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   Senate   
State of Minnesota
 
 
 
 
 
S.F. No. 3982 - Omnibus tax bill (as proposed to be amended by the A-3 delete-everything amendment)
 
Author: Senator Roger C. Chamberlain
 
Prepared By: Eric S. Silvia, Senate Counsel (651/296-1771)
Nora Pollock, Senate Counsel (651/297-8066)
 
Date: April 30, 2018



 

Article 1

Federal Conformity

This article makes numerous changes to the individual income and corporate franchise tax chapter in response to the changes to the federal tax code made in the Disaster Tax Relief and Airport and Airway Extension Act in September 2017, the Tax Cuts and Jobs Act (TCJA) in December 2017, the Bipartisan Budget Act in February 2018, and the Consolidated Appropriations Act in March 2018.

The provisions in this article are mostly a result of the changes made to the calculation of federal taxable income (FTI) in TCJA. Minnesota currently references federal taxable income (FTI) as its starting point and incorporates federal deductions and exemptions. Changes to those deductions and exemptions therefore affect Minnesota taxpayers. This article decouples the calculation of Minnesota taxable income from FTI and instead uses federal adjusted gross income (FAGI) as the starting point for individual taxpayers.

Many federal itemized deductions were limited or repealed under TCJA. This article retains most of those deductions by reference to a previous version of the Internal Revenue Code (IRC), including:

  • property taxes;
  • retained limitation on deduction for home mortgage indebtedness;
  • theft and casualty losses;
  • moving expenses; and
  • unreimbursed employee expenses.

The article also establishes a state standard deduction at the same amount allowed prior to TCJA. The TCJA repealed personal and dependent exemptions; this article establishes Minnesota personal and dependent exemptions at the same amount allowed prior to TCJA. The TCJA also increased the amount and phaseout thresholds for section 179 expensing and bonus depreciation. Minnesota would conform to those increased amounts but would retain its 80% addback schedule for bonus depreciation. Minnesota would not adopt the 20% deduction for pass-through income that was included in TCJA. This article also adopts the new inflation adjustment calculation under TCJA – Chained Consumer Price Index for Urban Consumers (“chained CPI”), which allows for modification of consumption habits by substituting for other goods and projects a slower measure of growth than the Consumer Price Index for Urban Consumers (CPI).

The changes are generally effective beginning in tax year 2018. Some provisions are effective for tax year 2017, including tax treatment of charitable contributions and certain early retirement account withdrawals made as a result of hurricane disasters that year. Other changes applicable to tax year 2017 include tax extenders that have been enacted on a year-to-year or otherwise shorter-term basis at the federal level.

Section 1. Debt. Updates the income thresholds for debtors with medical care debts for purposes of revenue recapture provisions. The income amounts are updated for 2018. Also modifies the method used to calculate inflation from CPI to chained CPI. Effective beginning in tax year 2018.

Section 2. Internal Revenue Code. Updates the reference to the IRC in the administrative chapter. Effective beginning in tax year 2018.

Section 3. Generally; individuals. Requires the commissioner of revenue to determine the income levels at which individuals are required to file a tax return. Currently, individuals must file a return if they are required to file a federal return. This section provides that individuals must file a return if they are required to file a federal return or if they are so required under the income thresholds determined by the commissioner. Effective beginning in tax year 2018.

Section 4. Composite income tax returns for nonresident partners, shareholders, and beneficiaries. Modifies a cross-reference to reflect changes to other references in the article. Effective beginning in tax year 2018.

Section 5. Reporting exempt interest and exempt-interest dividends. Modifies the reference from FTI to FAGI for purposes of reporting exempt interest and interest-exempt dividends. Effective beginning in tax year 2018.

Section 6. Assessments on returns. Modifies the reference from FTI to FAGI for purposes of the commissioner’s authority to audit and adjust returns. Effective beginning in tax year 2018.

Section 7. Surviving spouse. Creates a definition of surviving spouse, referencing the federal definition, for purposes of calculations made under new provisions in the article. A surviving spouse is an unmarried individual whose spouse died in one of the two preceding tax years and who maintains a separate household. Effective beginning in tax year 2018.

Section 8. Net income. Specifies that the current definition of “net income” – which means federal taxable income – applies to corporations, estates, and trusts, as the calculation of taxable income for these entities is not modified from current law. Specifies that “net income” for individuals means FAGI, as modified with Minnesota additions and subtractions. Updates the IRC reference date for purposes of the definition. Effective the day following final enactment, and changes incorporated by federal changes are effective at the same time as effective for federal purposes. Establishing FAGI as the starting point for individuals is effective beginning in tax year 2018.

Section 9. Adjusted gross income. Codifies the definition of “adjusted gross income” and “federal adjusted gross income” to reference the federal definition. The definition incorporates federal changes made through the date in section 8. Effective the day following final enactment.

Section 10. Taxable net income. Modifies the definition of taxable net income to reflect the new deductions and exemptions established in a later section. Effective beginning in tax year 2018.

Section 11. State itemized deduction. Modifies the definition of “state itemized deduction” to adopt federal itemized deductions effective prior to TCJA, except that the TCJA provision to lower all the floor for the medical expenses deduction from 10% to 7.5% of FAGI for tax years 2017 and 2018 would be allowed. The federal deduction for state income and sales taxes is also excluded, as it is no longer relevant given the new state itemized deduction. This section also establishes that private mortgage insurance (PMI) is a state itemized deduction (PMI was disallowed under TCJA as an expense that could be included as part of the federal home mortgage interest deduction). Effective beginning in tax year 2018.

Section 12. State standard deduction. Codifies a state standard deduction to reflect the pre-TCJA federal standard deduction amounts. The deduction amounts are adjusted by chained CPI. Effective beginning in tax year 2018.

Section 13. Internal Revenue Code. Updates the reference to the IRC in the income and corporate franchise chapter to reflect changes made by TCJA, except where otherwise specified. Effective the day following final enactment and applies to the tax years incorporated by federal changes, including any retroactive provisions.

Section 14. Definition; scope. Provides that additions to Minnesota taxable income are specific to estates and trusts, as individuals will apply Minnesota additions to FAGI. The additions apply to amounts excluded from calculating federal taxable income for trusts and estates, and FAGI for individuals. Effective beginning in tax year 2018.

Section 15. Income, sales and use, motor vehicle sales, or excise taxes paid. Provides that only trusts and estates must add back state income, sales, and other local taxes that were deducted for federal purposes. Individuals will not have to add these taxes back given the transition to FAGI as the starting point for calculating state tax liability. Effective beginning in tax year 2018.

Sections 16 and 31. Section 179 expensing. Conforms to the increased section 179 federal expensing amounts for income and franchise tax purposes – up to $1,000,000 may be expensed, and the phaseout threshold was increased to $2,500,000. Minnesota taxpayers will now be able to expense the full eligible amount in a single tax year beginning in 2019 instead of the five-year expensing schedule under current law.

Section 17. Disallowed itemized deduction. Provides for the phaseout of Minnesota itemized deductions to be consistent with how the phaseout was calculated prior to TCJA. Effective beginning in tax year 2018.   

Section 18. Disallowed personal exemption amount. Applies the phaseout of personal exemptions to the new Minnesota personal and dependent exemption subtraction established in a later section. Effective beginning in tax year 2018.

Section 19. Qualified business income addition. Requires that trusts and estates add back the 20% of pass-through income deducted under TCJA for purposes of calculating Minnesota taxable income. Effective beginning in tax year 2018.

Section 20. Definition; scope. Provides that subtractions from Minnesota taxable income are specific to estates and trusts, as individuals will apply Minnesota additions to FAGI. The subtractions apply to amounts excluded from calculating federal taxable income for trusts and estates, and FAGI for individuals. Effective beginning in tax year 2018.

Section 21. Charitable contributions for taxpayers who do not itemize. Provides that taxpayers may continue to use the existing subtraction for taxpayers who do not itemize under the new state itemized deduction. The amount of qualified charitable distributions from an IRA may not count toward the amount calculated in the subtraction (as under current law). Effective beginning in tax year 2018.

Section 22. Personal and dependent exemption. Provides a subtraction for the new state personal and dependent exemption, which is established in a later section. Effective beginning in tax year 2018.

Section 23. Military service pension; retirement pay. Corrects the reference for the military pension subtraction to reflect the shift to FAGI as the starting point for calculating Minnesota taxable income. Effective beginning in tax year 2018.

Section 24. Social Security benefits. Updates the subtraction and income threshold amounts for 2018. Also provides that the subtraction amount for married separate filers is one-half the amount for married joint filers. The subtraction and phaseout threshold amounts are adjusted by chained CPI. Effective beginning in tax year 2018.

Section 25. Moving expenses. Provides a state subtraction for moving expenses, which were disallowed as an above the line federal deduction under TJCA. Effective beginning in tax year 2018.

Sections 26 and 32. Global intangible low-taxed income. Provides a subtraction for individuals, estates and trusts, and corporations for certain foreign source earnings subject to taxed under TCJA. Global intangible low-taxed income (GILTI) is income that exceeds 10% of a controlled foreign corporation’s fixed assets that are depreciable as trade or business assets. Effective beginning in tax year 2018.

Section 27. Deferred foreign income. Provides a state subtraction for foreign-source income that was not subject to tax prior to TCJA, the extent it was included in federal adjusted gross income. Under TCJA, this income is “deemed” repatriated and thus subject to tax. Effective for tax years 2017 and 2018.

Section 28. Standard or itemized deduction. Provides a subtraction for the amount of the state standard or itemized deduction, which are defined in an earlier section. Effective beginning in tax year 2018.

Section 29. Foreign-derived intangible income. Provides a subtraction for certain foreign source earnings included in federal adjusted gross income and subject to tax under TCJA. Foreign derived intangible income (FDII) is income from intangible assets (such as patents and trademarks) that U.S.-based companies earn from servicing foreign markets. Effective beginning in tax year 2018.

Section 30. Tuition subtraction. Allows a subtraction for the amount of the federal deduction for tuition and related expenses (up to $4,000 per year) that has been allowed under federal law as an above-the-line deduction. The subtraction was included as part of the Bipartisan Budget Act tax extenders, but is set to expire after 2017. Effective beginning in tax year 2018.

Section 33. Schedules of rates for individuals, estates, and trusts. Updates the income thresholds for 2018 and reduces the first-tier income tax rate from 5.35% to 5.1%. Corrects cross-references for purposes of calculating tax liability for nonresidents. Effective beginning in tax year 2018.

Section 34. Inflation adjustment of brackets. Provides for chained CPI adjustments for the individual income tax brackets. Effective beginning in tax year 2018.

Section 35. Amount of credit. Updates the income phaseout thresholds for the dependent care credit for 2018. Effective beginning in tax year 2018.

Section 36. Income. Strikes a reference to the IRC definition of federal adjusted gross income, which is no longer necessary due to its codification in an earlier section, and strikes a reference to the domestic production deduction, which was repealed by TCJA, for purposes of income eligibility for the dependent care credit. Also adds alimony received from a post-2018 divorce to the extent not included in the recipient’s income to the calculation. Effective beginning in tax year 2018.

Section 37. Inflation adjustment. Updates the year reference in the inflation adjustment for the dependent care credit. The income phaseout thresholds for the credit would be adjusted by chained CPI. Effective beginning in tax year 2018.

Section 38. Credit allowed. Adjusts the income phaseout thresholds for the working family credit for 2018. Effective beginning in tax year 2018.

Section 39. Inflation adjustment. Indexes the income phaseout thresholds for the working family credit by chained CPI. Effective beginning in tax year 2018.

Sections 40 and 41. Definitions; credit. Update the reference in the long term care credit to refer to Minnesota instead of federal itemized deductions. Effective beginning in tax year 2018.

Section 42 to 45. Credit for certified historic structure rehabilitation. Updates the Minnesota credit to reflect changes made in TCJA to pay the credit or grant over five taxable years instead of the single year the structure was placed in service. Effective for applications for allocation certificates submitted after December 31, 2017.

Section 46. Credit allowed. Updates the income phaseout thresholds for the 529 plan credit. The threshold amounts would be adjusted for chained CPI. Effective beginning in tax year 2018.

Section 47. Subtraction. Modifies the income reference from FTI to FAGI for the elderly and disabled subtraction. Effective beginning in tax year 2018.

Section 48. Standard or itemized deduction. Allows an individual to claim the state standard deduction or state itemized deduction. Married separate filers must claim the same type of deduction. Allows a subtraction for the state standard or state itemized deduction. Effective beginning in tax year 2018.

Section 49. Definitions. Amends the Minnesota AMT calculation to require the Minnesota addition of QBI deducted at the federal level. Modifies the income calculation reference from FTI to FAGI. Allows the amount allowed to be deducted for casualty losses prior to TCJA to be included in the Minnesota AMT deduction. Effective beginning in tax year 2018.

Section 50. Exemption amount. Updates the AMT exemption amounts for 2018 and updates a cross-reference to the IRC. Adjusts exemption thresholds by chained CPI. Effective beginning in tax year 2018.

Section 51. Imposition. Updates the bracket thresholds for the corporate minimum fee for 2018. The threshold amounts would be adjusted by chained CPI.

Section 52. Computation and modifications. Provides that the limitation under TCJA to allow corporations to claim 80% of NOLs does not apply to the calculation of NOLs for Minnesota corporate filers. Effective beginning in tax year 2018.

Section 53. Income not derived from conduct of a trade or business. Updates the definition of “wages” to correspond to a new clause of the IRC that requires wage withholding on certain stock option elections that were not available prior to TCJA. Effective beginning in tax year 2018.

Section 54. Dividends received from another corporation. Disallows a dividend-received deduction for dividends paid from stock that is debt-financed, which is disallowed under the IRC. Effective beginning in tax year 2018.

Section 55. Wages. Amends the definition of wages subject to Minnesota withholding to correspond to a new IRC provision that requires federal withholding on certain stock option elections. Effective beginning in tax year 2018.

Section 56. Income. Modifies the calculation of income for purposes of the property tax refund to reflect the repeal of the domestic production deduction under TCJA and specifies that alimony received by the claimant and not already taxed must be included in the calculation. Provides a definition of “exemption amount” that reflects what the personal and dependent exemption would have been had TCJA not been enacted. The exemption amount is adjusted for chained CPI. Moves other definitions to a new clause. Effective beginning in tax year 2018.

Section 57. Gross rent. Updates the gross rent amounts for nursing homes, foster care homes, and intermediate care facilities for 2018. Effective beginning in tax year 2018.

Section 58. Internal Revenue Code. Updates the reference to the IRC for purposes of the property tax refund. Effective for refunds based on property taxes payable after December 31, 2018, and rent paid after December 31, 2017.

Section 59. Scope. Updates the reference to the IRC for purposes of the estate tax chapter. Effective for estates of decedents dying after December 31, 2017.

Section 60. Sale of property used in a trade or business. Provides a past-date IRC reference for purposes of the sales tax exemption for like-kind exchanges. Under TCJA, like-kind treatment for personal property is no longer allowed. Effective retroactively for sales and purchases made after December 31, 2017.

Section 61. Exemptions. Provides a past-date IRC reference for purposes of the motor vehicle sales tax exemption for like-kind exchanges. Under TCJA, like-kind treatment for personal property is no longer allowed. Effective retroactively for sales and purchases made after December 31, 2017.

Sections 62 and 63. Subtraction; Addition. Updates the reference for the first-time homebuyer savings account from FTI to FAGI. Effective beginning in tax year 2018.

Section 64. Application. Updates the reference in the JOBZ chapter from FTI to FAGI. Effective beginning in tax year 2018.

Section 65. Repealer. Repeals provisions obsolete with the transition from FTI to FAGI, effective beginning in tax year 2018:

  • Addition for fines, fees, and penalties for individuals, which is now included in federal income;
  • addition for domestic production activities for individuals;
  • addition for domestic production activities for corporations;
  • addition for fines, fees, and penalties for corporations, which is now included in federal income; and
  • disallowance of trade or business expenses for fines, fees, and penalties, which were disallowed under TCJA.

Article 2

Income, Corporate Franchise, and Estate Taxes

Section 1. Tax rates adjustment. Requires the commissioner of revenue to calculate income, corporate franchise, and alternative minimum tax rate reductions if certain criteria are met, in addition to the existing requirements for priority allocation of additional revenues under current law. Reductions must not exceed one percentage point for each rate. The rate reduction would be enacted beginning with the taxable year beginning one year after the year following the forecast year, for reductions resulting from a forecast in an even-numbered year. For reductions resulting from a forecast in an odd-numbered year, the rate reduction would be enacted beginning with the taxable year of the year immediately following the forecast year. If the criteria for rate reductions are met, reductions must occur before budget reserve transfers. The commissioner must timely publish the new rates, and the revisor must update the rates in the next edition of Minnesota Statutes. Effective the day following final enactment.

Sections 2 and 3. Angel investment credit. Extends the small business investment credit, commonly known as the angel investment credit, for one year and allocates $5 million for the credit. Also extends reporting requirements to correspond to the additional year the credit is available. Effective for tax year 2018.

Section 4. Return required. Modifies the requirements to file an estate tax return to correspond to the increased estate tax exclusion amount in a later section. Effective for decedents dying after December 31, 2017.

Section 5. Financial institution. Makes a technical amendment to the definition of “financial institution” to strike an unnecessary reference to the insurance premium tax chapter. Effective retroactively to tax year 2017.

Section 6. Disqualified captive insurance company. Establishes a definition of “disqualified captive insurance company” as one that is licensed as a captive insurance company or derives 80% or more of its total premiums from its unitary business members and receives less than 50% of its gross receipts from premiums, or pays less than 0.25% of its total premiums under state insurance premium tax. Effective retroactively to tax year 2017.

Sections 7, 8, 11, and 12. Disallowed section 280E expenses. Allows a subtraction for purposes of calculating Minnesota individual income, corporate franchise, and alternative minimum tax for business expenses incurred by medical cannabis manufacturers, which are disallowed as business expenses under federal law. Effective beginning in tax year 2018.

Section 9. Exempt entities. Excludes disqualified captive insurance companies from the general income tax exemption for insurance companies. Effective retroactively to tax year 2017.

Section 10. Credit allowed. Modifies the stillbirth credit to allow residents who gave birth resulting in stillbirth in another state and residents or spouses of residents who are members of the armed forces stationed outside the state and gave birth resulting in stillbirth, to claim the credit. Effective retroactively to tax year 2015.

Section 13. Unitary business principle. Requires that the combined report for unitary businesses exclude the income and apportionment factors of a disqualified captive insurance company. Strikes language providing that insurance companies that are part of a unitary business and not licensed in Minnesota or another state that imposes retaliatory taxes must be included on the combined report. Effective retroactively to tax year 2017.

Section 14. Subtraction. Increases the estate tax exclusion amount to $5 million beginning in 2019. Effective for estates of decedents dying after December 31, 2018.

Section 15. Tax amount. Strikes obsolete language pertaining to estates of decedents dying in 2017. Effective retroactively to estates of decedents dying after December 31, 2018.

Section 16. Definitions. Corrects a cross-reference in the definition of “qualified heir” for purposes of the qualified small business and qualified farm property subtractions. Effective retroactively for estates of decedents dying after December 31, 2016.

Section 17. Qualified small business property. Modifies the requirement for the three-year holding period prior to the decedent’s death to allow ownership of the property by the decedent’s spouse, or undivided or joint interest in the property between the decedent and decedent’s spouse, to meet the property ownership requirement of the qualified small business property subtraction.

Exempts an operating account from the types of property that are ineligible for property to qualify for the small business estate tax exclusion.

Effective retroactively for estates of decedents dying after December 31, 2017.

Section 18. Qualified farm property. Modifies the requirement for the three-year holding period prior to the decedent’s death to allow ownership of the property by the decedent’s spouse, or undivided or joint interest in the property between the decedent and decedent’s spouse, to meet the property ownership requirement of the qualified farm property subtraction. Effective retroactively for estates of decedents dying after December 31, 2017.

Section 19. Recapture tax. Corrects a cross-reference for purposes of application of the recapture tax for the qualified small business and qualified farm property subtractions. Effective retroactively for estates of decedents dying after December 31, 2016.

Section 20. Repealer. Repeals provisions pertaining the subtraction for qualified small business and qualified farm property, as those will be obsolete with the increased general estate tax exclusion in an earlier section. Effective for estates of decedent dying after December 31, 2018.

Article 3

Sales, Use, and Excise Taxes

Section 1. Sale and purchase. Excludes release fees or other charges for pen-raised game or poultry by a game farm or hunting preserve from the definition of “sale and purchase” and provides a similar exclusion for these fees or charges with regard to the granting of membership in a club, association, or other organization. Effective for sales and purchases made after June 30, 2018.

Section 2. Minnetonka policy and fire public safety facilities. Provides an upfront sales and use tax exemption for materials and supplies, and equipment incorporated into the construction of a new fire station in Minnetonka and the remodeling and expansion of an existing police and fire station in Minnetonka. Effective for sales and purchases made after June 30, 2018 and before January 1, 2021.

Section 3. New taxes prohibited. Prohibits a city, county, town, or other taxing authority from increasing or imposing an excise tax on food or containers. The prohibition relating to food applies at the manufacturer, distributor, wholesale, or retail levels. The prohibition does not apply to license fees imposed by a licensing authority in the exercise of that authority to license a trade, profession, or business. Effective June 1, 2018.

Section 4. Liquor, lodging, and restaurant taxes. Modifies the maximum combined rate of Minneapolis lodging taxes, state general taxes, and any other local taxes to 13.875%, which would allow the city to restore its lodging tax to the originally authorized 3%. Effective for sales and purchases made after September 30, 2018.

Article 4

Property Taxes

Section 1. Project tax levy. Modifies the project tax levy authority for watershed districts by allowing a district to levy a tax to pay the costs of projects undertaken by the district that are funded, in whole or in part, with money appropriated by law for grants or loans.  Under current law, the levy must be used to pay costs of projects undertaken with proceeds for construction or implementation loans under the Clean Water Partnership program. Effective for taxes payable in 2019 and thereafter.

Section 2. County historical society; tax levy. Allows the governing bodies of a city or town to appropriate funds from its general fund to be paid to the historical society of its respective city or town; current law provides that the funds must be paid to the historical society of its respective county only. Effective the day following final enactment.

Sections 3 and 6. Records; data privacy; disclosure.  Authorizes county veterans service officers and county assessors to disclose to each other private data necessary to determine a client’s eligibility for the disabled veteran’s homestead market value exclusion. Effective the day following final enactment.

Section 4. Certain property owned by an Indian tribe. Provides a property tax exemption for property used exclusively as a pharmacy in the city of Minneapolis and owned by a federally recognized Indian tribe. To qualify for the exemption, the property must have been owned by the federally recognized Indian tribe on January 1, 2016, and for the current assessment year. This exemption is limited to parcels and structures that do not exceed, in the aggregate, 4,000 square feet, and the exemption expires with taxes payable in 2028. Effective beginning with taxes payable in 2019.

Sections 5 and 12. Manufactured home park cooperative; property taxes payable. Allow manufactured home park cooperative residents to include 17% of the rent paid for site rental in the determination of property taxes payable for purposes of the property tax refund. Under current law, residents may claim a property tax refund for the property taxes paid on the manufactured home itself, but may not include any taxes attributable to ground lease payments. Effective beginning with claims for refunds for taxes payable in 2019.

Section 7. Class 4. Allows craft/retreat houses consisting of not more than five sleeping rooms that provide areas for guests to prepare meals and conduct indoor craft or hobby activities to qualify for the class 4c(1) resort property tax classification. Effective beginning with taxes payable in 2019 and thereafter.

Section 8. Disabled veterans homestead market value exclusion. Makes the following changes to the disabled veterans homestead exclusion: (1) allows a spouse to carry over the benefit to a new property, provided that the new property is less than or equal to the estimated market value of the property that was first subject to the exclusion; (2) removes the exclusion on properties that are sold to non-qualifying owners, so that new owners will not receive the benefit in the following taxes payable year; and (3) changes the application deadline date from July 1 to December 15. Effective beginning with taxes payable in 2019 and thereafter.

Sections 9 and 10. State general levy; commercial-industrial tax capacity. Exempts the personal property of certain natural gas pipeline systems from the state general levy. The exemption applies for a period not to exceed 12 years, provided that once a facility no longer qualifies for the exemption, it may not subsequently qualify.  Provides that the state general levy amount must be reduced each year by the amount of tax that would be paid by the exempt property.  Effective beginning with taxes payable in 2020 and thereafter.

Sections 11 and 13. Fire protection special taxing districts. Authorizes two or more political subdivisions to establish, by resolution, a special taxing district for fire protection services. The district shall be governed by a board consisting of representatives of each participating political subdivision in the proportions set out in the district’s establishing resolution. Each representative must be an elected member of the governing body of the political subdivision he or she represents.

The board may levy a tax on property in the district not to exceed 0.048 percent of the estimated market value of the district, or $550,000, whichever is less.  The proceeds of the tax levy must be used to provide fire protection or emergency medical services to the residents and property located within the district, and to pay any debt issued to accomplish its duties.

Additional political subdivisions may be added to the district as provided by the board and agreed to in a resolution of the governing body.  A political subdivision may withdraw from the district by providing two years’ notice of its intent to withdraw. The taxable property of the withdrawing subdivision is in effect for the two taxes payable years following notice of withdrawal. Property subject to debt issued by the board remains subject to the debt levy until the outstanding debt has been paid. The district may be dissolved by resolution approved by majority vote of the board. Effective the day following final enactment.

Section 14. Till expiration started. Allows a state agency or governmental unit to initiate the expiration of a metropolitan agricultural preserve. Effective the day following final enactment and applies to any agricultural preserve where the previously required eight-year termination period required under law has not yet expired.

Sections 15 and 16. Expiration for park and trail purposes; notice. Provides that a metropolitan agricultural preserve expires immediately for property that is purchased or subject to an easement by a state agency or other governmental unit for park or trail purposes.  The state agency or governmental unit must give notice of the acquisition or easement to the local unit of government with planning and zoning authority over the property. Effective the day following final enactment and applies to any agricultural preserve where the previously required eight-year termination period required under law has not yet expired.

Section 17. Northwest Minnesota multicounty housing and redevelopment authority. Extends the levy authority of the Northwest Minnesota multicounty housing and redevelopment authority by five years, to taxes payable in 2024. Effective beginning with taxes payable in 2019.

Section 18. Effective date; application (SFIA). Amends the effective date for a provision passed in 2017 that amended the definition of forest land to include land improved with a paved trail under an easement, lease, or license to the state or a political subdivision. This effective date change clarifies that land improved with a paved trail at the time an SFIA enrollee submits their annual certification meets the new definition.  Effective the day following final enactment.

Section 19. Study of pipeline and public utility operating property. Requires the Commissioner of Revenue to study and prepare a report on the methods used to value pipeline and certain public utility operating property in Minnesota. The report must, among other things, describe prior and current methods used to value pipeline and public utility operating property, evaluate whether the current methods produce an accurate estimate of market value, and compile and explain the number of pipeline and public utility valuations that have been appealed over the last 20 years and the taxing jurisdictions that have been issued refund orders. Effective July 1, 2018.

Article 5

Public Finance

Section 1. Interest. Modifies the interest rate charged on drainage lien principal so that the interest rate may not exceed the rate set by the State Court Administrator, or six percent, whichever is greater.

Section 2. Any relief under bankruptcy code.  Deletes an outdated reference to the United States Bankruptcy Code.

Section 3. Public facilities project. Expands the types of district heating/cooling projects that qualify as public facilities projects by allowing both publicly and privately owned facilities. Under current law, the facility must be publicly owned or owned by a nonprofit organization.

Section 4. Definitions. Updates a cross-reference to the definition of “municipality” for purposes of capital improvement bonds.

Article 6

Miscellaneous

Section 1. Operations funding. Permits MNsure to continue to collect up to 3.5% of premiums for plans sold through MNsure to fund the operation of MNsure through December 31, 2018. Beginning January 1, 2019, lowers the amount MNsure may collect to 2% of premiums for plans sold through MNsure, and caps the total amount collected per year at 25% of the Minnesota Comprehensive Health Association (MCHA) member assessments collected in calendar year 2012.

Section 2. Health carrier and health plan requirements; participation. Provides that a health plan that meets the minimum requirements in state and federal law for certification as a qualified health plan, is deemed to be in the interests of qualified individuals and employers. Strikes language listing elements the MNsure board may consider when determining the interests of qualified individuals and employers for purposes of certifying qualified health plans, and prohibits the MNsure board from establishing additional requirements for certifying health carriers and health plans to be offered through MNsure. Also prohibits the board from establishing costs, cost-sharing elements, or benefits for health plans sold through MNsure. Updates references to federal law and strikes outdated language.

Section 3. Limitations; risk bearing. Prohibits the commissioner of human services from bearing insurance risk or entering into any agreement to pay claims for health coverage for a state health care program available for purchase through the MNsure Web site, as an alternative to purchasing an individual health plan. Specifies that this subdivision does not prohibit the commissioner from administering medical assistance or MinnesotaCare, as long as health coverage under medical assistance or MinnesotaCare is not purchased by an individual through MNsure’s Web site. Also provides that this subdivision does not prohibit employees of DHS from obtaining insurance coverage through the state employee group insurance program.

Section 4. Reports. Requires MNsure to include the total amount spent on business continuity planning, data privacy protection, and cyber security provisions in its annual report to the legislature.

Section 5. Occupation taxes to be apportioned; refund. Provides a refund of the occupation tax to taconite producers with any occupation tax revenue remaining in the general fund after all statutory allocations are made. The refund amount shall be equal to the proportion of occupation tax paid by the provider compared to the tax paid by all producers. Other formatting changes are also made. Effective beginning with distributions made in 2019 and thereafter.

Section 6. Taconite economic development fund (TEDF). Modifies the projects for which TEDF funds may be released and allows the commissioner to release funds prior to the next board meeting. Any funds not released shall be distributed to the taconite environmental protection fund. Effective July 1, 2018.

Section 7. Taconite economic development fund; Minnesota producer. Clarifies that taconite economic development fund distributions must be made to a Minnesota taconite pellet producer’s fund. Effective retroactively from December 31, 2016.

Section 8. Expanded access to qualified health plans and subsidies. Requires the commissioner of commerce to submit federal waivers and approvals by October 1, 2018, for a proposal to allow individuals to purchase qualified health plans outside of MNsure and receive advanced premium tax credits and cost-sharing reductions for the purchase of these plans.

Section 9. City of Melrose & Stearns County; fire remediation grants. Extends, by three years, the availability of grants authored in 2017 to the city of Melrose and Stearns County to remediate the effects of fires in Melrose in September 2016.  Effective the day following final enactment.

Section 10. Rates for individual market health and dental plans for 2019. Requires health carriers, when setting rates for individual health and dental plans for 2019, to take into account the reduction in the premium withhold percentage beginning in 2019.

Section 11. Transfer 2018 distribution only. Transfers ten cents per ton from the property tax relief account to the IRRRB account, but only if there are excess funds in the property tax relief account after all required distributions are made. Effective for the 2018 distribution, and the transfer must be made within ten days of the August 2018 payment.

Article 7

Department of Revenue; Property Tax; Policy Changes

Section 1. Administration (Small Cities Assistance). Provides that the Commissioner of Transportation will certify aid amounts for the Small Cities Assistance program to the Commissioner of Revenue by June 1. Effective for aids payable in 2018 and thereafter.

Section 2. Assessor sanctions; refusal to license. Requires the Commissioner of Revenue to make recommendations to the Board of Assessors for sanctions and clarifies the notice and hearing procedures for an applicant or licensee who disputes the commissioner’s recommendation. Effective for sanctions or refusals to grant or renew a license recommended by the Commissioner of Revenue after June 30, 2018.

Section 3. Requirement (Certificates of Real Estate Value). Changes the threshold for filing a Certificate of Real Estate Value at consideration in excess of $1,000 to in excess of $3,000. Effective for certificates of value filed after December 31, 2018.

Section 4. Determination of tax (deed tax). Changes the minimum consideration for real property, used in calculating the deed tax, from $500 or less to $3,000 or less. Effective date: Effective for deeds recorded after December 31, 2018.

Article 8

Department of Revenue; Miscellaneous; Policy Changes

Section 1. Disclosure. Allows the commissioner to disclose data identifying the holder of a sales tax permit that has been canceled. Effective the day following final enactment.

Sections 2 and 3. Sales tax permits. Prevent a business from evading a sales tax liability by prohibiting the issuance of a new sales tax permit to a business or person that has an unpaid sales tax liability not under appeal and provides for cancellation with notice. Effective for permits applied for after December 31, 2018.

Article 9

Department of Revenue; Partnership Tax; Policy Changes

Sections 1-4 and 10-15. Various conforming changes. Amend various statutes to correct cross-references and generally comport with the changes in other sections.

Section 5. Definitions relating to federal adjustments. Adds various definitions relating to the reporting of federal adjustments, and federal adjustments to partnership returns.

Section 6. General rule – reporting federal adjustments. Provides the general requirement that taxpayers report federal audit adjustments, and amended federal returns to Minnesota within 180 days. Partnerships having undergone entity-level audits are exempt from this provision and are required to report adjustments to Minnesota under current law.

Section 7. Reporting adjustments following a partnership-level audit. Provides for the reporting of federal adjustments following a partnership-level audit by the IRS. By default, each partnership will be required to file a federal adjustments report related to federal changes, and submit the report to both Minnesota and its direct partners within 90 days. Each partnership reporting changes must also file amended composite and withholding reports for nonresident partners within 180 days. Each direct partner, other than a tiered partner, receiving an adjustment report as described above is also required to make a federal adjustment report and pay any additional tax due within 180 days of the final determination date.

Each partnership reporting federal adjustments after a partnership-level audit is also eligible to make an election to pay the additional tax due to Minnesota at the entity level. A partnership making the election is required to do so on a federal adjustment report filed with the commissioner within 90 days of the final determination date. A partnership making the election must be able to determine and report the residency status of all direct and indirect individual partners, and pay tax on the properly allocated and apportioned share of all income at the highest marginal rate for its individual and corporate partners.

Section 8. Statute of limitations on assessment. Provides that when a taxpayer reports federal adjustments in a timely fashion that the statute of limitations on assessment for state tax purposes is extended for a period of one year. When a taxpayer files a federal adjustment report in an untimely fashion the statute of limitations is extended for the shorter of either 1) one year after the filing of the untimely report; or 2) six years.

Section 9. Statute of limitations on refund claims. Provides that the statute of limitations on refund claims related to adjustments made by the IRS is equal to the extended period for additional assessments.

Section 16. Repealer. Repeals provisions made obsolete by the new language in the article.

Effective date. Effective for tax years beginning after December 31, 2017, except that for partnerships that make an election under federal law, the article is effective retroactively and applies to the same tax periods to which the election relates.

Article 10

Department of Revenue; Individual Income and Corporate Franchise Taxes; Technical Changes

Section 1. Federal settlements. Specifies that taxpayers are required to report adjustments to the department following a settlement or compromise with the IRS. Effective the day following final enactment.

Section 2. Accelerated recognition. Deletes the phrase “allocable amount” which is unnecessary as the allocation rules provide for the applicable standard following the implementation of the changes in a later section. Effective the day following final enactment.

Section 3. Schedule of rates for individuals, estates, and trusts. Provides that the married filing separate bracket is exactly half of the married filing joint bracket, effective for taxable years beginning in 2018. Also provides for the representation of accelerated installment sale receipts in the nonresident apportionment fraction of taxpayers who pay income taxes on accelerated installment sale gains under section 2, effective the day following final enactment.

Section 4. Inflation adjustment of brackets. Ensures the general tax brackets for married filing separate are exactly half of married filing joint. Effective for taxable years beginning in 2018.

Section 6. Payments to horse racing license holders. Corrects a cross-reference that was moved in a prior session. Effective the day following final enactment.

Section 7. First time homebuyer. Provides that a taxpayer may designate the required beneficiary at the same time as when they file their income tax return. Effective the day following final enactment.

Article 11

Department of Revenue; Sales and Use Taxes; Technical Changes

Section 1. Ships used in interstate commerce. Clarifies an ambiguity created in the chapter 297A recodification in 2000. Effective the day following final enactment.

Section 2. DEED certification of Greater Minnesota businesses. Clarifies that the commissioner of DEED must certify a Greater Minnesota business as a qualifying business and that any purchase and delivery received occurred during the duration of the business subsidy agreement. Effective the day following final enactment.

Section 3. DEED certification of biopharmaceutical manufacturing facilities. Clarifies that the commissioner of DEED must certify to the commissioner of revenue that the biopharmaceutical manufacturing facility is qualified. Effective the day following final enactment.

Section 4. Recordkeeping requirement. Clarifies language inadvertently omitted during the chapter 289A recodification in 1990. Effective the day following final enactment.

Article 12

Department of Revenue; Tobacco Taxes; Technical Changes

Section 1. Definition of tobacco product. Clarifies that this definition specifically includes vapor products. Effective the day following final enactment.

Section 2. Definition of vapor product. Clarifies that the definition of “vapor product” includes electronic pipes and cigarettes, batteries, heating elements, and other products, devices, components parts, and accessories sold with a nicotine solution. The definition also includes solutions containing nicotine produced from sources other than tobacco. Effective the day following final enactment except the inclusion of non-tobacco nicotine in the definition is effective January 1, 2019.

Section 3. Definition of wholesales sales price. Clarifies that the definition of wholesale sales price does not include the cost electronic pipes and cigarettes, batteries, heating elements, and other products, devices, components parts, and accessories sold with a nicotine solution if the taxpayer separately sells the container of nicotine solution. Effective the day following final enactment.

Article 13

Department of Revenue; Property Taxes; Technical Changes

Section 1. Powers and duties; property tax data reports. Amends the commissioner’s powers to administer the state’s property tax laws by clarifying that the Commissioner of Revenue may collect property tax data at the parcel level or higher in the time, form, and manner as the commissioner may prescribe. This method of collection is consistent with property tax data collection under the Property Record Information System of Minnesota. Effective the day following final enactment.

Section 2. Initial report. Conforming changes and cross-references added to the changes in section 1. Effective the day following final enactment.

Section 3. Final report. Conforming changes and cross-references added to the changes in section 1. Effective the day following final enactment.

Section 4. Record of proceedings changing net tax capacity; duties of county auditor. Conforming changes to the changes in section 1. Effective the day following final enactment.

Section 5. Additional general duties. Conforming changes and cross-references added to the changes in section 1. Effective the day following final enactment.

Section 6. Training and education of property tax personnel. Conforming changes and cross-references added to the changes in section 1. Effective the day following final enactment.

Section 7. Reimbursement for lost revenue. Conforming changes and cross-references added to the changes in section 1. Effective the day following final enactment.

Section 8. Reimbursement for lost revenue. Conforming changes and cross-references added to the changes in section 1. Effective the day following final enactment.

Section 9. Disaster or emergency area. Conforming changes and cross-references added to the changes in section 1. Effective the day following final enactment.

Section 10. Reduction amounts submitted to county. Conforming changes and cross-references added to the changes in section 1. Effective the day following final enactment.

Section 11. Agricultural homestead market value credit. Amends agricultural homestead credit to clarify that a fractional agricultural homestead will also receive a fractional maximum credit amount. Effective for taxes payable in 2019 and thereafter.

Section 12. Credit reimbursements. Conforming changes and cross-references added to the changes in section 1. Effective the day following final enactment.

Section 13. Credit reimbursements. Conforming changes and cross-references added to the changes in section 1. Effective the day following final enactment.

Section 14. Listing, valuation, and assessment of exempt property by county auditors. Conforming changes and cross-references added to the changes in section 1. Effective the day following final enactment.

Section 15. Length of session; record. Conforming changes to the changes in section 1. Effective the day following final enactment.

Section 16. Corrected lists, abstracts. Conforming changes to the changes in section 1. Effective the day following final enactment.

Section 17. Levy amount. Conforming changes and cross-references added to the changes in section 1. Effective the day following final enactment.

Section 18. Determination; payment. Conforming changes and cross-references added to the changes in section 1. Effective the day following final enactment.

Section 19. Original net tax capacity. Conforming changes and cross-references added to the changes in section 1. Effective the day following final enactment.

Section 20. Repealer. Repeals the statute describing the abstract of tax lists. Effective date: Effective the day following final enactment.

Article 14

Department of Revenue; Miscellaneous; Technical Changes

Section 1. Superior National Forest; recreational property for use by disabled veterans. Amends the statute to update language for persons who have a disability. Effective the day following final enactment.

Section 2. Certain recreational property for disabled veterans. Amends the statute to update language for persons who have a disability. Effective the day following final enactment.

Section 3. Market value definition. Amends the statute to update language for persons who have a disability. Effective the day following final enactment.

Section 4. Class 1. Amends the statute to update language for persons who are blind or have a disability. Effective the day following final enactment.

Section 5. Homestead of disabled veteran or family caregiver. Amends the statute to update language for persons who have a disability. Effective the day following final enactment.

Section 6. Returns of married persons. Updates gender-specific language for spouses. Effective the day following final enactment.

Section 7. Requirements to pay. Updates gender-specific language for spouses. Effective the day following final enactment.

Section 8. Joint income tax returns. Updates gender-specific language for spouses. Effective the day following final enactment.

Section 9. Order of assessment if joint income tax return. Updates gender-specific language for spouses. Effective the day following final enactment.

Section 10. Subtraction. Amends the statute to update language for persons who have a disability. Effective the day following final enactment.

Section 11. Restrictions; married couples. Amends the statutes listed below to update gender-specific language for spouses. Effective the day following final enactment.

Section 12. Definitions. Amends the statute to update language for persons who have a disability. Effective the day following final enactment.

Section 13. Income. Amends the statute to update language for persons who have a disability. Effective the day following final enactment.

Section 14. Household. Updates gender-specific language for spouses. Effective the day following final enactment.

Section 15. Claimant. Updates gender-specific language for spouses. Effective the day following final enactment.

Section 16. Combined household income. Amends the statutes listed below to update gender-specific language for spouses. Effective the day following final enactment.

Section 17. One claimant per household. Amends the statutes listed below to update gender-specific language for spouses. Effective the day following final enactment.

Section 18. Proof of claim. Amends the statute to update language for persons who have a disability. Effective the day following final enactment.

Section 19. Disabled. Amends the statute to update language for persons who have a disability. Effective the day following final enactment.

Section 20. Other exempt meals. Amends the statute to update language for persons who have a disability. Effective the day following final enactment.

Section 21. Parts and accessories used to make a motor vehicle disabled accessible. Amends the statute to update language for persons who have a disability. Effective the day following final enactment.

Section 22. Sales of certain goods and services to government. Amends the statute to update language for persons who have a disability. Effective the day following final enactment.

Section 23. Sales to nonprofit groups. Amends the statute to update language for persons who have a disability. Effective the day following final enactment.

Section 24. Camp fees. Amends the statute to update language for persons who have a disability. Effective the day following final enactment.

Section 25. Materials used to make residential property disabled accessible. Amends the statute to update language for persons who have a disability. Effective the day following final enactment.

Section 26. Tax collected. Amends the statute to update language for persons who have a disability. Effective the day following final enactment.

Section 27. Purchase price. Amends the statute to update language for persons who have a disability. Effective the day following final enactment.

Section 28. Sale, sells, selling, purchase, purchased, or acquired. Amends the statutes listed below to update gender-specific language for spouses. Effective the day following final enactment.

Section 29. Effective date. Amends the effective date in Laws 2017, First Special Session chapter 1, article 8, section 3 concerning the period of time to file post-trial motions. After June 30, 2018, all cases have 30 days to file post-trial motions. Effective the day following final enactment.

 
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