HF 2413

as introduced - 89th Legislature (2015 - 2016) Posted on 03/10/2016 05:18pm

A bill for an act
relating to taxation; phasing out the state general levy; increasing the estate
tax exclusion amount; amending Minnesota Statutes 2014, sections 275.025;
289A.10, subdivision 1; 291.016, subdivision 3; 291.03, subdivisions 1, 1d;
Minnesota Statutes 2015 Supplement, section 291.005, subdivision 1.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

Minnesota Statutes 2014, section 275.025, is amended to read:

275.025 STATE GENERAL TAX.

Subdivision 1.

Levy amount.

The state general levy is levied against
commercial-industrial property and seasonal residential recreational property, as defined
in this section. The state general levy deleted text begin base amount deleted text end new text begin for commercial-industrial property new text end is
deleted text begin $592,000,000 deleted text end new text begin $601,400,000 new text end for taxes payable in deleted text begin 2002 deleted text end new text begin 2017. The state general levy for
seasonal recreational property is $12,142,000 for taxes payable in 2017 new text end . For taxes payable
in subsequent years, the levy deleted text begin base amount is increased deleted text end new text begin amounts are reduced new text end each year
by deleted text begin multiplying the levy base amount for the prior year by the sum of one plus the rate of
increase, if any, in the implicit price deflator for government consumption expenditures
and gross investment for state and local governments prepared by the Bureau of Economic
Analysts of the United States Department of Commerce for the 12-month period ending
March 31 of the year prior to the year the taxes are payable deleted text end new text begin 25 percent of the payable in
2017 amounts. The levy amounts are $0 for taxes payable in 2021 and thereafter new text end . The tax
under this section is not treated as a local tax rate under section 469.177 and is not the
levy of a governmental unit under chapters 276A and 473F.

The commissioner shall increase or decrease the preliminary or final deleted text begin rate deleted text end new text begin rates new text end for a
year as necessary to account for errors and tax base changes that affected a preliminary or
final rate for either of the two preceding years. Adjustments are allowed to the extent that
the necessary information is available to the commissioner at the time the rates for a year
must be certified, and for the following reasons:

(1) an erroneous report of taxable value by a local official;

(2) an erroneous calculation by the commissioner; and

(3) an increase or decrease in taxable value for commercial-industrial or seasonal
residential recreational property reported on the abstracts of tax lists submitted under
section 275.29 that was not reported on the abstracts of assessment submitted under
section 270C.89 for the same year.

The commissioner may, but need not, make adjustments if the total difference in the tax
levied for the year would be less than $100,000.

Subd. 2.

Commercial-industrial tax capacity.

For the purposes of this section,
"commercial-industrial tax capacity" means the tax capacity of all taxable property
classified as class 3 or class 5(1) under section 273.13, deleted text begin except for deleted text end new text begin excluding:
new text end

new text begin (1) the first $500,000 of market value of each parcel of commercial-industrial net tax
capacity as defined under section 273.13, subdivision 24, clauses (1) and (2);
new text end

new text begin (2) new text end electric generation attached machinery under class 3 new text begin ; new text end and

new text begin (3) new text end property described in section 473.625.

County commercial-industrial tax capacity amounts are not adjusted for the captured net
tax capacity of a tax increment financing district under section 469.177, subdivision 2, the
net tax capacity of transmission lines deducted from a local government's total net tax
capacity under section 273.425, or fiscal disparities contribution and distribution net tax
capacities under chapter 276A or 473F. new text begin For purposes of this subdivision, the procedures
for determining eligibility for tier 1 under section 273.13, subdivision 24, clause (1),
shall apply in determining the portion of a property eligible to be considered within the
first $500,000 of market value.
new text end

Subd. 3.

Seasonal residential recreational tax capacity.

For the purposes of this
section, "seasonal residential recreational tax capacity" means the tax capacity of tier III of
class 1c under section 273.13, subdivision 22, and all class 4c(1), 4c(3)(ii), and 4c(12)
property under section 273.13, subdivision 25, deleted text begin except that deleted text end new text begin excluding new text end the first deleted text begin $76,000
deleted text end new text begin $250,000 new text end of market value of each noncommercial class 4c(12) property deleted text begin has a tax capacity
for this purpose equal to 40 percent of its tax capacity under section 273.13 deleted text end .

Subd. 4.

Apportionment and levy of state general tax.

deleted text begin Ninety-five percent of deleted text end The
state general tax must be levied by applying a uniform rate to all commercial-industrial tax
capacity and deleted text begin five percent of the state general tax must be levied by applying deleted text end a uniform
rate to all seasonal residential recreational tax capacity. On or before October 1 each year,
the commissioner of revenue shall certify the preliminary state general levy rates to each
county auditor that must be used to prepare the notices of proposed property taxes for taxes
payable in the following year. By January 1 of each year, the commissioner shall certify the
final state general levy deleted text begin rate deleted text end new text begin rates new text end to each county auditor that shall be used in spreading taxes.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning with taxes payable in 2017.
new text end

Sec. 2.

Minnesota Statutes 2014, section 289A.10, subdivision 1, is amended to read:

Subdivision 1.

Return required.

In the case of a decedent who has an interest in
property with a situs in Minnesota, the personal representative must submit a Minnesota
estate tax return to the commissioner, on a form prescribed by the commissioner, if:

(1) a federal estate tax return is required to be filed; or

(2) the sum of the federal gross estate and federal adjusted taxable gifts, as defined in
section 2001(b) of the Internal Revenue Code, made within three years of the date of the
decedent's death exceeds deleted text begin $1,200,000 for estates of decedents dying in 2014; $1,400,000
for estates of decedents dying in 2015; $1,600,000 deleted text end new text begin $3,000,000 new text end for estates of decedents
dying in 2016 deleted text begin ; $1,800,000 for estates of decedents dying in 2017; and $2,000,000 for
estates of decedents dying in 2018 and thereafter deleted text end .

The return must contain a computation of the Minnesota estate tax due. The return
must be signed by the personal representative.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for estates of decedents dying after
December 31, 2015.
new text end

Sec. 3.

Minnesota Statutes 2015 Supplement, section 291.005, subdivision 1, is
amended to read:

Subdivision 1.

Scope.

Unless the context otherwise clearly requires, the following
terms used in this chapter shall have the following meanings:

(1) "Commissioner" means the commissioner of revenue or any person to whom the
commissioner has delegated functions under this chapter.

(2) "Federal gross estate" means the gross estate of a decedent as required to be valued
and otherwise determined for federal estate tax purposes under the Internal Revenue Code,
increased by the value of any property in which the decedent had a qualifying income
interest for life and for which an election was made under section 291.03, subdivision 1d,
for Minnesota estate tax purposes, but was not made for federal estate tax purposes.

(3) "Internal Revenue Code" means the United States Internal Revenue Code of
1986, as amended through December 31, deleted text begin 2014 deleted text end new text begin 2015 new text end .

(4) "Minnesota gross estate" means the federal gross estate of a decedent after
(a) excluding therefrom any property included in the estate which has its situs outside
Minnesota, and (b) including any property omitted from the federal gross estate which
is includable in the estate, has its situs in Minnesota, and was not disclosed to federal
taxing authorities.

(5) "Nonresident decedent" means an individual whose domicile at the time of
death was not in Minnesota.

(6) "Personal representative" means the executor, administrator or other person
appointed by the court to administer and dispose of the property of the decedent. If there
is no executor, administrator or other person appointed, qualified, and acting within this
state, then any person in actual or constructive possession of any property having a situs in
this state which is included in the federal gross estate of the decedent shall be deemed
to be a personal representative to the extent of the property and the Minnesota estate tax
due with respect to the property.

(7) "Resident decedent" means an individual whose domicile at the time of death
was in Minnesota.

(8) "Situs of property" means, with respect to:

(i) real property, the state or country in which it is located;

(ii) tangible personal property, the state or country in which it was normally kept
or located at the time of the decedent's death or for a gift of tangible personal property
within three years of death, the state or country in which it was normally kept or located
when the gift was executed;

(iii) a qualified work of art, as defined in section 2503(g)(2) of the Internal Revenue
Code, owned by a nonresident decedent and that is normally kept or located in this state
because it is on loan to an organization, qualifying as exempt from taxation under section
501(c)(3) of the Internal Revenue Code, that is located in Minnesota, the situs of the art is
deemed to be outside of Minnesota, notwithstanding the provisions of item (ii); and

(iv) intangible personal property, the state or country in which the decedent was
domiciled at death or for a gift of intangible personal property within three years of death,
the state or country in which the decedent was domiciled when the gift was executed.

For a nonresident decedent with an ownership interest in a pass-through entity with
assets that include real or tangible personal property, situs of the real or tangible personal
property, including qualified works of art, is determined as if the pass-through entity does
not exist and the real or tangible personal property is personally owned by the decedent.
If the pass-through entity is owned by a person or persons in addition to the decedent,
ownership of the property is attributed to the decedent in proportion to the decedent's
capital ownership share of the pass-through entity.

(9) "Pass-through entity" includes the following:

(i) an entity electing S corporation status under section 1362 of the Internal Revenue
Code;

(ii) an entity taxed as a partnership under subchapter K of the Internal Revenue Code;

(iii) a single-member limited liability company or similar entity, regardless of
whether it is taxed as an association or is disregarded for federal income tax purposes
under Code of Federal Regulations, title 26, section 301.7701-3; or

(iv) a trust to the extent the property is includible in the decedent's federal gross
estate; but excludes

(v) an entity whose ownership interest securities are traded on an exchange regulated
by the Securities and Exchange Commission as a national securities exchange under
section 6 of the Securities Exchange Act, United States Code, title 15, section 78f.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for estates of decedents dying after
December 31, 2015.
new text end

Sec. 4.

Minnesota Statutes 2014, section 291.016, subdivision 3, is amended to read:

Subd. 3.

Subtraction.

new text begin (a) new text end The value of qualified small business property under
section 291.03, subdivision 9, and the value of qualified farm property under section
291.03, subdivision 10, or the result of $5,000,000 minus the amount for the year of death
listed in clauses (1) to deleted text begin (5) deleted text end new text begin (3) new text end , whichever is less, may be subtracted in computing the
Minnesota taxable estate but must not reduce the Minnesota taxable estate to less than zero:

(1) $1,200,000 for estates of decedents dying in 2014;

(2) $1,400,000 for estates of decedents dying in 2015; new text begin and
new text end

(3) deleted text begin $1,600,000 deleted text end new text begin $3,000,000 new text end for estates of decedents dying in 2016 deleted text begin ; deleted text end new text begin .
new text end

deleted text begin (4) $1,800,000 for estates of decedents dying in 2017; and
deleted text end

deleted text begin (5) $2,000,000 for estates of decedents dying in 2018 and thereafter.
deleted text end

new text begin (b) The subtraction under paragraph (a) does not apply to estates of decedents dying
after December 31, 2016.
new text end

new text begin (c) For estates of decedents dying after December 31, 2016, the value of the federal
exclusion amount under section 2010 of the Internal Revenue Code may be subtracted in
computing the Minnesota taxable estate, but must not reduce the Minnesota taxable estate
to less than zero. For purposes of this subdivision, the federal exclusion amount equals:
new text end

new text begin (1) the basic exclusion amount under section 2010(c)(3) for the year in which the
decedent died; plus
new text end

new text begin (2) any deceased spouse unused exclusion amount that is allowed in computing the
federal estate tax of the estate; less
new text end

new text begin (3) the amount of taxable gifts made by the decedent that reduces the federal
applicable exclusion amount, but excluding any taxable gifts added under subdivision
2, clause (3).
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for estates of decedents dying after
December 31, 2015.
new text end

Sec. 5.

Minnesota Statutes 2014, section 291.03, subdivision 1, is amended to read:

Subdivision 1.

Tax amount.

The tax imposed must be computed by applying to the
Minnesota taxable estate the following schedule of rates and then the resulting amount
multiplied by a fraction, not greater than one, the numerator of which is the value of the
Minnesota gross estate plus the value of gifts under section 291.016, subdivision 2, clause
(3), with a Minnesota situs, and the denominator of which is the federal gross estate plus
the value of gifts under section 291.016, subdivision 2, clause (3):

(a) For estates of decedents dying in 2014:

Amount of Minnesota Taxable Estate	Rate of Tax
Not over $1,200,000	None
Over $1,200,000 but not over $1,400,000	nine percent of the excess over $1,200,000
Over $1,400,000 but not over $3,600,000	$18,000 plus ten percent of the excess over $1,400,000
Over $3,600,000 but not over $4,100,000	$238,000 plus 10.4 percent of the excess over $3,600,000
Over $4,100,000 but not over $5,100,000	$290,000 plus 11.2 percent of the excess over $4,100,000
Over $5,100,000 but not over $6,100,000	$402,000 plus 12 percent of the excess over $5,100,000
Over $6,100,000 but not over $7,100,000	$522,000 plus 12.8 percent of the excess over $6,100,000
Over $7,100,000 but not over $8,100,000	$650,000 plus 13.6 percent of the excess over $7,100,000
Over $8,100,000 but not over $9,100,000	$786,000 plus 14.4 percent of the excess over $8,100,000
Over $9,100,000 but not over $10,100,000	$930,000 plus 15.2 percent of the excess over $9,100,000
Over $10,100,000	$1,082,000 plus 16 percent of the excess over $10,100,000

(b) For estates of decedents dying in 2015:

Amount of Minnesota Taxable Estate	Rate of Tax
Not over $1,400,000	None
Over $1,400,000 but not over $3,600,000	ten percent of the excess over $1,400,000
Over $3,600,000 but not over $6,100,000	$220,000 plus 12 percent of the excess over $3,600,000
Over $6,100,000 but not over $7,100,000	$520,000 plus 12.8 percent of the excess over $6,100,000
Over $7,100,000 but not over $8,100,000	$648,000 plus 13.6 percent of the excess over $7,100,000
Over $8,100,000 but not over $9,100,000	$784,000 plus 14.4 percent of the excess over $8,100,000
Over $9,100,000 but not over $10,100,000	$928,000 plus 15.2 percent of the excess over $9,100,000
Over $10,100,000	$1,080,000 plus 16 percent of the excess over $10,100,000

(c) For estates of decedents dying in 2016:

Amount of Minnesota Taxable Estate	Rate of Tax
Not over $ deleted text begin 1,600,000 deleted text end new text begin $3,000,000 new text end	None
Over deleted text begin $1,600,000 deleted text end new text begin $3,000,000 new text end but not over deleted text begin $2,600,000 deleted text end new text begin $8,100,000 new text end	deleted text begin ten deleted text end new text begin 14 new text end percent of the excess over deleted text begin $1,600,000 deleted text end new text begin $3,000,000 new text end
Over deleted text begin $2,600,000 deleted text end new text begin $8,100,000 new text end but not over deleted text begin $6,100,000 deleted text end new text begin $9,100,000 new text end	deleted text begin $100,000 deleted text end new text begin $714,000 new text end plus deleted text begin 12 deleted text end new text begin 14.4 new text end percent of the excess over deleted text begin $2,600,000 deleted text end new text begin $8,100,000 new text end
deleted text begin Over $6,100,000 but not over $7,100,000 deleted text end	deleted text begin $520,000 plus 12.8 percent of the excess over $6,100,000 deleted text end
deleted text begin Over $7,100,000 but not over $8,100,000 deleted text end	deleted text begin $648,000 plus 13.6 percent of the excess over $7,100,000 deleted text end
deleted text begin Over $8,100,000 but not over $9,100,000 deleted text end	deleted text begin $784,000 plus 14.4 percent of the excess over $8,100,000 deleted text end
Over $9,100,000 but not over $10,100,000	deleted text begin $928,000 deleted text end new text begin $858,000 new text end plus 15.2 percent of the excess over $9,100,000
Over $10,100,000	deleted text begin $1,080,000 deleted text end new text begin $1,010,000 new text end plus 16 percent of the excess over $10,100,000

(d) For estates of decedents dying in 2017 deleted text begin : deleted text end new text begin and thereafter, 16 percent of the amount
of the Minnesota taxable estate.
new text end

deleted text begin Amount of Minnesota Taxable Estate deleted text end	deleted text begin Rate of Tax deleted text end
deleted text begin Not over $1,800,000 deleted text end	deleted text begin None deleted text end
deleted text begin Over $1,800,000 but not over $2,100,000 deleted text end	deleted text begin ten percent of the excess over $1,800,000 deleted text end
deleted text begin Over $2,100,000 but not over $5,100,000 deleted text end	deleted text begin $30,000 plus 12 percent of the excess over $2,100,000 deleted text end
deleted text begin Over $5,100,000 but not over $7,100,000 deleted text end	deleted text begin $390,000 plus 12.8 percent of the excess over $5,100,000 deleted text end
deleted text begin Over $7,100,000 but not over $8,100,000 deleted text end	deleted text begin $646,000 plus 13.6 percent of the excess over $7,100,000 deleted text end
deleted text begin Over $8,100,000 but not over $9,100,000 deleted text end	deleted text begin $782,000 plus 14.4 percent of the excess over $8,100,000 deleted text end
deleted text begin Over $9,100,000 but not over $10,100,000 deleted text end	deleted text begin $926,000 plus 15.2 percent of the excess over $9,100,000 deleted text end
deleted text begin Over $10,100,000 deleted text end	deleted text begin $1,078,000 plus 16 percent of the excess over $10,100,000 deleted text end

deleted text begin (e) For estates of decedents dying in 2018 and thereafter:
deleted text end

deleted text begin Amount of Minnesota Taxable Estate deleted text end	deleted text begin Rate of Tax deleted text end
deleted text begin Not over $2,000,000 deleted text end	deleted text begin None deleted text end
deleted text begin Over $2,000,000 but not over $2,600,000 deleted text end	deleted text begin ten percent of the excess over $2,000,000 deleted text end
deleted text begin Over $2,600,000 but not over $7,100,000 deleted text end	deleted text begin $60,000 plus 13 percent of the excess over $2,600,000 deleted text end
deleted text begin Over $7,100,000 but not over $8,100,000 deleted text end	deleted text begin $645,000 plus 13.6 percent of the excess over $7,100,000 deleted text end
deleted text begin Over $8,100,000 but not over $9,100,000 deleted text end	deleted text begin $781,000 plus 14.4 percent of the excess over $8,100,000 deleted text end
deleted text begin Over $9,100,000 but not over $10,100,000 deleted text end	deleted text begin $925,000 plus 15.2 percent of the excess over $9,100,000 deleted text end
deleted text begin Over $10,100,000 deleted text end	deleted text begin $1,077,000 plus 16 percent of the excess over $10,100,000 deleted text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for estates of decedents dying after
December 31, 2015.
new text end

Sec. 6.

Minnesota Statutes 2014, section 291.03, subdivision 1d, is amended to read:

Subd. 1d.

Elections.

(a) For the purposes of this section, the value of the Minnesota
taxable estate is determined by taking into account the deduction available under section
2056(b) of the Internal Revenue Code. An election under section 2056(b) of the Internal
Revenue Code may be made for Minnesota estate tax purposes regardless of whether the
election is made for federal estate tax purposes. The value of the gross estate includes the
value of any property in which the decedent had a qualifying income interest for life for
which an election was made under this subdivision. new text begin The authority to make an election
under this paragraph is limited to estates of decedents dying before January 1, 2017.
new text end

(b) Except for an election made under section 2056(b) of the Internal Revenue Code,
no federal election is allowable in computing the tax under this chapter unless the estate is
required to file a federal estate tax return, the election is made on the federal estate tax
return, and the election is allowed under federal law.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for estates of decedents dying after
December 31, 2016.
new text end