Bill Text: MN HF1548 | 2011-2012 | 87th Legislature | Introduced

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Bill Title: Taxation; policy, technical, administrative, enforcement, and other changes made to individual income, corporate franchise, estate, sales and use, property, insurance, and other taxes and tax-related provisions; and conforming changes made to the Internal Revenue Code.

Spectrum: Partisan Bill (Republican 1-0)

Status: (Introduced - Dead) 2011-04-26 - Introduction and first reading, referred to Taxes [HF1548 Detail]

Download: Minnesota-2011-HF1548-Introduced.html

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A bill for an act

relating to taxation; making policy, technical, administrative, enforcement, and
other changes to individual income, corporate franchise, estate, sales and use,
property, insurance, and other taxes and tax-related provisions; conforming to
changes made to the Internal Revenue Code;amending Minnesota Statutes
2010, sections 270C.01, by adding subdivisions; 270C.03, subdivision 1;
275.025; 276.112; 289A.02, subdivision 7, as amended; 289A.08, subdivision
3; 289A.60, by adding a subdivision; 290.01, subdivisions 7, 19, as amended,
19a, as amended, 19b, 19c, as amended, 19d, 22, 29, 31, as amended; 290.014,
subdivision 5; 290.05, subdivision 1; 290.06, subdivisions 2c, 2d, 22; 290.0671,
subdivision 1; 290.0675, subdivision 1; 290.068, subdivisions 1, 2; 290.0921,
subdivisions 1, 2, 3, 6; 290.0922, subdivisions 1, 2; 290.093; 290.095,
subdivisions 2, 3; 290.17, subdivisions 1, 2, 3, 4; 290.191, subdivisions 2,
5; 290.21, subdivision 4; 290.9201, subdivision 11; 290A.03, subdivision
15, as amended; 290A.04, subdivision 2h; 291.005, subdivision 1; 297A.61,
subdivisions 3, 25, 27, by adding subdivisions; 297A.64, subdivision 1;
297A.66, by adding subdivisions; 297A.668, by adding a subdivision; 297A.70,
subdivision 6; 297A.94; 297B.03; 297I.01, subdivisions 9, 16, by adding
subdivisions; 297I.05, subdivisions 7, 12; 297I.20, subdivision 1; 297I.30,
subdivisions 1, 2; proposing coding for new law in Minnesota Statutes, chapters
270C; 275; 290; repealing Minnesota Statutes 2010, sections 290.01, subdivision
6b; 290.0678; 290.9201, subdivision 3; 297F.14, subdivision 4; 297I.05,
subdivisions 9, 10; Minnesota Rules, part 8130.0500, subpart 2.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

ARTICLE 1

CORPORATE FRANCHISE, INDIVIDUAL INCOME, AND ESTATE TAXES

    Section 1. Minnesota Statutes 2010, section 270C.01, is amended by adding a
subdivision to read:
    Subd. 12. Nontax purpose. Nontax purpose means the taxpayer's purpose for
entering into a transaction other than the acquisition of the tax effects of the transaction.
Nontax purposes include a business, investment, or other nontax purpose for entering
into a transaction.
EFFECTIVE DATE.This section is effective for taxable years beginning after
December 31, 2010.

    Sec. 2. Minnesota Statutes 2010, section 270C.01, is amended by adding a subdivision
to read:
    Subd. 13. Economic substance. Economic substance means a transaction has an
objective and substantial net effect on the taxpayer's economic position and beneficial
interest and the taxpayer has a substantial nontax purpose, apart from tax effects, for
entering into such transaction or series of transactions.
EFFECTIVE DATE.This section is effective for taxable years beginning after
December 31, 2010.

    Sec. 3. Minnesota Statutes 2010, section 270C.01, is amended by adding a subdivision
to read:
    Subd. 14. Tax effects. The tax effects of a transaction means the state and local tax
effects arising from the application of the laws of any state or local unit of government to
the form of the transaction, and the federal tax effects resulting from the transaction that
affect federal taxable income as defined in section 63 of the Internal Revenue Code, or
both.
EFFECTIVE DATE.This section is effective for taxable years beginning after
December 31, 2010.

    Sec. 4. Minnesota Statutes 2010, section 270C.01, is amended by adding a subdivision
to read:
    Subd. 15. Transaction. Transaction means any transaction or series of transactions,
including any fact or set of facts, material to the reduction, deferral, nonrecognition,
escape, avoidance, evasion, or any similar result of any tax or income, or the creation
of any loss, deduction, or credit.
EFFECTIVE DATE.This section is effective for taxable years beginning after
December 31, 2010.

    Sec. 5. Minnesota Statutes 2010, section 270C.03, subdivision 1, is amended to read:
    Subdivision 1. Powers and duties. The commissioner shall have and exercise
the following powers and duties:
    (1) administer and enforce the assessment and collection of taxes;
    (2) make determinations, corrections, and assessments with respect to taxes,
including interest, additions to taxes, and assessable penalties;
(3) administer the tax laws according to the substance of a transaction, not the form
of a transaction; in administering these laws, the commissioner must disregard the tax
effects of a transaction that does not have economic substance and nontax purpose;
    (3) (4) use statistical or other sampling techniques consistent with generally accepted
auditing standards in examining returns or records and making assessments;
    (4) (5) investigate the tax laws of other states and countries, and formulate and
submit to the legislature such legislation as the commissioner may deem expedient
to prevent evasions of state revenue laws and to secure just and equal taxation and
improvement in the system of state revenue laws;
    (5) (6) consult and confer with the governor upon the subject of taxation, the
administration of the laws in regard thereto, and the progress of the work of the
department, and furnish the governor, from time to time, such assistance and information
as the governor may require relating to tax matters;
    (6) (7) execute and administer any agreement with the secretary of the treasury or the
Bureau of Alcohol, Tobacco, Firearms and Explosives in the Department of Justice of the
United States or a representative of another state regarding the exchange of information
and administration of the state revenue laws;
    (7) (8) require town, city, county, and other public officers to report information
as to the collection of taxes received from licenses and other sources, and such other
information as may be needful in the work of the commissioner, in such form as the
commissioner may prescribe;
    (8) (9) authorize the use of unmarked motor vehicles to conduct seizures or criminal
investigations pursuant to the commissioner's authority;
    (9) (10) maintain toll-free telephone access for taxpayer assistance for calls from
locations within the state; and
    (10) (11) exercise other powers and authority and perform other duties required of or
imposed upon the commissioner by law.
EFFECTIVE DATE.This section is effective for taxable years beginning after
December 31, 2010.

    Sec. 6. [270C.331] CRITERIA FOR ASSESSMENT.
(a) In determining whether a taxpayer has a nontax purpose for entering into a
transaction pursuant to section 270C.03, subdivision 1, clause (3), the commissioner may
determine that a transaction has a nontax purpose only if:
(1) the expected results of a transaction are that the present value of the reasonably
expected pretax profit from the transaction is substantial in relation to the present value
of the expected net tax benefits that would be allowed if the transaction or series of
transactions were respected;
(2) the reasonably expected pretax profit from the transaction or series of transactions
exceeds a risk-free rate of return;
(3) the nontax purpose is the taxpayer's primary motivation for entering into the
transaction; and
(4) the form of the transaction is a reasonable means of attaining that purpose.
Fees and other transaction expenses and foreign taxes must be taken into account as
expenses in determining pretax profit. The acquisition of a financial accounting benefit is
a nontax purpose only if the financial accounting benefit is unrelated to the expected tax
effects of a transaction.
(b) To overcome the presumption in section 270C.33, subdivision 6, that an order of
the commissioner disallowing the tax effects of a transaction because the commissioner
has determined that the transaction does not have a nontax purpose and economic
substance is correct and valid, the taxpayer must prove the existence of a nontax purpose
and economic substance with clear and convincing evidence.
EFFECTIVE DATE.This section is effective for taxable years beginning after
December 31, 2010.

    Sec. 7. Minnesota Statutes 2010, section 289A.08, subdivision 3, is amended to read:
    Subd. 3. Corporations. (a) A corporation that is subject to the state's jurisdiction to
tax under section 290.014, subdivision 5, must file a return, except that a foreign operating
corporation as defined in section 290.01, subdivision 6b, is not required to file a return.
(b) Members of a unitary business that are required to file a combined report on one
return must designate a member of the unitary business to be responsible for tax matters,
including the filing of returns, the payment of taxes, additions to tax, penalties, interest,
or any other payment, and for the receipt of refunds of taxes or interest paid in excess of
taxes lawfully due. The designated member must be a member of the unitary business that
is filing the single combined report and either:
(1) a corporation that is subject to the taxes imposed by chapter 290; or
(2) a corporation that is not subject to the taxes imposed by chapter 290:
(i) Such corporation consents by filing the return as a designated member under this
clause to remit taxes, penalties, interest, or additions to tax due from the members of the
unitary business subject to tax, and receive refunds or other payments on behalf of other
members of the unitary business. The member designated under this clause is a "taxpayer"
for the purposes of this chapter and chapter 270C, and is liable for any liability imposed
on the unitary business under this chapter and chapter 290.
(ii) If the state does not otherwise have the jurisdiction to tax the member designated
under this clause, consenting to be the designated member does not create the jurisdiction
to impose tax on the designated member, other than as described in item (i).
(iii) The member designated under this clause must apply for a business tax account
identification number.
(c) The commissioner shall adopt rules for the filing of one return on behalf of the
members of an affiliated group of corporations that are required to file a combined report.
All members of an affiliated group that are required to file a combined report must file one
return on behalf of the members of the group under rules adopted by the commissioner.
(d) If a corporation claims on a return that it has paid tax in excess of the amount of
taxes lawfully due, that corporation must include on that return information necessary for
payment of the tax in excess of the amount lawfully due by electronic means.
EFFECTIVE DATE.This section is effective for taxable years beginning after
December 31, 2010.

    Sec. 8. Minnesota Statutes 2010, section 289A.60, is amended by adding a subdivision
to read:
    Subd. 27a. Noneconomic substance transaction understatement penalty. (a) If a
taxpayer has a transaction without economic substance and nontax purpose as defined in
section 270C.01, a penalty equal to 20 percent of the amount of the disclosed noneconomic
substance transaction understatement must be added to the tax. This subdivision applies to
any income or item that is attributable to any transaction or series of transactions without
economic substance and nontax purpose under section 270C.01.
(b) If a taxpayer has a transaction without economic substance and nontax purpose
as defined in section 270C.01, in the case of any portion of an underpayment which is
attributable to one or more nondisclosed noneconomic substance transactions, a penalty
equal to 40 percent of the noneconomic substance transaction understatement must be
added to the tax.
(c) For purposes of this subdivision, the term "nondisclosed noneconomic substance
transaction" means a transaction described in section 270C.03, subdivision 1, clause (3),
with respect to which the relevant facts affecting the tax treatment are not adequately
disclosed in the return nor in a statement attached to the return.
(d) In no event shall any amendment or supplement to a return of tax be taken into
account for purposes of this subdivision to reduce the noneconomic substance transaction
understatement if the amendment or supplement is filed after the date the taxpayer is first
contacted by the commissioner regarding examination of the return.
(e) For purposes of this subdivision, "noneconomic substance transaction
understatement" means the product of:
(1) the amount of the increase, if any, in taxable income that results from a difference
between the proper tax treatment of an item to which section 270C.03, subdivision 1,
clause (3) applies and the taxpayer's treatment of that item as shown on the taxpayer's tax
return. For purposes of this clause, any reduction of the excess of deductions allowed for
the taxable year over gross income for that year, and any reduction in the amount of
capital losses which would, without regard to section 1211 of the Internal Revenue Code,
be allowed for that year, must be treated as an increase in taxable income; and
(2) the highest rate of tax imposable on the taxpayer under section 290.06 determined
without regard to the understatement.
(f) If the noneconomic substance transaction understatement penalty is imposed
under this subdivision, the noneconomic substance transaction understatement penalty
applies in lieu of the penalties imposed under subdivision 27.
EFFECTIVE DATE.This section is effective for noneconomic substance
transaction understatements assessed after December 31, 2012.

    Sec. 9. Minnesota Statutes 2010, section 290.01, subdivision 7, is amended to read:
    Subd. 7. Resident. (a) The term "resident" means any individual domiciled
in Minnesota, except that an individual is not a "resident" for the period of time that
the individual is a "qualified individual" as defined in section 911(d)(1) of the Internal
Revenue Code, if the qualified individual notifies the county within three months of
moving out of the country that homestead status be revoked for the Minnesota residence
of the qualified individual, and the property is not classified as a homestead while the
individual remains a qualified individual.
(b) "Resident" also means any individual domiciled outside the state who maintains
a place of abode in the state and spends in the aggregate more than one-half of the tax
year in Minnesota, unless:
(1) the individual or the spouse of the individual is in the armed forces of the United
States; or
(2) the individual is covered under the reciprocity provisions in section 290.081.
For purposes of this subdivision, presence within the state for any part of a calendar
day constitutes a day spent in the state. Individuals shall keep adequate records to
substantiate the days spent outside the state.
The term "abode" means a dwelling maintained by an individual, whether or not
owned by the individual and whether or not occupied by the individual, and includes a
dwelling place owned or leased by the individual's spouse and a dwelling place owned by
the individual or spouse of the individual that is leased to a person with a relationship to
the individual or their spouse described in section 267(b) of the Internal Revenue Code.
(c) Neither the commissioner nor any court shall consider charitable contributions
made by an individual within or without the state in determining if the individual is
domiciled in Minnesota.
(d) "Part-year resident" means an individual domiciled outside the state, who is not a
resident of the state under paragraph (b), who maintains a place of abode in the state for
more than one-half of the tax year, and spends in the aggregate more than 60 days in the
state during the period the individual was domiciled outside the state unless:
(1) the individual or spouse of the individual is in the armed forces of the United
States; or
(2) the individual is covered under the reciprocity provisions in section 290.081.
For the purposes of this paragraph, a day spent in Minnesota for the primary purpose
of receiving medical treatment by the taxpayer, or the spouse, child, or parent of the
taxpayer, is not treated as a day spent in Minnesota. Medical treatment is treatment as
defined in section 213(d)(1)(A) of the Internal Revenue Code.
EFFECTIVE DATE.This section is effective for taxable years beginning after
December 31, 2010, except days spent in Minnesota prior to the date of enactment are not
counted as days spent in Minnesota for purposes of paragraph (d).

    Sec. 10. Minnesota Statutes 2010, section 290.01, subdivision 19b, is amended to read:
    Subd. 19b. Subtractions from federal taxable income. For individuals, estates,
and trusts, there shall be subtracted from federal taxable income:
    (1) net interest income on obligations of any authority, commission, or
instrumentality of the United States to the extent includable in taxable income for federal
income tax purposes but exempt from state income tax under the laws of the United States;
    (2) if included in federal taxable income, the amount of any overpayment of income
tax to Minnesota or to any other state, for any previous taxable year, whether the amount
is received as a refund or as a credit to another taxable year's income tax liability;
    (3) the amount paid to others, less the amount used to claim the credit allowed under
section 290.0674, not to exceed $1,625 for each qualifying child in grades kindergarten
to 6 and $2,500 for each qualifying child in grades 7 to 12, for tuition, textbooks, and
transportation of each qualifying child in attending an elementary or secondary school
situated in Minnesota, North Dakota, South Dakota, Iowa, or Wisconsin, wherein a
resident of this state may legally fulfill the state's compulsory attendance laws, which
is not operated for profit, and which adheres to the provisions of the Civil Rights Act
of 1964 and chapter 363A. For the purposes of this clause, "tuition" includes fees or
tuition as defined in section 290.0674, subdivision 1, clause (1). As used in this clause,
"textbooks" includes books and other instructional materials and equipment purchased
or leased for use in elementary and secondary schools in teaching only those subjects
legally and commonly taught in public elementary and secondary schools in this state.
Equipment expenses qualifying for deduction includes expenses as defined and limited in
section 290.0674, subdivision 1, clause (3). "Textbooks" does not include instructional
books and materials used in the teaching of religious tenets, doctrines, or worship, the
purpose of which is to instill such tenets, doctrines, or worship, nor does it include books
or materials for, or transportation to, extracurricular activities including sporting events,
musical or dramatic events, speech activities, driver's education, or similar programs. No
deduction is permitted for any expense the taxpayer incurred in using the taxpayer's or
the qualifying child's vehicle to provide such transportation for a qualifying child. For
purposes of the subtraction provided by this clause, "qualifying child" has the meaning
given in section 32(c)(3) of the Internal Revenue Code;
    (4) income as provided under section 290.0802;
    (5) to the extent included in federal adjusted gross income, income realized on
disposition of property exempt from tax under section 290.491;
    (6) to the extent not deducted or not deductible pursuant to section 408(d)(8)(E)
of the Internal Revenue Code in determining federal taxable income by an individual
who does not itemize deductions for federal income tax purposes for the taxable year, an
amount equal to 50 percent of the excess of charitable contributions over $500 allowable
as a deduction for the taxable year under section 170(a) of the Internal Revenue Code,
under the provisions of Public Law 109-1 and Public Law 111-126;
    (7) for individuals who are allowed a federal foreign tax credit for taxes that do not
qualify for a credit under section 290.06, subdivision 22, an amount equal to the carryover
of subnational foreign taxes for the taxable year, but not to exceed the total subnational
foreign taxes reported in claiming the foreign tax credit. For purposes of this clause,
"federal foreign tax credit" means the credit allowed under section 27 of the Internal
Revenue Code, and "carryover of subnational foreign taxes" equals the carryover allowed
under section 904(c) of the Internal Revenue Code minus national level foreign taxes to
the extent they exceed the federal foreign tax credit;
    (8) in each of the five tax years immediately following the tax year in which an
addition is required under subdivision 19a, clause (7), or 19c, clause (15) (14), in the case
of a shareholder of a corporation that is an S corporation, an amount equal to one-fifth
of the delayed depreciation. For purposes of this clause, "delayed depreciation" means
the amount of the addition made by the taxpayer under subdivision 19a, clause (7), or
subdivision 19c, clause (15) (14), in the case of a shareholder of an S corporation, minus
the positive value of any net operating loss under section 172 of the Internal Revenue
Code generated for the tax year of the addition. The resulting delayed depreciation
cannot be less than zero;
    (9) job opportunity building zone income as provided under section 469.316;
    (10) to the extent included in federal taxable income, the amount of compensation
paid to members of the Minnesota National Guard or other reserve components of the
United States military for active service performed in Minnesota, excluding compensation
for services performed under the Active Guard Reserve (AGR) program. For purposes of
this clause, "active service" means (i) state active service as defined in section 190.05,
subdivision 5a , clause (1); (ii) federally funded state active service as defined in section
190.05, subdivision 5b ; or (iii) federal active service as defined in section 190.05,
subdivision 5c , but "active service" excludes service performed in accordance with section
190.08, subdivision 3 ;
    (11) to the extent included in federal taxable income, the amount of compensation
paid to Minnesota residents who are members of the armed forces of the United States or
United Nations for active duty performed outside Minnesota under United States Code,
title 10, section 101(d); United States Code, title 32, section 101(12); or the authority of
the United Nations;
    (12) an amount, not to exceed $10,000, equal to qualified expenses related to a
qualified donor's donation, while living, of one or more of the qualified donor's organs
to another person for human organ transplantation. For purposes of this clause, "organ"
means all or part of an individual's liver, pancreas, kidney, intestine, lung, or bone marrow;
"human organ transplantation" means the medical procedure by which transfer of a human
organ is made from the body of one person to the body of another person; "qualified
expenses" means unreimbursed expenses for both the individual and the qualified donor
for (i) travel, (ii) lodging, and (iii) lost wages net of sick pay, except that such expenses
may be subtracted under this clause only once; and "qualified donor" means the individual
or the individual's dependent, as defined in section 152 of the Internal Revenue Code. An
individual may claim the subtraction in this clause for each instance of organ donation for
transplantation during the taxable year in which the qualified expenses occur;
    (13) in each of the five tax years immediately following the tax year in which an
addition is required under subdivision 19a, clause (8), or 19c, clause (16) (15), in the case
of a shareholder of a corporation that is an S corporation, an amount equal to one-fifth
of the addition made by the taxpayer under subdivision 19a, clause (8), or 19c, clause
(16) (15), in the case of a shareholder of a corporation that is an S corporation, minus the
positive value of any net operating loss under section 172 of the Internal Revenue Code
generated for the tax year of the addition. If the net operating loss exceeds the addition for
the tax year, a subtraction is not allowed under this clause;
    (14) to the extent included in federal taxable income, compensation paid to a service
member as defined in United States Code, title 10, section 101(a)(5), for military service
as defined in the Servicemembers Civil Relief Act, Public Law 108-189, section 101(2);
    (15) international economic development zone income as provided under section
469.325 ;
    (16) to the extent included in federal taxable income, the amount of national service
educational awards received from the National Service Trust under United States Code,
title 42, sections 12601 to 12604, for service in an approved Americorps National Service
program; and
(17) to the extent included in federal taxable income, discharge of indebtedness
income resulting from reacquisition of business indebtedness included in federal taxable
income under section 108(i) of the Internal Revenue Code. This subtraction applies only
to the extent that the income was included in net income in a prior year as a result of the
addition under section 290.01, subdivision 19a, clause (16).
EFFECTIVE DATE.This section is effective for taxable years beginning after
December 31, 2010.

    Sec. 11. Minnesota Statutes 2010, section 290.01, subdivision 19c, as amended by
Laws 2011, chapter 8, section 4, is amended to read:
    Subd. 19c. Corporations; additions to federal taxable income. For corporations,
there shall be added to federal taxable income:
    (1) the amount of any deduction taken for federal income tax purposes for income,
excise, or franchise taxes based on net income or related minimum taxes, including but not
limited to the tax imposed under section 290.0922, paid by the corporation to Minnesota,
another state, a political subdivision of another state, the District of Columbia, or any
foreign country or possession of the United States;
    (2) interest not subject to federal tax upon obligations of: the United States, its
possessions, its agencies, or its instrumentalities; the state of Minnesota or any other
state, any of its political or governmental subdivisions, any of its municipalities, or any
of its governmental agencies or instrumentalities; the District of Columbia; or Indian
tribal governments;
    (3) exempt-interest dividends received as defined in section 852(b)(5) of the Internal
Revenue Code;
    (4) the amount of any net operating loss deduction taken for federal income tax
purposes under section 172 or 832(c)(10) of the Internal Revenue Code or operations loss
deduction under section 810 of the Internal Revenue Code;
    (5) the amount of any special deductions taken for federal income tax purposes
under sections 241 to 247 and 965 of the Internal Revenue Code;
    (6) losses from the business of mining, as defined in section 290.05, subdivision 1,
clause (a), that are not subject to Minnesota income tax;
    (7) the amount of any capital losses deducted for federal income tax purposes under
sections 1211 and 1212 of the Internal Revenue Code;
    (8) the exempt foreign trade income of a foreign sales corporation under sections
921(a) and 291 of the Internal Revenue Code;
    (9) the amount of percentage depletion deducted under sections 611 through 614 and
291 of the Internal Revenue Code;
    (10) for certified pollution control facilities placed in service in a taxable year
beginning before December 31, 1986, and for which amortization deductions were elected
under section 169 of the Internal Revenue Code of 1954, as amended through December
31, 1985, the amount of the amortization deduction allowed in computing federal taxable
income for those facilities;
    (11) the amount of any deemed dividend from a foreign operating corporation
determined pursuant to section 290.17, subdivision 4, paragraph (g). The deemed dividend
shall be reduced by the amount of the addition to income required by clauses (20), (21),
(22), and (23);
    (12) (11) the amount of a partner's pro rata share of net income which does not flow
through to the partner because the partnership elected to pay the tax on the income under
section 6242(a)(2) of the Internal Revenue Code;
    (13) (12) the amount of net income excluded under section 114 of the Internal
Revenue Code;
    (14) (13) any increase in subpart F income, as defined in section 952(a) of the
Internal Revenue Code, for the taxable year when subpart F income is calculated without
regard to the provisions of Division C, title III, section 303(b) of Public Law 110-343;
    (15) (14) 80 percent of the depreciation deduction allowed under section
168(k)(1)(A) and (k)(4)(A) of the Internal Revenue Code. For purposes of this clause, if
the taxpayer has an activity that in the taxable year generates a deduction for depreciation
under section 168(k)(1)(A) and (k)(4)(A) and the activity generates a loss for the taxable
year that the taxpayer is not allowed to claim for the taxable year, "the depreciation
allowed under section 168(k)(1)(A) and (k)(4)(A)" for the taxable year is limited to excess
of the depreciation claimed by the activity under section 168(k)(1)(A) and (k)(4)(A)
over the amount of the loss from the activity that is not allowed in the taxable year. In
succeeding taxable years when the losses not allowed in the taxable year are allowed, the
depreciation under section 168(k)(1)(A) and (k)(4)(A) is allowed;
    (16) (15) 80 percent of the amount by which the deduction allowed by section 179 of
the Internal Revenue Code exceeds the deduction allowable by section 179 of the Internal
Revenue Code of 1986, as amended through December 31, 2003;
    (17) (16) to the extent deducted in computing federal taxable income, the amount of
the deduction allowable under section 199 of the Internal Revenue Code;
    (18) (17) the exclusion allowed under section 139A of the Internal Revenue Code
for federal subsidies for prescription drug plans;
    (19) (18) the amount of expenses disallowed under section 290.10, subdivision 2;
    (20) an amount equal to the interest and intangible expenses, losses, and costs paid,
accrued, or incurred by any member of the taxpayer's unitary group to or for the benefit
of a corporation that is a member of the taxpayer's unitary business group that qualifies
as a foreign operating corporation. For purposes of this clause, intangible expenses and
costs include:
    (i) expenses, losses, and costs for, or related to, the direct or indirect acquisition,
use, maintenance or management, ownership, sale, exchange, or any other disposition of
intangible property;
    (ii) losses incurred, directly or indirectly, from factoring transactions or discounting
transactions;
    (iii) royalty, patent, technical, and copyright fees;
    (iv) licensing fees; and
    (v) other similar expenses and costs.
For purposes of this clause, "intangible property" includes stocks, bonds, patents, patent
applications, trade names, trademarks, service marks, copyrights, mask works, trade
secrets, and similar types of intangible assets.
This clause does not apply to any item of interest or intangible expenses or costs paid,
accrued, or incurred, directly or indirectly, to a foreign operating corporation with respect
to such item of income to the extent that the income to the foreign operating corporation
is income from sources without the United States as defined in subtitle A, chapter 1,
subchapter N, part 1, of the Internal Revenue Code;
    (21) except as already included in the taxpayer's taxable income pursuant to clause
(20), any interest income and income generated from intangible property received or
accrued by a foreign operating corporation that is a member of the taxpayer's unitary
group. For purposes of this clause, income generated from intangible property includes:
    (i) income related to the direct or indirect acquisition, use, maintenance or
management, ownership, sale, exchange, or any other disposition of intangible property;
    (ii) income from factoring transactions or discounting transactions;
    (iii) royalty, patent, technical, and copyright fees;
    (iv) licensing fees; and
    (v) other similar income.
For purposes of this clause, "intangible property" includes stocks, bonds, patents, patent
applications, trade names, trademarks, service marks, copyrights, mask works, trade
secrets, and similar types of intangible assets.
This clause does not apply to any item of interest or intangible income received or accrued
by a foreign operating corporation with respect to such item of income to the extent that
the income is income from sources without the United States as defined in subtitle A,
chapter 1, subchapter N, part 1, of the Internal Revenue Code;
    (22) the dividends attributable to the income of a foreign operating corporation that
is a member of the taxpayer's unitary group in an amount that is equal to the dividends
paid deduction of a real estate investment trust under section 561(a) of the Internal
Revenue Code for amounts paid or accrued by the real estate investment trust to the
foreign operating corporation;
    (23) the income of a foreign operating corporation that is a member of the taxpayer's
unitary group in an amount that is equal to gains derived from the sale of real or personal
property located in the United States;
    (24) (19) for taxable years beginning before January 1, 2010, and after December
31, 2010, the additional amount allowed as a deduction for donation of computer
technology and equipment under section 170(e)(6) of the Internal Revenue Code, to the
extent deducted from taxable income; and
(25) (20) discharge of indebtedness income resulting from reacquisition of business
indebtedness and deferred under section 108(i) of the Internal Revenue Code.
EFFECTIVE DATE.This section is effective for taxable years beginning after
December 31, 2010.

    Sec. 12. Minnesota Statutes 2010, section 290.01, subdivision 19d, is amended to read:
    Subd. 19d. Corporations; modifications decreasing federal taxable income. For
corporations, there shall be subtracted from federal taxable income after the increases
provided in subdivision 19c:
    (1) the amount of foreign dividend gross-up added to gross income for federal
income tax purposes under section 78 of the Internal Revenue Code;
    (2) the amount of salary expense not allowed for federal income tax purposes due to
claiming the work opportunity credit under section 51 of the Internal Revenue Code;
    (3) any dividend (not including any distribution in liquidation) paid within the
taxable year by a national or state bank to the United States, or to any instrumentality of
the United States exempt from federal income taxes, on the preferred stock of the bank
owned by the United States or the instrumentality;
    (4) amounts disallowed for intangible drilling costs due to differences between
this chapter and the Internal Revenue Code in taxable years beginning before January
1, 1987, as follows:
    (i) to the extent the disallowed costs are represented by physical property, an amount
equal to the allowance for depreciation under Minnesota Statutes 1986, section 290.09,
subdivision 7 , subject to the modifications contained in subdivision 19e; and
    (ii) to the extent the disallowed costs are not represented by physical property, an
amount equal to the allowance for cost depletion under Minnesota Statutes 1986, section
290.09, subdivision 8 ;
    (5) the deduction for capital losses pursuant to sections 1211 and 1212 of the
Internal Revenue Code, except that:
    (i) for capital losses incurred in taxable years beginning after December 31, 1986,
capital loss carrybacks shall not be allowed;
    (ii) for capital losses incurred in taxable years beginning after December 31, 1986,
a capital loss carryover to each of the 15 taxable years succeeding the loss year shall be
allowed;
    (iii) for capital losses incurred in taxable years beginning before January 1, 1987, a
capital loss carryback to each of the three taxable years preceding the loss year, subject to
the provisions of Minnesota Statutes 1986, section 290.16, shall be allowed; and
    (iv) for capital losses incurred in taxable years beginning before January 1, 1987,
a capital loss carryover to each of the five taxable years succeeding the loss year to the
extent such loss was not used in a prior taxable year and subject to the provisions of
Minnesota Statutes 1986, section 290.16, shall be allowed;
    (6) an amount for interest and expenses relating to income not taxable for federal
income tax purposes, if (i) the income is taxable under this chapter and (ii) the interest and
expenses were disallowed as deductions under the provisions of section 171(a)(2), 265 or
291 of the Internal Revenue Code in computing federal taxable income;
    (7) in the case of mines, oil and gas wells, other natural deposits, and timber for
which percentage depletion was disallowed pursuant to subdivision 19c, clause (9), a
reasonable allowance for depletion based on actual cost. In the case of leases the deduction
must be apportioned between the lessor and lessee in accordance with rules prescribed
by the commissioner. In the case of property held in trust, the allowable deduction must
be apportioned between the income beneficiaries and the trustee in accordance with the
pertinent provisions of the trust, or if there is no provision in the instrument, on the basis
of the trust's income allocable to each;
    (8) for certified pollution control facilities placed in service in a taxable year
beginning before December 31, 1986, and for which amortization deductions were elected
under section 169 of the Internal Revenue Code of 1954, as amended through December
31, 1985, an amount equal to the allowance for depreciation under Minnesota Statutes
1986, section 290.09, subdivision 7;
    (9) amounts included in federal taxable income that are due to refunds of income,
excise, or franchise taxes based on net income or related minimum taxes paid by the
corporation to Minnesota, another state, a political subdivision of another state, the
District of Columbia, or a foreign country or possession of the United States to the extent
that the taxes were added to federal taxable income under section 290.01, subdivision 19c,
clause (1), in a prior taxable year;
    (10) 80 percent of royalties, fees, or other like income accrued or received from a
foreign operating corporation or a foreign corporation which is part of the same unitary
business as the receiving corporation, unless the income resulting from such payments or
accruals is income from sources within the United States as defined in subtitle A, chapter
1, subchapter N, part 1, of the Internal Revenue Code;
    (11) (10) income or gains from the business of mining as defined in section 290.05,
subdivision 1 , clause (a), that are not subject to Minnesota franchise tax;
    (12) (11) the amount of disability access expenditures in the taxable year which are
not allowed to be deducted or capitalized under section 44(d)(7) of the Internal Revenue
Code;
    (13) (12) the amount of qualified research expenses not allowed for federal income
tax purposes under section 280C(c) of the Internal Revenue Code, but only to the extent
that the amount exceeds the amount of the credit allowed under section 290.068;
    (14) (13) the amount of salary expenses not allowed for federal income tax purposes
due to claiming the Indian employment credit under section 45A(a) of the Internal
Revenue Code;
    (15) (14) for a corporation whose foreign sales corporation, as defined in section
922 of the Internal Revenue Code, constituted a foreign operating corporation during any
taxable year ending before January 1, 1995, and a return was filed by August 15, 1996,
claiming the deduction under section 290.21, subdivision 4, for income received from
the foreign operating corporation, an amount equal to 1.23 multiplied by the amount of
income excluded under section 114 of the Internal Revenue Code, provided the income is
not income of a foreign operating company;
    (16) (15) any decrease in subpart F income, as defined in section 952(a) of the
Internal Revenue Code, for the taxable year when subpart F income is calculated without
regard to the provisions of Division C, title III, section 303(b) of Public Law 110-343;
    (17) (16) in each of the five tax years immediately following the tax year in which an
addition is required under subdivision 19c, clause (15) (14), an amount equal to one-fifth
of the delayed depreciation. For purposes of this clause, "delayed depreciation" means the
amount of the addition made by the taxpayer under subdivision 19c, clause (15) (14). The
resulting delayed depreciation cannot be less than zero;
    (18) (17) in each of the five tax years immediately following the tax year in which an
addition is required under subdivision 19c, clause (16) (15), an amount equal to one-fifth
of the amount of the addition; and
(19) (18) to the extent included in federal taxable income, discharge of indebtedness
income resulting from reacquisition of business indebtedness included in federal taxable
income under section 108(i) of the Internal Revenue Code. This subtraction applies only
to the extent that the income was included in net income in a prior year as a result of the
addition under section 290.01, subdivision 19c, clause (25) (20).
EFFECTIVE DATE.This section is effective for taxable years beginning after
December 31, 2010.

    Sec. 13. Minnesota Statutes 2010, section 290.01, subdivision 22, is amended to read:
    Subd. 22. Taxable net income. For tax years beginning after December 31, 1986,
the term "taxable net income" means:
(1) for resident individuals the same as net income;
(2) for individuals who were not residents of Minnesota for the entire year, the same
as net income except that the tax is imposed only on the Minnesota apportioned share of
that income as determined pursuant to section 290.06, subdivision 2c, paragraph (e);
(3) for all other taxpayers, the part of net income that is allocable to Minnesota by
assignment or apportionment under one or more of sections 290.17, 290.191, 290.20,
290.341, and 290.36.
For tax years beginning before January 1, 1987, the term "taxable net income"
means the net income assignable to this state pursuant to sections 290.17 to 290.20. For
corporations, taxable net income is then reduced by the deductions contained in section
290.21 .
EFFECTIVE DATE.This section is effective for taxable years beginning after
December 31, 2010.

    Sec. 14. Minnesota Statutes 2010, section 290.01, subdivision 29, is amended to read:
    Subd. 29. Taxable income. The term "taxable income" means:
(1) for individuals, estates, and trusts, the same as taxable net income;
(2) for corporations, including insurance companies, the taxable net income less
(i) the net operating loss deduction under section 290.095;
(ii) the dividends received deduction under section 290.21, subdivision 4;
(iii) the exemption for operating in a job opportunity building zone under section
469.317 ;
(iv) the exemption for operating in a biotechnology and health sciences industry
zone under section 469.337; and
(v) the exemption for operating in an international economic development zone
under section 469.326.
EFFECTIVE DATE.This section is effective for taxable years beginning after
December 31, 2010.

    Sec. 15. Minnesota Statutes 2010, section 290.014, subdivision 5, is amended to read:
    Subd. 5. Corporations. Except as provided in section 290.015, corporations are
subject to the return filing requirements and to tax as provided in this chapter if the
corporation so exercises its franchise as to engage in such contacts with this state as to
cause part of the income of the corporation to be:
(1) allocable to this state under section 290.17, 290.191, 290.20, 290.341, or 290.36;
(2) taxed to the corporation under the Internal Revenue Code (or not taxed under the
Internal Revenue Code by reason of its character but of a character which is taxable under
this chapter) in its capacity as a beneficiary of an estate with income allocable to this state
under section 290.17, 290.191, or 290.20 and the income, taking into account the income
character provisions of section 662(b) of the Internal Revenue Code, would be allocable to
this state under section 290.17, 290.191, or 290.20 if realized by the corporation directly
from the source from which realized by the estate;
(3) taxed to the corporation under the Internal Revenue Code (or not taxed under
the Internal Revenue Code by reason of its character but of a character which is taxable
under this chapter) in its capacity as a beneficiary or grantor or other person treated as a
substantial owner of a trust with income allocable to this state under section 290.17,
290.191 , or 290.20 and the income, taking into account the income character provisions of
section 652(b), 662(b), or 664(b) of the Internal Revenue Code, would be allocable to this
state under section 290.17, 290.191, or 290.20 if realized by the corporation directly from
the source from which realized by the trust; or
(4) taxed to the corporation under the Internal Revenue Code (or not taxed under the
Internal Revenue Code by reason of its character but of a character which is taxable under
this chapter) in its capacity as a limited or general partner in a partnership with income
allocable to this state under section 290.17, 290.191, or 290.20 and the income, taking into
account the income character provisions of section 702(b) of the Internal Revenue Code,
would be allocable to this state under section 290.17, 290.191, or 290.20 if realized by the
corporation directly from the source from which realized by the partnership.
EFFECTIVE DATE.This section is effective for taxable years beginning after
December 31, 2010.

    Sec. 16. Minnesota Statutes 2010, section 290.05, subdivision 1, is amended to read:
    Subdivision 1. Exempt entities. The following corporations, individuals, estates,
trusts, and organizations shall be exempted from taxation under this chapter, provided
that every such person or corporation claiming exemption under this chapter, in whole
or in part, must establish to the satisfaction of the commissioner the taxable status of
any income or activity:
(a) corporations, individuals, estates, and trusts engaged in the business of mining
or producing iron ore and other ores the mining or production of which is subject to
the occupation tax imposed by section 298.01; but if any such corporation, individual,
estate, or trust engages in any other business or activity or has income from any property
not used in such business it shall be subject to this tax computed on the net income from
such property or such other business or activity. Royalty shall not be considered as income
from the business of mining or producing iron ore within the meaning of this section;
(b) the United States of America, the state of Minnesota or any political subdivision
of either agencies or instrumentalities, whether engaged in the discharge of governmental
or proprietary functions; and
(c) any insurance company. that is domiciled in a state or country other than
Minnesota that imposes retaliatory taxes, fines, deposits, penalties, licenses, or fees
and that does not grant, on a reciprocal basis, exemption from such retaliatory taxes to
insurance companies or their agents domiciled in Minnesota. "Retaliatory taxes" has the
meaning provided in section 297I.05, subdivision 11; and
(d) town and farmer's mutual insurance companies.
EFFECTIVE DATE.This section is effective for taxable years beginning after
December 31, 2010.

    Sec. 17. Minnesota Statutes 2010, section 290.06, subdivision 2c, is amended to read:
    Subd. 2c. Schedules of rates for individuals, estates, and trusts. (a) The income
taxes imposed by this chapter upon married individuals filing joint returns and surviving
spouses as defined in section 2(a) of the Internal Revenue Code must be computed by
applying to their taxable net income the following schedule of rates:
    (1) On the first $25,680 $33,770, 5.35 percent;
    (2) On all over $25,680 $33,770, but not over $102,030 $134,170, 7.05 percent;
    (3) On all over $102,030 $134,170, but not over $150,000, 7.85 percent.;
(4) On all over $150,000, 10.95 percent.
    Married individuals filing separate returns, estates, and trusts must compute their
income tax by applying the above rates to their taxable income, except that the income
brackets will be one-half of the above amounts.
    (b) The income taxes imposed by this chapter upon unmarried individuals must be
computed by applying to taxable net income the following schedule of rates:
    (1) On the first $17,570 $23,100, 5.35 percent;
    (2) On all over $17,570 $23,100, but not over $57,710 $75,890, 7.05 percent;
    (3) On all over $57,710 $75,890, but not over $85,000, 7.85 percent.;
(4) On all over $85,000, 10.95 percent.
    (c) The income taxes imposed by this chapter upon unmarried individuals qualifying
as a head of household as defined in section 2(b) of the Internal Revenue Code must be
computed by applying to taxable net income the following schedule of rates:
    (1) On the first $21,630 $28,440, 5.35 percent;
    (2) On all over $21,630 $28,440, but not over $86,910 $114,290, 7.05 percent;
    (3) On all over $86,910 $114,290, but not over $130,000, 7.85 percent.;
(4) On all over $130,000, 10.95 percent.
    (d) In lieu of a tax computed according to the rates set forth in this subdivision, the
tax of any individual taxpayer whose taxable net income for the taxable year is less than
an amount determined by the commissioner must be computed in accordance with tables
prepared and issued by the commissioner of revenue based on income brackets of not
more than $100. The amount of tax for each bracket shall be computed at the rates set
forth in this subdivision, provided that the commissioner may disregard a fractional part of
a dollar unless it amounts to 50 cents or more, in which case it may be increased to $1.
    (e) An individual who is not a Minnesota resident for the entire year must compute
the individual's Minnesota income tax as provided in this subdivision. After the
application of the nonrefundable credits provided in this chapter, the tax liability must
then be multiplied by a fraction in which:
    (1) the numerator is the individual's Minnesota source federal adjusted gross income
as defined in section 62 of the Internal Revenue Code and increased by the additions
required under section 290.01, subdivision 19a, clauses (1), (5), (6), (7), (8), (9), (12),
(13), (16), and (17), and reduced by the Minnesota assignable portion of the subtraction
for United States government interest under section 290.01, subdivision 19b, clause
(1), and the subtractions under section 290.01, subdivision 19b, clauses (8), (9), (13),
(14), (15), and (17), after applying the allocation and assignability provisions of section
290.081 , clause (a), or 290.17; and
    (2) the denominator is the individual's federal adjusted gross income as defined in
section 62 of the Internal Revenue Code of 1986, increased by the amounts specified in
section 290.01, subdivision 19a, clauses (1), (5), (6), (7), (8), (9), (12), (13), (16), and
(17), and reduced by the amounts specified in section 290.01, subdivision 19b, clauses (1),
(8), (9), (13), (14), (15), and (17).
EFFECTIVE DATE.This section is effective for taxable years beginning after
December 31, 2010.

    Sec. 18. Minnesota Statutes 2010, section 290.06, subdivision 2d, is amended to read:
    Subd. 2d. Inflation adjustment of brackets. (a) For taxable years beginning after
December 31, 2000 2011, the minimum and maximum dollar amounts for each rate
bracket for which a tax is imposed in subdivision 2c shall be adjusted for inflation by the
percentage determined under paragraph (b). For the purpose of making the adjustment as
provided in this subdivision all of the rate brackets provided in subdivision 2c shall be the
rate brackets as they existed for taxable years beginning after December 31, 1999 2010,
and before January 1, 2001 2012. The rate applicable to any rate bracket must not be
changed. The dollar amounts setting forth the tax shall be adjusted to reflect the changes
in the rate brackets. The rate brackets as adjusted must be rounded to the nearest $10
amount. If the rate bracket ends in $5, it must be rounded up to the nearest $10 amount.
(b) The commissioner shall adjust the rate brackets and by the percentage determined
pursuant to the provisions of section 1(f) of the Internal Revenue Code, except that in
section 1(f)(3)(B) the word "1999" "2010" shall be substituted for the word "1992." For
2001 2012, the commissioner shall then determine the percent change from the 12 months
ending on August 31, 1999 2010, to the 12 months ending on August 31, 2000 2011, and
in each subsequent year, from the 12 months ending on August 31, 1999 2010, to the 12
months ending on August 31 of the year preceding the taxable year. The determination of
the commissioner pursuant to this subdivision shall not be considered a "rule" and shall
not be subject to the Administrative Procedure Act contained in chapter 14.
No later than December 15 of each year, the commissioner shall announce the
specific percentage that will be used to adjust the tax rate brackets.
EFFECTIVE DATE.This section is effective for taxable years beginning after
December 31, 2011.

    Sec. 19. Minnesota Statutes 2010, section 290.06, subdivision 22, is amended to read:
    Subd. 22. Credit for taxes paid to another state. (a) A taxpayer who is liable for
taxes based on net income to another state, as provided in paragraphs (b) through (f),
upon income allocated or apportioned to Minnesota, is entitled to a credit for the tax paid
to another state if the tax is actually paid in the taxable year or a subsequent taxable
year. A taxpayer who is a resident of this state pursuant to section 290.01, subdivision
7 , paragraph (b) or (d), and who is subject to income tax as a resident in the state of
the individual's domicile is not allowed this credit unless the state of domicile does not
allow a similar credit.
(b) For an individual, estate, or trust, the credit is determined by multiplying the tax
payable under this chapter by the ratio derived by dividing the income subject to tax in the
other state that is also subject to tax in Minnesota while a resident of Minnesota by the
taxpayer's federal adjusted gross income, as defined in section 62 of the Internal Revenue
Code, modified by the addition required by section 290.01, subdivision 19a, clause (1),
and the subtraction allowed by section 290.01, subdivision 19b, clause (1), to the extent
the income is allocated or assigned to Minnesota under sections 290.081 and 290.17.
(c) If the taxpayer is an athletic team that apportions all of its income under section
290.17, subdivision 5 , the credit is determined by multiplying the tax payable under this
chapter by the ratio derived from dividing the total net income subject to tax in the other
state by the taxpayer's Minnesota taxable income.
(d) The credit determined under paragraph (b) or (c) shall not exceed the amount of
tax so paid to the other state on the gross income earned within the other state subject to
tax under this chapter, nor shall the allowance of the credit reduce the taxes paid under
this chapter to an amount less than what would be assessed if such income amount was
excluded from taxable net income.
(e) In the case of the tax assessed on a lump-sum distribution under section
290.032 , the credit allowed under paragraph (a) is the tax assessed by the other state on
the lump-sum distribution that is also subject to tax under section 290.032, and shall
not exceed the tax assessed under section 290.032. To the extent the total lump-sum
distribution defined in section 290.032, subdivision 1, includes lump-sum distributions
received in prior years or is all or in part an annuity contract, the reduction to the tax on
the lump-sum distribution allowed under section 290.032, subdivision 2, includes tax paid
to another state that is properly apportioned to that distribution.
(f) If a Minnesota resident reported an item of income to Minnesota and is assessed
tax in such other state on that same income after the Minnesota statute of limitations
has expired, the taxpayer shall receive a credit for that year under paragraph (a),
notwithstanding any statute of limitations to the contrary. The claim for the credit must
be submitted within one year from the date the taxes were paid to the other state. The
taxpayer must submit sufficient proof to show entitlement to a credit.
(g) For the purposes of this subdivision, a resident shareholder of a corporation
treated as an "S" corporation under section 290.9725, must be considered to have paid
a tax imposed on the shareholder in an amount equal to the shareholder's pro rata share
of any net income tax paid by the S corporation to another state. For the purposes of the
preceding sentence, the term "net income tax" means any tax imposed on or measured by
a corporation's net income.
(h) For the purposes of this subdivision, a resident partner of an entity taxed as
a partnership under the Internal Revenue Code must be considered to have paid a tax
imposed on the partner in an amount equal to the partner's pro rata share of any net income
tax paid by the partnership to another state. For purposes of the preceding sentence,
the term "net income" tax means any tax imposed on or measured by a partnership's
net income.
(i) For the purposes of this subdivision, "another state":
(1) includes:
(i) the District of Columbia; and
(ii) a province or territory of Canada; but
(2) excludes Puerto Rico and the several territories organized by Congress.
(j) The limitations on the credit in paragraphs (b), (c), and (d), are imposed on a
state by state basis.
(k) For a tax imposed by a province or territory of Canada, the tax for purposes of
this subdivision is the excess of the tax over the amount of the foreign tax credit allowed
under section 27 of the Internal Revenue Code. In determining the amount of the foreign
tax credit allowed, the net income taxes imposed by Canada on the income are deducted
first. Any remaining amount of the allowable foreign tax credit reduces the provincial or
territorial tax that qualifies for the credit under this subdivision.
EFFECTIVE DATE.This section is effective for taxable years beginning after
December 31, 2010.

    Sec. 20. Minnesota Statutes 2010, section 290.068, subdivision 1, is amended to read:
    Subdivision 1. Credit allowed. A corporation, partners in a partnership, or
shareholders in a corporation treated as an "S" corporation under section 290.9725 are
allowed a credit against the tax computed under this chapter for the taxable year equal to:
    (a) ten 15 percent of the first $2,000,000 of the excess (if any) of
    (1) the qualified research expenses for the taxable year, over
    (2) the base amount; and
    (b) 2.5 percent on all of such excess expenses over $2,000,000.
EFFECTIVE DATE.This section is effective for taxable years beginning after
December 31, 2010.

    Sec. 21. Minnesota Statutes 2010, section 290.068, subdivision 2, is amended to read:
    Subd. 2. Definitions. For purposes of this section, the following terms have the
meanings given.
    (a) "Qualified research expenses" means (i) qualified research expenses and basic
research payments as defined in section 41(b) and (e) of the Internal Revenue Code, except
it does not include expenses incurred for qualified research or basic research conducted
outside the state of Minnesota pursuant to section 41(d) and (e) of the Internal Revenue
Code; and (ii) contributions to a nonprofit corporation established and operated pursuant
to the provisions of chapter 317A for the purpose of promoting the establishment and
expansion of business in this state, provided the contributions are invested by the nonprofit
corporation for the purpose of providing funds for small, technologically innovative
enterprises in Minnesota during the early stages of their development.
    (b) "Qualified research" means qualified research as defined in section 41(d) of the
Internal Revenue Code, except that the term does not include qualified research conducted
outside the state of Minnesota.
    (c) "Base amount" means base amount as defined in section 41(c) of the Internal
Revenue Code, except that the average annual gross receipts must be calculated using
Minnesota sales or receipts under section 290.191 and the definitions contained in clauses
(a) and (b) shall apply. If a taxpayer does not have records to substantiate the aggregate
qualified research expenses for the taxable years beginning after December 31, 1983, and
before January 1, 1989, and is not a start-up company to which Internal Revenue Code,
section 41(c)(3)(B), applies, the taxpayer may use a fixed base percentage of 16 percent.
EFFECTIVE DATE.This section is effective for taxable years beginning after
December 31, 2010.

    Sec. 22. Minnesota Statutes 2010, section 290.0921, subdivision 1, is amended to read:
    Subdivision 1. Tax imposed. In addition to the taxes computed under this chapter
without regard to this section, the franchise tax imposed on corporations includes a tax
equal to the excess, if any, for the taxable year of:
(1) 5.8 percent of Minnesota alternative minimum taxable income less the credit
allowed under section 290.341, subdivision 3; over
(2) the tax imposed under section 290.06, subdivision 1, without regard to this
section.
EFFECTIVE DATE.This section is effective for taxable years beginning after
December 31, 2010.

    Sec. 23. Minnesota Statutes 2010, section 290.0921, subdivision 2, is amended to read:
    Subd. 2. Definitions. (a) For purposes of this section, the following terms have
the meanings given them.
(b) "Alternative minimum taxable net income" is alternative minimum taxable
income,
(1) less the exemption amount, and
(2) apportioned or allocated to Minnesota under section 290.17, 290.191, or 290.20.
(c) The "exemption amount" is $40,000, reduced, but not below zero, by 25 percent
of the excess of alternative minimum taxable income over $150,000.
(d) "Minnesota alternative minimum taxable income" is alternative minimum taxable
net income, less the deductions for alternative tax net operating loss under subdivision
4; and dividends received under subdivision 6. The sum of the deductions under this
paragraph may not exceed 90 percent of alternative minimum taxable net income. This
limitation does not apply to:
(1) a deduction for dividends paid to or received from a corporation which is subject
to tax under section 290.341 or 290.36 and which is a member of an affiliated group of
corporations as defined by the Internal Revenue Code; or
(2) a deduction for dividends received from a property and casualty insurer as
defined under section 60A.60, subdivision 8, which is a member of an affiliated group
of corporations as defined by the Internal Revenue Code and either: (i) the dividend is
eliminated in consolidation under Treasury Regulation 1.1502-14(a), as amended through
December 31, 1989; or (ii) the dividend is deducted under an election under section
243(b) of the Internal Revenue Code.
EFFECTIVE DATE.This section is effective for taxable years beginning after
December 31, 2010.

    Sec. 24. Minnesota Statutes 2010, section 290.0921, subdivision 3, is amended to read:
    Subd. 3. Alternative minimum taxable income. "Alternative minimum taxable
income" is Minnesota net income as defined in section 290.01, subdivision 19, and
includes the adjustments and tax preference items in sections 56, 57, 58, and 59(d), (e),
(f), and (h) of the Internal Revenue Code. If a corporation files a separate company
Minnesota tax return, the minimum tax must be computed on a separate company basis.
If a corporation is part of a tax group filing a unitary return, the minimum tax must be
computed on a unitary basis. The following adjustments must be made.
(1) For purposes of the depreciation adjustments under section 56(a)(1) and
56(g)(4)(A) of the Internal Revenue Code, the basis for depreciable property placed in
service in a taxable year beginning before January 1, 1990, is the adjusted basis for federal
income tax purposes, including any modification made in a taxable year under section
290.01, subdivision 19e , or Minnesota Statutes 1986, section 290.09, subdivision 7,
paragraph (c).
For taxable years beginning after December 31, 2000, the amount of any remaining
modification made under section 290.01, subdivision 19e, or Minnesota Statutes 1986,
section 290.09, subdivision 7, paragraph (c), not previously deducted is a depreciation
allowance in the first taxable year after December 31, 2000.
(2) The portion of the depreciation deduction allowed for federal income tax
purposes under section 168(k) of the Internal Revenue Code that is required as an addition
under section 290.01, subdivision 19c, clause (15) (14), is disallowed in determining
alternative minimum taxable income.
(3) The subtraction for depreciation allowed under section 290.01, subdivision
19d , clause (17) (16), is allowed as a depreciation deduction in determining alternative
minimum taxable income.
(4) The alternative tax net operating loss deduction under sections 56(a)(4) and 56(d)
of the Internal Revenue Code does not apply.
(5) The special rule for certain dividends under section 56(g)(4)(C)(ii) of the Internal
Revenue Code does not apply.
(6) The special rule for dividends from section 936 companies under section
56(g)(4)(C)(iii) does not apply.
(7) The tax preference for depletion under section 57(a)(1) of the Internal Revenue
Code does not apply.
(8) The tax preference for intangible drilling costs under section 57(a)(2) of the
Internal Revenue Code must be calculated without regard to subparagraph (E) and the
subtraction under section 290.01, subdivision 19d, clause (4).
(9) The tax preference for tax exempt interest under section 57(a)(5) of the Internal
Revenue Code does not apply.
(10) The tax preference for charitable contributions of appreciated property under
section 57(a)(6) of the Internal Revenue Code does not apply.
(11) For purposes of calculating the tax preference for accelerated depreciation or
amortization on certain property placed in service before January 1, 1987, under section
57(a)(7) of the Internal Revenue Code, the deduction allowable for the taxable year is the
deduction allowed under section 290.01, subdivision 19e.
For taxable years beginning after December 31, 2000, the amount of any remaining
modification made under section 290.01, subdivision 19e, not previously deducted is a
depreciation or amortization allowance in the first taxable year after December 31, 2004.
(12) For purposes of calculating the adjustment for adjusted current earnings in
section 56(g) of the Internal Revenue Code, the term "alternative minimum taxable
income" as it is used in section 56(g) of the Internal Revenue Code, means alternative
minimum taxable income as defined in this subdivision, determined without regard to the
adjustment for adjusted current earnings in section 56(g) of the Internal Revenue Code.
(13) For purposes of determining the amount of adjusted current earnings under
section 56(g)(3) of the Internal Revenue Code, no adjustment shall be made under section
56(g)(4) of the Internal Revenue Code with respect to (i) the amount of foreign dividend
gross-up subtracted as provided in section 290.01, subdivision 19d, clause (1), or (ii) the
amount of refunds of income, excise, or franchise taxes subtracted as provided in section
290.01, subdivision 19d , clause (9), or (iii) the amount of royalties, fees or other like
income subtracted as provided in section 290.01, subdivision 19d, clause (10).
(14) Alternative minimum taxable income excludes the income from operating in a
job opportunity building zone as provided under section 469.317.
(15) Alternative minimum taxable income excludes the income from operating in a
biotechnology and health sciences industry zone as provided under section 469.337.
(16) Alternative minimum taxable income excludes the income from operating in an
international economic development zone as provided under section 469.326.
Items of tax preference must not be reduced below zero as a result of the
modifications in this subdivision.
EFFECTIVE DATE.This section is effective for taxable years beginning after
December 31, 2010.

    Sec. 25. Minnesota Statutes 2010, section 290.0921, subdivision 6, is amended to read:
    Subd. 6. Dividends received. (a) A deduction is allowed from alternative
minimum taxable net income equal to the deduction for dividends received under section
290.21, subdivision 4 , for purposes of calculating taxable income under section 290.01,
subdivision 29 .
(b) The amount of the deduction must not exceed 90 percent of alternative minimum
taxable net income.
This limitation does not apply to:
(1) dividends paid to or received from a corporation which is subject to tax under
section 290.341 or 290.36 and which is a member of an affiliated group of corporations as
defined by the Internal Revenue Code; or
(2) dividends received from a property and casualty insurer as defined under
section 60A.60, subdivision 8, which is a member of an affiliated group of corporations
as defined by the Internal Revenue Code and either: (i) the dividend is eliminated in
consolidation under Treasury Regulation 1.1502-14(a), as amended through December
31, 1989; or (ii) the dividend is deducted under an election under section 243(b) of the
Internal Revenue Code.
EFFECTIVE DATE.This section is effective for taxable years beginning after
December 31, 2010.

    Sec. 26. Minnesota Statutes 2010, section 290.0922, subdivision 1, is amended to read:
    Subdivision 1. Imposition. (a) In addition to the tax imposed by this chapter without
regard to this section, the franchise tax imposed on a corporation required to file under
section 289A.08, subdivision 3, other than a corporation treated as an "S" corporation
under section 290.9725 for the taxable year includes a tax equal to the following amounts:

	If the sum of the corporation's Minnesota property, payrolls, and sales or receipts is:							the tax equals:
			less than		$	500,000		$	0
		$	500,000	to	$	999,999		$	100
		$	1,000,000	to	$	4,999,999		$	300
		$	5,000,000	to	$	9,999,999		$	1,000
		$	10,000,000	to	$	19,999,999		$	2,000
		$	20,000,000	or	more			$	5,000
			less than		$	890,000		$	0
		$	890,000	to	$	1,779,999		$	180
		$	1,780,000	to	$	8,889,999		$	530
		$	8,890,000	to	$	17,779,999		$	1,780
		$	17,800,000	to	$	35,559,999		$	3,560
		$	35,560,000	or	more			$	8,890

(b) A tax is imposed for each taxable year on a corporation required to file a return
under section 289A.12, subdivision 3, that is treated as an "S" corporation under section
290.9725 and on a partnership required to file a return under section 289A.12, subdivision
3 , other than a partnership that derives over 80 percent of its income from farming. The
tax imposed under this paragraph is due on or before the due date of the return for the
taxpayer due under section 289A.18, subdivision 1. The commissioner shall prescribe
the return to be used for payment of this tax. The tax under this paragraph is equal to
the following amounts:

	If the sum of the S corporation's or partnership's Minnesota property, payrolls, and sales or receipts is:							the tax equals:
			less than		$	500,000		$	0
		$	500,000	to	$	999,999		$	100
		$	1,000,000	to	$	4,999,999		$	300
		$	5,000,000	to	$	9,999,999		$	1,000
		$	10,000,000	to	$	19,999,999		$	2,000
		$	20,000,000	or	more			$	5,000
			less than		$	890,000		$	0
		$	890,000	to	$	1,779,999		$	180
		$	1,780,000	to	$	8,889,999		$	530
		$	8,890,000	to	$	17,779,999		$	1,780
		$	17,800,000	to	$	35,559,999		$	3,560
		$	35,560,000	or	more			$	8,890

(c) The commissioner shall adjust the dollar amounts of both the tax and the
property, payrolls, and sales or receipts thresholds in paragraphs (a) and (b) by the
percentage determined pursuant to the provisions of section 1(f) of the Internal Revenue
Code, except that in section 1(f)(3)(B) the word "2010" must be substituted for the word
"1992." For 2012, the commissioner shall then determine the percent change from the 12
months ending on August 31, 2010, to the 12 months ending on August 31, 2011, and in
each subsequent year, from the 12 months ending on August 31, 2010, to the 12 months
ending on August 31 of the year preceding the taxable year. The determination of the
commissioner pursuant to this subdivision is not a "rule" subject to the Administrative
Procedure Act contained in chapter 14. The tax amounts as adjusted must be rounded
to the nearest $10 amounts and the threshold amounts must be adjusted to the nearest
$10,000 amounts. For tax amounts that end in $5, the amount is rounded up to the nearest
$10 amount and for threshold amounts that end in $5,000, the amount is rounded up to
the nearest $10,000.
EFFECTIVE DATE.This section is effective for taxable years beginning after
December 31, 2010.

    Sec. 27. Minnesota Statutes 2010, section 290.0922, subdivision 2, is amended to read:
    Subd. 2. Exemptions. The following entities are exempt from the tax imposed
by this section:
(1) corporations exempt from tax under section 290.05 other than insurance
companies exempt under subdivision 1, paragraphs (c) and (d);
(2) real estate investment trusts;
(3) regulated investment companies or a fund thereof; and
(4) entities having a valid election in effect under section 860D(b) of the Internal
Revenue Code;
(5) town and farmers' mutual insurance companies;
(6) cooperatives organized under chapter 308A or 308B that provide housing
exclusively to persons age 55 and over and are classified as homesteads under section
273.124, subdivision 3 ;
(7) an entity, if for the taxable year all of its property is located in a job opportunity
building zone designated under section 469.314 and all of its payroll is a job opportunity
building zone payroll under section 469.310; and
(8) an entity, if for the taxable year all of its property is located in an international
economic development zone designated under section 469.322, and all of its payroll is
international economic development zone payroll under section 469.321. The exemption
under this clause applies to taxable years beginning during the duration of the international
economic development zone.
Entities not specifically exempted by this subdivision are subject to tax under this
section, notwithstanding section 290.05.
EFFECTIVE DATE.This section is effective for taxable years beginning after
December 31, 2010.

    Sec. 28. Minnesota Statutes 2010, section 290.093, is amended to read:
290.093 TAX COMPUTATION FOR MUTUAL SAVINGS BANKS
CONDUCTING LIFE INSURANCE BUSINESS.
Mutual savings banks as defined in section 594 of the Internal Revenue Code are
subject to a tax consisting of the sum of the taxes determined under clauses (1) and (2).
(1) a tax computed on the taxable income determined without regard to any items
of gross income or deductions properly allocable to the business of the life insurance
department, at the rates and in the manner for a corporation not engaged in the business of
issuing life insurance contracts as if this section did not apply; and
(2) a tax computed on the income of the life insurance department determined
without regard to any items of gross income or deductions not properly allocable to the
department computed in the manner provided in section 290.341 and at the rate provided
in section 290.06.
This section applies only if the life insurance department would, if it were treated
as a separate corporation, qualify as a life insurance company under section 816 of the
Internal Revenue Code.
EFFECTIVE DATE.This section is effective for taxable years beginning after
December 31, 2010.

    Sec. 29. Minnesota Statutes 2010, section 290.095, subdivision 2, is amended to read:
    Subd. 2. Defined and limited. (a) The term "net operating loss" as used in this
section shall mean a net operating loss as defined in section 172(c) or 810(a), in the case of
life insurance companies, of the Internal Revenue Code, with the modifications specified
in subdivision 4. The deductions provided in section 290.21 and the modification provided
in section 290.01, subdivision 19d, clause (10), cannot be used in the determination of a
net operating loss.
(b) The term "net operating loss deduction" as used in this section means the
aggregate of the net operating loss carryovers to the taxable year, computed in accordance
with subdivision 3. The provisions of section 172(b) of the Internal Revenue Code relating
to the carryback of net operating losses, do not apply.
EFFECTIVE DATE.This section is effective for taxable years beginning after
December 31, 2010.

    Sec. 30. Minnesota Statutes 2010, section 290.095, subdivision 3, is amended to read:
    Subd. 3. Carryover. (a) A net operating loss incurred in a taxable year: (i)
beginning after December 31, 1986, shall be a net operating loss carryover to each of the
15 taxable years following the taxable year of such loss; (ii) beginning before January 1,
1987, shall be a net operating loss carryover to each of the five taxable years following the
taxable year of such loss subject to the provisions of Minnesota Statutes 1986, section
290.095 ; and (iii) beginning before January 1, 1987, shall be a net operating loss carryback
to each of the three taxable years preceding the loss year subject to the provisions of
Minnesota Statutes 1986, section 290.095.
(b) The entire amount of the net operating loss for any taxable year shall be carried to
the earliest of the taxable years to which such loss may be carried. The portion of such loss
which shall be carried to each of the other taxable years shall be the excess, if any, of the
amount of such loss over the sum of the taxable net income, adjusted by the modifications
specified in subdivision 4, for each of the taxable years to which such loss may be carried.
(c) Where a corporation apportions its income under the provisions of section
290.191 , the net operating loss deduction incurred in any taxable year shall be allowed
to the extent of the apportionment ratio of the loss year plus the excess loss assigned
by section 290.17, subdivision 2. The loss carryover is applied to income allocated to
Minnesota in the carryover year.
(d) The provisions of sections 381, 382, and 384 of the Internal Revenue Code apply
to carryovers in certain corporate acquisitions and special limitations on net operating loss
carryovers. The limitation amount determined under section 382 shall be applied to net
income, before apportionment, in each post change year to which a loss is carried.
EFFECTIVE DATE.This section is effective for taxable years beginning after
December 31, 2010.

    Sec. 31. Minnesota Statutes 2010, section 290.17, subdivision 1, is amended to read:
    Subdivision 1. Scope of allocation rules. (a) The income of resident individuals
is not subject to allocation outside this state. The allocation rules apply to nonresident
individuals, estates, trusts, nonresident partners of partnerships, nonresident shareholders
of corporations treated as "S" corporations under section 290.9725, and all corporations
not having such an election in effect. If a partnership or corporation would not otherwise
be subject to the allocation rules, but conducts a trade or business that is part of a
unitary business involving another legal entity that is subject to the allocation rules, the
partnership or corporation is subject to the allocation rules.
(b) Expenses, losses, and other deductions (referred to collectively in this paragraph
as "deductions") must be allocated along with the item or class of gross income to which
they are definitely related for purposes of assignment under this section or apportionment
under section 290.191, 290.20, or 290.36. Deductions definitely related to any item of
gross income assigned under subdivision 2, paragraph (e), are assigned to the taxpayer's
domicile.
(c) In the case of an individual who is a resident for only part of a taxable year,
the individual's income, gains, losses, and deductions from the distributive share of a
partnership, S corporation, trust, or estate are not subject to allocation outside this state
to the extent of the distributive share multiplied by a ratio, the numerator of which is
the number of days the individual was a resident of this state during the tax year of the
partnership, S corporation, trust, or estate, and the denominator of which is the number of
days in the taxable year of the partnership, S corporation, trust, or estate.
(d) In the case of an individual who is a part-year resident as defined in section
290.01, subdivision 7, paragraph (d), income is assigned or allocated under subdivisions
2 and 3 except a pro rata share of income recognized while the individual maintains an
abode in Minnesota and is not assigned or allocated to the state under subdivision 2 or
3 is also assigned to the state. The pro rata share is the income not assigned to the state
under subdivision 2 or 3 multiplied by the ratio of the number of days physically present
in Minnesota while domiciled in another state during the tax year over the number of days
the individual maintains an abode in Minnesota while domiciled in another state.
EFFECTIVE DATE.This section is effective for taxable years beginning after
December 31, 2010.

    Sec. 32. Minnesota Statutes 2010, section 290.17, subdivision 2, is amended to read:
    Subd. 2. Income not derived from conduct of a trade or business. The income of
a taxpayer subject to the allocation rules that is not derived from the conduct income of a
trade or business must be assigned in accordance with paragraphs (a) to (f):
    (a)(1) Subject to paragraphs (a)(2) and (a)(3), income from wages as defined in
section 3401(a) and (f) of the Internal Revenue Code is assigned to this state if, and to the
extent that, the work of the employee is performed within it; all other income from such
sources is treated as income from sources without this state.
    Severance pay shall be considered income from labor or personal or professional
services.
    (2) In the case of an individual who is a nonresident of Minnesota and who is an
athlete or entertainer, income from compensation for labor or personal services performed
within this state shall be determined in the following manner:
    (i) The amount of income to be assigned to Minnesota for an individual who is a
nonresident salaried athletic team employee shall be determined by using a fraction in
which the denominator contains the total number of days in which the individual is under
a duty to perform for the employer, and the numerator is the total number of those days
spent in Minnesota. For purposes of this paragraph, off-season training activities, unless
conducted at the team's facilities as part of a team imposed program, are not included in
the total number of duty days. Bonuses earned as a result of play during the regular season
or for participation in championship, play-off, or all-star games must be allocated under
the formula. Signing bonuses are not subject to allocation under the formula if they are
not conditional on playing any games for the team, are payable separately from any other
compensation, and are nonrefundable; and
    (ii) The amount of income to be assigned to Minnesota for an individual who is a
nonresident, and who is an athlete or entertainer not listed in clause (i), for that person's
athletic or entertainment performance in Minnesota shall be determined by assigning to
this state all income from performances or athletic contests in this state.
    (3) For purposes of this section, amounts received by a nonresident as "retirement
income" as defined in section (b)(1) of the State Income Taxation of Pension Income
Act, Public Law 104-95, are not considered income derived from carrying on a trade
or business or from wages or other compensation for work an employee performed in
Minnesota, and are not taxable under this chapter.
    (b) Income or gains from tangible property located in this state that is not employed
in the business of the recipient of the income or gains must be assigned to this state.
    (c) Income or gains from intangible personal property not employed in the business
of the recipient of the income or gains must be assigned to this state if the recipient of the
income or gains is a resident of this state or is a resident trust or estate.
    Gain on the sale of a partnership interest is allocable to this state in the ratio of the
original cost of partnership tangible property in this state to the original cost of partnership
tangible property everywhere, determined at the time of the sale. If more than 50 percent
of the value of the partnership's assets consists of intangibles, gain or loss from the sale
of the partnership interest is allocated to this state in accordance with the sales factor of
the partnership for its first full tax period immediately preceding the tax period of the
partnership during which the partnership interest was sold.
Gain on the sale of an interest in a single member limited liability company that
is disregarded for federal income tax purposes is allocable to this state as if the single
member limited liability company did not exist and the assets of the limited liability
company are personally owned by the sole member.
    Gain on the sale of goodwill or income from a covenant not to compete that is
connected with a business operating all or partially in Minnesota is allocated to this state
to the extent that the income from the business in the year preceding the year of sale was
assignable to Minnesota under subdivision 3.
    When an employer pays an employee for a covenant not to compete, the income
allocated to this state is in the ratio of the employee's service in Minnesota in the calendar
year preceding leaving the employment of the employer over the total services performed
by the employee for the employer in that year.
    (d) Income from winnings on a bet made by an individual while in Minnesota is
assigned to this state. In this paragraph, "bet" has the meaning given in section 609.75,
subdivision 2 , as limited by section 609.75, subdivision 3, clauses (1), (2), and (3).
    (e) All items of gross income not covered in paragraphs (a) to (d) and not part of the
taxpayer's income from a trade or business shall be assigned to the taxpayer's domicile.
    (f) For the purposes of this section, working as an employee shall not be considered
to be conducting a trade or business.
EFFECTIVE DATE.This section is effective for taxable years beginning after
December 31, 2011.

    Sec. 33. Minnesota Statutes 2010, section 290.17, subdivision 3, is amended to read:
    Subd. 3. Trade or business income; general rule. All income of a trade or
business is subject to apportionment except nonbusiness income. Income derived from
carrying on of a trade or business must be assigned apportioned to this state if the trade or
business is conducted wholly within this state, assigned apportioned outside this state if
conducted wholly without this state and apportioned between this state and other states
and countries under this subdivision if conducted partly within and partly without this
state. For purposes of determining whether a trade or business is carried on exclusively
within or without this state:
(a) A trade or business physically located exclusively within this state is nevertheless
carried on partly within and partly without this state if any of the principles set forth in
section 290.191 for the allocation of sales or receipts within or without this state when
applied to the taxpayer's situation result in the allocation of any sales or receipts without
this state.
(b) A trade or business physically located exclusively without this state is
nevertheless carried on partly within and partly without this state if any of the principles
set forth in section 290.191 for the allocation of sales or receipts within or without this
state when applied to the taxpayer's situation result in the allocation of any sales or
receipts within this state. The jurisdiction to tax such a business under this chapter must
be determined in accordance with sections 290.014 and 290.015.
EFFECTIVE DATE.This section is effective for taxable years beginning after
December 31, 2011.

    Sec. 34. Minnesota Statutes 2010, section 290.17, subdivision 4, is amended to read:
    Subd. 4. Unitary business principle. (a) If a trade or business conducted wholly
within this state or partly within and partly without this state is part of a unitary business,
the entire income of the unitary business is subject to apportionment pursuant to section
290.191 . Notwithstanding subdivision 2, paragraph (c), none of the income of a unitary
business is considered to be derived from any particular source and none may be allocated
to a particular place except as provided by the applicable apportionment formula. The
provisions of this subdivision do not apply to business income subject to subdivision 5,
income of an insurance company determined under section 290.341, or income of an
investment company determined under section 290.36.
(b) The term "unitary business" means business activities or operations which
result in a flow of value between them. The term may be applied within a single legal
entity or between multiple entities and without regard to whether each entity is a sole
proprietorship, a corporation, a partnership or a trust.
(c) Unity is presumed whenever there is unity of ownership, operation, and use,
evidenced by centralized management or executive force, centralized purchasing,
advertising, accounting, or other controlled interaction, but the absence of these
centralized activities will not necessarily evidence a nonunitary business. Unity is also
presumed when business activities or operations are of mutual benefit, dependent upon or
contributory to one another, either individually or as a group.
(d) Where a business operation conducted in Minnesota is owned by a business
entity that carries on business activity outside the state different in kind from that
conducted within this state, and the other business is conducted entirely outside the state, it
is presumed that the two business operations are unitary in nature, interrelated, connected,
and interdependent unless it can be shown to the contrary.
(e) Unity of ownership is not deemed to exist when a corporation is involved unless
that corporation is a member of a group of two or more business entities and more than 50
percent of the voting stock of each member of the group is directly or indirectly owned
by a common owner or by common owners, either corporate or noncorporate, or by one
or more of the member corporations of the group. For this purpose, the term "voting
stock" shall include membership interests of mutual insurance holding companies formed
under section 66A.40.
(f) The net income and apportionment factors under section 290.191 or 290.20 of
foreign corporations and other foreign entities which are part of a unitary business shall not
be included in the net income or the apportionment factors of the unitary business, except
that foreign corporations or other foreign entities that are included on a federal income tax
return must be included on the combined report. Income of a foreign partnership or other
foreign entity treated as a partnership included in federal taxable income, as defined in
section 63 of the Internal Revenue Code of 1986, as amended through the date named in
section 290.01, subdivision 19, and the proportionate amount of apportionment factors,
must be included in the combined report. A foreign corporation or other foreign entity
which is not included on a combined report and which is required to file a return under this
chapter shall file on a separate return basis. The net income and apportionment factors
under section 290.191 or 290.20 of foreign operating corporations shall not be included in
the net income or the apportionment factors of the unitary business except as provided in
paragraph (g).
(g) The adjusted net income of a foreign operating corporation shall be deemed to
be paid as a dividend on the last day of its taxable year to each shareholder thereof, in
proportion to each shareholder's ownership, with which such corporation is engaged in
a unitary business. Such deemed dividend shall be treated as a dividend under section
290.21, subdivision 4.
Dividends actually paid by a foreign operating corporation to a corporate shareholder
which is a member of the same unitary business as the foreign operating corporation shall
be eliminated from the net income of the unitary business in preparing a combined report
for the unitary business. The adjusted net income of a foreign operating corporation
shall be its net income adjusted as follows:
(1) any taxes paid or accrued to a foreign country, the commonwealth of Puerto
Rico, or a United States possession or political subdivision of any of the foregoing shall
be a deduction; and
(2) the subtraction from federal taxable income for payments received from foreign
corporations or foreign operating corporations under section 290.01, subdivision 19d,
clause (10), shall not be allowed.
If a foreign operating corporation incurs a net loss, neither income nor deduction
from that corporation shall be included in determining the net income of the unitary
business.
(h) (g) For purposes of determining the net income of a unitary business and the
factors to be used in the apportionment of net income pursuant to section 290.191 or
290.20 , there must be included only the income and apportionment factors of domestic
corporations or other domestic entities other than foreign operating corporations that are
determined to be part of the unitary business pursuant to this subdivision, notwithstanding
that foreign corporations or other foreign entities might be included in the unitary
business, except that foreign corporations or other foreign entities that are included on a
federal income tax return must be included on the combined report. Income of a foreign
partnership or other foreign entity treated as a partnership included in federal taxable
income, as defined in section 63 of the Internal Revenue Code of 1986, as amended
through the date named in section 290.01, subdivision 19, and the proportionate amount of
apportionment factors, must be included in the combined report.
(i) Deductions for expenses, interest, or taxes otherwise allowable under this chapter
that are connected with or allocable against dividends, deemed dividends described
in paragraph (g), or royalties, fees, or other like income described in section 290.01,
subdivision 19d , clause (10), shall not be disallowed.
(j) (h) Each corporation or other entity, except a sole proprietorship, that is part of
a unitary business must file combined reports as the commissioner determines. On the
reports, all intercompany transactions between entities included pursuant to paragraph
(h) (g) must be eliminated and the entire net income of the unitary business determined in
accordance with this subdivision is apportioned among the entities by using each entity's
Minnesota factors for apportionment purposes in the numerators of the apportionment
formula and the total factors for apportionment purposes of all entities included pursuant
to paragraph (h) (g) in the denominators of the apportionment formula. All sales of the
unitary business made within Minnesota pursuant to section 290.191 or 290.20 must be
included on the separate combined report of a corporation that is a member of the unitary
business and is subject to the jurisdiction of this state to impose tax under this chapter.
(k) (i) If a corporation has been divested from a unitary business and is included in a
combined report for a fractional part of the common accounting period of the combined
report:
(1) its income includable in the combined report is its income incurred for that part
of the year determined by proration or separate accounting; and
(2) its sales, property, and payroll included in the apportionment formula must
be prorated or accounted for separately.
EFFECTIVE DATE.This section is effective for taxable years beginning after
December 31, 2010, except that the new language added to paragraph (f) and the new
language added to the new paragraph (g) are effective for taxable years beginning after
December 31, 2011.

    Sec. 35. Minnesota Statutes 2010, section 290.191, subdivision 2, is amended to read:
    Subd. 2. Apportionment formula of general application. (a) Except for those
trades or businesses required to use a different formula under subdivision 3 or section
290.341 or 290.36, and for those trades or businesses that receive permission to use some
other method under section 290.20 or under subdivision 4, a trade or business required
to apportion its net income must apportion its income to this state on the basis of the
percentage obtained by taking the sum of:
(1) the percent for the sales factor under paragraph (b) of the percentage which
the sales made within this state in connection with the trade or business during the tax
period are of the total sales wherever made in connection with the trade or business during
the tax period;
(2) the percent for the property factor under paragraph (b) of the percentage which
the total tangible property used by the taxpayer in this state in connection with the trade or
business during the tax period is of the total tangible property, wherever located, used by
the taxpayer in connection with the trade or business during the tax period; and
(3) the percent for the payroll factor under paragraph (b) of the percentage which
the taxpayer's total payrolls paid or incurred in this state or paid in respect to labor
performed in this state in connection with the trade or business during the tax period are
of the taxpayer's total payrolls paid or incurred in connection with the trade or business
during the tax period.
(b) For purposes of paragraph (a) and subdivision 3, the following percentages apply
for the taxable years specified:

	Taxable years beginning during calendar year			Sales factor percent			Property factor percent		Payroll factor percent
	2007			78			11		11
	2008			81			9.5		9.5
	2009			84			8		8
	2010			87			6.5		6.5
	2011			90			5		5
	2012			93			3.5		3.5
	2013			96			2		2
	2014 and later calendar years			100			0		0

EFFECTIVE DATE.This section is effective for taxable years beginning after
December 31, 2010.

    Sec. 36. Minnesota Statutes 2010, section 290.191, subdivision 5, is amended to read:
    Subd. 5. Determination of sales factor. For purposes of this section, the following
rules apply in determining the sales factor.
    (a) The sales factor includes all sales, gross earnings, or receipts received in the
ordinary course of the business, except that the following types of income are not included
in the sales factor:
    (1) interest;
    (2) dividends;
    (3) sales of capital assets as defined in section 1221 of the Internal Revenue Code;
    (4) sales of property used in the trade or business, except sales of leased property of
a type which is regularly sold as well as leased; and
    (5) sales of debt instruments as defined in section 1275(a)(1) of the Internal Revenue
Code or sales of stock; and.
    (6) royalties, fees, or other like income of a type which qualify for a subtraction from
federal taxable income under section 290.01, subdivision 19d(10).
    (b) Sales of tangible personal property are made within this state if the property is
received by a purchaser at a point within this state, and the taxpayer is taxable in this state,
regardless of the f.o.b. point, other conditions of the sale, or the ultimate destination
of the property.
    (c) Tangible personal property delivered to a common or contract carrier or foreign
vessel for delivery to a purchaser in another state or nation is a sale in that state or nation,
regardless of f.o.b. point or other conditions of the sale.
    (d) Notwithstanding paragraphs (b) and (c), when intoxicating liquor, wine,
fermented malt beverages, cigarettes, or tobacco products are sold to a purchaser who is
licensed by a state or political subdivision to resell this property only within the state of
ultimate destination, the sale is made in that state.
    (e) Sales made by or through a corporation that is qualified as a domestic
international sales corporation under section 992 of the Internal Revenue Code are not
considered to have been made within this state.
    (f) Sales, rents, royalties, and other income in connection with real property is
attributed to the state in which the property is located.
    (g) Receipts from the lease or rental of tangible personal property, including finance
leases and true leases, must be attributed to this state if the property is located in this
state and to other states if the property is not located in this state. Receipts from the
lease or rental of moving property including, but not limited to, motor vehicles, rolling
stock, aircraft, vessels, or mobile equipment are included in the numerator of the receipts
factor to the extent that the property is used in this state. The extent of the use of moving
property is determined as follows:
    (1) A motor vehicle is used wholly in the state in which it is registered.
    (2) The extent that rolling stock is used in this state is determined by multiplying
the receipts from the lease or rental of the rolling stock by a fraction, the numerator of
which is the miles traveled within this state by the leased or rented rolling stock and the
denominator of which is the total miles traveled by the leased or rented rolling stock.
    (3) The extent that an aircraft is used in this state is determined by multiplying the
receipts from the lease or rental of the aircraft by a fraction, the numerator of which is
the number of landings of the aircraft in this state and the denominator of which is the
total number of landings of the aircraft.
    (4) The extent that a vessel, mobile equipment, or other mobile property is used in
the state is determined by multiplying the receipts from the lease or rental of the property
by a fraction, the numerator of which is the number of days during the taxable year the
property was in this state and the denominator of which is the total days in the taxable year.
    (h) Royalties and other income not described in paragraph (a), clause (6), received
for the use of or for the privilege of using intangible property, including patents,
know-how, formulas, designs, processes, patterns, copyrights, trade names, service names,
franchises, licenses, contracts, customer lists, or similar items, must be attributed to the
state in which the property is used by the purchaser. If the property is used in more
than one state, the royalties or other income must be apportioned to this state pro rata
according to the portion of use in this state. If the portion of use in this state cannot be
determined, the royalties or other income must be excluded from both the numerator
and the denominator. Intangible property is used in this state if the purchaser uses the
intangible property or the rights therein in the regular course of its business operations in
this state, regardless of the location of the purchaser's customers.
    (i) Sales of intangible property are made within the state in which the property is
used by the purchaser. If the property is used in more than one state, the sales must be
apportioned to this state pro rata according to the portion of use in this state. If the
portion of use in this state cannot be determined, the sale must be excluded from both the
numerator and the denominator of the sales factor. Intangible property is used in this
state if the purchaser used the intangible property in the regular course of its business
operations in this state.
    (j) Receipts from the performance of services must be attributed to the state where
the services are received. For the purposes of this section, receipts from the performance
of services provided to a corporation, partnership, or trust may only be attributed to a state
where it has a fixed place of doing business. If the state where the services are received is
not readily determinable or is a state where the corporation, partnership, or trust receiving
the service does not have a fixed place of doing business, the services shall be deemed
to be received at the location of the office of the customer from which the services were
ordered in the regular course of the customer's trade or business. If the ordering office
cannot be determined, the services shall be deemed to be received at the office of the
customer to which the services are billed.
    (k) For the purposes of this subdivision and subdivision 6, paragraph (l), receipts
from management, distribution, or administrative services performed by a corporation
or trust for a fund of a corporation or trust regulated under United States Code, title 15,
sections 80a-1 through 80a-64, must be attributed to the state where the shareholder of
the fund resides. Under this paragraph, receipts for services attributed to shareholders are
determined on the basis of the ratio of: (1) the average of the outstanding shares in the
fund owned by shareholders residing within Minnesota at the beginning and end of each
year; and (2) the average of the total number of outstanding shares in the fund at the
beginning and end of each year. Residence of the shareholder, in the case of an individual,
is determined by the mailing address furnished by the shareholder to the fund. Residence
of the shareholder, when the shares are held by an insurance company as a depositor for
the insurance company policyholders, is the mailing address of the policyholders. In
the case of an insurance company holding the shares as a depositor for the insurance
company policyholders, if the mailing address of the policyholders cannot be determined
by the taxpayer, the receipts must be excluded from both the numerator and denominator.
Residence of other shareholders is the mailing address of the shareholder.
EFFECTIVE DATE.This section is effective for taxable years beginning after
December 31, 2010.

    Sec. 37. Minnesota Statutes 2010, section 290.21, subdivision 4, is amended to read:
    Subd. 4. Dividends received from another corporation. (a)(1) Eighty percent
of dividends received by a corporation during the taxable year from another corporation,
in which the recipient owns 20 percent or more of the stock, by vote and value, not
including stock described in section 1504(a)(4) of the Internal Revenue Code when the
corporate stock with respect to which dividends are paid does not constitute the stock in
trade of the taxpayer or would not be included in the inventory of the taxpayer, or does not
constitute property held by the taxpayer primarily for sale to customers in the ordinary
course of the taxpayer's trade or business, or when the trade or business of the taxpayer
does not consist principally of the holding of the stocks and the collection of the income
and gains therefrom; and
    (2)(i) the remaining 20 percent of dividends if the dividends received are the stock in
an affiliated company transferred in an overall plan of reorganization and the dividend
is eliminated in consolidation under Treasury Department Regulation 1.1502-14(a), as
amended through December 31, 1989;
    (ii) the remaining 20 percent of dividends if the dividends are received from a
corporation which is subject to tax under section 290.341 or 290.36 and which is a
member of an affiliated group of corporations as defined by the Internal Revenue Code
and the dividend is eliminated in consolidation under Treasury Department Regulation
1.1502-14(a), as amended through December 31, 1989, or is deducted under an election
under section 243(b) of the Internal Revenue Code; or
    (iii) the remaining 20 percent of the dividends if the dividends are received from a
property and casualty insurer as defined under section 60A.60, subdivision 8, which is a
member of an affiliated group of corporations as defined by the Internal Revenue Code
and either: (A) the dividend is eliminated in consolidation under Treasury Regulation
1.1502-14(a), as amended through December 31, 1989; or (B) the dividend is deducted
under an election under section 243(b) of the Internal Revenue Code.
    (b) Seventy percent of dividends received by a corporation during the taxable year
from another corporation in which the recipient owns less than 20 percent of the stock,
by vote or value, not including stock described in section 1504(a)(4) of the Internal
Revenue Code when the corporate stock with respect to which dividends are paid does not
constitute the stock in trade of the taxpayer, or does not constitute property held by the
taxpayer primarily for sale to customers in the ordinary course of the taxpayer's trade or
business, or when the trade or business of the taxpayer does not consist principally of the
holding of the stocks and the collection of income and gain therefrom.
    (c) The dividend deduction provided in this subdivision shall be allowed only with
respect to dividends that are included in a corporation's Minnesota taxable net income
for the taxable year.
    The dividend deduction provided in this subdivision does not apply to a dividend
from a corporation which, for the taxable year of the corporation in which the distribution
is made or for the next preceding taxable year of the corporation, is a corporation exempt
from tax under section 501 of the Internal Revenue Code.
The dividend deduction provided in this subdivision does not apply to a dividend
received from a real estate investment trust, as defined in section 856 of the Internal
Revenue Code.
    The dividend deduction provided in this subdivision applies to the amount of
regulated investment company dividends only to the extent determined under section
854(b) of the Internal Revenue Code.
    The dividend deduction provided in this subdivision shall not be allowed with
respect to any dividend for which a deduction is not allowed under the provisions of
section 246(c) of the Internal Revenue Code.
    (d) If dividends received by a corporation that does not have nexus with Minnesota
under the provisions of Public Law 86-272 are included as income on the return of
an affiliated corporation permitted or required to file a combined report under section
290.17, subdivision 4 , or 290.34, subdivision 2, then for purposes of this subdivision the
determination as to whether the trade or business of the corporation consists principally
of the holding of stocks and the collection of income and gains therefrom shall be made
with reference to the trade or business of the affiliated corporation having a nexus with
Minnesota.
    (e) The deduction provided by this subdivision does not apply if the dividends are
paid by a FSC as defined in section 922 of the Internal Revenue Code.
    (f) If one or more of the members of the unitary group whose income is included on
the combined report received a dividend, the deduction under this subdivision for each
member of the unitary business required to file a return under this chapter is the product
of: (1) 100 percent of the dividends received by members of the group; (2) the percentage
allowed pursuant to paragraph (a) or (b); and (3) the percentage of the taxpayer's business
income apportionable to this state for the taxable year under section 290.191 or 290.20.
EFFECTIVE DATE.The changes made to paragraph (a) are effective for taxable
years beginning after December 31, 2010, and the changes made to paragraph (c) are
effective for taxable years beginning after December 31, 2011.

    Sec. 38. [290.341] INSURANCE COMPANIES; REPORT OF NET INCOME;
COMPUTATION OF AMOUNT OF INCOME ALLOCABLE TO STATE.
    Subdivision 1. Computation of net income. (a) The net income of insurance
companies taxable under this chapter is computed as follows.
(b) Each life insurance company must report to the commissioner the life insurance
company taxable net income as defined in section 801(b) of the Internal Revenue Code,
incorporating any elections made by the taxpayer in determining life insurance company
taxable income for federal income tax purposes.
(c) Each insurance company other than a life insurance company must report to the
commissioner its federal taxable income as defined in section 832 of the Internal Revenue
Code, or its taxable investment income as defined in section 832 of the Internal Revenue
Code, incorporating any elections made by the taxpayer in accordance with the Internal
Revenue Code in determining federal taxable income or taxable investment income for
federal income tax purposes.
(d) The life insurance company taxable net income, federal taxable income, or
taxable investment income so reported is subject to the modifications provided in section
290.01, subdivisions 19c to 19f.
    Subd. 2. Apportionment of taxable net income. (a) The commissioner shall
compute from net income the taxable net income of insurance companies by apportioning
to this state net income on the ratio of gross premiums collected by them during the
taxable year from old and new business within this state, including reinsurance premiums,
to the total gross premiums collected by them during that year from their entire old and
new business, including reinsurance premiums; the commissioner shall add to the taxable
net income so apportioned to this state the amount of any taxes on premiums paid by the
company by virtue of any law of this state, other than the surcharge on premiums imposed
by section 297I.06 and the surcharge imposed by section 168A.40, subdivision 3, which
shall have been deducted from gross income by the company in arriving at its total net
income under the provisions of section 810(b) or 832 of the Internal Revenue Code.
(b) For purposes of determining the Minnesota apportionment percentage, premiums
from reinsurance contracts in connection with property in or liability arising out of
activity in, or in connection with the lives or health of Minnesota residents must be
attributed to Minnesota and premiums from reinsurance contracts in connection with
property in or liability arising out of activity in, or in connection with the lives or health of
non-Minnesota residents must be attributed outside of Minnesota. Reinsurance premiums
are presumed to be received for a Minnesota risk and are assigned to Minnesota, if:
(1) the reinsurance contract is assumed for a company domiciled in Minnesota; and
(2) the taxpayer, upon request of the commissioner, fails to provide reliable records
indicating the reinsured contract covered non-Minnesota risks.
For purposes of this paragraph, "Minnesota risk" means coverage in connection with
property in or liability arising out of activity in Minnesota, or in connection with the lives
or health of Minnesota residents.
(c) The apportionment method prescribed by paragraph (b) must be presumed to
fairly and correctly determine the taxpayer's taxable net income. If the method prescribed
in paragraph (b) does not fairly reflect all or any part of taxable net income, the taxpayer
may petition for or the commissioner may require the determination of taxable net
income by use of another method if that method fairly reflects taxable net income. A
petition within the meaning of this section must be filed by the taxpayer on a form as the
commissioner requires.
    Subd. 3. Credit. An insurance company shall receive a credit against the tax
computed under sections 290.06, subdivision 1, and 290.0921, equal to any taxes based
on premiums imposed by section 297I.05 and paid by the insurance company that are
attributable to the period for which the tax under this chapter is imposed.
    Subd. 4. Guaranty association assessment offset. (a) An insurance company may
offset against its corporate franchise tax liability under this chapter any amount paid
pursuant to assessments made for insolvencies which occur after December 31, 2010,
under chapter 60C, and any amount paid pursuant to assessments made after December
31, 2010, under chapter 61B, as follows.
(b) Each such assessment must give rise to an amount of offset equal to 20 percent
of the amount of the assessment for each of the five calendar years following the year in
which the assessment was paid.
(c) The amount of offset initially determined for each taxable year is the sum of the
amounts determined under paragraph (b) for that taxable year.
(d) Each year the commissioner of revenue shall compare total guaranty association
assessments levied over the preceding five calendar years to the sum of all premium
tax and corporate franchise tax revenues collected from insurance companies without
reduction for any guaranty association assessment offset in the preceding calendar year,
referred to in this subdivision as "preceding year insurance tax revenues." If total guaranty
association assessments levied over the preceding five years exceed the preceding year
insurance tax revenues, insurance companies are allowed only a proportionate part of the
corporate franchise tax offset calculated under paragraph (c) for the current calendar
year. The proportionate part of the corporate franchise tax offset allowed in the current
calendar year is determined by multiplying the amount calculated under paragraph (c) by a
fraction, the numerator of which equals the preceding year insurance tax revenues and
the denominator of which equals total guaranty association assessments levied over the
preceding five-year period. The proportionate part of the premium tax offset that is not
allowed is carried forward to subsequent tax years and added to the amount of corporate
franchise tax offset calculated under paragraph (c) before application of the limitation
imposed by this paragraph. Any amount carried forward from prior years must be allowed
before allowance of the offset for the current year calculated under paragraph (c). The
corporate franchise tax offset limitation must be calculated separately for (1) insurance
companies subject to assessment under chapter 60C, and (2) insurance companies subject
to assessment under chapter 61B. When the corporate franchise tax offset is limited by
this provision, the commissioner of revenue shall notify affected insurance companies
before February 1 for purposes of filing premium and corporate franchise tax returns. The
guaranty associations created under chapters 60C and 61B must provide the commissioner
of revenue with the necessary information on guaranty association assessments. The
limitation in this paragraph is effective for offsets allowable in 2011 and thereafter.
(e) If the offset determined by the application of paragraphs (b) and (c) exceeds the
greater of the insurance company's corporate franchise tax liability under this chapter prior
to allowance of the credit provided by subdivision 3 or its premium tax liability under
chapter 297I, then the insurance company may carry forward the excess, referred to in this
subdivision as the "carryforward credit," to subsequent taxable years. The carryforward
credit must be allowed as an offset against corporate franchise tax liability for the first
succeeding year to the extent that the corporate franchise tax liability for that year exceeds
the amount of the allowable offset for the year determined under paragraphs (b) and (c).
The carryforward credit must be reduced, but not below zero, by the greater of the amount
of the carryforward credit allowed as an offset against the corporate franchise tax pursuant
to this paragraph or the amount of the carryforward credit allowed as an offset against the
insurance company's premium tax liability under chapter 297I pursuant to section 297I.20,
subdivision 1, paragraph (b), clause (4). The remainder, if any, of the carryforward credit
must be carried forward to succeeding taxable years until the entire carryforward credit
has been credited against the insurance company's liability for corporate franchise tax
under this chapter and premium tax under chapter 297I.
(f) A refund paid by the Minnesota life and health insurance guaranty association
to member insurers under section 61B.24, subdivision 6, with respect to an assessment
payment which has been offset against taxes must reduce the carryforward credit
determined under paragraph (e) and, if the refund exceeds the amount of the carryforward
credit, must be repaid by the insurers to the extent of the offset to the state in the manner
the commissioner of revenue requires.
EFFECTIVE DATE.This section is effective for taxable years beginning after
December 31, 2010.

    Sec. 39. Minnesota Statutes 2010, section 290.9201, subdivision 11, is amended to
read:
    Subd. 11. Exception Exemption from withholding for public speakers and tax.
The provisions of (a) Subdivisions 7 and 8 shall not be effective for do not apply to:
(1) compensation paid to nonresident public speakers, if the compensation paid to
the speaker is less than $2,000 or is only a payment of the speaker's expenses.; or
(2) compensation paid to an entertainment entity if the compensation paid to the
entertainment entity is less than $600.
(b) Compensation paid to a public speaker or an entertainment entity that is not
subject to withholding tax under this subdivision is not subject to tax under subdivision 2
unless the total compensation received by the public speaker or entertainment entity in the
tax year exceeds the individual income tax filing requirements for a nonresident individual
under section 289A.08, subdivision 1, paragraph (a), clause (1).
EFFECTIVE DATE.This section is effective for compensation paid or received
after December 31, 2011.

    Sec. 40. Minnesota Statutes 2010, section 291.005, subdivision 1, is amended to read:
    Subdivision 1. Scope. Unless the context otherwise clearly requires, the following
terms used in this chapter shall have the following meanings:
    (1) "Commissioner" means the commissioner of revenue or any person to whom the
commissioner has delegated functions under this chapter.
    (2) "Federal gross estate" means the gross estate of a decedent as required to be
valued and otherwise determined for federal estate tax purposes under the Internal
Revenue Code.
    (3) "Internal Revenue Code" means the United States Internal Revenue Code of
1986, as amended through March 18, 2010, but without regard to the provisions of
sections 501 and 901 of Public Law 107-16.
    (4) "Minnesota adjusted taxable estate" means federal adjusted taxable estate as
defined by section 2011(b)(3) of the Internal Revenue Code, increased by the amount of
deduction for state death taxes allowed under section 2058 of the Internal Revenue Code.
    (5) "Minnesota gross estate" means the federal gross estate of a decedent after (a)
excluding therefrom any property included therein which has its situs outside Minnesota,
and (b) including therein any property omitted from the federal gross estate which is
includable therein, has its situs in Minnesota, and was not disclosed to federal taxing
authorities.
    (6) "Nonresident decedent" means an individual whose domicile at the time of
death was not in Minnesota.
    (7) "Personal representative" means the executor, administrator or other person
appointed by the court to administer and dispose of the property of the decedent. If there
is no executor, administrator or other person appointed, qualified, and acting within this
state, then any person in actual or constructive possession of any property having a situs in
this state which is included in the federal gross estate of the decedent shall be deemed
to be a personal representative to the extent of the property and the Minnesota estate tax
due with respect to the property.
    (8) "Resident decedent" means an individual whose domicile at the time of death
was in Minnesota.
    (9) "Situs of property" means, with respect to real property, the state or country in
which it is located; with respect to tangible personal property, the state or country in which
it was normally kept or located at the time of the decedent's death; and with respect to
intangible personal property, the state or country in which the decedent was domiciled
at death. For a nonresident decedent with an ownership interest in a pass-through entity
with assets that include real or tangible personal property, situs of the real or tangible
personal property is determined as if the pass-through entity does not exist and the real
or tangible personal property is personally owned by the decedent. If the pass-through
entity is owned by a person or persons in addition to the decedent, ownership of the
property is attributed to the decedent in proportion to the decedent's capital ownership
share of the pass-through entity.
(10) "Pass-through entity" includes the following:
(i) an entity electing S corporation status under section 1362 of the Internal Revenue
Code;
(ii) an entity taxed as a partnership under subchapter K of the Internal Revenue Code;
(iii) a single member limited liability company or similar entity, regardless of
whether it is taxed as an association or is disregarded for federal income tax purposes
under Code of Federal Regulations, title 26, section 301.7701-3; or
(iv) a trust.
EFFECTIVE DATE.This section is effective for estates of decedents dying after
December 31, 2010.

    Sec. 41. Minnesota Statutes 2010, section 297I.20, subdivision 1, is amended to read:
    Subdivision 1. Guaranty association assessment offsets. (a) An insurance
company may offset against its premium tax liability to this state any amount paid
for assessments made for insolvencies which occur after July 31, 1994, under sections
60C.01 to 60C.22; and any amount paid for assessments made after July 31, 1994, under
Minnesota Statutes 1992, sections 61B.01 to 61B.16, or under sections 61B.18 to 61B.32
as follows:
(1) Each such assessment shall give rise to an amount of offset equal to 20 percent
of the amount of the assessment for each of the five calendar years following the year in
which the assessment was paid.
(2) The amount of offset initially determined for each taxable year is the sum of the
amounts determined under clause (1) for that taxable year.
(b)(1) Each year the commissioner shall compare total guaranty association
assessments levied over the preceding five calendar years to the sum of all premium
tax and corporate franchise tax revenues collected from insurance companies, without
reduction for any guaranty association assessment offset in the preceding calendar year,
referred to in this subdivision as "preceding year insurance tax revenues."
(2) If total guaranty association assessments levied over the preceding five years
exceed the preceding year insurance tax revenues, insurance companies must be allowed
only a proportionate part of the premium tax offset calculated under paragraph (a) for
the current calendar year.
(3) The proportionate part of the premium tax offset allowed in the current calendar
year is determined by multiplying the amount calculated under paragraph (a) by a fraction.
The numerator of the fraction equals the preceding year insurance tax revenues, and its
denominator equals total guaranty association assessments levied over the preceding
five-year period.
(4) The proportionate part of the premium tax offset that is not allowed must be
carried forward to subsequent tax years and added to the amount of premium tax offset
calculated under paragraph (a) prior to application of the limitation imposed by this
paragraph.
(5) Any amount carried forward from prior years must be allowed before allowance
of the offset for the current year calculated under paragraph (a).
(6) The premium tax offset limitation must be calculated separately for (i) insurance
companies subject to assessment under sections 60C.01 to 60C.22, and (ii) insurance
companies subject to assessment under Minnesota Statutes 1992, sections 61B.01 to
61B.16 , or 61B.18 to 61B.32.
(7) When the premium tax offset is limited by this provision, the commissioner
shall notify affected insurance companies on a timely basis for purposes of completing
premium and corporate franchise tax returns.
(8) The guaranty associations created under sections 60C.01 to 60C.22, Minnesota
Statutes 1992, sections 61B.01 to 61B.16, and 61B.18 to 61B.32, shall provide the
commissioner with the necessary information on guaranty association assessments.
(c)(1) If the offset determined by the application of paragraphs (a) and (b) exceeds
the greater of the insurance company's premium tax liability under this section or its
corporate franchise tax liability under chapter 290 prior to allowance of the credit for
premium taxes, then the insurance company may carry forward the excess, referred to in
this subdivision as the "carryforward credit" to subsequent taxable years.
(2) The carryforward credit is allowed as an offset against premium tax liability for
the first succeeding year to the extent that the premium tax liability for that year exceeds
the amount of the allowable offset for the year determined under paragraphs (a) and (b).
(3) The carryforward credit must be reduced, but not below zero, by the greater of
the amount of the carryforward credit allowed as an offset against the premium tax under
this paragraph or the amount of the carryforward credit allowed as an offset against the
insurance company's corporate franchise tax liability under section 290.341, subdivision
5. The remainder, if any, of the carryforward credit must be carried forward to succeeding
taxable years until the entire carryforward credit has been credited against the insurance
company's liability for premium tax under this chapter and corporate franchise tax under
chapter 290 if applicable for that taxable year.
(d) When an insurer has offset against taxes its payment of an assessment of the
Minnesota Life and Health Guaranty Association, and the association pays the insurer
a refund with respect to the assessment under Minnesota Statutes 1992, section 61B.07,
subdivision 6 , or 61B.24, subdivision 6, then the refund reduces the insurer's carryforward
credit under paragraph (c). If the refund exceeds the amount of the carryforward credit,
the excess amount must be repaid to the state by the insurers to the extent of the offset
in the manner the commissioner requires.
EFFECTIVE DATE.This section is effective for taxable years beginning after
December 31, 2010.

    Sec. 42. REPEALER.
(a) Minnesota Statutes 2010, section 290.01, subdivision 6b, is repealed.
(b) Minnesota Statutes 2010, section 290.0678, is repealed.
(c) Minnesota Statutes 2010, section 290.9201, subdivision 3, is repealed.
EFFECTIVE DATE.Paragraph (a) is effective for taxable years beginning after
December 31, 2010. Paragraph (b) is effective for taxable years beginning after December
31, 2011. Paragraph (c) is effective for compensation received after December 31, 2011.

ARTICLE 2

FEDERAL UPDATE

    Section 1. Minnesota Statutes 2010, section 289A.02, subdivision 7, as amended by
Laws 2011, chapter 8, section 1, is amended to read:
    Subd. 7. Internal Revenue Code. Unless specifically defined otherwise, for taxable
years beginning before January 1, 2010, and after December 31, 2010, "Internal Revenue
Code" means the Internal Revenue Code of 1986, as amended through March 18, 2010;
and for taxable years beginning after December 31, 2009, and before January 1, 2011,
"Internal Revenue Code" means the Internal Revenue Code of 1986, as amended through
December 31, 2010.
EFFECTIVE DATE.This section is effective the day following final enactment.

    Sec. 2. Minnesota Statutes 2010, section 290.01, subdivision 19, as amended by Laws
2011, chapter 8, section 2, is amended to read:
    Subd. 19. Net income. The term "net income" means the federal taxable income,
as defined in section 63 of the Internal Revenue Code of 1986, as amended through the
date named in this subdivision, incorporating the federal effective dates of changes to the
Internal Revenue Code and any elections made by the taxpayer in accordance with the
Internal Revenue Code in determining federal taxable income for federal income tax
purposes, and with the modifications provided in subdivisions 19a to 19f.
    In the case of a regulated investment company or a fund thereof, as defined in section
851(a) or 851(g) of the Internal Revenue Code, federal taxable income means investment
company taxable income as defined in section 852(b)(2) of the Internal Revenue Code,
except that:
    (1) the exclusion of net capital gain provided in section 852(b)(2)(A) of the Internal
Revenue Code does not apply;
    (2) the deduction for dividends paid under section 852(b)(2)(D) of the Internal
Revenue Code must be applied by allowing a deduction for capital gain dividends and
exempt-interest dividends as defined in sections 852(b)(3)(C) and 852(b)(5) of the Internal
Revenue Code; and
    (3) the deduction for dividends paid must also be applied in the amount of any
undistributed capital gains which the regulated investment company elects to have treated
as provided in section 852(b)(3)(D) of the Internal Revenue Code.
    The net income of a real estate investment trust as defined and limited by section
856(a), (b), and (c) of the Internal Revenue Code means the real estate investment trust
taxable income as defined in section 857(b)(2) of the Internal Revenue Code.
    The net income of a designated settlement fund as defined in section 468B(d) of
the Internal Revenue Code means the gross income as defined in section 468B(b) of the
Internal Revenue Code.
    The Internal Revenue Code of 1986, as amended through March 18 December 31,
2010, shall be in effect for taxable years beginning after December 31, 1996, except
that for taxable years beginning after December 31, 2009, and before January 1, 2011,
"Internal Revenue Code" means the Internal Revenue Code of 1986, as amended through
December 31, 2010. The provisions of the act of January 22, 2010, Public Law 111-126,
to accelerate the benefits for charitable cash contributions for the relief of victims of the
Haitian earthquake, are effective at the same time it became effective for federal purposes
and apply to the subtraction under subdivision 19b, clause (6). The provisions of title II,
section 2112, of the act of September 27, 2010, Public Law 111-240, rollovers from
elective deferral plans to designated Roth accounts, are effective at the same time they
became effective for federal purposes and taxable rollovers are included in net income at
the same time they are included in gross income for federal purposes.
    Except as otherwise provided, references to the Internal Revenue Code in
subdivisions 19 to 19f mean the code in effect for purposes of determining net income for
the applicable year.
EFFECTIVE DATE.This section is effective the day following final enactment.

    Sec. 3. Minnesota Statutes 2010, section 290.01, subdivision 19a, as amended by Laws
2011, chapter 8, section 3, is amended to read:
    Subd. 19a. Additions to federal taxable income. For individuals, estates, and
trusts, there shall be added to federal taxable income:
    (1)(i) interest income on obligations of any state other than Minnesota or a political
or governmental subdivision, municipality, or governmental agency or instrumentality
of any state other than Minnesota exempt from federal income taxes under the Internal
Revenue Code or any other federal statute; and
    (ii) exempt-interest dividends as defined in section 852(b)(5) of the Internal Revenue
Code, except:
(A) the portion of the exempt-interest dividends exempt from state taxation under
the laws of the United States; and
(B) the portion of the exempt-interest dividends derived from interest income
on obligations of the state of Minnesota or its political or governmental subdivisions,
municipalities, governmental agencies or instrumentalities, but only if the portion of the
exempt-interest dividends from such Minnesota sources paid to all shareholders represents
95 percent or more of the exempt-interest dividends, including any dividends exempt
under subitem (A), that are paid by the regulated investment company as defined in section
851(a) of the Internal Revenue Code, or the fund of the regulated investment company as
defined in section 851(g) of the Internal Revenue Code, making the payment; and
    (iii) for the purposes of items (i) and (ii), interest on obligations of an Indian tribal
government described in section 7871(c) of the Internal Revenue Code shall be treated as
interest income on obligations of the state in which the tribe is located;
    (2) the amount of income, sales and use, motor vehicle sales, or excise taxes paid or
accrued within the taxable year under this chapter and the amount of taxes based on net
income paid, sales and use, motor vehicle sales, or excise taxes paid to any other state or
to any province or territory of Canada, to the extent allowed as a deduction under section
63(d) of the Internal Revenue Code minus any addition that would have been required
under clause (20) if the taxpayer had claimed the standard deduction, but the addition may
not be more than the amount by which the itemized deductions as allowed under section
63(d) of the Internal Revenue Code exceeds the amount of the standard deduction as
defined in section 63(c) of the Internal Revenue Code, disregarding the amounts allowed
under sections 63(c)(1)(C) and 63(c)(1)(E) of the Internal Revenue Code. For the purpose
of this paragraph, the disallowance of itemized deductions under section 68 of the Internal
Revenue Code of 1986, income, sales and use, motor vehicle sales, or excise taxes are
the last itemized deductions disallowed;
    (3) the capital gain amount of a lump-sum distribution to which the special tax under
section 1122(h)(3)(B)(ii) of the Tax Reform Act of 1986, Public Law 99-514, applies;
    (4) the amount of income taxes paid or accrued within the taxable year under this
chapter and taxes based on net income paid to any other state or any province or territory
of Canada, to the extent allowed as a deduction in determining federal adjusted gross
income. For the purpose of this paragraph, income taxes do not include the taxes imposed
by sections 290.0922, subdivision 1, paragraph (b), 290.9727, 290.9728, and 290.9729;
    (5) the amount of expense, interest, or taxes disallowed pursuant to section 290.10
other than expenses or interest used in computing net interest income for the subtraction
allowed under subdivision 19b, clause (1);
    (6) the amount of a partner's pro rata share of net income which does not flow
through to the partner because the partnership elected to pay the tax on the income under
section 6242(a)(2) of the Internal Revenue Code;
    (7) 80 percent of the depreciation deduction allowed under section 168(k) of the
Internal Revenue Code. For purposes of this clause, if the taxpayer has an activity that
in the taxable year generates a deduction for depreciation under section 168(k) and the
activity generates a loss for the taxable year that the taxpayer is not allowed to claim for
the taxable year, "the depreciation allowed under section 168(k)" for the taxable year is
limited to excess of the depreciation claimed by the activity under section 168(k) over the
amount of the loss from the activity that is not allowed in the taxable year. In succeeding
taxable years when the losses not allowed in the taxable year are allowed, the depreciation
under section 168(k) is allowed;
    (8) 80 percent of the amount by which the deduction allowed by section 179 of the
Internal Revenue Code exceeds the deduction allowable by section 179 of the Internal
Revenue Code of 1986, as amended through December 31, 2003;
    (9) to the extent deducted in computing federal taxable income, the amount of the
deduction allowable under section 199 of the Internal Revenue Code;
    (10) for tax years beginning before January 1, 2013, the exclusion allowed under
section 139A of the Internal Revenue Code for federal subsidies for prescription drug
plans;
(11) the amount of expenses disallowed under section 290.10, subdivision 2;
    (12) for taxable years beginning before January 1, 2010, and after December 31,
2010, the amount deducted for qualified tuition and related expenses under section 222 of
the Internal Revenue Code, to the extent deducted from gross income;
    (13) for taxable years beginning before January 1, 2010, and after December 31,
2010, the amount deducted for certain expenses of elementary and secondary school
teachers under section 62(a)(2)(D) of the Internal Revenue Code, to the extent deducted
from gross income;
(14) the additional standard deduction for property taxes payable that is allowable
under section 63(c)(1)(C) of the Internal Revenue Code;
(15) the additional standard deduction for qualified motor vehicle sales taxes
allowable under section 63(c)(1)(E) of the Internal Revenue Code;
(16) discharge of indebtedness income resulting from reacquisition of business
indebtedness and deferred under section 108(i) of the Internal Revenue Code; and
(17) the amount of unemployment compensation exempt from tax under section
85(c) of the Internal Revenue Code.; and
(18) to the extent included in the computation of federal taxable income in taxable
years beginning after December 31, 2010, the amount of disallowed itemized deductions.
(i) The amount of disallowed itemized deductions is equal to the lesser of:
(A) three percent of the excess of the taxpayer's federal adjusted gross income
over the applicable amount; or
(B) 80 percent of the amount of the itemized deductions otherwise allowable to the
taxpayer under the Internal Revenue Code for the taxable year.
(ii) The term "applicable amount" means $100,000, or $50,000 in the case of a
married individual filing a separate return. Each dollar amount shall be increased by
an amount equal to:
(A) such dollar amount, multiplied by
(B) the cost-of-living adjustment determined under section 1(f)(3) of the Internal
Revenue Code for the calendar year in which the taxable year begins, by substituting
"calendar year 1990" for "calendar year 1992" in subparagraph (B) thereof.
(iii) The term "itemized deductions" does not include:
(A) the deduction for medical expenses under section 213 of the Internal Revenue
Code;
(B) any deduction for investment interest as defined in section 163(d) of the Internal
Revenue Code; and
(C) the deduction under section 165(a) of the Internal Revenue Code for casualty or
theft losses described in paragraph (2) or (3) of section 165(c) of the Internal Revenue
Code or for losses described in section 165(d) of the Internal Revenue Code;
(19) to the extent included in federal taxable income in taxable years beginning after
December 31, 2010, the amount of disallowed personal exemptions for taxpayers with
federal adjusted gross income over the threshold amount.
(i) The disallowed personal exemption amount is equal to the dollar amount of the
personal exemptions claimed by the taxpayer in the computation of federal taxable income
multiplied by the applicable percentage.
(ii) "Applicable percentage" means two percentage points for each $2,500 (or
fraction thereof) by which the taxpayer's federal adjusted gross income for the taxable
year exceeds the threshold amount. In the case of a married individual filing a separate
return, the preceding sentence shall be applied by substituting "$1,250" for "$2,500." In no
event shall the applicable percentage exceed 100 percent.
(iii) The term "threshold amount" means:
(A) $150,000 in the case of a joint return or a surviving spouse;
(B) $125,000 in the case of a head of a household;
(C) $100,000 in the case of an individual who is not married and who is not a
surviving spouse or head of a household; and
(D) $75,000 in the case of a married individual filing a separate return.
(iv) The thresholds shall be increased by an amount equal to:
(A) such dollar amount, multiplied by
(B) the cost-of-living adjustment determined under section 1(f)(3) of the Internal
Revenue Code for the calendar year in which the taxable year begins, by substituting
"calendar year 1990" for "calendar year 1992" in subparagraph (B) thereof; and
(20) to the extent deducted in the computation of federal taxable income, for taxable
years beginning after December 31, 2010, and before January 1, 2013, the difference
between the standard deduction allowed under section 63(a) of the Internal Revenue Code
and the standard deduction allowed for 2011 and 2012 under the Internal Revenue Code
as amended through December 1, 2010.
EFFECTIVE DATE.This section is effective the day following final enactment.

    Sec. 4. Minnesota Statutes 2010, section 290.01, subdivision 19c, as amended by Laws
2011, chapter 8, section 4, is amended to read:
    Subd. 19c. Corporations; additions to federal taxable income. For corporations,
there shall be added to federal taxable income:
    (1) the amount of any deduction taken for federal income tax purposes for income,
excise, or franchise taxes based on net income or related minimum taxes, including but not
limited to the tax imposed under section 290.0922, paid by the corporation to Minnesota,
another state, a political subdivision of another state, the District of Columbia, or any
foreign country or possession of the United States;
    (2) interest not subject to federal tax upon obligations of: the United States, its
possessions, its agencies, or its instrumentalities; the state of Minnesota or any other
state, any of its political or governmental subdivisions, any of its municipalities, or any
of its governmental agencies or instrumentalities; the District of Columbia; or Indian
tribal governments;
    (3) exempt-interest dividends received as defined in section 852(b)(5) of the Internal
Revenue Code;
    (4) the amount of any net operating loss deduction taken for federal income tax
purposes under section 172 or 832(c)(10) of the Internal Revenue Code or operations loss
deduction under section 810 of the Internal Revenue Code;
    (5) the amount of any special deductions taken for federal income tax purposes
under sections 241 to 247 and 965 of the Internal Revenue Code;
    (6) losses from the business of mining, as defined in section 290.05, subdivision 1,
clause (a), that are not subject to Minnesota income tax;
    (7) the amount of any capital losses deducted for federal income tax purposes under
sections 1211 and 1212 of the Internal Revenue Code;
    (8) the exempt foreign trade income of a foreign sales corporation under sections
921(a) and 291 of the Internal Revenue Code;
    (9) the amount of percentage depletion deducted under sections 611 through 614 and
291 of the Internal Revenue Code;
    (10) for certified pollution control facilities placed in service in a taxable year
beginning before December 31, 1986, and for which amortization deductions were elected
under section 169 of the Internal Revenue Code of 1954, as amended through December
31, 1985, the amount of the amortization deduction allowed in computing federal taxable
income for those facilities;
    (11) the amount of any deemed dividend from a foreign operating corporation
determined pursuant to section 290.17, subdivision 4, paragraph (g). The deemed dividend
shall be reduced by the amount of the addition to income required by clauses (20), (21),
(22), and (23);
    (12) the amount of a partner's pro rata share of net income which does not flow
through to the partner because the partnership elected to pay the tax on the income under
section 6242(a)(2) of the Internal Revenue Code;
    (13) the amount of net income excluded under section 114 of the Internal Revenue
Code;
    (14) any increase in subpart F income, as defined in section 952(a) of the Internal
Revenue Code, for the taxable year when subpart F income is calculated without regard to
the provisions of Division C, title III, section 303(b) of Public Law 110-343 section 750
of Public Law 111-312;
    (15) 80 percent of the depreciation deduction allowed under section 168(k)(1)(A)
and (k)(4)(A) of the Internal Revenue Code. For purposes of this clause, if the taxpayer
has an activity that in the taxable year generates a deduction for depreciation under
section 168(k)(1)(A) and (k)(4)(A) and the activity generates a loss for the taxable year
that the taxpayer is not allowed to claim for the taxable year, "the depreciation allowed
under section 168(k)(1)(A) and (k)(4)(A)" for the taxable year is limited to excess of the
depreciation claimed by the activity under section 168(k)(1)(A) and (k)(4)(A) over the
amount of the loss from the activity that is not allowed in the taxable year. In succeeding
taxable years when the losses not allowed in the taxable year are allowed, the depreciation
under section 168(k)(1)(A) and (k)(4)(A) is allowed;
    (16) 80 percent of the amount by which the deduction allowed by section 179 of the
Internal Revenue Code exceeds the deduction allowable by section 179 of the Internal
Revenue Code of 1986, as amended through December 31, 2003;
    (17) to the extent deducted in computing federal taxable income, the amount of the
deduction allowable under section 199 of the Internal Revenue Code;
    (18) for taxable years beginning before January 1, 2013, the exclusion allowed
under section 139A of the Internal Revenue Code for federal subsidies for prescription
drug plans;
    (19) the amount of expenses disallowed under section 290.10, subdivision 2;
    (20) an amount equal to the interest and intangible expenses, losses, and costs paid,
accrued, or incurred by any member of the taxpayer's unitary group to or for the benefit
of a corporation that is a member of the taxpayer's unitary business group that qualifies
as a foreign operating corporation. For purposes of this clause, intangible expenses and
costs include:
    (i) expenses, losses, and costs for, or related to, the direct or indirect acquisition,
use, maintenance or management, ownership, sale, exchange, or any other disposition of
intangible property;
    (ii) losses incurred, directly or indirectly, from factoring transactions or discounting
transactions;
    (iii) royalty, patent, technical, and copyright fees;
    (iv) licensing fees; and
    (v) other similar expenses and costs.
For purposes of this clause, "intangible property" includes stocks, bonds, patents, patent
applications, trade names, trademarks, service marks, copyrights, mask works, trade
secrets, and similar types of intangible assets.
This clause does not apply to any item of interest or intangible expenses or costs paid,
accrued, or incurred, directly or indirectly, to a foreign operating corporation with respect
to such item of income to the extent that the income to the foreign operating corporation
is income from sources without the United States as defined in subtitle A, chapter 1,
subchapter N, part 1, of the Internal Revenue Code;
    (21) except as already included in the taxpayer's taxable income pursuant to clause
(20), any interest income and income generated from intangible property received or
accrued by a foreign operating corporation that is a member of the taxpayer's unitary
group. For purposes of this clause, income generated from intangible property includes:
    (i) income related to the direct or indirect acquisition, use, maintenance or
management, ownership, sale, exchange, or any other disposition of intangible property;
    (ii) income from factoring transactions or discounting transactions;
    (iii) royalty, patent, technical, and copyright fees;
    (iv) licensing fees; and
    (v) other similar income.
For purposes of this clause, "intangible property" includes stocks, bonds, patents, patent
applications, trade names, trademarks, service marks, copyrights, mask works, trade
secrets, and similar types of intangible assets.
This clause does not apply to any item of interest or intangible income received or accrued
by a foreign operating corporation with respect to such item of income to the extent that
the income is income from sources without the United States as defined in subtitle A,
chapter 1, subchapter N, part 1, of the Internal Revenue Code;
    (22) the dividends attributable to the income of a foreign operating corporation that
is a member of the taxpayer's unitary group in an amount that is equal to the dividends
paid deduction of a real estate investment trust under section 561(a) of the Internal
Revenue Code for amounts paid or accrued by the real estate investment trust to the
foreign operating corporation;
    (23) the income of a foreign operating corporation that is a member of the taxpayer's
unitary group in an amount that is equal to gains derived from the sale of real or personal
property located in the United States;
    (24) for taxable years beginning before January 1, 2010, and after December 31,
2010, the additional amount allowed as a deduction for donation of computer technology
and equipment under section 170(e)(6) of the Internal Revenue Code, to the extent
deducted from taxable income; and
(25) discharge of indebtedness income resulting from reacquisition of business
indebtedness and deferred under section 108(i) of the Internal Revenue Code.
EFFECTIVE DATE.The changes to clauses (14) and (24) are effective for taxable
years beginning after December 31, 2009. The change to clause (18) is effective the
day following final enactment.

    Sec. 5. Minnesota Statutes 2010, section 290.01, subdivision 19d, is amended to read:
    Subd. 19d. Corporations; modifications decreasing federal taxable income. For
corporations, there shall be subtracted from federal taxable income after the increases
provided in subdivision 19c:
    (1) the amount of foreign dividend gross-up added to gross income for federal
income tax purposes under section 78 of the Internal Revenue Code;
    (2) the amount of salary expense not allowed for federal income tax purposes due to
claiming the work opportunity credit under section 51 of the Internal Revenue Code;
    (3) any dividend (not including any distribution in liquidation) paid within the
taxable year by a national or state bank to the United States, or to any instrumentality of
the United States exempt from federal income taxes, on the preferred stock of the bank
owned by the United States or the instrumentality;
    (4) amounts disallowed for intangible drilling costs due to differences between
this chapter and the Internal Revenue Code in taxable years beginning before January
1, 1987, as follows:
    (i) to the extent the disallowed costs are represented by physical property, an amount
equal to the allowance for depreciation under Minnesota Statutes 1986, section 290.09,
subdivision 7 , subject to the modifications contained in subdivision 19e; and
    (ii) to the extent the disallowed costs are not represented by physical property, an
amount equal to the allowance for cost depletion under Minnesota Statutes 1986, section
290.09, subdivision 8 ;
    (5) the deduction for capital losses pursuant to sections 1211 and 1212 of the
Internal Revenue Code, except that:
    (i) for capital losses incurred in taxable years beginning after December 31, 1986,
capital loss carrybacks shall not be allowed;
    (ii) for capital losses incurred in taxable years beginning after December 31, 1986,
a capital loss carryover to each of the 15 taxable years succeeding the loss year shall be
allowed;
    (iii) for capital losses incurred in taxable years beginning before January 1, 1987, a
capital loss carryback to each of the three taxable years preceding the loss year, subject to
the provisions of Minnesota Statutes 1986, section 290.16, shall be allowed; and
    (iv) for capital losses incurred in taxable years beginning before January 1, 1987,
a capital loss carryover to each of the five taxable years succeeding the loss year to the
extent such loss was not used in a prior taxable year and subject to the provisions of
Minnesota Statutes 1986, section 290.16, shall be allowed;
    (6) an amount for interest and expenses relating to income not taxable for federal
income tax purposes, if (i) the income is taxable under this chapter and (ii) the interest and
expenses were disallowed as deductions under the provisions of section 171(a)(2), 265 or
291 of the Internal Revenue Code in computing federal taxable income;
    (7) in the case of mines, oil and gas wells, other natural deposits, and timber for
which percentage depletion was disallowed pursuant to subdivision 19c, clause (9), a
reasonable allowance for depletion based on actual cost. In the case of leases the deduction
must be apportioned between the lessor and lessee in accordance with rules prescribed
by the commissioner. In the case of property held in trust, the allowable deduction must
be apportioned between the income beneficiaries and the trustee in accordance with the
pertinent provisions of the trust, or if there is no provision in the instrument, on the basis
of the trust's income allocable to each;
    (8) for certified pollution control facilities placed in service in a taxable year
beginning before December 31, 1986, and for which amortization deductions were elected
under section 169 of the Internal Revenue Code of 1954, as amended through December
31, 1985, an amount equal to the allowance for depreciation under Minnesota Statutes
1986, section 290.09, subdivision 7;
    (9) amounts included in federal taxable income that are due to refunds of income,
excise, or franchise taxes based on net income or related minimum taxes paid by the
corporation to Minnesota, another state, a political subdivision of another state, the
District of Columbia, or a foreign country or possession of the United States to the extent
that the taxes were added to federal taxable income under section 290.01, subdivision 19c,
clause (1), in a prior taxable year;
    (10) 80 percent of royalties, fees, or other like income accrued or received from a
foreign operating corporation or a foreign corporation which is part of the same unitary
business as the receiving corporation, unless the income resulting from such payments or
accruals is income from sources within the United States as defined in subtitle A, chapter
1, subchapter N, part 1, of the Internal Revenue Code;
    (11) income or gains from the business of mining as defined in section 290.05,
subdivision 1 , clause (a), that are not subject to Minnesota franchise tax;
    (12) the amount of disability access expenditures in the taxable year which are not
allowed to be deducted or capitalized under section 44(d)(7) of the Internal Revenue Code;
    (13) the amount of qualified research expenses not allowed for federal income tax
purposes under section 280C(c) of the Internal Revenue Code, but only to the extent that
the amount exceeds the amount of the credit allowed under section 290.068;
    (14) the amount of salary expenses not allowed for federal income tax purposes due
to claiming the Indian employment credit under section 45A(a) of the Internal Revenue
Code;
    (15) for a corporation whose foreign sales corporation, as defined in section 922
of the Internal Revenue Code, constituted a foreign operating corporation during any
taxable year ending before January 1, 1995, and a return was filed by August 15, 1996,
claiming the deduction under section 290.21, subdivision 4, for income received from
the foreign operating corporation, an amount equal to 1.23 multiplied by the amount of
income excluded under section 114 of the Internal Revenue Code, provided the income is
not income of a foreign operating company;
    (16) any decrease in subpart F income, as defined in section 952(a) of the Internal
Revenue Code, for the taxable year when subpart F income is calculated without regard to
the provisions of Division C, title III, section 303(b) of Public Law 110-343 section 750
of Public Law 111-312;
    (17) in each of the five tax years immediately following the tax year in which an
addition is required under subdivision 19c, clause (15), an amount equal to one-fifth of
the delayed depreciation. For purposes of this clause, "delayed depreciation" means the
amount of the addition made by the taxpayer under subdivision 19c, clause (15). The
resulting delayed depreciation cannot be less than zero;
    (18) in each of the five tax years immediately following the tax year in which an
addition is required under subdivision 19c, clause (16), an amount equal to one-fifth of
the amount of the addition; and
(19) to the extent included in federal taxable income, discharge of indebtedness
income resulting from reacquisition of business indebtedness included in federal taxable
income under section 108(i) of the Internal Revenue Code. This subtraction applies only
to the extent that the income was included in net income in a prior year as a result of the
addition under section 290.01, subdivision 19c, clause (25).
EFFECTIVE DATE.This section is effective for taxable years beginning after
December 31, 2009.

    Sec. 6. Minnesota Statutes 2010, section 290.01, subdivision 31, as amended by Laws
2011, chapter 8, section 5, is amended to read:
    Subd. 31. Internal Revenue Code. Unless specifically defined otherwise, for
taxable years beginning before January 1, 2010, and after December 31, 2010, "Internal
Revenue Code" means the Internal Revenue Code of 1986, as amended through March 18,
2010; and for taxable years beginning after December 31, 2009, and before January 1,
2011, "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended
through December 31, 2010. Internal Revenue Code also includes any uncodified
provision in federal law that relates to provisions of the Internal Revenue Code that are
incorporated into Minnesota law. When used in this chapter, the reference to "subtitle A,
chapter 1, subchapter N, part 1, of the Internal Revenue Code" is to the Internal Revenue
Code as amended through March 18, 2010.
EFFECTIVE DATE.This section is effective the day following final enactment
except that the changes incorporated by federal changes are effective at the same time as
the changes were effective for federal purposes.

    Sec. 7. Minnesota Statutes 2010, section 290.0671, subdivision 1, is amended to read:
    Subdivision 1. Credit allowed. (a) An individual is allowed a credit against the tax
imposed by this chapter equal to a percentage of earned income. To receive a credit, a
taxpayer must be eligible for a credit under section 32 of the Internal Revenue Code.
(b) For individuals with no qualifying children, the credit equals 1.9125 percent of
the first $4,620 of earned income. The credit is reduced by 1.9125 percent of earned
income or adjusted gross income, whichever is greater, in excess of $5,770, but in no
case is the credit less than zero.
(c) For individuals with one qualifying child, the credit equals 8.5 percent of the first
$6,920 of earned income and 8.5 percent of earned income over $12,080 but less than
$13,450. The credit is reduced by 5.73 percent of earned income or adjusted gross income,
whichever is greater, in excess of $15,080, but in no case is the credit less than zero.
(d) For individuals with two or more qualifying children, the credit equals ten
percent of the first $9,720 of earned income and 20 percent of earned income over
$14,860 but less than $16,800. The credit is reduced by 10.3 percent of earned income
or adjusted gross income, whichever is greater, in excess of $17,890, but in no case is
the credit less than zero.
(e) For a nonresident or part-year resident, the credit must be allocated based on the
percentage calculated under section 290.06, subdivision 2c, paragraph (e).
(f) For a person who was a resident for the entire tax year and has earned income
not subject to tax under this chapter, including income excluded under section 290.01,
subdivision 19b , clause (9) or (15), the credit must be allocated based on the ratio of
federal adjusted gross income reduced by the earned income not subject to tax under
this chapter over federal adjusted gross income. For purposes of this paragraph, the
subtractions for military pay under section 290.01, subdivision 19b, clauses (10) and (11),
are not considered "earned income not subject to tax under this chapter."
For the purposes of this paragraph, the exclusion of combat pay under section 112
of the Internal Revenue Code is not considered "earned income not subject to tax under
this chapter."
(g) For tax years beginning after December 31, 2007, and before December 31,
2010, the $5,770 in paragraph (b), the $15,080 in paragraph (c), and the $17,890 in
paragraph (d), after being adjusted for inflation under subdivision 7, are each increased by
$3,000 for married taxpayers filing joint returns. For tax years beginning after December
31, 2008, the commissioner shall annually adjust the $3,000 by the percentage determined
pursuant to the provisions of section 1(f) of the Internal Revenue Code, except that in
section 1(f)(3)(B), the word "2007" shall be substituted for the word "1992." For 2009,
the commissioner shall then determine the percent change from the 12 months ending on
August 31, 2007, to the 12 months ending on August 31, 2008, and in each subsequent
year, from the 12 months ending on August 31, 2007, to the 12 months ending on August
31 of the year preceding the taxable year. The earned income thresholds as adjusted
for inflation must be rounded to the nearest $10. If the amount ends in $5, the amount
is rounded up to the nearest $10. The determination of the commissioner under this
subdivision is not a rule under the Administrative Procedure Act.
(h) For tax years beginning after December 31, 2010, and before January 1, 2013,
the $5,770 in paragraph (b), the $15,800 in paragraph (c), and the $17,890 in paragraph
(d), after being adjusted for inflation under subdivision 7, are each increased by $5,000
for married taxpayers filing joint returns. For tax years beginning after December 31,
2010, the commissioner shall annually adjust the $5,000 by the percentage determined
pursuant to the provisions of section 1(f) of the Internal Revenue Code, except that in
section 1(f)(3)(B), the word "2008" shall be substituted for the word "1992." For 2011,
the commissioner shall then determine the percent change from the 12 months ending on
August 31, 2008, to the 12 months ending on August 31, 2010, and in each subsequent
year, from the 12 months ending on August 31, 2008, to the 12 months ending on August
31 of the year preceding the taxable year. The earned income thresholds as adjusted
for inflation must be rounded to the nearest $10. If the amount ends in $5, the amount
is rounded up to the nearest $10. The determination of the commissioner under this
subdivision is not a rule under the Administrative Procedure Act.
(h) (i) The commissioner shall construct tables showing the amount of the credit
at various income levels and make them available to taxpayers. The tables shall follow
the schedule contained in this subdivision, except that the commissioner may graduate
the transition between income brackets.
EFFECTIVE DATE.This section is effective for taxable years beginning after
December 31, 2010.

    Sec. 8. Minnesota Statutes 2010, section 290.0675, subdivision 1, is amended to read:
    Subdivision 1. Definitions. (a) For purposes of this section the following terms
have the meanings given.
(b) "Earned income" means the sum of the following, to the extent included in
Minnesota taxable income:
(1) earned income as defined in section 32(c)(2) of the Internal Revenue Code;
(2) income received from a retirement pension, profit-sharing, stock bonus, or
annuity plan; and
(3) Social Security benefits as defined in section 86(d)(1) of the Internal Revenue
Code.
(c) "Taxable income" means net income as defined in section 290.01, subdivision 19.
(d) "Earned income of lesser-earning spouse" means the earned income of the
spouse with the lesser amount of earned income as defined in paragraph (b) for the taxable
year minus the sum of (i) the amount for one exemption under section 151(d) of the
Internal Revenue Code and (ii) one-half the amount of the standard deduction under
section 63(c)(2)(A) and (4) of the Internal Revenue Code minus one-half of any addition
required under section 290.01, subdivision 19a, clause (20), and one-half of the addition
that would have been required under section 290.01, subdivision 19a, clause (20), if the
taxpayer had claimed the standard deduction.
EFFECTIVE DATE.This section is effective for taxable years beginning after
December 31, 2010.

    Sec. 9. Minnesota Statutes 2010, section 290A.03, subdivision 15, as amended by
Laws 2011, chapter 8, section 6, is amended to read:
    Subd. 15. Internal Revenue Code. For taxable years beginning before January 1,
2010, and after December 31, 2010, "Internal Revenue Code" means the Internal Revenue
Code of 1986, as amended through March 18, 2010; and for taxable years beginning after
December 31, 2009, and before January 1, 2011, "Internal Revenue Code" means the
Internal Revenue Code of 1986, as amended through December 31, 2010.
EFFECTIVE DATE.This section is effective for property tax refunds based on
property taxes payable after December 31, 2010, and rent paid after December 31, 2009.

    Sec. 10. Minnesota Statutes 2010, section 291.005, subdivision 1, is amended to read:
    Subdivision 1. Scope. Unless the context otherwise clearly requires, the following
terms used in this chapter shall have the following meanings:
    (1) "Commissioner" means the commissioner of revenue or any person to whom the
commissioner has delegated functions under this chapter.
    (2) "Federal gross estate" means the gross estate of a decedent as required to be
valued and otherwise determined for federal estate tax purposes under the Internal
Revenue Code.
    (3) "Internal Revenue Code" means the United States Internal Revenue Code of
1986, as amended through March 18 December 31, 2010, but without regard to the
provisions of sections 501 and 901 of Public Law 107-16, as amended by Public Law
111-312, and section 301(c) of Public Law 111-312.
    (4) "Minnesota adjusted taxable estate" means federal adjusted taxable estate as
defined by section 2011(b)(3) of the Internal Revenue Code, increased by the amount of
deduction for state death taxes allowed under section 2058 of the Internal Revenue Code.
    (5) "Minnesota gross estate" means the federal gross estate of a decedent after (a)
excluding therefrom any property included therein which has its situs outside Minnesota,
and (b) including therein any property omitted from the federal gross estate which is
includable therein, has its situs in Minnesota, and was not disclosed to federal taxing
authorities.
    (6) "Nonresident decedent" means an individual whose domicile at the time of
death was not in Minnesota.
    (7) "Personal representative" means the executor, administrator or other person
appointed by the court to administer and dispose of the property of the decedent. If there
is no executor, administrator or other person appointed, qualified, and acting within this
state, then any person in actual or constructive possession of any property having a situs in
this state which is included in the federal gross estate of the decedent shall be deemed
to be a personal representative to the extent of the property and the Minnesota estate tax
due with respect to the property.
    (8) "Resident decedent" means an individual whose domicile at the time of death
was in Minnesota.
    (9) "Situs of property" means, with respect to real property, the state or country in
which it is located; with respect to tangible personal property, the state or country in which
it was normally kept or located at the time of the decedent's death; and with respect to
intangible personal property, the state or country in which the decedent was domiciled
at death.
EFFECTIVE DATE.This section is effective the day following final enactment.

ARTICLE 3

PROPERTY TAXES

    Section 1. Minnesota Statutes 2010, section 275.025, is amended to read:
275.025 STATE GENERAL TAX.
    Subdivision 1. Levy amount. The state general levy is levied against
commercial-industrial property and seasonal residential recreational property, as defined in
this section. The state general levy base amount is $592,000,000 $810,826,000 for taxes
payable in 2002 2012. For taxes payable in subsequent years, the levy base amount is
increased each year by multiplying the levy base amount for the prior year by the sum
of one plus the rate of increase, if any, in the implicit price deflator for government
consumption expenditures and gross investment for state and local governments prepared
by the Bureau of Economic Analysts of the United States Department of Commerce for
the 12-month period ending March 31 of the year prior to the year the taxes are payable.
The tax under this section is not treated as a local tax rate under section 469.177 and is not
the levy of a governmental unit under chapters 276A and 473F.
The commissioner shall may increase or decrease the preliminary or final rate for a
year as necessary to account for errors and tax base changes that affected a preliminary
or final rate for either or both of the two preceding two years. Adjustments are allowed
only to the extent that the necessary information is available to the commissioner at the
time the rates for a year must be certified, and for the following reasons:
(1) an erroneous report of taxable value by a local official;
(2) an erroneous calculation by the commissioner; and
(3) an increase or decrease in taxable value for commercial-industrial or seasonal
residential recreational property reported on the abstracts of tax lists submitted under
section 275.29 that was not reported on the abstracts of assessment submitted under
section 270C.89 for the same year.
The commissioner may, but need not, shall make the allowed adjustments if the total
difference in the tax levied for the year affected by the error or change would be less
than have been $100,000 or more.
    Subd. 2. Commercial-industrial tax capacity. For the purposes of this section,
"commercial-industrial tax capacity" means the net tax capacity of all taxable property
classified as class 3 or class 5(1) under section 273.13, except for electric generation
attached machinery under class 3 and property described in section 473.625. County
commercial-industrial tax capacity amounts are not adjusted for the captured net tax
capacity of a tax increment financing district under section 469.177, subdivision 2, the
net tax capacity of transmission lines deducted from a local government's total net tax
capacity under section 273.425, or fiscal disparities contribution and distribution net
tax capacities under chapter 276A or 473F.
    Subd. 3. Seasonal residential recreational tax capacity. For the purposes of this
section, "seasonal residential recreational tax capacity" means the net tax capacity of tier
III of class 1c under section 273.13, subdivision 22, and all class 4c(1) and 4c(3)(ii)
property under section 273.13, subdivision 25, except that the first $76,000 of market
value of each noncommercial class 4c(1) property has a tax capacity for this purpose
equal to 40 percent of its net tax capacity under section 273.13 and the net tax capacity
of the excess of market value over $1,000,000 of each single unit noncommercial class
4c(1) property is excluded.
    Subd. 4. Apportionment and levy of state general tax. Ninety-five 95.1 percent of
the state general tax must be levied by applying a uniform rate to all commercial-industrial
tax capacity and five 4.9 percent of the state general tax must be levied by applying a
uniform rate to all seasonal residential recreational tax capacity. On or before October 1
each year, the commissioner of revenue shall certify the preliminary state general levy
rates to each county auditor that must be used to prepare the notices of proposed property
taxes for taxes payable in the following year. By January 1 of each year, the commissioner
shall certify the final state general levy rate to each county auditor that shall be used
in spreading taxes.
EFFECTIVE DATE.This section is effective for taxes payable in 2012 and
thereafter.

    Sec. 2. [275.026] STATE GENERAL RESIDENTIAL LEVY.
    Subdivision 1. Levy amount. The state general residential levy is levied against (1)
residential homestead tax capacity, (2) agricultural homestead tax capacity, (3) residential
nonhomestead tax capacity, and (4) seasonal residential recreational tax capacity, as
defined in this section. The state general residential levy amount is $44,330,000 for taxes
payable in 2012. For taxes payable in subsequent years, the amount of the levy for each
year is computed by multiplying the general residential levy amount for the prior year by
the sum of one plus the rate of increase, if any, in the implicit price deflator for government
consumption expenditures and gross investment for state and local governments prepared
by the Bureau of Economic Analysts of the United States Department of Commerce for
the 12-month period ending March 31 of the year prior to the year the taxes are payable.
The tax under this section is not treated as a local tax rate under section 469.177 and is
not the levy of a governmental unit under chapters 276A and 473F. None of the tax bases
defined in this section are adjusted for the captured net tax capacity of a tax increment
financing district under section 469.177, subdivision 2.
The commissioner may increase or decrease the preliminary or final rate for a year
as necessary to account for errors and tax base changes that affected a preliminary or final
rate for either or both of the preceding two years. Adjustments are allowed only to the
extent that the necessary information is available to the commissioner at the time the rates
for a year must be certified, and for the following reasons:
(1) an erroneous report of taxable value by a local official;
(2) an erroneous calculation by the commissioner; and
(3) an increase or decrease in taxable value for the residential classes subject to tax
under this section that was reported on the abstracts of tax lists submitted under section
275.29, but not reported on the abstracts of assessment submitted under section 270C.89
for the same year.
The commissioner shall make the allowed adjustments if the total difference in the tax
levied for the year affected by the error or change would have been $100,000 or more.
    Subd. 2. Residential homestead tax capacity. For the purposes of this section,
"residential homestead tax capacity" means the market value in excess of $1,000,000
for each tract of single unit property classified as class 1a or 1b under section 273.13,
subdivision 22, times one percent.
    Subd. 3. Agricultural homestead tax capacity. For the purposes of this section,
"agricultural homestead tax capacity" means the market value in excess of $1,000,000 of
the house, garage, and surrounding one acre of land for each tract of single unit property
classified as agricultural homestead property under section 273.13, subdivision 23, times
one percent.
    Subd. 4. Residential nonhomestead tax capacity. For the purposes of this section,
"residential nonhomestead tax capacity" means one percent times the market value in
excess of $1,000,000 for (1) each tract of taxable property classified as class 4bb under
section 273.13, subdivision 25; and (2) each tract of single-unit property classified as class
4(b)(1) under section 273.13, subdivision 25.
    Subd. 5. Seasonal residential recreational tax capacity. For the purposes of
this section, "seasonal residential recreational tax capacity" means the market value in
excess of $1,000,000 for each tract of single unit property classified as seasonal residential
recreational property not used for commercial purposes under section 273.13, subdivision
25, times one percent.
    Subd. 6. Apportionment and levy of state general tax. (a) The state general
residential levy must be levied by applying a uniform rate to all the residential homestead
tax capacity, agricultural homestead tax capacity, residential nonhomestead tax capacity,
and seasonal residential recreational tax capacity as defined in this section.
(b) On or before October 1 each year, the commissioner of revenue shall determine
and certify the preliminary rate for the state general residential levy to each county auditor
that must be used to prepare the notices of proposed property taxes for taxes payable in the
following year. By January 1 of each year, the commissioner shall determine and certify
the final rate for the state general residential levy to each county auditor that shall be
used in spreading taxes.
EFFECTIVE DATE.This section is effective for taxes payable in 2012 and
thereafter.

    Sec. 3. Minnesota Statutes 2010, section 276.112, is amended to read:
276.112 STATE PROPERTY TAXES; COUNTY TREASURER.
On the estimated payment and settlement dates provided in this chapter for
the settlement of taxes levied by school districts, the county treasurer must make
full settlement with the county auditor for all receipts of state property taxes levied
under section sections 275.025 and 275.026, and must transmit those receipts to the
commissioner of revenue by electronic means on the dates and according to the provisions
applicable to distributions to school districts.
EFFECTIVE DATE.This section is effective for taxes payable in 2012 and
thereafter.

    Sec. 4. Minnesota Statutes 2010, section 290A.04, subdivision 2h, is amended to read:
    Subd. 2h. Additional refund. (a) If the gross property taxes payable on a
homestead increase more than 12 percent over the property taxes payable in the prior
year on the same property that is owned and occupied by the same owner on January
2 of both years, and the amount of that increase is $100 or more, a claimant who is a
homeowner shall be allowed an additional refund equal to 60 percent of the amount of
the increase over the greater of 12 percent of the prior year's property taxes payable or
$100. This subdivision shall not apply to any increase in the gross property taxes payable
attributable to improvements made to the homestead after the assessment date for the prior
year's taxes. This subdivision shall not apply to any increase in the gross property taxes
payable attributable to (1) the termination of valuation exclusions under section 273.11,
subdivision 16 ; and (2) for taxes payable in 2012 only, the tax under section 275.026.
The maximum refund allowed under this subdivision is $1,000.
(b) For purposes of this subdivision "gross property taxes payable" means property
taxes payable determined without regard to the refund allowed under this subdivision.
(c) In addition to the other proofs required by this chapter, each claimant under
this subdivision shall file with the property tax refund return a copy of the property tax
statement for taxes payable in the preceding year or other documents required by the
commissioner.
(d) Upon request, the appropriate county official shall make available the names and
addresses of the property taxpayers who may be eligible for the additional property tax
refund under this section. The information shall be provided on a magnetic computer
disk. The county may recover its costs by charging the person requesting the information
the reasonable cost for preparing the data. The information may not be used for any
purpose other than for notifying the homeowner of potential eligibility and assisting the
homeowner, without charge, in preparing a refund claim.
EFFECTIVE DATE.This section is effective for refunds based on property taxes
payable in 2012 and thereafter.

ARTICLE 4

SALES AND USE TAX

    Section 1. Minnesota Statutes 2010, section 297A.61, subdivision 3, is amended to
read:
    Subd. 3. Sale and purchase. (a) "Sale" and "purchase" include, but are not limited
to, each of the transactions listed in this subdivision.
    (b) Sale and purchase include:
    (1) any transfer of title or possession, or both, of tangible personal property, whether
absolutely or conditionally, for a consideration in money or by exchange or barter; and
    (2) the leasing of or the granting of a license to use or consume, for a consideration
in money or by exchange or barter, tangible personal property, other than a manufactured
home used for residential purposes for a continuous period of 30 days or more.
    (c) Sale and purchase include the production, fabrication, printing, or processing of
tangible personal property for a consideration for consumers who furnish either directly or
indirectly the materials used in the production, fabrication, printing, or processing.
    (d) Sale and purchase include the preparing for a consideration of food.
Notwithstanding section 297A.67, subdivision 2, taxable food includes, but is not limited
to, the following:
    (1) prepared food sold by the retailer;
    (2) soft drinks;
    (3) candy;
    (4) dietary supplements; and
    (5) all food sold through vending machines.
    (e) A sale and a purchase includes the furnishing for a consideration of electricity,
gas, water, or steam for use or consumption within this state.
    (f) A sale and a purchase includes the transfer for a consideration of prewritten
computer software whether delivered electronically, by load and leave, or otherwise. A
sale and purchase also includes the right to access and use prewritten computer software
for a consideration, where possession of the software is maintained by the seller or third
party, regardless of whether the consideration is paid on a per use, per user, per license,
subscription, or some other basis.
    (g) A sale and a purchase includes the furnishing for a consideration of the following
services:
    (1) the privilege of admission to places of amusement, amusement events,
exhibitions, selling events, recreational areas, or athletic events, including the rental of
box seats and suites, and the making available of amusement devices, tanning facilities,
reducing salons, steam baths, Turkish baths, health clubs, and spas or athletic facilities.
"Exhibitions" includes, but is not limited to, trade shows, boat shows, home shows, garden
shows, and other similar events. "Selling events" includes, but is not limited to, flea
markets, estate sales, auctions, and other similar events;
    (2) lodging and related services by a hotel, rooming house, resort, campground,
motel, or trailer camp, including furnishing the guest of the facility with access to
telecommunication services, and the granting of any similar license to use real property in
a specific facility, other than the renting or leasing of it for a continuous period of 30 days
or more under an enforceable written agreement that may not be terminated without prior
notice and including accommodations intermediary service provided in connection with
other services provided under this clause;
    (3) nonresidential parking services, whether on a contractual, hourly, or other
periodic basis, except for parking at a meter;
    (4) the granting of membership in a club, association, or other organization if:
    (i) the club, association, or other organization makes available for the use of its
members sports and athletic facilities, without regard to whether a separate charge is
assessed for use of the facilities; and
    (ii) use of the sports and athletic facility is not made available to the general public
on the same basis as it is made available to members.
Granting of membership means both onetime initiation fees and periodic membership
dues. Sports and athletic facilities include golf courses; tennis, racquetball, handball, and
squash courts; basketball and volleyball facilities; running tracks; exercise equipment;
swimming pools; and other similar athletic or sports facilities;
    (5) delivery of aggregate materials by a third party, excluding delivery of aggregate
material used in road construction, and delivery of concrete block by a third party if
the delivery would be subject to the sales tax if provided by the seller of the concrete
block; and
    (6) services as provided in this clause:
    (i) laundry and dry cleaning services including cleaning, pressing, repairing, altering,
and storing clothes, linen services and supply, cleaning and blocking hats, and carpet,
drapery, upholstery, and industrial cleaning. Laundry and dry cleaning services do not
include services provided by coin operated facilities operated by the customer;
    (ii) motor vehicle washing, waxing, and cleaning services, including services
provided by coin operated facilities operated by the customer, and rustproofing,
undercoating, and towing of motor vehicles;
    (iii) building and residential cleaning, maintenance, and disinfecting services and
pest control and exterminating services;
    (iv) detective, security, burglar, fire alarm, and armored car services; but not
including services performed within the jurisdiction they serve by off-duty licensed peace
officers as defined in section 626.84, subdivision 1, or services provided by a nonprofit
organization for monitoring and electronic surveillance of persons placed on in-home
detention pursuant to court order or under the direction of the Minnesota Department
of Corrections;
    (v) pet grooming services;
    (vi) lawn care, fertilizing, mowing, spraying and sprigging services; garden planting
and maintenance; tree, bush, and shrub pruning, bracing, spraying, and surgery; indoor
plant care; tree, bush, shrub, and stump removal, except when performed as part of a land
clearing contract as defined in section 297A.68, subdivision 40; and tree trimming for
public utility lines. Services performed under a construction contract for the installation of
shrubbery, plants, sod, trees, bushes, and similar items are not taxable;
    (vii) massages, except when provided by a licensed health care facility or
professional or upon written referral from a licensed health care facility or professional for
treatment of illness, injury, or disease; and
    (viii) the furnishing of lodging, board, and care services for animals in kennels and
other similar arrangements, but excluding veterinary and horse boarding services.
    In applying the provisions of this chapter, the terms "tangible personal property" and
"retail sale" include taxable services listed in clause (6), items (i) to (vi) and (viii), and
the provision of these taxable services, unless specifically provided otherwise. Services
performed by an employee for an employer are not taxable. Services performed by a
partnership or association for another partnership or association are not taxable if one
of the entities owns or controls more than 80 percent of the voting power of the equity
interest in the other entity. Services performed between members of an affiliated group
of corporations are not taxable.
For purposes of the preceding sentence, "affiliated group of corporations" means
those entities that would be classified as members of an affiliated group as defined under
United States Code, title 26, section 1504, disregarding the exclusions in section 1504(b).
    For purposes of clause (5), "road construction" means construction of (1) public
roads, (2) cartways, and (3) private roads in townships located outside of the seven-county
metropolitan area up to the point of the emergency response location sign.
    (h) A sale and a purchase includes the furnishing for a consideration of tangible
personal property or taxable services by the United States or any of its agencies or
instrumentalities, or the state of Minnesota, its agencies, instrumentalities, or political
subdivisions.
    (i) A sale and a purchase includes the furnishing for a consideration of
telecommunications services, ancillary services associated with telecommunication
services, cable television services, and direct satellite services, and ring tones.
Telecommunication services include, but are not limited to, the following services,
as defined in section 297A.669: air-to-ground radiotelephone service, mobile
telecommunication service, postpaid calling service, prepaid calling service, prepaid
wireless calling service, and private communication services. The services in this
paragraph are taxed to the extent allowed under federal law.
    (j) A sale and a purchase includes the furnishing for a consideration of installation if
the installation charges would be subject to the sales tax if the installation were provided
by the seller of the item being installed.
    (k) A sale and a purchase includes the rental of a vehicle by a motor vehicle dealer
to a customer when (1) the vehicle is rented by the customer for a consideration, or (2)
the motor vehicle dealer is reimbursed pursuant to a service contract as defined in section
59B.02, subdivision 11.
EFFECTIVE DATE.This section is effective for sales and purchases made after
June 30, 2011, except the changes made to paragraph (g), clause (2), are effective the
day following final enactment.

    Sec. 2. Minnesota Statutes 2010, section 297A.61, subdivision 25, is amended to read:
    Subd. 25. Cable television service. "Cable television service" means the
transmission of video, audio, or other programming service to purchasers, and the
subscriber interaction, if any, required for the selection or use of the programming service,
regardless of whether the programming is transmitted over facilities owned or operated by
the cable service provider or over facilities owned or operated by one or more dealers of
communications services. The term includes point-to-multipoint distribution services by
which programming is transmitted or broadcast by microwave or other equipment directly
to the subscriber's premises. The term includes basic, extended, premium, pay-per-view,
digital, and music services.
EFFECTIVE DATE.This section is effective for sales and purchases made after
June 30, 2011.

    Sec. 3. Minnesota Statutes 2010, section 297A.61, subdivision 27, is amended to read:
    Subd. 27. Direct satellite service. "Direct satellite service" means the transmission
of video, audio, or other programming services transmitted or broadcast by satellite
directly to the subscriber's premises subscriber without the use of ground receiving
or distribution equipment, except at the subscriber's premises subscriber location or in
the uplink process to the satellite. The term also includes any subscriber interaction,
if any, required for the selection or use of the programming service as well as any
point-to-multipoint distribution services transmitted or broadcast by satellite or other
equipment directly to the subscriber. The term includes any and all service packages and
formats as well as pay-per-view, digital video recorder, and digital music services.
EFFECTIVE DATE.This section is effective for sales and purchases made after
June 30, 2011.

    Sec. 4. Minnesota Statutes 2010, section 297A.61, is amended by adding a subdivision
to read:
    Subd. 47. Accommodations intermediary. "Accommodations intermediary"
means any person or entity, other than an accommodations provider, that facilitates the sale
of lodging as defined in subdivision 3, paragraph (g), clause (2), and that charges a room
charge to a customer. The term "facilitates the sale" includes brokering, coordinating, or in
any way arranging for the purchase of or the right to use accommodations by a customer.
EFFECTIVE DATE.This section is effective the day following final enactment.

    Sec. 5. Minnesota Statutes 2010, section 297A.61, is amended by adding a subdivision
to read:
    Subd. 48. Accommodations provider. "Accommodations provider" means any
person or entity that furnishes lodging as defined in subdivision 3, paragraph (g), clause
(2), to the general public for compensation. The term "furnishes" includes the sale of use
or possession, or the sale of the right to use or possess.
EFFECTIVE DATE.This section is effective the day following final enactment.

    Sec. 6. Minnesota Statutes 2010, section 297A.64, subdivision 1, is amended to read:
    Subdivision 1. Tax imposed. A tax is imposed on the lease or rental in this state
for not more than 28 days of a passenger automobile as defined in section 168.002,
subdivision 24 , a van as defined in section 168.002, subdivision 40, or a pickup truck as
defined in section 168.002, subdivision 26. The rate of tax is 6.2 7.2 percent of the sales
price. The tax applies whether or not the vehicle is licensed in the state.
EFFECTIVE DATE.This section is effective for leases or rentals entered into
after June 30, 2011.

    Sec. 7. Minnesota Statutes 2010, section 297A.66, is amended by adding a subdivision
to read:
    Subd. 4a. Solicitor. (a) A retailer is presumed to have a solicitor in this state if it
enters into an agreement with a resident under which the resident, for a commission or
other consideration, directly or indirectly refers potential customers, whether by a link on
an Internet Web site, or otherwise, to the seller. This paragraph only applies if the total
gross receipts from sales to customers located in this state who were referred to the retailer
by all residents with this type of agreement with the retailer are at least $10,000 in the
12-month period ending on the last day of the most recent calendar quarter before the
calendar quarter in which the sale is made.
(b) The presumption under paragraph (a) may be rebutted by proof that the resident
with whom the retailer has an agreement did not engage in any solicitation in this state
on behalf of the retailer that would satisfy the nexus requirements of the United States
Constitution during the 12-month period in question. Nothing in this section shall be
construed to narrow the scope of the terms affiliate, agent, salesperson, canvasser, or other
representative for purposes of subdivision 1, paragraph (a).
(c) For purposes of this paragraph, "resident" includes an individual who is a resident
of this state, as defined in section 290.01, or a business that owns tangible personal property
located in this state or has one or more employees providing services for it in this state.
EFFECTIVE DATE.This section is effective for sales and purchases made after
June 30, 2011.

    Sec. 8. Minnesota Statutes 2010, section 297A.66, is amended by adding a subdivision
to read:
    Subd. 6. Lodging services. An accommodations intermediary shall collect sales
tax and remit it to the commissioner under section 297A.77 for services provided in
connection with or for lodging located in this state.
EFFECTIVE DATE.This section is effective the day following final enactment.

    Sec. 9. Minnesota Statutes 2010, section 297A.668, is amended by adding a
subdivision to read:
    Subd. 9. Florist sales. (a) Notwithstanding other subdivisions of this section, the
retail sale of "florist sales" is sourced as follows:
(1) When a Minnesota retailer takes a florist sales order directly from a customer,
whether or not the customer is physically present in Minnesota when placing the order,
and delivers the items to the customer or a third person, either within this state or outside
this state, and regardless of the delivery method, the florist sale is sourced according to
subdivision 2.
(2) When one retailer transmits a florist sales order to another retailer of florist sales
through a floral network service or floral delivery association, whether by telephone,
telegraph, Internet, or other means of communication, the florist sale is sourced to the
location of the retailer which originally takes the order from the customer and accepts
payment.
(b) For purposes of this subdivision, florist sales means sales at retail of flowers,
wreaths, floral bouquets, potted plants, hospital baskets, funeral designs, seeds, nursery
seedling stock, trees, shrubs, plants, sod, soil, bulbs, sand, rock, and all other floral
or nursery products.
EFFECTIVE DATE.This section is effective for sales and purchases made after
June 30, 2011.

    Sec. 10. Minnesota Statutes 2010, section 297A.70, subdivision 6, is amended to read:
    Subd. 6. Ambulances. The lease of a motor vehicle for use as an ambulance by
an ambulance service licensed under section 144E.10 that is equipped and specifically
intended for emergency response or for providing ambulance services is exempt.
EFFECTIVE DATE.This section is effective for sales and purchases made after
June 30, 2011.

    Sec. 11. Minnesota Statutes 2010, section 297A.94, is amended to read:
297A.94 DEPOSIT OF REVENUES.
(a) Except as provided in this section, the commissioner shall deposit the revenues,
including interest and penalties, derived from the taxes imposed by this chapter in the state
treasury and credit them to the general fund.
(b) The commissioner shall deposit taxes in the Minnesota agricultural and economic
account in the special revenue fund if:
(1) the taxes are derived from sales and use of property and services purchased for
the construction and operation of an agricultural resource project; and
(2) the purchase was made on or after the date on which a conditional commitment
was made for a loan guaranty for the project under section 41A.04, subdivision 3.
The commissioner of management and budget shall certify to the commissioner the date
on which the project received the conditional commitment. The amount deposited in
the loan guaranty account must be reduced by any refunds and by the costs incurred by
the Department of Revenue to administer and enforce the assessment and collection of
the taxes.
(c) The commissioner shall deposit the revenues, including interest and penalties,
derived from the taxes imposed on sales and purchases included in section 297A.61,
subdivision 3 , paragraph (g), clauses (1) and (4), in the state treasury, and credit them
as follows:
(1) first to the general obligation special tax bond debt service account in each fiscal
year the amount required by section 16A.661, subdivision 3, paragraph (b); and
(2) after the requirements of clause (1) have been met, the balance to the general
fund.
(d) The commissioner shall deposit the revenues, including interest and penalties,
collected under section 297A.64, subdivision 5, in the state treasury and credit them to the
general fund. By July 15 of each year the commissioner shall transfer to the highway user
tax distribution fund an amount equal to the excess fees collected under section 297A.64,
subdivision 5 , for the previous calendar year.
(e) For fiscal year 2001, 97 percent; for fiscal years 2002 and 2003, 87 percent; and
for fiscal year 2004 and thereafter, 72.43 percent of the revenues, including interest and
penalties, transmitted to the commissioner under section 297A.65, must be deposited by
the commissioner in the state treasury as follows:
(1) 50 percent of the receipts must be deposited in the heritage enhancement account
in the game and fish fund, and may be spent only on activities that improve, enhance, or
protect fish and wildlife resources, including conservation, restoration, and enhancement
of land, water, and other natural resources of the state;
(2) 22.5 percent of the receipts must be deposited in the natural resources fund, and
may be spent only for state parks and trails;
(3) 22.5 percent of the receipts must be deposited in the natural resources fund, and
may be spent only on metropolitan park and trail grants;
(4) three percent of the receipts must be deposited in the natural resources fund, and
may be spent only on local trail grants; and
(5) two percent of the receipts must be deposited in the natural resources fund,
and may be spent only for the Minnesota Zoological Garden, the Como Park Zoo and
Conservatory, and the Duluth Zoo.
(f) The revenue dedicated under paragraph (e) may not be used as a substitute
for traditional sources of funding for the purposes specified, but the dedicated revenue
shall supplement traditional sources of funding for those purposes. Land acquired with
money deposited in the game and fish fund under paragraph (e) must be open to public
hunting and fishing during the open season, except that in aquatic management areas or
on lands where angling easements have been acquired, fishing may be prohibited during
certain times of the year and hunting may be prohibited. At least 87 percent of the money
deposited in the game and fish fund for improvement, enhancement, or protection of fish
and wildlife resources under paragraph (e) must be allocated for field operations.
(g) The revenues deposited under paragraphs (a) to (f) do not include the revenues,
including interest and penalties, generated by the sales tax imposed under section
297A.62, subdivision 1a , which must be deposited as provided under the Minnesota
Constitution, article XI, section 15.
(h) The commissioner shall deposit 13.89 percent of the revenues collected under
section 297A.64, subdivision 1, in the state treasury and credit them to a special revenue
fund dedicated to Explore Minnesota Tourism for promotional and marketing purposes
under chapter 116U.
EFFECTIVE DATE.This section is effective for leases or rentals entered into
after June 30, 2011.

    Sec. 12. Minnesota Statutes 2010, section 297B.03, is amended to read:
297B.03 EXEMPTIONS.
    There is specifically exempted from the provisions of this chapter and from
computation of the amount of tax imposed by it the following:
    (1) purchase or use, including use under a lease purchase agreement or installment
sales contract made pursuant to section 465.71, of any motor vehicle by the United States
and its agencies and instrumentalities and by any person described in and subject to the
conditions provided in section 297A.67, subdivision 11;
    (2) purchase or use of any motor vehicle by any person who was a resident of
another state or country at the time of the purchase and who subsequently becomes a
resident of Minnesota, provided the purchase occurred more than 60 days prior to the date
such person began residing in the state of Minnesota and the motor vehicle was registered
in the person's name in the other state or country;
    (3) purchase or use of any motor vehicle by any person making a valid election to be
taxed under the provisions of section 297A.90;
    (4) purchase or use of any motor vehicle previously registered in the state of
Minnesota when such transfer constitutes a transfer within the meaning of section 118,
331, 332, 336, 337, 338, 351, 355, 368, 721, 731, 1031, 1033, or 1563(a) of the Internal
Revenue Code;
    (5) purchase or use of any vehicle owned by a resident of another state and leased
to a Minnesota-based private or for-hire carrier for regular use in the transportation of
persons or property in interstate commerce provided the vehicle is titled in the state of
the owner or secured party, and that state does not impose a sales tax or sales tax on
motor vehicles used in interstate commerce;
    (6) purchase or use of a motor vehicle by a private nonprofit or public educational
institution for use as an instructional aid in automotive training programs operated by the
institution. "Automotive training programs" includes motor vehicle body and mechanical
repair courses but does not include driver education programs;
    (7) purchase of a motor vehicle for use as an ambulance by an ambulance service
licensed under section 144E.10 when that vehicle is equipped and specifically intended for
emergency response or for providing ambulance services;
    (8) purchase of a motor vehicle by or for a public library, as defined in section
134.001, subdivision 2 , as a bookmobile or library delivery vehicle;
    (9) purchase of a ready-mixed concrete truck;
    (10) purchase or use of a motor vehicle by a town for use exclusively for road
maintenance, including snowplows and dump trucks, but not including automobiles,
vans, or pickup trucks;
    (11) purchase or use of a motor vehicle by a corporation, society, association,
foundation, or institution organized and operated exclusively for charitable, religious,
or educational purposes, except a public school, university, or library, but only if the
vehicle is:
    (i) a truck, as defined in section 168.002, a bus, as defined in section 168.002, or a
passenger automobile, as defined in section 168.002, if the automobile is designed and
used for carrying more than nine persons including the driver; and
    (ii) intended to be used primarily to transport tangible personal property or
individuals, other than employees, to whom the organization provides service in
performing its charitable, religious, or educational purpose;
    (12) purchase of a motor vehicle for use by a transit provider exclusively to provide
transit service is exempt if the transit provider is either (i) receiving financial assistance or
reimbursement under section 174.24 or 473.384, or (ii) operating under section 174.29,
473.388 , or 473.405;
    (13) purchase or use of a motor vehicle by a qualified business, as defined in section
469.310 , located in a job opportunity building zone, if the motor vehicle is principally
garaged in the job opportunity building zone and is primarily used as part of or in direct
support of the person's operations carried on in the job opportunity building zone. The
exemption under this clause applies to sales, if the purchase was made and delivery
received during the duration of the job opportunity building zone. The exemption under
this clause also applies to any local sales and use tax; and
    (14) purchase of a leased vehicle by the lessee who was a participant in a
lease-to-own program from a charitable organization that is:
    (i) described in section 501(c)(3) of the Internal Revenue Code; and
    (ii) licensed as a motor vehicle lessor under section 168.27, subdivision 4.
EFFECTIVE DATE.This section is effective the day following final enactment.

    Sec. 13. REVISOR'S INSTRUCTION.
In Minnesota Rules, part 8130.9700, the revisor of statutes shall remove the last
sentence in subpart 3, item B, that reads "Use of equipment on a time-sharing basis,
where access to the equipment is only by means of remote access facilities, is not taxable
leasing of such equipment."
EFFECTIVE DATE.This section is effective for sales and purchases made after
June 30, 2011.

    Sec. 14. REPEALER.
Minnesota Rules, part 8130.0500, subpart 2, is repealed.
EFFECTIVE DATE.This section is effective for sales and purchases made after
June 30, 2011.

ARTICLE 5

SPECIAL TAXES

    Section 1. Minnesota Statutes 2010, section 297I.01, is amended by adding a
subdivision to read:
    Subd. 2a. Affiliated group. "Affiliated group" means a group that includes the
insured and any entity, or group of entities, that controls, is controlled by, or is under
common control with the insured. An entity has control over another entity when: (1) the
entity directly or indirectly or acting through one or more other persons owns, controls,
or has the power to vote 25 percent or more of any class of voting securities of the other
entity; or (2) the entity controls in any manner the election of a majority of the directors or
trustees of the other entity.
EFFECTIVE DATE.This section is effective for nonadmitted insurance policies
that go into effect after July 20, 2011.

    Sec. 2. Minnesota Statutes 2010, section 297I.01, subdivision 9, is amended to read:
    Subd. 9. Gross premiums. "Gross premiums" means total premiums paid by
policyholders and applicants of policies, whether received in the form of money or other
valuable consideration, on property, persons, lives, interests and other risks located,
resident, or to be performed in this state, but excluding consideration and premiums for
reinsurance assumed from other insurance companies.
(a) "Gross premiums" includes the total consideration paid to bail bond agents
for bail bonds.
(b) For title insurance companies, "gross premiums" means the charge for title
insurance made by a title insurance company or its agents according to the company's rate
filing approved by the commissioner of commerce without a deduction for commissions
paid to or retained by the agent. Gross premiums of a title insurance company does not
include any other charge or fee for abstracting, searching, or examining the title, or
escrow, closing, or other related services.
(c) "Gross premiums" includes any workers' compensation special compensation
fund premium surcharge pursuant to section 176.129.
(d) "Gross premiums" for surplus lines nonadmitted insurance includes all
related charges, commissions, and fees received by the licensee any payment made as
consideration for an insurance contract for such insurance, including premium deposits,
assessments, fees, and any other compensation given in consideration for a contract
of insurance. Gross premiums does not include the stamping fee, as provided under
section 60A.2085, subdivision 7, nor the operating assessment, as provided under section
60A.208, subdivision 8 .
EFFECTIVE DATE.This section is effective for nonadmitted insurance policies
that go into effect after July 20, 2011.

    Sec. 3. Minnesota Statutes 2010, section 297I.01, is amended by adding a subdivision
to read:
    Subd. 10a. Home state. "Home state" means the state in which an insured maintains
its principal place of business, or in the case of an individual, the individual's principal
residence; or if 100 percent of the insured risk is located out of the state, the state to
which the greatest percentage of the insured's taxable premium for that insurance contract
is allocated. If more than one insured from an affiliated group are named insureds on a
single nonadmitted insurance contract, the term home state means the home state of the
member of the affiliated group that has the largest percentage of premium attributed to
it under that insurance contract.
EFFECTIVE DATE.This section is effective for nonadmitted insurance policies
that go into effect after July 20, 2011.

    Sec. 4. Minnesota Statutes 2010, section 297I.01, is amended by adding a subdivision
to read:
    Subd. 10b. Independently procured insurance. "Independently procured
insurance" means insurance procured directly by an insured from a nonadmitted insurer.
EFFECTIVE DATE.This section is effective for nonadmitted insurance policies
that go into effect after July 20, 2011.

    Sec. 5. Minnesota Statutes 2010, section 297I.01, is amended by adding a subdivision
to read:
    Subd. 10c. Nonadmitted insurance. "Nonadmitted insurance" means any property
and casualty insurance permitted to be placed directly or through a surplus lines broker
with a nonadmitted insurer.
EFFECTIVE DATE.This section is effective for nonadmitted insurance policies
that go into effect after July 20, 2011.

    Sec. 6. Minnesota Statutes 2010, section 297I.01, is amended by adding a subdivision
to read:
    Subd. 10d. Nonadmitted insurance premium tax. "Nonadmitted insurance
premium tax" means, with respect to surplus lines or independently procured insurance
coverage, any tax, fee, assessment, or other charge imposed directly or indirectly by a
government entity.
EFFECTIVE DATE.This section is effective for nonadmitted insurance policies
that go into effect after July 20, 2011.

    Sec. 7. Minnesota Statutes 2010, section 297I.01, is amended by adding a subdivision
to read:
    Subd. 10e. Nonadmitted insurer. "Nonadmitted insurer" means an insurer not
licensed to engage in the business of insurance in Minnesota, but does not include a risk
retention group as the term is defined in section 2(a)(4) of the Liability Risk Retention Act
of 1986, United States Code, title 15, section 3901(a)(4).
EFFECTIVE DATE.This section is effective for nonadmitted insurance policies
that go into effect after July 20, 2011.

    Sec. 8. Minnesota Statutes 2010, section 297I.01, is amended by adding a subdivision
to read:
    Subd. 15a. Surplus lines broker. "Surplus lines broker" means an individual,
firm, or corporation which is licensed in a state to sell, solicit, or negotiate insurance on
properties, risks, or exposures located or to be performed in a state with nonadmitted
insurers.
EFFECTIVE DATE.This section is effective for nonadmitted insurance policies
that go into effect after July 20, 2011.

    Sec. 9. Minnesota Statutes 2010, section 297I.01, subdivision 16, is amended to read:
    Subd. 16. Taxpayer. "Taxpayer" means any insurance company, association,
surplus lines licensee broker, automobile risk self-insurer, or insured or any other person
or entity required to pay any amount due under this chapter.
EFFECTIVE DATE.This section is effective for nonadmitted insurance policies
that go into effect after July 20, 2011.

    Sec. 10. Minnesota Statutes 2010, section 297I.05, subdivision 7, is amended to read:
    Subd. 7. Surplus lines Nonadmitted insurance premium tax. (a) A tax is imposed
on surplus lines licensees brokers. The rate of tax is equal to three percent of the gross
premiums less return premiums paid by an insured whose home state is Minnesota.
(b) If surplus lines insurance placed by a surplus lines licensee and taxed under this
subdivision covers a subject of insurance residing, located, or to be performed outside this
state, a proper pro rata portion of the entire premium payable for all of that insurance must
be allocated according to the subjects of insurance residing, located, or to be performed
in this state. A tax is imposed on persons, firms, or corporations that procure insurance
directly from a nonadmitted insurer. The rate of tax is equal to two percent of the gross
premiums less return premiums paid by an insured whose home state is Minnesota.
(c) No state other than the home state of an insured may require any premium tax
payment for nonadmitted insurance. When Minnesota is the home state of the insured,
as provided under section 297I.01, 100 percent of the gross premiums are taxable in
Minnesota with no allocation of the tax to other states.
EFFECTIVE DATE.This section is effective for nonadmitted insurance policies
that go into effect after July 20, 2011.

    Sec. 11. Minnesota Statutes 2010, section 297I.05, subdivision 12, is amended to read:
    Subd. 12. Other entities. (a) A tax is imposed equal to two percent of:
    (1) gross premiums less return premiums written for risks resident or located in
Minnesota by a risk retention group;
    (2) gross premiums less return premiums received by an attorney in fact acting
in accordance with chapter 71A;
    (3) gross premiums less return premiums received pursuant to assigned risk policies
and contracts of coverage under chapter 79;
    (4) the direct funded premium received by the reinsurance association under section
79.34 from self-insurers approved under section 176.181 and political subdivisions that
self-insure; and
    (5) gross premiums less return premiums paid to an insurer other than a licensed
insurance company or a surplus lines licensee broker for coverage of risks resident or
located in Minnesota by a purchasing group or any members of the purchasing group to a
broker or agent for the purchasing group.
    (b) A tax is imposed on a joint self-insurance plan operating under chapter 60F. The
rate of tax is equal to two percent of the total amount of claims paid during the fund year,
with no deduction for claims wholly or partially reimbursed through stop-loss insurance.
    (c) A tax is imposed on a joint self-insurance plan operating under chapter 62H.
The rate of tax is equal to two percent of the total amount of claims paid during the
fund's fiscal year, with no deduction for claims wholly or partially reimbursed through
stop-loss insurance.
    (d) A tax is imposed equal to the tax imposed under section 297I.05, subdivision 5,
on the gross premiums less return premiums on all coverages received by an accountable
provider network or agents of an accountable provider network in Minnesota, in cash or
otherwise, during the year.
EFFECTIVE DATE.This section is effective for nonadmitted insurance policies
that go into effect after July 20, 2011.

    Sec. 12. Minnesota Statutes 2010, section 297I.30, subdivision 1, is amended to read:
    Subdivision 1. General rule. On or before March 1, every taxpayer subject to
taxation under section 297I.05, subdivisions 1 to 5, 9, 10 7, paragraph (b), 12, paragraphs
(a), clauses (1) to (4), (b), (c), and (d), and 14, shall file an annual return for the preceding
calendar year in the form prescribed by the commissioner.
EFFECTIVE DATE.This section is effective for nonadmitted insurance policies
that go into effect after July 20, 2011.

    Sec. 13. Minnesota Statutes 2010, section 297I.30, subdivision 2, is amended to read:
    Subd. 2. Surplus lines licensees brokers and purchasing groups. On or before
February 15 and August 15 of each year, every surplus lines licensee broker subject to
taxation under section 297I.05, subdivision 7, paragraph (a), and every purchasing group
or member of a purchasing group subject to tax under section 297I.05, subdivision 12,
paragraph (a), clause (5), shall file a return with the commissioner for the preceding
six-month period ending December 31, or June 30, in the form prescribed by the
commissioner.
EFFECTIVE DATE.This section is effective for nonadmitted insurance policies
that go into effect after July 20, 2011.

    Sec. 14. REPEALER.
(a) Minnesota Statutes 2010, section 297F.14, subdivision 4, is repealed.
(b) Minnesota Statutes 2010, section 297I.05, subdivisions 9 and 10, are repealed.
EFFECTIVE DATE.Paragraph (a) is effective for claims filed after June 30, 2011.
Paragraph (b) is effective for nonadmitted insurance policies that go into effect after
July 20, 2011.