1.1 	A bill for an act
1.2 	relating to taxation; corporate franchise; eliminating the preferences for foreign 
1.3 	source income; repealing the subtraction for foreign royalties; expanding the 
1.4 	definition of domestic corporations to include certain foreign corporations 
1.5 	incorporated in or doing business in tax havens; repealing foreign operating 
1.6 	corporations; amending Minnesota Statutes 2008, sections 290.01, subdivision 
1.7 	5, by adding a subdivision; 290.17, subdivision 4; Minnesota Statutes 2009 
1.8 	Supplement, sections 289A.08, subdivision 3; 290.01, subdivisions 19c, 19d; 
1.9 	repealing Minnesota Statutes 2008, sections 290.01, subdivision 6b; 290.0921, 
1.10 	subdivision 7.
1.11 	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

1.12 	Section 1. Minnesota Statutes 2009 Supplement, section 289A.08, subdivision 3, 
1.13 	is amended to read:
1.14 		Subd. 3.Corporations. (a) A corporation that is subject to the state's jurisdiction to 
1.15 	tax under section 290.014, subdivision 5, must file a return, except that a foreign operating 
1.16 	corporation as defined in section 290.01, subdivision 6b, is not required to file a return.
1.17 	(b) Members of a unitary business that are required to file a combined report on one 
1.18 	return must designate a member of the unitary business to be responsible for tax matters, 
1.19 	including the filing of returns, the payment of taxes, additions to tax, penalties, interest, 
1.20 	or any other payment, and for the receipt of refunds of taxes or interest paid in excess of 
1.21 	taxes lawfully due. The designated member must be a member of the unitary business that 
1.22 	is filing the single combined report and either:
1.23 	(1) a corporation that is subject to the taxes imposed by chapter 290; or
1.24 	(2) a corporation that is not subject to the taxes imposed by chapter 290:
1.25 	(i) Such corporation consents by filing the return as a designated member under this 
1.26 	clause to remit taxes, penalties, interest, or additions to tax due from the members of the 
1.27 	unitary business subject to tax, and receive refunds or other payments on behalf of other 
2.1 	members of the unitary business. The member designated under this clause is a "taxpayer" 
2.2 	for the purposes of this chapter and chapter 270C, and is liable for any liability imposed 
2.3 	on the unitary business under this chapter and chapter 290.
2.4 	(ii) If the state does not otherwise have the jurisdiction to tax the member designated 
2.5 	under this clause, consenting to be the designated member does not create the jurisdiction 
2.6 	to impose tax on the designated member, other than as described in item (i).
2.7 	(iii) The member designated under this clause must apply for a business tax account 
2.8 	identification number.
2.9 	(c) The commissioner shall adopt rules for the filing of one return on behalf of the 
2.10 	members of an affiliated group of corporations that are required to file a combined report. 
2.11 	All members of an affiliated group that are required to file a combined report must file one 
2.12 	return on behalf of the members of the group under rules adopted by the commissioner.
2.13 	(d) If a corporation claims on a return that it has paid tax in excess of the amount of 
2.14 	taxes lawfully due, that corporation must include on that return information necessary for 
2.15 	payment of the tax in excess of the amount lawfully due by electronic means.

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

2.18 	Sec. 2. Minnesota Statutes 2008, section 290.01, subdivision 5, is amended to read:
2.19 		Subd. 5.Domestic corporation. The term "domestic" when applied to a corporation 
2.20 	means a corporation:
2.21 	(1) created or organized in the United States, or under the laws of the United States 
2.22 	or of any state, the District of Columbia, or any political subdivision of any of the 
2.23 	foregoing but not including the Commonwealth of Puerto Rico, or any possession of 
2.24 	the United States;
2.25 	(2) which qualifies as a DISC, as defined in section 992(a) of the Internal Revenue 
2.26 	Code; or
2.27 	(3) which qualifies as a FSC, as defined in section 922 of the Internal Revenue Code.;
2.28 	(4) which is incorporated in a tax haven;
2.29 	(5) which is engaged in activity in a tax haven sufficient for the tax haven to impose 
2.30 	a net income tax under United States constitutional standards and section 290.015, and 
2.31 	which reports that 20 percent or more of its income is attributable to business in the tax 
2.32 	haven; or
2.33 	(6) which has the average of its property, payroll, and sales factors, as defined under 
2.34 	section 290.191, within the 50 states of the United States and the District of Columbia of 
2.35 	20 percent or more.

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

3.3 	Sec. 3. Minnesota Statutes 2008, section 290.01, is amended by adding a subdivision 
3.4 	to read:
3.5 		Subd. 5c.Tax haven. (a) "Tax haven" means a foreign jurisdiction designated 
3.6 	under this subdivision.
3.7 	(b) The commissioner may designate a foreign jurisdiction as a tax haven by 
3.8 	administrative rule if the jurisdiction:
3.9 	(1) has no or nominal effective tax on the relevant income; and
3.10 	(2)(i) has laws or practices that prevent effective exchange of information for tax 
3.11 	purposes with other governments on taxpayers benefiting from the tax regime;
3.12 	(ii) has a tax regime that lacks transparency. A tax regime lacks transparency if the 
3.13 	details of legislative, legal, or administrative provisions are not open and apparent or are 
3.14 	not consistently applied among similarly situated taxpayers, or if the information needed 
3.15 	by tax authorities to determine a taxpayer's correct tax liability, such as accounting records 
3.16 	and underlying documentation, is not adequately available;
3.17 	(iii) facilitates the establishment of foreign-owned entities without the need for a 
3.18 	local substantive presence or prohibits these entities from having any commercial impact 
3.19 	on the local economy;
3.20 	(iv) explicitly or implicitly excludes the jurisdiction's resident taxpayers from taking 
3.21 	advantage of the tax regime's benefits or prohibits enterprises that benefit from the regime 
3.22 	from operating in the jurisdiction's domestic markets; or
3.23 	(v) has created a tax regime that is favorable for tax avoidance, based upon an 
3.24 	overall assessment of relevant factors, including whether the jurisdiction has a significant 
3.25 	untaxed offshore financial or other services sector relative to its overall economy.
3.26 	(c) The following foreign jurisdictions are deemed to be tax havens, unless the 
3.27 	commissioner, by revenue notice, revokes the listing of a jurisdiction:
3.28 	(1) Anguilla;
3.29 	(2) Antigua and Barbuda;
3.30 	(3) Aruba;
3.31 	(4) Bahamas;
3.32 	(5) Barbados;
3.33 	(6) Belize;
3.34 	(7) Bermuda;
3.35 	(8) British Virgin Islands;
4.1 	(9) Cayman Islands;
4.2 	(10) Cook Islands;
4.3 	(11) Dominica;
4.4 	(12) Gibraltar;
4.5 	(13) Grenada;
4.6 	(14) Guernsey-Sark-Alderney;
4.7 	(15) Isle of Man;
4.8 	(16) Jersey;
4.9 	(17) Latvia;
4.10 	(18) Liechtenstein;
4.11 	(19) Luxembourg;
4.12 	(20) Nauru;
4.13 	(21) Netherlands Antilles;
4.14 	(22) Panama;
4.15 	(23) Samoa;
4.16 	(24) St. Kitts and Nevis;
4.17 	(25) St. Lucia;
4.18 	(26) St. Vincent and Grenadines;
4.19 	(27) Turks and Caicos; and
4.20 	(28) Vanuatu.
4.21 	(d) The commissioner shall revoke a foreign jurisdiction's listing under paragraph 
4.22 	(b) or (c), as applicable, if the United States enters into a tax treaty or other agreement 
4.23 	with the foreign jurisdiction that provides for prompt, obligatory, and automatic exchange 
4.24 	of information with the United States government relevant to enforcing the provisions of 
4.25 	federal tax laws and the treaty or other agreement was in effect for the taxable year.

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

4.28 	Sec. 4. Minnesota Statutes 2009 Supplement, section 290.01, subdivision 19c, is 
4.29 	amended to read:
4.30 		Subd. 19c.Corporations; additions to federal taxable income. For corporations, 
4.31 	there shall be added to federal taxable income:
4.32 	(1) the amount of any deduction taken for federal income tax purposes for income, 
4.33 	excise, or franchise taxes based on net income or related minimum taxes, including but not 
4.34 	limited to the tax imposed under section 290.0922, paid by the corporation to Minnesota, 
5.1 	another state, a political subdivision of another state, the District of Columbia, or any 
5.2 	foreign country or possession of the United States;
5.3 	(2) interest not subject to federal tax upon obligations of: the United States, its 
5.4 	possessions, its agencies, or its instrumentalities; the state of Minnesota or any other 
5.5 	state, any of its political or governmental subdivisions, any of its municipalities, or any 
5.6 	of its governmental agencies or instrumentalities; the District of Columbia; or Indian 
5.7 	tribal governments;
5.8 	(3) exempt-interest dividends received as defined in section 852(b)(5) of the Internal 
5.9 	Revenue Code;
5.10 	(4) the amount of any net operating loss deduction taken for federal income tax 
5.11 	purposes under section 172 or 832(c)(10) of the Internal Revenue Code or operations loss 
5.12 	deduction under section 810 of the Internal Revenue Code;
5.13 	(5) the amount of any special deductions taken for federal income tax purposes 
5.14 	under sections 241 to 247 and 965 of the Internal Revenue Code;
5.15 	(6) losses from the business of mining, as defined in section 290.05, subdivision 1, 
5.16 	clause (a), that are not subject to Minnesota income tax;
5.17 	(7) the amount of any capital losses deducted for federal income tax purposes under 
5.18 	sections 1211 and 1212 of the Internal Revenue Code;
5.19 	(8) the exempt foreign trade income of a foreign sales corporation under sections 
5.20 	921(a) and 291 of the Internal Revenue Code;
5.21 	(9) the amount of percentage depletion deducted under sections 611 through 614 and 
5.22 	291 of the Internal Revenue Code;
5.23 	(10) for certified pollution control facilities placed in service in a taxable year 
5.24 	beginning before December 31, 1986, and for which amortization deductions were elected 
5.25 	under section 169 of the Internal Revenue Code of 1954, as amended through December 
5.26 	31, 1985, the amount of the amortization deduction allowed in computing federal taxable 
5.27 	income for those facilities;
5.28 	(11) for taxable years beginning before January 1, 2010, the amount of any deemed 
5.29 	dividend from a foreign operating corporation determined pursuant to section 290.17, 
5.30 	subdivision 4, paragraph (g). The deemed dividend shall be reduced by the amount of the 
5.31 	addition to income required by clauses (20), (21), (22), and (23);
5.32 	(12) the amount of a partner's pro rata share of net income which does not flow 
5.33 	through to the partner because the partnership elected to pay the tax on the income under 
5.34 	section 6242(a)(2) of the Internal Revenue Code;
5.35 	(13) the amount of net income excluded under section 114 of the Internal Revenue 
5.36 	Code;
6.1 	(14) for taxable years beginning before January 1, 2010, any increase in subpart F 
6.2 	income, as defined in section 952(a) of the Internal Revenue Code, for the taxable year 
6.3 	when subpart F income is calculated without regard to the provisions of Division C, title 
6.4 	III, section 303(b) of Public Law 110-343;
6.5 	(15) 80 percent of the depreciation deduction allowed under section 168(k)(1)(A) 
6.6 	and (k)(4)(A) of the Internal Revenue Code. For purposes of this clause, if the taxpayer 
6.7 	has an activity that in the taxable year generates a deduction for depreciation under 
6.8 	section 168(k)(1)(A) and (k)(4)(A) and the activity generates a loss for the taxable year 
6.9 	that the taxpayer is not allowed to claim for the taxable year, "the depreciation allowed 
6.10 	under section 168(k)(1)(A) and (k)(4)(A)" for the taxable year is limited to excess of the 
6.11 	depreciation claimed by the activity under section 168(k)(1)(A) and (k)(4)(A) over the 
6.12 	amount of the loss from the activity that is not allowed in the taxable year. In succeeding 
6.13 	taxable years when the losses not allowed in the taxable year are allowed, the depreciation 
6.14 	under section 168(k)(1)(A) and (k)(4)(A) is allowed;
6.15 	(16) 80 percent of the amount by which the deduction allowed by section 179 of the 
6.16 	Internal Revenue Code exceeds the deduction allowable by section 179 of the Internal 
6.17 	Revenue Code of 1986, as amended through December 31, 2003;
6.18 	(17) to the extent deducted in computing federal taxable income, the amount of the 
6.19 	deduction allowable under section 199 of the Internal Revenue Code;
6.20 	(18) the exclusion allowed under section 139A of the Internal Revenue Code for 
6.21 	federal subsidies for prescription drug plans;
6.22 	(19) the amount of expenses disallowed under section 290.10, subdivision 2;
6.23 	(20) for taxable years beginning before January 1, 2010, an amount equal to the 
6.24 	interest and intangible expenses, losses, and costs paid, accrued, or incurred by any 
6.25 	member of the taxpayer's unitary group to or for the benefit of a corporation that is a 
6.26 	member of the taxpayer's unitary business group that qualifies as a foreign operating 
6.27 	corporation. For purposes of this clause, intangible expenses and costs include:
6.28 	(i) expenses, losses, and costs for, or related to, the direct or indirect acquisition, 
6.29 	use, maintenance or management, ownership, sale, exchange, or any other disposition of 
6.30 	intangible property;
6.31 	(ii) losses incurred, directly or indirectly, from factoring transactions or discounting 
6.32 	transactions;
6.33 	(iii) royalty, patent, technical, and copyright fees;
6.34 	(iv) licensing fees; and
6.35 	(v) other similar expenses and costs.
7.1 	For purposes of this clause, "intangible property" includes stocks, bonds, patents, patent 
7.2 	applications, trade names, trademarks, service marks, copyrights, mask works, trade 
7.3 	secrets, and similar types of intangible assets.
7.4 	This clause does not apply to any item of interest or intangible expenses or costs paid, 
7.5 	accrued, or incurred, directly or indirectly, to a foreign operating corporation with respect 
7.6 	to such item of income to the extent that the income to the foreign operating corporation 
7.7 	is income from sources without the United States as defined in subtitle A, chapter 1, 
7.8 	subchapter N, part 1, of the Internal Revenue Code;
7.9 	(21) for taxable years beginning before January 1, 2010, except as already included 
7.10 	in the taxpayer's taxable income pursuant to clause (20), any interest income and income 
7.11 	generated from intangible property received or accrued by a foreign operating corporation 
7.12 	that is a member of the taxpayer's unitary group. For purposes of this clause, income 
7.13 	generated from intangible property includes:
7.14 	(i) income related to the direct or indirect acquisition, use, maintenance or 
7.15 	management, ownership, sale, exchange, or any other disposition of intangible property;
7.16 	(ii) income from factoring transactions or discounting transactions;
7.17 	(iii) royalty, patent, technical, and copyright fees;
7.18 	(iv) licensing fees; and
7.19 	(v) other similar income.
7.20 	For purposes of this clause, "intangible property" includes stocks, bonds, patents, patent 
7.21 	applications, trade names, trademarks, service marks, copyrights, mask works, trade 
7.22 	secrets, and similar types of intangible assets.
7.23 	This clause does not apply to any item of interest or intangible income received or accrued 
7.24 	by a foreign operating corporation with respect to such item of income to the extent that 
7.25 	the income is income from sources without the United States as defined in subtitle A, 
7.26 	chapter 1, subchapter N, part 1, of the Internal Revenue Code;
7.27 	(22) for taxable years beginning before January 1, 2010, the dividends attributable to 
7.28 	the income of a foreign operating corporation that is a member of the taxpayer's unitary 
7.29 	group in an amount that is equal to the dividends paid deduction of a real estate investment 
7.30 	trust under section 561(a) of the Internal Revenue Code for amounts paid or accrued by 
7.31 	the real estate investment trust to the foreign operating corporation;
7.32 	(23) for taxable years beginning before January 1, 2010, the income of a foreign 
7.33 	operating corporation that is a member of the taxpayer's unitary group in an amount that 
7.34 	is equal to gains derived from the sale of real or personal property located in the United 
7.35 	States;
8.1 	(24) the additional amount allowed as a deduction for donation of computer 
8.2 	technology and equipment under section 170(e)(6) of the Internal Revenue Code, to the 
8.3 	extent deducted from taxable income; and
8.4 	(25) discharge of indebtedness income resulting from reacquisition of business 
8.5 	indebtedness and deferred under section 108(i) of the Internal Revenue Code.

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

8.8 	Sec. 5. Minnesota Statutes 2009 Supplement, section 290.01, subdivision 19d, is 
8.9 	amended to read:
8.10 		Subd. 19d.Corporations; modifications decreasing federal taxable income. For 
8.11 	corporations, there shall be subtracted from federal taxable income after the increases 
8.12 	provided in subdivision 19c:
8.13 	(1) the amount of foreign dividend gross-up added to gross income for federal 
8.14 	income tax purposes under section 78 of the Internal Revenue Code;
8.15 	(2) the amount of salary expense not allowed for federal income tax purposes due to 
8.16 	claiming the work opportunity credit under section 51 of the Internal Revenue Code;
8.17 	(3) any dividend (not including any distribution in liquidation) paid within the 
8.18 	taxable year by a national or state bank to the United States, or to any instrumentality of 
8.19 	the United States exempt from federal income taxes, on the preferred stock of the bank 
8.20 	owned by the United States or the instrumentality;
8.21 	(4) amounts disallowed for intangible drilling costs due to differences between 
8.22 	this chapter and the Internal Revenue Code in taxable years beginning before January 
8.23 	1, 1987, as follows:
8.24 	(i) to the extent the disallowed costs are represented by physical property, an amount 
8.25 	equal to the allowance for depreciation under Minnesota Statutes 1986, section 290.09, 
8.26 	subdivision 7, subject to the modifications contained in subdivision 19e; and
8.27 	(ii) to the extent the disallowed costs are not represented by physical property, an 
8.28 	amount equal to the allowance for cost depletion under Minnesota Statutes 1986, section 
8.29 	290.09, subdivision 8;
8.30 	(5) the deduction for capital losses pursuant to sections 1211 and 1212 of the 
8.31 	Internal Revenue Code, except that:
8.32 	(i) for capital losses incurred in taxable years beginning after December 31, 1986, 
8.33 	capital loss carrybacks shall not be allowed;
9.1 	(ii) for capital losses incurred in taxable years beginning after December 31, 1986, 
9.2 	a capital loss carryover to each of the 15 taxable years succeeding the loss year shall be 
9.3 	allowed;
9.4 	(iii) for capital losses incurred in taxable years beginning before January 1, 1987, a 
9.5 	capital loss carryback to each of the three taxable years preceding the loss year, subject to 
9.6 	the provisions of Minnesota Statutes 1986, section 290.16, shall be allowed; and
9.7 	(iv) for capital losses incurred in taxable years beginning before January 1, 1987, 
9.8 	a capital loss carryover to each of the five taxable years succeeding the loss year to the 
9.9 	extent such loss was not used in a prior taxable year and subject to the provisions of 
9.10 	Minnesota Statutes 1986, section 290.16, shall be allowed;
9.11 	(6) an amount for interest and expenses relating to income not taxable for federal 
9.12 	income tax purposes, if (i) the income is taxable under this chapter and (ii) the interest and 
9.13 	expenses were disallowed as deductions under the provisions of section 171(a)(2), 265 or 
9.14 	291 of the Internal Revenue Code in computing federal taxable income;
9.15 	(7) in the case of mines, oil and gas wells, other natural deposits, and timber for 
9.16 	which percentage depletion was disallowed pursuant to subdivision 19c, clause (9), a 
9.17 	reasonable allowance for depletion based on actual cost. In the case of leases the deduction 
9.18 	must be apportioned between the lessor and lessee in accordance with rules prescribed 
9.19 	by the commissioner. In the case of property held in trust, the allowable deduction must 
9.20 	be apportioned between the income beneficiaries and the trustee in accordance with the 
9.21 	pertinent provisions of the trust, or if there is no provision in the instrument, on the basis 
9.22 	of the trust's income allocable to each;
9.23 	(8) for certified pollution control facilities placed in service in a taxable year 
9.24 	beginning before December 31, 1986, and for which amortization deductions were elected 
9.25 	under section 169 of the Internal Revenue Code of 1954, as amended through December 
9.26 	31, 1985, an amount equal to the allowance for depreciation under Minnesota Statutes 
9.27 	1986, section 290.09, subdivision 7;
9.28 	(9) amounts included in federal taxable income that are due to refunds of income, 
9.29 	excise, or franchise taxes based on net income or related minimum taxes paid by the 
9.30 	corporation to Minnesota, another state, a political subdivision of another state, the 
9.31 	District of Columbia, or a foreign country or possession of the United States to the extent 
9.32 	that the taxes were added to federal taxable income under section 290.01, subdivision 19c, 
9.33 	clause (1), in a prior taxable year;
9.34 	(10) for taxable years beginning before January 1, 2010, 80 percent of royalties, 
9.35 	fees, or other like income accrued or received from a foreign operating corporation 
9.36 	or a foreign corporation which is part of the same unitary business as the receiving 
10.1 	corporation, unless the income resulting from such payments or accruals is income from 
10.2 	sources within the United States as defined in subtitle A, chapter 1, subchapter N, part 
10.3 	1, of the Internal Revenue Code;
10.4 	(11) income or gains from the business of mining as defined in section 290.05, 
10.5 	subdivision 1, clause (a), that are not subject to Minnesota franchise tax;
10.6 	(12) the amount of disability access expenditures in the taxable year which are not 
10.7 	allowed to be deducted or capitalized under section 44(d)(7) of the Internal Revenue Code;
10.8 	(13) the amount of qualified research expenses not allowed for federal income tax 
10.9 	purposes under section 280C(c) of the Internal Revenue Code, but only to the extent that 
10.10 	the amount exceeds the amount of the credit allowed under section 290.068;
10.11 	(14) the amount of salary expenses not allowed for federal income tax purposes due 
10.12 	to claiming the Indian employment credit under section 45A(a) of the Internal Revenue 
10.13 	Code;
10.14 	(15) for taxable years beginning before January 1, 2008, the amount of the federal 
10.15 	small ethanol producer credit allowed under section 40(a)(3) of the Internal Revenue Code 
10.16 	which is included in gross income under section 87 of the Internal Revenue Code;
10.17 	(16) for a corporation whose foreign sales corporation, as defined in section 922 
10.18 	of the Internal Revenue Code, constituted a foreign operating corporation during any 
10.19 	taxable year ending before January 1, 1995, and a return was filed by August 15, 1996, 
10.20 	claiming the deduction under section 290.21, subdivision 4, for income received from 
10.21 	the foreign operating corporation, an amount equal to 1.23 multiplied by the amount of 
10.22 	income excluded under section 114 of the Internal Revenue Code, provided the income is 
10.23 	not income of a foreign operating company;
10.24 	(17) for taxable years beginning before January 1, 2010, any decrease in subpart F 
10.25 	income, as defined in section 952(a) of the Internal Revenue Code, for the taxable year 
10.26 	when subpart F income is calculated without regard to the provisions of Division C, title 
10.27 	III, section 303(b) of Public Law 110-343;
10.28 	(18) in each of the five tax years immediately following the tax year in which an 
10.29 	addition is required under subdivision 19c, clause (15), an amount equal to one-fifth of 
10.30 	the delayed depreciation. For purposes of this clause, "delayed depreciation" means the 
10.31 	amount of the addition made by the taxpayer under subdivision 19c, clause (15). The 
10.32 	resulting delayed depreciation cannot be less than zero;
10.33 	(19) in each of the five tax years immediately following the tax year in which an 
10.34 	addition is required under subdivision 19c, clause (16), an amount equal to one-fifth of 
10.35 	the amount of the addition; and
11.1 	(20) to the extent included in federal taxable income, discharge of indebtedness 
11.2 	income resulting from reacquisition of business indebtedness included in federal taxable 
11.3 	income under section 108(i) of the Internal Revenue Code. This subtraction applies only 
11.4 	to the extent that the income was included in net income in a prior year as a result of the 
11.5 	addition under section 290.01, subdivision 19c, clause (25).

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

11.8 	Sec. 6. Minnesota Statutes 2008, section 290.17, subdivision 4, is amended to read:
11.9 		Subd. 4.Unitary business principle. (a) If a trade or business conducted wholly 
11.10 	within this state or partly within and partly without this state is part of a unitary business, 
11.11 	the entire income of the unitary business is subject to apportionment pursuant to section 
11.12 	290.191. Notwithstanding subdivision 2, paragraph (c), none of the income of a unitary 
11.13 	business is considered to be derived from any particular source and none may be allocated 
11.14 	to a particular place except as provided by the applicable apportionment formula. The 
11.15 	provisions of this subdivision do not apply to business income subject to subdivision 5, 
11.16 	income of an insurance company, or income of an investment company determined under 
11.17 	section 290.36. 
11.18 	(b) The term "unitary business" means business activities or operations which 
11.19 	result in a flow of value between them. The term may be applied within a single legal 
11.20 	entity or between multiple entities and without regard to whether each entity is a sole 
11.21 	proprietorship, a corporation, a partnership or a trust.
11.22 	(c) Unity is presumed whenever there is unity of ownership, operation, and use, 
11.23 	evidenced by centralized management or executive force, centralized purchasing, 
11.24 	advertising, accounting, or other controlled interaction, but the absence of these 
11.25 	centralized activities will not necessarily evidence a nonunitary business. Unity is also 
11.26 	presumed when business activities or operations are of mutual benefit, dependent upon or 
11.27 	contributory to one another, either individually or as a group.
11.28 	(d) Where a business operation conducted in Minnesota is owned by a business 
11.29 	entity that carries on business activity outside the state different in kind from that 
11.30 	conducted within this state, and the other business is conducted entirely outside the state, it 
11.31 	is presumed that the two business operations are unitary in nature, interrelated, connected, 
11.32 	and interdependent unless it can be shown to the contrary.
11.33 	(e) Unity of ownership is not deemed to exist when a corporation is involved unless 
11.34 	that corporation is a member of a group of two or more business entities and more than 50 
11.35 	percent of the voting stock of each member of the group is directly or indirectly owned 
12.1 	by a common owner or by common owners, either corporate or noncorporate, or by one 
12.2 	or more of the member corporations of the group. For this purpose, the term "voting 
12.3 	stock" shall include membership interests of mutual insurance holding companies formed 
12.4 	under section 66A.40. 
12.5 	(f) The net income and apportionment factors under section 290.191 or 290.20 of 
12.6 	foreign corporations and other foreign entities which are part of a unitary business shall 
12.7 	not be included in the net income or the apportionment factors of the unitary business. 
12.8 	A foreign corporation or other foreign entity which is required to file a return under this 
12.9 	chapter shall file on a separate return basis. The net income and apportionment factors 
12.10 	under section 290.191 or 290.20 of foreign operating corporations shall not be included in 
12.11 	the net income or the apportionment factors of the unitary business except as provided 
12.12 	in paragraph (g).The legislature intends that the provisions of this paragraph are not 
12.13 	severable from the provisions of section 290.01, subdivision 5, clauses (4) to (6), and if 
12.14 	any of those provisions are found to be unconstitutional, the provisions of this paragraph 
12.15 	are void for the respective taxable years.
12.16 	(g) The adjusted net income of a foreign operating corporation shall be deemed to 
12.17 	be paid as a dividend on the last day of its taxable year to each shareholder thereof, in 
12.18 	proportion to each shareholder's ownership, with which such corporation is engaged in 
12.19 	a unitary business. Such deemed dividend shall be treated as a dividend under section 
12.20 	290.21, subdivision 4. 
12.21 	Dividends actually paid by a foreign operating corporation to a corporate shareholder 
12.22 	which is a member of the same unitary business as the foreign operating corporation shall 
12.23 	be eliminated from the net income of the unitary business in preparing a combined report 
12.24 	for the unitary business. The adjusted net income of a foreign operating corporation 
12.25 	shall be its net income adjusted as follows:
12.26 	(1) any taxes paid or accrued to a foreign country, the commonwealth of Puerto 
12.27 	Rico, or a United States possession or political subdivision of any of the foregoing shall 
12.28 	be a deduction; and
12.29 	(2) the subtraction from federal taxable income for payments received from foreign 
12.30 	corporations or foreign operating corporations under section 290.01, subdivision 19d, 
12.31 	clause (10), shall not be allowed. 
12.32 	If a foreign operating corporation incurs a net loss, neither income nor deduction 
12.33 	from that corporation shall be included in determining the net income of the unitary 
12.34 	business.
12.35 	(h) For purposes of determining the net income of a unitary business and the factors 
12.36 	to be used in the apportionment of net income pursuant to section 290.191 or 290.20, there 
13.1 	must be included only the income and apportionment factors of domestic corporations or 
13.2 	other domestic entities other than foreign operating corporations that are determined to 
13.3 	be part of the unitary business pursuant to this subdivision, notwithstanding that foreign 
13.4 	corporations or other foreign entities might be included in the unitary business. 
13.5 	(i) (h) Deductions for expenses, interest, or taxes otherwise allowable under 
13.6 	this chapter that are connected with or allocable against dividends, deemed dividends 
13.7 	described in paragraph (g), or royalties, fees, or other like income described in section 
13.8 	290.01, subdivision 19d, clause (10), shall not be disallowed. 
13.9 	(j) (i) Each corporation or other entity, except a sole proprietorship, that is part of 
13.10 	a unitary business must file combined reports as the commissioner determines. On the 
13.11 	reports, all intercompany transactions between entities included pursuant to paragraph 
13.12 	(h) (g) must be eliminated and the entire net income of the unitary business determined in 
13.13 	accordance with this subdivision is apportioned among the entities by using each entity's 
13.14 	Minnesota factors for apportionment purposes in the numerators of the apportionment 
13.15 	formula and the total factors for apportionment purposes of all entities included pursuant 
13.16 	to paragraph (h) (g) in the denominators of the apportionment formula.
13.17 	(k) (j) If a corporation has been divested from a unitary business and is included in a 
13.18 	combined report for a fractional part of the common accounting period of the combined 
13.19 	report:
13.20 	(1) its income includable in the combined report is its income incurred for that part 
13.21 	of the year determined by proration or separate accounting; and
13.22 	(2) its sales, property, and payroll included in the apportionment formula must 
13.23 	be prorated or accounted for separately.

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

13.26 	Sec. 7.  REPEALER.
 13.27 	Minnesota Statutes 2008, sections 290.01, subdivision 6b; and 290.0921, subdivision 
13.28 	7, are repealed.

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