INCOME AND ESTATE TAX
Section 1 [Information sharing authorization for reciprocity] authorizes the Commissioner of Revenue to share data with the Wisconsin Secretary of Revenue for purposes of conducting the Income Tax Reciprocity Benchmark Study authorized in section 9.
Section 2 [Nonresident entertainer tax] changes current law to require entertainment promoters to withhold two percent on the amounts above $600 that the promoter pays the nonresident entertainer in a year (identical to the federal requirement for this kind of income). Under current law, promoters withhold two percent from all compensation paid to nonresident entertainers from the first dollar, but nonresident entertainers are allowed a $120 nonrefundable credit against the tax. This section also exempts entertainers receiving total compensation less than the individual filing requirements ($9,350 in 2010). These changes are effective beginning tax year 2012.
Sections 3 to 8 [Qualified farm and small business property estate tax exclusion] allows for a subtraction of the combined value of qualified farm property and qualified small business property from the federal adjusted taxable estate for determining the Minnesota adjusted taxable estate. The combined value may not exceed $4,000,000. The qualified property must be included in the federal adjusted taxable estate, the decedent must have owned the property for three years immediately preceding death, and a family member must use the property for the qualified farm or small business purpose for the three years immediately after the decedent’s death. In the case of a business, its most recent gross annual sales may not have exceeded $10,000,000. Qualified family members must agree in writing to pay a recapture tax if the family member disposes of an interest in the property to someone other than a family member, or the property is not used as a qualified farm or small business property. The recapture tax equals 16 percent of the amount of the exclusion claimed by the estate. These sections are effective for decedents dying after June 30, 2011.
Section 9 [Income tax reciprocity benchmark study] directs the Department of Revenue, together with the Wisconsin Department of Revenue, to conduct a study on various income reciprocity issues based on each state’s 2011 income tax returns and other necessary sources, and submit a report on the study by March 1, 2013. The study must determine: (1) the number of residents in each state earning income in the other state; (2) the income earned by residents of one state who work in the other state; and (3) the change in tax revenue for each state if taxpayers were required to pay income taxes only in their state of residence under a resumed reciprocity arrangement.
Section 10 [Estate tax study] directs the Department of Revenue to conduct a study on the various elements of Minnesota estate tax and submit a report on the study by February 1, 2013. The study must include an analysis of: (1) the Minnesota estate tax; (2) implications of federal estate tax changes such as repeal of the federal credit for state death taxes, increase in federal exclusion about, and portability of the federal exclusion; (3) considerations of revenue neutral alternatives to the estate tax such as inheritance or complementary gift taxes, or imposing an income tax on bequests; and (4) effects of current and alternate tax structures in Minnesota on residents’ domicile decisions.
Section 11 [New income tax reciprocity agreement with Wisconsin] directs the Commissioner of Revenue to initiate negotiations with the Secretary of Revenue of Wisconsin for purposes of entering into a new reciprocity agreement that would be effective for tax year 2012. It requires the commissioner to submit, at least 30 days before entering a final agreement, a copy of the agreement and supporting documentation to the chairs and ranking minority members of the House and Senate tax committees for their review and comment.
Section 12 [Appropriations] appropriates $291,000 in fiscal year 2012 and $314,000 in fiscal year 2013 to cover administrative costs of conducting the income tax reciprocity benchmark study described in Section 16.
Section 13 [Repealer] repeals current Minnesota law that provides for a tax credit equal to 20 percent of the health insurance premiums paid for a plan under section 125 of the Internal Revenue Code, effective tax year 2012. Currently, the credit is available taxpayers who pay health insurance premiums for the first twelve months of coverage under a Section 125 plan administered by their employers, did not have health insurance for at least a year prior to Section 125 coverage, and meet certain income restrictions. This section also repeals the provision in current law allowing the $120 nonrefundable credit for nonresident entertainers (referenced in section 2).
Section 1 [Update of administrative tax provisions] adopts federal tax administrative provisions made between March 18, 2010, and April 14, 2011, that Minnesota references for state tax administration purposes for tax year 2011 and following years. This section is effective the day following final enactment.
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 with the following exceptions:
• Extension of the elimination of the limitation on itemized deductions and the phaseout of personal and dependent exemptions. Minnesota would require taxpayers to add the amounts phased out and limited under prior federal law to taxable income in section 3.
• Extension of the increased standard deduction for married filing joint taxpayers. Minnesota would require those taxpayers to add back the difference between the increased federal standard deduction and the previous federal deduction amount as described in section 3.
Section 3 [Additions to federal taxable income (FTI) for individuals] conforms Minnesota's income tax to federal deductions by restricting the addition of the following items to federal taxable income:
· Qualifying teacher classroom expenses (limited to tax years before 2010);
· Qualifying higher education tuition expenses (limited to tax years before 2010); and
· The value of subsidies received by companies providing retiree prescription drug benefits (limited to tax years before 2013).
This section also contains language to reflect that, effective beginning in tax year 2011, Minnesota is not conforming to the increased elimination of the limitation on itemized deductions and phaseout of personal dependent exemptions and the federal standard deduction for married filing joint taxpayers (described in section 2).
Section 4 [Additions to taxable income for corporations] conforms Minnesota's income tax to the enhanced federal deduction for the donation of computer equipment by restricting the addition to taxable income for these items to tax years before 2010, and limits the addition for subsidies received by companies providing retiree prescription drug benefits to tax years before 2013. This section is effective tax year 2011.
Section 5 [Internal Revenue Code] adopts federal changes to federal adjusted gross income (FAGI) made between March 18, 2010, and April 14, 2011. Federal adjusted gross income is used for computing individual alternative minimum tax, determining withholding, and is the starting point for calculating household income, which is used to compute the dependent care and K-12 education credit. The main changes to federal adjusted gross income are described in section 2. Also ties references of foreign source income to the Internal Revenue Code as amended through March 18, 2010. These references are used in the foreign operating corporation and foreign royalty (“Subpart F”) provisions.
Section 6 [Credit allowed] This section conforms to federal changes in the income threshold levels for the working family tax credit for tax year 2011 only. It reduces the marriage penalty in the working family tax credit by increasing the income threshold by $5,000 for eligible married joint filers. The $5,000 amount is indexed for inflation from 2008 to 2011, making the additional phaseout amount $5,080.
Section 7 [Update of references to Internal Revenue Code 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. This section is effective for property tax refunds based on property taxes payable for tax year 2012 and after, and rent paid for tax year 2011 and after.
Section 8 [Scope of chapter] adopts federal changes in the Internal Revenue Code that affect the estate tax chapter.
SALES AND USE TAXES
Section 1 [Sales and use tax inclusions and exemptions] includesaccommodation intermediary servicesin the list of products and services subject to sales and use tax, effective the day after final enactment. Exempts the purchase of ring tones from sales and use tax, effective September 30, 2011.
Sections 2 to 4 [Online lodging reservations] allows for the collection of sales tax for lodging reservations secured by intermediaries, effective the day after final enactment. Under current law, intermediaries do not charge sales tax on fees they may receive from the provider of lodging services (e.g., a hotel). As a result, the consumer pays less tax if a room is booked through an intermediary rather than if made directly with the hotel, even though in both situations the price of the room is the same. Under these sections, the tax would be the same in both situations, and intermediaries will be required to collect and remit sales tax on the full amount charged for lodging services.
· Section 2 adds the definition of “accommodations intermediary” to include a person entity that brokers, coordinated, or arranges lodging for a customer.
· Section 3 adds the definition of “accommodations provider” to include any person or entity that furnishes lodging.
· Section 4 requires accommodations intermediaries to collect and remit sales tax on the service provided in connection with securing lodging in Minnesota.
Section 5 [Florist sourcing] clarifies application of the sales tax for all floral sales to include the sale of florist products and services that originate within the state for customers located within or outside of Minnesota, as well as sales that originate outside the state for delivery in Minnesota, such as telefloral orders. Effective September 30, 2011.
Section 6 [Non-ferrous minerals exemption] modifies the sales tax exemption for materials consumed in the production of taconite to include similar materials used in nonferrous minerals and metal production, if used by taxpayers subject to the net proceeds tax. Effective September 30, 2011.
Sections 7 and 13 to 15 [Qualified data centers] provides a sales tax exemption for materials used in construction or refurbishing of “qualified data centers” in Minnesota and for ongoing equipment, computer software, and electricity purchases. A qualified data center consists of one or more buildings on a single parcel of land or contiguous parcels where total construction or refurbishment costs and equipments, software, and electricity purchases is at least $10 million in a 24-month period. The facility must have uninterruptable power supply and/or generator backup power, sophisticated fire suppression and prevention systems, and enhanced security systems and features. Once a qualified data center has met the expenditure threshold, electricity purchases are exempt from sales tax on an up-front basis. All other purchases require sales tax to be paid up-front, but qualified data centers are eligible for a sales tax refund in the manner prescribed by the commissioner of revenue, and may apply for the refund beginning July 1, 2013. Qualified data centers may continue to receive the exemption for a maximum of 20 years or until June 30, 2042, whichever is earlier. This section is effective for sales and purchases made after June 30, 2012.
Section 8 [Resold admission tickets] allows sellers of resold admission tickets to claim a refund or provide a credit to the purchaser of resold tickets for sales tax paid on the original ticket. The ticket reseller’s credit is the value of the tax paid at the time of the original ticket sale or the tax charged by the reseller, whichever is less. The ticket reseller must charge sales tax on the full value of the ticket resale if tax was not paid on the original ticket sale. This section is effective for sales and purchases after September 30, 2011.
Section 9 [Scope] makes a technical change to current law by adding “units of local government” to the list of organizations eligible for a sales tax exemption.
Section 10 [Local sales tax exemption for townships] exempts townships from sales tax and provides that goods and services purchased by a township that are usually provided by a private business are taxable if a private business engages in that same activity. Effective for sales and purchases after September 30, 2011.
Section 11 [Sales of goods and services to local governments] expands the sales tax exemption for certain goods and services to local governments to include water used directly in providing fire protection by a fire department, fire protection district, or fire company providing services to the state or a political subdivision. The exemption is retroactive for sales and purchases made after June 30, 2007; however, no refunds will be made for taxes already paid on water purchased before January 30, 2010.
This section also strikes language exempting from sales tax purchases by towns of gravel, machinery, and equipment used for road and bridge maintenance, and leases by a town of certain motor vehicles. This exemption is no longer necessary because purchases by towns are exempt from sales tax under section 10. Effective for sales and purchases after September 30, 2011.
Section 12 [Emergency vehicles] provides a sales tax exemption, effective after September 30, 2011, for leases of vehicles specifically intended for emergency response or providing ambulance services.
Section 16 [Minnesota High School Sports League ticket exemption] extends the current sales tax exemption on tickets or admissions to non-regularseason games, events, and activities sponsored by the Minnesota State High School League (MSHSL) to July 1, 2015.
Section 1 [Local sales tax authorization] strikes language that prohibited political subdivisions from adopting new local sales tax provisions until after May 31, 2010. Since that date has passed, the paragraph is no longer needed. Section 1 also adds language prohibiting a local government from spending money to promote a local sales tax referendum, except for funds spent to conduct the vote. This prohibition applies to all referenda on local sales taxes, including those contained in Article 4. This section is effective the day following final enactment.
Section 2 [Local sales tax authorization] requires voter approval of a local option sales tax before the sales tax may be authorized by the legislature, and is effective the day following final enactment.
Section 3 [Limit on deposits to reserve fund; Hennepin county ballpark tax] imposes a limit on the amount of reserves that may be maintained for the baseball park equal to (1) the net present value of all its obligations to fund the ball park authority operating costs, youth sports, extension of library hours, and required capital improvements for a thirty year period starting from when the first bonds were issued, minus (2) the amount of these obligations already paid. Effective the day following final enactment.
Section 4 [Hermantown local sales tax] authorizes the city of Hermantown to impose an additional one-half of one percent local sales tax to pay for the costs of extending a sewer interceptor line; constructing a booster pump station, reservoirs, and related improvements to the water system; and constructing a building to house a police and fire station and an administrative services facility, if approved by referendum at a general election before December 31, 2012. Hermantown is authorized to impose up to a one percent local sales tax to fund these projects, but currently imposes a one-half of one percent sales tax.
Sections 5 to 7 [Rochester expansion of local sales tax revenues; bonding authority] authorizes the city of Rochester to use its existing sales and use tax revenues for the following additional projects: (1) $47 million for transportation infrastructure improvements, except railroad bypasses that would divert rail traffic from the city; (2) $26.5 million for higher education facilities; (3) $20 million for the Destination Medical Community initiative; (4) $8 million for construction of regional public safety facilities; (5) $20 million for a regional recreation/senior center; (6) $10 million for an economic development fund; and (7) $8 million for downtown infrastructure. Five million dollars of the $10 million allocated for the economic development fund must be used for development grants to the following communities: Byron, Chatfield, Dodge Center, Dover, Elgin, Eyota, Kasson, Mantorville, Oronoco, Pine Island, Plainview, St. Charles, Stewartville, Zumbrota, Spring Valley, West Concord, and Hayfield.
Both the sales and use tax applications and associated capital expenditure and bond financing must be approved by city voters in the 2012 general election. If the extension appears on the 2012 ballot, sales and use tax applications currently authorized may be collected until December 31, 2012. The aggregate principal of all bonds issued for the purposes in this section may not exceed $139.5 million plus issuance costs. The extension would be effective until the Rochester City Council determines that $139.5 million has been received to finance the projects and pay the balance on any bonds issued. Remaining funds may be placed in city’s general fund.
Section 8 [Clearwater modification of existing local sales tax revenues] extends voter-approved uses of a one-half of one percent sales and use tax for purposes of acquiring, constructing, and improving regional parks, bicycle trails, park land, open space, and pedestrian walkways.
Section 9 [Marshall local special sales tax deadline extension] extends the date by which the city of Marshall must seek voter approval of local lodging and food and beverage taxes authorized in the 2010 tax bill, allowing the city to hold this vote with the vote on its local sales tax authorized in section 14.
Section 10 [Cloquet local sales and use tax authorization] allows the city to impose a local sales tax of up to 1/2 of one percent, subject to approval at a general election. The imposition and administration of the tax is subject to the provisions in Minnesota Statutes, section 297A.99. The city may also impose a flat $20/vehicle tax on motor vehicles sold by dealers located in the city. Revenues from the taxes must be used to pay the costs of administration and to pay for the following projects: $4.5 million for the improvements to the Veteran's Park, a soccer complex, baseball complex, hockey arena, recreation center, and pedestrian trails throughout the city; $5.8 million for extension of utilities and other improvements related to property development adjacent to Highway 33 and Interstate 35; and $6.2 million for engineering and construction of infrastructure improvements identified in the city's comprehensive land use plan.
The city may issue up to $16.5 million in bonds for the projects listed based on the voter approval of the sales tax imposition. No separate vote is required for issuing the bonds and the bonds are not included in any debt or levy limit on the city. The taxes expire at the earlier of (1) 30 years; or (2) when the revenues collected are sufficient to pay for the projects and retire any associated bonds and bond costs. Because of the timing requirements for termination, any excess revenues will be deposited in the city general fund. The city may choose to end the taxes at an earlier date.
Section 11 [Fergus Falls local sales and use tax authorization] allows the city to impose a local sales tax of one-half of one percent to finance a regional ice arena, as approved by the voters at the 2010 general election. The city may use up to $6.6 million in revenues from the taxes to pay the costs of administration and to pay for the acquisition and betterment of a regional ice center facility, including associated bond costs. Allowed costs include furnishing and equipment costs as well as acquisition, design, and construction costs, and associated bond costs. The tax expires when the revenues collected are sufficient to pay for the project and retire any associated bonds and bond costs. Because of the timing requirements for termination, any excess revenues will be deposited in the city general fund. The city may choose to end the taxes at an earlier date.
Section 12 [Hutchinson local sales and use tax authorization] allows the city to impose a local sales tax of one-half of one percent to pay for its wastewater treatment facility, as approved by the voters at the 2010 general election. Allows the city to impose a complementary flat $20 per vehicle tax on motor vehicles sold by dealers located in the city.
Revenues from the taxes must be used to pay the costs of administration and to pay for the construction and renovation of the city's wastewater treatment facility, including construction, engineering, and associated bond costs. The taxes end at the earlier of (1) 18 years; or (2) when revenues raised are sufficient to pay for the project, including all associated bond costs. Because of the timing requirements for termination, any excess revenues will be deposited in the city general fund. The city may choose to end the taxes at an earlier date.
Section 13 [Lanesboro local sales and use tax authorization] allows the city to impose a one-half of one percent sales tax, as approved by the voters at the 2010 general election, for the following projects: street and utility improvements along a number of specified streets; street lighting on State Highways 250 and 16; wastewater treatment facility improvements; utility improvements to the Lanesboro High Hazard Dam; and improvements to the community center, library, and city hall. The city may issue up to $800,000 in bonds for these projects. Total improvements are limited to $800,000 and associated bond costs. The tax ends when revenues raised are sufficient to pay for the projects, including all associated bond costs. Because of the timing requirements for termination, any excess revenues will be deposited in the city general fund. The city may choose to end the taxes at an earlier date.
Section 14 [Marshall local sales and use tax authorization] allows the city to impose a one-half of one percent sales tax in the city of Marshall, if approved by voters at a general election held in the next two years. The city is required to present separate ballot questions for each of the following two authorized projects: new and existing facilities of the Minnesota Emergency Response and Industry Training Center; and new facilities of the Southwest Minnesota Regional Amateur Sports Center. The city may issue up to $17.29 million in bonds for these projects based on the voter approval of the sales tax imposition, and the bonds are not included in any debt or levy limit on the city. The tax ends at the earlier of (1) 15 years; or (2) when revenues raised are sufficient to pay for the projects, including all associated bond costs. Because of the timing requirements for termination, any excess revenues will be deposited in the city general fund. The city may choose to end the taxes at an earlier date.
Section 15 [Medford local sales and use tax authorization] allows the city to impose a one-half of one percent sales tax to repay Minnesota Public Facility Authority Loans, if approved by the voters at the next general election. The loans were used to finance $4.2 million of improvements to the city's water and wastewater systems. The local sales tax ends at the earlier of (1) 20 years; or (2) when revenues raised are sufficient to repay the loans, including interest. Because of the timing requirements for termination, any excess revenues will be deposited in the city general fund. The city may choose to end the taxes at an earlier date.
Section 1 [Referendum market value] technical change in the definition of referendum market value to accommodate the cleanup of class 4c language in section 7.
Section 2 [Property tax working group] eliminates the Commissioner of Revenue or designee from the membership of the Property Tax Working Group.
Section 3 [Economic development; public purpose] modifies the holding period that applies to the property tax exemption for property that is held by a political subdivision of the state for later resale for economic development purposes. Under current law, property will be exempt for up to eight years, except that a property that is located in a city of 5,000 or less population, and outside of the metropolitan area, the period is extended to 15 years. This section extends the eight-year holding period to nine years.
Section 4 [Electric generation facility; personal property] provides an exemption from the property tax for personal property located at an electric generation facility that meets the following criteria:
· it must be designed to utilize natural gas as a primary fuel;
· it must be owned and operated by a municipal power agency;
· it must be located within one mile of existing natural gas pipeline;
· it must be designed to have black-start capability to furnish emergency backup power service to the city in which it is located; and
· it must satisfy a resource deficiency identified in an approved integrated resource plan.
The governing bodies of the city and county in which the facility is located must approve the exemption. Construction of the facility must begin after December 31, 2011, and before January 1, 2015.
Section 5 [Valuation notice] provides that the notice of valuation must clearly state when a property’s classification has changed between the current and prior assessment. Also deletes obsolete language.
Section 6 [Game birds] requires that owners of property used for raising game birds and waterfowl must provide to the assessor a copy of their DNR licensing report showing that at least 500 birds were raised in the previous year and must also provide a copy of their most recent federal schedule F.
Section 7 [Class 4] provides a reduced property tax classification (4c) for commercial properties consisting of not more than 20 rental units used for less than 250 days a year, located in a city or town with a population under 2,500 outside the metropolitan area, provided that a state trail passes through the city or town. Class 4c property has a class rate of 1.5 percent, and pays the statewide property tax at the seasonal recreational tax rate rather than the commercial-industrial tax rate. Also makes a number of technical changes to eliminate redundancies and generally cleanup the 4c classification statute.
Section 8 [Disabled veteran homestead] modifies a limitation on the duration of the tax exemption for homesteads of surviving spouses of disabled veterans. Current law provides an exemption from property taxation for a certain amount of market value of the homestead of a disabled veteran. If the veteran has a disability rating of 70 percent or more, $150,000 of the market value is excluded, and if the disability is a total and permanent disability, $300,000 of the market value is excluded. Currently, if the disabled veteran dies, and there is a surviving spouse who also resides in the homestead and retains the title to it, the exclusion continues in effect for the benefit of the veteran’s spouse for one additional assessment year, or until the spouse sells or otherwise disposes of the property, whichever comes first. This section extends the one-year limitation on the continuation of the benefit for the surviving spouse, so that it would continue to be eligible for the exemption for five additional taxes payable years, or until the surviving spouse remarries or no longer owns and occupies the property. The surviving spouse of a service member who dies of service-connected causes while serving honorably in active military service is allowed to receive the exclusion for the same five-year period as the surviving spouse of a disabled veteran that dies. A disabled veteran's primary family caregiver, if one exists, is allowed to receive the market value exclusion if the veteran has no homestead of his or her own.
Section 9 [Seasonal recreational tax capacity] technical change in the definition of seasonal recreational tax capacity for the state general levy to accommodate the cleanup of class 4c language in section 7.
Section 10 [Maintenance of effort requirements] reduces county maintenance of effort (MOE) requirements for 2012 and thereafter to 90 percent of the amount required for 2011, provided that the suspension of an MOE does not require the state to spend additional money, or cause the state or county to lose federal funds. Also reduces the library MOE requirement for cities to 90 percent of the 2011 requirement for 2012 and thereafter. Requires the Commissioner of Management and Budget to post a list of all MOEs that will be suspended under this provision.
Section 11 [Minneapolis tornado damage housing replacement TIF] authorizes the city of Minneapolis to designate an additional 200 parcels within the tornado disaster area to be included in the city’s housing replacement TIF district on a onetime basis.
Section 12 [Minneapolis tornado damage TIF pooling] authorizes the city of Minneapolis to spend tax increment revenues from any district within the city to provide reconstruction assistance to properties within the tornado disaster area.
Section 13 [Minneapolis tornado damage tax abatements] authorizes the county boards of Anoka and Hennepin Counties to grant abatements for property taxes payable in 2011 for damaged homestead property located within the tornado disaster area.
AIDS, CREDITS, PAYMENTS, AND REFUNDS
Section 1 [Public hunting areas and game refuges] eliminates a reference to the inflation adjustment on the per acre PILT payments for public hunting land.
Section 2 [Referendum market value] clarifies that referendum market value is calculated based on the market value prior to the homestead market value exclusion calculated under section 3.
Section 3 [Homestead market value exclusion] converts the homestead market value credit from a credit against the property tax to an exclusion of the homestead’s market value.
Sections 4 and 5 [Credit reimbursements] provides that the agricultural market value credit will continue to be a state-paid credit, after the homestead market value credit is converted to a market value exclusion.
Section 6 [Computation of net property taxes] eliminates the market value homestead credit from the list of credits to be subtracted in going from a property’s gross tax to its net tax.
Section 7 [Content of tax statements] adds the homestead market value exclusion to the property tax statement and eliminates the market value homestead credit from the list of credit subtractions on the tax statement.
Sections 8 and 9 [Renter property tax refund] reduce the percent of rent constituting property taxes used in calculating the renter property tax refund from 19 percent to 17 percent permanently beginning with claims based on rent paid in 2011.
Section 10 [Homeowner property tax refund] increases the maximum state refund amounts and reduces the percentage paid by claimants at most income levels.
Section 11 [Inflation adjustment] the household income levels for the homeowner property tax refund are updated to reflect inflation adjustments through the 2012 filing year.
Section 12 [Sustainable forest incentive payment] permanently limits the Sustainable Forestry Incentive Act payment to no more than $7.00 per acre for each acre enrolled and to no more than $100,000 for any taxpayer identification number beginning in calendar year 2011. Taxpayers affected by the maximum payment limit are allowed to terminate participation in the program by December 31, 2011.
Section 13 [Alternative process for consolidation] allows an alternative way for counties to begin the process for consolidation by filing a unanimous resolution from each county board with the Secretary of State. Currently, they need to have a petition signed by 25 percent of the voters in the last general election from each county in order to start the process.
Section 14 [City net tax capacity] clarifies that the homestead market value exclusion is subtracted in the calculation of city net tax capacity for the purpose of calculating local government aid.
Section 15 [CPA reductions] provides that for 2011 and 2012, County Program Aid distributions are equal to the lesser of the 2011 certified CPA distribution or the 2010 CPA final distribution after reductions.
Section 16 [LGA minimum and maximum] provides that the LGA minimum and maximum aids for 2013 will be calculated based on 2012 LGA. The minimum and maximum aids for 2014 and subsequent years will be based on the previous year’s certified aid.
Section 17 [LGA reductions] provides that the local government aid distribution in 2011 and 2012 for all cities is equal to the lesser of the 2011 certified LGA distribution or the 2010 LGA final distribution after reductions.
Section 18 [Aid appropriations] permanently reduces the appropriation for local government aid from $527.1 million to $426.4 million for aids payable in 2013 and thereafter. The appropriation for county program aid is reduced from $197.7 million to $165.7 million beginning in 2013.
Section 19 [Terms] eliminates a cross reference to the inflation factor for PILT payments that is repealed in section 27.
Section 20 [Types of land, payments] Eliminates a reference to the inflation adjustment on per acre PILT payments. Currently, the inflation adjusted rates for payable 2011 are equal to:
• $5.133/acre or 0.75 percent of assessed value for acquired land;
• $1.283/acre for county administered other natural resources land and land utilization project (LUP) land; and
• $0.642/acre on commissioner administered other natural resource land.
Section 21 [General distribution] updates the allocation of PILT payments to the county and the townships to current levels and eliminates a reference to the inflation adjustment of PILT payments.
Section 22 [Political contribution refund] extends the suspension of the political contribution refund program by two years, through June 30, 2013.
Section 23 [Market value credit reductions] provides that the market value credit reimbursement for cities and counties in 2011 cannot exceed the reimbursement that they received for 2010.
Section 24 [Property tax statement for taxes payable in 2012 only] provides that for purposes of the 2012 tax statement only, the market value homestead credit for property taxes payable in 2011 will not be explicitly shown. Instead, the credit will be subtracted from the amount shown as the gross tax.
Section 25 [Aid payment delay] requires the Commissioner of Revenue to delay making aid payments to local governments from July 20 to July 27, 2011.
Section 26 [Sustainable forest incentive act reduction purpose] provides a purpose statement for the reduction made to the sustainable forest program payments under section 12. The legislature finds that it is prudent and necessary to reduce the program cost and finds that the program requirements are in the participants’ own financial interest without regard to the state incentive payments.
Section 27 [Repealer]
Paragraph (a) repeals the wetland reimbursement and the inflation factor used to adjust PILT payments.
Paragraph (b) repeals the market value credit reimbursement reduction effective for taxes payable in 2012.
Section 1 provides that property used in nonferrous mining is exempt from the property tax; the business would pay a net proceeds tax in lieu of the property tax.
Section 2 clarifies that businesses engaged in the business of mining, producing or refining of ores, and metals and minerals, are exempt from corporate income tax.
Section 3 establishes a definition of "refining" in the minerals taxation chapter.
Section 4 adds references to refining metals and minerals to the description of taxpayers who are subject to the nonferrous occupation tax. It specifically provides that mining includes the application of hydrometallurigical processes.
Section 5 modifies the definition of gross income that is used in the nonferrous occupation tax provision to include metals or minerals and to remove the reference to energy resources.
Section 6 changes the imposition of the nonferrous net proceeds tax so that it applies to all ores, metals, and minerals, mined, extracted, produced, or refined within the state.
Section 7 provides that the same deductions will apply to the net proceeds tax that are provided for the nonferrous occupation tax.
Section 8 defines “metals or mineral products” to mean all of those that are subject to the nonferrous net proceeds tax.
Section 9 repeals a provision that established deductions for the computation of the nonferrous net proceeds tax, which is replaced in this bill.
Section 1 [Affiliated group] defines “affiliated group” as an entity that controls another by having the power to vote 25% or more of the voting securities of another entity or an entity that controls the election of the majority of directors of another entity. Effective for nonadmitted insurance policies that go into effect after July 20, 2011.
Section 2 [Gross premiums] clarifies that “gross premiums” for the purpose of nonadmitted insurance coverage includes any type of payment that is made in consideration for an insurance contract. It includes premium deposits, assessments, and fees. Effective for nonadmitted insurance policies that go into effect after July 20, 2011.
Section 3 [Home state] defines “home state” as the state where the insured has a principal place of business or principal residence. If the total risk is located outside of the home state, the premiums are taxable at the state where the greatest portion of the premiums is allocated. Effective for nonadmitted insurance policies that go into effect after July 20, 2011.
Section 4 [Independently procured insurance] defines “independently procured insurance” to mean insurance that is procured directly by an insured from a nonadmitted insurer, without the involvement of a surplus lines broker. Effective for nonadmitted insurance policies that go into effect after July 20, 2011.
Section 5 [Nonadmitted insurance] defines “nonadmitted insurance” as insurance placed directly by the insured, or through a surplus lines broker with a nonadmitted insurer. Effective for nonadmitted insurance policies that go into effect after July 20, 2011.
Section 6 [Nonadmitted insurance premium tax] defines “nonadmitted insurance premium tax” as the tax on nonadmitted insurance and includes any tax, fee, assessment, or other charge imposed directly or indirectly by a government entity. Effective for nonadmitted insurance policies that go into effect after July 20, 2011.
Section 7 [Nonadmitted insurer] defines “nonadmitted insurer” as an insurer that is not licensed in Minnesota. Effective for nonadmitted insurance policies that go into effect after July 20, 2011.
Section 8 [Surplus lines broker] defines “surplus lines broker”. This definition replaces the term “licensee” which is currently used in Minn. Stat. chap. 297I. The new definition includes a person licensed to sell, solicit, or negotiate insurance on properties, risks, or exposures located or to be performed in a state with nonadmitted insurers. Effective for nonadmitted insurance policies that go into effect after July 20, 2011.
Section 9 [Taxpayer] replaces the term “surplus lines licensee” with the term “surplus lines broker.” Effective for nonadmitted insurance policies that go into effect after July 20, 2011.
Section 10 [Nonadmitted insurance premium tax] explains the new application of the nonadmitted insurance premium tax. Under subd. 7(a), a tax is imposed on surplus lines brokers when premiums are paid to the broker by an insured whose home state is Minnesota. Subd. 7(b) explains the application of the tax when insurance is purchased directly from a nonadmitted insurer, without the involvement of a surplus lines broker. Under subd. 7(b), the rate of the tax remains at 2% for nonadmitted insurance that is independently procured. Subd. 7(c) explains that only the home state of the insured can impose a tax when Minnesota is the home state. Effective for nonadmitted insurance policies that go into effect after July 20, 2011.
Section 11 [Other entities] replaces the term “surplus lines licensee” with the term “surplus lines broker.” Effective for nonadmitted insurance policies that go into effect after July 20, 2011.
Section 12 [Due dates for filing returns] clarifies that when an insured buys insurance directly from a nonadmitted insurer, the return is due annually on March 1. This is consistent with the way the tax return is currently filed. Effective for nonadmitted insurance policies that go into effect after July 20, 2011.
Section 13 [Due dates for filing returns for surplus lines brokers] clarifies that when an insured buys insurance from a surplus lines broker, the return is due twice a year. Effective for nonadmitted insurance policies that go into effect after July 20, 2011.
Section 14 [Repealer] repeals Minn. Stat. § 297I.05, subds. 9 and 10. These subdivisions are no longer necessary since they have been incorporated into Minn. Stat. § 297I.05, subd. 7 which combines the tax currently imposed under subds. 9 and 10, into one tax which is imposed when insurance is purchased directly from a nonadmitted insurer, without the involvement of a surplus lines broker. Effective for nonadmitted insurance policies that go into effect after July 20, 2011.
SCIENCE AND TECHNOLOGY PROGRAM
Section 1 [Citation] names the law proposed in sections 2 through 10 the “Minnesota Science and Technology Program.”
Section 2 [Definitions] defines the following terms for purposes of the program:
“Authority” is the Minnesota Science and Technology Authority, an existing state entity that is established in Minnesota Statutes, section 116W.03.
“College or university” is a private or public postsecondary education institution that grantsacademic degrees and conducts research and development in science and technology.
“Commercialization” includes all of the activities involved with developing, producing, and selling a new product, ranging from doing the basic research at the “conceptual stage” through selling the product.
“Commercialized research project” is research conducted in a college or university or at a nonprofit research institution or by a qualified science and technology company that has shown advanced commercial potential in the form of licenses, patents, or similar and for which a qualified science and technology company is being or has been formed.
“Fund” is the Minnesota science and technology fund created under section 3.
“Nonprofit research institution” is a 501(c)(3) organization with its principal place of business in Minnesota that conducts significant research and development activities in Minnesota.
“Qualified science and technology company” is a business with fewer than 100 employees engaged in research, development, or production of science or technology in Minnesota.
Section 3 [Minnesota Science and Technology Fund] establishes the Minnesota Science and Technology Fund as a special revenue fund in the state treasury. Payments from the fund may only be made at the request of the authority.
Section 4 [Authorized uses of the fund] authorizes the fund to be used for:
· The commercialized research program under section 5;
· The federal research and development support program under section 6;
· The industry innovation and competitiveness program under section 7; and
· Carrying out the powers of the authority to award grants and loans under section 8.
Section 5 [Commercialized research program] authorizes the authority to establish a commercialized research program to encourage the creation of science and technology jobs. This program can provide grants of up to $250,000 per project for:
· Research projects to assist in the commercialization of science and technology, developed by a college, university, or nonprofit organization and transferred to a qualified science and technology company; and
· Projects developed directly by a qualified science and technology company.
This program is subject to the following limits:
· The authority must establish written criteria for award and use of the grants;
· The recipient (college, university, nonprofit organization, or private company) must provide matching funds;
· Only 15 percent of the grants may be usedfor overhead; and
· Recipients must report to the authority on the uses and outcomes of the grant within one year.
Section 6 [Federal research and development support program] authorizes the authority to establish a federal research and development support program to increase and coordinate efforts to obtain federal funding for research of primary benefit to qualified science and technology companies, colleges and universities, and nonprofit research organizations.
Specifically, this program is to:
· Identify potential federal funding sources;
· Make grants to qualified science and technology companies; and
· Help develop federal Small Business Innovation (SBIR) or Small Business Technology Transfer (STTR) proposals.
Match SBIR and STTR awards (subject to an annual $1.5 million funding limit).
Section 7 [Industry innovation and competitiveness program] authorizes the authority to create an industry technology and competitiveness program to:
· Provide matching funds to help startup of qualified science and technology companies;
· Fund efforts to retain engineering, science, and technical jobs in Minnesota; and
· Fund science and technology industry growth clusters.
This program is subject to the following limits:
· The authority must establish written criteria for the award and use of the grants;
· The recipient (college, university, nonprofit organization, or private company) must provide matching funds; and
· Recipients must report to the authority on the uses and outcomes of the grant within one year.
Section 8 [Minnesota Science and Technology Authority; powers] provides that the authority has all of the powers necessary to carry out its purposes, including the power to make grants and loans and to pay for reasonable administrative expenses, including staff and professional fees. Administrative costs are limited to five percent of the first $5,000,000 in the fund and two percent of any balance in excess of $5,000,000.
In making grants, the authority is directed to give priority to qualified science and technology businesses that have “demonstrable economic benefits to the state” by creating jobs, attracting federal money, or creating new businesses.
In making grants to colleges, universities, and nonprofit research organizations, the authority is to give priority to proposals that:
· Promote collaboration with private businesses;
· Attract new research entities, talent, or resources to Minnesota; or
· Attract significant researchers and resources from outside of Minnesota.
Interest charged on the loans and other revenues from the fund’s transactions, including required repayments, go back to the corpus of the fund.
Section 9 [Repayment] requires the recipient of an award, grant, loan, or other financial assistance to repay all or part of it, if the recipient moves out of Minnesota or ceases operation in the state within three years after it received the grant. If the relocation or closing occurs within two years of receipt, the entire amount must be repaid. Relocations or cessation of operations that occur after three years and before four years require repayment of 75 percent of the amount.
Section 10 [Expiration] provides that the law expires when the Minnesota Science and Technology Authority expires by law (June 30, 2018). Any unused money in the fund at that point would be returned to the general fund.
Section 11 [Appropriation] appropriates $500,000 to the science and technology fund for fiscal year 2012. Any unspent money carries over to fiscal year 2013. Up to $107,000 may be used for administrative expenses of the authority.
Section 1 [Tax incidence study] requires the tax incidence study to include information on the distribution of the burden of federal taxes borne by Minnesota residents.
Section 2 [Budget reserve account reduction] cancels $8,665,000 of the balance in the budget reserve account to the general fund on July 1, 2011.
Section 3 [Cash flow account reduction] cancels $171,000,000 of the balance in the cash flow account to the general fund on July 1, 2011.
Section 4 [Tax incidence study appropriation] appropriates $30,000 to the Department of Revenue for the cost of making the change in the tax incidence study required in section 1.
Section 5 [Appropriation for disaster relief.] Appropriates $9,000,000 to provide a match for FEMA disaster assistance to state agencies and political subdivisions for disaster recovery work related to the spring 2011 floods, the May 22, 2011, tornadoes in Hennepin and Anoka Counties, and the July 2011 tornadoes. $5,000,000 of the appropriation is reserved for the area of the spring flooding. Any unexpended portion of a 2010 appropriation to the Department of Agriculture for disaster assistance may be transferred to the Commissioner of Public Safety if it is needed to supplement the $9,000,000 appropriation.
Section 6 [Modifications due to shutdown] provides that statutes of limitation relating to claims for refunds, appeals, or other documents to be filed with the Commissioner of Revenue during the shutdown may be tolled by the commissioner until 30 days after the shutdown ends. The time for actions required to be taken, or determination required to be made by the commissioner or property tax administrators during the shutdown period may be extended, or the commissioner may waive the mandatory nature of an action or determination by a property tax administrator. Statutes of limitation related to the assessments of taxes are not extended. The commissioner’s discretionary authority to extend times under this provision is not subject to appeal.
Section 7 [Purpose statements] provides required purpose statements for tax expenditures created in this bill.
Section 8 [Relationship to other appropriations] provides that, except where specified otherwise, the act is effective retroactively to July 1, 2011, and any appropriations in this act replace funding provided under the order of the court.
Section 1 provides an exception from the general rule that the proceeds of litigation or a settlement must be deposited in the general fund. It provides that tobacco settlement revenues may be deposited under the terms of the tobacco securitization bond provision in section 3.
Section 2 authorizes the Commissioner of Management and Budget to issue debt under either the tobacco securitization bond provision or the tobacco appropriation bonds provision of this article. The total proceeds of the bonds issued and sold under those sections must not exceed $640 million, not including bond sale expenses and the cost of the first two years of debt service.
Section 3 authorizes the use of tobacco securitization bonds. The Tobacco Securitization Authority is created, with a governing board consisting of the Commissioner of Management and Budget, the Commissioner of Revenue, and the Commissioner of Health. The authority is authorized to issue bonds in an aggregate principal amount that does not exceed $900 million, in order to provide funds not to exceed $640 million for the purchase of all or a portion of the tobacco settlement revenues and to provide sufficient funds for the establishment of a debt service reserve fund and the payment or provision for financing costs and capitalized interest. It may also issue refunding bonds. The bonds must have a term that is no more than 30 years and may be sold at either private or public sale. The bill provides for the deposit of the net proceeds of the sale by the state of its tobacco settlement revenues, which are the revenues derived from the settlement agreement in 1998 between the state of Minnesota and Blue Cross and Blue Shield of Minnesota and Philip Morris and other tobacco manufacturers that provided for annual payments by the tobacco companies to the state. The state is not liable on the bonds of the authority, and they will not be considered obligations of the state or any of its subdivisions. The authority is required to report to the Legislature each year on its operations during the fiscal year, including amounts of income.
Section 4 authorizes the issuance of tobacco appropriation bonds. These are bonds, notes, or similar instruments of the state that are payable in whole or in part from tobacco settlement revenues, as well as money appropriated in any biennium for debt service. The Commissioner of Management and Budget is authorized to issue appropriation bonds in an amount not to exceed $640 million, plus issuance and first-year debt service costs, with the total not to exceed $800 million in a principal amount. The term of the bonds may not exceed 30 years, and interest on the bonds may or may not be taxable. The bonds may be sold at a public or private sale, and the commissioner may issue refunding bonds. The appropriation bonds will not be public debt of the state, and the full faith, credit, and taxing powers of the state are not pledged to their payment. Appropriation bonds are payable in each fiscal year only from amounts that the Legislature may appropriate for debt service. The bill specifically provides that the amount needed to pay principal and interest on appropriation bonds is appropriated each year to the commissioner from the general fund, subject to the repeal, unallotment, or cancellation of the appropriation. The bill establishes a process for validation of the appropriation bonds by the Minnesota Supreme Court. The Commissioner of Management and Budget would take action providing for the issuance of the appropriation bonds and would then file a complaint that would set out the state’s authority to issue the bonds, the action, or proceeding authorizing the issuance and its adoption and all other proceedings. The Supreme Court would issue an order allowing all persons and the state to the Attorney General to appear before the Court and show why the complaint should not be granted and the proceedings and bonds validated. The Court would then determine whether or not the bonds would be validated.