres, times the highest number of animals tested on the property for bovine tuberculosis in 2006, 2007, or 2008. The amount of the credit may not exceed the property tax payable on the land where the herd had been located, excluding tax attributable to residential structures.
Section 18. Utility property class rates. Increases the class rate that applies to personal property of an electric generation system to 2.8 percent, and the class rate that applies to personal property that is either part of a pipeline system that transports water, gas, crude oil, or petroleum or part of an electric transmission or distribution system, to 2.25 percent. Under current law, most utility personal property has a class rate of 2 percent, although personal property that is part of an electric generation system or a pipeline system has the class rate provided for the first tier of commercial industrial property.
Section 19. Seasonal recreational commercial property. Provides that properties may be classified seasonal-commercial if they contain fewer than 20 rental units that are available for rent no more than 250 days per year, and are located in a city or town of 2,500 population or less outside the metropolitan area that contains a portion of a state trail. This section also allows seasonal-commercial classification to lakeshore and riparian property used as a marina that is accessible to the public for recreational use.
Section 20. State general levy; seasonal recreational property. Eliminates the application of the state general tax to seasonal residential recreational property. The tax amount that had been spread against these properties would then be added to the state general tax applied to commercial industrial property. The tax rate applied to commercial-industrial property is frozen at the rate imposed on C-I property for taxes payable in 2003.
Section 21. State general levy allocation. Eliminates the allocation of the state general levy between commercial-industrial and seasonal residential recreational property.
Sections 22 through 25. Truth in taxation hearings. Eliminates the requirement of truth in taxation hearings, that currently applies to cities with over 500 population, and all counties, school districts, and special taxing districts if they increase the amount of their proposed levy by more than the rate of increase in the implicit price deflator over the previous year's levy. Section 24 suspends the published notice of proposed property taxes for levy years 2009 and 2010.
Sections 26 and 27. Levy limit cross references. Section 26 strikes a reference to levy limit provisions that are repealed in section 61. Section 27 adds a reference to 2008 Minnesota Statutes to the levy categories required for the property tax levy report.
Section 28. Property tax installments. Increases from $50 to $250 the minimum property tax amount for which counties must allow payments in two installments.
Section 29. Delinquent property corrected notices. Modifies the requirements that apply to publication of corrected notices of delinquent property. Under existing law, if an error is discovered in the list the county auditor is required to direct the publisher to republish the corrected list for an additional period of two weeks. This provision would modify that requirement so that the publication requirement only applies to correction of the information that had been erroneous in the original list.
Section 30. Airport authority. Permits airport authorities to exercise the municipal power of airport zoning.
Sections 31 and 32. Truth in taxation cross references. Strikes cross references to the Truth in Taxation public hearings that are eliminated by section 25.
Sections 33 and 36. Establishment of special service districts and housing improvement districts. Extends the deadline for establishment of special service districts and housing improvement areas under the general law without requiring a special law for each district. Under current law, this authority expires June 30, 2009. This bill would extend that deadline by a period of four years to June 30, 2013.
Sections 34 and 35. Housing improvement areas. Provides that before establishing a housing improvement area, a city must provide full disclosure of public expenditures, including terms of financing for improvement area projects. If fees are imposed on housing units within the area on a basis other than tax capacity or square footage of the units, the council must make a finding that the alternative is more equitable. Fees imposed must meet the standard for benefits as special assessments and are subject to the same appeal processes.
Section 37. County special assessments. Adds to the definition of "municipality" in the assessment law, a county in the case of the abatement of nuisances.
Sections 38 and 39. Truth in taxation cross references. Strikes cross references to the Truth in Taxation public hearings that are eliminated by section 25.
Section 40. Duluth Seaway Port Authority levy. Provides that the Seaway Port Authority of Duluth is a special taxing district with the power to levy a property tax of up to 0.01813 percent of taxable market value.
Section 41. Implicit price deflator. Provides a definition for the implicit price deflator to replace the definition that is being repealed in the levy limit law.
Section 42. Truth in taxation cross references. Strikes a cross reference to the Truth in Taxation public hearings that are eliminated by section 25.
Sections 43 through 45. Levy limit cross references. Replaces references to the implicit price deflator used for miscellaneous levy limits provisions with the statutory reference in section 41.
Sections 46 and 47. Fiscal disparities lag. Modifies the fiscal disparities programs that apply within the seven-county metropolitan area. The computation of the fiscal disparities formula is currently based on previous year's tax rates. These sections would eliminate the one-year lag in those figures so that the distributions and contributions would be based on current year tax rates. To accommodate these changes, deadlines for various stages of the property tax process are changed in order to provide sufficient time to obtain the current year data. These sections are effective beginning with taxes payable in 2014.
Section 48. Emergency debt certificates referendum. Provides that a referendum is not required for issuance of emergency debt certificates issued under section 46.
Section 49. Emergency debt certificates. Authorizes the issuance of emergency debt certificates by a local government. It provides that, if any time during a fiscal year, the receipts of the local government are reasonably expected to be reduced below the amount provided in the local government's budget when the final property tax levy was certified, and the receipts are insufficient to meet the expenses for the fiscal year, the governing body may authorize and sell certificates of indebtedness. The certificates must mature within two years or less from the end of the fiscal year in which they were issued. The maximum principle amount of the certificates is limited to the expected reduction in receipts plus the cost of issuance of the certificate. The governing body is authorized to levy taxes for the payment of the debt service on the certificates; the certificates would not be included in the net debt limit of the local government. Local governments are defined to include: statutory or home rule charter cities, towns, or counties. Receipts are defined to include the amounts scheduled to be received by the local government for the fiscal year from taxes, aid payments previously certified by the state, state reimbursement payments for property tax credits, and any other source.
Section 50. Red River Watershed Management Board. Allows the Red River Watershed Management Board to conduct meetings at a public facility within the Red River basin or within a jurisdiction with which the board is authorized to cooperate.
Section 51. Emergency medical service districts sunset. Removes the sunset date from the law authorizing establishment of emergency medical services special taxing districts. Under current law, the ability to levy for the purposes of the district would terminate with taxes payable in 2012.
Sections 52 and 53. Plat law effective date. Clarifies that the 2008 law changes affecting the valuation of platted lands applies only to land platted after the enactment of the 2008 omnibus tax act.
Section 54. Conservation management plans. Provides that the conservation management plans required for the Rural Preserve property tax program must be prepared according to guidance provided by the Board of Water and Soil Resources. The board must provide a training course for conservation plan writers.
Section 55. Rural preserves. Strikes a limitation that not more than 50 percent of the acreage of an agricultural homestead can be class 2b property enrolled in rural preserves.
Section 56. Cloquet Fire and Ambulance special taxing district. Authorizes the city of Cloquet and Perch Lake township to create a special taxing district for the purpose of providing fire and ambulance services throughout the district. Other adjoining municipalities are authorized to join the district with the approval of the member municipalities. The special taxing district is authorized to levy 0.2835 percent of taxable market value for taxes payable in 2010.
Section 57. Property tax treatment of horse breeding and horse boarding properties. Requires the Commissioner of Revenue, in consultation with the Commissioner of Agriculture, to study the property tax treatment of properties used for horse breeding and horse boarding under current law. The commissioner is required to report to the Tax Committees of the Senate and House by February 1, 2010. The owner of property that had been classified as agricultural in 2008 based on its use for horse breeding or boarding may appeal its 2009 classification to the commissioner if the property's use has not substantially changed, and the commissioner must resolve the appeal by issuing a written order.
Section 58. Disrupted access abatements. Allows municipalities to abate taxes on business property with a market value of $250,000 or less if a public transportation project has impeded access to the business for more than three months resulting in a loss of revenue to the business.
Section 59. Report by administrative auditor. Requires the metropolitan area fiscal disparities administrative auditor to develop a working model of the fiscal disparities system that implements the changes required under sections 46 and 47. The administrative auditor is required to prepare a report to the Tax Committees of the Senate and House by February 1, 2012 that includes recommendations for amendments to chapter 473F that are needed to administer the changes in sections 46 and 47.
Section 60. Public charity purpose statement. Provides that the purpose of Section 6 is not to contract or expand the definition of institutions of purely public charity, but to provide standards that can be applied uniformly to determine the eligibility for the property tax exemption.
Section 61. Repealer. Repeals: (a) Truth in Taxation hearing requirements; (b) levy limits applicable to county governments and cities over 2,500 population; and (c) the allocation of the statewide general levy between seasonal recreational and commercial-industrial properties.
Aids and Credits
Section 1. Market value credit reductions. Provides that market value credit reimbursements are reduced to the extent that the aid reduction target calculated in section 6 is greater than a city or county's local government aid or county program aid. The reimbursement cannot be less than zero.
Section 2. Targeted refund. Eliminates the appropriation for the targeted property tax refund. This refund is repealed in section 7.
Section 3. City aid base adjustments. Provides that the 2010 minimum and maximum aid for Taylors Falls is increased by $30,000. The aid base and the minimum and maximum aids for Green Isle are increased by $150,000 for 2010 only. The aid base and the minimum and maximum aids for St. Charles are increased by $163,036 for 2010 and 2011 only.
Section 4. County program aid reductions. Provides that in 2010, 2011, and 2012, county program aid is reduced by 0.5 percent of the county's levy plus aid base for the previous year. If the aid reduction exceeds a county's program aid distribution, the excess is taken from the market value homestead credit reimbursement.
Section 5. Local government aid reductions. Provides that in 2010, 2011, and 2012, local government aid is reduced by 0.7 percent of the city's levy plus aid base for the previous year. If the aid reduction exceeds a city's LGA distribution, the excess is taken from the market value homestead credit reimbursement.
Section 6. Calculation of aid reductions. Defines the revenue base for aid reductions as the certified property tax levy for the previous year, plus certified taconite aids and local government aid for cities and county program aid for counties. The reduction percentages are 0.7 percent for cities and 0.5 percent for counties.
Section 7. Repealer. Repeals M.S. 290A.04, subd 2h, the targeted refund and M.S. 477A.16, utility transition aid.
Section 1 provides that there will be no municipal incorporations after June 1, 2009, and before June 1, 2014.
Section 2 adds to the definition of "special services" for a special service district in a city that includes a portion of the Central Corridor light rail transit project, public redevelopments costs related to the project, including the cost of programs to mitigate lost parking caused by the project.
Section 3 provides a definition of a new type of tax increment financing district, a "compact development district." This district would consist of a project within which parcels consisting of 70 percent of the area of the district are occupied by commercial or industrial buildings or other structures, and the planned redevelopment or development of the district will increase the total square footage of commercial or industrial buildings in the district by three times or more.
Section 4 adds Development Region 7E to the list of development regions within which authorities will qualify to use tax increments from an economic development district for tourism facilities.
Section 5 modifies the list of items that must be included within tax increment financing plans.
Section 6 modifies the items that must be included in the annual financial reporting for tax increment districts to focus on information relating to tax increments, rather than other types of public funds.
Section 7 provides that a compact development district will have a duration of 25 years.
Section 8 provides that tax increments derived from a compact development district may be used only to pay the cost of acquiring land located in the district or a abutting its boundary, demolition and removal of buildings or other improvements or site preparation, and installation of public infrastructure or public improvements serving the district, not to include the cost of streets, roads, highways, parking, or other public improvements designed to serve private passenger motor vehicles.
Section 9 provides that increments that are used to pay a county's administrative expenses are not subject to the percentage limitations on administrative expenses in the general tax increment financing law.
Section 10 authorizes expenditure of tax increments from districts located within transit improvement areas outside of the district but within the transit improvement area to support its activities.
Section 11 provides that for a redevelopment district or a renewal or renovation district certified after June 30, 2003, and before April 20, 2009, the five-year periods defined in the five-year rule are extended to ten years after the certification of the district in order to accommodate delays in development activities due to economic circumstances.
Section 12 changes a reference to the time when an interfund loan is made to the time when the loan is authorized.
Section 13 provides that no additional JOBZ designations will be made after April 30, 2009.
Sections 14 and 15 authorize the City of Brooklyn Park to establish housing replacement tax increment financing projects.
Sections 16 to 19 modify the availability of the public financing for public improvements at the Mall of America so that they are available for any phase of the Mall of America, rather than being limited to Phase II. In section 18 revenue bonds may be sold to pay for public improvements not related to parking at the Mall of America.
Section 20 corrects the description of the area of a tax increment financing district in the city of Oakdale by addition of two specified parcels. This district was authorized in the 2008 tax bill and allowed the HRA to elect to have the original tax capacity of the district certified as the tax capacity of the land only.
Section 21 imposes a labor peace agreement requirement as a condition of providing any public financing to any phase of the Mall of America project.
Section 22 authorizes the cities of Chisago City and Lindstrom and their development authorities, as well as Chisago County, to enter into a joint powers agreement to acquire and develop a business park in either city. Any of the parties to the agreement may spend money or incur debt for the project, even if the project is not located within its corporate boundaries. An election is not required for issuance of debt under this section. If the project is included in a tax increment financing district, each city and authority that is a party to the agreement may treat the tax increment district as being located within its corporate boundaries.
Section 23 authorizes the city of Mankato to expend increments generated from its South Riverfront tax increment financing district anywhere within the South Riverfront redevelopment project area. Increments from this district may be used to pay the city of Mankato for allowable expenditures under the planned budget for the district. The requirement for resolutions relating to the granting of interfund loans would not apply to this district.
Section 24 enables the city of North Mankato to expand the boundaries of an existing tax increment financing district to include specified property. The original tax capacity of the district will be adjusted according to the amount of value added by the addition of the new area permitted under this proposal. The bill provides that the tax increments derived from the enlarged districts may be used to pay the port authority of the city of North Mankato and the city for allowable expenditures under the tax increment plan and to pay debt service on tax increment bonds issued by the city for redevelopment costs in the district. The requirement that, when a redevelopment district is enlarged, the reasons and supporting facts for the determination that the addition to the district meets the criteria for creation of the original district must be documented is waived for this addition.
Section 25 authorizes a ten-year duration extension for a tax increment financing district in the city of St. Louis Park.
Section 26 authorizes the St. Paul HRA to establish a Central Corridor light rail transit project area as a redevelopment project. At least 80 percent of the property included in the project area must located within one-quarter mile of the Central Corridor light rail transit alignment
Section 27 allows the cities of St. Paul and Fridley to operate under the law that granted them the authority to create housing improvement districts, even though the cities had failed to approve the 1995 law in which that authority was granted.
Section 28 provides that four existing tax increment financing districts in the city of St. Paul would be allowed to expend money for costs related to the Central Corridor.
Section 29 authorizes the city of Sauk Rapids to treat certain parcels within specified blocks of the city as if they qualified to be included in a redevelopment district by having had improvements demolished. The bill extends the deadline for the request for certification of the parcel to December 31, 2012.
Section 30 authorizes the Housing and Redevelopment Authority of the city of South St. Paul to establish a redevelopment tax increment financing district comprised of the properties that were included in the existing Concord Street tax increment district. The district would be certified after August 1, 2009, and must terminate by the end of 2024. The HRA is authorized to create the district only if it enters into an agreement with Dakota County to make annual payments to the county of increment that would be equal to the tax that would have been obtained by the county on the captured tax capacity of the district if the district had not been created. The requirements for certifying a redevelopment district do not apply to the parcels within the district, and the district is also exempt from the rules restricting expenditures in redevelopment districts and the prohibition on expenditures for public facilities. The original tax capacity of the district is $354,945. Tax increments from the district may be expended to pay for any eligible activities authorized by the tax increment financing law within the redevelopment area that includes the district. All of these expenditures are deemed to be activities within the district for the purpose of the restrictions on pooling. The South St. Paul HRA is required to collect the second half of the 2009 tax increment from the existing Concord Street tax increment district and use the tax increment for eligible activities within the redevelopment area. The captured tax capacity of the district must be included in the adjusted net tax capacity of the city and county for purposes of computing local government aid, education aid, and county program aid.
Section 31 provides that, of the money available in the Minnesota Investment Fund, $3,000,000 will be appropriated in fiscal year 2010 for a loan to an aircraft manufacturing and assembly company for equipment used to establish an aircraft completion center at the Minneapolis-St. Paul International Airport. The center must use the state's vocational training programs designed specifically for aircraft maintenance training, and to the extent possible, recruit employees from these programs. The center is required to create at least 200 new manufacturing jobs within 24 months of receiving the loan, and not less than 500 new manufacturing jobs over a five-year period in Minnesota. The loan is not subject to the $1,000,000 loan limitation under the general law, and match requirements may be made from current resources.
Section 32 authorizes the Mountain Iron Economic Development Authority to form or become a member of a limited liability company for the purpose of developing a community-based energy development project. The LLC would be subject to the open meeting requirements of state law. The project is prohibited from selling, transmitting, or distributing the electrical energy at retail or providing for end use of the electrical energy to an off-site facility of the economic development authority or the LLC. The authority is authorized to acquire a leasehold interest in property outside its boundaries for the purpose of the project.
Section 33 provides that if the Seaway Port Authority of Duluth adopts a tax increment financing plan or plans for one or more tax increment financing districts, and these plans are approved by the governing body of the city, the five-year rule, which is part of the anti-pooling restrictions of the tax increment financing law, is extended to ten years for these projects. The bill specifies the parcels that may be included within the districts that would be subject to these special rules.
Section 34 authorizes the Winona County Development Economic Authority to form or become a member of a limited liability company for the purpose of developing a community-based energy development project. The LLC would be subject to the open meeting requirements of state law. The project is prohibited from selling, transmitting, or distributing the electrical energy at retail or providing for end use of the electrical energy to an off-site facility of the economic development authority or the limited liability company. The authority is allowed to acquire a leasehold interest in property outside its corporate boundaries for the purpose of developing the project.
Section 35 is the repealer. Laws 1996, chapter 464, article 1, section 8, subdivisions 3 and 5, are limitations of the expenditures on tax increment from the Bloomington tax increment financing district in the vicinity of the Mall of America. Laws 2008, chapter 366, article 5, section 30, subdivision 7, is a requirement that the Legislative Commission on Planning and Fiscal Policy would review Mall of America financing information.
Section 1 provides that, when the Commissioner of Finance issues state general obligation bonds authorized under law, the bonds may be either tax credit bonds or interest subsidy bonds or a combination of them. Tax credit bonds are bonds that provide taxable income, but for which the owner of the bonds is entitled to a federal tax credit. Interest subsidy bonds are bonds with taxable interest for which the issuer is entitled to federal interest subsidy payments.
Section 2 extends the sunset date for the authority to issue bonds by the State Fair Board from July 1, 2009, to July 1, 2015.
Section 3 provides that whenever the state pays interest on bonds issued by a school district for which the issuer is entitled to federal interest subsidy payments, the state is subrogated to the issuer's rights to federal interest subsidy payments until the state has been reimbursed by the issuer.
Section 4 eliminates the prohibition on submitting more than two ballot questions at a mail election.
Section 5 eliminates the referendum requirement for airport improvement bonds that are issued by a municipality if the bonds are authorized by resolution of the governing body of the municipality with a vote of at least 60 percent of its members.
Section 6 extends the maximum maturity of certificates of indebtedness issued by towns from five to ten years.
Section 7 provides that bonds issued for a public safety radio system by a county under its capital improvement program do not count against the limitation on the total amount of the bonds that may be issued under the program.
Section 8 provides that when the state pays interest on bonds issued under the public facilities authority, the state is subrogated to the issuer's rights to any federal interest subsidy payments until the state has been reimbursed in full.
Section 9 removes the requirement that an authority that has been established within a city in which a county and multi-county housing and redevelopment authority intends to operate a project must adopt a resolution declaring that there is a need for the exercise of powers by the authority. The governing body of the city in which the project will be located is still required to adopt a resolution to that effect.
Sections 10 to 12 amend the bidding and payment and performance bond requirements for HRAs so that those requirements are the same as provided under the Uniform Municipal Contracting Law and the law that generally applies to contractors' bonds for public work.
Section 13 provides that a housing and redevelopment authority may issue bonds to refund outstanding bonds secured by the general obligation pledge of the city or county without making additional findings regarding the adequacy of pledged revenues or conducting a public hearing. This provision is made effective retroactively to apply to refunding bonds issued after June 30, 1992.
Section 14 provides that the law that renders previously tax-exempt HRA property taxable, does not apply to leases by the authority to individuals or families for residential use. This section is made applicable to housing projects and housing development projects constructed or acquired by an authority after July 1, 1987.
Section 15 modifies the tax treatment of metropolitan area HRA properties that include both subsidized housing and other types of housing so that the ratio of taxable to nontaxable property is determined according to the number of units in the facility that are constructed with funds provided under section 5 of the United States Housing Act of 1937, and that receive operating subsidies under section 5 or rental assistance under section 8.
Section 16 expands the definition of "project" in the municipal industrial development law to include property used in connection with manufacturing, creation, or production of intangible property including any patent, copyright, formula, process, design, know-how, format or similar item.
Section 17 provides that facilities for conventions and conferences are included within the properties for which a city operating a program of public recreation and playgrounds may acquire or lease property.
Section 18 modifies the definition of "annual volume cap" in the bond allocation law to specify that it refers to obligations constituting private activity bonds under federal tax law. It also provides that the Department of Finance will administer the volume cap allocations for obligations permitted under the federal American Recovery and Reinvestment Act of 2009.
Section 19 modifies the definition of "manufacturing project" to include the type of facility that is used in the manufacturing, creation, or production of intangible property.
Section 20 defines "rating category" to mean a generic securities rating category without regard to subcategories of the ratings.
Section 21 extends from ten to 30 years the greatest maturity date of bonds issued by the city of St. Paul for public buildings or parking structures.
Section 22 requires the Commissioner of Finance to apply a deposit of $31,800 paid by the St. Paul Port Authority in 2008 for a proposed bond issue of $1,590,000 for District Cooling St. Paul, Inc. to a later application for an allocation of tax-exempt bonds for the same project. This authority expires January 1, 2011.
Section 23 is the effective date, which is the day following final enactment for all provisions in the article other than those that specify a different date.
Section 1 provides that if the amount of the occupation tax proceeds collected in 2009 exceeds the amount that had been forecasted to be collected from that source, half of the excess amount that is credited to the general fund and not dedicated under the statute to educational purposes will be deposited in the 21st Century Minerals Fund.
Section 2 extends for one year the authorization for use of the production tax equal to ten cents per ton of production for a biomass energy facility. Obsolete language is stricken.
Section 3 clarifies that for the escalator that applies to the production tax rate, the implicit price deflator would not be applied if it were less than zero. This section also provides that the exemption from production tax for direct reduced ore facilities during their first two years of commercial production would not subject those facilities to the general property tax.
Section 4 provides that, in any year in which there are insufficient production tax proceeds to make the full distribution to school districts provided in law, production tax proceeds will be transferred from the taconite property tax relief account as needed to make the full distribution to the schools.
Section 5 modifies the definition of the area within which distributions will be made from the taconite municipal aid account by reference to the taconite assistance area.
Section 6 authorizes Breitung township to retain the one-cent per ton distribution it received in 2008 that was scheduled to expire if a new state park was not established in the township by July 1, 2009. This provision would extend that deadline to July 1, 2012.
Section 7 authorizes the Iron Range Resources and Rehabilitation Board to vote to provide $10,000,000 from the Douglas J. Johnson economic protection trust fund for a grant or forgivable loan to a manufacturer of windmill blades to be located in the taconite tax relief area. If the board provides this money, then an additional $10,000,000 is appropriated from the general fund and an additional $10,000,000 will be transferred from the 21st Century Minerals Fund for this purpose.
Department Individual Income, Corporate Franchise and Estate Taxes
Section 1. Designated member for single combined returns. Amends Minn. Stat. § 289A.08, subd. 3, to allow a corporation without Minnesota nexus that is a member of a unitary business to file and be liable as the designated member for tax matters of the unitary business that is required to file a single combined report. Effective for tax years beginning after December 31, 2008.
Sections 2 and 3. Information reporting by qualified intermediaries. Amends Minn. Stat. §§ 289A.12 and 289A.18 to require qualified intermediaries to report information to the commissioner concerning exchanges facilitated by the intermediary. The reports are due 30 days after demand by the commissioner. Effective July 1, 2009, and applies to all transactions whether facilitated on, before or after that date.
Section 4. Estate tax return due date. Amends Minn. Stat. § 289A.19, subd. 4, removing the requirement that taxpayers request the obligatory six-month filing extension for estate tax returns by automatically providing the same. Effective for estates of decedents dying after December 31, 2008.
Section 5. Penalty for failure to withhold from wages or from pay to independent contractors in the construction trades. Amends Minn. Stat. § 289A.31, subd. 5, by adding a penalty that applies when employers fail to withhold income tax when required to do so under Minn. St. § 290.92, subdivision 2a, by reason of not treating such person as not being an employee. The penalty is equal to three percent of the wages paid to an employee. Effective for taxes that should have been withheld after June 30, 2009.
Section 6. Reporting of federal adjustments to withholding tax returns. Amends Minn. Stat. § 289A.38, subd. 7, to clarify that the requirement to report federal changes to withholding tax returns applies when there have been changes during a withholding tax period to the wages reported to the Internal Revenue Service. Effective the day following final enactment.
Section 7. K-12 education deduction - transportation in taxpayer's vehicle. Amends Minn. Stat. § 290.01, subd. 19b (3), to clarify that a taxpayer cannot claim expenses paid to transport a qualifying child in the taxpayer's or the child's vehicle. This codifies the position found in Minnesota Rule 8009.3000, which is otherwise being repealed as obsolete. Effective the day following final enactment.
Section 8. Inflation adjustment for working family credit. Amends Minn. Stat. § 290.0671 so that the inflation adjustments required beginning in 2009 for the higher married filing joint working family credit phase out threshold conforms to inflation adjustment changes made in 2008 and thus reflects only one year of inflation. Also removes obsolete language related to the working family credit calculations for taxable years 2002 through 2007. Effective for taxable years beginning after December 31, 2008.
Sections 9 and 10. Confession of judgment for manufactured homes. Amends Minn. Stat. §§ 290A.10 and 290A.14 to clarify that property taxes on a manufactured home are not considered delinquent for purposes of the property tax refund if the owner has entered into, and is current with, a confession of judgment to pay the delinquency. Effective the day following final enactment.
Section 11. Repealer. School tuition and transportation. Minnesota Rule 8009.3000 is repealed. A portion of the Rule is being codified in the amendment to Minn. Stat. § 290.01, subd. 19b (3). The remainder of the Rule is repealed as obsolete. Effective the day following final enactment.
Department Sales and Use Taxes
Section 1. Sales to government. Amends Minn. Stat. § 297A.70, subd. 2, to provide that the exemption for sales to exempt units of government does not apply to the purchase of alcoholic beverages. Effective for sales and purchases made after June 30, 2009.
Section 2. Sales to nonprofit groups. Amends Minn. Stat. § 297A.70, subd. 4, to provide that the exemption for sales to nonprofit groups does not apply to the purchase of alcoholic beverages other than alcohol purchased by religious organizations for sacramental purposes. Effective for sales and purchases made after June 30, 2009.
This section also provides that the exemption for purchases made by senior citizens groups does not extend to housing and that the senior citizen groups must have exempt status under Internal Revenue Code § 501(c). Effective for sales and purchases made after June 30, 2009, except the change for senior citizens groups is effective the day following final enactment.
Sections 3 and 4. Motor vehicle definition. Amends Minn. Stat. §§ 297A.992, subd. 2, and 297A.993, subd. 1, to provide that for purposes of the Metropolitan Transit Improvement Tax and the Greater Minnesota Transportation Tax, the term "motor vehicle" is defined in Minn. Stat. § 297B.01, subd. 5, for the sales tax on motor vehicles. Effective the day following final enactment.
Section 5. Repealer. Repeals Minn. Stat. § 297A.67, subd. 24, which provided a sales tax exemption for all sales and uses that the state was prohibited from taxing under the United States and Minnesota Constitutions. The statutory exemption is duplicative and not necessary since the Constitutions already prevent the state from taxing certain sales and uses. Effective the day following final enactment.
Department Special Taxes
Section 1. Mortgage tax; agricultural loan exemption. Amends Minn. Stat. § 287.04, clause (i), to update the cross-reference to the property tax classification statute for agricultural property. The update is necessary because of recent changes to the classification statute. Effective the day following final enactment.
Section 2. Mortgage registry tax. Amends Minn. Stat. § 287.05 by adding the new subd. 9. The provision clarifies the tax result when mortgages contain multiple statements that are each designed to limit the debt secured by the mortgage, the resulting tax obligation, or both. In such cases, the tax on the mortgage is based on the actual combined effect of those statements, if any, and not on the statements, or portions of them, taken in isolation. Effective the day following final enactment.
Section 3. Deed tax; transfer on death deeds. Amends Minn. Stat. § 287.22, clause (15). This exemption clause was added by the 2008 Legislature to exempt the new "transfer on death" deeds from the deed tax. This change makes clear that the exemption also applies to related recorded documents. Effective the day following final enactment.
Sections 4 and 17. Deed tax stamps. Amends Minn. Stat. § 287.25 and repeals Minn. Stat. §§ 287.26 and 287.27, subd. 1, to eliminate the procedure for paying the deed tax by purchasing stamps of given denominations from the county and affixing the proper number of stamps to the deed when it is presented for recording. Taxpayers no longer use this procedure. Effective the day following final enactment.
Section 5. Transfer of accounts receivable. Amends Minn. Stat. § 295.56 to add surgical centers and wholesale drug distributors to the list of entities whose liability is transferred to the transferee, assignee, or buyer when accounts receivable are sold. Effective the day following final enactment.
Section 6. Exemption for amounts paid for legend drugs. Amends Minn. Stat. § 295.57, subd. 5, adds surgical centers to the list of entities that may use an alternative method for calculating the cost of legend drugs when the entity cannot determine the actual cost of the drug. Effective the day following final enactment.
Section 7. Petroleum tax - general rules. Amends Minn. Stat. § 296A.21, subd. 1, which deals with the statute of limitations, to clarify that a tax return filed before the last day prescribed by law for filing is considered to be filed on the last day. Effective the day following final enactment.
Sections 8, 11, 12, 14, and 16. Electronic payments. Amends Minn. Stat. §§ 297E.02, subd. 4 (lawful gambling tax), 297F.09, subd. 7 (cigarette and tobacco products tax), 297G.09, subd. 6 (liquor tax), 297I.35, subd. 2 (insurance tax), and 473.843, subd. 3 (metropolitan solid waste landfill fee), to reduce the electronic payment threshold from $120,000 to $10,000 per fiscal year. Effective for payments due in calendar years 2010 and thereafter, based upon liabilities incurred in the fiscal year ending June 30, 2009, and in fiscal years thereafter.
Section 9. Lawful gambling - required signatures. Amends Minn. Stat. § 297E.06 by adding a new subdivision to clarify that signatures of organization's CEO, gambling manager, and return preparer are all required on tax returns. This identical requirement was contained in a Minnesota rule which was recently repealed. Effective the day following final enactment.
Section 10. Lawful gambling - general rule. Amends Minn. Stat. § 297E.11, subd. 1, which deals with the statute of limitations, to clarify that a tax return filed before the last day prescribed by law for filing is considered to be filed on the last day. Effective the day following final enactment.
Section 13. Insurance tax - extensions for filing returns. Amends Minn. Stat. § 297I..30, by adding a new subdivision 9, which provides that when good cause exists, the commissioner may extend the time for filing returns for not more than 6 months. Effective the day following final enactment.
Section 15. Distribution of production tax; remainder. Amends Minn. Stat. § 298.28, subd. 11, to delete obsolete language (the provision was effective for 2003 distributions) and a reference to the deleted language. Effective the day following final enactment.
Section 17. Repealer. Amends Minn. Stat. § 298.28, repealing obsolete subdivisions 11a and 13. Subdivision 11a provided for prorated distributions in production years 1994 through 1999. Subdivision 13 required a deduction of credits authorized under § 298.24, subdivision 3, that was repealed in 2003. Effective the day following final enactment.
Property Taxes and Aids
Section 1. Indexing agricultural homestead first tier upper-limit. Amends Minn. Stat. § 273.11, subd. 23, to modify the procedures for indexing the value of the first tier valuation limit for homestead agricultural property. Due to provisions passed in 2008 revising the class 2 definitions, the needed data is not consistent after 2009, so the limit is re-set for assessment year 2010; and, the formula is resumed for assessment year 2011, with a two- year lag for the base year. Effective for taxes payable in 2011 and thereafter.
Section 2. Greens Acres; Indexing of "low" value for nonproductive land. Amends Minn. Stat. § 273.111, subd. 4, to allow the data used to index the "low" value for nonproductive land to be based on data from the prior assessment year; in order to avoid using data from the current year that is not final. Effective for taxes payable in 2009 and thereafter.
Section 3. Aggregate resource preservation act. Amends Minn. Stat. § 273.1115, subd. 2, to clarify that class 2e lands are eligible if the 2e lands were class 1a or 1b immediately before becoming 2e. This effectively allows all properties to qualify for both a partial value exclusion and a preferential class rate. Effective for taxes payable in 2010 and thereafter.
Section 4. Abatements and credits for damaged properties. Amends Minn. Stat. § 273.1231, subd. 8, to clarify that "utility property" for these purposes - i.e., authorizing the Commissioner of Revenue to grant a disaster-related abatement or credit -- is limited to property that is valued and classified by the Commissioner of Revenue on an order. Effective the day following final enactment.
Sections 5 and 6. Cooperative associations. Adds a reference to chapter 308B to clarify that cooperative associations are included under these sections.
Section 7. Homestead applications. Amends Minn. Stat. § 273.124, subd. 13, to require that the spouse of an occupying relative must also sign, and provide their SSN on, the applications. Effective for applications received after June 30, 2009.
Section 8. Trust-held homesteads. Amends Minn. Stat. § 273.124, subd. 21, to clarify that the provisions of this subdivision, that specify when trust-held property can qualify for the homestead classification, applies to personal property as well as real property. The remaining changes are for readability and clarity. Effective the day following final enactment.
Section 9. Class 2 properties. Amends Minn. Stat. § 273.13, subd. 23, to clarify that the presence of a minor structure will not disqualify property from the managed forest land class; and to provide a May 1 deadline for the applications required from owners of managed forest land. The remaining changes are for readability and clarity. Effective the day following final enactment.
Section 10. Class 4 properties. Amends Minn. Stat. § 273.13, subd. 25, to include organizations described in IRC § 501(c)(8) in the definition of "community service organizations" under clause (d)(3) - Class 4c(3); and, to make several technical clarifications in clause (d)(1) covering seasonal recreational-residential properties - i.e., Class 4c(1) - so that the requirements in the clause apply only to the properties classified therein, instead of to all class 4c properties. Effective the day following final enactment.
Section 11. Vacant land. Amends Minn. Stat. § 273.13, subd. 33, to update cross-references to section 273.13, subd. 23, which was changed in 2008. The updates clarify the requirements of current law to classify vacant land according to its "highest and best " use by adding an exception for unimproved rural lands, because those lands have a specifically-designated classification. Effective the day following final enactment.
Sections 12, 13, and 17. Date for sending utility values to the counties. Amends Minn. Stat. §§ 273.33, subd. 2, 273.37, subd. 2, and 274.175 to change the date by which the Department of Revenue must send the ordered and assessed values of pipelines and electric utilities to the counties from June 30 to August 1. The change is needed because current timing allows a very short time for review by the companies and counties prior to issuance of the orders resulting in the department having to send out revised orders. Effective for assessment year 2009 and thereafter.
Sections 14, 15, and 16. County boards of appeal and equalization. Amends Minn. Stat. §§ 274.13, subd. 2 and 274.135, subd. 3, to provide that if a county board of appeal and equalization or special board of equalization fails to satisfy the training and quorum requirements, owners and taxpayers who could have appealed to that board can appeal to the commissioner. A fee of $500 per tax parcel will be assessed to the county. Section 14 is effective the day following final enactment. Section 15 is effective for taxes payable in 2010 and thereafter. Amends Minn. Stat. § 274.14, to allow county boards of appeal and equalization to meet for up to ten days after the second Friday in July, rather than requiring them to meet for a full "ten consecutive days". Effective the day following final enactment.
Section 18. Sustainable Forest Incentive Act, calculation of annual average market value. Amends Minn. Stat. § 290C.06 to conform to changes made in 2008 that created a new forest land classification (2c property) titled "managed forest land" in Minn. Stat. § 237.13, subd. 23(d). Under the Sustainable Forest Incentive Act, the department must calculate the annual average market value of forest land. These changes are needed to make sure that the calculation is consistent with prior years' calculations. The new classification contains roughly the same type of land that was formerly included in 2b property (timberlands) which is referred to in the original calculation. This section is effective for calculations made in 2010 and thereafter.
Section 19. Sustainable Forest Incentive Act, Calculation of incentive payment. Amends Minn. Stat. § 290C.07 to conform to changes made in 2008 regarding classification of forest land. The changes are necessary so that the statutory calculation will remain the same under current law. Prior law that referred to 2b property was amended and now includes different property. The references in § 290C.07 to the class rate for 2b property have been changed to "a class rate of 1%" which was the class rate for 2b property under the old law. References to "timberlands" have been changed to refer to "managed forest land" which is now the correct term. This section is effective for calculations made in 2010 and thereafter.
Sections 20, 21, and 22. Local government aid. Amends Minn. Stat. § 477A.011, subd. 34, to correct the placement in the statute of the $285 minimum amount for city revenue need. This provision was included in paragraph (c), but should have been placed in paragraph (a) instead. Amends Minn. Stat. § 477A.011, subd. 42, to correct a cross-reference in Minn. Stat. § 477A.011, subd. 42, to the "regional-center aid base." The definition of city jobs base refers to the regional center aid base in Minn. Stat. 477A.011, subd. 36(l); but, the reference should have been to subd. 34(k). Amends Minn. Stat. § 477A.013, subd. 8, to eliminate two internal conflicts with other pre-existing provisions by clarifying that the levies used to determine the minimum/maximum aid-change caps are the levies for taxes payable in the year the aid is calculated (i.e., the year prior to the year the aid is distributed); and, by clarifying that the population data to be used in the aid calculations are the data available as of July 15 of the year the aid is calculated. These three sections are effective for aids payable in 2009 and thereafter.
Section 23. Repealer. Repeals Minn. Rules chapter 8115 which are obsolete rules that applied to levy limits that were repealed in 1997.
Sections 1 and 7. Classification of tax-forfeited lands as conservation or nonconservation. Amends Minn. Stat. § 282.01, subds. 1 and 3.
Section 2. Conveyances to public entities. Amends Minn. Stat. § 282.01, subd. 1a.
Section 3. Deed of conveyance; form. Amends Minn. Stat. § 282.01, subd. 1c.
Section 4. Reverter for failure to use; conveyance to state. Amends Minn. Stat. § 282.01, subd. 1d.
Section 5. Conditional use deed fees. Amends Minn. Stat. § 282.01, by adding the new subdivision 1g. Imposes a fee on applications for conditional use deeds submitted to the commissioner. If the application is denied, the fee is $100. If the application is granted, the fee is $250. The remaining amounts of the fees each fiscal year are appropriated to the Commissioner of Revenue to pay the expenses of administering the conditional use deed laws. Effective for applications received by the commissioner after June 30, 2009.
Section 6. Conservation lands; county supervision. Amends Minn. Stat. § 282.01, subd. 2. Reorganizes the provisions; but also eliminates the authority of the county board, with approval from the Commissioner of Natural Resources, to sell conservation lands for timber production under the provisions applicable to nonconservation land if the land is located within an unincorporated area and is zoned by the county for a compatible restricted use. This authority is no longer needed. Effective July 1, 2009.
Sections 8 and 10. Sale; method, requirements, effects. Amends Minn. Stat. § 282.01, subds. 4 and 7a. Grants counties the authority to sell tax-forfeited lands to the public for less than the appraised value when the property consists of undivided interests; parcels that cannot be improved under zoning ordinances due to their size, shape, or lack of access; and, parcels were there is no zoning, but the physical characteristics of the land indicate that the best use would be to combine it with an adjoining parcel. Effective July 1, 2009.
Section 9. County sales; notice, purchase price, disposition. Amends Minn. Stat. § 282.01, subd. 7. Clarifies that the public sale provisions of this statute apply to parcels of nonconservation tax-forfeited land. Effective July 1, 2009.
Section 11. Cross reference. Amends Minn. Stat. § 287.2205 - having to do with the deed tax - to eliminate a reference to Minn. Stat. § 282.01, subd. 1b, which is being repealed in the next section of the bill. Effective July 1, 2009.
Section 12. Repealer. Repeals the following:
Minn. Stat. § 282.01, subd. 1b. This provision allows conveyances of tax-forfeited land within "targeted neighborhoods" (defined in Minn. Stat. § 469.201) for no consideration upon approval by the county board. After the amendments in this bill, Minn. Stat. § 282.01, subd. 1a, will allow essentially the same thing in that the county boards will have a new authority for reduced-price sales to correct blight or develop affordable housing.
Minn. Stat. § 282.01, subds. 9, 10, and 11. These subdivisions allow the Commissioner of Revenue to ratify pre-1943 sales of tax-forfeited lands made under Mason's Supplement 1940, section 2139-15, that were done without a separate appraisal of the value of the standing timber (a separate appraisal of standing timber is still required under current laws). These sale-ratification-provisions are believed to be obsolete. Effective July 1, 2009.
Section 1. Disclosure to law enforcement authorities of harassment. Amends Minn. Stat. § 270B.14, subd. 16, to include harassment as an additional circumstance under which tax return information can be disclosed to law enforcement authorities. Under current law, the Department of Revenue can apprise law enforcement authorities of circumstances involving the threat of death or physical injury to someone. There are other situations where, as part of a tax case, the department may become aware that a taxpayer is harassing someone or is being harassed by another person to the point where notifying law enforcement is necessary for protection. This includes the harassment of a Department of Revenue employee. Harassment is defined as purposeful conduct directed at an individual, and causing them to feel frightened, threatened, oppressed, persecuted, or intimidated.
Section 2. Amends Minn. St. § 270C.12 by adding a subdivision. The subdivision states that the microdata coordinating committee established in this section shall not expire.
Sections 3 and 4. Publication of names of tax prepares subject to penalties. Amends Minn. Stat. § 270C.446, subds. 2 and 5, to clarify that a tax preparer who is subject to publication due to criminal penalty must have been a preparer with respect to the return or claim from which the criminal penalty arose and that the preparer must demonstrate to the commissioner that conditions for removal from the list have been met, including satisfaction of any sentence imposed. Effective the day following final enactment.
Section 5. Personal liability for penalty and interest assessments procedure. Amends Minn. Stat. § 270C.56, subd. 1, to clarify that all applicable penalties and interest may be assessed for personal liability in the same manner as the underlying tax. This clarifies that the personal liability assessment of penalties and interest is treated consistently for all taxes subject to personal liability assessment and parallels language that existed prior to various recodifications of the state tax laws which have occurred over the last several years. Effective the day following final enactment.
Section 6. Bankruptcy; suspension of time clarification. Amends Minn. Stat. § 289A.41 to make a technical correction to clarify the application of the statute. Clarifies that the notice requirement applies to the termination or expiration of the automatic stay, as well as notice that the bankruptcy proceedings have been closed or dismissed. Effective the day following final enactment.
Section 1. Tax Preparation Services. This bill extends disclosure requirements for refund anticipation loans (RALs) provided by tax preparers, and provides disclosure requirements for refund anticipation checks (RACs). It expands the list of actions which are prohibited for tax preparers. It requires written agreements for RALs and RACs, and authorizes clients to rescind RALs within one business day of entering an agreement. There is an extension of the current $1000 administrative penalty and private right of action to tax preparers who fail to provide written agreements for RALs and RACs, and to tax preparers who fail to rescind RALs within one business day on the request of the client. The bill also increases civil damages available to plaintiffs to include two times tax preparation fees plus interest and fees for RALs.
Section 2. Time for filing. Establishes a procedure for filing claims for refunds of payments made under the law that imposes personal liability on responsible officers and directors for unpaid taxes of a business entity. The personal liability statute generally applies to individuals who are responsible (by themselves or with others) for filing and paying the specified taxes on behalf of the business. This liability most frequently arises with regard to sales tax and withholding tax, but also applies to some other tax types. If the business fails to pay, the Department of Revenue (DOR) issues an order assessing personal liability for the tax against the director or officer. Authorizes individuals, subject to personal liability assessments, to file claims for refunds (which will enable them to appeal administratively or file a lawsuit), if they do so within 120 days of making a payment and if this is no more than 3½ years after DOR issued the assessment. The ability to claim a refund applies to both voluntary payments and to amounts collected by DOR (e.g., by garnishing wages or levying on a bank account). It does not require paying the full assessment to file a claim for a refund. Effective for personal liability assessments issued after the day following final enactment.
Section 3. Mortgage registry tax payments. Amends Minn. St. § 287.08, paragraph (d), related to apportionment of payments of the tax for real property located in more than one county. This section raises the value of the debt secured by the mortgage that is subject to division and payment by the county treasurer from $1 million to $20 million. Effective the day following final enactment.
Section 4. Estate tax nexus for nonresident decedents. Amends Minn. St. § 291.005, subdivision 1, by expanding the definition of situs for nonresident decedents. If the decedent is a nonresident of Minnesota, and if the decedent had an interest in a pass-through entity containing real or tangible Minnesota property, then situs of that property is determined as if the pass-through entity did not exist and the property is personally owned by the decedent. A pass-through entity includes those taxed as S corporations, partnerships, trusts, and single member limited liability companies or similar entities.
Sections 5 and 6. Hospital tax and surgical center tax. Amends Minnesota Statutes, section 295.52, subdivisions 1 and 1a. Provides for an unspecified change to each of these taxes.
Section 7. Gambling taxes-reports and records. Amends Minnesota Statutes, section 297E.06, subdivision 4. Raises the threshold for annual financial audits from $300,000 receipts to $500,000. Allows the Commissioner of Revenue to require a financial audit of organizations with less than $500,000 of gross receipts for various violations of gambling tax compliance requirements. Organizations licensed under chapter 349 must now perform a certified inventory and cash count each year. The Commissioner of Revenue will prescribe the standards for these requirements.
Section 8. Solid waste management tax exemptions. Amends Minn. St. § 297H.06, subdivision 1, related to certain surcharges or fees that are exempt from the solid waste management tax. This section provides an exemption from the solid waste management tax that would apply to service charges imposed by a home rule charter city that owns and operates a solid waste-to-energy resource recovery facility. The exemption is effective retroactively for taxes imposed after March 31, 2007.
Section 9. Charitable organizations-financial statement requirements. Amends Minnesota Statutes, section 309.53, subdivision 3. Raises the threshold from revenue of $350,000 to $750,000 that triggers an audited financial statement that has been examined by an independent certified public accountant.
Sections 10 and 11. Gambling taxes compliance. Amends Minnesota Statutes, sections 349.1641 to 349.19, subdivision 9. Shortens the time for suspension of a license for filing a late tax return from three months to 45 days. Amends one annual audit requirement to still require an annual financial audit, but discontinue the requirement for an annual financial review.
Sections 12 to 14. Local police and firefighters relief association amortization state aid. Provides corrective language clarifying that the distribution of amortization state aid and supplementary amortization state aid is an open and standing appropriation. Current law contains the distribution amounts, but lacks conventional open and standing appropriation language. Subdivision 3a provides for retroactive annual appropriation language from the general fund to the Commissioner of Revenue for both aid programs.
Section 15. Appropriation. Appropriates $164,081,000 from the general fund to be used for one purpose of 2009 S.F. 2078, if enacted.
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