1.1 	A bill for an act
1.2 	relating to taxation; modifying income and corporate franchise tax structures;
1.3 	amending Minnesota Statutes 2010, sections 289A.08, subdivision 3; 290.01, 
1.4 	subdivisions 5, 19d, by adding a subdivision; 290.06, subdivision 2d; 290.17, 
1.5 	subdivision 4; Minnesota Statutes 2011 Supplement, sections 290.01, subdivision 
1.6 	19c; 290.06, subdivision 2c; repealing Minnesota Statutes 2010, sections 290.01, 
1.7 	subdivision 6b; 290.0921, subdivision 7.
1.8 	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

1.9 	Section 1. Minnesota Statutes 2010, section 289A.08, subdivision 3, is amended to 
1.10 	read:
1.11 		Subd. 3.Corporations. (a) A corporation that is subject to the state's jurisdiction to 
1.12 	tax under section 290.014, subdivision 5, must file a return, except that a foreign operating 
1.13 	corporation as defined in section 290.01, subdivision 6b, is not required to file a return.
1.14 	(b) Members of a unitary business that are required to file a combined report on one 
1.15 	return must designate a member of the unitary business to be responsible for tax matters, 
1.16 	including the filing of returns, the payment of taxes, additions to tax, penalties, interest, 
1.17 	or any other payment, and for the receipt of refunds of taxes or interest paid in excess of 
1.18 	taxes lawfully due. The designated member must be a member of the unitary business that 
1.19 	is filing the single combined report and either:
1.20 	(1) a corporation that is subject to the taxes imposed by chapter 290; or
1.21 	(2) a corporation that is not subject to the taxes imposed by chapter 290:
1.22 	(i) Such corporation consents by filing the return as a designated member under this 
1.23 	clause to remit taxes, penalties, interest, or additions to tax due from the members of the 
1.24 	unitary business subject to tax, and receive refunds or other payments on behalf of other 
1.25 	members of the unitary business. The member designated under this clause is a "taxpayer" 
2.1 	for the purposes of this chapter and chapter 270C, and is liable for any liability imposed 
2.2 	on the unitary business under this chapter and chapter 290.
2.3 	(ii) If the state does not otherwise have the jurisdiction to tax the member designated 
2.4 	under this clause, consenting to be the designated member does not create the jurisdiction 
2.5 	to impose tax on the designated member, other than as described in item (i).
2.6 	(iii) The member designated under this clause must apply for a business tax account 
2.7 	identification number.
2.8 	(c) The commissioner shall adopt rules for the filing of one return on behalf of the 
2.9 	members of an affiliated group of corporations that are required to file a combined report. 
2.10 	All members of an affiliated group that are required to file a combined report must file one 
2.11 	return on behalf of the members of the group under rules adopted by the commissioner.
2.12 	(d) If a corporation claims on a return that it has paid tax in excess of the amount of 
2.13 	taxes lawfully due, that corporation must include on that return information necessary for 
2.14 	payment of the tax in excess of the amount lawfully due by electronic means.

2.15 	EFFECTIVE DATE. This section is effective for returns filed for taxable years 
2.16 	beginning after December 31, 2011.

2.17 	Sec. 2. Minnesota Statutes 2010, section 290.01, subdivision 5, is amended to read:
2.18 		Subd. 5.Domestic corporation. The term "domestic" when applied to a corporation 
2.19 	means a corporation:
2.20 	(1) created or organized in the United States, or under the laws of the United States 
2.21 	or of any state, the District of Columbia, or any political subdivision of any of the 
2.22 	foregoing but not including the Commonwealth of Puerto Rico, or any possession of 
2.23 	the United States;
2.24 	(2) which qualifies as a DISC, as defined in section 992(a) of the Internal Revenue 
2.25 	Code; or
2.26 	(3) which qualifies as a FSC, as defined in section 922 of the Internal Revenue Code.;
2.27 	(4) which is incorporated in a tax haven;
2.28 	(5) which is engaged in activity in a tax haven sufficient for the tax haven to impose 
2.29 	a net income tax under United States constitutional standards and section 290.015, and 
2.30 	which reports that 20 percent or more of its income is attributable to business in the tax 
2.31 	haven; or
2.32 	(6) which has 20 percent or more of the average of its property, payroll, and sales 
2.33 	factors, as defined under section 290.191, within the 50 states of the United States and 
2.34 	the District of Columbia.

3.1 	EFFECTIVE DATE. This section is effective for returns filed for taxable years 
3.2 	beginning after December 31, 2011.

3.3 	Sec. 3. Minnesota Statutes 2010, section 290.01, is amended by adding a subdivision 
3.4 	to read:
3.5 		Subd. 5c.Tax haven. (a) "Tax haven" means the following foreign jurisdictions, 
3.6 	unless the listing of the jurisdiction does not apply under paragraph (b):
3.7 	(1) Andorra;
3.8 	(2) Anguilla;
3.9 	(3) Antigua and Barbuda;
3.10 	(4) Aruba;
3.11 	(5) Bahamas;
3.12 	(6) Bahrain;
3.13 	(7) Belize;
3.14 	(8) British Virgin Islands;
3.15 	(9) Cayman Islands;
3.16 	(10) Cook Islands;
3.17 	(11) Costa Rica;
3.18 	(12) Dominica;
3.19 	(13) Gibraltar;
3.20 	(14) Grenada;
3.21 	(15) Guernsey-Sark-Alderney;
3.22 	(16) Jersey;
3.23 	(17) Jordan;
3.24 	(18) Lebanon;
3.25 	(19) Liberia;
3.26 	(20) Liechtenstein;
3.27 	(21) Maldives;
3.28 	(22) Marshall Islands;
3.29 	(23) Monaco;
3.30 	(24) Montserrat;
3.31 	(25) Nauru;
3.32 	(26) Netherlands Antilles;
3.33 	(27) Niue;
3.34 	(28) Panama;
3.35 	(29) St. Kitts and Nevis;
4.1 	(30) St. Lucia;
4.2 	(31) St. Vincent and Grenadines;
4.3 	(32) Tonga;
4.4 	(33) Turks and Caicos; and
4.5 	(34) Vanuatu.
4.6 	(b) A foreign jurisdiction's listing under paragraph (a) does not apply to the first 
4.7 	taxable year after the United States enters into a tax treaty or other agreement with the 
4.8 	foreign jurisdiction that provides for prompt, obligatory, and automatic exchange of 
4.9 	information with the United States government relevant to enforcing the provisions of 
4.10 	federal tax laws and the treaty or other agreement was in effect for the taxable year.

4.11 	EFFECTIVE DATE. This section is effective for returns filed for taxable years 
4.12 	beginning after December 31, 2011.

4.13 	Sec. 4. Minnesota Statutes 2011 Supplement, section 290.01, subdivision 19c, is 
4.14 	amended to read:
4.15 		Subd. 19c.Corporations; additions to federal taxable income. For corporations, 
4.16 	there shall be added to federal taxable income:
4.17 	(1) the amount of any deduction taken for federal income tax purposes for income, 
4.18 	excise, or franchise taxes based on net income or related minimum taxes, including but not 
4.19 	limited to the tax imposed under section 290.0922, paid by the corporation to Minnesota, 
4.20 	another state, a political subdivision of another state, the District of Columbia, or any 
4.21 	foreign country or possession of the United States;
4.22 	(2) interest not subject to federal tax upon obligations of: the United States, its 
4.23 	possessions, its agencies, or its instrumentalities; the state of Minnesota or any other 
4.24 	state, any of its political or governmental subdivisions, any of its municipalities, or any 
4.25 	of its governmental agencies or instrumentalities; the District of Columbia; or Indian 
4.26 	tribal governments;
4.27 	(3) exempt-interest dividends received as defined in section 852(b)(5) of the Internal 
4.28 	Revenue Code;
4.29 	(4) the amount of any net operating loss deduction taken for federal income tax 
4.30 	purposes under section 172 or 832(c)(10) of the Internal Revenue Code or operations loss 
4.31 	deduction under section 810 of the Internal Revenue Code;
4.32 	(5) the amount of any special deductions taken for federal income tax purposes 
4.33 	under sections 241 to 247 and 965 of the Internal Revenue Code;
4.34 	(6) losses from the business of mining, as defined in section 290.05, subdivision 1, 
4.35 	clause (a), that are not subject to Minnesota income tax;
5.1 	(7) the amount of any capital losses deducted for federal income tax purposes under 
5.2 	sections 1211 and 1212 of the Internal Revenue Code;
5.3 	(8) the exempt foreign trade income of a foreign sales corporation under sections 
5.4 	921(a) and 291 of the Internal Revenue Code;
5.5 	(9) the amount of percentage depletion deducted under sections 611 through 614 and 
5.6 	291 of the Internal Revenue Code;
5.7 	(10) for certified pollution control facilities placed in service in a taxable year 
5.8 	beginning before December 31, 1986, and for which amortization deductions were elected 
5.9 	under section 169 of the Internal Revenue Code of 1954, as amended through December 
5.10 	31, 1985, the amount of the amortization deduction allowed in computing federal taxable 
5.11 	income for those facilities;
5.12 	(11) for taxable years beginning before January 1, 2012, the amount of any deemed 
5.13 	dividend from a foreign operating corporation determined pursuant to section 290.17, 
5.14 	subdivision 4, paragraph (g). The deemed dividend shall be reduced by the amount of the 
5.15 	addition to income required by clauses (20), (21), (22), and (23);
5.16 	(12) the amount of a partner's pro rata share of net income which does not flow 
5.17 	through to the partner because the partnership elected to pay the tax on the income under 
5.18 	section 6242(a)(2) of the Internal Revenue Code;
5.19 	(13) the amount of net income excluded under section 114 of the Internal Revenue 
5.20 	Code;
5.21 	(14) any increase in subpart F income, as defined in section 952(a) of the Internal 
5.22 	Revenue Code, for the taxable year when subpart F income is calculated without regard to 
5.23 	the provisions of Division C, title III, section 303(b) of Public Law 110-343;
5.24 	(15) 80 percent of the depreciation deduction allowed under section 168(k)(1)(A) 
5.25 	and (k)(4)(A) of the Internal Revenue Code. For purposes of this clause, if the taxpayer 
5.26 	has an activity that in the taxable year generates a deduction for depreciation under 
5.27 	section 168(k)(1)(A) and (k)(4)(A) and the activity generates a loss for the taxable year 
5.28 	that the taxpayer is not allowed to claim for the taxable year, "the depreciation allowed 
5.29 	under section 168(k)(1)(A) and (k)(4)(A)" for the taxable year is limited to excess of the 
5.30 	depreciation claimed by the activity under section 168(k)(1)(A) and (k)(4)(A) over the 
5.31 	amount of the loss from the activity that is not allowed in the taxable year. In succeeding 
5.32 	taxable years when the losses not allowed in the taxable year are allowed, the depreciation 
5.33 	under section 168(k)(1)(A) and (k)(4)(A) is allowed;
5.34 	(16) 80 percent of the amount by which the deduction allowed by section 179 of the 
5.35 	Internal Revenue Code exceeds the deduction allowable by section 179 of the Internal 
5.36 	Revenue Code of 1986, as amended through December 31, 2003;
6.1 	(17) to the extent deducted in computing federal taxable income, the amount of the 
6.2 	deduction allowable under section 199 of the Internal Revenue Code;
6.3 	(18) for taxable years beginning before January 1, 2013, the exclusion allowed 
6.4 	under section 139A of the Internal Revenue Code for federal subsidies for prescription 
6.5 	drug plans;
6.6 	(19) the amount of expenses disallowed under section 290.10, subdivision 2;
6.7 	(20) for taxable years beginning before January 1, 2012, an amount equal to the 
6.8 	interest and intangible expenses, losses, and costs paid, accrued, or incurred by any 
6.9 	member of the taxpayer's unitary group to or for the benefit of a corporation that is a 
6.10 	member of the taxpayer's unitary business group that qualifies as a foreign operating 
6.11 	corporation. For purposes of this clause, intangible expenses and costs include:
6.12 	(i) expenses, losses, and costs for, or related to, the direct or indirect acquisition, 
6.13 	use, maintenance or management, ownership, sale, exchange, or any other disposition of 
6.14 	intangible property;
6.15 	(ii) losses incurred, directly or indirectly, from factoring transactions or discounting 
6.16 	transactions;
6.17 	(iii) royalty, patent, technical, and copyright fees;
6.18 	(iv) licensing fees; and
6.19 	(v) other similar expenses and costs.
6.20 	For purposes of this clause, "intangible property" includes stocks, bonds, patents, patent 
6.21 	applications, trade names, trademarks, service marks, copyrights, mask works, trade 
6.22 	secrets, and similar types of intangible assets.
6.23 	This clause does not apply to any item of interest or intangible expenses or costs paid, 
6.24 	accrued, or incurred, directly or indirectly, to a foreign operating corporation with respect 
6.25 	to such item of income to the extent that the income to the foreign operating corporation 
6.26 	is income from sources without the United States as defined in subtitle A, chapter 1, 
6.27 	subchapter N, part 1, of the Internal Revenue Code;
6.28 	(21) for taxable years beginning before January 1, 2012, except as already included 
6.29 	in the taxpayer's taxable income pursuant to clause (20), any interest income and income 
6.30 	generated from intangible property received or accrued by a foreign operating corporation 
6.31 	that is a member of the taxpayer's unitary group. For purposes of this clause, income 
6.32 	generated from intangible property includes:
6.33 	(i) income related to the direct or indirect acquisition, use, maintenance or 
6.34 	management, ownership, sale, exchange, or any other disposition of intangible property;
6.35 	(ii) income from factoring transactions or discounting transactions;
6.36 	(iii) royalty, patent, technical, and copyright fees;
7.1 	(iv) licensing fees; and
7.2 	(v) other similar income.
7.3 	For purposes of this clause, "intangible property" includes stocks, bonds, patents, patent 
7.4 	applications, trade names, trademarks, service marks, copyrights, mask works, trade 
7.5 	secrets, and similar types of intangible assets.
7.6 	This clause does not apply to any item of interest or intangible income received or accrued 
7.7 	by a foreign operating corporation with respect to such item of income to the extent that 
7.8 	the income is income from sources without the United States as defined in subtitle A, 
7.9 	chapter 1, subchapter N, part 1, of the Internal Revenue Code;
7.10 	(22) for taxable years beginning before January 1, 2012, the dividends attributable to 
7.11 	the income of a foreign operating corporation that is a member of the taxpayer's unitary 
7.12 	group in an amount that is equal to the dividends paid deduction of a real estate investment 
7.13 	trust under section 561(a) of the Internal Revenue Code for amounts paid or accrued by 
7.14 	the real estate investment trust to the foreign operating corporation;
7.15 	(23) for taxable years beginning before January 1, 2012, the income of a foreign 
7.16 	operating corporation that is a member of the taxpayer's unitary group in an amount that 
7.17 	is equal to gains derived from the sale of real or personal property located in the United 
7.18 	States;
7.19 	(24) for taxable years beginning before January 1, 2010, the additional amount 
7.20 	allowed as a deduction for donation of computer technology and equipment under section 
7.21 	170(e)(6) of the Internal Revenue Code, to the extent deducted from taxable income; and
7.22 	(25) discharge of indebtedness income resulting from reacquisition of business 
7.23 	indebtedness and deferred under section 108(i) of the Internal Revenue Code.

7.24 	EFFECTIVE DATE. This section is effective for returns filed for taxable years 
7.25 	beginning after December 31, 2011.

7.26 	Sec. 5. Minnesota Statutes 2010, section 290.01, subdivision 19d, is amended to read:
7.27 		Subd. 19d.Corporations; modifications decreasing federal taxable income. For 
7.28 	corporations, there shall be subtracted from federal taxable income after the increases 
7.29 	provided in subdivision 19c:
7.30 	(1) the amount of foreign dividend gross-up added to gross income for federal 
7.31 	income tax purposes under section 78 of the Internal Revenue Code;
7.32 	(2) the amount of salary expense not allowed for federal income tax purposes due to 
7.33 	claiming the work opportunity credit under section 51 of the Internal Revenue Code;
8.1 	(3) any dividend (not including any distribution in liquidation) paid within the 
8.2 	taxable year by a national or state bank to the United States, or to any instrumentality of 
8.3 	the United States exempt from federal income taxes, on the preferred stock of the bank 
8.4 	owned by the United States or the instrumentality;
8.5 	(4) amounts disallowed for intangible drilling costs due to differences between 
8.6 	this chapter and the Internal Revenue Code in taxable years beginning before January 
8.7 	1, 1987, as follows:
8.8 	(i) to the extent the disallowed costs are represented by physical property, an amount 
8.9 	equal to the allowance for depreciation under Minnesota Statutes 1986, section 290.09, 
8.10 	subdivision 7, subject to the modifications contained in subdivision 19e; and
8.11 	(ii) to the extent the disallowed costs are not represented by physical property, an 
8.12 	amount equal to the allowance for cost depletion under Minnesota Statutes 1986, section 
8.13 	290.09, subdivision 8;
8.14 	(5) the deduction for capital losses pursuant to sections 1211 and 1212 of the 
8.15 	Internal Revenue Code, except that:
8.16 	(i) for capital losses incurred in taxable years beginning after December 31, 1986, 
8.17 	capital loss carrybacks shall not be allowed;
8.18 	(ii) for capital losses incurred in taxable years beginning after December 31, 1986, 
8.19 	a capital loss carryover to each of the 15 taxable years succeeding the loss year shall be 
8.20 	allowed;
8.21 	(iii) for capital losses incurred in taxable years beginning before January 1, 1987, a 
8.22 	capital loss carryback to each of the three taxable years preceding the loss year, subject to 
8.23 	the provisions of Minnesota Statutes 1986, section 290.16, shall be allowed; and
8.24 	(iv) for capital losses incurred in taxable years beginning before January 1, 1987, 
8.25 	a capital loss carryover to each of the five taxable years succeeding the loss year to the 
8.26 	extent such loss was not used in a prior taxable year and subject to the provisions of 
8.27 	Minnesota Statutes 1986, section 290.16, shall be allowed;
8.28 	(6) an amount for interest and expenses relating to income not taxable for federal 
8.29 	income tax purposes, if (i) the income is taxable under this chapter and (ii) the interest and 
8.30 	expenses were disallowed as deductions under the provisions of section 171(a)(2), 265 or 
8.31 	291 of the Internal Revenue Code in computing federal taxable income;
8.32 	(7) in the case of mines, oil and gas wells, other natural deposits, and timber for 
8.33 	which percentage depletion was disallowed pursuant to subdivision 19c, clause (9), a 
8.34 	reasonable allowance for depletion based on actual cost. In the case of leases the deduction 
8.35 	must be apportioned between the lessor and lessee in accordance with rules prescribed 
8.36 	by the commissioner. In the case of property held in trust, the allowable deduction must 
9.1 	be apportioned between the income beneficiaries and the trustee in accordance with the 
9.2 	pertinent provisions of the trust, or if there is no provision in the instrument, on the basis 
9.3 	of the trust's income allocable to each;
9.4 	(8) for certified pollution control facilities placed in service in a taxable year 
9.5 	beginning before December 31, 1986, and for which amortization deductions were elected 
9.6 	under section 169 of the Internal Revenue Code of 1954, as amended through December 
9.7 	31, 1985, an amount equal to the allowance for depreciation under Minnesota Statutes 
9.8 	1986, section 290.09, subdivision 7;
9.9 	(9) amounts included in federal taxable income that are due to refunds of income, 
9.10 	excise, or franchise taxes based on net income or related minimum taxes paid by the 
9.11 	corporation to Minnesota, another state, a political subdivision of another state, the 
9.12 	District of Columbia, or a foreign country or possession of the United States to the extent 
9.13 	that the taxes were added to federal taxable income under section 290.01, subdivision 19c, 
9.14 	clause (1), in a prior taxable year;
9.15 	(10) for taxable years beginning before January 1, 2012, 80 percent of royalties, 
9.16 	fees, or other like income accrued or received from a foreign operating corporation 
9.17 	or a foreign corporation which is part of the same unitary business as the receiving 
9.18 	corporation, unless the income resulting from such payments or accruals is income from 
9.19 	sources within the United States as defined in subtitle A, chapter 1, subchapter N, part 
9.20 	1, of the Internal Revenue Code;
9.21 	(11) income or gains from the business of mining as defined in section 290.05, 
9.22 	subdivision 1, clause (a), that are not subject to Minnesota franchise tax;
9.23 	(12) the amount of disability access expenditures in the taxable year which are not 
9.24 	allowed to be deducted or capitalized under section 44(d)(7) of the Internal Revenue Code;
9.25 	(13) the amount of qualified research expenses not allowed for federal income tax 
9.26 	purposes under section 280C(c) of the Internal Revenue Code, but only to the extent that 
9.27 	the amount exceeds the amount of the credit allowed under section 290.068;
9.28 	(14) the amount of salary expenses not allowed for federal income tax purposes due 
9.29 	to claiming the Indian employment credit under section 45A(a) of the Internal Revenue 
9.30 	Code;
9.31 	(15) for a corporation whose foreign sales corporation, as defined in section 922 
9.32 	of the Internal Revenue Code, constituted a foreign operating corporation during any 
9.33 	taxable year ending before January 1, 1995, and a return was filed by August 15, 1996, 
9.34 	claiming the deduction under section 290.21, subdivision 4, for income received from 
9.35 	the foreign operating corporation, an amount equal to 1.23 multiplied by the amount of 
10.1 	income excluded under section 114 of the Internal Revenue Code, provided the income is 
10.2 	not income of a foreign operating company;
10.3 	(16) any decrease in subpart F income, as defined in section 952(a) of the Internal 
10.4 	Revenue Code, for the taxable year when subpart F income is calculated without regard to 
10.5 	the provisions of Division C, title III, section 303(b) of Public Law 110-343;
10.6 	(17) in each of the five tax years immediately following the tax year in which an 
10.7 	addition is required under subdivision 19c, clause (15), an amount equal to one-fifth of 
10.8 	the delayed depreciation. For purposes of this clause, "delayed depreciation" means the 
10.9 	amount of the addition made by the taxpayer under subdivision 19c, clause (15). The 
10.10 	resulting delayed depreciation cannot be less than zero;
10.11 	(18) in each of the five tax years immediately following the tax year in which an 
10.12 	addition is required under subdivision 19c, clause (16), an amount equal to one-fifth of 
10.13 	the amount of the addition; and
10.14 	(19) to the extent included in federal taxable income, discharge of indebtedness 
10.15 	income resulting from reacquisition of business indebtedness included in federal taxable 
10.16 	income under section 108(i) of the Internal Revenue Code. This subtraction applies only 
10.17 	to the extent that the income was included in net income in a prior year as a result of the 
10.18 	addition under section 290.01, subdivision 19c, clause (25).

10.19 	EFFECTIVE DATE. This section is effective for returns filed for taxable years 
10.20 	beginning after December 31, 2011.

10.21 	Sec. 6. Minnesota Statutes 2011 Supplement, section 290.06, subdivision 2c, is 
10.22 	amended to read:
10.23 		Subd. 2c.Schedules of rates for individuals, estates, and trusts. (a) The income 
10.24 	taxes imposed by this chapter upon married individuals filing joint returns and surviving 
10.25 	spouses as defined in section 2(a) of the Internal Revenue Code must be computed by 
10.26 	applying to their taxable net income the following schedule of rates:
10.27 	(1) on the first $25,680 $34,590, 5.35 percent;
10.28 	(2) on all over $25,680 $34,590, but not over $102,030 $137,430, 7.05 percent;
10.29 	(3) on all over $102,030 $137,430, but not over $1,000,000, 7.85 percent;
10.30 	(4) on all over $1,000,000, 10.85 percent.
10.31 	Married individuals filing separate returns, estates, and trusts must compute their 
10.32 	income tax by applying the above rates to their taxable income, except that the income 
10.33 	brackets will be one-half of the above amounts.
10.34 	(b) The income taxes imposed by this chapter upon unmarried individuals must be 
10.35 	computed by applying to taxable net income the following schedule of rates:
11.1 	(1) on the first $17,570 $23,670, 5.35 percent;
11.2 	(2) on all over $17,570 $23,670, but not over $57,710 $77,730, 7.05 percent;
11.3 	(3) on all over $57,710 $77,730, but not over $1,000,000, 7.85 percent;
11.4 	(4) on all over $1,000,000, 10.85 percent.
11.5 	(c) The income taxes imposed by this chapter upon unmarried individuals qualifying 
11.6 	as a head of household as defined in section 2(b) of the Internal Revenue Code must be 
11.7 	computed by applying to taxable net income the following schedule of rates:
11.8 	(1) on the first $21,630 $29,130, 5.35 percent;
11.9 	(2) on all over $21,630 $29,130, but not over $86,910 $117,060, 7.05 percent;
11.10 	(3) on all over $86,910 $117,060, but not over $1,000,000, 7.85 percent;
11.11 	(4) on all over $1,000,000, 10.85 percent.
11.12 	(d) In lieu of a tax computed according to the rates set forth in this subdivision, the 
11.13 	tax of any individual taxpayer whose taxable net income for the taxable year is less than 
11.14 	an amount determined by the commissioner must be computed in accordance with tables 
11.15 	prepared and issued by the commissioner of revenue based on income brackets of not 
11.16 	more than $100. The amount of tax for each bracket shall be computed at the rates set 
11.17 	forth in this subdivision, provided that the commissioner may disregard a fractional part of 
11.18 	a dollar unless it amounts to 50 cents or more, in which case it may be increased to $1.
11.19 	(e) An individual who is not a Minnesota resident for the entire year must compute 
11.20 	the individual's Minnesota income tax as provided in this subdivision. After the 
11.21 	application of the nonrefundable credits provided in this chapter, the tax liability must 
11.22 	then be multiplied by a fraction in which:
11.23 	(1) the numerator is the individual's Minnesota source federal adjusted gross income 
11.24 	as defined in section 62 of the Internal Revenue Code and increased by the additions 
11.25 	required under section 290.01, subdivision 19a, clauses (1), (5), (6), (7), (8), (9), (12), 
11.26 	(13), and (16) to (18), and reduced by the Minnesota assignable portion of the subtraction 
11.27 	for United States government interest under section 290.01, subdivision 19b, clause (1), 
11.28 	and the subtractions under section 290.01, subdivision 19b, clauses (8), (9), (13), (14), 
11.29 	(15), (17), and (18), after applying the allocation and assignability provisions of section 
11.30 	290.081, clause (a), or 290.17; and
11.31 	(2) the denominator is the individual's federal adjusted gross income as defined in 
11.32 	section 62 of the Internal Revenue Code of 1986, increased by the amounts specified in 
11.33 	section 290.01, subdivision 19a, clauses (1), (5), (6), (7), (8), (9), (12), (13), and (16) to 
11.34 	(18), and reduced by the amounts specified in section 290.01, subdivision 19b, clauses 
11.35 	(1), (8), (9), (13), (14), (15), (17), and (18).

12.1 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
12.2 	December 31, 2011.

12.3 	Sec. 7. Minnesota Statutes 2010, section 290.06, subdivision 2d, is amended to read:
12.4 		Subd. 2d.Inflation adjustment of brackets. (a) For taxable years beginning after 
12.5 	December 31, 2000 2012, the minimum and maximum dollar amounts for each rate 
12.6 	bracket for which a tax is imposed in subdivision 2c shall be adjusted for inflation by the 
12.7 	percentage determined under paragraph (b). For the purpose of making the adjustment as 
12.8 	provided in this subdivision all of the rate brackets provided in subdivision 2c shall be the 
12.9 	rate brackets as they existed for taxable years beginning after December 31, 1999 2011, 
12.10 	and before January 1, 2001 2013. The rate applicable to any rate bracket must not be 
12.11 	changed. The dollar amounts setting forth the tax shall be adjusted to reflect the changes 
12.12 	in the rate brackets. The rate brackets as adjusted must be rounded to the nearest $10 
12.13 	amount. If the rate bracket ends in $5, it must be rounded up to the nearest $10 amount.
12.14 	(b) The commissioner shall adjust the rate brackets and by the percentage determined 
12.15 	pursuant to the provisions of section 1(f) of the Internal Revenue Code, except that in 
12.16 	section 1(f)(3)(B) the word "1999 2011" shall be substituted for the word "1992." For 
12.17 	2001 2013, the commissioner shall then determine the percent change from the 12 months 
12.18 	ending on August 31, 1999 2011, to the 12 months ending on August 31, 2000 2012, and 
12.19 	in each subsequent year, from the 12 months ending on August 31, 1999 2011, to the 12 
12.20 	months ending on August 31 of the year preceding the taxable year. The determination of 
12.21 	the commissioner pursuant to this subdivision shall not be considered a "rule" and shall 
12.22 	not be subject to the Administrative Procedure Act contained in chapter 14.
12.23 	No later than December 15 of each year, the commissioner shall announce the 
12.24 	specific percentage that will be used to adjust the tax rate brackets.

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

12.27 	Sec. 8. Minnesota Statutes 2010, section 290.17, subdivision 4, is amended to read:
12.28 		Subd. 4.Unitary business principle. (a) If a trade or business conducted wholly 
12.29 	within this state or partly within and partly without this state is part of a unitary business, 
12.30 	the entire income of the unitary business is subject to apportionment pursuant to section 
12.31 	290.191. Notwithstanding subdivision 2, paragraph (c), none of the income of a unitary 
12.32 	business is considered to be derived from any particular source and none may be allocated 
12.33 	to a particular place except as provided by the applicable apportionment formula. The 
12.34 	provisions of this subdivision do not apply to business income subject to subdivision 5, 
13.1 	income of an insurance company, or income of an investment company determined under 
13.2 	section 290.36.
13.3 	(b) The term "unitary business" means business activities or operations which 
13.4 	result in a flow of value between them. The term may be applied within a single legal 
13.5 	entity or between multiple entities and without regard to whether each entity is a sole 
13.6 	proprietorship, a corporation, a partnership or a trust.
13.7 	(c) Unity is presumed whenever there is unity of ownership, operation, and use, 
13.8 	evidenced by centralized management or executive force, centralized purchasing, 
13.9 	advertising, accounting, or other controlled interaction, but the absence of these 
13.10 	centralized activities will not necessarily evidence a nonunitary business. Unity is also 
13.11 	presumed when business activities or operations are of mutual benefit, dependent upon or 
13.12 	contributory to one another, either individually or as a group.
13.13 	(d) Where a business operation conducted in Minnesota is owned by a business 
13.14 	entity that carries on business activity outside the state different in kind from that 
13.15 	conducted within this state, and the other business is conducted entirely outside the state, it 
13.16 	is presumed that the two business operations are unitary in nature, interrelated, connected, 
13.17 	and interdependent unless it can be shown to the contrary.
13.18 	(e) Unity of ownership is not deemed to exist when a corporation is involved unless 
13.19 	that corporation is a member of a group of two or more business entities and more than 50 
13.20 	percent of the voting stock of each member of the group is directly or indirectly owned 
13.21 	by a common owner or by common owners, either corporate or noncorporate, or by one 
13.22 	or more of the member corporations of the group. For this purpose, the term "voting 
13.23 	stock" shall include membership interests of mutual insurance holding companies formed 
13.24 	under section 66A.40.
13.25 	(f) The net income and apportionment factors under section 290.191 or 290.20 of 
13.26 	foreign corporations and other foreign entities which are part of a unitary business shall 
13.27 	not be included in the net income or the apportionment factors of the unitary business. 
13.28 	A foreign corporation or other foreign entity which is required to file a return under this 
13.29 	chapter shall file on a separate return basis. The net income and apportionment factors 
13.30 	under section 290.191 or 290.20 of foreign operating corporations shall not be included in 
13.31 	the net income or the apportionment factors of the unitary business except as provided in 
13.32 	paragraph (g). The provisions of this paragraph are not severable from the provisions of 
13.33 	section 290.01, subdivision 5, clauses (4) to (6); if any of those provisions are found to be 
13.34 	unconstitutional, the provisions of this paragraph are void for the respective taxable years.
13.35 	(g) The adjusted net income of a foreign operating corporation shall be deemed to 
13.36 	be paid as a dividend on the last day of its taxable year to each shareholder thereof, in 
14.1 	proportion to each shareholder's ownership, with which such corporation is engaged in 
14.2 	a unitary business. Such deemed dividend shall be treated as a dividend under section 
14.3 	290.21, subdivision 4.
14.4 	Dividends actually paid by a foreign operating corporation to a corporate shareholder 
14.5 	which is a member of the same unitary business as the foreign operating corporation shall 
14.6 	be eliminated from the net income of the unitary business in preparing a combined report 
14.7 	for the unitary business. The adjusted net income of a foreign operating corporation 
14.8 	shall be its net income adjusted as follows:
14.9 	(1) any taxes paid or accrued to a foreign country, the commonwealth of Puerto 
14.10 	Rico, or a United States possession or political subdivision of any of the foregoing shall 
14.11 	be a deduction; and
14.12 	(2) the subtraction from federal taxable income for payments received from foreign 
14.13 	corporations or foreign operating corporations under section 290.01, subdivision 19d, 
14.14 	clause (10), shall not be allowed.
14.15 	If a foreign operating corporation incurs a net loss, neither income nor deduction 
14.16 	from that corporation shall be included in determining the net income of the unitary 
14.17 	business.
14.18 	(h) (g) For purposes of determining the net income of a unitary business and the 
14.19 	factors to be used in the apportionment of net income pursuant to section 290.191 or 
14.20 	290.20, there must be included only the income and apportionment factors of domestic 
14.21 	corporations or other domestic entities other than foreign operating corporations that are 
14.22 	determined to be part of the unitary business pursuant to this subdivision, notwithstanding 
14.23 	that foreign corporations or other foreign entities might be included in the unitary business.
14.24 	(i) (h) Deductions for expenses, interest, or taxes otherwise allowable under 
14.25 	this chapter that are connected with or allocable against dividends, deemed dividends 
14.26 	described in paragraph (g), or royalties, fees, or other like income described in section 
14.27 	290.01, subdivision 19d, clause (10), shall not be disallowed.
14.28 	(j) (i) Each corporation or other entity, except a sole proprietorship, that is part of 
14.29 	a unitary business must file combined reports as the commissioner determines. On the 
14.30 	reports, all intercompany transactions between entities included pursuant to paragraph 
14.31 	(h) (g) must be eliminated and the entire net income of the unitary business determined in 
14.32 	accordance with this subdivision is apportioned among the entities by using each entity's 
14.33 	Minnesota factors for apportionment purposes in the numerators of the apportionment 
14.34 	formula and the total factors for apportionment purposes of all entities included pursuant 
14.35 	to paragraph (h) (g) in the denominators of the apportionment formula.
15.1 	(k) (j) If a corporation has been divested from a unitary business and is included in a 
15.2 	combined report for a fractional part of the common accounting period of the combined 
15.3 	report:
15.4 	(1) its income includable in the combined report is its income incurred for that part 
15.5 	of the year determined by proration or separate accounting; and
15.6 	(2) its sales, property, and payroll included in the apportionment formula must 
15.7 	be prorated or accounted for separately.

15.8 	EFFECTIVE DATE. This section is effective for returns filed for taxable years 
15.9 	beginning after December 31, 2011.

15.10 	Sec. 9.  REPEALER.
 15.11 	Minnesota Statutes 2010, sections 290.01, subdivision 6b; and 290.0921, subdivision 
15.12 	7, are repealed.

15.13 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
15.14 	December 31, 2011.