Bill Text: MN HF386 | 2013-2014 | 88th Legislature | Introduced
Bill Title: Qualified small business and farm property tax exemptions clarified.
Spectrum: Partisan Bill (Republican 5-0)
Status: (Introduced - Dead) 2013-02-11 - Authors added Petersburg and Schomacker [HF386 Detail]
Download: Minnesota-2013-HF386-Introduced.html
1.2relating to taxation; estate; clarifying the exemptions for qualified small
1.3business and farm property; amending Minnesota Statutes 2012, section 291.03,
1.4subdivisions 8, 9, 10, 11.
1.5BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
1.6 Section 1. Minnesota Statutes 2012, section 291.03, subdivision 8, is amended to read:
1.7 Subd. 8. Definitions. (a) For purposes of this section, the following terms have the
1.8meanings given in this subdivision.
1.9(b) "Family member" means a family member as defined in section 2032A(e)(2) of
1.10the Internal Revenue Code or a trust whose present beneficiaries are all family members as
1.11defined in section 2032A(e)(2) of the Internal Revenue Code.
1.12(c) "Qualified heir" means a family member who acquired qualified propertyfrom
1.13 upon the death of the decedent and satisfies the requirement under subdivision 9, clause
1.14(6) (8), or subdivision 10, clause (4) (5), for the property.
1.15(d) "Qualified property" means qualified small business property under subdivision
1.169 and qualified farm property under subdivision 10.
1.17EFFECTIVE DATE.This section is effective for estates of decedents dying after
1.18June 30, 2011.
1.19 Sec. 2. Minnesota Statutes 2012, section 291.03, subdivision 9, is amended to read:
1.20 Subd. 9. Qualified small business property. Property satisfying all of the following
1.21requirements is qualified small business property:
1.22(1) The value of the property was included in the federal adjusted taxable estate.
2.1(2) The property consists of the assets of a trade or business or shares of stock or
2.2other ownership interests in a corporation or other entity engaged in a trade or business.
2.3The decedent or the decedent's spouse must have materially participated in the trade or
2.4business within the meaning of section 469 of the Internal Revenue Code during the
2.5taxable year that ended before the date of the decedent's death. Shares of stock in a
2.6corporation or an ownership interest in another type of entity do not qualify under this
2.7subdivision if the shares or ownership interests are traded on a public stock exchange at
2.8any time during the three-year period ending on the decedent's date of death. For purposes
2.9of this subdivision, an ownership interest includes the interest the decedent is deemed to
2.10own under sections 2036, 2037, and 2038 of the Internal Revenue Code.
2.11(3) During the decedent's taxable year that ended before the decedent's death, the
2.12trade or business must not have been a passive activity within the meaning of section
2.13469(c) of the Internal Revenue Code and the decedent or the decedent's spouse must have
2.14materially participated in the trade or business within the meaning of section 469(h) of the
2.15Internal Revenue Code, excluding section 469(h)(3) of the Internal Revenue Code and
2.16any other provision provided by a United States Treasury Department regulation that
2.17substitutes material participation in prior taxable years for material participation in the
2.18taxable year that ended before the decedent's death.
2.19(4) The gross annual sales of the trade or business were $10,000,000 or less for the
2.20last taxable year that ended before the date of the death of the decedent.
2.21(4) (5) The property does not consist of cash or, cash equivalents, publicly traded
2.22securities, or assets not used in the operation of the trade or business. For property
2.23consisting of shares of stock or other ownership interests in an entity, theamount value of
2.24cashor, cash equivalents, publicly traded securities, or assets not used in the operation of
2.25the trade or business held by the corporation or other entity must be deducted from the
2.26value of the property qualifying under this subdivision in proportion to the decedent's
2.27share of ownership of the entity on the date of death.
2.28(6) The property does not consist of qualified farm property. For property consisting
2.29of shares of stock or other ownership interests in an entity, the value of the qualified
2.30farm property held by the corporation or other entity must be deducted from the value
2.31of the property qualifying under this subdivision in proportion to the decedent's share of
2.32ownership of the entity on the date of death.
2.33(5) (7) The decedent continuously owned the property, including property the
2.34decedent is deemed to own under sections 2036, 2037, and 2038 of the Internal Revenue
2.35Code, for the three-year period ending on the date of death of the decedent. For a sole
2.36proprietor, if the property replaced similar property within the three-year period, the
3.1replacement property will be treated as having been owned for the three-year period
3.2ending on the date of death of the decedent.
3.3(6) A family member continuously uses the property in the operation of the trade or
3.4business for three years following the date of death of the decedent.
3.5(8) For three years following the date of death of the decedent, the trade or business
3.6is not a passive activity within the meaning of section 469(c) of the Internal Revenue Code
3.7and a family member materially participates in the operation of the trade or business within
3.8the meaning of section 469(h) of the Internal Revenue Code, excluding section 469(h)(3)
3.9of the Internal Revenue Code and any other provision provided by a United States Treasury
3.10Department regulation that substitutes material participation in prior taxable years for
3.11material participation in the three years following the date of death of the decedent.
3.12(7) (9) The estate and the qualified heir elect to treat the property as qualified small
3.13business property and agree, in the form prescribed by the commissioner, to pay the
3.14recapture tax under subdivision 11, if applicable.
3.15EFFECTIVE DATE.This section is effective for estates of decedents dying after
3.16June 30, 2011.
3.17 Sec. 3. Minnesota Statutes 2012, section 291.03, subdivision 10, is amended to read:
3.18 Subd. 10. Qualified farm property. Property satisfying all of the following
3.19requirements is qualified farm property:
3.20(1) The value of the property was included in the federal adjusted taxable estate.
3.21(2) The property consists of agricultural land as defined by section 500.24, subdivision
3.222, paragraph (g), and owned by afarm meeting the requirements of person or entity that
3.23is not excluded from owning agricultural land by section500.24 , and was classified for
3.24property tax purposes as the homestead of the decedent or the decedent's spouse or both
3.25under section
273.124, and as class 2a property under section
273.13, subdivision 23
3.26(3) For property taxes payable in the year of the decedent's death, the decedent's
3.27interest in the property was classified as the homestead of the decedent or the decedent's
3.28spouse or both under section 273.124, and as class 2a property under section 273.13,
3.29subdivision 23.
3.30(4) The decedent continuously owned the property, including property the decedent
3.31is deemed to own under sections 2036, 2037, and 2038 of the Internal Revenue Code, for
3.32the three-year period ending on the date of death of the decedent either by ownership of
3.33the agricultural land or pursuant to holding an interest in an entity that is not excluded
3.34from owning agricultural land under section 500.24.
4.1(4) A family member continuously uses the property in the operation of the trade or
4.2business (5) The property is classified for property tax purposes as class 2a property under
4.3section 273.13, subdivision 23, for three years following the date of death of the decedent.
4.4(5) (6) The estate and the qualified heir elect to treat the property as qualified farm
4.5property and agree, in a form prescribed by the commissioner, to pay the recapture tax
4.6under subdivision 11, if applicable.
4.7EFFECTIVE DATE.This section is effective for estates of decedents dying after
4.8June 30, 2011.
4.9 Sec. 4. Minnesota Statutes 2012, section 291.03, subdivision 11, is amended to read:
4.10 Subd. 11. Recapture tax. (a) If, within three years after the decedent's death and
4.11before the death of the qualified heir, the qualified heir disposes of any interest in the
4.12qualified property, other than by a disposition to a family member or qualifying entity, or a
4.13family member ceases touse the qualified property which was acquired or passed from
4.14the decedent satisfy the requirement under subdivision 9, clause (8), or subdivision 10,
4.15clause (5), an additional estate tax is imposed on the property. For a sole proprietor, if
4.16the qualified heir replaces qualified small business property excluded under subdivision 9
4.17with similar property, then the qualified heir will not be treated as having disposed of an
4.18interest in the qualified property.
4.19(b) The amount of the additional tax equals the amount of the exclusion claimed with
4.20respect to the qualified interest disposed of by the estate under subdivision 8, paragraph
4.21(d), multiplied by 16 percent.
4.22(c) The additional tax under this subdivision is due on the day which is six months
4.23after the date of the disposition or cessation in paragraph (a).
4.24(d) For purposes of paragraph (a), "qualifying entity" means a corporation or other
4.25entity that is owned by a family member or family members and, for qualified farm
4.26property, that is not excluded from owning agricultural land under section 500.24.
4.27EFFECTIVE DATE.This section is effective for estates of decedents dying after
4.28June 30, 2011.
1.3business and farm property; amending Minnesota Statutes 2012, section 291.03,
1.4subdivisions 8, 9, 10, 11.
1.5BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
1.6 Section 1. Minnesota Statutes 2012, section 291.03, subdivision 8, is amended to read:
1.7 Subd. 8. Definitions. (a) For purposes of this section, the following terms have the
1.8meanings given in this subdivision.
1.9(b) "Family member" means a family member as defined in section 2032A(e)(2) of
1.10the Internal Revenue Code or a trust whose present beneficiaries are all family members as
1.11defined in section 2032A(e)(2) of the Internal Revenue Code.
1.12(c) "Qualified heir" means a family member who acquired qualified property
1.13 upon the death of the decedent and satisfies the requirement under subdivision 9, clause
1.14
1.15(d) "Qualified property" means qualified small business property under subdivision
1.169 and qualified farm property under subdivision 10.
1.17EFFECTIVE DATE.This section is effective for estates of decedents dying after
1.18June 30, 2011.
1.19 Sec. 2. Minnesota Statutes 2012, section 291.03, subdivision 9, is amended to read:
1.20 Subd. 9. Qualified small business property. Property satisfying all of the following
1.21requirements is qualified small business property:
1.22(1) The value of the property was included in the federal adjusted taxable estate.
2.1(2) The property consists of the assets of a trade or business or shares of stock or
2.2other ownership interests in a corporation or other entity engaged in a trade or business.
2.3
2.4
2.5
2.6corporation or an ownership interest in another type of entity do not qualify under this
2.7subdivision if the shares or ownership interests are traded on a public stock exchange at
2.8any time during the three-year period ending on the decedent's date of death. For purposes
2.9of this subdivision, an ownership interest includes the interest the decedent is deemed to
2.10own under sections 2036, 2037, and 2038 of the Internal Revenue Code.
2.11(3) During the decedent's taxable year that ended before the decedent's death, the
2.12trade or business must not have been a passive activity within the meaning of section
2.13469(c) of the Internal Revenue Code and the decedent or the decedent's spouse must have
2.14materially participated in the trade or business within the meaning of section 469(h) of the
2.15Internal Revenue Code, excluding section 469(h)(3) of the Internal Revenue Code and
2.16any other provision provided by a United States Treasury Department regulation that
2.17substitutes material participation in prior taxable years for material participation in the
2.18taxable year that ended before the decedent's death.
2.19(4) The gross annual sales of the trade or business were $10,000,000 or less for the
2.20last taxable year that ended before the date of the death of the decedent.
2.21
2.22securities, or assets not used in the operation of the trade or business. For property
2.23consisting of shares of stock or other ownership interests in an entity, the
2.24cash
2.25the trade or business held by the corporation or other entity must be deducted from the
2.26value of the property qualifying under this subdivision in proportion to the decedent's
2.27share of ownership of the entity on the date of death.
2.28(6) The property does not consist of qualified farm property. For property consisting
2.29of shares of stock or other ownership interests in an entity, the value of the qualified
2.30farm property held by the corporation or other entity must be deducted from the value
2.31of the property qualifying under this subdivision in proportion to the decedent's share of
2.32ownership of the entity on the date of death.
2.33
2.34decedent is deemed to own under sections 2036, 2037, and 2038 of the Internal Revenue
2.35Code, for the three-year period ending on the date of death of the decedent. For a sole
2.36proprietor, if the property replaced similar property within the three-year period, the
3.1replacement property will be treated as having been owned for the three-year period
3.2ending on the date of death of the decedent.
3.3
3.4
3.5(8) For three years following the date of death of the decedent, the trade or business
3.6is not a passive activity within the meaning of section 469(c) of the Internal Revenue Code
3.7and a family member materially participates in the operation of the trade or business within
3.8the meaning of section 469(h) of the Internal Revenue Code, excluding section 469(h)(3)
3.9of the Internal Revenue Code and any other provision provided by a United States Treasury
3.10Department regulation that substitutes material participation in prior taxable years for
3.11material participation in the three years following the date of death of the decedent.
3.12
3.13business property and agree, in the form prescribed by the commissioner, to pay the
3.14recapture tax under subdivision 11, if applicable.
3.15EFFECTIVE DATE.This section is effective for estates of decedents dying after
3.16June 30, 2011.
3.17 Sec. 3. Minnesota Statutes 2012, section 291.03, subdivision 10, is amended to read:
3.18 Subd. 10. Qualified farm property. Property satisfying all of the following
3.19requirements is qualified farm property:
3.20(1) The value of the property was included in the federal adjusted taxable estate.
3.21(2) The property consists of agricultural land as defined by section 500.24, subdivision
3.222, paragraph (g), and owned by a
3.23is not excluded from owning agricultural land by section
3.24
3.25
3.26(3) For property taxes payable in the year of the decedent's death, the decedent's
3.27interest in the property was classified as the homestead of the decedent or the decedent's
3.28spouse or both under section 273.124, and as class 2a property under section 273.13,
3.29subdivision 23.
3.30(4) The decedent continuously owned the property, including property the decedent
3.31is deemed to own under sections 2036, 2037, and 2038 of the Internal Revenue Code, for
3.32the three-year period ending on the date of death of the decedent either by ownership of
3.33the agricultural land or pursuant to holding an interest in an entity that is not excluded
3.34from owning agricultural land under section 500.24.
4.1
4.2
4.3section 273.13, subdivision 23, for three years following the date of death of the decedent.
4.4
4.5property and agree, in a form prescribed by the commissioner, to pay the recapture tax
4.6under subdivision 11, if applicable.
4.7EFFECTIVE DATE.This section is effective for estates of decedents dying after
4.8June 30, 2011.
4.9 Sec. 4. Minnesota Statutes 2012, section 291.03, subdivision 11, is amended to read:
4.10 Subd. 11. Recapture tax. (a) If, within three years after the decedent's death and
4.11before the death of the qualified heir, the qualified heir disposes of any interest in the
4.12qualified property, other than by a disposition to a family member or qualifying entity, or a
4.13family member ceases to
4.14
4.15clause (5), an additional estate tax is imposed on the property. For a sole proprietor, if
4.16the qualified heir replaces qualified small business property excluded under subdivision 9
4.17with similar property, then the qualified heir will not be treated as having disposed of an
4.18interest in the qualified property.
4.19(b) The amount of the additional tax equals the amount of the exclusion claimed with
4.20respect to the qualified interest disposed of by the estate under subdivision 8, paragraph
4.21(d), multiplied by 16 percent.
4.22(c) The additional tax under this subdivision is due on the day which is six months
4.23after the date of the disposition or cessation in paragraph (a).
4.24(d) For purposes of paragraph (a), "qualifying entity" means a corporation or other
4.25entity that is owned by a family member or family members and, for qualified farm
4.26property, that is not excluded from owning agricultural land under section 500.24.
4.27EFFECTIVE DATE.This section is effective for estates of decedents dying after
4.28June 30, 2011.
