Senate Counsel, Research
and Fiscal Analysis
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Tom Bottern
Director
   Senate   
State of Minnesota
 
 
 
 
 
S.F. No. 2255 - Omnibus Tax Bill (Delete-Everything Amendment)
 
Author: Senator Roger C. Chamberlain
 
Prepared By: Nora Pollock, Senate Counsel (651/297-8066)
Eric S. Silvia, Senate Counsel (651/296-1771)
Jay M. Willms, Senate Fiscal Analyst (651/296-2090)
Jack Paulson, Senate Analyst (651/296-4954)
 
Date: March 28, 2017



 

Article 1 - Income, Corporate Franchise, and Estate Taxes

Sections 1. Workforce housing credit. Establishes a refundable tax credit for qualified investments in workforce housing projects, effective for tax years 2018 to 2023. Credit certificates and allocations are awarded by DEED.

Subdivision 1. Definitions. Provides definitions for the following significant terms:

“Developer” is the individual or entity who arranges the financing for and construction of a qualified workforce housing project.

“Eligible project site” means the site for the qualified workforce housing project that meets the following criteria:

  • does not require extension of public infrastructure beyond connections to the site;
  • located outside the metropolitan area;
  • a city with at least 500 jobs, as measured by the Quarterly Census of Employment and Wages (QCEW), or within the jurisdiction of an EDA as a joint city/county partnership; and
  • average vacancy rate of four percent or less for any two of the last five years, for market rate residential rental properties located in the municipality and any city within 15 miles or less. 

“Market rate residential properties” are properties rented at market value, excluding properties constructed with financial assistance for flood recovery and financial assistance that requires the property to be occupied with residents that meet certain income limits.

“Qualified investment” means a cash investment or fair market value equivalent for various investment vehicles.

“Qualified workforce housing project” means a project:

  • With a minimum of three dwelling units;
  • With an average construction cost between $75,000 and $250,000 per unit;
  • Located on an eligible project site;
  • With more than 50 percent of funding from non-state sources; and
  • Designated by the commissioner of DEED as a qualified workforce housing project.

“Workforce Housing Undersupply Ratio” means the number of full-time jobs in an eligible project area divided by the number of individuals over 16 that are employed and living in the eligible project area.

Subdivision 2. Qualified project investor tax credits. Authorizes a qualified project investor in a qualified workforce housing project to claim a credit of 40 percent of the qualified investment, up to $1 million per taxable year. The credit is allowed in the first tax year in which the housing workforce housing projects has units certified for occupancy.  Authorizes the commissioner of DEED to allocate up to $2.5 million in credits for tax year 2018.

Credit certificates must be issued to the qualified project investor designated in the application and state the amount of the credit. If the project does not have units certified for occupancy within two years of the issuance of the credit certificate, the allocation is cancelled. The commissioner of DEED must notify the commissioner of revenue of credit certificates issued.

Subdivision 3. Transfer and revocation of credits. Provides that credits are transferable. Credits must be repaid by the investor if the commissioner of DEED discovers that the qualified project investor did not meet eligibility requirements.

Subdivision 4. Reporting. Requires the commissioner of DEED to provide a report to the House and Senate Taxes and Economic Development committees on the program, beginning in 2019.

Section 2. Greater Minnesota internship credit modification. Modifies the requirements for the Greater Minnesota internship credit to remove the requirements that the employer certify that it would not have hired the intern without the internship credit and that an internship required as part of an academic program does not qualify for the credit. Effective beginning in tax year 2017.

Section 3. Estate tax return filing requirement. Modifies the requirement for filing an estate tax return in connection with the changes to the estate tax exclusion amount in section 26. Effective for estates of decedents dying in 2018 and after.

Section 4. Definition of resident. Modifies the domicile test so that the Department of Revenue or a court, in determining where the individual intends his or her permanent home, cannot consider the location of the individual’s attorney, certified public accountant, or financial advisor and the place of business of a financial institution where the individual opened or maintains an account. Defines “financial advisor” and “financial institution.” Effective beginning in tax year 2017.

Sections 5 and 10. Section 179 expensing. Allow Minnesota individual filers (S-corporations, partnerships, and LLCs filing as partnerships) and corporate filers to use the federal Section 179 expensing schedule, beginning with purchases in tax year 2018. Under current law, businesses must add back 80% of the additional amount claimed to Minnesota taxable income on its Minnesota return, and then may subtract one-fifth of the amount added back in each of the next five tax years. For tax years before 2018, the current Minnesota approach would apply and expensing would follow the five year add-back schedule until completed. Effective beginning in tax year 2018.

Sections 6 and 11. Equity and opportunity donations to qualified foundations credit. Require individual and corporate filers to include equity and opportunity in education donations when calculating Minnesota taxable income. Because these amounts would be deducted at the federal level as a charitable contribution for purposes of federal taxable income, they must be added back to Minnesota taxable income for purposes of claiming the credit authorized in section 22. Effective beginning in tax year 2018.

Sections 7, 9, 14, and 29-34. First-time homebuyer savings account.  Section 7 requires certain amounts of the first-time home buyer savings account created in section 33 to be added back for purposes of calculating Minnesota taxable income. Section 9 authorizes a subtraction for of $15,000 for married joint filers or $7,500 for all other filers for purposes of Minnesota taxable income for contributions to and earnings on a first-time home buyer savings account. The subtraction amount is phased out for married joint filers earning in excess of $250,000 and for all other filers earning in excess of $125,000. The income thresholds are adjusted annually for inflation. Section 14 imposes an additional penalty tax on amounts withdrawn and not used for eligible costs and for any amounts remaining in the account after ten years from when the account was opened. Effective beginning in tax year 2017.

Section 8. Subtraction for Social Security benefits. Authorizes a subtraction of Social
Security benefits for purposes of calculating Minnesota taxable income. The subtraction equals the lesser of the amount of benefits, or: $2,500 for married joint filers; $1,955 for single or head of household filers; and $1,250 married couples filing separate returns. Effective beginning in tax year 2017. The amounts specified are adjusted annually for inflation beginning in tax year 2018.

Sections 12, 13, and 15. Schedule of rates for individuals, estates, and trusts; inflation adjustment. Section 12 reduces the first tier tax rate for individual filers from 5.35% to 5.0%, effective beginning in tax year 2018. The income brackets are updated for tax year 2018. Section 13 updates the inflation adjustment statute beginning in tax year 2019. Section 15 temporarily reduces the first tier rate from 5.35% to 5.15% for individual filers for tax year 2017 only.  The income brackets reflect inflation for 2017.

Section 16. Workforce housing credit. Authorizes in the income tax chapter the workforce housing tax credit created in section 1. Pass-through entities (S corporations and partnerships) pass the credit through to their members as provided in the organization documents. Authorizes the commissioner of revenue to audit compliance with the credit requirements. Effective for taxable years 2018-2023

Section 17. Working family credit modification for certain income derived from an Indian reservation. Modifies the working family tax credit to exclude on-reservation earnings of enrolled members of a tribe earned while living on the reservation. Under current law, the credit is apportioned based on the portion of income taxable to Minnesota relative to total income. Minnesota does not tax on-reservation earnings of enrolled tribal members because is it pre-empted from doing so under federal law. For these members, the effect of the apportionment formula is to disallow the credit because if all income is earned on-reservation, then there is no Minnesota taxable income to apportion. This section specifies that income earned on-reservation by enrolled tribal members is not included in the apportionment formula, thus allowing those members to claim the credit. Effective beginning in tax year 2017.

Section 18. Inflation adjustment, K-12 credit. Indexes the credit amount and the income thresholds at which the credit begins to phase out to claim the K-12 expenses credit, beginning in tax year 2019.

Sections 19 and 20. R&D credit; alternative simplified calculation election. Provides a new definition for the base amount for taxpayers making the ASC election equal to 50 percent of the average of qualified research expenses for the three previous taxable years prior to the year the credit is claimed. Under current law, the base amount is a percentage of qualified expenses in tax years 1984 to 1988, up to 16 percent. Authorizes taxpayers to elect the alternative simplified credit (ASC) calculation. The taxpayer may revoke the election at any time.

Section 21. Master’s degree credit. Authorizes a $2,500 nonrefundable credit for teachers who obtain a master’s degree in their field of licensure.

            Subdivision 1 defines the following terms:

“Master’s degree program” is a graduate level program at an accredited university leading to a master of arts or science degree in a content area directly related to the qualified teacher’s licensure field or in which the teacher provides instruction.  Programs that include pedagogy or a pedagogy component do not qualify.

“Qualified teacher” is a K-12 teacher holding a continuing license by the Minnesota Board of Teaching who began a master’s degree program after June 30, 2017 and completes the program during the taxable year.     

“Core content area” is the academic subject of reading, English or language arts, mathematics, science, foreign languages, civics and government, economics, arts, history, or geography.

Subdivision 2 authorizes the credit for a qualified teacher who completes a master’s degree program in a taxable year. The credit is available one time for each master’s degree program completed in a core content area.  

Section 22. Equity and opportunity in education credit. Authorizes the credit, defines terms, and sets forth requirements to claim the credit. 

Subdivision 1. Provides definitions for the following significant terms:

“Eligible student” is a student who:

  • is a Minnesota resident;
  • with household has annual income less than 200 percent of the income standard used to qualify for the federal reduced price lunch program; and
  • meets one of the following criteria:
    • attended a public, nonpublic, or homeschool in the semester before receiving a scholarship;
    • is age 6 or younger and not enrolled in kindergarten or first grade in the semester before receiving a scholarship;
    • previously received a scholarship; or
    • lived in Minnesota within the previous year before receiving a scholarship.

“Qualified charter school” is a charter school at which at least 30 percent of students qualify for the federal reduced-price lunch program.

“Qualified school” means a nonpublic elementary or secondary school in Minnesota at which a student may fulfill the state’s compulsory attendance laws

“Qualified foundation” is a 501(c)(3) nonprofit organization.

“Qualified scholarship” means a payment from a foundation either to a parent or to a qualified school for the cost of a child’s tuition for enrollment.

Subdivision 2. Credit allowed. Authorizes a credit of 70 percent of the donation amount made in a taxable year, up to specified amounts. The maximum annual credit is $21,000 for married joint filers, $10,500 for other individual filers, and $105,000 for corporations. Requires claimants to provide a copy of a receipt from a qualified foundation. Allows amounts in excess of the maximum to be carried forward for up to five tax years. 

Subdivision 3. Application for credit certificate. Requires taxpayers to apply to the commissioner of revenue for a tax credit certificate in order to claim the credit. Credits must be issued on a first-come, first-served basis. The maximum amount of credits that may be allocated by the commissioner in a tax year is $35 million. 

Subdivision 4. Responsibilities of qualified foundations.  Requires participating foundations that award scholarships to award scholarships to eligible students; not restrict scholarships to any one qualified school; not charge fees to scholarship applicants; and require schools receiving payment of tuition through a scholarship to not use different admissions standards for scholarship students. Foundations must apply to the commissioner to be a qualified foundation. The application must document that the entity is a 501(c)(3) nonprofit and demonstrate the entity’s accountability and financial viability.

Foundations must provide receipts to taxpayers who make donations and if a foundation awards scholarships, it must annually verify that each school to which it awards scholarships: complies with health and safety laws; holds a valid occupancy permit if required; certifies that it adheres to federal civil rights laws and the human rights chapter of Minnesota law; and provides regular reports to parents on student progress.

Foundations must annually report by June 1 the following: financial viability; documentation of criminal background checks of employees and board members; documentation that it has used donations to provide scholarships; a list of qualified schools to which it provided scholarships; the number and dollar amount of donations received and scholarships awarded; and the amount used for administrative expenses.

Subdivision 5. Responsibilities of commissioner. Requires the commissioner of revenue to make applications for qualified foundations available by August 1 of each year, and to approve or deny applications within 60 days. Requires the commissioner to post a list of qualified foundations on the Department’s website by November 15 of each year. Directs the commissioner to develop standard forms for use as receipts and in reporting, conduct audits of foundations after finding evidence of fraud or intentional misreporting, and bar a foundation that intentionally and substantially fails to submit required information from participating in the program.

Section 23. Reciprocity. Authorizes the commissioner of revenue to enter into an income tax reciprocity agreement with the Wisconsin secretary of revenue. Requires that the state with a net revenue loss must receive the amount of that loss by the other state on a quarterly basis. For agreements entered into before October 1, 2017, the amount received by Minnesota must equal net revenue loss minus $3,000,000. Requires that an agreement with Wisconsin must provide for:

  • suspension of the agreement in case of late payment;
  • the interest rate applied and the duration for which the rate applies;
  • a time for annual reconciliation by October 31 of the year following the year the agreement is in effect;
  • a requirement that each party conduct benchmark studies every five years;
  • a requirement that a list of taxpayers who request exemption from withholding in the state where they work to be made available and exchanged annually; and
  • the sum of the amount of quarterly payments must reasonably estimate the amount of revenue loss

Effective beginning in tax year 2018.

Section 24. Alternative minimum tax. Provides a corresponding subtraction for purposes of calculating alternative minimum tax to the first-time homebuyer account subtraction in section 7 and the Social Security income subtraction in section 8.

Section 25. Estate tax; definitions. Provides that the definition of “resident” established in section 4 applies to the definition of “resident decedent” in the estate tax chapter. Effective retroactively for decedents dying after December 31, 2016.

Section 26. Estate tax subtraction. Modifies the calculation of the subtraction available for purposes of calculating the Minnesota taxable estate.  The qualified small business and farm property subtraction is modified to reflect the increased general exclusion amount, beginning for estates of decedents dying in 2018.  The combined available exclusion amount for the general exclusion and the qualified small business and farm property subtraction equals $5 million, until 2022, when the general exclusion from the Minnesota taxable estate equals $5 million.  Minnesota would conform to the federal exclusion amount for estates of decedents dying in 2023 and thereafter.  Effective for estates of decedents dying in 2018.

Section 27. Estate tax rates. Provides new rates and thresholds for purposes of calculating the Minnesota taxable estate.  Effective for estates of decedents dying in 2017 and thereafter.

Section 28. Qualified farm property exclusion; recapture tax. Provides that a taxpayer will not be disqualified from claiming the farm property estate tax exclusion solely due to the farm property becoming disqualified as a result of a taking under eminent domain. Effective retroactively for estates of decedents dying after June 30, 2011.

Section 29. First-time home buyer program. Adds a new chapter to Minnesota Statutes for the first-time home buyer savings account program. Section 30 establishes definitions for the program.

 

Section 31 provides requirements for designation of first-time home buyer savings accounts. Authorizes an individual to establish a first-time home buyer savings account. The individual must designate a beneficiary of the account. No more than one qualified beneficiary may be designated per account, but a married couple qualifies as one qualified beneficiary. Requires the commissioner of revenue to establish a process for account holders to notify the state of the account, account holder or holders, transfers to and from the account, and the designated qualified beneficiary of each account.

Allows an individual to jointly own a first-time home buyer account with another person if the holders of the account file a joint tax return. An individual may have more than one account but may not have multiple accounts that designate the same beneficiary. An individual may be the designated beneficiary on more than one account.

Requires that only cash may be contributed to an account and allows individuals other than the account holder to contribute to the account. There is no limit to the amount of contributions made to or retained in a first-time home buyer account.

Section 32 requires the account holder to not use funds in a first-time home buyer savings account to pay administrative expenses, except for a service fee. Requires the account holder to submit to the commissioner a list of transactions and eligible costs for which funds were expended. Allows transfer of funds to another first-time home buyer account at the same or a different financial institution.

Section 33 states that financial institutions are not required to take action or ensure compliance by account holders or beneficiaries.

Section 34 allows a subtraction for account holders from federal taxable income for purposes of calculating Minnesota taxable income, up to $10,000 for married joint filers and $5,000 for all other filers, plus interest or dividends earned on the first-time home buyer savings account during the taxable year. The subtraction is allowed in the year a contribution for ten years following and including the year the account was established, but the total of amounts subtracted must not exceed $50,000. Requires account holders to add back the following to federal taxable income for purposes of calculating Minnesota taxable income:

  • Any amount withdrawn and not used to pay eligible costs (down payment, closing costs, new construction) or not transferred to another first-time home buyer account; and
  • Any amount remaining in the account after the end of the tenth year after the taxable year the account was established.

A 10% tax is also imposed on the amount required to be added back. The tax is not imposed on withdrawals due to the account holder or beneficiary’s death or disability, or disbursement of assets under bankruptcy.

Section 35. Income tax reciprocity benchmark study. Requires the Department of Revenue, in conjunction with the Wisconsin Department of Revenue, to conduct a study to determine the number of residents from each state who earn income from personal services in the other state; and the total amount of income earned by these residents; and the change in tax revenue in each state if a reciprocity agreement were resumed. The Department of Revenue must submit a report to the House and Senate tax committees by March 1, 2019. The study may only be conducted if the Wisconsin Department of Revenue fully participates.

Section 36. Report of free electronic filing for individual income tax returns. Requires the Department of Revenue to provide a written report to the Senate and House Tax Committees on options for a free electronic filing system for individual income tax returns, effective the day following final enactment. The report must be submitted by March 16, 2018, and must include responses from a Department request for information from consumer-based tax filing software vendors. 

The request for information may include information sought from vendors on several aspects of a free e-filing solution:

  • Costs to the state of Minnesota to provide an e-filing process for the preparation, submission, and payment remittance of individual income tax returns, on a per return basis;
  • Capability to provide customer service and issue resolution to taxpayers using the software;
  • Capability to provide and maintain an appropriate link between the Department of Revenue and the IRS Modernized Electronic Filing Program;
  • Capability to ensure that taxpayer return information is secure and protected;
  • Products for the free filing and submitting of both Minnesota and federal returns offered to customers and the various thresholds for using those products; and
  • Any add-on products offered to customers and their costs.

Section 37. Student loan credit. Provides a nonrefundable credit of up to $700 for eligible individuals ($1,400 for married joint filers) equal to a specified percentage of student loan payments in excess of ten percent of adjusted gross income. An eligible individual is an individual with qualified education loans related to an undergraduate or graduate degree at a postsecondary institution. Loans must have been incurred on behalf of the individual or individual’s spouse. The percentage of payments eligible for the credit for eligible individuals is 50 percent; for eligible individuals in a public service job (excluding public education), the percentage is 65 percent; and for eligible individuals in an education profession, the percentage is 75 percent. For spouses eligible at different percentage amounts, the credit must be calculated on the lowest applicable percentage amount. Effective for tax years 2017 and 2018.

Section 38. Taxpayer assistance grants appropriation. Appropriates $200,000 in fiscal years 2018 and 2019 only from the general fund to the commissioner of revenue to provide taxpayer assistance grants. Up to five percent may be used for program administration. Any unencumbered balance may be carried over to the next year. Under current law, the taxpayer assistance grants program awards grants to nonprofit organizations to help provide taxpayer assistance services. This bill also clarifies that “taxpayer assistance services” means accounting and tax preparation services provided by volunteers to low-income, elderly, and disadvantage residents to assist in the filing of state and federal returns and property tax refund claims.

Section 39. Repealer. Repeals provisions pertaining to filing of estate tax returns and the exclusions for the qualified small business and qualified farm property subtractions, effective for decedents dying after December 31, 2018. These provisions are no longer applicable given the increased general exclusion amount for the estate tax that begins in 2019.

Article 2 – Property Taxes

Section 1. Allowed commercial and industrial operations; agricultural preserve program. Allows wireless communication equipment, including cell phone towers, to be installed on property within an agricultural preserve outside of the metropolitan area. Effective the day following final enactment.

Section 2. Assessor accreditation waiver. Extends the deadline by which assessors must obtain licensure as an accredited assessor from the State Board of Assessors (SBOA), from July 1, 2019, or within four years of becoming a certified assessor, whichever is later, to July 1, 2022, or within five years of becoming certified. An individual may apply for a waiver from the requirements if the individual: (1) was licensed as a certified assessor before July 1, 2004; (2) has maintained an assessor license in good standing since July 1, 2004; (3) has successfully passed an examination substantially equivalent to the requirements by the SBOA for the accredited assessor license before May 1, 2020; and (4) submits an application to the SBOA no later than July 1, 2022. Waivers granted under this section expire on June 30, 2032 and this accreditation waiver authorization expires on July 1, 2032.  Effective the day following final enactment.

Section 3. Apprenticeship training facilities. Modifies the criteria by which townships may qualify for the training facilities property tax exemption by decreasing the population threshold from 2,000 to 1,400.

Section 4. Certain property owned by an Indian tribe. Provides a twelve-year property tax exemption for certain Indian-owned property. To qualify for the exemption, the property must be: (1) classified as commercial/industrial for taxes payable in 2016; (2) located in a city of the first class with a population less than 100,000 according to the 2010 federal census; (3) owned by a federally recognized Indian tribe, or its instrumentality, on January 1, 2016 and for the current assessment; and (4) used exclusively as a medical clinic. Effective for taxes payable in 2017 through 2028.

Section 5. Wind energy conversion systems; definitions. Modifies how the determination is made to combine the nameplate capacities of more than one wind energy conversion system to determine the system’s size and appropriate production tax rate. The requirement that, in the case of a dispute, the commissioner of commerce shall draw all reasonable inferences in favor of combining the systems is removed, and provides that the commissioner may determine that two systems are under the same ownership when the underlying ownership structure contains the same persons or entities – current law allows for “similar” persons or entities. Effective the day following final enactment.

Section 6. Manufactured homes; sectional structures. Provides that storage sheds, decks, or similar structures constructed on a leased manufactured home sites are taxable if its total estimated market value is over $10,000. Under current law, these items are taxable if the value is over $1,000.

Section 7. Class 2; agricultural property. Modifies the definition of “agricultural purposes” to allow land enrolled in a local conservation program to be classified as agricultural. A “local conservation program” is defined as a program administered by a town, city or county, including a watershed district, water management organization, or soil and water conservation district, in which the owner voluntarily enrolls land and receives incentive payments in exchange for certain restrictions placed on the land. Under current law, only property enrolled in state or federal conservation programs may be classified as agricultural. Effective beginning with assessment year 2018.

Section 8. Class 4; manufactured home parks. Provides that Class 1 manufactured home parks have a classification rate of 1 percent. Effective for taxes payable in 2018 and thereafter.

Section 9. Disabled veteran homestead exclusion. Eliminates the eight-year limit so that a spouse can continue to receive the homestead exclusion until they sell, transfer or otherwise disposes of the property. This section also makes the exclusion available to a surviving spouse of a veteran who died before applying or receiving the exclusion, subject to eligibility requirements. A spouse qualifying under this section must file a first-time application within two years of the death of the veteran or by June 1, 2019, whichever is later.  Effective for taxes payable in 2018.

Section 10. State general levy; amount. Eliminates the automatic inflator, and sets the state general levy amount for seasonal residential-recreational property at the payable 2018 level. The state general levy amount for commercial-industrial property is reduced from the payable 2018 level to prevent a shift resulting from the exclusion in Section 11.  Effective for taxes payable in 2018 and thereafter.

 

Section 11. State general levy; commercial-industrial tax capacity. Excludes the first $100,000 of market value of each parcel of commercial-industrial net tax capacity from the state general levy. Effective for taxes payable in 2018 and thereafter.

Section 12. State general levy; apportionment. Eliminates the 95/5 percentage apportionment of the state general levy between commercial-industrial and seasonal residential-recreational property as separate levy amounts are now set in Section X. Effective for taxes payable in 2018 and thereafter.

Sections 13 and 14. Proposed levy certification dates.  Changes, from September 15th to September 30th, the date by which towns and special taxing districts must certify their proposed levy to the county auditor, and clarifies that the Metropolitan Council and the Metropolitan Mosquito Control Commission must certify their proposed levy by September 15th.  Under current law, school districts, cities and counties must certify their proposed levy by September 30, while towns must submit their proposed levy by September 15th. Effective beginning with proposed levy certifications for taxes payable in 2018.

Section 15. Abatement of late payment penalty. Authorizes a county to abate the penalty for late payment of property taxes for the current year if the payment is delivered by mail and the envelope containing the payment is postmarked by the United States Postal Service within one business day of the due date. This provision is available one-time. Effective for property taxes payable in 2018 and thereafter. 

Section 16. Early termination; metropolitan agricultural preserve program. Allows a property’s enrollment in the Metropolitan Agricultural Preserves Program to be terminated upon the death of an owner.  When an agricultural preserve is terminated under this provision, the property is subject to additional taxes equal to 50 percent of the current year’s taxes.  Under current law, an agricultural preserve can only be terminated eight years after the owner notifies the city, organized township, or county of the owner’s intention to terminate and additional taxes are not imposed. Effective July 1, 2017.

Section 17. Allowed commercial and industrial operations; metropolitan agricultural preserve program. Allows wireless communication equipment, including cell phone towers, to be installed on property within an agricultural preserve inside the metropolitan area. Effective the day following final enactment.

Section 18. Carlton County; Sawyer levy. Reinstates and increases Carlton County’s authority to levy in and for the unorganized Sawyer township for recreational purposes. Effective for taxes payable in 2018 and thereafter, and effective after Carlton County complies with approval and filing requirements.

Article 3 - Sales and Use Taxes

Sections 1 and 14. Minnesota State High School League funds exemption and transfer. Section 1 provides a reference to the exemption in the new subdivision created in section 14. This section of statute requires the Minnesota State High School League (MSHSL) to determine the tax savings attributable to the exemption in section 14 and transfer that amount to a nonprofit charitable foundation created to promote high school extracurricular activities. Section 14 exempts tickets and admissions to games, events, and activities sponsored by the MSHSL. Effective for sales and purchases made after June 30, 2017, and before July 1, 2027.

Sections 2, 4, and 9 to 12. Food sold through vending machines. Removes food sold through vending machines from the list of taxable food items within the definition of “sale and purchase.” Amends the definition of “food sold through vending machines” to specify that taxable food sold through vending machines means prepared food, soft drinks, and candy dispensed from a vending machine. Removes food sold through vending machines from the list of items that are taxable under the definition of “food and food ingredients.” Specifies that taxable food sold through vending machines at residential facilities, schools, and in connection with certain government programs or nonprofit organizations is not exempt. Effective for sales and purchases made after June 30, 2017.

Section 3. Definition of “end user”. Specifies that an “end user” does not include a person, including the owner or operator of a jukebox or other similar device, that charges customers for access to specified digital products or other digital products and who receives a product transferred electronically under a contract for further commercial broadcast or transmission to another person. Effective for sales and purchases made after June 30, 2017.

Sections 5 to 8; 23, 24. Remittance requirements for marketplace providers and marketplace retailers. Modifies the definition of a “retailer maintaining a place of business in the state” for purposes of the requirement to collect and remit Minnesota sales and use taxes.  A retailer maintaining a place of business in the state includes having storage facility in the state, employing a state resident who works from a home office in the state, or having a marketplace provider or other third party operating in the state under the retailer’s authority to facilitate or process sales in the state. Defines “marketplace provider” and “total taxable retail sales.”

Provides that the duty to collect and remit sales taxes does not apply to a retailer making less than $10,000 of taxable retail sales into the state in a year whose sole physical connection to the state is through a marketplace provider located in the state, unless they are or were previously registered in the state.

Modifies the definition of “affiliated entities.” A retailer having an in-state affiliate is required to collect and remit sales and use tax. Adds criteria by which an affiliate entity is deemed to be a related party to the retailer (and thus required to collect and remit sales and use tax) to include:

  • selling taxable products that are the same as or similar to the retailer or selling under the same or similar name;
  • maintaining a facility such as an office, warehouse, distribution center, or the like to facilitate sales in the state made by the out-of-state retailer;
  • using intellectual property with consent or knowledge that is the same or similar to the out-of-state retailer’s intellectual property;
  • delivering, installing, assembling, performing maintenance or repair services on tangible personal property in the state if the property is sold to in-state customers by the out-of-state retailer;
  • facilitating delivery of tangible personal property to in-state customers by allowing a customer to pick up the property at a facility in the state; or
  • sharing information systems or employees with, or engaging in intercompany transactions with the out-of-state retailer.

Also deems two entities as related parties if the entities are related taxpayers under the Internal Revenue Code for purposes of certain disallowed deductions, or if the transactions are disallowed losses between partnerships and their owners under the Code. Entities that have one or more ownership relationships designed with the purpose of avoiding establishment of affiliate nexus would also be deemed related parties.

Establishes collection and remittance requirements for marketplace providers. Marketplace providers are required to collect and remit sales and use tax under provisions in existing law, except when a marketplace seller for whom the marketplace facilitates a sale either provides a copy of its registration to collect and remit sales and use tax to the marketplace provider before the marketplace provider facilitates the sale, or the commissioner of revenue discloses to the marketplace provider, upon inquiry, that the marketplace seller is registered to collect and remit sales and use taxes in the state. Relieves a marketplace provider of liability to collect and remit sales and use taxes, in most cases, to the extent that the provider demonstrates that failure to collect and remit was due to incorrect or insufficient information provided by the marketplace seller.

Section 23 provides that if any provision in sections 5 to 8 are held invalid, other provisions not affected by the invalidity are given effect. Effective the day following final enactment.

Section 24 stablishes that the provisions of sections 5 to 8 are effective upon the U.S. Supreme Court overturning or expanding its Quill decision, or July 1, 2018, whichever is earlier.  If Congress enacts a law authorizing states to impose collection and remittance requirements for retailers without physical presence in the state, Minnesota must enforce the provisions of sections 5 to 8 and 23 to the extent allowed under federal law.

Section 13. Precious metal bullion and bullion coin exemption. Provides a sales tax exemption for precious metal bullion and bullion coin. “Precious metal bullion” is defined as bars or rounds that are at least 99.9% gold, silver, or platinum by weight, and are marked for weight, purity, and content. The bill also specifies coins that qualify as bullion coins. Effective for sales and purchases made after June 30, 2017.

Section 15. Fundraising events by nonprofit groups. Removes the requirement that fundraising events sponsored by nonprofit groups must be conducted on premises leased for more than five, but less than 30 days for the sales tax exemption for sales of personal property, services, and admissions to apply to those events. Effective for sales and purchases made after June 30, 2017.

Section 16. Building materials, capital projects. Provides a sales tax exemption for materials and supplies used or consumed in, and equipment incorporated into, the construction, remodeling, expansion, or improvement of an ice arena or other buildings or facilities owned and operated by the city of Plymouth. "Facilities" is defined to include municipal streets and facilities associated with streets including, but not limited to, lighting, curbs, gutters, and sidewalks. The maximum amount that may be refunded is $2.5 million. Current law refund provisions apply to the exemption. Effective retroactively for sales and purchases made after January 1, 2015.

Sections 17 to 21. Properties destroyed by fire; Madelia and Melrose. Section 17 provides a sales tax exemption for building materials and supplies used in, and equipment incorporated into the construction or replacement of real property in Melrose that was affected by the fire in September 2016. The exemption is retroactive for sales and purchases made after September 30, 2016. For purchases made between that date and July 1, 2017, sales tax must be paid upfront and purchasers must apply for a refund. For purchases made after July 1, 2017 and before January 1, 2018, the exemption is upfront.

Section 18 provides a sales tax exemption for building materials, equipment and supplies used in and equipment incorporated into the construction or replacement of real property in Madelia affected by the fire in February 2016. The tax must be paid upfront and purchasers can apply for a refund. Effective retroactively for sales and purchase made after December 31, 2015 and before July 1, 2018. Sections 19 to 21 add the exemptions to the refund provisions under current law.

Section 22. Exemption from job expansion program provisions. Provides a 10-year certification period for available tax incentives for an eligible wholesale electronic component distribution center that invests a minimum of $200,000,000 and constructs at least a 700,000 square foot facility. The current certification period allowed for a qualified expansion of greater Minnesota businesses is seven years. Allows the tax exemptions for an eligible wholesale electronic component distribution center to be authorized up to $5,000,000 annually and up to $40,000,000 during the total period of the agreement. The current sales tax exemptions are $2,000,000 annually and $10,000,000 during the total period of the agreement.

Article 4 – Property Tax: Aids & Credits

Sections 1, 2, and 22. Debt service equalization revenue; appropriation.   Increases the state share of school debt service revenue by reducing the minimum debt service tax rate to qualify for state tier 1 equalization from 15.74 percent to ten percent and increases the equalizing factor for tier 1 equalization from 55.33 to 75 percent of the statewide average ANTC per pupil unit for taxes payable in 2018.  $14,773,000 is appropriated from the general fund to the Department of Education for this purpose.  Effective for taxes payable in 2018 and thereafter.

Section 3. Payments to school nonoperating funds. Provides that state general fund aid payments to school districts shall be paid in six, rather than twelve, monthly installments. Effective beginning with fiscal year 2019.

Section 4. Aid payment percentage. Excludes payments for nonoperating funds from payment schedule for other state aid payments to school districts.  Effective beginning with fiscal year 2019.

Section 5. School building bond agricultural credit. Provides a property tax credit on all property classified as agricultural equal to 40% of the property tax attributable to school district bond levies. The commissioner of revenue shall certify the tax reductions under this section to the commissioner of education who shall reimburse each school district. An open appropriation from the general fund to the commissioner of education is provided. Effective beginning with taxes payable in 2018.

Section 6. Payments; school districts. Adds a reference to the new school building bond agricultural credit to the list of credit certifications made by the department of revenue to the department of education. Effective beginning with taxes payable in 2018.

Section 7. Computation of net property taxes. Includes the new school building bond agricultural credit to the list of credits that reduces the amount of tax owed. Effective beginning with taxes payable in 2018.

Section 8. Notice of proposed property taxes. Requires that the new school building bond agricultural credit appear on the truth-in-taxation (TNT) statement. Effective beginning with taxes payable in 2018.

Section 9. School district levies; special requirements. Defines what levies are considered to be debt services levies. Effective beginning with taxes payable in 2018.

Section 10. Computation of tax rates. Requires the county auditor to compute a school debt tax rate for each school district. Effective beginning with taxes payable in 2018.

Section 11. Contents of tax statements. Requires that the new school building bond agricultural credit appear on the property tax statement. Effective beginning with taxes payable in 2018.

Section 12. LGA; City revenue need. Modifies the transition formula used when cities increase in population and move from one need formula to another. This section increases the threshold from 10,500 to 11,000 for cities that move from a medium to a large-sized city, and adds a new factor of 0.1 percent times the amount that the city’s population exceeds the minimum threshold. Effective for aids payable in calendar year 2018 and thereafter.

Section 13. Out-of-home placement aid. Establishes a new aid program for counties and tribes for out-of-home placement costs of children under the Indian Child Welfare Act. Aid to tribes shall be the greater of: (1) five percent of the average reimbursement amount received from the federal government for out-of-home placement costs for three calendar years; or (2) $200,000. Aids to counties shall be the county’s proportionate share of the appropriation that remains after the aid for tribes has been paid. $2,000,000 is annually appropriated to the commissioner of revenue from the general fund to make the aid payments. Effective beginning with aids payable in 2018 and thereafter.

Section 14. LGA; city formula aid. Specifies that for aids payable in 2018 and thereafter, the formula aid for a city is equal to the product of (i) the difference between its unmet need and its certified aid in the prior year before any statutory aid adjustment and (ii) the aid gap percentage. Current law looks at the city’s formula aid, rather than certified aid, in the previous year. A city’s formula aid does not take into account any limits on annual decreases. Effective for aids payable in 2018 and thereafter.

Section 15. LGA; city aid distribution. Provides that in 2018 and thereafter, if a city’s certified aid before any statutory aid adjustment for the previous year is less than its unmet need, the city shall receive a distribution equal to the sum of: (i) its certified aid in the previous year before any aid adjustment; (2) the city’s formula aid; and (3) its aid adjustment. If a city’s certified aid before any statutory adjustment for the previous year is equal to or greater than its current unmet need, the total aid is equal to the greater: (1) its unmet need plus any aid adjustment; or (2) 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 prior year. No city may have a total aid amount less than zero. Effective for aids payable in calendar 2018 and thereafter.

Section 16. LGA; appropriation. Increases the local government aid appropriation by $12 million for aids payable in 2018 only.

Section 17. CPA; appropriation. Increases the county program aid appropriation by $6 million for aids payable in 2018 only. The increase is split evenly between county program need aid and tax-base equalization aid.

Section 18. PILT; payments. Increases, from $1.50 to $2.00, the payment per acre for county-administered other natural resources land and commissioner-administered other natural resources land. Effective for payments made in calendar year 2018 and thereafter.

 

Section 19. 2014 LGA penalty forgiveness. Provides that the cities of Dundee, Jeffers and Woodstock shall receive all of their 2014 LGA payments that were withheld for failing to file the required financial statements with the state auditor if the state auditor certifies that all necessary statements for calendar years 2013 and 2014 were received by June 1, 2015. Up to $101,570 in fiscal year 2018 is appropriated from the general fund to the commissioner of revenue to make payments to each city by July 20, 2017. Effective the day following final enactment. 

Section 20. Base year formula aid for newly incorporated city. Provides that a city that incorporated on October 13, 2015 and that first qualifies for aid in 2017 (city of Rice Lake) will have its formula aid for 2016 equal to $115 times its population. Under current law, a city’s formula aid in the previous year is used to calculate aid for the following payable year. When a town incorporates as a city, its formula aid for the previous year is zero.  Effective for aids payable in 2017. The 2017 aid payment for Rice Lake shall be recalculated and treated as an aid correction.

Section 21. 2013 LGA penalty forgiveness. Provides that the city of Oslo shall receive the portion of its 2013 LGA payment that was withheld for failing to file required financial statements with the state auditor upon certification by the state auditor that all required information for calendar year 2012 was received by December 31, 2013. $37,473.50 is appropriated from the general fund to the commissioner of revenue to make payment to the city on July 20, 2017. Effective the day following final enactment.

Section 23. Appropriation; Melrose fire remediation. Appropriates $1,296,458 to the city of Melrose, and $95,800 to Stearns County grants to remediate the effects of fires in the city of Melrose on September 8, 2016. Grants must be used for remediation costs, including disaster recovery, infrastructure, reimbursement for emergency personnel and equipment costs, and reimbursement for property tax abatements. $1,392,258 in fiscal year 2018 is appropriated from the general fund to the commissioner of public safety to make the grant payments. 

Article 5 - Local Option Sales and Special Taxes

Sections 1 and 2. Duluth food and beverage and lodging taxing area modification. Changes the boundary line defining the area in which Duluth may spend revenues from its extra ½ percent food and beverage tax and ½ percent lodging tax from 34th Avenue West to 14th Avenue West and the area south of and including Skyline Parkway. Effective the day after the city files its local approval with the Secretary of State.

Sections 3 to 5. Mankato local option sales tax modification. Allows Mankato to extend its 0.5% sales tax for different projects as approved by the voters at the November 2016 general election. The tax may be used to raise $47 million plus associated bond costs to fund:

  • construction and improvements to regional recreational facilities including indoor athletic facilities;
  • improvements to the flood control and levee system;
  • water quality improvement projects in Blue Earth and Nicollet counties;
  • expansion of a transit building and related transit improvements; and
  • matching funds for regional facilities such as a historic museum, supportive housing, and a senior center.

Requires the tax to expire at the earlier of December 31, 2038, or when revenues are sufficient to fund the current projects. Allows Mankato to issue an additional $47 million in bonds for the projects. Effective the day after each city files its local approval with the Secretary of State.

Sections 6 and 7. Hermantown local option sales tax modification. Allows the city to use revenues from its 1% local option sales tax to fund debt service payments for construction of a regional wellness center, as approved by the voters at the November 2016 general election.  The tax would terminate at the earlier of December 31, 2036, or when the city council determines that sufficient funds have been received to fund bonding costs, including interest. Effective the day after the city files its approval with the Secretary of State.

Sections 8 to 10. New Ulm local option sales tax modification. Modifies the current New Ulm 0.5% local sales tax by authorizing new uses for the tax revenues and authorizing additional bonding authority, as approved by the voters in the November 2016 election, for the following projects:

  • construction of an indoor water park and safety improvements to the existing pool;
  • construction of an indoor playground, wellness center, and gymnastics facility;
  • construction of a winter multipurpose dome;
  • improvements to the Johnson Park Grandstand; and
  • improvements to the entrance road and parking and Hermann Heights Park.

Authorizes an additional $14.8 million in bonding for these projects. The local sales tax terminates when the city council determines that sufficient funds have been raised from the taxes to finance capital and administrative costs of the facilities and improvements. Effective the day after the city files its approval with the Secretary of State.

Sections 11 and 29. Proctor local option sales tax modification; validation of prior act. Allows the city of Proctor to increase the rate of its 0.5% existing local sales tax by an additional 0.5%, if approved by the voters in the first general election after the bill is enacted. The revenue from the increased tax would pay for the $10 million in improvements to public utilities, sidewalks, bike paths and trails, and park and recreation facilities authorized in 2008 and 2010 special laws. Retroactively approves the extension of the existing sales tax and new uses for the sales tax revenue authorized in the 2008 and 2010 special laws, based on the voter approval at the 2010 general election and the filing of local approval with the Secretary of State before January 1, 2015. Effective the day after the city files its approval with the Secretary of State.

Sections 12 and 13. Albert Lea local option sales tax modification. Modifies the existing Albert Lea 0.5% local sales tax to direct revenues to pay for “water quality improvements” in the Shell Rock River watershed district instead of “lake improvements” as under current law. Also strikes language stating that the city is not required to review intended uses of the tax revenues and the district is not required to submit proposed budgets, statements or invoices explaining the intended uses as a prerequisite to receive the revenues. Instead, requires the district to appear before the city on a biannual basis to report its activities, expenditures, and intended uses of the sales tax revenue. Extends the duration of the tax from 15 to 30 years and increases the bonding authority for the authorized projects from $15 million to $30 million. Effective the day after the city files its local approval with the Secretary of State.

Sections 14 to 16. Worthington local option sales tax modification. Modifies the Worthington 0.5% local sales tax to authorize revenues to be used for construction of public athletic facilities, subject to the following requirements:

  • The city must pass a resolution stating the intent to issue debt and propose a public hearing;
  • The resolution must be published for two consecutive weeks, with a notice of the public hearing date, in the city’s official newspaper. The hearing must be held at least two weeks but not more than four weeks after the first publication;  
  • If the city adopts the resolution, the resolution must be published in the city’s official newspaper but is not effective for 30 days;
  • Within this 30 days, a petition requesting a citywide vote that is signed by voters constituting at least 10% of the number of votes cast in the last general election must be submitted to the county auditor. If this requirement is met, the resolution must be approved by the voters in a general or special election.

Effective the day after the city files its approval with the Secretary of State.

Section 17. North Mankato local option sales tax modification. Authorizes the city of North Mankato to extend its 0.5% existing sales tax to raise up to an additional $15 million for the currently funded projects and adds construction of athletic facilities to the existing uses for the tax revenues. The existing projects include an interchange, trails, a library, riverfront development, and lake improvement projects, with a total authorization of $6 million. The extension was approved by the voters at the November 2016 election. The tax expires at the earlier of December 31, 2038 or when revenues are sufficient to fund $21 million (the current $6 million authorization plus the $15 million proposed in the bill) in bond costs and interest. Effective the day after each city files its local approval with the Secretary of State.

Section 18. East Grand Forks local option sales tax authorization. Authorizes the city of East Grand Forks to impose up to a 1% sales tax to finance improvements to the city swimming pool. The voters approved the tax at a March 7, 2016, special election. Allows the city to bond for up to $2,820,000 for the project without additional approval. The tax expires at the later of (1) five years or (2) when revenues from the tax are sufficient to pay for the $2,820,000 in improvements plus associated bond costs. Effective the day after the city files its approval with the Secretary of State.

Section 19. Excelsior local option sales tax authorization. Authorizes the city of Excelsior to impose a local option sales tax of up to 0.5%, as approved by the voters at the November 2014 general election. Revenues must be used to finance capital and administrative costs of improvements to The Commons park. Authorizes the city to bond for up to $7 million for the improvements. The tax terminates at the later of 25 years after the tax is first imposed, or when the city council determines that a sufficient amount has been raised to pay the bond costs plus interest. Effective the day after the city files its approval with the Secretary of State.

Section 20. Fairmont local option sales tax authorization. Authorizes the city of Fairmont to impose a 0.5% local sales tax, as approved by the voters in the November 2016 election, to finance capital and administrative costs of constructing and funding recreational amenities, trails, and a community center. The city may bond for up to $15 million for the projects. The tax terminates at the earlier of 25 years or when the city council determines that sufficient funds have been raised from the taxes to pay the bonds issuance, including interest. Effective the day after the city files its approval with the Secretary of State.

Section 21. Fergus Falls local option sales tax authorization. Authorizes the city of Fergus Falls to impose a 0.5% local sales tax, as approved by the voters in the November 2016 election, to finance costs of expansion and betterment of the Fergus Falls Public Library. The city may bond for up to $9.8 million for the projects, plus bond issuance costs. The tax terminates at the earlier of 12 years or when the city council determines that sufficient funds have been raised from the taxes to pay the bond issuance, including interest. Effective the day after the city files its approval with the Secretary of State.

Section 22. Moose Lake local option sales tax authorization. Authorizes the city of Moose Lake to impose a local option sales tax of up to 0.5%, as approved by the voters at the November 2012 election. Revenues must be used to finance the costs of improvements to the city’s park system, street and related infrastructure improvements, and municipal arena improvements. Authorizes the city to bond for up to $3 million for the improvements. The tax terminates at the earlier of 20 years after the tax is first imposed, or when the city council determines that a sufficient amount has been raised to pay the bond costs plus interest. Effective the day after the city files its approval with the Secretary of State.

Section 23. New London local option sales tax authorization. Authorizes the city of New London to impose a local sales tax up to 0.5% to finance capital and administrative costs for construction and equipping of a new library and community room and an ambulance bay at the fire hall, and improvements to the New London Senior Citizen Center. The tax was approved by the voters in the November 2016 election. Revenues from the tax may not exceed $872,000 plus finance and debt service costs. The tax terminates 20 years after it is first imposed, or when the city council determines that the amount sufficient to pay the capital and bond costs have been raised. Effective the day after the city files its approval with the Secretary of State.

Section 24. North Mankato food and beverage tax authorization. Authorizes North Mankato to impose by ordinance a sales tax of up to 1% on gross receipts of sales of food and beverages by a restaurant or place of refreshment in the city, including retail on-sales of alcoholic beverages. The definition of "restaurant or place of refreshment" would be defined by city resolution.  The tax would be used to finance operation, maintenance, and capital expenses for the Caswell Park Regional Sporting Complex and costs related to regional tourism events. Effective the day after the city files its approval with the Secretary of State.

Section 25. Sleepy Eye lodging tax. Authorizes Sleepy Eye to impose a lodging tax up to 2%. Under current law, local jurisdictions may impose, without legislative approval, up to a 3% tax on lodging gross receipts, 95% of which must be used to fund tourism promotion in the city. The total tax that may be imposed under current authority and the authorization in this section must not exceed 5% and revenues from the tax imposed under this section must be used for the same purposes as revenues from the taxes imposed under general law authority. Effective the day after the city files its approval with the Secretary of State.

Section 26. Spicer local option sales tax authorization. Authorizes the city of Spicer to impose a 0.5% local sales tax, as approved by the voters in the November 2016 election, to finance capital and administrative costs for pedestrian public safety, park and trail, and regional community facility improvements. The city may bond for up to $800,000 for the projects, plus bond issuance costs. The tax terminates at the earlier of ten years after the tax was first imposed, December 31, 2027, or when the city council determines sufficient revenues have been raised to pay the bond costs, including interest. Effective the day after the city files its approval with the Secretary of State.

Section 27. Clay County local option sales tax authorization. Authorizes Clay County to impose up to a 0.5% percent sales tax to finance capital and administrative costs of constructing and equipping a new correctional facility, law enforcement center, and related parking facility. The voters approved the tax at the November 2016 general election. Allows the city to bond for up to $52 million for the projects without additional approval. The tax expires at the earlier of 20 years after the date of initial imposition or when the city council determines that $52 million, plus associated bond costs, has been received from the tax revenues. Effective the day after the city files its approval with the Secretary of State.

Section 28. Woodbury lodging tax authorization. Authorizes Woodbury to impose a lodging tax up to 2%. Under current law, local jurisdictions may impose, without legislative approval, up to a 3% tax on lodging gross receipts, 95% of which must be used to fund tourism promotion in the city. This section provides that the total tax that may be imposed under current authority and the authorization in the bill must not exceed 5% and that revenues from the tax imposed under this section must be used for the same purposes as revenues from the taxes imposed under general law authority. Effective the day after the city files its approval with the Secretary of State.

Article 6 – Tax Increment Financing

Section 1. Definitions; five-year rule. Modifies the definition of tax increment that is subject to the 5-year rule and the pooling rule to exclude increments that are repaid by developers. Effective the day following final enactment.

Section 2. Expenditures outside district; pooling.  Clarifies that the percentage pooling rules only apply to increment derived from properties located in the TIF district. Effective the day following final enactment.

Section 3. Five-year rule; increments. Clarifies that that five-year rule applies to revenues derived from increment paid by properties in the district. Effective the day following final enactment.

Section 4. Interfund loans. Makes several changes to the interfund loan provisions, including: (1) allowing loans to be made up to 60 days after the money has been transferred or spent; (2) authorizes the passage of a resolution authorizing the loan before the TIF plan is approved; (3) authorizes the development authority to rewrite the loans terms after the loan has been made if done before the district is decertified; and (4) requires an annual report on the amount of interfund loans made and any amendment of an interfund loan. Effective the day following final enactment and applies to all districts, regardless of when the request for certification was made.

Section 5. Burnsville TIF. Modifies special law authorized in 2008 that allowed the city of Burnsville to establish tax increment financing districts to develop the Northwest Quadrant area. This section allows the city two additional years to establish districts pursuant to this authorization, and allows the city to establish economic development districts in addition to redevelopment, renewal and renovation and soils districts. Lastly, the four-year knockdown rule is extended to nine years. Effective upon compliance by the city of Burnsville with approval and filing requirements.

 

Section 6. Seaway Port Authority; Duluth. Modifies special law authorized in 2009 by adding four additional parcels to the area in which the district can be created and authorizes the use of interfund loans prior to approval of the TIF plan. Effective upon compliance by the city of Duluth with approval and filing requirements.

Section 7. Edina TIF. Modifies a 2014 special law authorization for the city of Edina to allow two additional years to certify districts. Effective upon compliance with the city of Edina with approval and filing requirements.

Section 8. Maple Grove TIF. Modifies special law authorized in 2014 that allows the city of Maple Grove to establish districts to develop a gravel pit. This section allows the city to designate all or a portion of the defined project area and to include all of a parcel if part is outside the area. In addition, the city may use money from soil deficiency districts for land acquisition and infrastructure outside of the district if it is for a development that does not include retail or housing development and the city has a binding, written commitment and adequate financial assurances from the developer that the development will occur. Effective upon compliance by the city of Maple Grove with approval and filing requirements.

Section 9. Anoka TIF.  Extends the five-year rule to eight years for the city of Anoka’s Greens of Anoka redevelopment district.  Effective upon compliance by the city of Anoka with approval and filing requirements.

Section 10. Coon Rapids TIF. Provides a five-year duration extension for TIF District 6-1 (Port Riverwalk) in the city of Coon Rapids. Effective upon compliance by the city of Coon Rapids, Anoka County, and Independent School District No. 11 with approval and filing requirements.

Section 11. Cottage Grove TIF. Extends the five-year rule for TIF District No. 1-12 (Gateway North) in the city of Cottage Grove to allow expenditures until January 1, 2017. Effective upon compliance with the city of Cottage Grove with approval and filing requirements.

Section 12. Edina TIF. Provides that the city of Edina must have filed a certificate of approval of a 2014 special law authorization with the secretary of state by December 31, 2016, and if so filed, the special law is deemed approved and all actions taken by the city before the effective date are deemed consistent with the authorization.  Effective the day following final enactment without local approval.

Section 13. Moorhead TIF. Extends the five-year rule to eight years for the city of Moorhead’s 1st Avenue North (Central Corridors) redevelopment district.  Effective upon compliance by the city of Moorhead with approval and filing requirements.

Section 14. Richfield TIF. Provides a ten-year duration extension for the Cedar Avenue tax increment financing district in the city of Richfield. Effective upon compliance by the city of Richfield, Hennepin County, and Independent School District No. 280 with approval and filing requirements.

Section 15. Richfield TIF. Extends the five-year rule to seven years for the city of Richfield’s Lyndale Gardens tax increment financing district. Effective upon compliance by the city of Richfield with approval and filing requirements.

Section 16. St. Louis Park TIF. Increases the permitted pooling percentage for the city of St. Louis Park’s Elmwood Village tax increment financing district from 25 to 30 percent. Effective upon compliance by the city of St. Louis Park with approval and filing requirements.

Section 17. St. Paul TIF. Allows the city of St. Paul to waive increment for up to four years for the tax increment financing district the city created at the Ford Motor Company plant site. If the city elects to waive the increment under this section, the district’s certification is deemed to be January 2 of the assessment year for the first year increment is received. Effective July 1, 2017 without local approval.

Section 18. Washington County; Newport TIF. Authorizes Washington County to establish TIF districts in the city of Newport. The following special rules apply: (1) several parcels are deemed to meet the “blight test” required under current law to establish redevelopment districts; (2) increment spent outside the district must be spent on blight correction within the project area; (3) pooling percentage limits are increased from 25% to 30%; and (4) the five-year rule is extended to nine  years. The authority to establish districts under this authorization expires on December 31, 2027. Effective upon approval by the city of Newport and Washington County with approval and filing requirements, and shall retroactively include a redevelopment district already approved.

Article 7 – Public Finance

Section 1. Certificates of indebtedness; towns. Provides that bonds issued by the town for the purpose of eliminating R-22 (Freon) as a refrigerant used in ice-making systems in existing public facilities shall be payable in not more than 20 years. 

Section 2. Equipment acquisition; capital notes; Hennepin County. Provides that bonds issued by Hennepin County for the purpose of eliminating R-22 (Freon) as a refrigerant used in ice-making systems in existing public facilities shall be payable in not more than 20 years. 

Section 3. Cities may issue capital notes for capital equipment; home rule charter cities. Provides that bonds issued by home rule charter cities for the purpose of eliminating R-22 (Freon) as a refrigerant used in ice-making systems in existing public facilities shall be payable in not more than 20 years. 

Section 4. Financing purchase of certain equipment; statutory cities. Provides that bonds issued by statutory cities for the purpose of eliminating R-22 (Freon) as a refrigerant used in ice-making systems in existing public facilities shall be payable in not more than 20 years. 

Section 5. General obligation revenue bonds; HRA. Increases the maximum amount of general obligation bonds that an HRA may issue to the greater of: (1) one-half of one percent of the estimated market value of the general jurisdiction governmental unit whose general obligation is pledged; or (2) $5,000,000 (an increase from $3,000,000).

Section 6. Establishment; EDA. Eliminates the requirement that before an economic development authority establishes an economic development district, the authority must publish notice of the hearing in a ’daily’ newspaper, so that any newspaper of general circulation in the city is sufficient.

Section 7. Street reconstruction and bituminous overlays. Allows a city to approve a plan to issue and sell obligations for street reconstruction or bituminous overlays with approval of a majority of the members of the governing body present rather than approval by all members of the governing body present at the meeting.

Section 8. Requirements waived.  Updates a reference of ‘financial’ advisor to ‘municipal’ advisor to be consistent with generally accepted terms.

Article 8 – Miscellaneous

Section 1. Mortgage registry tax collection. A portion of the mortgage registry tax is paid to the treasurer of the county in which the real property subject to mortgage is located. For real property in multiple counties, the tax is paid to the treasurer of the county in which the mortgage is first presented for recording. Under current law, for these multi-county mortgages, the county treasurer must calculate and pay a proportionate share of the county portion of the tax proceeds to each county in which the real property covered by the mortgage is located, if the principal amount of the debt exceeds $10 million. This section removes the requirement that the county calculate and distribute the proceeds for multi-county mortgages exceeding $10 million, and requires that the county receiving the tax forward it to the commissioner of revenue for division and payment to applicable counties.

Section 2. Provider tax; exemption for intergovernmental transfers. The 2% provider tax applies to health care providers, hospitals, surgical centers, and wholesale drug distributors on their gross revenues for patient services and is deposited to the Health Care Access Fund. Some services are excluded from gross revenues under the statute. Under federal law, states can use state or local tax dollars transferred from local units of government to fund their Medicaid programs. The money transferred can be used as the state Medicaid match to draw down the federal Medicaid match. This section exempts supplemental or enhanced payments made through intergovernmental transfers from gross revenues subject to the provider tax. Effective retroactively for gross revenues received on or after July 1, 2016.

Sections 3 and 6. Compressed natural gas rate modification. Aligns the defined energy content of compressed natural gas (CNG) with the industry standard of 900 BTUs per cubic foot (current law is at 1000 BTUs per cubic foot). Also changes the conversion factor used to calculate fuel tax on CNG from 114.9 cubic feet of CNG for every one gallon of gasoline, to 126.67 cubic feet, which is the standard under the International Fuel Tax Agreement.  This changes the effective fuel tax rate on CNG from $2.174 to $1.974 per thousand cubic feet. Effective for sales and purchases made after June 30, 2017.

Sections 4, 5, 7 to 12, and 14 to 19. Gasoline used as a substitute for aviation gasoline. Makes the following changes:

  • Adds a definition to the fuel tax chapter of statutes, defining “dealer of gasoline used as a substitute for aviation gasoline” as a person who sells gasoline on the premises of an airport to be dispensed directly into the fuel tank of an aircraft. 
  • Exempts from the fuel excise tax gasoline purchased by a dealer of gasoline used as a substitute for aviation gasoline. 
  • Applies the five cents per gallon aviation gasoline tax to gasoline used as a substitute for aviation gasoline. 
  • Provides that the aviation gasoline tax does not apply to gasoline purchased and placed in an aircraft fuel tank outside the state of Minnesota. 
  • Provides that the aviation gasoline tax is not a tax upon consumption by an aircraft. Exempts a licensed ambulance service from liability for the aviation gasoline tax. 
  • Requires gasoline taxpayers to include in their monthly reports to the Department of Revenue a statement of the number of gallons sold to a dealer of gasoline used as a substitute for aviation gasoline. 
  • Requires a person who buys gasoline from a dealer of gasoline used as a substitute for aviation gasoline and pays the tax on it, then uses it in motor vehicles, or sells it knowingly to a person for use in motor vehicles, to report this to the commissioner of revenue.
  • Requires a person claiming a graduated refund or credit to set forth in the claim form the total number of gallons of gasoline used as a substitute for aviation gasoline on which tax was paid during the calendar year. 
  • Adds purchasers of gasoline used as a substitute for aviation gasoline to the eligible claimants for refunds of aviation taxes paid and not used in motor vehicles or in aircraft.
  • Adds taxpayers who have paid aviation tax on gasoline used as a substitute for aviation tax, and airflight property tax, or is an aerial applicator, to the eligible claimants for refunds on a graduated basis. 
  • Exempts gasoline sold to a dealer of gasoline used as a substitute for aviation gasoline from the presumption that all gasoline in this state is intended for use in motor vehicles. 
  • Provides that revenues from excise taxes on gasoline used as a substitute for aviation gasoline are credited to the state airports fund and appropriated to the commissioner as needed.
  • Establishes recordkeeping and retention requirements for dealers of gasoline used as a substitute for aviation gasoline. 
  • Repeals a subpart of Minnesota Rules that describes who may claim refunds for gasoline used as a substitute for aviation gasoline, effective the day following final enactment. All other provisions are effective for sales and purchases made after June 30, 2017.

Sections 13 and 20. Special fuels exemption. Authorizes a sales tax exemption for certain special fuels used for any of the following purposes:

  • Powering a refrigeration unit mounted on a licensed motor vehicle, if the refrigeration unit has a separate engine than the motor vehicle and the fuel is used exclusively for the refrigeration unit;
  • Powering an unlicensed motor vehicle used solely or primarily to move semitrailers within certain cargo or warehouse facilities; or
  • Operating a power take-off unit or auxiliary engine in or on a licensed motor vehicle, regardless of whether the unit or engine is fueled from the same tank as the motor vehicle.

Also includes these special fuels in the exemption for petroleum products. Effective for sales and purchases made after June 30, 2017.

Section 21. Small winery credit. Authorizes a credit for qualified wineries, defined as wineries in any state manufacturing fewer than 75,000 gallons of wine and cider annually. The credit is equal to the excise taxes due on wine and cider, for wine and cider sold in the fiscal year beginning July 1, up to $136,275. Effective July 1, 2017.

Section 22. Taconite economic development fund allocation. Provides that the commissioner of Iron Range Resources and Rehabilitation shall transfer 25.1 cents per taxable ton of the production tax to the taconite economic development fund. Two-thirds shall be transferred from the taconite environmental protection fund and one-third shall be transferred from the Douglas J. Johnson economic protection fund, and deposited into the taconite economic development fund by June 30, 2017. Effective the day following final enactment.

Article 9 - Department of Revenue

2015-2016 Sales Suppression Devices Provisions

Sections 1 through 4. Tax Evasion Software. Makes it unlawful for a person to sell, purchase, manufacture install, transfer, possess, develop, access or use an automated sales suppression device, zapper, phantom-ware or similar device in this state and providing civil and criminal penalties. The provision also amends section 609.5316, subd. 3, to provide that these devices are contraband and must be summarily forfeited upon conviction. Finally, the provision adds definitions applicable to all related statutes. Effective for activities described and crimes committed on or after August 1, 2017.

Article 10 - Department of Revenue

2015-2016 Individual Income, Corporate Franchise, and Estate Tax Provisions

Section 1. Telefiling of income tax returns. Removes references to telefiling of individual income tax returns. Filing state or federal returns by telephone has not been offered since 2005. Effective the day following final enactment.

Sections 2 and 9. Expanded electronic filing. Section 2 requires that professional tax return preparers submit individual income tax returns electronically. The bill extends the requirement to professional preparers of corporate, partnership, and fiduciary returns. There is a $5.00 fee for each return submitted by a professional preparer non-electronically. However, customers may opt out of electronic filing without incurring the penalty by requesting that a preparer submit a return non-electronically. Section 9 requires that an identification number be submitted on each individual income tax return prepared by a professional return preparer. The bill extends the requirement to professional preparers who prepare corporate, partnership and fiduciary returns. There is a $50.00 penalty for each return submitted by a professional preparer without the appropriate identification number. Effective for taxable years beginning after December 31, 2016.

Section 3. Withholding statement. Allows the commissioner to determine the content, format, and manner in which W-2’s must be submitted. Effective for W-2 statements required to be submitted to the commissioner after December 31, 2017.

Also changes the date when employers must submit a Form W-2 from February 28 to January 31. Effective for wages paid after December 31, 2016.

Removes the requirement that employers submit an annual reconciliation of their quarterly withholding returns. The requirement has been rendered obsolete by the Department’s ability to electronically identify discrepancies in withholding accounts without the need for a separate return. Effective for reconciliations required to be filed after December 31, 2016.

Section 4. Reporting of exempt interest and dividends. Requires any person receiving $10 or more of exempt non-Minnesota municipal bond interest or dividends and paying those amounts as nominee to an individual who is a resident of Minnesota, to report the amount paid to the recipient by February 15 of the year following the year of payment and by June 1 of the year following the year of payment to the commissioner. Effective for reports required to be filed after December 31, 2017.

Sections 5 and 6. Annual withholding returns. Makes the threshold to file an annual withholding return $500, eliminates the annual indexing of the threshold, gives the commissioner the authority to notify newly eligible employers that they have the option of filing an annual return, and changes the date when employers must file an annual return from February 28 to January 31. Effective for taxable years beginning after December 31, 2016.

Sections 7, 8 and 13. Assessments for pass-through companies. Allows S corporation shareholders and partners to request that orders of assessment be issued to and paid by the entity after the initiation of the audit. The commissioner has the authority to determine when such requests shall be allowed. Decisions by the commissioner on this issue are not appealable. Also allows partnerships to be liable for the individual income taxes due from partners. Effective the day following final enactment.

Section 10. Long term medical care insurance premiums credit. Removes the specific reference to a “7.5% income test” for claiming medical deductions as a federal itemized deduction. Internal Revenue Code section 213 was amended in 2013 so that medical deductions are now subject to a 10% of adjusted gross income test, except that it remains at 7.5% of adjusted gross income through 2016 for taxpayers age 65 or older. Effective retroactively for taxable years beginning after December 31, 2012.

Section 11. Research credit modifications. Clarifies that Minnesota sales or receipts must be used in all calculations of the base period. Effective the day following final enactment.

Section 12. Allocation language corporate franchise tax. Clarifies that gains from the sale of goodwill or income from a covenant not to compete, are to be allocated to Minnesota to the extent that prior year income was allocable to Minnesota. Effective the day following final enactment.

Section 14. Landlord submission of certificates of rent paid. Simplifies the filing process for renters by authorizing the commissioner to require owners or managing agents of residential rental property to furnish to the commissioner, through a simple process, a copy of each certificate of rent furnished to a renter. If required, the certificate must be submitted in the content, format, and manner prescribed by the commissioner and is due by February 1 of the year following the year the rent was paid. Effective for certificates of rent paid for rent paid after December 31, 2016.

Section 15. Addition for taxable gifts. Clarifies that federally taxable gifts made within three years of death must be added back in the calculation of Minnesota estate even though they are not technically “deducted” in the calculation of federal gross estate. Effective retroactively for estates of decedents dying after June 30, 2013.

Section 16. Estate tax calculation. Clarifies that property subject to a Minnesota-only Qualified Terminable Interest Property election under section 291.03, subd. 1d, may be excluded in the calculation of Minnesota taxable estate. This change clarifies the meaning of a 2011 amendment, which made the election available. Effective retroactively for estates of decedents dying after June 30, 2011.

Section 17. Qualified small business property-estate tax. Clarifies that the estate tax qualified small business property subtraction may not include the value of any cash, cash equivalents, or publicly traded securities, whether or not employed in a trade or business, and whether or not they are owned directly or through intangible property such as stock or partnership interests. This change clarifies the meaning of the criteria for the small business property subtraction, which was made available in 2011. Effective retroactively for estates of decedents dying after June 30, 2011.

Section 18. Estate tax - property tax reclassifications. Provides that qualified farm property exempt from the estate tax shall not become disqualified solely because a portion of the property is reclassified from class 2a to class 4bb property under section 273.13, subd. 25, during the three year holding period. Effective retroactively for estates of decedents dying after June 30, 2011.

Section 19. Repealer.

  1. Repeals Minn. Rules, part 8092.1400 (Annual Returns for Withholding Taxes) because it is no longer necessary given the amendment to Minn. Stat. sections 289A.18 and 289A.20 in sections 2 and 3 of this article. Effective for taxable years beginning after December 31, 2016, except that notifications from the Department of Revenue to employers regarding eligibility to file an annual return for taxes withheld in calendar year 2017 remain in force.
  2. Repeals Minn. Rules, part 8092.2000, since it unnecessarily duplicates statutory law and contains obsolete references to particular Department of Revenue forms. This rule deals with procedures that construction contractors must follow to demonstrate compliance with income tax withholding obligations before receiving final payment under contracts with state or local government agencies. The repeal will not change the way that the Department administers Minn. Stat. section 270C.66, which is the underlying law. Effective the day following final enactment.

Article 11 - Department of Revenue

2015-2016 Policy & Technical: Property Tax

Section 1. Income producing property assessment data. Adds the state of Minnesota as a political entity to the disclosure provision so that property tax data related to income producing property when collected by the state for purposes of making state assessed property tax valuations is private or nonpublic data. Effective the day following final enactment.

Section 2. Air commerce definition. Changes the definition of air commerce to specifically include airline companies that make three or more flights in, out, or within Minnesota during a calendar year. Effective for assessment year 2018 and thereafter.

Section 3. Flight property definition. Provides that flight property does not include aircraft with a maximum takeoff weight of less than 30,000 pounds. Current law refers to aircraft with a gross weight of less than 30,000 pounds. Maximum takeoff weight is a standard aviation term that refers to the maximum weight at which the pilot of an aircraft is allowed to take off. Effective for assessment year 2018 and thereafter.

Section 4. Person definition. Adopts the definition of “person” used in section 270C.01, subd. 6, to make it consistent with the definition used for other taxes administered by the commissioner. Effective for assessment year 2018 and thereafter.

Section 5. Intermittent or irregularly timed flights definition. Adds a definition of “intermittent or irregularly timed flights” to mean flights in which departures and arrivals are negotiated with the customer. The term also includes charter flights. Effective for assessment year 2018 and thereafter.

Section 6. Assessment of flight property. Deletes language that excludes aircraft with a gross weight of less than 30,000 pounds and used on intermittent and irregularly timed flights from the provisions of the Airflight Property Tax. This language will no longer be needed because the statute will use the term “maximum takeoff weight” instead of “gross weight”. This type of aircraft will no longer meet the definition of “flight property”, and therefore will not be valued for purposes of the tax. Companies using aircraft with maximum takeoff weights of less than 30,000 pounds and flown on intermittent and irregularly timed flights will still need to file reports. Effective for assessment year 2018 and thereafter.

Section 7. Air flight property tax reports. Provides that airline companies must file reports unless the commissioner determines that the company is exempt and clarifies that the commissioner may prescribe the content, format, and manner of air flight property tax reports pursuant to Minn. Stat. section 270C.30. Also adds a cross reference to the definition of “electronic signature” in section 270C.304. The provision requiring airline companies to file reports unless determined to be exempt is effective for reports filed in 2018 and thereafter. The provisions regarding the content, format, and manner of reports are effective the day following final enactment.

Section 8. Airline company reports. Provides that if an airline company does not file a report the commissioner may file a report for it based on information that the commissioner has or can obtain or may issue a notice of net tax capacity. Effective for assessment year 2018 and thereafter.

Section 9. State Board of Equalization (Board) reassessment orders. Allows the Board to issue orders to county assessors to reassess a parcel or identified set of parcels in a county if the Board determines that property has been under or over valued and the assessment is grossly unfair or inequitable. Effective for assessment year 2018 and thereafter.

Section 10. County Board of Appeal and Equalization proceedings minutes. Eliminates the requirement that county boards of appeal and equalization file a printed or typewritten copy of meeting minutes with the Commissioner of Revenue. Effective for local and county boards of appeal and equalization meetings held in 2017 and thereafter.

Sections 11, 18 and 19. Definition of pipeline companies. Clarifies that all transportation pipelines are subject to assessment and taxation without regard to the material transported through the pipeline. Effective the day following final enactment.

Section 12. Wind energy conversion systems. Provides that one of the criteria for determining whether the nameplate capacities of wind energy conversion systems may be combined in order to determine the total size of the system for purposes of the wind energy production tax rate is whether the systems were constructed within the same 12-month period. This change would make the criteria consistent with that used for the solar energy production tax. Effective for reports filed in 2018 and thereafter.

Section 13. Wind energy production tax reports. Allows the commissioner to grant an extension of time to file Wind Energy Production Tax Reports for up to 15 days upon a showing of good cause. This makes it consistent with solar energy production tax reports. Effective for reports filed in 2018 and thereafter.

Sections 14 and 15. Division of duties between local and county assessor. Requires that local assessors must enter construction and valuation data into the records as directed by the county auditor and the county assessor. Effective for assessment year 2018 and thereafter.

Section 16. Valuation notice compliance. Provides that if a county or city assessor fails to timely mail valuation notices to taxpayers, the assessor must mail an additional valuation and convene a supplemental local board of appeal and equalization meeting or local review session. Effective for valuation notices sent in 2018 and thereafter.

Section 17. Blind/disabled homestead classification. Clarifies that for class 1b blind or disabled homestead property, for market value in excess of $50,000, the remainder of the property is classified as either class 1a or 2a property whichever is appropriate. Effective for assessment year 2018 and thereafter.

Section 20. Utility and railroad valuation appeals. Requires utility and railroad taxpayers who challenge the commissioner’s ordered or recommended valuation of their property under chapter 271 to also sue the counties or taxing districts involved. As in cases where taxpayers challenge the tax that results from the commissioner’s order, service will be on the commissioner only and not on the local officials. Effective for appeals of valuations made in assessment year 2018 and thereafter.

Section 21. State assessed property tax appeals. Provides that utility and railroad company appeals to the Minnesota Tax Court from orders of the commissioner must be filed within the time period in section 271.06, subd. 2, (60 days from the date of the order or 90 days if an extension is granted). Also provides that in the case of a conflict between section 273.372 and chapter 271 (Tax Court) or 278 (District Court or Tax Court), section 273.372 prevails. Current law only lists chapter 271. Effective for assessment year 2018 and thereafter.

Section 22. Railroad and utility company appeals. Makes various changes in how utilities and railroads may appeal their valuations. Companies must request an administrative appeal in writing within 30 days of the valuation. The commissioner may grant a 15-day extension to file. The appeal must include identifying information about the company, include the assessment periods, identify findings that the company disputes and identify reasons for the dispute. An appeal conference must be held within 20 days, and the commissioner must notify the company of the final determination within 30 days after the conference. Taxpayers may appeal the commissioner’s determination to either Tax Court or District Court. Paragraph (c) dealing with informal appeals is deleted because it is no longer necessary as the revised section spells out how railroad and utility companies may appeal their valuations. Effective for assessment year 2018 and thereafter.

Section 23. Settlement of appeals. Provides that when it appears to be in the best interest of the state the commissioner may settle appeals of utility and railroad valuations. Effective beginning with assessment year 2018 and thereafter.

Section 24. Administrative appeal and appeal to tax court. Clarifies that if a taxpayer files an administrative appeal for an order of the commissioner and also files an appeal to Tax Court for that same order, the administrative appeal is dismissed and the commissioner no longer has to make a determination. Effective beginning with assessment year 2017.

Section 25. Equalization of public utility structures. Provides that after making the apportionment required in 2015 Minn. Rules, part 8100.0600 the commissioner shall equalize the values of the operating structures to the level accepted by the State Board of Equalization. Effective beginning with assessment year 2017.

Section 26. Local boards of appeal and equalization. Clarifies that the statute’s provisions related to meeting dates and times apply to local boards of appeal and equalization. Effective the day following final enactment.

Section 27. County board of appeal and equalization valuation. Provides that county boards of appeal and equalization may not make a change in value to benefit the property if the owner has denied the assessor access to the property. This would make the authority of county boards of appeal and equalization consistent with local boards of appeal and equalization, which are already prohibited from making valuation changes after an owner has denied the assessor access. Effective for county board of appeal and equalization meetings in 2018 and thereafter.

Section 28. County Board of Appeal and Equalization certification. Extends the deadline from December 1 to February 1, for county boards of appeal and equalization to certify a trained member of the board in order to be eligible to hold regular board of appeal and equalization meetings. Effective for county boards of appeal and equalization meetings held in 2018 and thereafter.

Section 29. Public meeting announcement. Clarifies that taxing authorities only need to announce the time and place of their regularly scheduled meetings at which the budget and levy will be discussed if they have such a meeting. Effective the day following final enactment.

Section 30. Property tax levy reports. Removes the requirement that towns with a population over 5,000 and communities receiving taconite aid file a property tax levy report. The reports are no longer needed for these towns and communities, as they are not subject to levy limitations. Effective the day following final enactment.

Section 31. State assessed property tax appeals. Clarifies that appeals of valuation notices may be filed in Tax Court prior to May 1 of the year in which taxes are payable only on receipt of valuation notices received from county assessors. Current law includes a citation to the notices required by section 273.121 which applies to notices received from county assessors. The statute is being clarified so that taxpayers will be aware that the additional time to appeal valuation notices does not apply to state assessed property because those notices are not required by section 273.121. Effective the day following final enactment.

Section 32. Conveyances to public entities. Clarifies and modernizes the language used in describing the procedures for taxing districts to sell tax-forfeited land. Effective the day following final enactment.

Section 33. Conditional use deed. Clarifies that when a governmental subdivision wishes to purchase tax-forfeited property that it owns, but is subject to a conditional use deed, the governmental subdivision must reconvey the land subject to the conditional use deed to the commissioner of revenue before the commissioner may convey the property free of the use restriction. Effective the day following final enactment.

Section 34. City email address. Requires cities receiving aid to register an official electronic mail address with the Commissioner for use in communicating with the city. Effective for aids payable in 2018 and thereafter.

Section 35. Aquatic invasive species prevention aid. Requires the commissioner of natural resources to certify the number of watercraft launches and watercraft trailer parking spaces in each county for purposes of administering aquatic invasive species prevention aid. Effective for aids payable in 2018 and thereafter.

Section 36. Aquatic invasive species prevention guidelines. Requires the commissioner of natural resources to certify to the commissioner of revenue the counties that have complied with the requirement to establish guidelines for addressing aquatic invasive species. Effective for aids payable in 2018 and thereafter.

Section 37. Tax-forfeited property contracts for deed. Clarifies that the five-day rescission period for sales made by contracts for deed does not apply to sales of tax-forfeited property. Effective for sales of tax-forfeited land occurring the day following final enactment and thereafter.

Section 38. Property tax exemption for public utility project. Restores an exemption for personal property of an electric generating facility that was inadvertently repealed in 2014. The provision is revived and reenacted. Effective retroactively from May 20, 2014.

Section 39. Repealer.

  1. Repeals section 281.22, which is an obsolete provision that provided a one-year notice period for the expiration of redemption for properties bid in for the state prior to 1935. Effective the day following final enactment.
  2. Also repeals 2015 Minn. Rules, part 8100.0700 (Equalization) because it provides an equalization formula that will be obsolete due to the new provision in chapter 273 that provides that values shall be equalized to the level established by the State Board of Equalization. Effective for assessment year 2017 and thereafter.

Article 12 - Department of Revenue

2015-2016 Policy and Technical Provisions: Miscellaneous

Sections 1, 4, 16 through 23, 25 through 27, 31 through 34, 37 through 42, 44 and 46. Commissioner’s authority. Section 4 clarifies that the commissioner may prescribe the content, format, and manner of returns and forms. Other sections are amended to cross reference section 270C.30 and conform to this language so that language regarding the commissioner’s authority to prescribe how returns and forms are filed is uniform. Amends cross references to the definition of “electronic signature” in section 270C.304 because the existing definition in chapter 270C does not apply to these property tax laws. Effective the day following final enactment.

Section 2. Revenue recapture definition of debtor. Clarifies the calculation that is used when evaluating whether a medical care debt may be submitted to the department’s revenue recapture system to have tax refunds applied to the debt. This proposal clarifies that the income of the debtor’s spouse is included in the calculation and that the spouse is considered a dependent. Additionally, the threshold income amounts listed in the statute are updated. Effective retroactively for debts incurred after December 31, 2014.

Section 3. Provide information to commissioner of human services. Allows the commissioner to provide information to the commissioner of human services to verify income for eligibility and premium payment under the medical assistance program under chapter 256B. Effective the day following final enactment.

Sections 5 through 8, 10, 14, 15, 30, 35, 36, 43, 45, 47, 48, and 49. Tax court appeals; appealable orders and notices; period of time to appeal. Provides that an appeal to Tax Court must be served and filed within 60 days of the notice date of an order, the same as the period of time to make an administrative appeal. Notice date is defined as the notice date designated by the commissioner on the order. Amends the following other sections of statute and session law to clarify and conform the period of time to appeal to 60 days from the notice date of an order or other appealable notice or determination: 270C.33, subds. 5 and 8; 270C.34, subd. 2; 270C.35, subd. 3; 270C.38, subd. 1; 289A.50, subd. 7; 290C.13, subd. 3; 296A.22, subd. 9; 296A.26; 297F.23; 297G.22; 297I.60, subd. 2; 469.319, subd. 5; and 2016 Minn. Laws, ch. 187, section 5. Section 289A.50, subd. 7 is also amended to clarify that the period of time to bring an action in district court on a denial of a claim for refund begins with the notice date. Effective for orders and notices dated after December 31, 2017.

Section 9. Administrative appeal. Clarifies that if a taxpayer files an administrative appeal for an order of the commissioner and also files an appeal to Tax Court for that same order, the administrative appeal is dismissed and the commissioner no longer has to make a determination. Effective for administrative appeals filed after June 30, 2017.

Section 11. Tax preparer administrative penalty; statute of limitation. Provides that the statute of limitations to assess an administrative penalty against a tax return preparer for an improper return equals the amount of time allowed to assess tax. Establishes a 5-year statute of limitations for imposing a penalty arising from violations not related to a specific tax return. Effective for tax preparation services provided after the day following final enactment.

Section 12. Publication of tax preparers. Extends from 90 days to three years the period of time in which the name of a tax preparer who has been subject to a penalty may be posted by the Department of Revenue. Effective the day following final enactment.

Section 13. Individual tax identification number. Clarifies that for purposes of the license clearance program, a licensing authority may accept an individual tax identification number in addition to social security and Minnesota business identification numbers. Effective the day following final enactment.

Sections 23. Reports of utility companies. The changes to subd. 1 and 2 are technical changes that refer to utility and pipeline companies doing business in Minnesota and states that an extension to file the report must not exceed 15 days. Also provides that if the utility company does not file the report required, the commissioner may file a report for the company or make valuations based on information in the commissioner’s possession. Effective the day following final enactment.

Section 24. Deed tax on school forest. Clarifies that the deed tax for a conveyance of tax-forfeited land for a governmental subdivision for a school forest is $1.65. Effective the day following final enactment.

Section 28. Partnership return due date. Requires that partnerships, like corporations, file their tax returns on the same day that the equivalent federal return is due. Effective the day following final enactment.

Section 29. Erroneous refund statute of limitations. Defines what constitutes an “erroneous refund” and further clarifies that assessments of tax that do not involve an erroneous refund are conducted under Minn. Stat. section 289A.38. Effective July 1, 2017.   

Article 13 - Department of Revenue

2015-2016 Sustainable Forest Incentive Act

Section 1. Sustainable Forest Incentive Act (SFIA) forest management plans and eligibility requirements. Provides that forest management plans required under the SFIA must be registered with the Department of Natural Resources. Also adds the requirement that if land enrolled in the Reinvest in Minnesota Program, certain state or federal easement programs, the Agricultural Preserves Program and Green Acres Programs, the entire parcel that contains those acres cannot be enrolled in the SFIA program. Under current law, land in these programs is not considered for purposes of determining whether at least 50% of the land meets the definition of forest land. The provision that forest management plans must be registered with the Department of Natural Resources is effective for certifications filed after July 1, 2018. The provision regarding land enrolled in specific state or federal programs is effective the day following final enactment.

Clarifies that land classified as 2c managed forest land cannot be enrolled in the SFIA program. This is a technical clarification because Minn. Stat. section 273.13, subd. 23(d) already defines 2c land as land that is not enrolled in the SFIA. Also adds a provision that a minimum of three acres must be excluded from enrolled land when the land is improved with a structure. The provision regarding 2c land is effective for certifications and applications due in 2017 and thereafter. The provision requiring a minimum 3 acre exclusion from enrolled land is effective the day following final enactment.

Section 2. Verification of forest management plans. Requires that on the request of the commissioner of revenue, the commissioner of natural resources must annually verify that claimants have current forest management plans on file with the Department of Natural Resources. Effective for certifications filed after July 1, 2018.

Section 3. Repealer. Repeals sections 290C.02, subds. 5 and 9, and 290C.06 that contain an obsolete formula for calculating SFIA payments. These sections are not needed because the payment is now a flat $7 per acre. Effective the day following final enactment.

Article 14 - Department of Revenue

2015-2016 Policy and Technical Provisions: Special Taxes and Sales and Use Taxes

Sections 1, 3 and 13. Township mutual insurance companies. Replaces the term “town and farmers’ mutual insurance companies” with “township mutual insurance companies”. This is consistent with the use of the term in chapter 67A, which deals with these entities. Effective the day following final enactment.

MinnesotaCare Tax

Section 2. Omission in excess of 25%. Clarifies that a person that omits from the MinnesotaCare tax return an amount of tax that is 25% greater than the amount reported may be assessed within 6-½ years after the due date of the return, or the date the return was filed, whichever is later. Effective the day following final enactment.

Section 4. Pharmacy refund. Provides that the request for refund has to be filed on an annual return by March 15 of the year following the year in which the drugs were delivered outside Minnesota. A refund will not be allowed if the initial claim for refund is filed later than one year from that date. Effective for qualifying legend drugs delivered outside Minnesota after December 31, 2017.

Petroleum Tax

Section 5. Bulk storage or bulk storage facility. Adds a new subdivision 9a, to provide a definition of bulk storage or bulk storage facility. Effective the day following final enactment.

Section 6. Motor fuel definition. Modifies the definition motor fuel to also refer to a gaseous form of fuel. Effective the day following final enactment.

Section 7. Petroleum products definition. Modifies the definition of petroleum products, to clarify that biobutanol is a petroleum product. Effective the day following final enactment.

Section 8. Biobutanol blends. Clarifies that biobutanol blends are taxable as gasoline. Effective day following final enactment.

Sales Tax

Section. 9. Air flight equipment definition. Modifies the definition of “air flight equipment” to clarify that the sales tax exemption does not apply to aircraft with a maximum takeoff weight of less than 30,000 pounds. This amendment conforms to the definition of “flight property” in section 270.071, subd. 4. Effective for sales and purchases made after December 31, 2017.

Section. 10. Deposit of revenues. Clarifies that the amount that is to be deposited in the state airports fund from the sales tax collected on the sale or purchase of an aircraft is limited to the revenue generated from the sales tax imposed under section 297A.62, subd. 1 (6.5 percent rate). The amount to be deposited in this fund does not include the revenue generated by the sales tax imposed under section 297A.62, subd. 1a (0.375 percent rate), which must be deposited as provided in the Minnesota Constitution. Effective the day following final enactment.

Miscellaneous

Section 11. Untaxed gambling product. Provides a tax return filing requirement for untaxed gambling. Provides authority to tax all forms of gambling that are illegal pursuant to the criminal code under chapter 609. Disclosure provisions are also provided. Effective for games played or purchased after June 30, 2017.

Section 12. Recyclable materials and source-separated compostable materials. Clarifies that the exemption from the solid waste management tax for recycling materials is only available if the price for handling the materials is separately itemized on a bill to the generator of the waste; and to correct terminology regarding the exemption for source-separated compostable materials, consistent with terms used in chapter 115A and related rules. Effective the day following final enactment.

Section 14 and 15. Firefighter relief surcharge payments. Clarifies that the commissioner of revenue, not the commissioner of management and budget, shall determine amount of payment for the firefighter relief surcharge for cities of the first class. Effective the day following final enactment.

Section 16. Occupation tax net operating loss. Deletes a reference to an obsolete net operating loss provision. The repealed provision applies to tax periods for which net operating loss carryover is no longer available. Effective the day following final enactment.

Article 15 - Department of Revenue

2017 Technical Provisions: Individual Income, Corporate Franchise & Estate Taxes

Section 1. Subtraction for military retirement pay. Clarifies that a taxpayer is prohibited from claiming both the credit for military service under and the subtraction. Effective retroactively for tax years beginning after December 31, 2015.

Section 2. Retirement plan contribution. Corrects a statutory reference to the Internal Revenue Code. Effective the day following final enactment.

Section 3. Property tax refund. Provides that a taxpayer is only required to provide a property tax statement upon request by the commissioner. This section is effective for refunds based on rent paid after December 31, 2015, and property taxes payable after December 31, 2016.

Section 4. Federal Estate Tax Credit. Deletes an obsolete reference to the federal credit for state estate or inheritance taxes. Effective the day following final enactment.

Section 5. Repealer. Repeals sections 290.9743 and 290.9744, which became obsolete following the repeal of federal FASIT (Financial Asset Securitization Investment Trust) legislation in 2005. Effective the day following final enactment.

Article 16 - Department of Revenue

2017 Policy and Technical Provisions: Sales and Use, and Special Taxes

Sections 1 through 3, 5, and 8. Snowmobiles, all-terrain vehicles, and watercraft. Authorizes the commissioner of revenue to enter into an agreement with the commissioner of natural resources for the DNR and authorized deputy registrars of motor vehicles to be agents of the commissioner of revenue. As agents, they will collect use tax on snowmobiles, all-terrain vehicles, and watercraft from a person applying for a registration or license if the applicant does not have a receipt, invoice, or other document to prove that sales or use tax was paid on the purchase, that the purchase was exempt, or that the purchase was from a Minnesota dealer. Additionally, they may issue refunds of use tax paid to them in error. Effective the day following final enactment.

Incorporates the authority to collect use tax, and to issue refunds of use tax collected in error under those subdivisions. Also deletes obsolete language regarding a purchaser’s certificate as those are no longer issued. Effective for snowmobiles and all-terrain vehicles registered after June 30, 2017 and for watercraft licensed after June 30, 2017.

Authorizes the Department of Revenue to disclose return information related to taxes imposed under chapter 297A to the Department of Natural Resources or an authorized deputy registrar of motor vehicles, to administer sections 297A.825, 84.82, subd. 10, 84.922, subd. 11, and 86B.401, subd. 12, including disclosure to verify that sales or use tax has been paid on the purchase of a snowmobile, all-terrain vehicle, or watercraft, or that the purchase was exempt from tax under chapter 297A. Effective the day following final enactment.

Section 4. Electronic waste registration fee. Clarifies that the annual electronic waste registration fee of manufacturers who sold fewer than 100 video display devices during the prior year is a variable fee based on the amount by which the manufacturer failed to meet its recycling obligation. Effective for registration fees due after June 30, 2017.

Section 6. Special law local taxes; definitions. Clarifies that when a special law grants a local government the authority to impose a local tax other than sales tax (for example, lodging, entertainment, admissions, or food and beverage taxes), and the Department of Revenue administers the local tax, then the terms in the special law, unless the special law defines them, are defined as the same terms are defined in chapter 297A, or in MN Rules, chapter 8130. If the terms are not defined in the sales tax statute or rule, then the definition is to be consistent with the Department’s position as to the extent of the tax base. Further clarifies that the terms are defined in this matter regardless of whether the local government specifically or formally adopts the definitions into its local law. Effective the day following final enactment.

Section 7. Purchaser refunds. Clarifies that refunds for sales for resale will not be paid to purchasers if the vendor has a published no resale policy. Effective the day following final enactment.

Section 9. Surcharge. Consolidates three filing dates for the firefighter relief surcharge to two filing dates. By combining the March and May filings, there will no longer be filing dates for a two-month period. Effective for returns due after October 31, 2017.

Sections 10 and 11. Occupation tax apportionment. Removes obsolete apportionment language from the occupation tax. Effective the day following final enactment.

Section 12. Production tax. Separates the language relating to the imposition of tax on other iron-bearing material into a new paragraph, and changes the term "direct reduced iron" to "direct reduced ore" to make the term consistent with its use in the rest of the minerals chapter. Effective the day following final enactment.

Sections 13 and 14. Production tax distribution. Clarify distributions of production tax revenue to cities and towns affected by mining, and to counties with an electric power plant. Effective the day following final enactment.

Sections 15 and 16. Local lodging taxes. Clarify that all local lodging taxes, whether collected by the local government or the state, imposed under this subdivision or under a special law, apply to the total consideration paid to obtain access to lodging, including ancillary or related services such as services provided by accommodations intermediaries (as defined in section 297A.61, subd. 47), and similar services. Effective the day following final enactment, and states that the legislature confirms its intent that section 469.190, its predecessor provisions, and any special laws authorizing lodging taxes, were and are intended to apply to the total consideration paid to access lodging.

Additionally provides that if the local lodging tax is not collected by the department of revenue, then the local government may by ordinance limit the filing and remittance of a tax by an accommodations intermediary to once a calendar year. The local government must inform the accommodations intermediary of the due date of the return and remittance, which must be the same as the due date for general sales tax, and provide the intermediary with geographic and zip code information necessary to correctly collect the tax. Effective the day following final enactment.

Article 17: Department of Revenue

2017 Policy & Technical: Property Tax

Sections 1 and 17. Flight property apportionment. Adjusts the formula for apportioning the value of flight property to Minnesota, so that apportionment is based on the total of one-half of the percentage of revenue ton miles flown by an airline company within the state and one-half of the percentage of total departures by an airline company within the state. Also repeals section 270.074, subd. 2, which provides for alternative apportionment methods upon petition to the Commissioner. Effective for assessment year 2018 and thereafter.

Section 2. Flight property. Corrects an erroneous cross-reference to the proper subdivision that provides for the net tax capacity of the flight property of airline companies. Effective the day following final enactment.

Section 3. Statement of exemption. Requires the commissioner to publish on the department’s website a list of exemptions for which a taxpayer must file a statement of exemption. Effective for applications for exemption submitted in 2018 and thereafter.

Section 4. Filing extension. Adds a subdivision allowing the commissioner to extend the time for a taxpayer to file a report under the solar energy production tax by fifteen days. Effective for reports filed in 2018 and thereafter.

Sections 5, 6, and 7. Certificate of real estate value. Allows the Commissioner to set the threshold amount of consideration paid for real estate that triggers the need for filing a certificate of real estate value. Removes references to paper copies of the certificate of value. Effective for certificates of value filed after December 31, 2017. Also removes the requirement that the Department of Revenue provide paper certificate of value forms to counties, as all certificates of value are now submitted electronically. Effective the day following final enactment.

Sections 8. Training requirements. Allows the Commissioner of Revenue to require an individual at a county or city who administers property tax to complete additional training to promote uniform and equitable implementation of the property tax laws.

Sections 9 and 10. Homestead application. Requires that a homestead applicant provide the social security number of a married spouse who does not occupy the property. Effective for applications for homestead filed in 2018 and thereafter.

Section 11. Homestead property tax relief. Clarifies that the credit for property in a taconite tax relief area applies to both homestead and nonhomestead portions of qualifying property. Effective the day following final enactment.

Sections 12 and 13. Local and county boards of appeal and equalization. Clarifies training compliance requirements for local and county boards of appeal and equalization and specifies that the transfers of appeal and equalization powers for local and county boards that do not comply with the compliance requirements are for a minimum of two assessment years. Effective for board of appeal and equalization meetings held in 2018 and thereafter.

Section 14. Annexation requirements. Removes the requirement that the Office of Administrative Hearings send copies of municipal boundary adjustment orders to the Department of Revenue. Effective the day following final enactment.

Section 15. County program aid population. Modifies certain population-based definitions to accurately reflect the data used in calculating county program aid. Effective the day following final enactment.

Section 16. Town aid. Provides the correct usage of the term “ratio” for town aid purposes and provides that the data to be used is the most recently available data as of January 1 of the year in which the aid is calculated. Effective the day following final enactment.

Article 18 - Department of Revenue

 Paid Preparers Policy Provisions

Sections 1 through 22. Paid preparer oversight. Expands and clarifies the obligations of paid tax return preparers for all tax types, and enhances the authority of the commissioner of revenue to sanction and disclose improper behavior of such preparers, including the authority to issue a cease and desist order. A violation of a cease and desist order would support the assessment of a civil penalty up to $5,000 per violation, and a request for a civil court injunction and court ordered penalties up to $10,000 per violation. Recodifies provisions in section 270C.445, regarding refund anticipation loans and checks. Clarifies and expands the commissioner’s obligation to publish the names of paid preparers that have been sanctioned for improper conduct in the course of preparing returns. Amends authority to seek a district court injunction to conform to and support the authority to issue cease and desist orders. Extends to all tax types the authority to assess a preparer penalty for a reckless or willful understatement of liability. Clarifies and expands penalties for failure to provide a preparer tax identification number (“PTIN”) when required. Effective for claims and returns filed after December 31, 2017.

 
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