Bill Text: MN HF841 | 2011-2012 | 87th Legislature | Introduced
Bill Title: State general tax reduced, corporate franchise tax reduced and repealed, business income subtraction provided, and capital equipment exemption at the time of purchase allowed and application expanded.
Spectrum: Partisan Bill (Republican 10-0)
Status: (Introduced - Dead) 2011-03-08 - Referred by Chair to Property and Local Tax Division [HF841 Detail]
Download: Minnesota-2011-HF841-Introduced.html
1.2relating to taxation; reducing the state general tax; reducing and repealing the
1.3corporate franchise tax; providing a subtraction for certain business income;
1.4expanding the application of and allowing the capital equipment exemption at
1.5the time of purchase; amending Minnesota Statutes 2010, sections 275.025,
1.6subdivision 1; 290.01, subdivision 19b; 290.06, subdivision 1; 290.0921,
1.7subdivision 1; 297A.68, subdivision 5; 297A.75, subdivisions 1, 2, 3.
1.8BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
1.9 Section 1. Minnesota Statutes 2010, section 275.025, subdivision 1, is amended to read:
1.10 Subdivision 1. Levy amount. The state general levy is levied against
1.11commercial-industrial property and seasonal residential recreational property, as defined in
1.12this section. The state general levy base amount is$592,000,000 $695,000,000 for taxes
1.13payable in2002 2012 and thereafter. For taxes payable in subsequent years, the levy base
1.14amount is increased each year by multiplying the levy base amount for the prior year by
1.15the sum of one plus the rate of increase, if any, in the implicit price deflator for government
1.16consumption expenditures and gross investment for state and local governments prepared
1.17by the Bureau of Economic Analysts of the United States Department of Commerce for
1.18the 12-month period ending March 31 of the year prior to the year the taxes are payable.
1.19The tax under this section is not treated as a local tax rate under section469.177 and is not
1.20the levy of a governmental unit under chapters 276A and 473F.
1.21The commissioner shall increase or decrease the preliminary or final rate for a year
1.22as necessary to account for errors and tax base changes that affected a preliminary or final
1.23rate for either of the two preceding years. Adjustments are allowed to the extent that the
1.24necessary information is available to the commissioner at the time the rates for a year must
1.25be certified, and for the following reasons:
2.1(1) an erroneous report of taxable value by a local official;
2.2(2) an erroneous calculation by the commissioner; and
2.3(3) an increase or decrease in taxable value for commercial-industrial or seasonal
2.4residential recreational property reported on the abstracts of tax lists submitted under
2.5section275.29 that was not reported on the abstracts of assessment submitted under
2.6section270C.89 for the same year.
2.7The commissioner may, but need not, make adjustments if the total difference in the tax
2.8levied for the year would be less than $100,000.
2.9EFFECTIVE DATE.This section is effective for assessment year 2011 and
2.10thereafter, for taxes payable in 2012 and thereafter.
2.11 Sec. 2. Minnesota Statutes 2010, section 290.01, subdivision 19b, is amended to read:
2.12 Subd. 19b. Subtractions from federal taxable income. For individuals, estates,
2.13and trusts, there shall be subtracted from federal taxable income:
2.14 (1) net interest income on obligations of any authority, commission, or
2.15instrumentality of the United States to the extent includable in taxable income for federal
2.16income tax purposes but exempt from state income tax under the laws of the United States;
2.17 (2) if included in federal taxable income, the amount of any overpayment of income
2.18tax to Minnesota or to any other state, for any previous taxable year, whether the amount
2.19is received as a refund or as a credit to another taxable year's income tax liability;
2.20 (3) the amount paid to others, less the amount used to claim the credit allowed under
2.21section290.0674 , not to exceed $1,625 for each qualifying child in grades kindergarten
2.22to 6 and $2,500 for each qualifying child in grades 7 to 12, for tuition, textbooks, and
2.23transportation of each qualifying child in attending an elementary or secondary school
2.24situated in Minnesota, North Dakota, South Dakota, Iowa, or Wisconsin, wherein a
2.25resident of this state may legally fulfill the state's compulsory attendance laws, which
2.26is not operated for profit, and which adheres to the provisions of the Civil Rights Act
2.27of 1964 and chapter 363A. For the purposes of this clause, "tuition" includes fees or
2.28tuition as defined in section290.0674, subdivision 1 , clause (1). As used in this clause,
2.29"textbooks" includes books and other instructional materials and equipment purchased
2.30or leased for use in elementary and secondary schools in teaching only those subjects
2.31legally and commonly taught in public elementary and secondary schools in this state.
2.32Equipment expenses qualifying for deduction includes expenses as defined and limited in
2.33section290.0674, subdivision 1 , clause (3). "Textbooks" does not include instructional
2.34books and materials used in the teaching of religious tenets, doctrines, or worship, the
3.1purpose of which is to instill such tenets, doctrines, or worship, nor does it include books
3.2or materials for, or transportation to, extracurricular activities including sporting events,
3.3musical or dramatic events, speech activities, driver's education, or similar programs. No
3.4deduction is permitted for any expense the taxpayer incurred in using the taxpayer's or
3.5the qualifying child's vehicle to provide such transportation for a qualifying child. For
3.6purposes of the subtraction provided by this clause, "qualifying child" has the meaning
3.7given in section 32(c)(3) of the Internal Revenue Code;
3.8 (4) income as provided under section290.0802 ;
3.9 (5) to the extent included in federal adjusted gross income, income realized on
3.10disposition of property exempt from tax under section290.491 ;
3.11 (6) to the extent not deducted or not deductible pursuant to section 408(d)(8)(E)
3.12of the Internal Revenue Code in determining federal taxable income by an individual
3.13who does not itemize deductions for federal income tax purposes for the taxable year, an
3.14amount equal to 50 percent of the excess of charitable contributions over $500 allowable
3.15as a deduction for the taxable year under section 170(a) of the Internal Revenue Code,
3.16under the provisions of Public Law 109-1 and Public Law 111-126;
3.17 (7) for individuals who are allowed a federal foreign tax credit for taxes that do not
3.18qualify for a credit under section290.06, subdivision 22 , an amount equal to the carryover
3.19of subnational foreign taxes for the taxable year, but not to exceed the total subnational
3.20foreign taxes reported in claiming the foreign tax credit. For purposes of this clause,
3.21"federal foreign tax credit" means the credit allowed under section 27 of the Internal
3.22Revenue Code, and "carryover of subnational foreign taxes" equals the carryover allowed
3.23under section 904(c) of the Internal Revenue Code minus national level foreign taxes to
3.24the extent they exceed the federal foreign tax credit;
3.25 (8) in each of the five tax years immediately following the tax year in which an
3.26addition is required under subdivision 19a, clause (7), or 19c, clause (15), in the case
3.27of a shareholder of a corporation that is an S corporation, an amount equal to one-fifth
3.28of the delayed depreciation. For purposes of this clause, "delayed depreciation" means
3.29the amount of the addition made by the taxpayer under subdivision 19a, clause (7), or
3.30subdivision 19c, clause (15), in the case of a shareholder of an S corporation, minus the
3.31positive value of any net operating loss under section 172 of the Internal Revenue Code
3.32generated for the tax year of the addition. The resulting delayed depreciation cannot be
3.33less than zero;
3.34 (9) job opportunity building zone income as provided under section469.316 ;
3.35 (10) to the extent included in federal taxable income, the amount of compensation
3.36paid to members of the Minnesota National Guard or other reserve components of the
4.1United States military for active service performed in Minnesota, excluding compensation
4.2for services performed under the Active Guard Reserve (AGR) program. For purposes of
4.3this clause, "active service" means (i) state active service as defined in section190.05,
4.4subdivision 5a , clause (1); (ii) federally funded state active service as defined in section
4.5190.05, subdivision 5b
; or (iii) federal active service as defined in section
190.05,
4.6subdivision 5c , but "active service" excludes service performed in accordance with section
4.7190.08, subdivision 3
;
4.8 (11) to the extent included in federal taxable income, the amount of compensation
4.9paid to Minnesota residents who are members of the armed forces of the United States or
4.10United Nations for active duty performed outside Minnesota under United States Code,
4.11title 10, section 101(d); United States Code, title 32, section 101(12); or the authority of
4.12the United Nations;
4.13 (12) an amount, not to exceed $10,000, equal to qualified expenses related to a
4.14qualified donor's donation, while living, of one or more of the qualified donor's organs
4.15to another person for human organ transplantation. For purposes of this clause, "organ"
4.16means all or part of an individual's liver, pancreas, kidney, intestine, lung, or bone marrow;
4.17"human organ transplantation" means the medical procedure by which transfer of a human
4.18organ is made from the body of one person to the body of another person; "qualified
4.19expenses" means unreimbursed expenses for both the individual and the qualified donor
4.20for (i) travel, (ii) lodging, and (iii) lost wages net of sick pay, except that such expenses
4.21may be subtracted under this clause only once; and "qualified donor" means the individual
4.22or the individual's dependent, as defined in section 152 of the Internal Revenue Code. An
4.23individual may claim the subtraction in this clause for each instance of organ donation for
4.24transplantation during the taxable year in which the qualified expenses occur;
4.25 (13) in each of the five tax years immediately following the tax year in which an
4.26addition is required under subdivision 19a, clause (8), or 19c, clause (16), in the case of a
4.27shareholder of a corporation that is an S corporation, an amount equal to one-fifth of the
4.28addition made by the taxpayer under subdivision 19a, clause (8), or 19c, clause (16), in the
4.29case of a shareholder of a corporation that is an S corporation, minus the positive value of
4.30any net operating loss under section 172 of the Internal Revenue Code generated for the
4.31tax year of the addition. If the net operating loss exceeds the addition for the tax year, a
4.32subtraction is not allowed under this clause;
4.33 (14) to the extent included in federal taxable income, compensation paid to a service
4.34member as defined in United States Code, title 10, section 101(a)(5), for military service
4.35as defined in the Servicemembers Civil Relief Act, Public Law 108-189, section 101(2);
5.1 (15) international economic development zone income as provided under section
5.2469.325
;
5.3 (16) to the extent included in federal taxable income, the amount of national service
5.4educational awards received from the National Service Trust under United States Code,
5.5title 42, sections 12601 to 12604, for service in an approved Americorps National Service
5.6program;and
5.7(17) to the extent included in federal taxable income, discharge of indebtedness
5.8income resulting from reacquisition of business indebtedness included in federal taxable
5.9income under section 108(i) of the Internal Revenue Code. This subtraction applies only
5.10to the extent that the income was included in net income in a prior year as a result of the
5.11addition under section290.01, subdivision 19a , clause (16); and
5.12(18) to the extent included in federal taxable income, an amount, but not less than
5.13zero, equal to ten percent of the distributive share of income or loss, as defined in sections
5.14703(a) and 1366(a)(2) of the Internal Revenue Code, combined from all partnerships or S
5.15corporations in which the taxpayer materially participates, as defined in section 469(h) of
5.16the Internal Revenue Code.
5.17EFFECTIVE DATE.This section is effective for taxable years beginning after
5.18December 31, 2010.
5.19 Sec. 3. Minnesota Statutes 2010, section 290.06, subdivision 1, is amended to read:
5.20 Subdivision 1. Computation, corporations. The franchise tax imposed upon
5.21corporations shall be computed by applying to their taxable income the rate of:
5.22(1) 9.8 percent for taxable years beginning before January 1, 2011;
5.23(2) 8.8 percent for taxable year 2011;
5.24(3) 7.8 percent for taxable year 2012;
5.25(4) 6.3 percent for taxable year 2013;
5.26(5) 5.5 percent for taxable year 2014;
5.27(6) three percent for taxable year 2015;
5.28(7) two percent for taxable year 2016;
5.29(8) one percent for taxable year 2017; and
5.30(9) zero for taxable years beginning after December 31, 2017.
5.31EFFECTIVE DATE.This section is effective for taxable years beginning after
5.32December 31, 2010.
5.33 Sec. 4. Minnesota Statutes 2010, section 290.0921, subdivision 1, is amended to read:
6.1 Subdivision 1. Tax imposed. (a) In addition to the taxes computed under this
6.2chapter without regard to this section, the franchise tax imposed on corporations includes
6.3a tax equal to the excess, if any, for the taxable year of:
6.4(1) (i) 5.8 percent of Minnesota alternative minimum taxable income for taxable
6.5years beginning before January 1, 2011;
6.6(ii) 5.2 percent of Minnesota alternative minimum taxable income for taxable year
6.72011;
6.8(iii) 4.6 percent of Minnesota alternative minimum taxable income for taxable year
6.92012;
6.10(iv) 3.7 percent of Minnesota alternative minimum taxable income for taxable year
6.112013;
6.12(v) 3.3 percent of Minnesota alternative minimum taxable income for taxable year
6.132014;
6.14(vi) 1.8 percent of Minnesota alternative minimum taxable income for taxable year
6.152015;
6.16(vii) 1.2 percent of Minnesota alternative minimum taxable income for taxable
6.17year 2016;
6.18(viii) 0.6 percent of Minnesota alternative minimum taxable income for taxable
6.19year 2017; over
6.20(2) the tax imposed under section290.06, subdivision 1 , without regard to this
6.21section.
6.22(b) For taxable years beginning after December 31, 2017, the tax under this
6.23subdivision is zero.
6.24EFFECTIVE DATE.This section is effective for taxable years beginning after
6.25December 31, 2010.
6.26 Sec. 5. Minnesota Statutes 2010, section 297A.68, subdivision 5, is amended to read:
6.27 Subd. 5. Capital equipment. (a) Capital equipment is exempt.The tax must be
6.28imposed and collected as if the rate under section
297A.62, subdivision 1, applied, and
6.29then refunded in the manner provided in section
297A.75.
6.30"Capital equipment" means machinery and equipment purchased or leased, and used
6.31in this state by the purchaser or lessee primarily:
6.32(1) for manufacturing, fabricating, mining, or refining tangible personal property to
6.33be sold ultimately at retail if the machinery and equipment are essential to the integrated
6.34production process of manufacturing, fabricating, mining, or refining. Capital equipment
6.35also includes machinery and equipment used primarily;
7.1(2) to electronically transmit results retrieved by a customer of an online
7.2computerized data retrieval system; and
7.3(3) in the direct production of taxable services, as defined in section 297A.61,
7.4subdivision 3, paragraphs (c), (d), (e), (f), (g), (i), and (j).
7.5(b) Capital equipment includes, but is not limited to:
7.6(1) machinery and equipment used to operate, control, or regulate the production
7.7equipment;
7.8(2) machinery and equipment used for research and development, design, quality
7.9control, and testing activities;
7.10(3) environmental control devices that are used to maintain conditions such as
7.11temperature, humidity, light, or air pressure when those conditions are essential to and are
7.12part of the production process;
7.13(4) materials and supplies used to construct and install machinery or equipment;
7.14(5) repair and replacement parts, including accessories, whether purchased as spare
7.15parts, repair parts, or as upgrades or modifications to machinery or equipment;
7.16(6) materials used for foundations that support machinery or equipment;
7.17(7) materials used to construct and install special purpose buildings used in the
7.18production process;
7.19(8) ready-mixed concrete equipment in which the ready-mixed concrete is mixed
7.20as part of the delivery process regardless if mounted on a chassis, repair parts for
7.21ready-mixed concrete trucks, and leases of ready-mixed concrete trucks; and
7.22(9) machinery or equipment used for research, development, design, or production
7.23of computer software.
7.24(c) Capital equipment does not include the following:
7.25(1) motor vehicles taxed under chapter 297B;
7.26(2) machinery or equipment used to receive or store raw materials;
7.27(3) building materials, except for materials included in paragraph (b), clauses (6)
7.28and (7);
7.29(4) machinery or equipment used for nonproduction purposes, including, but not
7.30limited to, the following: plant security, fire prevention, first aid, and hospital stations;
7.31support operations or administration; pollution control; and plant cleaning, disposal of
7.32scrap and waste, plant communications, space heating, cooling, lighting, or safety;
7.33(5) farm machinery and aquaculture production equipment as defined by section
7.34297A.61, subdivisions 12 and 13
;
7.35(6) machinery or equipment purchased and installed by a contractor as part of an
7.36improvement to real property;
8.1(7) machinery and equipment used by restaurants in the furnishing, preparing, or
8.2serving of prepared foods as defined in section
297A.61, subdivision 31;
8.3(8) machinery and equipment used to furnish the services listed in section
297A.61,
8.4subdivision 3
, paragraph (g), clause (6), items (i) to (vi) and (viii);
8.5(9) machinery or equipment used in the transportation, transmission, or distribution
8.6of petroleum, liquefied gas, natural gas, water, or steam, in, by, or through pipes, lines,
8.7tanks, mains, or other means of transporting those products. This clause does not apply to
8.8machinery or equipment used to blend petroleum or biodiesel fuel as defined in section
8.9239.77; or
8.10(10) (7) any other item that is not essential to the integrated process of manufacturing,
8.11fabricating, mining, or refining or to the direct production of taxable services.
8.12(d) For purposes of this subdivision:
8.13(1) "Equipment" means independent devices or tools separate from machinery but
8.14essential to an integrated production process, including computers and computer software,
8.15used in operating, controlling, or regulating machinery and equipment; and any subunit or
8.16assembly comprising a component of any machinery or accessory or attachment parts of
8.17machinery, such as tools, dies, jigs, patterns, and molds.
8.18(2) "Fabricating" means to make, build, create, produce, or assemble components or
8.19property to work in a new or different manner.
8.20(3) "Integrated production process" means a process or series of operations through
8.21which tangible personal property is manufactured, fabricated, mined, or refined. For
8.22purposes of this clause, (i) manufacturing begins with the removal of raw materials
8.23from inventory and ends when the last process prior to loading for shipment has been
8.24completed; (ii) fabricating begins with the removal from storage or inventory of the
8.25property to be assembled, processed, altered, or modified and ends with the creation
8.26or production of the new or changed product; (iii) mining begins with the removal of
8.27overburden from the site of the ores, minerals, stone, peat deposit, or surface materials and
8.28ends when the last process before stockpiling is completed; and (iv) refining begins with
8.29the removal from inventory or storage of a natural resource and ends with the conversion
8.30of the item to its completed form.
8.31(4) "Machinery" means mechanical, electronic, or electrical devices, including
8.32computers and computer software, that are purchased or constructed to be used for the
8.33activities set forth in paragraph (a), beginning with the removal of raw materials from
8.34inventory through completion of the product, including packaging of the product.
9.1(5) "Machinery and equipment used for pollution control" means machinery and
9.2equipment used solely to eliminate, prevent, or reduce pollution resulting from an activity
9.3described in paragraph (a).
9.4(6) "Manufacturing" means an operation or series of operations where raw materials
9.5are changed in form, composition, or condition by machinery and equipment and which
9.6results in the production of a new article of tangible personal property. For purposes of
9.7this subdivision, "manufacturing" includes the generation of electricity or steam to be
9.8sold at retail.
9.9(7) "Mining" means the extraction of minerals, ores, stone, or peat.
9.10(8) "Online data retrieval system" means a system whose cumulation of information
9.11is equally available and accessible to all its customers.
9.12(9) "Primarily" means machinery and equipment used 50 percent or more of the time
9.13in an activity described in paragraph (a).
9.14(10) "Refining" means the process of converting a natural resource to an intermediate
9.15or finished product, including the treatment of water to be sold at retail.
9.16(11) This subdivision does not apply to telecommunications equipment as
9.17provided in subdivision 35, and does not apply to wire, cable, fiber, poles, or conduit
9.18for telecommunications services.
9.19EFFECTIVE DATE.This section is effective for sales and purchases made after
9.20June 30, 2011.
9.21 Sec. 6. Minnesota Statutes 2010, section 297A.75, subdivision 1, is amended to read:
9.22 Subdivision 1. Tax collected. The tax on the gross receipts from the sale of the
9.23following exempt items must be imposed and collected as if the sale were taxable and the
9.24rate under section297A.62, subdivision 1 , applied. The exempt items include:
9.25(1) capital equipment exempt under section
297A.68, subdivision 5;
9.26(2) (1) building materials for an agricultural processing facility exempt under section
9.27297A.71, subdivision 13
;
9.28(3) (2) building materials for mineral production facilities exempt under section
9.29297A.71, subdivision 14
;
9.30(4) (3) building materials for correctional facilities under section
297A.71,
9.31subdivision 3 ;
9.32(5) (4) building materials used in a residence for disabled veterans exempt under
9.33section297A.71, subdivision 11 ;
9.34(6) (5) elevators and building materials exempt under section
297A.71, subdivision
9.3512 ;
10.1(7) (6) building materials for the Long Lake Conservation Center exempt under
10.2section297A.71, subdivision 17 ;
10.3(8) (7) materials and supplies for qualified low-income housing under section
10.4297A.71, subdivision 23
;
10.5(9) (8) materials, supplies, and equipment for municipal electric utility facilities
10.6under section297A.71, subdivision 35 ;
10.7(10) (9) equipment and materials used for the generation, transmission, and
10.8distribution of electrical energy and an aerial camera package exempt under section
10.9297A.68
, subdivision 37;
10.10(11) (10) tangible personal property and taxable services and construction materials,
10.11supplies, and equipment exempt under section297A.68 , subdivision 41;
10.12(12) (11) commuter rail vehicle and repair parts under section
297A.70, subdivision
10.133, clause (11);
10.14(13) (12) materials, supplies, and equipment for construction or improvement of
10.15projects and facilities under section297A.71, subdivision 40 ;
10.16(14) (13) materials, supplies, and equipment for construction or improvement of a
10.17meat processing facility exempt under section297A.71, subdivision 41 ; and
10.18(15) (14) materials, supplies, and equipment for construction, improvement, or
10.19expansion of an aerospace defense manufacturing facility exempt under section297A.71,
10.20subdivision 42.
10.21EFFECTIVE DATE.This section is effective for sales and purchases made after
10.22June 30, 2011.
10.23 Sec. 7. Minnesota Statutes 2010, section 297A.75, subdivision 2, is amended to read:
10.24 Subd. 2. Refund; eligible persons. Upon application on forms prescribed by the
10.25commissioner, a refund equal to the tax paid on the gross receipts of the exempt items
10.26must be paid to the applicant. Only the following persons may apply for the refund:
10.27 (1) for subdivision 1, clauses (1)to (3) and (2), the applicant must be the purchaser;
10.28 (2) for subdivision 1, clauses(4) (3) and (7) (6), the applicant must be the
10.29governmental subdivision;
10.30 (3) for subdivision 1, clause(5) (4), the applicant must be the recipient of the
10.31benefits provided in United States Code, title 38, chapter 21;
10.32 (4) for subdivision 1, clause(6) (5), the applicant must be the owner of the
10.33homestead property;
10.34 (5) for subdivision 1, clause(8) (7), the owner of the qualified low-income housing
10.35project;
11.1 (6) for subdivision 1, clause(9) (8), the applicant must be a municipal electric utility
11.2or a joint venture of municipal electric utilities;
11.3 (7) for subdivision 1, clauses(10), (11), (14), and (15) (9), (10), (13), and (14),
11.4the owner of the qualifying business; and
11.5 (8) for subdivision 1, clauses (11) and (12)and (13), the applicant must be the
11.6governmental entity that owns or contracts for the project or facility.
11.7EFFECTIVE DATE.This section is effective for sales and purchases made after
11.8June 30, 2011.
11.9 Sec. 8. Minnesota Statutes 2010, section 297A.75, subdivision 3, is amended to read:
11.10 Subd. 3. Application. (a) The application must include sufficient information
11.11to permit the commissioner to verify the tax paid. If the tax was paid by a contractor,
11.12subcontractor, or builder, under subdivision 1, clause (3), (4), (5), (6), (7), (8), (9), (10),
11.13(11), (12), (13), or (14), or (15), the contractor, subcontractor, or builder must furnish to
11.14the refund applicant a statement including the cost of the exempt items and the taxes paid
11.15on the items unless otherwise specifically provided by this subdivision. The provisions of
11.16sections289A.40 and
289A.50 apply to refunds under this section.
11.17(b) An applicant may not file more than two applications per calendar year for
11.18refunds for taxes paid on capital equipment exempt under section
297A.68, subdivision 5.
11.19(c) (b) Total refunds for purchases of items in section
297A.71, subdivision 40 ,
11.20must not exceed $5,000,000 in fiscal years 2010 and 2011. Applications for refunds for
11.21purchases of items in sections297A.70, subdivision 3 , paragraph (a), clause (11), and
11.22297A.71
, subdivision 40, must not be filed until after June 30, 2009.
11.23EFFECTIVE DATE.This section is effective for sales and purchases made after
11.24June 30, 2011.
1.3corporate franchise tax; providing a subtraction for certain business income;
1.4expanding the application of and allowing the capital equipment exemption at
1.5the time of purchase; amending Minnesota Statutes 2010, sections 275.025,
1.6subdivision 1; 290.01, subdivision 19b; 290.06, subdivision 1; 290.0921,
1.7subdivision 1; 297A.68, subdivision 5; 297A.75, subdivisions 1, 2, 3.
1.8BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
1.9 Section 1. Minnesota Statutes 2010, section 275.025, subdivision 1, is amended to read:
1.10 Subdivision 1. Levy amount. The state general levy is levied against
1.11commercial-industrial property and seasonal residential recreational property, as defined in
1.12this section. The state general levy base amount is
1.13payable in
1.14
1.15
1.16
1.17
1.18
1.19The tax under this section is not treated as a local tax rate under section
1.20the levy of a governmental unit under chapters 276A and 473F.
1.21The commissioner shall increase or decrease the preliminary or final rate for a year
1.22as necessary to account for errors and tax base changes that affected a preliminary or final
1.23rate for either of the two preceding years. Adjustments are allowed to the extent that the
1.24necessary information is available to the commissioner at the time the rates for a year must
1.25be certified, and for the following reasons:
2.1(1) an erroneous report of taxable value by a local official;
2.2(2) an erroneous calculation by the commissioner; and
2.3(3) an increase or decrease in taxable value for commercial-industrial or seasonal
2.4residential recreational property reported on the abstracts of tax lists submitted under
2.5section
2.6section
2.7The commissioner may, but need not, make adjustments if the total difference in the tax
2.8levied for the year would be less than $100,000.
2.9EFFECTIVE DATE.This section is effective for assessment year 2011 and
2.10thereafter, for taxes payable in 2012 and thereafter.
2.11 Sec. 2. Minnesota Statutes 2010, section 290.01, subdivision 19b, is amended to read:
2.12 Subd. 19b. Subtractions from federal taxable income. For individuals, estates,
2.13and trusts, there shall be subtracted from federal taxable income:
2.14 (1) net interest income on obligations of any authority, commission, or
2.15instrumentality of the United States to the extent includable in taxable income for federal
2.16income tax purposes but exempt from state income tax under the laws of the United States;
2.17 (2) if included in federal taxable income, the amount of any overpayment of income
2.18tax to Minnesota or to any other state, for any previous taxable year, whether the amount
2.19is received as a refund or as a credit to another taxable year's income tax liability;
2.20 (3) the amount paid to others, less the amount used to claim the credit allowed under
2.21section
2.22to 6 and $2,500 for each qualifying child in grades 7 to 12, for tuition, textbooks, and
2.23transportation of each qualifying child in attending an elementary or secondary school
2.24situated in Minnesota, North Dakota, South Dakota, Iowa, or Wisconsin, wherein a
2.25resident of this state may legally fulfill the state's compulsory attendance laws, which
2.26is not operated for profit, and which adheres to the provisions of the Civil Rights Act
2.27of 1964 and chapter 363A. For the purposes of this clause, "tuition" includes fees or
2.28tuition as defined in section
2.29"textbooks" includes books and other instructional materials and equipment purchased
2.30or leased for use in elementary and secondary schools in teaching only those subjects
2.31legally and commonly taught in public elementary and secondary schools in this state.
2.32Equipment expenses qualifying for deduction includes expenses as defined and limited in
2.33section
2.34books and materials used in the teaching of religious tenets, doctrines, or worship, the
3.1purpose of which is to instill such tenets, doctrines, or worship, nor does it include books
3.2or materials for, or transportation to, extracurricular activities including sporting events,
3.3musical or dramatic events, speech activities, driver's education, or similar programs. No
3.4deduction is permitted for any expense the taxpayer incurred in using the taxpayer's or
3.5the qualifying child's vehicle to provide such transportation for a qualifying child. For
3.6purposes of the subtraction provided by this clause, "qualifying child" has the meaning
3.7given in section 32(c)(3) of the Internal Revenue Code;
3.8 (4) income as provided under section
3.9 (5) to the extent included in federal adjusted gross income, income realized on
3.10disposition of property exempt from tax under section
3.11 (6) to the extent not deducted or not deductible pursuant to section 408(d)(8)(E)
3.12of the Internal Revenue Code in determining federal taxable income by an individual
3.13who does not itemize deductions for federal income tax purposes for the taxable year, an
3.14amount equal to 50 percent of the excess of charitable contributions over $500 allowable
3.15as a deduction for the taxable year under section 170(a) of the Internal Revenue Code,
3.16under the provisions of Public Law 109-1 and Public Law 111-126;
3.17 (7) for individuals who are allowed a federal foreign tax credit for taxes that do not
3.18qualify for a credit under section
3.19of subnational foreign taxes for the taxable year, but not to exceed the total subnational
3.20foreign taxes reported in claiming the foreign tax credit. For purposes of this clause,
3.21"federal foreign tax credit" means the credit allowed under section 27 of the Internal
3.22Revenue Code, and "carryover of subnational foreign taxes" equals the carryover allowed
3.23under section 904(c) of the Internal Revenue Code minus national level foreign taxes to
3.24the extent they exceed the federal foreign tax credit;
3.25 (8) in each of the five tax years immediately following the tax year in which an
3.26addition is required under subdivision 19a, clause (7), or 19c, clause (15), in the case
3.27of a shareholder of a corporation that is an S corporation, an amount equal to one-fifth
3.28of the delayed depreciation. For purposes of this clause, "delayed depreciation" means
3.29the amount of the addition made by the taxpayer under subdivision 19a, clause (7), or
3.30subdivision 19c, clause (15), in the case of a shareholder of an S corporation, minus the
3.31positive value of any net operating loss under section 172 of the Internal Revenue Code
3.32generated for the tax year of the addition. The resulting delayed depreciation cannot be
3.33less than zero;
3.34 (9) job opportunity building zone income as provided under section
3.35 (10) to the extent included in federal taxable income, the amount of compensation
3.36paid to members of the Minnesota National Guard or other reserve components of the
4.1United States military for active service performed in Minnesota, excluding compensation
4.2for services performed under the Active Guard Reserve (AGR) program. For purposes of
4.3this clause, "active service" means (i) state active service as defined in section
4.4subdivision 5a
4.6subdivision 5c
4.8 (11) to the extent included in federal taxable income, the amount of compensation
4.9paid to Minnesota residents who are members of the armed forces of the United States or
4.10United Nations for active duty performed outside Minnesota under United States Code,
4.11title 10, section 101(d); United States Code, title 32, section 101(12); or the authority of
4.12the United Nations;
4.13 (12) an amount, not to exceed $10,000, equal to qualified expenses related to a
4.14qualified donor's donation, while living, of one or more of the qualified donor's organs
4.15to another person for human organ transplantation. For purposes of this clause, "organ"
4.16means all or part of an individual's liver, pancreas, kidney, intestine, lung, or bone marrow;
4.17"human organ transplantation" means the medical procedure by which transfer of a human
4.18organ is made from the body of one person to the body of another person; "qualified
4.19expenses" means unreimbursed expenses for both the individual and the qualified donor
4.20for (i) travel, (ii) lodging, and (iii) lost wages net of sick pay, except that such expenses
4.21may be subtracted under this clause only once; and "qualified donor" means the individual
4.22or the individual's dependent, as defined in section 152 of the Internal Revenue Code. An
4.23individual may claim the subtraction in this clause for each instance of organ donation for
4.24transplantation during the taxable year in which the qualified expenses occur;
4.25 (13) in each of the five tax years immediately following the tax year in which an
4.26addition is required under subdivision 19a, clause (8), or 19c, clause (16), in the case of a
4.27shareholder of a corporation that is an S corporation, an amount equal to one-fifth of the
4.28addition made by the taxpayer under subdivision 19a, clause (8), or 19c, clause (16), in the
4.29case of a shareholder of a corporation that is an S corporation, minus the positive value of
4.30any net operating loss under section 172 of the Internal Revenue Code generated for the
4.31tax year of the addition. If the net operating loss exceeds the addition for the tax year, a
4.32subtraction is not allowed under this clause;
4.33 (14) to the extent included in federal taxable income, compensation paid to a service
4.34member as defined in United States Code, title 10, section 101(a)(5), for military service
4.35as defined in the Servicemembers Civil Relief Act, Public Law 108-189, section 101(2);
5.1 (15) international economic development zone income as provided under section
5.3 (16) to the extent included in federal taxable income, the amount of national service
5.4educational awards received from the National Service Trust under United States Code,
5.5title 42, sections 12601 to 12604, for service in an approved Americorps National Service
5.6program;
5.7(17) to the extent included in federal taxable income, discharge of indebtedness
5.8income resulting from reacquisition of business indebtedness included in federal taxable
5.9income under section 108(i) of the Internal Revenue Code. This subtraction applies only
5.10to the extent that the income was included in net income in a prior year as a result of the
5.11addition under section
5.12(18) to the extent included in federal taxable income, an amount, but not less than
5.13zero, equal to ten percent of the distributive share of income or loss, as defined in sections
5.14703(a) and 1366(a)(2) of the Internal Revenue Code, combined from all partnerships or S
5.15corporations in which the taxpayer materially participates, as defined in section 469(h) of
5.16the Internal Revenue Code.
5.17EFFECTIVE DATE.This section is effective for taxable years beginning after
5.18December 31, 2010.
5.19 Sec. 3. Minnesota Statutes 2010, section 290.06, subdivision 1, is amended to read:
5.20 Subdivision 1. Computation, corporations. The franchise tax imposed upon
5.21corporations shall be computed by applying to their taxable income the rate of:
5.22(1) 9.8 percent for taxable years beginning before January 1, 2011;
5.23(2) 8.8 percent for taxable year 2011;
5.24(3) 7.8 percent for taxable year 2012;
5.25(4) 6.3 percent for taxable year 2013;
5.26(5) 5.5 percent for taxable year 2014;
5.27(6) three percent for taxable year 2015;
5.28(7) two percent for taxable year 2016;
5.29(8) one percent for taxable year 2017; and
5.30(9) zero for taxable years beginning after December 31, 2017.
5.31EFFECTIVE DATE.This section is effective for taxable years beginning after
5.32December 31, 2010.
5.33 Sec. 4. Minnesota Statutes 2010, section 290.0921, subdivision 1, is amended to read:
6.1 Subdivision 1. Tax imposed. (a) In addition to the taxes computed under this
6.2chapter without regard to this section, the franchise tax imposed on corporations includes
6.3a tax equal to the excess, if any, for the taxable year of:
6.4(1) (i) 5.8 percent of Minnesota alternative minimum taxable income for taxable
6.5years beginning before January 1, 2011;
6.6(ii) 5.2 percent of Minnesota alternative minimum taxable income for taxable year
6.72011;
6.8(iii) 4.6 percent of Minnesota alternative minimum taxable income for taxable year
6.92012;
6.10(iv) 3.7 percent of Minnesota alternative minimum taxable income for taxable year
6.112013;
6.12(v) 3.3 percent of Minnesota alternative minimum taxable income for taxable year
6.132014;
6.14(vi) 1.8 percent of Minnesota alternative minimum taxable income for taxable year
6.152015;
6.16(vii) 1.2 percent of Minnesota alternative minimum taxable income for taxable
6.17year 2016;
6.18(viii) 0.6 percent of Minnesota alternative minimum taxable income for taxable
6.19year 2017; over
6.20(2) the tax imposed under section
6.21section.
6.22(b) For taxable years beginning after December 31, 2017, the tax under this
6.23subdivision is zero.
6.24EFFECTIVE DATE.This section is effective for taxable years beginning after
6.25December 31, 2010.
6.26 Sec. 5. Minnesota Statutes 2010, section 297A.68, subdivision 5, is amended to read:
6.27 Subd. 5. Capital equipment. (a) Capital equipment is exempt.
6.28
6.29
6.30"Capital equipment" means machinery and equipment purchased or leased, and used
6.31in this state by the purchaser or lessee primarily:
6.32(1) for manufacturing, fabricating, mining, or refining tangible personal property to
6.33be sold ultimately at retail if the machinery and equipment are essential to the integrated
6.34production process of manufacturing, fabricating, mining, or refining
6.35
7.1(2) to electronically transmit results retrieved by a customer of an online
7.2computerized data retrieval system; and
7.3(3) in the direct production of taxable services, as defined in section 297A.61,
7.4subdivision 3, paragraphs (c), (d), (e), (f), (g), (i), and (j).
7.5(b) Capital equipment includes, but is not limited to:
7.6(1) machinery and equipment used to operate, control, or regulate the production
7.7equipment;
7.8(2) machinery and equipment used for research and development, design, quality
7.9control, and testing activities;
7.10(3) environmental control devices that are used to maintain conditions such as
7.11temperature, humidity, light, or air pressure when those conditions are essential to and are
7.12part of the production process;
7.13(4) materials and supplies used to construct and install machinery or equipment;
7.14(5) repair and replacement parts, including accessories, whether purchased as spare
7.15parts, repair parts, or as upgrades or modifications to machinery or equipment;
7.16(6) materials used for foundations that support machinery or equipment;
7.17(7) materials used to construct and install special purpose buildings used in the
7.18production process;
7.19(8) ready-mixed concrete equipment in which the ready-mixed concrete is mixed
7.20as part of the delivery process regardless if mounted on a chassis, repair parts for
7.21ready-mixed concrete trucks, and leases of ready-mixed concrete trucks; and
7.22(9) machinery or equipment used for research, development, design, or production
7.23of computer software.
7.24(c) Capital equipment does not include the following:
7.25(1) motor vehicles taxed under chapter 297B;
7.26(2) machinery or equipment used to receive or store raw materials;
7.27(3) building materials, except for materials included in paragraph (b), clauses (6)
7.28and (7);
7.29(4) machinery or equipment used for nonproduction purposes, including, but not
7.30limited to, the following: plant security, fire prevention, first aid, and hospital stations;
7.31support operations or administration; pollution control; and plant cleaning, disposal of
7.32scrap and waste, plant communications, space heating, cooling, lighting, or safety;
7.33(5) farm machinery and aquaculture production equipment as defined by section
7.35(6) machinery or equipment purchased and installed by a contractor as part of an
7.36improvement to real property;
8.1
8.2
8.3
8.4
8.5
8.6
8.7
8.8
8.9
8.10
8.11fabricating, mining, or refining or to the direct production of taxable services.
8.12(d) For purposes of this subdivision:
8.13(1) "Equipment" means independent devices or tools separate from machinery but
8.14essential to an integrated production process, including computers and computer software,
8.15used in operating, controlling, or regulating machinery and equipment; and any subunit or
8.16assembly comprising a component of any machinery or accessory or attachment parts of
8.17machinery, such as tools, dies, jigs, patterns, and molds.
8.18(2) "Fabricating" means to make, build, create, produce, or assemble components or
8.19property to work in a new or different manner.
8.20(3) "Integrated production process" means a process or series of operations through
8.21which tangible personal property is manufactured, fabricated, mined, or refined. For
8.22purposes of this clause, (i) manufacturing begins with the removal of raw materials
8.23from inventory and ends when the last process prior to loading for shipment has been
8.24completed; (ii) fabricating begins with the removal from storage or inventory of the
8.25property to be assembled, processed, altered, or modified and ends with the creation
8.26or production of the new or changed product; (iii) mining begins with the removal of
8.27overburden from the site of the ores, minerals, stone, peat deposit, or surface materials and
8.28ends when the last process before stockpiling is completed; and (iv) refining begins with
8.29the removal from inventory or storage of a natural resource and ends with the conversion
8.30of the item to its completed form.
8.31(4) "Machinery" means mechanical, electronic, or electrical devices, including
8.32computers and computer software, that are purchased or constructed to be used for the
8.33activities set forth in paragraph (a), beginning with the removal of raw materials from
8.34inventory through completion of the product, including packaging of the product.
9.1(5) "Machinery and equipment used for pollution control" means machinery and
9.2equipment used solely to eliminate, prevent, or reduce pollution resulting from an activity
9.3described in paragraph (a).
9.4(6) "Manufacturing" means an operation or series of operations where raw materials
9.5are changed in form, composition, or condition by machinery and equipment and which
9.6results in the production of a new article of tangible personal property. For purposes of
9.7this subdivision, "manufacturing" includes the generation of electricity or steam to be
9.8sold at retail.
9.9(7) "Mining" means the extraction of minerals, ores, stone, or peat.
9.10(8) "Online data retrieval system" means a system whose cumulation of information
9.11is equally available and accessible to all its customers.
9.12(9) "Primarily" means machinery and equipment used 50 percent or more of the time
9.13in an activity described in paragraph (a).
9.14(10) "Refining" means the process of converting a natural resource to an intermediate
9.15or finished product, including the treatment of water to be sold at retail.
9.16(11) This subdivision does not apply to telecommunications equipment as
9.17provided in subdivision 35, and does not apply to wire, cable, fiber, poles, or conduit
9.18for telecommunications services.
9.19EFFECTIVE DATE.This section is effective for sales and purchases made after
9.20June 30, 2011.
9.21 Sec. 6. Minnesota Statutes 2010, section 297A.75, subdivision 1, is amended to read:
9.22 Subdivision 1. Tax collected. The tax on the gross receipts from the sale of the
9.23following exempt items must be imposed and collected as if the sale were taxable and the
9.24rate under section
9.25
9.26
9.28
9.30
9.31subdivision 3
9.32
9.33section
9.34
9.3512
10.1
10.2section
10.3
10.5
10.6under section
10.7
10.8distribution of electrical energy and an aerial camera package exempt under section
10.10
10.11supplies, and equipment exempt under section
10.12
10.14
10.15projects and facilities under section
10.16
10.17meat processing facility exempt under section
10.18
10.19expansion of an aerospace defense manufacturing facility exempt under section
10.20subdivision
10.21EFFECTIVE DATE.This section is effective for sales and purchases made after
10.22June 30, 2011.
10.23 Sec. 7. Minnesota Statutes 2010, section 297A.75, subdivision 2, is amended to read:
10.24 Subd. 2. Refund; eligible persons. Upon application on forms prescribed by the
10.25commissioner, a refund equal to the tax paid on the gross receipts of the exempt items
10.26must be paid to the applicant. Only the following persons may apply for the refund:
10.27 (1) for subdivision 1, clauses (1)
10.28 (2) for subdivision 1, clauses
10.29governmental subdivision;
10.30 (3) for subdivision 1, clause
10.31benefits provided in United States Code, title 38, chapter 21;
10.32 (4) for subdivision 1, clause
10.33homestead property;
10.34 (5) for subdivision 1, clause
10.35project;
11.1 (6) for subdivision 1, clause
11.2or a joint venture of municipal electric utilities;
11.3 (7) for subdivision 1, clauses
11.4the owner of the qualifying business; and
11.5 (8) for subdivision 1, clauses (11) and (12)
11.6governmental entity that owns or contracts for the project or facility.
11.7EFFECTIVE DATE.This section is effective for sales and purchases made after
11.8June 30, 2011.
11.9 Sec. 8. Minnesota Statutes 2010, section 297A.75, subdivision 3, is amended to read:
11.10 Subd. 3. Application. (a) The application must include sufficient information
11.11to permit the commissioner to verify the tax paid. If the tax was paid by a contractor,
11.12subcontractor, or builder, under subdivision 1, clause (3), (4), (5), (6), (7), (8), (9), (10),
11.13(11), (12), (13), or (14)
11.14the refund applicant a statement including the cost of the exempt items and the taxes paid
11.15on the items unless otherwise specifically provided by this subdivision. The provisions of
11.16sections
11.17
11.18
11.19
11.20must not exceed $5,000,000 in fiscal years 2010 and 2011. Applications for refunds for
11.21purchases of items in sections
11.23EFFECTIVE DATE.This section is effective for sales and purchases made after
11.24June 30, 2011.
