1.1 	A bill for an act
1.2 	relating to taxation; increasing state aids to education; increasing certain 
1.3 	homestead market value credits; increasing amounts of property tax refunds and 
1.4 	targeting refunds for homeowners; modifying and increasing aids paid to cities 
1.5 	and counties;amending Minnesota Statutes 2006, sections 126C.10, subdivision 
1.6 	2; 126C.17, subdivisions 1, 2, by adding a subdivision; 273.1384, subdivisions 
1.7 	1, 2; 290A.04, subdivisions 2, 2h, 4; 477A.011, subdivision 34; 477A.013, 
1.8 	subdivision 8; 477A.03, subdivisions 2a, 2b.
1.9 	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

1.10 	Section 1. Minnesota Statutes 2006, section 126C.10, subdivision 2, is amended to read:
1.11 		Subd. 2.Basic revenue. The basic revenue for each district equals the formula 
1.12 	allowance times the adjusted marginal cost pupil units for the school year. ~~The formula~~ 
1.13 	~~allowance for fiscal year 2005 is $4,601. The formula allowance for fiscal year 2006 is~~ 
1.14 	~~$4,783.~~ The formula allowance for fiscal ~~year~~ years 2007 and 2008 ~~subsequent years~~ is 
1.15 	$4,974. The formula allowance for fiscal year 2009 and subsequent years is $4,974, plus 
1.16 	the referendum transfer allowance in section 126C.17, subdivision 14.

1.17 	Sec. 2. Minnesota Statutes 2006, section 126C.17, subdivision 1, is amended to read:
1.18 		Subdivision 1.Referendum allowance. (a) For fiscal year 2003 and later, a district's 
1.19 	initial referendum revenue allowance equals the sum of the allowance under section 
1.20 	126C.16, subdivision 2, plus any additional allowance per resident marginal cost pupil 
1.21 	unit authorized under subdivision 9 before May 1, 2001, for fiscal year 2002 and later, 
1.22 	plus the referendum conversion allowance approved under subdivision 13, minus $415. 
1.23 	For districts with more than one referendum authority, the reduction must be computed 
1.24 	separately for each authority. The reduction must be applied first to the referendum 
2.1 	conversion allowance and next to the authority with the earliest expiration date. A 
2.2 	district's initial referendum revenue allowance may not be less than zero. 
2.3 	(b) For fiscal year 2003, a district's referendum revenue allowance equals the initial 
2.4 	referendum allowance plus any additional allowance per resident marginal cost pupil unit 
2.5 	authorized under subdivision 9 between April 30, 2001, and December 30, 2001, for 
2.6 	fiscal year 2003 and later.
2.7 	(c) For fiscal year 2004 ~~and later~~ through 2008, a district's referendum revenue 
2.8 	allowance equals the sum of:
2.9 	(1) the product of (i) the ratio of the resident marginal cost pupil units the district 
2.10 	would have counted for fiscal year 2004 under Minnesota Statutes 2002, section 126C.05, 
2.11 	to the district's resident marginal cost pupil units for fiscal year 2004, times (ii) the initial 
2.12 	referendum allowance plus any additional allowance per resident marginal cost pupil unit 
2.13 	authorized under subdivision 9 between April 30, 2001, and May 30, 2003, for fiscal 
2.14 	year 2003 and later, plus 
2.15 	(2) any additional allowance per resident marginal cost pupil unit authorized under 
2.16 	subdivision 9 after May 30, 2003, for fiscal year 2005 and later.
2.17 	(d) For fiscal year 2009 and later, a district's preliminary referendum revenue 
2.18 	allowance equals the sum of:
2.19 	(1) the product of (i) the ratio of the resident marginal cost pupil units the district 
2.20 	would have counted for fiscal year 2004 under Minnesota Statutes 2002, section 126C.05, 
2.21 	to the district's resident marginal cost pupil units for fiscal year 2004, times (ii) the initial 
2.22 	referendum allowance plus any additional allowance per resident marginal cost pupil unit 
2.23 	authorized under subdivision 9 between April 30, 2001, and May 30, 2003, for fiscal 
2.24 	year 2003 and later, plus
2.25 	(2) any additional allowance per resident marginal cost pupil unit authorized under 
2.26 	subdivision 9 after May 30, 2003, for fiscal year 2005 and later.
2.27 	(e) For fiscal year 2009 and later, a district's referendum revenue allowance 
2.28 	equals the district's preliminary referendum allowance authorized under paragraph (d) 
2.29 	for fiscal year 2009 and later, plus any allowance per resident marginal cost pupil unit 
2.30 	authorized under subdivision 9 before May 1, 2007, for fiscal year 2008 and later, minus 
2.31 	the referendum transfer allowance under section 14. For districts with more than one 
2.32 	referendum authority, the reduction must be computed separately for each authority. The 
2.33 	reduction must be applied first to the referendum authority with the earliest expiration date 
2.34 	and then sequentially based on the next earliest expiration date. A district's referendum 
2.35 	revenue allowance may not be less than zero.

3.1 	Sec. 3. Minnesota Statutes 2006, section 126C.17, subdivision 2, is amended to read:
3.2 		Subd. 2.Referendum allowance limit. (a) Notwithstanding subdivision 1, for 
3.3 	fiscal year 2007 and later, a district's referendum allowance must not exceed the greater of:
3.4 	(1) the sum of: (i) a district's referendum allowance for fiscal year 1994 times 1.177
3.5 	times the annual inflationary increase as calculated under paragraph (b) plus (ii) its 
3.6 	referendum conversion allowance for fiscal year 2003, minus (iii) $215, minus (iv) the 
3.7 	referendum transfer allowance for each fiscal year;
3.8 	(2) the greater of (i): 26 percent of the formula allowance minus the referendum 
3.9 	transfer allowance for each fiscal year or (ii) $1,294 times the annual inflationary increase 
3.10 	as calculated under paragraph (b) minus the referendum transfer allowance for each 
3.11 	fiscal year; or
3.12 	(3) for a newly reorganized district created after July 1, 2006, the referendum 
3.13 	revenue authority for each reorganizing district in the year preceding reorganization 
3.14 	divided by its resident marginal cost pupil units for the year preceding reorganization
3.15 	minus the referendum transfer allowance for each fiscal year.
3.16 	(b) For purposes of this subdivision, for fiscal year 2005 and later, "inflationary 
3.17 	increase" means one plus the percentage change in the Consumer Price Index for urban 
3.18 	consumers, as prepared by the United States Bureau of Labor Standards, for the current 
3.19 	fiscal year to fiscal year 2004. For fiscal years 2009 and later, for purposes of paragraph 
3.20 	(a), clause (1), the inflationary increase equals the inflationary increase for fiscal year 
3.21 	2008 plus one-fourth of the percentage increase in the formula allowance for that year 
3.22 	compared with the formula allowance for fiscal year 2008.

3.23 	Sec. 4. Minnesota Statutes 2006, section 126C.17, is amended by adding a subdivision 
3.24 	to read:
3.25 		Subd. 14.Referendum transfer allowance. The referendum transfer allowance for 
3.26 	fiscal year 2009 and subsequent years is $.......

3.27 	Sec. 5. Minnesota Statutes 2006, section 273.1384, subdivision 1, is amended to read:
3.28 		Subdivision 1.Residential homestead market value credit. Each county auditor 
3.29 	shall determine a homestead credit for each class 1a, 1b, and 2a homestead property 
3.30 	within the county equal to ~~0.4~~ ... percent of the first ~~$76,000~~ $....... of market value 
3.31 	of the property minus ~~.09~~ ... percent of the market value in excess of ~~$76,000~~ $........ 
3.32 	The credit amount may not be less than zero. In the case of an agricultural or resort 
3.33 	homestead, only the market value of the house, garage, and immediately surrounding one 
3.34 	acre of land is eligible in determining the property's homestead credit. In the case of a 
4.1 	property that is classified as part homestead and part nonhomestead, (i) the credit shall 
4.2 	apply only to the homestead portion of the property, but (ii) if a portion of a property is 
4.3 	classified as nonhomestead solely because not all the owners occupy the property, not all 
4.4 	the owners have qualifying relatives occupying the property, or solely because not all the 
4.5 	spouses of owners occupy the property, the credit amount shall be initially computed as 
4.6 	if that nonhomestead portion were also in the homestead class and then prorated to the 
4.7 	owner-occupant's percentage of ownership. For the purpose of this section, when an 
4.8 	owner-occupant's spouse does not occupy the property, the percentage of ownership for 
4.9 	the owner-occupant spouse is one-half of the couple's ownership percentage.

4.10 	EFFECTIVE DATE. This section is effective for taxes levied in 2007, payable 
4.11 	in 2008, and thereafter.

4.12 	Sec. 6. Minnesota Statutes 2006, section 273.1384, subdivision 2, is amended to read:
4.13 		Subd. 2.Agricultural homestead market value credit. Property classified as class 
4.14 	2a agricultural homestead is eligible for an agricultural credit. The credit is computed 
4.15 	using the property's agricultural credit market value, defined for this purpose as the 
4.16 	property's class 2a market value excluding the market value of the house, garage, and 
4.17 	immediately surrounding one acre of land. The credit is equal to ~~0.3~~ ... percent of the first 
4.18 	~~$115,000~~ $....... of the property's agricultural credit market value minus ~~.05~~ ... percent 
4.19 	of the property's agricultural credit market value in excess of ~~$115,000~~ $......., subject to 
4.20 	a maximum reduction of ~~$115~~ $........ In the case of property that is classified in part as 
4.21 	class 2a agricultural homestead and in part as class 2b nonhomestead farm land solely 
4.22 	because not all the owners occupy or farm the property, not all the owners have qualifying 
4.23 	relatives occupying or farming the property, or solely because not all the spouses of 
4.24 	owners occupy the property, the credit must be initially computed as if that nonhomestead 
4.25 	agricultural land was also classified as class 2a agricultural homestead and then prorated 
4.26 	to the owner-occupant's percentage of ownership.

4.27 	EFFECTIVE DATE. This section is effective for taxes levied in 2007, payable 
4.28 	in 2008, and thereafter.

4.29 	Sec. 7. Minnesota Statutes 2006, section 290A.04, subdivision 2, is amended to read:
4.30 		Subd. 2.Homeowners. A claimant whose property taxes payable are in excess 
4.31 	of the percentage of the household income stated below shall pay an amount equal to 
4.32 	the percent of income shown for the appropriate household income level along with the 
4.33 	percent to be paid by the claimant of the remaining amount of property taxes payable. 
5.1 	The state refund equals the amount of property taxes payable that remain, up to the state 
5.2 	refund amount shown below.

5.3

5.4

Household Income

Percent of Income

Percent Paid by 
Claimant

Maximum State 
Refund

5.5 | ~~$0 to 1,189~~ ........ | 1.0 percent | ~~15~~ .. percent | | $1,450
5.6

5.7

~~1,190 to 2,379~~
 ....... to .......

1.1 percent

~~15~~ .. percent

$1,450

5.8

5.9

~~2,380 to 3,589~~
 ....... to .......

1.2 percent

~~15~~ .. percent

$1,410

5.10

5.11

~~3,590 to 4,789~~
....... to .......

1.3 percent

~~20~~ .. percent

$1,410

5.12

5.13

~~4,790 to 5,979~~
 ....... to .......

1.4 percent

~~20~~ .. percent

$1,360

5.14

5.15

~~5,980 to 8,369~~
....... to .......

1.5 percent

~~20~~ .. percent

$1,360

5.16

5.17

~~8,370 to 9,559~~
 ....... to .......

1.6 percent

~~25~~ .. percent

$1,310

5.18

5.19

~~9,560 to 10,759~~
 ....... to .......

1.7 percent

~~25~~ .. percent

$1,310

5.20

5.21

~~10,760 to 11,949~~
 ....... to .......

1.8 percent

~~25~~ .. percent

$1,260

5.22

5.23

~~11,950 to 13,139~~
 ....... to .......

1.9 percent

~~30~~ .. percent

$1,260

5.24

5.25

~~13,140 to 14,349~~
 ....... to .......

2.0 percent

~~30~~ .. percent

$1,210

5.26

5.27

~~14,350 to 16,739~~
 ....... to .......

2.1 percent

~~30~~ .. percent

$1,210

5.28

5.29

~~16,740 to 17,929~~
 ....... to .......

2.2 percent

~~35~~ .. percent

$1,160

5.30

5.31

~~17,930 to 19,119~~
 ....... to ........

2.3 percent

~~35~~  ..  percent

$1,160

5.32

5.33

~~19,120 to 20,319~~
 ....... to .......

2.4 percent

~~35~~ .. percent

$1,110

5.34

5.35

~~20,320 to 25,099~~
 ....... to .......

2.5 percent

~~40~~  ..  percent

$1,110

5.36

5.37

~~25,100 to 28,679~~
 ....... to .......

2.6 percent

~~40~~ .. percent

$1,070

5.38

5.39

~~28,680 to 35,849~~
 ....... to .......

2.7 percent

~~40~~ .. percent

$1,070

5.40

5.41

~~35,850 to 41,819~~
 ....... to .......

2.8 percent

~~45~~ .. percent

$ ........970

5.42

5.43

~~41,820 to 47,799~~
 ....... to .......

3.0 percent

~~45~~ .. percent

$ ........970

5.44

5.45

~~47,800 to 53,779~~
 ....... to .......

3.2 percent

~~45~~ .. percent

$ ........870

5.46

5.47

~~53,780 to 59,749~~
 ....... to .......

3.5 percent

~~50~~ .. percent

$ ........780

6.1

6.2

~~59,750 to 65,729~~
 ....... to ........

4.0 percent

~~50~~ .. percent

$ ........680

6.3

6.4

~~65,730 to 69,319~~
....... to .......

4.0 percent

~~50~~ .. percent

$ ........580

6.5

6.6

~~69,320 to 71,719~~
....... to .......

4.0 percent

~~50~~ .. percent

$ ........480

6.7

6.8

~~71,720 to 74,619~~
 ....... to .......

4.0 percent

~~50~~ .. percent

$ ........390

6.96.10

~~74,620 to 77,519~~
 ....... to .......

4.0 percent

~~50~~  .. percent

$ ........290

6.11 	The payment made to a claimant shall be the amount of the state refund calculated 
6.12 	under this subdivision. No payment is allowed if the claimant's household income is 
6.13 	~~$77,520~~ $....... or more.

6.14 	EFFECTIVE DATE. This section is effective for claims based on property taxes 
6.15 	payable in 2008 and thereafter.

6.16 	Sec. 8. Minnesota Statutes 2006, section 290A.04, subdivision 2h, is amended to read:
6.17 		Subd. 2h.Additional refund. (a) If the gross property taxes payable on a 
6.18 	homestead increase more than ~~12~~ .. percent over the property taxes payable in the prior 
6.19 	year on the same property that is owned and occupied by the same owner on January 
6.20 	2 of both years, and the amount of that increase is $100 or more, a claimant who is a 
6.21 	homeowner shall be allowed an additional refund equal to ~~60~~ .. percent of the amount of 
6.22 	the increase over the greater of ~~12~~ ... percent of the prior year's property taxes payable 
6.23 	or $100. This subdivision shall not apply to any increase in the gross property taxes 
6.24 	payable attributable to improvements made to the homestead after the assessment date 
6.25 	for the prior year's taxes. This subdivision shall not apply to any increase in the gross 
6.26 	property taxes payable attributable to the termination of valuation exclusions under 
6.27 	section  273.11, subdivision 16. 
6.28 	The maximum refund allowed under this subdivision is $1,000.
6.29 	(b) For purposes of this subdivision "gross property taxes payable" means property 
6.30 	taxes payable determined without regard to the refund allowed under this subdivision.
6.31 	(c) In addition to the other proofs required by this chapter, each claimant under 
6.32 	this subdivision shall file with the property tax refund return a copy of the property tax 
6.33 	statement for taxes payable in the preceding year or other documents required by the 
6.34 	commissioner.
6.35 	(d) Upon request, the appropriate county official shall make available the names and 
6.36 	addresses of the property taxpayers who may be eligible for the additional property tax 
6.37 	refund under this section. The information shall be provided on a magnetic computer 
7.1 	disk. The county may recover its costs by charging the person requesting the information 
7.2 	the reasonable cost for preparing the data. The information may not be used for any 
7.3 	purpose other than for notifying the homeowner of potential eligibility and assisting the 
7.4 	homeowner, without charge, in preparing a refund claim.

7.5 	EFFECTIVE DATE. This section is effective for property taxes levied in 2007, 
7.6 	payable in 2008, and thereafter.

7.7 	Sec. 9. Minnesota Statutes 2006, section 290A.04, subdivision 4, is amended to read:
7.8 		Subd. 4.Inflation adjustment. Beginning for property tax refunds payable in 
7.9 	calendar year ~~2002~~ 2009, the commissioner shall annually adjust the dollar amounts of the 
7.10 	income thresholds and the maximum refunds under subdivisions 2 and 2a for inflation. The 
7.11 	commissioner shall make the inflation adjustments in accordance with section 1(f) of the 
7.12 	Internal Revenue Code, except that for purposes of this subdivision the percentage increase 
7.13 	shall be determined from the year ending on June 30, ~~2000~~ 2007, to the year ending on 
7.14 	June 30 of the year preceding that in which the refund is payable. The commissioner shall 
7.15 	use the appropriate percentage increase to annually adjust the income thresholds and 
7.16 	maximum refunds under subdivisions 2 and 2a for inflation without regard to whether or 
7.17 	not the income tax brackets are adjusted for inflation in that year. The commissioner shall 
7.18 	round the thresholds and the maximum amounts, as adjusted to the nearest $10 amount. If 
7.19 	the amount ends in $5, the commissioner shall round it up to the next $10 amount.
7.20 	The commissioner shall annually announce the adjusted refund schedule at the same 
7.21 	time provided under section  290.06. The determination of the commissioner under this 
7.22 	subdivision is not a rule under the Administrative Procedure Act. 

7.23 	Sec. 10. Minnesota Statutes 2006, section 477A.011, subdivision 34, is amended to 
7.24 	read:
7.25 		Subd. 34.City revenue need. (a) For a city with a population equal to or greater 
7.26 	than 2,500, "city revenue need" is the sum of (1) 5.0734098 times the pre-1940 housing 
7.27 	percentage; plus (2) 19.141678 times the population decline percentage; plus (3) 
7.28 	2504.06334 times the road accidents factor; plus (4) 355.0547; minus (5) the metropolitan 
7.29 	area factor; minus (6) 49.10638 times the household size.
7.30 	(b) For a city with a population less than 2,500, "city revenue need" is the sum of 
7.31 	(1) 2.387 times the pre-1940 housing percentage; plus (2) 2.67591 times the commercial 
7.32 	industrial percentage; plus (3) 3.16042 times the population decline percentage; plus (4) 
7.33 	1.206 times the transformed population; minus (5) 62.772.
8.1 	(c) For a city with a population of 2,500 or more and a population in one of the most 
8.2 	recently available five years that was less than 2,500, "city revenue need" is the sum of (1) 
8.3 	its city revenue need calculated under paragraph (a) multiplied by its transition factor; 
8.4 	plus (2) its city revenue need calculated under the formula in paragraph (b) multiplied 
8.5 	by the difference between one and its transition factor. For purposes of this paragraph, a 
8.6 	city's "transition factor" is equal to 0.2 multiplied by the number of years that the city's 
8.7 	population estimate has been 2,500 or more. This provision only applies for aids payable 
8.8 	in calendar years 2006 to 2008 to cities with a 2002 population of less than 2,500. It 
8.9 	applies to any city for aids payable in 2009 and thereafter.
8.10 	(d) The city revenue need cannot be less than zero.
8.11 	(e) For calendar year ~~2005~~ 2008 and subsequent years, the city revenue need for 
8.12 	a city, as determined in paragraphs (a) to (d), is multiplied by the ratio of the annual 
8.13 	implicit price deflator for government consumption expenditures and gross investment for 
8.14 	state and local governments as prepared by the United States Department of Commerce, 
8.15 	for the most recently available year to the ~~2003~~ .... implicit price deflator for state and 
8.16 	local government purchases.

8.17 	Sec. 11. Minnesota Statutes 2006, section 477A.013, subdivision 8, is amended to read:
8.18 		Subd. 8.City formula aid. In calendar year ~~2004~~ 2008 and subsequent years, the 
8.19 	formula aid for a city is equal to the need increase percentage multiplied by the difference 
8.20 	between (1) the city's revenue need multiplied by its population, and (2) ~~the sum of~~  the 
8.21 	city's net tax capacity multiplied by the tax effort rate~~; the taconite aids under sections~~ 
8.22 	~~298.28 and 298.282 to any city except a citydirectly impacted by a taconite mine or plant,~~ 
8.23 	~~multiplied by the following percentages:~~
8.24 	~~(i) zero percent for aids payable in 2004;~~
8.25 	~~(ii) 25 percent for aids payable in 2005;~~
8.26 	~~(iii) 50 percent for aids payable in 2006;~~
8.27 	~~(iv) 75 percent for aids payable in 2007; and~~
8.28 	~~(v) 100 percent for aids payable in 2008 and thereafter.~~
8.29 	~~For purposes of this subdivision, "a city directly impacted by a taconite mine or~~ 
8.30 	~~plant" means: (1) Babbit, (2) Eveleth, (3) Hibbing, (4) Keewatin, (5) Mountain Iron, (6)~~ 
8.31 	~~Silver Bay, or (7) Virginia~~.
8.32 	No city may have a formula aid amount less than zero. The need increase percentage 
8.33 	must be the same for all cities.
8.34 	The applicable need increase percentage must be calculated by the Department of 
8.35 	Revenue so that the total of the aid under subdivision 9 equals the total amount available 
9.1 	for aid under section 477A.03 after the subtraction under section 477A.014, subdivisions 
9.2 	4 and 5.

9.3 	Sec. 12. Minnesota Statutes 2006, section 477A.03, subdivision 2a, is amended to read:
9.4 		Subd. 2a.Cities. ~~For aids payable in 2004, the total aids paid under section~~ 
9.5 	~~477A.013, subdivision 9, are limited to $429,000,000. For aids payable in 2005, the~~ 
9.6 	~~total aids paid under section 477A.013, subdivision 9, are limited to $437,052,000.~~ For 
9.7 	aids payable in 2006 and ~~thereafter~~ 2007, the total aids paid under section 477A.013, 
9.8 	subdivision 9, is limited to $485,052,000. For aids payable in 2008 and thereafter, the 
9.9 	total aids paid under section 477A.013, subdivision 9, is limited to $.......

9.10 	Sec. 13. Minnesota Statutes 2006, section 477A.03, subdivision 2b, is amended to read:
9.11 		Subd. 2b.Counties. (a) For aids payable in calendar year ~~2005~~ 2008 and thereafter, 
9.12 	the total aids paid to counties under section 477A.0124, subdivision 3, are limited to 
9.13 	~~$100,500,000~~ $........ Each calendar year, $500,000 shall be retained by the commissioner 
9.14 	of revenue to make reimbursements to the commissioner of finance for payments made 
9.15 	under section 611.27. For calendar year 2004, the amount shall be in addition to the 
9.16 	payments authorized under section 477A.0124, subdivision 1. For calendar year 2005 
9.17 	and subsequent years, the amount shall be deducted from the appropriation under 
9.18 	this paragraph. The reimbursements shall be to defray the additional costs associated 
9.19 	with court-ordered counsel under section 611.27. Any retained amounts not used for 
9.20 	reimbursement in a year shall be included in the next distribution of county need aid 
9.21 	that is certified to the county auditors for the purpose of property tax reduction for the 
9.22 	next taxes payable year.
9.23 	(b) ~~For aids payable in 2005, the total aids under section 477A.0124, subdivision~~ 
9.24 	~~4, are limited to $105,000,000.~~ For aids payable in ~~2006~~ 2008 and thereafter, the total 
9.25 	aid under section 477A.0124, subdivision 4, is limited to ~~$105,132,923~~ $........ The 
9.26 	commissioner of finance shall bill the commissioner of revenue for the cost of preparation 
9.27 	of local impact notes as required by section 3.987, not to exceed $207,000 in fiscal year 
9.28 	2004 and thereafter. The commissioner of education shall bill the commissioner of 
9.29 	revenue for the cost of preparation of local impact notes for school districts as required by 
9.30 	section 3.987, not to exceed $7,000 in fiscal year 2004 and thereafter. The commissioner 
9.31 	of revenue shall deduct the amounts billed under this paragraph from the appropriation 
9.32 	under this paragraph. The amounts deducted are appropriated to the commissioner of 
9.33 	finance and the commissioner of education for the preparation of local impact notes.

10.1 	EFFECTIVE DATE. This section is effective for aids payable in calendar year 
10.2 	2008 and thereafter.