Bill Text: MN HF290 | 2011-2012 | 87th Legislature | Introduced
Bill Title: Individual income, corporate franchise, and property tax refund conformed to federal law provisions; corporate franchise tax rate reduced; foreign source income preferences eliminated; and foreign royalty subtraction and foreign operating corporations repealed.
Sponsorship: Partisan Bill (Democrat 1)
Status: (Introduced - Dead) 2011-02-01 - Referred by Chair to Property and Local Tax Division [HF290 Detail]
Download: Minnesota-2011-HF290-Introduced.html
1.2relating to taxation; conforming the individual income, corporate franchise, and
1.3property tax refund to certain provisions of federal law; reducing the corporate
1.4franchise tax rate; eliminating the preferences for foreign source income;
1.5repealing the subtraction for foreign royalties; repealing foreign operating
1.6corporations; amending Minnesota Statutes 2010, sections 289A.02, subdivision
1.77; 289A.08, subdivision 3; 290.01, subdivisions 19, 19a, 19c, 19d, 31; 290.06,
1.8subdivision 1; 290.0921, subdivision 1; 290.17, subdivision 4; 290A.03,
1.9subdivision 15; repealing Minnesota Statutes 2010, sections 290.01, subdivision
1.106b; 290.0921, subdivision 7.
1.11BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
1.12 Section 1. Minnesota Statutes 2010, section 289A.02, subdivision 7, is amended to
1.13read:
1.14 Subd. 7. Internal Revenue Code. Unless specifically defined otherwise, "Internal
1.15Revenue Code" means the Internal Revenue Code of 1986, as amended throughMarch
1.1618 December 17, 2010.
1.17EFFECTIVE DATE.This section is effective the day following final enactment.
1.18 Sec. 2. Minnesota Statutes 2010, section 289A.08, subdivision 3, is amended to read:
1.19 Subd. 3. Corporations. (a) A corporation that is subject to the state's jurisdiction to
1.20tax under section290.014, subdivision 5 , must file a return, except that a foreign operating
1.21corporation as defined in section
290.01, subdivision 6b, is not required to file a return.
1.22(b) Members of a unitary business that are required to file a combined report on one
1.23return must designate a member of the unitary business to be responsible for tax matters,
1.24including the filing of returns, the payment of taxes, additions to tax, penalties, interest,
1.25or any other payment, and for the receipt of refunds of taxes or interest paid in excess of
2.1taxes lawfully due. The designated member must be a member of the unitary business that
2.2is filing the single combined report and either:
2.3(1) a corporation that is subject to the taxes imposed by chapter 290; or
2.4(2) a corporation that is not subject to the taxes imposed by chapter 290:
2.5(i) Such corporation consents by filing the return as a designated member under this
2.6clause to remit taxes, penalties, interest, or additions to tax due from the members of the
2.7unitary business subject to tax, and receive refunds or other payments on behalf of other
2.8members of the unitary business. The member designated under this clause is a "taxpayer"
2.9for the purposes of this chapter and chapter 270C, and is liable for any liability imposed
2.10on the unitary business under this chapter and chapter 290.
2.11(ii) If the state does not otherwise have the jurisdiction to tax the member designated
2.12under this clause, consenting to be the designated member does not create the jurisdiction
2.13to impose tax on the designated member, other than as described in item (i).
2.14(iii) The member designated under this clause must apply for a business tax account
2.15identification number.
2.16(c) The commissioner shall adopt rules for the filing of one return on behalf of the
2.17members of an affiliated group of corporations that are required to file a combined report.
2.18All members of an affiliated group that are required to file a combined report must file one
2.19return on behalf of the members of the group under rules adopted by the commissioner.
2.20(d) If a corporation claims on a return that it has paid tax in excess of the amount of
2.21taxes lawfully due, that corporation must include on that return information necessary for
2.22payment of the tax in excess of the amount lawfully due by electronic means.
2.23EFFECTIVE DATE.This section is effective for returns filed for taxable years
2.24beginning after December 31, 2010.
2.25 Sec. 3. Minnesota Statutes 2010, section 290.01, subdivision 19, is amended to read:
2.26 Subd. 19. Net income. The term "net income" means the federal taxable income,
2.27as defined in section 63 of the Internal Revenue Code of 1986, as amended through the
2.28date named in this subdivision, incorporating the federal effective dates of changes to the
2.29Internal Revenue Code and any elections made by the taxpayer in accordance with the
2.30Internal Revenue Code in determining federal taxable income for federal income tax
2.31purposes, and with the modifications provided in subdivisions 19a to 19f.
2.32 In the case of a regulated investment company or a fund thereof, as defined in section
2.33851(a) or 851(g) of the Internal Revenue Code, federal taxable income means investment
2.34company taxable income as defined in section 852(b)(2) of the Internal Revenue Code,
2.35except that:
3.1 (1) the exclusion of net capital gain provided in section 852(b)(2)(A) of the Internal
3.2Revenue Code does not apply;
3.3 (2) the deduction for dividends paid under section 852(b)(2)(D) of the Internal
3.4Revenue Code must be applied by allowing a deduction for capital gain dividends and
3.5exempt-interest dividends as defined in sections 852(b)(3)(C) and 852(b)(5) of the Internal
3.6Revenue Code; and
3.7 (3) the deduction for dividends paid must also be applied in the amount of any
3.8undistributed capital gains which the regulated investment company elects to have treated
3.9as provided in section 852(b)(3)(D) of the Internal Revenue Code.
3.10 The net income of a real estate investment trust as defined and limited by section
3.11856(a), (b), and (c) of the Internal Revenue Code means the real estate investment trust
3.12taxable income as defined in section 857(b)(2) of the Internal Revenue Code.
3.13 The net income of a designated settlement fund as defined in section 468B(d) of
3.14the Internal Revenue Code means the gross income as defined in section 468B(b) of the
3.15Internal Revenue Code.
3.16 The Internal Revenue Code of 1986, as amended throughMarch 18 December
3.1717, 2010, shall be in effect for taxable years beginning after December 31, 1996. The
3.18provisions of the act of January 22, 2010, Public Law 111-126, to accelerate the benefits
3.19for charitable cash contributions for the relief of victims of the Haitian earthquake, are
3.20effective at the same time it became effective for federal purposes and apply to the
3.21subtraction under subdivision 19b, clause (6).
3.22 Except as otherwise provided, references to the Internal Revenue Code in
3.23subdivisions 19 to 19f mean the code in effect for purposes of determining net income for
3.24the applicable year.
3.25EFFECTIVE DATE.This section is effective the day following final enactment.
3.26 Sec. 4. Minnesota Statutes 2010, section 290.01, subdivision 19a, is amended to read:
3.27 Subd. 19a. Additions to federal taxable income. For individuals, estates, and
3.28trusts, there shall be added to federal taxable income:
3.29 (1)(i) interest income on obligations of any state other than Minnesota or a political
3.30or governmental subdivision, municipality, or governmental agency or instrumentality
3.31of any state other than Minnesota exempt from federal income taxes under the Internal
3.32Revenue Code or any other federal statute; and
3.33 (ii) exempt-interest dividends as defined in section 852(b)(5) of the Internal Revenue
3.34Code, except:
4.1(A) the portion of the exempt-interest dividends exempt from state taxation under
4.2the laws of the United States; and
4.3(B) the portion of the exempt-interest dividends derived from interest income
4.4on obligations of the state of Minnesota or its political or governmental subdivisions,
4.5municipalities, governmental agencies or instrumentalities, but only if the portion of the
4.6exempt-interest dividends from such Minnesota sources paid to all shareholders represents
4.795 percent or more of the exempt-interest dividends, including any dividends exempt
4.8under subitem (A), that are paid by the regulated investment company as defined in section
4.9851(a) of the Internal Revenue Code, or the fund of the regulated investment company as
4.10defined in section 851(g) of the Internal Revenue Code, making the payment; and
4.11 (iii) for the purposes of items (i) and (ii), interest on obligations of an Indian tribal
4.12government described in section 7871(c) of the Internal Revenue Code shall be treated as
4.13interest income on obligations of the state in which the tribe is located;
4.14 (2) the amount of income, sales and use, motor vehicle sales, or excise taxes paid
4.15or accrued within the taxable year under this chapter and the amount of taxes based on
4.16net income paid, sales and use, motor vehicle sales, or excise taxes paid to any other
4.17state or to any province or territory of Canada, to the extent allowed as a deduction
4.18under section 63(d) of the Internal Revenue Code, but the addition may not be more
4.19than the amount by which the itemized deductions as allowed under section 63(d) of
4.20the Internal Revenue Code exceeds the amount of the standard deduction as defined in
4.21section 63(c) of the Internal Revenue Code, disregarding the amounts allowed under
4.22sections 63(c)(1)(C) and 63(c)(1)(E) of the Internal Revenue Code. For the purpose of
4.23this paragraph, the disallowance of itemized deductions under section 68 of the Internal
4.24Revenue Code of 1986, income, sales and use, motor vehicle sales, or excise taxes are
4.25the last itemized deductions disallowed;
4.26 (3) the capital gain amount of a lump-sum distribution to which the special tax under
4.27section 1122(h)(3)(B)(ii) of the Tax Reform Act of 1986, Public Law 99-514, applies;
4.28 (4) the amount of income taxes paid or accrued within the taxable year under this
4.29chapter and taxes based on net income paid to any other state or any province or territory
4.30of Canada, to the extent allowed as a deduction in determining federal adjusted gross
4.31income. For the purpose of this paragraph, income taxes do not include the taxes imposed
4.32by sections290.0922, subdivision 1 , paragraph (b),
290.9727 ,
290.9728 , and
290.9729 ;
4.33 (5) the amount of expense, interest, or taxes disallowed pursuant to section290.10
4.34other than expenses or interest used in computing net interest income for the subtraction
4.35allowed under subdivision 19b, clause (1);
5.1 (6) the amount of a partner's pro rata share of net income which does not flow
5.2through to the partner because the partnership elected to pay the tax on the income under
5.3section 6242(a)(2) of the Internal Revenue Code;
5.4 (7) 80 percent of the depreciation deduction allowed under section 168(k) of the
5.5Internal Revenue Code. For purposes of this clause, if the taxpayer has an activity that
5.6in the taxable year generates a deduction for depreciation under section 168(k) and the
5.7activity generates a loss for the taxable year that the taxpayer is not allowed to claim for
5.8the taxable year, "the depreciation allowed under section 168(k)" for the taxable year is
5.9limited to excess of the depreciation claimed by the activity under section 168(k) over the
5.10amount of the loss from the activity that is not allowed in the taxable year. In succeeding
5.11taxable years when the losses not allowed in the taxable year are allowed, the depreciation
5.12under section 168(k) is allowed;
5.13 (8) 80 percent of the amount by which the deduction allowed by section 179 of the
5.14Internal Revenue Code exceeds the deduction allowable by section 179 of the Internal
5.15Revenue Code of 1986, as amended through December 31, 2003;
5.16 (9) to the extent deducted in computing federal taxable income, the amount of the
5.17deduction allowable under section 199 of the Internal Revenue Code;
5.18 (10) for taxable years beginning before January 1, 2013, the exclusion allowed
5.19under section 139A of the Internal Revenue Code for federal subsidies for prescription
5.20drug plans;
5.21(11) the amount of expenses disallowed under section 290.10, subdivision 2;
5.22 (12) for taxable years beginning before January 1, 2010, the amount deducted for
5.23qualified tuition and related expenses under section 222 of the Internal Revenue Code, to
5.24the extent deducted from gross income;
5.25 (13) for taxable years beginning before January 1, 2010, the amount deducted for
5.26certain expenses of elementary and secondary school teachers under section 62(a)(2)(D)
5.27of the Internal Revenue Code, to the extent deducted from gross income;
5.28(14) the additional standard deduction for property taxes payable that is allowable
5.29under section 63(c)(1)(C) of the Internal Revenue Code;
5.30(15) the additional standard deduction for qualified motor vehicle sales taxes
5.31allowable under section 63(c)(1)(E) of the Internal Revenue Code;
5.32(16) discharge of indebtedness income resulting from reacquisition of business
5.33indebtedness and deferred under section 108(i) of the Internal Revenue Code; and
5.34(17) the amount of unemployment compensation exempt from tax under section
5.3585(c) of the Internal Revenue Code.
6.1EFFECTIVE DATE.This section is effective for taxable years beginning after
6.2December 31, 2009.
6.3 Sec. 5. Minnesota Statutes 2010, section 290.01, subdivision 19c, is amended to read:
6.4 Subd. 19c. Corporations; additions to federal taxable income. For corporations,
6.5there shall be added to federal taxable income:
6.6 (1) the amount of any deduction taken for federal income tax purposes for income,
6.7excise, or franchise taxes based on net income or related minimum taxes, including but not
6.8limited to the tax imposed under section290.0922 , paid by the corporation to Minnesota,
6.9another state, a political subdivision of another state, the District of Columbia, or any
6.10foreign country or possession of the United States;
6.11 (2) interest not subject to federal tax upon obligations of: the United States, its
6.12possessions, its agencies, or its instrumentalities; the state of Minnesota or any other
6.13state, any of its political or governmental subdivisions, any of its municipalities, or any
6.14of its governmental agencies or instrumentalities; the District of Columbia; or Indian
6.15tribal governments;
6.16 (3) exempt-interest dividends received as defined in section 852(b)(5) of the Internal
6.17Revenue Code;
6.18 (4) the amount of any net operating loss deduction taken for federal income tax
6.19purposes under section 172 or 832(c)(10) of the Internal Revenue Code or operations loss
6.20deduction under section 810 of the Internal Revenue Code;
6.21 (5) the amount of any special deductions taken for federal income tax purposes
6.22under sections 241 to 247 and 965 of the Internal Revenue Code;
6.23 (6) losses from the business of mining, as defined in section290.05, subdivision 1 ,
6.24clause (a), that are not subject to Minnesota income tax;
6.25 (7) the amount of any capital losses deducted for federal income tax purposes under
6.26sections 1211 and 1212 of the Internal Revenue Code;
6.27 (8) the exempt foreign trade income of a foreign sales corporation under sections
6.28921(a) and 291 of the Internal Revenue Code;
6.29 (9) the amount of percentage depletion deducted under sections 611 through 614 and
6.30291 of the Internal Revenue Code;
6.31 (10) for certified pollution control facilities placed in service in a taxable year
6.32beginning before December 31, 1986, and for which amortization deductions were elected
6.33under section 169 of the Internal Revenue Code of 1954, as amended through December
6.3431, 1985, the amount of the amortization deduction allowed in computing federal taxable
6.35income for those facilities;
7.1 (11) for taxable years beginning before January 1, 2011, the amount of any deemed
7.2dividend from a foreign operating corporation determined pursuant to section290.17,
7.3subdivision 4 , paragraph (g). The deemed dividend shall be reduced by the amount of the
7.4addition to income required by clauses (20), (21), (22), and (23);
7.5 (12) the amount of a partner's pro rata share of net income which does not flow
7.6through to the partner because the partnership elected to pay the tax on the income under
7.7section 6242(a)(2) of the Internal Revenue Code;
7.8 (13) the amount of net income excluded under section 114 of the Internal Revenue
7.9Code;
7.10 (14) any increase in subpart F income, as defined in section 952(a) of the Internal
7.11Revenue Code, for the taxable year when subpart F income is calculated without regard to
7.12the provisions of Division C, title III, section 303(b) of Public Law 110-343 and section
7.13750 of Public Law 111-312;
7.14 (15) 80 percent of the depreciation deduction allowed under section 168(k)(1)(A)
7.15and (k)(4)(A) of the Internal Revenue Code. For purposes of this clause, if the taxpayer
7.16has an activity that in the taxable year generates a deduction for depreciation under
7.17section 168(k)(1)(A) and (k)(4)(A) and the activity generates a loss for the taxable year
7.18that the taxpayer is not allowed to claim for the taxable year, "the depreciation allowed
7.19under section 168(k)(1)(A) and (k)(4)(A)" for the taxable year is limited to excess of the
7.20depreciation claimed by the activity under section 168(k)(1)(A) and (k)(4)(A) over the
7.21amount of the loss from the activity that is not allowed in the taxable year. In succeeding
7.22taxable years when the losses not allowed in the taxable year are allowed, the depreciation
7.23under section 168(k)(1)(A) and (k)(4)(A) is allowed;
7.24 (16) 80 percent of the amount by which the deduction allowed by section 179 of the
7.25Internal Revenue Code exceeds the deduction allowable by section 179 of the Internal
7.26Revenue Code of 1986, as amended through December 31, 2003;
7.27 (17) to the extent deducted in computing federal taxable income, the amount of the
7.28deduction allowable under section 199 of the Internal Revenue Code;
7.29 (18) for taxable years beginning before January 1, 2013, the exclusion allowed
7.30under section 139A of the Internal Revenue Code for federal subsidies for prescription
7.31drug plans;
7.32 (19) the amount of expenses disallowed under section290.10, subdivision 2 ;
7.33 (20) for taxable years beginning before January 1, 2011, an amount equal to the
7.34interest and intangible expenses, losses, and costs paid, accrued, or incurred by any
7.35member of the taxpayer's unitary group to or for the benefit of a corporation that is a
8.1member of the taxpayer's unitary business group that qualifies as a foreign operating
8.2corporation. For purposes of this clause, intangible expenses and costs include:
8.3 (i) expenses, losses, and costs for, or related to, the direct or indirect acquisition,
8.4use, maintenance or management, ownership, sale, exchange, or any other disposition of
8.5intangible property;
8.6 (ii) losses incurred, directly or indirectly, from factoring transactions or discounting
8.7transactions;
8.8 (iii) royalty, patent, technical, and copyright fees;
8.9 (iv) licensing fees; and
8.10 (v) other similar expenses and costs.
8.11For purposes of this clause, "intangible property" includes stocks, bonds, patents, patent
8.12applications, trade names, trademarks, service marks, copyrights, mask works, trade
8.13secrets, and similar types of intangible assets.
8.14This clause does not apply to any item of interest or intangible expenses or costs paid,
8.15accrued, or incurred, directly or indirectly, to a foreign operating corporation with respect
8.16to such item of income to the extent that the income to the foreign operating corporation
8.17is income from sources without the United States as defined in subtitle A, chapter 1,
8.18subchapter N, part 1, of the Internal Revenue Code;
8.19 (21) for taxable years beginning before January 1, 2011, except as already included
8.20in the taxpayer's taxable income pursuant to clause (20), any interest income and income
8.21generated from intangible property received or accrued by a foreign operating corporation
8.22that is a member of the taxpayer's unitary group. For purposes of this clause, income
8.23generated from intangible property includes:
8.24 (i) income related to the direct or indirect acquisition, use, maintenance or
8.25management, ownership, sale, exchange, or any other disposition of intangible property;
8.26 (ii) income from factoring transactions or discounting transactions;
8.27 (iii) royalty, patent, technical, and copyright fees;
8.28 (iv) licensing fees; and
8.29 (v) other similar income.
8.30For purposes of this clause, "intangible property" includes stocks, bonds, patents, patent
8.31applications, trade names, trademarks, service marks, copyrights, mask works, trade
8.32secrets, and similar types of intangible assets.
8.33This clause does not apply to any item of interest or intangible income received or accrued
8.34by a foreign operating corporation with respect to such item of income to the extent that
9.1the income is income from sources without the United States as defined in subtitle A,
9.2chapter 1, subchapter N, part 1, of the Internal Revenue Code;
9.3 (22) for taxable years beginning before January 1, 2011, the dividends attributable to
9.4the income of a foreign operating corporation that is a member of the taxpayer's unitary
9.5group in an amount that is equal to the dividends paid deduction of a real estate investment
9.6trust under section 561(a) of the Internal Revenue Code for amounts paid or accrued by
9.7the real estate investment trust to the foreign operating corporation;
9.8 (23) for taxable years beginning before January 1, 2010, the income of a foreign
9.9operating corporation that is a member of the taxpayer's unitary group in an amount that
9.10is equal to gains derived from the sale of real or personal property located in the United
9.11States;
9.12 (24) the additional amount allowed as a deduction for donation of computer
9.13technology and equipment under section 170(e)(6) of the Internal Revenue Code, to the
9.14extent deducted from taxable income; and
9.15(25) discharge of indebtedness income resulting from reacquisition of business
9.16indebtedness and deferred under section 108(i) of the Internal Revenue Code.
9.17EFFECTIVE DATE.This section is effective for returns filed for taxable years
9.18beginning after December 31, 2010.
9.19 Sec. 6. Minnesota Statutes 2010, section 290.01, subdivision 19d, is amended to read:
9.20 Subd. 19d. Corporations; modifications decreasing federal taxable income. For
9.21corporations, there shall be subtracted from federal taxable income after the increases
9.22provided in subdivision 19c:
9.23 (1) the amount of foreign dividend gross-up added to gross income for federal
9.24income tax purposes under section 78 of the Internal Revenue Code;
9.25 (2) the amount of salary expense not allowed for federal income tax purposes due to
9.26claiming the work opportunity credit under section 51 of the Internal Revenue Code;
9.27 (3) any dividend (not including any distribution in liquidation) paid within the
9.28taxable year by a national or state bank to the United States, or to any instrumentality of
9.29the United States exempt from federal income taxes, on the preferred stock of the bank
9.30owned by the United States or the instrumentality;
9.31 (4) amounts disallowed for intangible drilling costs due to differences between
9.32this chapter and the Internal Revenue Code in taxable years beginning before January
9.331, 1987, as follows:
10.1 (i) to the extent the disallowed costs are represented by physical property, an amount
10.2equal to the allowance for depreciation under Minnesota Statutes 1986, section290.09,
10.3subdivision 7 , subject to the modifications contained in subdivision 19e; and
10.4 (ii) to the extent the disallowed costs are not represented by physical property, an
10.5amount equal to the allowance for cost depletion under Minnesota Statutes 1986, section
10.6290.09, subdivision 8
;
10.7 (5) the deduction for capital losses pursuant to sections 1211 and 1212 of the
10.8Internal Revenue Code, except that:
10.9 (i) for capital losses incurred in taxable years beginning after December 31, 1986,
10.10capital loss carrybacks shall not be allowed;
10.11 (ii) for capital losses incurred in taxable years beginning after December 31, 1986,
10.12a capital loss carryover to each of the 15 taxable years succeeding the loss year shall be
10.13allowed;
10.14 (iii) for capital losses incurred in taxable years beginning before January 1, 1987, a
10.15capital loss carryback to each of the three taxable years preceding the loss year, subject to
10.16the provisions of Minnesota Statutes 1986, section290.16 , shall be allowed; and
10.17 (iv) for capital losses incurred in taxable years beginning before January 1, 1987,
10.18a capital loss carryover to each of the five taxable years succeeding the loss year to the
10.19extent such loss was not used in a prior taxable year and subject to the provisions of
10.20Minnesota Statutes 1986, section290.16 , shall be allowed;
10.21 (6) an amount for interest and expenses relating to income not taxable for federal
10.22income tax purposes, if (i) the income is taxable under this chapter and (ii) the interest and
10.23expenses were disallowed as deductions under the provisions of section 171(a)(2), 265 or
10.24291 of the Internal Revenue Code in computing federal taxable income;
10.25 (7) in the case of mines, oil and gas wells, other natural deposits, and timber for
10.26which percentage depletion was disallowed pursuant to subdivision 19c, clause (9), a
10.27reasonable allowance for depletion based on actual cost. In the case of leases the deduction
10.28must be apportioned between the lessor and lessee in accordance with rules prescribed
10.29by the commissioner. In the case of property held in trust, the allowable deduction must
10.30be apportioned between the income beneficiaries and the trustee in accordance with the
10.31pertinent provisions of the trust, or if there is no provision in the instrument, on the basis
10.32of the trust's income allocable to each;
10.33 (8) for certified pollution control facilities placed in service in a taxable year
10.34beginning before December 31, 1986, and for which amortization deductions were elected
10.35under section 169 of the Internal Revenue Code of 1954, as amended through December
11.131, 1985, an amount equal to the allowance for depreciation under Minnesota Statutes
11.21986, section290.09, subdivision 7 ;
11.3 (9) amounts included in federal taxable income that are due to refunds of income,
11.4excise, or franchise taxes based on net income or related minimum taxes paid by the
11.5corporation to Minnesota, another state, a political subdivision of another state, the
11.6District of Columbia, or a foreign country or possession of the United States to the extent
11.7that the taxes were added to federal taxable income under section290.01, subdivision 19c ,
11.8clause (1), in a prior taxable year;
11.9 (10) for taxable years beginning before January 1, 2011, 80 percent of royalties,
11.10fees, or other like income accrued or received from a foreign operating corporation
11.11or a foreign corporation which is part of the same unitary business as the receiving
11.12corporation, unless the income resulting from such payments or accruals is income from
11.13sources within the United States as defined in subtitle A, chapter 1, subchapter N, part
11.141, of the Internal Revenue Code;
11.15 (11) income or gains from the business of mining as defined in section290.05,
11.16subdivision 1 , clause (a), that are not subject to Minnesota franchise tax;
11.17 (12) the amount of disability access expenditures in the taxable year which are not
11.18allowed to be deducted or capitalized under section 44(d)(7) of the Internal Revenue Code;
11.19 (13) the amount of qualified research expenses not allowed for federal income tax
11.20purposes under section 280C(c) of the Internal Revenue Code, but only to the extent that
11.21the amount exceeds the amount of the credit allowed under section290.068 ;
11.22 (14) the amount of salary expenses not allowed for federal income tax purposes due
11.23to claiming the Indian employment credit under section 45A(a) of the Internal Revenue
11.24Code;
11.25 (15) for a corporation whose foreign sales corporation, as defined in section 922
11.26of the Internal Revenue Code, constituted a foreign operating corporation during any
11.27taxable year ending before January 1, 1995, and a return was filed by August 15, 1996,
11.28claiming the deduction under section290.21, subdivision 4 , for income received from
11.29the foreign operating corporation, an amount equal to1.23 multiplied by the amount of
11.30income excluded under section 114 of the Internal Revenue Code, provided the income is
11.31not income of a foreign operating company;
11.32 (16) any decrease in subpart F income, as defined in section 952(a) of the Internal
11.33Revenue Code, for the taxable year when subpart F income is calculated without regard to
11.34the provisions of Division C, title III, section 303(b) of Public Law 110-343 and section
11.35750 of Public Law 111-312;
12.1 (17) in each of the five tax years immediately following the tax year in which an
12.2addition is required under subdivision 19c, clause (15), an amount equal to one-fifth of
12.3the delayed depreciation. For purposes of this clause, "delayed depreciation" means the
12.4amount of the addition made by the taxpayer under subdivision 19c, clause (15). The
12.5resulting delayed depreciation cannot be less than zero;
12.6 (18) in each of the five tax years immediately following the tax year in which an
12.7addition is required under subdivision 19c, clause (16), an amount equal to one-fifth of
12.8the amount of the addition; and
12.9(19) to the extent included in federal taxable income, discharge of indebtedness
12.10income resulting from reacquisition of business indebtedness included in federal taxable
12.11income under section 108(i) of the Internal Revenue Code. This subtraction applies only
12.12to the extent that the income was included in net income in a prior year as a result of the
12.13addition under section290.01, subdivision 19c , clause (25).
12.14EFFECTIVE DATE.This section is effective for returns filed for taxable years
12.15beginning after December 31, 2010.
12.16 Sec. 7. Minnesota Statutes 2010, section 290.01, subdivision 31, is amended to read:
12.17 Subd. 31. Internal Revenue Code. Unless specifically defined otherwise, "Internal
12.18Revenue Code" means the Internal Revenue Code of 1986, as amended throughMarch 18
12.19December 17, 2010. Internal Revenue Code also includes any uncodified provision in
12.20federal law that relates to provisions of the Internal Revenue Code that are incorporated
12.21into Minnesota law.
12.22EFFECTIVE DATE.This section is effective the day following final enactment.
12.23 Sec. 8. Minnesota Statutes 2010, section 290.06, subdivision 1, is amended to read:
12.24 Subdivision 1. Computation, corporations. The franchise tax imposed upon
12.25corporations shall be computed by applying to their taxable income the rate of 9.8 percent
12.26for taxable years beginning before January 1, 2013, and a rate of 7.6 percent thereafter.
12.27 Sec. 9. Minnesota Statutes 2010, section 290.0921, subdivision 1, is amended to read:
12.28 Subdivision 1. Tax imposed. In addition to the taxes computed under this chapter
12.29without regard to this section, the franchise tax imposed on corporations includes a tax
12.30equal to the excess, if any, for the taxable year of:
13.1(1) 5.8 percent of Minnesota alternative minimum taxable income for taxable years
13.2beginning before January 1, 2013, and 4.5 percent of Minnesota alternative minimum
13.3taxable income for taxable years thereafter; over
13.4(2) the tax imposed under section290.06, subdivision 1 , without regard to this
13.5section.
13.6 Sec. 10. Minnesota Statutes 2010, section 290.17, subdivision 4, is amended to read:
13.7 Subd. 4. Unitary business principle. (a) If a trade or business conducted wholly
13.8within this state or partly within and partly without this state is part of a unitary business,
13.9the entire income of the unitary business is subject to apportionment pursuant to section
13.10290.191
. Notwithstanding subdivision 2, paragraph (c), none of the income of a unitary
13.11business is considered to be derived from any particular source and none may be allocated
13.12to a particular place except as provided by the applicable apportionment formula. The
13.13provisions of this subdivision do not apply to business income subject to subdivision 5,
13.14income of an insurance company, or income of an investment company determined under
13.15section290.36 .
13.16(b) The term "unitary business" means business activities or operations which
13.17result in a flow of value between them. The term may be applied within a single legal
13.18entity or between multiple entities and without regard to whether each entity is a sole
13.19proprietorship, a corporation, a partnership or a trust.
13.20(c) Unity is presumed whenever there is unity of ownership, operation, and use,
13.21evidenced by centralized management or executive force, centralized purchasing,
13.22advertising, accounting, or other controlled interaction, but the absence of these
13.23centralized activities will not necessarily evidence a nonunitary business. Unity is also
13.24presumed when business activities or operations are of mutual benefit, dependent upon or
13.25contributory to one another, either individually or as a group.
13.26(d) Where a business operation conducted in Minnesota is owned by a business
13.27entity that carries on business activity outside the state different in kind from that
13.28conducted within this state, and the other business is conducted entirely outside the state, it
13.29is presumed that the two business operations are unitary in nature, interrelated, connected,
13.30and interdependent unless it can be shown to the contrary.
13.31(e) Unity of ownership is not deemed to exist when a corporation is involved unless
13.32that corporation is a member of a group of two or more business entities and more than 50
13.33percent of the voting stock of each member of the group is directly or indirectly owned
13.34by a common owner or by common owners, either corporate or noncorporate, or by one
13.35or more of the member corporations of the group. For this purpose, the term "voting
14.1stock" shall include membership interests of mutual insurance holding companies formed
14.2under section66A.40 .
14.3(f) The net income and apportionment factors under section290.191 or
290.20 of
14.4foreign corporations and other foreign entities which are part of a unitary business shall
14.5not be included in the net income or the apportionment factors of the unitary business.
14.6A foreign corporation or other foreign entity which is required to file a return under this
14.7chapter shall file on a separate return basis.The net income and apportionment factors
14.8under section
290.191 or
290.20 of foreign operating corporations shall not be included in
14.9the net income or the apportionment factors of the unitary business except as provided in
14.10paragraph (g).
14.11(g) The adjusted net income of a foreign operating corporation shall be deemed to
14.12be paid as a dividend on the last day of its taxable year to each shareholder thereof, in
14.13proportion to each shareholder's ownership, with which such corporation is engaged in
14.14a unitary business. Such deemed dividend shall be treated as a dividend under section
14.15290.21, subdivision 4.
14.16Dividends actually paid by a foreign operating corporation to a corporate shareholder
14.17which is a member of the same unitary business as the foreign operating corporation shall
14.18be eliminated from the net income of the unitary business in preparing a combined report
14.19for the unitary business. The adjusted net income of a foreign operating corporation
14.20shall be its net income adjusted as follows:
14.21(1) any taxes paid or accrued to a foreign country, the commonwealth of Puerto
14.22Rico, or a United States possession or political subdivision of any of the foregoing shall
14.23be a deduction; and
14.24(2) the subtraction from federal taxable income for payments received from foreign
14.25corporations or foreign operating corporations under section
290.01, subdivision 19d,
14.26clause (10), shall not be allowed.
14.27If a foreign operating corporation incurs a net loss, neither income nor deduction
14.28from that corporation shall be included in determining the net income of the unitary
14.29business.
14.30(h) (g) For purposes of determining the net income of a unitary business and the
14.31factors to be used in the apportionment of net income pursuant to section290.191 or
14.32290.20
, there must be included only the income and apportionment factors of domestic
14.33corporations or other domestic entitiesother than foreign operating corporations that are
14.34determined to be part of the unitary business pursuant to this subdivision, notwithstanding
14.35that foreign corporations or other foreign entities might be included in the unitary business.
15.1(i) (h) Deductions for expenses, interest, or taxes otherwise allowable under
15.2this chapter that are connected with or allocable against dividends, deemed dividends
15.3described in paragraph (g), or royalties, fees, or other like income described in section
15.4290.01, subdivision 19d, clause (10), shall not be disallowed.
15.5(j) (i) Each corporation or other entity, except a sole proprietorship, that is part of
15.6a unitary business must file combined reports as the commissioner determines. On the
15.7reports, all intercompany transactions between entities included pursuant to paragraph
15.8(h) (g) must be eliminated and the entire net income of the unitary business determined in
15.9accordance with this subdivision is apportioned among the entities by using each entity's
15.10Minnesota factors for apportionment purposes in the numerators of the apportionment
15.11formula and the total factors for apportionment purposes of all entities included pursuant
15.12to paragraph(h) (g) in the denominators of the apportionment formula.
15.13(k) (j) If a corporation has been divested from a unitary business and is included in a
15.14combined report for a fractional part of the common accounting period of the combined
15.15report:
15.16(1) its income includable in the combined report is its income incurred for that part
15.17of the year determined by proration or separate accounting; and
15.18(2) its sales, property, and payroll included in the apportionment formula must
15.19be prorated or accounted for separately.
15.20EFFECTIVE DATE.This section is effective for returns filed for taxable years
15.21beginning after December 31, 2010.
15.22 Sec. 11. Minnesota Statutes 2010, section 290A.03, subdivision 15, is amended to read:
15.23 Subd. 15. Internal Revenue Code. "Internal Revenue Code" means the Internal
15.24Revenue Code of 1986, as amended throughMarch 18 December 17, 2010.
15.25EFFECTIVE DATE.This section is effective for property tax refunds based on
15.26property taxes payable on or after December 31, 2010, and rent paid on or after December
15.2731, 2009.
15.28 Sec. 12. CORRECTED FORM W-2 NOT REQUIRED.
15.29Employers who have prepared and distributed form W-2, wage and tax statement,
15.30for tax year 2010, that reported to employees the amount of health coverage provided to
15.31adult children under age 27 includible in net income under prior law, are not required to
15.32prepare and distribute corrected tax year 2010 form W-2.
15.33EFFECTIVE DATE.This section is effective the day following final enactment.
16.1 Sec. 13. REPEALER.
16.2Minnesota Statutes 2010, sections 290.01, subdivision 6b; and 290.0921, subdivision
16.37, are repealed.
16.4EFFECTIVE DATE.This section is effective for returns filed for taxable years
16.5beginning after December 31, 2010.
1.3property tax refund to certain provisions of federal law; reducing the corporate
1.4franchise tax rate; eliminating the preferences for foreign source income;
1.5repealing the subtraction for foreign royalties; repealing foreign operating
1.6corporations; amending Minnesota Statutes 2010, sections 289A.02, subdivision
1.77; 289A.08, subdivision 3; 290.01, subdivisions 19, 19a, 19c, 19d, 31; 290.06,
1.8subdivision 1; 290.0921, subdivision 1; 290.17, subdivision 4; 290A.03,
1.9subdivision 15; repealing Minnesota Statutes 2010, sections 290.01, subdivision
1.106b; 290.0921, subdivision 7.
1.11BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
1.12 Section 1. Minnesota Statutes 2010, section 289A.02, subdivision 7, is amended to
1.13read:
1.14 Subd. 7. Internal Revenue Code. Unless specifically defined otherwise, "Internal
1.15Revenue Code" means the Internal Revenue Code of 1986, as amended through
1.16
1.17EFFECTIVE DATE.This section is effective the day following final enactment.
1.18 Sec. 2. Minnesota Statutes 2010, section 289A.08, subdivision 3, is amended to read:
1.19 Subd. 3. Corporations. (a) A corporation that is subject to the state's jurisdiction to
1.20tax under section
1.21
1.22(b) Members of a unitary business that are required to file a combined report on one
1.23return must designate a member of the unitary business to be responsible for tax matters,
1.24including the filing of returns, the payment of taxes, additions to tax, penalties, interest,
1.25or any other payment, and for the receipt of refunds of taxes or interest paid in excess of
2.1taxes lawfully due. The designated member must be a member of the unitary business that
2.2is filing the single combined report and either:
2.3(1) a corporation that is subject to the taxes imposed by chapter 290; or
2.4(2) a corporation that is not subject to the taxes imposed by chapter 290:
2.5(i) Such corporation consents by filing the return as a designated member under this
2.6clause to remit taxes, penalties, interest, or additions to tax due from the members of the
2.7unitary business subject to tax, and receive refunds or other payments on behalf of other
2.8members of the unitary business. The member designated under this clause is a "taxpayer"
2.9for the purposes of this chapter and chapter 270C, and is liable for any liability imposed
2.10on the unitary business under this chapter and chapter 290.
2.11(ii) If the state does not otherwise have the jurisdiction to tax the member designated
2.12under this clause, consenting to be the designated member does not create the jurisdiction
2.13to impose tax on the designated member, other than as described in item (i).
2.14(iii) The member designated under this clause must apply for a business tax account
2.15identification number.
2.16(c) The commissioner shall adopt rules for the filing of one return on behalf of the
2.17members of an affiliated group of corporations that are required to file a combined report.
2.18All members of an affiliated group that are required to file a combined report must file one
2.19return on behalf of the members of the group under rules adopted by the commissioner.
2.20(d) If a corporation claims on a return that it has paid tax in excess of the amount of
2.21taxes lawfully due, that corporation must include on that return information necessary for
2.22payment of the tax in excess of the amount lawfully due by electronic means.
2.23EFFECTIVE DATE.This section is effective for returns filed for taxable years
2.24beginning after December 31, 2010.
2.25 Sec. 3. Minnesota Statutes 2010, section 290.01, subdivision 19, is amended to read:
2.26 Subd. 19. Net income. The term "net income" means the federal taxable income,
2.27as defined in section 63 of the Internal Revenue Code of 1986, as amended through the
2.28date named in this subdivision, incorporating the federal effective dates of changes to the
2.29Internal Revenue Code and any elections made by the taxpayer in accordance with the
2.30Internal Revenue Code in determining federal taxable income for federal income tax
2.31purposes, and with the modifications provided in subdivisions 19a to 19f.
2.32 In the case of a regulated investment company or a fund thereof, as defined in section
2.33851(a) or 851(g) of the Internal Revenue Code, federal taxable income means investment
2.34company taxable income as defined in section 852(b)(2) of the Internal Revenue Code,
2.35except that:
3.1 (1) the exclusion of net capital gain provided in section 852(b)(2)(A) of the Internal
3.2Revenue Code does not apply;
3.3 (2) the deduction for dividends paid under section 852(b)(2)(D) of the Internal
3.4Revenue Code must be applied by allowing a deduction for capital gain dividends and
3.5exempt-interest dividends as defined in sections 852(b)(3)(C) and 852(b)(5) of the Internal
3.6Revenue Code; and
3.7 (3) the deduction for dividends paid must also be applied in the amount of any
3.8undistributed capital gains which the regulated investment company elects to have treated
3.9as provided in section 852(b)(3)(D) of the Internal Revenue Code.
3.10 The net income of a real estate investment trust as defined and limited by section
3.11856(a), (b), and (c) of the Internal Revenue Code means the real estate investment trust
3.12taxable income as defined in section 857(b)(2) of the Internal Revenue Code.
3.13 The net income of a designated settlement fund as defined in section 468B(d) of
3.14the Internal Revenue Code means the gross income as defined in section 468B(b) of the
3.15Internal Revenue Code.
3.16 The Internal Revenue Code of 1986, as amended through
3.1717, 2010, shall be in effect for taxable years beginning after December 31, 1996. The
3.18provisions of the act of January 22, 2010, Public Law 111-126, to accelerate the benefits
3.19for charitable cash contributions for the relief of victims of the Haitian earthquake, are
3.20effective at the same time it became effective for federal purposes and apply to the
3.21subtraction under subdivision 19b, clause (6).
3.22 Except as otherwise provided, references to the Internal Revenue Code in
3.23subdivisions 19 to 19f mean the code in effect for purposes of determining net income for
3.24the applicable year.
3.25EFFECTIVE DATE.This section is effective the day following final enactment.
3.26 Sec. 4. Minnesota Statutes 2010, section 290.01, subdivision 19a, is amended to read:
3.27 Subd. 19a. Additions to federal taxable income. For individuals, estates, and
3.28trusts, there shall be added to federal taxable income:
3.29 (1)(i) interest income on obligations of any state other than Minnesota or a political
3.30or governmental subdivision, municipality, or governmental agency or instrumentality
3.31of any state other than Minnesota exempt from federal income taxes under the Internal
3.32Revenue Code or any other federal statute; and
3.33 (ii) exempt-interest dividends as defined in section 852(b)(5) of the Internal Revenue
3.34Code, except:
4.1(A) the portion of the exempt-interest dividends exempt from state taxation under
4.2the laws of the United States; and
4.3(B) the portion of the exempt-interest dividends derived from interest income
4.4on obligations of the state of Minnesota or its political or governmental subdivisions,
4.5municipalities, governmental agencies or instrumentalities, but only if the portion of the
4.6exempt-interest dividends from such Minnesota sources paid to all shareholders represents
4.795 percent or more of the exempt-interest dividends, including any dividends exempt
4.8under subitem (A), that are paid by the regulated investment company as defined in section
4.9851(a) of the Internal Revenue Code, or the fund of the regulated investment company as
4.10defined in section 851(g) of the Internal Revenue Code, making the payment; and
4.11 (iii) for the purposes of items (i) and (ii), interest on obligations of an Indian tribal
4.12government described in section 7871(c) of the Internal Revenue Code shall be treated as
4.13interest income on obligations of the state in which the tribe is located;
4.14 (2) the amount of income, sales and use, motor vehicle sales, or excise taxes paid
4.15or accrued within the taxable year under this chapter and the amount of taxes based on
4.16net income paid, sales and use, motor vehicle sales, or excise taxes paid to any other
4.17state or to any province or territory of Canada, to the extent allowed as a deduction
4.18under section 63(d) of the Internal Revenue Code, but the addition may not be more
4.19than the amount by which the itemized deductions as allowed under section 63(d) of
4.20the Internal Revenue Code exceeds the amount of the standard deduction as defined in
4.21section 63(c) of the Internal Revenue Code, disregarding the amounts allowed under
4.22sections 63(c)(1)(C) and 63(c)(1)(E) of the Internal Revenue Code. For the purpose of
4.23this paragraph, the disallowance of itemized deductions under section 68 of the Internal
4.24Revenue Code of 1986, income, sales and use, motor vehicle sales, or excise taxes are
4.25the last itemized deductions disallowed;
4.26 (3) the capital gain amount of a lump-sum distribution to which the special tax under
4.27section 1122(h)(3)(B)(ii) of the Tax Reform Act of 1986, Public Law 99-514, applies;
4.28 (4) the amount of income taxes paid or accrued within the taxable year under this
4.29chapter and taxes based on net income paid to any other state or any province or territory
4.30of Canada, to the extent allowed as a deduction in determining federal adjusted gross
4.31income. For the purpose of this paragraph, income taxes do not include the taxes imposed
4.32by sections
4.33 (5) the amount of expense, interest, or taxes disallowed pursuant to section
4.35allowed under subdivision 19b, clause (1);
5.1 (6) the amount of a partner's pro rata share of net income which does not flow
5.2through to the partner because the partnership elected to pay the tax on the income under
5.3section 6242(a)(2) of the Internal Revenue Code;
5.4 (7) 80 percent of the depreciation deduction allowed under section 168(k) of the
5.5Internal Revenue Code. For purposes of this clause, if the taxpayer has an activity that
5.6in the taxable year generates a deduction for depreciation under section 168(k) and the
5.7activity generates a loss for the taxable year that the taxpayer is not allowed to claim for
5.8the taxable year, "the depreciation allowed under section 168(k)" for the taxable year is
5.9limited to excess of the depreciation claimed by the activity under section 168(k) over the
5.10amount of the loss from the activity that is not allowed in the taxable year. In succeeding
5.11taxable years when the losses not allowed in the taxable year are allowed, the depreciation
5.12under section 168(k) is allowed;
5.13 (8) 80 percent of the amount by which the deduction allowed by section 179 of the
5.14Internal Revenue Code exceeds the deduction allowable by section 179 of the Internal
5.15Revenue Code of 1986, as amended through December 31, 2003;
5.16 (9) to the extent deducted in computing federal taxable income, the amount of the
5.17deduction allowable under section 199 of the Internal Revenue Code;
5.18 (10) for taxable years beginning before January 1, 2013, the exclusion allowed
5.19under section 139A of the Internal Revenue Code for federal subsidies for prescription
5.20drug plans;
5.21(11) the amount of expenses disallowed under section 290.10, subdivision 2;
5.22 (12) for taxable years beginning before January 1, 2010, the amount deducted for
5.23qualified tuition and related expenses under section 222 of the Internal Revenue Code, to
5.24the extent deducted from gross income;
5.25 (13) for taxable years beginning before January 1, 2010, the amount deducted for
5.26certain expenses of elementary and secondary school teachers under section 62(a)(2)(D)
5.27of the Internal Revenue Code, to the extent deducted from gross income;
5.28(14) the additional standard deduction for property taxes payable that is allowable
5.29under section 63(c)(1)(C) of the Internal Revenue Code;
5.30(15) the additional standard deduction for qualified motor vehicle sales taxes
5.31allowable under section 63(c)(1)(E) of the Internal Revenue Code;
5.32(16) discharge of indebtedness income resulting from reacquisition of business
5.33indebtedness and deferred under section 108(i) of the Internal Revenue Code; and
5.34(17) the amount of unemployment compensation exempt from tax under section
5.3585(c) of the Internal Revenue Code.
6.1EFFECTIVE DATE.This section is effective for taxable years beginning after
6.2December 31, 2009.
6.3 Sec. 5. Minnesota Statutes 2010, section 290.01, subdivision 19c, is amended to read:
6.4 Subd. 19c. Corporations; additions to federal taxable income. For corporations,
6.5there shall be added to federal taxable income:
6.6 (1) the amount of any deduction taken for federal income tax purposes for income,
6.7excise, or franchise taxes based on net income or related minimum taxes, including but not
6.8limited to the tax imposed under section
6.9another state, a political subdivision of another state, the District of Columbia, or any
6.10foreign country or possession of the United States;
6.11 (2) interest not subject to federal tax upon obligations of: the United States, its
6.12possessions, its agencies, or its instrumentalities; the state of Minnesota or any other
6.13state, any of its political or governmental subdivisions, any of its municipalities, or any
6.14of its governmental agencies or instrumentalities; the District of Columbia; or Indian
6.15tribal governments;
6.16 (3) exempt-interest dividends received as defined in section 852(b)(5) of the Internal
6.17Revenue Code;
6.18 (4) the amount of any net operating loss deduction taken for federal income tax
6.19purposes under section 172 or 832(c)(10) of the Internal Revenue Code or operations loss
6.20deduction under section 810 of the Internal Revenue Code;
6.21 (5) the amount of any special deductions taken for federal income tax purposes
6.22under sections 241 to 247 and 965 of the Internal Revenue Code;
6.23 (6) losses from the business of mining, as defined in section
6.24clause (a), that are not subject to Minnesota income tax;
6.25 (7) the amount of any capital losses deducted for federal income tax purposes under
6.26sections 1211 and 1212 of the Internal Revenue Code;
6.27 (8) the exempt foreign trade income of a foreign sales corporation under sections
6.28921(a) and 291 of the Internal Revenue Code;
6.29 (9) the amount of percentage depletion deducted under sections 611 through 614 and
6.30291 of the Internal Revenue Code;
6.31 (10) for certified pollution control facilities placed in service in a taxable year
6.32beginning before December 31, 1986, and for which amortization deductions were elected
6.33under section 169 of the Internal Revenue Code of 1954, as amended through December
6.3431, 1985, the amount of the amortization deduction allowed in computing federal taxable
6.35income for those facilities;
7.1 (11) for taxable years beginning before January 1, 2011, the amount of any deemed
7.2dividend from a foreign operating corporation determined pursuant to section
7.3subdivision 4
7.4addition to income required by clauses (20), (21), (22), and (23);
7.5 (12) the amount of a partner's pro rata share of net income which does not flow
7.6through to the partner because the partnership elected to pay the tax on the income under
7.7section 6242(a)(2) of the Internal Revenue Code;
7.8 (13) the amount of net income excluded under section 114 of the Internal Revenue
7.9Code;
7.10 (14) any increase in subpart F income, as defined in section 952(a) of the Internal
7.11Revenue Code, for the taxable year when subpart F income is calculated without regard to
7.12the provisions of Division C, title III, section 303(b) of Public Law 110-343 and section
7.13750 of Public Law 111-312;
7.14 (15) 80 percent of the depreciation deduction allowed under section 168(k)(1)(A)
7.15and (k)(4)(A) of the Internal Revenue Code. For purposes of this clause, if the taxpayer
7.16has an activity that in the taxable year generates a deduction for depreciation under
7.17section 168(k)(1)(A) and (k)(4)(A) and the activity generates a loss for the taxable year
7.18that the taxpayer is not allowed to claim for the taxable year, "the depreciation allowed
7.19under section 168(k)(1)(A) and (k)(4)(A)" for the taxable year is limited to excess of the
7.20depreciation claimed by the activity under section 168(k)(1)(A) and (k)(4)(A) over the
7.21amount of the loss from the activity that is not allowed in the taxable year. In succeeding
7.22taxable years when the losses not allowed in the taxable year are allowed, the depreciation
7.23under section 168(k)(1)(A) and (k)(4)(A) is allowed;
7.24 (16) 80 percent of the amount by which the deduction allowed by section 179 of the
7.25Internal Revenue Code exceeds the deduction allowable by section 179 of the Internal
7.26Revenue Code of 1986, as amended through December 31, 2003;
7.27 (17) to the extent deducted in computing federal taxable income, the amount of the
7.28deduction allowable under section 199 of the Internal Revenue Code;
7.29 (18) for taxable years beginning before January 1, 2013, the exclusion allowed
7.30under section 139A of the Internal Revenue Code for federal subsidies for prescription
7.31drug plans;
7.32 (19) the amount of expenses disallowed under section
7.33 (20) for taxable years beginning before January 1, 2011, an amount equal to the
7.34interest and intangible expenses, losses, and costs paid, accrued, or incurred by any
7.35member of the taxpayer's unitary group to or for the benefit of a corporation that is a
8.1member of the taxpayer's unitary business group that qualifies as a foreign operating
8.2corporation. For purposes of this clause, intangible expenses and costs include:
8.3 (i) expenses, losses, and costs for, or related to, the direct or indirect acquisition,
8.4use, maintenance or management, ownership, sale, exchange, or any other disposition of
8.5intangible property;
8.6 (ii) losses incurred, directly or indirectly, from factoring transactions or discounting
8.7transactions;
8.8 (iii) royalty, patent, technical, and copyright fees;
8.9 (iv) licensing fees; and
8.10 (v) other similar expenses and costs.
8.11For purposes of this clause, "intangible property" includes stocks, bonds, patents, patent
8.12applications, trade names, trademarks, service marks, copyrights, mask works, trade
8.13secrets, and similar types of intangible assets.
8.14This clause does not apply to any item of interest or intangible expenses or costs paid,
8.15accrued, or incurred, directly or indirectly, to a foreign operating corporation with respect
8.16to such item of income to the extent that the income to the foreign operating corporation
8.17is income from sources without the United States as defined in subtitle A, chapter 1,
8.18subchapter N, part 1, of the Internal Revenue Code;
8.19 (21) for taxable years beginning before January 1, 2011, except as already included
8.20in the taxpayer's taxable income pursuant to clause (20), any interest income and income
8.21generated from intangible property received or accrued by a foreign operating corporation
8.22that is a member of the taxpayer's unitary group. For purposes of this clause, income
8.23generated from intangible property includes:
8.24 (i) income related to the direct or indirect acquisition, use, maintenance or
8.25management, ownership, sale, exchange, or any other disposition of intangible property;
8.26 (ii) income from factoring transactions or discounting transactions;
8.27 (iii) royalty, patent, technical, and copyright fees;
8.28 (iv) licensing fees; and
8.29 (v) other similar income.
8.30For purposes of this clause, "intangible property" includes stocks, bonds, patents, patent
8.31applications, trade names, trademarks, service marks, copyrights, mask works, trade
8.32secrets, and similar types of intangible assets.
8.33This clause does not apply to any item of interest or intangible income received or accrued
8.34by a foreign operating corporation with respect to such item of income to the extent that
9.1the income is income from sources without the United States as defined in subtitle A,
9.2chapter 1, subchapter N, part 1, of the Internal Revenue Code;
9.3 (22) for taxable years beginning before January 1, 2011, the dividends attributable to
9.4the income of a foreign operating corporation that is a member of the taxpayer's unitary
9.5group in an amount that is equal to the dividends paid deduction of a real estate investment
9.6trust under section 561(a) of the Internal Revenue Code for amounts paid or accrued by
9.7the real estate investment trust to the foreign operating corporation;
9.8 (23) for taxable years beginning before January 1, 2010, the income of a foreign
9.9operating corporation that is a member of the taxpayer's unitary group in an amount that
9.10is equal to gains derived from the sale of real or personal property located in the United
9.11States;
9.12 (24) the additional amount allowed as a deduction for donation of computer
9.13technology and equipment under section 170(e)(6) of the Internal Revenue Code, to the
9.14extent deducted from taxable income; and
9.15(25) discharge of indebtedness income resulting from reacquisition of business
9.16indebtedness and deferred under section 108(i) of the Internal Revenue Code.
9.17EFFECTIVE DATE.This section is effective for returns filed for taxable years
9.18beginning after December 31, 2010.
9.19 Sec. 6. Minnesota Statutes 2010, section 290.01, subdivision 19d, is amended to read:
9.20 Subd. 19d. Corporations; modifications decreasing federal taxable income. For
9.21corporations, there shall be subtracted from federal taxable income after the increases
9.22provided in subdivision 19c:
9.23 (1) the amount of foreign dividend gross-up added to gross income for federal
9.24income tax purposes under section 78 of the Internal Revenue Code;
9.25 (2) the amount of salary expense not allowed for federal income tax purposes due to
9.26claiming the work opportunity credit under section 51 of the Internal Revenue Code;
9.27 (3) any dividend (not including any distribution in liquidation) paid within the
9.28taxable year by a national or state bank to the United States, or to any instrumentality of
9.29the United States exempt from federal income taxes, on the preferred stock of the bank
9.30owned by the United States or the instrumentality;
9.31 (4) amounts disallowed for intangible drilling costs due to differences between
9.32this chapter and the Internal Revenue Code in taxable years beginning before January
9.331, 1987, as follows:
10.1 (i) to the extent the disallowed costs are represented by physical property, an amount
10.2equal to the allowance for depreciation under Minnesota Statutes 1986, section
10.3subdivision 7
10.4 (ii) to the extent the disallowed costs are not represented by physical property, an
10.5amount equal to the allowance for cost depletion under Minnesota Statutes 1986, section
10.7 (5) the deduction for capital losses pursuant to sections 1211 and 1212 of the
10.8Internal Revenue Code, except that:
10.9 (i) for capital losses incurred in taxable years beginning after December 31, 1986,
10.10capital loss carrybacks shall not be allowed;
10.11 (ii) for capital losses incurred in taxable years beginning after December 31, 1986,
10.12a capital loss carryover to each of the 15 taxable years succeeding the loss year shall be
10.13allowed;
10.14 (iii) for capital losses incurred in taxable years beginning before January 1, 1987, a
10.15capital loss carryback to each of the three taxable years preceding the loss year, subject to
10.16the provisions of Minnesota Statutes 1986, section
10.17 (iv) for capital losses incurred in taxable years beginning before January 1, 1987,
10.18a capital loss carryover to each of the five taxable years succeeding the loss year to the
10.19extent such loss was not used in a prior taxable year and subject to the provisions of
10.20Minnesota Statutes 1986, section
10.21 (6) an amount for interest and expenses relating to income not taxable for federal
10.22income tax purposes, if (i) the income is taxable under this chapter and (ii) the interest and
10.23expenses were disallowed as deductions under the provisions of section 171(a)(2), 265 or
10.24291 of the Internal Revenue Code in computing federal taxable income;
10.25 (7) in the case of mines, oil and gas wells, other natural deposits, and timber for
10.26which percentage depletion was disallowed pursuant to subdivision 19c, clause (9), a
10.27reasonable allowance for depletion based on actual cost. In the case of leases the deduction
10.28must be apportioned between the lessor and lessee in accordance with rules prescribed
10.29by the commissioner. In the case of property held in trust, the allowable deduction must
10.30be apportioned between the income beneficiaries and the trustee in accordance with the
10.31pertinent provisions of the trust, or if there is no provision in the instrument, on the basis
10.32of the trust's income allocable to each;
10.33 (8) for certified pollution control facilities placed in service in a taxable year
10.34beginning before December 31, 1986, and for which amortization deductions were elected
10.35under section 169 of the Internal Revenue Code of 1954, as amended through December
11.131, 1985, an amount equal to the allowance for depreciation under Minnesota Statutes
11.21986, section
11.3 (9) amounts included in federal taxable income that are due to refunds of income,
11.4excise, or franchise taxes based on net income or related minimum taxes paid by the
11.5corporation to Minnesota, another state, a political subdivision of another state, the
11.6District of Columbia, or a foreign country or possession of the United States to the extent
11.7that the taxes were added to federal taxable income under section
11.8clause (1), in a prior taxable year;
11.9 (10) for taxable years beginning before January 1, 2011, 80 percent of royalties,
11.10fees, or other like income accrued or received from a foreign operating corporation
11.11or a foreign corporation which is part of the same unitary business as the receiving
11.12corporation, unless the income resulting from such payments or accruals is income from
11.13sources within the United States as defined in subtitle A, chapter 1, subchapter N, part
11.141, of the Internal Revenue Code;
11.15 (11) income or gains from the business of mining as defined in section
11.16subdivision 1
11.17 (12) the amount of disability access expenditures in the taxable year which are not
11.18allowed to be deducted or capitalized under section 44(d)(7) of the Internal Revenue Code;
11.19 (13) the amount of qualified research expenses not allowed for federal income tax
11.20purposes under section 280C(c) of the Internal Revenue Code, but only to the extent that
11.21the amount exceeds the amount of the credit allowed under section
11.22 (14) the amount of salary expenses not allowed for federal income tax purposes due
11.23to claiming the Indian employment credit under section 45A(a) of the Internal Revenue
11.24Code;
11.25 (15) for a corporation whose foreign sales corporation, as defined in section 922
11.26of the Internal Revenue Code, constituted a foreign operating corporation during any
11.27taxable year ending before January 1, 1995, and a return was filed by August 15, 1996,
11.28claiming the deduction under section
11.29the foreign operating corporation, an amount equal to
11.30income excluded under section 114 of the Internal Revenue Code, provided the income is
11.31not income of a foreign operating company;
11.32 (16) any decrease in subpart F income, as defined in section 952(a) of the Internal
11.33Revenue Code, for the taxable year when subpart F income is calculated without regard to
11.34the provisions of Division C, title III, section 303(b) of Public Law 110-343 and section
11.35750 of Public Law 111-312;
12.1 (17) in each of the five tax years immediately following the tax year in which an
12.2addition is required under subdivision 19c, clause (15), an amount equal to one-fifth of
12.3the delayed depreciation. For purposes of this clause, "delayed depreciation" means the
12.4amount of the addition made by the taxpayer under subdivision 19c, clause (15). The
12.5resulting delayed depreciation cannot be less than zero;
12.6 (18) in each of the five tax years immediately following the tax year in which an
12.7addition is required under subdivision 19c, clause (16), an amount equal to one-fifth of
12.8the amount of the addition; and
12.9(19) to the extent included in federal taxable income, discharge of indebtedness
12.10income resulting from reacquisition of business indebtedness included in federal taxable
12.11income under section 108(i) of the Internal Revenue Code. This subtraction applies only
12.12to the extent that the income was included in net income in a prior year as a result of the
12.13addition under section
12.14EFFECTIVE DATE.This section is effective for returns filed for taxable years
12.15beginning after December 31, 2010.
12.16 Sec. 7. Minnesota Statutes 2010, section 290.01, subdivision 31, is amended to read:
12.17 Subd. 31. Internal Revenue Code. Unless specifically defined otherwise, "Internal
12.18Revenue Code" means the Internal Revenue Code of 1986, as amended through
12.19December 17, 2010. Internal Revenue Code also includes any uncodified provision in
12.20federal law that relates to provisions of the Internal Revenue Code that are incorporated
12.21into Minnesota law.
12.22EFFECTIVE DATE.This section is effective the day following final enactment.
12.23 Sec. 8. Minnesota Statutes 2010, section 290.06, subdivision 1, is amended to read:
12.24 Subdivision 1. Computation, corporations. The franchise tax imposed upon
12.25corporations shall be computed by applying to their taxable income the rate of 9.8 percent
12.26for taxable years beginning before January 1, 2013, and a rate of 7.6 percent thereafter.
12.27 Sec. 9. Minnesota Statutes 2010, section 290.0921, subdivision 1, is amended to read:
12.28 Subdivision 1. Tax imposed. In addition to the taxes computed under this chapter
12.29without regard to this section, the franchise tax imposed on corporations includes a tax
12.30equal to the excess, if any, for the taxable year of:
13.1(1) 5.8 percent of Minnesota alternative minimum taxable income for taxable years
13.2beginning before January 1, 2013, and 4.5 percent of Minnesota alternative minimum
13.3taxable income for taxable years thereafter; over
13.4(2) the tax imposed under section
13.5section.
13.6 Sec. 10. Minnesota Statutes 2010, section 290.17, subdivision 4, is amended to read:
13.7 Subd. 4. Unitary business principle. (a) If a trade or business conducted wholly
13.8within this state or partly within and partly without this state is part of a unitary business,
13.9the entire income of the unitary business is subject to apportionment pursuant to section
13.11business is considered to be derived from any particular source and none may be allocated
13.12to a particular place except as provided by the applicable apportionment formula. The
13.13provisions of this subdivision do not apply to business income subject to subdivision 5,
13.14income of an insurance company, or income of an investment company determined under
13.15section
13.16(b) The term "unitary business" means business activities or operations which
13.17result in a flow of value between them. The term may be applied within a single legal
13.18entity or between multiple entities and without regard to whether each entity is a sole
13.19proprietorship, a corporation, a partnership or a trust.
13.20(c) Unity is presumed whenever there is unity of ownership, operation, and use,
13.21evidenced by centralized management or executive force, centralized purchasing,
13.22advertising, accounting, or other controlled interaction, but the absence of these
13.23centralized activities will not necessarily evidence a nonunitary business. Unity is also
13.24presumed when business activities or operations are of mutual benefit, dependent upon or
13.25contributory to one another, either individually or as a group.
13.26(d) Where a business operation conducted in Minnesota is owned by a business
13.27entity that carries on business activity outside the state different in kind from that
13.28conducted within this state, and the other business is conducted entirely outside the state, it
13.29is presumed that the two business operations are unitary in nature, interrelated, connected,
13.30and interdependent unless it can be shown to the contrary.
13.31(e) Unity of ownership is not deemed to exist when a corporation is involved unless
13.32that corporation is a member of a group of two or more business entities and more than 50
13.33percent of the voting stock of each member of the group is directly or indirectly owned
13.34by a common owner or by common owners, either corporate or noncorporate, or by one
13.35or more of the member corporations of the group. For this purpose, the term "voting
14.1stock" shall include membership interests of mutual insurance holding companies formed
14.2under section
14.3(f) The net income and apportionment factors under section
14.4foreign corporations and other foreign entities which are part of a unitary business shall
14.5not be included in the net income or the apportionment factors of the unitary business.
14.6A foreign corporation or other foreign entity which is required to file a return under this
14.7chapter shall file on a separate return basis.
14.8
14.9
14.10
14.11
14.12
14.13
14.14
14.15
14.16
14.17
14.18
14.19
14.20
14.21
14.22
14.23
14.24
14.25
14.26
14.27
14.28
14.29
14.30
14.31factors to be used in the apportionment of net income pursuant to section
14.33corporations or other domestic entities
14.34determined to be part of the unitary business pursuant to this subdivision, notwithstanding
14.35that foreign corporations or other foreign entities might be included in the unitary business.
15.1
15.2this chapter that are connected with or allocable against dividends
15.3
15.4
15.5
15.6a unitary business must file combined reports as the commissioner determines. On the
15.7reports, all intercompany transactions between entities included pursuant to paragraph
15.8
15.9accordance with this subdivision is apportioned among the entities by using each entity's
15.10Minnesota factors for apportionment purposes in the numerators of the apportionment
15.11formula and the total factors for apportionment purposes of all entities included pursuant
15.12to paragraph
15.13
15.14combined report for a fractional part of the common accounting period of the combined
15.15report:
15.16(1) its income includable in the combined report is its income incurred for that part
15.17of the year determined by proration or separate accounting; and
15.18(2) its sales, property, and payroll included in the apportionment formula must
15.19be prorated or accounted for separately.
15.20EFFECTIVE DATE.This section is effective for returns filed for taxable years
15.21beginning after December 31, 2010.
15.22 Sec. 11. Minnesota Statutes 2010, section 290A.03, subdivision 15, is amended to read:
15.23 Subd. 15. Internal Revenue Code. "Internal Revenue Code" means the Internal
15.24Revenue Code of 1986, as amended through
15.25EFFECTIVE DATE.This section is effective for property tax refunds based on
15.26property taxes payable on or after December 31, 2010, and rent paid on or after December
15.2731, 2009.
15.28 Sec. 12. CORRECTED FORM W-2 NOT REQUIRED.
15.29Employers who have prepared and distributed form W-2, wage and tax statement,
15.30for tax year 2010, that reported to employees the amount of health coverage provided to
15.31adult children under age 27 includible in net income under prior law, are not required to
15.32prepare and distribute corrected tax year 2010 form W-2.
15.33EFFECTIVE DATE.This section is effective the day following final enactment.
16.1 Sec. 13. REPEALER.
16.2Minnesota Statutes 2010, sections 290.01, subdivision 6b; and 290.0921, subdivision
16.37, are repealed.
16.4EFFECTIVE DATE.This section is effective for returns filed for taxable years
16.5beginning after December 31, 2010.
