Senate Counsel, Research
and Fiscal Analysis
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Tom Bottern
Director
   Senate   
State of Minnesota
 
 
 
 
 
H.F. No. 677 - Omnibus Tax Bill
 
Author: Senator Rod Skoe
 
Prepared By: Nora Pollock, Senate Counsel (651/297-8066)
Eric S. Silvia, Senate Counsel (651/296-1771)
 
Date: May 20, 2013



 

ARTICLE 1 – HOMESTEAD CREDIT REFUND

Section 1.  Household income.  Modifies the definition of household income used for the property tax refund program (for both homeowners and renters) by excluding a portion of contributions to voluntary retirement plans, and including all distributions from such plans.  Also modifies the addition for the federal tuition deduction to reference the Internal Revenue Code and strikes the obsolete addition for unemployment benefits.

Section 2.  Homestead credit refund.  Names the homeowner property tax refund the “homestead credit refund,” and provides a new schedule for the refund.  The new schedule decreases the threshold percentage used to determine eligibility for the refund, for homeowners with household income between $22,780 and $105,500, with the threshold decreasing to 2.0 percent for homeowners with household incomes from $22,780 to $65,050, and the threshold percentage at the highest income levels eligible decreasing from 3.5 percent to 2.5 percent.  The schedule also updates the income brackets and maximum refunds to the amounts projected to be in effect under current law for refunds based on taxes payable in 2014.  The reduction in the threshold percentage allows for the number of income ranges in the schedule to be decreased from 27 to 23.  Effective beginning with refunds based on taxes payable in 2014.

Section 3.  Renter property tax refund.  Decreases the threshold percentages under the renter property tax refund to be no higher than the threshold percentages proposed for the homestead credit refund in section 2.  The effect is to decrease the thresholds to be two percent for household incomes from $34,300 to $57,170, the maximum income eligible.  Under current law, threshold percentages for incomes from $34,300 to $57,170 increase as income increases from 2.2 percent to 3.5 percent. The reduction in the threshold percentage allows for the number of income ranges in the schedule to be decreased from 29 to 22.  Increases the maximum refund allowed under the renter property tax refund across all income ranges, with the maximum at the lowest income ranges increasing from $1,620 to $2,000.

Section 4.  Homestead credit refund and renter property tax refund; inflation adjustment.  Updates the annual inflation adjustment of the income brackets and maximum refunds for the homestead credit refund and renter property tax refund to be calculated relative to the schedules provided in sections 2 and 3.

Section 5.  Notification of potential eligibility; report.  Directs the commissioner to undertake a onetime effort in 2014 to notify homeowners who may be eligible for the homestead credit refund, using data from the most recent income tax returns and homestead credit refund claims matched with information about current year homestead property tax information provided by county auditors.  Effective for refunds based on taxes payable in 2014, with the notifications due by August 1, 2014.

Requires a report to the legislature on the notification project, due by March 15, 2015.  The report is to include information on:

  • the count and dollar amount of homestead credit refund claims anticipated prior to the notification;
  • the number of notifications issued by county;
  • the count and dollar amount of claims processed through December 31, 2014; and
  • information on any other outreach efforts conducted by the department.

ARTICLE 2 – PROPERTY TAX AIDS AND CREDITS

Section 1.  Disparity reduction credit.  Increases the disparity reduction credit to an amount necessary to reduce the effective tax rate on both commercial-industrial and apartment property to 1.9 percent in the border cities of Breckenridge, Dilworth, East Grand Forks, and Moorhead.  Current law reduces the effective tax rate to 2.3 percent.

Section 2.  Forest land qualification.  Excludes land exceeding 60,000 acres that is subject to a single conservation easement and any land that becomes subject to a conservation easement after the effective date of the act from participation in the SFIA program.

Section 3.  Eligibility requirements; SFIA.  Requires that claimants enrolling more than 1,920 acres in the program must also allow motorized access on established and maintained roads and trails, unless the road or trail is temporarily closed due to safety, natural resource, or road damage.

Section 4.  Length of covenant; SFIA.  Allows a claimant to terminate its covenant in the program if future changes are made to the payment formula.

Section 5.  Calculation of incentive payment; SFIA.  Sets the annual payment of property enrolled in the sustainable forest incentive program at $7.00 per acre, and removes the $100,000 cap per recipient.

Section 6.  Police and fire state aid.  Appropriates $15,500,000 from the general fund in fiscal year 2014 and thereafter to the commissioner of revenue and allocated as follows:

  1. 35.484 percent as fire state aid;
  2. 58.065 percent to PERA for deposit as a supplemental state pension funding aid in the public employees police and fire retirement fund; and
  3. 6.452 percent to the Minnesota State Retirement System for deposit as a supplemental state pension funding aid in the state patrol retirement fund.

Section 7.  Pre-1940 housing percentage. “Pre-1940 housing percentage” means 100 times the most recent count of all housing units built before 1940 divided by the number of all housing units in the city.  A separate definition is provided for the city of East Grand Forks.

Section 8.  Percent of housing built between 1940 and 1970.  “Percent of housing built between 1940 and 1970” is equal to 100 times the most recent count of all housing units in the city built after 1939, but before 1970, divided by the total number of all housing units in the city.

Section 9.  City revenue need.  Defines "city revenue need" for three different sized cities.

Population greater than 10,000 – "city revenue need" means 1.15 times the sum of (1) 4.59 times the pre-1940 housing percentage; plus (2) 0.622 times the percent of housing built between 1940 and 1970; plus (3) 169.425 times the jobs per capita; plus (4) 307.664.

Population equal to or greater than 2,500 but less than 10,000 – "city revenue need" means 1.15 times the sum of (1) 572.62; plus (2) 5.026 times the pre-1940 housing percentage; minus (3) 53.768 times household size; plus (4) 14.022 times peak population decline.

Population less than 2,500 – "city revenue need" means the sum of 410 plus 0.367 times the city’s population over 100. The city revenue need cannot exceed $630 per capita.

Section 10.  Jobs per capita.  “Jobs per capita” means the average number of employees in the city divided by the city’s population for the same calendar year.

Section 11.  Peak population decline.  “Peak population decline” is equal to 100 times the difference between one and the ratio of the city’s current population, to the highest city population reported in a federal census from 1970 or later, but not less than zero.

Section 12.  Sparsity adjustment.  For a city with a population of 10,000 of more, the sparsity adjustment is 100 for any city with an average population density less than 150 per square mile.  For any other city, the sparsity adjustment is zero.

Section 13.  Town aid.  Provides aid payments to towns in 2014 and thereafter equal to the product of (1) its agricultural property factor; (2) its town area factor; (3) its population factor; and (4) 0.0045.  If the sum of all aids payable under this subdivision exceeds the limit, the distribution to each town must be reduced proportionately.

Section 14.  City formula aid.  For aids payable in 2014 only, “city formula aid” equals the sum of (1) its 2013 certified aid and (2) the product of the difference between its unmet need and its 2013 certified aid and the aid gap percentage. For aids payable in 2015 and thereafter, city formula aid is equal to the sum of (1) its formula aid in the previous year and (2) the product of the difference between its unmet need and its certified aid in the previous year and the aid gap percentage.

Section 15.  City aid distribution.  In calendar year 2014 and thereafter, each city receives an aid distribution equal to the sum of (1) the city formula aid and (2) its aid adjustment.  For aids payable in 2014 only, the total aid for a city may not be less than the amount it was certified to receive in 2013.  For aids payable in 2015 and thereafter, the total aid for a city must not be less than the amount it was certified to receive in the previous year minus the lesser of $10 multiplied by its population or 5% of its net levy in the year prior to the aid distribution.

Section 16.  Certified aid adjustments.  Provides additional aid in the amount of $150,000 for the city of Warroad through 2018, $160,000 for the city of Mahnomen for aids payable in 2014 and thereafter, and $1,000,000 for the city of Red Wing for 2014 only.

Section 17.  Payment dates.  Allows a city that was deemed to be in a disaster area in April 2013 to receive its December LGA payment with its July payment. 

Section 18.  Cities; appropriation.  Sets the city aid appropriation for aids payable in 2014 at $507,598,012; the appropriation for aids payable in 2015 is set at $509,098,012; and the appropriation for aids payable in 2016 is set at $511,598,012.

Section 19.  Counties; appropriation.  Increases the appropriation for county program aid by $40 million for aids payable in 2014 and thereafter.  The $40 million increase is split evenly between county formula need and tax base equalization aid.

Section 20.  Towns; appropriation.  Sets the town aid appropriation for aids payable in 2014 and thereafter at $10,000.000.

Section 21.  Minneapolis debt service aid.  Provides for debt service aid to the city of Minneapolis equal to forty percent of the city’s levy for library referendum bonds. 

Section 22.  PILT; purpose statement.  Provides a purpose statement for payment in lieu of taxes (PILT).

Section 23.  PILT; acquired natural resources land.  Modifies definition of ‘acquired natural resources land’ to specifically exclude ‘wildlife management land.’ 

Section 24.  PILT; other natural resources land.  Modifies definition of ‘other natural resources land’ to specifically exclude ‘acquired natural resource land’ and ‘wildlife management land.’

Section 25.  PILT; military game refuge.  Defines ‘military game refuge' as land owned in fee by another state agency for military purposes and designated as a state game refuge.

Section 26.  PILT; transportation wetland.   Defines ‘transportation wetland’ as land administered by the Department of Transportation in which the sate acquired, by purchase from a private owner, a fee title interest in over 500 acres of land within a county to replace wetland losses from transportation projects.

Section 27.  PILT; wildlife management land.   Defines ‘wildlife management land’ as land administered by the commissioner in which the state acquired, from a private owner by purchase, condemnation, or gift, a fee interest under the authority granted in chapter 94 (lands, state forests) or 97A (game and fish) for wildlife management purposes and actually used as a wildlife management area.

Section 28.  PILT; payments.  Sets PILT payments as follows:

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

Section 29.  PILT; determination and certification of land.  Clarifies that the commissioner of natural resources shall determine and certify to the commissioner of revenue the number of wildlife management land and military refuge land within each county and the commissioner of transportation shall determine and certify to the commissioner of revenue the number of acres of transportation wetland within the county, to reflect the additional classifications of land.

Section 30.  PILT; determination of appraised value.  Clarifies that the appraised value of acquired natural resources land is the purchase price until the next sixth year.

Section 31.  PILT; townships.  Requires that ten cents of the amount received by the county for each acre of acquired natural resources land must be paid to each organized township.

Section 32.  PILT; distribution for wildlife management land and military refuge landRequires the county treasurer to allocate payments for these lands among the county, town, and school districts as if they were taxes on the land received in the year.

Section 33.  Mahnomen County; appropriations.  Increases the annual aid appropriations to taxing jurisdictions in Mahnomen County.  $1,200,000 is annually appropriated from the general fund to the commissioner of revenue to make the following payments: $900,000 to the county of Mahnomen, $160,000 to the city of Mahnomen, and $140,000 to Independent School district No. 432, Mahnomen.

Section 34.  Ineligibility; SFIA.  Allows lands that no longer qualify for the SFIA program due to the conservation easement restriction in section 2 to be released from the SFIA covenant.

Section 35.  Reenrollment; SFIA.  Allows claimants who chose to terminate participation in the SFIA program under the 2011 law changes to the program to reenroll and be eligible for a payment in October, 2013. 

Section 36.  Repealer.  Repeals provisions relating to the current local government aid formula and obsolete aid adjustments.

ARTICLE 3 -- EDUCATION AIDS AND LEVIES

Changes summarized in this section are in addition to the changes passed by the legislature in the education omnibus conference committee report (H.F. 630).

Section 1. Achievement and integration revenue. Further amends the achievement and integration revenue program by establishing a levy amount at 30 percent of revenues.

Section 2. General education revenue. Adds location equity revenue to general education revenue.

Section 3. Location equity revenue. Establishes a new component of general education revenue called location equity revenue and sets the revenue amount equal to $424 per adjusted pupil unit for any district located wholly or partially in the metropolitan area and $212 per adjusted pupil unit for other districts serving at least 2,000 students.  This section also provides the location equity revenue through an equalized aid and levy with an equalizing factor of $515,000 and calculates and spreads the levy on referendum market value.  School districts are provided the option to opt out of the location equity revenue program.

Section 4. General education aid. Adds location equity revenue to general education aid.

Section 5. Referendum revenue. Creates a new third tier of referendum equalization with new equalization levels set for each tier. This section also provides that $300 per pupil unit for all school districts is allowed to be board-approved rather than voter-approved.

Section 6. Operating referendum freeze; fiscal year 2015. For fiscal year 2015 only, prohibits a school district from authorizing an increase in its operating referendum, except to reauthorize an expiring referendum, unless either (i) the board has adopted a resolution to conduct a referendum prior to June 30, 2013; (ii) the district did not have an operating referendum in fiscal year 2014, or (iii) the district is in statutory operating debt.

 ARTICLE 4 --  PROPERTY TAX

Section 1. Evaluation and report.  Extends the maximum amount of time the Board of Water and Soil Resources (BWSR) has to evaluate a local water management entity’s progress in accomplishing its plan to ten years. Allows the board to determine the frequency based on the budget and operations of the entity.

Section 2. Tax levy authority.  Broadens tax levy authority by allowing a county, municipality, or township to levy for implementation funds for a comprehensive watershed management plan.  Clarifies that counties may levy for the reasonable costs to soil and water conservation districts for administering and implementing programs identified in the plans.

Section 3. Financial assistance.  Requires a county that implements a water implementation tax to raise matching funds for base grants awarded by BWSR to levy at a rate sufficient to generate a minimum amount.  Authorizes the use of funds raised by metropolitan county conservation fees (a $5 fee on mortgage and deed recordings/registrations) to be used as matching funds for the base grants and to address high-priority needs in local water management plans or comprehensive watershed management plans.

Section 4. Cost-sharing funds.  Eliminates cost-share fund allocation requirements that required 70 percent of cost-share funds to be allocated to certain areas and no more than 20 percent to be allocated for technical and administrative assistances.  Requires funds for technical assistance to be used to leverage federal or other nonstate funds or address high-priority needs in local water management plans or comprehensive watershed management plans.

Section 5. Authority.  Allows soil loss ordinances adopted by counties, cities, and towns to use the soil loss tolerance for each soil type developed by BWSR, in addition to those in the United States National Resources Conservation Service Field Office Technical Guide, which is currently the only approved source. Requires soil loss ordinances to be consistent with a comprehensive plan, local water management plan, or watershed management plan.

Section 6. Manufactured homes and park trailers.  Exempts manufactured homes and park trailers from the motor vehicle registration tax and the personal property tax if held as inventory by a limited dealer. 

Section 7. Manufactured home as dealer inventory.  Defines a manufactured home as dealer inventory if it is listed as inventory by a licensed or limited dealer, and is unoccupied and not available for rent. The exemption under this subdivision is allowable for up to 5 years after the date a home is initially claimed as dealer inventory.

Section 8 and 15. Assessor sanctions; refusal to license. Authorizes the State Board of Assessors to censure, warn, or fine a licensed assessor or any other person employed by an assessment jurisdiction for failing to perform duties through malfeasance, misfeasance, or nonfeasance.

Section 9. Report on disciplinary actions. Requires the State Board of Assessors to publish a report in each odd-numbered year detailing the number and types of disciplinary actions recommended by the commissioner of revenue and the disposition of those recommendations.

Section 10. Disposition of fees and fines. Clarifies that all fines collected by the State Board of Assessors must be paid to the commissioner of management and budget for deposit in the general fund.

Section 11. Assessor accreditation. Requires that every individual who appraises or physically inspects real property for property tax purposes must obtain licensure as an accredited Minnesota assessor from the State Board of Assessors by July 1, 2019, or within four years of that person becoming licensed as a certified assessor, whichever is later.

Section 12. Economic development; public purpose.  Increases the allowed time that a jurisdiction may hold property awaiting development off the tax rolls from nine years to 15 years, if (1) the property is located in a city with a population under 20,000 located outside the metro area; or (2) if the property is located in a city and acquired on or after January 1, 2000, and on or before December 31, 2010.

Section 13. Certain property owned by an Indian tribe.  Creates a property tax exemption for certain property located in Minneapolis owned by a federally recognized tribal government, or its instrumentality, and used for tribal government activities or services to members of the tribe.  The exemption applies only to property used for noncommercial and nonresidential purposes, and expires with taxes payable in 2024.

Section 14. Electric generation facility; personal property.  Provides a property tax exemption for the personal property of a new electric generation facility on which construction begins between June 1, 2013, and June 1, 2007, that: exceeds five megawatts of installed capacity, utilizes natural gas as a primary fuel, is owned and operated by a municipal power agency, is located within the service territory of a municipal power agency’s utility that serves a metropolitan county, and connects directly with a municipality’s substation.

Section 16. Commissioner review of assessment practices.  Authorizes county assessors to file a written complaint with the commissioner of revenue detailing allegations of nonfeasance, malfeasance, or misfeasance by a local assessor. After receiving the complaint, the commissioner must complete an investigation and recommend an appropriate action to the State Board of Assessors.

Section 17. Conservation property tax valuation. Clarifies that the value of real property subject to a conservation easement or restriction shall not be reduced by the assessor if the restriction or easement is for a conservation purpose and recorded on the property and used in accordance with the terms of the restriction or easement.  This section does not apply to easements or restrictions covering riparian buffers used for water quantity or quality control, or to easements in a county that has adopted, by referendum, a program to protect farmland and natural areas since 1999.

Section 18. Class 4.  Creates a second tier for class 4d (low-income properties) at .25 percent. The first tier limit is set at $100,000 for assessment year 2014.  In subsequent years, the limit is adjusted each year by the average statewide change in estimated market value of class 4d and 4a property for the previous year, excluding valuation changes due to new construction.

Section 19 and 20. Federal active service exception; due dates.  Grants a four-month grace period for complying with the property tax due dates for homestead property owned by an individual who is on federal active service.  No late fees or penalties may be assessed during this period.  The taxpayer must also provide proof of the dates of active federal service at the time of payment.

Section 21. Duties of county auditor and treasurer.  Provides that property owned by an individual who is on active federal service on the property tax due date shall not be deemed delinquent.  This section is a result of the four-month extension under section 20.

Section 22. Confessions of judgment; class 3a property.  Removes the value cap of $500,000 for class 3a property eligible for a confession of judgment and adds an approval requirement by the county auditor.  Also allows assessment authorities or municipalities to waive or abate repayment of a portion of special assessments.  Conditions including, but not limited to, environmental remediation may be required when considering eligibility.

Section 23. Installment payments.  Adjusts amount and number of payments under confessions of judgment by allowing an initial payment of one-fifth the amount and four equal, annual installments.

Section 24. Expiration of time for redemption.  Corrects cross-reference relating to redemption periods under section 25.

Section 25. Period for redemption.  Removes five-year period for redemption for homestead or seasonal residential recreational land, so that the redemption period for most properties is three years.

Sections 26, 27, 28, and 29. Hennepin and Ramsey Counties.  Authorizes Hennepin and Ramsey Counties to impose the mortgage registry and deed tax through 2028.

Sections 30 and 31. Special service and housing improvement districts.  Extends the authority to establish special service and housing improvement districts without special law authorization, by fifteen years.

Section 32. Bloomington computation.  Removes the city of Bloomington from having to repay loans to the fiscal disparities pool and requires the state to make these payments for the remaining four years, 2015-2018.

Section 33. Cook-Orr hospital district.  Modifies the levy authority of the Cook-Orr Hospital District by allowing the levy to be used to purchase equipment, parts, and replacement parts for ambulances, in addition to the existing authority to purchase ambulances.  Maintains the current prohibition on using the levy for operating costs.  Also provides that the proceeds of the levy be divided equally between the Cook ambulance service and the Orr ambulance service.

Section 34. Sawyer cemetery levy.  Reinstates and makes permanent Carlton County’s authority to levy in and for the unorganized territory of Sawyer for cemetery purposes and eliminates the $1,000 annual cap on the levy.  

Section 35. Northwest Minnesota HRA levy authority; effective date.  Extends the authority of the Northwest Minnesota Multicounty Housing and Redevelopment Authority to levy up to 25 percent of its total levy authority on its own by five years, through taxes payable in 2018.

Section 36. Cloquet area fire and ambulance taxing district; agreement.  Allows municipalities to join the district that are noncontiguous to current member-municipalities.

Section 37. Cloquet area fire and ambulance taxing district; tax.  Requires the district board to determine the amount of the levy attributable to fire and ambulance services.  Costs of ambulance services shall be levied at a rate not to exceed 0.019 percent of estimated market value.  For municipalities that receive both fire and ambulance services, the levy shall be at a rate not to exceed 0.2835 percent of estimated market value.

Section 38. Marshall County farm homesteads.  Allows farmers in Marshall County who were forced to move away from their farms due to flooding in 2009 to continue to receive agricultural homestead classification on the farmland indefinitely, provided they continue to reside in Minnesota within 50 miles of the land. 

Section 39. Entertainment facilities coordination.  Directs Minneapolis and St. Paul to study and report to the legislature on establishing a joint governing structure to be responsible for the joint administration, financing, and operating of the Target Center in Minneapolis and the Xcel Energy Center in St. Paul by February 1, 2014.  Up to $50,000 is appropriated from the general fund to the commissioner of administration to pay for up to one-half of the cost of the consultant.

Section 40. Reimbursement for property tax abatements; appropriation.  Appropriates $336,000 in fiscal year 2014 only, to the commissioner of revenue to reimburse taxing jurisdictions in Hennepin County for property tax abatements granted due to the 2011 tornado.

Section 41. St. Paul Ball Park; property tax exemption.  Grants a property tax exemption for a city-owned ball park primarily used by a minor league team.  The ball park remains subject to special assessments.

Section 42. Target Center; property tax exemption.  Provides a property tax exemption for the Target Center.  The exemption does not apply to any portion of the facility leased for business purposes unrelated to the operation of the arena, and specifies that the center is subject to special assessments.

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

Section 44. Commercial seasonal recreational properties; extension of property tax due date.  Extends the due date on the first-half of property taxes for commercial seasonal recreational properties until June 15.

Section 45. Report on class 4d tier structure.  Requires the commissioners of revenue and housing finance to report to the legislature by January 31, 2015, on the implementation of the second tier of market value for class 4d properties (as created under section 18).

Section 46. Report and study on certain property; assessment moratorium.  Requires the commissioner of revenue to study the property tax assessment procedures for facilities used in the production of biofuels, wine, beer, distilled beverages, and dairy products.  For the 2013 and 2014 assessments, assessors must use assessment practices or policies in effect in that county on January 20, 2012, for determining the taxable status of these enumerated facilities.

Section 47. Property tax savings report.  Requires each city that has a population over 500 and each county to include, at the time of its certification of its proposed levy, the amount of sales and use tax paid, or estimated to be paid, in 2012 and requires a statement that provides a list of these taxes to be mailed to each taxpayers at the time of the truth in taxation notice. At the truth in taxation (TNT) hearing, estimated savings to city and county budgets, resulting from the sales tax exemption, must be discussed.

Section 48. Levy limits for taxes paid in 2013.  Establishes a levy limit for taxes payable in 2014 only for all counties over 5,000 population and all cities over 2,500 population.  The levy limit base is the certified levy, plus the certified county program aid or local government aid for taxes payable in 2012 or 2013, whichever is greater, increased by three percent. The levy limit is the levy limit base minus the certified CPA or LGA for 2014.  The levy limit may not be less than the certified levy for taxes payable in 2012 or 2013, whichever is greater.

Section 49. Appropriation. Appropriates $2,000,000, in fiscal year 2014 only, to the commissioner of revenue for a grant to the city of Moose Lake to reimburse for costs associated with connection of state facilities to sewer lines.

 ARTICLE 5 -SPECIAL TAXES

Section 1.  Cross-reference.  Eliminates a cross-reference to the Health Impact Fee that is repealed by section 28.  Effective July 1, 2013.

Section 2.  Section 10.  Jet fuel and special fuels tax.   Imposes an excise tax on jet fuel and special fuel used as a substitute for aviation gasoline of 15 cents per gallon.  Effective July 1, 2014, and applies to sales and purchases made on or after that date. 

Section 3.  Refund on graduated basis.  Cross-references the new language in section 2 relating to nonrefundable fuel tax in the graduated refund section of statutes.  Effective July 1, 2014, and applies to sales and purchases made on or after that date. 

Section 4.  Exemptions.  Exempts from the general sales tax certain air flight equipment, aircraft parts, and associated installation charges.  Effective July 1, 2014, and applies to sales and purchases made on or after that date.

Section 5.  Deposit in state airports fund.  Provides that revenues from the general sales tax collected from the taxable sale or purchase of an aircraft must be deposited in the state airports fund.  Effective July 1, 2014, and applies to sales and purchase made on or after that date.

Section 6.  Cigarette definition.  Modifies the definition of “cigarette” to include “little cigars” -  a product wrapped in a substance containing tobacco and marketed as a cigarette, unless it (1) weighs more than 4.5 pounds per thousand, (2) does not have a filter, or (3) is wrapped in whole leaf tobacco. Expansion of the definition will result in these products being taxed as cigarettes rather than “other tobacco products.”  This definition is similar to the definition of “cigarette” under the federal excise tax.

Section 7. Moist snuff.  Adds a definition of “moist snuff” products.  Under section 12, a per-container minimum tax applies to moist snuff products.

Section 8.  Premium cigar.  Defines premium cigars as hand-made cigars wrapped in whole leaf tobacco with a minimum wholesale price of $2 per cigar.

Section 9. Other tobacco products.  Removes “little cigars” from the definition of other tobacco products, because under the language of the bill, “little cigars” would be taxed as cigarettes.  Includes “premium cigars” within the definition of tobacco products. 

Section 10. Cigarette tax rate.  Increases the excise tax on cigarettes from 24 mills to 141.5 mills per unit for cigarettes weighing not more than three pounds per thousand, and from 48 mills to 283 mills for cigarettes weighing more than three pounds per thousand.  This is a per unit tax rate.  The rate of tax per cigarette is 14.15 cents on the former and 28.3 cents on the latter.  With the repeal in section 28 of the health impact fee, this results in an increase in the total excise tax/fee burden by $1.60/pack of 20 cigarettes from $1.23 to $2.83 per pack.

Section 11. Annual indexing.  Requires the commissioner of revenue to adjust the tax rates on cigarettes and other tobacco products annually.  This rate adjustment will be based on the change in the average price of cigarettes sold in Minnesota, the same basis used to annually set the in-lieu sales tax on cigarettes.

Section 12.  Other tobacco products tax rates.  Increases the tax imposed on other tobacco products from 35 percent to 95 percent of the wholesale sales price of the product.  (The health impact fee, which is repealed by section 28, makes the current total tax/fee rate on other tobacco products 70 percent, so the net increase is from 70 percent to 95 percent.) A minimum tax on individual containers of moist snuff is imposed equal to the tax on a pack of 20 cigarettes.  This minimum rate would apply to the sale of any product if 95 percent of the wholesale price of that product is less than the minimum tax.

Section 13.  Rates; premium cigars.  Imposes a tax on premium cigar distributors of 95 percent of the wholesale price, or $3.50 per cigar, whichever is less.  Effective July 1, 2013.

Section 14. Tobacco use tax.  Raises the use tax on tobacco products from 35 percent to 95 percent of the cost to the consumer, or the minimum tax as outlined above.

Section 15.  Use tax; premium cigars. Provides a use tax for premium cigars at 95 percent of the wholesale price, or $3.50 per cigar, whichever is less.

Section 16.  Nonsettlement fee.  Increases the rate of the fee on cigarettes sold by manufacturers who are not required to pay a fee in connection with a legal settlement from 1.75 cents per cigarette to 2.5 cents per cigarette.

Section 17. Cigarette sales tax.  Provides the rate of the tax that is in lieu of the sales tax on cigarettes will be calculated using both the regular sales tax rate and the additional legacy rate (equal to 3/8 of one percent).  Under present law, only the regular sales tax (6.5 percent) rate is used in the calculation, rather than the full 6.875 percent rate.

Section 18.  Small brewer tax credit.  Increases the threshold to qualify for the small brewer tax credit to 250,000 barrels. Effective for determinations based on calendar year 2012 production and thereafter.

Section 19. Cigarette definition.  Changes the definition of cigarette in the unfair cigarette sales act, which establishes minimum pricing rules for cigarette sales, to include “little cigars,” consistent with the changes made in section 6.

Section 20.  Tobacco products delivery sales.  Adds premium cigars to the types of tobacco subject to the commerce statutes governing delivery of tobacco products.

Section 21. Exemption; 501(c)(3) organizations.  Exempts 501(c)(3) organizations from registering with the Gambling Control Board if the value of all raffle prizes awarded by the organization at one event in a calendar year are $5,000 or below.  Effective July 1, 2013.

Section 22.  In lieu tax.   Changes the aircraft registration tax rate from the current system (one percent of value, subject to a minimum tax) to a rate derived from a statutory graduated schedule based on manufacturer's list price.  Eliminates the element of depreciation from calculation of an aircraft's base price for registration tax purposes.  Effective July 1, 2014, and applies to aircraft tax due on or after that date. 

Section 23.  State airports fund.  Updates statutory references relating to the state airports fund.  Effective July 1, 2014, and applies to aircraft tax due on or after that date.

Section 24.  Report.  Requires the commissioner of transportation, in consultation with the commissioner of revenue, to report to the legislative transportation committees every four years beginning in 2016, concerning revenues to and expenditures/transfers from the state airports fund, as well as any recommended statutory changes to ensure the future adequacy of the state airports fund.  Effective July 1, 2014, and applies to aircraft tax due on or after that date. 

Section 25.  Floor stocks tax.  Imposes a one-time floor stock tax on cigarettes, so that the increase in the tax under an earlier section will also apply to cigarettes in the inventory of retailers and wholesalers.  This tax would be imposed on both the stamped cigarettes and unaffixed stamps in the person’s possession at 12:01 a.m., July 1, 2013.  The rate of the tax imposed is 80 mills per cigarette.  This section also gives the commissioner of revenue authority to conduct an audit to enforce this tax, as well as the ability to levy penalties.  The proceeds from this section will be deposited to the general fund. $26,500,000 of the revenues from this tax must be deposited into the general reserve account established under section 297E.021, subdivision 4.  Any remaining funds are deposited into the general fund.

Section 26.  Interim sales tax rate.  Requires the commissioner to adjust the weighted average retail price of cigarettes on July 1, 2013, which will be used to calculate the tax rate imposed until December 31, 2013.  This, in effect, will immediately incorporate the likely price effects of the excise and health impact fee changes made by the bill in the in-lieu sales tax rate.  On January 1, 2014, the commissioner will resume annual adjustments to the weighted average retail price, occurring on January 1 of each calendar year.

Section 27.  Tobacco tax collection report.  Requires the commissioner to report to the 2014 legislature on the tobacco tax collection system, including recommendations to improve compliance of all tobacco tax programs.  This report will be due by January 1, 2014.

Section 28.  Repealer.  Repeals the health impact fee on cigarettes and tobacco products and health impact fund.  The only moneys deposited in the fund are the revenues from the health impact fee.  These revenues are transferred to the general fund after the certification of the amount of state health care costs.

ARTICLE 6 - INCOME AND CORPORATE FRANCHISE TAXES

Section 1.  Angel investment credit; definitions.  Provides a new definition of “liquidation event” as a conversion of a qualified investment to cash, cash and other considerations, or any other form of debt or equity interest.  Effective for businesses certified after June 30, 2013.

Section 2.  Angel investment credit; qualifying small business.  Modifies the requirements that a small business must satisfy to qualify under the angel investment credit.  Extends the number of years in which a business may have been in operation from ten to 20 for businesses engaged in researching, developing, or producing drugs or medical devices that require U.S. Food and Drug Administration approval, effective the day following final enactment.  Prohibits the business from having its securities trade on a public stock exchange before the investment is made and within 180 days after the investment is made.  Prohibits the business from having a liquidation event, defined in section 1, within 180 days of the date the investment qualifying for the credit was made.  Effective for businesses certified after June 30, 2013. 

Section 3.  Angel investment credit; data privacy.  Modifies the exemption from the Government Data Practices Act for disclosure of information on businesses that receive investments qualifying for the angel credit.  Under present law, only the name of the qualified business may be disclosed. This section allows the mailing address, telephone number, e-mail address, contact person’s name, and industry type to also be disclosed.

Section 4.  Greater Minnesota internship program.  Establishes a tax credit for employers that hire certain qualifying interns, effective beginning in tax year 2014.  Subdivision 1 defines terms applicable to the program and tax credit.

Subdivision 2.  Establishes a paid internship program for students at Minnesota public post secondary institutions or a baccalaureate degree granting nonprofit Minnesota institution, to be administered by the Office of Higher Education.

Subdivision 3.  The internship must be at a place of employment in greater Minnesota.  A student must have completed at least one-half of a course of study and the internship must be related to the course of study.  A student is to be paid and receive academic credit for the internship.  An eligible institution must enter into written agreements with employers for the provision of an internship of at least 12 weeks in greater Minnesota.  The internship must be closely related to a course of study and provide academic credit for its successful completion.  An eligible employer must agree with the eligible institution that the intern would not have been hired without the tax credits, did not previously work with the employer in the same or a similar job, does not replace an existing employee, and has not previously participated in the internship program.  The intern must work at least 16 hours a week and be paid at least minimum wage.  An internship required to complete an academic program does not qualify for the greater Minnesota internship program.

Subdivision 4.  Authorizes an income tax credit for qualifying employers.  The total amount of credits allocated in a calendar year must not exceed $2,000,000.  Requires the Office of Higher Education to determine relevant criteria, including geographic distribution of work locations and allocate credits to eligible institutions that meet the criteria on a first come, first served basis.  Unused credits allocated to an institution may be reallocated to other eligible institutions.

Subdivision 6.  Requires the Office of Higher Education and the Department of Revenue to submit two reports to the legislature on the program.  The February 1, 2015, report must have cost and participation information.  The February 1, 2016, report must have an effectiveness analysis.

This section is effective beginning tax year 2014.

Section 5.  Update of administrative tax provisions.  Adopts federal tax administrative provisions made between April 14, 2011, and January 3, 2013, that Minnesota references for state tax administration purposes under chapter 289A.  Neither of the federal acts enacted between April 14, 2011, and January 3, 2013, changed federal provisions that Minnesota provisions refer to in chapter 289A.  Effective the day following final enactment.

Section 6.  Update to federal definition of taxable income.  Adopts federal changes to taxable income pertaining to increased section 179 expensing with 80 percent addback and five-year recovery, and 50 percent bonus depreciation with 80 percent addback and five-year recovery.  Effective for tax year 2013 only.   

Section 7.  Individuals; subtractions from federal taxable income.  Updates cross-references to conform to other changes in the bill.  Provides a subtraction for railroad maintenance expenses by short line railroads that qualify for the federal tax credit in an amount equal to the credit.  Effective beginning tax year 2013. 

Section 8.  Corporations; additions to federal taxable income.  Eliminates the addition to income for the deemed dividends that are not derived from foreign source income.  Current law providing preferential treatment of FOCs is repealed in a later section.  Effective beginning tax year 2013. 

Section 9.  Corporations, subtractions from federal taxable income.  Eliminates the foreign royalties subtraction. Provides a subtraction for railroad maintenance expenses by short line railroads that qualify for the federal tax credit in an amount equal to the credit.  Eliminates an obsolete subtraction for foreign sales corporations.  Updates cross-references to conform to other changes in the bill.  Effective beginning tax year 2013. 

Section 10.  Individual income tax rates.  Updates income tax brackets and provides for a new fourth tier rate of 9.85 percent for married joint filers with taxable net income over $250,000, for single filers with taxable net income over $150,000, and for head of household filers with taxable net income over $200,000.  Effective beginning tax year 2013. 

Section 11.  Inflation adjustment of brackets.  Resets the base year for adjusting the income tax brackets for inflation to 2013, using as the starting point the bracket amounts provided in section 10.  Effective beginning tax year 2013. 

Section 12.  Greater Minnesota internship credit.  Authorizes a refundable credit to eligible employers who hire qualified interns of 40 percent of the amount paid to an intern qualifying under the internship program up to $2,000, or the amount certified by the Office of Higher Education under an earlier section.  Credits allowed to business organizations are passed through to partners, members, shareholders, or owners on a pro rata basis.  Effective beginning tax year 2014. 

Section 13.  Military retirement credit; past service.  Expands the eligibility criteria for the tax credit for past military service to include any veteran who receives a pension or retirement pay for service in the military.  Current law limits the credit to individuals who receive retirement pay and have either served 20 years or are separated from the military due to a disability.  The change would extend the credit to individuals who were honorably discharged with retirement pay after serving fewer than 20 years due to military downsizing.  Effective beginning tax year 2013. 

Section 14.  Research credit carryover.  Provides that the R & D credit is nonrefundable if the amount of credit exceeds a taxpayer’s tax liability and requires the credit to be allocated among all members of a unitary group.  Effective beginning tax year 2013. 

Section 15.  Research credit.  Provides that the R & D credit is refundable for years 2010-2012 only.  For tax years beginning in 2013, the credit is nonrefundable as provided in section 14. 

Section 16.  Definitions; historic structure rehabilitation credit.  Adds a definition of the term “federal credit” to mean the federal historic structure rehabilitation credit.  Provides that the terms “placed in service” and “qualified rehabilitation expenditures” have the meanings given in the Internal Revenue Code for the federal credit.  Effective the day following final enactment. 

Section 17.  Applications; historic credit.  Authorizes the State Historic Preservation Office (SHPO) of the Minnesota Historical Society to collect up to 0.5 percent of estimated qualified rehabilitation expenditures, up to a maximum of $40,000, as an application fee for a project.

Requires the SHPO to notify the developer in writing if a project is eligible for a credit.  Present law requires SHPO to determine eligibility but does not require notification.  Allows determinations of the SHPO regarding project eligibility for the historic credit to be appealed through a contested case procedure under chapter 14, within 45 days of the written notification. Effective the day following final enactment. 

Section 18.  Assignment of credit certificates and grants; historic credit.  Allows grant agreements to provide for grants to be issued to an individual or entity other than the developer.  Present law does not provide for grants to be assigned. Requires entities that are assigned a credit certificate to notify the commissioner within 30 days of being assigned a credit, in a form and manner prescribed by the commissioner. Clarifies that the pass-through of credits to owners of a pass-through entity are not considered credit assignments.  Effective the day following final enactment. 

Section 19.  Partnerships; multiple owners; historic credit.  Allows entities with multiple owners to allocate the credit among owners based on the allocation in any “executed agreement.”  Current law allows allocation of the credit either based on the ownership of the entity’s assets, or as specified in the entity’s organizational documents.  Effective the day following final enactment. 

Section 20.  Sunset; historic credit.  Extends the availability of the historic structure rehabilitation credit by five years, through fiscal year 2022 (June 30, 2021) and extends the State Historic Preservation Office’s authority to issue credit certificates based on allocation certificates issued before fiscal year 2023 (June 30, 2022) through calendar year 2025. Extends the annual reporting requirement through the earlier of 2026, or the year following the year in which all allocation certificates have been canceled or resulted in issuance of credit certificates.  Effective the day following final enactment.

Section 21.  Alternative minimum tax; individuals.  Increases the AMT rate from 6.4 percent to 6.75 percent.  Effective beginning tax year 2013. 

Section 22.  Tentative minimum tax; individuals.  Makes a conforming change in the definition of “tentative minimum tax” to reflect the change in the AMT rate in section 21.  Effective beginning tax year 2013. 

Section 23.  Minimum tax credit; individuals.  Makes a conforming change in the AMT credit to reflect the change in the AMT rate.  Effective beginning tax year 2013. 

Section 24.  AMT; corporations.  Strikes a reference to the foreign royalties subtraction, which is repealed in an earlier section.  Also strikes a reference to the expired federal Puerto Rico and possessions tax credit and makes conforming changes to cross-references in the corporate AMT to reflect the changes to corporate additions and subtractions in earlier sections.  Effective beginning tax year 2013. 

Section 25.  Franchise tax minimum fee.  Increases the corporate minimum fee amounts and thresholds at which the fee amounts apply and adjusts the dollar amounts for future increases in the Consumer Price Index (CPI).  Effective beginning tax year 2013. 

Section 26.  Net operating loss; definition.  Removes a reference to the foreign royalty subtraction, which is repealed in an earlier section.  Effective beginning tax year 2013. 

Section 27.  Nondeductible items.  Removes a reference to the foreign royalty subtraction, which is repealed in an earlier section.  Effective beginning tax year 2013. 

Section 28.  Unitary business principle.  Eliminates exclusion from income and apportionment factors of FOCs from the combined report and eliminates the deemed dividend deduction for 80 percent of FOC income.  Minnesota sales of subsidiaries that do not have nexus in Minnesota (other than foreign corporations) must be reflected in the combined report and be reported by a corporation that is subject to Minnesota tax.  Clarifies that unity of ownership does not exist when two or more corporations are involved unless there is, directly or indirectly, a common owner of more than 50 percent of the business.  Effective beginning tax year 2013. 

Section 29.  Determination of sales factor.  Strikes a reference to the foreign royalty subtraction, which is repealed in earlier section.  Effective beginning tax year 2013. 

Section 30.  REIT dividends.  Provides that a corporation may not take a dividend received deduction if the corporation received dividends from a real estate investment trust (REIT).  This provision conforms to the federal law treatment of REIT dividends.  Effective beginning tax year 2013. 

Section 31. Taxable income; occupation tax.  Updates a statutory reference allowing deductions from taxable income under the occupation tax to reflect the renumbering of the additions to corporate income in an earlier section.  Effective beginning tax year 2013. 

Section 32.  Historic structure rehabilitation credit; effective date.  Clarifies the effective date of the credit to make the credit effective for rehabilitation expenditures first paid by the developer or taxpayer after May 1, 2010, and for rehabilitation that occurs after May 1, 2010, provided that the application submitted for credit eligibility is submitted before the project is placed in service.  Effective the day following final enactment and applies retroactively for certified historic structures placed in service after May 1, 2010, but no credit certificates allowed under the change to this effective date clarification may be issued until July 1, 2013. 

Section 33.  Estimated taxes; exceptions.  Exempts from penalties and interest the underpayment of estimated tax before September 15, 2013, resulting from the 9.85 percent income tax rate in section 10.  Effective beginning tax year 2013. 

Section 34.  Repealer.  Repeals the definition of “foreign operating corporation” for the corporate franchise tax and the corporate AMT.  Repeals the nonresidents’ credit for taxes paid to state of domicile.

ARTICLE 7 - ESTATE AND GIFT TAXES

Section 1.  Cross-reference. Adds a cross-reference to the gift tax imposed by section 12 to the list of taxes administered by the Commissioner of Revenue.

Section 2.  Return inspection.  Adds a reference to gift tax returns and donors to the list of entities authorized to inspect each type of tax return.

Section 3.  Estate tax filing requirements.  Modifies the filing requirements for the estate tax to provide that taxable gifts (those in excess of the annual per-recipient, federal exclusion amount) made within three years of decedent’s death must be added to the value of the estate to determine if the estate exceeds the $1 million filing requirement.  Effective for decedents dying after December 31, 2012.

Section 4.  Estate tax definitions.  Updates the estate tax for federal changes enacted through January 3, 2013, and includes the amount of taxable gifts made by the decedent within three years of death in the taxable estate.  Under federal law, taxable gifts are defined as gifts of present interests that exceed the annual exclusion amount ($14,000 per recipient) or gifts of future interests of any value. 

Provides situs rules for gifts: gifts of tangible personal property would be assigned to the place where property is normally kept or located and gifts of intangible property (e.g., cash, stocks, or other securities) would be assigned to the domicile of the donor.

Provides special situs rules under the estate tax for nonresidents who have ownership interests in pass-through entities that own real or tangible personal property in Minnesota.  Pass-through entities are defined as S corporations, partnerships, disregarded single-member LLCs and trusts to the extent the trust property is included in decedent’s estate. Under present law, ownership interests in these entities are treated as intangibles and would be assigned to the decedent’s state of residence and, thus, would not be included in the Minnesota estate.  This change assigns the situs of the real and tangible personal property as if the pass-through entity did not exist.  Thus, it will include the Minnesota real and tangible personal property owned by the pass-through entity in the Minnesota estate of the decedent.  If there are multiple owners of the entity, the property is assigned to the decedent based on his or her share of the capital interest in the entity. Effective date:  Decedents dying after December 31, 2012.

Section 5.  Conforming change.  Provides that any gift tax paid on gifts included in the adjusted taxable estate and the credit allowed under section 6 reduces the estate tax due.  Effective for decedents dying after December 31, 2012.

Section 6.  Nonresident decedent tax credit.  Allows a tax credit against the Minnesota estate tax for estate or inheritance tax paid to another state on property held in pass-through entities, as provided under section 4.  The credit cannot exceed the Minnesota estate tax attributable to that property.  Effective for estates of decedents dying after December 31, 2012.

Section 7.  Family member definition.  Clarifies that a trust whose beneficiaries are all family members qualifies as a family member for purposes of the qualified small business property and qualified farm property exclusion.

Section 8.  Qualified small business property definition.  Modifies the qualified small business property definition for purposes of the exclusion to:

  • Clarify that property held in trusts qualify for the exclusion (as property of the decedent), if they are included in the federal adjusted taxable estate;
  • Clarify how the passive activity test applies to the tax year prior to the decedent’s death;
  • Exclude publicly traded securities and assets not used in the operation of the trade or business from qualifying for the exemption (paralleling the treatment of cash);
  • Treat replacement property of sole proprietors as meeting the three-year ownership test prior to decedent’s death if it replaced similar property;
  • Exclude qualified farm property from qualifying for the exclusion; nonhomestead farm property, as well as equipment, can qualify; and

Eliminates the requirement that a family member materially participate in the trade or business of the farm for three years after the decedent’s death and substitutes a test based on the federal passive activity rules.

Section 9.  Qualified farm property definition.  Modifies the definition of qualified farm property for purposes of the exclusion to:

  • Clarify that the property must be agricultural land and owned by a person or entity that is not excluded from owning agricultural land by section 500.24.  The property must be the agricultural homestead of the decedent, including qualifying under the relative homestead and special homestead rules;
  • Remove the requirement that for three years after decedent’s death a family member must continuously use the property in the operation of the trade or business;
  • Require that for three years after decedent’s death the property must be classified for property tax purposes as class 2a agricultural property, rather than that family material participate in the trade or business; and
  • Clarify that property held in trusts qualifies for the exclusion (as property of the decedent), if it is included in the federal adjusted taxable estate.

Section 10.  Recapture tax.  Clarifies that for sole proprietor property, the qualified heir will not be treated as having disposed of an interest in the qualified property if the heir replaces qualified small business property with similar property.

Section 11.  Definitions; gift tax.  Defines terms for purposes of the gift tax. Terms defined in the estate tax chapter apply to the gift tax.  Taxable gifts are defined by reference to the federal gift tax.  As a result, gifts below the annual exemption amount (for calendar year 2013, $14,000 per recipient, indexed for inflation) are excluded.  Generation-skipping gifts under federal law would not be treated as taxable gifts.  Gifts to charities and spouses would also not be taxable, as under the federal gift tax.

Section 12.  Gift tax imposition.  Imposes a ten percent tax on taxable gifts.  A lifetime credit of $100,000 is allowed (the equivalent of a $1 million exemption).  The tax does not apply to transfers of tangible personal property or real property with a situs outside of Minnesota.

Section 13.  Gift tax returns.  Requires an individual making a taxable gift during the taxable year to file a gift tax return in the form and manner prescribed by the commissioner.  If the donor dies before filing, the personal representative must file the return.  The return is to include each gift, the deductions claimed, a description of the gift, the donee’s name, address, and Social Security number, the fair market value of noncash gifts and any other information that the commissioner requires.

Section 14.  Filing requirements.  Requires returns to be filed by April 15 after the close of the calendar year in which the gift was made.  If the donor dies, the due date is the time for filing the federal gift tax return.

Section 15.  Appraisal of property.  Authorizes the commissioner to require the donor or donee to show the property subject to tax and to hire suitable persons to appraise the property.  The donor is required to provide a statement that the return reflects all of the taxable gifts for the year.

Section 16.  Administrative provisions.  Imposes a payment date of April 15 following the calendar year in which the gift was made.  If the donor dies, the time for payment of the federal gift tax applies.  A ten-percent penalty (or $100, if greater) applies to late payments.  The commissioner can extend the time for filing upon written request, filing of a tentative return, and a showing of good cause.  However, tentative tax must be paid with interest (if applicable).

The taxpayer must notify the commissioner of federal changes in the value of taxable gifts within 180 days of a final determination.  If a federal amended gift tax return is filed, the taxpayer must file an amended Minnesota return within 180 days. Various special federal valuation rules apply, such as those for transfers of interests in closely held corporations and trusts.

ARTICLE 8 - SALES AND USE TAXES; LOCAL SALES TAX

Section 1.  Greater Minnesota business expansion exemption.  Provides a definition and method of certification for businesses in greater Minnesota that qualify for a sales tax exemption in a later section.  Defines a qualified business as one that has operated in greater Minnesota for at least one year before applying for certification; pays or agrees to pay its employees compensation of at least 120 percent of the federal poverty line for a family four not including benefits mandated by law; plans and agrees to expand its employment in greater Minnesota by a minimum number of employees; and receive qualification from the Commissioner of DEED as a qualified business.  Public utilities and retail employers that are primarily engaged in selling to purchasers physically present at the business’s location are ineligible.

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

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

50 or fewer FTEs – must increase by five or more FTEs;

          51-199 FTEs – must increase FTEs by at least ten percent; and

          200 or more FTEs – must increase by at least 21 FTEs.

Subdivision 4.  Authorizes a sales tax exemption on qualifying purchases of materials and services by qualified greater Minnesota businesses.

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

Section 2.  Sale and purchase.  Expands the definition of “sale and purchase” for sales tax purposes to include certain digital products, business related warehousing and storage, business related electronic and precision equipment repair, and commercial and industrial machinery and equipment repair.  Clarifies that services for monitoring and electronic surveillance of persons in in-home detention pursuant to a court order performed at the direction of a county are exempt.  Replaces the terms “cable” television services and “direct satellite services” with the term “pay” television services.  Adds language stricken from a later part of the statute regarding taxation of services provided by employees and between associated businesses, and the definition of road construction.  Effective for sales and purchases made after June 30, 2013, except that the tax on warehousing and storage is not effective until after March 31, 2014.

Section 3.  Retail sale.  Makes the following changes to the definition of “retail sale”:

  • Adds the sale, lease, or rental of tangible personal property or the sale of any service listed in section 297A.61, subdivision 3, for any purpose other than resale by the purchaser in the normal course of business.
  • Adds the sale of specified digital products or other digital products to an end user to the definition of “retail sale.”
  • Adds the sale of motor vehicle repair paint and materials to the definition of a taxable retail sale.  Provides that the repair paint and supply portion of a bill can be calculated by multiplying the number of labor hours by an hourly consideration rate for the paint and materials.  Allows the taxpayer to use another method to calculate the tax, provided that the method fairly reflects the gross receipts from the retail sale of the paint and materials.  This provision does not apply to wholesale transactions at an automobile auction facility.
  • Clarifies that a payment made as a contribution in aid of construction is a contract for improvement to real property and not a taxable sale.

Effective for sales, purchases, and leases entered after June 30, 2013.

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

Section 5.  Pay television service.  Replaces the term “cable television service” with “pay television service” and specifies that direct satellite service, subscription programming service, and digital video recording service are included in the definition of “pay television service.”  The definition of “direct satellite service” is repealed later in the article.  Effective for sales and purchases made after June 30, 2013.

Section 6.  Bundled transaction.  Adds specified digital products and other digital products to the definition of “bundled transaction” for purposes of determining whether the sale of two or more products is taxable when the items are sold for one nonitemized price.  Effective for sales and purchases made after June 30, 2013.

Section 7.  Ring tones.  Clarifies that a ring tone does not include digital audio files not stored on the communication device.  Effective for sales and purchases made after June 30, 2013.

Section 8.  Motor vehicle repair paint and motor vehicle materials.  Defines motor vehicle repair paint and materials for sales tax purposes.  “Motor vehicle repair paint” includes primer, body paint, clear coat, and paint thinner.  “Repair materials” include items incorporated in the repair or directly consumed in the repair process.  They do not include items used to clean and maintain the shop and shop equipment.  Effective for sales and purchases made after June 30, 2013.

Section 9.  Digital audio works.  Defines “digital audio works” as works that result from a series of musical, spoken, or other sounds that are transferred electronically.  Digital audio works include songs, live music, readings of books, speeches, ring tones, or other sound recordings.  Effective for sales and purchases made after June 30, 2013.

Section 10.  Digital audiovisual works.  Defines “digital audio-visual works” as a series of related images which, when shown in succession, impart an impression of motion, together in accompanying sounds, if any, that are transferred electronically.  Digital audio-visual works include movies, music videos, news and entertainment, and live events.  Effective for sales and purchases made after June 30, 2013.

Section 11.  Digital books.  Defines “digital books” as any literary work, other that digital audio works or digital audio-visual works, expressed in words, numbers, or other verbal or numerical symbols generally recognized as a book.  Digital books does not include periodicals, magazines, newspapers or other news or information products or blogs.  Effective for sales and purchases made after June 30, 2013.

Section 12.  Digital code.  Defines “digital code” as a code providing a purchaser a right to obtain one or more specified digital products or other digital products, such as a code imprinted on another tangible medium.  A digital code does not include a gift card or other product that represents a stored monetary value that is deducted from a total.  Effective for sales and purchases made after June 30, 2013.

Section 13.  Other digital products.  Specifies “other digital products” not covered in the definitions in earlier sections as e-greeting cards and online video or electronic games.  Effective for sales and purchases made after June 30, 2013.

Section 14.  Specified digital products.  Defines specified digital products to mean digital audio works, digital audio-visual works, and digital books that are transferred electronically.  Effective for sales and purchases made after June 30, 2013.

Section 15.  Transferred electronically.  Defines “transferred electronically” as obtained by the purchaser by means other than tangible storage media.  Effective for sales and purchases made after June 30, 2013.

Section 16.  Self-storage services.  Defines "self-storage" which is excluded from the definition of business-related warehousing and storage that would now be taxable under section 2.

Section 17.  Motor vehicle rental tax; rate increase.  Increases the tax rate on car rentals from 6.2 percent to 9.2 percent.  Effective for sales and purchases made after May 31, 2013.

Section 18.  Retailer not maintaining place of business in the state.  Clarifies that a remote seller must collect and remit the state sales tax in accordance with any federal remote seller law. This will allow the state to impose the duty to collect the tax on remote sellers if the Federal Main Street Fairness Act is enacted into law.  Effective the day after final enactment.

Section 19.  Solicitor nexus.  Provides a definition of “solicitor,” which includes residents in the state who directly or indirectly refer potential customers to a seller through an Internet Web site or similar link for a commission or other consideration.  The presumption is that a retailer has nexus if the total receipts of sales to Minnesota customers generated by Internet referrals made through Web sites operated by Minnesota residents exceed $10,000 in the last 12-month period.  A rebuttal process to this presumption is provided.  Provides that this section affects whether a business is subject to income or corporate income taxes.  Effective for sales and purchases made after May 31, 2013.

Section 20.  Presumption of tax; burden of proof.  Allows a person engaged in drop shipping to claim an exemption for resale sales based on an exemption certificate provided by its customer or reseller.  Effective for sales and purchases made after June 30, 2013.

Section 21.  Multiple points of use.  Allows a business purchaser to use a multiple-points-of-use exemption certificate when purchasing electronically delivered goods and services that are concurrently available for use in multiple taxing jurisdictions (i.e. multiuser software licenses).  The seller is exempt from collecting the tax, but the purchaser is responsible for paying the tax in the multiple jurisdictions using a consistent and uniform method of apportioning the sale.  Effective for sales and purchases made after June 30, 2013.

Sections 22 and 23.  Drugs; medical devices.  Removes the sales tax exemption for over-the-counter drugs.  Exempts purchases in items covered by Medicare and Medicaid.  Expands the definition of “durable medical equipment” to include single-patient use items.  Modifies the definition of “repair and replacement parts” of durable medical equipment to include such parts for single patient use only.  Exempts accessories and supplies required for the effective use of durable medical equipment and prosthetic devices.  Effective for sales and purchases made after June 30, 2013. 

Section 24.  Textbooks.  Clarifies that digital books prescribed in conjunction with a course of study in a school, college, university, and private career school qualify as textbooks.  Effective for sales and purchases made after June 30, 2013. 

Section 25.  Materials consumed in industrial production.  Adds the word “tangible” to the sales tax exemption for materials stored, used, or consumed in industrial production of personal property to make clear that the exemption applies to industrial production of tangible personal property.  Specifies that industrial production does not include services.  Effective for sales and purchases made after June 30, 2013.

Section 26.  Capital equipment exemption.  Allows an upfront sales tax exemption for capital equipment purchases.  Under current law, the sales tax must be paid upfront and then refunded.  Effective for sales and purchases made after August 31, 2014. 

Section 27.  Qualified data centers.  Reduces the minimum square footage requirement of the building housing the data center from 30,000 to 25,000 square feet and the minimum amount of investment in enterprise information technology equipment and computer software from $50 million to $30 million in a 48-month period.  Reduces the amount of space that must be “substantially refurbished” for building the data center from 30,000 square feet to 25,000 square feet.  Modifies the definition of “substantially refurbished” to include installation of specified equipment, environmental control, energy efficiency improvements, computer software, and building improvements.  Specifies that “computer software” means software utilized or loaded at the qualified data center, including the maintenance, licensing, and customization of the software.  Provides a new definition for qualified “refurbished data centers” to mean an existing data center where the total cost of construction and improvements is at least $50 million within 24 months.  Effective for sales and purchases made after June 30, 2013.

Section 28.  Greater Minnesota business expansion exemption. Provides a sales tax exemption for purchases of tangible personal property and taxable services purchased by a qualified business if the exemption is provided for in the business subsidy agreement under section 1.  The exemption applies for state and local sales and taxes.  The allocations to all qualifying businesses may not exceed $7 million in a fiscal year.  If more than $7 million in credits is allocated in a fiscal year, those credits must be paid first in the next fiscal year. Any unused amounts may be carried forward and available in future years.  Effective for sales and purchases made after June 30, 2014.

Section 29.  Sales to local governments.  Adds cities and counties to the list of purchasers eligible for a sales tax exemption on qualifying purchases. Towns are already exempt under current law. This bill retains current law to not extend the exemption to goods or services purchased as inputs to goods and services generally provided by a private business, such as those provided by liquor stores, utilities, golf courses, marinas, health and fitness centers, campgrounds, cafes, and laundromats. Effective for sales and purchases made after December 31, 2013.

Section 30. Sales to nonprofit groups. Provides a cross reference to the exemption in section 33.

Section 31.  Sales to veterans groups.  Extends the current sales tax exemption for qualifying sales of tangible personal property to qualifying sales of services to veterans groups. Effective for sales and purchases made after June 30, 2013.

Section 32.  Sales tax exemption; critical access dental providers.  Extends the current sales tax exemption for hospitals and outpatient surgical centers to certain critical access dental care providers, as defined under current law that had no more than 15 percent of its patients covered by private insurance in the previous calendar year. The exemption does not extend to purchases made by a medical facility not operating as a critical access dental provider, building and construction materials for buildings that will not be used principally by the critical access dental provider, and building materials purchased by a contractor as part of a lump sum contract.  Effective retroactively for purchases made after June 30, 2007.  Purchasers may apply for refunds until June 30, 2014.

Section 33.  Religious orders exemption.  Extends the current sales tax exemption for qualifying sales of tangible personal property to qualifying sales of services to veterans groups. Effective for sales and purchases made after June 30, 2013.

Section 34.  Fundraising sales by nonprofit organizations.  Extends the current sales tax exemption for qualifying sales of tangible personal property to qualifying sales of services for fundraising sales by or for nonprofit groups.  Effective for sales and purchases made after June 30, 2013.

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

Section 36.  Sales tax exemption; nursing homes and boarding care homes. Exempts a certified nursing facility or boarding care home certified as a nursing facility from sales tax on qualifying purchases, effective for sales and purchases made after June 30, 2013.  The facility must be a 501(c)(3) tax-exempt organization and certified to participate in the Social Security Medical Assistance Program that certifies to the Commissioner of Revenue that it does not discharge residents due to inability to pay.  The exemption does not apply to:

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

Section 37.  Sales tax exemption; biopharmaceutical manufacturing facility.  Exempts materials and supplies used or consumed in, capital equipment incorporated into, and privately owned infrastructure in support of construction, improvement, or expansion of a biopharmaceutical manufacturing facility.  The total capital investment must be at least $50 million and the facility must create and maintain at least 190 new FTE positions at the facility.  The facility must continue to be certified under these criteria for each year that it claims the exemption.  The refund must be paid annually in the amount of 25 percent of the total allowable refund payable to date until all refundable amounts have been repaid. Effective retroactively to capital investments made and jobs created after December 31, 2012, and to qualifying purchases made after December 31, 2012 and before July 1, 2019. 

Section 38.  Sales tax exemption; research and development facility.  Exempts materials and supplies used or consumed in and equipment incorporated into the construction or improvement of a qualifying research and development facility that has laboratory space of at least 400,000 square feet and utilizes high and low-intensity laboratories and has a total construction cost of at least $140 million in a 24-month period.  Effective for sales and purchases made after June 30, 2013 and before September 1, 2015. 

Section 39.  Industrial measurement manufacturing and controls facility.  Authorizes a sales tax exemption for materials and supplies used or consumed in, capital equipment incorporated into, fixtures installed in, and privately owned infrastructure in support of the construction improvement or expansion of a qualifying industrial measurement manufacturing and controls facility.  Sales tax on qualifying purchases is paid upfront and refunded after DEED determines that the company has met the following requirements:  total capital investment in the facility is at least $60 million; the facility employs at least 250 FTEs not currently employed by the company in the state; and DEED determines that the expansion, remodeling, or improvement of the facility has a significant impact on the state economy.  A company must apply for certification of eligibility for a sales tax refund no later than one year after final completion of construction, improvement, or expansion of the facility.  Effective for sales and purchases made after June 13, 2013, through calendar year 2015. 

Sections 40 to 42.  Refunds; sales tax exemptions.  Authorizes refunds for qualifying purchases under newly authorized sales tax exemptions, effective the day following final enactment.  Removes references to the refund process for capital equipment purchases, as those purchases will be exempt upfront as of September 1, 2014. 

Section 43.  Local sales tax referenda; authorized expenditures. Authorizes a political subdivision to expend funds to disseminate information included in a city council resolution adopting the imposition of a local sales tax; provide notice of and conduct forums for expression of public opinion on the referendum; and provide facts and data on the impact of a proposed sales tax and on the programs and projects that are proposed to be funded with the local sales tax. Effective the day following final enactment.

Sections 44 and 45.  St. Paul local sales tax modification. Authorizes the city of St. Paul to deposit excess revenue from the 40 percent of revenue dedicated to the St. Paul Civic Center complex that is not needed for the complex into an economic development fund. Extends the taxing authority to 2042. Effective the day after the city council approves the change by resolution and its chief clerical officer certifies the approval with the secretary of state.

Section 46.  Rochester lodging tax. Modifies the Rochester lodging tax as follows:

Subd. 1a increases the allowed rate of the lodging tax imposed to fund construction, renovation, improvement, and expansion of the Mayo Civic Center Complex from one percent to three percent.

     Subd. 2 adds design costs to the allowed uses for the lodging tax proceeds.

Subd. 2a increases the authority to issue bonds for this project from $43.5 million to $50 million.

Subd. 3 removes the requirement that the tax in subdivision 1a expires when the proceeds are sufficient to pay the bonds in subdivision 2a; however, it allows the city to choose to repeal the tax anytime after that time.

Section 47.  Use of revenues (St. Cloud).  Modifies one of the existing allowed uses of the sales tax in the city of St. Cloud to allow funding of regional community and aquatic and recreational centers and facilities.

Section 48.  Termination of tax (central cities).  Allows each city to extend the tax in its community from 2018 to 2038, provided the extension is approved by the voters at a general election held by November 6, 2018.  The vote must still list the projects to be funded from the tax extension but the tax does not have to expire for one year before being re-imposed.

Section 49.  Use of revenues (Clearwater).  The bill provides a specific list of park and trail improvements that the city of Clearwater may fund with its local sales tax.  The $12 million total amount of revenue that the city may raise from the sales tax remains the same as it was in the original 2008 authorizing legislation.

Section 50.  Use of food and beverage tax (Marshall).  Allows the city to use proceeds of this tax for construction of the Minnesota Emergency Response and Training Center and the Southwest Amateur Sports Center, as well as for their ongoing maintenance costs.

Section 51.  City of Marshall; validation of prior act.  Allows the city of Marshall until July 1, 2013, to file its approval of the special laws authorizing the taxes in sections 30 and 31, which were originally enacted in 2010.

Section 52.  City of Proctor; validation of prior act.  Allows the city to approve the extended uses and additional bond authority authorized under 2008 and 2010 special law by passing a resolution and filing the approval with the secretary of state by January 1, 2014.  The additional bonding authority in the 2010 law was already approved by the city voters.

Section 53.  Repealer.  Paragraph (a) repeals the definition of direct satellite service now included in the definition of paid television and repeals the exemption of the capital equipment exemption for the telecommunications industry; effective for sales and purchases made after June 30, 2013. Paragraph (b) repeals the Rochester local food and beverage tax authority authorized in 2009 but never imposed.

ARTICLE 9 -- ECONOMIC DEVELOPMENT

Section 1. Public bidding requirement.  Modifies the Bloomington Port Authority’s special law exception to the general law competitive bidding requirements by expanding the exemption to apply regardless of the source of port authority funds used and to extend it to other public improvements in addition to structured parking.

Section 2. Border city funding.  Allocates $1.5 million for border city enterprise zone and border city development zone tax reductions.  This allocation is divided equally between the two programs ($750,000 to each), but the city can reallocate the amounts between the two programs.  The allocation is divided among the qualifying border cities on a per capita basis.  The five cities that qualify are Moorhead, Dilworth, East Grand Forks, Breckenridge, and Ortonville.

Section 3. Economic development districts.  Eliminates obsolete language related to the qualified retail facilities (the substantive definitions were repealed in 2010) and the temporary exemptions under the 2010 jobs bill.

Section 4. General government use.  Eliminates the prohibition on using tax increments for improvements and equipment that either primarily serve a decorative or aesthetic purpose, or whose costs are twice as high because of the selection of the types of materials or designs compared with more commonly used improvements or equipment.

Section 5. Four-year rule; extension. Extends the four-year ‘knockdown rule’ for tax increment financing districts certified on or after January 1, 2005 and before April 20, 2009. For these districts, the four-year period is deemed to end on December 31, 2016.

Section 6. Original local tax rate; TIF. Clarifies that the sum of all the local tax rates excludes that portion of the school rate attributable to the general education levy under section 126C.13.

Section 7. Adjustment to original net tax capacity.  Authorizes development authorities to elect to reduce the original net tax capacity of a TIF district for the effects of enactment of the homestead market value exclusion (HMVE).  This election must be approved by the municipality. The election is limited to “qualified TIF districts”—generally districts that have a large loss in captured tax capacity, as a result of enactment of the HMVE. To qualify for the election, a district must satisfy three criteria:

  1. The district received a homestead market value credit of $10,000 or more for taxes payable in 2011 (the last year before the credit was replaced by the HMVE);
  2. The district’s captured net tax capacity must have dropped by at least 1.75 percent as a result of the MVE for taxes payable in 2013 (the most recently available year); and
  3. Either the district’s five-year rule must still be open (increments that are still permitted to be spent) or the district must not have enough increment to pay its outstanding bonds.

For a qualified district, the subtraction will equal the reduction in net tax capacity of the TIF district that results from the HMVE for taxes payable in 2013.  The subtraction cannot reduce original net tax capacity below zero.  An election must be made before July 1, 2014.  For an election to apply for taxes payable in 2014, it must be made by July 1, 2013.

Section 8. Adjustments; qualifying districts. Requires the original net tax capacity of a TIF district to be reduced by the full amount of the original net tax capacity or $20,000, whichever is less, for districts that meet the following criteria:

  1. The district was certified after January 1, 2011 and before January 1, 2012;
  2. For assessment year 2012, at least 75% of the tax capacity is class 4d;  and
  3. For assessment year 2012, the average estimated market value is over $115,000 per housing  unit for the portion of the property that is class 4d.

Section 9. Distribution of excess taxes on captured net tax capacity. Requires that the excess taxes attributable to imposing the general education levy must be returned to the school district within which the tax increment financing district is located.

Section 10. Fiscal disparities calculations; MOA funding.  Provides that commercial-industrial tax capacity in the MOA TIF districts is exempt from contributing to the area-wide pool and that tax increments in the MOA TIF districts include the tax that would normally be paid to the area-wide pool.

Section 11. Bloomington Central Station (BCS) TIF.  Makes the following changes to Bloomington’s BCS TIF district:

  1. Extends the five-year rule from ten years to 15 years.
  2. Allows an eight-year extension of the district; and
  3. Unfreezes the original tax capacity rate.

Section 12. Oakdale TIF.  Modifies the special TIF law for the city of Oakdale, passed by the legislature in 2008 and modified in 2009, granting the city authority to deviate from general law rules with regard to TIF districts created in a defined area of the city.  This section extends the period of time that the city has to establish TIF districts by four years from 2013 to 2017 and exempts the district from the general law ‘blight test’ rules. The adjustment to original net tax capacity does not apply.  An option for a ten-year extension is also included.

Section 13. Oakdale TIF; extension and expanded spending authority.  Extends the duration of the Bergen Plaza TIF district in Oakdale by 16 years.  In addition, this section repeals the restrictions the 2010 special legislation placed on the extension.  The 2010 legislation prohibited pooling of increments from the district during the extension, except to the extent that they were used for improvements on two listed parcels.

Section 14. St. Cloud; TIF. Provides that St. Cloud TIF District No. 2. is deemed to be a "gap" district certified between August 1, 1979, and July 1, 1982.

Section 15. Glencoe TIF extension.  Authorizes the city of Glencoe to extend the duration of its TIF district No. 4 through December 31, 2023.  The additional increment collected during the extension would be limited to paying debt service on bonds that were outstanding on January 1, 2013, for public improvements serving:

  1. The city’s TIF district No. 14;
  2. The city’s TIF district No. 15; and
  3. Benefited properties related to a series of special assessment bonds issued in 2007 (or refunding bonds).

Section 16. Ely TIF extension.  Extends the duration of TIF District No. 1 through December 31, 2021. Increments may only be used to pay binding obligations and administrative expenses. Revenue from TIF District No. 3 may also be transferred to the tax increment account for TIF District No. 1. The transfer amount is limited to the lesser of $168,000 or the total amount due on binding obligations on that date, less the amount of increment collected by No. 1 after December 31, 2012.

Section 17. Dakota County CDA TIF; West St. Paul.  Authorizes the creation of a redevelopment district consisting of parcels from a district that was required to be decertified in 2012.  Sets the original tax capacity at $93,239 and provides exemptions for the ‘blight test’ and the requirement that 90% of revenue be used to finance the cost of correcting conditions. The district must decertify by December 31, 2023.

Section 18. City of Apple Valley; TIF Authority. Authorizes the city of Apple Valley to create tax increment financing districts, including a ‘soil deficiency district’ within a defined geographic area. Special rules extend the five-year rule to ten years and exempt the district from pooling requirement. Eligible uses of the increment from the soil deficiency district include correcting the unusual terrain or soil deficiencies.

Section 19. City of Apply Valley; TIF Authority. Authorizes the city of Apple Valley to use tax increment financing to provide improvements, loans, subsidies to buildings and facilities if:

  1. The projects will create or retain jobs, including construction jobs, in Minnesota;
  2. Construction of the project will not begin prior to July 1, 2014 without the use of tax increment financing;
  3. Request for certification of the district is made no later than June 30, 2014; and
  4. Construction of the project begins no later than July 1, 2014.

Section 20. City of Minneapolis; streetcar financing. Authorizes the city of Minneapolis to establish a value capture district consisting of specific parcels. A public hearing is required before a district can be established. Permitted uses of increment include planning, design and engineering services related to the construction of the streetcar line, acquiring property for, constructing, and installing a street carline. The duration of the district is limited to 25 years or the time needed to pay for the capital improvements, including bonds, if shorter.

Section 21. City of Maplewood; TIF.  Authorizes the city of Maplewood to establish TIF districts within a defined area of the city through December 31, 2018. The district would be exempt from the ‘blight test’, the pooling requirements (except that increment mush be spent within the project area), and the five-year rule is extended to ten years. Parcels in the district are also subject to a one-year knockdown rule as opposed to the four-year knockdown rule under general law.

Section 22. Mall of America (MOA) TIF district; property transfer and extension.  Allows the port authority and city of Bloomington to elect to transfer several parcels between the MOA TIF districts.  In addition, this section allows Bloomington to extend the two MOA TIF districts through 2034. During the extension, however, increment would be limited to the special fiscal disparities computation. The extensions would terminate for taxes payable in 2024, if new improvements, worth at least $100 million, have not been constructed in District No. 1-G (the district containing the former Met Center) by January 1, 2021. This provision does not become effective unless the city has entered a binding, written agreement to rehabilitate or replace the Old Cedar Avenue bridge.

Section 23. City of Bloomington; Old Cedar Avenue Bridge.  Requires the city of Bloomington to transfer increment from its two MOA TIF districts equal to the amount of increment for taxes payable in 2014 to be used to renovate or replace the Old Cedar Avenue bridge. The section also prohibits putting signage on or around the bridge acknowledging contributions, sponsorships, or sale of naming rights to the bridge.

ARTICLE 10 - DESTINATION MEDICAL CENTER

Section 1.  Private donor gift data. Provides that identity data on donors and prospects of the Destination Medical Center Corporation are classified as private or nonpublic.

Section 2.  Construction material; public infrastructure costs.  Provides a sales tax exemption for construction materials and supplies used in, and equipment incorporated into public infrastructure included in the Destination Medical Center Corporation (DMCC) development plan and financed with public funds.  Effective for sales and purchases made after June 30, 2015.

Section 3.  Definitions.  Defines “city” (Rochester), “county” (Olmsted), “Destination Medical Center Corporation” (nonprofit created by the city), “destination medical center development district” (geographic area in the city in which under the development plan public infrastructure projects are implemented), “development plan” (adopted by the nonprofit corporation), “medical business entity” (Mayo), “nonprofit economic development agency” (nonprofit corporation established by Mayo), and “public infrastructure project” (project funded in part or whole with public money to support the medical business entity’s development identified in the development plan).

Section 4.  Destination Medical Center Corporation (DMCC) established.  Directs the city to establish a nonprofit corporation. Provides that the corporation is not subject to laws governing the city except as provided in this section. Provides for eight members: the mayor of the city or the mayor’s designee, subject to city council approval; the city council president or a designee; a member of the county board; a representative of the medical business entity; and four appointees of the governor.

Section 5.  Officers; duties; organizational matters.  Authorizes the DMCC to adopt bylaws and rules of procedure.  The corporation is required to elect a treasurer.  The chair is required to appoint a secretary and assistant treasurer. 

Section 6.  Development plan.  Directs the DMCC to prepare and adopt a development plan after publication, notice, and public hearing.  Requires the DMCC to make certain findings before adopting the plan, including that the city has approved the plan.  The plan must give priority to projects that pay wages equal to a basic cost of living standard. Directs the DMCC to review and update the plan at least every five years.  Permits the DMCC plan to create districts and subdistricts within the city. Permits projects to be undertaken within the districts consistent with the adopted development plan.  Requires an annual report by the DMCC and city to the legislature, and to the commissioners of revenue and employment and economic development, and to the county.  Specifies scope of report, including actual costs and financing sources, including state aid amounts paid and the required local contributions.

Section 7.  City powers; duties, authority to issue bonds.  Grants the following powers to the city for purposes of implementing the DMC development plan: general port authority powers; authority to provide money to fund the corporation; authority to issue any type of bonds, without referendum and outside of net debt limits, secured by any of the city revenues, including the newly authorized taxes and state aid payments under section 10. The city is prohibited from issuing bonds secured only by state aid payments and is required to use, to the extent practicable, American made steel in the project.

Section 8.  City tax authority.  Provides the city of Rochester options to fund the city’s share of the public infrastructure projects for the DMC development plan.  Authorizes the city to impose by ordinance a local lodging tax, a food and beverage tax, and/or an admissions/entertainment tax.  Proceeds from any of these taxes must be dedicated to funding projects included in the development plan.  If imposed, these taxes terminate by December 31, 2049, or when sufficient funds are raised to meet the city’s obligations for funding these projects.  The city may also choose to extend its existing local sales tax until 2049 under section 13 or increase its general local sales tax rate by .25 percent.

Authorizes the city and county to use the general economic development abatement law to fund the DMC development without regard to the duration limits, the prohibition on granting additional abatements for eight years after an abatement was granted, and the percentage and dollar amount limits.  Authorizes the city to establish redevelopment TIF districts within the area of the DMC district without regard to the blight test and the requirement that redevelopment district increments be spent on blight correction.

Section 9.  County tax authority.  Authorizes Olmsted County to impose, by resolution, up to a 0.25 percent general sales tax and/or up to a $10 per vehicle wheelage tax to pay a portion of the transit infrastructure costs related to the DMC development plan.  Until January 1, 2018, the combined wheelage tax imposed under this section and general law must be equal to the rate in general law.

Taxes imposed under this section expire at the earlier of December 31, 2049, or when the county determines it has revenues sufficient to meets its obligation to the DMC transit projects.

Section 10.  State infrastructure aid.  Provides for general state infrastructure aid and transit aid based on private investment and local city and county contributions to fund infrastructure projects in the DMC development plan. Requires Mayo Clinic to annually certify to DEED the amount of its expenditures.  This must be done in the manner specified by DEED. Provides for payment of state aid to Rochester after the Mayo Clinic has made a minimum of expenditures of $200 million for construction of buildings in the city.  The aid equals the amount of those expenditures in the prior calendar year multiplied by 2.75 percent. To qualify for this aid, the city must make the local match of $128 million of project costs.  DEED and the city will agree on the manner and timing for making this local contribution.  The city and DEED may agree to modify this agreement when appropriate.

The aid will be paid on September 1.  The city is authorized to use the aid only for public infrastructure costs (other than transit costs) of the DMC.  The aid cannot exceed $30 million in any year and the total amount of aid cannot exceed the amount necessary to pay for the project costs of $327 million, including financing costs.  If the aid entitlement in any year exceeds the annual dollar limit, the excess is carried over to later years.

Provides that the local match of transit aid is an amount equal to the lesser of: 40 percent of state transit aid, or the amount that would be raised by imposing a county general sales tax at a rate of 0.15 percent.  The local match could be met by the county imposing that tax or by the county and city agreeing to use other funds to provide an equal amount.

Requires that laborers during the construction and remodeling must be paid prevailing wages. 

Terminates aid payments in fiscal year 2049.  General infrastructure aid payments may terminate earlier if the maximum amount of project costs have been funded by state aid. Provides an open and standing general fund appropriation to pay the state aid.

Section 11.  Sales and use taxes authorized (Rochester).  Authorizes the city of Rochester to impose an additional general sales tax of up to one-quarter of one percent without voter approval.  This would be in addition to the current one-half percent tax in Rochester.

Section 12.  Use of revenues (Rochester sales tax).  Requires that any additional revenue resulting from either (1) an extension of the duration of the existing local sales tax or (2) an increase in the local sales tax rate under section 11 be used to fund the city share of public infrastructure costs related to the DMC development plan. Also strikes language requiring the city to share $5 million of its existing sales tax revenues with surrounding cities.  A new sales tax sharing provision is enacted in section 14.

Section 13.  Termination of taxes (Rochester).  Authorizes the city to extend the duration of the existing one-half of one percent local sales tax as late as December 31, 2049, without voter approval.  Also provides that if the sales tax rate is increased under section 11, the additional tax expires at the earlier of December 31, 2049, or when the city determines that the total revenues raised by the city for the DMC development project under this and other optional taxes is sufficient to meet the city’s obligation.

Section 14.  Rochester sales tax sharing.  Provides that the city may use economic development revenues from its local sales tax for grants to any or all of the cities of Byron, Chatfield, Dodge Center, Dover, Elgin, Eyota, Hayfield, Kasson, Mantorville, Oronoco, Pine Island, Plainview, Spring Valley, St. Charles, Stewartville, West Concord and Zumbrota for economic development projects in those communities.  Requires the city council to hold a hearing and approve the revenue sharing by resolution by September 1, 2013, in order to share the money. 

Section 15.  Olmsted interregional passenger rail study.  Requires the commissioner of transportation to prepare a study examining transportation needs in the region, including interaction with expansion of the Mayo Clinic. The study must include an analysis of the feasibility of high-speed rail between Rochester and the Mall of America, extending to the airport and the Union Depot in St. Paul.

Section 16. Effective date.  Upon local approval by the city of Rochester. 

ARTICLE 11 -- MINERALS TAX

Section  1. Taconite payments and other reductions. Fixes the school share of the portion of the taconite production tax that is used for property tax relief under this section at 95 percent of the total property tax relief for that year, and directs the other five percentage points to the cities and townships located within that school district.

Section 2. Occupation taxes to be apportioned. Redirects a portion of the occupation tax deposited in the general fund for an annual appropriation to the mining environmental and regulatory account in the special revenue fund equal to 2.5 cents per ton of the taconite production tax.

Section 3. Taconite economic development fund (TEDF).  Requires taconite companies to provide a dollar-for-dollar match to any funds received from the TEDF, beginning with distributions in 2014.  Under current law, the match requirement is 50 percent, but only applies to the first 14.7 cents of the TEDF (out of 30.1 cents total).  The higher match would apply to all TEDF grants.

Sections 4 and 8. Taconite production tax. Increases the rate of the taconite production tax by five cents per ton, to $2.56 per ton and resets the default rate to $2.56 per ton if the tax is held to be unconstitutional.

Section 5. Taconite school aid.  Increases the general distribution to all school districts in the taconite area by nine cents per ton. Provides for a supplemental distribution of taconite production tax proceeds to school districts based on the size of each district’s referendum levy authority and its tax base.

Section 6. Property tax relief.  Reduces the distribution to the fund that pays for the taconite homestead credit by nine cents per ton, from 43.8 cents/ton to 34.8 cents per ton.

Section 7. Distribution; city of Eveleth. Makes permanent the distribution of the taconite production tax used for support of the Hockey Hall of Fame.

Section 9. Iron Range fiscal disparities study.  Requires the commissioner of revenue, in consultation with the IRRB, to study the Iron Range fiscal disparities program and issue a report to the legislature by February 1, 2014.  The study must analyze trends in population, tax base, tax rates, and contribution and distribution tax capacities across the region; the volatility of the program’s distribution and causes of the volatility; the impact of state policy changes on the program; and the interaction between the program and the distribution of property tax aids and credits, taconite aid, and IRRR funding across the region.

Section 10. 2013 distribution.  Establishes a special fund to receive 38.7 cents per ton of the taconite production tax and allocates specified amounts for local projects. Effective for the 2013 distribution, all of which must be made within ten days of the August 2013 payment.

Section 11. Iron Range resources and rehabilitation commissioner; bonds authorized.  Authorizes the Iron Range Resources and Rehabilitation commissioner to issue bonds to make grants to school districts in the taconite tax relief areas for capital projects.  These bonds would be paid by production tax distributions equal to ten cents per ton.  The proceeds provided to School District No. 2142 (St. Louis County Schools) must be used to reduce debt service on an outstanding bond issue.

ARTICLE 12 -- PUBLIC FINANCE

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

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

Section 3. Special assessments for energy improvements.  Eliminates a reference under the energy improvement financing program (EIFP), enacted by the 2010 Legislature, that the properties must be “benefited” and allows EIFP special assessments to be repaid in 20 equal annual installments.

Section 4. County capital notes.  Modifies the definition of “capital equipment” for which county capital notes may be issued to include computer hardware and software together with application development and training related to use of computer hardware or software.

Section 5. Capital improvement bonds definitions; county. Expands list of projects eligible for financing with county capital improvement bonds to include public works facilities, fairground buildings, records and data storage facilities, and expenditures incurred before adoption of the plan if the expenditures are included in the plan.

Section 6. County capital improvement bonds; election requirement. Makes the following changes to the reverse referendum authority for CIP bonds: 

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

Section 7. Dakota County Community Development Agency (DCCDA); housing improvement area powers.  Authorizes the DCCDA to exercise housing improvement district powers.  The agency is allowed to do this by resolution, rather than ordinance, as is required for cities exercising these powers.  The agency must send a copy of the petition to establish the area to the city within which the proposed district is located and the agency must not establish the district if the city council opposes the establishment.  

Section 8. City capital notes.  Modifies the definition of “capital equipment” for which city capital notes may be issued to include computer hardware and software together with application development and training related to use of computer hardware or software.

Section  9. Statutory city capital notes.  Makes changes to the statutory city note authority for statutory cities issued to include computer hardware and software together with application development and training related to use of computer hardware or software.

Section 10. Metropolitan Council; transit obligations. Increases the council’s authority to issue debt obligations to fund its capital improvement plan for transit and paratransit by $35.8 million.  Proceeds may also be used to pay issuance costs (subject to the $35.8 million limit).

Section 11. Metropolitan Airports Commission.  Eliminates restrictions on the Metropolitan Airports Commission’s investment policy to be consistent with authority granted to other local government in Chapter 118A.

Section 12. Entitlement reservations. Removes requirement that any unused carryover of bond allocations be deducted from that entitlement allocation for the next year.

Section 13. Minnesota Office of Higher Education. Removes the one-year carryforward limit on allocations for student loan bonds.

Section 14. Minnesota Housing Finance Agency; mortgage bonds. Removes the one-year carryforward limit on mortgage bonds awarded to the Minnesota Housing Finance Agency

Section 15. City CIP bonds.  Authorizes use of CIP bonds for expenditures incurred before adoption of the CIP, if the expenditures are included in the plan. 

Section 16. City capital improvement bonds; election requirement. Makes the following changes to the reverse referendum authority for CIP bonds: 

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

Section 17. Street reconstruction bonds.  Makes changes in the reverse referendum provisions governing street reconstruction bonds for questions that are subject to referendum, but that are not submitted to the voters or that are defeated.  Also provides that expenditures incurred before adoption of the capital improvement plan can be financed with the bonds, if the expenditures are included in the plan. This section also allows street reconstruction bonds to be used for bituminous overlay projects, which under current law are not considered to be reconstructions.

Section 18. City of St. Paul; bonding extension. Extends the city of St. Paul’s capital improvement bonding program to 2024.

Section 19.  Carryforward of bonding authority for 2011. Clarifies that bonding authority that was allocated to an entitlement user in 2001 but for which the user did not provide a notice of issue by the last business day of December 2012, will not be deducted from the entitlement allocation for that user in 2013.

Section 20. Local match; Independent School District No. 435. Allows Independent School District No. 435, Wauben-Ogema-White Earth to expand classroom space at its Omega elementary site using a grant that was awarded to the district by the Department of Human Services on August 12, 2012. Notwithstanding match requirements, the district may use a lease-purchase agreement held by the district.

Section 21. Legislative office facilities. Authorizes the commissioner of administration to enter into a long-term lease-purchase agreement to predesign, construct and equip office, hearing room and parking facilities for legislative and other functions. $3,000,000 is appropriated from the general fund, in fiscal year 2014 only, to the commissioner of administration for the predesign and design of facilities. The appropriation is available until June 30, 2015.

Section 22. Appropriation; relocation expenses. Appropriates $1,860,000 from the general fund for rent loss and relocation expenses related to the Capitol renovation project.

ARTICLE 13 - MISCELLANEOUS PROVISIONS

Section 1.  Football stadium backup revenues.  Adds a provision to trigger a revenue source for the special revenue fund for the Vikings stadium.  Effective the day following final enactment.

Section 2.  Agricultural utilization research institute.  Appropriates $1 million in FY 2014 and thereafter from the general fund to the Commissioner of Revenue for transfer to the Agricultural Utilization Research Institute.

Section 3.  E911 fee; collection.  Provides an exception to the requirement that all telecommunications carriers collect the Telephone Access Minnesota (TAM) fee under this subdivision.

Section 4.  E911 fee; prepaid wireless telecommunications service.  Specifies that the regular TAM fee does not apply to prepaid wireless communications service, which is subject instead to the fee established in a later section.

Section 5.  E911 fee; Minnesota tax laws.  Adds fees established in section 403 (i.e., the E911 fee) to the definition of “Minnesota tax laws.”

Section 6.  E911 fee; Department of Public Safety.  Allows the commissioner of revenue to disclose return information to the Department of Public Safety as necessary to administer the collection of E911 and TAM fees from prepaid wireless customers.

Section 7.  Commissioner of Revenue; powers and duties.  Authorizes the Commissioner of Revenue to participate in audits performed by the Multistate Tax Commission (MTC).  (Section 24 repeals Minnesota’s membership in the MTC.)  Effective the day following final enactment.

Section 8.  Timely filed.  Provides that, when filed by mail delivery, an appeal is timely filed if the official postmark stamped on the envelope by the United States Postal Service is within the time allowed for an appeal, even if the envelope is physically delivered by mail on a date that is not within the time allowed for the appeal.  Other more technical requirements, including that the envelope be properly addressed, are also included.  Applies to appeals filed in the state’s tax court for review of decisions of the commissioner of revenue related to taxes, fees, or other assessments. This allowance applies only to postmarks made by the United States Postal Service or its designated delivery service.  A mark made by a private postage meter would not qualify for consideration of timely filing under the standards provided in this section.

Section 9.  Available revenues. Adds a provision to trigger a revenue source for the special revenue fund for the Vikings stadium.  Effective the day following final enactment.

Section 10.  Prepaid wireless telecommunications services; definition.  Provides a definition of prepaid wireless telecommunications services in chapter 403 for use in administering the E911 fee.

Section 11.  Wireless telecommunications service; definition.  Provides a definition of wireless telecommunications service in chapter 403 for use in administering the E911 fee.

Section 12.  Wireless telecommunications service provider; definition.  Changes the existing definition of wireless telecommunications service provider to reference the new definition of wireless telecommunication service in section 11.

Section 13.  Biennial budget; annual financial report.  Requires inclusion of  911 revenue and expenditure forecasts and projections, including separate data for prepaid wireless revenues, and projections of year-end fund balances in the Department of Public Safety’s annual budget report to the legislature.

Section 14.  Emergency telecommunications service fee; account.  Exempts prepaid wireless customers from the current 911 fee and subjects them to the fee established in section 18.

Section 15.  Eligible telecommunications carrier.  Provides that no wireless communications provider may provide telecommunication services unless the Commissioner of Public Safety certified to the Public Utilities Commission that the provider is not in arrears on payments owed to the 911 emergency telecommunications service account. 

Section 16.  Report.  Requires semiannual reports from telecommunications providers to the commissioner of public safety on the number of prepaid and total wireless subscribers sourced to Minnesota.  Specifies that this is trade secret data.

Section 17.  Definitions; prepaid wireless fee.  Provides definitions for use in administering the E911 prepaid wireless fee.

Section 18.  Prepaid wireless fees imposed; collection; remittance.

     Subd. 1.  Fees imposed.  Imposes an E911 and TAM fee on prepaid wireless service at the current monthly rate.

     Subd. 2.  Exemption.  Exempts from the fees in subdivision 1 a minimal amount of prepaid wireless telecommunications service (ten minutes or $5 or less) sold with a prepaid wireless device that is charged a single nonitemized price.

     Subd. 3.  Fee collected.  Specifies that these fees must be collected at the point of retail sale, combined into one amount, and separately reported on a receipt.

     Subd. 4.  Sales and use tax treatment.  Specifies that the sales tax statutes be used to determine whether retail transactions of prepaid wireless service occur in Minnesota.

     Subd. 5.  Remittance.  Specifies that the seller is liable to remit these fees as provided in section 16.

     Subd. 6.  Exclusion for calculating other charges.  Excludes the fees from being included in the base for measuring any other tax or charge imposed by the state or a local government.

     Subd. 7.  Fee changes.  Specifies that these fees for prepaid wireless service must be increased or reduced proportionately to fluctuations in the same fees that apply to other customers.  Specifies the effective date of fee changes and notice requirements.  

Section 19. Administration of prepaid wireless 911 fees.

     Subd. 1.  Remittance.  Specifies that the fees must be collected by sellers and remitted to the commissioner of revenue in the same general manner as sales taxes.

     Subd. 2.  Seller’s fee retention.  Authorizes a seller to deduct and retain three percent of these fees.

    Subd. 3.  Department of Revenue provisions.  Specifies that the audit, collection, appeal, and other procedures of chapter 297A apply to these fees.

     Subd. 4.  Procedures for resale transactions.  Authorizes the commissioner of revenue to establish procedures by which a seller may document that a sale is not a retail transaction that substantially coincide with existing provisions in chapter 297A.

     Subd. 5.  Fees deposited.  Requires the commissioner of revenue to deposit each fee in its corresponding account within 30 days of receipt.  The department may retain and deduct up to two percent of the collected fees for administration costs.

Section 20.  Liability protection for sellers and providers.  Exempts providers and sellers of prepaid wireless telecommunications service from liability for damages resulting from providing lawful assistance in good faith to a state, federal, or local law enforcement officer.

Section 21.  Exclusivity of prepaid wireless E911 fee.  Prohibits any tax, fee, or surcharge being imposed on prepaid wireless telecommunications service for E911 purposes.

Section 22.  Purpose statements for tax expenditures.  Provides purpose statements for various tax expenditures added by the bill as follows:

  • Federal conformity – to simplify compliance and administration of the individual income tax
  • Income tax subtraction for federal railroad track maintenance credit – to increase maintenance and upgrading of railroad track in Minnesota
  • Sales tax exemption for aircraft parts and labor – to encourage growth of the aviation industry in the state
  • Expansion of sales tax exemption of durable medical products to Medicare and Medicaid purchases – to simplify sales tax administration and provide relief for sellers unable to collect tax under Medicare and Medicaid
  • Greater Minnesota internship credit – encourage Minnesota businesses to employ and provide education to Minnesota students
  • Extend historic structure credit – to encourage the preservation of historic structures
  • Sales tax exemption for established religious orders – to maintain an existing exemption that is jeopardized due to a St. John’s University governance change
  • Sales tax exemption for certain dental providers – to assist critical access dental providers in providing dental service to underserved communities
  • Sales tax exemption for nursing homes and boarding care homes – to maintain an existing exemption potentially eliminated due to a property tax court case
  • Various sales tax exemptions for construction materials – to increase jobs and reduce tax pyramiding
  • Sales tax exemption for public infrastructure related to destination medical center – to reduce city costs for projects

Section 23.  Appropriations.  Appropriates $950,000 to the Commissioner of Revenue for the cost of administering the act.  Appropriates $25,000 in FY14 and FY15 to the Commissioner of DEED for administering the provisions of DMC.

Section 24. Repealer. Repeals Minnesota provisions related to the Multistate Tax Compact. 

ARTICLE 14 – MARKET VALUE DEFINITIONS

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

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

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

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

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

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

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

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

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

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

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

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

Section 13.  Watershed district, survey and data acquisition fund.  Converts the levy limit from .02418 percent of taxable market value to one based on estimated market value.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Section 106.  Local government aid; county program aid.  Updates reference to county net tax capacity in county program aid statute to recodified section.  This section is effective the day following final enactment.

Section 107.  County and regional jails; levy limit.  Converts levy to pay county jail bonds issued without election from 0.09671 percent of market value to estimated market value.

Section 108.  County and regional jails; leases.  Converts rent limit permitting lease revenue bond financing of county jails from 0.1 percent of taxable market value to estimated market value.

Section 109  Definition of estimated market value.  Adds definition of "estimated market value" to general definition section of statutes.  This definition applies for purposes of levy, tax, spending, debt limit and calculation of aid payments.

Section 110.  Revisor’s instruction.   Directs the Revisor of Statutes to recodify the statute governing calculation of adjusted net tax capacity in property tax statutes (Chapter 273).   This section is effective the day following final enactment.

Section 111.  Repealer.  Repeals the following statutes: 

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

Section 112.  Effective date.  Provides the changes affecting computation of debt limits are effective the day following final enactment while changes affecting levy and tax limitations or aid computations are effective for taxes payable in 2013.

ARTICLE 15 – DEPARTMENT POLICY AND TECHNICAL; INCOME AND FRANCHISE TAXES; ESTATE TAXES

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

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

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

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

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

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

Section 11.  Withholding on payments to out of state contractors.  Amends Minn. Stat. § 290.9705 to require state and local government units and other persons who in the regular course of business contract with certain nonMinnesota construction contractors to withhold 8 percent of payments due under the contract if the value of the contract exceeds $50,000.  The funds are held by the Department of Revenue as surety for payment of state taxes owed under the contract.  Current law requires withholding if cumulative payments received by the contractor in the year exceed $50,000.  Effective for payments made to contractors after December 31, 2013.

ARTICLE 16 – DEPARTMENT POLICY AND TECHNICAL: SALES AND USE TAXES; SPECIAL TAXES

 Section 1. Deed tax; partitions.  Defines a real property “partition” for purposes of the deed tax exemption for partition deeds (i.e., a deed to or from a co-owner partitioning their undivided interest in the same piece of real property).  The definition provides, in effect, that the exemption only applies to a deed, or that portion of a deed, that divides a contiguous tract of co-owned real property into physically separate tracts owned individually by each of the co-owners. Effective date:  Day following final enactment.

Section 2. Sales and use tax.  Eliminates the accelerated remittance schedules for vendors with annual sales tax collections of at least $120,000 for all months except for June collections.  Effective the day following final enactment.  These early remittance requirements became inactive after the full statutory amounts for the budget reserve and cash flow accounts were restored in the February 2012 economic forecast. Effective date:  Day following final enactment.

Section 3. Exemption certificate taken in good faith.  Defines the term “taken in good faith” for purposes of seller relief from sales tax liability when a seller obtains a fully completed exemption certificate within 120 days after a request by the commissioner for substantiation of the exemption.  Also clarifies that the relief is not available if the commissioner finds that the seller knows or has reason to know that the information relating to the exemption was materially false; or knowingly participated in activity intended to purposefully evade the tax due. This is current practice but putting the definition in statute is necessary for conformity with the Streamlined Sales Tax Agreement. Effective date:  Retroactively from January 1, 2013.

Section 4. Wholesale sales price; tobacco products.  Modifies the definition of wholesale sales price by replacing references to price lists in current law with a reference to the price at which a distributor purchases the tobacco product. Effective date:  Purchases made after December 31, 2013.

Section 5. Beer excise tax; small brewer credit.  Ties allowance of the credit for small brewers to the fiscal year (rather than calendar year).  Effective date:  Day following final enactment.

Section 6. Nonadmitted insurance tax.  Includes purchasing groups that purchase insurance directly from a nonadmitted insurer in the entities subject to tax. Effective date:  Premiums received after December 31, 2013.

Section 7. Retaliatory provisions.  Includes life insurance companies in the list of entities that are covered by the retaliatory tax provisions. Effective date:  Day following final enactment.

Section 8. Tax on purchasing groups.  Removes the tax on purchasing groups that purchase insurance directly from a nonadmitted insurer.  Section 6 moves the tax on these groups to tax that applies to entities that purchase insurance from nonadmitted insurers. Effective date:  Premiums received after December 31, 2012.

Section 9. Purchasing groups due date.  Eliminates the requirement that purchasing groups file biannual returns.  Section 10 provides for filing of annual returns. Effective date:  Premiums received after December 31, 2013.

Section 10. Purchasing groups due date.  Changes purchasing groups’ due date for filing returns from twice a year to once a year.  This is consistent with the annual return due for other entities that buy directly from unauthorized insurers rather than from licensed insurance companies or surplus lines brokers. Effective date:  Premiums received after December 31, 2013.

Section 11. Repealer.  Repeals the penalty and safe harbor provisions related to the early remittance schedules for sales tax eliminated in section 2.

ARTICLE 17 - DEPARTMENT POLISY AND TECHNICAL:  MINERALS; PROPERTY TAX

Section 1. Definitions. Modifies a cross reference due to the change made in section 10.

Section 2. Taxes credited to state airports fund. Clarifies that the commissioner of revenue collects the air flight property tax. Current law only requires the tax to be credited to the state airports fund but does not specifically require the commissioner to collect the tax.

Section 3. Prohibited activity (assessor’s duties). Modifies the list of nontax property appraisals that assessors may perform within their jurisdictions, so that county assessors are allowed to do appraisals related to land exchanges.

Section 4. Authority; air flight property tax penalties. Adds a citation to allow the commissioner to abate air flight property tax late payment penalties, clarifying that the commissioner has the power to abate both late payment and late filing penalties upon finding reasonable cause.

Section 5. Exempt property used by private entity. Clarifies that taxes on the use of federal real property are assessed as a personal property tax against the user.

Section 6. Net proceeds tax, property tax exemption. Deletes the exemption from property tax for “direct reduced ore” under the net proceeds tax. Direct reduced ore is an iron ore product, which will not be the net proceeds tax that only applies to nonferrous ores, metals, or minerals.

Section 7. Definition of person for property taxes. Clarifies that for property tax purposes, the term “person” includes many different kinds of entities.

Section 8. Additional taxes (ownership changes for property in rural preserves). Allows certain new owners of property enrolled in the rural preserves program to qualify without an intervening period of disqualification. This avoids deferred taxes becoming payable when both the prior owner and the new owner qualify. Provides that the new owner will qualify in the following situations: (1) a transfer of the property to a surviving owner due to death; (2) a transfer of the property to a spouse by reason of marriage or divorce; or (3) a transfer of the property to a trust or authorized farming partnership, corporation, or company when the same people retain the same beneficial interests.

Section 9. Class 2 agricultural classification. Clarifies that (a) intensive livestock and poultry confinement operations are agricultural even if less than ten acres in size, (b) land must have been agricultural prior to enrollment in a conservation program in order to retain agricultural classification, and (c) certain 11-acre parcels fall under qualification criteria for ten-acre parcels.

Section 10. Class 4 residential nonhomestead classification. Eliminates a requirement that assessors separately report residential nonhomestead properties located on farms (but makes no changes in how those properties are classified or taxed).

Section 11. Tax-exempt property; lease. Clarifies that the tax on leased exempt property applies in the case of property owned by a local unit of government.

Section 12. Administrative appeals; railroad and utility valuations. Allows railroads, until the earlier of June 15 or ten days after the date of the valuation, and utilities, until the earlier of July 1 or ten days after the valuation, to file an administrative appeal of their property tax valuations. Current law allows both railroads and utilities to file appeals until May 15 or ten days after the date of the valuation, whichever is earlier.

Section 13. Definition of rural area; electrical cooperatives per capita tax. Amends the definition of rural area to refer to “statutory cities” and “home rule charter cities.” This technical change is necessary because the current statute refers only to “incorporated city,” a designation that no longer exists. All cities are now either statutory cities or home rule charter cities.

Section 14. Notice of delinquent property tax. Eliminates obsolete text from the notice regarding the various times within which the owners of different types of property may avoid a forfeiture of the property by paying the taxes, costs, and interest. Instructs the commissioner of revenue to provide a narrative description of the various redemption periods that the respective county auditors will include in the notice. Effective for notices required beginning in 2014.

Section 15. Approval; recording (senior deferral program). Allows the commissioner to prescribe the form of the lien notices recorded under this program, eliminating the need for the lien notices to be notarized or contain a notation that the document was drafted by the commissioner of revenue.

Section 16. Nonferrous occupation tax, mining. Defines the term “hydrometallurgical processes” that is used in nonferrous minerals tax.

Section 17. Net proceeds tax. Modifies the terminology used in the distribution language for the net proceeds tax to be consistent with the language imposing the tax.

Section 18. Public corporation; listed powers (duties of assessors). Provides that county assessors need not be licensed as real estate appraisers in order to do land exchange appraisals as provided in section 3.

Section 19. Repealer. Repeals obsolete provisions relating to (a) filing a list of leased tangible personal property with the commissioner of revenue, (b) limited market value, and (c) a market value exclusion for property treated for lead paint removal.

ARTICLE 18 – DEPARTMENT POLICY AND TECHNICAL:  MISCELLANEOUS

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

Sections 2-6. Uniform Interest on Penalties.   Provides a single, uniform statement of the rule regarding when interest on penalties accrues.  Effective the day following final enactment.

Section 7. Aviation gasoline definition; petroleum taxes. Modifies the definition of aviation gasoline to refer to a new standard recently adopted by the American Society for Testing and Materials (ASTM).

Section 8. Aviation turbine fuel and jet fuel definition; petroleum taxes. Modifies the definition of aviation turbine fuel and jet fuel to refer to a new standard recently adopted by the ASTM.

Section 9. Biobutanol definition; petroleum taxes. Provides a new definition of biobutanol by refer to the ASTM standard for use in the petroleum tax chapter.

Section 10. Diesel fuel oil definition; petroleum taxes. Modifies the definition of diesel fuel oil to refer to a new standard recently adopted by the ASTM.

Section 11. E85 definition; petroleum taxes. Modifies the definition of E85 (ethanol) used in the petroleum tax chapter to refer to a new standard recently adopted by the ASTM.

Section 12. Denatured ethanol definition; petroleum taxes. Modifies the definition of denatured ethanol to refer to a new standard recently adopted by the ASTM.

Section 13. Gasoline definition; petroleum taxes. Modifies the definition of gasoline to refer to new standards recently adopted by the ASTM.

Section 14. Blended gasoline definition; petroleum taxes. Modifies the definition of blended gasoline to refer to a new standard recently adopted by the ASTM.

Section 15. Heating fuel oil definition; petroleum taxes. Modifies the definition of heating fuel oil to refer to a new standard recently adopted by the ASTM.

Section 16. Penalty for failure to pay; petroleum taxes. Clarifies that interest on penalties for failure to pay taxes or fees under the petroleum tax accrues until the tax or fee is paid. Effective the day following final enactment.

Sections 17-26. Uniform Interest on Penalties.   Provides a single, uniform statement of the rule regarding when interest on penalties accrues.  Effective the day following final enactment.

 

 

 
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