1.1                          A bill for an act 
  1.2             relating to taxation; correcting cross-references 
  1.3             relating to franchise taxes; amending Minnesota 
  1.4             Statutes 2001 Supplement, sections 290.0921, 
  1.5             subdivisions 2, 6; 290.21, subdivision 4. 
  1.6   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.7      Section 1.  Minnesota Statutes 2001 Supplement, section 
  1.8   290.0921, subdivision 2, is amended to read: 
  1.9      Subd. 2.  [DEFINITIONS.] (a) For purposes of this section, 
  1.10  the following terms have the meanings given them. 
  1.11     (b) "Alternative minimum taxable net income" is alternative 
  1.12  minimum taxable income, 
  1.13     (1) less the exemption amount, and 
  1.14     (2) apportioned or allocated to Minnesota under section 
  1.15  290.17, 290.191, or 290.20. 
  1.16     (c) The "exemption amount" is $40,000, reduced, but not 
  1.17  below zero, by 25 percent of the excess of alternative minimum 
  1.18  taxable income over $150,000. 
  1.19     (d) "Minnesota alternative minimum taxable income" is 
  1.20  alternative minimum taxable net income, less the deductions for 
  1.21  alternative tax net operating loss under subdivision 4; 
  1.22  charitable contributions under subdivision 5; and dividends 
  1.23  received under subdivision 6.  The sum of the deductions under 
  1.24  this paragraph may not exceed 90 percent of alternative minimum 
  1.25  taxable net income.  This limitation does not apply to a 
  2.1   deduction for dividends paid to or received from a corporation 
  2.2   which is subject to tax under section 290.36 or was subject to 
  2.3   tax under Minnesota Statutes 2000, section 290.35, and which is 
  2.4   a member of an affiliated group of corporations as defined by 
  2.5   the Internal Revenue Code. 
  2.6      Sec. 2.  Minnesota Statutes 2001 Supplement, section 
  2.7   290.0921, subdivision 6, is amended to read: 
  2.8      Subd. 6.  [DIVIDENDS RECEIVED.] (a) A deduction is allowed 
  2.9   from alternative minimum taxable net income equal to the 
  2.10  deduction for dividends received under section 290.21, 
  2.11  subdivision 4, for purposes of calculating taxable income under 
  2.12  section 290.01, subdivision 29. 
  2.13     (b) The amount of the deduction must not exceed 90 percent 
  2.14  of alternative minimum taxable net income.  This limitation does 
  2.15  not apply to dividends paid to or received from a corporation 
  2.16  which is subject to tax under section 290.36 or was subject to 
  2.17  tax under Minnesota Statutes 2000, section 290.35, and which is 
  2.18  a member of an affiliated group of corporations as defined by 
  2.19  the Internal Revenue Code. 
  2.20     Sec. 3.  Minnesota Statutes 2001 Supplement, section 
  2.21  290.21, subdivision 4, is amended to read: 
  2.22     Subd. 4.  (a)(1) Eighty percent of dividends received by a 
  2.23  corporation during the taxable year from another corporation, in 
  2.24  which the recipient owns 20 percent or more of the stock, by 
  2.25  vote and value, not including stock described in section 
  2.26  1504(a)(4) of the Internal Revenue Code when the corporate stock 
  2.27  with respect to which dividends are paid does not constitute the 
  2.28  stock in trade of the taxpayer or would not be included in the 
  2.29  inventory of the taxpayer, or does not constitute property held 
  2.30  by the taxpayer primarily for sale to customers in the ordinary 
  2.31  course of the taxpayer's trade or business, or when the trade or 
  2.32  business of the taxpayer does not consist principally of the 
  2.33  holding of the stocks and the collection of the income and gains 
  2.34  therefrom; and 
  2.35     (2)(i) The remaining 20 percent of dividends if the 
  2.36  dividends received are the stock in an affiliated company 
  3.1   transferred in an overall plan of reorganization and the 
  3.2   dividend is eliminated in consolidation under Treasury 
  3.3   Department Regulation 1.1502-14(a), as amended through December 
  3.4   31, 1989; or 
  3.5      (ii) The remaining 20 percent of dividends if the dividends 
  3.6   are received from a corporation which is subject to tax under 
  3.7   section 290.36 or was subject to tax under Minnesota Statutes 
  3.8   2000, section 290.35, and which is a member of an affiliated 
  3.9   group of corporations as defined by the Internal Revenue Code 
  3.10  and the dividend is eliminated in consolidation under Treasury 
  3.11  Department Regulation 1.1502-14(a), as amended through December 
  3.12  31, 1989, or is deducted under an election under section 243(b) 
  3.13  of the Internal Revenue Code. 
  3.14     (b) Seventy percent of dividends received by a corporation 
  3.15  during the taxable year from another corporation in which the 
  3.16  recipient owns less than 20 percent of the stock, by vote or 
  3.17  value, not including stock described in section 1504(a)(4) of 
  3.18  the Internal Revenue Code when the corporate stock with respect 
  3.19  to which dividends are paid does not constitute the stock in 
  3.20  trade of the taxpayer, or does not constitute property held by 
  3.21  the taxpayer primarily for sale to customers in the ordinary 
  3.22  course of the taxpayer's trade or business, or when the trade or 
  3.23  business of the taxpayer does not consist principally of the 
  3.24  holding of the stocks and the collection of income and gain 
  3.25  therefrom.  
  3.26     (c) The dividend deduction provided in this subdivision 
  3.27  shall be allowed only with respect to dividends that are 
  3.28  included in a corporation's Minnesota taxable net income for the 
  3.29  taxable year. 
  3.30     The dividend deduction provided in this subdivision does 
  3.31  not apply to a dividend from a corporation which, for the 
  3.32  taxable year of the corporation in which the distribution is 
  3.33  made or for the next preceding taxable year of the corporation, 
  3.34  is a corporation exempt from tax under section 501 of the 
  3.35  Internal Revenue Code. 
  3.36     The dividend deduction provided in this subdivision applies 
  4.1   to the amount of regulated investment company dividends only to 
  4.2   the extent determined under section 854(b) of the Internal 
  4.3   Revenue Code. 
  4.4      The dividend deduction provided in this subdivision shall 
  4.5   not be allowed with respect to any dividend for which a 
  4.6   deduction is not allowed under the provisions of section 246(c) 
  4.7   of the Internal Revenue Code. 
  4.8      (d) If dividends received by a corporation that does not 
  4.9   have nexus with Minnesota under the provisions of Public Law 
  4.10  Number 86-272 are included as income on the return of an 
  4.11  affiliated corporation permitted or required to file a combined 
  4.12  report under section 290.34, subdivision 2, then for purposes of 
  4.13  this subdivision the determination as to whether the trade or 
  4.14  business of the corporation consists principally of the holding 
  4.15  of stocks and the collection of income and gains therefrom shall 
  4.16  be made with reference to the trade or business of the 
  4.17  affiliated corporation having a nexus with Minnesota. 
  4.18     (e) The deduction provided by this subdivision does not 
  4.19  apply if the dividends are paid by a FSC as defined in section 
  4.20  922 of the Internal Revenue Code. 
  4.21     (f) If one or more of the members of the unitary group 
  4.22  whose income is included on the combined report received a 
  4.23  dividend, the deduction under this subdivision for each member 
  4.24  of the unitary business required to file a return under this 
  4.25  chapter is the product of:  (1) 100 percent of the dividends 
  4.26  received by members of the group; (2) the percentage allowed 
  4.27  pursuant to paragraph (a) or (b); and (3) the percentage of the 
  4.28  taxpayer's business income apportionable to this state for the 
  4.29  taxable year under section 290.191 or 290.20. 
  4.30     Sec. 4.  [EFFECTIVE DATE.] 
  4.31     Sections 1 to 3 are effective for tax years beginning after 
  4.32  December 31, 2000.