Bill Text: MN HF2690 | 2011-2012 | 87th Legislature | Engrossed

NOTE: There are more recent revisions of this legislation. Read Latest Draft

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Bill Title: Individual income, corporate franchise, property, sales and use, and other taxes and tax-related provisions changed; supplemental targeting refund provided; city aid payments modified and cities exempted from 2011 aid payment penalties; technical, minor, and clarifying changes made in enterprise zone and economic development powers, and obsolete provisions eliminated; fund transfer required; and money appropriated.

Spectrum: Partisan Bill (Republican 4-0)

Status: (Passed) 2012-05-14 - Secretary of State Chapter 294 [HF2690 Detail]

Download: Minnesota-2011-HF2690-Engrossed.html

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A bill for an act

relating to taxation; making technical, administrative, and clarifying changes to
individual income, corporate franchise, estate, property, sales and use, special,
mineral, and various taxes and tax-related provisions;amending Minnesota
Statutes 2010, sections 16C.16, subdivision 7; 41A.036, subdivision 2; 117.025,
subdivision 10; 216C.436, subdivisions 7, 8; 270B.14, subdivision 3; 272.02,
subdivision 77; 273.13, subdivision 24; 273.1398, subdivision 4; 276A.01,
subdivision 3; 289A.10, by adding a subdivision; 289A.12, by adding a
subdivision; 289A.18, by adding a subdivision; 289A.20, subdivision 3, by
adding a subdivision; 290.01, subdivision 29; 290.067, subdivision 1; 290.0921,
subdivision 3; 373.40, subdivisions 1, 2, 4; 469.015, subdivision 4; 469.033,
subdivision 7; 469.166, subdivisions 3, 5, 6; 469.167, subdivision 2; 469.171,
subdivisions 1, 4, 7, 9, 11; 469.172; 469.173, subdivisions 5, 6; 469.174,
subdivisions 20, 25; 469.176, subdivision 7; 469.1763, subdivision 6; 469.1764,
subdivision 1; 469.177, subdivision 1; 469.1793; 469.1813, subdivision 6b;
473F.02, subdivision 3; 474A.02, subdivision 23a; 475.521, subdivisions 2, 4;
475.58, subdivision 3b; Minnesota Statutes 2011 Supplement, sections 290.01,
subdivision 19b; 290.06, subdivision 2c; 290.0671, subdivision 1; 290.091,
subdivision 2; 290.0922, subdivisions 2, 3; 291.03, subdivisions 8, 9, 10, 11;
297A.75, subdivision 1; repealing Minnesota Statutes 2010, sections 272.02,
subdivision 83; 290.06, subdivisions 24, 32; 297A.68, subdivision 41; 469.042,
subdivisions 2, 3, 4; 469.043; 469.059, subdivision 13; 469.129; 469.134;
469.162, subdivision 2; 469.1651; 469.166, subdivisions 7, 8, 9, 10, 11, 12;
469.167, subdivisions 1, 3; 469.168; 469.169, subdivisions 1, 2, 3, 4, 5, 6,
7, 8, 9, 10, 11, 13; 469.170, subdivisions 1, 2, 3, 4, 5, 5a, 5b, 5c, 5d, 5e, 6, 7,
8; 469.171, subdivisions 2, 5, 6a, 6b; 469.173, subdivisions 1, 3; 469.1765;
469.1791; 469.1799, subdivision 2; 469.301, subdivisions 1, 2, 3, 4, 5; 469.302;
469.303; 469.304; 469.321; 469.3215; 469.322; 469.323; 469.324; 469.325;
469.326; 469.327; 469.328; 469.329; 473.680.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

ARTICLE 1

ESTATE TAXES

    Section 1. Minnesota Statutes 2010, section 289A.10, is amended by adding a
subdivision to read:
    Subd. 1a. Recapture tax return required. If a disposition or cessation as provided
by section 291.03, subdivision 11, paragraph (a), has occurred, the qualified heir, as
defined under section 291.03, subdivision 8, paragraph (c), or personal representative of
the decedent's estate must submit a recapture tax return to the commissioner.
EFFECTIVE DATE.This section is effective for estates of decedents dying after
June 30, 2011.

    Sec. 2. Minnesota Statutes 2010, section 289A.12, is amended by adding a subdivision
to read:
    Subd. 18. Returns by qualified heirs. Within 24 months and within 36 months
after a decedent's death, a qualified heir, as defined under section 291.03, subdivision 8,
paragraph (c), must file a return with the commissioner relating to the qualified property
received from the decedent.
EFFECTIVE DATE.This section is effective for estates of decedents dying after
June 30, 2011.

    Sec. 3. Minnesota Statutes 2010, section 289A.18, is amended by adding a subdivision
to read:
    Subd. 3a. Recapture tax return. A recapture tax return is due within six months
after the date of the disposition or cessation as provided by section 291.03, subdivision
11, paragraph (a).
EFFECTIVE DATE.This section is effective for estates of decedents dying after
June 30, 2011.

    Sec. 4. Minnesota Statutes 2010, section 289A.20, subdivision 3, is amended to read:
    Subd. 3. Estate tax. Taxes imposed by chapter 291 section 291.03, subdivision 1,
take effect at and upon the death of the person whose estate is subject to taxation and are
due and payable on or before the expiration of nine months from that death.
EFFECTIVE DATE.This section is effective for estates of decedents dying after
June 30, 2011.

    Sec. 5. Minnesota Statutes 2010, section 289A.20, is amended by adding a subdivision
to read:
    Subd. 3a. Recapture tax. Taxes imposed by section 291.03, subdivision 11,
paragraph (b), are due and payable on or before the expiration of six months from the date
of disposition or cessation as provided by section 291.03, subdivision 11, paragraph (a).
EFFECTIVE DATE.This section is effective for estates of decedents dying after
June 30, 2011.

    Sec. 6. Minnesota Statutes 2011 Supplement, section 291.03, subdivision 8, is
amended to read:
    Subd. 8. Definitions. (a) For purposes of this section, the following terms have the
meanings given in this subdivision.
(b) "Family member" means a family member as defined in section 2032A(e)(2) of
the Internal Revenue Code or a trust whose present beneficiaries are all family members as
defined in section 2032A(e)(2) of the Internal Revenue Code.
(c) "Qualified heir" means a family member who acquired qualified property from
upon the death of the decedent and satisfies the requirement under subdivision 9, clause
(6) (7), or subdivision 10, clause (4) (5), for the property.
(d) "Qualified property" means qualified small business property under subdivision
9 and qualified farm property under subdivision 10.
EFFECTIVE DATE.This section is effective for estates of decedents dying after
June 30, 2011.

    Sec. 7. Minnesota Statutes 2011 Supplement, section 291.03, subdivision 9, is
amended to read:
    Subd. 9. Qualified small business property. Property satisfying all of the following
requirements is qualified small business property:
(1) The value of the property was included in the federal adjusted taxable estate.
(2) The property consists of the assets of a trade or business or shares of stock or
other ownership interests in a corporation or other entity engaged in a trade or business.
The decedent or the decedent's spouse must have materially participated in the trade or
business within the meaning of section 469 of the Internal Revenue Code during the
taxable year that ended before the date of the decedent's death. Shares of stock in a
corporation or an ownership interest in another type of entity do not qualify under this
subdivision if the shares or ownership interests are traded on a public stock exchange at
any time during the three-year period ending on the decedent's date of death. For purposes
of this subdivision, an ownership interest includes the interest the decedent is deemed to
own under sections 2036, 2037, and 2038 of the Internal Revenue Code.
(3) During the decedent's taxable year that ended before the decedent's death, the
trade or business must not have been a passive activity within the meaning of section
469(c) of the Internal Revenue Code and the decedent or the decedent's spouse must have
materially participated in the trade or business within the meaning of section 469(h) of the
Internal Revenue Code, excluding section 469(h)(3) of the Internal Revenue Code and
any other provision provided by Treasury Department regulation that substitutes material
participation in prior taxable years for material participation in the taxable year that ended
before the decedent's death.
(3) (4) The gross annual sales of the trade or business were $10,000,000 or less for
the last taxable year that ended before the date of the death of the decedent.
(4) (5) The property does not consist of cash or, cash equivalents, publicly traded
securities, or assets not used in the operation of the trade or business. For property
consisting of shares of stock or other ownership interests in an entity, the amount value of
cash or, cash equivalents, publicly traded securities, or assets not used in the operation of
the trade or business held by the corporation or other entity must be deducted from the
value of the property qualifying under this subdivision in proportion to the decedent's
share of ownership of the entity on the date of death.
(5) (6) The decedent continuously owned the property, including property the
decedent is deemed to own under sections 2036, 2037, and 2038 of the Internal Revenue
Code, for the three-year period ending on the date of death of the decedent. In the case of
a sole proprietor, if the property replaced similar property within the three-year period,
the replacement property will be treated as having been owned for the three-year period
ending on the date of death of the decedent.
(6) A family member continuously uses the property in the operation of the trade or
business for three years following the date of death of the decedent.
(7) For three years following the date of death of the decedent, the trade or business
is not a passive activity within the meaning of section 469(c) of the Internal Revenue
Code and a family member materially participates in the operation of the trade or business
within the meaning of section 469(h) of the Internal Revenue Code, excluding section
469(h)(3) of the Internal Revenue Code and any other provision provided by Treasury
Department regulation that substitutes material participation in prior taxable years for
material participation in the three years following the date of death of the decedent.
(7) (8) The estate and the qualified heir elect to treat the property as qualified small
business property and agree, in the form prescribed by the commissioner, to pay the
recapture tax under subdivision 11, if applicable.
EFFECTIVE DATE.This section is effective for estates of decedents dying after
June 30, 2011.

    Sec. 8. Minnesota Statutes 2011 Supplement, section 291.03, subdivision 10, is
amended to read:
    Subd. 10. Qualified farm property. Property satisfying all of the following
requirements is qualified farm property:
(1) The value of the property was included in the federal adjusted taxable estate.
(2) The property consists of agricultural land as defined by section 500.24,
subdivision 2, paragraph (g), and owned by a farm meeting the requirements of person
or entity that is not excluded from owning agricultural land by section 500.24, and was
classified for property tax purposes as the homestead of the decedent or the decedent's
spouse or both under section 273.124, and as class 2a property under section 273.13,
subdivision 23 .
(3) For property taxes payable in the year of decedent's death, the decedent's interest
in the property was classified as the homestead of the decedent or the decedent's spouse or
both under section 273.124, and as class 2a property under section 273.13, subdivision 23.
(4) The decedent continuously owned the property, including property the decedent
is deemed to own under sections 2036, 2037, and 2038 of the Internal Revenue Code, for
the three-year period ending on the date of death of the decedent either by ownership of
the agricultural land or pursuant to holding an interest in an entity that is not excluded
from owning agricultural land under section 500.24.
(4) A family member continuously uses the property in the operation of the trade or
business (5) The property is classified for property tax purposes as class 2a property under
section 273.13, subdivision 23, for three years following the date of death of the decedent.
(5) (6) The estate and the qualified heir elect to treat the property as qualified farm
property and agree, in a form prescribed by the commissioner, to pay the recapture tax
under subdivision 11, if applicable.
EFFECTIVE DATE.This section is effective for estates of decedents dying after
June 30, 2011.

    Sec. 9. Minnesota Statutes 2011 Supplement, section 291.03, subdivision 11, is
amended to read:
    Subd. 11. Recapture tax. (a) If, within three years after the decedent's death and
before the death of the qualified heir, the qualified heir disposes of any interest in the
qualified property, other than by a disposition to a family member or qualifying entity,
or a family member ceases to use the qualified property which was acquired or passed
from the decedent satisfy the requirement under subdivision 9, clause (7); or 10, clause
(5), an additional estate tax is imposed on the property. In the case of a sole proprietor, if
the qualified heir replaces qualified small business property excluded under subdivision 9
with similar property, then the qualified heir will not be treated as having disposed of an
interest in the qualified property.
(b) The amount of the additional tax equals the amount of the exclusion claimed with
respect to the qualified interest disposed of by the estate under subdivision 8, paragraph
(d), multiplied by 16 percent.
(c) The additional tax under this subdivision is due on the day which is six months
after the date of the disposition or cessation in paragraph (a).
(c) For purposes of paragraph (a), "qualifying entity" means a corporation or other
entity owned by a family member or family members that is not excluded from owning
agricultural land under section 500.24.
EFFECTIVE DATE.This section is effective for estates of decedents dying after
June 30, 2011.

ARTICLE 2

OBSOLETE PROVISIONS

    Section 1. Minnesota Statutes 2010, section 16C.16, subdivision 7, is amended to read:
    Subd. 7. Economically disadvantaged areas. (a) Except as otherwise provided in
paragraph (b), the commissioner may award up to a six percent preference in the amount
bid on state procurement to small businesses located in an economically disadvantaged
area.
(b) The commissioner may award up to a four percent preference in the amount bid
on state construction to small businesses located in an economically disadvantaged area.
(c) A business is located in an economically disadvantaged area if:
(1) the owner resides in or the business is located in a county in which the median
income for married couples is less than 70 percent of the state median income for married
couples;
(2) the owner resides in or the business is located in an area designated a labor
surplus area by the United States Department of Labor; or
(3) the business is a certified rehabilitation facility or extended employment provider
as described in chapter 268A.
(d) The commissioner may designate one or more areas designated as targeted
neighborhoods under section 469.202 or as border city enterprise zones under section
469.167 469.166 as economically disadvantaged areas for purposes of this subdivision
if the commissioner determines that this designation would further the purposes of this
section. If the owner of a small business resides or is employed in a designated area, the
small business is eligible for any preference provided under this subdivision.
(e) The Department of Revenue shall gather data necessary to make the
determinations required by paragraph (c), clause (1), and shall annually certify counties
that qualify under paragraph (c), clause (1). An area designated a labor surplus area
retains that status for 120 days after certified small businesses in the area are notified of
the termination of the designation by the United States Department of Labor.

    Sec. 2. Minnesota Statutes 2010, section 41A.036, subdivision 2, is amended to read:
    Subd. 2. Small business development loans; preferences. The following eligible
small businesses have preference among all business applicants for small business
development loans:
(1) businesses located in rural areas of the state that are experiencing the most
severe unemployment rates in the state;
(2) businesses that are likely to expand and provide additional permanent
employment in rural areas of the state, or enhance the quality of existing jobs in those
areas;
(3) businesses located in border communities that experience a competitive
disadvantage due to location;
(4) businesses that have been unable to obtain traditional financial assistance due to
a disadvantageous location, minority ownership, or other factors rather than due to the
business having been considered a poor financial risk;
(5) businesses that utilize state resources and reduce state dependence on outside
resources, and that produce products or services consistent with the long-term social and
economic needs of the state; and
(6) businesses located in designated border city enterprise zones, as described in
section 469.168 469.166.

    Sec. 3. Minnesota Statutes 2010, section 117.025, subdivision 10, is amended to read:
    Subd. 10. Public service corporation. "Public service corporation" means a
utility, as defined by section 216E.01, subdivision 10; gas, electric, telephone, or cable
communications company; cooperative association; natural gas pipeline company;
crude oil or petroleum products pipeline company; municipal utility; municipality when
operating its municipally owned utilities; joint venture created pursuant to section 452.25
or 452.26; or municipal power or gas agency. Public service corporation also means a
municipality or public corporation when operating an airport under chapter 360 or 473, a
common carrier, a watershed district, or a drainage authority. Public service corporation
also means an entity operating a regional distribution center within an international
economic development zone designated under section 469.322.

    Sec. 4. Minnesota Statutes 2010, section 270B.14, subdivision 3, is amended to read:
    Subd. 3. Administration of enterprise, job opportunity, and biotechnology
and health sciences industry zone programs. The commissioner may disclose return
information relating to the taxes imposed by chapters 290 and 297A to the Department of
Employment and Economic Development or a municipality receiving an with a border
city enterprise zone designation as defined under section 469.169 469.166, but only as
necessary to administer the funding limitations under section 469.169, subdivision 7, or
to the Department of Employment and Economic Development and appropriate officials
from the local government units in which a qualified business is located but only as
necessary to enforce the job opportunity building zone benefits under section 469.315, or
biotechnology and health sciences industry zone benefits under section 469.336.

    Sec. 5. Minnesota Statutes 2010, section 272.02, subdivision 77, is amended to read:
    Subd. 77. Property of housing and redevelopment authorities. Property of
projects of housing and redevelopment authorities are exempt to the extent permitted by
sections section 469.042, subdivision 1, and 469.043, subdivisions 2 and 5.

    Sec. 6. Minnesota Statutes 2010, section 273.13, subdivision 24, is amended to read:
    Subd. 24. Class 3. (a) Commercial and industrial property and utility real and
personal property is class 3a.
(1) Except as otherwise provided, each parcel of commercial, industrial, or utility
real property has a class rate of 1.5 percent of the first tier of market value, and 2.0 percent
of the remaining market value. In the case of contiguous parcels of property owned by the
same person or entity, only the value equal to the first-tier value of the contiguous parcels
qualifies for the reduced class rate, except that contiguous parcels owned by the same
person or entity shall be eligible for the first-tier value class rate on each separate business
operated by the owner of the property, provided the business is housed in a separate
structure. For the purposes of this subdivision, the first tier means the first $150,000 of
market value. Real property owned in fee by a utility for transmission line right-of-way
shall be classified at the class rate for the higher tier.
For purposes of this subdivision, parcels are considered to be contiguous even if
they are separated from each other by a road, street, waterway, or other similar intervening
type of property. Connections between parcels that consist of power lines or pipelines do
not cause the parcels to be contiguous. Property owners who have contiguous parcels of
property that constitute separate businesses that may qualify for the first-tier class rate shall
notify the assessor by July 1, for treatment beginning in the following taxes payable year.
(2) All personal property that is: (i) part of an electric generation, transmission, or
distribution system; or (ii) part of a pipeline system transporting or distributing water, gas,
crude oil, or petroleum products; and (iii) not described in clause (3), and all railroad
operating property has a class rate as provided under clause (1) for the first tier of market
value and the remaining market value. In the case of multiple parcels in one county that
are owned by one person or entity, only one first tier amount is eligible for the reduced rate.
(3) The entire market value of personal property that is: (i) tools, implements, and
machinery of an electric generation, transmission, or distribution system; (ii) tools,
implements, and machinery of a pipeline system transporting or distributing water, gas,
crude oil, or petroleum products; or (iii) the mains and pipes used in the distribution of
steam or hot or chilled water for heating or cooling buildings, has a class rate as provided
under clause (1) for the remaining market value in excess of the first tier.
(b) Employment property defined in section 469.166, during the period provided
in section 469.170, shall constitute class 3b. The class rates for class 3b property are
determined under paragraph (a).

    Sec. 7. Minnesota Statutes 2010, section 273.1398, subdivision 4, is amended to read:
    Subd. 4. Disparity reduction credit. (a) Beginning with taxes payable in 1989,
class 4a, and class 3a, and class 3b property qualifies for a disparity reduction credit if: (1)
the property is located in a border city that has an enterprise zone designated pursuant to
section 469.168, subdivision 4, as defined in section 469.166; (2) the property is located
in a city with a population greater than 2,500 and less than 35,000 according to the
1980 decennial census; (3) the city is adjacent to a city in another state or immediately
adjacent to a city adjacent to a city in another state; and (4) the adjacent city in the
other state has a population of greater than 5,000 and less than 75,000 according to the
1980 decennial census.
    (b) The credit is an amount sufficient to reduce (i) the taxes levied on class 4a
property to 2.3 percent of the property's market value and (ii) the tax on class 3a and class
3b property to 2.3 percent of market value.
    (c) The county auditor shall annually certify the costs of the credits to the
Department of Revenue. The department shall reimburse local governments for the
property taxes forgone as the result of the credits in proportion to their total levies.

    Sec. 8. Minnesota Statutes 2010, section 276A.01, subdivision 3, is amended to read:
    Subd. 3. Commercial-industrial property. "Commercial-industrial property"
means the following categories of property, as defined in section 273.13, excluding that
portion of the property (i) that may, by law, constitute the tax base for a tax increment
pledged pursuant to section 469.042 or 469.162 or sections 469.174 to 469.178,
certification of which was requested prior to May 1, 1996, to the extent and while the tax
increment is so pledged; or (ii) that is exempt from taxation under section 272.02:
    (1) that portion of class 5 property consisting of unmined iron ore and low-grade
iron-bearing formations as defined in section 273.14, tools, implements, and machinery,
except the portion of high voltage transmission lines, the value of which is deducted from
net tax capacity under section 273.425; and
    (2) that portion of class 3 and class 5 property which is either used or zoned for
use for any commercial or industrial purpose, including property that becomes taxable
under section 298.25, except for such property which is, or, in the case of property under
construction, will when completed be used exclusively for residential occupancy and
the provision of services to residential occupants thereof. Property must be considered
as used exclusively for residential occupancy only if each of not less than 80 percent
of its occupied residential units is, or, in the case of property under construction, will
when completed be occupied under an oral or written agreement for occupancy over a
continuous period of not less than 30 days.
    If the classification of property prescribed by section 273.13 is modified by
legislative amendment, the references in this subdivision are to the successor class or
classes of property, or portions thereof, that include the kinds of property designated
in this subdivision.

    Sec. 9. Minnesota Statutes 2011 Supplement, 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. No
deduction is permitted for any expense the taxpayer incurred in using the taxpayer's or
the qualifying child's vehicle to provide such transportation for a qualifying child. 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;
    (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,
under the provisions of Public Law 109-1 and Public Law 111-126;
    (7) 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;
    (8) 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;
    (9) job opportunity building zone income as provided under section 469.316;
    (10) 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, 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); or (ii) federally funded state active service as defined in section 190.05, subdivision
5b , but "active service" excludes service performed in accordance with section 190.08,
subdivision 3 ;
    (11) 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 under United States Code, title 10; or the
authority of the United Nations;
    (12) 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;
    (13) 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) (15), 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) (15), 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;
    (14) to the extent included in the federal taxable income of a nonresident of
Minnesota, 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);
    (15) international economic development zone income as provided under section
469.325;
    (16) 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;
(17) (16) to the extent included in federal taxable income, discharge of indebtedness
income resulting 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 section 290.01, subdivision 19a, clause (16); and
(18) (17) the amount of the net operating loss allowed under section 290.095,
subdivision 11, paragraph (c).

    Sec. 10. Minnesota Statutes 2010, 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;
(ii) the dividends received deduction under section 290.21, subdivision 4;
(iii) the exemption for operating in a job opportunity building zone under section
469.317 ; and
(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.

    Sec. 11. Minnesota Statutes 2011 Supplement, 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, 5.35 percent;
    (2) On all over $25,680, but not over $102,030, 7.05 percent;
    (3) On all over $102,030, 7.85 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.
    (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, 5.35 percent;
    (2) On all over $17,570, but not over $57,710, 7.05 percent;
    (3) On all over $57,710, 7.85 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, 5.35 percent;
    (2) On all over $21,630, but not over $86,910, 7.05 percent;
    (3) On all over $86,910, 7.85 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),
(13), and (16) to (18), 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 (8), (9), (13), (14),
(15), (17), (16), and (18) (17), 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), (13), and (16) to
(18), and reduced by the amounts specified in section 290.01, subdivision 19b, clauses (1),
(8), (9), (13), (14), (15), (17) (16), and (18) (17).

    Sec. 12. Minnesota Statutes 2010, section 290.067, subdivision 1, is amended to read:
    Subdivision 1. Amount of credit. (a) A taxpayer may take as a credit against the
tax due from the taxpayer and a spouse, if any, under this chapter an amount equal to the
dependent care credit for which the taxpayer is eligible pursuant to the provisions of
section 21 of the Internal Revenue Code subject to the limitations provided in subdivision
2 except that in determining whether the child qualified as a dependent, income received
as a Minnesota family investment program grant or allowance to or on behalf of the child
must not be taken into account in determining whether the child received more than half
of the child's support from the taxpayer, and the provisions of section 32(b)(1)(D) of
the Internal Revenue Code do not apply.
(b) If a child who has not attained the age of six years at the close of the taxable year
is cared for at a licensed family day care home operated by the child's parent, the taxpayer
is deemed to have paid employment-related expenses. If the child is 16 months old or
younger at the close of the taxable year, the amount of expenses deemed to have been paid
equals the maximum limit for one qualified individual under section 21(c) and (d) of the
Internal Revenue Code. If the child is older than 16 months of age but has not attained the
age of six years at the close of the taxable year, the amount of expenses deemed to have
been paid equals the amount the licensee would charge for the care of a child of the same
age for the same number of hours of care.
(c) If a married couple:
(1) has a child who has not attained the age of one year at the close of the taxable
year;
(2) files a joint tax return for the taxable year; and
(3) does not participate in a dependent care assistance program as defined in section
129 of the Internal Revenue Code, in lieu of the actual employment related expenses paid
for that child under paragraph (a) or the deemed amount under paragraph (b), the lesser of
(i) the combined earned income of the couple or (ii) the amount of the maximum limit for
one qualified individual under section 21(c) and (d) of the Internal Revenue Code will
be deemed to be the employment related expense paid for that child. The earned income
limitation of section 21(d) of the Internal Revenue Code shall not apply to this deemed
amount. These deemed amounts apply regardless of whether any employment-related
expenses have been paid.
(d) If the taxpayer is not required and does not file a federal individual income tax
return for the tax year, no credit is allowed for any amount paid to any person unless:
(1) the name, address, and taxpayer identification number of the person are included
on the return claiming the credit; or
(2) if the person is an organization described in section 501(c)(3) of the Internal
Revenue Code and exempt from tax under section 501(a) of the Internal Revenue Code,
the name and address of the person are included on the return claiming the credit.
In the case of a failure to provide the information required under the preceding sentence,
the preceding sentence does not apply if it is shown that the taxpayer exercised due
diligence in attempting to provide the information required.
In the case of a nonresident, part-year resident, or a person who has earned income
not subject to tax under this chapter including earned income excluded pursuant to section
290.01, subdivision 19b , clause (9) or (15), the credit determined under section 21 of the
Internal Revenue Code must be allocated based on the ratio by which the earned income
of the claimant and the claimant's spouse from Minnesota sources bears to the total earned
income of the claimant and the claimant's spouse.
For residents of Minnesota, the subtractions for military pay under section 290.01,
subdivision 19b , clauses (10) and (11), are not considered "earned income not subject to
tax under this chapter."
For residents of Minnesota, 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."

    Sec. 13. Minnesota Statutes 2011 Supplement, 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 (9) or (15), 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 (10) and (11),
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, 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 commissioner shall annually adjust the $3,000 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 "2007" shall be substituted for the word "1992." For 2009,
the commissioner shall then determine the percent change from the 12 months ending on
August 31, 2007, to the 12 months ending on August 31, 2008, and in each subsequent
year, from the 12 months ending on August 31, 2007, to the 12 months ending on August
31 of the year preceding the taxable year. The earned income thresholds 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.
(h) For tax years beginning after December 31, 2010, and before January 1, 2012,
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 $5,000
for married taxpayers filing joint returns. For tax years beginning after December 31,
2010, and before January 1, 2012, the commissioner shall annually adjust the $5,000
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" shall be substituted for
the word "1992." For 2011, 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, 2010. The earned income thresholds 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.
(i) 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. 14. Minnesota Statutes 2011 Supplement, 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;
    (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) the medical expense deduction;
    (iii) the casualty, theft, and disaster loss deduction; and
    (iv) 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), (13), and (16) to (18);
    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;
    (4) amounts subtracted from federal taxable income as provided by section 290.01,
subdivision 19b , clauses (6), (8) to (15) (14), and (17) (16); and
(5) the amount of the net operating loss allowed under section 290.095, subdivision
11, paragraph (c).
    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) "Net minimum tax" means the minimum tax imposed by this section.
    (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.
    (e) "Tentative minimum tax" equals 6.4 percent of alternative minimum taxable
income after subtracting the exemption amount determined under subdivision 3.

    Sec. 15. Minnesota Statutes 2010, 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 (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.
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), (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.
Items of tax preference must not be reduced below zero as a result of the
modifications in this subdivision.

    Sec. 16. Minnesota Statutes 2011 Supplement, section 290.0922, subdivision 2,
is amended to read:
    Subd. 2. Exemptions. The following entities are exempt from the tax imposed
by this section:
(1) corporations exempt from tax under section 290.05;
(2) real estate investment trusts;
(3) regulated investment companies or a fund thereof; and
(4) entities having a valid election in effect under section 860D(b) of the Internal
Revenue Code;
(5) town and farmers' mutual insurance companies;
(6) cooperatives organized under chapter 308A or 308B that provide housing
exclusively to persons age 55 and over and are classified as homesteads under section
273.124, subdivision 3 ; and
(7) a qualified business as defined under section 469.310, subdivision 11, if for the
taxable year all of its property is located in a job opportunity building zone designated
under section 469.314 and all of its payroll is a job opportunity building zone payroll
under section 469.310; and.
(8) an entity, if for the taxable year all of its property is located in an international
economic development zone designated under section 469.322, and all of its payroll is
international economic development zone payroll under section 469.321. The exemption
under this clause applies to taxable years beginning during the duration of the international
economic development zone.
Entities not specifically exempted by this subdivision are subject to tax under this
section, notwithstanding section 290.05.

    Sec. 17. Minnesota Statutes 2011 Supplement, 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) the property of a qualified business as defined under section
469.310, subdivision 11 , that is located in a job opportunity building zone designated under
section 469.314, and (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.
(c) "Minnesota payrolls" means total Minnesota payrolls as provided in section
290.191, subdivision 12 , but does not include: (1) the job opportunity building zone
payroll under section 469.310, subdivision 8, of a qualified business as defined under
section 469.310, subdivision 11, and (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.

    Sec. 18. Minnesota Statutes 2011 Supplement, section 297A.75, subdivision 1, is
amended to read:
    Subdivision 1. Tax collected. The tax on the gross receipts from the sale of the
following exempt items must be imposed and collected as if the sale were taxable and the
rate under section 297A.62, subdivision 1, applied. The exempt items include:
    (1) capital equipment exempt under section 297A.68, subdivision 5;
    (2) building materials for an agricultural processing facility exempt under section
297A.71, subdivision 13 ;
    (3) building materials for mineral production facilities exempt under section
297A.71, subdivision 14 ;
    (4) building materials for correctional facilities under section 297A.71, subdivision
3 ;
    (5) building materials used in a residence for disabled veterans exempt under section
297A.71, subdivision 11 ;
    (6) elevators and building materials exempt under section 297A.71, subdivision 12;
    (7) building materials for the Long Lake Conservation Center exempt under section
297A.71, subdivision 17 ;
    (8) materials and supplies for qualified low-income housing under section 297A.71,
subdivision 23 ;
    (9) materials, supplies, and equipment for municipal electric utility facilities under
section 297A.71, subdivision 35;
    (10) equipment and materials used for the generation, transmission, and distribution
of electrical energy and an aerial camera package exempt under section 297A.68,
subdivision 37;
    (11) tangible personal property and taxable services and construction materials,
supplies, and equipment exempt under section 297A.68, subdivision 41;
    (12) commuter rail vehicle and repair parts under section 297A.70, subdivision
3, clause (11);
    (13) (12) materials, supplies, and equipment for construction or improvement of
projects and facilities under section 297A.71, subdivision 40;
(14) (13) materials, supplies, and equipment for construction or improvement of a
meat processing facility exempt under section 297A.71, subdivision 41;
(15) (14) materials, supplies, and equipment for construction, improvement, or
expansion of an aerospace defense manufacturing facility exempt under section 297A.71,
subdivision 42; and
(16) (15) enterprise information technology equipment and computer software for
use in a qualified data center exempt under section 297A.68, subdivision 42.

    Sec. 19. Minnesota Statutes 2010, section 469.015, subdivision 4, is amended to read:
    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; and
(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
(4) a services or materials contract for a housing project.
For purposes of this paragraph, "services or materials contract" does not include
construction contracts.

    Sec. 20. Minnesota Statutes 2010, section 469.033, subdivision 7, is amended to read:
    Subd. 7. Inactive authorities; transfer of funds; dissolution. The authority may
transfer to the city in and for which it was created all property, assets, cash or other
funds held or used by the authority which were derived from the special benefit tax
for redevelopment levied pursuant to subdivision 6 prior to March 6, 1953, whenever
collected. Upon any such transfer, an authority shall not thereafter levy the tax or exercise
the redevelopment powers of sections 469.001 to 469.047. All cash or other funds
transferred to the city shall be used exclusively for permanent improvements in the city
or the retirement of debts or bonds incurred for permanent improvements in the city.
An authority which transfers its property, assets, cash, or other funds derived from the
special benefit tax for redevelopment and which has not entered into a contract with
the federal government with respect to any low-rent public housing project prior to
March 6, 1953, shall be dissolved as herein provided in this subdivision. After a public
hearing after ten days' published notice thereof in a newspaper of general circulation in
the city, the governing body of a city in and for which an authority has been created
may dissolve the authority if the authority has not entered into any contract with the
federal government or any agency or instrumentality thereof for a loan or a grant with
respect to any urban redevelopment or low-rent public housing project that remains in
effect. The resolution or ordinance dissolving the authority shall be published in the
same manner in which ordinances are published in the city and the authority shall be
dissolved when the resolution or ordinance becomes finally effective. The clerk of the
governing body of the municipality shall furnish to the commissioner of employment and
economic development a certified copy of the resolution or ordinance of the governing
body dissolving the authority. All property, records, assets, cash, or other funds held or
used by an authority shall be transferred to and become the property of the municipality
and cash or other funds shall be used as herein provided. Upon dissolution of an authority,
all rights of an authority against any person, firm, or corporation shall accrue to and
be enforced by the municipality.

    Sec. 21. Minnesota Statutes 2010, section 469.166, subdivision 3, is amended to read:
    Subd. 3. Border city enterprise zone. "Border city enterprise zone" means an area
in the state designated as such an enterprise zone by the commissioner in the cities of
Breckenridge, Dilworth, East Grand Forks, Moorhead, or Ortonville.

    Sec. 22. Minnesota Statutes 2010, section 469.166, subdivision 5, is amended to read:
    Subd. 5. Municipality. "Municipality" means a city, or a county for an area located
outside the boundaries of a city. If an area lies in two or more cities or in both incorporated
and unincorporated areas, "municipality" shall include an entity formed pursuant to
section 471.59 by the governing bodies of the cities with jurisdiction over the incorporated
area and the counties with jurisdiction over the unincorporated area.

    Sec. 23. Minnesota Statutes 2010, section 469.166, subdivision 6, is amended to read:
    Subd. 6. Governing body. "Governing body" means the county board in the case
of a county, the city council or other body designated by its the charter in the case of a
of the city, or the tribal or federal agency recognized as the governing body of an Indian
reservation by the United States Secretary of the Interior.

    Sec. 24. Minnesota Statutes 2010, section 469.167, subdivision 2, is amended to read:
    Subd. 2. Duration. The designation of an area as an a border city enterprise zone
shall be effective for seven years after the date of designation, except that enterprise zones
in border cities eligible to receive allocations for tax reductions under section 469.169,
subdivisions 7 and 8 , and under section 469.171, subdivision 6a or 6b, shall be is effective
until terminated by resolution adopted by the city in which the border city enterprise
zone is located.

    Sec. 25. Minnesota Statutes 2010, section 469.171, subdivision 1, is amended to read:
    Subdivision 1. Authorized types. (a) The following types of tax reductions may
be approved by the commissioner for businesses located in an a border city enterprise
zone, after the governing body of the border city has designated an area or areas, each
consisting of at least 100 acres, of the city not in excess of a total of 400 acres in which the
tax reductions may be provided:
(1) an exemption from the general sales tax imposed by chapter 297A for purchases
of construction materials or equipment for use in the zone if the purchase was made
after the date of application for the zone;
(2) a credit against the income tax of an employer for additional workers employed
in the zone, other than workers employed in construction, up to a maximum of $3,000
per employee per year;
(3) an income tax credit for a percentage of the cost of debt financing to construct
new or expanded facilities in the zone; and
(4) a state paid property tax credit for a portion of the property taxes paid by a new
commercial or industrial facility or the additional property taxes paid by an expansion of
an existing commercial or industrial facility in the zone.
(b) An application for a tax reduction under this subdivision may not be approved
unless the governing body finds that the construction or improvement of the facility is
not likely to have the effect of transferring existing employment from a location outside
of the municipality but within the state.

    Sec. 26. Minnesota Statutes 2010, section 469.171, subdivision 4, is amended to read:
    Subd. 4. Restriction. The tax reductions provided by this section shall not
apply to (1) a facility the primary purpose of which is one of the following: retail food
and beverage services, automobile sales or service, or the provision of recreation or
entertainment, or a private or commercial golf course, country club, massage parlor, tennis
club, skating facility including roller skating, skateboard, and ice skating, racquet sports
facility, including any handball or racquetball court, hot tub facility, suntan facility, or
racetrack; (2) property of a public utility; (3) property used in the operation of a financial
institution; (4) property owned by a fraternal or veterans' organization; or (5) property of a
business operating under a franchise agreement that requires the business to be located in
the state; except that, in an enterprise zone designated under section 469.168, subdivision
4, paragraph (c) , that is not in a city of the first class, tax reductions may be provided to
a retail food or beverage facility or an automobile sales or service facility, or a business
operating under a franchise agreement that requires the business to be located in this state
except for such a franchised retail food or beverage facility.

    Sec. 27. Minnesota Statutes 2010, section 469.171, subdivision 7, is amended to read:
    Subd. 7. Duration. Each tax reduction provided to a business pursuant to this
subdivision shall terminate not longer than five years after the effective date of the tax
reduction for the business unless the business is located in a border city enterprise zone
designated under section 469.168, subdivision 4, paragraph (c), that is not a city of the
first class. Each tax reduction provided to a business that is located in a border city
enterprise zone designated under section 469.168, subdivision 4, paragraph (c), that is not
located in a city of the first class, may be provided until the allocations provided under
subdivision 6a, and under section 469.169, subdivisions 7 and 8, have been expended.
Subject to the limitation in this subdivision, the tax reductions may be provided after
expiration of the zone's designation.

    Sec. 28. Minnesota Statutes 2010, section 469.171, subdivision 9, is amended to read:
    Subd. 9. Recapture. Any business that (1) receives tax reductions authorized by
subdivisions 1 to 8, classification as employment property pursuant to section 469.170, or
an alternative local contribution under section 469.169, subdivision 5; and (2) ceases to
operate its facility located within the border city enterprise zone shall repay the amount of
the tax reduction or local contribution received during the two years immediately before
it ceased to operate in the zone.
The repayment must be paid to the state to the extent it represents a tax reduction
under subdivisions 1 to 8 and to the municipality to the extent it represents a property tax
reduction or other local contribution. Any amount repaid to the state must be credited
to the amount certified as available for tax reductions in the zone pursuant to section
469.169, subdivision 7 the city's allocation. Any amount repaid to the municipality must
be used by the municipality for economic development purposes. The commissioner of
revenue may seek repayment of tax credits from a business ceasing to operate within an
enterprise zone by utilizing any remedies available for the collection of tax.

    Sec. 29. Minnesota Statutes 2010, section 469.171, subdivision 11, is amended to read:
    Subd. 11. Limitations; last eight months of duration. This subdivision applies
only to state tax reductions first authorized by the municipality to be provided to a business
within eight months of the expiration of the border city enterprise zone's designation.
Before agreeing with a business to provide tax reductions, the municipality must
submit the proposed tax reductions to the commissioner for approval. The commissioner
shall review and analyze the proposal in light of, at least: (1) the proposed investment that
the business will make in the zone, (2) the number and quality of new jobs that will be
created in the zone, (3) the overall positive impact on economic activity in the zone, and
(4) the extent to which the impacts in clauses (1) to (3) are dependent upon providing the
state tax reductions to the business. The commissioner shall disapprove the proposal if the
commissioner determines the public benefits of increased investment and employment
resulting from the tax reductions is disproportionately small relative to the cost of the
state tax reductions. If the commissioner disapproves of the proposal, the tax reductions
are not allowed to the business.
If the municipality submits the proposal to the commissioner before expiration
of the zone designation, the authority to grant the tax reductions continues until the
commissioner acts on the proposal.

    Sec. 30. Minnesota Statutes 2010, section 469.172, is amended to read:
469.172 DEVELOPMENT AND REDEVELOPMENT POWERS.
Notwithstanding any contrary provision of law or charter, any city of the first or
second class that contains an a border city enterprise zone or that has been designated as
an enterprise zone may, in addition to its other powers, exercise the powers granted to
a governmental subdivision by sections 469.001 to 469.047, 469.048 to 469.068, and
469.109 to 469.113. Section 469.059, subdivision 15, shall apply applies to the city in
the exercise of the powers granted pursuant to this section. It may exercise the powers
assigned to redevelopment agencies pursuant to sections 469.152 to 469.165, without
limitation to further the purposes of sections 469.001 to 469.047, 469.048 to 469.068, and
469.109 to 469.134. It may exercise the powers set forth in sections 469.001 to 469.047,
469.048 to 469.068, and 469.109 to 469.164 without limitation to further the purposes
and policies set forth in sections 469.152 to 469.165. It may exercise the powers granted
by this subdivision and any other development or redevelopment powers authorized by
other laws, including sections 469.124 to 469.134 and 469.152 to 469.165, independently
or in conjunction with each other as though all the powers had been granted to a single
entity. Any project undertaken to accomplish the purposes of sections 469.001 to 469.047
that qualifies as single-family housing under section 462C.02, subdivision 4, shall be is
subject to the provisions of chapter 462C.
Upon expiration of the designation of the enterprise zone, the powers granted by
this subdivision may be exercised only with respect to any project, program, or activity
commenced or established prior to that date. The powers granted by this subdivision may
only be exercised within the zone.

    Sec. 31. Minnesota Statutes 2010, section 469.173, subdivision 5, is amended to read:
    Subd. 5. Information sharing. Pursuant to section 270B.14, subdivision 3,
the commissioner of revenue may share information with the commissioner or with a
municipality receiving an enterprise zone designation, insofar as necessary to administer
the funding limitations provided by section 469.169, subdivision 7.

    Sec. 32. Minnesota Statutes 2010, section 469.173, subdivision 6, is amended to read:
    Subd. 6. Zone boundary realignment. The commissioner may approve specific
applications by a municipality to amend the boundaries of a border city enterprise zone
or of an area or areas designated pursuant to section 469.171, subdivision 5, at any time.
Boundaries of a zone may not be amended to create noncontiguous subdivisions. If the
commissioner approves the amended boundaries, the change is effective on the date of
approval. Notwithstanding the area limitation under section 469.168, subdivision 3, the
commissioner may approve a specific application to amend the boundaries of an enterprise
zone which is located within five municipalities and was designated in 1984, to increase
its area to not more than 800 acres, and may approve an additional specific application to
amend the boundaries of that enterprise zone to include a sixth municipality or to further
increase its area to include all or part of the territory of a town that surrounds one of
the five municipalities, or both.
Notwithstanding the area limitation under section 469.168, subdivision 3, the
commissioner may approve a specific application to amend the boundaries of an enterprise
zone that is located within four municipalities to include a fifth municipality. The addition
of the fifth municipality may only be approved after the existing municipalities, by
adoption of a resolution by each municipality's governing board, agree to the addition
of the fifth municipality.

    Sec. 33. Minnesota Statutes 2010, section 469.174, subdivision 20, is amended to read:
    Subd. 20. Internal Revenue Code. "Internal Revenue Code" means the Internal
Revenue Code of 1986, as amended through December 31, 1993.

    Sec. 34. Minnesota Statutes 2010, section 469.174, subdivision 25, is amended to read:
    Subd. 25. Increment. "Increment," "tax increment," "tax increment revenues,"
"revenues derived from tax increment," and other similar terms for a district include:
(1) taxes paid by the captured net tax capacity, but excluding any excess taxes, as
computed under section 469.177;
(2) the proceeds from the sale or lease of property, tangible or intangible, to the
extent the property was purchased by the authority with tax increments;
(3) principal and interest received on loans or other advances made by the authority
with tax increments;
(4) interest or other investment earnings on or from tax increments; and
(5) repayments or return of tax increments made to the authority under agreements
for districts for which the request for certification was made after August 1, 1993; and
(6) the market value homestead credit paid to the authority under section 273.1384.

    Sec. 35. Minnesota Statutes 2010, section 469.176, subdivision 7, is amended to read:
    Subd. 7. Parcels not includable in districts. (a) The authority may request
inclusion in a tax increment financing district and the county auditor may certify the
original tax capacity of a parcel or a part of a parcel that qualified under the provisions of
section 273.111 or, 273.112, 273.114, or chapter 473H for taxes payable in any of the five
calendar years before the filing of the request for certification only for:
    (1) a district in which 85 percent or more of the planned buildings and facilities
(determined on the basis of square footage) are a qualified manufacturing facility or a
qualified distribution facility or a combination of both; or
    (2) a housing district.
    (b)(1) A distribution facility means buildings and other improvements to real
property that are used to conduct activities in at least each of the following categories:
    (i) to store or warehouse tangible personal property;
    (ii) to take orders for shipment, mailing, or delivery;
    (iii) to prepare personal property for shipment, mailing, or delivery; and
    (iv) to ship, mail, or deliver property.
    (2) A manufacturing facility includes space used for manufacturing or producing
tangible personal property, including processing resulting in the change in condition of the
property, and space necessary for and related to the manufacturing activities.
    (3) To be a qualified facility, the owner or operator of a manufacturing or distribution
facility must agree to pay and pay 90 percent or more of the employees of the facility at
a rate equal to or greater than 160 percent of the federal minimum wage for individuals
over the age of 20.

    Sec. 36. Minnesota Statutes 2010, section 469.1763, subdivision 6, is amended to read:
    Subd. 6. Pooling permitted for deficits. (a) This subdivision applies only to
districts for which the request for certification was made before August 1, 2001, and
without regard to whether the request for certification was made prior to August 1, 1979.
(b) The municipality for the district may transfer available increments from another
tax increment financing district located in the municipality, if the transfer is necessary to
eliminate a deficit in the district to which the increments are transferred. The municipality
may transfer increments as provided by this subdivision without regard to whether the
transfer or expenditure is authorized by the tax increment financing plan for the district
from which the transfer is made. A deficit in the district for purposes of this subdivision
means the lesser of the following two amounts:
(1)(i) the amount due during the calendar year to pay preexisting obligations of
the district; minus
(ii) the total increments collected or to be collected from properties located within
the district that are available for the calendar year including amounts collected in prior
years that are currently available; plus
(iii) total increments from properties located in other districts in the municipality
including amounts collected in prior years that are available to be used to meet the district's
obligations under this section, excluding this subdivision, or other provisions of law (but
excluding a special tax under section 469.1791 and the grant program under Laws 1997,
chapter 231, article 1, section 19, or Laws 2001, First Special Session chapter 5); or
(2) the reduction in increments collected from properties located in the district for
the calendar year as a result of the changes in class rates in Laws 1997, chapter 231, article
1; Laws 1998, chapter 389, article 2; and Laws 1999, chapter 243, and Laws 2001, First
Special Session chapter 5, or the elimination of the general education tax levy under
Laws 2001, First Special Session chapter 5.
The authority may compute the deficit amount under clause (1) only (without regard
to the limit under clause (2)) if the authority makes an irrevocable commitment, by
resolution, to use increments from the district to which increments are to be transferred and
any transferred increments are only used to pay preexisting obligations and administrative
expenses for the district that are required to be paid under section 469.176, subdivision
4h , paragraph (a).
(c) A preexisting obligation means:
(1) bonds issued and sold before August 1, 2001, or bonds issued pursuant to a
binding contract requiring the issuance of bonds entered into before July 1, 2001, and
bonds issued to refund such bonds or to reimburse expenditures made in conjunction with
a signed contractual agreement entered into before August 1, 2001, to the extent that the
bonds are secured by a pledge of increments from the tax increment financing district; and
(2) binding contracts entered into before August 1, 2001, to the extent that the
contracts require payments secured by a pledge of increments from the tax increment
financing district.
(d) The municipality may require a development authority, other than a seaway port
authority, to transfer available increments including amounts collected in prior years that
are currently available for any of its tax increment financing districts in the municipality to
make up an insufficiency in another district in the municipality, regardless of whether the
district was established by the development authority or another development authority.
This authority applies notwithstanding any law to the contrary, but applies only to a
development authority that:
(1) was established by the municipality; or
(2) the governing body of which is appointed, in whole or part, by the municipality
or an officer of the municipality or which consists, in whole or part, of members of
the governing body of the municipality. The municipality may use this authority only
after it has first used all available increments of the receiving development authority to
eliminate the insufficiency and exercised any permitted action under section 469.1792,
subdivision 3 , for preexisting districts of the receiving development authority to eliminate
the insufficiency.
(e) The authority under this subdivision to spend tax increments outside of the area
of the district from which the tax increments were collected:
(1) is an exception to the restrictions under section 469.176, subdivisions 4b, 4c,
4d, 4e, 4i, and 4j ; the expenditure limits under section 469.176, subdivision 1c; and the
other provisions of this section; and the percentage restrictions under subdivision 2 must
be calculated after deducting increments spent under this subdivision from the total
increments for the district; and
(2) applies notwithstanding the provisions of the Tax Increment Financing Act in
effect for districts for which the request for certification was made before June 30, 1982,
or any other law to the contrary.
(f) If a preexisting obligation requires the development authority to pay an amount
that is limited to the increment from the district or a specific development within the
district and if the obligation requires paying a higher amount to the extent that increments
are available, the municipality may determine that the amount due under the preexisting
obligation equals the higher amount and may authorize the transfer of increments
under this subdivision to pay up to the higher amount. The existence of a guarantee of
obligations by the individual or entity that would receive the payment under this paragraph
is disregarded in the determination of eligibility to pool under this subdivision. The
authority to transfer increments under this paragraph may only be used to the extent
that the payment of all other preexisting obligations in the municipality due during the
calendar year have been satisfied.
(g) For transfers of increments made in calendar year 2005 and later, the reduction in
increments as a result of the elimination of the general education tax levy for purposes of
paragraph (b), clause (2), for a taxes payable year equals the general education tax rate
for the school district under Minnesota Statutes 2000, section 273.1382, subdivision 1,
for taxes payable in 2001, multiplied by the captured tax capacity of the district for the
current taxes payable year.

    Sec. 37. Minnesota Statutes 2010, section 469.1764, subdivision 1, is amended to read:
    Subdivision 1. Scope; application. (a) This section applies to a tax increment
financing district or area added to a district, if the request for certification of the district or
the area added to the district was made after July 31, 1979, and before July 1, 1982.
(b) This section, section 469.1763, subdivision 6, and any special law applying to
the district are the exclusive authority to spend tax increments on activities located outside
of the geographic area of a tax increment financing district that is subject to this section.
(c) This section does not apply to increments from a district that is subject to the
provisions of this section, if:
(1) the district was decertified before the enactment of this section and all increments
spent on activities located outside of the geographic area of the district were repaid and
distributed as excess increments under section 469.176, subdivision 2; or
(2) the use of increments on activities located outside of the geographic area of
the district consists solely of payment of debt service on bonds under section 469.129,
subdivision 2 , before its repeal, and any bonds issued to refund bonds issued under that
subdivision.

    Sec. 38. Minnesota Statutes 2010, section 469.177, subdivision 1, is amended to read:
    Subdivision 1. Original net tax capacity. (a) Upon or after adoption of a tax
increment financing plan, the auditor of any county in which the district is situated shall,
upon request of the authority, certify the original net tax capacity of the tax increment
financing district and that portion of the district overlying any subdistrict as described in
the tax increment financing plan and shall certify in each year thereafter the amount by
which the original net tax capacity has increased or decreased as a result of a change in tax
exempt status of property within the district and any subdistrict, reduction or enlargement
of the district or changes pursuant to subdivision 4. The auditor shall certify the amount
within 30 days after receipt of the request and sufficient information to identify the parcels
included in the district. The certification relates to the taxes payable year as provided in
subdivision 6.
    (b) If the classification under section 273.13 of property located in a district changes
to a classification that has a different assessment ratio, the original net tax capacity of that
property must be redetermined at the time when its use is changed as if the property had
originally been classified in the same class in which it is classified after its use is changed.
    (c) The amount to be added to the original net tax capacity of the district as a result
of previously tax exempt real property within the district becoming taxable equals the net
tax capacity of the real property as most recently assessed pursuant to section 273.18 or, if
that assessment was made more than one year prior to the date of title transfer rendering
the property taxable, the net tax capacity assessed by the assessor at the time of the
transfer. If improvements are made to tax exempt property after the municipality approves
the district and before the parcel becomes taxable, the assessor shall, at the request of
the authority, separately assess the estimated market value of the improvements. If the
property becomes taxable, the county auditor shall add to original net tax capacity, the net
tax capacity of the parcel, excluding the separately assessed improvements. If substantial
taxable improvements were made to a parcel after certification of the district and if the
property later becomes tax exempt, in whole or part, as a result of the authority acquiring
the property through foreclosure or exercise of remedies under a lease or other revenue
agreement or as a result of tax forfeiture, the amount to be added to the original net tax
capacity of the district as a result of the property again becoming taxable is the amount
of the parcel's value that was included in original net tax capacity when the parcel was
first certified. The amount to be added to the original net tax capacity of the district as a
result of enlargements equals the net tax capacity of the added real property as most
recently certified by the commissioner of revenue as of the date of modification of the tax
increment financing plan pursuant to section 469.175, subdivision 4.
    (d) If the net tax capacity of a property increases because the property no longer
qualifies under the Minnesota Agricultural Property Tax Law, section 273.111; the
Minnesota Open Space Property Tax Law, section 273.112; or the Metropolitan
Agricultural Preserves Act, chapter 473H, the Rural Preserve Property Tax Program under
section 273.114, or because platted, unimproved property is improved or market value is
increased after approval of the plat under section 273.11, subdivision 14, 14a, or 14b, the
increase in net tax capacity must be added to the original net tax capacity.
    (e) The amount to be subtracted from the original net tax capacity of the district
as a result of previously taxable real property within the district becoming tax exempt,
or a reduction in the geographic area of the district, shall be the amount of original net
tax capacity initially attributed to the property becoming tax exempt or being removed
from the district. If the net tax capacity of property located within the tax increment
financing district is reduced by reason of a court-ordered abatement, stipulation agreement,
voluntary abatement made by the assessor or auditor or by order of the commissioner of
revenue, the reduction shall be applied to the original net tax capacity of the district when
the property upon which the abatement is made has not been improved since the date of
certification of the district and to the captured net tax capacity of the district in each year
thereafter when the abatement relates to improvements made after the date of certification.
The county auditor may specify reasonable form and content of the request for certification
of the authority and any modification thereof pursuant to section 469.175, subdivision 4.
    (f) If a parcel of property contained a substandard building or improvements
described in section 469.174, subdivision 10, paragraph (e), that were demolished or
removed and if the authority elects to treat the parcel as occupied by a substandard
building under section 469.174, subdivision 10, paragraph (b), or by improvements under
section 469.174, subdivision 10, paragraph (e), the auditor shall certify the original net tax
capacity of the parcel using the greater of (1) the current net tax capacity of the parcel, or
(2) the estimated market value of the parcel for the year in which the building or other
improvements were demolished or removed, but applying the class rates for the current
year.
    (g) For a redevelopment district qualifying under section 469.174, subdivision 10,
paragraph (a), clause (4), as a qualified disaster area, the auditor shall certify the value of
the land as the original tax capacity for any parcel in the district that contains a building
that suffered substantial damage as a result of the disaster or emergency.

    Sec. 39. Minnesota Statutes 2010, section 469.1793, is amended to read:
469.1793 DEVELOPER OBLIGATIONS CONTINUED.
If a developer or other private entity agreed to make payments to the authority or
municipality to reimburse the municipality for the state aid offset under Minnesota Statutes
2000, section 273.1399, the obligation continues in effect, notwithstanding the repeal of
section 273.1399. Payments received by the development authority are increments for
purposes of the state grant program under section 469.1799.

    Sec. 40. Minnesota Statutes 2010, section 469.1813, subdivision 6b, is amended to
read:
    Subd. 6b. Extended duration limit. (a) Notwithstanding the provisions of
subdivision 6, a political subdivision may grant an abatement for a period of up to 20
years, if the abatement is for a qualified business.
(b) To be a qualified business for purposes of this subdivision, at least 50 percent of
the payroll of the operations of the business that qualify for the abatement must be for
employees engaged in one of the following lines of business or any combination of them:
(1) manufacturing;
(2) agricultural processing;
(3) mining;
(4) research and development;
(5) warehousing; or
(6) qualified high technology.
Alternatively, a qualified business also includes a taxpayer whose real and personal
property is subject to valuation under Minnesota Rules, chapter 8100.
(c)(1) "Manufacturing" means the material staging and production of tangible
personal property by procedures commonly regarded as manufacturing, processing,
fabrication, or assembling which changes some existing material into new shapes, new
qualities, or new combinations.
(2) "Mining" has the meaning given in section 613(c) of the Internal Revenue Code
of 1986.
(3) "Agricultural processing" means transforming, packaging, sorting, or grading
livestock or livestock products, agricultural commodities, or plants or plant products into
goods that are used for intermediate or final consumption including goods for nonfood use.
(4) "Research and development" means qualified research as defined in section
41(d) of the Internal Revenue Code of 1986.
(5) "Qualified high technology" means one or more of the following activities:
(i) advanced computing, which is any technology used in the design and development
of any of the following:
(A) computer hardware and software;
(B) data communications; and
(C) information technologies;
(ii) advanced materials, which are materials with engineered properties created
through the development of specialized process and synthesis technology;
(iii) biotechnology, which is any technology that uses living organisms, cells,
macromolecules, microorganisms, or substances from living organisms to make or modify
a product, improve plants or animals, or develop microorganisms for useful purposes;
(iv) electronic device technology, which is any technology that involves
microelectronics, semiconductors, electronic equipment, and instrumentation, radio
frequency, microwave, and millimeter electronics, and optical and optic-electrical devices,
or data and digital communications and imaging devices;
(v) engineering or laboratory testing related to the development of a product;
(vi) technology that assists in the assessment or prevention of threats or damage to
human health or the environment, including, but not limited to, environmental cleanup
technology, pollution prevention technology, or development of alternative energy sources;
(vii) medical device technology, which is any technology that involves medical
equipment or products other than a pharmaceutical product that has therapeutic or
diagnostic value and is regulated; or
(viii) advanced vehicles technology which is any technology that involves electric
vehicles, hybrid vehicles, or alternative fuel vehicles, or components used in the
construction of electric vehicles, hybrid vehicles, or alternative fuel vehicles. An electric
vehicle is a road vehicle that draws propulsion energy only from an onboard source of
electrical energy. A hybrid vehicle is a road vehicle that can draw propulsion energy from
both a consumable fuel and a rechargeable energy storage system.
(d) The authority to grant new abatements under this subdivision expires on July 1,
2004, except that the authority to grant new abatements for real and personal property
subject to valuation under Minnesota Rules, chapter 8100, does not expire.

    Sec. 41. Minnesota Statutes 2010, section 473F.02, subdivision 3, is amended to read:
    Subd. 3. Commercial-industrial property. "Commercial-industrial property"
means the following categories of property, as defined in section 273.13, excluding that
portion of such property (1) which may, by law, constitute the tax base for a tax increment
pledged under section 469.042 or 469.162, certification of which was requested prior to
August 1, 1979, to the extent and while such tax increment is so pledged; or (2) which is
exempt from taxation under section 272.02:
(a) That portion of class 3 property defined in Minnesota Statutes 1971, section
273.13 , consisting of stocks of merchandise and furniture and fixtures used therewith;
manufacturers' materials and manufactured articles; and tools, implements and machinery,
whether fixtures or otherwise.
(b) That portion of class 4 property defined in Minnesota Statutes 1971, section
273.13 , which is either used or zoned for use for any commercial or industrial purpose,
except for such property which is, or, in the case of property under construction, will when
completed be used exclusively for residential occupancy and the provision of services
to residential occupants thereof. Property shall be considered as used exclusively for
residential occupancy only if each of not less than 80 percent of its occupied residential
units is, or, in the case of property under construction, will when completed be occupied
under an oral or written agreement for occupancy over a continuous period of not less
than 30 days.
If the classification of property prescribed by section 273.13 is modified by
legislative amendment, the references in this subdivision shall be to such successor class
or classes of property, or portions thereof, as embrace the kinds of property designated
in this subdivision.

    Sec. 42. REPEALER.
Minnesota Statutes 2010, sections 272.02, subdivision 83; 290.06, subdivisions
24 and 32; 297A.68, subdivision 41; 469.042, subdivisions 2, 3, and 4; 469.043;
469.059, subdivision 13; 469.129; 469.134; 469.162, subdivision 2; 469.1651; 469.166,
subdivisions 7, 8, 9, 10, 11, and 12; 469.167, subdivisions 1 and 3; 469.168; 469.169,
subdivisions 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, and 13; 469.170, subdivisions 1, 2, 3, 4, 5, 5a,
5b, 5c, 5d, 5e, 6, 7, and 8; 469.171, subdivisions 2, 5, 6a, and 6b; 469.173, subdivisions 1
and 3; 469.1765; 469.1791; 469.1799, subdivision 2; 469.301, subdivisions 1, 2, 3, 4, and
5; 469.302; 469.303; 469.304; 469.321; 469.3215; 469.322; 469.323; 469.324; 469.325;
469.326; 469.327; 469.328; 469.329; and 473.680, are repealed.

    Sec. 43. EFFECTIVE DATE.
This act is effective August 1, 2012, and the tax increment financing provisions
apply to all districts, regardless of when the request for certification was made.

ARTICLE 3

PUBLIC FINANCE

    Section 1. Minnesota Statutes 2010, section 216C.436, subdivision 7, is amended to
read:
    Subd. 7. Repayment. An implementing entity that finances an energy improvement
under this section must:
(1) secure payment with a lien against the benefited qualifying real property; and
(2) collect repayments as a special assessment as provided for in section 429.101
or by charter, provided that special assessments may be made payable in up to 20 equal
annual installments.
If the implementing entity is an authority, the local government that authorized
the authority to act as implementing entity shall impose and collect special assessments
necessary to pay debt service on bonds issued by the implementing entity under
subdivision 8, and shall transfer all collections of the assessments upon receipt to the
authority.

    Sec. 2. Minnesota Statutes 2010, section 216C.436, subdivision 8, is amended to read:
    Subd. 8. Bond issuance; repayment. (a) An implementing entity may issue
revenue bonds as provided in chapter 475 for the purposes of this section, provided that
the revenue bonds must not be payable more than 20 years from the date of issuance.
(b) The bonds must be payable as to both principal and interest solely from the
revenues from the assessments established in subdivision 7.
(c) No holder of bonds issued under this subdivision may compel any exercise of the
taxing power of the implementing entity that issued the bonds to pay principal or interest
on the bonds, and if the implementing entity is an authority, no holder of the bonds may
compel any exercise of the taxing power of the local government. Bonds issued under
this subdivision are not a debt or obligation of the issuer or any local government that
issued them, nor is the payment of the bonds enforceable out of any money other than the
revenue pledged to the payment of the bonds.

    Sec. 3. Minnesota Statutes 2010, section 373.40, subdivision 1, is amended to read:
    Subdivision 1. Definitions. For purposes of this section, the following terms have
the meanings given.
(a) "Bonds" means an obligation as defined under section 475.51.
(b) "Capital improvement" means acquisition or betterment of public lands,
buildings, or other improvements within the county for the purpose of a county courthouse,
administrative building, health or social service facility, correctional facility, jail, law
enforcement center, hospital, morgue, library, park, qualified indoor ice arena, roads
and bridges, public works facilities, fairgrounds buildings, and records and data storage
facilities and the acquisition of development rights in the form of conservation easements
under chapter 84C. An improvement must have an expected useful life of five years or
more to qualify. "Capital improvement" does not include a recreation or sports facility
building (such as, but not limited to, a gymnasium, ice arena, racquet sports facility,
swimming pool, exercise room or health spa), unless the building is part of an outdoor
park facility and is incidental to the primary purpose of outdoor recreation.
(c) "Metropolitan county" means a county located in the seven-county metropolitan
area as defined in section 473.121 or a county with a population of 90,000 or more.
(d) "Population" means the population established by the most recent of the
following (determined as of the date the resolution authorizing the bonds was adopted):
(1) the federal decennial census,
(2) a special census conducted under contract by the United States Bureau of the
Census, or
(3) a population estimate made either by the Metropolitan Council or by the state
demographer under section 4A.02.
(e) "Qualified indoor ice arena" means a facility that meets the requirements of
section 373.43.
(f) "Tax capacity" means total taxable market value, but does not include captured
market value.

    Sec. 4. Minnesota Statutes 2010, section 373.40, subdivision 2, is amended to read:
    Subd. 2. Application of election requirement. (a) Bonds issued by a county
to finance capital improvements under an approved capital improvement plan are not
subject to the election requirements of section 375.18 or 475.58. The bonds must be
approved by vote of at least three-fifths of the members of the county board. In the case
of a metropolitan county, the bonds must be approved by vote of at least two-thirds of
the members of the county board.
(b) Before issuance of bonds qualifying under this section, the county must publish
a notice of its intention to issue the bonds 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 ten, but not more than 28, days before the date of the hearing.
(c) A county may issue the bonds only upon obtaining the approval of a majority of
the voters voting on the question of issuing the obligations, if a petition requesting a vote
on the issuance is signed by voters equal to five percent of the votes cast in the county in
the last county general election and is filed with the county auditor within 30 days after
the public hearing. The commissioner of revenue shall prepare a suggested form of the
question to be presented at the election. If the county elects not to submit the question to
the voters, the county shall not propose the issuance of bonds under this section for the
same purpose and in the same amount for a period of 365 days from the date of receipt
of the petition. If the question of issuing the bonds is submitted and not approved by the
voters, the provisions of section 475.58, subdivision 1a, apply.

    Sec. 5. Minnesota Statutes 2010, section 373.40, subdivision 4, is amended to read:
    Subd. 4. Limitations on amount. A county may not issue bonds under this section
if the maximum amount of principal and interest to become due in any year on all the
outstanding bonds issued pursuant to this section (including the bonds to be issued) will
equal or exceed 0.12 percent of taxable market value of property in the county. Calculation
of the limit must be made using the taxable market value for the taxes payable year in
which the obligations are issued and sold, provided that, for purposes of determining
the principal and interest due in any year, the county may deduct the amount of interest
expected to be paid or reimbursed to the county by the federal government in that year on
any outstanding bonds or the bonds to be issued. This section does not limit the authority
to issue bonds under any other special or general law.

    Sec. 6. Minnesota Statutes 2010, section 474A.02, subdivision 23a, is amended to read:
    Subd. 23a. Qualified bonds. "Qualified bonds" means the specific type or types
of obligations that are subject to the annual volume cap. Qualified bonds include the
following types of obligations as defined in federal tax law:
(a) "public facility bonds" means "exempt facility bonds" as defined in federal
tax law, except for residential rental project bonds, which are those obligations issued
to finance airports, docks and wharves, mass commuting facilities, facilities for the
furnishing of water, sewage facilities, solid waste disposal facilities, facilities for the
local furnishing of electric energy or gas, local district heating or cooling facilities, and
qualified hazardous waste facilities. New bonds and other obligations are ineligible to
receive state allocations or entitlement authority for public facility projects under this
section if they have been issued:
(1) for the purpose of refinancing, refunding, or otherwise defeasing existing debt;
and
(2) more than one calendar year prior to the date of application;
(b) "residential rental project bonds" which are those obligations issued to finance
qualified residential rental projects;
(c) "mortgage bonds";
(d) "small issue bonds" issued to finance manufacturing projects and the acquisition
or improvement of agricultural real or personal property under sections 41C.01 to 41C.13;
(e) "student loan bonds" issued by or on behalf of the Minnesota Office of Higher
Education;
(f) "redevelopment bonds";
(g) "governmental bonds" with a nonqualified amount in excess of $15,000,000 as
set forth in section 141(b)5 of federal tax law; and
(h) "enterprise zone facility bonds" issued to finance facilities located within
empowerment zones or enterprise communities, as authorized under Public Law 103-66,
section 13301 section 1394 of the Internal Revenue Code.

    Sec. 7. Minnesota Statutes 2010, section 475.521, subdivision 2, is amended to read:
    Subd. 2. Election requirement. (a) Bonds issued by a municipality to finance
capital improvements under an approved capital improvements plan are not subject to the
election requirements of section 475.58. The bonds must be approved by an affirmative
vote of three-fifths of the members of a five-member governing body. In the case of a
governing body having more or less than five members, the bonds must be approved by a
vote of at least two-thirds of the members of the governing body.
(b) Before the issuance of bonds qualifying under this section, the municipality must
publish a notice of its intention to issue the bonds and the date and time of the hearing
to obtain public comment on the matter. The notice must be published in the official
newspaper of the municipality or in a newspaper of general circulation in the municipality.
Additionally, the notice may be posted on the official Web site, if any, of the municipality.
The notice must be published at least 14 ten but not more than 28 days before the date
of the hearing.
(c) A municipality may issue the bonds only after obtaining the approval of a
majority of the voters voting on the question of issuing the obligations, if a petition
requesting a vote on the issuance is signed by voters equal to five percent of the votes cast
in the municipality in the last municipal general election and is filed with the clerk within
30 days after the public hearing. The commissioner of revenue shall prepare a suggested
form of the question to be presented at the election. If the municipality elects not to submit
the question to the voters, the municipality shall not propose the issuance of bonds under
this section for the same purpose and in the same amount for a period of 365 days from the
date of receipt of the petition. If the question of issuing the bonds is submitted and not
approved by the voters, the provisions of section 475.58, subdivision 1a, apply.

    Sec. 8. Minnesota Statutes 2010, section 475.521, subdivision 4, is amended to read:
    Subd. 4. Limitations on amount. A municipality may not issue bonds under
this section if the maximum amount of principal and interest to become due in any
year on all the outstanding bonds issued under this section, including the bonds to be
issued, will equal or exceed 0.16 percent of the taxable market value of property in the
municipality. Calculation of the limit must be made using the taxable market value for
the taxes payable year in which the obligations are issued and sold, provided that, for
purposes of determining the principle and interest due in any year, the municipality may
deduct the amount of interest expected to be paid or reimbursed to the municipality by the
federal government in that year on any outstanding bonds or the bonds to be issued. In
the case of a municipality with a population of 2,500 or more, the bonds are subject to
the net debt limits under section 475.53. In the case of a shared facility in which more
than one municipality participates, upon compliance by each participating municipality
with the requirements of subdivision 2, the limitations in this subdivision and the net debt
represented by the bonds shall be allocated to each participating municipality in proportion
to its required financial contribution to the financing of the shared facility, as set forth in
the joint powers agreement relating to the shared facility. This section does not limit the
authority to issue bonds under any other special or general law.

    Sec. 9. Minnesota Statutes 2010, section 475.58, subdivision 3b, is amended to read:
    Subd. 3b. Street reconstruction. (a) A municipality may, without regard to
the election requirement under subdivision 1, issue and sell obligations for street
reconstruction, if the following conditions are met:
    (1) the streets are reconstructed under a street reconstruction plan that describes the
street reconstruction to be financed, the estimated costs, and any planned reconstruction
of other streets in the municipality over the next five years, and the plan and issuance of
the obligations has been approved by a vote of all of the members of the governing body
present at the meeting following a public hearing for which notice has been published in
the official newspaper at least ten days but not more than 28 days prior to the hearing; and
    (2) if a petition requesting a vote on the issuance is signed by voters equal to
five percent of the votes cast in the last municipal general election and is filed with the
municipal clerk within 30 days of the public hearing, the municipality may issue the bonds
only after obtaining the approval of a majority of the voters voting on the question of the
issuance of the obligations. If the municipality elects not to submit the question to the
voters, the municipality shall not propose the issuance of bonds under this section for the
same purpose and in the same amount for a period of 365 days from the date of receipt
of the petition. If the question of issuing the bonds is submitted and not approved by the
voters, the provisions of subdivision 1a, apply.
    (b) Obligations issued under this subdivision are subject to the debt limit of the
municipality and are not excluded from net debt under section 475.51, subdivision 4.
    (c) For purposes of this subdivision, street reconstruction includes utility
replacement and relocation and other activities incidental to the street reconstruction, turn
lanes and other improvements having a substantial public safety function, realignments,
other modifications to intersect with state and county roads, and the local share of state
and county road projects.
    (d) Except in the case of turn lanes, safety improvements, realignments, intersection
modifications, and the local share of state and county road projects, street reconstruction
does not include the portion of project cost allocable to widening a street or adding curbs
and gutters where none previously existed.