1.2relating to taxation; income and corporate franchise; eliminating the preferences
1.3for foreign source income; repealing the subtraction for foreign royalties; taxing
1.4certain development subsidies; expanding the definition of domestic corporations
1.5to include certain foreign corporations incorporated or doing business in tax
1.6havens; modifying JOBZ and biotechnology and health science industry zones;
1.7repealing international economic development zones; reducing the corporate
1.8franchise tax rates; repealing the research credit; repealing foreign operating
1.9corporations; repealing the special apportionment formula for certain mail order
1.10businesses;amending Minnesota Statutes 2010, sections 289A.08, subdivision 3;
1.11290.01, subdivisions 5, 19c, 19d, 29, by adding subdivisions; 290.06, subdivision
1.121; 290.0921, subdivision 1; 290.17, subdivision 4; 290.191, subdivisions 2, 3;
1.13repealing Minnesota Statutes 2010, sections 290.01, subdivision 6b; 290.06,
1.14subdivisions 24, 28, 29, 30, 31, 32; 290.068, subdivisions 1, 2, 3, 4, 5, 6a, 7;
1.15290.0921, subdivision 7; 290.191, subdivision 4; 469.317; 469.318; 469.321;
1.16469.3215; 469.322; 469.323; 469.324; 469.325; 469.326; 469.327; 469.328;
1.17469.329; 469.337; 469.338; 469.339.
1.18BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

1.19    Section 1. Minnesota Statutes 2010, section 289A.08, subdivision 3, is amended to
1.20read:
1.21    Subd. 3. Corporations. (a) A corporation that is subject to the state's jurisdiction to
1.22tax under section 290.014, subdivision 5, must file a return, except that a foreign operating
1.23corporation as defined in section 290.01, subdivision 6b, is not required to file a return.
1.24(b) Members of a unitary business that are required to file a combined report on one
1.25return must designate a member of the unitary business to be responsible for tax matters,
1.26including the filing of returns, the payment of taxes, additions to tax, penalties, interest,
1.27or any other payment, and for the receipt of refunds of taxes or interest paid in excess of
1.28taxes lawfully due. The designated member must be a member of the unitary business that
1.29is filing the single combined report and either:
2.1(1) a corporation that is subject to the taxes imposed by chapter 290; or
2.2(2) a corporation that is not subject to the taxes imposed by chapter 290:
2.3(i) Such corporation consents by filing the return as a designated member under this
2.4clause to remit taxes, penalties, interest, or additions to tax due from the members of the
2.5unitary business subject to tax, and receive refunds or other payments on behalf of other
2.6members of the unitary business. The member designated under this clause is a "taxpayer"
2.7for the purposes of this chapter and chapter 270C, and is liable for any liability imposed
2.8on the unitary business under this chapter and chapter 290.
2.9(ii) If the state does not otherwise have the jurisdiction to tax the member designated
2.10under this clause, consenting to be the designated member does not create the jurisdiction
2.11to impose tax on the designated member, other than as described in item (i).
2.12(iii) The member designated under this clause must apply for a business tax account
2.13identification number.
2.14(c) The commissioner shall adopt rules for the filing of one return on behalf of the
2.15members of an affiliated group of corporations that are required to file a combined report.
2.16All members of an affiliated group that are required to file a combined report must file one
2.17return on behalf of the members of the group under rules adopted by the commissioner.
2.18(d) If a corporation claims on a return that it has paid tax in excess of the amount of
2.19taxes lawfully due, that corporation must include on that return information necessary for
2.20payment of the tax in excess of the amount lawfully due by electronic means.
2.21EFFECTIVE DATE.This section is effective for returns filed for taxable years
2.22beginning after December 31, 2010.

2.23    Sec. 2. Minnesota Statutes 2010, section 290.01, subdivision 5, is amended to read:
2.24    Subd. 5. Domestic corporation. The term "domestic" when applied to a corporation
2.25means a corporation:
2.26(1) created or organized in the United States, or under the laws of the United States
2.27or of any state, the District of Columbia, or any political subdivision of any of the
2.28foregoing but not including the Commonwealth of Puerto Rico, or any possession of
2.29the United States;
2.30(2) which qualifies as a DISC, as defined in section 992(a) of the Internal Revenue
2.31Code; or
2.32(3) which qualifies as a FSC, as defined in section 922 of the Internal Revenue Code.;
2.33    (4) which is incorporated in a tax haven;
2.34    (5) which is engaged in activity in a tax haven sufficient for the tax haven to impose
2.35a net income tax under United States constitutional standards and section 290.015, and
3.1which reports that 20 percent or more of its income is attributable to business in the tax
3.2haven; or
3.3    (6) which has the average of its property, payroll, and sales factors, as defined under
3.4section 290.191, within the 50 states of the United States and the District of Columbia, of
3.520 percent or more.
3.6EFFECTIVE DATE.This section is effective for returns filed for taxable years
3.7beginning after December 31, 2010.

3.8    Sec. 3. Minnesota Statutes 2010, section 290.01, is amended by adding a subdivision
3.9to read:
3.10    Subd. 5c. Tax haven. (a) "Tax haven" means the following foreign jurisdictions,
3.11unless the listing of the jurisdiction does not apply under paragraph (b):
3.12(1) Andorra;
3.13(2) Anguilla;
3.14(3) Antigua and Barbuda;
3.15(4) Aruba;
3.16(5) Bahamas;
3.17(6) Bahrain;
3.18(7) Belize;
3.19(8) British Virgin Islands;
3.20(9) Cayman Islands;
3.21(10) Cook Islands;
3.22(11) Costa Rica;
3.23(12) Dominica;
3.24(13) Gibraltar;
3.25(14) Grenada;
3.26(15) Guernsey-Sark-Alderney;
3.27(16) Jersey;
3.28(17) Jordan;
3.29(18) Lebanon;
3.30(19) Liberia;
3.31(20) Liechtenstein;
3.32(21) Maldives;
3.33(22) Marshall Islands;
3.34(23) Monaco;
3.35(24) Montserrat;
4.1(25) Nauru;
4.2(26) Netherlands Antilles;
4.3(27) Niue;
4.4(28) Panama;
4.5(29) St. Kitts and Nevis;
4.6(30) St. Lucia;
4.7(31) St. Vincent and Grenadines;
4.8(32) Tonga;
4.9(33) Turks and Caicos; and
4.10(34) Vanuatu.
4.11(b) A foreign jurisdiction's listing under paragraph (a) does not apply to the first
4.12taxable year after the United States enters into a tax treaty or other agreement with the
4.13foreign jurisdiction that provides for prompt, obligatory, and automatic exchange of
4.14information with the United States government relevant to enforcing the provisions of
4.15federal tax laws and the treaty or other agreement was in effect for the taxable year.
4.16EFFECTIVE DATE.This section is effective for returns filed for taxable years
4.17beginning after December 31, 2010.

4.18    Sec. 4. Minnesota Statutes 2010, section 290.01, subdivision 19c, is amended to read:
4.19    Subd. 19c. Corporations; additions to federal taxable income. For corporations,
4.20there shall be added to federal taxable income:
4.21    (1) the amount of any deduction taken for federal income tax purposes for income,
4.22excise, or franchise taxes based on net income or related minimum taxes, including but not
4.23limited to the tax imposed under section 290.0922, paid by the corporation to Minnesota,
4.24another state, a political subdivision of another state, the District of Columbia, or any
4.25foreign country or possession of the United States;
4.26    (2) interest not subject to federal tax upon obligations of: the United States, its
4.27possessions, its agencies, or its instrumentalities; the state of Minnesota or any other
4.28state, any of its political or governmental subdivisions, any of its municipalities, or any
4.29of its governmental agencies or instrumentalities; the District of Columbia; or Indian
4.30tribal governments;
4.31    (3) exempt-interest dividends received as defined in section 852(b)(5) of the Internal
4.32Revenue Code;
4.33    (4) the amount of any net operating loss deduction taken for federal income tax
4.34purposes under section 172 or 832(c)(10) of the Internal Revenue Code or operations loss
4.35deduction under section 810 of the Internal Revenue Code;
5.1    (5) the amount of any special deductions taken for federal income tax purposes
5.2under sections 241 to 247 and 965 of the Internal Revenue Code;
5.3    (6) losses from the business of mining, as defined in section 290.05, subdivision 1,
5.4clause (a), that are not subject to Minnesota income tax;
5.5    (7) the amount of any capital losses deducted for federal income tax purposes under
5.6sections 1211 and 1212 of the Internal Revenue Code;
5.7    (8) the exempt foreign trade income of a foreign sales corporation under sections
5.8921(a) and 291 of the Internal Revenue Code;
5.9    (9) the amount of percentage depletion deducted under sections 611 through 614 and
5.10291 of the Internal Revenue Code;
5.11    (10) for certified pollution control facilities placed in service in a taxable year
5.12beginning before December 31, 1986, and for which amortization deductions were elected
5.13under section 169 of the Internal Revenue Code of 1954, as amended through December
5.1431, 1985, the amount of the amortization deduction allowed in computing federal taxable
5.15income for those facilities;
5.16    (11) for taxable years beginning before January 1, 2011, the amount of any deemed
5.17dividend from a foreign operating corporation determined pursuant to section 290.17,
5.18subdivision 4 , paragraph (g). The deemed dividend shall be reduced by the amount of the
5.19addition to income required by clauses (20), (21), (22), and (23);
5.20    (12) the amount of a partner's pro rata share of net income which does not flow
5.21through to the partner because the partnership elected to pay the tax on the income under
5.22section 6242(a)(2) of the Internal Revenue Code;
5.23    (13) the amount of net income excluded under section 114 of the Internal Revenue
5.24Code;
5.25    (14) any increase in subpart F income, as defined in section 952(a) of the Internal
5.26Revenue Code, for the taxable year when subpart F income is calculated without regard to
5.27the provisions of Division C, title III, section 303(b) of Public Law 110-343;
5.28    (15) 80 percent of the depreciation deduction allowed under section 168(k)(1)(A)
5.29and (k)(4)(A) of the Internal Revenue Code. For purposes of this clause, if the taxpayer
5.30has an activity that in the taxable year generates a deduction for depreciation under
5.31section 168(k)(1)(A) and (k)(4)(A) and the activity generates a loss for the taxable year
5.32that the taxpayer is not allowed to claim for the taxable year, "the depreciation allowed
5.33under section 168(k)(1)(A) and (k)(4)(A)" for the taxable year is limited to excess of the
5.34depreciation claimed by the activity under section 168(k)(1)(A) and (k)(4)(A) over the
5.35amount of the loss from the activity that is not allowed in the taxable year. In succeeding
6.1taxable years when the losses not allowed in the taxable year are allowed, the depreciation
6.2under section 168(k)(1)(A) and (k)(4)(A) is allowed;
6.3    (16) 80 percent of the amount by which the deduction allowed by section 179 of the
6.4Internal Revenue Code exceeds the deduction allowable by section 179 of the Internal
6.5Revenue Code of 1986, as amended through December 31, 2003;
6.6    (17) to the extent deducted in computing federal taxable income, the amount of the
6.7deduction allowable under section 199 of the Internal Revenue Code;
6.8    (18) the exclusion allowed under section 139A of the Internal Revenue Code for
6.9federal subsidies for prescription drug plans;
6.10    (19) the amount of expenses disallowed under section 290.10, subdivision 2;
6.11    (20) for taxable years beginning before January 1, 2011, an amount equal to the
6.12interest and intangible expenses, losses, and costs paid, accrued, or incurred by any
6.13member of the taxpayer's unitary group to or for the benefit of a corporation that is a
6.14member of the taxpayer's unitary business group that qualifies as a foreign operating
6.15corporation. For purposes of this clause, intangible expenses and costs include:
6.16    (i) expenses, losses, and costs for, or related to, the direct or indirect acquisition,
6.17use, maintenance or management, ownership, sale, exchange, or any other disposition of
6.18intangible property;
6.19    (ii) losses incurred, directly or indirectly, from factoring transactions or discounting
6.20transactions;
6.21    (iii) royalty, patent, technical, and copyright fees;
6.22    (iv) licensing fees; and
6.23    (v) other similar expenses and costs.
6.24For purposes of this clause, "intangible property" includes stocks, bonds, patents, patent
6.25applications, trade names, trademarks, service marks, copyrights, mask works, trade
6.26secrets, and similar types of intangible assets.
6.27This clause does not apply to any item of interest or intangible expenses or costs paid,
6.28accrued, or incurred, directly or indirectly, to a foreign operating corporation with respect
6.29to such item of income to the extent that the income to the foreign operating corporation
6.30is income from sources without the United States as defined in subtitle A, chapter 1,
6.31subchapter N, part 1, of the Internal Revenue Code;
6.32    (21) for taxable years beginning before January 1, 2011, except as already included
6.33in the taxpayer's taxable income pursuant to clause (20), any interest income and income
6.34generated from intangible property received or accrued by a foreign operating corporation
6.35that is a member of the taxpayer's unitary group. For purposes of this clause, income
6.36generated from intangible property includes:
7.1    (i) income related to the direct or indirect acquisition, use, maintenance or
7.2management, ownership, sale, exchange, or any other disposition of intangible property;
7.3    (ii) income from factoring transactions or discounting transactions;
7.4    (iii) royalty, patent, technical, and copyright fees;
7.5    (iv) licensing fees; and
7.6    (v) other similar income.
7.7For purposes of this clause, "intangible property" includes stocks, bonds, patents, patent
7.8applications, trade names, trademarks, service marks, copyrights, mask works, trade
7.9secrets, and similar types of intangible assets.
7.10This clause does not apply to any item of interest or intangible income received or accrued
7.11by a foreign operating corporation with respect to such item of income to the extent that
7.12the income is income from sources without the United States as defined in subtitle A,
7.13chapter 1, subchapter N, part 1, of the Internal Revenue Code;
7.14    (22) for taxable years beginning before January 1, 2011, the dividends attributable to
7.15the income of a foreign operating corporation that is a member of the taxpayer's unitary
7.16group in an amount that is equal to the dividends paid deduction of a real estate investment
7.17trust under section 561(a) of the Internal Revenue Code for amounts paid or accrued by
7.18the real estate investment trust to the foreign operating corporation;
7.19    (23) for taxable years beginning before January 1, 2011, the income of a foreign
7.20operating corporation that is a member of the taxpayer's unitary group in an amount that
7.21is equal to gains derived from the sale of real or personal property located in the United
7.22States;
7.23    (24) the additional amount allowed as a deduction for donation of computer
7.24technology and equipment under section 170(e)(6) of the Internal Revenue Code, to the
7.25extent deducted from taxable income; and
7.26(25) discharge of indebtedness income resulting from reacquisition of business
7.27indebtedness and deferred under section 108(i) of the Internal Revenue Code.
7.28EFFECTIVE DATE.This section is effective for returns filed for taxable years
7.29beginning after December 31, 2010.

7.30    Sec. 5. Minnesota Statutes 2010, section 290.01, subdivision 19d, is amended to read:
7.31    Subd. 19d. Corporations; modifications decreasing federal taxable income. For
7.32corporations, there shall be subtracted from federal taxable income after the increases
7.33provided in subdivision 19c:
8.1    (1) the amount of foreign dividend gross-up added to gross income for federal
8.2income tax purposes under section 78 of the Internal Revenue Code;
8.3    (2) the amount of salary expense not allowed for federal income tax purposes due to
8.4claiming the work opportunity credit under section 51 of the Internal Revenue Code;
8.5    (3) any dividend (not including any distribution in liquidation) paid within the
8.6taxable year by a national or state bank to the United States, or to any instrumentality of
8.7the United States exempt from federal income taxes, on the preferred stock of the bank
8.8owned by the United States or the instrumentality;
8.9    (4) amounts disallowed for intangible drilling costs due to differences between
8.10this chapter and the Internal Revenue Code in taxable years beginning before January
8.111, 1987, as follows:
8.12    (i) to the extent the disallowed costs are represented by physical property, an amount
8.13equal to the allowance for depreciation under Minnesota Statutes 1986, section 290.09,
8.14subdivision 7 , subject to the modifications contained in subdivision 19e; and
8.15    (ii) to the extent the disallowed costs are not represented by physical property, an
8.16amount equal to the allowance for cost depletion under Minnesota Statutes 1986, section
8.17290.09, subdivision 8 ;
8.18    (5) the deduction for capital losses pursuant to sections 1211 and 1212 of the
8.19Internal Revenue Code, except that:
8.20    (i) for capital losses incurred in taxable years beginning after December 31, 1986,
8.21capital loss carrybacks shall not be allowed;
8.22    (ii) for capital losses incurred in taxable years beginning after December 31, 1986,
8.23a capital loss carryover to each of the 15 taxable years succeeding the loss year shall be
8.24allowed;
8.25    (iii) for capital losses incurred in taxable years beginning before January 1, 1987, a
8.26capital loss carryback to each of the three taxable years preceding the loss year, subject to
8.27the provisions of Minnesota Statutes 1986, section 290.16, shall be allowed; and
8.28    (iv) for capital losses incurred in taxable years beginning before January 1, 1987,
8.29a capital loss carryover to each of the five taxable years succeeding the loss year to the
8.30extent such loss was not used in a prior taxable year and subject to the provisions of
8.31Minnesota Statutes 1986, section 290.16, shall be allowed;
8.32    (6) an amount for interest and expenses relating to income not taxable for federal
8.33income tax purposes, if (i) the income is taxable under this chapter and (ii) the interest and
8.34expenses were disallowed as deductions under the provisions of section 171(a)(2), 265 or
8.35291 of the Internal Revenue Code in computing federal taxable income;
9.1    (7) in the case of mines, oil and gas wells, other natural deposits, and timber for
9.2which percentage depletion was disallowed pursuant to subdivision 19c, clause (9), a
9.3reasonable allowance for depletion based on actual cost. In the case of leases the deduction
9.4must be apportioned between the lessor and lessee in accordance with rules prescribed
9.5by the commissioner. In the case of property held in trust, the allowable deduction must
9.6be apportioned between the income beneficiaries and the trustee in accordance with the
9.7pertinent provisions of the trust, or if there is no provision in the instrument, on the basis
9.8of the trust's income allocable to each;
9.9    (8) for certified pollution control facilities placed in service in a taxable year
9.10beginning before December 31, 1986, and for which amortization deductions were elected
9.11under section 169 of the Internal Revenue Code of 1954, as amended through December
9.1231, 1985, an amount equal to the allowance for depreciation under Minnesota Statutes
9.131986, section 290.09, subdivision 7;
9.14    (9) amounts included in federal taxable income that are due to refunds of income,
9.15excise, or franchise taxes based on net income or related minimum taxes paid by the
9.16corporation to Minnesota, another state, a political subdivision of another state, the
9.17District of Columbia, or a foreign country or possession of the United States to the extent
9.18that the taxes were added to federal taxable income under section 290.01, subdivision 19c,
9.19clause (1), in a prior taxable year;
9.20    (10) for taxable years beginning before January 1, 2011, 80 percent of royalties,
9.21fees, or other like income accrued or received from a foreign operating corporation
9.22or a foreign corporation which is part of the same unitary business as the receiving
9.23corporation, unless the income resulting from such payments or accruals is income from
9.24sources within the United States as defined in subtitle A, chapter 1, subchapter N, part
9.251, of the Internal Revenue Code;
9.26    (11) income or gains from the business of mining as defined in section 290.05,
9.27subdivision 1 , clause (a), that are not subject to Minnesota franchise tax;
9.28    (12) the amount of disability access expenditures in the taxable year which are not
9.29allowed to be deducted or capitalized under section 44(d)(7) of the Internal Revenue Code;
9.30    (13) the amount of qualified research expenses not allowed for federal income tax
9.31purposes under section 280C(c) of the Internal Revenue Code, but only to the extent that
9.32the amount exceeds the amount of the credit allowed under section 290.068;
9.33    (14) the amount of salary expenses not allowed for federal income tax purposes due
9.34to claiming the Indian employment credit under section 45A(a) of the Internal Revenue
9.35Code;
10.1    (15) for a corporation whose foreign sales corporation, as defined in section 922
10.2of the Internal Revenue Code, constituted a foreign operating corporation during any
10.3taxable year ending before January 1, 1995, and a return was filed by August 15, 1996,
10.4claiming the deduction under section 290.21, subdivision 4, for income received from
10.5the foreign operating corporation, an amount equal to 1.23 multiplied by the amount of
10.6income excluded under section 114 of the Internal Revenue Code, provided the income is
10.7not income of a foreign operating company;
10.8    (16) any decrease in subpart F income, as defined in section 952(a) of the Internal
10.9Revenue Code, for the taxable year when subpart F income is calculated without regard to
10.10the provisions of Division C, title III, section 303(b) of Public Law 110-343;
10.11    (17) in each of the five tax years immediately following the tax year in which an
10.12addition is required under subdivision 19c, clause (15), an amount equal to one-fifth of
10.13the delayed depreciation. For purposes of this clause, "delayed depreciation" means the
10.14amount of the addition made by the taxpayer under subdivision 19c, clause (15). The
10.15resulting delayed depreciation cannot be less than zero;
10.16    (18) in each of the five tax years immediately following the tax year in which an
10.17addition is required under subdivision 19c, clause (16), an amount equal to one-fifth of
10.18the amount of the addition; and
10.19(19) to the extent included in federal taxable income, discharge of indebtedness
10.20income resulting from reacquisition of business indebtedness included in federal taxable
10.21income under section 108(i) of the Internal Revenue Code. This subtraction applies only
10.22to the extent that the income was included in net income in a prior year as a result of the
10.23addition under section 290.01, subdivision 19c, clause (25).
10.24EFFECTIVE DATE.This section is effective for returns filed for taxable years
10.25beginning after December 31, 2010.

10.26    Sec. 6. Minnesota Statutes 2010, section 290.01, subdivision 29, is amended to read:
10.27    Subd. 29. Taxable income. The term "taxable income" means:
10.28(1) for individuals, estates, and trusts, the same as taxable net income;
10.29(2) for corporations, the taxable net income less
10.30(i) the net operating loss deduction under section 290.095; and
10.31(ii) the dividends received deduction under section 290.21, subdivision 4; plus
10.32(iii) the exemption for operating in a job opportunity building zone under section
10.33469.317; Minnesota development subsidies.
10.34(iv) the exemption for operating in a biotechnology and health sciences industry
10.35zone under section 469.337; and
11.1(v) the exemption for operating in an international economic development zone
11.2under section 469.326.
11.3EFFECTIVE DATE.This section is effective for taxable years beginning after
11.4December 31, 2010.

11.5    Sec. 7. Minnesota Statutes 2010, section 290.01, is amended by adding a subdivision
11.6to read:
11.7    Subd. 33. Minnesota development subsidies. (a) "Minnesota development
11.8subsidies" means the greater of the following amounts:
11.9(1) one-half of the amount deducted by the taxpayer in computing federal taxable
11.10income for the taxable year, as property taxes, business expenses, or otherwise, that is
11.11attributable to property taxes paid by the taxpayer, either directly or indirectly through a
11.12lease or otherwise, on property located in a tax increment financing district, as defined in
11.13section 469.174, or that receives an abatement under sections 469.1813 to 469.1815, if the
11.14owner of the property or a related party has entered a development or similar agreement
11.15with respect to the increment district or derives a benefit from the abatement by its
11.16property having access to or use of public improvements financed with the abatement or
11.17otherwise; or
11.18(2) the amount of payments received by the taxpayer under a development or similar
11.19agreement that provides for payments or reimbursements from the proceeds of increments
11.20from a tax increment financing district or from an abatement under sections 469.1813 to
11.21469.1815, but excluding reimbursements under a development action response plan, as
11.22defined in section 469.174, subdivision 17, to pay for its costs incurred to fund removal
11.23or remedial actions.
11.24EFFECTIVE DATE.This section is effective for taxable years beginning after
11.25December 31, 2010.

11.26    Sec. 8. Minnesota Statutes 2010, section 290.06, subdivision 1, is amended to read:
11.27    Subdivision 1. Computation, corporations. The franchise tax imposed upon
11.28corporations shall be computed by applying to their taxable income the rate of 9.8 7.5
11.29percent.
11.30EFFECTIVE DATE.This section is effective for taxable years beginning after
11.31December 31, 2010.

11.32    Sec. 9. Minnesota Statutes 2010, section 290.0921, subdivision 1, is amended to read:
12.1    Subdivision 1. Tax imposed. In addition to the taxes computed under this chapter
12.2without regard to this section, the franchise tax imposed on corporations includes a tax
12.3equal to the excess, if any, for the taxable year of:
12.4(1) 5.8 4.5 percent of Minnesota alternative minimum taxable income; over
12.5(2) the tax imposed under section 290.06, subdivision 1, without regard to this
12.6section.
12.7EFFECTIVE DATE.This section is effective for taxable years beginning after
12.8December 31, 2010.

12.9    Sec. 10. Minnesota Statutes 2010, section 290.17, subdivision 4, is amended to read:
12.10    Subd. 4. Unitary business principle. (a) If a trade or business conducted wholly
12.11within this state or partly within and partly without this state is part of a unitary business,
12.12the entire income of the unitary business is subject to apportionment pursuant to section
12.13290.191 . Notwithstanding subdivision 2, paragraph (c), none of the income of a unitary
12.14business is considered to be derived from any particular source and none may be allocated
12.15to a particular place except as provided by the applicable apportionment formula. The
12.16provisions of this subdivision do not apply to business income subject to subdivision 5,
12.17income of an insurance company, or income of an investment company determined under
12.18section 290.36.
12.19(b) The term "unitary business" means business activities or operations which
12.20result in a flow of value between them. The term may be applied within a single legal
12.21entity or between multiple entities and without regard to whether each entity is a sole
12.22proprietorship, a corporation, a partnership or a trust.
12.23(c) Unity is presumed whenever there is unity of ownership, operation, and use,
12.24evidenced by centralized management or executive force, centralized purchasing,
12.25advertising, accounting, or other controlled interaction, but the absence of these
12.26centralized activities will not necessarily evidence a nonunitary business. Unity is also
12.27presumed when business activities or operations are of mutual benefit, dependent upon or
12.28contributory to one another, either individually or as a group.
12.29(d) Where a business operation conducted in Minnesota is owned by a business
12.30entity that carries on business activity outside the state different in kind from that
12.31conducted within this state, and the other business is conducted entirely outside the state, it
12.32is presumed that the two business operations are unitary in nature, interrelated, connected,
12.33and interdependent unless it can be shown to the contrary.
12.34(e) Unity of ownership is not deemed to exist when a corporation is involved unless
12.35that corporation is a member of a group of two or more business entities and more than 50
13.1percent of the voting stock of each member of the group is directly or indirectly owned
13.2by a common owner or by common owners, either corporate or noncorporate, or by one
13.3or more of the member corporations of the group. For this purpose, the term "voting
13.4stock" shall include membership interests of mutual insurance holding companies formed
13.5under section 66A.40.
13.6(f) The net income and apportionment factors under section 290.191 or 290.20 of
13.7foreign corporations and other foreign entities which are part of a unitary business shall
13.8not be included in the net income or the apportionment factors of the unitary business.
13.9A foreign corporation or other foreign entity which is required to file a return under this
13.10chapter shall file on a separate return basis. The net income and apportionment factors
13.11under section 290.191 or 290.20 of foreign operating corporations shall not be included in
13.12the net income or the apportionment factors of the unitary business except as provided
13.13in paragraph (g). The legislature intends that the provisions of this paragraph are not
13.14severable from the provisions of section 290.01, subdivision 5, clauses (4) to (6), and if
13.15any of those provisions are found to be unconstitutional, the provisions of this paragraph
13.16are void for the respective taxable years.
13.17(g) The adjusted net income of a foreign operating corporation shall be deemed to
13.18be paid as a dividend on the last day of its taxable year to each shareholder thereof, in
13.19proportion to each shareholder's ownership, with which such corporation is engaged in
13.20a unitary business. Such deemed dividend shall be treated as a dividend under section
13.21290.21, subdivision 4.
13.22Dividends actually paid by a foreign operating corporation to a corporate shareholder
13.23which is a member of the same unitary business as the foreign operating corporation shall
13.24be eliminated from the net income of the unitary business in preparing a combined report
13.25for the unitary business. The adjusted net income of a foreign operating corporation
13.26shall be its net income adjusted as follows:
13.27(1) any taxes paid or accrued to a foreign country, the commonwealth of Puerto
13.28Rico, or a United States possession or political subdivision of any of the foregoing shall
13.29be a deduction; and
13.30(2) the subtraction from federal taxable income for payments received from foreign
13.31corporations or foreign operating corporations under section 290.01, subdivision 19d,
13.32clause (10), shall not be allowed.
13.33If a foreign operating corporation incurs a net loss, neither income nor deduction
13.34from that corporation shall be included in determining the net income of the unitary
13.35business.
14.1(h) (g) For purposes of determining the net income of a unitary business and the
14.2factors to be used in the apportionment of net income pursuant to section 290.191 or
14.3290.20 , there must be included only the income and apportionment factors of domestic
14.4corporations or other domestic entities other than foreign operating corporations that are
14.5determined to be part of the unitary business pursuant to this subdivision, notwithstanding
14.6that foreign corporations or other foreign entities might be included in the unitary business.
14.7(i) (h) Deductions for expenses, interest, or taxes otherwise allowable under
14.8this chapter that are connected with or allocable against dividends, deemed dividends
14.9described in paragraph (g), or royalties, fees, or other like income described in section
14.10290.01, subdivision 19d, clause (10), shall not be disallowed.
14.11(j) (i) Each corporation or other entity, except a sole proprietorship, that is part of
14.12a unitary business must file combined reports as the commissioner determines. On the
14.13reports, all intercompany transactions between entities included pursuant to paragraph (h)
14.14(g) must be eliminated and the entire net income of the unitary business determined in
14.15accordance with this subdivision is apportioned among the entities by using each entity's
14.16Minnesota factors for apportionment purposes in the numerators of the apportionment
14.17formula and the total factors for apportionment purposes of all entities included pursuant
14.18to paragraph (h) (g) in the denominators of the apportionment formula.
14.19(k) (j) If a corporation has been divested from a unitary business and is included in a
14.20combined report for a fractional part of the common accounting period of the combined
14.21report:
14.22(1) its income includable in the combined report is its income incurred for that part
14.23of the year determined by proration or separate accounting; and
14.24(2) its sales, property, and payroll included in the apportionment formula must
14.25be prorated or accounted for separately.
14.26EFFECTIVE DATE.This section is effective for returns filed for taxable years
14.27beginning after December 31, 2010.

14.28    Sec. 11. Minnesota Statutes 2010, section 290.191, subdivision 2, is amended to read:
14.29    Subd. 2. Apportionment formula of general application. (a) Except for those
14.30trades or businesses required to use a different formula under subdivision 3 or section
14.31290.36 , and for those trades or businesses that receive permission to use some other
14.32method under section 290.20 or under subdivision 4, a trade or business required to
14.33apportion its net income must apportion its income to this state on the basis of the
14.34percentage obtained by taking the sum of:
15.1(1) the percent for the sales factor under paragraph (b) of the percentage which
15.2the sales made within this state in connection with the trade or business during the tax
15.3period are of the total sales wherever made in connection with the trade or business during
15.4the tax period;.
15.5(2) the percent for the property factor under paragraph (b) of the percentage which
15.6the total tangible property used by the taxpayer in this state in connection with the trade or
15.7business during the tax period is of the total tangible property, wherever located, used by
15.8the taxpayer in connection with the trade or business during the tax period; and
15.9(3) the percent for the payroll factor under paragraph (b) of the percentage which
15.10the taxpayer's total payrolls paid or incurred in this state or paid in respect to labor
15.11performed in this state in connection with the trade or business during the tax period are
15.12of the taxpayer's total payrolls paid or incurred in connection with the trade or business
15.13during the tax period.
15.14(b) For purposes of paragraph (a) and subdivision 3, the following percentages apply
15.15for the taxable years specified:

15.16 15.17	Taxable years beginning during calendar year			Sales factor percent			Property factor percent		Payroll factor percent
15.18	2007			78			11		11
15.19	2008			81			9.5		9.5
15.20	2009			84			8		8
15.21	2010			87			6.5		6.5
15.22	2011			90			5		5
15.23	2012			93			3.5		3.5
15.24	2013			96			2		2
15.25	2014 and later calendar years			100			0		0

15.26EFFECTIVE DATE.This section is effective for taxable years beginning after
15.27December 31, 2010.

15.28    Sec. 12. Minnesota Statutes 2010, section 290.191, subdivision 3, is amended to read:
15.29    Subd. 3. Apportionment formula for financial institutions. Except for an
15.30investment company required to apportion its income under section 290.36, a financial
15.31institution that is required to apportion its net income must apportion its net income to this
15.32state on the basis of the percentage obtained by taking the sum of:
15.33(1) the percent for the sales factor under subdivision 2, paragraph (b), of the
15.34percentage which the receipts from within this state in connection with the trade or
15.35business during the tax period are of the total receipts in connection with the trade or
15.36business during the tax period, from wherever derived;.
16.1(2) the percent for the property factor under subdivision 2, paragraph (b), of the
16.2percentage which the sum of the total tangible property used by the taxpayer in this
16.3state and the intangible property owned by the taxpayer and attributed to this state in
16.4connection with the trade or business during the tax period is of the sum of the total
16.5tangible property, wherever located, used by the taxpayer and the intangible property
16.6owned by the taxpayer and attributed to all states in connection with the trade or business
16.7during the tax period; and
16.8(3) the percent for the payroll factor under subdivision 2, paragraph (b), of the
16.9percentage which the taxpayer's total payrolls paid or incurred in this state or paid in
16.10respect to labor performed in this state in connection with the trade or business during
16.11the tax period are of the taxpayer's total payrolls paid or incurred in connection with
16.12the trade or business during the tax period.
16.13EFFECTIVE DATE.This section is effective for taxable years beginning after
16.14December 31, 2010.

16.15    Sec. 13. REPEALER.
16.16Minnesota Statutes 2010, sections 290.01, subdivision 6b; 290.06, subdivisions
16.1724, 28, 29, 30, 31, and 32; 290.068, subdivisions 1, 2, 3, 4, 5, 6a, and 7; 290.0921,
16.18subdivision 7; 290.191, subdivision 4; 469.317; 469.318; 469.321; 469.3215; 469.322;
16.19469.323; 469.324; 469.325; 469.326; 469.327; 469.328; 469.329; 469.337; 469.338;
16.20and 469.339, are repealed.
16.21EFFECTIVE DATE.This section is effective for returns filed for taxable years
16.22beginning after December 31, 2010.