SF 2019

as introduced - 85th Legislature (2007 - 2008) Posted on 12/15/2009 12:00am

A bill for an act
relating to estate taxation; providing an exclusion for certain farm and small
business properties; amending Minnesota Statutes 2006, sections 291.005,
subdivision 1; 291.03, subdivision 1, by adding subdivisions.

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

Section 1.

Minnesota Statutes 2006, 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) "Federal gross estate" means the gross estate of a decedent as valued and
otherwise determined for federal estate tax purposes by federal taxing authorities pursuant
to the provisions of the Internal Revenue Code.

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

(3) "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.

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

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

(6) "Situs of property" means, with respect to real property, the state or country in
which it is located; with respect to tangible personal property, the state or country in which
it was normally kept or located at the time of the decedent's death; and with respect to
intangible personal property, the state or country in which the decedent was domiciled
at death.

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

(8) "Internal Revenue Code" means the United States Internal Revenue Code of
1986, as amended through May 18, 2006.

(9) "Minnesota adjusted taxable estate" means new text begin the following amount:
new text end

new text begin (i) new text end federal adjusted taxable estate as defined by section 2011(b)(3) of the Internal
Revenue Code deleted text begin , increased by deleted text end new text begin ; plus new text end

new text begin (ii) new text end the amount of deduction for state death taxes allowed under section 2058 of
the Internal Revenue Code deleted text begin . deleted text end new text begin ; plus
new text end

new text begin (iii) expenses which are deducted for federal income tax purposes under section
642(g) of the Internal Revenue Code; less
new text end

new text begin (iv)(A) 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 (B) $1,000,000, whichever is less.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for decedents dying after December
31, 2006.
new text end

Sec. 2.

Minnesota Statutes 2006, section 291.03, subdivision 1, is amended to read:

Subdivision 1.

Tax amount.

The tax imposed shall be an amount equal to the
proportion of the maximum credit for state death taxes computed under section 2011 of
the Internal Revenue Code, as amended through December 31, 2000, but using Minnesota
adjusted taxable estate instead of federal adjusted taxable estate, as the Minnesota gross
estate bears to the value of the federal gross estate. The tax determined under this
paragraph shall not be greater than the amount computed by applying the rates and
brackets under section 2001(c) of the Internal Revenue Code to the Minnesota adjusted
gross estate and subtracting the federal credit allowed under section 2010 of the Internal
Revenue Code of 1986, as amended through December 31, 2000. deleted text begin For the purposes of
this section, expenses which are deducted for federal income tax purposes under section
642(g) of the Internal Revenue Code as amended through December 31, 2002, are not
allowable in computing the tax under this chapter.
deleted text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for decedents dying after December
31, 2006.
new text end

Sec. 3.

Minnesota Statutes 2006, section 291.03, is amended by adding a subdivision
to read:

new text begin Subd. 8. new text end

new text begin Definitions. new text end

new text begin (a) For purposes of this section, the following terms have the
meanings given in this subdivision.
new text end

new text begin (b) "Family member" means a family member as defined in section 2032A(e)(2) of
the Internal Revenue Code.
new text end

new text begin (c) "Qualified heir" means a family member who acquired qualified property from
the decedent and satisfies the requirement under subdivision 9, clause (6), or subdivision
10, clause (4), for the property.
new text end

new text begin (d) "Qualified property" means qualified small businesss property under subdivision
9 and qualified farm property under subdivision 10.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for decedents dying after December
31, 2006.
new text end

Sec. 4.

Minnesota Statutes 2006, section 291.03, is amended by adding a subdivision
to read:

new text begin Subd. 9. new text end

new text begin Qualified small business property. new text end

new text begin Property satisfying all of the following
requirements is qualified small business property:
new text end

new text begin (1) The value of the property was included in the federal adjusted taxable estate.
new text end

new text begin (2) The property consists of the assets of a trade or business or shares of stock or
other ownership interests in a corporation or other entity engaged in a trade or business.
The decedent or the decedent's spouse must have materially participated in the trade or
business within the meaning of section 469 of the Internal Revenue Code during the
taxable year that ended before the date of the decedent's death. Shares of stock in a
corporation or an ownership interest in another type of entity do not qualify under this
subdivision, if the shares or ownership interests are traded on a public stock exchange at
any time during the three-year period ending on the decedent's date of death.
new text end

new text begin (3) The gross annual sales of the trade or business were $10,000,000 or less for the
last taxable year that ended before the date of the death of the decedent.
new text end

new text begin (4) The property does not consist of cash or cash equivalents. For property consisting
of shares of stock or other ownership interests in an entity, the amount of cash or cash
equivalents held by the corporation or other entity must be deducted from the value of
the property qualifying under this subdivision in proportion to the decedent's share of
ownership of the entity on the date of death.
new text end

new text begin (5) The decedent continuously owned the property for the three-year period ending
on the date of death of the decedent.
new text end

new text begin (6) A family member continuously uses the property in the operation of the trade or
business for three years following the date of death of the decedent.
new text end

new text begin (7) The estate and the qualified heir elect to treat the property as qualified small
business property and agree, in the form prescribed by the commissioner, to pay the
recapture tax under subdivision 11, if applicable.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for decedents dying after December
31, 2006.
new text end

Sec. 5.

Minnesota Statutes 2006, section 291.03, is amended by adding a subdivision
to read:

new text begin Subd. 10. new text end

new text begin Qualified farm property. new text end

new text begin Property satisfying all of the following
requirements is qualified farm property:
new text end

new text begin (1) The value of the property was included in the federal adjusted taxable estate.
new text end

new text begin (2) The property consists of a farm meeting the requirements of section 500.24
and was classified for property tax purposes as the homestead of the decedent or the
decedent's spouse or both under section 273.124, and as class 2a property under section
273.13, subdivision 23.
new text end

new text begin (3) The decedent continuously owned the property for the three-year period ending
on the date of death of the decedent.
new text end

new text begin (4) A family member continuously uses the property in the operation of the trade or
business for three years following the date of death of the decedent.
new text end

new text begin (5) The estate and the qualified heir elect to treat the property as qualified farm
property and agree, in a form prescribed by the commissioner, to pay the recapture tax
under subdivision 11, if applicable.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for decedents dying after December
31, 2006.
new text end

Sec. 6.

Minnesota Statutes 2006, section 291.03, is amended by adding a subdivision
to read:

new text begin Subd. 11. new text end

new text begin Recapture tax. new text end

new text begin (a) If, within three years after the decedent's death and
before the death of the qualified heir, the qualified heir disposes of any interest in qualified
property, other than by a disposition to a family member, or a family member ceases to
use the qualified property which was acquired or passed from the decedent, an additional
estate tax is imposed on the property.
new text end

new text begin (b) The amount of the additional tax equals the amount of the exclusion claimed by
the estate under subdivision 8, paragraph (d), multiplied by 16 percent.
new text end

new text begin (c) The additional tax under this subdivision is due on the day which is six months
after the date of the disposition or cessation in paragraph (a).
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for decedents dying after December
31, 2006.
new text end