HF 129

1st Engrossment - 87th Legislature (2011 - 2012) Posted on 01/20/2011 03:07pm

A bill for an act
relating to state government finance; making changes to tax aids and credits
and reducing payments; conforming to certain changes in the Internal Revenue
Code; amending Minnesota Statutes 2010, sections 270A.03, subdivision 7;
273.1384, subdivision 6; 289A.02, subdivision 7; 289A.50, subdivision 1;
290.01, subdivisions 6, 19, 19a, 19c, 31; 290A.03, subdivisions 11, 13, 15;
290C.07; 477A.013, subdivision 9; 477A.03; proposing coding for new law in
Minnesota Statutes, chapter 477A; repealing Minnesota Statutes 2010, sections
10A.322, subdivision 4; 13.4967, subdivision 2; 290.06, subdivision 23.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

ARTICLE 1

TAX AIDS AND CREDITS

Section 1.

Minnesota Statutes 2010, section 270A.03, subdivision 7, is amended to
read:

Subd. 7.

Refund.

"Refund" means an individual income tax refund deleted text begin or political
contribution refund deleted text end , pursuant to chapter 290, or a property tax credit or refund, pursuant to
chapter 290A, or a sustainable forest tax payment to a claimant under chapter 290C.

For purposes of this chapter, lottery prizes, as set forth in section 349A.08,
subdivision 8, and amounts granted to persons by the legislature on the recommendation
of the joint senate-house of representatives Subcommittee on Claims shall be treated
as refunds.

In the case of a joint property tax refund payable to spouses under chapter 290A,
the refund shall be considered as belonging to each spouse in the proportion of the total
refund that equals each spouse's proportion of the total income determined under section
290A.03, subdivision 3. In the case of a joint income tax refund under chapter 289A, the
refund shall be considered as belonging to each spouse in the proportion of the total
refund that equals each spouse's proportion of the total taxable income determined under
section 290.01, subdivision 29. The commissioner shall remit the entire refund to the
claimant agency, which shall, upon the request of the spouse who does not owe the debt,
determine the amount of the refund belonging to that spouse and refund the amount to
that spouse. For court fines, fees, and surcharges and court-ordered restitution under
section 611A.04, subdivision 2, the notice provided by the commissioner of revenue under
section 270A.07, subdivision 2, paragraph (b), serves as the appropriate legal notice
to the spouse who does not owe the debt.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for refund claims based on
contributions made after June 30, 2011.
new text end

Sec. 2.

Minnesota Statutes 2010, section 273.1384, subdivision 6, is amended to read:

Subd. 6.

Credit reduction.

In 2011 and each year thereafter, the market value
credit reimbursement amount for each taxing jurisdiction determined under this section is
reduced by the dollar amount of the reduction in market value credit reimbursements for
that taxing jurisdiction in 2010 due to the reductions under deleted text begin section deleted text end new text begin sections new text end 477A.0133 new text begin
and 477A.0134 new text end . No taxing jurisdiction's market value credit reimbursements are reduced
to less than zero under this subdivision. The commissioner of revenue shall pay the annual
market value credit reimbursement amounts, after reduction under this subdivision, to the
affected taxing jurisdictions as provided in this section.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 3.

Minnesota Statutes 2010, section 289A.50, subdivision 1, is amended to read:

Subdivision 1.

General right to refund.

(a) Subject to the requirements of this
section and section 289A.40, a taxpayer who has paid a tax in excess of the taxes lawfully
due and who files a written claim for refund will be refunded or credited the overpayment
of the tax determined by the commissioner to be erroneously paid.

(b) The claim must specify the name of the taxpayer, the date when and the period
for which the tax was paid, the kind of tax paid, the amount of the tax that the taxpayer
claims was erroneously paid, the grounds on which a refund is claimed, and other
information relative to the payment and in the form required by the commissioner. An
income tax, estate tax, or corporate franchise tax return, or amended return claiming an
overpayment constitutes a claim for refund.

(c) When, in the course of an examination, and within the time for requesting a
refund, the commissioner determines that there has been an overpayment of tax, the
commissioner shall refund or credit the overpayment to the taxpayer and no demand
is necessary. If the overpayment exceeds $1, the amount of the overpayment must
be refunded to the taxpayer. If the amount of the overpayment is less than $1, the
commissioner is not required to refund. In these situations, the commissioner does not
have to make written findings or serve notice by mail to the taxpayer.

(d) If the amount allowable as a credit for withholding, estimated taxes, or dependent
care exceeds the tax against which the credit is allowable, the amount of the excess is
considered an overpayment. deleted text begin The refund allowed by section 290.06, subdivision 23, is also
considered an overpayment. deleted text end The requirements of section 270C.33 do not apply to the
refunding of such an overpayment shown on the original return filed by a taxpayer.

(e) If the entertainment tax withheld at the source exceeds by $1 or more the taxes,
penalties, and interest reported in the return of the entertainment entity or imposed by
section 290.9201, the excess must be refunded to the entertainment entity. If the excess is
less than $1, the commissioner need not refund that amount.

(f) If the surety deposit required for a construction contract exceeds the liability of
the out-of-state contractor, the commissioner shall refund the difference to the contractor.

(g) An action of the commissioner in refunding the amount of the overpayment does
not constitute a determination of the correctness of the return of the taxpayer.

(h) There is appropriated from the general fund to the commissioner of revenue the
amount necessary to pay refunds allowed under this section.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for refund claims based on
contributions made after June 30, 2011.
new text end

Sec. 4.

Minnesota Statutes 2010, section 290.01, subdivision 6, is amended to read:

Subd. 6.

Taxpayer.

The term "taxpayer" means any person or corporation subject to
a tax imposed by this chapter. deleted text begin For purposes of section 290.06, subdivision 23, the term
"taxpayer" means an individual eligible to vote in Minnesota under section 201.014.
deleted text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for refund claims based on
contributions made after June 30, 2011.
new text end

Sec. 5.

Minnesota Statutes 2010, section 290A.03, subdivision 11, is amended to read:

Subd. 11.

Rent constituting property taxes.

"Rent constituting property taxes"
means deleted text begin 19 deleted text end new text begin 15 new text end percent of the gross rent actually paid in cash, or its equivalent, or the portion
of rent paid in lieu of property taxes, in any calendar year by a claimant for the right
of occupancy of the claimant's Minnesota homestead in the calendar year, and which
rent constitutes the basis, in the succeeding calendar year of a claim for relief under this
chapter by the claimant.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for claims based on rent paid in
2010 and following years.
new text end

Sec. 6.

Minnesota Statutes 2010, section 290A.03, subdivision 13, is amended to read:

Subd. 13.

Property taxes payable.

"Property taxes payable" means the property tax
exclusive of special assessments, penalties, and interest payable on a claimant's homestead
after deductions made under sections 273.135, 273.1384, 273.1391, 273.42, subdivision 2,
and any other state paid property tax credits in any calendar year, and after any refund
claimed and allowable under section 290A.04, subdivision 2h, that is first payable in
the year that the property tax is payable. In the case of a claimant who makes ground
lease payments, "property taxes payable" includes the amount of the payments directly
attributable to the property taxes assessed against the parcel on which the house is located.
No apportionment or reduction of the "property taxes payable" shall be required for the
use of a portion of the claimant's homestead for a business purpose if the claimant does not
deduct any business depreciation expenses for the use of a portion of the homestead in the
determination of federal adjusted gross income. For homesteads which are manufactured
homes as defined in section 273.125, subdivision 8, and for homesteads which are park
trailers taxed as manufactured homes under section 168.012, subdivision 9, "property
taxes payable" shall also include deleted text begin 19 deleted text end new text begin 15 new text end percent of the gross rent paid in the preceding
year for the site on which the homestead is located. When a homestead is owned by
two or more persons as joint tenants or tenants in common, such tenants shall determine
between them which tenant may claim the property taxes payable on the homestead. If
they are unable to agree, the matter shall be referred to the commissioner of revenue
whose decision shall be final. Property taxes are considered payable in the year prescribed
by law for payment of the taxes.

In the case of a claim relating to "property taxes payable," the claimant must have
owned and occupied the homestead on January 2 of the year in which the tax is payable
and (i) the property must have been classified as homestead property pursuant to section
273.124, on or before December 15 of the assessment year to which the "property taxes
payable" relate; or (ii) the claimant must provide documentation from the local assessor
that application for homestead classification has been made on or before December 15
of the year in which the "property taxes payable" were payable and that the assessor has
approved the application.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for claims based on rent paid in
2010 and following years.
new text end

Sec. 7.

Minnesota Statutes 2010, section 290C.07, is amended to read:

290C.07 CALCULATION OF INCENTIVE PAYMENT.

new text begin (a) new text end An approved claimant under the sustainable forest incentive program is eligible
to receive an annual payment. new text begin Subject to the limitation contained in paragraph (b), new text end the
payment shall equal the greater of:

(1) the difference between the property tax that would be paid on the land using the
previous year's statewide average total township tax rate and a class rate of one percent, if
the land were valued at (i) the average statewide managed forest land market value per
acre calculated under section 290C.06, and (ii) the average statewide managed forest land
current use value per acre calculated under section 290C.02, subdivision 5; or

(2) two-thirds of the property tax amount determined by using the previous year's
statewide average total township tax rate, the estimated market value per acre as calculated
in section 290C.06, and a class rate of one percent, provided that the payment shall be no
less than $7 per acre for each acre enrolled in the sustainable forest incentive program.

new text begin (b) The annual payment under this section per each Social Security number or state
or federal business tax identification number must not exceed $100,000.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for payments in calendar year 2011
and thereafter.
new text end

Sec. 8.

Minnesota Statutes 2010, section 477A.013, subdivision 9, is amended to read:

Subd. 9.

City aid distribution.

(a) In calendar year 2009 and thereafter, each
city shall receive an aid distribution equal to the sum of (1) the city formula aid under
subdivision 8, and (2) its city aid base.

(b) For aids payable in deleted text begin 2011 deleted text end new text begin 2012 new text end only, the total aid in the previous year for any
city shall mean the amount of aid it was certified to receive for aids payable in deleted text begin 2010 deleted text end new text begin
2011 new text end under this section minus the amount of its aid reduction under section deleted text begin 477A.0134 deleted text end new text begin
477A.0135 new text end . For aids payable in deleted text begin 2012 deleted text end new text begin 2013 new text end and thereafter, the total aid in the previous
year for any city means the amount of aid it was certified to receive under this section in
the previous payable year.

(c) For aids payable in 2010 and thereafter, the total aid for any city shall not exceed
the sum of (1) ten percent of the city's net levy for the year prior to the aid distribution
plus (2) its total aid in the previous year. For aids payable in 2009 and thereafter, the total
aid for any city with a population of 2,500 or more may not be less than its total aid under
this section in the previous year minus the lesser of $10 multiplied by its population, or ten
percent of its net levy in the year prior to the aid distribution.

(d) For aids payable in 2010 and thereafter, the total aid for a city with a population
less than 2,500 must not be less than the amount it was certified to receive in the
previous year minus the lesser of $10 multiplied by its population, or five percent of its
2003 certified aid amount. For aids payable in 2009 only, the total aid for a city with a
population less than 2,500 must not be less than what it received under this section in the
previous year unless its total aid in calendar year 2008 was aid under section 477A.011,
subdivision 36, paragraph (s), in which case its minimum aid is zero.

(e) A city's aid loss under this section may not exceed $300,000 in any year in
which the total city aid appropriation under section 477A.03, subdivision 2a, is equal or
greater than the appropriation under that subdivision in the previous year, unless the
city has an adjustment in its city net tax capacity under the process described in section
469.174, subdivision 28.

(f) If a city's net tax capacity used in calculating aid under this section has decreased
in any year by more than 25 percent from its net tax capacity in the previous year due to
property becoming tax-exempt Indian land, the city's maximum allowed aid increase
under paragraph (c) shall be increased by an amount equal to (1) the city's tax rate in the
year of the aid calculation, multiplied by (2) the amount of its net tax capacity decrease
resulting from the property becoming tax exempt.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for aids payable in calendar year
2012 and thereafter.
new text end

Sec. 9.

new text begin [477A.0135] 2011 REDUCTIONS; COUNTIES AND CITIES.
new text end

new text begin The commissioner of revenue must compute and apply reductions to each county's
aid under section 477A.0124 and each city's aid under section 477A.013, subdivision 9,
for 2011 under this section. The reduction is equal to 48.5358 percent of each county's
total county program aid reductions and 91.53216 percent of each city's local government
aid reductions for aids payable in 2010 under sections 477A.0133 and 477A.0134. The
reduction shall be limited to (1) the amount a county is certified to receive in aid in 2011
under section 477A.0124 and (2) the amount a city is certified to receive in aid in 2011
under section 477A.013, subdivision 9.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for aids payable in calendar year
2011.
new text end

Sec. 10.

Minnesota Statutes 2010, section 477A.03, is amended to read:

477A.03 APPROPRIATION.

Subd. 2.

Annual appropriation.

A sum sufficient to discharge the duties imposed
by sections 477A.011 to 477A.014 is annually appropriated from the general fund to the
commissioner of revenue.

Subd. 2a.

Cities.

For aids payable in deleted text begin 2011 deleted text end new text begin 2012 new text end and thereafter, the total aid paid
under section 477A.013, subdivision 9, is deleted text begin $527,100,646 deleted text end new text begin $426,438,012 new text end .

Subd. 2b.

Counties.

(a) For aids payable in deleted text begin 2011 deleted text end new text begin 2012 new text end and thereafter, the total aid
payable under section 477A.0124, subdivision 3, is deleted text begin $96,395,000 deleted text end new text begin $80,795,000 new text end . Each
calendar year, $500,000 shall be retained by the commissioner of revenue to make
reimbursements to the commissioner of management and budget for payments made
under section 611.27. For calendar year 2004, the amount shall be in addition to the
payments authorized under section 477A.0124, subdivision 1. For calendar year 2005
and subsequent years, the amount shall be deducted from the appropriation under
this paragraph. The reimbursements shall be to defray the additional costs associated
with court-ordered counsel under section 611.27. Any retained amounts not used for
reimbursement in a year shall be included in the next distribution of county need aid
that is certified to the county auditors for the purpose of property tax reduction for the
next taxes payable year.

(b) For aids payable in deleted text begin 2011 deleted text end new text begin 2012 new text end and thereafter, the total aid under section
477A.0124, subdivision 4, is deleted text begin $101,309,575 deleted text end new text begin $84,909,575 new text end . The commissioner of
management and budget shall bill the commissioner of revenue for the cost of preparation
of local impact notes as required by section 3.987, not to exceed $207,000 in fiscal year
2004 and thereafter. The commissioner of education shall bill the commissioner of
revenue for the cost of preparation of local impact notes for school districts as required by
section 3.987, not to exceed $7,000 in fiscal year 2004 and thereafter. The commissioner
of revenue shall deduct the amounts billed under this paragraph from the appropriation
under this paragraph. The amounts deducted are appropriated to the commissioner of
management and budget and the commissioner of education for the preparation of local
impact notes.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for aids payable in calendar year
2012 and thereafter.
new text end

Sec. 11. new text begin ADMINISTRATION OF PROPERTY TAX REFUND CLAIMS; 2011.
new text end

new text begin In administering sections 5 and 6 for claims for refunds submitted using 19 percent
of gross rent as rent constituting property taxes under prior law, the commissioner shall
recalculate and pay the refund amounts using 15 percent of gross rent. The commissioner
shall notify the claimant that the recalculation was mandated by action of the 2011
Legislature.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 12. new text begin REPEALER.
new text end

new text begin (a) Minnesota Statutes 2010, sections 10A.322, subdivision 4; and 13.4967,
subdivision 2, new text end new text begin are repealed.
new text end

new text begin (b) Minnesota Statutes 2010, section 290.06, subdivision 23, new text end new text begin is repealed.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin Paragraph (a) is effective the day following final enactment.
Paragraph (b) is effective for refund claims based on contributions made after June 30,
2011.
new text end

ARTICLE 2

FEDERAL UPDATE

Section 1.

Minnesota Statutes 2010, section 289A.02, subdivision 7, is amended to
read:

Subd. 7.

Internal Revenue Code.

Unless specifically defined otherwise, "Internal
Revenue Code" means the Internal Revenue Code of 1986, as amended through deleted text begin March 18,
2010 deleted text end new text begin September 27, 2010 new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day after final enactment.
new text end

Sec. 2.

Minnesota Statutes 2010, section 290.01, subdivision 19, is amended to read:

Subd. 19.

Net income.

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

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

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

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

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

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

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

The Internal Revenue Code of 1986, as amended through deleted text begin March 18, 2010 deleted text end new text begin September
27, 2010 new text end , shall be in effect for taxable years beginning after December 31, 1996. The
provisions of the act of January 22, 2010, Public Law 111-126, to accelerate the benefits
for charitable cash contributions for the relief of victims of the Haitian earthquake, are
effective at the same time it became effective for federal purposes and apply to the
subtraction under subdivision 19b, clause (6).

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

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day after final enactment.
new text end

Sec. 3.

Minnesota Statutes 2010, section 290.01, subdivision 19a, is amended to read:

Subd. 19a.

Additions to federal taxable income.

For individuals, estates, and
trusts, there shall be added to federal taxable income:

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

(ii) exempt-interest dividends as defined in section 852(b)(5) of the Internal Revenue
Code, except:

(A) the portion of the exempt-interest dividends exempt from state taxation under
the laws of the United States; and

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

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

(2) the amount of income, sales and use, motor vehicle sales, or excise taxes paid
or accrued within the taxable year under this chapter and the amount of taxes based on
net income paid, sales and use, motor vehicle sales, or excise taxes paid to any other
state or to any province or territory of Canada, to the extent allowed as a deduction
under section 63(d) of the Internal Revenue Code, but the addition may not be more
than the amount by which the itemized deductions as allowed under section 63(d) of
the Internal Revenue Code exceeds the amount of the standard deduction as defined in
section 63(c) of the Internal Revenue Code, disregarding the amounts allowed under
sections 63(c)(1)(C) and 63(c)(1)(E) of the Internal Revenue Code. For the purpose of
this paragraph, the disallowance of itemized deductions under section 68 of the Internal
Revenue Code of 1986, income, sales and use, motor vehicle sales, or excise taxes are
the last itemized deductions disallowed;

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

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

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

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

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

(8) new text begin for taxable years beginning before January 1, 2011, new text end 80 percent of the amount by
which the deduction allowed by section 179 of the Internal Revenue Code exceeds the
deduction allowable by section 179 of the Internal Revenue Code of 1986, as amended
through December 31, 2003;

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

(10) new text begin for taxable years beginning before January 1, 2013, new text end the exclusion allowed
under section 139A of the Internal Revenue Code for federal subsidies for prescription
drug plans;

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

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

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

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

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

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

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

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2009.
new text end

Sec. 4.

Minnesota Statutes 2010, section 290.01, subdivision 19c, is amended to read:

Subd. 19c.

Corporations; additions to federal taxable income.

For corporations,
there shall be added to federal taxable income:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(16) new text begin for taxable years beginning before January 1, 2011, new text end 80 percent of the amount by
which the deduction allowed by section 179 of the Internal Revenue Code exceeds the
deduction allowable by section 179 of the Internal Revenue Code of 1986, as amended
through December 31, 2003;

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

(18) new text begin for taxable years beginning before January 1, 2013, new text end the exclusion allowed
under section 139A of the Internal Revenue Code for federal subsidies for prescription
drug plans;

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

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

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

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

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

(iv) licensing fees; and

(v) other similar expenses and costs.

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

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

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

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

(ii) income from factoring transactions or discounting transactions;

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

(iv) licensing fees; and

(v) other similar income.

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

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

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

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

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

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

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2009.
new text end

Sec. 5.

Minnesota Statutes 2010, section 290.01, subdivision 31, is amended to read:

Subd. 31.

Internal Revenue Code.

Unless specifically defined otherwise, "Internal
Revenue Code" means the Internal Revenue Code of 1986, as amended through deleted text begin March
18, 2010 deleted text end new text begin September 27, 2010 new text end . Internal Revenue Code also includes any uncodified
provision in federal law that relates to provisions of the Internal Revenue Code that are
incorporated into Minnesota law.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment
except that the changes incorporated by federal changes are effective at the same time as
the changes were effective for federal purposes.
new text end

Sec. 6.

Minnesota Statutes 2010, section 290A.03, subdivision 15, is amended to read:

Subd. 15.

Internal Revenue Code.

"Internal Revenue Code" means the Internal
Revenue Code of 1986, as amended through deleted text begin March 18, 2010 deleted text end new text begin September 27, 2010 new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for property tax refunds based on
property taxes payable on or after December 31, 2010, and rent paid on or after December
31, 2009.
new text end

Sec. 7. new text begin CORRECTED FORM W-2 NOT REQUIRED.
new text end

new text begin Employers who have prepared and distributed form W-2, wage and tax statement,
for tax year 2010, that reported to employees the amount of health coverage provided to
adult children under age 27 includable in net income under prior law, are not required to
prepare and distribute corrected tax year 2010 form W-2.
new text end