HF 289

as introduced - 87th Legislature (2011 - 2012) Posted on 01/31/2011 10:28am

A bill for an act
relating to taxation; eliminating property tax exemptions for certain airport
property; eliminating the preferences for foreign source income; repealing the
subtraction for foreign royalties; taxing certain development subsidies; expanding
the definition of domestic corporations to include certain foreign corporations
incorporated or doing business in tax havens; modifying JOBZ and biotechnology
and health science industry zones; repealing international economic development
zones; reducing the corporate franchise tax rates; repealing the research credit;
repealing foreign operating corporations; repealing the special apportionment
formula for certain mail order businesses; amending Minnesota Statutes 2010,
sections 275.025, subdivisions 1, 2; 289A.08, subdivision 3; 290.01, subdivisions
5, 19c, 19d, 29, by adding subdivisions; 290.06, subdivision 1; 290.0921,
subdivision 1; 290.17, subdivision 4; 290.191, subdivisions 2, 3; repealing
Minnesota Statutes 2010, sections 290.01, subdivision 6b; 290.06, subdivisions
24, 28, 29, 30, 31, 32; 290.068, subdivisions 1, 2, 3, 4, 5, 6a, 7; 290.0921,
subdivision 7; 290.191, subdivision 4; 469.317; 469.318; 469.321; 469.322;
469.323; 469.324; 469.325; 469.326; 469.327; 469.328; 469.329; 469.337;
469.338; 469.339.

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

Section 1.

Minnesota Statutes 2010, section 275.025, subdivision 1, is amended to read:

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 base amount is $592,000,000 for taxes payable in
2002. For taxes payable in subsequent years, the levy base amount is increased each year
by 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. 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.

new text begin In setting the rate, the commissioner shall exclude the tax capacity of property
described in section 473.625 from the tax base. new text end The commissioner shall increase or
decrease the preliminary or final rate 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.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes payable in 2012 and
thereafter.
new text end

Sec. 2.

Minnesota Statutes 2010, section 275.025, subdivision 2, is amended to read:

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, except for electric generation
attached machinery under class 3 deleted text begin and property described in section 473.625 deleted text end . 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 EFFECTIVE DATE. new text end

new text begin This section is effective for taxes payable in 2012 and
thereafter.
new text end

Sec. 3.

Minnesota Statutes 2010, section 289A.08, subdivision 3, is amended to read:

Subd. 3.

Corporations.

(a) A corporation that is subject to the state's jurisdiction to
tax under section 290.014, subdivision 5, must file a return deleted text begin , except that a foreign operating
corporation as defined in section 290.01, subdivision 6b, is not required to file a return deleted text end .

(b) Members of a unitary business that are required to file a combined report on one
return must designate a member of the unitary business to be responsible for tax matters,
including the filing of returns, the payment of taxes, additions to tax, penalties, interest,
or any other payment, and for the receipt of refunds of taxes or interest paid in excess of
taxes lawfully due. The designated member must be a member of the unitary business that
is filing the single combined report and either:

(1) a corporation that is subject to the taxes imposed by chapter 290; or

(2) a corporation that is not subject to the taxes imposed by chapter 290:

(i) Such corporation consents by filing the return as a designated member under this
clause to remit taxes, penalties, interest, or additions to tax due from the members of the
unitary business subject to tax, and receive refunds or other payments on behalf of other
members of the unitary business. The member designated under this clause is a "taxpayer"
for the purposes of this chapter and chapter 270C, and is liable for any liability imposed
on the unitary business under this chapter and chapter 290.

(ii) If the state does not otherwise have the jurisdiction to tax the member designated
under this clause, consenting to be the designated member does not create the jurisdiction
to impose tax on the designated member, other than as described in item (i).

(iii) The member designated under this clause must apply for a business tax account
identification number.

(c) The commissioner shall adopt rules for the filing of one return on behalf of the
members of an affiliated group of corporations that are required to file a combined report.
All members of an affiliated group that are required to file a combined report must file one
return on behalf of the members of the group under rules adopted by the commissioner.

(d) If a corporation claims on a return that it has paid tax in excess of the amount of
taxes lawfully due, that corporation must include on that return information necessary for
payment of the tax in excess of the amount lawfully due by electronic means.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for returns filed for taxable years
beginning after December 31, 2010.
new text end

Sec. 4.

Minnesota Statutes 2010, section 290.01, subdivision 5, is amended to read:

Subd. 5.

Domestic corporation.

The term "domestic" when applied to a corporation
means a corporation:

(1) created or organized in the United States, or under the laws of the United States
or of any state, the District of Columbia, or any political subdivision of any of the
foregoing but not including the Commonwealth of Puerto Rico, or any possession of
the United States;

(2) which qualifies as a DISC, as defined in section 992(a) of the Internal Revenue
Code; deleted text begin or
deleted text end

(3) which qualifies as a FSC, as defined in section 922 of the Internal Revenue Code deleted text begin . deleted text end new text begin ;
new text end

new text begin (4) which is incorporated in a tax haven;
new text end

new text begin (5) which is engaged in activity in a tax haven sufficient for the tax haven to impose
a net income tax under United States constitutional standards and section 290.015, and
which reports that 20 percent or more of its income is attributable to business in the tax
haven; or
new text end

new text begin (6) which has the average of its property, payroll, and sales factors, as defined under
section 290.191, within the 50 states of the United States and the District of Columbia, of
20 percent or more.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for returns filed for taxable years
beginning after December 31, 2010.
new text end

Sec. 5.

Minnesota Statutes 2010, section 290.01, is amended by adding a subdivision
to read:

new text begin Subd. 5c. new text end

new text begin Tax haven. new text end

new text begin (a) "Tax haven" means the following foreign jurisdictions,
unless the listing of the jurisdiction does not apply under paragraph (b):
new text end

new text begin (1) Andorra;
new text end

new text begin (2) Anguilla;
new text end

new text begin (3) Antigua and Barbuda;
new text end

new text begin (4) Aruba;
new text end

new text begin (5) Bahamas;
new text end

new text begin (6) Bahrain;
new text end

new text begin (7) Belize;
new text end

new text begin (8) British Virgin Islands;
new text end

new text begin (9) Cayman Islands;
new text end

new text begin (10) Cook Islands;
new text end

new text begin (11) Costa Rica;
new text end

new text begin (12) Dominica;
new text end

new text begin (13) Gibraltar;
new text end

new text begin (14) Grenada;
new text end

new text begin (15) Guernsey-Sark-Alderney;
new text end

new text begin (16) Jersey;
new text end

new text begin (17) Jordan;
new text end

new text begin (18) Lebanon;
new text end

new text begin (19) Liberia;
new text end

new text begin (20) Liechtenstein;
new text end

new text begin (21) Maldives;
new text end

new text begin (22) Marshall Islands;
new text end

new text begin (23) Monaco;
new text end

new text begin (24) Montserrat;
new text end

new text begin (25) Nauru;
new text end

new text begin (26) Netherlands Antilles;
new text end

new text begin (27) Niue;
new text end

new text begin (28) Panama;
new text end

new text begin (29) St. Kitts and Nevis;
new text end

new text begin (30) St. Lucia;
new text end

new text begin (31) St. Vincent and Grenadines;
new text end

new text begin (32) Tonga;
new text end

new text begin (33) Turks and Caicos; and
new text end

new text begin (34) Vanuatu.
new text end

new text begin (b) A foreign jurisdiction's listing under paragraph (a) does not apply to the first
taxable year after the United States enters into a tax treaty or other agreement with the
foreign jurisdiction that provides for prompt, obligatory, and automatic exchange of
information with the United States government relevant to enforcing the provisions of
federal tax laws and the treaty or other agreement was in effect for the taxable year.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for returns filed for taxable years
beginning after December 31, 2010.
new text end

Sec. 6.

Minnesota Statutes 2010, section 290.01, subdivision 19c, is amended to read:

Subd. 19c.

Corporations; additions to federal taxable income.

For corporations,
there shall be added to federal taxable income:

(1) the amount of any deduction taken for federal income tax purposes for income,
excise, or franchise taxes based on net income or related minimum taxes, including but not
limited to the tax imposed under section 290.0922, paid by the corporation to Minnesota,
another state, a political subdivision of another state, the District of Columbia, or any
foreign country or possession of the United States;

(2) interest not subject to federal tax upon obligations of: the United States, its
possessions, its agencies, or its instrumentalities; the state of Minnesota or any other
state, any of its political or governmental subdivisions, any of its municipalities, or any
of its governmental agencies or instrumentalities; the District of Columbia; or Indian
tribal governments;

(3) exempt-interest dividends received as defined in section 852(b)(5) of the Internal
Revenue Code;

(4) the amount of any net operating loss deduction taken for federal income tax
purposes under section 172 or 832(c)(10) of the Internal Revenue Code or operations loss
deduction under section 810 of the Internal Revenue Code;

(5) the amount of any special deductions taken for federal income tax purposes
under sections 241 to 247 and 965 of the Internal Revenue Code;

(6) losses from the business of mining, as defined in section 290.05, subdivision 1,
clause (a), that are not subject to Minnesota income tax;

(7) the amount of any capital losses deducted for federal income tax purposes under
sections 1211 and 1212 of the Internal Revenue Code;

(8) the exempt foreign trade income of a foreign sales corporation under sections
921(a) and 291 of the Internal Revenue Code;

(9) the amount of percentage depletion deducted under sections 611 through 614 and
291 of the Internal Revenue Code;

(10) for certified pollution control facilities placed in service in a taxable year
beginning before December 31, 1986, and for which amortization deductions were elected
under section 169 of the Internal Revenue Code of 1954, as amended through December
31, 1985, the amount of the amortization deduction allowed in computing federal taxable
income for those facilities;

(11) new text begin for taxable years beginning before January 1, 2011, new text end the amount of any deemed
dividend from a foreign operating corporation determined pursuant to section 290.17,
subdivision 4, paragraph (g). The deemed dividend shall be reduced by the amount of the
addition to income required by clauses (20), (21), (22), and (23);

(12) the amount of a partner's pro rata share of net income which does not flow
through to the partner because the partnership elected to pay the tax on the income under
section 6242(a)(2) of the Internal Revenue Code;

(13) the amount of net income excluded under section 114 of the Internal Revenue
Code;

(14) any increase in subpart F income, as defined in section 952(a) of the Internal
Revenue Code, for the taxable year when subpart F income is calculated without regard to
the provisions of Division C, title III, section 303(b) of Public Law 110-343;

(15) 80 percent of the depreciation deduction allowed under section 168(k)(1)(A)
and (k)(4)(A) of the Internal Revenue Code. For purposes of this clause, if the taxpayer
has an activity that in the taxable year generates a deduction for depreciation under
section 168(k)(1)(A) and (k)(4)(A) and the activity generates a loss for the taxable year
that the taxpayer is not allowed to claim for the taxable year, "the depreciation allowed
under section 168(k)(1)(A) and (k)(4)(A)" for the taxable year is limited to excess of the
depreciation claimed by the activity under section 168(k)(1)(A) and (k)(4)(A) over the
amount of the loss from the activity that is not allowed in the taxable year. In succeeding
taxable years when the losses not allowed in the taxable year are allowed, the depreciation
under section 168(k)(1)(A) and (k)(4)(A) is allowed;

(16) 80 percent of the amount by which the deduction allowed by section 179 of the
Internal Revenue Code exceeds the deduction allowable by section 179 of the Internal
Revenue Code of 1986, as amended through December 31, 2003;

(17) to the extent deducted in computing federal taxable income, the amount of the
deduction allowable under section 199 of the Internal Revenue Code;

(18) the exclusion allowed under section 139A of the Internal Revenue Code for
federal subsidies for prescription drug plans;

(19) the amount of expenses disallowed under section 290.10, subdivision 2;

(20) new text begin for taxable years beginning before January 1, 2011, new text end an amount equal to the
interest and intangible expenses, losses, and costs paid, accrued, or incurred by any
member of the taxpayer's unitary group to or for the benefit of a corporation that is a
member of the taxpayer's unitary business group that qualifies as a foreign operating
corporation. For purposes of this clause, intangible expenses and costs include:

(i) expenses, losses, and costs for, or related to, the direct or indirect acquisition,
use, maintenance or management, ownership, sale, exchange, or any other disposition of
intangible property;

(ii) losses incurred, directly or indirectly, from factoring transactions or discounting
transactions;

(iii) royalty, patent, technical, and copyright fees;

(iv) licensing fees; and

(v) other similar expenses and costs.

For purposes of this clause, "intangible property" includes stocks, bonds, patents, patent
applications, trade names, trademarks, service marks, copyrights, mask works, trade
secrets, and similar types of intangible assets.

This clause does not apply to any item of interest or intangible expenses or costs paid,
accrued, or incurred, directly or indirectly, to a foreign operating corporation with respect
to such item of income to the extent that the income to the foreign operating corporation
is income from sources without the United States as defined in subtitle A, chapter 1,
subchapter N, part 1, of the Internal Revenue Code;

(21) new text begin for taxable years beginning before January 1, 2011, new text end except as already included
in the taxpayer's taxable income pursuant to clause (20), any interest income and income
generated from intangible property received or accrued by a foreign operating corporation
that is a member of the taxpayer's unitary group. For purposes of this clause, income
generated from intangible property includes:

(i) income related to the direct or indirect acquisition, use, maintenance or
management, ownership, sale, exchange, or any other disposition of intangible property;

(ii) income from factoring transactions or discounting transactions;

(iii) royalty, patent, technical, and copyright fees;

(iv) licensing fees; and

(v) other similar income.

For purposes of this clause, "intangible property" includes stocks, bonds, patents, patent
applications, trade names, trademarks, service marks, copyrights, mask works, trade
secrets, and similar types of intangible assets.

This clause does not apply to any item of interest or intangible income received or accrued
by a foreign operating corporation with respect to such item of income to the extent that
the income is income from sources without the United States as defined in subtitle A,
chapter 1, subchapter N, part 1, of the Internal Revenue Code;

(22) new text begin for taxable years beginning before January 1, 2011, new text end the dividends attributable to
the income of a foreign operating corporation that is a member of the taxpayer's unitary
group in an amount that is equal to the dividends paid deduction of a real estate investment
trust under section 561(a) of the Internal Revenue Code for amounts paid or accrued by
the real estate investment trust to the foreign operating corporation;

(23) new text begin for taxable years beginning before January 1, 2011, new text end the income of a foreign
operating corporation that is a member of the taxpayer's unitary group in an amount that
is equal to gains derived from the sale of real or personal property located in the United
States;

(24) the additional amount allowed as a deduction for donation of computer
technology and equipment under section 170(e)(6) of the Internal Revenue Code, to the
extent deducted from taxable income; and

(25) discharge of indebtedness income resulting from reacquisition of business
indebtedness and deferred under section 108(i) of the Internal Revenue Code.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for returns filed for taxable years
beginning after December 31, 2010.
new text end

Sec. 7.

Minnesota Statutes 2010, section 290.01, subdivision 19d, is amended to read:

Subd. 19d.

Corporations; modifications decreasing federal taxable income.

For
corporations, there shall be subtracted from federal taxable income after the increases
provided in subdivision 19c:

(1) the amount of foreign dividend gross-up added to gross income for federal
income tax purposes under section 78 of the Internal Revenue Code;

(2) the amount of salary expense not allowed for federal income tax purposes due to
claiming the work opportunity credit under section 51 of the Internal Revenue Code;

(3) any dividend (not including any distribution in liquidation) paid within the
taxable year by a national or state bank to the United States, or to any instrumentality of
the United States exempt from federal income taxes, on the preferred stock of the bank
owned by the United States or the instrumentality;

(4) amounts disallowed for intangible drilling costs due to differences between
this chapter and the Internal Revenue Code in taxable years beginning before January
1, 1987, as follows:

(i) to the extent the disallowed costs are represented by physical property, an amount
equal to the allowance for depreciation under Minnesota Statutes 1986, section 290.09,
subdivision 7, subject to the modifications contained in subdivision 19e; and

(ii) to the extent the disallowed costs are not represented by physical property, an
amount equal to the allowance for cost depletion under Minnesota Statutes 1986, section
290.09, subdivision 8;

(5) the deduction for capital losses pursuant to sections 1211 and 1212 of the
Internal Revenue Code, except that:

(i) for capital losses incurred in taxable years beginning after December 31, 1986,
capital loss carrybacks shall not be allowed;

(ii) for capital losses incurred in taxable years beginning after December 31, 1986,
a capital loss carryover to each of the 15 taxable years succeeding the loss year shall be
allowed;

(iii) for capital losses incurred in taxable years beginning before January 1, 1987, a
capital loss carryback to each of the three taxable years preceding the loss year, subject to
the provisions of Minnesota Statutes 1986, section 290.16, shall be allowed; and

(iv) for capital losses incurred in taxable years beginning before January 1, 1987,
a capital loss carryover to each of the five taxable years succeeding the loss year to the
extent such loss was not used in a prior taxable year and subject to the provisions of
Minnesota Statutes 1986, section 290.16, shall be allowed;

(6) an amount for interest and expenses relating to income not taxable for federal
income tax purposes, if (i) the income is taxable under this chapter and (ii) the interest and
expenses were disallowed as deductions under the provisions of section 171(a)(2), 265 or
291 of the Internal Revenue Code in computing federal taxable income;

(7) in the case of mines, oil and gas wells, other natural deposits, and timber for
which percentage depletion was disallowed pursuant to subdivision 19c, clause (9), a
reasonable allowance for depletion based on actual cost. In the case of leases the deduction
must be apportioned between the lessor and lessee in accordance with rules prescribed
by the commissioner. In the case of property held in trust, the allowable deduction must
be apportioned between the income beneficiaries and the trustee in accordance with the
pertinent provisions of the trust, or if there is no provision in the instrument, on the basis
of the trust's income allocable to each;

(8) for certified pollution control facilities placed in service in a taxable year
beginning before December 31, 1986, and for which amortization deductions were elected
under section 169 of the Internal Revenue Code of 1954, as amended through December
31, 1985, an amount equal to the allowance for depreciation under Minnesota Statutes
1986, section 290.09, subdivision 7;

(9) amounts included in federal taxable income that are due to refunds of income,
excise, or franchise taxes based on net income or related minimum taxes paid by the
corporation to Minnesota, another state, a political subdivision of another state, the
District of Columbia, or a foreign country or possession of the United States to the extent
that the taxes were added to federal taxable income under section 290.01, subdivision 19c,
clause (1), in a prior taxable year;

(10) new text begin for taxable years beginning before January 1, 2011, new text end 80 percent of royalties,
fees, or other like income accrued or received from a foreign operating corporation
or a foreign corporation which is part of the same unitary business as the receiving
corporation, unless the income resulting from such payments or accruals is income from
sources within the United States as defined in subtitle A, chapter 1, subchapter N, part
1, of the Internal Revenue Code;

(11) income or gains from the business of mining as defined in section 290.05,
subdivision 1, clause (a), that are not subject to Minnesota franchise tax;

(12) the amount of disability access expenditures in the taxable year which are not
allowed to be deducted or capitalized under section 44(d)(7) of the Internal Revenue Code;

(13) the amount of qualified research expenses not allowed for federal income tax
purposes under section 280C(c) of the Internal Revenue Code, but only to the extent that
the amount exceeds the amount of the credit allowed under section 290.068;

(14) the amount of salary expenses not allowed for federal income tax purposes due
to claiming the Indian employment credit under section 45A(a) of the Internal Revenue
Code;

(15) for a corporation whose foreign sales corporation, as defined in section 922
of the Internal Revenue Code, constituted a foreign operating corporation during any
taxable year ending before January 1, 1995, and a return was filed by August 15, 1996,
claiming the deduction under section 290.21, subdivision 4, for income received from
the foreign operating corporation, an amount equal to 1.23 multiplied by the amount of
income excluded under section 114 of the Internal Revenue Code, provided the income is
not income of a foreign operating company;

(16) any decrease in subpart F income, as defined in section 952(a) of the Internal
Revenue Code, for the taxable year when subpart F income is calculated without regard to
the provisions of Division C, title III, section 303(b) of Public Law 110-343;

(17) in each of the five tax years immediately following the tax year in which an
addition is required under subdivision 19c, clause (15), an amount equal to one-fifth of
the delayed depreciation. For purposes of this clause, "delayed depreciation" means the
amount of the addition made by the taxpayer under subdivision 19c, clause (15). The
resulting delayed depreciation cannot be less than zero;

(18) in each of the five tax years immediately following the tax year in which an
addition is required under subdivision 19c, clause (16), an amount equal to one-fifth of
the amount of the addition; and

(19) to the extent included in federal taxable income, discharge of indebtedness
income resulting from reacquisition of business indebtedness included in federal taxable
income under section 108(i) of the Internal Revenue Code. This subtraction applies only
to the extent that the income was included in net income in a prior year as a result of the
addition under section 290.01, subdivision 19c, clause (25).

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for returns filed for taxable years
beginning after December 31, 2010.
new text end

Sec. 8.

Minnesota Statutes 2010, section 290.01, subdivision 29, is amended to read:

Subd. 29.

Taxable income.

The term "taxable income" means:

(1) for individuals, estates, and trusts, the same as taxable net income;

(2) for corporations, the taxable net income less

(i) the net operating loss deduction under section 290.095; new text begin and
new text end

(ii) the dividends received deduction under section 290.21, subdivision 4; new text begin plus
new text end

(iii) deleted text begin the exemption for operating in a job opportunity building zone under section
469.317; deleted text end new text begin Minnesota development subsidies.
new text end

deleted text begin (iv) the exemption for operating in a biotechnology and health sciences industry
zone under section 469.337; and
deleted text end

deleted text begin (v) the exemption for operating in an international economic development zone
under section 469.326.
deleted text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2010.
new text end

Sec. 9.

Minnesota Statutes 2010, section 290.01, is amended by adding a subdivision
to read:

new text begin Subd. 33. new text end

new text begin Minnesota development subsidies. new text end

new text begin (a) "Minnesota development
subsidies" means the greater of the following amounts:
new text end

new text begin (1) one-half of the amount deducted by the taxpayer in computing federal taxable
income for the taxable year, as property taxes, business expenses, or otherwise, that is
attributable to property taxes paid by the taxpayer, either directly or indirectly through a
lease or otherwise, on property located in a tax increment financing district, as defined in
section 469.174, or that receives an abatement under sections 469.1813 to 469.1815, if the
owner of the property or a related party has entered a development or similar agreement
with respect to the increment district or derives a benefit from the abatement by its
property having access to or use of public improvements financed with the abatement or
otherwise; or
new text end

new text begin (2) the amount of payments received by the taxpayer under a development or similar
agreement that provides for payments or reimbursements from the proceeds of increments
from a tax increment financing district or from an abatement under sections 469.1813 to
469.1815, but excluding reimbursements under a development action response plan, as
defined in section 469.174, subdivision 17, to pay for its costs incurred to fund removal
or remedial actions.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2010.
new text end

Sec. 10.

Minnesota Statutes 2010, section 290.06, subdivision 1, is amended to read:

Subdivision 1.

Computation, corporations.

The franchise tax imposed upon
corporations shall be computed by applying to their taxable income the rate of deleted text begin 9.8 deleted text end new text begin 7.5 new text end
percent.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2010.
new text end

Sec. 11.

Minnesota Statutes 2010, section 290.0921, subdivision 1, is amended to read:

Subdivision 1.

Tax imposed.

In addition to the taxes computed under this chapter
without regard to this section, the franchise tax imposed on corporations includes a tax
equal to the excess, if any, for the taxable year of:

(1) deleted text begin 5.8 deleted text end new text begin 4.5 new text end percent of Minnesota alternative minimum taxable income; over

(2) the tax imposed under section 290.06, subdivision 1, without regard to this
section.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2010.
new text end

Sec. 12.

Minnesota Statutes 2010, section 290.17, subdivision 4, is amended to read:

Subd. 4.

Unitary business principle.

(a) If a trade or business conducted wholly
within this state or partly within and partly without this state is part of a unitary business,
the entire income of the unitary business is subject to apportionment pursuant to section
290.191. Notwithstanding subdivision 2, paragraph (c), none of the income of a unitary
business is considered to be derived from any particular source and none may be allocated
to a particular place except as provided by the applicable apportionment formula. The
provisions of this subdivision do not apply to business income subject to subdivision 5,
income of an insurance company, or income of an investment company determined under
section 290.36.

(b) The term "unitary business" means business activities or operations which
result in a flow of value between them. The term may be applied within a single legal
entity or between multiple entities and without regard to whether each entity is a sole
proprietorship, a corporation, a partnership or a trust.

(c) Unity is presumed whenever there is unity of ownership, operation, and use,
evidenced by centralized management or executive force, centralized purchasing,
advertising, accounting, or other controlled interaction, but the absence of these
centralized activities will not necessarily evidence a nonunitary business. Unity is also
presumed when business activities or operations are of mutual benefit, dependent upon or
contributory to one another, either individually or as a group.

(d) Where a business operation conducted in Minnesota is owned by a business
entity that carries on business activity outside the state different in kind from that
conducted within this state, and the other business is conducted entirely outside the state, it
is presumed that the two business operations are unitary in nature, interrelated, connected,
and interdependent unless it can be shown to the contrary.

(e) Unity of ownership is not deemed to exist when a corporation is involved unless
that corporation is a member of a group of two or more business entities and more than 50
percent of the voting stock of each member of the group is directly or indirectly owned
by a common owner or by common owners, either corporate or noncorporate, or by one
or more of the member corporations of the group. For this purpose, the term "voting
stock" shall include membership interests of mutual insurance holding companies formed
under section 66A.40.

(f) The net income and apportionment factors under section 290.191 or 290.20 of
foreign corporations and other foreign entities which are part of a unitary business shall
not be included in the net income or the apportionment factors of the unitary business.
A foreign corporation or other foreign entity which is required to file a return under this
chapter shall file on a separate return basis. deleted text begin The net income and apportionment factors
under section 290.191 or 290.20 of foreign operating corporations shall not be included in
the net income or the apportionment factors of the unitary business except as provided
in paragraph (g). deleted text end new text begin The legislature intends that the provisions of this paragraph are not
severable from the provisions of section 290.01, subdivision 5, clauses (4) to (6), and if
any of those provisions are found to be unconstitutional, the provisions of this paragraph
are void for the respective taxable years.
new text end

deleted text begin (g) The adjusted net income of a foreign operating corporation shall be deemed to
be paid as a dividend on the last day of its taxable year to each shareholder thereof, in
proportion to each shareholder's ownership, with which such corporation is engaged in
a unitary business. Such deemed dividend shall be treated as a dividend under section
290.21, subdivision 4.
deleted text end

deleted text begin Dividends actually paid by a foreign operating corporation to a corporate shareholder
which is a member of the same unitary business as the foreign operating corporation shall
be eliminated from the net income of the unitary business in preparing a combined report
for the unitary business. The adjusted net income of a foreign operating corporation
shall be its net income adjusted as follows:
deleted text end

deleted text begin (1) any taxes paid or accrued to a foreign country, the commonwealth of Puerto
Rico, or a United States possession or political subdivision of any of the foregoing shall
be a deduction; and
deleted text end

deleted text begin (2) the subtraction from federal taxable income for payments received from foreign
corporations or foreign operating corporations under section 290.01, subdivision 19d,
clause (10), shall not be allowed.
deleted text end

deleted text begin If a foreign operating corporation incurs a net loss, neither income nor deduction
from that corporation shall be included in determining the net income of the unitary
business.
deleted text end

deleted text begin (h) deleted text end new text begin (g) new text end For purposes of determining the net income of a unitary business and the
factors to be used in the apportionment of net income pursuant to section 290.191 or
290.20, there must be included only the income and apportionment factors of domestic
corporations or other domestic entities deleted text begin other than foreign operating corporations deleted text end that are
determined to be part of the unitary business pursuant to this subdivision, notwithstanding
that foreign corporations or other foreign entities might be included in the unitary business.

deleted text begin (i) deleted text end new text begin (h) new text end Deductions for expenses, interest, or taxes otherwise allowable under
this chapter that are connected with or allocable against dividends deleted text begin , deemed dividends
described in paragraph (g), or royalties, fees, or other like income described in section
290.01, subdivision 19d, clause (10), deleted text end shall not be disallowed.

deleted text begin (j) deleted text end new text begin (i) new text end Each corporation or other entity, except a sole proprietorship, that is part of
a unitary business must file combined reports as the commissioner determines. On the
reports, all intercompany transactions between entities included pursuant to paragraph deleted text begin (h) deleted text end
new text begin (g) new text end must be eliminated and the entire net income of the unitary business determined in
accordance with this subdivision is apportioned among the entities by using each entity's
Minnesota factors for apportionment purposes in the numerators of the apportionment
formula and the total factors for apportionment purposes of all entities included pursuant
to paragraph deleted text begin (h) deleted text end new text begin (g) new text end in the denominators of the apportionment formula.

deleted text begin (k) deleted text end new text begin (j) new text end If a corporation has been divested from a unitary business and is included in a
combined report for a fractional part of the common accounting period of the combined
report:

(1) its income includable in the combined report is its income incurred for that part
of the year determined by proration or separate accounting; and

(2) its sales, property, and payroll included in the apportionment formula must
be prorated or accounted for separately.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for returns filed for taxable years
beginning after December 31, 2010.
new text end

Sec. 13.

Minnesota Statutes 2010, section 290.191, subdivision 2, is amended to read:

Subd. 2.

Apportionment formula of general application.

deleted text begin (a) deleted text end Except for those
trades or businesses required to use a different formula under subdivision 3 or section
290.36, and for those trades or businesses that receive permission to use some other
method under section 290.20 or under subdivision 4, a trade or business required to
apportion its net income must apportion its income to this state on the basis of the
deleted text begin percentage obtained by taking the sum of:
deleted text end

deleted text begin (1) the percent for the sales factor under paragraph (b) of the deleted text end percentage which
the sales made within this state in connection with the trade or business during the tax
period are of the total sales wherever made in connection with the trade or business during
the tax period deleted text begin ; deleted text end new text begin .
new text end

deleted text begin (2) the percent for the property factor under paragraph (b) of the percentage which
the total tangible property used by the taxpayer in this state in connection with the trade or
business during the tax period is of the total tangible property, wherever located, used by
the taxpayer in connection with the trade or business during the tax period; and
deleted text end

deleted text begin (3) the percent for the payroll factor under paragraph (b) of the percentage which
the taxpayer's total payrolls paid or incurred in this state or paid in respect to labor
performed in this state in connection with the trade or business during the tax period are
of the taxpayer's total payrolls paid or incurred in connection with the trade or business
during the tax period.
deleted text end

deleted text begin (b) For purposes of paragraph (a) and subdivision 3, the following percentages apply
for the taxable years specified:
deleted text end

deleted text begin Taxable years beginning during calendar year deleted text end			deleted text begin Sales factor percent deleted text end			deleted text begin Property factor percent deleted text end		deleted text begin Payroll factor percent deleted text end
deleted text begin 2007 deleted text end			deleted text begin 78 deleted text end			deleted text begin 11 deleted text end		deleted text begin 11 deleted text end
deleted text begin 2008 deleted text end			deleted text begin 81 deleted text end			deleted text begin 9.5 deleted text end		deleted text begin 9.5 deleted text end
deleted text begin 2009 deleted text end			deleted text begin 84 deleted text end			deleted text begin 8 deleted text end		deleted text begin 8 deleted text end
deleted text begin 2010 deleted text end			deleted text begin 87 deleted text end			deleted text begin 6.5 deleted text end		deleted text begin 6.5 deleted text end
deleted text begin 2011 deleted text end			deleted text begin 90 deleted text end			deleted text begin 5 deleted text end		deleted text begin 5 deleted text end
deleted text begin 2012 deleted text end			deleted text begin 93 deleted text end			deleted text begin 3.5 deleted text end		deleted text begin 3.5 deleted text end
deleted text begin 2013 deleted text end			deleted text begin 96 deleted text end			deleted text begin 2 deleted text end		deleted text begin 2 deleted text end
deleted text begin 2014 and later calendar years deleted text end			deleted text begin 100 deleted text end			deleted text begin 0 deleted text end		deleted text begin 0 deleted text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2010.
new text end

Sec. 14.

Minnesota Statutes 2010, section 290.191, subdivision 3, is amended to read:

Subd. 3.

Apportionment formula for financial institutions.

Except for an
investment company required to apportion its income under section 290.36, a financial
institution that is required to apportion its net income must apportion its net income to this
state on the basis of the percentage deleted text begin obtained by taking the sum of:
deleted text end

deleted text begin (1) the percent for the sales factor under subdivision 2, paragraph (b), of the
percentage deleted text end which the receipts from within this state in connection with the trade or
business during the tax period are of the total receipts in connection with the trade or
business during the tax period, from wherever derived deleted text begin ; deleted text end new text begin .
new text end

deleted text begin (2) the percent for the property factor under subdivision 2, paragraph (b), of the
percentage which the sum of the total tangible property used by the taxpayer in this
state and the intangible property owned by the taxpayer and attributed to this state in
connection with the trade or business during the tax period is of the sum of the total
tangible property, wherever located, used by the taxpayer and the intangible property
owned by the taxpayer and attributed to all states in connection with the trade or business
during the tax period; and
deleted text end

deleted text begin (3) the percent for the payroll factor under subdivision 2, paragraph (b), of the
percentage which the taxpayer's total payrolls paid or incurred in this state or paid in
respect to labor performed in this state in connection with the trade or business during
the tax period are of the taxpayer's total payrolls paid or incurred in connection with
the trade or business during the tax period.
deleted text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2010.
new text end

Sec. 15. new text begin REPEALER.
new text end

new text begin Minnesota Statutes 2010, sections 290.01, subdivision 6b; 290.06, subdivisions
24, 28, 29, 30, 31, and 32; 290.068, subdivisions 1, 2, 3, 4, 5, 6a, and 7; 290.0921,
subdivision 7; 290.191, subdivision 4; 469.317; 469.318; 469.321; 469.322; 469.323;
469.324; 469.325; 469.326; 469.327; 469.328; 469.329; 469.337; 469.338; and 469.339, new text end new text begin
are repealed.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for returns filed for taxable years
beginning after December 31, 2010.
new text end