Journal of the House - 38th Day - Wednesday, April 22, 2009

A quorum was present.

Atkins was excused.

Lieder was excused until 11:30 a.m. Mariani was excused until 1:15 p.m. Winkler was excused until 7:30 p.m.

The Chief Clerk proceeded to read the Journal of the preceding day. Cornish moved that further reading of the Journal be dispensed with and that the Journal be approved as corrected by the Chief Clerk. The motion prevailed.

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REPORTS OF CHIEF CLERK

S. F. No. 802 and H. F. No. 1657, which had been referred to the Chief Clerk for comparison, were examined and found to be identical with certain exceptions.

SUSPENSION OF RULES

Paymar moved that the rules be so far suspended that S. F. No. 802 be substituted for H. F. No. 1657 and that the House File be indefinitely postponed. The motion prevailed.

REPORTS OF STANDING COMMITTEES AND DIVISIONS

Lenczewski from the Committee on Taxes to which was referred:

H. F. No. 2323, A bill for an act relating to taxation; income and corporate franchise; providing a federal update; amending Minnesota Statutes 2008, sections 289A.02, subdivision 7, as amended; 290.01, subdivisions 19, as amended, 19a, as amended, 19b, 19c, as amended, 19d, as amended, 31, as amended; 290.06, subdivision 2c; 290.067, subdivision 2a, as amended; 290.091, subdivision 2; 290.095, subdivision 11; 290.9727, by adding a subdivision; 290A.03, subdivisions 3, as amended, 15, as amended; 291.005, subdivision 1, as amended.

Reported the same back with the following amendments:

Delete everything after the enacting clause and insert:

"ARTICLE 1

INDIVIDUAL INCOME, CORPORATE FRANCHISE, AND ESTATE AND GIFT TAXES

Section 1. Minnesota Statutes 2008, section 289A.02, subdivision 7, as amended by Laws 2009, chapter 12, article 1, section 1, is amended to read:

Subd. 7. Internal Revenue Code. Unless specifically defined otherwise, "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended through ~~December 31, 2008~~ March 31, 2009.

EFFECTIVE DATE. This section is effective the day following final enactment.

Sec. 2. Minnesota Statutes 2008, section 289A.31, subdivision 5, is amended to read:

Subd. 5. Withholding tax, withholding from payments to out-of-state contractors, and withholding by partnerships and small business corporations. (a) Except as provided in paragraph (b), an employer or person withholding tax under section 290.92 or 290.923, subdivision 2, who fails to pay to or deposit with the commissioner a sum or sums required by those sections to be deducted, withheld, and paid, is personally and individually liable to the state for the sum or sums, and added penalties and interest, and is not liable to another person for that payment or payments. The sum or sums deducted and withheld under section 290.92, subdivision 2a or 3, or 290.923, subdivision 2, must be held as a special fund in trust for the state of Minnesota.

(b) If the employer or person withholding tax under section 290.92 or 290.923, subdivision 2, fails to deduct and withhold the tax in violation of those sections, and later the taxes against which the tax may be credited are paid, the tax required to be deducted and withheld will not be collected from the employer. This does not, however, relieve the employer from liability for any penalties and interest otherwise applicable for failure to deduct and withhold.

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(c) Liability for payment of withholding taxes includes a responsible person or entity described in the personal liability provisions of section 270C.56.

(d) Liability for payment of withholding taxes includes a third party lender or surety described in section 270C.59.

(e) A partnership or S corporation required to withhold and remit tax under section 290.92, subdivisions 4b and 4c, is liable for payment of the tax to the commissioner, and a person having control of or responsibility for the withholding of the tax or the filing of returns due in connection with the tax is personally liable for the tax due.

(f) A payor of sums required to be withheld under section 290.9705, subdivision 1, is liable to the state for the amount required to be deducted, and is not liable to an out-of-state contractor for the amount of the payment.

(g) If an employer fails to withhold tax from the wages of an employee when required to do so under section 290.92, subdivision 2a, by reason of treating the employee as not being an employee, then the liability for tax is equal to three percent of the wages paid to the employee. The liability for tax of an employee is not affected by the assessment or collection of tax under this paragraph. The employer is not entitled to recover from the employee any tax determined under this paragraph.

EFFECTIVE DATE. This section is effective for taxes required to be withheld after June 30, 2009.

Sec. 3. Minnesota Statutes 2008, section 290.01, subdivision 5, is amended to read:

Subd. 5. Domestic corporation. The term "domestic" when applied to a corporation means a corporation:

(1) created or organized in the United States, or under the laws of the United States or of any state, the District of Columbia, or any political subdivision of any of the foregoing but not including the Commonwealth of Puerto Rico, or any possession of the United States;

(2) which qualifies as a DISC, as defined in section 992(a) of the Internal Revenue Code; or

(3) which qualifies as a FSC, as defined in section 922 of the Internal Revenue Code.;

(4) which is incorporated in a tax haven;

(5) which is engaged in activity in a tax haven sufficient for the tax haven to impose a net income tax under United States constitutional standards and section 290.015; or

(6) which has the average of its property, payroll, and sales factors, as defined under section 290.191, within the 50 states of the United States and the District of Columbia of 20 percent or more.

EFFECTIVE DATE. This section is effective for taxable years beginning after December 31, 2008.

Sec. 4. Minnesota Statutes 2008, section 290.01, is amended by adding a subdivision to read:

Subd. 5c. Tax haven. (a) "Tax haven" means a foreign jurisdiction designated under this subdivision.

(b) The commissioner may designate a foreign jurisdiction as a tax haven by administrative rule if the jurisdiction:

(1) has no or nominal effective tax on the relevant income; and

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(2)(i) has laws or practices that prevent effective exchange of information for tax purposes with other governments on taxpayers benefiting from the tax regime;

(ii) has a tax regime that lacks transparency. A tax regime lacks transparency if the details of legislative, legal, or administrative provisions are not open and apparent or are not consistently applied among similarly situated taxpayers, or if the information needed by tax authorities to determine a taxpayer's correct tax liability, such as accounting records and underlying documentation, is not adequately available;

(iii) facilitates the establishment of foreign-owned entities without the need for a local substantive presence or prohibits these entities from having any commercial impact on the local economy;

(iv) explicitly or implicitly excludes the jurisdiction's resident taxpayers from taking advantage of the tax regime's benefits or prohibits enterprises that benefit from the regime from operating in the jurisdiction's domestic markets; or

(v) has created a tax regime that is favorable for tax avoidance, based upon an overall assessment of relevant factors, including whether the jurisdiction has a significant untaxed offshore financial or other services sector relative to its overall economy.

(c) The following foreign jurisdictions are deemed to be tax havens, unless the commissioner, by revenue notice, revokes the listing of a jurisdiction:

(1) Anguilla;

(2) Antigua and Barbuda;

(3) Aruba;

(4) Bahamas;

(5) Barbados;

(6) Belize;

(7) Bermuda;

(8) British Virgin Islands;

(9) Cayman Islands;

(10) Cook Islands;

(11) Dominica;

(12) Gibraltar;

(13) Grenada;

(14) Guernsey-Sark-Alderney;

(15) Isle of Man;

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(16) Jersey;

(17) Latvia;

(18) Liechtenstein;

(19) Luxembourg;

(20) Nauru;

(21) Netherlands Antilles;

(22) Panama;

(23) Samoa;

(24) St. Kitts and Nevis;

(25) St. Lucia;

(26) St. Vincent and Grenadines;

(27) Turks and Caicos; and

(28) Vanuatu.

(d) The commissioner shall revoke a foreign jurisdiction's listing under paragraph (b) or (c), as applicable, if the United States enters into a tax treaty or other agreement with the foreign jurisdiction that provides for prompt, obligatory, and automatic exchange of information with the United States government relevant to enforcing the provisions of federal tax laws and the treaty or other agreement was in effect for the taxable year.

EFFECTIVE DATE. This section is effective for taxable years beginning after December 31, 2008.

Sec. 5. Minnesota Statutes 2008, section 290.01, subdivision 19, as amended by Laws 2009, chapter 12, article 1, section 2, is amended to read:

Subd. 19. Net income. The term "net income" means the federal taxable income, as defined in section 63 of the Internal Revenue Code of 1986, as amended through the date named in this subdivision, incorporating the federal effective dates of changes to the Internal Revenue Code and any elections made by the taxpayer in accordance with the Internal Revenue Code in determining federal taxable income for federal income tax purposes, and with the modifications provided in subdivisions 19a to 19f.

In the case of a regulated investment company or a fund thereof, as defined in section 851(a) or 851(g) of the Internal Revenue Code, federal taxable income means investment company taxable income as defined in section 852(b)(2) of the Internal Revenue Code, except that:

(1) the exclusion of net capital gain provided in section 852(b)(2)(A) of the Internal Revenue Code does not apply;

(2) the deduction for dividends paid under section 852(b)(2)(D) of the Internal Revenue Code must be applied by allowing a deduction for capital gain dividends and exempt-interest dividends as defined in sections 852(b)(3)(C) and 852(b)(5) of the Internal Revenue Code; and

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(3) the deduction for dividends paid must also be applied in the amount of any undistributed capital gains which the regulated investment company elects to have treated as provided in section 852(b)(3)(D) of the Internal Revenue Code.

The net income of a real estate investment trust as defined and limited by section 856(a), (b), and (c) of the Internal Revenue Code means the real estate investment trust taxable income as defined in section 857(b)(2) of the Internal Revenue Code.

The net income of a designated settlement fund as defined in section 468B(d) of the Internal Revenue Code means the gross income as defined in section 468B(b) of the Internal Revenue Code.

The Internal Revenue Code of 1986, as amended through ~~December 31, 2008~~ March 31, 2009, shall be in effect for taxable years beginning after December 31, 1996.

Except as otherwise provided, references to the Internal Revenue Code in subdivisions 19 to 19f mean the code in effect for purposes of determining net income for the applicable year.

EFFECTIVE DATE. This section is effective for taxable years beginning after December 31, 2008. In enacting this section and other provisions of this article, the legislature intends net income to include and tax to apply to interest paid on any Build America Bond, as defined under section 54AA of the Internal Revenue Code of 1986, notwithstanding the provisions of section 1531 of Division B, Title I of the American Recovery and Reinvestment Act of 2009, Public Law 111-5.

Sec. 6. Minnesota Statutes 2008, section 290.01, subdivision 19a, as amended by Laws 2009, chapter 12, article 1, section 3, is amended to read:

Subd. 19a. Additions to federal taxable income. For individuals, estates, and trusts, there shall be added to federal taxable income:

(1)(i) interest income on obligations of any state ~~other than Minnesota~~ or a political or governmental subdivision, municipality, or governmental agency or instrumentality of any state ~~other than Minnesota~~ exempt from federal income taxes under the Internal Revenue Code or any other federal statute, but excluding interest on qualified obligations; and

(ii) exempt-interest dividends as defined in section 852(b)(5) of the Internal Revenue Code, except the portion of the exempt-interest dividends derived from interest income on obligations of the state of Minnesota or its political or governmental subdivisions, municipalities, governmental agencies or instrumentalities, but only if the portion of the exempt-interest dividends from such Minnesota sources paid to all shareholders represents 95 percent or more of the exempt-interest dividends that are paid by the regulated investment company as defined in section 851(a) of the Internal Revenue Code, or the fund of the regulated investment company as defined in section 851(g) of the Internal Revenue Code, making the payment and only to the extent the interest is paid on qualified obligations; and

(iii) for the purposes of items (i) and (ii), interest on obligations of an Indian tribal government described in section 7871(c) of the Internal Revenue Code shall be treated as interest income on obligations of the state in which the tribe is located;

(2)(i) the amount of income or, sales and use, motor vehicle sales, or excise taxes paid or accrued within the taxable year under this chapter and the amount of taxes based on net income paid or, sales and use, motor vehicle sales, or excise taxes paid to any other state or to any province or territory of Canada,;

(ii) the amount of real and personal property taxes paid or accrued within the taxable year;

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(iii) qualified residence interest, as defined in section 163(h) of the Internal Revenue Code, to the extent allowed as a deduction under section 63(d) of the Internal Revenue Code; and

(iv) charitable contributions, as defined in section 170(c) of the Internal Revenue Code, to the extent allowed as a deduction under section 170(a) of the Internal Revenue Code,

to the extent allowed as ~~a deduction~~ deductions under section 63(d) of the Internal Revenue Code~~, but the addition~~; but the sum of the additions made under items (i), (ii), (iii), and (iv) may not be more than the amount by which the itemized deductions as allowed under section 63(d) of the Internal Revenue Code exceeds the amount of the standard deduction as defined in section 63(c) of the Internal Revenue Code, disregarding the ~~amount~~ amounts allowed under ~~section~~ sections 63(c)(1)(C) and 63(c)(1)(E) of the Internal Revenue Code. For the purpose of this paragraph, the disallowance of itemized deductions under section 68 of the Internal Revenue Code of 1986, income or sales and use tax is, motor vehicle sales or excise tax, real and personal property taxes, qualified residence interest, and charitable contributions are the last itemized ~~deduction~~ deductions disallowed;

(3) the capital gain amount of a lump-sum distribution to which the special tax under section 1122(h)(3)(B)(ii) of the Tax Reform Act of 1986, Public Law 99-514, applies;

(4) the amount of income taxes paid or accrued within the taxable year under this chapter and taxes based on net income paid to any other state or any province or territory of Canada, to the extent allowed as a deduction in determining federal adjusted gross income. For the purpose of this paragraph, income taxes do not include the taxes imposed by sections 290.0922, subdivision 1, paragraph (b), 290.9727, 290.9728, and 290.9729;

(5) the amount of expense, interest, or taxes disallowed pursuant to section 290.10 other than expenses or interest used in computing net interest income for the subtraction allowed under subdivision 19b, clause (1);

(6) the amount of a partner's pro rata share of net income which does not flow through to the partner because the partnership elected to pay the tax on the income under section 6242(a)(2) of the Internal Revenue Code;

(7) 80 percent of the depreciation deduction allowed under section 168(k) of the Internal Revenue Code. For purposes of this clause, if the taxpayer has an activity that in the taxable year generates a deduction for depreciation under section 168(k) and the activity generates a loss for the taxable year that the taxpayer is not allowed to claim for the taxable year, "the depreciation allowed under section 168(k)" for the taxable year is limited to excess of the depreciation claimed by the activity under section 168(k) over the amount of the loss from the activity that is not allowed in the taxable year. In succeeding taxable years when the losses not allowed in the taxable year are allowed, the depreciation under section 168(k) is allowed;

(8) for taxable years beginning before January 1, 2009, 80 percent of the amount by which the deduction allowed by section 179 of the Internal Revenue Code exceeds the deduction allowable by section 179 of the Internal Revenue Code of 1986, as amended through December 31, 2003;

(9) to the extent deducted in computing federal taxable income, the amount of the deduction allowable under section 199 of the Internal Revenue Code;

(10) the exclusion allowed under section 139A of the Internal Revenue Code for federal subsidies for prescription drug plans;

(11) the amount of expenses disallowed under section 290.10, subdivision 2;

(12) the amount deducted for qualified tuition and related expenses under section 222 of the Internal Revenue Code, to the extent deducted from gross income;

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(13) the amount deducted for certain expenses of elementary and secondary school teachers under section 62(a)(2)(D) of the Internal Revenue Code, to the extent deducted from gross income; ~~and~~

(14) the additional standard deduction for property taxes payable that is allowable under section 63(c)(1)(C) of the Internal Revenue Code.; and

(15) the additional deduction for qualified motor vehicle sales tax allowable under section 63(c)(1)(E) of the Internal Revenue Code;

(16) discharge of indebtedness income resulting from reacquisition of business indebtedness and deferred under section 108(i) of the Internal Revenue Code; and

(17) the amount of unemployment compensation exempt from tax under section 85(c) of the Internal Revenue Code.

EFFECTIVE DATE. This section is effective for taxable years beginning after December 31, 2008, except that clause (16) is effective for taxable years ending after December 31, 2008.

Sec. 7. Minnesota Statutes 2008, section 290.01, subdivision 19b, is amended to read:

Subd. 19b. Subtractions from federal taxable income. For individuals, estates, and trusts, there shall be subtracted from federal taxable income:

(1) net interest income on obligations of any authority, commission, or instrumentality of the United States to the extent includable in taxable income for federal income tax purposes but exempt from state income tax under the laws of the United States;

(2) if included in federal taxable income, the amount of any overpayment of income tax to Minnesota or to any other state, for any previous taxable year, whether the amount is received as a refund or as a credit to another taxable year's income tax liability;

(3) the amount paid to others, less the amount used to claim the credit allowed under section 290.0674, not to exceed $1,625 for each qualifying child in grades kindergarten to 6 and $2,500 for each qualifying child in grades 7 to 12, for tuition, textbooks, and transportation of each qualifying child in attending an elementary or secondary school situated in Minnesota, North Dakota, South Dakota, Iowa, or Wisconsin, wherein a resident of this state may legally fulfill the state's compulsory attendance laws, which is not operated for profit, and which adheres to the provisions of the Civil Rights Act of 1964 and chapter 363A. For the purposes of this clause, "tuition" includes fees or tuition as defined in section 290.0674, subdivision 1, clause (1). As used in this clause, "textbooks" includes books and other instructional materials and equipment purchased or leased for use in elementary and secondary schools in teaching only those subjects legally and commonly taught in public elementary and secondary schools in this state. Equipment expenses qualifying for deduction includes expenses as defined and limited in section 290.0674, subdivision 1, clause (3). "Textbooks" does not include instructional books and materials used in the teaching of religious tenets, doctrines, or worship, the purpose of which is to instill such tenets, doctrines, or worship, nor does it include books or materials for, or transportation to, extracurricular activities including sporting events, musical or dramatic events, speech activities, driver's education, or similar programs. For purposes of the subtraction provided by this clause, "qualifying child" has the meaning given in section 32(c)(3) of the Internal Revenue Code;

~~(4) income as provided under section 290.0802;~~

~~(5) to the extent included in federal adjusted gross income, income realized on disposition of property exempt from tax under section 290.491;~~

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(6) to the extent not deducted or not deductible pursuant to section 408(d)(8)(E) of the Internal Revenue Code in determining federal taxable income by an individual who does not itemize deductions for federal income tax purposes for the taxable year, an amount equal to 50 percent of the excess of charitable contributions over $500 allowable as a deduction for the taxable year under section 170(a) of the Internal Revenue Code and under the provisions of Public Law 109-1;

(7) for taxable years beginning before January 1, 2008, the amount of the federal small ethanol producer credit allowed under section 40(a)(3) of the Internal Revenue Code which is included in gross income under section 87 of the Internal Revenue Code;

(8) for individuals who are allowed a federal foreign tax credit for taxes that do not qualify for a credit under section 290.06, subdivision 22, an amount equal to the carryover of subnational foreign taxes for the taxable year, but not to exceed the total subnational foreign taxes reported in claiming the foreign tax credit. For purposes of this clause, "federal foreign tax credit" means the credit allowed under section 27 of the Internal Revenue Code, and "carryover of subnational foreign taxes" equals the carryover allowed under section 904(c) of the Internal Revenue Code minus national level foreign taxes to the extent they exceed the federal foreign tax credit;

~~(9)~~ (3) in each of the five tax years immediately following the tax year in which an addition is required under subdivision 19a, clause (7), or 19c, clause (15), in the case of a shareholder of a corporation that is an S corporation, an amount equal to one-fifth of the delayed depreciation. For purposes of this clause, "delayed depreciation" means the amount of the addition made by the taxpayer under subdivision 19a, clause (7), or subdivision 19c, clause (15), in the case of a shareholder of an S corporation, minus the positive value of any net operating loss under section 172 of the Internal Revenue Code generated for the tax year of the addition. The resulting delayed depreciation cannot be less than zero;

~~(10) job opportunity building zone income as provided under section 469.316;~~

~~(11)~~ (4) to the extent included in federal taxable income, the amount of compensation paid to members of the Minnesota National Guard or other reserve components of the United States military for active service performed in Minnesota, excluding compensation for services performed under the Active Guard Reserve (AGR) program. For purposes of this clause, "active service" means (i) state active service as defined in section 190.05, subdivision 5a, clause (1); (ii) federally funded state active service as defined in section 190.05, subdivision 5b; or (iii) federal active service as defined in section 190.05, subdivision 5c, but "active service" excludes service performed in accordance with section 190.08, subdivision 3;

~~(12)~~ (5) to the extent included in federal taxable income, the amount of compensation paid to Minnesota residents who are members of the armed forces of the United States or United Nations for active duty performed outside Minnesota under United States Code, title 10, section 101(d); United States Code, title 32, section 101(12); or the authority of the United Nations;

(13) an amount, not to exceed $10,000, equal to qualified expenses related to a qualified donor's donation, while living, of one or more of the qualified donor's organs to another person for human organ transplantation. For purposes of this clause, "organ" means all or part of an individual's liver, pancreas, kidney, intestine, lung, or bone marrow; "human organ transplantation" means the medical procedure by which transfer of a human organ is made from the body of one person to the body of another person; "qualified expenses" means unreimbursed expenses for both the individual and the qualified donor for (i) travel, (ii) lodging, and (iii) lost wages net of sick pay, except that such expenses may be subtracted under this clause only once; and "qualified donor" means the individual or the individual's dependent, as defined in section 152 of the Internal Revenue Code. An individual may claim the subtraction in this clause for each instance of organ donation for transplantation during the taxable year in which the qualified expenses occur;

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~~(14)~~ (6) in each of the five tax years immediately following the tax year in which an addition is required under subdivision 19a, clause (8), or 19c, clause (16), in the case of a shareholder of a corporation that is an S corporation, an amount equal to one-fifth of the addition made by the taxpayer under subdivision 19a, clause (8), or 19c, clause (16), in the case of a shareholder of a corporation that is an S corporation, minus the positive value of any net operating loss under section 172 of the Internal Revenue Code generated for the tax year of the addition. If the net operating loss exceeds the addition for the tax year, a subtraction is not allowed under this clause;

~~(15)~~ (7) to the extent included in federal taxable income, compensation paid to a service member as defined in United States Code, title 10, section 101(a)(5), for military service as defined in the Servicemembers Civil Relief Act, Public Law 108-189, section 101(2); and

~~(16) international economic development zone income as provided under section 469.325; and~~

(17) to the extent included in federal taxable income, the amount of national service educational awards received from the National Service Trust under United States Code, title 42, sections 12601 to 12604, for service in an approved Americorps National Service program.

(8) to the extent included in federal taxable income, discharge of indebtedness income from reacquisition of business indebtedness included in federal taxable income under section 108(i) of the Internal Revenue Code. This subtraction applies only to the extent that the income was included in net income in a prior year as a result of the addition under subdivision 19a, clause (16).

EFFECTIVE DATE. This section is effective for taxable years beginning after December 31, 2008, except that clause (8) is effective for taxable years ending after December 31, 2008.

Sec. 8. Minnesota Statutes 2008, section 290.01, subdivision 19c, as amended by Laws 2009, chapter 12, article 1, section 4, is amended to read:

Subd. 19c. Corporations; additions to federal taxable income. For corporations, there shall be added to federal taxable income:

(1) the amount of any deduction taken for federal income tax purposes for income, excise, or franchise taxes based on net income or related minimum taxes, including but not limited to the tax imposed under section 290.0922, paid by the corporation to Minnesota, another state, a political subdivision of another state, the District of Columbia, or any foreign country or possession of the United States;

(2) interest not subject to federal tax upon obligations of: the United States, its possessions, its agencies, or its instrumentalities; the state of Minnesota or any other state, any of its political or governmental subdivisions, any of its municipalities, or any of its governmental agencies or instrumentalities; the District of Columbia; or Indian tribal governments;

(3) exempt-interest dividends received as defined in section 852(b)(5) of the Internal Revenue Code;

(4) the amount of any net operating loss deduction taken for federal income tax purposes under section 172 or 832(c)(10) of the Internal Revenue Code or operations loss deduction under section 810 of the Internal Revenue Code;

(5) the amount of any special deductions taken for federal income tax purposes under sections 241 to 247 and 965 of the Internal Revenue Code;

(6) losses from the business of mining, as defined in section 290.05, subdivision 1, clause (a), that are not subject to Minnesota income tax;

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(7) the amount of any capital losses deducted for federal income tax purposes under sections 1211 and 1212 of the Internal Revenue Code;

(8) the exempt foreign trade income of a foreign sales corporation under sections 921(a) and 291 of the Internal Revenue Code;

(9) the amount of percentage depletion deducted under sections 611 through 614 and 291 of the Internal Revenue Code;

(10) for certified pollution control facilities placed in service in a taxable year beginning before December 31, 1986, and for which amortization deductions were elected under section 169 of the Internal Revenue Code of 1954, as amended through December 31, 1985, the amount of the amortization deduction allowed in computing federal taxable income for those facilities;

(11) for taxable years beginning before January 1, 2009, the amount of any deemed dividend from a foreign operating corporation determined pursuant to section 290.17, subdivision 4, paragraph (g). The deemed dividend shall be reduced by the amount of the addition to income required by clauses (20), (21), (22), and (23);

(12) the amount of a partner's pro rata share of net income which does not flow through to the partner because the partnership elected to pay the tax on the income under section 6242(a)(2) of the Internal Revenue Code;

(13) the amount of net income excluded under section 114 of the Internal Revenue Code;

(14) any increase in subpart F income, as defined in section 952(a) of the Internal Revenue Code, for the taxable year when subpart F income is calculated without regard to the provisions of Division C, title III, section ~~304(a)(1)-(2)~~ 303(b) of Public Law 110-343;

(15) 80 percent of the depreciation deduction allowed under section 168(k)(1)(A) and (k)(4)(A) of the Internal Revenue Code. For purposes of this clause, if the taxpayer has an activity that in the taxable year generates a deduction for depreciation under section 168(k)(1)(A) and (k)(4)(A) and the activity generates a loss for the taxable year that the taxpayer is not allowed to claim for the taxable year, "the depreciation allowed under section 168(k)(1)(A) and (k)(4)(A)" for the taxable year is limited to excess of the depreciation claimed by the activity under section 168(k)(1)(A) and (k)(4)(A) over the amount of the loss from the activity that is not allowed in the taxable year. In succeeding taxable years when the losses not allowed in the taxable year are allowed, the depreciation under section 168(k)(1)(A) and (k)(4)(A) is allowed;

(16) for taxable years beginning before January 1, 2009, 80 percent of the amount by which the deduction allowed by section 179 of the Internal Revenue Code exceeds the deduction allowable by section 179 of the Internal Revenue Code of 1986, as amended through December 31, 2003;

(17) to the extent deducted in computing federal taxable income, the amount of the deduction allowable under section 199 of the Internal Revenue Code;

(18) the exclusion allowed under section 139A of the Internal Revenue Code for federal subsidies for prescription drug plans;

(19) the amount of expenses disallowed under section 290.10, subdivision 2;

(20) an amount equal to the interest and intangible expenses, losses, and costs paid, accrued, or incurred by any member of the taxpayer's unitary group to or for the benefit of a corporation that is a member of the taxpayer's unitary business group that qualifies as a foreign operating corporation. For purposes of this clause, intangible expenses and costs include:

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(i) expenses, losses, and costs for, or related to, the direct or indirect acquisition, use, maintenance or management, ownership, sale, exchange, or any other disposition of intangible property;

(ii) losses incurred, directly or indirectly, from factoring transactions or discounting transactions;

(iii) royalty, patent, technical, and copyright fees;

(iv) licensing fees; and

(v) other similar expenses and costs.

For purposes of this clause, "intangible property" includes stocks, bonds, patents, patent applications, trade names, trademarks, service marks, copyrights, mask works, trade secrets, and similar types of intangible assets.

This clause does not apply to any item of interest or intangible expenses or costs paid, accrued, or incurred, directly or indirectly, to a foreign operating corporation with respect to such item of income to the extent that the income to the foreign operating corporation is income from sources without the United States as defined in subtitle A, chapter 1, subchapter N, part 1, of the Internal Revenue Code;

(21) except as already included in the taxpayer's taxable income pursuant to clause (20), any interest income and income generated from intangible property received or accrued by a foreign operating corporation that is a member of the taxpayer's unitary group. For purposes of this clause, income generated from intangible property includes:

(i) income related to the direct or indirect acquisition, use, maintenance or management, ownership, sale, exchange, or any other disposition of intangible property;

(ii) income from factoring transactions or discounting transactions;

(iii) royalty, patent, technical, and copyright fees;

(iv) licensing fees; and

(v) other similar income.

This clause does not apply to any item of interest or intangible income received or accrued by a foreign operating corporation with respect to such item of income to the extent that the income is income from sources without the United States as defined in subtitle A, chapter 1, subchapter N, part 1, of the Internal Revenue Code;

(22) the dividends attributable to the income of a foreign operating corporation that is a member of the taxpayer's unitary group in an amount that is equal to the dividends paid deduction of a real estate investment trust under section 561(a) of the Internal Revenue Code for amounts paid or accrued by the real estate investment trust to the foreign operating corporation;

(23) the income of a foreign operating corporation that is a member of the taxpayer's unitary group in an amount that is equal to gains derived from the sale of real or personal property located in the United States; ~~and~~

(24) the additional amount allowed as a deduction for donation of computer technology and equipment under section 170(e)(6) of the Internal Revenue Code, to the extent deducted from taxable income.; and

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(25) discharge of indebtedness income resulting from reacquisition of business indebtedness and deferred under section 108(i) of the Internal Revenue Code.

EFFECTIVE DATE. This section is effective for taxable years beginning after December 31, 2008, except that clause (25) is effective for taxable years ending after December 31, 2008.

Sec. 9. Minnesota Statutes 2008, section 290.01, subdivision 19d, as amended by Laws 2009, chapter 12, article 1, section 5, is amended to read:

Subd. 19d. Corporations; modifications decreasing federal taxable income. For corporations, there shall be subtracted from federal taxable income after the increases provided in subdivision 19c:

(1) the amount of foreign dividend gross-up added to gross income for federal income tax purposes under section 78 of the Internal Revenue Code;

(2) the amount of salary expense not allowed for federal income tax purposes due to claiming the work opportunity credit under section 51 of the Internal Revenue Code;

(3) any dividend (not including any distribution in liquidation) paid within the taxable year by a national or state bank to the United States, or to any instrumentality of the United States exempt from federal income taxes, on the preferred stock of the bank owned by the United States or the instrumentality;

(4) amounts disallowed for intangible drilling costs due to differences between this chapter and the Internal Revenue Code in taxable years beginning before January 1, 1987, as follows:

(i) to the extent the disallowed costs are represented by physical property, an amount equal to the allowance for depreciation under Minnesota Statutes 1986, section 290.09, subdivision 7, subject to the modifications contained in subdivision 19e; and

(ii) to the extent the disallowed costs are not represented by physical property, an amount equal to the allowance for cost depletion under Minnesota Statutes 1986, section 290.09, subdivision 8;

(5) the deduction for capital losses pursuant to sections 1211 and 1212 of the Internal Revenue Code, except that:

(i) for capital losses incurred in taxable years beginning after December 31, 1986, capital loss carrybacks shall not be allowed;

(ii) for capital losses incurred in taxable years beginning after December 31, 1986, a capital loss carryover to each of the 15 taxable years succeeding the loss year shall be allowed;

(iii) for capital losses incurred in taxable years beginning before January 1, 1987, a capital loss carryback to each of the three taxable years preceding the loss year, subject to the provisions of Minnesota Statutes 1986, section 290.16, shall be allowed; and

(iv) for capital losses incurred in taxable years beginning before January 1, 1987, a capital loss carryover to each of the five taxable years succeeding the loss year to the extent such loss was not used in a prior taxable year and subject to the provisions of Minnesota Statutes 1986, section 290.16, shall be allowed;

(6) an amount for interest and expenses relating to income not taxable for federal income tax purposes, if (i) the income is taxable under this chapter and (ii) the interest and expenses were disallowed as deductions under the provisions of section 171(a)(2), 265 or 291 of the Internal Revenue Code in computing federal taxable income;

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(7) in the case of mines, oil and gas wells, other natural deposits, and timber for which percentage depletion was disallowed pursuant to subdivision 19c, clause (9), a reasonable allowance for depletion based on actual cost. In the case of leases the deduction must be apportioned between the lessor and lessee in accordance with rules prescribed by the commissioner. In the case of property held in trust, the allowable deduction must be apportioned between the income beneficiaries and the trustee in accordance with the pertinent provisions of the trust, or if there is no provision in the instrument, on the basis of the trust's income allocable to each;

(8) for certified pollution control facilities placed in service in a taxable year beginning before December 31, 1986, and for which amortization deductions were elected under section 169 of the Internal Revenue Code of 1954, as amended through December 31, 1985, an amount equal to the allowance for depreciation under Minnesota Statutes 1986, section 290.09, subdivision 7;

(9) amounts included in federal taxable income that are due to refunds of income, excise, or franchise taxes based on net income or related minimum taxes paid by the corporation to Minnesota, another state, a political subdivision of another state, the District of Columbia, or a foreign country or possession of the United States to the extent that the taxes were added to federal taxable income under section 290.01, subdivision 19c, clause (1), in a prior taxable year;

(10) 80 percent of royalties, fees, or other like income accrued or received from a foreign operating corporation or a foreign corporation which is part of the same unitary business as the receiving corporation, unless the income resulting from such payments or accruals is income from sources within the United States as defined in subtitle A, chapter 1, subchapter N, part 1, of the Internal Revenue Code;

~~(11)~~ (10) income or gains from the business of mining as defined in section 290.05, subdivision 1, clause (a), that are not subject to Minnesota franchise tax;

~~(12)~~ (11) the amount of disability access expenditures in the taxable year which are not allowed to be deducted or capitalized under section 44(d)(7) of the Internal Revenue Code;

~~(13)~~ (12) the amount of qualified research expenses not allowed for federal income tax purposes under section 280C(c) of the Internal Revenue Code, but only to the extent that the amount exceeds the amount of the credit allowed under section 290.068;

~~(14)~~ (13) the amount of salary expenses not allowed for federal income tax purposes due to claiming the Indian employment credit under section 45A(a) of the Internal Revenue Code;

~~(15)~~ (14) for taxable years beginning before January 1, 2008, the amount of the federal small ethanol producer credit allowed under section 40(a)(3) of the Internal Revenue Code which is included in gross income under section 87 of the Internal Revenue Code;

~~(16)~~ (15) for a corporation whose foreign sales corporation, as defined in section 922 of the Internal Revenue Code, constituted a foreign operating corporation during any taxable year ending before January 1, 1995, and a return was filed by August 15, 1996, claiming the deduction under section 290.21, subdivision 4, for income received from the foreign operating corporation, an amount equal to 1.23 multiplied by the amount of income excluded under section 114 of the Internal Revenue Code, provided the income is not income of a foreign operating company;

~~(17)~~ (16) any decrease in subpart F income, as defined in section 952(a) of the Internal Revenue Code, for the taxable year when subpart F income is calculated without regard to the provisions of Division C, title III, section ~~304(a)(1)-(2)~~ 303(b) of Public Law 110-343;

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~~(18)~~ (17) in each of the five tax years immediately following the tax year in which an addition is required under subdivision 19c, clause (15), an amount equal to one-fifth of the delayed depreciation. For purposes of this clause, "delayed depreciation" means the amount of the addition made by the taxpayer under subdivision 19c, clause (15). The resulting delayed depreciation cannot be less than zero; ~~and~~

~~(19)~~ (18) in each of the five tax years immediately following the tax year in which an addition is required under subdivision 19c, clause (16), an amount equal to one-fifth of the amount of the addition.; and

(19) to the extent included in federal taxable income, discharge of indebtedness income from reacquisition of business indebtedness included in federal taxable income under section 108(i) of the Internal Revenue Code. This subtraction applies only to the extent that the income was included in net income in a prior year as a result of the addition under subdivision 19c, clause (25).

EFFECTIVE DATE. This section is effective for taxable years beginning after December 31, 2008, except that clause (19) is effective for taxable years ending after December 31, 2008.

Sec. 10. Minnesota Statutes 2008, section 290.01, subdivision 29, is amended to read:

Subd. 29. Taxable income. The term "taxable income" means:

(1) for individuals, estates, and trusts, the same as taxable net income;

(2) for corporations, the taxable net income less

(i) the net operating loss deduction under section 290.095; and

(ii) the dividends received deduction under section 290.21, subdivision 4; plus

(iii) ~~the exemption for operating in a job opportunity building zone under section 469.317;~~ Minnesota development subsidies.

~~(iv) the exemption for operating in a biotechnology and health sciences industry zone under section 469.337; and~~

~~(v) the exemption for operating in an international economic development zone under section 469.326.~~

EFFECTIVE DATE. This section is effective for taxable years beginning after December 31, 2009.

Sec. 11. Minnesota Statutes 2008, section 290.01, subdivision 31, as amended by Laws 2009, chapter 12, article 1, section 7, is amended to read:

Subd. 31. Internal Revenue Code. Unless specifically defined otherwise, "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended through ~~December 31, 2008~~ March 31, 2009. Internal Revenue Code also includes any uncodified provision in federal law that relates to provisions of the Internal Revenue Code that are incorporated into Minnesota law.

Sec. 12. Minnesota Statutes 2008, section 290.01, is amended by adding a subdivision to read:

Subd. 33. Minnesota development subsidies. (a) "Minnesota development subsidies" means the greater of the following amounts:

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(1) one-half of the amount deducted by the taxpayer in computing federal taxable income for the taxable year, as property taxes, business expenses, or otherwise, that is attributable to property taxes paid by the taxpayer, either directly or indirectly through a lease or otherwise, on property located in a tax increment financing district, as defined in section 469.174, or that receives an abatement under sections 469.1813 to 469.1815, if the owner of the property or a related party has entered a development or similar agreement with respect to the increment district or derives a benefit from the abatement by its property having access to or use of public improvements financed with the abatement or otherwise; or

(2) the amount of payments received by the taxpayer under a development or similar agreement that provides for payments or reimbursements from the proceeds of increments from a tax increment financing district or from an abatement under sections 469.1813 to 469.1815, but excluding reimbursements under a development action response plan, as defined in section 469.174, subdivision 17, to pay for its costs incurred to fund removal or remedial actions.

(b) For purposes of this subdivision, "tax increment financing district" excludes:

(1) a housing district, as defined in section 469.174, subdivision 11;

(2) a soils condition district, as defined in section 469.174, subdivision 19; and

(3) a hazardous substance subdistrict, as defined in section 469.174, subdivision 23.

EFFECTIVE DATE. This section is effective for taxable years beginning after December 31, 2009.

Sec. 13. Minnesota Statutes 2008, section 290.01, is amended by adding a subdivision to read:

Subd. 34. Qualified obligations. (a) "Qualified obligations" means:

(1) obligations of the state of Minnesota or a political or governmental subdivision, municipality, or governmental agency or instrumentality of the state of Minnesota if the obligations were sold before July 1, 2009; or

(2) general obligations of the state of Minnesota sold after June 30, 2009, if the commissioner of finance certifies prior to offering and selling the obligations, based on an estimate prepared by the state economist, that (i) the present value of the reduction in state borrowing costs due to issuing the obligations exempt from taxation under sections 290.06 and 290.091 exceeds (ii) the present value of the revenues the state would collect if the obligations were issued subject to taxation under sections 290.06 and 290.091.

(b) If the commissioner of finance elects to issue qualified obligations under paragraph (a), clause (2), the commissioner must provide a written report to the chairs of the committees of the senate and the house of representatives with jurisdiction over taxes and capital investment on the decision to issue qualified obligations, including the estimate of the net savings in borrowing costs from the use of qualified obligations and a detailed description of how the estimate was prepared. This report must be provided within 15 days after the bonds are sold.

EFFECTIVE DATE. This section is effective for taxable years beginning after December 31, 2008.

Sec. 14. Minnesota Statutes 2008, section 290.014, subdivision 2, is amended to read:

Subd. 2. Nonresident individuals. Except as provided in section 290.015, a nonresident individual is subject to the return filing requirements and to tax as provided in this chapter to the extent that the income of the nonresident individual is:

(1) allocable to this state under section 290.17, 290.191, or 290.20;

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(2) taxed to the individual under the Internal Revenue Code (or not taxed under the Internal Revenue Code by reason of its character but of a character which is taxable under this chapter) in the individual's capacity as a beneficiary of an estate with income allocable to this state under section 290.17, 290.191, or 290.20 and the income, taking into account the income character provisions of section 662(b) of the Internal Revenue Code, would be allocable to this state under section 290.17, 290.191, or 290.20 if realized by the individual directly from the source from which realized by the estate;

(3) taxed to the individual under the Internal Revenue Code (or not taxed under the Internal Revenue Code by reason of its character but of a character that is taxable under this chapter) in the individual's capacity as a beneficiary or grantor or other person treated as a substantial owner of a trust with income allocable to this state under section 290.17, 290.191, or 290.20 and the income, taking into account the income character provisions of section 652(b), 662(b), or 664(b) of the Internal Revenue Code, would be allocable to this state under section 290.17, 290.191, or 290.20 if realized by the individual directly from the source from which realized by the trust;

(4) taxed to the individual under the Internal Revenue Code (or not taxed under the Internal Revenue Code by reason of its character but of a character which is taxable under this chapter) in the individual's capacity as a limited or general partner in a partnership with income allocable to this state under section 290.17, 290.191, or 290.20 and the income, taking into account the income character provisions of section 702(b) of the Internal Revenue Code, would be allocable to this state under section 290.17, 290.191, or 290.20 if realized by the individual directly from the source from which realized by the partnership; or

(5) taxed to the individual under the Internal Revenue Code (or not taxed under the Internal Revenue Code by reason of its character but of a character which is taxable under this chapter) in the individual's capacity as a shareholder of a corporation treated as an "S" corporation under section 290.9725, and income allocable to this state under section 290.17, 290.191, or 290.20 and the income, taking into account the income character provisions of section 1366(b) of the Internal Revenue Code, would be allocable to this state under section 290.17, 290.191, or 290.20 if realized by the individual directly from the source from which realized by the corporation.; or

(6) taxed to the individual under the Internal Revenue Code (or not taxed under the Internal Revenue Code by reason of its character but of a character which is taxable under this chapter) in the individual's capacity as the sole member of a limited liability company that is disregarded for federal income tax purposes, with income allocable to this state under section 290.17, 290.191, or 290.20, as though realized by the individual directly from the source from which it was realized by the limited liability company.

EFFECTIVE DATE. This section is effective the day following final enactment.

Sec. 15. Minnesota Statutes 2008, section 290.06, subdivision 2c, is amended to read:

Subd. 2c. Schedules of rates for individuals, estates, and trusts. (a) The income taxes imposed by this chapter upon married individuals filing joint returns and surviving spouses as defined in section 2(a) of the Internal Revenue Code must be computed by applying to their taxable net income the following schedule of rates:

(1) on the first ~~$25,680~~ $33,220, 5.35 percent;

(2) on all over ~~$25,680~~ $33,220, but not over ~~$102,030~~ $131,970, 7.05 percent;

(3) on all over ~~$102,030~~ $131,970, but not over $300,000, 7.85 percent.; and

(4) on all over $300,000, nine percent.

Married individuals filing separate returns, estates, and trusts must compute their income tax by applying the above rates to their taxable income, except that the income brackets will be one-half of the above amounts.

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(b) The income taxes imposed by this chapter upon unmarried individuals must be computed by applying to taxable net income the following schedule of rates:

(1) on the first ~~$17,570~~ $22,730, 5.35 percent;

(2) on all over ~~$17,570~~ $22,730, but not over ~~$57,710~~ $74,650, 7.05 percent;

(3) on all over ~~$57,710~~ $74,650, but not over $169,700, 7.85 percent.; and

(4) on all over $169,700, nine percent.

(c) The income taxes imposed by this chapter upon unmarried individuals qualifying as a head of household as defined in section 2(b) of the Internal Revenue Code must be computed by applying to taxable net income the following schedule of rates:

(1) on the first ~~$21,630~~ $27,980, 5.35 percent;

(2) on all over ~~$21,630~~ $27,980, but not over ~~$86,910~~ $112,420, 7.05 percent;

(3) on all over ~~$86,910~~ $112,420, but not over $255,560, 7.85 percent.; and

(4) on all over $255,560, nine percent.

(d) In lieu of a tax computed according to the rates set forth in this subdivision, the tax of any individual taxpayer whose taxable net income for the taxable year is less than an amount determined by the commissioner must be computed in accordance with tables prepared and issued by the commissioner of revenue based on income brackets of not more than $100. The amount of tax for each bracket shall be computed at the rates set forth in this subdivision, provided that the commissioner may disregard a fractional part of a dollar unless it amounts to 50 cents or more, in which case it may be increased to $1.

(e) An individual who is not a Minnesota resident for the entire year must compute the individual's Minnesota income tax as provided in this subdivision. After the application of the nonrefundable credits provided in this chapter, the tax liability must then be multiplied by a fraction in which:

(1) the numerator is the individual's Minnesota source federal adjusted gross income as defined in section 62 of the Internal Revenue Code and increased by the additions required under section 290.01, subdivision 19a, clauses (1), (5), (6), (7), (8), (9), (12), ~~and~~ (13), (16), and (17) and reduced by the Minnesota assignable portion of the subtraction for United States government interest under section 290.01, subdivision 19b, clause (1), and the subtractions under section 290.01, subdivision 19b, clauses ~~(9), (10), (14), (15), and (16)~~ (3), (6), (7), and (8), after applying the allocation and assignability provisions of section 290.081, clause (a), or 290.17; and

(2) the denominator is the individual's federal adjusted gross income as defined in section 62 of the Internal Revenue Code of 1986, increased by the amounts specified in section 290.01, subdivision 19a, clauses (1), (5), (6), (7), (8), (9), (12), ~~and~~ (13), (16), and (17) and reduced by the amounts specified in section 290.01, subdivision 19b, clauses (1), ~~(9), (10), (14), (15), and (16)~~ (3), (6), (7), and (8).

EFFECTIVE DATE. This section is effective for taxable years beginning after December 31, 2008.

Sec. 16. Minnesota Statutes 2008, section 290.06, subdivision 2d, is amended to read:

Subd. 2d. Inflation adjustment of brackets. (a) For taxable years beginning after December 31, ~~2000~~ 2009, the minimum and maximum dollar amounts for each rate bracket for which a tax is imposed in subdivision 2c shall be adjusted for inflation by the percentage determined under paragraph (b). For the purpose of making the adjustment as provided in this subdivision all of the rate brackets provided in subdivision 2c shall be the rate

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brackets as they existed for taxable years beginning after December 31, ~~1999~~ 2008, and before January 1, ~~2001~~ 2010. The rate applicable to any rate bracket must not be changed. The dollar amounts setting forth the tax shall be adjusted to reflect the changes in the rate brackets. The rate brackets as adjusted must be rounded to the nearest $10 amount. If the rate bracket ends in $5, it must be rounded up to the nearest $10 amount.

(b) The commissioner shall adjust the rate brackets and by the percentage determined pursuant to the provisions of section 1(f) of the Internal Revenue Code, except that:

(1) in section 1(f)(2)(A) the words "increasing or decreasing" shall be substituted for the word "increasing";

(2) in section 1(f)(3)(A) the words "differs from" shall be substituted for the word "exceeds"; and

(3) in section 1(f)(3)(B) the word ~~"1999"~~ "2008" shall be substituted for the word "1992." For ~~2001~~ 2010, the commissioner shall then determine the percent change from the 12 months ending on August 31, ~~1999~~ 2008, to the 12 months ending on August 31, ~~2000~~ 2009, and in each subsequent year, from the 12 months ending on August 31, ~~1999~~ 2008, to the 12 months ending on August 31 of the year preceding the taxable year. The determination of the commissioner pursuant to this subdivision shall not be considered a "rule" and shall not be subject to the Administrative Procedure Act contained in chapter 14.

No later than December 15 of each year, the commissioner shall announce the specific percentage that will be used to adjust the tax rate brackets.

EFFECTIVE DATE. This section is effective for taxable years beginning after December 31, 2008.

Sec. 17. Minnesota Statutes 2008, section 290.06, is amended by adding a subdivision to read:

Subd. 36. Mortgage interest credit. (a) An individual is allowed a credit against the tax imposed by this chapter equal to seven percent of the lesser of:

(1) $6,000; or

(2) qualified residence interest deduction for which the individual is eligible under section 63(d) of the Internal Revenue Code, minus $4,000.

(b) The amount of the credit allowed must be reduced by the amount of the taxpayer's liability under section 290.091, determined before the credit allowed by this section is subtracted from regular tax liability.

(c) For a nonresident or part-year resident, the credit must be allocated based on the percentage calculated under subdivision 2c, paragraph (e).

EFFECTIVE DATE. This section is effective for taxable years beginning after December 31, 2008.

Sec. 18. Minnesota Statutes 2008, section 290.06, is amended by adding a subdivision to read:

Subd. 37. Charitable contributions credit. (a) An individual is allowed a credit against the tax imposed by this chapter equal to eight percent of the amount by which eligible charitable contributions exceed the greater of:

(1) two percent of the individual's adjusted gross income for the taxable year; or

(2) $500.

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(b) For purposes of this subdivision, "eligible charitable contributions" means charitable contributions allowable as a deduction for the taxable year under section 170(a) of the Internal Revenue Code, subject to the limitations of section 170(b) of the Internal Revenue Code, and determined without regard to whether or not the taxpayers itemize deductions.

(c) For purposes of this subdivision, "adjusted gross income" has the meaning given in section 62 of the Internal Revenue Code.

(d) For a nonresident or part-year resident, the credit must be allocated based on the percentage calculated under subdivision 2c, paragraph (e).

EFFECTIVE DATE. This section is effective for taxable years beginning after December 31, 2008.

Sec. 19. Minnesota Statutes 2008, section 290.0671, subdivision 1, is amended to read:

Subdivision 1. Credit allowed. (a) An individual is allowed a credit against the tax imposed by this chapter equal to a percentage of earned income. To receive a credit, a taxpayer must be eligible for a credit under section 32 of the Internal Revenue Code.

(b) For individuals with no qualifying children, the credit equals 1.9125 percent of the first $4,620 of earned income. The credit is reduced by 1.9125 percent of earned income or adjusted gross income, whichever is greater, in excess of $5,770, but in no case is the credit less than zero.

(c) For individuals with one qualifying child, the credit equals 8.5 percent of the first $6,920 of earned income and 8.5 percent of earned income over $12,080 but less than $13,450. The credit is reduced by 5.73 percent of earned income or adjusted gross income, whichever is greater, in excess of $15,080, but in no case is the credit less than zero.

(d) For individuals with two or more qualifying children, the credit equals ten percent of the first $9,720 of earned income and 20 percent of earned income over $14,860 but less than $16,800. The credit is reduced by 10.3 percent of earned income or adjusted gross income, whichever is greater, in excess of $17,890, but in no case is the credit less than zero.

(e) For a nonresident or part-year resident, the credit must be allocated based on the percentage calculated under section 290.06, subdivision 2c, paragraph (e).

(f) For a person who was a resident for the entire tax year and has earned income not subject to tax under this chapter, ~~including income excluded under section 290.01, subdivision 19b, clause (10) or (16),~~ the credit must be allocated based on the ratio of federal adjusted gross income reduced by the earned income not subject to tax under this chapter over federal adjusted gross income. For purposes of this paragraph, the subtractions for military pay under section 290.01, subdivision 19b, clauses ~~(11) and (12)~~ (4) and (5), are not considered "earned income not subject to tax under this chapter."

For the purposes of this paragraph, the exclusion of combat pay under section 112 of the Internal Revenue Code is not considered "earned income not subject to tax under this chapter."

(g) For tax years beginning after December 31, 2001, and before December 31, 2004, the $5,770 in paragraph (b), the $15,080 in paragraph (c), and the $17,890 in paragraph (d), after being adjusted for inflation under subdivision 7, are each increased by $1,000 for married taxpayers filing joint returns.

(h) For tax years beginning after December 31, 2004, and before December 31, 2007, the $5,770 in paragraph (b), the $15,080 in paragraph (c), and the $17,890 in paragraph (d), after being adjusted for inflation under subdivision 7, are each increased by $2,000 for married taxpayers filing joint returns.

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(i) For tax years beginning after December 31, 2007, and before December 31, 2010, the $5,770 in paragraph (b), the $15,080 in paragraph (c), and the $17,890 in paragraph (d), after being adjusted for inflation under subdivision 7, are each increased by $3,000 for married taxpayers filing joint returns. For tax years beginning after December 31, 2008, the $3,000 is adjusted annually for inflation under subdivision 7.

(j) The commissioner shall construct tables showing the amount of the credit at various income levels and make them available to taxpayers. The tables shall follow the schedule contained in this subdivision, except that the commissioner may graduate the transition between income brackets.

Sec. 20. Minnesota Statutes 2008, section 290.068, subdivision 1, is amended to read:

Subdivision 1. Credit allowed. A ~~corporation, other than a corporation treated as an "S" corporation under section 290.9725,~~ taxpayer is allowed a credit against ~~the portion of~~ the ~~franchise~~ tax computed under section 290.06~~, subdivision 1,~~ for the taxable year equal to:

~~(a) 5~~ (1) ten percent of the first $2,000,000 of the excess (if any) of

~~(1)~~ (i) the qualified research expenses for the taxable year, over

~~(2)~~ (ii) the base amount; and

~~(b)~~ (2) 2.5 percent on all of such excess expenses over $2,000,000.

EFFECTIVE DATE. This section is effective for taxable years beginning after December 31, 2008.

Sec. 21. Minnesota Statutes 2008, section 290.068, subdivision 3, is amended to read:

Subd. 3. Limitation; carryover. (a)(1) The credit for the taxable year shall not exceed the liability for tax. "Liability for tax" for purposes of this section means the tax imposed under section 290.06, subdivision 1, for the taxable year reduced by the sum of the nonrefundable credits allowed under this chapter.

(2) ~~In the case of a corporation which is~~ For a partner in a partnership and for a shareholder in an S corporation, the credit allowed for the taxable year shall not exceed the lesser of the amount determined under clause (1) for the taxable year or an amount (separately computed with respect to the ~~corporation's~~ taxpayer's interest in the trade or business or entity) equal to the amount of tax attributable to that portion of taxable income which is allocable or apportionable to the ~~corporation's~~ taxpayer's interest in the trade or business or entity.

(b) If the amount of the credit determined under this section for any taxable year exceeds the limitation under clause (a), the excess shall be a research credit carryover to each of the 15 succeeding taxable years. The entire amount of the excess unused credit for the taxable year shall be carried first to the earliest of the taxable years to which the credit may be carried and then to each successive year to which the credit may be carried. The amount of the unused credit which may be added under this clause shall not exceed the taxpayer's liability for tax less the research credit for the taxable year.

EFFECTIVE DATE. This section is effective for taxable years beginning after December 31, 2008.

Sec. 22. Minnesota Statutes 2008, section 290.068, subdivision 4, is amended to read:

Subd. 4. Partnerships and S corporations. In the case of partnerships and S corporations the credit shall be allocated in the same manner provided by ~~section~~ sections 41(f)(2) and 41(g) of the Internal Revenue Code.

EFFECTIVE DATE. This section is effective for taxable years beginning after December 31, 2008.

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Sec. 23. [290.0682] MINNESOTA CHILD CREDIT.

Subdivision 1. Definitions. (a) For purposes of this section, the following terms have the meanings given.

(b) "Adjusted gross income" has the meaning given in section 62 of the Internal Revenue Code.

Subd. 2. Credit allowed. (a) An individual is allowed a credit against the tax imposed by this chapter equal to the lesser of:

(1) $200 for each qualifying child; or

(2) ten percent of adjusted gross income in excess of $14,000.

(b) The credit allowed in paragraph (a) is reduced by an amount equal to five percent of adjusted gross income in excess of $28,000, but in no case is the credit less than zero.

(c) For a nonresident or part-year resident, the credit must be allocated based on the percentage calculated under section 290.06, subdivision 2c, paragraph (e).

Subd. 3. Credit refundable. If the amount of credit that an individual is eligible to receive under this section exceeds the claimant's tax liability under this chapter, the commissioner shall refund the excess to the claimant.

Subd. 4. Appropriation. An amount sufficient to pay the refunds required by this section is appropriated to the commissioner from the general fund.

Subd. 5. Inflation adjustment. The adjusted gross income floor in subdivision 2, paragraph (a), clause (2), and the phaseout threshold in subdivision 2, paragraph (b), must be adjusted for inflation. For tax years beginning after December 31, 2009, the commissioner shall annually adjust the adjusted gross income floor and the phaseout threshold by the percentage determined pursuant to section 1(f) of the Internal Revenue Code, except that in section 1(f)(3)(B), the word "2008" shall be substituted for the word "1992." For 2010, the commissioner shall then determine the percent change from the 12 months ending on August 31, 2008, to the 12 months ending on August 31, 2009, and in each subsequent year, from the 12 months ending on August 31, 2008, to the 12 months ending on August 31 of the year preceding the taxable year. The adjusted gross income floor and the phaseout threshold as adjusted for inflation must be rounded to the nearest $10. If the amount ends in $5, the amount is rounded up to the nearest $10. The determination of the commissioner under this subdivision is not a rule under the Administrative Procedure Act.

EFFECTIVE DATE. This section is effective for taxable years beginning after December 31, 2008.

Sec. 24. Minnesota Statutes 2008, section 290.091, subdivision 2, is amended to read:

Subd. 2. Definitions. For purposes of the tax imposed by this section, the following terms have the meanings given:

(a) "Alternative minimum taxable income" means the sum of the following for the taxable year:

(1) the taxpayer's federal alternative minimum taxable income as defined in section 55(b)(2) of the Internal Revenue Code;

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(2) the taxpayer's itemized deductions allowed in computing federal alternative minimum taxable income, but excluding:

~~(i) the charitable contribution deduction under section 170 of the Internal Revenue Code;~~

~~(ii)~~ (i) the medical expense deduction;

~~(iii)~~ (ii) the casualty, theft, and disaster loss deduction; and

~~(iv)~~ (iii) the impairment-related work expenses of a disabled person;

(3) for depletion allowances computed under section 613A(c) of the Internal Revenue Code, with respect to each property (as defined in section 614 of the Internal Revenue Code), to the extent not included in federal alternative minimum taxable income, the excess of the deduction for depletion allowable under section 611 of the Internal Revenue Code for the taxable year over the adjusted basis of the property at the end of the taxable year (determined without regard to the depletion deduction for the taxable year);

(4) to the extent not included in federal alternative minimum taxable income, the amount of the tax preference for intangible drilling cost under section 57(a)(2) of the Internal Revenue Code determined without regard to subparagraph (E);

(5) to the extent not included in federal alternative minimum taxable income, the amount of interest income as provided by section 290.01, subdivision 19a, clause (1); and

(6) the amount of addition required by section 290.01, subdivision 19a, clauses (7) to (9), (12), ~~and~~ (13), (16), and (17);

less the sum of the amounts determined under the following:

(1) interest income as defined in section 290.01, subdivision 19b, clause (1);

(2) an overpayment of state income tax as provided by section 290.01, subdivision 19b, clause (2), to the extent included in federal alternative minimum taxable income;

(3) the amount of investment interest paid or accrued within the taxable year on indebtedness to the extent that the amount does not exceed net investment income, as defined in section 163(d)(4) of the Internal Revenue Code. Interest does not include amounts deducted in computing federal adjusted gross income; and

(4) amounts subtracted from federal taxable income as provided by section 290.01, subdivision 19b, clauses ~~(6) and (9) to (16)~~ (3) to (8).

In the case of an estate or trust, alternative minimum taxable income must be computed as provided in section 59(c) of the Internal Revenue Code.

(b) "Investment interest" means investment interest as defined in section 163(d)(3) of the Internal Revenue Code.

(c) "Tentative minimum tax" equals 6.4 percent of alternative minimum taxable income after subtracting the exemption amount determined under subdivision 3.

(d) "Regular tax" means the tax that would be imposed under this chapter (without regard to this section and section 290.032), reduced by the sum of the nonrefundable credits allowed under this chapter.

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(e) "Net minimum tax" means the minimum tax imposed by this section.

EFFECTIVE DATE. This section is effective for taxable years beginning after December 31, 2008.

Sec. 25. Minnesota Statutes 2008, section 290.0921, subdivision 3, is amended to read:

Subd. 3. Alternative minimum taxable income. "Alternative minimum taxable income" is Minnesota net income as defined in section 290.01, subdivision 19, and includes the adjustments and tax preference items in sections 56, 57, 58, and 59(d), (e), (f), and (h) of the Internal Revenue Code. If a corporation files a separate company Minnesota tax return, the minimum tax must be computed on a separate company basis. If a corporation is part of a tax group filing a unitary return, the minimum tax must be computed on a unitary basis. The following adjustments must be made.

(1) For purposes of the depreciation adjustments under section 56(a)(1) and 56(g)(4)(A) of the Internal Revenue Code, the basis for depreciable property placed in service in a taxable year beginning before January 1, 1990, is the adjusted basis for federal income tax purposes, including any modification made in a taxable year under section 290.01, subdivision 19e, or Minnesota Statutes 1986, section 290.09, subdivision 7, paragraph (c).

For taxable years beginning after December 31, 2000, the amount of any remaining modification made under section 290.01, subdivision 19e, or Minnesota Statutes 1986, section 290.09, subdivision 7, paragraph (c), not previously deducted is a depreciation allowance in the first taxable year after December 31, 2000.

(2) The portion of the depreciation deduction allowed for federal income tax purposes under section 168(k) of the Internal Revenue Code that is required as an addition under section 290.01, subdivision 19c, clause (15), is disallowed in determining alternative minimum taxable income.

(3) The subtraction for depreciation allowed under section 290.01, subdivision 19d, clause ~~(18)~~ (17), is allowed as a depreciation deduction in determining alternative minimum taxable income.

(4) The alternative tax net operating loss deduction under sections 56(a)(4) and 56(d) of the Internal Revenue Code does not apply.

(5) The special rule for certain dividends under section 56(g)(4)(C)(ii) of the Internal Revenue Code does not apply.

(6) The special rule for dividends from section 936 companies under section 56(g)(4)(C)(iii) does not apply.

(7) The tax preference for depletion under section 57(a)(1) of the Internal Revenue Code does not apply.

(8) The tax preference for intangible drilling costs under section 57(a)(2) of the Internal Revenue Code must be calculated without regard to subparagraph (E) and the subtraction under section 290.01, subdivision 19d, clause (4).

(9) The tax preference for tax exempt interest under section 57(a)(5) of the Internal Revenue Code does not apply.

(10) The tax preference for charitable contributions of appreciated property under section 57(a)(6) of the Internal Revenue Code does not apply.

(11) For purposes of calculating the tax preference for accelerated depreciation or amortization on certain property placed in service before January 1, 1987, under section 57(a)(7) of the Internal Revenue Code, the deduction allowable for the taxable year is the deduction allowed under section 290.01, subdivision 19e.

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For taxable years beginning after December 31, 2000, the amount of any remaining modification made under section 290.01, subdivision 19e, not previously deducted is a depreciation or amortization allowance in the first taxable year after December 31, 2004.

(12) For purposes of calculating the adjustment for adjusted current earnings in section 56(g) of the Internal Revenue Code, the term "alternative minimum taxable income" as it is used in section 56(g) of the Internal Revenue Code, means alternative minimum taxable income as defined in this subdivision, determined without regard to the adjustment for adjusted current earnings in section 56(g) of the Internal Revenue Code.

(13) For purposes of determining the amount of adjusted current earnings under section 56(g)(3) of the Internal Revenue Code, no adjustment shall be made under section 56(g)(4) of the Internal Revenue Code with respect to (i) the amount of foreign dividend gross-up subtracted as provided in section 290.01, subdivision 19d, clause (1), or (ii) the amount of refunds of income, excise, or franchise taxes subtracted as provided in section 290.01, subdivision 19d, clause (9)~~, or (iii) the amount of royalties, fees or other like income subtracted as provided in section 290.01, subdivision 19d, clause (10)~~.

~~(14) Alternative minimum taxable income excludes the income from operating in a job opportunity building zone as provided under section 469.317.~~

~~(15) Alternative minimum taxable income excludes the income from operating in a biotechnology and health sciences industry zone as provided under section 469.337.~~

~~(16) Alternative minimum taxable income excludes the income from operating in an international economic development zone as provided under section 469.326.~~

(14) Alternative minimum taxable income includes Minnesota development subsidies.

Items of tax preference must not be reduced below zero as a result of the modifications in this subdivision.

EFFECTIVE DATE. This section is effective for taxable years beginning after December 31, 2009, except the changes to clauses (3) and (13) and the new clause (14) are effective for taxable years beginning after December 31, 2008.

Sec. 26. Minnesota Statutes 2008, section 290.0922, subdivision 1, is amended to read:

Subdivision 1. Imposition. (a) In addition to the tax imposed by this chapter without regard to this section, the franchise tax imposed on a corporation required to file under section 289A.08, subdivision 3, other than a corporation treated as an "S" corporation under section 290.9725 for the taxable year includes a tax equal to the following amounts:

If the sum of the corporation's

Minnesota property payrolls,

and sales or receipts is: the tax equals:

~~less than~~ ~~$500,000~~ $0

~~$500,000 to $999,999~~ ~~$100~~

~~$1,000,000 to $4,999,999~~ ~~$300~~

~~$5,000,000 to $9,999,999~~ ~~$1,000~~

~~$10,000,000 to $19,999,999~~ ~~$2,000~~

~~$20,000,000 or more~~ ~~$5,000~~

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less than $830,000 $0

$830,000 to $1,659,999 $170

$1,660,000 to $8,319,999 $500

$8,320,000 to $16,649,999 $1,660

$16,650,000 to $33,299,999 $3,330

$33,300,000 or more $8,320

(b) A tax is imposed for each taxable year on a corporation required to file a return under section 289A.12, subdivision 3, that is treated as an "S" corporation under section 290.9725 and on a partnership required to file a return under section 289A.12, subdivision 3, other than a partnership that derives over 80 percent of its income from farming. The tax imposed under this paragraph is due on or before the due date of the return for the taxpayer due under section 289A.18, subdivision 1. The commissioner shall prescribe the return to be used for payment of this tax. The tax under this paragraph is equal to the following amounts:

If the sum of the S corporation's

or partnership's Minnesota property,

payrolls, and sales or receipts is: the tax equals:

~~less than $500,000~~ $0

~~$500,000 to $999,999~~ ~~$100~~

~~$1,000,000 to $4,999,999~~ ~~$300~~

~~$5,000,000 to $9,999,999~~ ~~$1,000~~

~~$10,000,000 to $19,999,999~~ ~~$2,000~~

~~$20,000,000 or more~~ ~~$5,000~~

less than $830,000 $0

$830,000 to $1,659,999 $170

$1,660,000 to $8,319,999 $500

$8,320,000 to $16,649,999 $1,660

$16,650,000 to $33,299,999 $3,330

$33,300,000 or more $8,320

EFFECTIVE DATE. This section is effective for taxable years beginning after December 31, 2008.

Sec. 27. Minnesota Statutes 2008, section 290.0922, subdivision 3, is amended to read:

Subd. 3. Definitions. (a) "Minnesota sales or receipts" means the total sales apportioned to Minnesota pursuant to section 290.191, subdivision 5, the total receipts attributed to Minnesota pursuant to section 290.191, subdivisions 6 to 8, and/or the total sales or receipts apportioned or attributed to Minnesota pursuant to any other apportionment formula applicable to the taxpayer.

(b) "Minnesota property" means total Minnesota tangible property as provided in section 290.191, subdivisions 9 to 11, any other tangible property located in Minnesota, but does not include: (1) property located in a job opportunity building zone designated under section 469.314, (2) property of a qualified business located in a biotechnology and health sciences industry zone designated under section 469.334, or (3) for taxable years beginning during the duration of the zone, property of a qualified business located in the international economic development zone designated under section 469.322. Intangible property shall not be included in Minnesota property for purposes of this section. Taxpayers who do not utilize tangible property to apportion income shall nevertheless include Minnesota property for purposes of this section. On a return for a short taxable year, the amount of Minnesota property owned, as determined under section 290.191, shall be included in Minnesota property based on a fraction in which the numerator is the number of days in the short taxable year and the denominator is 365.

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(c) "Minnesota payrolls" means total Minnesota payrolls as provided in section 290.191, subdivision 12, but does not include: (1) job opportunity building zone payrolls under section 469.310, subdivision 8, (2) biotechnology and health sciences industry zone payrolls under section 469.330, subdivision 8, or (3) for taxable years beginning during the duration of the zone, international economic development zone payrolls under section 469.321, subdivision 9. Taxpayers who do not utilize payrolls to apportion income shall nevertheless include Minnesota payrolls for purposes of this section.

EFFECTIVE DATE. This section is effective for taxable years beginning after December 31, 2009.

Sec. 28. Minnesota Statutes 2008, section 290.0922, is amended by adding a subdivision to read:

Subd. 5. Inflation adjustment. The commissioner shall adjust the dollar amounts of both the fee and the property, payrolls, and sales or receipts thresholds in subdivision 1 by the percentage determined pursuant to the provisions of section 1(f) of the Internal Revenue Code, except that in section 1(f)(3)(B) the word "2008" must be substituted for the word "1992." For 2010, the commissioner shall then determine the percent change from the 12 months ending on August 31, 2008, to the 12 months ending on August 31, 2009, and in each subsequent year, from the 12 months ending on August 31, 2008, to the 12 months ending on August 31 of the year preceding the taxable year. The determination of the commissioner pursuant to this subdivision is not a "rule" subject to the Administrative Procedure Act contained in chapter 14. The fee amounts as adjusted must be rounded to the nearest $10 and the threshold amounts must be adjusted to the nearest $10,000. For fee amounts that end in $5, the amount is rounded up to the nearest $10 and for threshold amounts that end in $5,000, the amount is rounded up to the nearest $10,000.

EFFECTIVE DATE. This section is effective for taxable years beginning after December 31, 2009.

Sec. 29. Minnesota Statutes 2008, section 290.17, subdivision 2, is amended to read:

Subd. 2. Income not derived from conduct of a trade or business. The income of a taxpayer subject to the allocation rules that is not derived from the conduct of a trade or business must be assigned in accordance with paragraphs (a) to (f):

(a)(1) Subject to paragraphs (a)(2) and (a)(3), income from wages as defined in section 3401(a) and (f) of the Internal Revenue Code is assigned to this state if, and to the extent that, the work of the employee is performed within it; all other income from such sources is treated as income from sources without this state.

Severance pay shall be considered income from labor or personal or professional services.

(2) In the case of an individual who is a nonresident of Minnesota and who is an athlete or entertainer, income from compensation for labor or personal services performed within this state shall be determined in the following manner:

(i) The amount of income to be assigned to Minnesota for an individual who is a nonresident salaried athletic team employee shall be determined by using a fraction in which the denominator contains the total number of days in which the individual is under a duty to perform for the employer, and the numerator is the total number of those days spent in Minnesota. For purposes of this paragraph, off-season training activities, unless conducted at the team's facilities as part of a team imposed program, are not included in the total number of duty days. Bonuses earned as a result of play during the regular season or for participation in championship, play-off, or all-star games must be allocated under the formula. Signing bonuses are not subject to allocation under the formula if they are not conditional on playing any games for the team, are payable separately from any other compensation, and are nonrefundable; and

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(ii) The amount of income to be assigned to Minnesota for an individual who is a nonresident, and who is an athlete or entertainer not listed in clause (i), for that person's athletic or entertainment performance in Minnesota shall be determined by assigning to this state all income from performances or athletic contests in this state.

(3) For purposes of this section, amounts received by a nonresident as "retirement income" as defined in section (b)(1) of the State Income Taxation of Pension Income Act, Public Law 104-95, are not considered income derived from carrying on a trade or business or from wages or other compensation for work an employee performed in Minnesota, and are not taxable under this chapter.

(b) Income or gains from tangible property located in this state that is not employed in the business of the recipient of the income or gains must be assigned to this state.

(c) Income or gains from intangible personal property not employed in the business of the recipient of the income or gains must be assigned to this state if the recipient of the income or gains is a resident of this state or is a resident trust or estate.

Gain on the sale of a partnership interest is allocable to this state in the ratio of the original cost of partnership tangible property in this state to the original cost of partnership tangible property everywhere, determined at the time of the sale. If more than 50 percent of the value of the partnership's assets consists of intangibles, gain or loss from the sale of the partnership interest is allocated to this state in accordance with the sales factor of the partnership for its first full tax period immediately preceding the tax period of the partnership during which the partnership interest was sold.

Gain on the sale of an interest in a single member limited liability company that is disregarded for federal income tax purposes is allocable to this state as if the single member limited liability company did not exist and the assets of the limited liability company are personally owned by the sole member.

Gain on the sale of goodwill or income from a covenant not to compete that is connected with a business operating all or partially in Minnesota is allocated to this state to the extent that the income from the business in the year preceding the year of sale was assignable to Minnesota under subdivision 3.

When an employer pays an employee for a covenant not to compete, the income allocated to this state is in the ratio of the employee's service in Minnesota in the calendar year preceding leaving the employment of the employer over the total services performed by the employee for the employer in that year.

(d) Income from winnings on a bet made by an individual while in Minnesota is assigned to this state. In this paragraph, "bet" has the meaning given in section 609.75, subdivision 2, as limited by section 609.75, subdivision 3, clauses (1), (2), and (3).

(e) All items of gross income not covered in paragraphs (a) to (d) and not part of the taxpayer's income from a trade or business shall be assigned to the taxpayer's domicile.

(f) For the purposes of this section, working as an employee shall not be considered to be conducting a trade or business.

EFFECTIVE DATE. This section is effective the day following final enactment.

Sec. 30. Minnesota Statutes 2008, section 290.17, subdivision 4, is amended to read:

Subd. 4. Unitary business principle. (a) If a trade or business conducted wholly within this state or partly within and partly without this state is part of a unitary business, the entire income of the unitary business is subject to apportionment pursuant to section 290.191. Notwithstanding subdivision 2, paragraph (c), none of the income of a unitary business is considered to be derived from any particular source and none may be allocated to a particular

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place except as provided by the applicable apportionment formula. The provisions of this subdivision do not apply to business income subject to subdivision 5, income of an insurance company, or income of an investment company determined under section 290.36.

(b) The term "unitary business" means business activities or operations which result in a flow of value between them. The term may be applied within a single legal entity or between multiple entities and without regard to whether each entity is a sole proprietorship, a corporation, a partnership or a trust.

(c) Unity is presumed whenever there is unity of ownership, operation, and use, evidenced by centralized management or executive force, centralized purchasing, advertising, accounting, or other controlled interaction, but the absence of these centralized activities will not necessarily evidence a nonunitary business. Unity is also presumed when business activities or operations are of mutual benefit, dependent upon or contributory to one another, either individually or as a group.

(d) Where a business operation conducted in Minnesota is owned by a business entity that carries on business activity outside the state different in kind from that conducted within this state, and the other business is conducted entirely outside the state, it is presumed that the two business operations are unitary in nature, interrelated, connected, and interdependent unless it can be shown to the contrary.

(e) Unity of ownership is not deemed to exist when a corporation is involved unless that corporation is a member of a group of two or more business entities and more than 50 percent of the voting stock of each member of the group is directly or indirectly owned by a common owner or by common owners, either corporate or noncorporate, or by one or more of the member corporations of the group. For this purpose, the term "voting stock" shall include membership interests of mutual insurance holding companies formed under section 66A.40.

(f) The net income and apportionment factors under section 290.191 or 290.20 of foreign corporations and other foreign entities which are part of a unitary business shall not be included in the net income or the apportionment factors of the unitary business. A foreign corporation or other foreign entity which is required to file a return under this chapter shall file on a separate return basis. The net income and apportionment factors under section 290.191 or 290.20 of foreign operating corporations shall not be included in the net income or the apportionment factors of the unitary business except as provided in paragraph (g).

(g) The adjusted net income of a foreign operating corporation shall be deemed to be paid as a dividend on the last day of its taxable year to each shareholder thereof, in proportion to each shareholder's ownership, with which such corporation is engaged in a unitary business. Such deemed dividend shall be treated as a dividend under section 290.21, subdivision 4.

Dividends actually paid by a foreign operating corporation to a corporate shareholder which is a member of the same unitary business as the foreign operating corporation shall be eliminated from the net income of the unitary business in preparing a combined report for the unitary business. The adjusted net income of a foreign operating corporation shall be its net income adjusted as follows:

~~(1) any taxes paid or accrued to a foreign country, the commonwealth of Puerto Rico, or a United States possession or political subdivision of any of the foregoing shall be a deduction; and~~

(2) the subtraction from federal taxable income for payments received from foreign corporations or foreign operating corporations under section 290.01, subdivision 19d, clause (10), shall not be allowed.

~~If a foreign operating corporation incurs a net loss, neither income nor deduction from that corporation shall be included in determining the net income of the unitary business.~~

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~~(h)~~ (g) For purposes of determining the net income of a unitary business and the factors to be used in the apportionment of net income pursuant to section 290.191 or 290.20, there must be included only the income and apportionment factors of domestic corporations or other domestic entities ~~other than foreign operating corporations~~ that are determined to be part of the unitary business pursuant to this subdivision, notwithstanding that foreign corporations or other foreign entities might be included in the unitary business.

~~(i)~~ (h) Deductions for expenses, interest, or taxes otherwise allowable under this chapter that are connected with or allocable against dividends~~, deemed dividends described in paragraph (g), or royalties, fees, or other like income described in section 290.01, subdivision 19d, clause (10),~~ shall not be disallowed.

~~(j)~~ (i) Each corporation or other entity, except a sole proprietorship, that is part of a unitary business must file combined reports as the commissioner determines. On the reports, all intercompany transactions between entities included pursuant to paragraph ~~(h)~~ (g) must be eliminated and the entire net income of the unitary business determined in accordance with this subdivision is apportioned among the entities by using each entity's Minnesota factors for apportionment purposes in the numerators of the apportionment formula and the total factors for apportionment purposes of all entities included pursuant to paragraph ~~(h)~~ (g) in the denominators of the apportionment formula.

~~(k)~~ (j) If a corporation has been divested from a unitary business and is included in a combined report for a fractional part of the common accounting period of the combined report:

(1) its income includable in the combined report is its income incurred for that part of the year determined by proration or separate accounting; and

(2) its sales, property, and payroll included in the apportionment formula must be prorated or accounted for separately.

EFFECTIVE DATE. This section is effective for taxable years beginning after December 31, 2008.

Sec. 31. Minnesota Statutes 2008, section 290.191, subdivision 2, is amended to read:

Subd. 2. Apportionment formula of general application. ~~(a)~~ Except for those trades or businesses required to use a different formula under subdivision 3 or section 290.36, and for those trades or businesses that receive permission to use some other method under section 290.20 or under subdivision 4, a trade or business required to apportion its net income must apportion its income to this state on the basis of the ~~percentage obtained by taking the sum of:~~

~~(1) the percent for the sales factor under paragraph (b) of the~~ percentage which the sales made within this state in connection with the trade or business during the tax period are of the total sales wherever made in connection with the trade or business during the tax period;.

(2) the percent for the property factor under paragraph (b) of the percentage which the total tangible property used by the taxpayer in this state in connection with the trade or business during the tax period is of the total tangible property, wherever located, used by the taxpayer in connection with the trade or business during the tax period; and

(3) the percent for the payroll factor under paragraph (b) of the percentage which the taxpayer's total payrolls paid or incurred in this state or paid in respect to labor performed in this state in connection with the trade or business during the tax period are of the taxpayer's total payrolls paid or incurred in connection with the trade or business during the tax period.

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~~(b) For purposes of paragraph (a) and subdivision 3, the following percentages apply for the taxable years specified:~~

~~Taxable years beginning~~ ~~Sales factor~~ ~~Property factor~~ ~~Payroll factor~~

~~during calendar year~~ ~~percent~~ ~~percent~~ ~~percent~~

~~2007~~ 78 11 11

~~2008~~ 81 ~~9.5~~ ~~9.5~~

~~2009~~ 84 8 8

~~2010~~ 87 ~~6.5~~ ~~6.5~~

~~2011~~ 90 5 5

~~2012~~ 93 ~~3.5~~ ~~3.5~~

~~2013~~ 96 2 2

~~2014 and later calendar years~~ ~~100~~ 0 0

EFFECTIVE DATE. This section is effective for taxable years beginning after December 31, 2008.

Sec. 32. Minnesota Statutes 2008, section 290.191, subdivision 3, is amended to read:

Subd. 3. Apportionment formula for financial institutions. Except for an investment company required to apportion its income under section 290.36, a financial institution that is required to apportion its net income must apportion its net income to this state on the basis of the percentage ~~obtained by taking the sum of:~~

~~(1) the percent for the sales factor under subdivision 2, paragraph (b), of the percentage~~ which the receipts from within this state in connection with the trade or business during the tax period are of the total receipts in connection with the trade or business during the tax period, from wherever derived;.

(2) the percent for the property factor under subdivision 2, paragraph (b), of the percentage which the sum of the total tangible property used by the taxpayer in this state and the intangible property owned by the taxpayer and attributed to this state in connection with the trade or business during the tax period is of the sum of the total tangible property, wherever located, used by the taxpayer and the intangible property owned by the taxpayer and attributed to all states in connection with the trade or business during the tax period; and

(3) the percent for the payroll factor under subdivision 2, paragraph (b), of the percentage which the taxpayer's total payrolls paid or incurred in this state or paid in respect to labor performed in this state in connection with the trade or business during the tax period are of the taxpayer's total payrolls paid or incurred in connection with the trade or business during the tax period.

EFFECTIVE DATE. This section is effective for taxable years beginning after December 31, 2008.

Sec. 33. Minnesota Statutes 2008, section 290A.03, subdivision 3, as amended by Laws 2009, chapter 12, article 1, section 9, is amended to read:

Subd. 3. Income. (1) "Income" means the sum of the following:

(a) federal adjusted gross income as defined in the Internal Revenue Code; and

(b) the sum of the following amounts to the extent not included in clause (a):

(i) all nontaxable income;

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(ii) the amount of a passive activity loss that is not disallowed as a result of section 469, paragraph (i) or (m) of the Internal Revenue Code and the amount of passive activity loss carryover allowed under section 469(b) of the Internal Revenue Code;

(iii) an amount equal to the total of any discharge of qualified farm indebtedness of a solvent individual excluded from gross income under section 108(g) of the Internal Revenue Code;

(iv) cash public assistance and relief;

(v) any pension or annuity (including railroad retirement benefits, all payments received under the federal Social Security Act, Supplemental Security Income, and veterans benefits), which was not exclusively funded by the claimant or spouse, or which was funded exclusively by the claimant or spouse and which funding payments were excluded from federal adjusted gross income in the years when the payments were made;

(vi) interest received from the federal or a state government or any instrumentality or political subdivision thereof;

(vii) workers' compensation;

(viii) nontaxable strike benefits;

(ix) the gross amounts of payments received in the nature of disability income or sick pay as a result of accident, sickness, or other disability, whether funded through insurance or otherwise;

(x) a lump-sum distribution under section 402(e)(3) of the Internal Revenue Code of 1986, as amended through December 31, 1995;

(xi) contributions made by the claimant to an individual retirement account, including a qualified voluntary employee contribution; simplified employee pension plan; self-employed retirement plan; cash or deferred arrangement plan under section 401(k) of the Internal Revenue Code; or deferred compensation plan under section 457 of the Internal Revenue Code;

(xii) nontaxable scholarship or fellowship grants;

(xiii) the amount of deduction allowed under section 199 of the Internal Revenue Code;

(xiv) the amount of deduction allowed under section 220 or 223 of the Internal Revenue Code;

(xv) the amount of tuition expenses required to be added to income under section 290.01, subdivision 19a, clause (12); ~~and~~

(xvi) the amount deducted for certain expenses of elementary and secondary school teachers under section 62(a)(2)(D) of the Internal Revenue Code; and

(xvii) unemployment compensation.

In the case of an individual who files an income tax return on a fiscal year basis, the term "federal adjusted gross income" shall mean federal adjusted gross income reflected in the fiscal year ending in the calendar year. Federal adjusted gross income shall not be reduced by the amount of a net operating loss carryback or carryforward or a capital loss carryback or carryforward allowed for the year.

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(2) "Income" does not include:

(a) amounts excluded pursuant to the Internal Revenue Code, sections 101(a) and 102;

(b) amounts of any pension or annuity which was exclusively funded by the claimant or spouse and which funding payments were not excluded from federal adjusted gross income in the years when the payments were made;

(d) relief granted under this chapter;

(e) child support payments received under a temporary or final decree of dissolution or legal separation; or

(f) restitution payments received by eligible individuals and excludable interest as defined in section 803 of the Economic Growth and Tax Relief Reconciliation Act of 2001, Public Law 107-16.

(3) The sum of the following amounts may be subtracted from income:

(a) for the claimant's first dependent, the exemption amount multiplied by 1.4;

(b) for the claimant's second dependent, the exemption amount multiplied by 1.3;

(d) for the claimant's fourth dependent, the exemption amount multiplied by 1.1;

(e) for the claimant's fifth dependent, the exemption amount; and

(f) if the claimant or claimant's spouse was disabled or attained the age of 65 on or before December 31 of the year for which the taxes were levied or rent paid, the exemption amount.

For purposes of this subdivision, the "exemption amount" means the exemption amount under section 151(d) of the Internal Revenue Code for the taxable year for which the income is reported.

EFFECTIVE DATE. This section is effective for property tax refunds based on property taxes payable after December 31, 2009, and rent paid after December 31, 2008, and thereafter.

Sec. 34. Minnesota Statutes 2008, section 290A.03, subdivision 15, as amended by Laws 2009, chapter 12, article 1, section 10, is amended to read:

Subd. 15. Internal Revenue Code. "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended through ~~December 31, 2008~~ March 31, 2009.

EFFECTIVE DATE. This section is effective for property tax refunds based on property taxes payable after December 31, 2009, and rent paid after December 31, 2008, and thereafter.

Sec. 35. Minnesota Statutes 2008, section 291.005, subdivision 1, as amended by Laws 2009, chapter 12, article 1, section 11, is amended to read:

Subdivision 1. Scope. Unless the context otherwise clearly requires, the following terms used in this chapter shall have the following meanings:

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(1) "Federal gross estate" means the gross estate of a decedent as valued and otherwise determined for federal estate tax purposes by federal taxing authorities pursuant to the provisions of the Internal Revenue Code.

(2) "Minnesota gross estate" means the federal gross estate of a decedent after (a) excluding therefrom any property included therein which has its situs outside Minnesota, and (b) including therein any property omitted from the federal gross estate which is includable therein, has its situs in Minnesota, and was not disclosed to federal taxing authorities.

(3) "Personal representative" means the executor, administrator or other person appointed by the court to administer and dispose of the property of the decedent. If there is no executor, administrator or other person appointed, qualified, and acting within this state, then any person in actual or constructive possession of any property having a situs in this state which is included in the federal gross estate of the decedent shall be deemed to be a personal representative to the extent of the property and the Minnesota estate tax due with respect to the property.

(4) "Resident decedent" means an individual whose domicile at the time of death was in Minnesota.

(5) "Nonresident decedent" means an individual whose domicile at the time of death was not in Minnesota.

(6) "Situs of property" means, with respect to real property, the state or country in which it is located; with respect to tangible personal property, the state or country in which it was normally kept or located at the time of the decedent's death; and with respect to intangible personal property, the state or country in which the decedent was domiciled at death. For a nonresident decedent with an ownership interest in a pass-through entity with assets that include real or tangible personal property, situs of the real or tangible personal property is determined as if the pass-through entity does not exist and the real or tangible personal property is personally owned by the decedent. If the pass-through entity is owned by a person or persons in addition to the decedent, ownership of the property is attributed to the decedent in proportion to the decedent's capital ownership share of the pass-through entity.

(7) "Commissioner" means the commissioner of revenue or any person to whom the commissioner has delegated functions under this chapter.

(8) "Internal Revenue Code" means the United States Internal Revenue Code of 1986, as amended through ~~December 31, 2008~~ March 31, 2009.

(9) "Minnesota adjusted taxable estate" means federal adjusted taxable estate as defined by section 2011(b)(3) of the Internal Revenue Code, increased by:

(i) the amount of deduction for state death taxes allowed under section 2058 of the Internal Revenue Code.; and

(ii) the amount of taxable gifts as defined in section 292.16 and made by the decedent within three years of the decedent's date of death.

(10) "Pass-through entity" includes the following:

(i) an entity electing S corporation status under section 1362 of the Internal Revenue Code;

(ii) an entity taxed as a partnership under subchapter K of the Internal Revenue Code;

(iii) a single member limited liability company or similar entity, regardless of whether it is taxed as an association or is disregarded for federal income tax purposes under Code of Federal Regulations, title 26, section 301.7701-3; or

(iv) a trust.

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EFFECTIVE DATE. This section is effective the day following final enactment, except the changes incorporated by federal changes are effective at the same time as the changes were effective for federal purposes, and except that the changes to clauses (6) to (10) are effective for decedents dying after December 31, 2008.

Sec. 36. Minnesota Statutes 2008, section 291.03, subdivision 1, is amended to read:

Subdivision 1. Tax amount. (a) The tax imposed shall be an amount equal to the proportion of the maximum credit for state death taxes computed under section 2011 of the Internal Revenue Code, but using Minnesota adjusted taxable estate instead of federal adjusted taxable estate, as the Minnesota gross estate bears to the value of the federal gross estate. The tax is reduced by the gift tax paid by the decedent under section 292.17 on gifts included in the Minnesota adjusted gross estate.

(b) The tax determined under this subdivision must not be greater than the sum of the following amounts multiplied by a fraction, the numerator of which is the Minnesota gross estate and the denominator of which is the federal gross estate:

(1) the rates and brackets under section 2001(c) of the Internal Revenue Code multiplied by the sum of:

(i) the taxable estate, as defined under section 2051 of the Internal Revenue Code; plus

(ii) adjusted taxable gifts, as defined in section 2001(b) of the Internal Revenue Code; less

(2) the amount of tax allowed under section 2001(b)(2) of the Internal Revenue Code; and less

(3) the federal credit allowed under section 2010 of the Internal Revenue Code.

(c) For purposes of this subdivision, "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended through December 31, 2000.

EFFECTIVE DATE. This section is effective for decedents dying after December 31, 2008.

Sec. 37. [292.16] DEFINITIONS.

(a) For purposes of this chapter, the following definitions apply.

(b) The definitions of terms defined in section 291.005 apply.

(1) the transfers by gift which are included in taxable gifts for federal gift tax purposes under the following sections of the Internal Revenue Code:

(i) section 2503;

(ii) sections 2511 to 2514; and

(iii) sections 2516 to 2519; less

(2) the deductions allowed in sections 2522 to 2524 of the Internal Revenue Code.

EFFECTIVE DATE. This section is effective for taxable gifts made after June 30, 2009.

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Sec. 38. [292.17] GIFT TAX.

Subdivision 1. Imposition. (a) A tax is imposed on the transfer of property by gift by any individual resident or nonresident in an amount equal to ten percent of the amount of the taxable gift.

(b) The donor is liable for payment of the tax. If the gift tax is not paid when due, the recipient of any gift is personally liable for the tax to the extent of the value of the gift.

Subd. 2. Lifetime credit. A credit of $100,000 is allowed against the tax imposed under this section. This credit applies to the cumulative amount of taxable gifts made by the donor during the donor's lifetime.

Subd. 3. Out-of-state gifts. Taxable gifts exclude the transfer of tangible personal property and real property having a situs outside this state.

EFFECTIVE DATE. This section is effective for taxable gifts made after June 30, 2009.

Sec. 39. [292.18] RETURNS.

(a) Any individual who makes a taxable gift during the taxable year shall file a gift tax return in the form and manner prescribed by the commissioner.

(b) If the donor dies before filing the return, the executor of the donor's will or the administrator of the donor's estate shall file the return. If the donor becomes legally incompetent before filing the return, the guardian or conservator shall file the return.

(1) each gift made during the calendar year which is to be included in computing the taxable gifts;

(2) the deductions claimed and allowable under section 292.16, paragraph (c), clause (2);

(3) a description of the gift, and the donee's name, address, and Social Security number;

(4) the fair market value of gifts not made in money; and

(5) any other information the commissioner requires to administer the gift tax.

EFFECTIVE DATE. This section is effective for taxable gifts made after June 30, 2009.

Sec. 40. [292.19] FILING REQUIREMENTS.

Gift tax returns must be filed by the April 15 following the close of the calendar year, except if a gift is made during the calendar year in which the donor dies, the return for the donor must be filed by the last date, including extensions, for filing the gift tax return for federal gift tax purposes for the donor.

EFFECTIVE DATE. This section is effective for taxable gifts made after June 30, 2009.

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Sec. 41. [292.20] APPRAISAL OF PROPERTY; DECLARATION BY DONOR.

The commissioner may require the donor or the donee to show the property subject to the tax under section 292.17 to the commissioner upon demand and may employ a suitable person to appraise the property. The donor shall submit a declaration, in a form prescribed by the commissioner and including any certification required by the commissioner, that the property shown by the donor on the gift tax return includes all of the property transferred by gift for the calendar year and not excluded from taxable gifts under section 292.16, paragraph (c), clause (2).

EFFECTIVE DATE. This section is effective for taxable gifts made after June 30, 2009.

Sec. 42. [292.21] ADMINISTRATIVE PROVISIONS.

Subdivision 1. Payment of tax; penalty for late payment. The tax imposed under section 292.17 is due and payable to the commissioner by the April 15 following the close of the calendar year during which the gift was made. The return required under section 292.18 must be included with the payment. If a taxable gift is made during the calendar year in which the donor dies, the due date is the last date, including extensions, for filing the gift tax return for federal gift tax purposes for the donor. If any person fails to pay the tax due within the time specified under this section, a penalty applies equal to ten percent of the amount due and unpaid or $100, whichever is greater. The unpaid tax and penalty bear interest at the rate under section 270C.40 from the due date of the return.

Subd. 2. Extensions. The commissioner may, for good cause, extend the time for filing a gift tax return, if a written request is filed with a tentative return accompanied by a payment of the tax, which is estimated in the tentative return, on or before the last day for filing the return. Any person to whom an extension is granted must pay, in addition to the tax, interest at the rate under section 270C.40 from the date on which the tax would have been due without the extension.

Subd. 3. Changes in federal gift tax. If the amount of a taxpayer's taxable gifts for federal gift tax purposes, as reported on the taxpayer's federal gift tax return for any calendar year, is changed or corrected by the Internal Revenue Service or other officer of the United States or other competent authority, the taxpayer shall report the change or correction in federal taxable gifts within 180 days after the final determination of the change or correction, and concede the accuracy of the determination or provide a letter detailing how the federal determination is incorrect or does not change the Minnesota gift tax. Any taxpayer filing an amended federal gift tax return shall also file within 180 days an amended return under this chapter and shall include any information the commissioner requires. The time for filing the report or amended return may be extended by the commissioner upon due cause shown. Notwithstanding any limitation of time in this chapter, if, upon examination, the commissioner finds that the taxpayer is liable for the payment of an additional tax, the commissioner shall, within a reasonable time from the receipt of the report or amended return, notify the taxpayer of the amount of additional tax, together with interest computed at the rate under section 270C.40 from the date when the original tax was due and payable. Within 30 days of the mailing of the notice, the taxpayer shall pay the commissioner the amount of the additional tax and interest. If, upon examination of the report or amended return and related information, the commissioner finds that the taxpayer has overpaid the tax due the state, the commissioner shall refund the overpayment to the taxpayer.

Subd. 4. Application of federal rules. In administering the tax under this chapter, the commissioner shall apply the provisions of sections 2701 to 2704 of the Internal Revenue Code. The words "secretary or his delegate," as used in those sections of the Internal Revenue Code, means the commissioner.

EFFECTIVE DATE. This section is effective for taxable gifts made after June 30, 2009.

Sec. 43. [292.22] CREDIT AGAINST ESTATE TAX.

A credit is allowed against the estate tax imposed under chapter 291 in the amount of any tax imposed and paid under this chapter for a gift includable in the Minnesota adjusted taxable estate of the donor under section 291.005.

EFFECTIVE DATE. This section is effective for taxable gifts made after June 30, 2009.

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Sec. 44. Minnesota Statutes 2008, section 469.315, is amended to read:

469.315 TAX INCENTIVES AVAILABLE IN ZONES.

Qualified businesses that operate in a job opportunity building zone, individuals who invest in a qualified business that operates in a job opportunity building zone, and property located in a job opportunity building zone qualify for:

~~(1) exemption from individual income taxes as provided under section 469.316;~~

~~(2) exemption from corporate franchise taxes as provided under section 469.317;~~

~~(3)~~ (1) exemption from the state sales and use tax and any local sales and use taxes on qualifying purchases as provided in section 297A.68, subdivision 37;

~~(4)~~ (2) exemption from the state sales tax on motor vehicles and any local sales tax on motor vehicles as provided under section 297B.03;

~~(5)~~ (3) exemption from the property tax as provided in section 272.02, subdivision 64;

~~(6)~~ (4) exemption from the wind energy production tax under section 272.029, subdivision 7; and

~~(7)~~ (5) the jobs credit allowed under section 469.318.

EFFECTIVE DATE. This section is effective for taxable years beginning after December 31, 2009.

Sec. 45. Minnesota Statutes 2008, section 469.3192, is amended to read:

469.3192 PROHIBITION AGAINST AMENDMENTS TO BUSINESS SUBSIDY AGREEMENT.

(a) Except as authorized under paragraphs (b) and (c) or section 469.3191, under no circumstance shall terms of any agreement required as a condition for eligibility for benefits listed under section 469.315 be amended to change job creation, job retention, or wage goals included in the agreement.

(b) A business may elect to void a business subsidy agreement permitting it to qualify for benefits listed under section 469.315 within 30 days after enactment of section 46, effective for obligations under the agreement that apply to periods after December 31, 2008. The authority to void an agreement expires 180 days after enactment of section 47.

(c) A business that does not elect to void an agreement under paragraph (b) may negotiate a modified or new business subsidy agreement to reflect the state's repeal of the benefits of the individual income and corporate franchise tax exemptions under sections 469.316 and 469.317.

EFFECTIVE DATE. This section is effective the day following final enactment.

Sec. 46. REVISOR'S INSTRUCTION.

The revisor of statutes shall identify and correct internal cross-references to sections that are affected by section 47. The revisor may make changes necessary to correct the punctuation, grammar, or structure of the remaining text to preserve its meaning.

EFFECTIVE DATE. This section is effective the day following final enactment.

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Sec. 47. REPEALER.

(a) Minnesota Statutes 2008, sections 289A.50, subdivision 10; 290.01, subdivision 6b; 290.06, subdivisions 33 and 34; 290.067, subdivisions 1, 2, 2a, 2b, 3, and 4; 290.0672; 290.0674; 290.0679; 290.0802; 290.0921, subdivision 7; 290.191, subdivision 4; and 290.491, and Laws 2009, chapter 3, section 1; and Laws 2009, chapter 12, article 1, section 8, are repealed.

(b) Minnesota Statutes 2008, sections 272.02, subdivision 83; 290.06, subdivisions 24, 28, 30, 31, and 32; 297A.68, subdivisions 38 and 41; 469.316; 469.317; 469.321; 469.3215; 469.322; 469.323; 469.324; 469.325; 469.326; 469.327; 469.328; 469.329; 469.330; 469.331; 469.332; 469.333; 469.334; 469.335; 469.336; 469.337; 469.338; 469.339; 469.340; and 469.341, are repealed.

EFFECTIVE DATE. Paragraph (a) is effective for taxable years beginning after December 31, 2008. Paragraph (b) is effective for taxable years beginning after December 31, 2009.

ARTICLE 2

COUNTY REVENUE REFORM

Section 1. Minnesota Statutes 2008, section 275.70, subdivision 3, is amended to read:

Subd. 3. Local governmental unit. "Local governmental unit" means a county~~, or a statutory or home rule charter city with a population greater than 2,500~~.

EFFECTIVE DATE. This section is effective for taxes levied in calendar year 2009, payable in 2010 and thereafter.

Sec. 2. Minnesota Statutes 2008, section 275.71, subdivision 2, is amended to read:

Subd. 2. Levy limit base. ~~(a)~~ The levy limit base for a local governmental unit for taxes levied in 2008 is its levy aid base from the previous year, subject to any adjustments under section 275.72. For taxes levied in 2009 ~~and 2010~~, the levy limit base for a local governmental unit is its adjusted levy limit base in the previous year, subject to any adjustments under section 275.72.

EFFECTIVE DATE. This section is effective for taxes levied in calendar year 2009, payable in 2010 and thereafter.

Sec. 3. Minnesota Statutes 2008, section 275.71, subdivision 4, is amended to read:

Subd. 4. Adjusted levy limit base. For taxes levied in 2008 ~~through 2010~~ and 2009, the adjusted levy limit base is equal to the levy limit base computed under subdivision 2 or section 275.72, multiplied by:

(1) one plus the lesser of 3.9 percent or the percentage growth in the implicit price deflator;

(2) one plus a percentage equal to 50 percent of the percentage increase in the number of households, if any, for the most recent 12-month period for which data is available; and

(3) one plus a percentage equal to 50 percent of the percentage increase in the taxable market value of the jurisdiction due to new construction of class 3 property, as defined in section 273.13, subdivision 4, except for state-assessed utility and railroad property, for the most recent year for which data is available.

EFFECTIVE DATE. This section is effective for taxes levied in calendar year 2009, payable in 2010 and thereafter.

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Sec. 4. Minnesota Statutes 2008, section 275.71, subdivision 5, is amended to read:

Subd. 5. Property tax levy limit. For taxes levied in ~~2008 through 2010~~ 2009, the property tax levy limit for a local governmental unit is equal to its adjusted levy limit base determined under subdivision 4 plus any additional levy authorized under section 275.73, which is levied against net tax capacity, reduced by the sum of (i) the total amount of aids and reimbursements that the local governmental unit is certified to receive under sections 477A.011 to 477A.014, (ii) the amount of aid reduction under section 477A.0124, subdivision 6, paragraph (c), (iii) taconite aids under sections 298.28 and 298.282 including any aid which was required to be placed in a special fund for expenditure in the next succeeding year, ~~(iii)~~ (iv) estimated payments to the local governmental unit under section 272.029, adjusted for any error in estimation in the preceding year, and ~~(iv)~~ (v) aids under section 477A.16.

EFFECTIVE DATE. This section is effective for taxes levied in calendar year 2009, payable in 2010 and thereafter.

Sec. 5. Minnesota Statutes 2008, section 297A.99, subdivision 1, is amended to read:

Subdivision 1. Authorization; scope. (a) A political subdivision of this state may impose a general sales tax (1) under section 297A.992, (2) under section 297A.993, (3) under section 297A.994, or (4) if permitted by special law enacted prior to May 20, 2008, or ~~(4)~~ (5) if the political subdivision enacted and imposed the tax before January 1, 1982, and its predecessor provision.

(b) This section governs the imposition of a general sales tax by the political subdivision. The provisions of this section preempt the provisions of any special law:

(1) enacted before June 2, 1997, or

(2) enacted on or after June 2, 1997, that does not explicitly exempt the special law provision from this section's rules by reference.

(d) Until after May 31, 2010, a political subdivision may not advertise, promote, expend funds, or hold a referendum to support imposing a local option sales tax unless it is for extension of an existing tax or the tax was authorized by a special law enacted prior to May 20, 2008.

EFFECTIVE DATE. This section is effective the day following final enactment.

Sec. 6. [297A.994] COUNTY LOCAL OPTION SALES TAX.

Subdivision 1. Authorization; rates. Notwithstanding section 297A.99, subdivisions 2, 3, and 5, or 477A.016, or any other law, a county board may, by resolution, impose a general sales tax of one-half of one percent on sales and uses taxable under this chapter. In addition, an excise tax of $20 per motor vehicle is imposed on motor vehicles, purchased or acquired from any person engaged within the county in the business of selling motor vehicles at retail if a county imposes a local sales and use tax under this section.

Subd. 2. Application of election requirement. (a) Imposition of the tax under this section is not subject to the requirements of section 297A.99, subdivision 3.

(b) Before imposing the tax under this section, the county must publish a notice of its intention to impose the tax and the date and time of a hearing to obtain public comment on the matter. The notice must be published in the official newspaper of the county, or in a newspaper of general circulation in the county. The notice must be published at least 14 days before the date of the hearing, but not more than 28 days. Following the public hearing the county board may determine to take no further action, or may adopt a resolution imposing the tax.

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(c) A county may impose the tax only upon obtaining the approval of the majority of voters voting on the question of imposing the tax, if a petition requesting a vote on imposition of the tax is signed by voters equal to the greater of (1) 500, or (2) ten percent of the votes cast in the county at the last general election is filed with the county auditor within 30 days after the public hearing. The vote on the tax may be held at a general or special election. The commissioner of revenue shall prepare a suggested form of the question to be presented at the election.

Subd. 3. Use of revenues. Revenues from the tax imposed under this section must first be used to fund obligations under section 297A.9945. Remaining revenues are deposited in the county general fund.

Subd. 4. Administration, collection, and enforcement. The administration, collection, and enforcement of the provisions in section 297A.99, subdivisions 4, and 6 to 12, apply to a tax imposed under this section.

Subd. 5. Termination. A county may terminate a tax imposed under this section upon resolution of the county board and notification to the commissioner of revenue, if all obligations under section 297A.9945 have been paid.

EFFECTIVE DATE. This section is effective the day following final enactment.

Sec. 7. [297A.9945] EFFECT ON EXISTING LOCAL SALES TAXES; SATISFACTION OF PREEXISTING OBLIGATIONS.

Subdivision 1. Preemption of preexisting local sales taxes. (a) Notwithstanding section 297A.99 or any other law or local ordinance to the contrary, all general local sales and use taxes in a county or a part of a county is preempted on the day that a county local sales tax under section 297A.994 takes effect, except the following taxes are not preempted:

(1) a local tax imposed under section 297A.992 or 297A.993;

(2) a local sales tax authorized by special law in a city of the first class;

(3) a local sales tax authorized by a special law in a city with a population in 2007 of at least 100,000, provided that it complies with paragraph (c); and

(4) a local sales tax in a county as authorized under Laws 2008, chapter 366, article 7, section 18.

(b) A local sales tax that is imposed by a city located in two or more counties is preempted if one or more counties in which the city is located impose the county tax. A replacement tax must be imposed under subdivision 6 in any portion of the city located in a county that has not imposed the tax under section 297A.994.

(c) If a city with a population in 2007 of at least 100,000 would like to maintain an existing local sales tax, the city council must pass a resolution to that effect within two months of the enactment of this section. The city council must provide a copy of the resolution to the commissioner of revenue and to the county in which the city is located within five business days of the passage of the resolution.

Subd. 2. County payment to cities; forgone sales tax revenue. (a) If a local sales tax imposed in a city located partially or totally within a county is preempted under subdivision 1, the county shall pay a portion of its local sales tax revenues, as provided under subdivision 4 or 5, to the city to fund obligations allowed under the law authorizing the city tax. The county must make these payments to the city within five business days after it receives the revenues from the commissioner.

(b) If the local sales tax was imposed under a joint powers agreement in cities located in more than one county, the share of the obligation to be funded by the county must be determined under subdivision 5.

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(1) the date on which the city tax was required to expire under the special law authorizing it;

(2) when the city has received sufficient revenues from its tax and from payments under this section to pay in full or to defease debt obligations issued by the city under the law authorizing the city sales tax and to pay any additional spending obligations allowed under the special law and not funded by the issuance of debt obligations; or

(3) the city becomes a city of the first class and imposes a city sales tax.

Subd. 3. Dedication of tax to fund county projects. If a county imposed local sales tax is preempted under subdivision 1, the revenues from the tax imposed under section 297A.994 are pledged first to pay and secure the bond obligations secured by and to be paid with the revenues from the preempted county sales tax.

Subd. 4. Calculation of forgone revenue in cities located entirely within a county. For purposes of subdivision 2, the forgone revenue to be paid to the city located entirely in a county imposing a tax under section 297A.994 is calculated as follows:

(1) in the first 12 months after the tax is preempted, the county shall make quarterly payments to a city entirely located within the county equal to the amount that the city received from the commissioner of revenue from the preempted tax in the corresponding quarter in the previous year, multiplied by a percentage equal to the percentage change in total state sales tax revenue in the previous quarter compared to the total state sales tax revenue for the fifth preceding quarter; and

(2) in subsequent years, the county shall make quarterly payments to the city equal to the payment made in the corresponding quarter in the previous year, multiplied by the ratio of the total quarterly remittance to the county in the current year compared to the total quarterly remittance to the county in the previous year.

Subd. 5. Calculation of forgone revenue in cities located partially within a county. (a) For purposes of subdivision 2, the forgone revenue to be paid to the city located partially in a county imposing a tax under section 297A.994 is calculated as provided in this subdivision.

(b) The commissioner of revenue shall determine the percentage of the city's local sales tax revenue attributable to transactions located in the county. The commissioner may consult with the county and the city to determine a reasonable percentage, or the commissioner may set the percentage equal to the percentage of the city's market value for the most recently available assessment year of class 3 property, except utility real and personal property located in the county. The sum of the percentage of a city's local sales tax revenue attributable to each county in which the city is located must equal 100 percent. The determination of the commissioner is final.

(c) In the first 12 months after the tax is preempted, the county shall make quarterly payments to a city partially located within the county equal to the amount that the city received from the commissioner from the preempted tax in the corresponding quarter in the previous year, multiplied by (1) a percentage equal to one plus the percentage change in total state sales tax revenue in the previous quarter compared to the total state sales tax revenue for the fifth preceding quarter, and (2) one plus the percentage calculated in paragraph (b).

(d) In subsequent years, the county shall make quarterly payments to the city equal to the payment made in the corresponding quarter in the previous year multiplied by the ratio of the total quarterly remittance to the county in the current year compared to the total quarterly remittance to the county in the previous year.

(e) A county's share of a city's obligations from the special law authorizing the city's sales tax is equal to the total obligation under the special law multiplied by one plus the percentage determined under paragraph (b).

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Subd. 6. Establishment of special sales tax districts within certain cities. (a) For any city located in two or more counties, if at least one county imposes a county sales tax under subdivision 1, and at least one county does not impose a county sales tax, a special sales tax district is established in the portion of the city that is not subject to a county sales tax.

(b) The governing body of the city is the governing body of the special taxing district and the special taxing district shall impose a replacement local sales tax by resolution to take effect upon the preemption of the city's sales tax under subdivision 1. The replacement tax must be imposed at the same rate as the city tax it replaces. Revenues from the replacement tax are pledged to and may only be used for the purposes permitted by law for the city sales tax, which it replaces. The authority to impose this tax expires upon the city's receipt of sufficient revenues to pay the obligations to which the city sales tax was pledged and other spending permitted by the law authorizing imposition of the city sales tax from the sum of the following:

(1) the city sales tax;

(2) county payments of forgone sales tax revenues under this section; and

(3) the special taxing district sales tax.

EFFECTIVE DATE. This section is effective the day following final enactment.

Sec. 8. Minnesota Statutes 2008, section 477A.0124, is amended by adding a subdivision to read:

Subd. 6. County program aid. (a) For calendar year 2010 and thereafter, a county's program aid under this section is equal to (1) its county program aid amount certified for aids payable in 2009 under this section, minus (2) an amount determined under paragraph (b) or (c). A county's program aid shall not be less than zero.

(b) For a county that does not impose a tax under section 297A.994, the amount subtracted under paragraph (a) is equal to 3.58 percent of the county's 2009 levy plus aid revenue base. The "2009 levy plus aid revenue base" for a county is equal to the sum of the county's certified property tax levy for taxes payable in 2009 plus the amount the county was certified to receive in county program aid in 2009 under this section and the amount the county was certified to receive in taconite aids in 2009 under sections 298.28 and 292.282, including any aid that was required to be placed in a special fund for expenditure in the next succeeding year.

(c) For a county that imposes a tax under section 297A.994, the amount subtracted under paragraph (a) is equal to (1) 50 percent of its net sales tax revenue for the preceding 12-month period in excess of the greater of (i) $70,000, or (ii) $7 per capita, plus (2) 25 percent of its net sales tax revenue for the preceding 12-month period in excess of the greater of (i) $170,000, or (ii) $17 per capita.

(d) For purposes of this subdivision, "net sales tax revenue for the preceding 12-month period" means the sales tax revenue for the county for the 12-month period ending July 1 of the year in which the aid under this section is certified minus its estimated existing obligations under section 297A.9945 for the year in which the aid is paid. For the first two years in which the aid is offset under this paragraph, the commissioner of revenue shall estimate the offset based on available data regarding sales tax collections in the county. Beginning with the third year in which the aid is offset under this paragraph, the offset will be based on actual sales tax collections in the county in the 12-month period ending July 1 of the year in which the aid is certified.

EFFECTIVE DATE. This section is effective for aids payable in calendar year 2010 and thereafter.

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Sec. 9. Minnesota Statutes 2008, section 477A.03, subdivision 2b, is amended to read:

Subd. 2b. Counties. ~~(a)~~ For aids payable in ~~2009~~ 2010 and thereafter, in addition to the total aid payable under section 477A.0124, subdivision 3, is $111,500,000 minus one-half of the total aid amount determined under section 477A.0124, subdivision 5, paragraph (b), subject to adjustment in subdivision 5. Each calendar year, 477A.0124, $500,000 ~~shall be retained by~~ is appropriated to the commissioner of revenue to make reimbursements to the commissioner of finance for payments made under section 611.27, $357,000 is appropriated to the commissioner of revenue to make reimbursements to the commissioner of finance for the preparation of local impact notes under section 3.987, and $7,000 is appropriated to the commissioner of revenue to reimburse the commissioner of education for the preparation of local impact notes for school districts under section 3.987. For calendar year 2004, the amount shall be in addition to the payments authorized under section 477A.0124, subdivision 1. For calendar year 2005 and subsequent years, the amount shall be deducted from the appropriation under this paragraph. The reimbursements shall be to defray the additional costs associated with court-ordered counsel under section 611.27. The commissioner of finance shall annually use at least $150,000 of the $357,000 appropriation to contract with the representative associations for counties, cities, towns, and school districts to establish a local impact network of political subdivisions for preparing local impact notes that provide information to the legislature as provided in section 270C.991, subdivision 7. Any ~~retained~~ appropriated amounts not used for reimbursement ~~in a year shall be included in the next distribution of county need aid that is certified to the county auditors for the purpose of property tax reduction for the next taxes payable year.~~ under this subdivision shall be returned to the general fund.

(b) For aids payable in 2009 and thereafter, the total aid under section 477A.0124, subdivision 4, is $116,132,923 minus one-half of the total aid amount determined under section 477A.0124, subdivision 5, paragraph (b), subject to adjustment in subdivision 5. The commissioner of finance shall bill the commissioner of revenue for the cost of preparation of local impact notes as required by section 3.987, not to exceed $207,000 in fiscal year 2004 and thereafter. The commissioner of education shall bill the commissioner of revenue for the cost of preparation of local impact notes for school districts as required by section 3.987, not to exceed $7,000 in fiscal year 2004 and thereafter. The commissioner of revenue shall deduct the amounts billed under this paragraph from the appropriation under this paragraph. The amounts deducted are appropriated to the commissioner of finance and the commissioner of education for the preparation of local impact notes.

EFFECTIVE DATE. This section is effective for aids payable in calendar year 2010 and thereafter.

Sec. 10. REPEALER.

Minnesota Statutes 2008, section 477A.0124, subdivisions 3, 4, and 5, are repealed.

EFFECTIVE DATE. This section is effective for aids payable in calendar year 2010 and thereafter.

ARTICLE 3

PROPERTY TAX REFORM, ACCOUNTABILITY, VALUE, AND EFFICIENCY PROVISIONS

Section 1. [6.90] COUNCIL ON LOCAL RESULTS AND INNOVATION.

Subdivision 1. Creation. The Council on Local Results and Innovation consists of 11 members, as follows:

(1) the state auditor;

(2) two persons who are not members of the legislature, appointed by the chair of the Property and Local Sales Tax Division of the house of representatives Taxes Committee;

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(3) two persons who are not members of the legislature, appointed by the designated lead minority member of the Property and Local Sales Tax Division of the house of representatives Taxes Committee;

(4) two persons who are not members of the legislature, appointed by the chair of the Taxes Division on Property Taxes of the senate Taxes Committee;

(5) two persons who are not members of the legislature, appointed by the designated lead minority member of the Taxes Division on Property Taxes of the senate Taxes Committee;

(6) one person who is not a member of the legislature, appointed by the Association of Minnesota Counties; and

(7) one person who is not a member of the legislature, appointed by the League of Minnesota Cities.

Each appointment under clauses (2) to (5) must include one person with expertise or interest in county government and one person with expertise or interest in city government. The appointing authorities must use their best efforts to ensure that a majority of council members have experience with local performance measurement systems. The membership of the council must include geographically balanced representation as well as representation balanced between large and small jurisdictions. The appointments under clauses (2) to (7) must be made within two months of the date of enactment.

Appointees to the council under clauses (2) to (5) serve terms of four years, except that one of each of the initial appointments under clauses (2) to (5) shall serve a term of two years; each appointing agent must designate which appointee is serving the two-year term. Subsequent appointments for members appointed under clauses (2) to (5) must be made by the council, including appointments to replace any appointees who might resign from the council prior to completion of their term. Appointees under clauses (2) to (5) are not eligible to vote on appointing their successor, nor on the successors of other appointees whose terms are expiring contemporaneously. In making appointments, the council shall make all possible efforts to reflect the geographical distribution and meet the qualifications of appointees required of the initial appointees. Subsequent appointments for members appointed under clauses (6) and (7) must be made by the original appointing authority. Appointees to the council under clauses (2) to (7) may serve no more than two consecutive terms.

Subd. 2. Duties. (a) By February 15, 2010, the council shall develop a standard set of approximately ten performance measures for counties and ten performance measures for cities that will aid residents, taxpayers, and state and local elected officials in determining the efficacy of counties and cities in providing services, and measure residents' opinions of those services. In developing its measures, the council must solicit input from private citizens. Counties and cities that elect to participate in the standard measures system shall report their results to the state auditor under section 6.91, who shall compile the results and make them available to all interested parties by publishing them on the auditor's Web site and report them to the legislative tax committees. Each year after the initial designation of performance measures, the council shall evaluate the usefulness of the standard set of performance measures and may revise the set by adding or removing measures as it deems appropriate.

(b) By February 15, 2011, the council shall develop minimum standards for comprehensive performance measurement systems, which may vary by size and type of governing jurisdiction.

(c) In addition to its specific duties under paragraphs (a) and (b), the council shall generally promote the use of performance measurement for governmental entities across the state and shall serve as a resource for all governmental entities seeking to implement a system of local performance measurement. The council may highlight and promote systems that are innovative, or are ones that it deems to be best practices of local performance measurement systems across the state and nation. The council should give preference in its recommendations to systems that are results-oriented. The council may, with the cooperation of the state auditor, establish and foster a collaborative network of practitioners of local performance measurement systems. The council may support the Association of Minnesota Counties and the League of Minnesota Cities to seek and receive private funding to provide expert technical assistance to local governments for the purposes of replicating best practices.

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Subd. 3. Reports. (a) The council shall report its initial set of standard performance measures to the Property and Local Sales Tax Division of the house of representatives Taxes Committee and the Taxes Division on Property Taxes of the senate Taxes Committee by February 28, 2010.

(b) By February 1 of each subsequent year, the council shall report to the committees with jurisdiction over taxes in the house of representatives and the senate on participation in and results of the performance measurement system, along with any revisions in the standard set of performance measures for the upcoming year. These reports may be made by the state auditor in lieu of the council if agreed to by the auditor and the council.

Subd. 4. Operation of council. (a) The state auditor shall convene the initial meeting of the council.

(b) The chair of the council shall be elected by the members. Once elected, a chair shall serve a term of two years.

(d) Council members shall share and rotate responsibilities for administrative support of the council.

(e) Chapter 13D does not apply to meetings of the council. Meetings of the council must be open to the public and the council must provide notice of a meeting on the state auditor's Web site at least seven days before the meeting. A meeting of the council occurs when a quorum is present.

(f) The council must meet at least two times prior to the initial release of the standard set of measurements. After the initial set has been developed, the council must meet a minimum of once per year.

Subd. 5. Termination. The council expires on January 1, 2019.

EFFECTIVE DATE. This section is effective the day following final enactment.

Sec. 2. [6.91] LOCAL PERFORMANCE MEASUREMENT AND REPORTING.

Subdivision 1. Reports of local performance measures. (a) A county or city that elects to participate in the standard measures program must report its results to its citizens annually through publication, direct mailing, posting on the jurisdiction's Web site, or through a presentation at the jurisdiction's truth-in-taxation hearing under section 275.065.

(b) Each year, jurisdictions participating in the local performance measurement and improvement program must file a report with the state auditor by July 1, in a form prescribed by the auditor. All reports must include a declaration that the jurisdiction has complied with, or will have complied with by the end of the year, the requirement in paragraph (a). For jurisdictions participating in the standard measures program, the report shall consist of the jurisdiction's results for the standard set of performance measures under section 6.90, subdivision 2, paragraph (a). In 2011, jurisdictions participating in the comprehensive performance measurement program must submit a resolution approved by its local governing body indicating that it either has implemented or is in the process of implementing a local performance measurement system that meets the minimum standards specified by the council under section 6.90, subdivision 2, paragraph (b). In 2012 and thereafter, jurisdictions participating in the comprehensive performance measurement program must submit a statement approved by its local governing body affirming that it has implemented a local performance measurement system that meets the minimum standards specified by the council under section 6.90, subdivision 2, paragraph (b).

Subd. 2. Benefits of participation. (a) A county or city that elects to participate in the standard measures program for 2010 is: (1) eligible for per capita reimbursement of $0.25 per capita in 2011, but not to exceed $25,000 for any government entity; (2) exempt from levy limits under sections 275.70 to 275.74 for taxes payable in 2011, if levy limits are in effect; and (3) exempt from the truth-in-taxation public hearing requirement under section 275.065, subdivision 6, for taxes payable in 2011, if the hearing requirement is in effect.

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(b) Any county or city that elects to participate in the standard measures program for 2011 is eligible for per capita reimbursement of $0.25 per capita in 2012, but not to exceed $25,000 for any government entity. Any jurisdiction participating in the comprehensive performance measurement program is exempt from levy limits under sections 275.70 to 275.74 for taxes payable in 2012 if levy limits are in effect, and is exempt from the truth-in-taxation public hearing requirement under section 275.065, subdivision 6, for taxes payable in 2012, if the hearing requirement is in effect.

(c) Any county or city that elects to participate in the standard measures program for 2012 or any year thereafter is eligible for per capita reimbursement of $0.25 per capita in the following year, but not to exceed $25,000 for any government entity. Any jurisdiction participating in the comprehensive performance measurement program for 2012 or any year thereafter is exempt from levy limits under sections 275.70 to 275.74 for taxes payable in the following year, if levy limits are in effect, and is exempt from the truth-in-taxation public hearing requirement under section 275.065, subdivision 6, for taxes payable in the following year, if the hearing requirement is in effect.

Subd. 3. Certification of participation. (a) The state auditor shall certify to the commissioner of revenue by August 1 of each year the counties and cities that are participating in the standard measures program and the comprehensive performance measurement program.

(b) The commissioner of revenue shall make per capita aid payments under this section on the second payment date specified in section 477A.015, in the same year that the measurements were reported.

(c) The commissioner of revenue shall notify each county and city that is entitled to exemption from levy limits by August 10 of each levy year.

Subd. 4. Appropriation. (a) The amount necessary to fund obligations to counties under subdivision 2 is annually appropriated from the general fund to the commissioner of revenue.

(b) The amount necessary to fund obligations to cities under subdivision 2 is annually appropriated from the general fund to the commissioner of revenue.

(c) The sum of $6,000 in fiscal year 2010 and $2,000 in each fiscal year thereafter is annually appropriated from the general fund to the state auditor to carry out the auditor's responsibilities under sections 6.90 to 6.91.

EFFECTIVE DATE. This section is effective December 31, 2009.

Sec. 3. Minnesota Statutes 2008, section 134.34, subdivision 1, is amended to read:

Subdivision 1. Local support levels. (a) A regional library basic system support grant shall be made to any regional public library system where there are at least three participating counties and where each participating city and county is providing for public library service support the lesser of ~~(a)~~ (1) an amount equivalent to .82 percent of the average of the adjusted net tax capacity of the taxable property of that city or county, as determined by the commissioner of revenue for the second, third, and fourth year preceding that calendar year ~~in 1991 and later years~~ or ~~(b)~~ (2) a per capita amount calculated under the provisions of this subdivision. The per capita amount is established for calendar year 1993 as $7.62. In succeeding calendar years, the per capita amount shall be increased by a percentage equal to one-half of the percentage by which the total state adjusted net tax capacity of property as determined by the commissioner of revenue for the second year preceding that calendar year increases over that total adjusted net tax capacity for the third year preceding that calendar year.

(b) The minimum level of support specified under this subdivision or subdivision 4 shall be certified annually to the participating cities and counties by the Department of Education. If a city or county chooses to reduce its local support in accordance with subdivision 4, paragraph (b) or (c), it shall notify its regional public library system. The regional public library system shall notify the Department of Education that a revised certification is required. The revised minimum level of support shall be certified to the city or county by the Department of Education.

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(c) A city which is a part of a regional public library system shall not be required to provide this level of support if the property of that city is already taxable by the county for the support of that regional public library system. In no event shall the Department of Education require any city or county to provide a higher level of support than the level of support specified in this section in order for a system to qualify for a regional library basic system support grant. This section shall not be construed to prohibit a city or county from providing a higher level of support for public libraries than the level of support specified in this section.

EFFECTIVE DATE. This section is effective for calendar years 2009 and thereafter, except that the change in paragraph (a) is effective for calendar years 2011 and thereafter.

Sec. 4. Minnesota Statutes 2008, section 134.34, subdivision 4, is amended to read:

Subd. 4. Limitation. (a) A regional library basic system support grant shall not be made to a regional public library system for a participating city or county which decreases the dollar amount provided for support for operating purposes of public library service below the amount provided by it for the second or third preceding year, whichever is less. For purposes of this subdivision and subdivision 1, any funds provided under section 473.757, subdivision 2, for extending library hours of operation shall not be considered amounts provided by a city or county for support for operating purposes of public library service. This subdivision shall not apply to participating cities or counties where the adjusted net tax capacity of that city or county has decreased, if the dollar amount of the reduction in support is not greater than the dollar amount by which support would be decreased if the reduction in support were made in direct proportion to the decrease in adjusted net tax capacity.

(b) In addition, in any calendar year in which a city's or county's aid under sections 477A.011 to 477A.014, or credits under section 273.1384 are reduced after the city or county has certified its levy payable in that year, it may reduce its local support by the lesser of (1) ten percent, or (2) a percent equal to the percent the aid or credit reduction is of the city or county's revenue base as defined in paragraph (e), based on aids certified for the current calendar year. For calendar year 2009 only, the reduction under this paragraph shall be based on 2008 aid and credit reductions under the December 2008 unallotment, as well as any aid and credit reductions in calendar year 2009. For calendar year 2009 only, the commissioner of revenue shall calculate the reductions under this paragraph and certify them to the commissioner of education within 15 days of this provision becoming law.

(c) In addition, in any payable year in which the total amounts certified for city or county aids under sections 477A.011 to 477A.014 are less than the total amounts paid under those sections in the previous calendar year, a city or county may reduce its local support by the lesser of (1) ten percent, or (2) a percentage equal to the ratio of (i) the difference between the sum of the aid it was paid under sections 477A.011 to 477A.014 and the credit reimbursements it received under section 273.1384 in the previous calendar year and the aid it is certified to be paid in the current calendar year under sections 477A.011 to 477A.014 and the credits estimated to be paid under section 273.1384, to (ii) its revenue base for the previous year, based on aids actually paid in the previous calendar year. The commissioner of revenue shall calculate the percent aid cut for each county and city under this paragraph and certify the percentage cuts to the commissioner of education by August 1 of the year prior to the year in which the reduced aids and credits are to be paid. The percentage of reduction related to reductions to credit reimbursements under section 273.1384 shall be based on the best estimation available as of July 30.

(d) Notwithstanding paragraph (a), (b), or (c), no city or county shall reduce its support for public libraries below the minimum level specified in subdivision 1. No county may make a reduction under paragraph (b) or (c) in a year in which it is receiving local sales tax revenue under section 297A.994.

(e) For purposes of this subdivision, "revenue base" means the sum of:

(1) its levy for taxes payable in the current calendar year, including the levy on the fiscal disparities distribution under section 276A.06, subdivision 3, paragraph (a), or 473F.08, subdivision 3, paragraph (a);

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(2) its aid under sections 477A.011 to 477A.014 in the current calendar year; and

(3) its taconite aid in the current calendar year under sections 298.28 and 298.282.

(f) The sum of $21,000 in fiscal year 2010 and each fiscal year thereafter is appropriated from the general fund to the commissioner of education to carry out the additional responsibilities under this section.

EFFECTIVE DATE. This section is effective for support in calendar year 2009 and thereafter for library grants paid in fiscal year 2010 and thereafter, except that the changes in paragraph (a) are effective for support in calendar year 2010 and thereafter.

Sec. 5. [256E.40] EQUITABLE FUNDING HEALTH AND HUMAN SERVICES REFORM.

Subdivision 1. Reform. The goals in reforming local funding of the health and human services delivery system is to:

(1) sustain the funding of county provided services;

(2) maintain Minnesota's ability to obtain federal funds to provide these services;

(3) equalize and make transparent the demands that providing these services makes on the property tax system; and

(4) encouraging local innovation and pilot programs using local revenues without the risk of long-term obligations.

Subd. 2. Consolidated program funding. (a) Each county is required to dedicate a portion of local property tax, determined under this section, to fund the local share of all health and human services programs and services required by state law. The commissioner of revenue shall provide estimates to the commissioner of human services of the expected revenue from this dedication in each county. The commissioner of human services shall devise a mechanism for collecting or allocating the sum of these dedications between programs as necessary to meet federal match requirements. Any contribution in excess of the amount needed to meet federal match requirements shall be spent on the various programs at the discretion of the county.

(b) In 2012, the required dedication of a county's portion of its local property tax is equal to a uniform percentage of its adjusted net tax capacity for the most recently available year, limited as provided in paragraph (d). The commissioner of revenue shall determine the percentage so that the total amount dedicated in all counties in 2012, after the limits in paragraph (d), is equal to the total estimated amount of local source revenues that all counties were required to pay for these programs and services in calendar year 2011. The commissioner of human services shall provide the commissioner of revenue with the information necessary to make this calculation by July 30, 2011.

(c) In 2013 and future years, the required dedication of a county's portion of its local property tax is equal to a percentage of its adjusted net tax capacity adjusted as required in paragraph (d). The percentage is the same as the percentage used in the previous year.

(d) In calendar year 2012, a county's revenue dedication under paragraph (b) cannot be greater than the sum of (1) its estimated amount of required local source revenues for these programs and services in calendar year 2011, plus (2) one percent of its calendar year 2011 property tax levy. In calendar year 2013 and future years, a county's revenue dedication under paragraph (c) cannot be greater than the sum of (1) its revenue dedicated under this subdivision in the previous year, multiplied by one plus its percentage increase in its adjusted net tax capacity for the most recently available year, plus (2) one percent of its property tax levy from the previous year.

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Subd. 3. County discretionary spending. Nothing in this section shall be construed as prohibiting counties from spending local source revenues on health and human services in excess of the amount calculated under subdivision 2 but a county may not be required to continue spending local source revenue at a higher level than the amount determined in subdivision 2.

EFFECTIVE DATE. This section is effective for property tax levies payable in 2012 and thereafter and program spending beginning January 1, 2012.

Sec. 6. [270C.991] PROPERTY TAX SYSTEM BENCHMARKS AND CRITICAL INDICATORS.

Subdivision 1. Purpose. State policy makers should be provided with the tools to create a more accountable and efficient property tax system. This section provides the principles and available tools necessary to work toward achieving that goal.

Subd. 2. Property tax principles. To better evaluate the various property tax proposals that come before the legislature, the following basic property tax principles should be taken into consideration. The property taxes proposed should be:

(1) transparent and understandable;

(2) simple and efficient;

(3) equitable;

(4) stable and predictable;

(5) compliance and accountability;

(6) competitive, both nationally and globally; and

(7) responsive to economic conditions.

Subd. 3. Major indicators. There are many different types of indicators available to legislators to evaluate tax legislation. Indicators are useful to have available as benchmarks when legislators are contemplating changes. Each tool has its own limitation, and no one tool is perfect or should be used independently. Some of the tools measure the global characteristics of the entire tax system, while others are only a measure of the property tax impacts and its administration. The following is a list of the available major indicators:

(1) property tax principles scale, the components of which are listed in subdivision 2, as they relate to the various features of the property tax system;

(2) price of government report, as required under section 16A.102;

(3) tax incidence report, as required under section 270C.13;

(4) tax expenditure budget and report, as required under section 270C.11;

(5) state tax rankings;

(6) property tax levy plus aid data, and market value and net tax capacity data, by taxing district for current and past years;

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(7) effective tax rate (tax as a percent of market value) and the equalized effective tax rate (effective tax rate adjusted for assessment differences);

(8) assessment sales ratio study, as required under section 127A.48;

(9) "Voss" database, which matches homeowner property taxes and household income;

(10) revenue estimates under section 270C.11, subdivision 5, and state fiscal notes under section 477A.03, subdivision 2b; and

(11) local impact notes, with improved local analysis as described in subdivision 7.

Subd. 4. Property tax working group. (a) A property tax working group is established as provided in this subdivision. The goals of the working group are:

(1) to investigate ways to simplify the property tax system and make advisory recommendations on ways to make the system more understandable;

(2) to reexamine the property tax calendar to determine what changes could be made to shorten the two-year cycle from assessment through property tax collection; and

(3) to determine the cost versus the benefits of the various property tax components, including property classifications, credits, aids, exclusions, exemptions, and abatements, and to suggest ways to achieve some of the goals in simpler and more cost-efficient ways.

(b) The 12-member working group shall consist of the following members:

(1) two state representatives, both appointed by the chair of the house of representatives Taxes Committee, one from the majority party and one from the minority party;

(2) two senators, both appointed by the chair of the senate Taxes Committee, one from the majority party and one from the minority party;

(3) the commissioner of revenue, or designee;

(4) one person, appointed by the Association of Minnesota Counties;

(5) one person, appointed by the League of Minnesota Cities;

(6) one person, appointed by the Minnesota Association of Townships;

(7) one person, appointed by the Minnesota Chamber of Commerce;

(8) one person, appointed by the Minnesota Association of Assessing Officers; and

(9) two homeowners, one who is under 65 years of age, and one who is 65 years of age or older, both appointed by the commissioner of revenue.

The commissioner of revenue shall chair the initial meeting, and the working group shall elect a chair at that initial meeting. The working group will meet at the call of the chair. Members of the working group shall serve without compensation. The commissioner of revenue must provide administrative support to the working group.

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Chapter 13D does not apply to meetings of the working group. Meetings of the working group must be open to the public and the working group must provide notice of a meeting to potentially interested persons at least seven days before the meeting. A meeting of the council occurs when a quorum is present.

(c) The working group shall make its advisory recommendations to the chairs of the house of representatives and senate Taxes Committees on or before February 1, 2011, at which time the working group shall be finished and this subdivision expires. The advisory recommendations should be reviewed by the Taxes Committee under subdivision 5.

Subd. 5. Taxes Committee review and resolution. On or before March 1, 2011, and every two years thereafter, the house of representatives and senate Taxes Committees must review the major indicators as contained in subdivision 3, and ascertain the accountability and efficiency of the property tax system. The house of representatives and senate Taxes Committees shall prepare a resolution on targets and benchmarks for use during the current biennium.

Subd. 6. Department of Revenue; revenue estimates. As provided under section 270C.11, subdivision 5, the Department of Revenue is required to prepare an estimate of the effect on the state's tax revenues which result from the passage of a legislative bill establishing, extending, or restricting a tax expenditure. Beginning with the 2010 legislative session, those revenue estimates must also identify how the property tax principles contained in subdivision 2 apply to the proposed tax changes. The commissioner of revenue shall develop a scale for measuring the appropriate principles for each proposed change. The department shall quantify the effects, if possible, or at a minimum, shall identify the relevant factors so that legislators are aware of possible outcomes, including administrative difficulties and cost. The interaction of property tax shifting should be identified and quantified to the degree possible.

Subd. 7. Local impact notes. Local impact notes are statements that provide information about changes in local government responsibility, administration, and cost due to changes in state law. The local impact note process seeks the participation of political subdivisions to gather information as needed by the legislature. The local impact network of political subdivisions shall consist of representation from associations from Minnesota counties, cities, towns, and school districts, and other members as needed. They shall, among other things, work with the legislature and the commissioner of finance to analyze:

(1) changes in tax revenues for local governments;

(2) changes in expenditures for local governments, including program and administration costs; and

(3) incidences of tax shifting, including identifying the target audience (taxpayers who will benefit from the tax shift) and the impact audience (taxpayers who will bear the burden of the tax shift).

For tax bills the local impact network of political subdivisions shall rate the impact on Minnesota's tax system using the tax principles contained in subdivision 2.

Some of the cost for preparing this information shall be distributed to the local impact network as provided under section 477A.03, subdivision 2b, paragraph (b).

Subd. 8. Appropriation. The sum of $30,000 in fiscal year 2010 and $25,000 in each fiscal year thereafter is appropriated from the general fund to the commissioner of revenue to carry out the commissioner's added responsibilities under subdivision 6.

EFFECTIVE DATE. This section is effective the day following final enactment.

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Sec. 7. Minnesota Statutes 2008, section 273.1384, is amended by adding a subdivision to read:

Subd. 3a. Reimbursement reductions. (a) Each year, each county's reimbursement under this section shall be reduced by a uniform percentage so that the total reduction in reimbursements equals the sum of: (i) the amount appropriated under section 6.91, subdivision 4, paragraph (a); (ii) one-half of the total amount appropriated under section 6.91, subdivision 4, paragraph (c); and (iii) one-half of the total amount appropriated under section 270C.991, subdivision 8.

(b) Each year, each city's reimbursement under this section shall be reduced by a uniform percentage so that the total reduction in reimbursements equals the sum of: (i) the amount appropriated under section 6.91, subdivision 4, paragraph (b); (ii) one-half of the total amount appropriated under section 6.91, subdivision 4, paragraph (c); and (iii) one-half of the total amount appropriated under section 270C.991, subdivision 8.

(c) Each year, each school district's reimbursement under this section shall be reduced by a uniform percentage so that the total reduction in reimbursements equals the amount appropriated under section 134.34, subdivision 4.

EFFECTIVE DATE. This section is effective for aids payable in 2009 and thereafter.

Sec. 8. [275.77] TEMPORARY SUSPENSION OF NEW OR INCREASED MAINTENANCE OF EFFORT AND MATCHING FUND REQUIREMENTS.

Subdivision 1. Definitions. For purposes of this section, the following terms have the meanings given them:

(1) "maintenance of effort" means a requirement imposed on a political subdivision by state law to continue providing funding of a service or program at a given or increasing level based on its funding of the service and program in prior years;

(2) "matching fund requirement" means a requirement imposed on a political subdivision by state law to fund a portion of a program or service but does not mean required nonstate contributions to state capital funded projects or other nonstate contributions required in order to receive a grant or loan the political subdivision has requested or applied for; and

(3) "political subdivision" means a county, town, or statutory or home rule charter city.

Subd. 2. Temporary suspension. (a) Notwithstanding any other provision of law to the contrary, any new maintenance of effort or matching fund requirement enacted after January 1, 2009, that will require spending by a political subdivision shall not be effective until January 1, 2012.

(b) Notwithstanding any other provision of law to the contrary, any changes to existing maintenance of effort or matching fund requirement enacted after January 1, 2009, that will require new spending by a political subdivision shall not be effective until January 1, 2012.

(c) The suspension of changes to existing maintenance of effort and matching fund requirements under paragraph (b) does not apply if the spending is required by federal law and there would be a cost to the state budget without the change.

EFFECTIVE DATE. This section is effective the day following final enactment.

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Sec. 9. REPEALER.

Minnesota Statutes 2008, sections 245.4835; 245.4932, subdivision 1; 246.54, subdivisions 1 and 2; 252.275, subdivision 3; 253B.045, subdivision 2; 254B.04, subdivision 1; 256.82, subdivision 2; 256.976; 256B.05, subdivision 1; 256B.0625, subdivisions 20 and 20a; 256B.0945, subdivisions 1, 2, 3, and 4; 256B.19, subdivision 1; 256D.03; 256D.053, subdivision 3; 256E.12, subdivision 3; 256F.10, subdivision 7; 256F.13, subdivision 1; 256I.04; 256I.08; 256J.09, subdivisions 1, 2, and 3; and 256L.15, subdivision 4, are repealed.

EFFECTIVE DATE. This section is effective January 1, 2012.

ARTICLE 4

LOCAL GOVERNMENT FLEXIBILITY AND MANDATE REDUCTION PROVISIONS

Section 1. Minnesota Statutes 2008, section 3.842, subdivision 4a, is amended to read:

Subd. 4a. Objections to rules. (a) For purposes of this subdivision, "committee" means the house of representatives policy committee or senate policy committee with primary jurisdiction over state governmental operations. The commission, the Legislative Commission on Mandate Reform, or a committee may object to a rule as provided in this subdivision. If the commission, the Legislative Commission on Mandate Reform, or a committee objects to all or some portion of a rule because the commission, the Legislative Commission on Mandate Reform, or a committee considers it to be beyond the procedural or substantive authority delegated to the agency, including a proposed rule submitted under section 14.15, subdivision 4, or 14.26, subdivision 3, paragraph (c), the commission, the Legislative Commission on Mandate Reform, or a committee may file that objection in the Office of the Secretary of State. The filed objection must contain a concise statement of the commission's, the Legislative Commission on Mandate Reform, or a committee's reasons for its action. An objection to a proposed rule submitted by the commission, the Legislative Commission on Mandate Reform, or a committee under section 14.15, subdivision 4, or 14.26, subdivision 3, paragraph (c), may not be filed before the rule is adopted.

(b) The secretary of state shall affix to each objection a certification of the date and time of its filing and as soon after the objection is filed as practicable shall transmit a certified copy of it to the agency issuing the rule in question and to the revisor of statutes. The secretary of state shall also maintain a permanent register open to public inspection of all objections by the commission, the Legislative Commission on Mandate Reform, or a committee.

(c) The commission, the Legislative Commission on Mandate Reform, or a committee shall publish and index an objection filed under this section in the next issue of the State Register. The revisor of statutes shall indicate the existence of the objection adjacent to the rule in question when that rule is published in Minnesota Rules.

(d) Within 14 days after the filing of an objection by the commission, the Legislative Commission on Mandate Reform, or a committee to a rule, the issuing agency shall respond in writing to the objecting entity. After receipt of the response, the commission, the Legislative Commission on Mandate Reform, or a committee may withdraw or modify its objection.

(e) After the filing of an objection by the commission, the Legislative Commission on Mandate Reform, or a committee that is not subsequently withdrawn, the burden is upon the agency in any proceeding for judicial review or for enforcement of the rule to establish that the whole or portion of the rule objected to is valid.

(f) The failure of the commission, the Legislative Commission on Mandate Reform, or a committee to object to a rule is not an implied legislative authorization of its validity.

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(g) In accordance with sections 14.44 and 14.45, the commission, the Legislative Commission on Mandate Reform, or a committee may petition for a declaratory judgment to determine the validity of a rule objected to by the commission, the Legislative Commission on Mandate Reform, or a committee. The action must be started within two years after an objection is filed in the Office of the Secretary of State.

(h) The commission, the Legislative Commission on Mandate Reform, or a committee may intervene in litigation arising from agency action. For purposes of this paragraph, agency action means the whole or part of a rule, or the failure to issue a rule.

Sec. 2. Minnesota Statutes 2008, section 3.843, is amended to read:

3.843 PUBLIC HEARINGS BY STATE AGENCIES.

By a vote of a majority of its members, the commission or the Legislative Commission on Mandate Reform may request any agency issuing rules to hold a public hearing in respect to recommendations made under section 3.842, including recommendations made by the commission or the Legislative Commission on Mandate Reform to promote adequate and proper rules by that agency and recommendations contained in the commission's biennial report. The agency shall give notice as provided in section 14.14, subdivision 1, of a hearing under this section, to be conducted in accordance with sections 14.05 to 14.28. The hearing must be held not more than 60 days after receipt of the request or within any other longer time period specified by the commission or the Legislative Commission on Mandate Reform in the request.

Sec. 3. [3.99] LEGISLATIVE COMMISSION ON MANDATE REFORM; ESTABLISHED.

Subdivision 1. Established. The Legislative Commission on Mandate Reform is established as provided in this section, with the powers and duties given it in sections 3.842, subdivision 4a; 3.843; and 3.99 to 3.992.

Subd. 2. Membership. The commission consists of four senators appointed by the senate Subcommittee on Committees of the Committee on Rules and Administration, three senators appointed by the senate minority leader, four state representatives appointed by the speaker of the house, and three state representatives appointed by the house of representatives minority leader. The appointing authorities must ensure balanced geographic representation. Each appointing authority must make appointments as soon as possible.

Subd. 3. Terms; vacancies. Members of the commission serve for a two-year term beginning upon appointment and expiring upon appointment of a successor after the opening of the next regular session of the legislature in the odd-numbered year. A vacancy in the membership of the commission must be filled for the unexpired term in a manner that will preserve the representation established by this section.

Subd. 4. Chair. The commission must meet as soon as practicable after members are appointed in each odd-numbered year to elect its chair and other officers as it may determine necessary. A chair serves a two-year term, expiring in the odd-numbered year after a successor is elected. The chair must alternate biennially between the senate and the house of representatives.

Subd. 5. Compensation. Members may be reimbursed for their reasonable expenses as members of the legislature.

Subd. 6. Staff. The Legislative Coordinating Commission must provide administrative support to the commission, including secretarial services, record keeping, and grants administration.

Subd. 7. Meetings; procedures; tie votes. The first meeting of the biennium must be convened by the member designated by the senate majority leader if a senator is to chair the commission for the biennium, or by the speaker of the house if a state representative is to chair the commission for the biennium. The commission meets at the call of the chair. Commission action requires a positive vote of at least four house of representatives members and at least four senate members.

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Subd. 8. Funding. The Legislative Coordinating Commission shall annually bill the commissioner of revenue for costs incurred by the Legislative Coordinating Commission in providing administrative support and to make the grants authorized by the Legislative Commission on Mandate Reform, in an amount not to exceed $100,000 per year. The commissioner of revenue shall deduct one-half of the certified costs from payments to counties under section 477A.03, subdivision 2b, and one-half of the certified costs from payments to cities under section 477A.03, subdivision 2a.

Sec. 4. [3.991] LEGISLATIVE COMMISSION ON MANDATE REFORM; REVIEW AND RECOMMENDATIONS TO LEGISLATURE.

The Legislative Commission on Mandate Reform must solicit from local governments information on state laws and rules that local governments consider to be problematic mandates. The commission must review the mandates identified and consider why each mandate was enacted or adopted, whether the reason for it still exists, the costs to local governments to comply with the mandate, and whether repeal or modification of the mandate is appropriate. Before the beginning of each legislative session, the commission must prepare for introduction a bill to repeal or modify those laws or rules the commission determines are unnecessary.

Sec. 5. [3.992] LEGISLATIVE COMMISSION ON MANDATE REFORM; GRANTS.

Upon recommendation of the Legislative Commission on Mandate Reform, the commissioner of revenue may make grants to the League of Minnesota Cities, the Association of Minnesota Counties, Minnesota Association of Townships, other organizations representing local governments, the Board of Regents of the University of Minnesota, the Board of Trustees of Minnesota State Colleges and Universities, or other accredited postsecondary institutions to research and make recommendations on mandate reform. The commissioner must specify the work to be done, the completion date, and the maximum grant amount, and may specify any other conditions the commissioner deems necessary or useful.

Sec. 6. [3.993] EXPIRATION.

Sections 3.99 to 3.992 expire June 30, 2013.

Sec. 7. [14.128] EFFECTIVE DATE FOR RULES REQUIRING LOCAL IMPLEMENTATION.

Subdivision 1. Determination. An agency must determine if a local government will be required to adopt or amend an ordinance or other regulation to comply with a proposed agency rule. An agency must make this determination before the close of the hearing record or before the agency submits the record to the administrative law judge if there is no hearing. The administrative law judge must review and approve or disapprove the agency's determination. "Local government" means a town, county, or home rule charter or statutory city.

Subd. 2. Effective dates. If the agency determines that the proposed rule requires adoption or amendment of an ordinance or other regulation, or if the administrative law judge disapproves the agency's determination that the rule does not have this effect, the rule may not become effective until:

(1) the next July 1 or January 1 after notice of final adoption is published in the State Register; or

(2) a later date provided by law or specified in the proposed rule.

Subd. 3. Exceptions. Subdivision 2 does not apply:

(1) to a rule adopted under section 14.388, 14.389, or 14.3895, or under another law specifying that the rulemaking procedures of this chapter do not apply;

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(2) if the administrative law judge approves an agency's determination that the rule has been proposed pursuant to a specific federal statutory or regulatory mandate that requires the rule to take effect before the date specified in subdivision 2; or

(3) if the governor waives application of subdivision 2.

Sec. 8. Minnesota Statutes 2008, section 16C.28, subdivision 1a, is amended to read:

Subd. 1a. Establishment and purpose. (a) The state recognizes the importance of the inclusion of a best value contracting system for construction as an alternative to the current low-bid system of procurement. In order to accomplish that goal, state and local governmental entities shall be able to choose the best value system in different phases.

(b) "Best value" means the procurement method defined in section 16C.02, subdivision 4a.

(1) state agencies;

(2) counties;

(3) cities; and

(4) school districts with the highest 25 percent enrollment of students in the state.

Phase I begins on July 1, 2007.

(d) The following entities are eligible to participate in phase II:

(1) those entities included in phase I; and

(2) school districts with the highest 50 percent enrollment of students in the state.

Phase II begins two years from July 1, 2007.

(e) The following entities are eligible to participate in phase III:

(1) all entities included in phases I and II; and

(2) all other townships, school districts, and political subdivisions in the state.

Phase III begins three years from July 1, 2007.

(f) The commissioner or any agency for which competitive bids or proposals are required may not use best value contracting as defined in section 16C.02, subdivision 4a, for more than one project annually, or 20 percent of its projects, whichever is greater, in each of the first three fiscal years in which best value construction contracting is used.

Sec. 9. Minnesota Statutes 2008, section 306.243, is amended by adding a subdivision to read:

Subd. 6. Abandonment; end of operation as cemetery. A county that has accepted responsibility for an abandoned cemetery may prohibit further burials in the abandoned cemetery, and may cease all acceptance of responsibility for new burials.

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Sec. 10. Minnesota Statutes 2008, section 344.18, is amended to read:

344.18 COMPENSATION OF VIEWERS.

Fence viewers must be paid for their services by the person employing them at the rate of $15 each for each day's employment. $60 must be deposited with the town or city treasurer before the service is performed. Upon completion of the service, any of the $60 not spent to compensate the fence viewers must be returned to the depositor. The town board may by resolution require the person employing the fence viewers to post a bond or other security acceptable to the board for the total estimated costs before the viewing takes place. The total estimated costs may include the cost of professional and other services, hearing costs, administrative costs, recording costs, and other costs and expenses which the town may incur in connection with the viewing.

Sec. 11. Minnesota Statutes 2008, section 365.28, is amended to read:

365.28 PUBLIC BURIAL GROUND IS TOWN'S AFTER TEN YEARS.

A tract of land in a town becomes town property after it has been used as a public burial ground for ten years if the tract is not owned by a cemetery association. The town board shall control the burial ground as it controls other town cemeteries. A town that has assumed ownership of a cemetery may prohibit further burials in it.

Sec. 12. Minnesota Statutes 2008, section 429.041, subdivision 1, is amended to read:

Subdivision 1. Plans and specifications, advertisement for bids. When the council determines to make any improvement, it shall let the contract for all or part of the work, or order all or part of the work done by day labor or otherwise as authorized by subdivision 2, no later than one year after the adoption of the resolution ordering such improvement, unless a different time limit is specifically stated in the resolution ordering the improvement. The council shall cause plans and specifications of the improvement to be made, or if previously made, to be modified, if necessary, and to be approved and filed with the clerk, and if the estimated cost exceeds ~~$50,000~~ the amount in section 471.345, subdivision 3, shall advertise for bids for the improvement in the newspaper and such other papers and for such length of time as it may deem advisable. If the estimated cost exceeds ~~$100,000~~ twice the amount in section 471.345, subdivision 3, publication shall be made no less than three weeks before the last day for submission of bids once in the newspaper and at least once in either a newspaper published in a city of the first class or a trade paper. To be eligible as such a trade paper, a publication shall have all the qualifications of a legal newspaper except that instead of the requirement that it shall contain general and local news, such trade paper shall contain building and construction news of interest to contractors in this state, among whom it shall have a general circulation. The advertisement shall specify the work to be done, shall state the time when the bids will be publicly opened for consideration by the council, which shall be not less than ten days after the first publication of the advertisement when the estimated cost is less than ~~$100,000~~ twice the amount in section 471.345, subdivision 3, and not less than three weeks after such publication in other cases, and shall state that no bids will be considered unless sealed and filed with the clerk and accompanied by a cash deposit, cashier's check, bid bond, or certified check payable to the clerk, for such percentage of the amount of the bid as the council may specify. In providing for the advertisement for bids the council may direct that the bids shall be opened publicly by two or more designated officers or agents of the municipality and tabulated in advance of the meeting at which they are to be considered by the council. Nothing herein shall prevent the council from advertising separately for various portions of the work involved in an improvement, or from itself, supplying by such means as may be otherwise authorized by law, all or any part of the materials, supplies, or equipment to be used in the improvement or from combining two or more improvements in a single set of plans and specifications or a single contract.

Sec. 13. Minnesota Statutes 2008, section 429.041, subdivision 2, is amended to read:

Subd. 2. Contracts; day labor. In contracting for an improvement, the council shall require the execution of one or more written contracts and bonds, conditioned as required by law. The council shall award the contract to the lowest responsible bidder or it may reject all bids. If any bidder to whom a contract is awarded fails to enter promptly into a written contract and to furnish the required bond, the defaulting bidder shall forfeit to the

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municipality the amount of the defaulter's cash deposit, cashier's check, bid bond, or certified check, and the council may thereupon award the contract to the next lowest responsible bidder. When it appears to the council that the cost of the entire work projected will be less than ~~$50,000~~ the amount in section 471.345, subdivision 3, or whenever no bid is submitted after proper advertisement or the only bids submitted are higher than the engineer's estimate, the council may advertise for new bids or, without advertising for bids, directly purchase the materials for the work and do it by the employment of day labor or in any other manner the council considers proper. The council may have the work supervised by the city engineer or other qualified person but shall have the work supervised by a registered engineer if done by day labor and it appears to the council that the entire cost of all work and materials for the improvement will be more than ~~$25,000~~ the lowest amount in section 471.345, subdivision 4. In case of improper construction or unreasonable delay in the prosecution of the work by the contractor, the council may order and cause the suspension of the work at any time and relet the contract, or order a reconstruction of any portion of the work improperly done, and where the cost of completion or reconstruction necessary will be less than ~~$50,000~~ the amount in section 471.345, subdivision 3, the council may do it by the employment of day labor.

Sec. 14. Minnesota Statutes 2008, section 469.015, is amended to read:

469.015 LETTING OF CONTRACTS; PERFORMANCE BONDS.

Subdivision 1. Bids; notice. All construction work, and work of demolition or clearing, and every purchase of equipment, supplies, or materials, necessary in carrying out the purposes of sections 469.001 to 469.047, that involve expenditure of ~~$50,000~~ the amount in section 471.345, subdivision 3, or more shall be awarded by contract. Before receiving bids the authority shall publish, once a week for two consecutive weeks in an official newspaper of general circulation in the community a notice that bids will be received for that construction work, or that purchase of equipment, supplies, or materials. The notice shall state the nature of the work and the terms and conditions upon which the contract is to be let, naming a time and place where bids will be received, opened and read publicly, which time shall be not less than seven days after the date of the last publication. After the bids have been received, opened and read publicly and recorded, the authority shall award the contract to the lowest responsible bidder, provided that the authority reserves the right to reject any or all bids. Each contract shall be executed in writing, and the person to whom the contract is awarded shall give sufficient bond to the authority for its faithful performance. If no satisfactory bid is received, the authority may readvertise. The authority may establish reasonable qualifications to determine the fitness and responsibility of bidders and to require bidders to meet the qualifications before bids are accepted.

Subd. 1a. Best value alternative. As an alternative to the procurement method described in subdivision 1, the authority may issue a request for proposals and award the contract to the vendor or contractor offering the best value under a request for proposals as described in section 16C.28, subdivision 1, paragraph (a), clause (2), and paragraph (c).

Subd. 2. Exception; emergency. If the authority by a vote of four-fifths of its members shall declare that an emergency exists requiring the immediate purchase of any equipment or material or supplies at a cost in excess of ~~$50,000~~ the amount in section 471.345, subdivision 3, but not exceeding ~~$75,000~~ half again as much as the amount in section 471.345, subdivision 3, or making of emergency repairs, it shall not be necessary to advertise for bids, but the material, equipment, or supplies may be purchased in the open market at the lowest price obtainable, or the emergency repairs may be contracted for or performed without securing formal competitive bids. An emergency, for purposes of this subdivision, shall be understood to be unforeseen circumstances or conditions which result in the placing in jeopardy of human life or property.

Subd. 3. Performance and payment bonds. Performance and payment bonds shall be required from contractors for any works of construction as provided in and subject to all the provisions of sections 574.26 to 574.31 except for contracts entered into by an authority for an expenditure of less than ~~$50,000~~ the minimum threshold amount in section 471.345, subdivision 3.

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Subd. 4. Exceptions. (a) An authority need not require competitive bidding in the following circumstances:

(1) in the case of a contract for the acquisition of a low-rent housing project:

(i) for which financial assistance is provided by the federal government;

(ii) which does not require any direct loan or grant of money from the municipality as a condition of the federal financial assistance; and

(iii) for which the contract provides for the construction of the project upon land that is either owned by the authority for redevelopment purposes or not owned by the authority at the time of the contract but the contract provides for the conveyance or lease to the authority of the project or improvements upon completion of construction;

(2) with respect to a structured parking facility:

(i) constructed in conjunction with, and directly above or below, a development; and

(ii) financed with the proceeds of tax increment or parking ramp general obligation or revenue bonds;

(3) until August 1, 2009, with respect to a facility built for the purpose of facilitating the operation of public transit or encouraging its use:

(i) constructed in conjunction with, and directly above or below, a development; and

(ii) financed with the proceeds of parking ramp general obligation or revenue bonds or with at least 60 percent of the construction cost being financed with funding provided by the federal government; and

(4) in the case of any building in which at least 75 percent of the usable square footage constitutes a housing development project if:

(i) the project is financed with the proceeds of bonds issued under section 469.034 or from nongovernmental sources;

(ii) the project is either located on land that is owned or is being acquired by the authority only for development purposes, or is not owned by the authority at the time the contract is entered into but the contract provides for conveyance or lease to the authority of the project or improvements upon completion of construction; and

(iii) the authority finds and determines that elimination of the public bidding requirements is necessary in order for the housing development project to be economical and feasible.

(b) An authority need not require a performance bond for the following projects:

(1) a contract described in paragraph (a), clause (1);

(2) a construction change order for a housing project in which 30 percent of the construction has been completed;

(3) a construction contract for a single-family housing project in which the authority acts as the general construction contractor; or

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(4) a services or materials contract for a housing project.

For purposes of this paragraph, "services or materials contract" does not include construction contracts.

Subd. 5. Security in lieu of bond. The authority may accept a certified check or cashier's check in the same amount as required for a bond in lieu of a performance bond for contracts entered into by an authority for an expenditure of less than ~~$50,000~~ the minimum threshold amount in section 471.345, subdivision 3. The check must be held by the authority for 90 days after the contract has been completed. If no suit is brought within the 90 days, the authority must return the amount of the check to the person making it. If a suit is brought within the 90-day period, the authority must disburse the amount of the check pursuant to the order of the court.

Sec. 15. Minnesota Statutes 2008, section 641.12, subdivision 1, is amended to read:

Subdivision 1. Fee. A county board may require that each person who is booked for confinement at a county or regional jail, and not released upon completion of the booking process, pay a fee ~~of up to $10~~ to the sheriff's department of the county in which the jail is located to cover costs incurred by the county in the booking of that person. The fee is payable immediately from any money then possessed by the person being booked, or any money deposited with the sheriff's department on the person's behalf. If the person has no funds at the time of booking or during the period of any incarceration, the sheriff shall notify the district court in the county where the charges related to the booking are pending, and shall request the assessment of the fee. Notwithstanding section 609.10 or 609.125, upon notification from the sheriff, the district court must order the fee paid to the sheriff's department as part of any sentence or disposition imposed. If the person is not charged, is acquitted, or if the charges are dismissed, the sheriff shall return the fee to the person at the last known address listed in the booking records.

Sec. 16. LEGISLATIVE COMMISSION ON MANDATE REFORM; FIRST MEETING.

The first meeting of the Legislative Commission on Mandate Reform must be held as soon as practicable after all appointments are made. The speaker of the house must designate a commission member to convene the first meeting. The first commission serves until a new commission is appointed at the beginning of the next biennium.

ARTICLE 5

TRUTH IN TAXATION

Section 1. Minnesota Statutes 2008, section 123B.10, subdivision 1, is amended to read:

Subdivision 1. Budgets; form of notification. (a) Every board must publish revenue and expenditure budgets for the current year and the actual revenues, expenditures, fund balances for the prior year and projected fund balances for the current year in a form prescribed by the commissioner within one week of the acceptance of the final audit by the board, or November 30, whichever is earlier. The forms prescribed must be designed so that year to year comparisons of revenue, expenditures and fund balances can be made.

(b) A school board annually must notify the public of its revenue, expenditures, fund balances, and other relevant budget information. The board must ~~include the budget information required by this section in the materials provided as a part of its truth in taxation hearing,~~ post the materials in a conspicuous place on the district's official Web site, including a link to the district's school report card on the Department of Education's Web site, and publish the information in a qualified newspaper of general circulation in the district.

EFFECTIVE DATE. This section is effective for taxes payable in 2010 and thereafter.

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Sec. 2. Minnesota Statutes 2008, section 275.065, subdivision 1, is amended to read:

Subdivision 1. Proposed levy. (a) Notwithstanding any law or charter to the contrary, on or before September 15 5, each taxing authority, other than a school district, shall adopt a proposed budget and shall certify to the county auditor the proposed or, in the case of a town, the final property tax levy for taxes payable in the following year.

(b) On or before September 30 20, each school district that has not mutually agreed with its home county to extend this date shall certify to the county auditor the proposed property tax levy for taxes payable in the following year. Each school district that has agreed with its home county to delay the certification of its proposed property tax levy must certify its proposed property tax levy for the following year no later than ~~October 7~~ September 28. The school district shall certify the proposed levy as:

(1) a specific dollar amount by school district fund, broken down between voter-approved and non-voter-approved levies and between referendum market value and tax capacity levies; or

(2) the maximum levy limitation certified by the commissioner of education according to section 126C.48, subdivision 1.

(c) If the board of estimate and taxation or any similar board that establishes maximum tax levies for taxing jurisdictions within a first class city certifies the maximum property tax levies for funds under its jurisdiction by charter to the county auditor by September 15 1, the city shall be deemed to have certified its levies for those taxing jurisdictions.

(d) For purposes of this section, "taxing authority" includes all home rule and statutory cities, towns, counties, school districts, and special taxing districts as defined in section 275.066. Intermediate school districts that levy a tax under chapter 124 or 136D, joint powers boards established under sections 123A.44 to 123A.446, and Common School Districts No. 323, Franconia, and No. 815, Prinsburg, are also special taxing districts for purposes of this section.

(e) At the meeting where a taxing authority, other than a town, adopts its proposed tax levy under paragraph (a) or (b), the taxing authority shall announce the time and place of its subsequent regularly scheduled meetings at which the budget levy will be discussed and at which the public will be allowed to speak. The time and place of those meetings must be included in the proceedings or summary of the proceedings published in the official newspaper of the taxing authority under section 123B.09, 375.12, or 412.191.

EFFECTIVE DATE. This section is effective for proposed notices prepared in 2010 and thereafter, for property taxes payable in 2011 and thereafter, except that paragraph (e) is effective for taxes payable in 2010 and thereafter.

Sec. 3. Minnesota Statutes 2008, section 275.065, subdivision 1a, is amended to read:

Subd. 1a. Overlapping jurisdictions. In the case of a taxing authority lying in two or more counties, the home county auditor shall certify the proposed levy and the proposed local tax rate to the other county auditor by ~~October 5~~ September 25, unless the home county has agreed to delay the certification of its proposed property tax levy, in which case the home county auditor shall certify the proposed levy and the proposed local tax rate to the other county auditor by ~~October 10~~ September 30. The home county auditor must estimate the levy or rate in preparing the notices required in subdivision 3, if the other county has not certified the appropriate information. If requested by the home county auditor, the other county auditor must furnish an estimate to the home county auditor.

EFFECTIVE DATE. This section is effective for proposed notices prepared in 2010 and thereafter, for property taxes payable in 2011 and thereafter.

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Sec. 4. Minnesota Statutes 2008, section 275.065, subdivision 1c, is amended to read:

Subd. 1c. Levy; shared, merged, consolidated services. If two or more taxing authorities are in the process of negotiating an agreement for sharing, merging, or consolidating services between those taxing authorities at the time the proposed levy is to be certified under subdivision 1, each taxing authority involved in the negotiation shall certify its total proposed levy as provided in that subdivision, including a notification to the county auditor of the specific service involved in the agreement which is not yet finalized. The affected taxing authorities may amend their proposed levies under subdivision 1 until ~~October 10~~ September 25 for levy amounts relating only to the specific service involved.

EFFECTIVE DATE. This section is effective for proposed notices prepared in 2010 and thereafter, for property taxes payable in 2011 and thereafter.

Sec. 5. Minnesota Statutes 2008, section 275.065, subdivision 3, is amended to read:

Subd. 3. Notice of proposed property taxes. (a) The county auditor shall prepare and the county treasurer shall deliver after ~~November 10~~ October 15 and on or before ~~November~~ October 24 each year, by first class mail to each taxpayer at the address listed on the county's current year's assessment roll, a notice of proposed property taxes. Upon written request by the taxpayer, the treasurer may send the notice in electronic form or by electronic mail instead of on paper or by ordinary mail.

(b) The commissioner of revenue shall prescribe the form of the notice.

(c) The notice must inform taxpayers that it contains the amount of property taxes each taxing authority proposes to collect for taxes payable the following year. In the case of a town, or in the case of the state general tax, the final tax amount will be its proposed tax. In the case of taxing authorities required to hold a public meeting under subdivision 6, the notice must clearly state that each taxing authority, including regional library districts established under section 134.201, and including the metropolitan taxing districts as defined in paragraph (i), but excluding all other special taxing districts and towns, will hold a public meeting to receive public testimony on the proposed budget and proposed or final property tax levy, or, in case of a school district, on the current budget and proposed property tax levy. The notice must clearly state for each city, county, school district, regional library authority established under section 134.201, and metropolitan taxing districts as defined in paragraph (i), the time and place of the taxing authorities' regularly scheduled meetings occurring after October 24, at which the budget and levy will be discussed. The taxing authorities must provide the county auditor with the information to be included in the notice on or before the time it certifies its proposed levy under subdivision 1. The public shall be allowed to speak at that meeting. It must ~~clearly state the time and place of each taxing authority's meeting,~~ provide a telephone number for the taxing authority that taxpayers may call if they have questions related to the notice, and an address where comments will be received by mail.

(d) The notice must state for each parcel:

(1) the market value of the property as determined under section 273.11, and used for computing property taxes payable in the following year and for taxes payable in the current year as each appears in the records of the county assessor on ~~November~~ September 1 of the current year; and, in the case of residential property, whether the property is classified as homestead or nonhomestead. The notice must clearly inform taxpayers of the years to which the market values apply and that the values are final values;

(2) the items listed below, shown separately by county, city or town, and state general tax, net of the residential and agricultural homestead credit under section 273.1384, voter approved school levy, other local school levy, and the sum of the special taxing districts, and as a total of all taxing authorities:

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(i) the actual tax for taxes payable in the current year; and

(ii) the proposed tax amount.

If the county levy under clause (2) includes an amount for a lake improvement district as defined under sections 103B.501 to 103B.581, the amount attributable for that purpose must be separately stated from the remaining county levy amount.

In the case of a town or the state general tax, the final tax shall also be its proposed tax unless the town changes its levy at a special town meeting under section 365.52. If a school district has certified under section 126C.17, subdivision 9, that a referendum will be held in the school district at the November general election, the county auditor must note next to the school district's proposed amount that a referendum is pending and that, if approved by the voters, the tax amount may be higher than shown on the notice. In the case of the city of Minneapolis, the levy for Minneapolis Park and Recreation shall be listed separately from the remaining amount of the city's levy. In the case of the city of St. Paul, the levy for the St. Paul Library Agency must be listed separately from the remaining amount of the city's levy. In the case of Ramsey County, any amount levied under section 134.07 may be listed separately from the remaining amount of the county's levy. In the case of a parcel where tax increment or the fiscal disparities areawide tax under chapter 276A or 473F applies, the proposed tax levy on the captured value or the proposed tax levy on the tax capacity subject to the areawide tax must each be stated separately and not included in the sum of the special taxing districts; and

(3) the increase or decrease between the total taxes payable in the current year and the total proposed taxes, expressed as a percentage.

For purposes of this section, the amount of the tax on homesteads qualifying under the senior citizens' property tax deferral program under chapter 290B is the total amount of property tax before subtraction of the deferred property tax amount.

(e) The notice must clearly state that the proposed or final taxes do not include the following:

(1) special assessments;

(2) levies approved by the voters after the date the proposed taxes are certified, including bond referenda and school district levy referenda;

(3) a levy limit increase approved by the voters by the first Tuesday after the first Monday in November of the levy year as provided under section 275.73;

(4) amounts necessary to pay cleanup or other costs due to a natural disaster occurring after the date the proposed taxes are certified;

(5) amounts necessary to pay tort judgments against the taxing authority that become final after the date the proposed taxes are certified; and

(6) the contamination tax imposed on properties which received market value reductions for contamination.

(f) Except as provided in subdivision 7, failure of the county auditor to prepare or the county treasurer to deliver the notice as required in this section does not invalidate the proposed or final tax levy or the taxes payable pursuant to the tax levy.

(g) If the notice the taxpayer receives under this section lists the property as nonhomestead, and satisfactory documentation is provided to the county assessor by the applicable deadline, and the property qualifies for the homestead classification in that assessment year, the assessor shall reclassify the property to homestead for taxes payable in the following year.

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(h) In the case of class 4 residential property used as a residence for lease or rental periods of 30 days or more, the taxpayer must either:

(1) mail or deliver a copy of the notice of proposed property taxes to each tenant, renter, or lessee; or

(2) post a copy of the notice in a conspicuous place on the premises of the property.

The notice must be mailed or posted by the taxpayer by ~~November~~ October 27 or within three days of receipt of the notice, whichever is later. A taxpayer may notify the county treasurer of the address of the taxpayer, agent, caretaker, or manager of the premises to which the notice must be mailed in order to fulfill the requirements of this paragraph.

(i) For purposes of this subdivision~~, subdivisions~~ and subdivision 5a ~~and 6~~, "metropolitan special taxing districts" means the following taxing districts in the seven-county metropolitan area that levy a property tax for any of the specified purposes listed below:

(1) Metropolitan Council under section 473.132, 473.167, 473.249, 473.325, 473.446, 473.521, 473.547, or 473.834;

(2) Metropolitan Airports Commission under section 473.667, 473.671, or 473.672; and

(3) Metropolitan Mosquito Control Commission under section 473.711.

For purposes of this section, any levies made by the regional rail authorities in the county of Anoka, Carver, Dakota, Hennepin, Ramsey, Scott, or Washington under chapter 398A shall be included with the appropriate county's levy ~~and shall be discussed at that county's public hearing~~.

(j) The governing body of a county, city, or school district may, with the consent of the county board, include supplemental information with the statement of proposed property taxes about the impact of state aid increases or decreases on property tax increases or decreases and on the level of services provided in the affected jurisdiction. This supplemental information may include information for the following year, the current year, and for as many consecutive preceding years as deemed appropriate by the governing body of the county, city, or school district. It may include only information regarding:

(1) the impact of inflation as measured by the implicit price deflator for state and local government purchases;

(2) population growth and decline;

(3) state or federal government action; and

(4) other financial factors that affect the level of property taxation and local services that the governing body of the county, city, or school district may deem appropriate to include.

The information may be presented using tables, written narrative, and graphic representations and may contain instruction toward further sources of information or opportunity for comment.

EFFECTIVE DATE. This section is effective for taxes payable in 2010 and thereafter, except that the changes advancing the dates for preparing and mailing the notices are effective for proposed notices in 2010, for taxes payable in 2011 and thereafter.

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Sec. 6. Minnesota Statutes 2008, section 275.065, subdivision 6, is amended to read:

Subd. 6. ~~Public hearing;~~ Adoption of budget and levy. ~~(a) For purposes of this section, the following terms shall have the meanings given:~~

(1) "Initial hearing" means the first and primary hearing held to discuss the taxing authority's proposed budget and proposed property tax levy for taxes payable in the following year, or, for school districts, the current budget and the proposed property tax levy for taxes payable in the following year.

~~(2) "Continuation hearing" means a hearing held to complete the initial hearing, if the initial hearing is not completed on its scheduled date.~~

(3) "Subsequent hearing" means the hearing held to adopt the taxing authority's final property tax levy, and, in the case of taxing authorities other than school districts, the final budget, for taxes payable in the following year.

(b) Between November 29 and December 20, the governing bodies of a city that has a population over 500, county, metropolitan special taxing districts as defined in subdivision 3, paragraph (i), and regional library districts shall each hold an initial public hearing to discuss and seek public comment on its final budget and property tax levy for taxes payable in the following year, and the governing body of the school district shall hold an initial public hearing to review its current budget and proposed property tax levy for taxes payable in the following year. The metropolitan special taxing districts shall be required to hold only a single joint initial public hearing, the location of which will be determined by the affected metropolitan agencies. A city, county, metropolitan special taxing district as defined in subdivision 3, paragraph (i), regional library district established under section 134.201, or school district is not required to hold a public hearing under this subdivision unless its proposed property tax levy for taxes payable in the following year, as certified under subdivision 1, has increased over its final property tax levy for taxes payable in the current year by a percentage that is greater than the percentage increase in the implicit price deflator for government consumption expenditures and gross investment for state and local governments prepared by the Bureau of Economic Analysts of the United States Department of Commerce for the 12-month period ending March 31 of the current year.

~~(c) The initial hearing must be held after 5:00 p.m. if scheduled on a day other than Saturday. No initial hearing may be held on a Sunday.~~

(d) At the initial hearing under this subdivision, the percentage increase in property taxes proposed by the taxing authority, if any, and the specific purposes for which property tax revenues are being increased must be discussed. During the discussion, the governing body shall hear comments regarding a proposed increase and explain the reasons for the proposed increase. The public shall be allowed to speak and to ask questions. At the public hearing, the school district must also provide and discuss information on the distribution of its revenues by revenue source, and the distribution of its spending by program area.

(e) If the initial hearing is not completed on its scheduled date, the taxing authority must announce, prior to adjournment of the hearing, the date, time, and place for the continuation of the hearing. The continuation hearing must be held at least five business days but no more than 14 business days after the initial hearing. A continuation hearing may not be held later than December 20 except as provided in paragraphs (f) and (g). A continuation hearing must be held after 5:00 p.m. if scheduled on a day other than Saturday. No continuation hearing may be held on a Sunday.

(f) The governing body of a county shall hold its initial hearing on the first Thursday in December each year, and may hold additional initial hearings on other dates before December 20 if necessary for the convenience of county residents. If the county needs a continuation of its hearing, the continuation hearing shall be held on the third Tuesday in December. If the third Tuesday in December falls on December 21, the county's continuation hearing shall be held on Monday, December 20.

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(g) The metropolitan special taxing districts shall hold a joint initial public hearing on the first Wednesday of December. A continuation hearing, if necessary, shall be held on the second Wednesday of December even if that second Wednesday is after December 10.

(h) The county auditor shall provide for the coordination of initial and continuation hearing dates for all school districts and cities within the county to prevent conflicts under clauses (i) and (j).

(i) By August 10, each school board and the board of the regional library district shall certify to the county auditors of the counties in which the school district or regional library district is located the dates on which it elects to hold its initial hearing and any continuation hearing. If a school board or regional library district does not certify these dates by August 10, the auditor will assign the initial and continuation hearing dates. The dates elected or assigned must not conflict with the initial and continuation hearing dates of the county or the metropolitan special taxing districts.

(j) By August 20, the county auditor shall notify the clerks of the cities within the county of the dates on which school districts and regional library districts have elected to hold their initial and continuation hearings. At the time a city certifies its proposed levy under subdivision 1 it shall certify the dates on which it elects to hold its initial hearing and any continuation hearing. Until September 15, the first and second Mondays of December are reserved for the use of the cities. If a city does not certify its hearing dates by September 15, the auditor shall assign the initial and continuation hearing dates. The dates elected or assigned for the initial hearing must not conflict with the initial hearing dates of the county, metropolitan special taxing districts, regional library districts, or school districts within which the city is located. To the extent possible, the dates of the city's continuation hearing should not conflict with the continuation hearing dates of the county, metropolitan special taxing districts, regional library districts, or school districts within which the city is located. This paragraph does not apply to cities of 500 population or less.

(k) The county initial hearing date and the city, metropolitan special taxing district, regional library district, and school district initial hearing dates must be designated on the notices required under subdivision 3. The continuation hearing dates need not be stated on the notices.

(l) At a subsequent hearing, each county, school district, city over 500 population, and metropolitan special taxing district may amend its proposed property tax levy and must adopt a final property tax levy. Each county, city over 500 population, and metropolitan special taxing district may also amend its proposed budget and must adopt a final budget at the subsequent hearing. The final property tax levy must be adopted prior to adopting the final budget. A school district is not required to adopt its final budget at the subsequent hearing. The subsequent hearing of a taxing authority must be held on a date subsequent to the date of the taxing authority's initial public hearing. If a continuation hearing is held, the subsequent hearing must be held either immediately following the continuation hearing or on a date subsequent to the continuation hearing. The subsequent hearing may be held at a regularly scheduled board or council meeting or at a special meeting scheduled for the purposes of the subsequent hearing. The subsequent hearing of a taxing authority does not have to be coordinated by the county auditor to prevent a conflict with an initial hearing, a continuation hearing, or a subsequent hearing of any other taxing authority. All subsequent hearings must be held prior to five working days after December 20 of the levy year. The date, time, and place of the subsequent hearing must be announced at the initial public hearing or at the continuation hearing.

~~(m)~~ (a) The property tax levy certified under section 275.07 by a city of any population, county, metropolitan special taxing district, regional library district, or school district must not exceed the proposed levy determined under subdivision 1, except by an amount up to the sum of the following amounts:

(1) the amount of a school district levy whose voters approved a referendum to increase taxes under section 123B.63, subdivision 3, or 126C.17, subdivision 9, after the proposed levy was certified;

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(2) the amount of a city or county levy approved by the voters after the proposed levy was certified;

(3) the amount of a levy to pay principal and interest on bonds approved by the voters under section 475.58 after the proposed levy was certified;

(4) the amount of a levy to pay costs due to a natural disaster occurring after the proposed levy was certified, if that amount is approved by the commissioner of revenue under subdivision 6a;

(5) the amount of a levy to pay tort judgments against a taxing authority that become final after the proposed levy was certified, if the amount is approved by the commissioner of revenue under subdivision 6a;

(6) the amount of an increase in levy limits certified to the taxing authority by the commissioner of education or the commissioner of revenue after the proposed levy was certified; ~~and~~

(7) the amount required under section 126C.55; and

(8) the amount of unallotment under section 16A.152 that was recertified under section 275.07, subdivision 6.

~~(n)~~ (b) This subdivision does not apply to towns and special taxing districts other than regional library districts and metropolitan special taxing districts.

~~(o)~~ (c) Notwithstanding the requirements of this section, the employer is required to meet and negotiate over employee compensation as provided for in chapter 179A.

EFFECTIVE DATE. This section is effective for taxes payable in 2010 and thereafter.

Sec. 7. Minnesota Statutes 2008, section 275.07, subdivision 1, is amended to read:

Subdivision 1. Certification of levy. (a) Except as provided under paragraph (b), the taxes voted by cities, counties, school districts, and special districts shall be certified by the proper authorities to the county auditor on or before five working days after December 20 10 in each year. A town must certify the levy adopted by the town board to the county auditor by September 15 5 each year. If the town board modifies the levy at a special town meeting after September 15 5, the town board must recertify its levy to the county auditor on or before five working days after December 20 10. If a city, town, county, school district, or special district fails to certify its levy by that date, its levy shall be the amount levied by it for the preceding year.

(b)(i) The taxes voted by counties under sections 103B.241, 103B.245, and 103B.251 shall be separately certified by the county to the county auditor on or before five working days after December 20 10 in each year. The taxes certified shall not be reduced by the county auditor by the aid received under section 273.1398, subdivision 3. If a county fails to certify its levy by that date, its levy shall be the amount levied by it for the preceding year.

(ii) For purposes of the proposed property tax notice under section 275.065 and the property tax statement under section 276.04, for the first year in which the county implements the provisions of this paragraph, the county auditor shall reduce the county's levy for the preceding year to reflect any amount levied for water management purposes under clause (i) included in the county's levy.

EFFECTIVE DATE. This section is effective for property taxes payable in 2011 and thereafter.

Sec. 8. Minnesota Statutes 2008, section 275.07, subdivision 4, is amended to read:

Subd. 4. Report to commissioner. (a) On or before ~~October 8~~ September 20 of each year, the county auditor shall report to the commissioner of revenue the proposed levy certified by local units of government under section 275.065, subdivision 1. If any taxing authorities have notified the county auditor that they are in the process of negotiating an agreement for sharing, merging, or consolidating services but that when the proposed levy was

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certified under section 275.065, subdivision 1c, the agreement was not yet finalized, the county auditor shall supply that information to the commissioner when filing the report under this section and shall recertify the affected levies as soon as practical after ~~October 10~~ September 25.

(b) On or before January 15 5 of each year, the county auditor shall report to the commissioner of revenue the final levy certified by local units of government under subdivision 1.

EFFECTIVE DATE. This section is effective for property taxes payable in 2011 and thereafter.

Sec. 9. Minnesota Statutes 2008, section 375.194, subdivision 5, is amended to read:

Subd. 5. Determination of county tax rate. The eligible county's proposed and final tax rates shall be determined by dividing the certified levy by the total taxable net tax capacity, without regard to any abatements granted under this section. ~~The county board shall make available the estimated amount of the abatement at the public hearing under section 275.065, subdivision 6.~~

EFFECTIVE DATE. This section is effective for taxes payable in 2010 and thereafter.

Sec. 10. Minnesota Statutes 2008, section 383A.75, subdivision 3, is amended to read:

Subd. 3. Duties. The committee is authorized to and shall meet from time to time to make appropriate recommendations for the efficient and effective use of property tax dollars raised by the jurisdictions for programs, buildings, and operations. In addition, the committee shall:

(1) identify trends and factors likely to be driving budget outcomes over the next five years with recommendations for how the jurisdictions should manage those trends and factors to increase efficiency and effectiveness;

(2) agree, by October 1 of each year, on the appropriate level of overall property tax levy for the three jurisdictions and publicly report such to the governing bodies of each jurisdiction for ratification or modification by resolution; and

~~(3) plan for the joint truth-in-taxation hearings under section 275.065, subdivision 8; and~~

~~(4)~~ (3) identify, by December 31 of each year, areas of the budget to be targeted in the coming year for joint review to improve services or achieve efficiencies.

In carrying out its duties, the committee shall consult with public employees of each jurisdiction and with other stakeholders of the city, county, and school district, as appropriate.

EFFECTIVE DATE. This section is effective for taxes payable in 2010 and thereafter.

Sec. 11. Minnesota Statutes 2008, section 446A.086, subdivision 8, is amended to read:

Subd. 8. Tax levy for repayment. (a) With the approval of the authority, a governmental unit may levy in the year the state makes a payment under this section an amount up to the amount necessary to provide funds for the repayment of the amount paid by the state plus interest through the date of estimated repayment by the governmental unit. The proceeds of this levy may be used only for this purpose unless they exceed the amount actually due. Any excess must be used to repay other state payments made under this section or must be deposited in the debt redemption fund of the governmental unit. The amount of aids to be reduced to repay the state are decreased by the amount levied.

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(b) If the state is not repaid in full for a payment made under this section by November 30 of the calendar year following the year in which the state makes the payment, the authority shall require the governmental unit to certify a property tax levy in an amount up to the amount necessary to provide funds for repayment of the amount paid by the state plus interest through the date of estimated repayment by the governmental unit. To prevent undue hardship, the authority may allow the governmental unit to certify the levy over a five-year period. The proceeds of the levy may be used only for this purpose unless they are in excess of the amount actually due, in which case the excess must be used to repay other state payments made under this section or must be deposited in the debt redemption fund of the governmental unit. If the authority orders the governmental unit to levy, the amount of aids reduced to repay the state are decreased by the amount levied.

(c) A levy under this subdivision is an increase in the levy limits of the governmental unit for purposes of section 275.065, subdivision 6, and must be explained as a specific increase at the meeting required under that provision.

EFFECTIVE DATE. This section is effective for taxes payable in 2010 and thereafter.

Sec. 12. Minnesota Statutes 2008, section 465.719, subdivision 9, is amended to read:

Subd. 9. Application of other laws. A corporation created by a political subdivision under this section must comply with every law that applies to the political subdivision, as if the corporation is a part of the political subdivision, unless the resolution ratifying creation of the corporation specifically exempts the corporation from part or all of a law. If the resolution exempts the corporation from part or all of a law, the resolution must make a detailed and specific finding as to why the corporation cannot fulfill its purpose if the corporation is subject to that law. A corporation may not be exempted from chapter 13D, the Minnesota Open Meeting Law, sections 138.163 to 138.25, governing records management, or chapter 13, the Minnesota Government Data Practices Act. Any affected or interested person may bring an action in district court to void the resolution on the grounds that the findings are not sufficiently detailed and specific, or that the corporation can fulfill its purpose if it is subject to the law from which the resolution exempts the corporation. Laws that apply to a political subdivision that also apply to a corporation created by a political subdivision under this subdivision include, but are not limited to:

(1) chapter 13D, the Minnesota Open Meeting Law;

(2) chapter 13, the Minnesota Government Data Practices Act;

(3) section 471.345, the Uniform Municipal Contracting Law;

(4) sections 43A.17, limiting the compensation of employees based on the governor's salary; 471.991 to 471.999, providing for equitable pay; and 465.72 and 465.722, governing severance pay;

(5) section 275.065, providing for truth-in-taxation hearings. If any tax revenues of the political subdivision will be appropriated to the corporation, the corporation's annual operating and capital budgets must be included in the truth-in-taxation hearing of the political subdivision that created the corporation;

~~(6)~~ (5) if the corporation issues debt, its debt is included in the political subdivision's debt limit if it would be included if issued by the political subdivision, and issuance of the debt is subject to the election and other requirements of chapter 475 and section 471.69;

~~(7)~~ (6) section 471.895, prohibiting acceptance of gifts from interested parties, and sections 471.87 to 471.89, relating to interests in contracts;

~~(8)~~ (7) chapter 466, relating to municipal tort liability;

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~~(9)~~ (8) chapter 118A, requiring deposit insurance or bond or pledged collateral for deposits;

~~(10)~~ (9) chapter 118A, restricting investments;

~~(11)~~ (10) section 471.346, requiring ownership of vehicles to be identified;

~~(12)~~ (11) sections 471.38 to 471.41, requiring claims to be in writing, itemized, and approved by the governing board before payment can be made; and

~~(13)~~ (12) the corporation cannot make advances of pay, make or guarantee loans to employees, or provide in-kind benefits unless authorized by law.

EFFECTIVE DATE. This section is effective for taxes payable in 2010 and thereafter.

Sec. 13. Minnesota Statutes 2008, section 473.13, subdivision 1, is amended to read:

Subdivision 1. Budget. (a) On or before December 20 10 of each year, the council~~, after the public hearing required in section 275.065,~~ shall adopt a final budget covering its anticipated receipts and disbursements for the ensuing year and shall decide upon the total amount necessary to be raised from ad valorem tax levies to meet its budget. The budget shall state in detail the expenditures for each program to be undertaken, including the expenses for salaries, consultant services, overhead, travel, printing, and other items. The budget shall state in detail the capital expenditures of the council for the budget year, based on a five-year capital program adopted by the council and transmitted to the legislature. After adoption of the budget and no later than five working days after December 20, the council shall certify to the auditor of each metropolitan county the share of the tax to be levied within that county, which must be an amount bearing the same proportion to the total levy agreed on by the council as the net tax capacity of the county bears to the net tax capacity of the metropolitan area. The maximum amount of any levy made for the purpose of this chapter may not exceed the limits set by the statute authorizing the levy.

(b) Each even-numbered year the council shall prepare for its transit programs a financial plan for the succeeding three calendar years, in half-year segments. The financial plan must contain schedules of user charges and any changes in user charges planned or anticipated by the council during the period of the plan. The financial plan must contain a proposed request for state financial assistance for the succeeding biennium.

(1) the estimated operating revenues from all sources including funds on hand at the beginning of the year, and estimated expenditures for costs of operation, administration, maintenance, and debt service;

(2) capital improvement funds estimated to be on hand at the beginning of the year and estimated to be received during the year from all sources and estimated cost of capital improvements to be paid out or expended during the year, all in such detail and form as the council may prescribe; and

(3) the estimated source and use of pass-through funds.

EFFECTIVE DATE. This section is effective for taxes payable in 2010 and thereafter, except that the date change in certifying the budget is effective for taxes payable in 2011 and thereafter.

Sec. 14. REPEALER.

Minnesota Statutes 2008, section 275.065, subdivisions 5a, 6b, 6c, 8, 9, and 10, are repealed.

EFFECTIVE DATE. This section is effective for taxes payable in 2010 and thereafter.

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ARTICLE 6

PROPERTY TAX

Section 1. Minnesota Statutes 2008, section 40A.09, is amended to read:

40A.09 AGRICULTURAL PRESERVE; ELIGIBILITY.

Subdivision 1. Basic requirements. An owner or owners of land that has been designated for exclusive long-term agricultural use under a plan submitted to or approved by the commissioner is eligible to apply for the creation of an agricultural preserve. Eligibility continues unless the commissioner determines that the plan and official controls do not address the elements contained in this chapter or unless the county fails to implement the plan and official controls as required by this chapter.

Subd. 2. Termination of eligibility. (a) A parcel of property enrolled under this section whose owner is subject to a final enforcement action for a violation of chapter 18B, 18C, 103E, 103F, 103G, or 103H, or any rule adopted under these chapters including but not limited to the agricultural shoreland use standards in Minnesota Rules, chapter 6120, occurring on the parcel, shall be removed from the program.

(b) For the purposes of this subdivision, "final enforcement action" means any administrative, civil, or criminal penalty other than an initial verbal or written warning. An enforcement action is not final until any time period for corrective action has expired, and until the completion or expiration of any applicable review or appeal procedure or period provided by law.

(c) When a final enforcement action is taken based on a violation occurring on a parcel enrolled under sections 40A.09 to 40A.12, the law enforcement officer or other person enforcing the law or rule must notify the county assessor. The county assessor must then notify the property owner that the parcel is being removed from the program. Any parcel for which the assessor has been notified prior to March 1 of any year shall be removed from the program for taxes payable in the following year. The assessor shall calculate (i) the amount of any credit received under section 273.119 for the current year, and (ii) the difference between the actual tax on the parcel for the current year and the tax that would apply if the value was not restricted under this section, and multiply the result by the number of years that the parcel has been under its current ownership or five, whichever is less. The resulting amount plus any special assessments that have been deferred under this section shall be extended against the property on the tax list for the current year, provided that no interest or penalties shall be levied on the additional taxes if timely paid.

(d) Termination of eligibility under this subdivision shall not affect the covenant required under section 40A.10. A parcel of property terminated under this subdivision may not be reenrolled for a period of three years, unless it has been sold or transferred so that it is no longer under the same ownership, in full or in part, as when the parcel was terminated.

EFFECTIVE DATE. This section is effective for taxes payable in 2011 and thereafter.

Sec. 2. Minnesota Statutes 2008, section 272.02, subdivision 7, is amended to read:

Subd. 7. Institutions of public charity. (a) Institutions of purely public charity that are exempt from federal income taxation under section 501(c)(3) of the Internal Revenue Code are exempt. if they meet the requirements of this subdivision. In determining whether real property is exempt under this subdivision, the following factors must be considered:

(1) whether the stated purpose of the undertaking is to be helpful to others without immediate expectation of material reward;

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(2) whether the institution of public charity is supported by material donations, gifts, or government grants for services to the public in whole or in part;

(3) whether a material number of the recipients of the charity receive benefits or services at reduced or no cost, or whether the organization provides services to the public that alleviate burdens or responsibilities that would otherwise be borne by the government;

(4) whether the income received, including material gifts and donations, produces a profit to the charitable institution that is distributed to private interests;

(5) whether the beneficiaries of the charity are restricted or unrestricted, and, if restricted, whether the class of persons to whom the charity is made available is one having a reasonable relationship to the charitable objectives; and

(6) whether dividends, in form or substance, or assets upon dissolution, are available to private interests.

A charitable organization must satisfy the factors in clauses (1) to (6) for its property to be exempt under this subdivision, unless there is a reasonable justification for failing to meet the factors in clause (2), (3), or (5). If there is reasonable justification for failing to meet the factors in clause (2), (3), or (5), an organization is a purely public charity under this subdivision without meeting those factors. After an exemption is properly granted under this subdivision, it will remain in effect unless there is a material change in facts.

(b) For purposes of this subdivision, a grant is a written instrument or electronic document defining a legal relationship between a granting agency and a grantee when the principal purpose of the relationship is to transfer cash or something of value to the grantee to support a public purpose authorized by law in a general manner instead of acquiring by professional or technical contract, purchase, lease, or barter property or services for the direct benefit or use of the granting agency.

(c) In determining whether rental housing property qualifies for exemption under this subdivision, the following are not gifts or donations to the owner of the rental housing:

(1) rent assistance provided by the government to or on behalf of tenants; and

(2) financing assistance or tax credits provided by the government to the owner on condition that specific units or a specific quantity of units be set aside for persons or families with certain income characteristics.

EFFECTIVE DATE. This section is effective for taxes payable in 2010 and thereafter.

Sec. 3. Minnesota Statutes 2008, section 272.02, is amended by adding a subdivision to read:

Subd. 90. Nursing homes. A nursing home licensed under section 144A.02 or a boarding care home certified as a nursing facility under title 19 of the Social Security Act that is exempt from federal income taxation pursuant to section 501(c)(3) of the Internal Revenue Code is exempt from property taxation if the nursing home or boarding care home either:

(1) is certified to participate in the medical assistance program under title 19 of the Social Security Act; or

(2) certifies to the commissioner of revenue that it does not discharge residents due to the inability to pay.

EFFECTIVE DATE. This section is effective for taxes payable in 2010 and thereafter.

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Sec. 4. Minnesota Statutes 2008, section 272.02, is amended by adding a subdivision to read:

Subd. 91. Railroad wye connections. Any real or personal property of a railroad wye connection, including the track, ties, ballast, switch gear, and related improvements, is exempt if it meets all of the following: (1) is publicly owned; (2) is funded, in whole or in part, by state grants; (3) is located within the metropolitan area as defined in section 473.121, subdivision 2; (4) includes a single track segment that is no longer than 2,500 feet in length; (5) connects intersecting rail lines; and (6) is constructed after January 1, 2009.

EFFECTIVE DATE. This section is effective for assessment year 2009 and thereafter, for taxes payable in 2010 and thereafter.

Sec. 5. Minnesota Statutes 2008, section 272.02, is amended by adding a subdivision to read:

Subd. 92. Electric generation facility; personal property. (a) Notwithstanding subdivision 9, clause (a), attached machinery and other personal property that is part of an electric generation facility that exceeds 150 megawatts of installed capacity, does not exceed 780 megawatts of summer capacity, and that meets the requirements of this subdivision, is exempt. At the start of construction, the facility must:

(1) be designed to utilize natural gas as a primary fuel;

(2) be owned by an entity other than a public utility as defined in section 216B.02, subdivision 4;

(3) be located within five miles of two or more interstate natural gas pipelines;

(4) be located within one mile of an existing electrical transmission substation with operating alternating current voltages of 115 kV, 345 kV, and 500 kV;

(5) be designed to provide electrical capacity, energy, and ancillary services;

(6) have satisfied all of the requirements under section 216B.243;

(7) have executed an interconnection agreement with the Midwest Independent System Operator that does not require the acquisition of more than one mile of new electric transmission right-of-way within the county where the facility is located, and does not provide for any other new routes or corridors for future electric transmission lines in the county where the facility is located;

(8) be located in a county with an essential services and transmission services ordinance;

(9) have signed a development agreement with the county board in the county in which the facility is located. The development agreement must be adopted by a two-thirds vote of the county board, and must contain provisions ensuring that:

(i) the facility is designed to use effluent from a wastewater treatment facility as its preferred water source and will not seek an exemption from legislative approval under section 103G.265, subdivision 3, paragraph (b);

(ii) all processed wastewater discharge will be colocated with the outfall of a wastewater treatment facility; and

(iii) penalties will be paid to the county for harm to any aquifer or surface water as a result of construction or operation and maintenance of the facility; and

(10) have signed a development agreement with the township board in the township in which the facility is located containing provisions ensuring that noise and visual impacts of the facility are fully mitigated. The development agreement must be adopted by a two-thirds vote of the township board.

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(b) Construction of the facility must begin after March 1, 2010, and before March 1, 2014. Property eligible for this exemption does not include electric transmission lines and interconnections or gas pipelines and interconnections appurtenant to the facility.

(c) The exemption granted under this subdivision is void if the Public Utilities Commission issues a route permit for an electric transmission line connected to the electric substation nearest the exempt facility on a route where no electric transmission line currently exists.

EFFECTIVE DATE. This section is effective the day following final enactment.

Sec. 6. [272.0275] PERSONAL PROPERTY USED TO GENERATE ELECTRICITY; EXEMPTION.

Subdivision 1. New plant construction after January 1, 2010. For a new generating plant built and placed in service after January 1, 2010, its personal property used to generate electric power is exempt if an exemption of generation personal property form, with an attached siting agreement, is filed with the Department of Revenue. The form must be signed by the utility, and the county and the city or town where the facility is proposed to be located.

Subd. 2. Definition; applicability. For purposes of this section, "personal property" means tools, implements, and machinery of the generating plant. The exemption under this section does not apply to transformers, transmission lines, distribution lines, or any other tools, implements, and machinery that are part of an electric substation, wherever located.

EFFECTIVE DATE. This section is effective the day following final enactment.

Sec. 7. Minnesota Statutes 2008, section 272.029, subdivision 6, is amended to read:

Subd. 6. Distribution of revenues.