Senate Counsel, Research
and Fiscal Analysis
Minnesota Senate Bldg.
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St. Paul, MN 55155
(651) 296-4791
Tom Bottern
Director
   Senate   
State of Minnesota
 
 
 
 
 
S.F. No. 552 - Omnibus Tax Bill (First Engrossment)
 
Author: Senator Rod Skoe
 
Prepared By: Nora Pollock, Senate Counsel (651/297-8066)
Eric S. Silvia, Senate Counsel (651/296-1771)
Jack Paulson, Senate Analyst (651/296-4954)
 
Date: April 26, 2013



 

ARTICLE 1 – AIDS AND CREDITS

Section 1.  Police and fire state aid.  Appropriates $745,000 from the general fund in fiscal year 2015 and thereafter to the commissioner of revenue for pension aid. The commissioner shall administer the account and allocate the money as follows:

  1. $130,065 to the Public Employees Retirement Association (PERA) for its police and fire fund;
  2. $64,935 to municipalities employing firefighters with retirement coverage; and
  3. $550,000 for municipalities, other than those receiving a disbursement under clause (2) which qualified to receive fire state aid (volunteer firefighters).

Appropriates $1,550,000 from the general fund in fiscal year 2015 and thereafter to the commissioner of revenue and allocated as follows:

  1. One-third as police state aid;
  2. Two-thirds to PERA for deposit as a supplemental state pension funding aid in the public employees police and fire retirement fund and to the Minnesota State Retirement System for deposit as a supplemental state pension funding aid in the state patrol retirement fund.

The base amounts are increased to $7,450,000 and $15,500,000 for fiscal year 2016 and thereafter until December 31, 2020, or until assets of the retirement plan are at least 90 percent of the actuarial accrued liabilities of the plan. 

Section 2.  Pre-1940 housing percentage. “Pre-1940 housing percentage” means 100 times the most recent count of all housing units built before 1940 divided by the number of all housing units in the city.  A separate definition is provided for the city of East Grand Forks.

Section 3.  Percent of housing built between 1940 and 1970. “Percent of housing built between 1940 and 1970” is equal to 100 times the most recent count of all housing units in the city built after 1939 but before 1970, divided by the total number of all housing units in the city.

Section 4.  City revenue need. Defines “city revenue need” for three different sized cities.

  • Population greater than 10,000 –“city revenue need” means 1.15 times the sum of (1) 4.59 times the pre-1940 housing percentage; plus (2) 0.622 times the percent of housing built between 1940 and 1970; plus (3) 169.425 times the jobs per capita; plus (4) 307.664.
  • Population equal to or greater than 2,500 but less than 10,000 – “city revenue need” means 1.15 times the sum of (1) 572.62; plus (2) 5.026 times the pre-1940 housing percentage; minus (3) 53.768 times household size; plus (4) 14.022 times peak population decline.
  • Population less than 2,500 –“city revenue need” means the sum of 410 plus 0.367 times the city’s population over 100.  The city revenue need cannot exceed $630 per capita.

Section 5.  Jobs per capita.  “Jobs per capita” means the average number of employees in the city divided by the city’s population for the same calendar year.

Section 6.  Peak population decline.  “Peak population decline” is equal to 100 times the difference between one and the ratio of the city’s current population, to the highest city population reported in a federal census from 1970 or later, but not less than zero.

Section 7.  Sparsity adjustment.  For a city with a population of 10,000 of more, the sparsity adjustment is 100 for any city with an average population density less than 150 per square mile. For any other city, the sparsity adjustment is zero.

Section 8.  Town aid.  Provides aid payments to towns in 2014 and thereafter equal to the product of:  (1) its agricultural property factor; (2) its town area factor; (3) its population factor; and (4) 0.00225. If the sum of all aids payable under this subdivision exceeds the limit, the distribution to each town must be reduced proportionately.

Section 9.  City formula aid.  For aids payable in 2014 only, “city formula aid” equals the sum of (1) its 2013 certified aid and (2) the product of the difference between its unmet need and its 2013 certified aid and the aid gap percentage. For aids payable in 2015 and thereafter, city formula aid is equal to the sum of (1) its formula aid in the previous year and (2) the product of the difference between its unmet need and its certified aid in the previous year and the aid gap percentage.

Section 10.  City aid distribution.  In calendar year 2014 and thereafter, each city receives an aid distribution equal to the sum of (1) the city formula aid and (2) its aid adjustment. For aids payable in 2014 only, the total aid for a city may not be less than the amount it was certified to receive in 2013. For aids payable in 2015 and thereafter, the total aid for a city must not be less than the amount it was certified to receive in the previous year minus the lesser of $10 multiplied by its population or five percent of its net levy in the year prior to the aid distribution.

Section 11.  Certified aid adjustments.  Provides additional aid in the amount of $150,000 for the city of Warroad through 2018, a base adjustment of $160,000 for the city of Mahnomen for aids payable in 2014 and thereafter, and base adjustments are made for temporary aid base adjustments that have expired.

Section 12.  Cities; appropriation.  Sets the city aid appropriation for aids payable in 2014 and thereafter at $506,438,012.

Section 13.  Counties; appropriation.  Increases the appropriation for county program aid by $40 million for aids payable in 2014 and thereafter. The $40 million increase is split evenly between county need and tax base equalization aid.

Section 14.  Towns; appropriation. Sets the town aid appropriation for aids payable in 2014 and thereafter at $5,000,000.

Section 15.  PILT; purpose statement.  Provides a purpose statement for payment in lieu of taxes (PILT).

Section 16.  PILT; acquired natural resources land.  Modifies definition of “acquired natural resources land” to specifically exclude “wildlife management land.”

Section 17.  PILT; other natural resources land.  Modifies definition of “other natural resources land” to specifically exclude “acquired natural resource land” and “wildlife management land.”

Section 18.  PILT; military game refuge.  Defines “military game refuge”‘as land owned in fee by another state agency for military purposes and designated as a state game refuge.

Section 19.  PILT; transportation wetland.  Defines “transportation wetland” as land administered by the Department of Transportation in which the sate acquired, by purchase from a private owner, a fee title interest in over 500 acres of land within a county to replace wetland losses from transportation projects.

Section 20.  PILT; wildlife management land.  Defines “wildlife management land” as land administered by the commissioner in which the state acquired, from a private owner by purchase, condemnation, or gift, a fee interest under the authority granted in Chapter 94 (lands, state forests) or 97A (game and fish) for wildlife management purposes and actually used as a wildlife management area.

Section 21.  PILT; payments.  Sets PILT payments as follows:

  1. Acquired Natural Resources Land: $5.133, multiplied by the total number of acres or, at the county’s option, three-fourths of one percent of the appraised value of land in the county, whichever is greater;
  2. Transportation Wetland: $5.133, multiplied by the total number of acres of transportation wetland, or, at the county’s option, three-fourths of one percent of the appraised value of all acquired natural resources land in the county, whichever is greater;
  3. Wildlife Management Land: three-fourths of one percent of the appraised value of all wildlife management land in the county;
  4. Military Refuge Land: 50 percent of the dollar amount as determined under clause (1), multiplied by the number of areas of military refuge land in the county;
  5. County-Administered: $1.50 multiplied by the number of acres of county-administered other natural resource land in the county;
  6. Land Utilization Projects: $5.133 multiplied by the total number of acres of land utilization project land in the county;
  7. Commissioner-Administered: $1.50 multiplied by the total number of acres of commissioner-administered other natural resources land in the county.
  8. Local Drainage Assessments: Without regard to acreage, $300,000 for local assessments under section 84A.55, subdivision 9.

Section 22.  PILT; determination and certification of land. Clarifies that the commissioner of natural resources shall determine and certify to the commissioner of revenue the number of wildlife management land and military refuge land within each county and the commissioner of transportation shall determine and certify to the commissioner of revenue the number of acres of transportation wetland within the county, to reflect the additional classifications of land.

Section 23.  PILT; determination of appraised value.  Changes the appraised schedule of acquired natural resources land from five years to six years to correspond to the schedule for appraising other tax exempt property.

Section 24.  PILT; townships.  Requires that ten percent of the amount received by the county for each acre of acquired natural resource, transportation wetland, county-administered, land-utilization, and commissioner administrated land must be paid to each organized township.

Section 25.  PILT; distribution for wildlife management land and military refuge land. Requires the county treasurer to allocate payments for these lands among the county, town and school districts as if they were taxes on the land received in the year.

Section 26.  Mahnomen County; appropriations. Increases the annual aid appropriations to taxing jurisdictions in Mahnomen County. $1,200,00 is annually appropriated from the general fund to the commissioner of revenue to make the following payments: $900,000 to the county of Mahnomen, $160,000 to the city of Mahnomen and $140,000 to Independent School district No. 432, Mahnomen.

Section 27.  Repealer. Repeals provisions relating to the current local government aid formula and obsolete aid adjustments.

ARTICLE 2 – PROPERTY TAX

Section 1.  Board of Water and Soil Resources; evaluation and report.  Extends the period of time that the Board must evaluate local government entities’ progress in accomplishing their adopted local water management plans to not less than once every ten years.

Section 2.  Tax levy authority.  Allows a county, municipality or township the option to levy for a comprehensive watershed management plan.

Section 3.  Financial assistance.  Requires that a water implementation tax imposed by a county to use as a match for the base granted by the BWSR be levied at a rate sufficient to generate a minimum amount as determined by the board. Allows the use of a county conservation fee to be used as matching funds.

Section 4.  Cost-sharing funds.  Removes requirement that at least 70 percent of cost sharing funds be allocated to areas with high priority erosion or water quality problems and requires the funds be used for technical assistance portion of the grants funds to leverage federal or other nonstate funds.

Section 5.  Authority.  Allows the soil loss ordinance to use the soil loss tolerance for each soil series including any method approved by the BSWR.

Section 6.  Manufactured homes and park trailers.  Exempts manufactured homes from property tax if held as inventory by a licensed or limited dealer.

Section 7.  Manufactured home as dealer inventory.  Defines a manufactured home as dealer inventory if the home is: (1) listed as inventory and held by a licensed or limited dealer; (2) unoccupied and not available for rent; (3) may or may not be permanently connected to utilities in a manufactured park; and (4) may or may not be temporarily connected to utilities at a dealer’s sales center.  The exemption is allowable for up to five assessment years after the date a home is initially claimed as dealer inventory.

Section 8.  Assessor accreditation.  Requires that every individual that appraises or physically inspects real property to determine valuation or classification for property tax purposes must obtain licensure as an accredited assessor by the Minnesota State Board of Assessors by July 1, 2017, or by the time they become licensed as a certified assessor, whichever is later.

Section 9.  Personal property used for pollution control.  Allows an exemption from property tax for personal property that is not required to be installed or required by a standard, rule, criteria, guideline, policy, or order of the Minnesota Pollution Control Agency.

Section 10.  Certain property owned by an Indian tribe.  Allows a ten-year exemption from property tax for property that is:

  1. Classified as commercial-industrial for taxes payable in 2013;
  2. Located in a city of the first class with a population greater than 300,000 as of 2010 federal census;
  3. Was on January 2, 2012 and for the current assessment owned by a federally recognized Indian tribe or its instrumentality, that is located in Minnesota; and
  4. Used exclusively for tribal purposes or institutions of purely public charity.

Property qualifying is limited to no more than two contiguous parcels that do not exceed 20,000 square feet.

Section 11.  Electric generation facility; personal property.  Provides a property tax exemption for attached machinery and other personal property that is part of an electric generation facility that exceeds five megawatts of installed capacity.  To qualify for the exemption, the facility, at the time of construction, must be:  (1) designed to utilize natural gas as a primary fuel; (2) owned and operated by a municipal power agency; (3) designed to utilize reciprocating engines paired with generators to produce electrical power; (4) located within the service territory of a municipal power agency’s electrical municipal utility that serves load exclusively in the metro area; and (5) designed to connect directly with a municipality’s substation.

Section 12.  Statement of exemption.  Requires that a taxpayer claiming an exemption from property tax for property used for pollution control must file a statement of exemption with the assessor of the assessment district in which the property is located, in addition to the commissioner of revenue.

Section 13.  Conservation property tax valuation.  Clarifies that the value of real property, which is subject to a conservation restriction or easement shall not be reduced by the assessor if the restriction is for a conservation purpose and the property is being used in accordance with the restriction. This section does not apply to restrictions or easements covering riparian buffers along lakes, rivers and streams that are used for water quantity or quality control or parcels of land in excess of 1,920 acres that allow motorized access.

Section 14 and 15.  Agricultural homesteads; special provisions.  Modifies agricultural homestead determinations by removing several special provisions which granted homestead status to property owned by entities or persons not actually living on the farm. An obsolete provision allowing continued homestead classification in certain counties relating to a 1998 tornado is also eliminated.

Section 16. Class 4d property tax maximum. Provides that taxes on the portion of a property classified as 4d low-income rental housing cannot exceed ten percent of the gross potential rent for qualifying units. Gross potential rent is calculated by the Minnesota Hosuing Finance Agency (MHFA). MHFA is required to annually certify to local assessors the property tax limitation for qualifying units in each property, effective beginning with assessment y

Section 17.  Disparity reduction credit.  Increases the disparity reduction credit to an amount necessary to reduce the effective tax rate on both commercial-industrial and apartment property to 1.9 percent in the border cities of Breckenridge, Dilworth, East Grand Forks and Moorhead. Current law reduces the effective tax rate to 2.3 percent.

Section 18.  State general levy; amount. Sets the state general levy amount on commercial-industrial property, for taxes payable in 2014 and thereafter, at the rate imposed for taxes payable in 2002.

Section 19.  State general levy; commercial-industrial tax capacity.  Eliminates the exemption for electric generation attached machinery from the state general levy.

Section 20.  Confessions of judgment; class 3a property.  Removes the value cap of $500,000 for class 3a property eligible for a confession of judgment and adds an approval requirement by the county auditor. Also allows assessment authorities or municipalities to waive or abate repayment of a portion of special assessments. Conditions including, but not limited to, environmental remediation may be required when considering eligibility.

Section 21.  Installment payments. Adjusts amount and number of payments under confessions of judgment by allowing an initial payment of one-fifth the amount and four equal, annual installments.

Section 22.  Expiration of time for redemption. Corrects cross-reference for redemption periods.

Section 23.  Period for redemption. Removes five year period for redemption for homestead or seasonal residential recreational land, so that the redemption period for most properties is three years.

Section 24.  Renter’s property tax refund; income. Increases the subtractions allowed for individuals claiming the renter’s property tax refund, by one-tenth. The allowed subtraction for renters aged 65 or disabled is increased to 1.5 times the exemption amount. Individuals who are married, aged 65 and/or disabled and living in the same household receive an additional subtraction equal to the exemption amount.

Section 25.  Renter’s property tax refund; copay. Lowers the required copay amounts for the renter’s property tax refund by five percentage points. The income brackets and maximum refund amounts are updated to reflect annual inflation adjustments and maximum refunds are increased by 10 percent.

Section 26.  Renter’s property tax refund; inflation adjustment. Updates the year in which the income brackets and maximum refunds will be annually adjusted for inflation, to refunds based on rent paid in 2014.

Section 27. SFIA qualification. Excludes land exceeding 60,000 acres that is subject to a single conservation easement and any land that becomes subject to a conservation easement after the effective date of the act from participation in the SFIA program.

Section 28.  Eligibility requirements; SFIA. Requires that claimants enrolling more than 1,920 acres in the program must also allow motorized access on established and maintained roads and trails, unless the road or trail is temporarily closed due to safety, natural resource or road damage.

Section 29. Length of covenant; SFIA. Allows a claimant to terminate its covenant in the program if future changes are made to the payment formula.

Section 30. Calculation of incentive payment; SFIA. Sets the annual payment of property enrolled in the sustainable forest incentive program at $7.25 per acre, and removes the $100,000 cap.

Section 31.  Special service districts; deadline. Extends, by five years, the date by which the establishment of new special service districts requires special authorization.

Section 32.  Housing improvement districts; deadline. Extends, by five years, the date by which the establishment of new housing improvement areas requires special authorization.

Section 33.  Special assessments; state property. Requires a city or town to determine the amount of special assessments on property owned by the state or any instrumentality as if the property were privately owned.  The state or its instrumentality may negotiate with the city or town to pay an amount less than was determined. 

Section 34.  Appropriation. Appropriates $5,000,000 in fiscal year 2014 and thereafter from the general fund and credited to the agency assessment account in the special revenue fund. Money in this fund is appropriated annually to the commissioner of revenue for grants to reimburse instrumentalities, departments or agencies for payment of special assessments as required in Section 32. Of the amounts appropriated in FY 2014, the city of Moose Lake must receive $2,000,000 for reimbursement for payments related to connection of state facilities to a sewer line.

Section 35.  Bloomington computation; fiscal disparities. Adds $4,000,000 to the city of Bloomington’s areawide portion of the levy for fiscal disparities effective for property taxes payable in 2014 through payable 2023.

Section 36.  Cook/Orr ambulance services; levy authority. Expands the authorized uses of the levy proceeds to include attached and portable equipment for use in and for the ambulances and parts and replacement parts for maintenance and repair of ambulances. Operation expenses are specifically excluded.

Section 37.  Carlton County cemetery levy. Permits Carlton County to levy annually in and for the unorganized township of Sawyer for cemetery purposes.

Section 38.  Northwest Minnesota Multicounty Housing and Redevelopment Authority. Extends, by five years, the levy authority for the Northwest Minnesota Multicounty Housing and Redevelopment Authority.

Section 39.  Marshall County; agricultural homestead. Allows a five-year extension of agricultural homestead classification for farmers who were forced to move away from their farm due to 2009 floods, provided they continue to live within 50 miles of the land and the land remains under the same ownership.

Section 40.  Hennepin County; reimbursement for property tax abatement. Authorizes the commissioner of revenue to reimburse taxing jurisdictions in Hennepin County for property tax abatements granted due to the 2011 Tornado. Appropriates, from the general fund, $336,000 in fiscal year 2014 only to commissioner of revenue to reimburse taxing jurisdictions in Hennepin County.

Section 41.  St. Paul ball park; property tax exemption. Provides a property tax exemption for property acquired, owned, leased, controlled used or occupied by the city of St. Paul for the purpose of providing a minor league baseball team. The property is still subject to special assessments.  The exemption does not apply to any property leased for residential, business or commercial development or any other inconsistent purpose.

Section 42.  Target Center; property tax exemption. Provides a property tax exemption for property acquired, owned, leased, controlled used or occupied by the city of Minneapolis for the purpose of providing an arena for a professional basketball team. The property is still subject to special assessments.  The exemption does not apply to any property leased for residential, business or commercial development or any other inconsistent purpose.

Section 43.  Public entertainment facility; construction manager at risk. Allows the city of Minneapolis to contract with persons, firms or corporations to perform projects to renovate, reburbish and remodel the Target Center under either the traditional design-bid-build or construction manager at risk, or a combination thereof.

Section 44.  Moratorium on changes in assessment practice. Requires that an assessor not deviate from current practices or policies used generally in assessing or determining the taxable status of property used in the production of biofuels, wine, beer, distilled beverages, or dairy products. Effective for assessment years 2013 and 2014.

Section 45.  Study and report on certain property. Requires the commissioner of revenue, with cooperation of the commissioners of agriculture and economic development, to study the impact of alternative interpretations and applications related to taxation of real and personal property used in business and production activities.

Section 46.  SFIA; reenrollment. Allows a person who elected to terminate participation in the program as provided in Laws 2001 to reenroll lands. A person may apply for reenrollment within sixty days after passing of this section.

Section 47.  Property tax savings report. Requires that each county and each city with a population over 500 must include along with its certification of its proposed levy the amount of sales and use tax paid or estimated to be paid in 2012. At the time the TNT notice is mailed, the county shall also include a separate statement providing a list of sales and use tax certified by the county and cities. At the TNT public hearing, the county and city must discuss the savings as a result of the sales tax exemption.

Section 48.  Metropolitan fiscal disparities working group. Requires the commissioner of revenue to convene a working group of interested parties to examine issues faced by local governments that are required to pay for services that are generally provided throughout the metropolitan area by the Met Council.

Section 49.  Repealer.  Repeals the 95/5 apportionment of the state general levy between commercial-industrial property and seasonal-residential recreational property.

ARTICLE 3- EDUCATION AIDS AND LEVIES

The following summarizes modifications that S.F. No. 552 has made in addition to the changes reflected in S.F. No. 453, First Engrossment.

Section 1. General Education Revenue.  Further amends the general education revenue definition for charter schools to exclude education advancement revenue. This section is effective for revenue for fiscal year 2015.

Section 2. Achievement and Integration Revenue. Further modifies the achieve and integration levy to make the levy ongoing instead of imposing it for the fiscal year 2014 only.

Section 3. General Education Revenue.  Further amends the general education revenue definition to include education advancement revenue.

Section 4. District Equity Index.  Further modifies the equity index to account for education advancement revenue.  This section is effective for revenue for fiscal  year 2015.

Section 5. Education Advancement Revenue.  Creates education advancement revenue for fiscal year 2015 and later.  The education advancement allowance is set to $300 per adjusted pupil unit.  This section is effective for revenue for fiscal year 2015.

Section 6. Education Advancement Levy. Authorizes a district to levy an amount not to exceed its education advancement revenue times the lesser of one or the ratio of its referendum market value per resident pupil unit to the education advancement revenue equalizing factor.  Sets the factor equal to $785,000.  A district board may choose to levy for less than the authorized amount, in which case the district’s aid is reduced proportionately.  This section is effective for revenue for fiscal  year 2015.

Section 7. Education Advancement Aid.  A district’s education advancement aid equals its authorized revenue minus levy.  This section is effective for revenue for fiscal  year 2015.

Section 8. General Education Levy; Districts off the Formula.  Further modifies the general education levy calculation for certain districts.  This section is effective for revenue for fiscal  year 2015.

Section 9. General Education Aid.  Further modifies the general education aid definition to include education advancement aid.

Section 10. Referendum Revenue.  Further modifies referendum revenue by subtracting $300 from a district’s referendum revenue allowance for fiscal year 2015 and later.  This subtraction is equal to the education advancement allowance.  This section is effective for revenue for fiscal  year 2015.

Section 11. Direction to the Commissioner .  Directs the commissioner to first reduce a district's referendum allowance with the earliest expiration date and then, if necessary, reduce additional allowances based on the next earliest expiration date.

Section 12. Operating Referendum Freeze; Fiscal Year 2015.  For fiscal year 2015 only, prohibits a school district from authorizing an increase to its operating referendum.  A school district seeking to reauthorize operating referendum authority expiring in fiscal year 2015 may request a reauthorization of that expiring authority minus $300.

Section 13.  Current Year Aid Percentage; Appropriation Adjustments.  Reduces the current year aid payment percentage by 0.2.  Directs the commissioner of education to adjust appropriations in 2013 S.F. No. 453 to reflect changes made in this bill.

Section 14.  Appropriations.  Appropriates $36,460,000 in fiscal year 2014 and $54,765,000 in fiscal year 2015 in addition to the amounts appropriated in another bill for the same purpose.

ARTICLE 4 – SPECIAL TAXES

Section 1.  Collection.  Requires that the fee for prepaid wireless service authorized in a later section is not subject to collection in the same manner as other telecommunications access fees.  Effective January 1, 2014.

Section 2.  Fee for prepaid wireless service.  Specifies that the regular TAM fee does not apply to prepaid wireless communications service, but that the prepaid service is subject to the fee established in a later section.  Effective January 1, 2014.

Section 3.  Minnesota tax laws.  Provides that the prepaid wireless fee authorized in a later section is subject to the definition of “Minnesota tax laws.”  Effective January 1, 2014.

Section 4.  Department of Public Safety; return information. Allows the Commissioner of Revenue to disclose return information to the Department of Public Safety as necessary to administer the collection of E911 and TAM fees from wireless customers.  Effective January 1, 2014.

Section 5.  Commissioner of Revenue; powers and duties.  Authorizes the Commissioner of Revenue to participate in audits performed by the Multistate Tax Commission.  Effective the day following final enactment.

Section 6.  Health impact fee; liability for payment.  Removes the reference to the health impact fee and repeals the fee and the health impact fund.  Effective July 1, 2013. 

Sections 7 and 8.  Hennepin and Ramsey County; authorization.  Authorizes Hennepin and Ramsey counties to impose an additional mortgage registry and deed tax. 

Section 9.  Sports memorabilia tax.  Imposes a 13 percent tax on gross receipts of wholesale sales on sports memorabilia to purchasers in the state.  “Sports memorabilia” includes trading cards, photographs, clothing, sports event licensed items, sports equipment, and one-of-a-kind items relating to sports, figures, teams or events that are sold under a license granted by a professional or Division I collegiate sports league, association, or team, or a franchise or affiliate of a league, association or team.  Revenue from the tax is deposited in the general fund.  Requires wholesalers to file quarterly returns with the Department of Revenue.  Appropriates five percent of the revenue from the tax for grants to counties for youth and amateur sports.  Effective for sales and purchases made after June 30, 2013.

Section 10.  Jet fuel and special fuels tax.   Imposes an excise tax on jet fuel and special fuel used as a substitute for aviation gasoline of 15 cents per gallon.  Effective July 1, 2014 and applies to sales and purchases made on or after that date. 

Section 11.  Refund on graduated basis.  Cross-references the new language in section 10 relating to nonrefundable fuel tax in the graduated refund section of statutes.  Effective July 1, 2014 and applies to sales and purchases made on or after that date. 

Section 12.  Exemptions.  Exempts from the general sales tax certain air flight equipment, aircraft parts, and associated installation charges.  Effective July 1, 2014 and applies to sales and purchases made on or after that date. 

Section 13.  Deposit in state airports fund.  Provides that revenues from the general sales tax collected from the taxable sale or purchase of an aircraft must be deposited in the state airports fund.  Effective July 1, 2014 and applies to sales and purchases made on or after that date. 

Section 14.  Gross receipts tax; paper pull-tabs.  Imposes a nine percent tax on gross receipts of paper pull-tabs, minus prizes paid.  The tax imposed on organizations where at least 50 percent of its annual gross receipts are from paper bingo as of January 1, 2013.  Effective July 1, 2013.

Section 15.  Combined net receipts tax; paper pull-tabs.  Exempts paper pull-tabs receipts from the combined net receipts tax for organizations where at least 50 percent of its annual gross receipts are from paper bingo as of January 1, 2013.  Effective July 1, 2013.

Sections 16 to 19; 28.  Definitions.  Provides definitions for “little cigar,” “moist snuff,”  and “premium cigar.”  Modifies the definition of “tobacco products” to include premium cigars; and modifies the definition of “tobacco products distributor” to include a premium cigar distributor.  Modifies the definition of “tobacco products” in the consumer protection chapter to include premium cigars.  Effective July 1, 2013. 

Section 20.  Rates; cigarettes.  Increases the rate of cigarettes to 108.5 mills, or 10.85 cents on each standard-sized cigarette.  Increases the rate on larger cigarettes to 217 mills, or 21.7 cents on each cigarette.  Effective July 1, 2013.

Section 21.  Annual indexing.  Requires annual indexing of the in-lieu sales tax rate.  Effective July 1, 2013. 

Section 22.  Rates; tobacco products.  Increases the distributor tobacco products tax from 35 percent of the wholesale sales price to 90 percent of the wholesale sales price.  Imposes a minimum tax in the same amount as the cigarette tax on each container of moist snuff, effective July 1, 2014.  Defines “container” as the smallest consumer-size can, package, or other container that is marketed or packaged by the manufacturer, distributor, or retailer for separate sale to the consumer.  Imposes a minimum tax of 10.85 cents, adjusted annually for indexing, on each little cigar.  All provisions except the minimum tax on moist snuff containers are effective July 1, 2013.

Section 23.  Rates; premium cigars.  Imposes a tax on premium cigar distributors of 70 percent of the wholesale price, or $3.50 per cigar, whichever is less.  Effective July 1, 2013.

Sections 24 and 25.  Use tax; tobacco products and premium cigars.  Imposes the corresponding use tax to the sale taxes imposed under sections 12 and 13 for little cigars and premium cigars.  Effective July 1, 2013. 

Section 26.  Nonsettlement fee.  Increases the fee for cigarettes not subject to the tobacco settlement agreement from 1.75 cents to 2.5 cents per cigarette (or 35 cents per pack to 50 cents per pack).  Effective July 1, 2013. 

Section 27.  In-lieu sales tax rate; adjustment.  Requires the commissioner of Revenue to proportionally adjust the cigarette in-lieu sales tax rate to reflect cigarette price changes in this article.  Effective July 1, 2013.  

Section 29. Exemption; 501(c)(3) organizations.  Exempts 501(c)(3) organizations from registering with the gambling control board if the value of all raffle prizes awarded by the organization are $50,000 or below. Effective July 1, 2013.

Section 30.  In lieu tax.   Changes the aircraft registration tax rate from the current system (one percent of value, subject to a minimum tax) to a rate derived from a statutory graduated schedule based on manufacturer's list price. Eliminates the element of depreciation from calculation of an aircraft's base price for registration tax purposes.  Effective July 1, 2014 and applies to aircraft tax due on or after that date. 

Section 31.  State airports fund.  Updates statutory references relating to the state airports fund.  Effective July 1, 2014 and applies to aircraft tax due on or after that date. 

Sections 32 and 33.  Hennepin and Ramsey counties; extension.  Extends the authorization for Hennepin and Ramsey counties to impose a mortgage registry and deed tax to 2023.  Effective for deeds and mortgages acknowledged after July 1, 2013.

Sections 34 to 36 and 40.  Definitions.  Provides definitions for prepaid wireless telecommunications fee provisions.  Effective January 1, 2014.

Section 37.  Report.  Requires inclusion of E911 fees from prepaid wireless customer in the Department of Public Safety's annual budget report to the Legislature.  Effective January 1, 2014.

Section 38.  Emergency telecommunications service fee.  Exempts prepaid wireless customers from the current 911 fee; they are instead subject to the fee established in a later section.   Effective January 1, 2014.

Section 39.  Report.  Requires semiannual reports from telecommunications providers to the commissioner of Public Safety on the number of prepaid and total wireless subscribers sourced to Minnesota.  Specifies that this is trade secret data.  Effective January 1, 2014.

Section 41.  Prepaid wireless fees imposed.  Imposes an E911 and TAM fee on prepaid wireless service at the current monthly rate imposed on other telecommunications service providers.  Exempts from the fees a minimal amount of prepaid wireless telecommunications service (10 minutes or $5 or less).  Specifies that fees must be collected at the point of retail sale, combined into one amount, and separately reported on a receipt.  Provides that the sales tax statutes be used to determine whether retail transactions of prepaid wireless service occur in Minnesota.  Provides that the seller is liable to remit these fees.  Excludes the fees from being included in the base for measuring any other tax or charge imposed by the state or a local government.  Specifies that fees for prepaid wireless service must be increased or reduced proportionately to fluctuations in the same fees that apply to other telecommunication providers.  Effective January 1, 2014.

Section 42.  Administration of prepaid wireless fees.  Specifies that fees must be collected by sellers and remitted to the commissioner of revenue in the same general manner as sales taxes.  The seller may deduct and retain three percent of fees.  Specifies that the audit and appeal procedures of chapter 297A apply to fees.  Requires the Commissioner of Revenue to deposit fees within 30 days of receipt. The Department of Revenue may retain and deduct two percent of the collected fees for administration costs.  Effective January 1, 2014.

Section 43.  Protection from liability.  Exempts providers and sellers of prepaid wireless telecommunication service from liability for damages resulting from providing lawful assistance in good faith to a state, federal or local law enforcement officer.  Effective January 1, 2014.

Section 44.  Exclusivity of prepaid wireless fee.  Prohibits any other tax, fee, or surcharge being imposed on prepaid wireless telecommunications service for E911 purposes.  Effective January 1, 2014.

Section 45.  Floor stocks tax.  Imposes a floor stocks tax of 94 cents per standard 20-cigarette pack and $1.88 on higher-weight packs.  The tax is imposed on distributors, retailers, subjobbers, vendors, manufacturers, or manufacturer’s representatives on stamped cigarettes or unaffixed stamps in their possession as of July 1, 2013.  Requires distributors to file a return with the commissioner of Revenue by July 10, 2013, indicating the stamped cigarettes and unaffixed stamps on hand as of July 1, 2013.  Retailers, subjobbers, vendors, manufacturers, and manufacturer’s representatives must file a return with the commissioner by July 8, 2013, indicating the cigarettes on hand as of July 1, 2013.  The tax owed by all entities is due and payable by August 7, 2013 and bears interest at a one percent per month interest rate.   Effective July 1, 2013.

Section 46.  Taxes and fees paid by Indians and Indian tribes.  Requires the commissioner of Revenue to recompute the cigarette tax refunds under the agreement authority in current law to refund sales or excise taxes paid by Indian tribes to the state, due to the repeal of the health impact fee in this article.  The refund is calculated by taking the sum of average statewide per capita cigarette and tobacco products excise tax paid during an applicable state fiscal year, plus the statewide average health impact fee (HIF) paid on cigarette and tobacco products during the same fiscal year, plus an additional amount that equals the difference between what the tribe has already been paid under an agreement and what they would have received if the HIF was assessed as a tax.  Prohibits the commissioner from entering into new HIF agreements for a period after December 21, 2009.  Prohibits the commissioner from making HIF payments for any period after the HIF has been repealed.   Requires the commissioner to adjust the excise tax per capita payment to $95.  Effective the day following final enactment, except for the provision prohibiting the commissioner from entering a new HIF agreement, which is effective January 2, 2014.

Section 47.  Report.  Requires the Commissioner of Transportation, in consultation with the Commissioner of Revenue, to report to the legislative transportation committees every four years beginning in 2016, concerning revenues to and expenditures/transfers from the state airports fund, as well as any recommended statutory changes to ensure the future adequacy of the state airports fund.  Effective July 1, 2014 and applies to aircraft tax due on or after that date. 

Section 48.  ARMER grants.  Appropriates a total of $3 million in payments in fiscal years 2014 and 2015 from the state government special revenue fund for the commissioner of Public Safety to reimburse counties for the sales tax costs associated with upgrading public safety radio systems prior to January 1, 2013.

Section 49.  Tobacco tax collection report.  Directs the commissioner of Revenue to report to the legislature by January 15, 2014, on recommendations for improving the tobacco tax collection system and appropriates $100,000 to the Department of Revenue for the cost of preparing the report.  The report must provide guidance and information to the legislature on improvements to the tobacco tax collection system, including: 

  • A detailed review of the present excise tax collection and compliance system for cigarettes and other tobacco products;
  • A survey of other states’ or nations’ methods of collection and enforcement for cigarettes and other tobacco products, with recommendations for best practices high-technology alternatives to increase compliance; 
  • An evaluation of the adequacy and effectiveness of existing penalties and other sanctions for noncompliance; and
  • An evaluation of the adequacy of state resources to enforce tobacco taxes and prevention laws and recommendations on implementation of a comprehensive tobacco tax collection system that can be implemented by January 1, 2014.

 Effective the day following final enactment.

Section 50.  Repealer.  Repeals the provisions of Minnesota Statutes pertaining to Minnesota’s participation in the Multistate Tax Compact and repeals the health care access fund and health impact fee.  Effective July 1, 2013.

ARTICLE 5 – INDIVIDUAL INCOME AND CORPORATE FRANCHISE TAXES

Section 1, Subdivision 1.  Qualified expansions of greater Minnesota businesses.  Defines “agricultural processing facility,” “business,” and "city."  “Greater Minnesota” is the area of the state, excluding Anoka, Carver, Chisago, Dakota, Hennepin, Isanti, Ramsey, Scott, Sherburne, Washington, and Wright counties.  Defines “qualified business” as a business meeting the requirements under subdivisions 2, 3, and 5. 

Subdivision 2.  Defines a qualified business as one that has operated in greater Minnesota for at least one year before applying for certification; pays or agrees to pay its employees compensation of at least 120 percent of the federal poverty line for a family four not including benefits mandated by law; plans and agrees to expand its employment in greater Minnesota by a minimum number of employees; and receive qualification from the Commissioner of DEED as a qualified business.  Public utilities and retail employers that are primarily engaged in selling to purchasers physically present at the business’s location are ineligible.

Subdivision 3.  Authorizes businesses to apply to the Commissioner of DEED in a form and manner prescribed by the Commissioner for certification as a qualified business.  Businesses must submit a copy of the application with the chief clerical officer of the city, or if applicable, the county auditor.  Requires the Commissioner to certify a business as a qualified business if the business meets the requirements under subdivision 2; the Commissioner determines that the business would not expand its operations in greater Minnesota without at least one of the tax incentives in subdivision 4; and the business enters into a business subsidy agreement with the Commissioner that it will satisfy minimum expansion requirements within three years of execution of the agreement.  The city or county in which a business or agricultural processing facility proposes to expand may file support or opposition to the certification with the Commissioner.  Certification is valid for 12 years beginning the first day of the calendar month following execution of the business subsidy agreement.

Sets the following minimum expansion requirements for the number of employees in greater Minnesota at the time of execution of the agreement:

  • 50 or fewer FTEs – must increase by five or more FTEs;
  • 51-199 FTEs – must increase FTEs by at least ten percent; and
  • 200 or more FTEs – must increase by at least 21 FTEs.

Subdivision 4.  Authorizes tax incentives for qualifying greater Minnesota businesses.  The incentives are a sales tax exemption on qualifying purchases and an income tax credit based on a calculation of wages and number of FTEs in greater Minnesota. 

Subdivision 5. Requires the Commissioner to ensure that certified businesses meet the minimum expansion requirements within three years of entering the business subsidy agreement and ensure that the business continues to satisfy the requirements for the duration of the certification period.  Provides that a business ceases to be a qualified business at the end of the duration of its certification period or the date the Commissioner finds that the business failed to meet its minimum expansion requirements.  A business may contest the Commissioner’s finding as a contested case under Minnesota Statutes, chapter 14.  The Commissioner may waive a breach of the certification agreement after consulting with the Commissioner of Revenue if it is determined that that terminating the tax incentives is not in the best interest of the state or local government, and the breach is the result of natural disaster, unforeseen industry trends, an overall decline in the statewide or greater Minnesota economy, or the loss of a major supplier or customer. 

Sections 2 and 3.  Angel investment credit.  Adds language to define “qualified greater Minnesota business” and provides criteria for qualifying as a qualified greater Minnesota small business for purposes of the small business (“angel”) investment credit.  Adds the definition of “liquidation event” and other provisions to prohibit qualified small businesses from receiving investments and selling off assets or issuing publicly traded securities within 180 days of the date a qualified investment was made.  Effective the day following final enactment.

Section 4.  Angel investment credit allocation.  Increases the allocation for the angel investment credit from $12 million to $17 million for tax years 2013 through 2015 and extends the credit for one year.  Effective the day following final enactment for taxable years beginning in 2013. 

Section 5.  Promotion of angel investment credit in greater Minnesota.  Requires the Commissioner of DEED to develop a plan to promote usage of the angel credit in greater Minnesota, with the goal of awarding 30 percent of credits to investments in greater Minnesota businesses during the second half of calendar year 2013 and following years, and requires the Commissioner to report on the plan and its results beginning with in March, 2014 report to the legislature.  If the 30 percent target is not achieved in the second half of 2013 or any following year, then the credit rate is increased from 25 percent to 40 percent for the next calendar year for investments in greater Minnesota businesses.  Effective the day following final enactment.

Section 6.  Revocation of credits.  Applies the repayment provisions for the small business investment credit to greater Minnesota businesses, if the DEED Commissioner determines that a business did not meet the certification requirements under section 2 in any of the five years after the year in which the qualifying investment was made.  Effective the day following final enactment.

Section 7.  Report to legislature.  Adds the requirement that the annual report to the Legislature on the qualified small business investment credit include the number of qualified small businesses that are minority or women-owned.  Effective the day following final enactment.

Section 8.  Sunset.  Extends the sunset provisions of the angel investment credit by one year.  Effective the day following final enactment.

Section 9.  Greater Minnesota internship program.  Establishes a tax credit for employers that hire certain qualifying interns, effective beginning in tax year 2014.  Subdivision 1 defines terms applicable to the program and tax credit.

Subdivision 2. Establishes a paid internship program for students at Minnesota public post secondary institutions or a baccalaureate degree granting nonprofit Minnesota institution, to be administered by the Office of Higher Education.  The goal of the program is to connect students with nonmetro area Minnesota employers for permanent employment in greater Minnesota. 

Subdivision 3. The internship must be at a place of employment in greater Minnesota.  A student must have completed at least one-half of a course of study and the internship must be related to the course of study.  A student is to be paid and receive academic credit for the internship.

An eligible institution must enter into written agreements with employers for the provision of an internship of at least 12 weeks in greater Minnesota.  The internship must be closely related to a course of study and provide academic credit for its successful completion. 

An eligible employer must agree with the eligible institution that the intern would not have been hired without the tax credits, did not previously work with the employer in the same or a similar job, does not replace an existing employee, and has not previously participated in the internship program.  The intern must work at least 16 hours a week and be paid at least minimum wage.  An internship required to complete an academic program does not qualify for the greater Minnesota internship program.

Subdivision 4. Authorizes an income tax credit for qualifying employers.  Requires the Office of Higher Education to allocate credits to eligible institutions for participating employers and certify the amount of the tax credit to the Department of Revenue.  Requires the Office of Higher Education to allocate grants and administrative fees to institutions based on relevant criteria, including geographic distribution of work locations.

Subdivision 6. Requires the Office of Higher Education and the Department of Revenue to submit two reports to the legislature on the program.  The February 1, 2014, report must have cost and participation information. The February 1, 2015, report must have an effectiveness analysis.

Sections 10 to 13, 32, 35, and 41.  Foreign operating income subtraction repeal.  These sections eliminate the deduction for foreign operating corporation (FOC) income.  This income would be taxed on the same basis as other corporate income.  Effective beginning tax year 2013. 

Sections 11 and 13 also contain a subtraction for the amount of the federal credit for qualified railroad maintenance expenditures made by shareholders of S corporations, partners in a partnership, or corporations. The credit is 50 percent of the qualified railroad track maintenance expenditures paid or incurred by an eligible taxpayer during the taxable year, and is subject to limitation based on the number of miles of track owned or leased by the taxpayer. 

The credit may not exceed $3,500, multiplied by: the number of miles of railroad track owned or leased by the eligible taxpayer as of the close of the taxable year, plus the number of miles of railroad track assigned by a Class II or Class III railroad which owns or leases such railroad track as of the close of the taxable year.  The subtraction is passed through to shareholders or partners on a pro rata basis relative to the taxpayer’s share of net income of the S corporation or partnership.  Effective for tax year 2013 (the federal credit expires December 31, 2013). 

Section 14.  Corporate tax rate.  Reduces the rate from 9.8 percent to 9.0 percent.  Effective beginning tax year 2013. 

Section 15.  Schedules of rates for individuals, estates, and trusts.  Increases the income thresholds for all tax brackets to reflect inflation adjustment for tax year 2013.  Increases the rate on the third tier income tax bracket from 7.85 percent to 9.4 percent.  Effective beginning tax year 2013. 

Section 16.  Inflation adjustment of brackets.  Updates the reference years for the inflation adjustment requirement to reflect the updated brackets in section 15.  Effective beginning tax year 2013. 

Section 17.  Greater Minnesota internship credit.  Authorizes a refundable credit of 40 percent of the amount paid to an intern qualifying under the internship program up to $2,000, or the amount certified by the Office of Higher Education under an earlier section.  Credits allowed to business organizations are passed through to partners, members, shareholders, or owners on a pro rata basis.  No more than $2 million may be allocated for the credit in a tax year.  Appropriates an amount sufficient to pay claims for the credits, and 10 percent of the credits authorized to pay for administrative costs of the program. 

Sections 18 and 19.  Military service credits.  Increases the tax credit for current military service from $120 to $200 per month and increases the credit for past military service from $750 to $1,000 per month.   Effective beginning tax year 2013. 

Section 20.  Military service credit; definitions.  Modifies the definition of “qualified individual” for purposes of the military service tax credit.   A person is eligible for the credit if the individual was separated from the military before the end of the taxable year and has at least 20 years of service in the military; a service-connected disability rating of 100 percent for a total and permanent disability; or is determined by the military to be eligible for pension or other retirement compensation, as defined and computed under federal law.  Effective beginning tax year 2013. 

Section 21.  Research and development credit.    Increases the second tier of the research and development credit from 2.5 percent to 4.5 percent.  Effective beginning in tax year 2013. 

Section 22.  Historic structure rehabilitation credit; definitions.  References the definitions of “federal credit," placed in service,” and “qualified rehabilitation expenditures” to the meanings given in the Internal Revenue Code.  Effective the day following final enactment.

Section 23.  Applications; Allocations.  Allows the State Historic Preservation Office to collect an application fee of up to .5 percent of qualified rehabilitation expenditures, up to $45,000.  Replaces the term “expenses” with “expenditures” for purposes of the historic structure rehabilitation credit.  Requires the Office to notify the developer of a project of its eligibility determination in writing.  Provides for a decision of the Office regarding eligibility for a state credit or grant to be challenged as a contested case under the state administrative procedure statutes.  Updates the references to the Commissioner of Revenue in the statute for consistency with references throughout the income tax chapter.  Effective the day following final enactment.

Section 24.  Credit certificates; grants.  Provides that assignment of credit allocation certificates issued by the State Historic Preservation Office is not valid unless the assignee notifies the Commissioner of Revenue within 30 days that the assignment is made.  Requires the Commissioner to prescribe the forms necessary for such notification.  Provides that a credit issued to a partnership, LLC taxed as a partnership, S corporation, or multiple owners of property passed through pro rata to partners, members, shareholders, or owners respectively, is not an assignment of a credit.  Allows a grant agreement between the Office and a grant recipient to be issued to another individual or entity.  Effective the day following final enactment. 

Section 25.  Partnerships; multiple owners.  Allows credits granted to corporate entities to be passed through to partners, members, shareholders, or owners of a corporate entity according to any executed agreement between relevant parties.  Effective the day following final enactment.

Section 26.  Appropriations.  Limits the appropriation for the historic structure rehabilitation credit to $15 million per fiscal year.  Effective beginning July 1, 2015.

Section 27.  Sunset.  Extends the availability of the historic structure rehabilitation credit by five years, through fiscal year 2022 (June 30, 2021) and extends the State Historic Preservation Office’s authority to issue credit certificates based on allocation certificates issued before fiscal year 2023 (June 30, 2022) through calendar year 2025.  Extends the annual reporting requirement through the earlier of 2026, or the year following the year in which all allocation certificates have been canceled or resulted in issuance of credit certificates.  Effective the day following final enactment. 

Section 28.  Greater Minnesota business expansion jobs credit.  Authorizes a tax credit to greater Minnesota qualified businesses that meet business expansion requirements under the program in section 1.  Specifies a formula for calculating the credit for each employer and limits the total amount of credits allocated in a calendar year to $5 million.  Effective for taxable years beginning after December 31, 2031. 

Section 29.  Clothing sales tax credit.  Authorizes a refundable income tax credit for eligible filers of $60 for a married couple filing jointly and $30 for all other filers; and $30 for the first dependent claimed, $15 for the second and third dependent, $10 for the fourth, and $5 for any subsequent dependent.  The credit is subject to income limitations of a $10 reduction for every $1,000 of income in excess of 200 percent of federal poverty guidelines.  Appropriates an amount sufficient from the general fund to pay the refund.  Effective beginning in tax year 2013. 

Section 30.  AMT; definitions.  Adds the cross-reference to the subtraction for qualified railroad maintenance expenditures in an earlier for purposes of calculating the individual alternative minimum tax.  Effective for tax year 2013.

Section 31.  Corporate alternative minimum tax.  Reduces the corporate AMT rate from 5.8 percent to 5.3 percent.  Effective beginning in tax year 2013. 

Sections 13, 32, 34, 35, 36, and 38.  Foreign royalties repeal.   Removes the subtraction for foreign royalty income so that such income would be taxed on the same basis as other corporate income.  The subtraction under current law is 80 percent of royalties from foreign income.  Effective beginning in tax year 2013. 

Section 33.  Corporate minimum fee.  Modifies the threshold and tax amounts for the corporate minimum fee.  Requires the Commissioner of Revenue to adjust the amounts for inflation.  Effective beginning in tax year 2013. 

Section 37.  REIT dividend received deduction.  Provides that a corporation may not take a dividend received deduction if the corporation received dividends from a real estate investment trust (REIT).  This provision conforms to the federal law treatment of REIT dividends.   Effective beginning in tax year 2013. 

Section 38. Tax credit. Increases the threshold to qualify for the small brewer tax credit. Effective for determinations based on calendar year 2012 production and thereafter.

Section 39.  Historic structure rehabilitation credit; effective date.  Clarifies the effective date of the credit to make the credit effective for rehabilitation expenditures first paid by the developer or taxpayer after May 1, 2010, and for rehabilitation that occurs after May 1, 2010, provided that the application submitted for credit eligibility is submitted before the project is placed in service.  Effective the day following final enactment and applies retroactively for certified historic structures placed in service after May 1, 2010, but no credit certificates allowed under the change to this effective date clarification may be issued until July 1, 2013.

Section 40. Clothing sales tax credit; tax year 2013 adjustment.  Provides that the clothing sales tax credit under section 1 must be reduced by one half to allow for the six-month difference in the tax year 2013 effective date of the income tax provision in this article and the July 2013 effective date for changes in article 7.

ARTICLE 6 – ESTATE TAXES

Section 1.  Definitions.  Specifies that a trust whose present beneficiaries are all family members qualifies as a “family member” for purposes of qualifying for the small business property and farm property exclusions.  Effective retroactively for estates of decedents dying after June 30, 2011. 

Section 2.  Qualified small business property.  Makes the following clarifying changes to the qualified small business property estate tax exclusion, effective retroactively for estates of decedents dying after June 30, 2011:

  • clarifies the decedent’s ownership interest requirement for qualified small business property;
  • requires that during the taxable year that ended before decedent’s death, the trade or business must not have been a passive activity and the decedent or the decedent’s spouse must have materially participated in the trade or business; 
  • excludes publicly traded securities and assets not used in the operation of the trade or business from the value of property subject to exclusion;
  • allows, in the case of a sole proprietor, that if property is replaced by similar property within the three-year period prior to decedent’s death, the replacement property will be treated as having met the three-year ownership test prior to decedent’s death; and
  • requires that for three years following the decedent’s death the trade or business must not be a passive activity and a family member must materially participate in the trade or business.

Section 3.  Qualified farm property.  Makes the following clarifying changes to the qualified farm property exclusion, effective retroactively for the estates of decedents dying after June 30, 2011:

  • clarifies that the property must be agricultural land and owned by a person or entity that is in compliance with or not subject to the agricultural land ownership provisions in section 500.24;
  • requires that for property taxes payable in the year of the decedent’s death, the property was classified as the homestead of the decedent or decedent’s spouse (or both) and as class 2a property under section 273.13, subdivision 23;
  • requires that the decedent continuously owned the property for the three years preceding the decedent’s date of death, either by owning the land or holding an interest in an entity that is in compliance with or not subject the agricultural land ownership provisions in section 500.24; and
  • requires that the property is classified as class 2a property under section 273.13, subdivision 23, for three years following the decedent’s date of death.

Section 4.  Recapture tax.  Provides that if the requirements for qualified small business and qualified small farm property are not met in the three years following the decedent’s death, the property will be subject to a 16 percent recapture tax.  Adds an exception for to allow, in the case of a sole proprietor, that the qualified heir will not be treated as having disposed of an interest in the qualified property if the qualified heir replaces qualified small business property with similar property.  Effective retroactively for estates of decedents dying after June 30, 2011.

ARTICLE 7 – SALES AND USE TAXES; LOCAL TAXES

Section 1.  Contracts with foreign vendors.  Requires foreign vendors that sell goods or services to the state to register with the Commissioner of Revenue.  Effective for sales and purchases made after June 30, 2013.

Section 2.  Sale and purchase; definition.  Adds the following services to the definition of “sale and purchase,” effective for sales and purchases made after June 30, 2013. 

  • Receipt of custom computer software;
  • Admission to exhibitions (such as trade shows, boat shows, and home and garden shows) and professional athletic events, including rental of box seats and suits and such events;
  • The furnishing for consideration and granting the right for a consideration to use “specified digital products” or “other digital products.” 
  • Personal services (such as haircuts, spa services, tattoos, piercings);
  • Repair labor for farm machinery, motor vehicles (excluding repair for vehicles sold at wholesale auction), and other tangible personal property (such as household electronics and furniture);
  • The furnishing of court reporter documents, excluding such documents for public defender services; and
  • Other personal services such as event planning, moving services, personal shopping, personal concierge services.

This section also clarifies that services for  monitoring and electronic surveillance of persons in in-home detention pursuant to a court order performed at the direction of a county are exempt.  Replaces the terms “cable” television services and “direct satellite services” with the term “pay” television services.

Section 3.  Retail sale.  Adds the sale, lease, or rental of tangible personal property or the sale of any service listed in section 297A.61, subdivision 3 for any purpose other than resale by the purchaser in the normal course of business.  Adds the sale of motor vehicle paint and materials by a motor vehicle repair or body shop to the definition of “retail sale” and specifies how motor vehicle paint and materials must be stated on an invoice to calculate the sales price of those items.  Adds the sale of specified digital products or other digital products to an end user to the definition of “retail sale.”  Effective for sales and purchases made after June 30, 2013. 

Section 4.  Tangible personal property.  Clarifies that the definition of “tangible personal property” does not include specified digital products or other digital products transferred electronically, but prewritten computer software delivered electronically is tangible personal property.  Effective for sales and purchases made after June 30, 2013.

Section 5.  Definition of “delivered electronically.”  Specifies that “delivered electronically” includes the delivery of computer software unless the context of delivery indicates otherwise.  Effective for sales and purchases the day following final enactment. 

Section 6.  Pay television service.  Replaces the term “cable television service” with “pay television service” and specifies that direct satellite service, subscription programming service, and digital video recording service are included in the definition of “pay television service.”  The definition of “direct satellite service” is repealed later in the article.  Effective for sales and purchases made after June 30, 2013.

Section 7.  Bundled transaction.  Adds specified digital products and other digital products to the definition of “bundled transaction” for purposes of determining whether the sale of two or more products is taxable when the items are sold for one nonitemized price.  Effective for sales and purchases made after June 30, 2013.

Section 8.  Ring tones.  Clarifies that a ring tone does not include digital audio files not stored on the communication device.  Effective for sales and purchases made after June 30, 2013.

Section 9.  Motor vehicle repair paint and motor vehicle materials.  Defines “motor vehicle repair paint” and “motor vehicle materials” for purposes of determining sales for resale and customer invoicing.  Effective for sales and purchases made after June 30, 2013.

Section 10.  Digital audio works.  Defines “digital audio works” as works that result from a series of musical, spoken, or other sounds that are transferred electronically.  Digital audio works include songs, live music, readings of books, speeches, ring tones, or other sound recordings.  Effective for sales and purchases made after June 30, 2013.

Section 11.  Digital audiovisual works.  Defines “digital audio-visual works” as a series of related images which, when shown in succession, impart an impression of motion, together in accompanying sounds, if any, that are transferred electronically.  Digital audio-visual works include movies, music videos, news and entertainment, and live events.  Effective for sales and purchases made after June 30, 2013.

Section 12.  Digital books.  Defines “digital books” as any literary work, other that digital audio works or digital audio-visual works, expressed in words, numbers, or other verbal or numerical symbols generally recognized as a book.  Digital books does not include periodicals, magazines, newspapers or other news or information products or blogs.  Effective for sales and purchases made after June 30, 2013.

Section 13.  Digital code.  Defines “digital code” as a code providing a purchaser a right to obtain one or more specified digital products or other digital products, such as a code imprinted on another tangible medium.  A digital code does not include a gift card or other product that represents a stored monetary value that is deducted from a total.  Effective for sales and purchases made after June 30, 2013.

Section 14.  Other digital products.  Specifies “other digital products” not covered in the definitions in earlier sections.  “Other digital products” does not include newspapers.  Effective for sales and purchases made after June 30, 2013.

Section 15.  Specified digital products.  Defines specified digital products to mean digital audio works, digital audio-visual works, and digital books that are transferred electronically.  Effective for sales and purchases made after June 30, 2013.

Section 16.  Transferred electronically.  Defines “transferred electronically” as obtained by the purchaser by means other than tangible storage media.  Effective for sales and purchases made after June 30, 2013.

Sections 17 and 18.  Sales tax rates.  Reduces the general sales tax rate to 5.675 percent and the Constitutional rate for legacy funds to .325 percent.  Effective for sales and purchases made after June 30, 2013.

Section 19.  Rental vehicle sales tax.  Increases the sales tax on rental vehicles from 6.2 percent to 9.05 percent.  Effective for sales and purchase made after June 30, 2013. 

Section 20.  Lottery tickets in-lieu tax.  Maintains the current rate of 6.5 percent for the lottery in-lieu sales tax.  Effective for sales and purchases made after June 30, 2013.

Sections 21 and 22.  Solicitor nexus; drop ship sales.  Adds rebuttable presumptions for “maintaining a place of business in the state” for purposes of establishing sales tax nexus.  Defines “retailer” and “solicitor” and allows the presumption a retailer is a solicitor in the state to be rebutted by evidence that the resident did not engage in any solicitation in the state on behalf of the retailer during the 12-month period in question.   Effective for sales and purchases made after June 30, 2013.

Section 23.  Severability.  Provides that if any part of sections 22 or 23 are invalid, then the remaining provisions not found invalid will be effective. 

Section 24.  Presumption; burden of proof.  Allows a person engaged in drop shipping to claim an exemption for resale sales based on an exemption certificate provided by its customer or reseller.  Effective for sales and purchases made after June 30, 2013. 

Section 25.   Multiple points of use.  Allows a business purchaser that purchases electronically delivered goods and services that are concurrently available for use in multiple taxing jurisdictions (such as software licenses used by employees of the business in multiple states) to use a multiple-points-of-use exemption certificate.  The seller is not required to collect the tax, but the purchaser is responsible for paying the tax in the required jurisdictions using a reasonable, consistent, and uniform method of apportionment for the sale.  Effective for sales and purchases made after June 30, 2013.      

Sections 26 and 27.  Drugs; medical devices.  Removes the sales tax exemption for over-the-counter drugs.  Exempts purchases in items covered by Medicare and Medicaid.  Expands the definition of “durable medical equipment” to include single patient use items. Modifies the definition of “repair and replacement parts” of durable medical equipment to include such parts for single patient use only.  Exempts accessories and supplies required for the effective use of durable medical equipment and prosthetic devices.  Effective for sales and purchases made after June 30, 2013. 

Section 28.  Materials consumed in industrial production.  Adds the word “tangible” to the sales tax exemption for materials stored, used, or consumed in industrial production of personal property to make clear that the exemption applies to industrial production of tangible personal property.  Specifies that industrial production does not include services.  Effective for sales and purchases made after June 30, 2013.

Section 29.  Capital equipment exemption.  Allows an upfront sales tax exemption for capital equipment purchases for certain purchasers.  A purchaser qualifies for the upfront exemption if, during calendar year 2012:

  • the purchaser employed 80 or fewer full-time equivalent employees; and
  • if another business owns at least 20 percent of the purchaser, the total number of full-time equivalent employees employed by the purchaser and the owning business is not more than 80 full-time equivalent employees.  This provision is applicable for any business that owns at least 20 percent of the purchaser.

Effective for sales and purchases made after June 30, 2014, and before July 1, 2015.  During this time, purchasers that do not meet these qualifications must still pay the sales tax on capital equipment and apply for a refund as specified in current law.  Beginning July 1, 2015, all qualifying capital equipment purchases would be eligible for the upfront exemption. 

Section 30.  Publications, publication materials.  Specifies that “publications” do not include magazines or other periodicals, regardless of whether they are sold over the counter or by subscription.  Effective for sales and purchases made after June 30, 2013.

Section 31.  Qualified data centers.  Reduces the minimum square footage requirement of the building housing the data center from 30,000 to 25,000 square feet and the minimum amount of investment in enterprise information technology equipment and computer software from $50 million to $20 million in a 48-month period.  Reduces the amount of space that must be “substantially refurbished” for building the data center from 30,000 square feet to 25,000 square feet.  Modifies the definition of “substantially refurbished” to include installation of specified equipment, environmental control, energy efficiency improvements, and building improvements.  Specifies that “computer software” means software utilized or loaded at the qualified data center, including the maintenance, licensing, and customization of the software.  Effective for sales and purchases made after June 30, 2013.

Section 32.  Sales tax exemption; greater Minnesota business expansions.  Provides an upfront sales tax exemption for purchases of tangible personal property and taxable services purchased by a qualified business if the exemption is provided for in the business subsidy agreement under Article 5.  The property or services must be primarily used or consumed in greater Minnesota and the purchase must have been made, and delivery received, during the certification period.  Exempts the purchase and use of construction materials used or consumed in, and equipment incorporated into, the construction of improvements to real property in greater Minnesota if the improvements are used in the conduct of the trade or business of the qualified business.  The exemption applies for state and local sales and taxes.  Qualifying businesses may claim the exemption up to $15,000.  The allocations to all qualifying businesses may not exceed $1 million in a fiscal year, but unused amounts may be carried forward and available in future years.  Effective for sales and purchases made after June 30, 2013.

Section 33.  Sales to local governments.  Adds local governments to the list of purchasers eligible for a sales tax exemption on qualifying purchases.  Defines “local governments” as cities, counties, and townships.  Under current law, towns receive this exemption, so the specific reference to towns is removed.  This bill retains current law to not extend the exemption to goods or services purchased as inputs to goods and services generally provided by a private business, such as those provided by liquor stores, utilities, golf courses, marinas, health and fitness centers, campgrounds, cafes, and laundromats.  Goods and services generally provided by a private business do not include housing services, sewer and water services, wastewater treatment ambulance and other public safety services, correctional services, core or homemaking services provide to elderly or disabled individuals, or road and street maintenance or lighting.  Effective for sales and purchases made after June 30, 2013.

Section 34 and 37.   Sales to established religious orders.  Provides that certain sales to established religious orders are exempt from sales tax.  Effective retroactivelyfor sales and purchases made after June 30, 2012.

Sections 35, 38, and 40.  Sales to veterans groups; sales to and for nonprofit organizations.  Extends the current sales tax exemption for qualifying sales of tangible personal property to qualifying sales of services to veterans groups, fundraising sales by or for nonprofit groups, and fundraising events sponsored by nonprofit groups.  Effective for sales and purchases made after June 30, 2013.

Section 36.  Sales tax exemption; critical access dental providers.  Extends the current sales tax exemption for hospitals and outpatient surgical centers to critical access dental care providers, as defined under current law.  Requires that the critical access dental center must serve only recipients of Minnesota health care programs (Minnesota Care, general assistance medical care, and medical assistance).  The exemption does not extend to purchases made by a medical facility not operating as a critical access dental provider, building and construction materials for buildings that will not be used principally by the critical access dental provider, and building materials purchased by a contractor as part of a lump sum contract.  Effective retroactively for purchases made after June 30, 2007. 

Section 40.  Sales tax exemption; nursing homes and boarding care homes.  Exempts a certified nursing facility or boarding care home certified as a nursing facility from sales tax on qualifying purchases, effective for sales and purchases made after June 30, 2013.  The facility must be a 501(c)(3) tax-exempt organization and certified to participate in the Social Security Medical Assistance Program that certifies to the Commissioner of Revenue that it does not discharge residents due to inability to pay.  The exemption does not apply to:

  • sales of construction materials purchased as a part of a lump-sum contract or similar type of contract with a guaranteed maximum price covering both labor and materials for use in the construction, alteration, or repair of the facility;
  • sales of construction materials purchased by the facility or their contractors to be used in constructing buildings or facilities that will not be used principally by the facility;
  • sales of lodging and prepared food, candy, soft drinks, and alcoholic beverages; and
  • leased vehicles, except those leased and used to transport residents and property of the facility.

Section 41.  Sales tax exemption; biopharmaceutical manufacturing facility.  Exempts materials and supplies used or consumed in, capital equipment incorporated into, and privately owned infrastructure in support of construction, improvement, or expansion of a biopharmaceutical manufacturing facility.  The total capital investment must be at least $50 million and the facility must create and maintain at least 190 new FTE positions at the facility.  The facility must continue to be certified under these criteria for each year that it claims the exemption.  The refund must be paid annually in the amount of 25 percent of the total allowable refund payable to date until all refundable amounts have been repaid. Effective retroactively to capital investments made and jobs created after December 31, 2012 and to qualifying purchases made after December 31, 2012 and before July 1, 2019.

Section 42.  Sales tax exemption; research and development facility.  Exempts materials and supplies used or consumed in and equipment incorporated into the construction or improvement of a qualifying research and development facility that has laboratory space of at least 400,000 square feet and utilizes high and low-intensity laboratories and has a total construction cost of at least $140 million in a 24-month period.  Effective for sales and purchases made after June 30, 2013 and before September 1, 2015. 

Section 43.  Industrial measurement manufacturing and controls facility.  Authorizes a sales tax exemption for materials and supplies used or consumed in, capital equipment incorporated into, fixtures installed in, and privately owned infrastructure in support of the construction improvement or expansion of a qualifying industrial measurement manufacturing and controls facility.  Sales tax on qualifying purchases is paid upfront and refunded after DEED determines that the company has met the following requirements:  total capital investment in the facility is at least $60 million; the facility employs at least 250 FTEs not currently employed by the company in the state; and DEED determines that the expansion, remodeling, or improvement of the facility has a significant impact on the state economy.  A company must apply for certification of eligibility for a sales tax refund no later than one year after final completion of construction, improvement, or expansion of the facility.  Effective for sales and purchases made after June 13, 2013, through calendar year 2015. 

Section 44.  Retail, hotel, amusement, and office construction project.  Exempts materials and supplied used or consumed in and equipment incorporated into the construction or improvement of buildings and infrastructure for retail, hotel, amusement, and office use provided the project is within a two square mile area and has a capital investment of at least $250 million.  Effective for sales and purchases made after June 30, 2013 and before July 1, 2024.

Sections 45 to 47.  Refunds; sales tax exemptions.  Authorizes refunds for qualifying purchases under newly authorized sales tax exemptions, effective the day following final enactment, and removes the refund provisions for all capital equipment purchases effective for sales and purchases made after June 30, 2015.

Section 48.  Motor vehicle sales tax revenue.  Adds language to tie the rate for calculating net revenue for motor vehicle leases to the current sales tax rate of 6.875 percent.  This amount would not be affected by the lowered general and Constitutional rates provided earlier in this article.  Effective for sales and purchases made after June 30, 2013. 

Section 49.  Local sales tax referenda; authorized expenditures.  Authorizes a political subdivision to expend funds to disseminate information included in a city council resolution adopting the imposition of a local sales tax; provide notice of and conduct forums for expression of public opinion on the referendum; and provide facts and data on the impact of a proposed sales tax and on the programs and projects that are proposed to be funded with the local sales tax.  Effective the day following final enactment.

Section 50.  Tax base; locally collected taxes.  Clarifies that all local lodging taxes, whether authorized under general or special law, are imposed on the same tax base as lodging taxes collected by the Department of Revenue.  Effective the day following final enactment and states the legislature intends to confirm its original intent to apply these taxes to the full price or compensation paid for access to short-term lodging.

Section 51 and 52. St. Paul local sales tax modification. Authorizes the city of St. Paul to deposit excess revenue from the 40 percent of revenue dedicated to the St. Paul Civic Center complex that is not needed for the complex into an economic development fund. Extends the taxing authority by ten years to 2040. Effective the day after the city council approves the change by resolution and its chief clerical officer certifies the approval with the secretary of state.

Sections 53 and 54.  St. Cloud area cities local sales tax modification.  Authorizes the city of St. Cloud to use its local sales tax for regional community and aquatics facilities projects.  Allows St. Cloud area cities (St. Joseph, Waite Park, Sartell, Sauk Rapids, and Augusta) to continue to use local sales tax revenue for authorized projects, provided an extension of the tax is approved by voters. Extends the termination date of the St. Cloud and area cities local sales tax through 2038 if such an extension is approved by the voters at a general election held by November 6, 2018.  Effective the day after the governing body of each city approves the local option sales tax by resolution and its chief clerical officers certify the voter approval of the tax to the Secretary of State.

Section 55.  Clearwater local sales tax modification.  Amends the local sales tax authorization for the city of Clearwater for specified improvements.  Effective the day after the city council approves the local option sales tax by resolution and its chief clerical officer certifies the voter approval of the tax to the Secretary of State.

Section 56. Duluth local sales tax rate reduction.  Requires the city of Duluth to reduce its general local sales tax from one percent to 0.87 percent.  Under general law, local jurisdictions are required to terminate their local option sales taxes when revenue sufficient to fund the projects funded by the taxes has been raised.  The broader sales tax base authorized in this article would result in local jurisdictions paying off their project obligations and terminating their local option sales taxes more quickly than anticipated under the current sales tax base.  Duluth is the only local option sales tax that has no expiration and may be used for any city purpose, so the increased sales tax base authorized in this article would result in Duluth realizing greater sales tax revenue than other local jurisdictions having local option sales taxes.  Effective for sales and purchases made after June 30, 2013.

Section 57.  Revisor’s instruction.  Provides an instruction to remove the sentence “Use of equipment on a time-sharing basis, where access to the equipment is only by means of remote access facilities, is not a taxable leasing of such equipment.”  Effective for sales and purchases made after June 30, 2013.

Section 58.  Repealer.  Repeals the exemptions for sales tax on clothing, Superbowl admissions, copies of court reporter documents, and telecommunications, cable television, and other direct satellite machinery and equipment.  Repeals Minnesota Rules, part 8130.0500.  Effective for sales and purchases made after June 30, 2013.

ARTICLE 8 – LOCAL DEVELOPMENT

Section 1. Authority; tax increment financing. Modifies the definition of ‘authority’ by adding a municipality that undertakes a project pursuant to the newly created mining reclamation project area

Section 2. Soil deficiency district; definition. Defines a soil deficiency district as a district consisting of a project or portions of a project within which the authority finds by resolution that the following exists:

  1. Parcels consisting of 70 percent of the area of the district contain unusual terrain or soil deficiencies that require substantial filling, grading, or other physical preparation for use. A parcel is eligible for inclusion if at least 50 percent of the area of the parcel requires substantial filling, grading, or other physical preparation for use; and
  2. The estimated cost of physical preparation of the district, excluding certain road and local improvement costs, exceeds the fair market value of the land before completion of the preparation.

Section 3. Mining reclamation project area. Authorizes an authority to designate a mining reclamation project area where parcels consisting of at least 70 percent of the acreage, excluding street and railroad right-of-ways, are characterized with one of more of the following: peat or other soils with geotechnical deficiencies; soils or terrain that requires substantial filling, landfills, dumps or similar deposits of municipal or private waste, floodways or substandard buildings.

Section 4. Municipality approval. Requires an authority that establishes a mining reclamation project area must document the reasons and supporting facts for creating the district, and must retain documentation until two years after decertification of the district. The findings must have been made and documented no more than ten years before the approval of the tax increment financing plan for the district.

Section 5. Duration limits; terms. Sets the duration limit for a soil deficiency district at 20 years.

Section 6. Soils conditions districts. Provides that increment from a soils condition district in a mining reclamation project area may also be used for public improvements in the area that are directly caused by the removal or remedial action.

Section 7. Economic development districts. Extends the 2010 jobs bill’s ‘TIF’ authority allowing increment from economic development districts to be used to provide improvements, loans and grants if the following conditions are met:

  1. Construction of the project begins prior to June 30, 2014;
  2. The project will create or retain jobs in Minnesota, including construction jobs and the project would not have commenced prior to June 30, 2014, without the assistance; and
  3. The request for certification of the district is made no later than December 31, 2014.

Section 8. Temporary authority to stimulate construction. Extends the 2010 jobs bill’s ‘TIF’ authority allowing authorities to spend excess and surplus increment to provide improvements, loans, and grants if the following conditions are met:

  1. The project will create or retain jobs in Minnesota, including construction jobs and the project would not have commenced prior to June 20, 2014, without the assistance;
  2. The municipality approves a written spending plan containing a detailed description of each action to be undertaken; and
  3. The authority to spent increment under this section expires December 31, 2014.

Section 9. Soil deficiency district; increments. Restricts the use of increment from a soil deficiency district in a mining reclamation project area to the acquisition of parcels, paying costs of correcting soil deficiencies, administration expenses and redevelopment costs provided that the costs do not exceed 25 percent of the tax increment.

Section 10. Four-year rule; extension. Extends the four-year ‘knockdown rule’ for tax increment financing districts certified on or after January 1, 2005 and before April 20, 2009. For these districts, the four-year period is deemed to end on December 31, 2016.

Section 11. Ten-year rule. Extends the five year rule under the tax increment financing law to ten years for all districts certified after June 30, 2003.

Section 12. Use of revenues for decertification. Makes a corresponding change in tax increment law to reflect the change from a five-year rule to a ten-year rule. Now, beginning with the eleventh year, increment may only be spent to pay bonds issued during the ten-year period, pay binding contracts with a third party and reimburse the developer or owner for costs incurred.

Section 13. Original local tax rate; TIF. Clarifies that the sum of all the local tax rates excludes that portion of the school rate attributable to the general education levy under section 126C.13.

Section 14. Bloomington Central Station; TIF. Extends the five-year rule to ten years for TIF District No. 1-I (Bloomington Central Station) and also provides an eight year extension of the duration of the district. Tax increment for the district must be computed using the local tax rate, not the original tax rate.

Section 15. City of Oakdale, TIF.  Provides an exemption to the general law blight test requirements for redevelopment districts for specified parcels.  Also provides the following special rules for qualification of parcels as being occupied by a substantial building:

  1. Exempts the district from the three-year limit between demolition of a building and certification of the district;
  2. Exempts the district from the requirement that demolition be done under a development agreement if done by the property owner, rather than the development authority; and
  3. Exempts the district from the adjustment to original net tax capacity and requires certification be filed by December 31, 2017.

Section 16. City of Oakdale; TIF. Extends the authority to collect tax increments from TIF District No. 6 (Bergen Plaza) through December 31, 2030 subject to specified conditions including that all increment collected after December 31, 2016 be used to only pay costs related to redevelopment of specified parcels of the Tanner’s Lake redevelopment site.

Section 17. City of Oakdale; TIF. Authorizes the city of Oakdale to spend increments from TIF District No. 1-6 (Echo Ridge) to pay for other activities (as specified) within the project area.

Section 18. City of Minneapolis; Streetcar Financing. Authorizes the city of Minneapolis to establish a value capture district consisting of specific parcels. A public hearing is required before a district can be established. Permitted uses of increment include planning, design and engineering services related to the construction of the streetcar line, acquiring property for, constructing, and installing a street carline.

Section 19. Dakota County; TIF. Authorizes the creation of a redevelopment district consisting of parcels from a district that was required to be decertified in 2012.  Sets the original tax capacity at $93,239 and provides exemptions for the ‘blight test’ and the requirement that 90% of revenue be used to finance the cost of correcting conditions. The district must decertify by December 31, 2028.

Section 20. St. Cloud; TIF. Provides that St. Cloud TIF District No. 2. is deemed to be a "gap" district certified between August 1, 1979, and July 1, 1982.

Section 21. City of Ely; TIF. Extends the duration of TIF District No. 1 through December 31, 2021. Increments may only be used to pay binding obligations and administrative expenses. Revenue from TIF District No. 3 may also be transferred to the tax increment account for TIF District No. 1. The transfer amount is limited to the lesser of $168,000 or the total amount due on binding obligations on that date, less the amount of increment collected by No. 1 after December 31, 2012.

Section 22. City of Glencoe, TIF. Extends the duration of TIF District No. 4 by ten years, to 2023. Increment collected after December 31, 2013 must only be used to pay debt service on or to defease bonds. When all bonds have been paid or defeased, the district must decertify and all remaining increment returned to the city, county and school district.

Section 23. City of Bloomington, TIF. Allows the city of Bloomington and its port authority to transfer parcels from TIF District No. 1-C and expand TIF District No. 1-G to include those parcels. If the parcels are transferred, the county auditor shall transfer the original tax capacity of the transferred parcels.

Section 24. City of Apply Valley; TIF Authority. Authorizes the city of Apple Valley to use tax increment financing to provide improvements, loans, subsidies to buildings and facilities if: (1) the projects will create or retain jobs, including construction jobs, in Minnesota; (2) construction of the project will not begin prior to July 1, 2014 without the use of tax increment financing; (3) request for certification of the district is made no later than June 30, 2014; and (4) construction of the project begins no later than July 1, 2014.

Section 25. City of Maplewood; TIF. Authorizes the city of Maplewood or its economic development authority to create one or more redevelopment TIF districts. The district(s) are exempt from the ‘blight test’, the requirement that 90% of revenue derived from increment from a redevelopment district must be used to correct blight conditions and the five-year rule is extended to ten years. Parcels are also subject to a one-year knockdown rule.

ARTICLE 9 – DESTINATION MEDICAL CENTER

Section 1.  Construction materials; public infrastructure costs.  Provides a sales tax exemption for construction materials and supplies used in, and equipment incorporated into public infrastructure included in the destination medical center authority development plan.  Effective for purchases after June 30, 2015.

Section 2.  Definitions. Defines “authority” (destination medical center authority), “board” (the governing body of the authority), “city” (Rochester), “county” (Olmsted), “destination medical center development district” (geographic area in the city in which under the development plan public infrastructure projects are implemented), “development plan” (adopted by the authority), “medical business entity” (Mayo Clinic), and “public infrastructure project” (project funded in part or whole with public money to support the medical business entity’s development identified in the development plan).

Section 3, Subdivision 1.  Establishment of authority and board.  Establishes the authority and board.  The board has eight members:  four members appointed by the Governor and confirmed by the Senate; two members appointed by the city council; one member appointed by the county; and one member appointed by Mayo.  The Governor’s appointees may not be residents of the city.  The gubernatorial, city, and county appointees must not have financial interests in Mayo or any projects under consideration or authorized by the authority.  Six members constitutes a quorum. 

Subdivision 2.  Terms; vacancies.  Provides that the eight board members are to be appointed by the first Monday in January 2014.  A board member’s term is six years, except that two of the Governor’s appointees, one city appointee, and the county appointee serve a three-year term after the 2014 appointment, and the Governor, city council, and county board of commissioners, respectively, must make replacement appointments for those board seats in January 2017. 

Subdivision 3.  Chair.  Requires the Governor to appoint a chair from the board’s membership and requires that the chair convene a meeting within two months of the senate confirmation of the Governor’s appointees.

Subdivision 4.  Pay.  Provides that the board members are to be compensated as required under current law for administrative boards and commissions and may be reimbursed for actual expenses.

Subdivision 5.  Removal.  Provides the procedures for removing a member of the board for cause.

Subdivision 6.  Sunset.  Requires the authority to sunset on December 31, 2043. 

Section 4.  Board characteristics and jurisdiction.  Provides that the authority is a subdivision of the state and states that the boundary of the authority must be within a medical development district.  If the authority finances development outside a medical development district, that development must be included in the public infrastructure development plan and is subject to the planning, zoning, sanitary, and building laws applicable to the area where the development authority takes place.  

Section 5.  Officers; duties; organizational matters.  Requires the authority to annually elect a treasurer and appoint a secretary and assistant treasurer.  The secretary and assistant treasurer may be board members.  Provides the duties of the treasurer, secretary, and assistant treasurer.  Requires that the authority’s financial statements must be prepared in the same way as city financial statements.  Requires the authority to employ a CPA for annual examination and audit and that the exam and audit report be filed with the state auditor by June 30 of every year.

Section 6.  Depositories; default; collateral.  Sets forth the provisions for authority depositories and a bond for repayment of deposits.  Exempts the treasurer from liability for loss of deposits based on fault of the depository. 

Section 7.  Tax levies; city or county appropriations; other fiscal matters.  Requires that the authority must not levy a tax or special assessment or incur obligation on property not owned by the authority.  Requires the authority to send its budget to the house and senate tax committee chairs and ranking minority members.  Authorizes the city or county to appropriate money for the authority’s use.  Provides that local government tax base is not reduced by any provision in the new chapter. 

Section 8.  County tax authority.  Authorizes the county to impose a quarter-cent transportation tax for purposes of financing transportation infrastructure for the county share of the development plan.  Authorizes the county to impose a wheelage tax for transportation projects within the county. 

Section 9.  Development plan.  Subdivision 1. Development plan. Directs the authority to prepare and adopt a development plan after publication, notice, and public hearing. Requires the authority to make certain findings before adopting the plan. The plan must give priority to projects that pay wages equal to a basic cost of living wage as calculated by the DEED commissioner.

Subdivision 2. City review of development plan. Requires the authority to submit the development plan to the city for review and comment on the plan’s consistency with the city’s adopted comprehensive plan. Requires the city to determine by written resolution any reasons for finding that the development plan is not consistent with the city comprehensive plan.

Subdivision 3. Modification of development plan. Authorizes the authority to modify the development plan at any time, but the development plan must be reviewed and updated the at least every five years.

Subdivision 4. Authority consultant. Requires the authority may hire a consultant to provide expertise and experience in developing the destination medical center, and work with the city and Mayo on the goals, objectives, and strategies of the development plan.

Subdivision 5. Audit of consultant contracts. Authorizes the state auditor to audit the books and records of the consultant.

Subdivision 6. Report. Requires the authority and city to submit an annual report to the chairs and ranking minority members of the house and senate committees with jurisdiction over local and state government operations, economic development, and taxes, and to the commissioners of employment and economic development and revenue, and to the county. The report must include the adopted development plan and any proposed changes; progress of projects in the development plan; actual and estimated costs and financing sources; and debt service schedules.

Subdivision 7. Construction requirements. Provides minimum requirements for contracts for construction, materials, supplies and equipment necessary for a public infrastructure project. Allows a variety of forms of contract, such as design-build and construction manager at risk. Authorizes the construction manager to hire subcontractors under certain conditions.

Section 10.  Powers and duties.  Provides for the powers of the authority, including those of a redevelopment agency under current law.  Authorizes the authority to undertake public infrastructure projects in a medical center development district, provided the authority finds that the public infrastructure project is consistent with and in furtherance of the development plan.  Allows the authority to acquire property to create medical development districts and provides for a property tax exemption for such property while held by the authority.  Authorizes the authority to sell property it owns or holds with two-thirds approval of the board and provides for notice requirements of property sales or other conveyances. Allows the authority to enter into contracts for economic development purposes and provides that the state and its municipal subdivisions are not liable for the obligations of the authority.  Provides for other powers of the authority, including contracting for services, purchasing supplies, using city facilities and services, delegating power, cooperating with or acting as an agent for state or federal government, and accepting public land, and borrowing in anticipation of bonds.  Provides that the authority does not have tax increment financing powers.

Section 11.  Revenue obligations; pledge; covenants.  Provides that the authority may issue revenue bonds and states the form and sale requirements for bonds.  Provides that bonds may be secured by authority revenue, payments by Mayo, and city and county revenue.  Requires that authority bond debt is not city, county, or state debt. 

Section 12, Subdivision 1.  City tax authority.  Authorizes the city to impose a tax on receipts for admission to entertainment and recreational facilities as defined by the city, in an amount imposed by ordinance.  Proceeds from the tax must be used to fund obligations related to public infrastructure costs. 

Subdivision 2.  General sales tax authority.  Authorizes an extension of the existing half-cent sales tax or the imposition of an additional quarter-cent sales tax. 

Subdivisions 3. and 4.  Special abatement and TIF rules.  States that certain abatement and TIF provisions under general law do not apply if the city uses tax abatement or a redevelopment TIF district to finance the costs of public infrastructure projects. 

Section 13.  State infrastructure aid.  Provides the requirements for state aid for the public infrastructure project. 

Subdivision 1.  Definitions.  Defines terms applicable to the conditions for state aid. 

Subdivision 2, 3, and 4.  Certification of expenditures; general state infrastructure aid; local contribution.  Provides that state aid may not be paid until certified Mayo expenditures reach $250 million.  After that point, the state pledges to pay three percent of the amount of qualified expenditures over $250 million, the total of which may not exceed $455 million plus financing costs.  The city must also pledge a contribution of at least $128 million, not including any state aid, to finance public infrastructure projects and may enter into an arrangement with the county to meet this requirement. 

Subdivision 5 and 6.  State transit aid; local contribution.  Provides that the city qualifies for state transit aid if the county imposes the transit tax under section 12 and the county provides a contribution equal to a .15 percent sales tax imposed for the previous calendar year.  State transit aid is .75 percent of qualified expenditures, reduced by the local transit aid contribution.  State transit aid payments may not exceed $7.5 million per fiscal year, and $116 million in total.

Section 14.  Rochester local sales and use tax authorization.  Allows the city to impose an additional quarter-cent sales tax.

Section 15.  Use of revenues.  Requires that if the city decides to extend existing sales taxes or impose the additional quarter-cent sales tax, the excess over the amount needed to fund existing projects must be used to finance costs related to public infrastructure projects.  Authorizes revenue sharing for economic development purposes for additional named cities.

Section 16.  Termination of taxes.  Requires that any additional taxes imposed for public infrastructure costs terminate December 31, 2046, or when the city council determines that sufficient funds have been raised to finance the city’s obligations associated with the development plan and public infrastructure projects. 

Section 17.  Rochester lodging tax.  Authorizes the city to impose an additional three percent lodging tax.  Revenues from the tax must be used to finance Mayo civic center projects.  The lodging tax terminates December 31, 2046, or when the city council determines that sufficient funds have been raised to finance the city’s obligations associated with the development plan and public infrastructure projects. 

Section 18.  Effective date.  Provides that, unless stated otherwise, the provisions of the bill are effective when the city formally adopts required items in the bill and files the adoption with the Secretary of State.

ARTICLE 10 – MINERALS TAX

Section 1. Taconite payment and other reductions. Corrects an error resulting from a 2009 law change that inadvertently shifted an additional five percent of taconite production tax used for property tax relief to cities and townships within school districts and sets the school share at ninety five percent.

Section 2. Occupation taxes to be apportioned. Redirects a portion of the occupation tax deposited in the general fund for an annual appropriation to the mining environmental and regulatory account in the special revenue fund an amount equal to a 5 cent tax per ton on the taconite production tax.

Section 3. Taconite economic development fund. Requires that companies match any funds received by the taconite economic development fund. Currently, companies must provide a matching expenditure of at least 50 percent of the distribution. Effective beginning for the 2014 distribution.

Section 4. Taconite production tax rate; calculation. Increases the taconite production tax rate, by five cents, to $2.56 per gross ton. Effective for 2013 production year.

Section 5. School districts. Increases distribution of taconite production tax to school districts by nine cents. Effective for 2014 distribution.

Section 6. Property tax relief. Reduces, by nine cents, the distribution of the taconite production tax used to fund the taconite homestead credit.

Section 7. 2013 distribution only. Establishes a special fund to receive 30.5 cents per ton of the taconite production tax and allocates specified amounts to local projects. Effective for the 2013 distribution, all of which must be made in the August 2013 payment.

Section 8.  Iron Range resources and rehabilitation commissioner; bond authorized. Authorizes the commissioner of the Iron Range resources and rehabilitation to issue revenue bonds in a principal amount of $38,000,000 to make grants to school districts located in the taconite relief area or taconite assistance area, to be used to pay for building projects or to reduce debt service on completed building projects. Effective the day following final enactment and applies beginning with the 2014 distribution.

Section 9. Iron Range fiscal disparities study. Requires the commissioner of revenue, in coordination with the commissioner of the Iron Range Resources and Rehabilitation Board, to study the Iron Range fiscal disparities program. By February 1, 2014, a report must be submitted to the chairs and ranking minority members of the house of representatives and senate tax committees of the findings of the study.

ARTICLE 11 – PUBLIC FINANCE

Section 1. State and local securities. Allows investment of public funds in notes issued by school districts with an original maturity not exceeding 13 months and rated in the highest category by a national bond rating service or enrolled in the credit enhancement program.

Section 2. Guaranteed investment contracts; ratings. Allows agreement or contracts for guaranteed investment contracts with a term of 18 months or less to be entered into regardless of credit quality of the issuer’s or guarantor’s long-term unsecured debt rating, provided the credit quality is rated in the highest category by a nationally recognized rating agency.

Section 3. Definitions. Expands list of projects eligible for financing with county capital improvement bonds to include public works facilities, fairground buildings and records and data storage facilities. Allows financing of projects financed prior to the approval of a capital improvement plan.

Section 4. Application of election requirement. Makes the following changes to the reverse referendum authority for CIP bonds: 

  1. Ties the 5-percent petition requirement to the number of voters in the last county general election;
  2. eliminates the requirement that the Commissioner of Revenue prepare the ballot question; and
  3. prohibits the county from proposing to issue CIP bonds for a one-year period if a reverse referendum petition is filed and the county chooses not to issue the bonds rather than holding an election to approve them.  If the issue is submitted and the voters do not approve, the issue can be resubmitted to the voters after 180 days.

Section 5.  Housing improvement areas. Allows the Dakota County Community Development Agency to have all powers of a city in connection with housing improvement areas in Dakota County.

Section 6. Treasurer investments.  Eliminates restrictions on Metropolitan Airports Commission’s investment policy to be consistent with authority for other local government found in Chapter 118A.

Section 7. Entitlement reservations. Removes requirement that any unused carryover of bond allocations be deducted from that entitlement allocation for the next year.

Section 8. Minnesota office of higher education. Removes the one-year carryforward limit on allocations for student loan bonds. Effective the day following final enactment and applies to any bonding authority allocated in 2012 and subsequent years.

Section 9. Mortgage bonds. Removes the one-year carryforward limit on mortgage bonds awarded to the Minnesota Housing Finance Agency.

Section 10. Definitions. Allows expenditures incurred to be financed with bonds even though they were incurred before approval of the plan, if such expenditures are included in the capital improvement plan.

Section 11. Election requirement. Makes the following changes to the reverse referendum authority for city CIP bonds: 

  1. Ties the 5-percent petition requirement to the number of voters in the last municipal general election;
  2. eliminates the requirement that the Commissioner of Revenue prepare the ballot question; and
  3. prohibits the city from proposing to issue CIP bonds for a one-year period if a reverse referendum petition is filed and the county chooses not to issue the bonds rather than holding an election to approve them.  If the issue is submitted and the voters do not approve, the issue can be resubmitted to the voters after 180 days.

Section 12. Street reconstruction. Makes changes to the reverse referendum authority for street construction bonds and allows expenditures that were incurred by a municipality before approval of a street construction plan, if such expenditures are included in the reconstruction plan.

Section 13. City of St. Paul; bonding extension. Extends the city of St. Paul’s capital improvement bonding program to 2024. The aggregate principal amount remains at $20,000,000 for each year.  Effective the day after compliance by the governing body of the city of St. Paul.

Section 14. Capitol Renovation Restoration. Appropriates $30,000,000 from the general fund in fiscal year 2015 for completion of repairs and renovation of the Capitol building, and for improvements to other properties located on the Capitol campus to meet temporary and permanent space needs required by the restoration of the Capitol. The program plan and cost estimates must be approved by each tenant in the Capitol before the commissioner of administration can prepare final plans and specifications for the work.  Money for temporary and permanent relocation costs is not available until tenant representatives have approved a detailed relocation plan. The commissioner of administration is prohibited from installing new windows in the Capitol building that cannot be opened by tenants of the building. The base for fiscal year 2016 only is $173,600,000 and must be used for the same purposes as states above.

Section 15.  Legislative office facilities. Authorizes the commissioner of administration to enter into a lease-purchase agreement for a term of up to 25 years for predesign, design and construction of offices and hearing rooms within the Capitol area for legislative and other functions.  Provides specific authorization for the commissioner of management and budget to use revenue bonds or certificates of participation to accomplish the financing for the project.  Exemptions allow the construction of a new building in the Capitol area without a design competition conducted by the Capitol area architectural and planning board and provides that the CAAP board must establish a selection committee in the place of the state designer selection board.

Authorization is provided to commissioner of administration to execute a ground lease to facilitate a lease-purchase agreement.  The Senate subcommittee on rules and administration must approve the program plan and cost estimates for any construction done under lease-purchase authority before the commissioner of administration can prepare final plans.  $3,000,000 is appropriated in fiscal year 2014 from the general fund to allow predesign work to begin during the period the lease-purchase financing is being arranged.  The commissioner of administration may reserve a portion of money for office space costs of the legislature to fund repairs for facilities constructed.

Section 16.  Carryforward of bonding authority for 2011. Clarifies that bonding authority that was allocated to an entitlement user in 2001 but for which the user did not provide a notice of issue by the last business day of December 2012, will not be deducted from the entitlement allocation for that user in 2013. Effective the day following final enactment and applies retroactively to rescind any reallocations by the commissioner of management and budget.

Section 17. Local match; Independent School District No. 435. Allows Independent School District No. 435, Wauben-Omega-White Earth to expand classroom space at its Omega elementary site using a grant that was awarded to the district by the Department of Human Services on August 12, 2012. Notwithstanding match requirements, the district may use a lease-purchase agreement held by the district.  Effective the day following final enactment.

ARTICLE 12 – MARKET VALUE DEFINITIONS

Section 1.  County fairgrounds; improvement aided.  Converts, from taxable market value to estimated market value, the criteria that allows a city, town, or school district to spend up to a certain amount per year on county fairground improvements.

Section 2.  Agricultural Land Preservation and Conservation Assistance Program.  Converts minimum levy required for a county to participate in program from 0.01209 percent of taxable market value to estimated market value.

Section 3.  Fire and Police Department aid.  Modifies definition of "market value" by changing it to "estimated market value” for purposes of state police and fire aid.

Section 4.  Fire and Police Department aid; apportionment of fire state aid.  Modifies apportionment of state fire aid based on estimated market value rather than market value.  

Section 5.  Fire and Police Department aid; fire state aid.  Changes reference from market value to estimated market value.

Section 6.  Auxiliary forest.  Clarifies that the market value of land in an auxiliary forest for all other purposes other than taxation be based on estimated market value.

Section 7.  Watershed Management Tax District; Levy Limit.  Converts the levy limits on watershed management tax district levies in rural towns 0.02418 percent of taxable market value to the same percentage of estimated market value.

Section 8.  Watershed Management Organizations; Bond Levy. Converts the reference of levy limits on bond levies in rural towns 0.02418 percent of taxable market value to the same percentage of estimated market value.

Section 9.  Lake Minnetonka Conservation District.  Converts the total funding limit from .00242 percent of taxable market value to the same percentage of estimated market value.

Section 10.  White Bear Lake Conservation District.  Changes the levy limit for municipalities within the district from 0.02418 percent of taxable market value to estimated market value.

Section 11. Watershed Districts, Organizational fund.  Changes the cap on a district’s organizational expense fund from 0.01596 percent of taxable market value to estimated market value.

Section 12.  Watershed District, General fund.  Modifies the limit on a district’s general levy from 0.048 percent of taxable market value to estimated market value.  This section also modifies the levy for basic water management features from taxable market value to estimated market value.

Section 13.  Watershed District, Survey and Data Acquisition Fund.  Converts the levy limit from .02418 percent of taxable market value to one based on estimated market value.

Section 14.  Eminent domain, blight test.  Modifies the definition of "structurally substandard" in eminent domain law to refer to estimated market value.

Section 15.  State aid payment and adjustment.  Requires the Department of Revenue to compute adjusted net tax capacity values for cities and counties and clarifies that the computations use values that reflect fiscal disparities, tax increment financing, and power line credit.

Section 16.  County Historical Society.  Converts city and town levy limits for appropriations to county historical societies from .02418 percent of taxable market value to estimated market value.

Section 17.  Emergency Medical Service Districts.  Converts district levy limit from 0.048 percent of taxable market value to estimated market value. The levy is capped at $400.000.

Section 18.  County state aid highway, rural counties.  Converts levy calculation in CSAH formula for rural counties from 0.01596 percent of taxable market value to estimated market value. This levy determines the local contribution.

Section 19.  County state aid highway, urban counties.  Converts levy calculation in CSAH formula for urban counties from 0.00967 percent of taxable market value to estimated market value. This levy determines the local contribution.

Section 20.  County highways; bridges within certain cities.  Modifies exemption from requirement that counties spend CSAH money on bridge and dam improvements in cities of the third and fourth class.  Under current law, this requirement does not apply to cities with taxable market value of more than $2,100 per capita and this change converts the amount based on estimated market value.

Section 21.  Taxation in unorganized townships.  Modifies qualifying rules related to expenditure of the county road and bridge levy in unorganized towns from valuation based on taxable market value to estimated market value.

Section 22.  County road and bridge bonds.  Converts the limit on county road and bridge bonds from 0.12089 percent of market value to estimated market value.

Section 23.  Definition of estimated market value.  Defines "estimated market value" for property tax statutes as the assessor’s determination of market value. The definition of ‘estimated market value’ in Section 25 governs calculation for levy limits, debit limits and aid computations.

Section 24.  Definition of taxable market value.  Defines "taxable market value" for property tax statutes as the estimated market value for the parcel as reduced by market value exclusions, deferments of value, or other adjustments.

Section 25.  Definition of market value.  Converts taxable market value to estimated market value in statute used in computing tax levy limits, debt limits, and statute aid computations and specifically references statutory exclusions and provides that estimated market value is the value prior to these adjustments.  This section also reverses current law which requires that tax-exempt wind energy property be added to taxable market value.  Also, limits under special law and city charters that are based on market value are changed to estimated market value.  The measure of estimated market value for tax limits is the amount for the previous assessment year while it’s the most recently available amount for debt limits.

Section 26.  Valuation of property.  Corrects a cross-reference to statute related to value of platted land.

Section 27.  Manufactured home park cooperative.  Changes a reference from the homestead market value credit to the homestead market value exclusion. 

Section 28.  Homestead application.  Adds a reference to the homestead market value exclusion as a homestead benefit and eliminates a reference to the credit. 

Section 29.  Classification of property; tax capacity.  Eliminates an obsolete definition of "gross tax capacity."

Section 30.  Disparity reduction aid.  Requires that taxable market value be used in computing disparity reduction aid.

Section 31.  Disparity reduction credit.  Requires that taxable market value be used in computing disparity reduction credit.

Section 32.  Taxes; determination of levy limit.  Provides that the law converting old special law and city charter provisions containing levy or mill rate limits provide increases based on growth in estimated market value rather than taxable market value.

Section 33.  Correction of levy amount, towns.  Modifies threshold used to determine which year levy for a correction of mistakes in town levies will be added to from a percentage or taxable market value to estimated market value.

Section 34.  Levy limits, adjusted levy limit base.  Changes reference from taxable market value to estimated market value under levy limit for commercial-industrial property.  This law is currently obsolete.

Section 35.  Contents of tax statement.  Eliminates obsolete reference to limited market value and updates a cross- reference to new definition of "taxable market value."

Section 36.  Iron Range Fiscal Disparities Program, adjusted market value.  Defines "adjusted market value" under the Iron Range Fiscal Disparities Program statute.

Section 37.  Iron Range Fiscal Disparities Program, fiscal capacity.  Modifies definition of "fiscal capacity" for municipalities.

Section 38.  Iron Range Fiscal Disparities Program, average fiscal capacity.  Modifies definition of “average fiscal capacity" for municipalities.

Section 39.  Iron Range Fiscal Disparities Program, net tax capacity.  Modifies definition of net tax capacity by changing market value to taxable market value.

Section 40. Iron Range Fiscal Disparities Program; adjustment of values. Requires that for purposes of computing fiscal capacity, a municipality’s taxable market value must be adjusted to reflect reductions.

Section 41.  Mortgage registry tax.  Clarifies that the county portion of collections of mortgage registry tax paid for mortgages on properties in more than one county is allocated to the counties based on estimated market value.

Section 42.  Real property outside county, deed tax.  Clarifies that the county portion of collections of the deed tax for properties in more than one county is allocated to the counties based on estimated market value.

Section 43.  Volunteer Firefighters Retirement Plan.  Provides that one-half of additional contributions to a volunteer firefighter’s pension fund, required due to insufficient funds, be allocated to employer-municipalities in proportion to their estimated market values.

Section 44.  Town general law; major purchases.  Converts threshold that subjects large contracts for town purchases to reverse referendum authority from 0.24177 of the taxable market value to estimated market value.

Section 45.  Towns; authority to issue certificates of indebtedness.  Converts reference from market value to estimated market value under threshold that subjects town’s issuance of certificates of indebtedness to reverse referendum authority.

Section 46.  Towns; firefighters’ relief tax levy.  Converts levy limit for firefighter pension benefits from 0.00806 percent of taxable market value to estimated market value.

Section 47.  Metropolitan area towns; certificate of indebtedness.  Converts reference from market value of the town to estimated market value of the town concerning threshold for certificates of indebtedness.

Section 48.  Towns may be dissolved.  Converts criteria for dissolution of town from amount of taxable market value to estimated market value.

Section 49.  Counties; change of boundaries.  Changes reference from market value of a county to estimated market value for purposes of the criteria for creating new counties.

Section 50.  Counties; capital improvement bonds.  Removes definition of  "tax capacity."

Section 51.  Counties; capital improvement bond debt limit.  Converts limit on capital improvement bonds from .012 percent of taxable market value of property in county to estimated market value.

Section 52.  Counties; nonprofit legal assistance.  Converts limit on county’s appropriation to nonprofit corporation providing legal assistance from 0.00604 percent of taxable market value to estimated market value.

Section 53.  Counties; courthouse.  Converts debt limit from 0.04030 percent of taxable market value to estimated market value.  Any amount in excess requires approval of majority of county voters.

Section 54.  Counties; county emergency jobs program.  Modifies the limit that a county may levy for emergency jobs program from 0.01209 percent of taxable market value to estimated market value.

Section 55.  Hennepin County; Building, and Maintenance Fund.  Converts levy limit from 0.02215 percent of taxable market value to estimated market value.

Section 56.  Hennepin County Library levy.  Converts levy limit from 0.01612 percent of taxable market value to estimated market value.

Section 57.  Three Rivers Park District levy.  Converts levy limit from 0.03224 percent of taxable market value to estimated market value.

Section 58.  Anoka County; library debt limit.  Converts debt limit on library bonds from 0.01 percent of taxable market value to estimated market value.

Section 59.  Anoka County; library levy limit.  Converts levy limit from .01 percent of taxable market value of taxable property in the county to estimated market value.

Section 60.  Payment of county orders or warrants.  Converts minimum amount required for county to qualify to borrow from another county from $1.033 billion of taxable market value to estimated market value.

Section 61.  Nonconformities; continuation of nonconformity.  Changes from market value to estimated market value concerning an exception to continue nonconforming land uses if more than 50 percent of the market value of the building or structure is destroyed by fire or natural disaster. 

Section 62.  Regional Railroad Authority; levy limit.  Converts levy limit from 0.04835 percent of taxable market value to estimated market value.

Section 63.  Community corrections; leasing.  Converts rent limit from 0.1 percent of taxable market value to estimated market concerning issuance of revenue bonds financing community correction facilities.

Section 64.  Home rule charter city; issuance of capital notes.  Converts debt limit on capital notes issued by home rule charter city without election from 0.03 percent of taxable market value to estimated market value.

Section 65.  Statutory cities; contracts.  Converts threshold that subjects conditional sale contracts and contracts for deed purchases to reverse referendum authority from 0.24177 percent of market value to estimated market value.

Section 66.  Statutory cities; certificates of indebtedness.  Converts threshold that subjects issuance of certificates of indebtedness to reverse referendum authority from 0.25 percent of market value to estimated market value.

Section 67.  Special service districts.  Modifies test used to determine whether a split use property in a special service district is subject to full or proportionately to the chargers or levies from 50 percent of taxable market value to estimated market value.

Section 68.  Pedestrian mall; improvement assessments.  Converts levy limits for pedestrian mall improvements from 0.12089 percent of market value to estimated market value.

Section 69.  Hospital; city of the first class.  Converts levy limit for cities of the first class owning hospitals from 0.00806 percent of market value to taxable market value.

Section 70.  Tourist camping grounds.  Converts levy for camping ground established by home rule charter or statutory city from 0.00806 percent of taxable market value to estimated market value.

Section 71.  Museum, gallery, or school of arts.  Converts levy from 0.00846 percent of taxable market value to estimated market value.

Section 72.  St. Cloud Transit Commission levy.  Converts levy limit from 0.12089 percent of market value to estimated market value.

Section 73.  Duluth Transit Commission levy.  Converts levy limit from 0.07253 percent of taxable market value to estimated market value.

Section 74.  Municipalities; acceptance of gifts.  Converts qualifying rule for cities of the second, third, and fourth class to accept gifts with conditions from $41 million of taxable market value to estimated market value.

Section 75.  Housing and redevelopment authorities levy limit.  Converts levy limit for housing and redevelopment authorities from 0.0185 percent of market value to estimated market value.

Section 76.  Housing and redevelopment authorities debt limit.  Converts debt limit on issuance of general obligation bonds from one-half percent of taxable market value to estimated market value.

Section 77.  Port authorities; mandatory city levy.  Converts levy limit from 0.01813 percent of taxable market value to estimated market value.

Section 78.  Seaway Port Authority levy.  Converts levy limit from 0.01813 percent of taxable market value to estimated market value.

Section 79.  Port authorities’ discretionary city levy.  Converts levy limit from 0.00282 percent of taxable market value to estimated market value.

Section 80.  Economic development authorities; city tax levy limit.  Converts levy limit from 0.01813 percent of taxable market value to estimated market value.

Section 81.  Development pacts with entities of other states.  Converts levy limit from 0.00080 percent of taxable market value to estimated market value.

Section 82.  First class city; publicity levy.  Converts levy limit from 0.00080 percent of taxable market value to estimated market value.

Section 83.  Hazardous property penalty.  Converts penalty city may assess on property determined to be hazardous from one percent of taxable market value to estimated market value.

Section 84.  Towns/Cities; joint maintenance of cemetery.  Modifies law allowing contiguous towns and statutory cities to jointly maintain public cemeteries if each have a minimum market value of $2 million.  The minimum market value would be based on estimated market value.

Section 85.  City improvement fund.  Modifies minimum requirement of taconite and iron ore values that permits cities to establish a permanent improvement fund based on estimated rather than taxable market value.

Section 86.  City improvement fund; levy limit.  Converts levy limit from 0.08059 percent of taxable market value to estimated market value.

 Section 87.  Acceptance of provisions.  Modifies reference in acceptance of 1943 law regulating financial practices which applied to cities with more than 50 percent of their value in unmined iron ore value to refer to estimated market value.

Section 88.  Metropolitan Council; debt limit.  Converts debt limit from 0.01209 percent of taxable market value to estimated market value.

Section 89.  Value of property for bond issues by school districts.  Converts statute that adjusts school district debt limit for districts affected by airport detachments from taxable market value to estimated market value.

Section 90.  Metropolitan Airport Commission; general budget.  Converts commission’s levy limit for operation and maintenance from 0.00806 percent of market value to estimated market value.

Section 91.  Metropolitan Airport Commission; additional taxes.  Converts commission’s additional levy limit from 0.00121 percent of market value to estimated market value.

Section 92.  Metropolitan Airport Commission; levy limit.  Converts commission’s levy limit from 0.00806 percent of taxable market value to estimated market value.

Section 93.  Metropolitan Mosquito Control Commission; levy limit.  Converts rate of growth in commission’s levy from the growth in its taxable market value to estimated market value.

Section 94.  Metropolitan Area Fiscal Disparities Program; adjusted market value.  Defines "adjusted market value" as taxable market value adjusted by the assessment sales ratio.

Section 95.  Metropolitan Area Fiscal Disparities Program; fiscal capacity.  Defines "fiscal capacity" as being based on adjusted market value.

Section 96.  Metropolitan Area Fiscal Disparities Program; average fiscal capacity.  Defines "average fiscal capacity" as being based on adjusted market value.

Section 97.  Metropolitan Area Fiscal Disparities Program; net tax capacity.  Defines "net tax capacity" as being based on taxable market value.

Section 98.  Metropolitan Area Fiscal Disparities Program; adjustment of values. Requires that for purposes of computing fiscal capacity, a municipality’s taxable market value must be adjusted to reflect reductions.

Section 99. Debt of defined municipalities; capitol improvement bonds.  Converts limit that applies under city capital improvement bond law from .16 percent of taxable market value to estimated market value.

Section 100.  Debt of defined municipalities; general net debt limit.  Converts general net debt limit for municipalities other than school districts and cities of the first class from three percent of market value to estimated market value.

Section 101.  Debt of defined municipalities; first class cities net debt limit.  Converts net debt limit from two percent of market value to estimated market value.

Section 121.  Debt of defined municipalities; school districts net debt limit.  Converts net debt limit from 15 percent of taxable market value to estimated market value and clarifies that values may be adjusted by assessor’s sales ratio if it results in a higher limit.

Section 103.  Refunding bonds.  Converts debt threshold that allows a city, county, town, or school to issue refunding bonds without an election from 1.62 percent of taxable market value to estimated market value.

Section 104.  State Board of Investment; bond purchase.  Converts maximum limit on Minnesota municipal bond purchases by State Board of Investment from 3.63 percent of taxable market value to estimated market value.

Section 104.  Local government aid; city net tax capacity.  Updates reference to city net tax capacity in LGA statute to recodified section.  This section is effective the day following final enactment.

Section 106.  Commercial industrial percentage.  Clarifies that the commercial industrial percentage for the LGA formula need factor is based on estimated market value. 

Section 107.  Local government aid; county program aid.  Updates reference to county net tax capacity in county program aid statute to recodified section.  This section is effective the day following final enactment.

Section 108.  County and regional jails; levy limit.  Converts levy to pay county jail bonds issued without election from 0.09671 percent of market value to estimated market value.

Section 109.  County and regional jails; leases.  Converts rent limit permitting lease revenue bond financing of county jails from 0.1 percent of taxable market value to estimated market value.

Section 110  Definition of estimated market value.  Adds definition of "estimated market value" to general definition section of statutes.  This definition applies for purposes of levy, tax, spending, debt limit and calculation of aid payments.

Section 111.  Revisor’s instruction.   Directs the Revisor of Statutes to recodify the statute governing calculation of adjusted net tax capacity in property tax statutes (Chapter 273).   This section is effective the day following final enactment.

Section 112.  Repealer.  Repeals the following statutes: 

  • M.S. 273.11, subd. 1a – Limited Market Value
  • M.S. 276A.01, subd. 11 – Definition of ‘valuation’ under Iron Range Fiscal Disparities Law.
  • M.S. 473F.02, subd. 13 – Definition of ‘valuation’ under Metropolitan Area Fiscal Disparities Law.
  • M.S. 477A.01, subd 11 – Definition of ‘equalized market value’ in local government aid statute.

Section 113.  Effective date.  Provides the changes affecting computation of debt limits are effective the day following final enactment while changes affecting levy and tax limitations or aid computations are effective for taxes payable in 2014.

ARTICLE 13 – DEPARTMENT POLICY AND TECHNICAL; INCOME AND FRANCHISE TAXES; ESTATE TAXES

Section 1. Recapture return required. Adds subdivision 1a to Minn. Stat. § 289A.10 to require a return if there is a cessation of the trade or business or a disqualifying disposition of the property that was excluded from the taxable estate. Effective for estates of decedents dying after June 30, 2011.

Section 2.  Reporting requirements of regulated investment companies paying municipal bond interest. Amends Minn. Stat. § 289A.12, subdivision 14 to remove the requirement that reporting of municipal bond interest and dividends paid is required only if the regulated investment company is required to register under chapter 80A, the Minnesota Securities Act. Effective the day following final enactment.

Section 3. Recapture informational return required. Adds subdivision 18 to Minn. Stat. § 289A.12 to require that qualified heirs file two information returns if a decedent excluded from the taxable estate qualified small business or qualified farm property. The first return is due two years after decedent’s death. The second return is due three years after decedent’s death. Effective for returns required to be filed after December 31, 2013.

Section 4. Recapture return due date. Adds subdivision 3a to Minn. Stat. § 289A.18 to clarify the due date of the recapture tax return: on or before 6 months after cessation of the trade or business or a disqualifying disposition of the property that was excluded from the taxable estate. Effective for estates of decedents dying after June 30, 2011.

Sections 5 and 6. Recapture payment due date. Amends Minn. Stat. § 289A.20, subdivision 3 and adds subdivision 3a to Minn. Stat. § 289A.20, to reflect the recapture tax payment due date: on or before 6 months after cessation of the trade or business or a disqualifying disposition of the property that was excluded from the taxable estate. Effective for estates of decedents dying after June 30, 2011.

Sections 7, 8, 9, and 10. Estimated tax payments for C corporations and exempt entities. Amends Minn. Stat. § 289A.26, subdivisions 3, 4, 7, and 9, to clarify that the estimated-tax-payment provisions provided by section 289A.26 apply to both C corporations that pay corporate franchise tax and exempt entities that pay unrelated business income tax. Effective the day following final enactment.

Sections 11 and 15. Possessions tax credit modifications. Amends Minn. Stat. § 290.01, subdivision 6b and Minn. Stat. § 290.0921, subdivision 3, to repeal obsolete references to Internal Revenue Code § 936. Effective the day following final enactment.

Sections 12, 13, 14, and 15. Extraterritorial income modifications. Amends Minn. Stat. § 290.01, subdivisions 19c and 19d, to repeal obsolete references to Internal Revenue code § 114. Also amends cross references found in Minn. Stat. §§ 290.01, subdivisions 19b and 19d, and 290.0921, subdivision 3. Effective the day following final enactment.

Section 16. Unity of ownership. Amends Minn. Stat. § 290.17, subdivision 4, to clarify that unity of ownership does not exist when two or more corporations are involved unless there is, directly or indirectly, a common owner of more than 50 percent. Effective the day following final enactment.

Section 17.  Withholding on payments to out of state contractors. Amends Minn. Stat. § 290.9705 to require state and local government units and other persons who in the regular course of business contract with certain non-Minnesota construction contractors to withhold 8 percent of payments due under the contract if the value of the contract exceeds $50,000. The funds are held by the Department of Revenue as surety for payment of state taxes owed under the contract. Current law requires withholding if cumulative payments received by the contractor in the year exceed $50,000. Effective for payments made to contractors after December 31, 2013.

ARTICLE 14 – DEPARTMENT POLICY AND TECHNICAL: SALES AND USE TAXES; SPECIAL TAXES

Section 1. Deed tax; partitions. Amends Minn. Stat. § 287.20, by adding the new subdivision 11. This subdivision defines a real property “partition” for purposes of the existing exemption for partition deeds (i.e., a deed to or from a co-owner partitioning their undivided interest in the same piece of real property). The new language makes it clear that the exemption only applies to a deed, or that portion of a deed, that divides a contiguous tract of co-owned real property into separate tracts owned individually by each of the co-owners, which has been the long-standing department interpretation. Effective the day following final enactment.

Sections 2 and 5. Obsolete accelerated monthly sales tax payment provisions. Amends Minn. Stat. § 289A.20, subdivision 4, to eliminate the monthly accelerated remittance schedules for vendors with annual sales tax collections of at least $120,000; and repeals Minn. Stat. § 289A.60, subdivision 31, the related penalty and safe harbor provision. Minn. Stat. § 289A.20 provided that once the cash flow and budget reserve accounts reached their statutory amounts, the sales tax remittance schedule would return to the pre-2010 schedule. This condition was met per the February 2012 budget forecast, beginning July 1, 2012. This change does not affect the June estimated payments. Effective the day following final enactment.

Section 3. Brewer credit. Amends Minn. Stat. § 297G.04, subdivision 2, to clarify that a reference to calendar year should be changed to fiscal year. Effective the day following final enactment.

Section 4. Retaliatory provisions. Amends Minn. Stat. § 297I.05, subdivision 11(d), to strike an obsolete reference and to include life insurance companies in the list of sections that are covered by the retaliatory tax provisions. These provisions cover foreign companies that may do business in Minnesota and thus should cover life insurance companies as well. This is a correction of an oversight that occurred when the rates for life insurance companies were lowered, beginning in 2006. Effective the day following final enactment.

ARTICLE 15 -- DEPARTMENT POLICY AND TECHNICAL: MINERALS; PROPERTY TAX

Section 1, 11, 12, and 21. Homestead and other applications. Clarifies that information collected to determine eligibility of property for homestead classification remains private data and removes obsolete language related to mailing homestead applications.

Section 2 and 14. Class 4bb residential classification. Eliminates the two separate property tax classifications in class 4bb for nonhomstead single-unit residences that are located on either nonagricultural or agricultural property.

Section 3. Air flight property tax; collection. Clarifies that the commissioner of revenue collects the air flight property tax.

Section 4. Assessor’s duties; prohibited activity. Modifies the list of non-tax property appraisals that an assessor may perform within the jurisdiction within which they are the assessor so that they are allowed to do appraisals related to land exchanges.

Section 5. Air flight property tax; authority. Clarifies that the commissioner has the power to abate both late payment and late filing penalties upon a finding of reasonable cause.

Section 6 and 17. Exempt property tax; usage. Clarifies that taxes on the use of federal real property are assessed as personal property tax against the user and modifies definition of tax-exempt property to include the state or any of its political subdivision.

Section 7.  Net Proceeds Tax; Property Tax Exemption. Eliminates the exemption from property tax for ‘direct reduced ore’ subject to the net proceeds tax.  Direct reduced ore is an iron ore product and the net proceeds tax only applies to nonferrous ores, metals or minerals.

Section 8. Property tax; person. Expands the definition of ‘person’ by including an individual, association, estate, trust and partnership.

Section 9. Market value definitions; Eliminates reference to the obsolete limited market value provision.

Section 10. Ownership changes. Clarifies that a sale or transfer disqualifies land from the rural preserve property tax program but a new owner may qualify for the program without an intervening period of disqualification.

Section 13. Agricultural homesteads. Clarifies that intensive livestock and poultry confinement operations are agricultural even when they are less than 10 acres in since.

Section 15 and 16. Homestead declaration before 2009/2009 and thereafter.  Updates cross-references relating to homestead applications.

Section 18. Administrative appeals for railroads and utilities. Allows railroads until the earlier of June 15 or ten days after the date of the valuation and utilities until the earlier of July 1 or ten days after the valuation to file an administrative appeal of their property tax valuations.

Section 19. Rural area; definition. Updates definition of ‘rural area’ to remove ‘incorporated city’, a designation that no longer exists.

Section 20. Notice of delinquent property tax. Eliminates obsolete text from notice relating to various times within which owners of different types of property may avoid forfeiture of property. Adds instruction that the commissioner of revenue will correct and complete narrative descriptions of the applicable redemption periods.

Section 22. Senior citizens property tax deferral program.  Authorizes the commissioner of revenue to prescribe the form of the notice and execution of the notice by the original or facsimile signature entitled them to be recorded.

Section  23. Nonferrous Occupation Tax. Provides a definition of ‘hydrometallurgical processes’ used in this subdivision.

Section 24.  Net Proceeds Tax. Conforms the distribution of net proceeds tax on mining or extraction of ores, metals or minerals outside the taconite assistance area to the statutory language imposing the tax.

Section 25. Assessor’s duties. Clarifies that the county assessor need not be licensed to do appraisals as modified by section 4.

Section 26. Repealer. Repeals obsolete statute relating to a limited, one-year exclusion for residential property if qualifying investments reducing the hazards related to lead paint were made prior to a specified date.

ARTICLE 16 – DEPARTMENT POLICY AND TECHNICAL:  MISCELLANEOUS

Sections 1. Lost or Destroyed Warrant Duplicate; Indemnity.  Clarifies that a holder of a void warrant may not recover against the state.  Effective the day following final enactment.

Sections 2-24. Uniform Interest on Penalties.   Provides a single, uniform statement of the rule regarding when interest on penalties accrues.  Effective the day following final enactment.

NBP/ESS/SM/JP/syl

 
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