Bill Text: MN SF900 | 2013-2014 | 88th Legislature | Introduced
Bill Title: Qualified small business and farm properties estate tax exclusions modifications
Sponsorship: Bipartisan Bill
Status: (Introduced - Dead) 2013-02-28 - Referred to Taxes [SF900 Detail]
Download: Minnesota-2013-SF900-Introduced.html
1.2relating to taxation; estate; making changes to exclusions for qualified small
1.3business property and qualified farm property;amending Minnesota Statutes
1.42012, section 291.03, subdivisions 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
1.11as defined 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) (7), 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 retroactively for estates of decedents
1.18dying after June 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 taxable year that ended before the decedent's death, the trade or
2.12business must not have been a passive activity within the meaning of section 469(c) of the
2.13Internal Revenue Code, and the decedent or the decedent's spouse must have materially
2.14participated in the trade or business within the meaning of section 469(h) of the Internal
2.15Revenue Code, excluding section 469(h)(3) of the Internal Revenue Code and any other
2.16provision provided by United States Treasury Department regulation that substitutes
2.17material participation in prior taxable years for material participation in the taxable year
2.18that 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(5) (6) The decedent continuously owned the property, including property the
2.29decedent is deemed to own under sections 2036, 2037, and 2038 of the Internal Revenue
2.30Code, for the three-year period ending on the date of death of the decedent. In the case of
2.31a sole proprietor, if the property replaced similar property within the three-year period,
2.32the replacement property will be treated as having been owned for the three-year period
2.33ending on the date of death of the decedent.
2.34(6) A family member continuously uses the property in the operation of the trade or
2.35business for three years following the date of death of the decedent.
3.1(7) For three years following the date of death of the decedent, the trade or business
3.2is not a passive activity within the meaning of section 469(c) of the Internal Revenue Code,
3.3and a family member materially participates in the operation of the trade or business within
3.4the meaning of section 469(h) of the Internal Revenue Code, excluding section 469(h)(3)
3.5of the Internal Revenue Code and any other provision provided by United States Treasury
3.6Department regulation that substitutes material participation in prior taxable years for
3.7material participation in the three years following the date of death of the decedent.
3.8(8) The estate and the qualified heir elect to treat the property as qualified small
3.9business property and agree, in the form prescribed by the commissioner, to pay the
3.10recapture tax under subdivision 11, if applicable.
3.11EFFECTIVE DATE.This section is effective retroactively for estates of decedents
3.12dying after June 30, 2011.
3.13 Sec. 3. Minnesota Statutes 2012, section 291.03, subdivision 10, is amended to read:
3.14 Subd. 10. Qualified farm property. Property satisfying all of the following
3.15requirements is qualified farm property:
3.16(1) The value of the property was included in the federal adjusted taxable estate.
3.17(2) The property consists ofa farm meeting the requirements of agricultural land as
3.18defined in section 500.24, subdivision 2, paragraph (g), and is owned by a person or entity
3.19that is not excluded from owning agricultural land by section500.24 , and was classified
3.20for property tax purposes as the homestead of the decedent or the decedent's spouse or
3.21both under section
273.124, and as class 2a property under section
273.13, subdivision 23
3.22(3) For property taxes payable in the taxable year of the decedent's death, the
3.23decedent's interest in the property was classified as the homestead of the decedent, the
3.24decedent's spouse, or both under section 273.124 and as class 2a property under section
3.25273.13, subdivision 23.
3.26(4) The decedent continuously owned the property, including property the decedent
3.27is deemed to own under sections 2036, 2037, and 2038 of the Internal Revenue Code, for
3.28the three-year period ending on the date of death of the decedent either by ownership of
3.29the agricultural land or pursuant to holding an interest in an entity that is not excluded
3.30from owning agricultural land under section 500.24.
3.31(4) A family member continuously uses the property in the operation of the trade or
3.32business (5) The property is classified for property tax purposes as class 2a property under
3.33section 273.13, subdivision 23, for three years following the date of death of the decedent.
4.1(5) (6) The estate and the qualified heir elect to treat the property as qualified farm
4.2property and agree, in a form prescribed by the commissioner, to pay the recapture tax
4.3under subdivision 11, if applicable.
4.4EFFECTIVE DATE.This section is effective retroactively for estates of decedents
4.5dying after June 30, 2011.
4.6 Sec. 4. Minnesota Statutes 2012, section 291.03, subdivision 11, is amended to read:
4.7 Subd. 11. Recapture tax. (a) If, within three years after the decedent's death and
4.8before the death of the qualified heir, the qualified heir disposes of any interest in the
4.9qualified property, other than by a disposition to a family member, or a family member
4.10ceases touse the qualified property which was acquired or passed from the decedent
4.11 satisfy the requirement under subdivision 9, clause (7); or 10, clause (5), an additional
4.12estate tax is imposed on the property. In the case of a sole proprietor, if the qualified heir
4.13replaces qualified small business property excluded under subdivision 9 with similar
4.14property, then the qualified heir will not be treated as having disposed of an interest in the
4.15qualified property.
4.16(b) The amount of the additional tax equals the amount of the exclusion claimed by
4.17the estate under subdivision 8, paragraph (d), multiplied by 16 percent.
4.18(c) The additional tax under this subdivision is due on the day which is six months
4.19after the date of the disposition or cessation in paragraph (a).
4.20EFFECTIVE DATE.This section is effective retroactively for estates of decedents
4.21dying after June 30, 2011.
1.3business property and qualified farm property;amending Minnesota Statutes
1.42012, section 291.03, subdivisions 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
1.11as defined 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 retroactively for estates of decedents
1.18dying after June 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 taxable year that ended before the decedent's death, the trade or
2.12business must not have been a passive activity within the meaning of section 469(c) of the
2.13Internal Revenue Code, and the decedent or the decedent's spouse must have materially
2.14participated in the trade or business within the meaning of section 469(h) of the Internal
2.15Revenue Code, excluding section 469(h)(3) of the Internal Revenue Code and any other
2.16provision provided by United States Treasury Department regulation that substitutes
2.17material participation in prior taxable years for material participation in the taxable year
2.18that 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
2.29decedent is deemed to own under sections 2036, 2037, and 2038 of the Internal Revenue
2.30Code, for the three-year period ending on the date of death of the decedent. In the case of
2.31a sole proprietor, if the property replaced similar property within the three-year period,
2.32the replacement property will be treated as having been owned for the three-year period
2.33ending on the date of death of the decedent.
2.34
2.35
3.1(7) For three years following the date of death of the decedent, the trade or business
3.2is not a passive activity within the meaning of section 469(c) of the Internal Revenue Code,
3.3and a family member materially participates in the operation of the trade or business within
3.4the meaning of section 469(h) of the Internal Revenue Code, excluding section 469(h)(3)
3.5of the Internal Revenue Code and any other provision provided by United States Treasury
3.6Department regulation that substitutes material participation in prior taxable years for
3.7material participation in the three years following the date of death of the decedent.
3.8(8) The estate and the qualified heir elect to treat the property as qualified small
3.9business property and agree, in the form prescribed by the commissioner, to pay the
3.10recapture tax under subdivision 11, if applicable.
3.11EFFECTIVE DATE.This section is effective retroactively for estates of decedents
3.12dying after June 30, 2011.
3.13 Sec. 3. Minnesota Statutes 2012, section 291.03, subdivision 10, is amended to read:
3.14 Subd. 10. Qualified farm property. Property satisfying all of the following
3.15requirements is qualified farm property:
3.16(1) The value of the property was included in the federal adjusted taxable estate.
3.17(2) The property consists of
3.18defined in section 500.24, subdivision 2, paragraph (g), and is owned by a person or entity
3.19that is not excluded from owning agricultural land by section
3.20
3.21
3.22(3) For property taxes payable in the taxable year of the decedent's death, the
3.23decedent's interest in the property was classified as the homestead of the decedent, the
3.24decedent's spouse, or both under section 273.124 and as class 2a property under section
3.25273.13, subdivision 23.
3.26(4) The decedent continuously owned the property, including property the decedent
3.27is deemed to own under sections 2036, 2037, and 2038 of the Internal Revenue Code, for
3.28the three-year period ending on the date of death of the decedent either by ownership of
3.29the agricultural land or pursuant to holding an interest in an entity that is not excluded
3.30from owning agricultural land under section 500.24.
3.31
3.32
3.33section 273.13, subdivision 23, for three years following the date of death of the decedent.
4.1
4.2property and agree, in a form prescribed by the commissioner, to pay the recapture tax
4.3under subdivision 11, if applicable.
4.4EFFECTIVE DATE.This section is effective retroactively for estates of decedents
4.5dying after June 30, 2011.
4.6 Sec. 4. Minnesota Statutes 2012, section 291.03, subdivision 11, is amended to read:
4.7 Subd. 11. Recapture tax. (a) If, within three years after the decedent's death and
4.8before the death of the qualified heir, the qualified heir disposes of any interest in the
4.9qualified property, other than by a disposition to a family member, or a family member
4.10ceases to
4.11 satisfy the requirement under subdivision 9, clause (7); or 10, clause (5), an additional
4.12estate tax is imposed on the property. In the case of a sole proprietor, if the qualified heir
4.13replaces qualified small business property excluded under subdivision 9 with similar
4.14property, then the qualified heir will not be treated as having disposed of an interest in the
4.15qualified property.
4.16(b) The amount of the additional tax equals the amount of the exclusion claimed by
4.17the estate under subdivision 8, paragraph (d), multiplied by 16 percent.
4.18(c) The additional tax under this subdivision is due on the day which is six months
4.19after the date of the disposition or cessation in paragraph (a).
4.20EFFECTIVE DATE.This section is effective retroactively for estates of decedents
4.21dying after June 30, 2011.
