1.1                          A bill for an act 
  1.2             relating to taxation; changing rate and computation of 
  1.3             the mining occupation tax; delaying implementation of 
  1.4             taconite production tax inflation adjustment; amending 
  1.5             Minnesota Statutes 2002, sections 298.01, subdivisions 
  1.6             3, 4; 298.24, subdivision 1; repealing Minnesota 
  1.7             Statutes 2002, section 298.01, subdivisions 3c, 3d, 
  1.8             4d, 4e. 
  1.9   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.10     Section 1.  Minnesota Statutes 2002, section 298.01, 
  1.11  subdivision 3, is amended to read: 
  1.12     Subd. 3.  [OCCUPATION TAX; OTHER ORES.] Every person 
  1.13  engaged in the business of mining or producing ores in this 
  1.14  state, except iron ore or taconite concentrates, shall pay an 
  1.15  occupation tax to the state of Minnesota as provided in this 
  1.16  subdivision.  The tax is determined in the same manner as the 
  1.17  tax imposed by section 290.02, except that: 
  1.18     (1) the tax rate is 0.25 percent of a person's taxable 
  1.19  income; and 
  1.20     (2) sections 290.05, subdivision 1, clause (a), 290.0921, 
  1.21  and 290.17, subdivision 4, do not apply.  The tax is in addition 
  1.22  to all other taxes. 
  1.23     <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
  1.24  years beginning after December 31, 2002. 
  1.25     Sec. 2.  Minnesota Statutes 2002, section 298.01, 
  1.26  subdivision 4, is amended to read: 
  1.27     Subd. 4.  [OCCUPATION TAX; IRON ORE; TACONITE 
  2.1   CONCENTRATES.] A person engaged in the business of mining or 
  2.2   producing of iron ore, taconite concentrates or direct reduced 
  2.3   ore in this state shall pay an occupation tax to the state of 
  2.4   Minnesota.  The tax is determined in the same manner as the tax 
  2.5   imposed by section 290.02, except that: 
  2.6      (1) the tax rate is 0.25 percent of a person's taxable 
  2.7   income; and 
  2.8      (2) sections 290.05, subdivision 1, clause (a), 290.0921, 
  2.9   and 290.17, subdivision 4, do not apply.  The tax is in addition 
  2.10  to all other taxes. 
  2.11     <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
  2.12  years beginning after December 31, 2002. 
  2.13     Sec. 3.  Minnesota Statutes 2002, section 298.24, 
  2.14  subdivision 1, is amended to read: 
  2.15     Subdivision 1.  (a) For concentrate produced in 2001, 2002, 
  2.16  and 2003 through 2005, there is imposed upon taconite and iron 
  2.17  sulphides, and upon the mining and quarrying thereof, and upon 
  2.18  the production of iron ore concentrate therefrom, and upon the 
  2.19  concentrate so produced, a tax of $2.103 per gross ton of 
  2.20  merchantable iron ore concentrate produced therefrom.  
  2.21     (b) For concentrates produced in 2004 2006 and subsequent 
  2.22  years, the tax rate shall be equal to the preceding year's tax 
  2.23  rate plus an amount equal to the preceding year's tax rate 
  2.24  multiplied by the percentage increase in the implicit price 
  2.25  deflator from the fourth quarter of the second preceding year to 
  2.26  the fourth quarter of the preceding year.  "Implicit price 
  2.27  deflator" means the implicit price deflator for the gross 
  2.28  domestic product prepared by the bureau of economic analysis of 
  2.29  the United States Department of Commerce.  
  2.30     (c) On concentrates produced in 1997 and thereafter, an 
  2.31  additional tax is imposed equal to three cents per gross ton of 
  2.32  merchantable iron ore concentrate for each one percent that the 
  2.33  iron content of the product exceeds 72 percent, when dried at 
  2.34  212 degrees Fahrenheit. 
  2.35     (d) The tax shall be imposed on the average of the 
  2.36  production for the current year and the previous two years.  The 
  3.1   rate of the tax imposed will be the current year's tax rate.  
  3.2   This clause shall not apply in the case of the closing of a 
  3.3   taconite facility if the property taxes on the facility would be 
  3.4   higher if this clause and section 298.25 were not applicable.  
  3.5      (e) If the tax or any part of the tax imposed by this 
  3.6   subdivision is held to be unconstitutional, a tax of $2.103 per 
  3.7   gross ton of merchantable iron ore concentrate produced shall be 
  3.8   imposed.  
  3.9      (f) Consistent with the intent of this subdivision to 
  3.10  impose a tax based upon the weight of merchantable iron ore 
  3.11  concentrate, the commissioner of revenue may indirectly 
  3.12  determine the weight of merchantable iron ore concentrate 
  3.13  included in fluxed pellets by subtracting the weight of the 
  3.14  limestone, dolomite, or olivine derivatives or other basic flux 
  3.15  additives included in the pellets from the weight of the 
  3.16  pellets.  For purposes of this paragraph, "fluxed pellets" are 
  3.17  pellets produced in a process in which limestone, dolomite, 
  3.18  olivine, or other basic flux additives are combined with 
  3.19  merchantable iron ore concentrate.  No subtraction from the 
  3.20  weight of the pellets shall be allowed for binders, mineral and 
  3.21  chemical additives other than basic flux additives, or moisture. 
  3.22     (g)(1) Notwithstanding any other provision of this 
  3.23  subdivision, for the first two years of a plant's production of 
  3.24  direct reduced ore, no tax is imposed under this section.  As 
  3.25  used in this paragraph, "direct reduced ore" is ore that results 
  3.26  in a product that has an iron content of at least 75 percent.  
  3.27  For the third year of a plant's production of direct reduced 
  3.28  ore, the rate to be applied to direct reduced ore is 25 percent 
  3.29  of the rate otherwise determined under this subdivision.  For 
  3.30  the fourth such production year, the rate is 50 percent of the 
  3.31  rate otherwise determined under this subdivision; for the fifth 
  3.32  such production year, the rate is 75 percent of the rate 
  3.33  otherwise determined under this subdivision; and for all 
  3.34  subsequent production years, the full rate is imposed. 
  3.35     (2) Subject to clause (1), production of direct reduced ore 
  3.36  in this state is subject to the tax imposed by this section, but 
  4.1   if that production is not produced by a producer of taconite or 
  4.2   iron sulfides, the production of taconite or iron sulfides 
  4.3   consumed in the production of direct reduced iron in this state 
  4.4   is not subject to the tax imposed by this section on taconite or 
  4.5   iron sulfides. 
  4.6      Sec. 4.  [REPEALER.] 
  4.7      Minnesota Statutes 2002, section 298.01, subdivisions 3c, 
  4.8   3d, 4d, and 4e, are repealed. 
  4.9      <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
  4.10  years beginning after December 31, 2002.