1.1                          A bill for an act 
  1.2             relating to taxation; providing for education funding; 
  1.3             providing property tax classification reform; changing 
  1.4             and providing state aids to local government; reducing 
  1.5             the sales and use tax rate and authorizing city 
  1.6             general sales and use taxes; providing for property 
  1.7             tax deferral for senior citizens; reducing the 
  1.8             franchise tax rate and providing a business activity 
  1.9             tax; increasing property tax refunds, and providing a 
  1.10            separate refund for farm homesteads; appropriating 
  1.11            money; amending Minnesota Statutes 1996, sections 
  1.12            124.17, subdivision 1d; 124A.03, subdivisions 1f and 
  1.13            3c; 124A.22, subdivisions 1 and 2, as amended; 
  1.14            124A.23, subdivision 1; 270B.12, by adding a 
  1.15            subdivision; 273.13, subdivisions 23, 24, 25, and by 
  1.16            adding a subdivision; 273.1398, subdivision 6; 
  1.17            275.065, subdivision 3; 275.08, subdivision 1b; 
  1.18            276.04, subdivision 2; 290.06, subdivision 1; 290A.03, 
  1.19            subdivisions 6, 13, and by adding a subdivision; 
  1.20            290A.04, subdivisions 1, 2, 2a, 6, and by adding a 
  1.21            subdivision; 297A.02, subdivision 1; 473F.08, 
  1.22            subdivision 3; 477A.011, subdivision 34, and by adding 
  1.23            subdivisions; 477A.013, subdivisions 1, 8, and 9; and 
  1.24            477A.03, subdivision 2; proposing coding for new law 
  1.25            in Minnesota Statutes, chapters 124A; 290; 297A; and 
  1.26            477A; proposing coding for new as Minnesota Statutes, 
  1.27            chapter 290B; repealing Minnesota Statutes 1996, 
  1.28            sections 124A.22, subdivisions 4a, 4b, 13d, and 13e; 
  1.29            124A.23, subdivisions 2, 3, 4, and 5; 273.13, 
  1.30            subdivision 32; 273.1398, subdivisions 1a, 2, 2c, 2d, 
  1.31            3, and 3a; 273.166; 290.0921; 290.0922; and 477A.011, 
  1.32            subdivisions 35, 36, and 37; Laws 1995, chapter 264, 
  1.33            article 4, as amended. 
  1.34  BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.35                             ARTICLE 1 
  1.36                         EDUCATION FUNDING 
  1.37     Section 1.  Minnesota Statutes 1996, section 124.17, 
  1.38  subdivision 1d, is amended to read: 
  1.39     Subd. 1d.  [AFDC PUPIL UNITS.] AFDC pupil units for fiscal 
  2.1   year 1993 and thereafter must be computed according to this 
  2.2   subdivision.  
  2.3      (a) The AFDC concentration percentage for a district equals 
  2.4   the product of 100 times the ratio of:  
  2.5      (1) the number of pupils enrolled in the district from 
  2.6   families receiving aid to families with dependent children 
  2.7   according to subdivision 1e; to 
  2.8      (2) the number of pupils in average daily membership 
  2.9   according to subdivision 1e enrolled in the district. 
  2.10     (b) The AFDC pupil weighting factor for a district equals 
  2.11  the lesser of one or the quotient obtained by dividing the 
  2.12  district's AFDC concentration percentage by 11.5.  
  2.13     (c) The AFDC pupil units for a district for fiscal year 
  2.14  1993 1999 and thereafter equals the product of:  
  2.15     (1) the number of pupils enrolled in the district from 
  2.16  families receiving aid to families with dependent children 
  2.17  according to subdivision 1e; times 
  2.18     (2) the AFDC pupil weighting factor for the district; times 
  2.19     (3) .67 .804. 
  2.20     Sec. 2.  [124A.0295] [DISCRETIONARY REVENUE AUTHORITY.] 
  2.21     A school district that has referendum authority of an 
  2.22  amount less than the product of five percent of the basic 
  2.23  formula allowance and its pupil units for that year may by 
  2.24  resolution of a majority of its board authorize referendum 
  2.25  authority of up to the product of five percent of the basic 
  2.26  formula allowance and its pupil units for that year. 
  2.27     Sec. 3.  Minnesota Statutes 1996, section 124A.03, 
  2.28  subdivision 1f, is amended to read: 
  2.29     Subd. 1f.  [REFERENDUM EQUALIZATION REVENUE.] A district's 
  2.30  referendum equalization revenue equals $315 times the district's 
  2.31  actual pupil units for that year 25 percent of the formula 
  2.32  allowance. 
  2.33     Referendum equalization revenue must not exceed a 
  2.34  district's total referendum revenue for that year. 
  2.35     Sec. 4.  Minnesota Statutes 1996, section 124A.03, 
  2.36  subdivision 3c, is amended to read: 
  3.1      Subd. 3c.  [REFERENDUM ALLOWANCE REDUCTION.] For fiscal 
  3.2   year 1998 and later, a district's referendum allowance for 
  3.3   referendum authority under subdivision 1c is reduced as provided 
  3.4   in this subdivision.  
  3.5      (a) For referendum revenue authority approved before June 
  3.6   1, 1996, and effective for fiscal year 1997, the reduction 
  3.7   equals the amount of the reduction computed for fiscal year 1997 
  3.8   under subdivision 3b.  
  3.9      (b) For referendum revenue authority approved before June 
  3.10  1, 1996, and effective beginning in fiscal year 1998, the 
  3.11  reduction equals the amount of the reduction computed for fiscal 
  3.12  year 1998 under subdivision 3b.  
  3.13     (c) For referendum revenue authority approved after May 31, 
  3.14  1996, there is no reduction.  
  3.15     (d) For districts with more than one referendum authority, 
  3.16  the reduction shall be computed separately for each authority.  
  3.17  The reduction shall be applied first to authorities levied 
  3.18  against tax capacity, and then to authorities levied against 
  3.19  referendum market value.  For districts with more than one 
  3.20  authority levied against net tax capacity or against referendum 
  3.21  market value, the referendum allowance reduction shall be 
  3.22  applied first to the authority with the earliest expiration date.
  3.23     (e) For a newly reorganized district created after July 1, 
  3.24  1996, the referendum revenue reduction equals the lesser of the 
  3.25  amount calculated for the combined district, or the sum of the 
  3.26  amounts by which each of the reorganizing district's 
  3.27  supplemental revenue reduction exceeds its respective 
  3.28  supplemental revenue allowances calculated for the year 
  3.29  preceding the year of reorganization. 
  3.30     (f) If a district's referendum revenue after the reductions 
  3.31  in this subdivision exceeds 25 percent of the formula allowance 
  3.32  times its pupil units for that year, then the referendum revenue 
  3.33  is reduced by an amount equal to the lesser of: 
  3.34     (1) the product of the district's pupil units for that year 
  3.35  and the difference between the basic formula allowance for that 
  3.36  year and $3,505; or 
  4.1      (2) the district's referendum revenue less the product of 
  4.2   25 percent of the basic formula allowance times the pupil units 
  4.3   for that year. 
  4.4      Sec. 5.  Minnesota Statutes 1996, section 124A.22, 
  4.5   subdivision 1, is amended to read: 
  4.6      Subdivision 1.  [GENERAL EDUCATION REVENUE.] (a) For fiscal 
  4.7   year 1996, the general education revenue for each district 
  4.8   equals the sum of the district's basic revenue, compensatory 
  4.9   education revenue, training and experience revenue, secondary 
  4.10  sparsity revenue, elementary sparsity revenue, and supplemental 
  4.11  revenue. 
  4.12     (b) (a) For fiscal year years 1997 and thereafter, the 
  4.13  general education revenue for each district equals the sum of 
  4.14  the district's basic revenue, compensatory education revenue, 
  4.15  secondary sparsity revenue, elementary sparsity revenue, 
  4.16  transportation sparsity, total operating capital revenue, 
  4.17  transition revenue, and supplemental revenue. 
  4.18     (b) For fiscal year 1999 and thereafter, general education 
  4.19  revenue is provided in state aid. 
  4.20     Sec. 6.  Minnesota Statutes 1996, section 124A.22, 
  4.21  subdivision 2, as amended by Laws 1997, chapter 1, section 4, is 
  4.22  amended to read: 
  4.23     Subd. 2.  [BASIC REVENUE.] The basic revenue for each 
  4.24  district equals the formula allowance times the actual pupil 
  4.25  units for the school year.  The formula allowance for fiscal 
  4.26  year 1995 is $3,150.  The formula allowance for fiscal year 1996 
  4.27  is $3,205.  The formula allowance for fiscal year years 1997 and 
  4.28  subsequent fiscal years 1998 is $3,505.  The formula allowance 
  4.29  for fiscal years 1999 and later equals the formula allowance for 
  4.30  the prior year, times the ratio of the annual implicit price 
  4.31  deflator for state and local government purchases, as prepared 
  4.32  by the United States Department of Commerce, for the most 
  4.33  recently available year to the prior year. 
  4.34     Sec. 7.  Minnesota Statutes 1996, section 124A.23, 
  4.35  subdivision 1, is amended to read: 
  4.36     Subdivision 1.  [GENERAL EDUCATION STATEWIDE PROPERTY TAX 
  5.1   RATE.] The commissioner of revenue shall establish the general 
  5.2   education statewide property tax rate by July 1 of each year for 
  5.3   levies payable in the following year.  The general 
  5.4   education statewide property tax capacity rate shall be a rate, 
  5.5   rounded up to the nearest tenth of a percent, that, when applied 
  5.6   to the adjusted net tax capacity for all districts counties, 
  5.7   raises the amount specified in this subdivision.  The general 
  5.8   education statewide property tax rate shall be the rate that 
  5.9   raises $1,054,000,000 for fiscal year 1996 and 
  5.10  $1,359,000,000 $759,000,000 for fiscal year 1997 1999 and later 
  5.11  fiscal years.  The general education tax rate may not be changed 
  5.12  due to changes or corrections made to a district's adjusted net 
  5.13  tax capacity after the tax rate has been established. The 
  5.14  commissioner of revenue shall calculate the amount that shall be 
  5.15  raised in each county and certify that amount to the county 
  5.16  auditor.  The auditor shall extend the levy against the net tax 
  5.17  capacity in the county. 
  5.18     Sec. 8.  Minnesota Statutes 1996, section 275.065, 
  5.19  subdivision 3, is amended to read: 
  5.20     Subd. 3.  [NOTICE OF PROPOSED PROPERTY TAXES.] (a) The 
  5.21  county auditor shall prepare and the county treasurer shall 
  5.22  deliver after November 10 and on or before November 24 each 
  5.23  year, by first class mail to each taxpayer at the address listed 
  5.24  on the county's current year's assessment roll, a notice of 
  5.25  proposed property taxes and, in the case of a town, final 
  5.26  property taxes.  
  5.27     (b) The commissioner of revenue shall prescribe the form of 
  5.28  the notice. 
  5.29     (c) The notice must inform taxpayers that it contains the 
  5.30  amount of property taxes each taxing authority other than a 
  5.31  town, including the state of Minnesota, proposes to collect for 
  5.32  taxes payable the following year and, for a town, the amount of 
  5.33  its final levy.  In the case of the state of Minnesota or any 
  5.34  town, the amount shown shall be based upon the final rather than 
  5.35  a proposed levy.  It must clearly state that each taxing 
  5.36  authority, including regional library districts established 
  6.1   under section 134.201, and including the metropolitan taxing 
  6.2   districts as defined in paragraph (i), but excluding the state 
  6.3   of Minnesota, all other special taxing districts, and towns, 
  6.4   will hold a public meeting to receive public testimony on the 
  6.5   proposed budget and proposed or final property tax levy, or, in 
  6.6   case of a school district, on the current budget and proposed 
  6.7   property tax levy.  It must clearly state the time and place of 
  6.8   each taxing authority's meeting and an address where comments 
  6.9   will be received by mail.  
  6.10     (d) The notice must state for each parcel: 
  6.11     (1) the market value of the property as determined under 
  6.12  section 273.11, and used for computing property taxes payable in 
  6.13  the following year and for taxes payable in the current year; 
  6.14  and, in the case of residential property, whether the property 
  6.15  is classified as homestead or nonhomestead.  The notice must 
  6.16  clearly inform taxpayers of the years to which the market values 
  6.17  apply and that the values are final values; 
  6.18     (2) by county, city or town, school district excess 
  6.19  referenda levy, remaining school district levy, the general 
  6.20  statewide education property tax, regional library district, if 
  6.21  in existence, the total of the metropolitan special taxing 
  6.22  districts as defined in paragraph (i) and the sum of the 
  6.23  remaining special taxing districts, and as a total of the taxing 
  6.24  authorities, including all special taxing districts, the 
  6.25  proposed or, for a town or for the state, final net tax on the 
  6.26  property for taxes payable the following year and the actual tax 
  6.27  for taxes payable the current year.  If a school district has 
  6.28  certified under section 124A.03, subdivision 2, that a 
  6.29  referendum will be held in the school district at the November 
  6.30  general election, the county auditor must note next to the 
  6.31  school district's proposed amount that a referendum is pending 
  6.32  and that, if approved by the voters, the tax amount may be 
  6.33  higher than shown on the notice.  For the purposes of this 
  6.34  subdivision, "school district excess referenda levy" means 
  6.35  school district taxes for operating purposes approved at 
  6.36  referendums, including those taxes based on net tax capacity as 
  7.1   well as those based on market value.  "School district excess 
  7.2   referenda levy" does not include school district taxes for 
  7.3   capital expenditures approved at referendums or school district 
  7.4   taxes to pay for the debt service on bonds approved at 
  7.5   referenda.  In the case of the city of Minneapolis, the levy for 
  7.6   the Minneapolis library board and the levy for Minneapolis park 
  7.7   and recreation shall be listed separately from the remaining 
  7.8   amount of the city's levy.  In the case of a parcel where tax 
  7.9   increment or the fiscal disparities areawide tax under chapter 
  7.10  276A or 473F applies, the proposed tax levy on the captured 
  7.11  value or the proposed tax levy on the tax capacity subject to 
  7.12  the areawide tax must each be stated separately and not included 
  7.13  in the sum of the special taxing districts; and 
  7.14     (3) the increase or decrease in the amounts in clause (2) 
  7.15  from taxes payable in the current year to proposed or, for a 
  7.16  town, final taxes payable the following year, expressed as a 
  7.17  dollar amount and as a percentage. 
  7.18     (e) The notice must clearly state that the proposed or 
  7.19  final taxes do not include the following: 
  7.20     (1) special assessments; 
  7.21     (2) levies approved by the voters after the date the 
  7.22  proposed taxes are certified, including bond referenda, school 
  7.23  district levy referenda, and levy limit increase referenda; 
  7.24     (3) amounts necessary to pay cleanup or other costs due to 
  7.25  a natural disaster occurring after the date the proposed taxes 
  7.26  are certified; 
  7.27     (4) amounts necessary to pay tort judgments against the 
  7.28  taxing authority that become final after the date the proposed 
  7.29  taxes are certified; and 
  7.30     (5) the contamination tax imposed on properties which 
  7.31  received market value reductions for contamination. 
  7.32     (f) Except as provided in subdivision 7, failure of the 
  7.33  county auditor to prepare or the county treasurer to deliver the 
  7.34  notice as required in this section does not invalidate the 
  7.35  proposed or final tax levy or the taxes payable pursuant to the 
  7.36  tax levy. 
  8.1      (g) If the notice the taxpayer receives under this section 
  8.2   lists the property as nonhomestead and the homeowner provides 
  8.3   satisfactory documentation to the county assessor that the 
  8.4   property is owned and used as the owner's homestead, the 
  8.5   assessor shall reclassify the property to homestead for taxes 
  8.6   payable in the following year. 
  8.7      (h) In the case of class 4 residential property used as a 
  8.8   residence for lease or rental periods of 30 days or more, the 
  8.9   taxpayer must either: 
  8.10     (1) mail or deliver a copy of the notice of proposed 
  8.11  property taxes to each tenant, renter, or lessee; or 
  8.12     (2) post a copy of the notice in a conspicuous place on the 
  8.13  premises of the property.  
  8.14     The notice must be mailed or posted by the taxpayer by 
  8.15  November 27 or within three days of receipt of the notice, 
  8.16  whichever is later.  A taxpayer may notify the county treasurer 
  8.17  of the address of the taxpayer, agent, caretaker, or manager of 
  8.18  the premises to which the notice must be mailed in order to 
  8.19  fulfill the requirements of this paragraph. 
  8.20     (i) For purposes of this subdivision, subdivisions 5a and 
  8.21  6, "metropolitan special taxing districts" means the following 
  8.22  taxing districts in the seven-county metropolitan area that levy 
  8.23  a property tax for any of the specified purposes listed below: 
  8.24     (1) metropolitan council under section 473.132, 473.167, 
  8.25  473.249, 473.325, 473.446, 473.521, 473.547, or 473.834; 
  8.26     (2) metropolitan airports commission under section 473.667, 
  8.27  473.671, or 473.672; and 
  8.28     (3) metropolitan mosquito control commission under section 
  8.29  473.711. 
  8.30     For purposes of this section, any levies made by the 
  8.31  regional rail authorities in the county of Anoka, Carver, 
  8.32  Dakota, Hennepin, Ramsey, Scott, or Washington under chapter 
  8.33  398A shall be included with the appropriate county's levy and 
  8.34  shall be discussed at that county's public hearing. 
  8.35     (j) For taxes levied in 1996, payable in 1997 only, in the 
  8.36  case of a statutory or home rule charter city or town that 
  9.1   exercises the local levy option provided in section 473.388, 
  9.2   subdivision 7, the notice of its proposed taxes may include a 
  9.3   statement of the amount by which its proposed tax increase for 
  9.4   taxes payable in 1997 is attributable to its exercise of that 
  9.5   option, together with a statement that the levy of the 
  9.6   metropolitan council was decreased by a similar amount because 
  9.7   of the exercise of that option.  
  9.8      Sec. 9.  Minnesota Statutes 1996, section 275.08, 
  9.9   subdivision 1b, is amended to read: 
  9.10     Subd. 1b.  [COMPUTATION OF TAX RATES.] The amounts 
  9.11  certified to be levied against net tax capacity under section 
  9.12  275.07 by an individual local government unit shall be divided 
  9.13  by the total net tax capacity of all taxable properties within 
  9.14  the local government unit's taxing jurisdiction.  The resulting 
  9.15  ratio, the local government's local tax rate, multiplied by each 
  9.16  property's net tax capacity shall be each property's net tax 
  9.17  capacity tax for that local government unit before reduction by 
  9.18  any credits. 
  9.19     The general education statewide property tax levied within 
  9.20  each county under section 124A.23, subdivision 1, shall be 
  9.21  divided by the total net tax capacity of all taxable properties 
  9.22  within the county.  The resulting ratio, the county's general 
  9.23  education statewide property tax rate, multiplied by each 
  9.24  property's net tax capacity, shall be each property's general 
  9.25  education statewide property tax before reduction by any credits.
  9.26     Any amount certified to the county auditor to be levied 
  9.27  against market value shall be divided by the total referendum 
  9.28  market value of all taxable properties within the taxing 
  9.29  district.  The resulting ratio, the taxing district's new 
  9.30  referendum tax rate, multiplied by each property's referendum 
  9.31  market value shall be each property's new referendum tax before 
  9.32  reduction by any credits.  For the purposes of this subdivision, 
  9.33  "referendum market value" means the market value as defined in 
  9.34  section 124A.02, subdivision 3b. 
  9.35     Sec. 10.  Minnesota Statutes 1996, section 276.04, 
  9.36  subdivision 2, is amended to read: 
 10.1      Subd. 2.  [CONTENTS OF TAX STATEMENTS.] (a) The treasurer 
 10.2   shall provide for the printing of the tax statements.  The 
 10.3   commissioner of revenue shall prescribe the form of the property 
 10.4   tax statement and its contents.  The statement must contain a 
 10.5   tabulated statement of the dollar amount due to each taxing 
 10.6   authority from the parcel of real property for which a 
 10.7   particular tax statement is prepared.  The dollar amounts due 
 10.8   the county, the state of Minnesota designated as the general 
 10.9   education statewide property tax, the school district amount, 
 10.10  the township or municipality, and the total of the metropolitan 
 10.11  special taxing districts as defined in section 275.065, 
 10.12  subdivision 3, paragraph (i), school district excess referenda 
 10.13  levy, remaining school district levy, and the total of other 
 10.14  voter approved referenda levies based on market value under 
 10.15  section 275.61 must be separately stated.  The amounts due all 
 10.16  other special taxing districts, if any, may be aggregated.  For 
 10.17  the purposes of this subdivision, "school district excess 
 10.18  referenda levy" means school district taxes for operating 
 10.19  purposes approved at referenda, including those taxes based on 
 10.20  net tax capacity as well as those based on market value. "School 
 10.21  district excess referenda levy" does not include school district 
 10.22  taxes for capital expenditures approved at referendums or school 
 10.23  district taxes to pay for the debt service on bonds approved at 
 10.24  referenda.  The amount of the tax on contamination value imposed 
 10.25  under sections 270.91 to 270.98, if any, must also be separately 
 10.26  stated.  The dollar amounts, including the dollar amount of any 
 10.27  special assessments, may be rounded to the nearest even whole 
 10.28  dollar.  For purposes of this section whole odd-numbered dollars 
 10.29  may be adjusted to the next higher even-numbered dollar.  The 
 10.30  amount of market value excluded under section 273.11, 
 10.31  subdivision 16, if any, must also be listed on the tax 
 10.32  statement.  The statement shall include the following sentence, 
 10.33  printed in upper case letters in boldface print:  "THE STATE OF 
 10.34  MINNESOTA DOES NOT RECEIVE ANY PROPERTY TAX REVENUES.  THE STATE 
 10.35  OF MINNESOTA REDUCES YOUR PROPERTY TAX BY PAYING CREDITS AND 
 10.36  REIMBURSEMENTS TO LOCAL UNITS OF GOVERNMENT."  
 11.1      (b) The property tax statements for manufactured homes and 
 11.2   sectional structures taxed as personal property shall contain 
 11.3   the same information that is required on the tax statements for 
 11.4   real property.  
 11.5      (c) Real and personal property tax statements must contain 
 11.6   the following information in the order given in this paragraph.  
 11.7   The information must contain the current year tax information in 
 11.8   the right column with the corresponding information for the 
 11.9   previous year in a column on the left: 
 11.10     (1) the property's estimated market value under section 
 11.11  273.11, subdivision 1; 
 11.12     (2) the property's taxable market value after reductions 
 11.13  under section 273.11, subdivisions 1a and 16; 
 11.14     (3) the property's gross tax, calculated by multiplying the 
 11.15  property's gross tax capacity times the total local tax rate and 
 11.16  adding to the result the sum of the aids enumerated in clause 
 11.17  (4); 
 11.18     (4) a total of the following aids: 
 11.19     (i) education aids payable under chapters 124 and 124A; 
 11.20     (ii) local government aids for cities, towns, and counties 
 11.21  under chapter 477A; and 
 11.22     (iii) disparity reduction aid under section 273.1398; 
 11.23     (5) for homestead residential and agricultural properties, 
 11.24  the homestead and agricultural credit aid apportioned to the 
 11.25  property.  This amount is obtained by multiplying the total 
 11.26  local tax rate by the difference between the property's gross 
 11.27  and net tax capacities under section 273.13.  This amount must 
 11.28  be separately stated and identified as "homestead and 
 11.29  agricultural credit."  For purposes of comparison with the 
 11.30  previous year's amount for the statement for taxes payable in 
 11.31  1990, the statement must show the homestead credit for taxes 
 11.32  payable in 1989 under section 273.13, and the agricultural 
 11.33  credit under section 273.132 for taxes payable in 1989; 
 11.34     (6) any credits received under sections 273.119; 273.123; 
 11.35  273.135; 273.1391; 273.1398, subdivision 4; 469.171; and 
 11.36  473H.10, except that the amount of credit received under section 
 12.1   273.135 must be separately stated and identified as "taconite 
 12.2   tax relief"; and 
 12.3      (7) the net tax payable in the manner required in paragraph 
 12.4   (a). 
 12.5      (d) If the county uses envelopes for mailing property tax 
 12.6   statements and if the county agrees, a taxing district may 
 12.7   include a notice with the property tax statement notifying 
 12.8   taxpayers when the taxing district will begin its budget 
 12.9   deliberations for the current year, and encouraging taxpayers to 
 12.10  attend the hearings.  If the county allows notices to be 
 12.11  included in the envelope containing the property tax statement, 
 12.12  and if more than one taxing district relative to a given 
 12.13  property decides to include a notice with the tax statement, the 
 12.14  county treasurer or auditor must coordinate the process and may 
 12.15  combine the information on a single announcement.  
 12.16     The commissioner of revenue shall certify to the county 
 12.17  auditor the actual or estimated aids enumerated in clauses (3) 
 12.18  and (4) that local governments will receive in the following 
 12.19  year.  In the case of a county containing a city of the first 
 12.20  class, for taxes levied in 1991, and for all counties for taxes 
 12.21  levied in 1992 and thereafter, The commissioner must certify 
 12.22  this amount by September 1.  
 12.23     Sec. 11.  Minnesota Statutes 1996, section 473F.08, 
 12.24  subdivision 3, is amended to read: 
 12.25     Subd. 3.  [APPORTIONMENT OF LEVY.] The county auditor shall 
 12.26  apportion the levy of each governmental unit in the auditor's 
 12.27  county in the manner prescribed by this subdivision.  The 
 12.28  auditor shall: 
 12.29     (a) by August 20, determine the areawide portion of the 
 12.30  levy for each governmental unit by multiplying the local tax 
 12.31  rate of the governmental unit for the preceding levy year times 
 12.32  the distribution value set forth in subdivision 2, clause (b); 
 12.33  and 
 12.34     (b) by September 5, determine the local portion of the 
 12.35  current year's levy by subtracting the resulting amount from 
 12.36  clause (a) from the governmental unit's current year's levy. 
 13.1      For property taxes payable in 1998 only, a percentage of 
 13.2   the areawide portion of a school district's levy shall be 
 13.3   distributed to the state of Minnesota equal to the percentage 
 13.4   that the general education levy under section 124A.23 was the 
 13.5   school district's payable 1997 levy.  The commissioner of 
 13.6   children, families, and learning shall certify the general 
 13.7   education levy percentage of each district's payable 1997 levy 
 13.8   to the administrative auditor by July 1, 1998, using the 
 13.9   definition of equalized levies found in section 273.1398, 
 13.10  subdivision 1. 
 13.11     Sec. 12.  [REPEALER.] 
 13.12     Minnesota Statutes 1996, sections 124A.22, subdivisions 4a, 
 13.13  4b, 13d, and 13e; and 124A.23, subdivisions 2, 3, 4, and 5, are 
 13.14  repealed. 
 13.15     Sec. 13.  [EFFECTIVE DATES.] 
 13.16     Sections 1 to 7 and 12 are effective for fiscal year 1999.  
 13.17  Sections 8 to 11 are effective for property taxes payable in 
 13.18  1998, and thereafter. 
 13.19                             ARTICLE 2
 13.20                 PROPERTY TAX CLASSIFICATION REFORM 
 13.21     Section 1.  Minnesota Statutes 1996, section 273.13, is 
 13.22  amended by adding a subdivision to read: 
 13.23     Subd. 22a.  [RESIDENTIAL NONHOMESTEAD.] Class 1d includes: 
 13.24     (1) residential real estate containing less than four 
 13.25  units; 
 13.26     (2) seasonal recreational residential property not used for 
 13.27  commercial purposes; 
 13.28     (3) manufactured homes not classified under any other 
 13.29  provision; and 
 13.30     (4) a dwelling, garage, and surrounding one acre of 
 13.31  property on a nonhomestead farm classified under subdivision 23, 
 13.32  paragraph (b). 
 13.33     Class 1d property has the same class rates as class 1a 
 13.34  property under subdivision 22. 
 13.35     Sec. 2.  Minnesota Statutes 1996, section 273.13, 
 13.36  subdivision 23, is amended to read: 
 14.1      Subd. 23.  [CLASS 2.] (a) Class 2a property is agricultural 
 14.2   land including any improvements that is homesteaded.  The market 
 14.3   value of the house and garage and immediately surrounding one 
 14.4   acre of land has the same class rates as class 1a property under 
 14.5   subdivision 22.  The value of the remaining land including 
 14.6   improvements up to $115,000 has a net class rate of .45 percent 
 14.7   of market value and a gross class rate of 1.75 percent of market 
 14.8   value.  The remaining value of class 2a property over $115,000 
 14.9   of market value that does not exceed 320 acres has a net class 
 14.10  rate of one percent of market value, and a gross class rate of 
 14.11  2.25 percent of market value.  The remaining property over the 
 14.12  $115,000 market value in excess of 320 acres has a class rate of 
 14.13  1.5 1.25 percent of market value, and a gross class rate of 2.25 
 14.14  percent of market value.  
 14.15     (b) Class 2b property is (1) real estate, rural in 
 14.16  character and used exclusively for growing trees for timber, 
 14.17  lumber, and wood and wood products; (2) real estate that is not 
 14.18  improved with a structure and is used exclusively for growing 
 14.19  trees for timber, lumber, and wood and wood products, if the 
 14.20  owner has participated or is participating in a cost-sharing 
 14.21  program for afforestation, reforestation, or timber stand 
 14.22  improvement on that particular property, administered or 
 14.23  coordinated by the commissioner of natural resources; (3) real 
 14.24  estate that is nonhomestead agricultural land; or (4) a landing 
 14.25  area or public access area of a privately owned public use 
 14.26  airport.  Class 2b property has a net class rate of 1.5 1.25 
 14.27  percent of market value, and a gross class rate of 2.25 percent 
 14.28  of market value.  
 14.29     (c) Agricultural land as used in this section means 
 14.30  contiguous acreage of ten acres or more, primarily used during 
 14.31  the preceding year for agricultural purposes.  Agricultural use 
 14.32  may include pasture, timber, waste, unusable wild land, and land 
 14.33  included in state or federal farm or conservation programs.  
 14.34  "Agricultural purposes" as used in this section means the 
 14.35  raising or cultivation of agricultural products.  Land enrolled 
 14.36  in the Reinvest in Minnesota program under sections 103F.505 to 
 15.1   103F.531 or the federal Conservation Reserve Program as 
 15.2   contained in Public Law Number 99-198, and consisting of a 
 15.3   minimum of ten contiguous acres, shall be classified as 
 15.4   agricultural.  Agricultural classification for property shall be 
 15.5   determined with respect to the use of the whole parcel, and not 
 15.6   based upon the market value of any residential structures on the 
 15.7   parcel or contiguous parcels under the same ownership. 
 15.8      (d) Real estate of less than ten acres used principally for 
 15.9   raising or cultivating agricultural products, shall be 
 15.10  considered as agricultural land, if it is not used primarily for 
 15.11  residential purposes.  
 15.12     (e) The term "agricultural products" as used in this 
 15.13  subdivision includes:  
 15.14     (1) livestock, dairy animals, dairy products, poultry and 
 15.15  poultry products, fur-bearing animals, horticultural and nursery 
 15.16  stock described in sections 18.44 to 18.61, fruit of all kinds, 
 15.17  vegetables, forage, grains, bees, and apiary products by the 
 15.18  owner; 
 15.19     (2) fish bred for sale and consumption if the fish breeding 
 15.20  occurs on land zoned for agricultural use; 
 15.21     (3) the commercial boarding of horses if the boarding is 
 15.22  done in conjunction with raising or cultivating agricultural 
 15.23  products as defined in clause (1); 
 15.24     (4) property which is owned and operated by nonprofit 
 15.25  organizations used for equestrian activities, excluding racing; 
 15.26  and 
 15.27     (5) game birds and waterfowl bred and raised for use on a 
 15.28  shooting preserve licensed under section 97A.115.  
 15.29     (f) If a parcel used for agricultural purposes is also used 
 15.30  for commercial or industrial purposes, including but not limited 
 15.31  to:  
 15.32     (1) wholesale and retail sales; 
 15.33     (2) processing of raw agricultural products or other goods; 
 15.34     (3) warehousing or storage of processed goods; and 
 15.35     (4) office facilities for the support of the activities 
 15.36  enumerated in clauses (1), (2), and (3), 
 16.1   the assessor shall classify the part of the parcel used for 
 16.2   agricultural purposes as class 1b, 2a, or 2b, whichever is 
 16.3   appropriate, and the remainder in the class appropriate to its 
 16.4   use.  The grading, sorting, and packaging of raw agricultural 
 16.5   products for first sale is considered an agricultural purpose.  
 16.6   A greenhouse or other building where horticultural or nursery 
 16.7   products are grown that is also used for the conduct of retail 
 16.8   sales must be classified as agricultural if it is primarily used 
 16.9   for the growing of horticultural or nursery products from seed, 
 16.10  cuttings, or roots and occasionally as a showroom for the retail 
 16.11  sale of those products.  Use of a greenhouse or building only 
 16.12  for the display of already grown horticultural or nursery 
 16.13  products does not qualify as an agricultural purpose.  
 16.14     The assessor shall determine and list separately on the 
 16.15  records the market value of the homestead dwelling and the one 
 16.16  acre of land on which that dwelling is located.  If any farm 
 16.17  buildings or structures are located on this homesteaded acre of 
 16.18  land, their market value shall not be included in this separate 
 16.19  determination.  
 16.20     (g) To qualify for classification under paragraph (b), 
 16.21  clause (4), a privately owned public use airport must be 
 16.22  licensed as a public airport under section 360.018.  For 
 16.23  purposes of paragraph (b), clause (4), "landing area" means that 
 16.24  part of a privately owned public use airport properly cleared, 
 16.25  regularly maintained, and made available to the public for use 
 16.26  by aircraft and includes runways, taxiways, aprons, and sites 
 16.27  upon which are situated landing or navigational aids.  A landing 
 16.28  area also includes land underlying both the primary surface and 
 16.29  the approach surfaces that comply with all of the following:  
 16.30     (i) the land is properly cleared and regularly maintained 
 16.31  for the primary purposes of the landing, taking off, and taxiing 
 16.32  of aircraft; but that portion of the land that contains 
 16.33  facilities for servicing, repair, or maintenance of aircraft is 
 16.34  not included as a landing area; 
 16.35     (ii) the land is part of the airport property; and 
 16.36     (iii) the land is not used for commercial or residential 
 17.1   purposes. 
 17.2   The land contained in a landing area under paragraph (b), clause 
 17.3   (4), must be described and certified by the commissioner of 
 17.4   transportation.  The certification is effective until it is 
 17.5   modified, or until the airport or landing area no longer meets 
 17.6   the requirements of paragraph (b), clause (4).  For purposes of 
 17.7   paragraph (b), clause (4), "public access area" means property 
 17.8   used as an aircraft parking ramp, apron, or storage hangar, or 
 17.9   an arrival and departure building in connection with the airport.
 17.10     Sec. 3.  Minnesota Statutes 1996, section 273.13, 
 17.11  subdivision 24, is amended to read: 
 17.12     Subd. 24.  [CLASS 3.] (a) Commercial and industrial 
 17.13  property and utility real and personal Business property, except 
 17.14  class 5 property as identified in subdivision 31, clause (1), is 
 17.15  class 3a and consists of commercial property, industrial 
 17.16  property, railroad operating property, and utility real and 
 17.17  personal property.  
 17.18     It Commercial property has a class rate of three two 
 17.19  percent of the first $100,000 of market value for taxes payable 
 17.20  in 1993 and thereafter, and 5.06 4.6 percent of the market value 
 17.21  over $100,000.  Commercial property includes all business 
 17.22  property that is not industrial, utility, or railroad operating 
 17.23  property. 
 17.24     Industrial property has a class rate of two percent of the 
 17.25  first $100,000 of market value and 3.3 percent of the market 
 17.26  value over $100,000.  For purposes of this subdivision, 
 17.27  "industrial property" means property used in manufacturing, 
 17.28  milling, converting, producing, processing, or fabricating 
 17.29  tangible property.  In the case of property which is used 
 17.30  partially for commercial and partially for industrial purposes, 
 17.31  each portion of the property's market value must be separately 
 17.32  assigned a class rate consistent with its use, provided that not 
 17.33  more than $100,000 of the property's market value may receive 
 17.34  the preferential two percent rate.  
 17.35     Railroad operating property has the same class rate as 
 17.36  industrial property. 
 18.1      Utility real and personal property has a class rate of two 
 18.2   percent on the first $100,000 of market value and 4.6 percent of 
 18.3   the market value over $100,000. 
 18.4      In the case of state-assessed commercial, industrial, 
 18.5   and or utility property owned by one person or entity, only one 
 18.6   parcel has a reduced class rate on the first $100,000 of market 
 18.7   value.  In the case of other commercial, industrial, and or 
 18.8   utility property owned by one person or entity, only one parcel 
 18.9   in each county city or town has a reduced class rate on the 
 18.10  first $100,000 of market value, except that: 
 18.11     (1) if the market value of the parcel is less than 
 18.12  $100,000, and additional parcels are owned by the same person or 
 18.13  entity in the same city or town within that county, the reduced 
 18.14  class rate shall be applied up to a combined total market value 
 18.15  of $100,000 for all parcels owned by the same person or entity 
 18.16  in the same city or town within the county; 
 18.17     (2) in the case of grain, fertilizer, and feed elevator 
 18.18  facilities, as defined in section 18C.305, subdivision 1, or 
 18.19  232.21, subdivision 8, the limitation to one parcel per owner 
 18.20  per county city or town for the reduced class rate shall not 
 18.21  apply, but there shall be a limit of $100,000 of preferential 
 18.22  value per site of contiguous parcels owned by the same person or 
 18.23  entity.  Only the value of the elevator portion of each parcel 
 18.24  shall qualify for treatment under this clause.  For purposes of 
 18.25  this subdivision, contiguous parcels include parcels separated 
 18.26  only by a railroad or public road right-of-way; and 
 18.27     (3) in the case of property owned by a nonprofit charitable 
 18.28  organization that qualifies for tax exemption under section 
 18.29  501(c)(3) of the Internal Revenue Code of 1986, as amended 
 18.30  through December 31, 1993, if the property is used as a business 
 18.31  incubator, the limitation to one parcel per owner per county 
 18.32  city or town for the reduced class rate shall not apply, 
 18.33  provided that the reduced rate applies only to the first 
 18.34  $100,000 of value per parcel owned by the organization.  As used 
 18.35  in this clause, a "business incubator" is a facility used for 
 18.36  the development of nonretail businesses, offering access to 
 19.1   equipment, space, services, and advice to the tenant businesses, 
 19.2   for the purpose of encouraging economic development, 
 19.3   diversification, and job creation in the area served by the 
 19.4   organization. 
 19.5      To receive the reduced class rate on additional parcels 
 19.6   under clause (1), (2), or (3), the taxpayer must notify the 
 19.7   county assessor that the taxpayer owns more than one parcel that 
 19.8   qualifies under clause (1), (2), or (3). 
 19.9      (b) Employment property defined in section 469.166, during 
 19.10  the period provided in section 469.170, shall constitute class 
 19.11  3b and has a class rate of 2.3 percent of the first $50,000 of 
 19.12  market value and 3.6 percent of the remainder, except that for 
 19.13  employment property located in a border city enterprise zone 
 19.14  designated pursuant to section 469.168, subdivision 4, paragraph 
 19.15  (c), the class rate of the first $100,000 of market value and 
 19.16  the class rate of the remainder is determined under paragraph 
 19.17  (a), unless the governing body of the city designated as an 
 19.18  enterprise zone determines that a specific parcel shall be 
 19.19  assessed pursuant to the first clause of this sentence.  The 
 19.20  governing body may provide for assessment under the first clause 
 19.21  of the preceding sentence only for property which is located in 
 19.22  an area which has been designated by the governing body for the 
 19.23  receipt of tax reductions authorized by section 469.171, 
 19.24  subdivision 1. 
 19.25     (b) Employment property defined in section 469.166, during 
 19.26  the period provided in section 469.170, and employment property 
 19.27  defined in section 469.168, subdivision 4, paragraph (c), shall 
 19.28  constitute class 3b and has a class rate of two percent of the 
 19.29  first $100,000 of market value and 3.3 percent of the remainder. 
 19.30     (c) Structures which are (i) located on property classified 
 19.31  as class 3a commercial property, (ii) constructed under an 
 19.32  initial building permit issued after January 2, 1996, (iii) 
 19.33  located in a transit zone as defined under section 473.3915, 
 19.34  subdivision 3, (iv) located within the boundaries of a school 
 19.35  district, and (v) not primarily used for retail or transient 
 19.36  lodging purposes, shall have a class rate of four percent on 
 20.1   that portion of the market value in excess of $100,000 and any 
 20.2   market value under $100,000 that does not qualify for the three 
 20.3   two percent class rate under paragraph (a).  As used in item 
 20.4   (v), a structure is primarily used for retail or transient 
 20.5   lodging purposes if over 50 percent of its square footage is 
 20.6   used for those purposes.  The four percent rate shall also apply 
 20.7   to improvements to existing structures that meet the 
 20.8   requirements of items (i) to (v) if the improvements are 
 20.9   constructed under an initial building permit issued after 
 20.10  January 2, 1996, even if the remainder of the structure was 
 20.11  constructed prior to January 2, 1996.  For the purposes of this 
 20.12  paragraph, a structure shall be considered to be located in a 
 20.13  transit zone if any portion of the structure lies within the 
 20.14  zone.  If any property once eligible for treatment under this 
 20.15  paragraph ceases to remain eligible due to revisions in transit 
 20.16  zone boundaries, the property shall continue to receive 
 20.17  treatment under this paragraph for a period of three years. 
 20.18     Sec. 4.  Minnesota Statutes 1996, section 273.13, 
 20.19  subdivision 25, is amended to read: 
 20.20     Subd. 25.  [CLASS 4.] (a) Class 4a is residential real 
 20.21  estate containing four or more units and used or held for use by 
 20.22  the owner or by the tenants or lessees of the owner as a 
 20.23  residence for rental periods of 30 days or more.  Class 4a also 
 20.24  includes hospitals licensed under sections 144.50 to 144.56, 
 20.25  other than hospitals exempt under section 272.02, and contiguous 
 20.26  property used for hospital purposes, without regard to whether 
 20.27  the property has been platted or subdivided.  Class 4a property 
 20.28  in a city with a population of 5,000 or less, that is (1) 
 20.29  located outside of the metropolitan area, as defined in section 
 20.30  473.121, subdivision 2, or outside any county contiguous to the 
 20.31  metropolitan area, and (2) whose city boundary is at least 15 
 20.32  miles from the boundary of any city with a population greater 
 20.33  than 5,000 has a class rate of 2.3 percent of market value for 
 20.34  taxes payable in 1996 and thereafter.  All other class 4a 
 20.35  property has a class rate of 3.4 percent of market value for 
 20.36  taxes payable in 1996 and thereafter.  For purposes of this 
 21.1   paragraph, population has the same meaning given in section 
 21.2   477A.011, subdivision 3. 
 21.3      (b) Class 4b includes: 
 21.4      (1) residential real estate containing less than four 
 21.5   units, other than seasonal residential, and recreational; 
 21.6      (2) manufactured homes not classified under any other 
 21.7   provision; 
 21.8      (3) a dwelling, garage, and surrounding one acre of 
 21.9   property on a nonhomestead farm classified under subdivision 23, 
 21.10  paragraph (b).  
 21.11     Class 4b property has a class rate of 2.8 percent of market 
 21.12  value for taxes payable in 1992, 2.5 percent of market value for 
 21.13  taxes payable in 1993, and 2.3 percent of market value for taxes 
 21.14  payable in 1994 and thereafter. 
 21.15     (c) (b) Class 4c property includes: 
 21.16     (1) a structure that is:  
 21.17     (i) situated on real property that is used for housing for 
 21.18  the elderly or for low- and moderate-income families as defined 
 21.19  in Title II, as amended through December 31, 1990, of the 
 21.20  National Housing Act or the Minnesota housing finance agency law 
 21.21  of 1971, as amended, or rules promulgated by the agency and 
 21.22  financed by a direct federal loan or federally insured loan made 
 21.23  pursuant to Title II of the Act; or 
 21.24     (ii) situated on real property that is used for housing the 
 21.25  elderly or for low- and moderate-income families as defined by 
 21.26  the Minnesota housing finance agency law of 1971, as amended, or 
 21.27  rules adopted by the agency pursuant thereto and financed by a 
 21.28  loan made by the Minnesota housing finance agency pursuant to 
 21.29  the provisions of the act.  
 21.30     This clause applies only to property of a nonprofit or 
 21.31  limited dividend entity.  Property is classified as class 4c 
 21.32  under this clause for 15 years from the date of the completion 
 21.33  of the original construction or substantial rehabilitation, or 
 21.34  for the original term of the loan.  
 21.35     (2) a structure that is: 
 21.36     (i) situated upon real property that is used for housing 
 22.1   lower income families or elderly or handicapped persons, as 
 22.2   defined in section 8 of the United States Housing Act of 1937, 
 22.3   as amended; and 
 22.4      (ii) owned by an entity which has entered into a housing 
 22.5   assistance payments contract under section 8 which provides 
 22.6   assistance for 100 percent of the dwelling units in the 
 22.7   structure, other than dwelling units intended for management or 
 22.8   maintenance personnel.  Property is classified as class 4c under 
 22.9   this clause for the term of the housing assistance payments 
 22.10  contract, including all renewals, or for the term of its 
 22.11  permanent financing, whichever is shorter; and 
 22.12     (3) a qualified low-income building as defined in section 
 22.13  42(c)(2) of the Internal Revenue Code of 1986, as amended 
 22.14  through December 31, 1990, that (i) receives a low-income 
 22.15  housing credit under section 42 of the Internal Revenue Code of 
 22.16  1986, as amended through December 31, 1990; or (ii) meets the 
 22.17  requirements of that section and receives public financing, 
 22.18  except financing provided under sections 469.174 to 469.179, 
 22.19  which contains terms restricting the rents; or (iii) meets the 
 22.20  requirements of section 273.1317.  Classification pursuant to 
 22.21  this clause is limited to a term of 15 years.  The public 
 22.22  financing received must be from at least one of the following 
 22.23  sources:  government issued bonds exempt from taxes under 
 22.24  section 103 of the Internal Revenue Code of 1986, as amended 
 22.25  through December 31, 1993, the proceeds of which are used for 
 22.26  the acquisition or rehabilitation of the building; programs 
 22.27  under section 221(d)(3), 202, or 236, of Title II of the 
 22.28  National Housing Act; rental housing program funds under Section 
 22.29  8 of the United States Housing Act of 1937 or the market rate 
 22.30  family graduated payment mortgage program funds administered by 
 22.31  the Minnesota housing finance agency that are used for the 
 22.32  acquisition or rehabilitation of the building; public financing 
 22.33  provided by a local government used for the acquisition or 
 22.34  rehabilitation of the building, including grants or loans from 
 22.35  federal community development block grants, HOME block grants, 
 22.36  or residential rental bonds issued under chapter 474A; or other 
 23.1   rental housing program funds provided by the Minnesota housing 
 23.2   finance agency for the acquisition or rehabilitation of the 
 23.3   building. 
 23.4      For all properties described in clauses (1), (2), and (3) 
 23.5   and in paragraph (d) (c), the market value determined by the 
 23.6   assessor must be based on the normal approach to value using 
 23.7   normal unrestricted rents unless the owner of the property 
 23.8   elects to have the property assessed under Laws 1991, chapter 
 23.9   291, article 1, section 55.  If the owner of the property elects 
 23.10  to have the market value determined on the basis of the actual 
 23.11  restricted rents, as provided in Laws 1991, chapter 291, article 
 23.12  1, section 55, the property will be assessed at the rate 
 23.13  provided for class 1d or class 4a or class 4b property, as 
 23.14  appropriate.  Properties described in clauses (1)(ii), (3), and 
 23.15  (4) may apply to the assessor for valuation under Laws 1991, 
 23.16  chapter 291, article 1, section 55.  The land on which these 
 23.17  structures are situated has the class rate given in paragraph 
 23.18  (b) subdivision 22a if the structure contains fewer than four 
 23.19  units, and the class rate given in paragraph (a) if the 
 23.20  structure contains four or more units.  This clause applies only 
 23.21  to the property of a nonprofit or limited dividend entity.  
 23.22     (4) a parcel of land, not to exceed one acre, and its 
 23.23  improvements or a parcel of unimproved land, not to exceed one 
 23.24  acre, if it is owned by a neighborhood real estate trust and at 
 23.25  least 60 percent of the dwelling units, if any, on all land 
 23.26  owned by the trust are leased to or occupied by lower income 
 23.27  families or individuals.  This clause does not apply to any 
 23.28  portion of the land or improvements used for nonresidential 
 23.29  purposes.  For purposes of this clause, a lower income family is 
 23.30  a family with an income that does not exceed 65 percent of the 
 23.31  median family income for the area, and a lower income individual 
 23.32  is an individual whose income does not exceed 65 percent of the 
 23.33  median individual income for the area, as determined by the 
 23.34  United States Secretary of Housing and Urban Development.  For 
 23.35  purposes of this clause, "neighborhood real estate trust" means 
 23.36  an entity which is certified by the governing body of the 
 24.1   municipality in which it is located to have the following 
 24.2   characteristics: 
 24.3      (a) it is a nonprofit corporation organized under chapter 
 24.4   317A; 
 24.5      (b) it has as its principal purpose providing housing for 
 24.6   lower income families in a specific geographic community 
 24.7   designated in its articles or bylaws; 
 24.8      (c) it limits membership with voting rights to residents of 
 24.9   the designated community; and 
 24.10     (d) it has a board of directors consisting of at least 
 24.11  seven directors, 60 percent of whom are members with voting 
 24.12  rights and, to the extent feasible, 25 percent of whom are 
 24.13  elected by resident members of buildings owned by the trust; and 
 24.14     (5) except as provided in subdivision 22, paragraph (c), 
 24.15  real property devoted to temporary and seasonal residential 
 24.16  occupancy for recreation purposes, including real property 
 24.17  devoted to temporary and seasonal residential occupancy for 
 24.18  recreation purposes and not devoted to commercial purposes for 
 24.19  more than 250 days in the year preceding the year of 
 24.20  assessment.  For purposes of this clause, property is devoted to 
 24.21  a commercial purpose on a specific day if any portion of the 
 24.22  property is used for residential occupancy, and a fee is charged 
 24.23  for residential occupancy.  Class 4c also includes commercial 
 24.24  use real property used exclusively for recreational purposes in 
 24.25  conjunction with class 4c property devoted to temporary and 
 24.26  seasonal residential occupancy for recreational purposes, up to 
 24.27  a total of two acres, provided the property is not devoted to 
 24.28  commercial recreational use for more than 250 days in the year 
 24.29  preceding the year of assessment and is located within two miles 
 24.30  of the class 4c property with which it is used.  Class 4c 
 24.31  property classified in this clause also includes the remainder 
 24.32  of class 1c resorts.  Owners of real property devoted to 
 24.33  temporary and seasonal residential occupancy for recreation 
 24.34  purposes and all or a portion of which was devoted to commercial 
 24.35  purposes for not more than 250 days in the year preceding the 
 24.36  year of assessment desiring classification as class 1c or 4c, 
 25.1   must submit a declaration to the assessor designating the cabins 
 25.2   or units occupied for 250 days or less in the year preceding the 
 25.3   year of assessment by January 15 of the assessment year.  Those 
 25.4   cabins or units and a proportionate share of the land on which 
 25.5   they are located will be designated class 1c or 4c as otherwise 
 25.6   provided.  The remainder of the cabins or units and a 
 25.7   proportionate share of the land on which they are located will 
 25.8   be designated as class 3a.  The first $100,000 of the market 
 25.9   value of the remainder of the cabins or units and a 
 25.10  proportionate share of the land on which they are located shall 
 25.11  have a the same class rate of three percent as the first 
 25.12  $100,000 of market value of commercial property under 
 25.13  subdivision 24, paragraph (a).  The owner of property desiring 
 25.14  designation as class 1c or 4c property must provide guest 
 25.15  registers or other records demonstrating that the units for 
 25.16  which class 1c or 4c designation is sought were not occupied for 
 25.17  more than 250 days in the year preceding the assessment if so 
 25.18  requested.  The portion of a property operated as a (1) 
 25.19  restaurant, (2) bar, (3) gift shop, and (4) other nonresidential 
 25.20  facility operated on a commercial basis not directly related to 
 25.21  temporary and seasonal residential occupancy for recreation 
 25.22  purposes shall not qualify for class 1c or 4c; 
 25.23     (6) real property up to a maximum of one acre of land owned 
 25.24  by a nonprofit community service oriented organization; provided 
 25.25  that the property is not used for a revenue-producing activity 
 25.26  for more than six days in the calendar year preceding the year 
 25.27  of assessment and the property is not used for residential 
 25.28  purposes on either a temporary or permanent basis.  For purposes 
 25.29  of this clause, a "nonprofit community service oriented 
 25.30  organization" means any corporation, society, association, 
 25.31  foundation, or institution organized and operated exclusively 
 25.32  for charitable, religious, fraternal, civic, or educational 
 25.33  purposes, and which is exempt from federal income taxation 
 25.34  pursuant to section 501(c)(3), (10), or (19) of the Internal 
 25.35  Revenue Code of 1986, as amended through December 31, 1990.  For 
 25.36  purposes of this clause, "revenue-producing activities" shall 
 26.1   include but not be limited to property or that portion of the 
 26.2   property that is used as an on-sale intoxicating liquor or 3.2 
 26.3   percent malt liquor establishment licensed under chapter 340A, a 
 26.4   restaurant open to the public, bowling alley, a retail store, 
 26.5   gambling conducted by organizations licensed under chapter 349, 
 26.6   an insurance business, or office or other space leased or rented 
 26.7   to a lessee who conducts a for-profit enterprise on the 
 26.8   premises.  Any portion of the property which is used for 
 26.9   revenue-producing activities for more than six days in the 
 26.10  calendar year preceding the year of assessment shall be assessed 
 26.11  as class 3a.  The use of the property for social events open 
 26.12  exclusively to members and their guests for periods of less than 
 26.13  24 hours, when an admission is not charged nor any revenues are 
 26.14  received by the organization shall not be considered a 
 26.15  revenue-producing activity; 
 26.16     (7) post-secondary student housing of not more than one 
 26.17  acre of land that is owned by a nonprofit corporation organized 
 26.18  under chapter 317A and is used exclusively by a student 
 26.19  cooperative, sorority, or fraternity for on-campus housing or 
 26.20  housing located within two miles of the border of a college 
 26.21  campus; and 
 26.22     (8) manufactured home parks as defined in section 327.14, 
 26.23  subdivision 3. 
 26.24     Except as otherwise provided in clause (5), class 4c 
 26.25  property has a class rate of 2.3 percent of market value, except 
 26.26  that (i) for each parcel of seasonal residential recreational 
 26.27  property not used for commercial purposes under clause (5) the 
 26.28  first $72,000 of market value on each parcel has a class rate of 
 26.29  1.75 percent for taxes payable in 1997 and 1.5 percent for taxes 
 26.30  payable in 1998 and thereafter, and the market value of each 
 26.31  parcel that exceeds $72,000 has a class rate of 2.5 percent, and 
 26.32  (ii) manufactured home parks assessed under clause (8) have a 
 26.33  class rate of two percent for taxes payable in 1996, and 
 26.34  thereafter. 
 26.35     (d) (c) Class 4d property includes: 
 26.36     (1) a structure that is: 
 27.1      (i) situated on real property that is used for housing for 
 27.2   the elderly or for low and moderate income families as defined 
 27.3   by the Farmers Home Administration; 
 27.4      (ii) located in a municipality of less than 10,000 
 27.5   population; and 
 27.6      (iii) financed by a direct loan or insured loan from the 
 27.7   Farmers Home Administration.  Property is classified under this 
 27.8   clause for 15 years from the date of the completion of the 
 27.9   original construction or for the original term of the loan.  
 27.10     The class rates in paragraph (c) (b), clauses (1), (2), and 
 27.11  (3) and this clause apply to the properties described in them, 
 27.12  only in proportion to occupancy of the structure by elderly or 
 27.13  handicapped persons or low and moderate income families as 
 27.14  defined in the applicable laws unless construction of the 
 27.15  structure had been commenced prior to January 1, 1984; or the 
 27.16  project had been approved by the governing body of the 
 27.17  municipality in which it is located prior to June 30, 1983; or 
 27.18  financing of the project had been approved by a federal or state 
 27.19  agency prior to June 30, 1983.  For those properties, 4c or 4d 
 27.20  classification is available only for those units meeting the 
 27.21  requirements of section 273.1318. 
 27.22     Classification under this clause is only available to 
 27.23  property of a nonprofit or limited dividend entity. 
 27.24     In the case of a structure financed or refinanced under any 
 27.25  federal or state mortgage insurance or direct loan program 
 27.26  exclusively for housing for the elderly or for housing for the 
 27.27  handicapped, a unit shall be considered occupied so long as it 
 27.28  is actually occupied by an elderly or handicapped person or, if 
 27.29  vacant, is held for rental to an elderly or handicapped person. 
 27.30     (2) For taxes payable in 1992, 1993, and 1994, only, 
 27.31  buildings and appurtenances, together with the land upon which 
 27.32  they are located, leased by the occupant under the community 
 27.33  lending model lease-purchase mortgage loan program administered 
 27.34  by the Federal National Mortgage Association, provided the 
 27.35  occupant's income is no greater than 60 percent of the county or 
 27.36  area median income, adjusted for family size and the building 
 28.1   consists of existing single family or duplex housing.  The lease 
 28.2   agreement must provide for a portion of the lease payment to be 
 28.3   escrowed as a nonrefundable down payment on the housing.  To 
 28.4   qualify under this clause, the taxpayer must apply to the county 
 28.5   assessor by May 30 of each year.  The application must be 
 28.6   accompanied by an affidavit or other proof required by the 
 28.7   assessor to determine qualification under this clause. 
 28.8      (3) Qualifying buildings and appurtenances, together with 
 28.9   the land upon which they are located, leased for a period of up 
 28.10  to five years by the occupant under a lease-purchase program 
 28.11  administered by the Minnesota housing finance agency or a 
 28.12  housing and redevelopment authority authorized under sections 
 28.13  469.001 to 469.047, provided the occupant's income is no greater 
 28.14  than 80 percent of the county or area median income, adjusted 
 28.15  for family size, and the building consists of two or less 
 28.16  dwelling units.  The lease agreement must provide for a portion 
 28.17  of the lease payment to be escrowed as a nonrefundable down 
 28.18  payment on the housing.  The administering agency shall verify 
 28.19  the occupants income eligibility and certify to the county 
 28.20  assessor that the occupant meets the income criteria under this 
 28.21  paragraph.  To qualify under this clause, the taxpayer must 
 28.22  apply to the county assessor by May 30 of each year.  For 
 28.23  purposes of this section, "qualifying buildings and 
 28.24  appurtenances" shall be defined as one or two unit residential 
 28.25  buildings which are unoccupied and have been abandoned and 
 28.26  boarded for at least six months. 
 28.27     Class 4d property has a class rate of two percent of market 
 28.28  value except that property classified under clause (3), shall 
 28.29  have the same class rate as class 1a property. 
 28.30     (e) (d) Residential rental property that would otherwise be 
 28.31  assessed as class 4 property under subdivision 22a, clauses (1) 
 28.32  and (4); paragraph (a); paragraph (b), clauses (1) and (3); or 
 28.33  paragraph (c) (b), clause (1), (2), (3), or (4), is assessed at 
 28.34  the class rate applicable to it under Minnesota Statutes 1988, 
 28.35  section 273.13, if it is found to be a substandard building 
 28.36  under section 273.1316.  Residential rental property that would 
 29.1   otherwise be assessed as class 4 property under 
 29.2   paragraph (d) (c) is assessed at 2.3 percent of market value if 
 29.3   it is found to be a substandard building under section 273.1316. 
 29.4      (f) (e) Class 4e property consists of the residential 
 29.5   portion of any structure located within a city that was 
 29.6   converted from nonresidential use to residential use, provided 
 29.7   that: 
 29.8      (1) the structure had formerly been used as a warehouse; 
 29.9      (2) the structure was originally constructed prior to 1940; 
 29.10     (3) the conversion was done after December 31, 1995, but 
 29.11  before January 1, 2003; and 
 29.12     (4) the conversion involved an investment of at least 
 29.13  $25,000 per residential unit. 
 29.14     Class 4e property has a class rate of 2.3 percent, provided 
 29.15  that a structure is eligible for class 4e classification only in 
 29.16  the 12 assessment years immediately following the conversion. 
 29.17     Sec. 5.  [TIF GRANTS; APPROPRIATIONS.] 
 29.18     (a) The commissioner of revenue shall pay grants to 
 29.19  municipalities for deficits in tax increment financing districts 
 29.20  caused by the changes in class rates under this article.  
 29.21  Municipalities must submit applications for the grants in a form 
 29.22  prescribed by the commissioner by no later than March 1 for 
 29.23  taxes payable during the calendar year.  The maximum grant 
 29.24  equals the lesser of: 
 29.25     (1) the reduction in the tax increment financing district's 
 29.26  revenues derived from increment resulting from the class rate 
 29.27  reductions under this article; and 
 29.28     (2) the municipality's total available tax increments, 
 29.29  including those from previous years, less the amount due during 
 29.30  the calendar year to pay bonds issued and sold before and 
 29.31  binding contracts entered into before the day following final 
 29.32  enactment of this act. 
 29.33     If the total applications for grants exceed the amount 
 29.34  available under the appropriation, the commissioner shall 
 29.35  proportionately reduce the grant for each municipality.  These 
 29.36  grants are available for calendar years 1998, 1999, and 2000. 
 30.1      (b) $....... is appropriated to the commissioner of revenue 
 30.2   for purposes of this section.  This appropriation does not 
 30.3   cancel until June 30, 2001. 
 30.4      Sec. 6.  [ASSESSORS' REPORTS.] 
 30.5      By July 1, 1997, each county assessor and the city 
 30.6   assessors of Duluth, Minneapolis, and St. Cloud shall report 
 30.7   separately to the commissioner of revenue for the 1996 
 30.8   assessment year the market values by city and town of: 
 30.9      (1) industrial property as defined in section 3, split 
 30.10  between the value receiving a class rate of two percent and the 
 30.11  value receiving a class rate of 3.3 percent; 
 30.12     (2) commercial property as defined in section 3, split 
 30.13  between the value receiving a class rate of two percent and the 
 30.14  value receiving a class rate of 4.6 percent; and 
 30.15     (3) residential nonhomestead property under Minnesota 
 30.16  Statutes 1996, section 273.13, subdivision 25, paragraph (b), 
 30.17  clause (1), up to $72,000 market value and over $72,000 market 
 30.18  value. 
 30.19     The commissioner of revenue shall prescribe the form of the 
 30.20  report.  The commissioner shall review the reports and may make 
 30.21  any changes the commissioner determines necessary or return the 
 30.22  report to the assessor for corrections. 
 30.23     Sec. 7.  [NET TAX CAPACITY ADJUSTMENTS.] 
 30.24     Using the information reported under section 6, the 
 30.25  commissioner of revenue shall: 
 30.26     (1) reduce the 1971 base value for each municipality under 
 30.27  Minnesota Statutes, chapter 473F, by the same proportion as the 
 30.28  overall reduction in commercial-industrial net tax capacity for 
 30.29  assessment year 1996 resulting from the changes made in this 
 30.30  article; 
 30.31     (2) reduce the 1995 base value for each municipality under 
 30.32  Minnesota Statutes, chapter 276A, by the same proportion as the 
 30.33  overall reduction in commercial-industrial net tax capacity for 
 30.34  assessment year 1996 resulting from the changes made in this 
 30.35  article; and 
 30.36     (3) adjust the net tax capacities for each school district 
 31.1   under Minnesota Statutes, section 124.2131, subdivision 1, to 
 31.2   reflect the class rates contained in this article. 
 31.3      By August 1, 1997, the commissioner of revenue shall 
 31.4   certify to the administrative auditor under chapters 276A and 
 31.5   473F and each affected county assessor the revised base values 
 31.6   determined under clauses (1) and (2). 
 31.7      Sec. 8.  [REPEALER.] 
 31.8      Minnesota Statutes 1996, section 273.13, subdivision 32, is 
 31.9   repealed. 
 31.10     Sec. 9.  [EFFECTIVE DATE.] 
 31.11     Sections 1 to 4 and 8 are effective for taxes payable in 
 31.12  1998 and subsequent years. 
 31.13                             ARTICLE 3
 31.14                             STATE AIDS
 31.15     Section 1.  Minnesota Statutes 1996, section 273.1398, 
 31.16  subdivision 6, is amended to read: 
 31.17     Subd. 6.  [PAYMENT.] The commissioner shall certify the 
 31.18  aids provided in subdivisions 2, 2b, 3, and 5 before September 1 
 31.19  of the year preceding the distribution year to the county 
 31.20  auditor of the affected local government.  The aids provided in 
 31.21  subdivisions 2, 2b, 3, and 5 must be paid to local governments 
 31.22  other than school districts at the times provided in section 
 31.23  477A.015 for payment of local government aid to taxing 
 31.24  jurisdictions, except that the first one-half payment of 
 31.25  disparity reduction aid provided in subdivision 3 must be paid 
 31.26  on or before August 31.  The disparity reduction credit provided 
 31.27  in subdivision 4 must be paid to taxing jurisdictions other than 
 31.28  school districts at the time provided in section 473H.10, 
 31.29  subdivision 3.  Aids and Credit reimbursements to school 
 31.30  districts must be certified to the commissioner of children, 
 31.31  families, and learning and paid under section 273.1392.  Except 
 31.32  for education districts and secondary cooperatives that receive 
 31.33  revenue according to section 124.575, payment shall not be made 
 31.34  to any taxing jurisdiction that has ceased to levy a property 
 31.35  tax.  
 31.36     Sec. 2.  Minnesota Statutes 1996, section 477A.011, is 
 32.1   amended by adding a subdivision to read: 
 32.2      Subd. 3b.  [SPRAWL POPULATION.] For a city with a 
 32.3   population of 5,000 or more which is located outside of the 
 32.4   metropolitan area, "sprawl population" is the total population 
 32.5   of all municipalities and unorganized townships that have a 
 32.6   geographic center closer to the geographic center of the city 
 32.7   than to the geographic center of any other city with a 
 32.8   population of 5,000 or more.  For a city with a population less 
 32.9   than 5,000, or a city located in the metropolitan area, the 
 32.10  sprawl population is zero. 
 32.11     Sec. 3.  Minnesota Statutes 1996, section 477A.011, is 
 32.12  amended by adding a subdivision to read: 
 32.13     Subd. 3c.  [ADJUSTED POPULATION.] "Adjusted population" is 
 32.14  the sum of a city's population plus five percent of the city's 
 32.15  sprawl population. 
 32.16     Sec. 4.  Minnesota Statutes 1996, section 477A.011, is 
 32.17  amended by adding a subdivision to read: 
 32.18     Subd. 20a.  [NET TAX CAPACITY PER CAPITA.] "Net tax 
 32.19  capacity per capita" is equal to a city's net tax capacity 
 32.20  divided by the city's population. 
 32.21     Sec. 5.  Minnesota Statutes 1996, section 477A.011, is 
 32.22  amended by adding a subdivision to read: 
 32.23     Subd. 32a.  [POVERTY PERCENTAGE.] "Poverty percentage" for 
 32.24  a city is 100 times the ratio of the number of households below 
 32.25  the poverty line to the total number of households in the city 
 32.26  according to the most recent federal census. 
 32.27     Sec. 6.  Minnesota Statutes 1996, section 477A.011, is 
 32.28  amended by adding a subdivision to read: 
 32.29     Subd. 33a.  [CITY DECLINE FACTOR.] "City decline factor" is 
 32.30  the product of the city's (1) pre-1940 housing percentage, (2) 
 32.31  commercial industrial percentage, and (3) population decline 
 32.32  percentage. 
 32.33     Sec. 7.  Minnesota Statutes 1996, section 477A.011, 
 32.34  subdivision 34, is amended to read: 
 32.35     Subd. 34.  [CITY REVENUE NEED PER CAPITA.] (a) For a city 
 32.36  with a population equal to or greater than 2,500, "city revenue 
 33.1   need per capita" is the sum of (1) 3.462312 6.110762 times the 
 33.2   pre-1940 housing percentage; plus (2) 2.093826 5.744915 times 
 33.3   the commercial industrial percentage; plus (3) 6.862552 0.024686 
 33.4   times the population city decline percentage factor; plus 
 33.5   (4) .00026 9.784552 times the city population; plus (5) 152.0141 
 33.6   poverty percentage. 
 33.7      (b) For a city with a population less than 2,500, "city 
 33.8   revenue need per capita" is the sum of (1) 1.795919 times the 
 33.9   pre-1940 housing percentage; plus (2) 1.562138 times the 
 33.10  commercial industrial percentage; plus (3) 4.177568 times the 
 33.11  population decline percentage; plus (4) 1.04013 times the 
 33.12  transformed population; minus (5) 107.475. 
 33.13     (c) The City revenue need per capita cannot be less than 
 33.14  zero. 
 33.15     (d) For calendar year 1995 and subsequent years, the city 
 33.16  revenue need per capita for a city with a population less than 
 33.17  2,500, as determined in paragraphs (a) to (b) and (c), is 
 33.18  multiplied by the ratio of the annual implicit price deflator 
 33.19  for state and local government purchases, as prepared by the 
 33.20  United States Department of Commerce, for the most recently 
 33.21  available year to the 1993 implicit price deflator for state and 
 33.22  local government purchases. 
 33.23     (e) For calendar year 1999 and subsequent years, the city 
 33.24  revenue need per capita for a city with a population of 2,500 or 
 33.25  more, as determined in paragraphs (a) and (c), is multiplied by 
 33.26  the ratio of the annual implicit price deflator for state and 
 33.27  local government purchases, as prepared by the United States 
 33.28  Department of Commerce, for the most recent available year to 
 33.29  the 1996 implicit price deflator for state and local government 
 33.30  purchases. 
 33.31     Sec. 8.  Minnesota Statutes 1996, section 477A.011, is 
 33.32  amended by adding a subdivision to read: 
 33.33     Subd. 38.  [NEED ADJUSTMENT FACTOR.] The "need adjustment 
 33.34  factor" for a city equals the square root of the ratio of (1) 
 33.35  1,000 less the city's net tax capacity per capita, to (2) 100.  
 33.36  If the city's net tax capacity per capita is greater than 1,000, 
 34.1   its need adjustment factor is zero. 
 34.2      Sec. 9.  Minnesota Statutes 1996, section 477A.011, is 
 34.3   amended by adding a subdivision to read: 
 34.4      Subd. 39.  [ACRES.] The "number of acres in a town" are the 
 34.5   number of acres of land in the town, according to the most 
 34.6   recent federal census, adjusted for any annexations and 
 34.7   detachments as provided in section 477A.014, subdivision 1. 
 34.8      Sec. 10.  Minnesota Statutes 1996, section 477A.011, is 
 34.9   amended by adding a subdivision to read: 
 34.10     Subd. 40.  [AGRICULTURAL NET TAX CAPACITY.] The 
 34.11  "agricultural net tax capacity" for a town is equal to the net 
 34.12  tax capacity for all property in the town that is classified as 
 34.13  2a or 2b under section 273.13, subdivision 23, except that 
 34.14  property classified as 2b under section 273.13, subdivision 23, 
 34.15  paragraph (b), clause (4), does not qualify as agricultural 
 34.16  property for purposes of this subdivision. 
 34.17     Sec. 11.  [477A.0125] [COUNTY AID DISTRIBUTIONS.] 
 34.18     Subdivision 1.  [FORMULA AMOUNT.] In calendar year 1998 and 
 34.19  subsequent years, each county shall receive an aid amount equal 
 34.20  to the product of (1) an aid percentage, and (2) the sum of (i) 
 34.21  its poverty weighted population multiplied by 145; and (ii) its 
 34.22  acres of land multiplied by .40; minus its net tax capacity 
 34.23  multiplied by 50 percent of the county tax effort rate.  The aid 
 34.24  percentage shall be calculated by the department of revenue so 
 34.25  that the total aid paid to counties under this section equals 
 34.26  the amount available for distribution under section 477A.03. 
 34.27     Subd. 2.  [AID LIMITATION.] (a) For aids payable in 1998, 
 34.28  the amount of aid a county receives under this section shall not 
 34.29  exceed an amount equal to (1) its 1997 homestead and 
 34.30  agricultural credit aid, plus (2) ten percent of its net levy 
 34.31  for taxes payable in 1997. 
 34.32     (b) For aids payable in 1999 and subsequent years, the 
 34.33  amount of aid a county receives under this section shall not 
 34.34  exceed an amount equal to (1) its 1997 homestead and 
 34.35  agricultural credit aid increased by the percentage increase in 
 34.36  total aid under this section for the current aid payable year 
 35.1   compared to the total aid under this section for 1998, plus (2) 
 35.2   a percentage of its net levy for taxes payable in 1997 equal to 
 35.3   ten percent plus one percent for each aid payable year since 
 35.4   1998. 
 35.5      Sec. 12.  Minnesota Statutes 1996, section 477A.013, 
 35.6   subdivision 1, is amended to read: 
 35.7      Subdivision 1.  [TOWNS.] In 1994 each town that had levied 
 35.8   for taxes payable in the prior year a local tax rate of at least 
 35.9   .008 shall receive a distribution equal to the amount it 
 35.10  received in 1993 under this section before any nonpermanent 
 35.11  reductions made under section 477A.0132.  In 1995 each town that 
 35.12  had levied for taxes payable in 1993 a local tax rate of at 
 35.13  least .008 shall receive a distribution equal to 102 percent of 
 35.14  the amount it received in 1994 under this section before any 
 35.15  increases or reductions under sections 16A.711, subdivision 5, 
 35.16  and 477A.0132.  In 1996 and subsequent years each town that had 
 35.17  levied for taxes payable in 1993 a local tax rate of at least 
 35.18  .008 shall receive a distribution equal to the amount it 
 35.19  received in the previous year under this section, adjusted for 
 35.20  inflation as provided under section 477A.03, subdivision 3.  In 
 35.21  calendar year 1998 and subsequent years, the amount of aid that 
 35.22  a town receives is equal to (1) the aid factor multiplied by the 
 35.23  number of acres in the town, less (2) 0.10 multiplied by the 
 35.24  difference between the town's net tax capacity and its 
 35.25  agricultural net tax capacity.  In 1998 the aid factor is $1.  
 35.26  In 1999 and subsequent years the aid factor is the aid factor 
 35.27  from the previous year adjusted for inflation as provided under 
 35.28  section 477A.03, subdivision 3.  If the town's agricultural net 
 35.29  tax capacity is less than 40 percent of its total net tax 
 35.30  capacity the amount of aid it receives is zero.  No town may 
 35.31  have an aid amount less than zero. 
 35.32     Sec. 13.  Minnesota Statutes 1996, section 477A.013, 
 35.33  subdivision 8, is amended to read: 
 35.34     Subd. 8.  [CITY FORMULA AID.] In calendar year 1994 1998 
 35.35  and subsequent years, the formula aid for a city is equal to the 
 35.36  need increase percentage multiplied by the difference between 
 36.1   (1) the city's revenue need multiplied by its population, and 
 36.2   (2) the city's net tax capacity multiplied by the tax effort 
 36.3   rate the product of (1) a scaling factor, (2) the city's 
 36.4   adjusted population, and (3) the sum of (i) 85, (ii) 0.6 
 36.5   multiplied by the city's revenue need per capita, (iii) -0.14 
 36.6   multiplied by the city's net tax capacity per capita, and (iv) 
 36.7   the city's revenue need per capita multiplied by its need 
 36.8   adjustment factor.  No city may have a formula aid amount less 
 36.9   than zero.  The need increase percentage scaling factor must be 
 36.10  the same for all cities.  
 36.11     Notwithstanding the prior sentence, in 1995 only, the need 
 36.12  increase percentage for a city shall be twice the need increase 
 36.13  percentage applicable to other cities if:  
 36.14     (1) the city, in 1992 or 1993, transferred an amount from 
 36.15  governmental funds to their sewer and water fund, and 
 36.16     (2) the amount transferred exceeded their net levy for 
 36.17  taxes payable in the year in which the transfer occurred. 
 36.18     The applicable need increase percentage or percentages 
 36.19  scaling factor must be calculated by the department of revenue 
 36.20  so that the total of the aid under subdivision 9 equals the 
 36.21  total amount available for aid under section 477A.03.  
 36.22     Sec. 14.  Minnesota Statutes 1996, section 477A.013, 
 36.23  subdivision 9, is amended to read: 
 36.24     Subd. 9.  [CITY AID DISTRIBUTION.] (a) In calendar year 
 36.25  1994 1998 and thereafter, each city shall receive an aid 
 36.26  distribution equal to the sum of (1) the city formula aid under 
 36.27  subdivision 8, and (2) its city aid base its city formula aid 
 36.28  subject to the limit in paragraph (b). 
 36.29     (b) The percentage increase for a first class city in 
 36.30  calendar year 1995 and thereafter shall not exceed the 
 36.31  percentage increase in the sum of the aid to all cities under 
 36.32  this section in the current calendar year compared to the sum of 
 36.33  the aid to all cities in the previous year. 
 36.34     (c) The total aid for any city, except a first class city, 
 36.35  shall not exceed the sum of (1) ten 15 percent of the city's net 
 36.36  levy for the year prior to the aid distribution plus (2) its 
 37.1   total aid in the previous year before any increases or decreases 
 37.2   under sections 16A.711, subdivision 5, and section 477A.0132. 
 37.3      (d) Notwithstanding paragraph (c), in 1995 only, for cities 
 37.4   which in 1992 or 1993 transferred an amount from governmental 
 37.5   funds to their sewer and water fund in an amount greater than 
 37.6   their net levy for taxes payable in the year in which the 
 37.7   transfer occurred, the total aid shall not exceed the sum of (1) 
 37.8   20 percent of the city's net levy for the year prior to the aid 
 37.9   distribution plus (2) its total aid in the previous year before 
 37.10  any increases or decreases under sections 16A.711, subdivision 
 37.11  5, and 477A.0132. 
 37.12     (c) Notwithstanding paragraphs (a) and (b), if a city with 
 37.13  a population of 2,500 or more has a reduction in its net tax 
 37.14  capacity of 20 percent or more in an assessment year compared to 
 37.15  the previous year, the following limits and minimums shall apply:
 37.16     (1) for aid distributed in the year immediately following 
 37.17  the assessment year of the net tax capacity loss, the aid may 
 37.18  not increase by more than an amount equal to the product of (i) 
 37.19  17 percent plus a percent equal to the percent loss in net tax 
 37.20  capacity and (ii) the city's net levy for the year prior to the 
 37.21  aid distribution; 
 37.22     (2) for aid distributed in the five years following the 
 37.23  assessment year of the net tax capacity loss, the aid may not be 
 37.24  less than an amount equal to the following: 
 37.25     (i) for the first year, the amount of the net tax capacity 
 37.26  loss multiplied by the city tax rate from the previous year; 
 37.27     (ii) for the second year, 80 percent of the minimum amount 
 37.28  guaranteed in the first year; 
 37.29     (iii) for the third year, 60 percent of the minimum amount 
 37.30  guaranteed in the first year; 
 37.31     (iv) for the fourth year, 40 percent of the minimum amount 
 37.32  guaranteed in the first year; 
 37.33     (v) for the fifth year, 20 percent of the minimum amount 
 37.34  guaranteed in the first year. 
 37.35     A city must notify the commissioner of revenue by July 1 of 
 37.36  the year prior to the first year it would qualify for provisions 
 38.1   under this paragraph in order to be eligible for aid adjustments 
 38.2   under this paragraph.  The city must also furnish the 
 38.3   commissioner with any information needed to administer the 
 38.4   provisions of this paragraph. 
 38.5      Sec. 15.  [477A.0133] [SMALL CITY AID.] 
 38.6      (a) For aids payable in 1998 and thereafter, a city with a 
 38.7   population of under 5,000, that has not imposed a sales and use 
 38.8   tax under section 297A.48, shall receive small city aid in an 
 38.9   amount equal its 1997 distribution under section 273.1398, 
 38.10  subdivision 2.  In the initial year that a city imposes a sales 
 38.11  and use tax under section 297A.48, the aid payable under this 
 38.12  section must be reduced by a percentage obtained by dividing the 
 38.13  number of full months in the initial year that the sales and use 
 38.14  tax is imposed by 12.  
 38.15     (b) Section 477A.03, subdivision 3, does not apply to aid 
 38.16  paid under this section.  
 38.17     (c) The commissioner of revenue shall pay small city aid at 
 38.18  the times provided in section 477A.015.  
 38.19     Sec. 16.  Minnesota Statutes 1996, section 477A.03, 
 38.20  subdivision 2, is amended to read: 
 38.21     Subd. 2.  [ANNUAL APPROPRIATION.] A sum sufficient to 
 38.22  discharge the duties imposed by sections 477A.011 to 477A.014 is 
 38.23  annually appropriated from the general fund to the commissioner 
 38.24  of revenue.  For aids payable in 1996 1998 and thereafter, the 
 38.25  total aids paid under sections 477A.013, subdivision 9, 
 38.26  477A.0121 and 477A.0122 are the amounts certified to be paid in 
 38.27  the previous year, adjusted for inflation as provided under 
 38.28  subdivision 3.  Aid payments to counties cities under section 
 38.29  477A.0121 477A.013, subdivision 9, are limited to $20,265,000 in 
 38.30  1996 $449,344,394 in 1998.  Aid payments to counties under 
 38.31  section 477A.0121 477A.0125 are limited to 
 38.32  $27,571,625 $200,000,000 in 1997 1999.  For aid payable 
 38.33  in 1998 1999 and thereafter, the total aids paid under 
 38.34  section 477A.0121 477A.013, subdivision 9, are the amounts 
 38.35  certified to be paid in the previous year, adjusted for 
 38.36  inflation as provided under subdivision 3.  For aid payable in 
 39.1   2000 and thereafter, the total aid paid under section 477A.0125 
 39.2   are the amounts certified to be paid in the previous year, 
 39.3   adjusted for inflation as provided under subdivision 3. 
 39.4      Sec. 17.  [REPEALER.] 
 39.5      Minnesota Statutes 1996, sections 273.1398, subdivisions 
 39.6   1a, 2, 2c, 2d, 3, and 3a; 273.166; and 477A.011, subdivisions 
 39.7   35, 36, and 37, are repealed. 
 39.8      Sec. 18.  [EFFECTIVE DATE.] 
 39.9      This article is effective for aids payable in 1998 and 
 39.10  thereafter. 
 39.11                             ARTICLE 4 
 39.12                        PROPERTY TAX REFUND 
 39.13     Section 1.  Minnesota Statutes 1996, section 290A.03, 
 39.14  subdivision 6, is amended to read: 
 39.15     Subd. 6.  [HOMESTEAD.] "Homestead" means the dwelling 
 39.16  occupied as the claimant's principal residence and so much of 
 39.17  the land surrounding it, not exceeding ten acres, as is 
 39.18  reasonably necessary for use of the dwelling as a home and any 
 39.19  other property used for purposes of a homestead as defined in 
 39.20  section 273.13, subdivision 22, except for agricultural land 
 39.21  assessed as part of a homestead pursuant to section 273.13, 
 39.22  subdivision 23, "homestead" is limited to 320 acres or, where 
 39.23  the farm homestead is rented, one acre a farm homestead under 
 39.24  subdivision 6a.  The homestead may be owned or rented and may be 
 39.25  a part of a multidwelling or multipurpose building and the land 
 39.26  on which it is built.  
 39.27     A manufactured home, as defined in section 273.125, 
 39.28  subdivision 8, or a park trailer taxed as a manufactured home 
 39.29  under section 168.012, subdivision 9, assessed as personal 
 39.30  property may be a dwelling for purposes of this subdivision. 
 39.31     Sec. 2.  Minnesota Statutes 1996, section 290A.03, is 
 39.32  amended by adding a subdivision to read: 
 39.33     Subd. 6a.  [FARM HOMESTEAD.] "Farm homestead" means the 
 39.34  house occupied as the claimant's principal residence, garage, 
 39.35  and up to 320 acres of the agricultural land assessed as part of 
 39.36  the homestead under section 273.13, subdivision 23, paragraph 
 40.1   (a), including any other improvements located on the land. 
 40.2      Sec. 3.  Minnesota Statutes 1996, section 290A.03, 
 40.3   subdivision 13, is amended to read: 
 40.4      Subd. 13.  [PROPERTY TAXES PAYABLE.] "Property taxes 
 40.5   payable" means the property tax exclusive of special 
 40.6   assessments, penalties, and interest payable on a claimant's 
 40.7   homestead or farm homestead before reductions made under section 
 40.8   273.13 but after deductions made under sections 273.135, 
 40.9   273.1391, 273.42, subdivision 2, and any other state paid 
 40.10  property tax credits in any calendar year.  In the case of a 
 40.11  claimant who makes ground lease payments, "property taxes 
 40.12  payable" includes the amount of the payments directly 
 40.13  attributable to the property taxes assessed against the parcel 
 40.14  on which the house is located.  No apportionment or reduction of 
 40.15  the "property taxes payable" shall be required for the use of a 
 40.16  portion of the claimant's homestead or farm homestead for a 
 40.17  business purpose if the claimant does not deduct any business 
 40.18  depreciation expenses for the use of a portion of the 
 40.19  homestead or farm homestead in the determination of federal 
 40.20  adjusted gross income.  For homesteads which are manufactured 
 40.21  homes as defined in section 273.125, subdivision 8, and for 
 40.22  homesteads which are park trailers taxed as manufactured homes 
 40.23  under section 168.012, subdivision 9, "property taxes payable" 
 40.24  shall also include the amount of the gross rent paid in the 
 40.25  preceding year for the site on which the homestead is located, 
 40.26  which is attributable to the net tax paid on the site.  The 
 40.27  amount attributable to property taxes shall be determined by 
 40.28  multiplying the net tax on the parcel by a fraction, the 
 40.29  numerator of which is the gross rent paid for the calendar year 
 40.30  for the site and the denominator of which is the gross rent paid 
 40.31  for the calendar year for the parcel.  When a homestead or farm 
 40.32  homestead is owned by two or more persons as joint tenants or 
 40.33  tenants in common, such tenants shall determine between them 
 40.34  which tenant may claim the property taxes payable on the 
 40.35  homestead or farm homestead.  If they are unable to agree, the 
 40.36  matter shall be referred to the commissioner of revenue whose 
 41.1   decision shall be final.  Property taxes are considered payable 
 41.2   in the year prescribed by law for payment of the taxes. 
 41.3      In the case of a claim relating to "property taxes 
 41.4   payable," the claimant must have owned and occupied the 
 41.5   homestead or farm homestead on January 2 of the year in which 
 41.6   the tax is payable and (i) the property must have been 
 41.7   classified as homestead property pursuant to section 273.13, 
 41.8   subdivision 22 or 23, on or before December 15 of the assessment 
 41.9   year to which the "property taxes payable" relate; or (ii) the 
 41.10  claimant must provide documentation from the local assessor that 
 41.11  application for homestead classification has been made on or 
 41.12  before December 15 of the year in which the "property taxes 
 41.13  payable" were payable and that the assessor has approved the 
 41.14  application. 
 41.15     Sec. 4.  Minnesota Statutes 1996, section 290A.04, 
 41.16  subdivision 1, is amended to read: 
 41.17     Subdivision 1.  A refund shall be allowed each claimant in 
 41.18  the amount that property taxes payable or rent constituting 
 41.19  property taxes exceed the percentage of the household income of 
 41.20  the claimant specified in subdivision 2 or, 2a, or 2j in the 
 41.21  year for which the taxes were levied or in the year in which the 
 41.22  rent was paid as specified in subdivision 2 or, 2a, or 2j.  If 
 41.23  the amount of property taxes payable or rent constituting 
 41.24  property taxes is equal to or less than the percentage of the 
 41.25  household income of the claimant specified in subdivision 2 or, 
 41.26  2a, or 2j in the year for which the taxes were levied or in the 
 41.27  year in which the rent was paid, the claimant shall not be 
 41.28  eligible for a state refund pursuant to this section.  
 41.29     Sec. 5.  Minnesota Statutes 1996, section 290A.04, 
 41.30  subdivision 2, is amended to read: 
 41.31     Subd. 2.  [HOMEOWNERS.] A claimant whose property taxes 
 41.32  payable on a homestead as defined in section 290A.03, 
 41.33  subdivision 6, are in excess of the percentage of the household 
 41.34  income stated below shall pay an amount equal to the percent of 
 41.35  income shown for the appropriate household income level along 
 41.36  with the percent to be paid by the claimant of the remaining 
 42.1   amount of property taxes payable.  The state refund equals the 
 42.2   amount of property taxes payable that remain, up to the state 
 42.3   refund amount shown below.  
 42.4                         Percent           Percent    Maximum
 42.5   Household Income     of Income          Paid by     State
 42.6                                           Claimant    Refund
 42.7       $0 to 1,029     1.2 percent        18 percent   $440
 42.8    1,030 to 2,059     1.3 percent        18 percent   $440
 42.9    2,060 to 3,099     1.4 percent        20 percent   $440
 42.10   3,100 to 4,129     1.6 percent        20 percent   $440
 42.11   4,130 to 5,159     1.7 percent        20 percent   $440
 42.12   5,160 to 7,229     1.9 percent        25 percent   $440
 42.13   7,230 to 8,259     2.1 percent        25 percent   $440
 42.14   8,260 to 9,289     2.2 percent        25 percent   $440
 42.15   9,290 to 10,319    2.3 percent        30 percent   $440
 42.16  10,320 to 11,349    2.4 percent        30 percent   $440
 42.17  11,350 to 12,389    2.5 percent        30 percent   $440
 42.18  12,390 to 14,449    2.6 percent        30 percent   $440
 42.19  14,450 to 15,479    2.8 percent        35 percent   $440
 42.20  15,480 to 16,509    3.0 percent        35 percent   $440
 42.21  16,510 to 17,549    3.2 percent        40 percent   $440
 42.22  17,550 to 21,669    3.3 percent        40 percent   $440
 42.23  21,670 to 24,769    3.4 percent        45 percent   $440
 42.24  24,770 to 30,959    3.5 percent        45 percent   $440
 42.25  30,960 to 36,119    3.5 percent        45 percent   $440
 42.26  36,120 to 41,279    3.7 percent        50 percent   $440
 42.27  41,280 to 58,829    4.0 percent        50 percent   $440
 42.28  58,830 to 59,859    4.0 percent        50 percent   $310
 42.29  59,860 to 60,889    4.0 percent        50 percent   $210
 42.30  60,890 to 61,929    4.0 percent        50 percent   $100 
 42.31      $0 to 1,059     1.2 percent        18 percent   $850
 42.32   1,060 to 2,119     1.3 percent        18 percent   $850
 42.33   2,120 to 3,188     1.4 percent        20 percent   $850
 42.34   3,189 to 4,247     1.6 percent        20 percent   $850
 42.35   4,248 to 5,307     1.7 percent        20 percent   $850
 42.36   5,308 to 7,435     1.9 percent        25 percent   $850
 42.37   7,436 to 8,495     2.0 percent        25 percent   $850
 42.38   8,496 to 9,554     2.1 percent        25 percent   $850
 42.39   9,555 to 10,613    2.1 percent        30 percent   $850
 42.40  10,614 to 11,673    2.2 percent        30 percent   $850
 42.41  11,674 to 12,742    2.2 percent        30 percent   $850
 42.42  12,743 to 14,861    2.3 percent        30 percent   $850
 42.43  14,862 to 15,920    2.4 percent        35 percent   $850
 42.44  15,921 to 16,979    2.6 percent        35 percent   $850
 42.45  16,980 to 18,049    2.8 percent        40 percent   $850
 42.46  18,050 to 22,286    3.0 percent        40 percent   $850
 42.47  22,287 to 25,474    3.2 percent        45 percent   $850
 42.48  25,475 to 31,840    3.3 percent        45 percent   $850
 42.49  31,841 to 37,147    3.5 percent        45 percent   $850
 42.50  37,148 to 42,453    3.7 percent        50 percent   $850
 42.51  42,454 to 60,502    4.0 percent        50 percent   $850
 42.52  60,503 to 61,561    4.0 percent        50 percent   $600
 42.53  61,562 to 62,621    4.0 percent        50 percent   $300
 42.54  62,622 to 63,689    4.0 percent        50 percent   $100 
 42.55     The payment made to a claimant shall be the amount of the 
 42.56  state refund calculated under this subdivision.  No payment is 
 42.57  allowed if the claimant's household income is $61,930 $63,690 or 
 42.58  more. 
 42.59     Sec. 6.  Minnesota Statutes 1996, section 290A.04, 
 42.60  subdivision 2a, is amended to read: 
 42.61     Subd. 2a.  [RENTERS.] A claimant whose rent constituting 
 43.1   property taxes exceeds the percentage of the household income 
 43.2   stated below must pay an amount equal to the percent of income 
 43.3   shown for the appropriate household income level along with the 
 43.4   percent to be paid by the claimant of the remaining amount of 
 43.5   rent constituting property taxes.  The state refund equals the 
 43.6   amount of rent constituting property taxes that remain, up to 
 43.7   the maximum state refund amount shown below.  
 43.8                         Percent           Percent      Maximum
 43.9   Household Income     of Income          Paid by        State
 43.10                                          Claimant      Refund
 43.11  $     0 to 3,099     1.0 percent         5 percent    $1,030  
 43.12    3,100 to 4,129     1.0 percent        10 percent    $1,030  
 43.13    4,130 to 5,159     1.1 percent        10 percent    $1,030  
 43.14    5,160 to 7,229     1.2 percent        10 percent    $1,030
 43.15    7,230 to 9,289     1.3 percent        15 percent    $1,030    
 43.16    9,290 to 10,319    1.4 percent        15 percent    $1,030
 43.17   10,320 to 11,349    1.4 percent        20 percent    $1,030
 43.18   11,350 to 13,419    1.5 percent        20 percent    $1,030
 43.19   13,420 to 14,449    1.6 percent        20 percent    $1,030
 43.20   14,450 to 15,479    1.7 percent        25 percent    $1,030
 43.21   15,480 to 17,549    1.8 percent        25 percent    $1,030 
 43.22   17,550 to 18,579    1.9 percent        30 percent    $1,030 
 43.23   18,580 to 19,609    2.0 percent        30 percent    $1,030  
 43.24   19,610 to 20,639    2.2 percent        30 percent    $1,030
 43.25   20,640 to 21,669    2.4 percent        30 percent    $1,030
 43.26   21,670 to 22,709    2.6 percent        35 percent    $1,030
 43.27   22,710 to 23,739    2.7 percent        35 percent    $1,030
 43.28   23,740 to 24,769    2.8 percent        35 percent    $1,030
 43.29   24,770 to 25,799    2.9 percent        40 percent    $1,030 
 43.30   25,800 to 26,839    3.0 percent        40 percent    $1,030  
 43.31   26,840 to 27,869    3.1 percent        40 percent    $1,030  
 43.32   27,870 to 28,899    3.2 percent        40 percent    $1,030
 43.33   28,900 to 29,929    3.3 percent        45 percent    $  930
 43.34   29,930 to 30,959    3.4 percent        45 percent    $  830
 43.35   30,960 to 31,999    3.5 percent        45 percent    $  720
 43.36   32,000 to 33,029    3.5 percent        50 percent    $  620
 43.37   33,030 to 34,059    3.5 percent        50 percent    $  520  
 43.38   34,060 to 35,089    3.5 percent        50 percent    $  310  
 43.39   35,090 to 36,119    3.5 percent        50 percent    $  100
 43.40       $0 to 3,189     1.0 percent         5 percent    $2,000  
 43.41    3,190 to 4,249     1.0 percent        10 percent    $2,000  
 43.42    4,250 to 6,369     1.1 percent        10 percent    $2,000  
 43.43    6,370 to 7,439     1.2 percent        10 percent    $2,000
 43.44    7,440 to 9,549     1.3 percent        10 percent    $2,000    
 43.45    9,550 to 10,609    1.4 percent        10 percent    $2,000
 43.46   10,610 to 11,669    1.4 percent        10 percent    $2,000
 43.47   11,670 to 13,799    1.5 percent        10 percent    $2,000
 43.48   13,800 to 14,859    1.6 percent        10 percent    $2,000
 43.49   14,860 to 15,919    1.7 percent        10 percent    $2,000
 43.50   15,920 to 18,049    1.8 percent        10 percent    $2,000 
 43.51   18,050 to 19,109    1.9 percent        10 percent    $2,000 
 43.52   19,110 to 20,169    2.0 percent        10 percent    $2,000  
 43.53   20,170 to 21,229    2.2 percent        15 percent    $2,000
 43.54   21,230 to 22,289    2.4 percent        15 percent    $2,000
 43.55   22,290 to 23,359    2.6 percent        15 percent    $2,000
 43.56   23,360 to 24,419    2.7 percent        15 percent    $2,000
 43.57   24,420 to 25,469    2.8 percent        15 percent    $2,000
 43.58   25,470 to 26,529    2.9 percent        20 percent    $2,000 
 43.59   25,530 to 27,599    3.0 percent        20 percent    $2,000  
 43.60   27,600 to 28,659    3.1 percent        20 percent    $2,000  
 43.61   28,660 to 29,719    3.2 percent        20 percent    $2,000
 43.62   27,720 to 30,779    3.3 percent        25 percent    $1,920
 43.63   30,780 to 31,839    3.4 percent        25 percent    $1,700
 43.64   31,840 to 32,909    3.5 percent        25 percent    $1,480
 44.1    32,910 to 33,969    3.5 percent        30 percent    $1,280
 44.2    33,970 to 35,029    3.5 percent        30 percent    $1,080  
 44.3    35,030 to 37,149    3.5 percent        30 percent    $  640  
 44.4    36,090 to 39,999    3.5 percent        30 percent    $  200
 44.5      The payment made to a claimant is the amount of the state 
 44.6   refund calculated under this subdivision.  No payment is allowed 
 44.7   if the claimant's household income is $36,120 $40,000 or more. 
 44.8      Sec. 7.  Minnesota Statutes 1996, section 290A.04, is 
 44.9   amended by adding a subdivision to read: 
 44.10     Subd. 2j.  [FARM HOMESTEADS.] A claimant whose property 
 44.11  taxes payable on a farm homestead as defined in section 290A.03, 
 44.12  subdivision 6a, are in excess of the percentage of the household 
 44.13  income stated in this subdivision shall pay an amount equal to 
 44.14  the percent of income shown for the appropriate household income 
 44.15  level along with the percent to be paid by the claimant of the 
 44.16  remaining amount of property taxes payable.  The state refund 
 44.17  equals the amount of property taxes payable that remain, up to 
 44.18  the state refund amount shown in this subdivision. 
 44.19  Household Income      Percent           Percent    Maximum
 44.20                       of Income          Paid by     State
 44.21                                          Claimant    Refund
 44.22      $0 to 1,059     1.2 percent        18 percent   $500
 44.23   1,060 to 2,119     1.3 percent        18 percent   $500
 44.24   2,120 to 3,188     1.4 percent        20 percent   $500
 44.25   3,189 to 4,247     1.6 percent        20 percent   $500
 44.26   4,248 to 5,307     1.7 percent        20 percent   $500
 44.27   5,308 to 7,435     1.9 percent        25 percent   $500
 44.28   7,436 to 8,495     2.0 percent        25 percent   $500
 44.29   8,496 to 9,554     2.1 percent        25 percent   $500
 44.30   9,555 to 10,613    2.1 percent        30 percent   $500
 44.31  10,614 to 11,673    2.2 percent        30 percent   $500
 44.32  11,674 to 12,742    2.2 percent        30 percent   $500
 44.33  12,743 to 14,861    2.3 percent        30 percent   $500
 44.34  14,862 to 15,920    2.4 percent        35 percent   $500
 44.35  15,921 to 16,979    2.6 percent        35 percent   $500
 44.36  16,980 to 18,049    2.8 percent        40 percent   $500
 44.37  18,050 to 22,286    3.0 percent        40 percent   $500
 44.38  22,287 to 25,474    3.2 percent        45 percent   $500
 44.39  25,475 to 31,840    3.3 percent        45 percent   $500
 44.40  31,841 to 37,147    3.5 percent        45 percent   $500
 44.41  37,148 to 42,453    3.7 percent        50 percent   $500
 44.42  42,454 to 60,502    4.0 percent        50 percent   $500
 44.43  60,503 to 61,561    4.0 percent        50 percent   $400
 44.44  61,562 to 62,621    4.0 percent        50 percent   $300
 44.45  62,622 to 63,689    4.0 percent        50 percent   $100
 44.46     The payment made to a claimant shall be the amount of the 
 44.47  state refund calculated under this subdivision.  No payment is 
 44.48  allowed if the claimant's household income is $63,690 or more. 
 44.49     Sec. 8.  Minnesota Statutes 1996, section 290A.04, 
 44.50  subdivision 6, is amended to read: 
 45.1      Subd. 6.  [INFLATION ADJUSTMENT.] Beginning for property 
 45.2   tax refunds payable in calendar year 1996 1999, the commissioner 
 45.3   shall annually adjust the dollar amounts of the income 
 45.4   thresholds and the maximum refunds under subdivisions 2 and, 2a, 
 45.5   and 2j for inflation.  The commissioner shall make the inflation 
 45.6   adjustments in accordance with section 290.06, subdivision 2d, 
 45.7   except that for purposes of this subdivision the percentage 
 45.8   increase shall be determined from the year ending on August 31, 
 45.9   1994 1997, to the year ending on August 31 of the year preceding 
 45.10  that in which the refund is payable.  The commissioner shall use 
 45.11  the appropriate percentage increase to annually adjust the 
 45.12  income thresholds and maximum refunds under subdivisions 2 and, 
 45.13  2a, and 2j for inflation without regard to whether or not the 
 45.14  income tax brackets are adjusted for inflation in that year.  
 45.15  The commissioner shall round the thresholds and the maximum 
 45.16  amounts, as adjusted to the nearest $10 amount.  If the amount 
 45.17  ends in $5, the commissioner shall round it up to the next $10 
 45.18  amount.  
 45.19     The commissioner shall annually announce the adjusted 
 45.20  refund schedule at the same time provided under section 290.06.  
 45.21  The determination of the commissioner under this subdivision is 
 45.22  not a rule under the administrative procedure act. 
 45.23     Sec. 9.  [REPEALER.] 
 45.24     Laws 1995, chapter 264, article 4, as amended by Laws 1996, 
 45.25  chapter 471, article 3, is repealed.  Notwithstanding Minnesota 
 45.26  Statutes 1996, section 645.34, the sections of statutes amended 
 45.27  by the repealed Laws 1995, chapter 264, article 4, as amended by 
 45.28  Laws 1996, chapter 471, article 3, remain in effect as if not so 
 45.29  amended. 
 45.30     Sec. 10.  [EFFECTIVE DATE.] 
 45.31     Sections 1 to 8 are effective for refunds claimed for 
 45.32  property taxes payable in 1998 and thereafter.  Section 9 is 
 45.33  effective the day following final enactment. 
 45.34                             ARTICLE 5 
 45.35                         SALES AND USE TAX 
 45.36     Section 1.  Minnesota Statutes 1996, section 297A.02, 
 46.1   subdivision 1, is amended to read: 
 46.2      Subdivision 1.  [GENERALLY.] Except as otherwise provided 
 46.3   in this chapter, there is imposed an excise tax of 6.5 5.5 
 46.4   percent of the gross receipts from sales at retail made by any 
 46.5   person in this state. 
 46.6      Sec. 2.  [297A.48] [CITY SALES TAX.] 
 46.7      Subdivision 1.  [DEFINITION.] For purposes of this section, 
 46.8   "city" means a statutory or home rule charter city. 
 46.9      Subd. 2.  [AUTHORIZATION.] Notwithstanding section 
 46.10  477A.016, or any other contrary provision of law, ordinance, or 
 46.11  city charter, and in addition to any general or limited sales 
 46.12  taxes authorized by a special law, a city may by ordinance 
 46.13  impose a tax of one percent on sales transactions taxable under 
 46.14  this chapter and chapter 297B that occur within the geographic 
 46.15  boundaries of the city.  A compensating use tax, at the same tax 
 46.16  rate, must also be imposed for using, storing, distributing, or 
 46.17  consuming tangible personal property or taxable services within 
 46.18  the city.  
 46.19     A tax imposed under this section is not included in 
 46.20  determining the maximum rate under Laws 1989, chapter 396, 
 46.21  section 5, clause (2). 
 46.22     For purposes of this subdivision, the following sales that 
 46.23  occur within the city are not subject to the tax: 
 46.24     (1) the gross receipts from the sale of items that are 
 46.25  mailed, shipped, delivered, or removed from the city and that 
 46.26  are not returned to the city except in the course of interstate 
 46.27  or intrastate commerce are exempt to the same extent that those 
 46.28  items would be exempt from the state sales tax if they were 
 46.29  mailed, shipped, delivered, or removed from the state and are 
 46.30  not returned to the state except in the course of interstate 
 46.31  commerce; and 
 46.32     (2) all mobile transportation equipment and parts and 
 46.33  accessories attached to or to be attached to such equipment are 
 46.34  exempt if purchased by a person using a motor carrier direct pay 
 46.35  permit issued under section 297A.211. 
 46.36     Subd. 3.  [CREDIT FOR OTHER LOCAL TAXES.] If taxable items 
 47.1   or services have been subjected to a sales tax imposed by a 
 47.2   city, and the items or services are used, stored, or consumed in 
 47.3   another city imposing a local use tax, a credit shall be given 
 47.4   for all legally imposed sales taxes paid by the purchaser with 
 47.5   respect to those items or services. 
 47.6      Subd. 4.  [TAX RATE.] Any items of tangible personal 
 47.7   property or services that are taxed at a rate less than the 
 47.8   state general sales and use tax rate are subject to tax at the 
 47.9   full rate of tax imposed by the city. 
 47.10     Subd. 5.  [EXEMPTIONS.] All items or services exempt from 
 47.11  the state sales and use tax and state sales tax on motor 
 47.12  vehicles are exempt from a tax imposed under this section.  All 
 47.13  requests for refunds of state sales taxes paid in excess of the 
 47.14  amount of tax legally due apply to local taxes paid on those 
 47.15  items or services.  The full amount of the local taxes paid on 
 47.16  items exempt from the state sales and use tax must be refunded 
 47.17  to the taxpayer. 
 47.18     Subd. 6.  [SERVICES.] Services that are taxable under the 
 47.19  general state sales tax are subject to a tax imposed under this 
 47.20  section if they are performed wholly within the boundaries of 
 47.21  the city or, if performed partly within and partly without the 
 47.22  city, and the greater proportion of the service is performed 
 47.23  within the city, based upon the cost of performance. 
 47.24     Subd. 7.  [ENFORCEMENT; COLLECTION; AND ADMINISTRATION OF 
 47.25  TAXES.] All local sales and use taxes imposed under this section 
 47.26  must be reported and paid to the commissioner of revenue with 
 47.27  the state sales taxes and are subject to the same penalties, 
 47.28  interest, and enforcement provisions.  The proceeds of the tax, 
 47.29  less refunds and a proportionate share of the cost of 
 47.30  collection, must be remitted at least quarterly to the city.  
 47.31  The commissioner shall deduct from the proceeds remitted an 
 47.32  amount that equals the direct and indirect department costs 
 47.33  necessary to administer, audit, and collect the tax. 
 47.34     Subd. 8.  [DEPOSIT OF PROCEEDS.] The proceeds of the taxes 
 47.35  shall be deposited in the city's general operating fund or other 
 47.36  fund designated by the city.  
 48.1      Subd. 9.  [NOTIFICATION.] A city that imposes a local sales 
 48.2   tax under this section shall make the tax effective on the first 
 48.3   day of a calendar quarter.  The city shall give the commissioner 
 48.4   90 days' notice to either commence or terminate the imposition 
 48.5   of the tax. 
 48.6      Sec. 3.  [EFFECTIVE DATE.] 
 48.7      This article is effective for sales made after June 30, 
 48.8   1998. 
 48.9                              ARTICLE 6
 48.10               SENIOR CITIZENS PROPERTY TAX DEFERRAL 
 48.11     Section 1.  Minnesota Statutes 1996, section 270B.12, is 
 48.12  amended by adding a subdivision to read: 
 48.13     Subd. 12.  [PROPERTY TAX DEFERRAL.] The commissioner may 
 48.14  disclose to a county auditor and treasurer, and to their 
 48.15  designated agents or employees, the annual deferral amounts and 
 48.16  the cumulative deferral and interest as determined by the 
 48.17  commissioner under chapter 290B for each parcel of homestead 
 48.18  property in the county that is enrolled in the senior citizen 
 48.19  property tax deferral program under chapter 290B. 
 48.20     Sec. 2.  Minnesota Statutes 1996, section 275.065, 
 48.21  subdivision 3, is amended to read: 
 48.22     Subd. 3.  [NOTICE OF PROPOSED PROPERTY TAXES.] (a) The 
 48.23  county auditor shall prepare and the county treasurer shall 
 48.24  deliver after November 10 and on or before November 24 each 
 48.25  year, by first class mail to each taxpayer at the address listed 
 48.26  on the county's current year's assessment roll, a notice of 
 48.27  proposed property taxes and, in the case of a town, final 
 48.28  property taxes.  
 48.29     (b) The commissioner of revenue shall prescribe the form of 
 48.30  the notice. 
 48.31     (c) The notice must inform taxpayers that it contains the 
 48.32  amount of property taxes each taxing authority other than a town 
 48.33  proposes to collect for taxes payable the following year and, 
 48.34  for a town, the amount of its final levy.  It must clearly state 
 48.35  that each taxing authority, including regional library districts 
 48.36  established under section 134.201, and including the 
 49.1   metropolitan taxing districts as defined in paragraph (i), but 
 49.2   excluding all other special taxing districts and towns, will 
 49.3   hold a public meeting to receive public testimony on the 
 49.4   proposed budget and proposed or final property tax levy, or, in 
 49.5   case of a school district, on the current budget and proposed 
 49.6   property tax levy.  It must clearly state the time and place of 
 49.7   each taxing authority's meeting and an address where comments 
 49.8   will be received by mail.  
 49.9      (d) The notice must state for each parcel: 
 49.10     (1) the market value of the property as determined under 
 49.11  section 273.11, and used for computing property taxes payable in 
 49.12  the following year and for taxes payable in the current year; 
 49.13  and, in the case of residential property, whether the property 
 49.14  is classified as homestead or nonhomestead.  The notice must 
 49.15  clearly inform taxpayers of the years to which the market values 
 49.16  apply and that the values are final values; 
 49.17     (2) by county, city or town, school district excess 
 49.18  referenda levy, remaining school district levy, regional library 
 49.19  district, if in existence, the total of the metropolitan special 
 49.20  taxing districts as defined in paragraph (i) and the sum of the 
 49.21  remaining special taxing districts, and as a total of the taxing 
 49.22  authorities, including all special taxing districts, the 
 49.23  proposed or, for a town, final net tax on the property for taxes 
 49.24  payable the following year and the actual tax for taxes payable 
 49.25  the current year.  If a school district has certified under 
 49.26  section 124A.03, subdivision 2, that a referendum will be held 
 49.27  in the school district at the November general election, the 
 49.28  county auditor must note next to the school district's proposed 
 49.29  amount that a referendum is pending and that, if approved by the 
 49.30  voters, the tax amount may be higher than shown on the notice.  
 49.31  For the purposes of this subdivision, "school district excess 
 49.32  referenda levy" means school district taxes for operating 
 49.33  purposes approved at referendums, including those taxes based on 
 49.34  net tax capacity as well as those based on market value.  
 49.35  "School district excess referenda levy" does not include school 
 49.36  district taxes for capital expenditures approved at referendums 
 50.1   or school district taxes to pay for the debt service on bonds 
 50.2   approved at referenda.  In the case of the city of Minneapolis, 
 50.3   the levy for the Minneapolis library board and the levy for 
 50.4   Minneapolis park and recreation shall be listed separately from 
 50.5   the remaining amount of the city's levy.  In the case of a 
 50.6   parcel where tax increment or the fiscal disparities areawide 
 50.7   tax under chapter 276A or 473F applies, the proposed tax levy on 
 50.8   the captured value or the proposed tax levy on the tax capacity 
 50.9   subject to the areawide tax must each be stated separately and 
 50.10  not included in the sum of the special taxing districts; and 
 50.11     (3) the increase or decrease in the amounts in clause (2) 
 50.12  from taxes payable in the current year to proposed or, for a 
 50.13  town, final taxes payable the following year, expressed as a 
 50.14  dollar amount and as a percentage. 
 50.15     For purposes of this section, the amount of the tax on 
 50.16  homesteads qualifying under the senior citizens' property tax 
 50.17  deferral program under chapter 290B is the total amount of 
 50.18  property tax before subtraction of the deferred property tax 
 50.19  amount. 
 50.20     (e) The notice must clearly state that the proposed or 
 50.21  final taxes do not include the following: 
 50.22     (1) special assessments; 
 50.23     (2) levies approved by the voters after the date the 
 50.24  proposed taxes are certified, including bond referenda, school 
 50.25  district levy referenda, and levy limit increase referenda; 
 50.26     (3) amounts necessary to pay cleanup or other costs due to 
 50.27  a natural disaster occurring after the date the proposed taxes 
 50.28  are certified; 
 50.29     (4) amounts necessary to pay tort judgments against the 
 50.30  taxing authority that become final after the date the proposed 
 50.31  taxes are certified; and 
 50.32     (5) the contamination tax imposed on properties which 
 50.33  received market value reductions for contamination. 
 50.34     (f) Except as provided in subdivision 7, failure of the 
 50.35  county auditor to prepare or the county treasurer to deliver the 
 50.36  notice as required in this section does not invalidate the 
 51.1   proposed or final tax levy or the taxes payable pursuant to the 
 51.2   tax levy. 
 51.3      (g) If the notice the taxpayer receives under this section 
 51.4   lists the property as nonhomestead and the homeowner provides 
 51.5   satisfactory documentation to the county assessor that the 
 51.6   property is owned and used as the owner's homestead, the 
 51.7   assessor shall reclassify the property to homestead for taxes 
 51.8   payable in the following year. 
 51.9      (h) In the case of class 4 residential property used as a 
 51.10  residence for lease or rental periods of 30 days or more, the 
 51.11  taxpayer must either: 
 51.12     (1) mail or deliver a copy of the notice of proposed 
 51.13  property taxes to each tenant, renter, or lessee; or 
 51.14     (2) post a copy of the notice in a conspicuous place on the 
 51.15  premises of the property.  
 51.16     The notice must be mailed or posted by the taxpayer by 
 51.17  November 27 or within three days of receipt of the notice, 
 51.18  whichever is later.  A taxpayer may notify the county treasurer 
 51.19  of the address of the taxpayer, agent, caretaker, or manager of 
 51.20  the premises to which the notice must be mailed in order to 
 51.21  fulfill the requirements of this paragraph. 
 51.22     (i) For purposes of this subdivision, subdivisions 5a and 
 51.23  6, "metropolitan special taxing districts" means the following 
 51.24  taxing districts in the seven-county metropolitan area that levy 
 51.25  a property tax for any of the specified purposes listed below: 
 51.26     (1) metropolitan council under section 473.132, 473.167, 
 51.27  473.249, 473.325, 473.446, 473.521, 473.547, or 473.834; 
 51.28     (2) metropolitan airports commission under section 473.667, 
 51.29  473.671, or 473.672; and 
 51.30     (3) metropolitan mosquito control commission under section 
 51.31  473.711. 
 51.32     For purposes of this section, any levies made by the 
 51.33  regional rail authorities in the county of Anoka, Carver, 
 51.34  Dakota, Hennepin, Ramsey, Scott, or Washington under chapter 
 51.35  398A shall be included with the appropriate county's levy and 
 51.36  shall be discussed at that county's public hearing. 
 52.1      (j) For taxes levied in 1996, payable in 1997 only, in the 
 52.2   case of a statutory or home rule charter city or town that 
 52.3   exercises the local levy option provided in section 473.388, 
 52.4   subdivision 7, the notice of its proposed taxes may include a 
 52.5   statement of the amount by which its proposed tax increase for 
 52.6   taxes payable in 1997 is attributable to its exercise of that 
 52.7   option, together with a statement that the levy of the 
 52.8   metropolitan council was decreased by a similar amount because 
 52.9   of the exercise of that option. 
 52.10     Sec. 3.  Minnesota Statutes 1996, section 276.04, 
 52.11  subdivision 2, is amended to read: 
 52.12     Subd. 2.  [CONTENTS OF TAX STATEMENTS.] (a) The treasurer 
 52.13  shall provide for the printing of the tax statements.  The 
 52.14  commissioner of revenue shall prescribe the form of the property 
 52.15  tax statement and its contents.  The statement must contain a 
 52.16  tabulated statement of the dollar amount due to each taxing 
 52.17  authority from the parcel of real property for which a 
 52.18  particular tax statement is prepared.  The dollar amounts due 
 52.19  the county, township or municipality, the total of the 
 52.20  metropolitan special taxing districts as defined in section 
 52.21  275.065, subdivision 3, paragraph (i), school district excess 
 52.22  referenda levy, remaining school district levy, and the total of 
 52.23  other voter approved referenda levies based on market value 
 52.24  under section 275.61 must be separately stated.  The amounts due 
 52.25  all other special taxing districts, if any, may be 
 52.26  aggregated.  The amount of the tax on homesteads qualifying 
 52.27  under the senior citizens' property tax deferral program under 
 52.28  chapter 290B is the total amount of property tax before 
 52.29  subtraction of the deferred property tax amount.  For the 
 52.30  purposes of this subdivision, "school district excess referenda 
 52.31  levy" means school district taxes for operating purposes 
 52.32  approved at referenda, including those taxes based on net tax 
 52.33  capacity as well as those based on market value.  "School 
 52.34  district excess referenda levy" does not include school district 
 52.35  taxes for capital expenditures approved at referendums or school 
 52.36  district taxes to pay for the debt service on bonds approved at 
 53.1   referenda.  The amount of the tax on contamination value imposed 
 53.2   under sections 270.91 to 270.98, if any, must also be separately 
 53.3   stated.  The dollar amounts, including the dollar amount of any 
 53.4   special assessments, may be rounded to the nearest even whole 
 53.5   dollar.  For purposes of this section whole odd-numbered dollars 
 53.6   may be adjusted to the next higher even-numbered dollar.  The 
 53.7   amount of market value excluded under section 273.11, 
 53.8   subdivision 16, if any, must also be listed on the tax 
 53.9   statement.  The statement shall include the following sentence, 
 53.10  printed in upper case letters in boldface print:  "THE STATE OF 
 53.11  MINNESOTA DOES NOT RECEIVE ANY PROPERTY TAX REVENUES.  THE STATE 
 53.12  OF MINNESOTA REDUCES YOUR PROPERTY TAX BY PAYING CREDITS AND 
 53.13  REIMBURSEMENTS TO LOCAL UNITS OF GOVERNMENT."  
 53.14     (b) The property tax statements for manufactured homes and 
 53.15  sectional structures taxed as personal property shall contain 
 53.16  the same information that is required on the tax statements for 
 53.17  real property.  
 53.18     (c) Real and personal property tax statements must contain 
 53.19  the following information in the order given in this paragraph.  
 53.20  The information must contain the current year tax information in 
 53.21  the right column with the corresponding information for the 
 53.22  previous year in a column on the left: 
 53.23     (1) the property's estimated market value under section 
 53.24  273.11, subdivision 1; 
 53.25     (2) the property's taxable market value after reductions 
 53.26  under section 273.11, subdivisions 1a and 16; 
 53.27     (3) the property's gross tax, calculated by multiplying the 
 53.28  property's gross tax capacity times the total local tax rate and 
 53.29  adding to the result the sum of the aids enumerated in clause 
 53.30  (4); 
 53.31     (4) a total of the following aids: 
 53.32     (i) education aids payable under chapters 124 and 124A; 
 53.33     (ii) local government aids for cities, towns, and counties 
 53.34  under chapter 477A; and 
 53.35     (iii) disparity reduction aid under section 273.1398; 
 53.36     (5) for homestead residential and agricultural properties, 
 54.1   the homestead and agricultural credit aid apportioned to the 
 54.2   property.  This amount is obtained by multiplying the total 
 54.3   local tax rate by the difference between the property's gross 
 54.4   and net tax capacities under section 273.13.  This amount must 
 54.5   be separately stated and identified as "homestead and 
 54.6   agricultural credit."  For purposes of comparison with the 
 54.7   previous year's amount for the statement for taxes payable in 
 54.8   1990, the statement must show the homestead credit for taxes 
 54.9   payable in 1989 under section 273.13, and the agricultural 
 54.10  credit under section 273.132 for taxes payable in 1989; 
 54.11     (6) any credits received under sections 273.119; 273.123; 
 54.12  273.135; 273.1391; 273.1398, subdivision 4; 469.171; and 
 54.13  473H.10, except that the amount of credit received under section 
 54.14  273.135 must be separately stated and identified as "taconite 
 54.15  tax relief"; and 
 54.16     (7) any deferred property tax amount under the senior 
 54.17  citizens' property tax deferral program under chapter 290B, as 
 54.18  well as the total deferred amount plus accrued interest; and 
 54.19     (8) the net tax payable in the manner required in paragraph 
 54.20  (a). 
 54.21     (d) If the county uses envelopes for mailing property tax 
 54.22  statements and if the county agrees, a taxing district may 
 54.23  include a notice with the property tax statement notifying 
 54.24  taxpayers when the taxing district will begin its budget 
 54.25  deliberations for the current year, and encouraging taxpayers to 
 54.26  attend the hearings.  If the county allows notices to be 
 54.27  included in the envelope containing the property tax statement, 
 54.28  and if more than one taxing district relative to a given 
 54.29  property decides to include a notice with the tax statement, the 
 54.30  county treasurer or auditor must coordinate the process and may 
 54.31  combine the information on a single announcement.  
 54.32     The commissioner of revenue shall certify to the county 
 54.33  auditor the actual or estimated aids enumerated in clauses (3) 
 54.34  and (4) that local governments will receive in the following 
 54.35  year.  In the case of a county containing a city of the first 
 54.36  class, for taxes levied in 1991, and for all counties for taxes 
 55.1   levied in 1992 and thereafter, the commissioner must certify 
 55.2   this amount by September 1.  
 55.3      Sec. 4.  [290B.02] [CITATION.] 
 55.4      This program shall be named the "senior citizens' property 
 55.5   tax deferral program." 
 55.6      Sec. 5.  [290B.03] [DEFERRAL OF PROPERTY TAXES.] 
 55.7      Subdivision 1.  [PROGRAM QUALIFICATIONS.] If the net tax 
 55.8   payable on class 1 property as defined in section 273.13, 
 55.9   subdivision 22, and that part of class 2a property as defined in 
 55.10  section 273.13, subdivision 23, consisting of the house, garage, 
 55.11  and surrounding one acre of land, is greater than its net tax 
 55.12  payable for the base year, the amount of the increase may be 
 55.13  deferred under this section, if all of the following conditions 
 55.14  are met: 
 55.15     (1) the property must be owned and occupied as a homestead 
 55.16  by a person 68 years of age or older.  In the case of a married 
 55.17  couple, only one of the spouses has to be at least 68 years old 
 55.18  at the time the first property tax deferral is granted, 
 55.19  regardless of whether the property is titled in the name of one 
 55.20  spouse or both spouses, or titled in another way that permits 
 55.21  the property to have homestead status; 
 55.22     (2) the homestead must have been owned and occupied as the 
 55.23  homestead of at least one of the qualifying homeowners for at 
 55.24  least ten years prior to the year the initial application is 
 55.25  filed; 
 55.26     (3) there are no delinquent property taxes, penalties, or 
 55.27  interest on the homesteaded property; 
 55.28     (4) there are no delinquent special assessments on the 
 55.29  homesteaded property; 
 55.30     (5) there are no state or federal tax liens or judgment 
 55.31  liens on the homesteaded property; 
 55.32     (6) there are no mortgages or other liens on the property 
 55.33  that secure future advances, except for those subject to credit 
 55.34  limits that result in compliance with clause (7); and 
 55.35     (7) the total unpaid balances of debts secured by mortgages 
 55.36  and other liens on the property, including unpaid special 
 56.1   assessments, but not including property taxes payable during the 
 56.2   year does not exceed 75 percent of the assessor's estimated 
 56.3   market value for the year. 
 56.4      Subd. 2.  [QUALIFYING HOMESTEAD; DEFINED.] Qualifying 
 56.5   homestead property is defined as the dwelling occupied as the 
 56.6   homeowner's principal residence and so much of the land 
 56.7   surrounding it, not exceeding one acre, as is reasonably 
 56.8   necessary for use of the dwelling as a home and any other 
 56.9   property used for purposes of a homestead as defined in section 
 56.10  273.13, subdivisions 22 and 23.  The homestead may be part of a 
 56.11  multidwelling building and the land on which it is built. 
 56.12     Sec. 6.  [290B.04] [APPLICATION FOR DEFERRAL.] 
 56.13     Subdivision 1.  [INITIAL APPLICATION.] A taxpayer meeting 
 56.14  the program qualifications under section 290B.03 may apply to 
 56.15  the commissioner of revenue for the deferral of taxes.  The 
 56.16  application is due on or before July 1 for deferral of the 
 56.17  following year's property taxes.  A taxpayer may apply in the 
 56.18  year in which the taxpayer becomes 68 years old, provided that 
 56.19  no deferral of property taxes will be made until the calendar 
 56.20  year after the taxpayer becomes 68 years old.  The application 
 56.21  shall be prescribed by the commissioner of revenue and shall 
 56.22  include the following items and any other information which the 
 56.23  commissioner deems necessary: 
 56.24     (1) the name, address, and social security number of the 
 56.25  owner or owners; 
 56.26     (2) a copy of the property tax statement for the current 
 56.27  payable year for the homesteaded property; 
 56.28     (3) the initial year of ownership and occupancy as a 
 56.29  homestead; and 
 56.30     (4) information on any mortgage loans or other amounts 
 56.31  secured by mortgages or other liens against the property, for 
 56.32  which purpose the commissioner may require the applicant to 
 56.33  provide a copy of the mortgage note, the mortgage, or a 
 56.34  statement of the balance owing on the mortgage loan provided by 
 56.35  the mortgage holder.  The commissioner may require the 
 56.36  appropriate documents in connection with obtaining and 
 57.1   confirming information on unpaid amounts secured by other liens. 
 57.2      The application must state that program participation is 
 57.3   voluntary.  The application must also state program 
 57.4   participation includes authorization for the deferred amount for 
 57.5   each year and for the cumulative deferral and interest to appear 
 57.6   on each year's property tax statement as public data. 
 57.7      Subd. 2.  [APPROVAL; RECORDING.] The commissioner shall 
 57.8   approve all initial applications that qualify under this chapter 
 57.9   and shall notify qualifying homeowners on or before December 1.  
 57.10  The commissioner may investigate the facts or require 
 57.11  confirmation in regard to an application.  The commissioner 
 57.12  shall record or file a notice of qualification for deferral, 
 57.13  including the names of the qualifying homeowners and a legal 
 57.14  description of the property, in the office of the county 
 57.15  recorder, or registrar of titles, whichever is applicable, in 
 57.16  the county where the qualifying property is located.  The notice 
 57.17  must state that it serves as a notice of lien and that it 
 57.18  includes deferrals under this section for future years.  The 
 57.19  homeowner shall pay the recording or filing fees. 
 57.20     Subd. 3.  [SUBSEQUENT YEARS.] A taxpayer whose initial 
 57.21  application has been approved under subdivision 2 need not 
 57.22  complete an annual certification to remain enrolled in the 
 57.23  program. 
 57.24     Sec. 7.  [290B.05] [DEFERRED PROPERTY TAX AMOUNT; MAXIMUM.] 
 57.25     Subdivision 1.  [DEFERRED TAX AMOUNT.] The difference 
 57.26  between the net property taxes payable on the qualifying 
 57.27  homestead and the net property taxes payable for the base year 
 57.28  is the "deferred property tax amount" for that taxes payable 
 57.29  year.  The deferred tax amounts must not include any special 
 57.30  assessments levied by any local unit of government.  Any tax 
 57.31  attributable to new improvements made to the property after the 
 57.32  initial application has been approved under section 290B.04, 
 57.33  subdivision 2, must be excluded when determining any subsequent 
 57.34  deferred property tax amounts.  No tax shall be deferred in any 
 57.35  year in which the homeowner does not meet the program 
 57.36  qualifications in section 290B.03. 
 58.1      Subd. 2.  [MAXIMUM DEFERRAL.] The maximum allowable total 
 58.2   deferral is equal to 75 percent of the assessor's estimated 
 58.3   market value for the year, less (1) the balance of any mortgage 
 58.4   loans and other amounts secured by liens against the property at 
 58.5   the time of application, including any unpaid special 
 58.6   assessments but not including property taxes payable during the 
 58.7   year; and (2) any outstanding deferral and interest.  
 58.8      Subd. 3.  [CERTIFICATION BY COMMISSIONER.] On or before 
 58.9   December 1, the commissioner shall certify to the county auditor 
 58.10  of the county in which the qualifying homesteads are located (1) 
 58.11  each qualifying homestead's base tax; (2) each qualifying 
 58.12  homestead's maximum allowable deferral under subdivision 2; and 
 58.13  (3) each qualifying homestead's cumulative deferral and interest 
 58.14  for all years preceding the next taxes payable year. 
 58.15     Subd. 4.  [CALCULATION OF DEFERRED PROPERTY TAX AMOUNT.] 
 58.16  When final property tax amounts for the following year have been 
 58.17  determined, the county auditor shall calculate the "deferred 
 58.18  property tax amount."  The county auditor shall annually, on or 
 58.19  before April 15, certify to the commissioner of revenue the 
 58.20  property tax deferral amounts determined under this subdivision 
 58.21  by property and by owner.  
 58.22     Subd. 5.  [LIMITATION ON TOTAL AMOUNT OF DEFERRED TAXES.] 
 58.23  On or before September 1 of each year, the commissioner shall 
 58.24  request, and each county or city assessor shall provide, the 
 58.25  current year's estimated market value of each property on the 
 58.26  list supplied by the commissioner that may be eligible for 
 58.27  deferral under this section for taxes payable in the following 
 58.28  year.  The total amount of deferred taxes and interest on a 
 58.29  property, when added to (1) the balance owing on any mortgages 
 58.30  on the property at the time of initial application; and (2) 
 58.31  other amounts secured by liens on the property at the time of 
 58.32  the initial application, may not exceed 75 percent of the 
 58.33  assessor's current estimated market value of the property. 
 58.34     Sec. 8.  [290B.06] [PROPERTY TAX REFUNDS.] 
 58.35     For purposes of qualifying for the regular property tax 
 58.36  refund or the special refund for homeowners under chapter 290A, 
 59.1   the qualifying tax is the full amount of taxes, including the 
 59.2   deferred portion of the tax.  Any regular or special property 
 59.3   tax refund awarded based upon those property taxes must be taken 
 59.4   first as a deduction from the amount of the deferred tax for 
 59.5   that year, and second as a deduction against any outstanding 
 59.6   deferral from previous years, rather than as a cash payment to 
 59.7   the homeowner.  The commissioner shall cancel any current year's 
 59.8   deferral or previous years' deferral and interest that is offset 
 59.9   by the property tax refunds. If the total of the regular and the 
 59.10  special property tax refund amounts exceeds the sum of the 
 59.11  deferred tax for the current year and cumulative deferred tax 
 59.12  and interest for previous years, the commissioner shall then 
 59.13  remit the excess amount to the homeowner.  On or before the date 
 59.14  on which the commissioner issues property tax refunds, the 
 59.15  commissioner shall notify program participants of any reduction 
 59.16  in the deferred amount for the current and previous years 
 59.17  resulting from property tax refunds. 
 59.18     Sec. 9.  [290B.07] [LIEN; DEFERRED PORTION.] 
 59.19     Payment by the state to the county treasurer of taxes 
 59.20  deferred under this section is deemed a loan from the state to 
 59.21  the program participant.  The interest is equal to 80 percent of 
 59.22  the interest rate determined under section 270.75, subdivision 
 59.23  5.  The commissioner shall compute the interest and maintain 
 59.24  records of the total deferred amount and interest for each 
 59.25  participant.  Interest shall accrue beginning September 1 of the 
 59.26  payable year for which the taxes are deferred.  The lien created 
 59.27  under section 272.31 continues to secure payment by the 
 59.28  taxpayer, or by the taxpayer's successors or assigns, of the 
 59.29  amount deferred, including interest, with respect to all years 
 59.30  for which amounts are deferred.  The lien for deferred taxes and 
 59.31  interest has the same priority as any other lien under section 
 59.32  272.31, except that liens, including mortgages, recorded or 
 59.33  filed prior to the recording or filing of the notice under 
 59.34  section 290B.04, subdivision 2, have priority over the lien for 
 59.35  deferred taxes and interest.  A seller's interest in a contract 
 59.36  for deed, in which a qualifying homeowner is the purchaser or an 
 60.1   assignee of the purchaser, has priority over deferred taxes and 
 60.2   interest on deferred taxes, regardless of whether the contract 
 60.3   for deed is recorded or filed.  The lien for deferred taxes and 
 60.4   interest for future years has the same priority as the lien for 
 60.5   deferred taxes and interest for the first year, which is always 
 60.6   higher in priority than any mortgages or other liens filed, 
 60.7   recorded, or created after the notice recorded or filed under 
 60.8   section 290B.04, subdivision 2.  The county treasurer or auditor 
 60.9   shall maintain records of the deferred portion and shall list 
 60.10  the amount of deferred taxes for the year and the cumulative 
 60.11  deferral and interest for all previous years as a lien against 
 60.12  the property on the property tax statement.  In any 
 60.13  certification of unpaid taxes for a tax parcel, the county 
 60.14  auditor shall clearly distinguish between taxes payable in the 
 60.15  current year, deferred taxes and interest, and delinquent 
 60.16  taxes.  Payment of the deferred portion becomes due and owing at 
 60.17  the time specified in section 290B.08.  Upon receipt of the 
 60.18  payment, the commissioner shall issue a receipt for it to the 
 60.19  person making the payment upon request and shall notify the 
 60.20  auditor of the county in which the parcel is located, within ten 
 60.21  days, identifying the parcel to which the payment applies.  Upon 
 60.22  receipt by the commissioner of revenue of collected funds in the 
 60.23  amount of the deferral, the state's loan to the program 
 60.24  participant is deemed paid in full. 
 60.25     Sec. 10.  [290B.08] [PARTIAL PAYMENT.] 
 60.26     A homeowner may pay all or part of the deferred taxes to 
 60.27  the commissioner of revenue. 
 60.28     Sec. 11.  [290B.09] [TERMINATION OF DEFERRAL; PAYMENT OF 
 60.29  DEFERRED TAXES.] 
 60.30     Subdivision 1.  [TERMINATION.] (a) The deferral of taxes 
 60.31  granted under this chapter terminates when one of the following 
 60.32  occurs: 
 60.33     (1) the property is sold or transferred; 
 60.34     (2) the death of the qualifying homeowner, except that in 
 60.35  the case of a married couple, both spouses must be deceased; 
 60.36     (3) the property no longer qualifies as a homestead; or 
 61.1      (4) the homeowner notifies the commissioner in writing that 
 61.2   the homeowner desires to terminate participation in the program. 
 61.3      (b) A property is not terminated from the program because 
 61.4   no deferred property tax amount is determined on the homestead 
 61.5   for any given year after the homestead's initial enrollment into 
 61.6   the program. 
 61.7      Subd. 2.  [PAYMENT UPON TERMINATION.] Upon the termination 
 61.8   of the deferral under subdivision 1, the amount of deferred 
 61.9   taxes and interest plus the recording or filing fees under both 
 61.10  section 290B.04, subdivision 2, and this subdivision becomes due 
 61.11  and payable to the commissioner within 90 days of termination of 
 61.12  the deferral.  No additional interest is due on the deferral if 
 61.13  timely paid.  On receipt of payment, the commissioner shall 
 61.14  within ten days notify the auditor of the county in which the 
 61.15  parcel is located, identifying the parcel to which the payment 
 61.16  applies and shall remit the recording or filing fees under 
 61.17  section 290B.04, subdivision 2, and this subdivision to the 
 61.18  auditor.  A notice of termination of deferral, containing the 
 61.19  legal description and the recording or filing data for the 
 61.20  notice of qualification for deferral under section 290B.04, 
 61.21  subdivision 2, shall be prepared and recorded or filed by the 
 61.22  county auditor in the same office in which the notice of 
 61.23  qualification for deferral under section 290B.04, subdivision 2, 
 61.24  was recorded or filed, and the county auditor shall mail a copy 
 61.25  of the notice of termination to the property owner.  The 
 61.26  property owner shall pay the recording or filing fees.  Upon 
 61.27  recording or filing of the notice of termination of deferral, 
 61.28  the notice of qualification for deferral under section 290B.04, 
 61.29  subdivision 2, and the lien created by it are discharged.  If 
 61.30  the deferral is not timely paid, the penalty, interest, lien, 
 61.31  forfeiture, and other rules for the collection of ad valorem 
 61.32  property taxes apply. 
 61.33     Sec. 12.  [290B.10] [STATE REIMBURSEMENT.] 
 61.34     Subdivision 1.  [DETERMINATION; PAYMENT.] The commissioner 
 61.35  of revenue shall determine the deferred amount of property tax 
 61.36  in each county, basing determinations on a review of abstracts 
 62.1   of tax lists submitted by the county auditors under section 
 62.2   275.29.  The commissioner may make changes in the abstracts of 
 62.3   tax lists as deemed necessary.  The commissioner of revenue, 
 62.4   after such review, shall pay the deferred amount of property tax 
 62.5   to each county treasurer on or before August 31.  
 62.6      At least once each year, the commissioner shall report to 
 62.7   the county auditor the total cumulative amount of deferred taxes 
 62.8   and interest that constitute a lien against the property.  
 62.9      The county treasurer shall distribute as part of the 
 62.10  October settlement the funds received as if they had been 
 62.11  collected as a part of the property tax. 
 62.12     Subd. 2.  [APPROPRIATION.] An amount sufficient to pay the 
 62.13  total amount of property tax determined under subdivision 1 is 
 62.14  annually appropriated from the general fund to the commissioner 
 62.15  of revenue. 
 62.16     Sec. 13.  [EFFECTIVE DATE.] 
 62.17     Sections 1 to 12 are effective the day following final 
 62.18  enactment for deferral of property taxes payable in 1999, and 
 62.19  thereafter. 
 62.20                             ARTICLE 7
 62.21                       BUSINESS ACTIVITY TAX
 62.22     Section 1.  Minnesota Statutes 1996, section 290.06, 
 62.23  subdivision 1, is amended to read: 
 62.24     Subdivision 1.  [COMPUTATION, CORPORATIONS.] The franchise 
 62.25  tax imposed upon corporations shall be computed by applying to 
 62.26  their taxable income the rate of 9.8 7.5 percent, subject to 
 62.27  adjustment as provided in paragraph (b). 
 62.28     (b) For each taxable year beginning after December 31, 
 62.29  1997, the commissioner of revenue shall adjust the rate of tax 
 62.30  imposed under paragraph (a) to the rate that the commissioner 
 62.31  estimates will produce revenue in the taxable year that, when 
 62.32  added to the proceeds of the tax imposed under section 290.9401 
 62.33  in the next taxable year, will not exceed the sum of: 
 62.34     (1) the proceeds of the tax imposed under section 290.0921 
 62.35  for the 1997 taxable year; 
 62.36     (2) the proceeds of the tax imposed under section 290.0922 
 63.1   for the 1997 taxable year; 
 63.2      (3) the proceeds of the tax imposed under this subdivision 
 63.3   for the 1997 taxable year; plus 
 63.4      (4) the estimated amount by which the aggregate statewide 
 63.5   tax on commercial-industrial property classified as class 3 
 63.6   property was reduced from the amount paid for taxes payable in 
 63.7   1998 to the amount paid for taxes payable in the calendar year 
 63.8   preceding the taxable year for which the estimate is made. 
 63.9      As used in this paragraph, "proceeds of the tax imposed for 
 63.10  the 1997 taxable year" means the proceeds of the specified tax 
 63.11  from all taxpayers during taxable years beginning after December 
 63.12  31, 1996, and before January 1, 1998. 
 63.13     Sec. 2.  [290.9401] [BUSINESS ACTIVITY TAX IMPOSED.] 
 63.14     In addition to the taxes imposed by this chapter, a tax of 
 63.15  .. percent applies to a firm's tax base. 
 63.16     Sec. 3.  [290.9402] [DEFINITIONS.] 
 63.17     Subdivision 1.  [SCOPE.] For purposes of sections 290.9401 
 63.18  to 290.9407, the following terms have the meanings given. 
 63.19     Subd. 2.  [BUSINESS ACTIVITY.] "Business activity" means 
 63.20  sale or rental of property or the performance of services in 
 63.21  this state to realize a gain, benefit, or advantage, whether 
 63.22  direct or indirect.  Business activity includes activity in 
 63.23  intrastate, interstate, and foreign commerce.  It does not 
 63.24  include services provided by an employee to the employee's 
 63.25  employer, service as the director of a corporation, or a casual 
 63.26  transaction.  Although an activity may be incidental to another 
 63.27  of the firm's business activities, each activity is a business 
 63.28  activity for purposes of the tax. 
 63.29     Subd. 3.  [BUSINESS INCOME.] "Business income" means net 
 63.30  income.  For a firm other than a corporation, net income is 
 63.31  limited to the portion derived from business activity. 
 63.32     Subd. 4.  [CASUAL TRANSACTION.] "Casual transaction" means 
 63.33  a transaction that (1) is not made in the ordinary course of 
 63.34  repeated or successive transactions of a like character by the 
 63.35  firm, and (2) is not incidental to the firm's regular business 
 63.36  activity. 
 64.1      Subd. 5.  [COMPENSATION.] (a) "Compensation" means all 
 64.2   payments made to or for the benefit of employees, officers, or 
 64.3   directors of the firm. 
 64.4      (b) Compensation specifically includes, but is not limited 
 64.5   to: 
 64.6      (1) wages, salaries, bonuses, commissions, and other 
 64.7   payments to employees, officers, or directors; 
 64.8      (2) payments to state and federal unemployment compensation 
 64.9   funds; 
 64.10     (3) payments, including self-insurance, for workers' 
 64.11  compensation; 
 64.12     (4) payments to individuals not currently working; 
 64.13     (5) payments to dependents and heirs of individuals because 
 64.14  of current or past labor service provided by those individuals; 
 64.15     (6) payments to a pension, retirement, profit-sharing, or 
 64.16  deferred compensation program; 
 64.17     (7) payments for insurance, including self-insurance, for 
 64.18  which employees are beneficiaries, including payments for health 
 64.19  and welfare and noninsured benefit plans and payment of fees for 
 64.20  administration of plans. 
 64.21     (c) Compensation does not include: 
 64.22     (1) discounts on the price of the firm's merchandise or 
 64.23  services sold to employees, officers, or directors that are not 
 64.24  available to other customers; or 
 64.25     (2) payments to independent contractors. 
 64.26     Subd. 6.  [FIRM.] "Firm" means a corporation, individual, 
 64.27  partnership, limited liability company, trust, nonprofit 
 64.28  corporation, joint venture, association, receiver, estate, or 
 64.29  other person engaged in business activity. 
 64.30     Subd. 7.  [PROPERTY.] "Property" includes all property, 
 64.31  whether tangible or intangible, or whether real, personal, or 
 64.32  mixed. 
 64.33     Sec. 4.  [290.9403] [BUSINESSES SUBJECT TO TAX.] 
 64.34     Subdivision 1.  [TAXABLE BUSINESSES.] The tax imposed by 
 64.35  sections 290.9401 to 290.9407 applies to a firm engaged in 
 64.36  business activity in Minnesota, unless an exemption under 
 65.1   subdivisions 2 to 4 applies. 
 65.2      Subd. 2.  [FOREIGN INSURANCE COMPANIES.] An insurance 
 65.3   company as defined in section 290.05, subdivision 1, clause (c), 
 65.4   is exempt. 
 65.5      Subd. 3.  [GOVERNMENT ENTITIES.] A governmental entity, as 
 65.6   defined in section 290.05, subdivision 1, clause (b), is exempt. 
 65.7      Subd. 4.  [OTHER EXEMPT ENTITIES.] An organization exempt 
 65.8   from taxation under Subchapter F of the Internal Revenue Code is 
 65.9   exempt, except to the extent of tax base from activities 
 65.10  generating: 
 65.11     (1) unrelated business income, as defined in sections 511 
 65.12  to 515 of the Internal Revenue Code; 
 65.13     (2) taxable income of farmers' cooperatives under section 
 65.14  521 of the Internal Revenue Code; 
 65.15     (3) taxable income of political organizations under section 
 65.16  527 of the Internal Revenue Code; and 
 65.17     (4) taxable income of homeowners associations under section 
 65.18  528 of the Internal Revenue Code. 
 65.19     Sec. 5.  [290.9404] [TAX BASE.] 
 65.20     Subdivision 1.  [GENERAL RULE.] The tax base of a firm for 
 65.21  the taxable year equals the sum of the firm's business income 
 65.22  and the amounts in subdivision 2, less 
 65.23     (1) the amounts in subdivision 3; 
 65.24     (2) the capital acquisition deduction under subdivision 4; 
 65.25  and 
 65.26     (3) the exemption amount under subdivision 5. 
 65.27     All amounts are the amounts paid or accrued for the taxable 
 65.28  year under the firm's method of accounting for federal income 
 65.29  tax purposes. 
 65.30     Subd. 2.  [ADDITIONS.] The following amounts are added to 
 65.31  business income to determine tax base: 
 65.32     (1) the amount of the additions to federal taxable income 
 65.33  under section 290.01, subdivision 19c, clauses (1), (2), (3), 
 65.34  (4), (5), (8), (10), and (11); and 
 65.35     (2) the amount of the following, to the extent deducted or 
 65.36  excluded in computing federal taxable income and not added under 
 66.1   clause (1): 
 66.2      (i) depreciation, amortization, or immediate or accelerated 
 66.3   write-off of the cost of tangible assets, 
 66.4      (ii) royalties, 
 66.5      (iii) dividends, except dividends representing reduction of 
 66.6   premiums to policyholders of insurance companies, and 
 66.7      (iv) interest including amounts paid, credited, or reserved 
 66.8   by insurance companies as amounts necessary to fulfill the 
 66.9   policy and other contract liability requirements of sections 805 
 66.10  and 809 of the Internal Revenue Code; 
 66.11     (3) the amount of compensation; and 
 66.12     (4) capital gains of individuals from business activity to 
 66.13  the extent excluded in computing federal taxable income. 
 66.14     Subd. 3.  [SUBTRACTIONS.] To the extent included in federal 
 66.15  taxable income, the following amounts are subtracted from income 
 66.16  to determine tax base: 
 66.17     (1) dividends received or deemed received, including the 
 66.18  foreign dividend gross-up; 
 66.19     (2) interest except amounts paid, credited, or reserved by 
 66.20  insurance companies as amounts necessary to fulfill the policy 
 66.21  and other contract liability requirements of sections 805 and 
 66.22  809 of the Internal Revenue Code; 
 66.23     (3) royalties; and 
 66.24     (4) any capital loss not deducted in computing federal 
 66.25  taxable income. 
 66.26     Subd. 4.  [CAPITAL ACQUISITION DEDUCTION.] (a) The capital 
 66.27  acquisition deduction equals the amount paid or accrued for the 
 66.28  taxable year of the cost of tangible assets qualifying for 
 66.29  depreciation, amortization, or immediate or accelerated 
 66.30  deduction under the Internal Revenue Code.  Costs include 
 66.31  fabrication and installation costs.  The deduction is the full 
 66.32  amount paid or accrued, regardless of the amount allowed by 
 66.33  federal law for the taxable year. 
 66.34     (b) If the capital acquisition deduction exceeds the net 
 66.35  amount under subdivisions 1 to 3 for the taxable year, the rest 
 66.36  is a carryover capital acquisition deduction to the next three 
 67.1   taxable years.  The entire amount must be taken in the earliest 
 67.2   of the taxable years to which it may be carried. 
 67.3      Subd. 5.  [EXEMPTION.] The exemption amount is $500,000.  
 67.4   The exemption must be deducted after computation of tax base 
 67.5   under subdivisions 1 to 4, but before apportionment under 
 67.6   section 290.9405 for multistate businesses. 
 67.7      Subd. 6.  [SPECIAL RULES FOR FINANCIAL INSTITUTIONS.] The 
 67.8   tax base of a financial institution is the amount calculated 
 67.9   under subdivisions 1 to 4, except that the addition under 
 67.10  subdivision 2, clause (2), item (iv), and the subtraction under 
 67.11  subdivision 3, clause (2), do not apply. 
 67.12     Sec. 6.  [290.9405] [MULTISTATE FIRMS.] 
 67.13     Subdivision 1.  [SCOPE.] The tax base of a firm from 
 67.14  business activity carried on partly within and partly without 
 67.15  Minnesota must be apportioned to Minnesota as provided in this 
 67.16  section. 
 67.17     Subd. 2.  [DEFINITIONS.] The definitions under section 
 67.18  290.191 apply for purposes of this section. 
 67.19     Subd. 3.  [APPORTIONMENT FORMULA.] (a) A firm must 
 67.20  apportion its tax base to Minnesota as follows.  The total tax 
 67.21  base, after deducting the capital acquisition deduction and 
 67.22  exemption, must be multiplied by the percentage that the firm's 
 67.23  sales made within Minnesota during the taxable year are of the 
 67.24  firm's total sales wherever made. 
 67.25     (b) A financial institution must apportion its tax base 
 67.26  under paragraph (a) using the receipts factor for financial 
 67.27  institutions. 
 67.28     Subd. 4.  [RULES FOR UNITARY BUSINESSES.] (a) If a business 
 67.29  activity conducted wholly within this state or partly within 
 67.30  this state is part of a unitary business, the entire tax base of 
 67.31  the unitary business is subject to apportionment under this 
 67.32  section.  The provisions of section 290.17 apply to determine if 
 67.33  a business activity is part of a unitary business. 
 67.34     (b) Each firm that is part of a unitary business must file 
 67.35  combined reports as the commissioner determines.  On the 
 67.36  reports, all intercompany transactions between domestic firms 
 68.1   that are part of the unitary business must be eliminated.  The 
 68.2   entire tax base of the unitary business must be apportioned 
 68.3   among the firms by using each firm's Minnesota sales factor in 
 68.4   the numerator of the apportionment formula and the total sales 
 68.5   factor of all firms in the unitary business in the denominator 
 68.6   of the apportionment formula. 
 68.7      (c) The tax base and apportionment factors of foreign firms 
 68.8   which are part of a unitary business are not included in the tax 
 68.9   base and apportionment factors of the unitary business.  A 
 68.10  foreign firm must file on a separate return basis. 
 68.11     Sec. 7.  [290.9406] [CREDITS.] 
 68.12     Subdivision 1.  [INSURANCE PREMIUMS TAX.] The amount of 
 68.13  premium tax paid by the firm under sections 60A.15 and 299F.21 
 68.14  to 299F.26 during the taxable year is a credit against the tax 
 68.15  under section 290.9401. 
 68.16     Subd. 2.  [MINNESOTACARE TAX.] The amount of gross revenue 
 68.17  tax paid by the firm under sections 295.50 to 295.58 during the 
 68.18  taxable year is a credit against the tax under section 290.9401. 
 68.19     Sec. 8.  [290.9407] [ADMINISTRATION.] 
 68.20     The commissioner of revenue shall prescribe forms and 
 68.21  instructions for payment of the tax.  The tax is due and payable 
 68.22  at the same times and under the same rules provided for the 
 68.23  franchise tax on corporations. 
 68.24     Sec. 9.  [REPEALER.] 
 68.25     Minnesota Statutes 1996, sections 290.0921; and 290.0922, 
 68.26  are repealed. 
 68.27     Sec. 10.  [EFFECTIVE DATE.] 
 68.28     This article is effective for taxable years beginning after 
 68.29  December 31, 1997.