1.1 	A bill for an act
1.2 	relating to taxation; property taxes; individual income taxes; sales taxes and 
1.3 	accelerated payments; corporate franchise taxes; administration and compliance; 
1.4 	economic development; budget format and reserve; amending the statewide 
1.5 	general property tax; amending levy limits; adding a fourth bracket to the 
1.6 	individual income tax; adjusting the individual alternative minimum tax; 
1.7 	adding a clothing sales tax credit to the individual income tax; providing 
1.8 	for a gradual phaseout of the corporate franchise tax; repealing deductions, 
1.9 	credits, and additions to the corporate franchise tax; repealing the corporate 
1.10 	alternative minimum tax; ending the minimum fee for corporations; amending 
1.11 	the gross and net income allocation definitions related to corporations; amending 
1.12 	the June accelerated tax payments; modifying the definition of a sale and 
1.13 	purchase to include legal and accounting services; adjusting the sales tax 
1.14 	rate; eliminating the imposition and refund of sales tax on capital equipment; 
1.15 	eliminating an obsolete provision; repealing the sales tax exemption for clothing; 
1.16 	amending administration and compliance statutes to remove corporate taxpayer 
1.17 	requirements; requiring the budget to show estimates for two biennia; requiring 
1.18 	the budget to the legislature to show structural balance over two biennia; 
1.19 	repealing the Price of Government Law; appropriating money;amending 
1.20 	Minnesota Statutes 2008, sections 16A.10, subdivision 1; 16A.11, subdivision 2; 
1.21 	275.025, subdivisions 1, 4; 275.71, subdivisions 2, 4, 5; 289A.18, subdivision 
1.22 	1; 289A.19, subdivision 2; 289A.20, subdivisions 1, 4; 289A.30, subdivision 1; 
1.23 	289A.31, subdivision 1; 289A.60, subdivisions 1, 4, 15; 290.01, subdivisions 
1.24 	19f, 22, 29; 290.03; 290.04, subdivision 1; 290.06, subdivisions 1, 2c, 2d, 33; 
1.25 	290.091, subdivision 1; 290.0922, subdivision 1; 290.095, subdivision 3; 290.17, 
1.26 	subdivisions 1, 4; 290.191, subdivision 4; 290.32; 290.36; 290.9201, subdivision 
1.27 	1; 297A.61, subdivision 3; 297A.62, subdivision 1, by adding a subdivision; 
1.28 	297A.68, subdivision 5; 297A.75; 297B.02, subdivision 1; 297F.09, subdivision 
1.29 	10; 297G.09, subdivision 9; 469.310, subdivision 10; 469.321, subdivision 5; 
1.30 	469.330, subdivision 10; proposing coding for new law in Minnesota Statutes, 
1.31 	chapter 290; repealing Minnesota Statutes 2008, sections 16A.102, subdivision 
1.32 	4; 297A.67, subdivision 8.
1.33 	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

2.1 	ARTICLE 1
2.2 	PROPERTY TAXES

2.3 	Section 1. Minnesota Statutes 2008, section 275.025, subdivision 1, is amended to read:
2.4 		Subdivision 1.Levy amount. The state general levy is levied against 
2.5 	commercial-industrial property and seasonal residential recreational property, as defined in 
2.6 	this section. The state general levy base amount is $592,000,000 for taxes payable in 2002
2.7 	for taxes payable in 2010 only is determined as follows: (1) for commercial-industrial 
2.8 	property,  the amount of $1,003,000,000; and (2) for seasonal residential recreational 
2.9 	property, the amount of $39,700,000. For taxes payable in subsequent years, the levy base 
2.10 	amount is increased each year by multiplying the levy base amount for the prior year by 
2.11 	the sum of one plus the rate of increase, if any, in the implicit price deflator for government 
2.12 	consumption expenditures and gross investment for state and local governments prepared 
2.13 	by the Bureau of Economic Analysts of the United States Department of Commerce for 
2.14 	the 12-month period ending March 31 of the year prior to the year the taxes are payable. 
2.15 	The tax under this section is not treated as a local tax rate under section 469.177 and is not 
2.16 	the levy of a governmental unit under chapters 276A and 473F.
2.17 	The commissioner shall increase or decrease the preliminary or final rate for a year 
2.18 	as necessary to account for errors and tax base changes that affected a preliminary or final 
2.19 	rate for either of the two preceding years. Adjustments are allowed to the extent that the 
2.20 	necessary information is available to the commissioner at the time the rates for a year must 
2.21 	be certified, and for the following reasons:
2.22 	(1) an erroneous report of taxable value by a local official;
2.23 	(2) an erroneous calculation by the commissioner; and
2.24 	(3) an increase or decrease in taxable value for commercial-industrial or seasonal 
2.25 	residential recreational property reported on the abstracts of tax lists submitted under 
2.26 	section 275.29 that was not reported on the abstracts of assessment submitted under 
2.27 	section 270C.89 for the same year.
2.28 	The commissioner may, but need not, make adjustments if the total difference in the tax 
2.29 	levied for the year would be less than $100,000.

2.30 	EFFECTIVE DATE. This section is effective for taxes payable in 2010 and 
2.31 	thereafter.

2.32 	Sec. 2. Minnesota Statutes 2008, section 275.025, subdivision 4, is amended to read:
2.33 		Subd. 4.Apportionment and Levy of state general tax. Ninety-five percent of the 
2.34 	state general tax must be levied by applying a uniform rate to all commercial-industrial tax 
3.1 	capacity and five percent of the state general tax must be levied by applying a uniform 
3.2 	rate to all seasonal residential recreational tax capacity. On or before October 1 each year, 
3.3 	the commissioner of revenue shall certify the preliminary state general levy rates to each 
3.4 	county auditor that must be used to prepare the notices of proposed property taxes for taxes 
3.5 	payable in the following year. By January 1 of each year, the commissioner shall certify 
3.6 	the final state general levy rate to each county auditor that shall be used in spreading taxes.

3.7 	EFFECTIVE DATE. This section is effective for taxes payable in 2010 and 
3.8 	thereafter.

3.9 	Sec. 3. Minnesota Statutes 2008, section 275.71, subdivision 2, is amended to read:
3.10 		Subd. 2.Levy limit base. (a) The levy limit base for a local governmental unit for 
3.11 	taxes levied in 2008 is its levy aid base from the previous year, subject to any adjustments 
3.12 	under section 275.72. For taxes levied in 2009 and 2010, the levy limit base for a local 
3.13 	governmental unit is its adjusted levy limit base in the previous year, subject to any 
3.14 	adjustments under section 275.72.

3.15 	EFFECTIVE DATE. This section is effective for taxes payable in 2010 and 
3.16 	thereafter.

3.17 	Sec. 4. Minnesota Statutes 2008, section 275.71, subdivision 4, is amended to read:
3.18 		Subd. 4.Adjusted levy limit base.  For taxes levied in 2008 through 2010, the 
3.19 	adjusted levy limit base is equal to the levy limit base computed under subdivision 2 
3.20 	or section 275.72, multiplied by:
3.21 	(1) one plus the lesser of 3.9 percent or the percentage growth in the implicit price 
3.22 	deflator, but not less than zero;
3.23 	(2) one plus a percentage equal to 50 percent of the percentage increase in the number 
3.24 	of households, if any, for the most recent 12-month period for which data is available; and
3.25 	(3) one plus a percentage equal to 50 percent of the percentage increase in the 
3.26 	taxable market value of the jurisdiction due to new construction of class 3 property, as 
3.27 	defined in section 273.13, subdivision 4, except for state-assessed utility and railroad 
3.28 	property, for the most recent year for which data is available.

3.29 	EFFECTIVE DATE. This section is effective for taxes payable in 2010 and 
3.30 	thereafter.

3.31 	Sec. 5. Minnesota Statutes 2008, section 275.71, subdivision 5, is amended to read:
4.1 		Subd. 5.Property tax levy limit. For taxes levied in 2008 through 2010, the 
4.2 	property tax levy limit for a local governmental unit is equal to its adjusted levy limit 
4.3 	base determined under subdivision 4 plus any additional levy authorized under section 
4.4 	275.73, which is levied against net tax capacity, reduced by the sum of (i) the total amount 
4.5 	of aids and reimbursements that the local governmental unit is certified to receive under 
4.6 	sections 477A.011 to 477A.014, (ii) taconite aids under sections 298.28 and 298.282
4.7 	including any aid which was required to be placed in a special fund for expenditure in 
4.8 	the next succeeding year, (iii) estimated payments to the local governmental unit under 
4.9 	section 272.029, adjusted for any error in estimation in the preceding year, and (iv) aids 
4.10 	under section 477A.16. 

4.11 	EFFECTIVE DATE. This section is effective for taxes payable in 2010 and 
4.12 	thereafter.

4.13 	ARTICLE 2
4.14 	INDIVIDUAL INCOME TAXES

4.15 	Section 1. Minnesota Statutes 2008, section 290.06, subdivision 2c, is amended to read:
4.16 		Subd. 2c. Schedules of rates for individuals, estates, and trusts. (a) The income 
4.17 	taxes imposed by this chapter upon married individuals filing joint returns and surviving 
4.18 	spouses as defined in section 2(a) of the Internal Revenue Code must be computed by 
4.19 	applying to their taxable net income the following schedule of rates: 
4.20 	(1) on the first $25,680 $31,860, 5.35 percent; 
4.21 	(2) on all over $25,680 $31,860, but not over $102,030 $126,580, 7.05 percent; 
4.22 	(3) on all over $102,030 $126,580, but not over $250,000, 7.85 percent; and
4.23 	(4) for taxable years beginning after December 31, 2008, and before January 1, 
4.24 	2010, on all over $250,000, 8.15 percent, and for taxable years beginning after December 
4.25 	31, 2009, on all over $250,000, 8.50 percent. 
4.26 	Married individuals filing separate returns, estates, and trusts must compute their 
4.27 	income tax by applying the above rates to their taxable income, except that the income 
4.28 	brackets will be one-half of the above amounts. 
4.29 	(b) The income taxes imposed by this chapter upon unmarried individuals must be 
4.30 	computed by applying to taxable net income the following schedule of rates: 
4.31 	(1) on the first $17,570 $21,800, 5.35 percent; 
4.32 	(2) on all over $17,570 $21,800, but not over $57,710 $71,590, 7.05 percent; 
4.33 	(3) on all over $57,710 $71,590, but not over $141,250, 7.85 percent; and
5.1 	(4) for taxable years beginning after December 31, 2008, and before January 1, 
5.2 	2010, on all over $141,250, 8.15 percent, and for taxable years beginning after December 
5.3 	31, 2009, on all over $141,250, 8.50 percent. 
5.4 	(c) The income taxes imposed by this chapter upon unmarried individuals qualifying 
5.5 	as a head of household as defined in section 2(b) of the Internal Revenue Code must be 
5.6 	computed by applying to taxable net income the following schedule of rates: 
5.7 	(1) on the first $21,630 $26,830, 5.35 percent; 
5.8 	(2) on all over $21,630 $26,830, but not over $86,910 $107,820, 7.05 percent; 
5.9 	(3) on all over $86,910 $107,820, but not over $212,500, 7.85 percent; and
5.10 	(4) for taxable years beginning after December 31, 2008, and before January 1, 
5.11 	2010, on all over $212,500, 8.15 percent, and for taxable years beginning after December 
5.12 	31, 2009, on all over $121,500, 8.50 percent. 
5.13 	(d) In lieu of a tax computed according to the rates set forth in this subdivision, the 
5.14 	tax of any individual taxpayer whose taxable net income for the taxable year is less than 
5.15 	an amount determined by the commissioner must be computed in accordance with tables 
5.16 	prepared and issued by the commissioner of revenue based on income brackets of not 
5.17 	more than $100. The amount of tax for each bracket shall be computed at the rates set 
5.18 	forth in this subdivision, provided that the commissioner may disregard a fractional part of 
5.19 	a dollar unless it amounts to 50 cents or more, in which case it may be increased to $1. 
5.20 	(e) An individual who is not a Minnesota resident for the entire year must compute 
5.21 	the individual's Minnesota income tax as provided in this subdivision. After the 
5.22 	application of the nonrefundable credits provided in this chapter, the tax liability must 
5.23 	then be multiplied by a fraction in which: 
5.24 	(1) the numerator is the individual's Minnesota source federal adjusted gross income 
5.25 	as defined in section 62 of the Internal Revenue Code and increased by the additions 
5.26 	required under section 290.01, subdivision 19a, clauses (1), (5), (6), (7), (8), (9), (12), and 
5.27 	(13) and reduced by the Minnesota assignable portion of the subtraction for United States 
5.28 	government interest under section 290.01, subdivision 19b, clause (1), and the subtractions 
5.29 	under section 290.01, subdivision 19b, clauses (9), (10), (14), (15), and (16), after applying 
5.30 	the allocation and assignability provisions of section 290.081, clause (a), or 290.17; and 
5.31 	(2) the denominator is the individual's federal adjusted gross income as defined in 
5.32 	section 62 of the Internal Revenue Code of 1986, increased by the amounts specified in 
5.33 	section 290.01, subdivision 19a, clauses (1), (5), (6), (7), (8), (9), (12), and (13) and 
5.34 	reduced by the amounts specified in section 290.01, subdivision 19b, clauses (1), (9), 
5.35 	(10), (14), (15), and (16). 

6.1 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
6.2 	December 31, 2008.

6.3 	Sec. 2. Minnesota Statutes 2008, section 290.06, subdivision 2d, is amended to read:
6.4 		Subd. 2d.Inflation adjustment of brackets. (a) For taxable years beginning after 
6.5 	December 31, 2000 2008, the minimum and maximum dollar amounts for each rate 
6.6 	bracket for which a tax is imposed in subdivision 2c shall be adjusted for inflation by the 
6.7 	percentage determined under paragraph (b). For the purpose of making the adjustment as 
6.8 	provided in this subdivision all of the rate brackets provided in subdivision 2c shall be the 
6.9 	rate brackets as they existed for taxable years beginning after December 31, 1999 2007, 
6.10 	and before January 1, 2001 2008. The rate applicable to any rate bracket must not be 
6.11 	changed. The dollar amounts setting forth the tax shall be adjusted to reflect the changes 
6.12 	in the rate brackets. The rate brackets as adjusted must be rounded to the nearest $10 
6.13 	amount. If the rate bracket ends in $5, it must be rounded up to the nearest $10 amount.
6.14 	(b) The commissioner shall adjust the rate brackets and by the percentage determined 
6.15 	pursuant to the provisions of section 1(f) of the Internal Revenue Code, except that in 
6.16 	section 1(f)(3)(B) the word "1999" "2007" shall be substituted for the word "1992." For 
6.17 	2001 2009, the commissioner shall then determine the percent change from the 12 months 
6.18 	ending on August 31, 1999 2007, to the 12 months ending on August 31, 2000 2008, and 
6.19 	in each subsequent year, from the 12 months ending on August 31, 1999 2007, to the 12 
6.20 	months ending on August 31 of the year preceding the taxable year. The determination of 
6.21 	the commissioner pursuant to this subdivision shall not be considered a "rule" and shall 
6.22 	not be subject to the Administrative Procedure Act contained in chapter 14.
6.23 	No later than December 15 of each year, the commissioner shall announce the 
6.24 	specific percentage that will be used to adjust the tax rate brackets.

6.25 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
6.26 	December 31, 2008.

6.27 	Sec. 3. [290.0683] CLOTHING SALES TAX CREDIT.
6.28 		Subdivision 1.Definitions. (a) For purposes of this section, the following terms 
6.29 	have the meanings given.
6.30 	(b) "Income" has the meaning given in section 290.067, subdivision 2a.
6.31 	(c) "Dependent" has the meaning given in section 152 of the Internal Revenue Code.
6.32 		Subd. 2.Credit allowed. A taxpayer is allowed a refundable credit against the tax 
6.33 	imposed under this chapter. The credit is equal to $60 for a married couple filing a joint 
6.34 	return, and $30 for all filers, plus $30 for the first dependent claimed on the return, $15 
7.1 	for each of the second and third dependents claimed on the return, $10 for the fourth 
7.2 	dependent claimed on the return, and $5 for each subsequent dependent.
7.3 		Subd. 3.Limitations. The credit allowed in this section is reduced by $10 for every 
7.4 	$1,000 of income in excess of 200 percent of the federal poverty guidelines.
7.5 		Subd. 4.Appropriation. An amount sufficient to pay the refunds required by this 
7.6 	section is appropriated to the commissioner from the general fund.

7.7 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
7.8 	December 31, 2009.

7.9 	Sec. 4. Minnesota Statutes 2008, section 290.091, subdivision 1, is amended to read:
7.10 		Subdivision 1.Imposition of tax. In addition to all other taxes imposed by this 
7.11 	chapter a tax is imposed on individuals, estates, and trusts equal to the excess (if any) of
7.12 	(a) an amount equal to 6.46.55 percent of alternative minimum taxable income after 
7.13 	subtracting the exemption amount, over
7.14 	(b) the regular tax for the taxable year.

7.15 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
7.16 	December 31, 2008.

7.17 	ARTICLE 3
7.18 	CORPORATE INCOME TAXES

7.19 	Section 1. Minnesota Statutes 2008, section 290.01, subdivision 19f, is amended to 
7.20 	read:
7.21 		Subd. 19f.Basis modifications affecting gain or loss on disposition of property.
 7.22 	(a) For individuals, estates, and trusts, the basis of property is its adjusted basis for 
7.23 	federal income tax purposes except as set forth in paragraphs (f), (g), and (m). For 
7.24 	corporations, the basis of property is its adjusted basis for federal income tax purposes, 
7.25 	without regard to the time when the property became subject to tax under this chapter or to 
7.26 	whether out-of-state losses or items of tax preference with respect to the property were not 
7.27 	deductible under this chapter, except that the modifications to the basis for federal income 
7.28 	tax purposes set forth in paragraphs (b) to (j) are allowed to corporations, and the resulting 
7.29 	modifications to federal taxable income must be made in the year in which gain or loss 
7.30 	on the sale or other disposition of property is recognized.
7.31 	(b) The basis of property shall not be reduced to reflect federal investment tax credit.
7.32 	(c) The basis of property subject to the accelerated cost recovery system under 
7.33 	section 168 of the Internal Revenue Code shall be modified to reflect the modifications in 
8.1 	depreciation with respect to the property provided for in subdivision 19e. For certified 
8.2 	pollution control facilities for which amortization deductions were elected under section 
8.3 	169 of the Internal Revenue Code of 1954, the basis of the property must be increased by 
8.4 	the amount of the amortization deduction not previously allowed under this chapter.
8.5 	(d) For property acquired before January 1, 1933, the basis for computing a gain is 
8.6 	the fair market value of the property as of that date. The basis for determining a loss is 
8.7 	the cost of the property to the taxpayer less any depreciation, amortization, or depletion, 
8.8 	actually sustained before that date. If the adjusted cost exceeds the fair market value of the 
8.9 	property, then the basis is the adjusted cost regardless of whether there is a gain or loss.
8.10 	(e) The basis is reduced by the allowance for amortization of bond premium if an 
8.11 	election to amortize was made pursuant to Minnesota Statutes 1986, section 290.09, 
8.12 	subdivision 13, and the allowance could have been deducted by the taxpayer under this 
8.13 	chapter during the period of the taxpayer's ownership of the property. 
8.14 	(f) For assets placed in service before January 1, 1987, corporations, partnerships, 
8.15 	or individuals engaged in the business of mining ores other than iron ore or taconite 
8.16 	concentrates subject to the occupation tax under chapter 298 must use the occupation 
8.17 	tax basis of property used in that business.
8.18 	(g) For assets placed in service before January 1, 1990, corporations, partnerships, 
8.19 	or individuals engaged in the business of mining iron ore or taconite concentrates subject 
8.20 	to the occupation tax under chapter 298 must use the occupation tax basis of property 
8.21 	used in that business.
8.22 	(h) In applying the provisions of sections 301(c)(3)(B), 312(f) and (g), and 316(a)(1) 
8.23 	of the Internal Revenue Code, the dates December 31, 1932, and January 1, 1933, shall be 
8.24 	substituted for February 28, 1913, and March 1, 1913, respectively.
8.25 	(i) In applying the provisions of section 362(a) and (c) of the Internal Revenue Code, 
8.26 	the date December 31, 1956, shall be substituted for June 22, 1954.
8.27 	(j) The basis of property shall be increased by the amount of intangible drilling 
8.28 	costs not previously allowed due to differences between this chapter and the Internal 
8.29 	Revenue Code.
8.30 	(k) The adjusted basis of any corporate partner's interest in a partnership is the same 
8.31 	as the adjusted basis for federal income tax purposes modified as required to reflect the 
8.32 	basis modifications set forth in paragraphs (b) to (j). The adjusted basis of a partnership 
8.33 	in which the partner is an individual, estate, or trust is the same as the adjusted basis for 
8.34 	federal income tax purposes modified as required to reflect the basis modifications set 
8.35 	forth in paragraphs (f) and (g).
9.1 	(l) The modifications contained in paragraphs (b) to (j) also apply to the basis of 
9.2 	property that is determined by reference to the basis of the same property in the hands of a 
9.3 	different taxpayer or by reference to the basis of different property.

9.4 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
9.5 	December 31, 2012.

9.6 	Sec. 2. Minnesota Statutes 2008, section 290.01, subdivision 22, is amended to read:
9.7 		Subd. 22.Taxable net income. For tax years beginning after December 31, 1986, 
9.8 	the term "taxable net income" means:
9.9 	(1) for resident individuals the same as net income;
9.10 	(2) for individuals who were not residents of Minnesota for the entire year, the same 
9.11 	as net income except that the tax is imposed only on the Minnesota apportioned share of 
9.12 	that income as determined pursuant to section 290.06, subdivision 2c, paragraph (e); 
9.13 	(3) for all other taxpayers, the part of net income that is allocable to Minnesota by 
9.14 	assignment or apportionment under one or more of sections 290.17, 290.191, 290.20, 
9.15 	and 290.36. 
9.16 	For tax years beginning before January 1, 1987, the term "taxable net income" 
9.17 	means the net income assignable to this state pursuant to sections 290.17 to 290.20. For 
9.18 	corporations, taxable net income is then reduced by the deductions contained in section 
9.19 	290.21.

9.20 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
9.21 	December 31, 2012.

9.22 	Sec. 3. Minnesota Statutes 2008, section 290.01, subdivision 29, is amended to read:
9.23 		Subd. 29.Taxable income. The term "taxable income" means:
9.24 	(1) for individuals, estates, and trusts, the same as taxable net income;.
9.25 	(2) for corporations, the taxable net income less
9.26 	(i) the net operating loss deduction under section 290.095;
9.27 	(ii) the dividends received deduction under section 290.21, subdivision 4;
9.28 	(iii) the exemption for operating in a job opportunity building zone under section 
9.29 	469.317;
9.30 	(iv) the exemption for operating in a biotechnology and health sciences industry 
9.31 	zone under section 469.337; and
9.32 	(v) the exemption for operating in an international economic development zone 
9.33 	under section 469.326.

10.1 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
10.2 	December 31, 2012.

10.3 	Sec. 4. Minnesota Statutes 2008, section 290.03, is amended to read:
10.4 	290.03 INCOME TAX; IMPOSITION, CLASSES OF TAXPAYERS.
10.5 	An annual tax for each taxable year, computed in the manner and at the rates 
10.6 	hereinafter provided, is hereby imposed upon the taxable income for such year of the 
10.7 	following classes of taxpayers:
10.8 	(1) Resident and nonresident individuals;
10.9 	(2) Estates of decedents, dying domiciled within or without this state;
10.10 	(3) Trusts (except those taxable as corporations) however created by residents or 
10.11 	nonresidents or by domestic or foreign corporations.

10.12 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
10.13 	December 31, 2012.

10.14 	Sec. 5. Minnesota Statutes 2008, section 290.04, subdivision 1, is amended to read:
10.15 		Subdivision 1.Accrual. The liability for the tax imposed by section 290.02 shall 
10.16 	arise upon the first day of the taxable year upon which a domestic corporation exercises 
10.17 	any of the privileges specified in section 290.02 or exists as a corporation, or on which 
10.18 	a foreign corporation is possessed of the privilege for the grant to it of the privilege of 
10.19 	transacting or for the actual transaction by it of any local business within this state during 
10.20 	any part of its taxable year, in corporate or organized form. The liability for the tax 
10.21 	imposed by section 290.03 shall arise concurrently with the receipt or accrual of income 
10.22 	during the taxable year. The provisions shall in no way affect the determination of the 
10.23 	amount of such taxes, the time for making returns, and the time for paying such taxes.  

10.24 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
10.25 	December 31, 2012.

10.26 	Sec. 6. Minnesota Statutes 2008, section 290.06, subdivision 1, is amended to read:
10.27 		Subdivision 1.Computation, corporations. (a) For taxable years beginning before 
10.28 	January 1, 2010, the franchise tax imposed upon corporations shall be computed by 
10.29 	applying to their taxable income the rate of 9.8 percent.
10.30 	(b) For taxable years beginning after December 31, 2009, the rates listed below 
10.31 	apply to taxable years beginning during the calendar year referenced below:

11.1
11.2		Taxable years beginning during the 
calendar year:
	Tax rate:
	
11.3		2010
	7.35 percent
	
11.4		2011
	4.9 percent
	
11.5		2012
	2.45 percent
	
11.6		2013 and later years
	0 percent

11.7 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
11.8 	December 31, 2009.

11.9 	Sec. 7. Minnesota Statutes 2008, section 290.06, subdivision 33, is amended to read:
11.10 		Subd. 33. Bovine testing credit. (a) An owner of cattle in Minnesota may take a 
11.11 	credit against the tax due under this chapter for an amount equal to: (1) for corporate 
11.12 	filers, including shareholders of an S corporation under section 290.9725, 25 percent of 
11.13 	the expenses incurred during the taxable year to conduct tuberculosis testing on those 
11.14 	cattle; and (2) for all other filers, one-half the expenses incurred during the taxable year to 
11.15 	conduct tuberculosis testing on those cattle. 
11.16 	(b) If the amount of credit which the taxpayer is eligible to receive under this 
11.17 	subdivision exceeds the taxpayer's tax liability under this chapter, the commissioner of 
11.18 	revenue shall refund the excess to the taxpayer. 
11.19 	(c) The amount necessary to pay claims for the refund provided in this subdivision is 
11.20 	appropriated from the general fund to the commissioner of revenue. 
11.21 	(d) Expenses incurred in a calendar year in which tuberculosis testing of cattle in 
11.22 	Minnesota is not federally required are not allowed in claiming the credit under paragraph 
11.23 	(a). 

11.24 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
11.25 	December 31, 2012.

11.26 	Sec. 8. Minnesota Statutes 2008, section 290.0922, subdivision 1, is amended to read:
11.27 		Subdivision 1.Imposition. (a) In addition to the tax imposed by this chapter without 
11.28 	regard to this section, the franchise tax imposed on a corporation required to file under 
11.29 	section 289A.08, subdivision 3, other than a corporation treated as an "S" corporation 
11.30 	under section 290.9725 for the taxable year includes a tax equal to the following amounts:

11.31
11.32
11.33	If the sum of the corporation's 
Minnesota property, payrolls, and sales 
or receipts is: 
		the tax equals: 
	
11.34			less than
	$
	500,000
		$
	0
		
11.35		$
	500,000 to
	$
	999,999
		$
	100
		
12.1		$
	1,000,000 to
	$
	4,999,999
		$
	300
		
12.2		$
	5,000,000 to
	$
	9,999,999
		$
	1,000
		
12.3
12.4		$
	10,000,000 
to
	$
	19,999,999
		$
	2,000
		
12.5		$
	20,000,000 or more 
		$
	5,000
		
12.6 	(b) A tax is imposed for each taxable year on a corporation required to file a return 
12.7 	under section 289A.12, subdivision 3, that is treated as an "S" corporation under section 
12.8 	290.9725 and on a partnership required to file a return under section 289A.12, subdivision 
12.9 	3, other than a partnership that derives over 80 percent of its income from farming. The 
12.10 	tax imposed under this paragraph is due on or before the due date of the return for the 
12.11 	taxpayer due under section 289A.18, subdivision 1. The commissioner shall prescribe 
12.12 	the return to be used for payment of this tax. The tax under this paragraph is equal to 
12.13 	the following amounts:

12.14
12.15
12.16	If the sum of the S corporation's or 
partnership's Minnesota property, 
payrolls, and sales or receipts is:
			the tax equals:
	
12.17			less than
	$
	500,000
		$
	0
		
12.18		$
	500,000 to
	$
	999,999
		$
	100
		
12.19		$
	1,000,000 to
	$
	4,999,999
		$
	300
		
12.20		$
	5,000,000 to
	$
	9,999,999
		$
	1,000
		
12.21
12.22		$
	10,000,000 
to
	$
	19,999,999
		$
	2,000
		
12.23		$
	20,000,000 or more
		$
	5,000

12.24 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
12.25 	December 31, 2012.

12.26 	Sec. 9. Minnesota Statutes 2008, section 290.095, subdivision 3, is amended to read:
12.27 		Subd. 3.Carryover. (a) A net operating loss incurred in a taxable year: (i) 
12.28 	beginning after December 31, 1986, shall be a net operating loss carryover to each of the 
12.29 	15 taxable years following the taxable year of such loss; (ii) beginning before January 1, 
12.30 	1987, shall be a net operating loss carryover to each of the five taxable years following the 
12.31 	taxable year of such loss subject to the provisions of Minnesota Statutes 1986, section 
12.32 	290.095; and (iii) beginning before January 1, 1987, shall be a net operating loss carryback 
12.33 	to each of the three taxable years preceding the loss year subject to the provisions of 
12.34 	Minnesota Statutes 1986, section 290.095.  
12.35 	(b) The entire amount of the net operating loss for any taxable year shall be carried to 
12.36 	the earliest of the taxable years to which such loss may be carried. The portion of such loss 
12.37 	which shall be carried to each of the other taxable years shall be the excess, if any, of the 
13.1 	amount of such loss over the sum of the taxable net income, adjusted by the modifications 
13.2 	specified in subdivision 4, for each of the taxable years to which such loss may be carried.
13.3 	(c) Where a corporation apportions its income under the provisions of section 
13.4 	290.191, the net operating loss deduction incurred in any taxable year shall be allowed 
13.5 	to the extent of the apportionment ratio of the loss year.  
13.6 	(d) (c) The provisions of sections 381, 382, and 384 of the Internal Revenue Code 
13.7 	apply to carryovers in certain corporate acquisitions and special limitations on net 
13.8 	operating loss carryovers. The limitation amount determined under section 382 shall be 
13.9 	applied to net income, before apportionment, in each post change year to which a loss 
13.10 	is carried.

13.11 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
13.12 	December 31, 2012.

13.13 	Sec. 10. Minnesota Statutes 2008, section 290.17, subdivision 1, is amended to read:
13.14 		Subdivision 1.Scope of allocation rules. (a) The income of resident individuals 
13.15 	is not subject to allocation outside this state. The allocation rules apply to nonresident 
13.16 	individuals, estates, trusts, nonresident partners of partnerships, and nonresident 
13.17 	shareholders of corporations treated as "S" corporations under section 290.9725, and all 
13.18 	corporations not having such an election in effect. If a partnership or corporation would 
13.19 	not otherwise be subject to the allocation rules, but conducts a trade or business that is part 
13.20 	of a unitary business involving another legal entity that is subject to the allocation rules, 
13.21 	the partnership or corporation is subject to the allocation rules. 
13.22 	(b) Expenses, losses, and other deductions (referred to collectively in this paragraph 
13.23 	as "deductions") must be allocated along with the item or class of gross income to which 
13.24 	they are definitely related for purposes of assignment under this section or apportionment 
13.25 	under section 290.191, 290.20, or 290.36. Deductions definitely related to any item of 
13.26 	gross income assigned under subdivision 2, paragraph (e), are assigned to the taxpayer's 
13.27 	domicile. 
13.28 	(c) In the case of an individual who is a resident for only part of a taxable year, 
13.29 	the individual's income, gains, losses, and deductions from the distributive share of a 
13.30 	partnership, S corporation, trust, or estate are not subject to allocation outside this state 
13.31 	to the extent of the distributive share multiplied by a ratio, the numerator of which is 
13.32 	the number of days the individual was a resident of this state during the tax year of the 
13.33 	partnership, S corporation, trust, or estate, and the denominator of which is the number of 
13.34 	days in the taxable year of the partnership, S corporation, trust, or estate.

14.1 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
14.2 	December 31, 2012.

14.3 	Sec. 11. Minnesota Statutes 2008, section 290.17, subdivision 4, is amended to read:
14.4 		Subd. 4.Unitary business principle. (a) If a trade or business conducted wholly 
14.5 	within this state or partly within and partly without this state is part of a unitary business, 
14.6 	the entire income of the unitary business is subject to apportionment pursuant to section 
14.7 	290.191. Notwithstanding subdivision 2, paragraph (c), none of the income of a unitary 
14.8 	business is considered to be derived from any particular source and none may be allocated 
14.9 	to a particular place except as provided by the applicable apportionment formula. The 
14.10 	provisions of this subdivision do not apply to business income subject to subdivision 5, 
14.11 	income of an insurance company, or income of an investment company determined under 
14.12 	section 290.36. 
14.13 	(b) The term "unitary business" means business activities or operations which 
14.14 	result in a flow of value between them. The term may be applied within a single legal 
14.15 	entity or between multiple entities and without regard to whether each entity is a sole 
14.16 	proprietorship, a corporation, a partnership or a trust.
14.17 	(c) Unity is presumed whenever there is unity of ownership, operation, and use, 
14.18 	evidenced by centralized management or executive force, centralized purchasing, 
14.19 	advertising, accounting, or other controlled interaction, but the absence of these 
14.20 	centralized activities will not necessarily evidence a nonunitary business. Unity is also 
14.21 	presumed when business activities or operations are of mutual benefit, dependent upon or 
14.22 	contributory to one another, either individually or as a group.
14.23 	(d) Where a business operation conducted in Minnesota is owned by a business 
14.24 	entity that carries on business activity outside the state different in kind from that 
14.25 	conducted within this state, and the other business is conducted entirely outside the state, it 
14.26 	is presumed that the two business operations are unitary in nature, interrelated, connected, 
14.27 	and interdependent unless it can be shown to the contrary.
14.28 	(e) Unity of ownership is not deemed to exist when a corporation is involved unless 
14.29 	that corporation is a member of a group of two or more business entities and more than 50 
14.30 	percent of the voting stock of each member of the group is directly or indirectly owned 
14.31 	by a common owner or by common owners, either corporate or noncorporate, or by one 
14.32 	or more of the member corporations of the group. For this purpose, the term "voting 
14.33 	stock" shall include membership interests of mutual insurance holding companies formed 
14.34 	under section 66A.40. 
15.1 	(f) The net income and apportionment factors under section 290.191 or 290.20 of 
15.2 	foreign corporations and other foreign entities which are part of a unitary business shall 
15.3 	not be included in the net income or the apportionment factors of the unitary business. 
15.4 	A foreign corporation or other foreign entity which is required to file a return under this 
15.5 	chapter shall file on a separate return basis. The net income and apportionment factors 
15.6 	under section 290.191 or 290.20 of foreign operating corporations shall not be included in 
15.7 	the net income or the apportionment factors of the unitary business except as provided in 
15.8 	paragraph (g).
15.9 	(g) The adjusted net income of a foreign operating corporation shall be deemed to 
15.10 	be paid as a dividend on the last day of its taxable year to each shareholder thereof, in 
15.11 	proportion to each shareholder's ownership, with which such corporation is engaged in 
15.12 	a unitary business. Such deemed dividend shall be treated as a dividend under section 
15.13 	290.21, subdivision 4. 
15.14 	Dividends actually paid by a foreign operating corporation to a corporate shareholder 
15.15 	which is a member of the same unitary business as the foreign operating corporation shall 
15.16 	be eliminated from the net income of the unitary business in preparing a combined report 
15.17 	for the unitary business. The adjusted net income of a foreign operating corporation 
15.18 	shall be its net income adjusted as follows:
15.19 	(1) any taxes paid or accrued to a foreign country, the commonwealth of Puerto 
15.20 	Rico, or a United States possession or political subdivision of any of the foregoing shall 
15.21 	be a deduction; and
15.22 	(2) the subtraction from federal taxable income for payments received from foreign 
15.23 	corporations or foreign operating corporations under section 290.01, subdivision 19d, 
15.24 	clause (10), shall not be allowed. 
15.25 	If a foreign operating corporation incurs a net loss, neither income nor deduction 
15.26 	from that corporation shall be included in determining the net income of the unitary 
15.27 	business.
15.28 	(h) (g) For purposes of determining the net income of a unitary business and the 
15.29 	factors to be used in the apportionment of net income pursuant to section 290.191 or 
15.30 	290.20, there must be included only the income and apportionment factors of domestic 
15.31 	corporations or other domestic entities other than foreign operating corporations that are 
15.32 	determined to be part of the unitary business pursuant to this subdivision, notwithstanding 
15.33 	that foreign corporations or other foreign entities might be included in the unitary business. 
15.34 	(i) (h) Deductions for expenses, interest, or taxes otherwise allowable under 
15.35 	this chapter that are connected with or allocable against dividends, deemed dividends 
16.1 	described in paragraph (g), or royalties, fees, or other like income described in section 
16.2 	290.01, subdivision 19d, clause (10), shall not be disallowed. 
16.3 	(j) (i) Each corporation or other entity, except a sole proprietorship, that is part of 
16.4 	a unitary business must file combined reports as the commissioner determines. On the 
16.5 	reports, all intercompany transactions between entities included pursuant to paragraph 
16.6 	(h) must be eliminated and the entire net income of the unitary business determined in 
16.7 	accordance with this subdivision is apportioned among the entities by using each entity's 
16.8 	Minnesota factors for apportionment purposes in the numerators of the apportionment 
16.9 	formula and the total factors for apportionment purposes of all entities included pursuant 
16.10 	to paragraph (h) in the denominators of the apportionment formula.
16.11 	(k) If a corporation has been divested from a unitary business and is included in a 
16.12 	combined report for a fractional part of the common accounting period of the combined 
16.13 	report:
16.14 	(1) its income includable in the combined report is its income incurred for that part 
16.15 	of the year determined by proration or separate accounting; and
16.16 	(2) its sales, property, and payroll included in the apportionment formula must 
16.17 	be prorated or accounted for separately.

16.18 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
16.19 	December 31, 2012.

16.20 	Sec. 12. Minnesota Statutes 2008, section 290.191, subdivision 4, is amended to read:
16.21 		Subd. 4.Apportionment formula for certain mail order businesses. If the 
16.22 	business of a corporation, partnership, or proprietorship consists exclusively of the 
16.23 	selling of tangible personal property and services at retail, as defined in section 297A.61, 
16.24 	subdivision 4, paragraph (a), in response to orders received by United States mail, 
16.25 	telephone, facsimile, or other electronic media, and 99 percent of the taxpayer's property 
16.26 	and payroll is within Minnesota, then the taxpayer may apportion net income to Minnesota 
16.27 	based solely upon the percentage that the sales made within this state in connection 
16.28 	with its trade or business during the tax period are of the total sales wherever made in 
16.29 	connection with the trade or business during the tax period. Property and payroll factors 
16.30 	are disregarded. In determining eligibility for this subdivision: 
16.31 	(1) the sale not in the ordinary course of business of tangible or intangible assets 
16.32 	used in conducting business activities must be disregarded; and
16.33 	(2) property and payroll at a distribution center outside of Minnesota are disregarded 
16.34 	if the sole activity at the distribution center is the filling of orders, and no solicitation 
16.35 	of orders occurs at the distribution center.

17.1 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
17.2 	December 31, 2012.

17.3 	Sec. 13. Minnesota Statutes 2008, section 290.32, is amended to read:
17.4 	290.32 TAXES FOR PART OF YEAR, COMPUTATION.
17.5 	When under this chapter a taxpayer is permitted or required to make a return for a 
17.6 	fractional part of a year, the tax shall be computed in the same manner as if such fractional 
17.7 	part of a year were an entire year, except:
17.8 	(1) A taxpayer who is permitted to change the basis for reporting income from a 
17.9 	fiscal to a calendar year shall make a separate return for the period between the close of 
17.10 	the taxpayer's last fiscal year and the following December 31st; if the change is from a 
17.11 	calendar to a fiscal year, a separate return shall be made for the period between the close 
17.12 	of the taxpayer's last calendar year and the date designated as the close of the fiscal year; 
17.13 	and if the change is from one fiscal year to another fiscal year, a separate return shall be 
17.14 	made for the period between the close of the former fiscal year and the date designated as 
17.15 	the close of the new fiscal year. The taxable net income, or for corporations the taxable 
17.16 	net income as reduced by the deductions contained in section 290.21, for any such period 
17.17 	shall be put on an annual basis by multiplying the amount thereof by 12 and dividing by 
17.18 	the number of months included in the period for which such separate return is made; and 
17.19 	the tax shall be that part of a tax, computed on the taxable net income put on such annual 
17.20 	basis which the number of months in such period bears to 12 months.
17.21 	(2) Where any of the enumerated changes in accounting period referred to in clause 
17.22 	(1) involve a 52-53 week fiscal year and any such change results in a short period of less 
17.23 	than seven days, such short period shall be added to and deemed a part of the following 
17.24 	taxable year. If the change results in a short period of seven or more days, but less than 
17.25 	359 days, the taxable net income, or for corporations the taxable net income as reduced 
17.26 	by the deductions contained in section 290.21, for any such period shall be placed on an 
17.27 	annual basis by multiplying such income by 365 and dividing the result by the same 
17.28 	number of days in the short period; and the tax shall be that part of a tax, computed on the 
17.29 	taxable net income placed on such annual basis which the number of days in such short 
17.30 	period bears to 365 days. Where the short period is 359 days or more, the tax shall be 
17.31 	computed in the same manner as if such short period were an entire year.  

17.32 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
17.33 	December 31, 2012.

18.1 	Sec. 14. Minnesota Statutes 2008, section 290.36, is amended to read:
18.2 	290.36 INVESTMENT COMPANIES; REPORT OF NET INCOME; 
18.3 	COMPUTATION OF AMOUNT OF INCOME ALLOCABLE TO STATE.
18.4 	The taxable net income of investment companies shall be computed as follows:
18.5 	Each investment company transacting business as such in this state shall report to 
18.6 	the commissioner the net income returned by the company for the taxable year to the 
18.7 	United States under the provisions of the Internal Revenue Code, less the credits provided 
18.8 	therein and subject to the adjustments required by this chapter. The commissioner shall 
18.9 	compute therefrom the taxable net income of the investment company by assigning to this 
18.10 	state that proportion of such net income, less such credits which the aggregate of the gross 
18.11 	payments collected by the company during the taxable year from old and new business 
18.12 	upon investment contracts issued by the company and held by residents of this state, bears 
18.13 	to the total amount of the gross payments collected during such year by the company from 
18.14 	such business upon investment contracts issued by the company and held by persons 
18.15 	residing within the state and elsewhere.
18.16 	As used in this section, the term "investment company" means any person, 
18.17 	copartnership, or association, or corporation, whether local or foreign, coming within 
18.18 	the purview of section 54.26, and who or which is registered under the Investment 
18.19 	Company Act of 1940 (United States Code, title 15, section 80a-1 and following), as 
18.20 	amended through December 31, 1986, and who or which solicits or receives payments 
18.21 	to be made to itself and which issues therefor, or has issued therefor and has or shall 
18.22 	have outstanding so-called bonds, shares, coupons, certificates of membership, or other 
18.23 	evidences of obligation or agreement or pretended agreement to return to the holders or 
18.24 	owners thereof money or anything of value at some future date; and as to whom the 
18.25 	gross payments received during the taxable year in question upon outstanding investment 
18.26 	contracts, plus interest and dividends earned on investment contracts determined by 
18.27 	prorating the total dividends and interest for the taxable year in question in the same 
18.28 	proportion that certificate reserves as defined by the Investment Company Act of 1940, as 
18.29 	amended through December 31, 1986, is to total assets, shall be at least 50 percent of the 
18.30 	company's gross payments upon investment contracts plus gross income from all other 
18.31 	sources except dividends from subsidiaries for the taxable year in question. The term 
18.32 	"investment contract" shall mean any such so-called bonds, shares, coupons, certificates 
18.33 	of membership, or other evidences of obligation or agreement or pretended agreement 
18.34 	issued by an investment company.  

19.1 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
19.2 	December 31, 2012.

19.3 	Sec. 15. Minnesota Statutes 2008, section 290.9201, subdivision 1, is amended to read:
19.4 		Subdivision 1.Definitions. (a) "Entertainer" means an individual who is not a 
19.5 	resident of Minnesota or a state with which Minnesota has a reciprocal agreement under 
19.6 	section 290.081 who performs acts in Minnesota that amuse, entertain, or inform. For 
19.7 	purposes of this section, "entertainer" includes, but is not limited to, a musician, singer, 
19.8 	dancer, comedian, thespian, athlete, and public speaker. 
19.9 	(b) Entertainment entity means either: (1) an entertainer who is paid compensation 
19.10 	for providing entertainment as an independent contractor, or (2) a partnership that is 
19.11 	paid compensation for entertainment provided by entertainers who are partners, or (3) a 
19.12 	corporation that is paid compensation for entertainment provided by entertainers who are 
19.13 	shareholders of the corporation.

19.14 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
19.15 	December 31, 2012.

19.16 	Sec. 16. EXPIRATION.
 19.17 	Minnesota Statutes 2008, sections 290.01, subdivisions 19c, 19d, and 19e; 290.014, 
19.18 	subdivision 5; 290.02; 290.06, subdivisions 1, 24, and 27; 290.068, subdivision 1; 
19.19 	290.0921, subdivisions 1, 2, 3, 3a, 4, 6, 7, and 8; 290.21, subdivisions 1 and 4; 290.371, 
19.20 	subdivisions 1, 2, 3, and 4; and 290.432, expire after December 31, 2012.

19.21 	ARTICLE 4
19.22 	SALES AND USE TAXES

19.23 	Section 1. Minnesota Statutes 2008, section 297A.61, subdivision 3, is amended to 
19.24 	read:
19.25 		Subd. 3. Sale and purchase. (a) "Sale" and "purchase" include, but are not limited 
19.26 	to, each of the transactions listed in this subdivision. 
19.27 	(b) Sale and purchase include: 
19.28 	(1) any transfer of title or possession, or both, of tangible personal property, whether 
19.29 	absolutely or conditionally, for a consideration in money or by exchange or barter; and 
19.30 	(2) the leasing of or the granting of a license to use or consume, for a consideration 
19.31 	in money or by exchange or barter, tangible personal property, other than a manufactured 
19.32 	home used for residential purposes for a continuous period of 30 days or more. 
20.1 	(c) Sale and purchase include the production, fabrication, printing, or processing of 
20.2 	tangible personal property for a consideration for consumers who furnish either directly or 
20.3 	indirectly the materials used in the production, fabrication, printing, or processing. 
20.4 	(d) Sale and purchase include the preparing for a consideration of food. 
20.5 	Notwithstanding section 297A.67, subdivision 2, taxable food includes, but is not limited 
20.6 	to, the following: 
20.7 	(1) prepared food sold by the retailer; 
20.8 	(2) soft drinks; 
20.9 	(3) candy; 
20.10 	(4) dietary supplements; and 
20.11 	(5) all food sold through vending machines. 
20.12 	(e) A sale and a purchase includes the furnishing for a consideration of electricity, 
20.13 	gas, water, or steam for use or consumption within this state. 
20.14 	(f) A sale and a purchase includes the transfer for a consideration of prewritten 
20.15 	computer software whether delivered electronically, by load and leave, or otherwise. 
20.16 	(g) A sale and a purchase includes the furnishing for a consideration of the following 
20.17 	services: 
20.18 	(1) the privilege of admission to places of amusement, recreational areas, or athletic 
20.19 	events, and the making available of amusement devices, tanning facilities, reducing 
20.20 	salons, steam baths, Turkish baths, health clubs, and spas or athletic facilities; 
20.21 	(2) lodging and related services by a hotel, rooming house, resort, campground, 
20.22 	motel, or trailer camp, including furnishing the guest of the facility with access to 
20.23 	telecommunication services, and the granting of any similar license to use real property 
20.24 	in a specific facility, other than the renting or leasing of it for a continuous period of 
20.25 	30 days or more under an enforceable written agreement that may not be terminated 
20.26 	without prior notice; 
20.27 	(3) nonresidential parking services, whether on a contractual, hourly, or other 
20.28 	periodic basis, except for parking at a meter; 
20.29 	(4) the granting of membership in a club, association, or other organization if: 
20.30 	(i) the club, association, or other organization makes available for the use of its 
20.31 	members sports and athletic facilities, without regard to whether a separate charge is 
20.32 	assessed for use of the facilities; and 
20.33 	(ii) use of the sports and athletic facility is not made available to the general public 
20.34 	on the same basis as it is made available to members. 
20.35 	Granting of membership means both onetime initiation fees and periodic membership 
20.36 	dues. Sports and athletic facilities include golf courses; tennis, racquetball, handball, and 
21.1 	squash courts; basketball and volleyball facilities; running tracks; exercise equipment; 
21.2 	swimming pools; and other similar athletic or sports facilities; 
21.3 	(5) delivery of aggregate materials by a third party, excluding delivery of aggregate 
21.4 	material used in road construction, and delivery of concrete block by a third party if 
21.5 	the delivery would be subject to the sales tax if provided by the seller of the concrete 
21.6 	block; and 
21.7 	(6) services as provided in this clause: 
21.8 	(i) laundry and dry cleaning services including cleaning, pressing, repairing, altering, 
21.9 	and storing clothes, linen services and supply, cleaning and blocking hats, and carpet, 
21.10 	drapery, upholstery, and industrial cleaning. Laundry and dry cleaning services do not 
21.11 	include services provided by coin operated facilities operated by the customer; 
21.12 	(ii) motor vehicle washing, waxing, and cleaning services, including services 
21.13 	provided by coin operated facilities operated by the customer, and rustproofing, 
21.14 	undercoating, and towing of motor vehicles; 
21.15 	(iii) building and residential cleaning, maintenance, and disinfecting services and 
21.16 	pest control and exterminating services; 
21.17 	(iv) detective, security, burglar, fire alarm, and armored car services; but not 
21.18 	including services performed within the jurisdiction they serve by off-duty licensed peace 
21.19 	officers as defined in section 626.84, subdivision 1, or services provided by a nonprofit 
21.20 	organization for monitoring and electronic surveillance of persons placed on in-home 
21.21 	detention pursuant to court order or under the direction of the Minnesota Department 
21.22 	of Corrections; 
21.23 	(v) pet grooming services; 
21.24 	(vi) lawn care, fertilizing, mowing, spraying and sprigging services; garden planting 
21.25 	and maintenance; tree, bush, and shrub pruning, bracing, spraying, and surgery; indoor 
21.26 	plant care; tree, bush, shrub, and stump removal, except when performed as part of a land 
21.27 	clearing contract as defined in section 297A.68, subdivision 40; and tree trimming for 
21.28 	public utility lines. Services performed under a construction contract for the installation of 
21.29 	shrubbery, plants, sod, trees, bushes, and similar items are not taxable; 
21.30 	(vii) massages, except when provided by a licensed health care facility or 
21.31 	professional or upon written referral from a licensed health care facility or professional for 
21.32 	treatment of illness, injury, or disease; and 
21.33 	(viii) the furnishing of lodging, board, and care services for animals in kennels and 
21.34 	other similar arrangements, but excluding veterinary and horse boarding services;
21.35 	(7) legal services; and
21.36 	(8) accounting, bookkeeping, and tax preparation services. 
22.1 	In applying the provisions of this chapter, the terms "tangible personal property" 
22.2 	and "retail sale" include taxable services listed in clause (6), items (i) to (vi) and (viii), 
22.3 	and the provision of these taxable services, unless specifically provided otherwise. 
22.4 	Services performed by an employee for an employer are not taxable. Services performed 
22.5 	by a partnership or association for another partnership or association are not taxable if 
22.6 	one of the entities owns or controls more than 80 percent of the voting power of the 
22.7 	equity interest in the other entity. Services performed between members of an affiliated 
22.8 	group of corporations are not taxable. For purposes of the preceding sentence, "affiliated 
22.9 	group of corporations" means those entities that would be classified as members of an 
22.10 	affiliated group as defined under United States Code, title 26, section 1504, disregarding 
22.11 	the exclusions in section 1504(b). 
22.12 	For purposes of clause (5), "road construction" means construction of (1) public 
22.13 	roads, (2) cartways, and (3) private roads in townships located outside of the seven-county 
22.14 	metropolitan area up to the point of the emergency response location sign. 
22.15 	(h) A sale and a purchase includes the furnishing for a consideration of tangible 
22.16 	personal property or taxable services by the United States or any of its agencies or 
22.17 	instrumentalities, or the state of Minnesota, its agencies, instrumentalities, or political 
22.18 	subdivisions. 
22.19 	(i) A sale and a purchase includes the furnishing for a consideration of 
22.20 	telecommunications services, ancillary services associated with telecommunication 
22.21 	services, cable television services, direct satellite services, and ring tones. 
22.22 	Telecommunication services include, but are not limited to, the following services, 
22.23 	as defined in section 297A.669: air-to-ground radiotelephone service, mobile 
22.24 	telecommunication service, postpaid calling service, prepaid calling service, prepaid 
22.25 	wireless calling service, and private communication services. The services in this 
22.26 	paragraph are taxed to the extent allowed under federal law. 
22.27 	(j) A sale and a purchase includes the furnishing for a consideration of installation if 
22.28 	the installation charges would be subject to the sales tax if the installation were provided 
22.29 	by the seller of the item being installed. 
22.30 	(k) A sale and a purchase includes the rental of a vehicle by a motor vehicle dealer 
22.31 	to a customer when (1) the vehicle is rented by the customer for a consideration, or (2) 
22.32 	the motor vehicle dealer is reimbursed pursuant to a service contract as defined in section 
22.33 	65B.29, subdivision 1, clause (1). 

22.34 	EFFECTIVE DATE. This section is effective for sales and purchases after June 
22.35 	30, 2011.

23.1 	Sec. 2. Minnesota Statutes 2008, section 297A.62, subdivision 1, is amended to read:
23.2 		Subdivision 1.Generally. Except as otherwise provided in subdivision 3 or in this 
23.3 	chapter, a sales tax of 6.5 ... percent is imposed after December 31, 2009, and ... percent 
23.4 	after June 30, 2011, on the gross receipts from retail sales as defined in section 297A.61, 
23.5 	subdivision 4, made in this state or to a destination in this state by a person who is required 
23.6 	to have or voluntarily obtains a permit under section 297A.83, subdivision 1. 

23.7 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
23.8 	December 31, 2009.

23.9 	Sec. 3. Minnesota Statutes 2008, section 297A.62, is amended by adding a subdivision 
23.10 	to read:
23.11 		Subd. 1a.Sales and use tax rate under Minnesota Constitution, article XI, 
23.12 	section 15. Pursuant to the requirements of the Minnesota Constitution, article XI, 
23.13 	section 15, the proportion of the sales and use tax rate in subdivision 1 dedicated for the 
23.14 	purposes defined in that section is ... percent after December 31, 2009, and ... percent 
23.15 	after June 30, 2011.

23.16 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
23.17 	December 31, 2009.

23.18 	Sec. 4. Minnesota Statutes 2008, section 297A.68, subdivision 5, is amended to read:
23.19 		Subd. 5.Capital equipment. (a) Capital equipment is exempt. The tax must be 
23.20 	imposed and collected as if the rate under section 297A.62, subdivision 1, applied, and 
23.21 	then refunded in the manner provided in section 297A.75.
23.22 	"Capital equipment" means machinery and equipment purchased or leased, and used 
23.23 	in this state by the purchaser or lessee primarily for manufacturing, fabricating, mining, 
23.24 	or refining tangible personal property to be sold ultimately at retail if the machinery and 
23.25 	equipment are essential to the integrated production process of manufacturing, fabricating, 
23.26 	mining, or refining. Capital equipment also includes machinery and equipment 
23.27 	used primarily to electronically transmit results retrieved by a customer of an online 
23.28 	computerized data retrieval system.
23.29 	(b) Capital equipment includes, but is not limited to:
23.30 	(1) machinery and equipment used to operate, control, or regulate the production 
23.31 	equipment;
23.32 	(2) machinery and equipment used for research and development, design, quality 
23.33 	control, and testing activities;
24.1 	(3) environmental control devices that are used to maintain conditions such as 
24.2 	temperature, humidity, light, or air pressure when those conditions are essential to and are 
24.3 	part of the production process;
24.4 	(4) materials and supplies used to construct and install machinery or equipment;
24.5 	(5) repair and replacement parts, including accessories, whether purchased as spare 
24.6 	parts, repair parts, or as upgrades or modifications to machinery or equipment;
24.7 	(6) materials used for foundations that support machinery or equipment;
24.8 	(7) materials used to construct and install special purpose buildings used in the 
24.9 	production process;
24.10 	(8) ready-mixed concrete equipment in which the ready-mixed concrete is mixed 
24.11 	as part of the delivery process regardless if mounted on a chassis, repair parts for 
24.12 	ready-mixed concrete trucks, and leases of ready-mixed concrete trucks; and
24.13 	(9) machinery or equipment used for research, development, design, or production 
24.14 	of computer software.
24.15 	(c) Capital equipment does not include the following:
24.16 	(1) motor vehicles taxed under chapter 297B;
24.17 	(2) machinery or equipment used to receive or store raw materials;
24.18 	(3) building materials, except for materials included in paragraph (b), clauses (6) 
24.19 	and (7);
24.20 	(4) machinery or equipment used for nonproduction purposes, including, but not 
24.21 	limited to, the following: plant security, fire prevention, first aid, and hospital stations; 
24.22 	support operations or administration; pollution control; and plant cleaning, disposal of 
24.23 	scrap and waste, plant communications, space heating, cooling, lighting, or safety;
24.24 	(5) farm machinery and aquaculture production equipment as defined by section 
24.25 	297A.61, subdivisions 12 and 13;
24.26 	(6) machinery or equipment purchased and installed by a contractor as part of an 
24.27 	improvement to real property;
24.28 	(7) machinery and equipment used by restaurants in the furnishing, preparing, or 
24.29 	serving of prepared foods as defined in section 297A.61, subdivision 31;
24.30 	(8) machinery and equipment used to furnish the services listed in section 297A.61, 
24.31 	subdivision 3, paragraph (g), clause (6), items (i) to (vi) and (viii);
24.32 	(9) machinery or equipment used in the transportation, transmission, or distribution 
24.33 	of petroleum, liquefied gas, natural gas, water, or steam, in, by, or through pipes, lines, 
24.34 	tanks, mains, or other means of transporting those products. This clause does not apply to 
24.35 	machinery or equipment used to blend petroleum or biodiesel fuel as defined in section 
24.36 	239.77; or
25.1 	(10) any other item that is not essential to the integrated process of manufacturing, 
25.2 	fabricating, mining, or refining.
25.3 	(d) For purposes of this subdivision:
25.4 	(1) "Equipment" means independent devices or tools separate from machinery but 
25.5 	essential to an integrated production process, including computers and computer software, 
25.6 	used in operating, controlling, or regulating machinery and equipment; and any subunit or 
25.7 	assembly comprising a component of any machinery or accessory or attachment parts of 
25.8 	machinery, such as tools, dies, jigs, patterns, and molds.
25.9 	(2) "Fabricating" means to make, build, create, produce, or assemble components or 
25.10 	property to work in a new or different manner.
25.11 	(3) "Integrated production process" means a process or series of operations through 
25.12 	which tangible personal property is manufactured, fabricated, mined, or refined. For 
25.13 	purposes of this clause, (i) manufacturing begins with the removal of raw materials 
25.14 	from inventory and ends when the last process prior to loading for shipment has been 
25.15 	completed; (ii) fabricating begins with the removal from storage or inventory of the 
25.16 	property to be assembled, processed, altered, or modified and ends with the creation 
25.17 	or production of the new or changed product; (iii) mining begins with the removal of 
25.18 	overburden from the site of the ores, minerals, stone, peat deposit, or surface materials and 
25.19 	ends when the last process before stockpiling is completed; and (iv) refining begins with 
25.20 	the removal from inventory or storage of a natural resource and ends with the conversion 
25.21 	of the item to its completed form.
25.22 	(4) "Machinery" means mechanical, electronic, or electrical devices, including 
25.23 	computers and computer software, that are purchased or constructed to be used for the 
25.24 	activities set forth in paragraph (a), beginning with the removal of raw materials from 
25.25 	inventory through completion of the product, including packaging of the product.
25.26 	(5) "Machinery and equipment used for pollution control" means machinery and 
25.27 	equipment used solely to eliminate, prevent, or reduce pollution resulting from an activity 
25.28 	described in paragraph (a).
25.29 	(6) "Manufacturing" means an operation or series of operations where raw materials 
25.30 	are changed in form, composition, or condition by machinery and equipment and which 
25.31 	results in the production of a new article of tangible personal property. For purposes of 
25.32 	this subdivision, "manufacturing" includes the generation of electricity or steam to be 
25.33 	sold at retail.
25.34 	(7) "Mining" means the extraction of minerals, ores, stone, or peat.
25.35 	(8) "Online data retrieval system" means a system whose cumulation of information 
25.36 	is equally available and accessible to all its customers.
26.1 	(9) "Primarily" means machinery and equipment used 50 percent or more of the time 
26.2 	in an activity described in paragraph (a).
26.3 	(10) "Refining" means the process of converting a natural resource to an intermediate 
26.4 	or finished product, including the treatment of water to be sold at retail.
26.5 	(11) This subdivision does not apply to telecommunications equipment as 
26.6 	provided in subdivision 35, and does not apply to wire, cable, fiber, poles, or conduit 
26.7 	for telecommunications services.

26.8 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
26.9 	December 31, 2009.

26.10 	Sec. 5. Minnesota Statutes 2008, section 297A.75, is amended to read:
26.11 	297A.75 REFUND; APPROPRIATION.
26.12 		Subdivision 1.Tax collected. The tax on the gross receipts from the sale of the 
26.13 	following exempt items must be imposed and collected as if the sale were taxable and the 
26.14 	rate under section 297A.62, subdivision 1, applied. The exempt items include:
26.15 	(1) capital equipment exempt under section 297A.68, subdivision 5;
26.16 	(2) (1) building materials for an agricultural processing facility exempt under section 
26.17 	297A.71, subdivision 13;
26.18 	(3) (2) building materials for mineral production facilities exempt under section 
26.19 	297A.71, subdivision 14;
26.20 	(4) (3) building materials for correctional facilities under section 297A.71, 
26.21 	subdivision 3;
26.22 	(5) (4) building materials used in a residence for disabled veterans exempt under 
26.23 	section 297A.71, subdivision 11;
26.24 	(6) (5) elevators and building materials exempt under section 297A.71, subdivision 
26.25 	12;
26.26 	(7) (6) building materials for the Long Lake Conservation Center exempt under 
26.27 	section 297A.71, subdivision 17;
26.28 	(8) materials, supplies, fixtures, furnishings, and equipment for a county law 
26.29 	enforcement and family service center under section 297A.71, subdivision 26;
26.30 	(9) (7) materials and supplies for qualified low-income housing under section 
26.31 	297A.71, subdivision 23; 
26.32 	(10) (8) materials, supplies, and equipment for municipal electric utility facilities 
26.33 	under section 297A.71, subdivision 35;
27.1 	(11) (9) equipment and materials used for the generation, transmission, and 
27.2 	distribution of electrical energy and an aerial camera package exempt under section 
27.3 	297A.68, subdivision 37; 
27.4 	(12) (10) tangible personal property and taxable services and construction materials, 
27.5 	supplies, and equipment exempt under section 297A.68, subdivision 41; 
27.6 	(13) (11) commuter rail vehicle and repair parts under section 297A.70, subdivision 
27.7 	3, clause (11); and
27.8 	(14) (12) materials, supplies, and equipment for construction or improvement of 
27.9 	projects and facilities under section 297A.71, subdivision 40.
27.10 		Subd. 2.Refund; eligible persons. Upon application on forms prescribed by the 
27.11 	commissioner, a refund equal to the tax paid on the gross receipts of the exempt items 
27.12 	must be paid to the applicant. Only the following persons may apply for the refund:
27.13 	(1) for subdivision 1, clauses (1) to (3) and (2), the applicant must be the purchaser;
27.14 	(2) for subdivision 1, clauses (4), (7), (3) and (8) (6), the applicant must be the 
27.15 	governmental subdivision;
27.16 	(3) for subdivision 1, clause (5) (4), the applicant must be the recipient of the 
27.17 	benefits provided in United States Code, title 38, chapter 21;
27.18 	(4) for subdivision 1, clause (6) (5), the applicant must be the owner of the 
27.19 	homestead property;
27.20 	(5) for subdivision 1, clause (9) (7), the owner of the qualified low-income housing 
27.21 	project; 
27.22 	(6) for subdivision 1, clause (10) (8), the applicant must be a municipal electric 
27.23 	utility or a joint venture of municipal electric utilities; 
27.24 	(7) for subdivision 1, clauses (11) (9) and (12) (10), the owner of the qualifying 
27.25 	business; and
27.26 	(8) for subdivision 1, clauses (13) (11) and (14) (12), the applicant must be the 
27.27 	governmental entity that owns or contracts for the project or facility.
27.28 		Subd. 3.Application. (a) The application must include sufficient information 
27.29 	to permit the commissioner to verify the tax paid. If the tax was paid by a contractor, 
27.30 	subcontractor, or builder, under subdivision 1, clause (3), (4), (5), (6), (7), (8), (9), (10), 
27.31 	(11), or (12), (13), or (14), the contractor, subcontractor, or builder must furnish to the 
27.32 	refund applicant a statement including the cost of the exempt items and the taxes paid on 
27.33 	the items unless otherwise specifically provided by this subdivision. The provisions of 
27.34 	sections 289A.40 and 289A.50 apply to refunds under this section.
27.35 	(b) An applicant may not file more than two applications per calendar year for 
27.36 	refunds for taxes paid on capital equipment exempt under section 297A.68, subdivision 5.
28.1 	(c) (b) Total refunds for purchases of items in section 297A.71, subdivision 40, 
28.2 	must not exceed $5,000,000 in fiscal years 2010 and 2011. Applications for refunds for 
28.3 	purchases of items in sections 297A.70, subdivision 3, paragraph (a), clause (11), and 
28.4 	297A.71, subdivision 40, must not be filed until after June 30, 2009.
28.5 		Subd. 4.Interest. Interest must be paid on the refund at the rate in section 270C.405 
28.6 	from 90 days after the refund claim is filed with the commissioner for taxes paid under 
28.7 	subdivision 1.
28.8 		Subd. 5.Appropriation. The amount required to make the refunds is annually 
28.9 	appropriated to the commissioner.

28.10 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
28.11 	December 31, 2009.

28.12 	Sec. 6. Minnesota Statutes 2008, section 297B.02, subdivision 1, is amended to read:
28.13 		Subdivision 1.Rate. There is imposed an excise tax at the rate provided in chapter 
28.14 	297A of 6.5 percent on the purchase price of any motor vehicle purchased or acquired, 
28.15 	either in or outside of the state of Minnesota, which is required to be registered under 
28.16 	the laws of this state.
28.17 	The excise tax is also imposed on the purchase price of motor vehicles purchased 
28.18 	or acquired on Indian reservations when the tribal council has entered into a sales tax on 
28.19 	motor vehicles refund agreement with the state of Minnesota.

28.20 	EFFECTIVE DATE. This section is effective January 1, 2010.

28.21 	Sec. 7.  REPEALER.
 28.22 	Minnesota Statutes 2008, section 297A.67, subdivision 8, is repealed.

28.23 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
28.24 	December 31, 2009.

28.25 	ARTICLE 5
28.26 	JUNE ACCELERATED TAX PAYMENTS

28.27 	Section 1. Minnesota Statutes 2008, section 289A.20, subdivision 4, is amended to 
28.28 	read:
28.29 		Subd. 4. Sales and use tax. (a) The taxes imposed by chapter 297A are due and 
28.30 	payable to the commissioner monthly on or before the 20th day of the month following the 
28.31 	month in which the taxable event occurred, or following another reporting period as the 
29.1 	commissioner prescribes or as allowed under section 289A.18, subdivision 4, paragraph 
29.2 	(f) or (g), except that use taxes due on an annual use tax return as provided under section 
29.3 	289A.11, subdivision 1, are payable by April 15 following the close of the calendar year. 
29.4 	(b) A vendor having a liability of $120,000 or more during a fiscal year ending June 
29.5 	30 must remit the June liability for the next year in the following manner: 
29.6 	(1) Two business days before June 30 of the year, the vendor must remit 90 0 percent 
29.7 	of the estimated June liability to the commissioner. 
29.8 	(2) On or before August 20 of the year, the vendor must pay any additional amount 
29.9 	of tax not remitted in June. 
29.10 	(c) A vendor having a liability of: 
29.11 	(1) $20,000 or more in the fiscal year ending June 30, 2005; or 
29.12 	(2) $10,000 or more in the fiscal year ending June 30, 2006, and fiscal years 
29.13 	thereafter, 
29.14 	must remit all liabilities on returns due for periods beginning in the subsequent calendar 
29.15 	year by electronic means on or before the 20th day of the month following the month in 
29.16 	which the taxable event occurred, or on or before the 20th day of the month following the 
29.17 	month in which the sale is reported under section 289A.18, subdivision 4, except for 90 0
29.18 	percent of the estimated June liability, which is due two business days before June 30. The 
29.19 	remaining amount of the June liability is due on August 20. 

29.20 	EFFECTIVE DATE. This section is effective beginning with June 2010 tax 
29.21 	liabilities.

29.22 	Sec. 2. Minnesota Statutes 2008, section 289A.60, subdivision 15, is amended to read:
29.23 		Subd. 15. Accelerated payment of June sales tax liability; penalty for 
29.24 	underpayment. For payments made after December 31, 2006, if a vendor is required by 
29.25 	law to submit an estimation of June sales tax liabilities and 90 0 percent payment by a 
29.26 	certain date, the vendor shall pay a penalty equal to ten percent of the amount of actual 
29.27 	June liability required to be paid in June less the amount remitted in June. The penalty 
29.28 	must not be imposed, however, if the amount remitted in June equals the lesser of 90 0
29.29 	percent of the preceding May's liability or 90 0 percent of the average monthly liability for 
29.30 	the previous calendar year. 

29.31 	EFFECTIVE DATE. This section is effective beginning with June 2010 tax 
29.32 	liabilities.

29.33 	Sec. 3. Minnesota Statutes 2008, section 297F.09, subdivision 10, is amended to read:
30.1 		Subd. 10. Accelerated tax payment; cigarette or tobacco products distributor.
 30.2 	A cigarette or tobacco products distributor having a liability of $120,000 or more during a 
30.3 	fiscal year ending June 30, shall remit the June liability for the next year in the following 
30.4 	manner: 
30.5 	(a) Two business days before June 30 of the year, the distributor shall remit the 
30.6 	actual May liability and 90 0 percent of the estimated June liability to the commissioner 
30.7 	and file the return in the form and manner prescribed by the commissioner. 
30.8 	(b) On or before August 18 of the year, the distributor shall submit a return showing 
30.9 	the actual June liability and pay any additional amount of tax not remitted in June. A 
30.10 	penalty is imposed equal to ten percent of the amount of June liability required to be paid 
30.11 	in June, less the amount remitted in June. However, the penalty is not imposed if the 
30.12 	amount remitted in June equals the lesser of: 
30.13 	(1) 90 0 percent of the actual June liability; or 
30.14 	(2) 90 0 percent of the preceding May's liability. 

30.15 	EFFECTIVE DATE. This section is effective beginning with June 2010 tax 
30.16 	liabilities.

30.17 	Sec. 4. Minnesota Statutes 2008, section 297G.09, subdivision 9, is amended to read:
30.18 		Subd. 9. Accelerated tax payment; penalty. A person liable for tax under this 
30.19 	chapter having a liability of $120,000 or more during a fiscal year ending June 30, shall 
30.20 	remit the June liability for the next year in the following manner: 
30.21 	(a) Two business days before June 30 of the year, the taxpayer shall remit the actual 
30.22 	May liability and 90 0 percent of the estimated June liability to the commissioner and file 
30.23 	the return in the form and manner prescribed by the commissioner. 
30.24 	(b) On or before August 18 of the year, the taxpayer shall submit a return showing 
30.25 	the actual June liability and pay any additional amount of tax not remitted in June. A 
30.26 	penalty is imposed equal to ten percent of the amount of June liability required to be paid 
30.27 	in June less the amount remitted in June. However, the penalty is not imposed if the 
30.28 	amount remitted in June equals the lesser of: 
30.29 	(1) 90 0 percent of the actual June liability; or 
30.30 	(2) 90 0 percent of the preceding May liability. 

30.31 	EFFECTIVE DATE. This section is effective beginning with June 2010 tax 
30.32 	liabilities.

31.1 	ARTICLE 6
31.2 	ADMINISTRATION AND COMPLIANCE

31.3 	Section 1. Minnesota Statutes 2008, section 289A.18, subdivision 1, is amended to 
31.4 	read:
31.5 		Subdivision 1. Individual income, fiduciary income, corporate franchise, and 
31.6 	entertainment taxes; partnership and S corporation returns; information returns; 
31.7 	mining company returns. The returns required to be made under sections 289A.08 and 
31.8 	289A.12 must be filed at the following times: 
31.9 	(1) returns made on the basis of the calendar year must be filed on April 15 following 
31.10 	the close of the calendar year, except that returns of corporations must be filed on March 
31.11 	15 following the close of the calendar year; 
31.12 	(2) returns made on the basis of the fiscal year must be filed on the 15th day of the 
31.13 	fourth month following the close of the fiscal year, except that returns of corporations 
31.14 	must be filed on the 15th day of the third month following the close of the fiscal year; 
31.15 	(3) returns for a fractional part of a year must be filed on the 15th day of the fourth 
31.16 	month following the end of the month in which falls the last day of the period for which 
31.17 	the return is made, except that the returns of corporations must be filed on the 15th day of 
31.18 	the third month following the end of the tax year; or, in the case of a corporation which is 
31.19 	a member of a unitary group, the return of the corporation must be filed on the 15th day of 
31.20 	the third month following the end of the tax year of the unitary group in which falls the 
31.21 	last day of the period for which the return is made; 
31.22 	(4) in the case of a final return of a decedent for a fractional part of a year, the return 
31.23 	must be filed on the 15th day of the fourth month following the close of the 12-month 
31.24 	period that began with the first day of that fractional part of a year; 
31.25 	(5) in the case of the return of a cooperative association, returns must be filed on or 
31.26 	before the 15th day of the ninth month following the close of the taxable year; 
31.27 	(6) if a corporation has been divested from a unitary group and files a return for 
31.28 	a fractional part of a year in which it was a member of a unitary business that files a 
31.29 	combined report under section 290.17, subdivision 4, the divested corporation's return 
31.30 	must be filed on the 15th day of the third month following the close of the common 
31.31 	accounting period that includes the fractional year;
31.32 	(7) returns of entertainment entities must be filed on April 15 following the close of 
31.33 	the calendar year; 
31.34 	(8) (7) returns required to be filed under section 289A.08, subdivision 4, must be 
31.35 	filed on the 15th day of the fifth month following the close of the taxable year; 
32.1 	(9) (8) returns of mining companies must be filed on May 1 following the close 
32.2 	of the calendar year; and 
32.3 	(10) (9) returns required to be filed with the commissioner under section 289A.12, 
32.4 	subdivision 2 or 4 to 10, must be filed within 30 days after being demanded by the 
32.5 	commissioner. 

32.6 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
32.7 	December 31, 2012.

32.8 	Sec. 2. Minnesota Statutes 2008, section 289A.19, subdivision 2, is amended to read:
32.9 		Subd. 2.Corporate franchise and Mining company taxes. Corporations or
32.10 	Mining companies shall receive an extension of seven months or the amount of time 
32.11 	granted by the Internal Revenue Service, whichever is longer, for filing the return of a 
32.12 	corporation subject to tax under chapter 290 or for filing the return of a mining company 
32.13 	subject to tax under sections 298.01 and 298.015. Interest on any balance of tax not paid 
32.14 	when the regularly required return is due must be paid at the rate specified in section 
32.15 	270C.40, from the date such payment should have been made if no extension was granted, 
32.16 	until the date of payment of such tax.
32.17 	If a corporation or mining company does not:
32.18 	(1) pay at least 90 percent of the amount of tax shown on the return on or before the 
32.19 	regular due date of the return, the penalty prescribed by section 289A.60, subdivision 1, 
32.20 	shall be imposed on the unpaid balance of tax; or
32.21 	(2) pay the balance due shown on the regularly required return on or before the 
32.22 	extended due date of the return, the penalty prescribed by section 289A.60, subdivision 1, 
32.23 	shall be imposed on the unpaid balance of tax from the original due date of the return.

32.24 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
32.25 	December 31, 2012.

32.26 	Sec. 3. Minnesota Statutes 2008, section 289A.20, subdivision 1, is amended to read:
32.27 		Subdivision 1.Individual income, fiduciary income, mining company, corporate 
32.28 	franchise, and entertainment taxes. (a) Individual income, fiduciary, and mining 
32.29 	company, and corporate franchise taxes must be paid to the commissioner on or before the 
32.30 	date the return must be filed under section 289A.18, subdivision 1, or the extended due 
32.31 	date as provided in section 289A.19, unless an earlier date for payment is provided. 
32.32 	Notwithstanding any other law, a taxpayer whose unpaid liability for income or 
32.33 	corporate franchise taxes, as reflected upon the return, is $1 or less need not pay the tax.
33.1 	(b) Entertainment taxes must be paid on or before the date the return must be filed 
33.2 	under section 289A.18, subdivision 1. 
33.3 	(c) If a fiduciary administers 100 or more trusts, fiduciary income taxes for all trusts 
33.4 	administered by the fiduciary must be paid by electronic means.

33.5 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
33.6 	December 31, 2012.

33.7 	Sec. 4. Minnesota Statutes 2008, section 289A.30, subdivision 1, is amended to read:
33.8 		Subdivision 1.Fiduciary income, corporate franchise tax. Where good cause 
33.9 	exists, the commissioner may extend the time for payment of the amount determined as a 
33.10 	fiduciary income tax or corporate franchise tax by the taxpayer, or an amount determined 
33.11 	as a deficiency, for a period of not more than six months from the date prescribed for 
33.12 	the payment of the tax.

33.13 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
33.14 	December 31, 2012.

33.15 	Sec. 5. Minnesota Statutes 2008, section 289A.31, subdivision 1, is amended to read:
33.16 		Subdivision 1.Individual income, fiduciary income, mining company, corporate 
33.17 	franchise, and entertainment taxes. (a) Individual income, fiduciary income, mining 
33.18 	company, and corporate franchise taxes, and interest and penalties, must be paid by the 
33.19 	taxpayer upon whom the tax is imposed, except in the following cases:
33.20 	(1) The tax due from a decedent for that part of the taxable year in which the 
33.21 	decedent died during which the decedent was alive and the taxes, interest, and penalty 
33.22 	due for the prior years must be paid by the decedent's personal representative, if any. 
33.23 	If there is no personal representative, the taxes, interest, and penalty must be paid by 
33.24 	the transferees, as defined in section 270C.58, subdivision 3, to the extent they receive 
33.25 	property from the decedent;
33.26 	(2) The tax due from an infant or other incompetent person must be paid by the 
33.27 	person's guardian or other person authorized or permitted by law to act for the person;
33.28 	(3) The tax due from the estate of a decedent must be paid by the estate's personal 
33.29 	representative;
33.30 	(4) The tax due from a trust, including those within the definition of a corporation, as 
33.31 	defined in section 290.01, subdivision 4, must be paid by a trustee; and
33.32 	(5) The tax due from a taxpayer whose business or property is in charge of a 
33.33 	receiver, trustee in bankruptcy, assignee, or other conservator, must be paid by the 
34.1 	person in charge of the business or property so far as the tax is due to the income from 
34.2 	the business or property.
34.3 	(b) Entertainment taxes are the joint and several liability of the entertainer and the 
34.4 	entertainment entity. The payor is liable to the state for the payment of the tax required to 
34.5 	be deducted and withheld under section 290.9201, subdivision 7, and is not liable to the 
34.6 	entertainer for the amount of the payment.
34.7 	(c) The tax imposed under section 290.0922 on partnerships is the joint and several 
34.8 	liability of the partnership and the general partners.

34.9 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
34.10 	December 31, 2012.

34.11 	Sec. 6. Minnesota Statutes 2008, section 289A.60, subdivision 1, is amended to read:
34.12 		Subdivision 1.Penalty for failure to pay tax. (a) If a corporate franchise, fiduciary 
34.13 	income, mining company, estate, partnership, S corporation, or nonresident entertainer 
34.14 	tax is not paid within the time specified for payment, a penalty of six percent is added to 
34.15 	the unpaid tax, except that if a corporation or mining company meets the requirements of 
34.16 	section 289A.19, subdivision 2, the penalty is not imposed. 
34.17 	(b) For the taxes listed in paragraph (a), in addition to the penalty in that paragraph, 
34.18 	whether imposed or not, if a return or amended return is filed after the due date, without 
34.19 	regard to extensions, and any tax reported as remaining due is not remitted with the return 
34.20 	or amended return, a penalty of five percent of the tax not paid is added to the tax. If the 
34.21 	commissioner issues an order assessing additional tax for a tax listed in paragraph (a), 
34.22 	and the tax is not paid within 60 days after the mailing of the order or, if appealed, within 
34.23 	60 days after final resolution of the appeal, a penalty of five percent of the unpaid tax 
34.24 	is added to the tax.
34.25 	(c) If an individual income tax is not paid within the time specified for payment, a 
34.26 	penalty of four percent is added to the unpaid tax. There is a presumption of reasonable 
34.27 	cause for the late payment if the individual: (i) pays by the due date of the return at 
34.28 	least 90 percent of the amount of tax, after credits other than withholding and estimated 
34.29 	payments, shown owing on the return; (ii) files the return within six months after the due 
34.30 	date; and (iii) pays the remaining balance of the reported tax when the return is filed.
34.31 	(d) If the commissioner issues an order assessing additional individual income tax, 
34.32 	and the tax is not paid within 60 days after the mailing of the order or, if appealed, within 
34.33 	60 days after final resolution of the appeal, a penalty of four percent of the unpaid tax 
34.34 	is added to the tax.
35.1 	(e) If a withholding or sales or use tax is not paid within the time specified for 
35.2 	payment, a penalty must be added to the amount required to be shown as tax. The penalty 
35.3 	is five percent of the tax not paid on or before the date specified for payment of the tax 
35.4 	if the failure is for not more than 30 days, with an additional penalty of five percent of 
35.5 	the amount of tax remaining unpaid during each additional 30 days or fraction of 30 days 
35.6 	during which the failure continues, not exceeding 15 percent in the aggregate.

35.7 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
35.8 	December 31, 2012.

35.9 	Sec. 7. Minnesota Statutes 2008, section 289A.60, subdivision 4, is amended to read:
35.10 		Subd. 4.Substantial understatement of liability; penalty. (a) The commissioner 
35.11 	of revenue shall impose a penalty for substantial understatement of any tax payable to the 
35.12 	commissioner, except a tax imposed under chapter 297A.
35.13 	(b) There must be added to the tax an amount equal to 20 percent of the amount of any 
35.14 	underpayment attributable to the understatement. There is a substantial understatement of 
35.15 	tax for the period if the amount of the understatement for the period exceeds the greater of:
35.16 	(1) ten percent of the tax required to be shown on the return for the period; or
35.17 	(2)(i) $10,000 in the case of a mining company or a corporation, other than an S 
35.18 	corporation as defined in section 290.9725, when the tax is imposed by chapter 290 or 
35.19 	section 298.01 or 298.015, or
35.20 	(ii) $5,000 in the case of any other taxpayer, and in the case of a mining company or 
35.21 	a corporation any tax not imposed by chapter 290 or section 298.01 or 298.015.
35.22 	(c) For a corporation, other than an S corporation, there is also a substantial 
35.23 	understatement of tax for any taxable year if the amount of the understatement for the 
35.24 	taxable year exceeds the lesser of:
35.25 	(1) ten percent of the tax required to be shown on the return for the taxable year 
35.26 	(or, if greater, $10,000); or
35.27 	(2) $10,000,000.
35.28 	(d) (c) The term "understatement" means the excess of the amount of the tax 
35.29 	required to be shown on the return for the period, over the amount of the tax imposed that 
35.30 	is shown on the return. The excess must be determined without regard to items to which 
35.31 	subdivision 27 applies. The amount of the understatement shall be reduced by that part of 
35.32 	the understatement that is attributable to the tax treatment of any item by the taxpayer if 
35.33 	(1) there is or was substantial authority for the treatment, or (2)(i) any item with respect to 
35.34 	which the relevant facts affecting the item's tax treatment are adequately disclosed in the 
35.35 	return or in a statement attached to the return and (ii) there is a reasonable basis for the tax 
36.1 	treatment of the item. The exception for substantial authority under clause (1) does not 
36.2 	apply to positions listed by the Secretary of the Treasury under section 6662(d)(3) of the 
36.3 	Internal Revenue Code. A corporation does not have a reasonable basis for its tax treatment 
36.4 	of an item attributable to a multiple-party financing transaction if the treatment does not 
36.5 	clearly reflect the income of the corporation within the meaning of section 6662(d)(2)(B) 
36.6 	of the Internal Revenue Code. The special rules in cases involving tax shelters provided in 
36.7 	section 6662(d)(2)(C) of the Internal Revenue Code shall apply and shall apply to a tax 
36.8 	shelter the principal purpose of which is the avoidance or evasion of state taxes.
36.9 	(e) (d) The commissioner may abate all or any part of the addition to the tax 
36.10 	provided by this section on a showing by the taxpayer that there was reasonable cause for 
36.11 	the understatement, or part of it, and that the taxpayer acted in good faith. The additional 
36.12 	tax and penalty shall bear interest at the rate specified in section 270C.40 from the time 
36.13 	the tax should have been paid until paid.

36.14 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
36.15 	December 31, 2012.

36.16 	Sec. 8. EXPIRATION.
 36.17 	Minnesota Statutes 2008, sections 289A.08, subdivision 3; and 289A.26, expire 
36.18 	after December 31, 2012.

36.19 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
36.20 	December 31, 2012.

36.21 	ARTICLE 7
36.22 	ECONOMIC DEVELOPMENT

36.23 	Section 1. Minnesota Statutes 2008, section 469.310, subdivision 10, is amended to 
36.24 	read:
36.25 		Subd. 10.Person. "Person" includes an individual, corporation, partnership, limited 
36.26 	liability company, association, or any other entity.

36.27 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
36.28 	December 31, 2012.

36.29 	Sec. 2. Minnesota Statutes 2008, section 469.321, subdivision 5, is amended to read:
36.30 		Subd. 5.Person. "Person" includes an individual, corporation, partnership, limited 
36.31 	liability company, association, or any other entity.

37.1 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
37.2 	December 31, 2012.

37.3 	Sec. 3. Minnesota Statutes 2008, section 469.330, subdivision 10, is amended to read:
37.4 		Subd. 10.Person. "Person" includes an individual, corporation, partnership, limited 
37.5 	liability company, association, or any other entity.

37.6 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
37.7 	December 31, 2012.

37.8 	ARTICLE 8
37.9 	MISCELLANEOUS

37.10 	Section 1. Minnesota Statutes 2008, section 16A.10, subdivision 1, is amended to read:
37.11 		Subdivision 1.Budget format. In each even-numbered calendar year the 
37.12 	commissioner shall prepare budget forms and instructions for all agencies, including 
37.13 	guidelines for reporting agency performance measures, subject to the approval of the 
37.14 	governor. The commissioner shall request and receive advisory recommendations from 
37.15 	the chairs of the senate Finance Committee and house of representatives Ways and 
37.16 	Means Committee before adopting a format for the biennial budget document. By June 
37.17 	15, the commissioner shall send the proposed budget forms to the appropriations and 
37.18 	finance committees. The committees have until July 15 to give the commissioner their 
37.19 	advisory recommendations on possible improvements. To facilitate this consultation, the 
37.20 	commissioner shall establish a working group consisting of executive branch staff and 
37.21 	designees of the chairs of the senate Finance and house of representatives Ways and Means 
37.22 	Committees. The commissioner must involve this group in all stages of development 
37.23 	of budget forms and instructions. The budget format must show actual expenditures 
37.24 	and receipts for the most recent fiscal year, estimated expenditures and receipts for the 
37.25 	current fiscal year, and estimates for each fiscal year of the next biennium two biennia. 
37.26 	Estimated expenditures must be classified by funds and character of expenditures and may 
37.27 	be subclassified by programs and activities. Agency revenue estimates must show how the 
37.28 	estimates were made and what factors were used. Receipts must be classified by funds, 
37.29 	programs, and activities. Expenditure and revenue estimates must be based on the law in 
37.30 	existence at the time the estimates are prepared.

37.31 	EFFECTIVE DATE. This section is effective the day following final enactment.

37.32 	Sec. 2. Minnesota Statutes 2008, section 16A.11, subdivision 2, is amended to read:
38.1 		Subd. 2.Part one: message. Part one of the budget, the governor's message, shall 
38.2 	include the governor's recommendations on the financial policy of the state for the coming 
38.3 	biennium, and for maintaining structural balance in the following biennium, describing 
38.4 	the important features of the budget plan, embracing a general budget summary setting 
38.5 	forth the aggregate figures of the budget so as to show the balanced relation between the 
38.6 	total proposed expenditures and the total anticipated income, with the basis and factors on 
38.7 	which the estimates are made, the amount to be borrowed, and other means of financing 
38.8 	the budget for the coming biennium, compared with the corresponding figures for at 
38.9 	least the last two completed fiscal years and the current year. The budget plan shall be 
38.10 	supported by explanatory schedules or statements, classifying its expenditures by agencies 
38.11 	and funds, and the income by agencies, sources, funds, and the proposed amount of 
38.12 	new borrowing, as well as proposed new tax or revenue sources. The budget plan shall 
38.13 	be submitted for all special and dedicated funds, as well as the general fund, and shall 
38.14 	include the estimated amounts of federal aids, for whatever purpose provided, together 
38.15 	with estimated expenditures from them.

38.16 	EFFECTIVE DATE. This section is effective the day following final enactment.

38.17 	Sec. 3.  REPEALER.
 38.18 	Minnesota Statutes 2008, section 16A.102, subdivision 4, is repealed.

38.19 	EFFECTIVE DATE. This section is effective the day following final enactment.