HF 2046

as introduced - 84th Legislature (2005 - 2006) Posted on 12/15/2009 12:00am

A bill for an act
relating to taxation; income, corporate franchise,
property tax refund, and estate; conforming provisions
to changes in the Internal Revenue Code; amending
Minnesota Statutes 2004, sections 289A.02, subdivision
7; 290.01, subdivisions 19, as amended, 19a, 19b, 31;
290.032, subdivisions 1, 2; 290.067, subdivision 2a;
290A.03, subdivisions 3, 15; 291.005, subdivision 1.

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

Section 1.

Minnesota Statutes 2004, section 289A.02,
subdivision 7, is amended to read:

Subd. 7.

Internal revenue code.

Unless specifically
defined otherwise, "Internal Revenue Code" means the Internal
Revenue Code of 1986, as amended through deleted text begin June 15, 2003 deleted text end new text begin December
31, 2004 new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 2.

Minnesota Statutes 2004, section 290.01,
subdivision 19, as amended by Laws 2005, chapter 1, is amended
to read:

Subd. 19.

Net income.

The term "net income" means the
federal taxable income, as defined in section 63 of the Internal
Revenue Code of 1986, as amended through the date named in this
subdivision, incorporating new text begin the federal effective dates of
changes to the Internal Revenue Code and new text end any elections made by
the taxpayer in accordance with the Internal Revenue Code in
determining federal taxable income for federal income tax
purposes, and with the modifications provided in subdivisions
19a to 19f.

In the case of a regulated investment company or a fund
thereof, as defined in section 851(a) or 851(g) of the Internal
Revenue Code, federal taxable income means investment company
taxable income as defined in section 852(b)(2) of the Internal
Revenue Code, except that:

(1) the exclusion of net capital gain provided in section
852(b)(2)(A) of the Internal Revenue Code does not apply;

(2) the deduction for dividends paid under section
852(b)(2)(D) of the Internal Revenue Code must be applied by
allowing a deduction for capital gain dividends and
exempt-interest dividends as defined in sections 852(b)(3)(C)
and 852(b)(5) of the Internal Revenue Code; and

(3) the deduction for dividends paid must also be applied
in the amount of any undistributed capital gains which the
regulated investment company elects to have treated as provided
in section 852(b)(3)(D) of the Internal Revenue Code.

The net income of a real estate investment trust as defined
and limited by section 856(a), (b), and (c) of the Internal
Revenue Code means the real estate investment trust taxable
income as defined in section 857(b)(2) of the Internal Revenue
Code.

The net income of a designated settlement fund as defined
in section 468B(d) of the Internal Revenue Code means the gross
income as defined in section 468B(b) of the Internal Revenue
Code.

deleted text begin The provisions of sections 1113(a), 1117, 1206(a), 1313(a),
1402(a), 1403(a), 1443, 1450, 1501(a), 1605, 1611(a), 1612,
1616, 1617, 1704(l), and 1704(m) of the Small Business Job
Protection Act, Public Law 104-188, the provisions of Public Law
104-117, the provisions of sections 313(a) and (b)(1), 602(a),
913(b), 941, 961, 971, 1001(a) and (b), 1002, 1003, 1012, 1013,
1014, 1061, 1062, 1081, 1084(b), 1086, 1087, 1111(a), 1131(b)
and (c), 1211(b), 1213, 1530(c)(2), 1601(f)(5) and (h), and
1604(d)(1) of the Taxpayer Relief Act of 1997, Public Law
105-34, the provisions of section 6010 of the Internal Revenue
Service Restructuring and Reform Act of 1998, Public Law
105-206, the provisions of section 4003 of the Omnibus
Consolidated and Emergency Supplemental Appropriations Act,
1999, Public Law 105-277, and the provisions of section 318 of
the Consolidated Appropriation Act of 2001, Public Law 106-554,
shall become effective at the time they become effective for
federal purposes.
deleted text end

The Internal Revenue Code of 1986, as amended through
December 31, deleted text begin 1996 deleted text end new text begin 2004 new text end , shall be in effect for taxable years
beginning after December 31, deleted text begin 1996 deleted text end new text begin 2004. The provisions of
Public Law 109-1 are effective for tax years beginning after
December 31, 2003 new text end .

deleted text begin The provisions of sections 202(a) and (b), 221(a), 225,
312, 313, 913(a), 934, 962, 1004, 1005, 1052, 1063, 1084(a) and
(c), 1089, 1112, 1171, 1204, 1271(a) and (b), 1305(a), 1306,
1307, 1308, 1309, 1501(b), 1502(b), 1504(a), 1505, 1527, 1528,
1530, 1601(d), (e), (f), and (i) and 1602(a), (b), (c), and (e)
of the Taxpayer Relief Act of 1997, Public Law 105-34, the
provisions of sections 6004, 6005, 6012, 6013, 6015, 6016, 7002,
and 7003 of the Internal Revenue Service Restructuring and
Reform Act of 1998, Public Law 105-206, the provisions of
section 3001 of the Omnibus Consolidated and Emergency
Supplemental Appropriations Act, 1999, Public Law 105-277, the
provisions of section 3001 of the Miscellaneous Trade and
Technical Corrections Act of 1999, Public Law 106-36, and the
provisions of section 316 of the Consolidated Appropriation Act
of 2001, Public Law 106-554, shall become effective at the time
they become effective for federal purposes.
deleted text end

deleted text begin The Internal Revenue Code of 1986, as amended through
December 31, 1997, shall be in effect for taxable years
beginning after December 31, 1997.
deleted text end

deleted text begin The provisions of sections 5002, 6009, 6011, and 7001 of
the Internal Revenue Service Restructuring and Reform Act of
1998, Public Law 105-206, the provisions of section 9010 of the
Transportation Equity Act for the 21st Century, Public Law
105-178, the provisions of sections 1004, 4002, and 5301 of the
Omnibus Consolidation and Emergency Supplemental Appropriations
Act, 1999, Public Law 105-277, the provision of section 303 of
the Ricky Ray Hemophilia Relief Fund Act of 1998, Public Law
105-369, the provisions of sections 532, 534, 536, 537, and 538
of the Ticket to Work and Work Incentives Improvement Act of
1999, Public Law 106-170, the provisions of the Installment Tax
Correction Act of 2000, Public Law 106-573, and the provisions
of section 309 of the Consolidated Appropriation Act of 2001,
Public Law 106-554, shall become effective at the time they
become effective for federal purposes.
deleted text end

deleted text begin The Internal Revenue Code of 1986, as amended through
December 31, 1998, shall be in effect for taxable years
beginning after December 31, 1998.
deleted text end

deleted text begin The provisions of the FSC Repeal and Extraterritorial
Income Exclusion Act of 2000, Public Law 106-519, and the
provision of section 412 of the Job Creation and Worker
Assistance Act of 2002, Public Law 107-147, shall become
effective at the time it became effective for federal purposes.
deleted text end

deleted text begin The Internal Revenue Code of 1986, as amended through
December 31, 1999, shall be in effect for taxable years
beginning after December 31, 1999. The provisions of sections
306 and 401 of the Consolidated Appropriation Act of 2001,
Public Law 106-554, and the provision of section 632(b)(2)(A) of
the Economic Growth and Tax Relief Reconciliation Act of 2001,
Public Law 107-16, and provisions of sections 101 and 402 of the
Job Creation and Worker Assistance Act of 2002, Public Law
107-147, shall become effective at the same time it became
effective for federal purposes.
deleted text end

deleted text begin The Internal Revenue Code of 1986, as amended through
December 31, 2000, shall be in effect for taxable years
beginning after December 31, 2000. The provisions of sections
659a and 671 of the Economic Growth and Tax Relief
Reconciliation Act of 2001, Public Law 107-16, the provisions of
sections 104, 105, and 111 of the Victims of Terrorism Tax
Relief Act of 2001, Public Law 107-134, and the provisions of
sections 201, 403, 413, and 606 of the Job Creation and Worker
Assistance Act of 2002, Public Law 107-147, shall become
effective at the same time it became effective for federal
purposes.
deleted text end

deleted text begin The Internal Revenue Code of 1986, as amended through March
15, 2002, shall be in effect for taxable years beginning after
December 31, 2001.
deleted text end

deleted text begin The provisions of sections 101 and 102 of the Victims of
Terrorism Tax Relief Act of 2001, Public Law 107-134, shall
become effective at the same time it becomes effective for
federal purposes.
deleted text end

deleted text begin The Internal Revenue Code of 1986, as amended through June
15, 2003, shall be in effect for taxable years beginning after
December 31, 2002. The provisions of section 201 of the Jobs
and Growth Tax Relief and Reconciliation Act of 2003, H.R. 2, if
it is enacted into law, are effective at the same time it became
effective for federal purposes. The provisions of the Act of
January 7, 2005, Public Law 109-1, to accelerate the income tax
benefits for charitable cash contributions for the relief of
victims of the Indian Ocean tsunami, are effective at the same
time it became effective for federal purposes and apply to the
subtraction under subdivision 19b, clause (7).
deleted text end

Except as otherwise provided, references to the Internal
Revenue Code in subdivisions deleted text begin 19a deleted text end new text begin 19 new text end to deleted text begin 19g deleted text end new text begin 19f new text end mean the code in
effect for purposes of determining net income for the applicable
year.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 3.

Minnesota Statutes 2004, section 290.01,
subdivision 19a, is amended to read:

Subd. 19a.

Additions to federal taxable income.

For
individuals, estates, and trusts, there shall be added to
federal taxable income:

(1)(i) interest income on obligations of any state other
than Minnesota or a political or governmental subdivision,
municipality, or governmental agency or instrumentality of any
state other than Minnesota exempt from federal income taxes
under the Internal Revenue Code or any other federal statute;
and

(ii) exempt-interest dividends as defined in section
852(b)(5) of the Internal Revenue Code, except the portion of
the exempt-interest dividends derived from interest income on
obligations of the state of Minnesota or its political or
governmental subdivisions, municipalities, governmental agencies
or instrumentalities, but only if the portion of the
exempt-interest dividends from such Minnesota sources paid to
all shareholders represents 95 percent or more of the
exempt-interest dividends that are paid by the regulated
investment company as defined in section 851(a) of the Internal
Revenue Code, or the fund of the regulated investment company as
defined in section 851(g) of the Internal Revenue Code, making
the payment; and

(iii) for the purposes of items (i) and (ii), interest on
obligations of an Indian tribal government described in section
7871(c) of the Internal Revenue Code shall be treated as
interest income on obligations of the state in which the tribe
is located;

(2) the amount of income new text begin or sales and use new text end taxes paid or
accrued within the taxable year under this chapter and income new text begin or
sales and use new text end taxes paid to any other state or to any province
or territory of Canada, to the extent allowed as a deduction
under section 63(d) of the Internal Revenue Code, but the
addition may not be more than the amount by which the itemized
deductions as allowed under section 63(d) of the Internal
Revenue Code exceeds the amount of the standard deduction as
defined in section 63(c) of the Internal Revenue Code. For the
purpose of this paragraph, the disallowance of itemized
deductions under section 68 of the Internal Revenue Code of
1986, income new text begin or sales and use new text end tax is the last itemized deduction
disallowed;

(3) the capital gain amount of a lump sum distribution to
which the special tax under section 1122(h)(3)(B)(ii) of the Tax
Reform Act of 1986, Public Law 99-514, applies;

(4) the amount of income taxes paid or accrued within the
taxable year under this chapter and income taxes paid to any
other state or any province or territory of Canada, to the
extent allowed as a deduction in determining federal adjusted
gross income. For the purpose of this paragraph, income taxes
do not include the taxes imposed by sections 290.0922,
subdivision 1, paragraph (b), 290.9727, 290.9728, and 290.9729;

(5) the amount of expense, interest, or taxes disallowed
pursuant to section 290.10;

(6) 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; and

(7) 80 percent of the depreciation deduction allowed under
section 168(k) 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)
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)" for the taxable year
is limited to excess of the depreciation claimed by the activity
under section 168(k) 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) is allowed.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for tax years
beginning after December 31, 2004, except the changes in clause
(2) are effective for tax years beginning after December 31,
2003.
new text end

Sec. 4.

Minnesota Statutes 2004, section 290.01,
subdivision 19b, is amended to read:

Subd. 19b.

Subtractions from federal taxable income.

For
individuals, estates, and trusts, there shall be subtracted from
federal taxable income:

(1) interest income on obligations of any authority,
commission, or instrumentality of the United States to the
extent includable in taxable income for federal income tax
purposes but exempt from state income tax under the laws of the
United States;

(2) if included in federal taxable income, the amount of
any overpayment of income tax to Minnesota or to any other
state, for any previous taxable year, whether the amount is
received as a refund or as a credit to another taxable year's
income tax liability;

(3) the amount paid to others, less the amount used to
claim the credit allowed under section 290.0674, not to exceed
$1,625 for each qualifying child in grades kindergarten to 6 and
$2,500 for each qualifying child in grades 7 to 12, for tuition,
textbooks, and transportation of each qualifying child in
attending an elementary or secondary school situated in
Minnesota, North Dakota, South Dakota, Iowa, or Wisconsin,
wherein a resident of this state may legally fulfill the state's
compulsory attendance laws, which is not operated for profit,
and which adheres to the provisions of the Civil Rights Act of
1964 and chapter 363A. For the purposes of this clause,
"tuition" includes fees or tuition as defined in section
290.0674, subdivision 1, clause (1). As used in this clause,
"textbooks" includes books and other instructional materials and
equipment purchased or leased for use in elementary and
secondary schools in teaching only those subjects legally and
commonly taught in public elementary and secondary schools in
this state. Equipment expenses qualifying for deduction
includes expenses as defined and limited in section 290.0674,
subdivision 1, clause (3). "Textbooks" does not include
instructional books and materials used in the teaching of
religious tenets, doctrines, or worship, the purpose of which is
to instill such tenets, doctrines, or worship, nor does it
include books or materials for, or transportation to,
extracurricular activities including sporting events, musical or
dramatic events, speech activities, driver's education, or
similar programs. For purposes of the subtraction provided by
this clause, "qualifying child" has the meaning given in section
32(c)(3) of the Internal Revenue Code;

(4) income as provided under section 290.0802;

(5) to the extent included in federal adjusted gross
income, income realized on disposition of property exempt from
tax under section 290.491;

(6) to the extent included in federal taxable income,
postservice benefits for youth community service under section
124D.42 for volunteer service under United States Code, title
42, sections 12601 to 12604;

(7) to the extent not deducted in determining federal
taxable income by an individual who does not itemize deductions
for federal income tax purposes for the taxable year, an amount
equal to 50 percent of the excess of charitable contributions
new text begin over $500 new text end allowable as a deduction for the taxable year under
section 170(a) of the Internal Revenue Code deleted text begin over $500 deleted text end new text begin and under
the provisions of Public Law 109-1 new text end ;

(8) for taxable years beginning before January 1, 2008, the
amount of the federal small ethanol producer credit allowed
under section 40(a)(3) of the Internal Revenue Code which is
included in gross income under section 87 of the Internal
Revenue Code;

(9) for individuals who are allowed a federal foreign tax
credit for taxes that do not qualify for a credit under section
290.06, subdivision 22, an amount equal to the carryover of
subnational foreign taxes for the taxable year, but not to
exceed the total subnational foreign taxes reported in claiming
the foreign tax credit. For purposes of this clause, "federal
foreign tax credit" means the credit allowed under section 27 of
the Internal Revenue Code, and "carryover of subnational foreign
taxes" equals the carryover allowed under section 904(c) of the
Internal Revenue Code minus national level foreign taxes to the
extent they exceed the federal foreign tax credit;

(10) in each of the five tax years immediately following
the tax year in which an addition is required under subdivision
19a, clause (7), 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 19a, clause (7), minus the positive
value of any net operating loss under section 172 of the
Internal Revenue Code generated for the tax year of the
addition. The resulting delayed depreciation cannot be less
than zero; and

(11) job opportunity building zone income as provided under
section 469.316.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for tax years
beginning after December 31, 2004, except the change to clause
(7) is effective for tax years beginning after December 31, 2003.
new text end

Sec. 5.

Minnesota Statutes 2004, section 290.01,
subdivision 31, is amended to read:

Subd. 31.

Internal revenue code.

Unless specifically
defined otherwise, "Internal Revenue Code" means the Internal
Revenue Code of 1986, as amended through deleted text begin June 15, 2003 deleted text end new text begin December
31, 2004 new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment, except the changes incorporated by
federal changes are effective at the same times as the changes
were effective for federal purposes.
new text end

Sec. 6.

Minnesota Statutes 2004, section 290.032,
subdivision 1, is amended to read:

Subdivision 1.

Imposition.

There is hereby imposed as an
addition to the annual income tax for a taxable year of a
taxpayer in the classes described in section 290.03 a tax with
respect to any distribution received by such taxpayer that is
treated as a lump sum distribution under section deleted text begin 402(d) of the
Internal Revenue Code deleted text end new text begin 1401(c)(2) of the Small Business Job
Protection Act, Public Law 104-188 new text end and that is subject to tax
for such taxable year under section deleted text begin 402(d) of the Internal
Revenue Code deleted text end new text begin 1401(c)(2) of the Small Business Job Protection
Act, Public Law 104-188 new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for tax years
beginning after December 31, 1999.
new text end

Sec. 7.

Minnesota Statutes 2004, section 290.032,
subdivision 2, is amended to read:

Subd. 2.

Computation.

The amount of tax imposed by
subdivision 1 shall be computed in the same way as the tax
imposed under section 402(d) of the Internal Revenue Code new text begin of
1986, as amended through December 31, 1995 new text end , except that the
initial separate tax shall be an amount equal to five times the
tax which would be imposed by section 290.06, subdivision 2c, if
the recipient was an unmarried individual, and the taxable net
income was an amount equal to one-fifth of the excess of

(i) the total taxable amount of the lump sum distribution
for the year, over

(ii) the minimum distribution allowance, and except that
references in section 402(d) of the Internal Revenue Code new text begin of
1986, as amended through December 31, 1995, new text end to paragraph (1)(A)
thereof shall instead be references to subdivision 1, and the
excess, if any, of the subtraction base amount over federal
taxable income for a qualified individual as provided under
section 290.0802, subdivision 2.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for tax years
beginning after December 31, 1999.
new text end

Sec. 8.

Minnesota Statutes 2004, section 290.067,
subdivision 2a, is amended to read:

Subd. 2a.

Income.

(a) For purposes of this section,
"income" means the sum of the following:

(1) federal adjusted gross income as defined in section 62
of the Internal Revenue Code; and

(2) the sum of the following amounts to the extent not
included in clause (1):

(i) all nontaxable income;

(ii) the amount of a passive activity loss that is not
disallowed as a result of section 469, paragraph (i) or (m) of
the Internal Revenue Code and the amount of passive activity
loss carryover allowed under section 469(b) of the Internal
Revenue Code;

(iii) an amount equal to the total of any discharge of
qualified farm indebtedness of a solvent individual excluded
from gross income under section 108(g) of the Internal Revenue
Code;

(iv) cash public assistance and relief;

(v) any pension or annuity (including railroad retirement
benefits, all payments received under the federal Social
Security Act, supplemental security income, and veterans
benefits), which was not exclusively funded by the claimant or
spouse, or which was funded exclusively by the claimant or
spouse and which funding payments were excluded from federal
adjusted gross income in the years when the payments were made;

(vi) interest received from the federal or a state
government or any instrumentality or political subdivision
thereof;

(vii) workers' compensation;

(viii) nontaxable strike benefits;

(ix) the gross amounts of payments received in the nature
of disability income or sick pay as a result of accident,
sickness, or other disability, whether funded through insurance
or otherwise;

(x) a lump sum distribution under section 402(e)(3) of the
Internal Revenue Code new text begin of 1986, as amended through December 31,
1995 new text end ;

(xi) contributions made by the claimant to an individual
retirement account, including a qualified voluntary employee
contribution; simplified employee pension plan; self-employed
retirement plan; cash or deferred arrangement plan under section
401(k) of the Internal Revenue Code; or deferred compensation
plan under section 457 of the Internal Revenue Code; deleted text begin and
deleted text end

(xii) nontaxable scholarship or fellowship grants new text begin ;
new text end

new text begin (xiii) the amount of deduction allowed under section 199 of
the Internal Revenue Code; and
new text end

new text begin (xiv) the amount of deduction allowed under section 220 or
223 of the Internal Revenue Code new text end .

In the case of an individual who files an income tax return
on a fiscal year basis, the term "federal adjusted gross income"
means federal adjusted gross income reflected in the fiscal year
ending in the next calendar year. Federal adjusted gross income
may not be reduced by the amount of a net operating loss
carryback or carryforward or a capital loss carryback or
carryforward allowed for the year.

(b) "Income" does not include:

(1) amounts excluded pursuant to the Internal Revenue Code,
sections 101(a) and 102;

(2) amounts of any pension or annuity that were exclusively
funded by the claimant or spouse if the funding payments were
not excluded from federal adjusted gross income in the years
when the payments were made;

(3) surplus food or other relief in kind supplied by a
governmental agency;

(4) relief granted under chapter 290A;

(5) child support payments received under a temporary or
final decree of dissolution or legal separation; and

(6) restitution payments received by eligible individuals
and excludable interest as defined in section 803 of the
Economic Growth and Tax Relief Reconciliation Act of 2001,
Public Law 107-16.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for tax years
beginning after December 31, 2003.
new text end

Sec. 9.

Minnesota Statutes 2004, section 290A.03,
subdivision 3, is amended to read:

Subd. 3.

Income.

(1) "Income" means the sum of the
following:

(a) federal adjusted gross income as defined in the
Internal Revenue Code; and

(b) the sum of the following amounts to the extent not
included in clause (a):

(i) all nontaxable income;

(ii) the amount of a passive activity loss that is not
disallowed as a result of section 469, paragraph (i) or (m) of
the Internal Revenue Code and the amount of passive activity
loss carryover allowed under section 469(b) of the Internal
Revenue Code;

(iii) an amount equal to the total of any discharge of
qualified farm indebtedness of a solvent individual excluded
from gross income under section 108(g) of the Internal Revenue
Code;

(iv) cash public assistance and relief;

(v) any pension or annuity (including railroad retirement
benefits, all payments received under the federal Social
Security Act, supplemental security income, and veterans
benefits), which was not exclusively funded by the claimant or
spouse, or which was funded exclusively by the claimant or
spouse and which funding payments were excluded from federal
adjusted gross income in the years when the payments were made;

(vi) interest received from the federal or a state
government or any instrumentality or political subdivision
thereof;

(vii) workers' compensation;

(viii) nontaxable strike benefits;

(ix) the gross amounts of payments received in the nature
of disability income or sick pay as a result of accident,
sickness, or other disability, whether funded through insurance
or otherwise;

(x) a lump sum distribution under section 402(e)(3) of the
Internal Revenue Code new text begin of 1986, as amended through December 31,
1995 new text end ;

(xi) contributions made by the claimant to an individual
retirement account, including a qualified voluntary employee
contribution; simplified employee pension plan; self-employed
retirement plan; cash or deferred arrangement plan under section
401(k) of the Internal Revenue Code; or deferred compensation
plan under section 457 of the Internal Revenue Code; deleted text begin and
deleted text end

(xii) nontaxable scholarship or fellowship grants new text begin ;
new text end

new text begin (xiii) the amount of deduction allowed under section 199 of
the Internal Revenue Code; and
new text end

new text begin (xiv) the amount of deduction allowed under section 220 or
223 of the Internal Revenue Code new text end .

In the case of an individual who files an income tax return
on a fiscal year basis, the term "federal adjusted gross income"
shall mean federal adjusted gross income reflected in the fiscal
year ending in the calendar year. Federal adjusted gross income
shall not be reduced by the amount of a net operating loss
carryback or carryforward or a capital loss carryback or
carryforward allowed for the year.

(2) "Income" does not include:

(a) amounts excluded pursuant to the Internal Revenue Code,
sections 101(a) and 102;

(b) amounts of any pension or annuity which was exclusively
funded by the claimant or spouse and which funding payments were
not excluded from federal adjusted gross income in the years
when the payments were made;

(c) surplus food or other relief in kind supplied by a
governmental agency;

(d) relief granted under this chapter;

(e) child support payments received under a temporary or
final decree of dissolution or legal separation; or

(f) restitution payments received by eligible individuals
and excludable interest as defined in section 803 of the
Economic Growth and Tax Relief Reconciliation Act of 2001,
Public Law 107-16.

(3) The sum of the following amounts may be subtracted from
income:

(a) for the claimant's first dependent, the exemption
amount multiplied by 1.4;

(b) for the claimant's second dependent, the exemption
amount multiplied by 1.3;

(c) for the claimant's third dependent, the exemption
amount multiplied by 1.2;

(d) for the claimant's fourth dependent, the exemption
amount multiplied by 1.1;

(e) for the claimant's fifth dependent, the exemption
amount; and

(f) if the claimant or claimant's spouse was disabled or
attained the age of 65 on or before December 31 of the year for
which the taxes were levied or rent paid, the exemption amount.

For purposes of this subdivision, the "exemption amount"
means the exemption amount under section 151(d) of the Internal
Revenue Code for the taxable year for which the income is
reported.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for property
tax refunds based on household income for 2004 and thereafter.
new text end

Sec. 10.

Minnesota Statutes 2004, section 290A.03,
subdivision 15, is amended to read:

Subd. 15.

Internal revenue code.

"Internal Revenue Code"
means the Internal Revenue Code of 1986, as amended through deleted text begin June
15, 2003 deleted text end new text begin December 31, 2004 new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for property
tax refunds based on property taxes payable on or after December
31, 2004, and rent paid on or after December 31, 2003.
new text end

Sec. 11.

Minnesota Statutes 2004, 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 December 31,
deleted text begin 2002 deleted text end new text begin 2004 new text end .

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new text begin This section is effective the day
following final enactment.
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