2013 Special Taxes Legislative Bulletin

2013 SPECIAL TAXES LEGISLATIVE BULLETIN

(2013 Regular Session)

Bulletin Date: May 31, 2013

MINNESOTA· REVENUE
Appeals and Legal Services Division
600 North Robert Street
Saint Paul, Minnesota 55146-2220

Unless otherwise noted, the provisions discussed in this bulletin can be found in 2013 Minn. Laws, Chapter 143.

MORTGAGE AND DEED TAX

Mortgage and deed registry taxes; Hennepin and Ramsey counties.

Amends Minn. Stat. § 287.05, by adding the new subdivision 10; amends Minn. Stat.,Chapter 287, by adding the new section 287.40; and, repeals Minn. Stat. § 383A.80, subd. 4 and § 383B.80, subd. 4 – the last two had expired on 1/1/13 – to reinstate the Hennepin and Ramsey county mortgage and deed taxes. Effective for mortgages and deeds acknowledged after June 30, 2013.

Deed tax; partitions.

Amends Minn. Stat. § 287.20, by adding the new subdivision 11. This subdivision defines a real property “partition” for purposes of the existing exemption for partition deeds (i.e., a deed to or from a co-owner partitioning their undivided interest in the same piece of real property). The new language makes it clear that the exemption only applies to a deed, or that portion of a deed, that divides a contiguous tract of co-owned real property into separate tracts owned individually by each of the co-owners. Effective May 24, 2013.

Mortgage registry and deed taxes; interest on penalties.

Amends Minn. Stat. § 287.385, subd. 7, to clarify that interest accrues on a penalty from the date it is assessable. Effective May 24,2013.

INSURANCE

Minnesota Firetown Premium and Police Premium Reports.

Minn. Stat. § 69.021, subd. 3 was amended to make minor clarifications in the statute prescribing the fines for false and not-filed premium reports. Effective July 1, 2013. 2013 Minn. Laws, Chapter 111, Article 5, Section 11.

1st Class City Fire Insurance Premium Tax Surcharges.

Minn. Stat. § 69.33, that requires certain reports from fire insurance companies, was amended by adding a cross-reference to the statute containing the state aid statute under which these surcharge revenues are distributed. Minn. Stat. § 2791.10, subd. 1, containing the 1st class city fire insurance premium tax surcharge collection and distribution provisions, was amended to clarify that the surcharge revenues are distributed to the applicable city instead of the relief associations, reflecting the merger of all 1st class city fire relief associations with the public employees retirement association – police and fire fund. Effective July 1,2013. 2013 Minn. Laws, Chapter 111, Article 5, Section 30.

Automobile theft prevention.

Amends Minn. Stat. § 65B.84, subd. 1, to reference section 2971.11, subd. 2, which describes the automobile theft prevention special revenue account. Previously this account was described in section 168A.40. Effective for premiums collected after June 30, 2013. 2013 Minn. Laws, Chapter 142, Article 5, Section 2.

Nonadmitted insurance tax; purchasing groups.

Amends Minn. Stat. § 2971.05, subds. 7 and 12, to remove from subd. 12 the tax on purchasing groups that purchase insurance directly from a nonadmitted insurer. This tax is instead to be included in subd. 7, similar to other entities that purchase insurance from nonadmitted insurers. Effective for premiums received after December 31, 2013.

Retaliatory provisions

Amends Minn. Stat. § 2971.05, subd. 11(d), to strike an obsolete reference and to include life insurance companies in the list of sections that are covered by the retaliatory tax provisions. These provisions cover foreign companies that may do business in Minnesota and thus should cover life insurance companies as well. Effective May 24, 2013.

Automobile theft prevention surcharge

Creates Minn. Stat. § 2971.11 to impose on each insurer of automobile insurance a surcharge of 50 cents per vehicle for every six months of coverage. Subd. 2 provides that the proceeds of the surcharge will be deposited in a special revenue account, and $1,300,000 of the surcharge must be transferred to the general fund. Revenues in excess of this amount may be used only for the automobile theft prevention program. Previously, the department of public safety was required to collect the surcharge, and the surcharge was collected by the department of revenue under an inter-agency agreement. This proposed change codifies the current agreement and authorizes the department of revenue to administer the surcharge in the manner it administers other taxes imposed under chapter 2971. Effective for premiums collected after June 30,2013. Minn. Laws, Chapter 142, Article 5, Section 10.

1st Class City Fire Insurance Premium Tax

Minn. Stat. § 2971.10, subd. 1, containing the 1st class city fire insurance premium tax surcharge collection and distribution provisions, was amended to clarify that the surcharge revenues are distributed to the applicable city instead of the relief associations, reflecting the merger of all 1st class city fire relief associations with the public employees retirement association – police and fire fund. Effective July 1,2013. Minn. Laws 2013, Chapter 111, Article 5, section 46.

Purchasing groups return due date

Amends Minn. Stat. § 2971.30, subds. 1 and 2, to change purchasing groups’ due date for filing returns from twice a year to once a year. Effective for premiums received after December 31, 2013.

Automobile theft prevention surcharge due date

Amends Minn. Stat. § 2971.30to add subd. 10 to require every insurer subject to the auto theft prevention surcharge to pay the surcharge and file a return quarterly. Effective for premiums collected after June 30, 2013. 2013 Minn. Laws, Chapter 142, Article 5, Section 11.

Electronic Payments

Amends Minn. Stat. § 2971.35,subd. 2, to clarify that if a taxpayer is required to pay tax or surcharge by electronic means, all future tax and surcharge payments must be paid in the same manner. Effective for fiscal year ending June 30, 2013 and all fiscal years thereafter. 2013 Minn. Laws, Chapter 142, Article 5, Section 12.

Interest on penalty; insurance premiums taxes

Amends Minn. Stat. §297I.80, subd. 1, to clarify that penalties bear interest from the date they are assessable. Effective May 24,2013.[See Miscellaneous Bulletin for other related provisions.]

Repealer

Repeals Minn. Stat. § 168A.40, subds. 3 and 4, pertaining to the auto theft prevention surcharge. These subdivisions are replaced by section 2971.11,subd. 1 and 2. Effective for premiums collected after June 30, 2013. 2013 Minn. Laws, Chapter 142, Article 5, Section 15(a).

MINERALS

Education funding, Levy procedure, Taconite payment reductions.

Minn. Stat. § 126C.48, subd. 8, was amended increasing the amount of the 95 percent taconite levy limitation calculated by the Department of Education by adding the amount of excess of school taconite money above the limitation that went to cities and townships within the school district the previous year. Effective for levies certified in 2013 and later

Net proceeds tax, property tax exemption.

Minn. Stat. § 272.02, subd. 97 was amended, deleting the exemption from property tax for “direct reduced ore” subject to the net proceeds tax. Direct reduced ore is defined as an iron ore product; the net proceeds tax only applies to nonferrous ores, metals or minerals, so direct reduced ore is not subject to the net proceeds tax and the exemption cannot apply. Effective May 24,2013.

Non ferrous occupation tax, mining.

Minn. Stat. § 298.01, subd. 3 was amended, to provide a definition of the term “hydrometallurgical processes” that is used in that subdivision. Effective May 24,2013.

Net Proceeds Tax.

Minn. Stat. § 298.018, regarding the distribution of net proceeds taxes paid on mining or extraction of ores, metals, or minerals outside the taconite assistance area. The amendment conforms the distribution language to the language imposing the tax in section 298.015. Effective May 24, 2013.

Occupation tax apportionment.

Minn. Stat. § 298.17, was amended allocating money from the general fund’s share of the occupation tax revenue to the Department of Natural Resources to pay for staff for environmental monitoring and permitting of ferrous and nonferrous mining operations. The payment required each July 1st is 2.5 cents per taxable ton of taconite produced in the previous year. Effective beginning for the 2013 production year.

Taconite Economic Development Fund.

Minn. Stat. § 298.227, was amended requiring taconite economic development funds released to the mining companies be matched by an equal expenditure from the company. Effective beginning for the 2014 taconite economic development fund distribution.

Production tax imposed.

Minn. Stat. § 298.24, subd. 1, was amended resetting the base rate of the taconite production tax to $2.56 per ton beginning with the 2013 production year. The reset rate includes a five cent per ton increase from previous rate, after escalation. Escalation will continue beginning in the 2014 production year. Effective beginning for the 2013 production year.

Production tax distribution, school districts.

Minn. Stat. § 298.28, subd. 4, was amended: (1) To increase the 15.72 cent school fund distribution to 24.72 cents per ton. The additional 9 cent distribution is not subject to the 95 percent taconite levy replacement calculated in Minn. Stat. § 126C.48, subd. 8; and, (2) To add a calculation to the taconite referendum allocation to schools. Effective beginning for the 2014 production tax distribution.

Production tax distribution, property tax relief.

Minn. Stat. § 298.28, subds. 6 and 8, were amended resetting the base amount of the distribution at 34.8 cents per taxable ton for distributions in 2014 and thereafter, and restarting the implicit price deflator for computing distributions in 2015. Both amendments are effective beginning for the 2014 distribution.

Production tax distribution, Hockey Hall of Fame. Minn. Stat. § 29828, subd. 9c, was amended making the production tax distribution of 0.20 cents per taxable ton to the City of Eveleth for operation of the Hockey Hall of Fame permanent and removing donor conditions on the distribution. Effective beginning for the 2013 production tax distribution

Iron Range fiscal disparities. An uncodified provision provides that the Commissioner of Revenue in coordination with the Commissioner of the IRRRB must conduct an Iron Range Fiscal Disparities Study and submit a report to the chairs and ranking minority members of the House and Senate Tax Committees of the legislature by February 1,2014. Effective June 1,2013.

Production tax distribution, 2013 distribution only. An uncodified section requires a 38.7 cents per taxable ton distribution to St. Louis County as fiscal agent to make payments to the 21 listed entities for various projects. The total amount of all of the projects is $14,826,100. The distribution must be made within ten days of the August 27l 2013 taconite production tax distribution payment to the Taconite Property tax relief account. Effective for the 2013 distribution.

Bonding for school districts. An uncodified section authorizes the IRRR to issue revenue bonds equal to $38,000,000 to be used for grants to school districts located within the taconite assistance area. Principal and interest on the bonds are to be paid from the taconite production tax, with the first ten cents per ton coming the remainder is distributed to the Taconite Environmental Protection Fund and Douglas 1. Johnson Economic Protection Trust Fund. Any additional amount necessary to pay principal and interest are appropriated from the Douglas 1. Johnson Economic Protection Trust Fund. Estimated annual payments are between $3.3 and 3.5 million. Effective May 24, 2013, applying to distributions beginning in 2014.

PETROLEUM TAX

Petroleum inspection fee; appropriation, uses

Amends Minn. Stat. § 239.101, subd. 3 to change the appropriation from 81 cents to 89 cents of the fee to the commissioner of commerce for the cost of operations of the Division of Weights and Measures, petroleum supply monitoring, and to make grants to providers of low-income weatherization services to install renewable energy equipment in households that are eligible for weatherization assistance under Minnesota’s weatherization assistance program state plan. Effective July 1, 2013. 2013 Minn. Laws, Chapter 85, Article 6, Section 5.

Aviation gasoline

Amends Minn. Stat. § 296A.Ol, subd. 7 which contains a definition of aviation gasoline to bring it in line with recent American Society for Testing and Materials (ASTM) specification changes. Effective May 24, 2013.

Aviation turbine fuel and jet fuel

Amends Minn. Stat. § 296A.Ol, subd. 8 which contains a definition of aviation turbine fuel and jet fuel to bring it in line with recent American Society for Testing and Materials (ASTM) specification changes. Effective May 24, 2013.

Biobutanol definition

Amends Minn. Stat. § 296A.Ol, by adding a new subdivision 8b to provide a definition of biobutanol which will either meet American Society for Testing and Material (ASTM) specifications, once released, or in absence of those specifications will meet the requirements listed. Effective May 24, 2013.

Diesel fuel oil.

Amends Minn. Stat. § 296A.Ol, subd. 14 which contains a definition of diesel fuel oil to bring it in line with recent American Society for Testing and Materials (ASTM) specification changes. Effective May 24, 2013.

E85 definition.

Amends Minn. Stat. § 296A.0 1, subd.19 which contains a definition of E85 to bring it in line with recent American Society for Testing and Materials (ASTM)
specification changes. Effective May 24, 2013.

Ethanol, denatured.

Amends Minn. Stat. § 296A.OI,subd. 20 which contains a definition of denatured ethanol to bring it in line with recent American Society for Testing and Materials (ASTM)specification changes. Effective May 24,2013.

Gasoline.

Amends Minn. Stat.§ 296A.OI, subd.23 which contains a definition of gasoline to bring it in line with recent American Society for Testing and Materials (ASTM)specification changes. Effective May 24,2013.

Gasoline blended with nonethanol oxygenate.

Amends Minn. Stat. § 296A.OI, subd. 24 which contains a definition of gasoline blended with nonethanol oxygenate to bring it in line with recent American Society for Testing and Materials (ASTM) specification changes. Effective May 24,2013.

Heating fuel oil.

Amends Minn. Stat. § 296A.Ol, subd. 26 which contains a definition of heating fuel oil to bring it in line with recent American Society for Testing and Materials (ASTM) specification changes. Effective May 24,2013.

Jet fuel and special fuels tax.

Amends Minn. Stat. § 296A.09, subd.2, to increase the excise tax on jet fuel and special fuel used as a substitute for aviation gasoline from five cents per gallon to 15 cents per gallon. (The five cent per gallon tax on aviation gasoline is not changed). This section is effective July 1, 2014, and applied to sales and purchases made on or after that date.

Refund of jet fuel tax on graduated basis.

Amends Minn. Stat. § 296A.17, subd. 3 to allow a graduated refund to persons who paid the tax under subd. 1 and who paid the airflightproperty tax under section 270.72. Effective July 1,2014, and applied to sales and purchases made on or after that date.

LAWFUL GAMBLING

Available revenues.

Amends Minn. Stat. § 297E.02I, subd. 3, to add up to $20,000,000 each fiscal year from the corporate franchise tax as backup revenues to fund the Vikings stadium. Effective May 24, 2013.

Annual audit.

Amends Minn. Stat. § 297E.06, subd. 4, to increase the threshold for requiring an annual financial audit for an organization licensed to conduct charitable gaming. Under current law, licensed organizations with gross receipts of more than $500,000 must have an annual financial audit of its lawful gambling activities and funds. This section changes the threshold for required annual audits to $750,000. Organizations with less than $750,000 in gross receipts will be required to conduct a financial audit when the Commissioner of Revenue requires it. Effective May 21, 2013. 2013 Minn. Laws, Chapter 79, Section 1.

Exclusions; exemptions

Amends Minn. Stat. § 349.166 by expanding the exclusion for raffles conducted by an unlicensed 501(c)(3) organization, if the value of all raffle prizes awarded by the organization at one event in a calendar year does not exceed $5,000. Effective July 1,2013.

Pull-tabs; reporting requirements

The commissioner of revenue may require a onetime closing of all currently active electronic pull-tab games on May 31, 2013,for the purpose of moving to a uniform system of reporting for electronic pull-tab game activities on a monthly basis. Effective May 21,2013. 2013 Minn. Laws, Chapter 79, section 6.

CIGARETTE & TOBACCO PRODUCTS

Liability imposed. Amends Minn. Stat. § 270C.56, subd.1, which provides personal liability authority, by eliminating a reference to the health impact fee that was repealed. Effective July 1, 2013.

Cigarette definition

Amends Minn. Stat. § 297F.01, subd. 3 to include “little cigars.” This results in this product being taxed as a cigarette, as opposed to an “other tobacco product.” Effective July 1,2013.

Moist snuff. Amends Minn. Stat. § 297F.Ol, to add a new subd. lOb to provide a definition of moist snuff. Effective January 1,2014.

Premium cigar

Amends Minn. Stat. § 297F.01, to add a new subd. 13a to provide a definition of a premium cigar. Effective July 1,2013.

Tobacco products

Amends Minn.Stat. § 297F.01, subd. 19 to remove “little cigars” from the definition of other tobacco products because “little cigars” will now be treated and taxed as cigarettes; and provides that the definition of tobacco products includes premium cigars. Effective July 1,2013.

Wholesale sales price

Amends Minn. Stat. § 297F.01, subd. 23 which provides a definition of wholesale sales price. References to price list are deleted and replaced with language referencing price at which a distributor purchases a tobacco product. Effective for purchases made after December 31,2013.

Cigarette tax rate

Amends Minn. Stat. § 297F.05, subd. 1 to increase the cigarette excise tax from 48 cents per pack of twenty cigarettes to $2.83 per pack. The tax rate on the large cigarettes is correspondingly increased to $5.66 per pack. Effective July 1, 2013.

Annual indexing

Amends Minn. Stat. § 297F.05,by adding a new subd. la which requires the commissioner to adjust the tax rates on cigarettes annually. The rate adjustment will be based on the change in the average price of cigarettes sold in Minnesota,the same basis used to annually set the in-lieu sales tax on cigarettes. Effective July 1,2014.

Tobacco products tax

Amends Minn. Stat. § 297F.05, subd. 3 to increase the tobacco products excise tax from 35 percent of the wholesale sales price to 95 percent of the wholesale sales price. The law is also amended to set a minimum tax equal to the rate imposed on a pack of 20 cigarettes on containers of moist snuff. Effective July 1,2013, except the minimum tax on a moist snuff container is effective January 1,2014.

Premium cigar tax rates

Amends Minn. Stat. § 297F.05, by adding a new subdivision 3a to provide that premium cigars are taxed at the lessor of 95 percent of the wholesale sales price or $3.50 per premium cigar. Effective July 1,2013.

Use tax on tobacco products

Amends Minn. Stat. § 297F.05, subd. 4 to increase the use tax on tobacco products from 35 percent of the cost to the consumer to 95 percent of the cost to the consumer. Effective July 1,2013.

Use tax on premium cigars

Amends Minn. Stat. § 297F.05, by creating a new subd. 4a to provide that the use tax on premium cigars is the lessor of 95 percent of the cost to the consumer or $3.50 per premium cigar. Effective July 1,2013.

Non-settlement fee

Amends Minn. Stat. § 297F.24, subd. 1 to increase the fee on cigarettes sold by manufacturers who are not required to pay a fee in connection with a legal settlement from 1.75 cents per cigarette to 2.5 cents per cigarette. Effective July 1,2013.

Cigarette sales tax

Amends Minn. Stat. § 297F.25, subd.1 to provide that the rate of tax that is in lieu of sales tax on cigarettes will be calculated using both the regular sales tax rate (6.5%) and the additional legacy rate (equal to 3/8 of one percent). Effective July 1,2013.

Cigarette definition

Amends Minn. Stat. § 325D.32, subd. 2 to change the definition of cigarette in the unfair cigarette salesact, which establishes minimum pricing rules for cigarette sales, to include “little cigars,” consistent with changes made to Minn. Stat. 297F.Ol, subd. 3. Effective July 1,2013.

Tobacco delivery sales

Amends Minn. Stat. § 325F.781, subd. 1 to add premium cigars to the list of tobacco products set forth in the tobacco product delivery sales section of the law.Effective July 1,2013.

Floor stocks tax

An uncodified provision creates a floor stocks tax of $1.60 per pack of 20 cigarettes that is imposed on all persons engaged in the business in this state of selling cigarettes as distributors, retailers, subjobbers, vendors, manufacturers, or manufacturer’s representatives who have stamped cigarettes and unaffixed stamps in their possession on July 1,2013. For packs of cigarettes with other than 20 cigarettes, the tax shall be adjusted proportionally. The commissioner is directed to deposit $26,500,000 of the revenues from this tax and credit them to the reserve fund account established under section 297E.021, subd. 4. Effective July 1,2013.

Interim cigarette sales tax

An uncodified provision requires the commissioner to adjust the weighted average retail price of cigarettes on July 1, 2013, which will be used to calculate the cigarette sales tax rate imposed until December 31, 2013. On January 1,2014, the commissioner will resume annual adjustments to the weighted average retail price, occurring January 1 of each calendar year. Effective July 1, 2013.

Tobacco tax collection report

An uncodified provision requires the commissioner to report to the 2014 legislature on the tobacco tax collection system, including recommendations to improve compliance with all tobacco tax programs. This report will be due by February 15,2014. The requirement provided for recommendations on implementation of a comprehensive tobacco tax collection system for Minnesota to be implemented by January 1,2014. This date was corrected in a later revisor’s bill to January 1,2015. 2013 Minn.Laws, Chapter 144, Section 19. Effective May 24,2013.

Repeal of health impactfund and fee.

Minn. Stat. § 16A. 725 (the health impact fund)and Minn. Stat. § 256.9658 (the health impact fee on cigarettes and tobacco products)were both repealed. Effective July 1,2013.

MISCELLANEOUS

Brewer credit.

Amends Minn. Stat. § 297G.04,subd. 2 to change a calendar year reference to fiscal year. Effective May 24, 2013.

Brewer credit.

Amends Minn. Stat. § 297G.04, subd. 2 to raise the threshold for a qualified brewer from one manufacturing less than 100,000 barrels of fermented malt beverages in the calendar year to one manufacturing less than 250,000 barrels. Effective for determinations based on calendar year 2012 production and thereafter.

Health care taxes and MinnesotaCare funding study.

The Commissioners of Revenue and Management and Budget are directed to assess the state’s health care taxes, and their relationship to the solvency of the health care access fund, as part of the November 2013 forecast. Additionally, the commissioners are required to determine the likelihood of long-term federal funding for MinnesotaCare under the Affordable Care Act, and the amount of state funding required for MinnesotaCare after December 31, 2019. These results must be reported to the legislature by January 15,2014. Minn. Laws 2013, Chapter 108, Article 1, Section 64.