Subd. 1. Definitions.

1. (a) "Area median gross income" means area median gross income as determined by the United States Secretary of Housing and Urban Development under section 142(d)(2)(B) of the Internal Revenue Code.
2. (b) "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended through December 31, 1990.
3. (c) "Low-income unit" means a unit that meets the requirements of subdivision 3 and section 42(i)(3)(B), (C), and (D) of the Internal Revenue Code.
4. (d) "Project" means a project for residential rental property. A project consists of a single building and must include the entire residential part of the building. Property must not be treated as failing to be residential rental property merely because part of the building is used for purposes other than residential rental purposes.
5. (e) "Rehabilitation expenditures" has the meaning given it in section 42(e)(2) of the Internal Revenue Code.
6. (f) "Rent restricted units" means rent restricted units as defined and limited by section 42(g)(2) of the Internal Revenue Code.

Subd. 2. Requirements.

Residential rental property that does not receive a low-income housing credit under section 42 of the Internal Revenue Code must meet the requirements in subdivisions 3 to 5 to qualify for classification 4c under section 273.13, subdivision 25, paragraph (c), clause (3), item (iii).

Subd. 3. Rent restrictions; income limits.

1. (a) At the irrevocable election of the taxpayer, either:

   1. (1) 20 percent or more of the residential units in the project must be both rent-restricted and occupied by individuals whose income is 50 percent or less of area median gross income; or
   2. (2) 40 percent or more of the residential units in the project must be both rent-restricted and occupied by individuals whose income is 60 percent or less of area median gross income.
2. (b) For purposes of meeting the income limits under paragraph (a) of tenants whose incomes increase, the provisions of section 42(g)(2)(D) and (E) of the Internal Revenue Code apply.

Subd. 4. New or rehabilitated building.

A building must be (1) a new building, the original use of which begins with the owners or developers of the building, or (2) an existing building with respect to which rehabilitation expenditures have been paid or incurred by the owner or developer. To qualify under this clause, the rehabilitation expenditures must meet the requirements of section 42(e)(3)(A) of the Internal Revenue Code.

Subd. 5. Agreement.

The owner or developer must execute an agreement with the local housing and redevelopment authority, or other authority as provided in subdivision 7. The agreement must be for a term of 15 years. The agreement must provide that the requirements of subdivision 3 will be met during the term of the agreement. The agreement must provide that the owner or developer must maintain and make available to the authority the information and records the authority considers necessary to monitor compliance with the provisions of this section, including rents, the incomes of tenants, and the number of low-income units in the building.

Subd. 6. Records review.

The local housing and redevelopment authority or other authority shall annually review income and rental information and records maintained by the owner or developer to determine compliance with the requirements of this section. The local housing and redevelopment authority or other authority shall report to the assessor responsible for assessing the property at the time and in the manner required by the assessor. The assessor shall determine the classification of the property.

Subd. 7. Housing authority.

If a local housing or redevelopment authority does not exist in the jurisdiction, the county housing and redevelopment authority shall execute the duties imposed in subdivisions 5 and 6. If a county housing and redevelopment authority does not exist in the county, the municipality must appoint the administrator of section 8 certificates within the jurisdiction or contract with a qualified person or entity to perform the duties imposed in subdivisions 5 and 6.

Subd. 8. Additional tax.

Notwithstanding the provisions of section 273.01, 274.01, or any other law, if the assessor determines that the provisions of this section have not been met for any period during which the property was classified under section 273.13, subdivision 25, paragraph (c), clause (3), item (iii), or valued under Laws 1991, chapter 291, article 1, section 55, and received the benefits of this section, an additional tax is imposed. The additional tax is equal to the tax which would have been imposed if the property had not been classified under section 273.13, subdivision 25, paragraph (c), clause (3), item (iii), or valued under Laws 1991, chapter 291, article 1, section 55, and the tax actually imposed, during the period of noncompliance. The additional tax must be extended against the property on the tax list for the current year. No interest or penalties may be levied on additional taxes if timely paid. The tax imposed by this subdivision is a lien upon the property assessed to the same extent and for the same duration as other taxes imposed on the property.