HF 806

as introduced - 88th Legislature (2013 - 2014) Posted on 02/22/2013 01:45pm

A bill for an act
relating to estate taxation; providing for situs rules for certain pass-through
interests; amending Minnesota Statutes 2012, sections 291.005, subdivision 1;
291.03, subdivision 1, by adding a subdivision.

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

Section 1.

Minnesota Statutes 2012, 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.

(3) "Internal Revenue Code" means the United States Internal Revenue Code of
1986, as amended through April 14, 2011, but without regard to the provisions of sections
501 and 901 of Public Law 107-16, as amended by Public Law 111-312, and section
301(c) of Public Law 111-312.

(4) "Minnesota adjusted taxable estate" means federal adjusted taxable estate as
defined by section 2011(b)(3) of the Internal Revenue Code, plus

(i) the amount of deduction for state death taxes allowed under section 2058 of
the Internal Revenue Code; less

(ii)(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) $4,000,000, whichever is less.

(5) "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.

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

(7) "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.

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

(9) "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. new text begin 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 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.
new text end

new text begin (10) "Pass-through entity" includes the following:
new text end

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

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

new text begin (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
new text end

new text begin (iv) a trust.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for decedents dying after December
31, 2012.
new text end

Sec. 2.

Minnesota Statutes 2012, section 291.03, subdivision 1, is amended to read:

Subdivision 1.

Tax amount.

(a) 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, 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. new text begin The tax is reduced by any credit allowed under subdivision 1c.
new text end

(b) The tax determined under this subdivision must not be greater than the sum of
the following amounts multiplied by a fraction, the numerator of which is the Minnesota
gross estate and the denominator of which is the federal gross estate:

(1) the rates and brackets under section 2001(c) of the Internal Revenue Code
multiplied by the sum of:

(i) the taxable estate, as defined under section 2051 of the Internal Revenue Code; plus

(ii) adjusted taxable gifts, as defined in section 2001(b) of the Internal Revenue
Code; less

(iii) the lesser of (A) the sum of the value of qualified small business property
under subdivision 9, and the value of qualified farm property under subdivision 10, or
(B) $4,000,000; less

(2) the amount of tax allowed under section 2001(b)(2) of the Internal Revenue
Code; and less

(3) the federal credit allowed under section 2010 of the Internal Revenue Code.

(c) For purposes of this subdivision, "Internal Revenue Code" means the Internal
Revenue Code of 1986, as amended through December 31, 2000.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for decedents dying after December
31, 2012.
new text end

Sec. 3.

Minnesota Statutes 2012, section 291.03, is amended by adding a subdivision
to read:

new text begin Subd. 1c. new text end

new text begin Nonresident decedent tax credit. new text end

new text begin (a) The estate of a nonresident
decedent that is subject to tax under this chapter on the value of Minnesota situs property
held in a pass-through entity is allowed a credit against the tax due under this section
equal to the lesser of:
new text end

new text begin (1) the amount of estate or inheritance tax paid to another state that is attributable to
the Minnesota situs property held in the pass-through entity; or
new text end

new text begin (2) the amount of tax paid under this section attributable to the Minnesota situs
property held in the pass-through entity.
new text end

new text begin (b) The amount of tax attributable to the Minnesota situs property held in the
pass-through entity must be determined by the increase in the estate or inheritance tax that
results from including the market value of the property in the estate or treating the value
as a taxable inheritance to the recipient of the property.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for decedents dying after December
31, 2012.
new text end