HF 2263

as introduced - 86th Legislature (2009 - 2010) Posted on 02/09/2010 02:01am

A bill for an act
relating to taxation; corporate franchise, individual income, mining occupation,
sales and use, and cigarette excise taxation; adopting the recommendations
of the governor's 21st century tax commission; modifying tax bases, credits,
and rates; repealing the corporate franchise tax; requiring reports; amending
Minnesota Statutes 2008, sections 289A.18, subdivision 1; 289A.20, subdivision
1; 289A.30, subdivision 1; 289A.31, subdivision 1; 289A.38, subdivisions 7, 12;
289A.50, subdivision 1; 289A.60, subdivisions 1, 4; 290.01, subdivisions 19,
19a, 19b, 19f, 22, 29, 31; 290.03; 290.04, subdivision 1; 290.06, subdivision 33,
by adding a subdivision; 290.068, subdivisions 1, 3, 4, by adding a subdivision;
290.0922, subdivision 1; 290.095, subdivision 3; 290.17, subdivisions 1, 4;
290.191, subdivision 4; 290.32; 290.36; 297A.61, subdivision 3; 297A.62,
subdivision 1; 297A.67, subdivision 7; 297A.68, subdivisions 2, 5, 10, by
adding a subdivision; 297A.75, subdivision 1; 297F.05, subdivision 1; proposing
coding for new law in Minnesota Statutes, chapters 116J; 270C; 297I; repealing
Minnesota Statutes 2008, sections 289A.08, subdivision 3; 289A.19, subdivision
2; 289A.26; 290.01, subdivisions 5, 5a, 6b, 19c, 19d, 19e; 290.014, subdivision
5; 290.02; 290.06, subdivisions 1, 24, 27; 290.0921, subdivisions 1, 2, 3, 3a, 4, 6,
7, 8; 290.21, subdivisions 1, 4; 290.34, subdivisions 1, 2; 290.371, subdivisions
1, 2, 3, 4; 290.432; 297A.67, subdivisions 8, 9, 10, 13, 13a, 14, 16, 17, 18, 19,
21, 27, 29; 297A.70, subdivisions 10, 12; 298.01, subdivisions 3, 3a, 3b, 4,
4a, 4b, 4c, 5, 6; 298.17.

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

Section 1.

new text begin [116J.665] MINNESOTA BUSINESS INVESTMENT COMPANY
CREDIT.
new text end

new text begin Subdivision 1. 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.
new text end

new text begin (b) "Affiliate" means:
new text end

new text begin (1) any person who, directly or indirectly, beneficially owns, controls, or holds
power to vote 15 percent or more of the outstanding voting securities or other voting
ownership interest of a Minnesota business investment company or insurance company;
new text end

new text begin (2) any person, 15 percent or more of whose outstanding voting securities or other
voting ownership interests are directly or indirectly beneficially owned, controlled, or held
with power to vote by a Minnesota business investment company or insurance company.
new text end

new text begin Notwithstanding this subdivision, an investment by a participating investor in a
Minnesota business investment company pursuant to an allocation of premium tax credits
under this section does not cause that Minnesota business investment company to become
an affiliate of that participating investor.
new text end

new text begin (c) "Allocation date" means the date on which credits under section 297I.23 are
allocated to the participating investors of a Minnesota business investment company
under this section.
new text end

new text begin (d) "Designated capital" means an amount of money that:
new text end

new text begin (1) is invested by a participating investor in a Minnesota business investment
company; and
new text end

new text begin (2) fully funds the purchase price of either or both participating investor's equity
interest in a Minnesota business investment company or a qualified debt instrument issued
by a Minnesota business investment company.
new text end

new text begin (e) "Minnesota business investment company" means a partnership, corporation,
trust, or limited liability company, organized on a for-profit basis, that:
new text end

new text begin (1) has its principal office located or headquartered in Minnesota;
new text end

new text begin (2) has as its primary business activity the investment of cash in qualified businesses;
and
new text end

new text begin (3) is certified by the Department of Employment and Economic Development as
meeting the criteria in this section.
new text end

new text begin (f) "Participating investor" means any insurer as defined in section 60A.02,
subdivision 4, that contributes designated capital pursuant to this section.
new text end

new text begin (g) "Person" means any natural person or entity, including, but not limited to, a
corporation, general or limited partnership, trust, or limited liability company.
new text end

new text begin (h)(1) "Qualified business" means a business that is independently owned and
operated and meets all of the following requirements:
new text end

new text begin (i) it is headquartered in Minnesota, its principal business operations are located in
this state, and at least 60 percent of its employees are located in Minnesota;
new text end

new text begin (ii) it has not more than 100 employees;
new text end

new text begin (iii) it is not predominantly engaged in:
new text end

new text begin (A) professional services provided by accountants, doctors, or lawyers;
new text end

new text begin (B) banking or lending;
new text end

new text begin (C) real estate development;
new text end

new text begin (D) insurance;
new text end

new text begin (E) oil and gas exploration;
new text end

new text begin (F) direct gambling activities; or
new text end

new text begin (G) making loans to or investments in a Minnesota business investment company
or an affiliate; and
new text end

new text begin (iv) it is not a franchise of and has no financial relationship with a Minnesota business
investment company or any affiliate of a Minnesota business investment company prior to
a Minnesota business investment company's first qualified investment in the business.
new text end

new text begin (2) A business classified as a qualified business at the time of the first qualified
investment in the business remains classified as a qualified business and may receive
continuing qualified investments from any Minnesota business investment company.
Continuing investments will constitute qualified investments even though the business may
not meet the definition of a qualified business at the time of such continuing investments.
new text end

new text begin (i) "Qualified debt instrument" means a debt instrument issued by a Minnesota
business investment company which meets all of the following criteria:
new text end

new text begin (1) it is issued at par value or a premium;
new text end

new text begin (2) it has an original maturity date of at least four years from the date of issuance,
and a repayment schedule which is not faster than a level principal amortization over
four years; and
new text end

new text begin (3) it satisfies the rating criteria to qualify as "NAIC1," as determined by the
Securities Valuation Office of the National Association of Insurance Commissioners.
new text end

new text begin (j) "Qualified distribution" means any distribution or payment not made to a
participating investor or affiliate of a participating investor by a Minnesota business
investment company in connection with the following:
new text end

new text begin (1) costs and expenses of forming, syndicating, and organizing the Minnesota
business investment company, including fees paid for professional services, and the costs
of financing and insuring the obligations of a Minnesota business investment company;
new text end

new text begin (2) an annual management fee not to exceed two percent of designated capital on
an annual basis to offset the costs and expenses of managing and operating a Minnesota
business investment company;
new text end

new text begin (3) reasonable and necessary fees in accordance with industry custom for ongoing
professional services, including, but not limited to, legal and accounting services related to
the operation of a Minnesota business investment company, not including any lobbying or
governmental relations;
new text end

new text begin (4) any increase or projected increase in federal or state taxes, including penalties
and related interest of the equity owners of a Minnesota business investment company
resulting from the earnings or other tax liability of a Minnesota business investment
company to the extent that the increase is related to the ownership, management, or
operation of a Minnesota business investment company.
new text end

new text begin (5) Payments of principal and interest to holders of qualified debt instruments issued
by a Minnesota business investment company may be made without any restriction
whatsoever.
new text end

new text begin (k) "Qualified investment" means the investment of money by a Minnesota
business investment company in a qualified business for the purchase of any debt, debt
participation, equity, or hybrid security of any nature and description whatsoever, including
a debt instrument or security that has the characteristics of debt but which provides for
conversion into equity or equity participation instruments such as options or warrants.
Any repayment of a qualified investment prior to one year from the date of issuance shall
result in the amount of such qualified investment being reduced by 50 percent for purposes
of the cumulative investment requirement set forth in subdivision 8, paragraph (c).
new text end

new text begin (l) "State premium tax liability" means any liability incurred by an insurance
company under the provisions of chapter 297I or in the case of a repeal or a reduction by
the state of the liability imposed by chapter 297I, any other tax liability imposed upon an
insurance company by the state.
new text end

new text begin Subd. 2. new text end

new text begin Certification. new text end

new text begin (a) The department must provide a standardized format for
applying for the business investment credit under section 297I.23.
new text end

new text begin (b) An applicant is required to:
new text end

new text begin (1) file an application with the department;
new text end

new text begin (2) pay a nonrefundable application fee of $7,500 at the time of filing the application;
new text end

new text begin (3) submit as part of its application an audited balance sheet that contains an
unqualified opinion of an independent certified public accountant issued not more than 35
days before the application date that states that the applicant has an equity capitalization
of $500,000 or more in the form of unencumbered cash, marketable securities, or other
liquid assets; and
new text end

new text begin (4) have at least two principals or persons, at least one of which is primarily located
in Minnesota, employed or engaged to manage the funds who each have a minimum of
five years of money management experience in the venture capital or business industry.
new text end

new text begin (c) The department may certify partnerships, corporations, trusts, or limited liability
companies, organized on a for-profit basis, which submit an application to be designated
as a Minnesota business investment company if such applicant is located, headquartered,
and licensed or registered to conduct business in Minnesota, has as its primary business
activity the investment of cash in qualified businesses, and meets the other criteria set
forth in this section.
new text end

new text begin (d) The department must review the organizational documents of each applicant for
certification and the business history of each applicant, determine whether the applicant
has satisfied the requirements of this section, and determine whether the officers and the
board of directors, general partners, trustees, managers, or members are trustworthy and
are thoroughly acquainted with the requirements of this section.
new text end

new text begin (e) Within 45 days after the receipt of an application, the department must issue the
certification or refuse the certification and communicate in detail to the applicant the
grounds for refusal, including suggestions for the removal of such grounds.
new text end

new text begin (f) The department must begin accepting applications to become a Minnesota
business investment company as defined under section 297I.23 by August 1, 2009.
new text end

new text begin Subd. 3. new text end

new text begin Requirements. new text end

new text begin (a) An insurance company or affiliate of an insurance
company must not, directly or indirectly:
new text end

new text begin (1) beneficially own, whether through rights, options, convertible interest, or
otherwise, 15 percent or more of the voting securities or other voting ownership interest of
a Minnesota business investment company;
new text end

new text begin (2) manage a Minnesota business investment company; or
new text end

new text begin (3) control the direction of investments for a Minnesota business investment
company.
new text end

new text begin (b) A Minnesota business investment company may obtain one or more guaranties,
indemnities, bonds, insurance policies, or other payment undertakings for the benefit
of its participating investors from any entity, except that in no case can more than one
participating investor of a Minnesota business investment company on an aggregate basis
with all affiliates of such participating investor be entitled to provide such guaranties,
indemnities, bonds, insurance policies, or other payment undertakings in favor of the
participating investors of a Minnesota business investment company and its affiliates in
this state.
new text end

new text begin (c) This subdivision does not preclude a participating investor, insurance company,
or other party from exercising its legal rights and remedies, including, without limitation,
interim management of a Minnesota business investment company, in the event that a
Minnesota business investment company is in default of its statutory obligations or its
contractual obligations to such participating investor, insurance company, or other party, or
from monitoring a Minnesota business investment company to ensure its compliance with
this section or disallowing any investments that have not been approved by the department.
new text end

new text begin (d) The department may contract with an independent third party to review,
investigate, and certify that the applications comply with the provisions of this section.
new text end

new text begin Subd. 4. new text end

new text begin Aggregate limitations on investment tax credits; allocation. new text end

new text begin (a)
The aggregate amount of investment tax credits to be allocated to all participating
investors of Minnesota business investment companies under this section shall not exceed
$160,000,000. No Minnesota business investment company, on an aggregate basis with its
affiliates, may file credit allocation claims that exceed $160,000,000.
new text end

new text begin (b) Credits must be allocated to participating investors in the order that the credit
allocation claims are filed with the department, provided that all credit allocation
claims filed with the department on the same day must be treated as having been filed
contemporaneously. Any credit allocation claims filed with the department prior to the
initial credit allocation claim filing date will be deemed to have been filed on such initial
credit allocation claim filing date. The department will set the initial credit allocation
claim filing date to be not less than 120 days and not greater than 150 days after the
department begins accepting applications for certification.
new text end

new text begin (c) In the event that two or more Minnesota business investment companies file
credit allocation claims with the department on behalf of their respective participating
investors on the same day, and the aggregate amount of credit allocation claims exceeds
the aggregate limit of investment tax credits under this section or the lesser amount of
credits that remain unallocated on that day, then the credits shall be allocated among the
participating investors who filed on that day on a pro rata basis with respect to the amounts
claimed. The pro rata allocation for any one participating investor is the product obtained
by multiplying a fraction, the numerator of which is the amount of the credit allocation
claim filed on behalf of a participating investor and the denominator of which is the total
of all credit allocation claims filed on behalf of all participating investors on that day, by
the aggregate limit of credits under this section or the lesser amount of credits that remain
unallocated on that day.
new text end

new text begin (d) Within ten business days after the department receives a credit allocation claim
filed by a Minnesota business investment company on behalf of one or more of its
participating investors, the department must notify the Minnesota business investment
company of the amount of credits allocated to each of the participating investors of that
Minnesota business investment company. In the event a Minnesota business investment
company does not receive an investment of designated capital from each participating
investor required to earn the amount of credits allocated to such participating investor
within ten business days of the Minnesota business investment company's receipt of notice
of allocation, then it shall notify the department on or before the next business day, and
the credits allocated to such participating investor of the Minnesota business investment
company forfeits. The department must then reallocate those forfeited credits among the
participating investors of the other Minnesota business investment companies on a pro
rata basis with respect to the credit allocation claims filed on behalf of the participating
investors. The commissioner is authorized, but not required, to levy a fine of not more than
$50,000 on any participating investor that does not invest the full amount of designated
capital required to fund the credits allocated to it by the department in accordance with the
credit allocation claim filed on its behalf.
new text end

new text begin (e) No participating investor, on an aggregate basis with its affiliates, may file an
allocation claim for more than 25 percent of the maximum amount of investment tax
credits authorized under this subdivision, regardless of whether such claim is made in
connection with one or more Minnesota business investment companies.
new text end

new text begin Subd. 5. new text end

new text begin Requirements for continuance of certification. new text end

new text begin (a) To maintain its
certification, a Minnesota business investment company must make qualified investments
as follows:
new text end

new text begin (1) within two years after the allocation date, a Minnesota business investment
company must invest an amount equal to at least 35 percent of its designated capital in
qualified investments; and
new text end

new text begin (2) within three years after the allocation date, a Minnesota business investment
company must invest an amount equal to at least 50 percent of its designated capital
in qualified investments.
new text end

new text begin (b) Prior to making a proposed qualified investment in a specific business, a
Minnesota business investment company must request from the department a written
determination that the proposed investment qualifies as a qualified investment in a qualified
business. The department must notify a Minnesota business investment company within
ten business days from the receipt of a request of its determination and an explanation
of its determination. If the department fails to notify the Minnesota business investment
company of its determination within the ten business day period, the proposed investment
is deemed to be a qualified investment in a qualified business. If the department determines
that the proposed investment does not meet the definition of a qualified investment or
qualified business, or both, the department may nevertheless consider the proposed
investment a qualified investment and, if necessary, the business a qualified business, if the
department determines that the proposed investment furthers state economic development.
new text end

new text begin (c) All designated capital not invested in qualified investments by a Minnesota
business investment company shall be held or invested in such manner as the Minnesota
business investment company, in its discretion, deems appropriate. Designated capital
and proceeds of designated capital returned to a Minnesota business investment company
after being originally invested in qualified investments may be invested again in qualified
investments and the investment shall count toward the requirements of paragraph (a) with
respect to making investments of designated capital in qualified investments.
new text end

new text begin (d) If, within four years after its allocation date, a Minnesota business investment
company has not invested at least 60 percent of its designated capital in qualified
investments, neither the Minnesota business investment company nor its affiliates shall
be permitted to receive management fees.
new text end

new text begin (e) If, within six years after its allocation date, a Minnesota business investment
company has not invested at least 100 percent of its designated capital in qualified
investments, neither the Minnesota business investment company nor its affiliates shall
be permitted to receive management fees.
new text end

new text begin (f) A Minnesota business investment company may not invest more than 15 percent
of its designated capital in any one qualified business without the specific approval
of the department.
new text end

new text begin (g) For purposes of calculating the investment percentage thresholds of paragraph
(a), the cumulative amount of all qualified investments made by a Minnesota business
investment company from the allocation date must be considered.
new text end

new text begin Subd. 6. new text end

new text begin Minnesota business investment company reporting requirements.
new text end

new text begin (a) Each Minnesota business investment company must report the following to the
department:
new text end

new text begin (1) as soon as practicable after the receipt of designated capital:
new text end

new text begin (i) the name of each participating investor from which the designated capital was
received, including the participating investor's insurance tax identification number;
new text end

new text begin (ii) the amount of each participating investor's investment of designated capital; and
new text end

new text begin (iii) the date on which the designated capital was received;
new text end

new text begin (2) on an annual basis, on or before January 31 of each year:
new text end

new text begin (i) the amount of the Minnesota business investment company's remaining
uninvested designated capital at the end of the immediately preceding taxable year;
new text end

new text begin (ii) whether or not the Minnesota business investment company has invested more
than 15 percent of its total designated capital in any one business;
new text end

new text begin (iii) all qualified investments that the Minnesota business investment company has
made in the previous taxable year, including the number of employees of each qualified
business in which it has made investments at the time of the investment, and as of
December 1 of the preceding taxable year; and
new text end

new text begin (iv) for any qualified business where the Minnesota business investment company
no longer has an investment, the Minnesota business investment company must provide
employment figures for that company as of the last day before the investment was
terminated;
new text end

new text begin (3) other information that the department may reasonably request that helps the
department ascertain the impact of the Minnesota business investment company program
both directly and indirectly on the economy of the state of Minnesota including, but
not limited to, the number of jobs created by qualified businesses that have received
qualified investments;
new text end

new text begin (4) within 90 days of the close of its fiscal year, annual audited financial statements
of the Minnesota business investment company, which must include the opinion of an
independent certified public accountant; and
new text end

new text begin (5) an "agreed upon procedures report" or equivalent regarding the operations of the
Minnesota business investment company.
new text end

new text begin (b) A Minnesota business investment company must pay to the department an
annual, nonrefundable certification fee of $5,000 on or before April 1, or $10,000 if later.
No annual certification fee is required if the payment date for such fee is within six months
of the date a Minnesota business investment company is first certified by the department.
new text end

new text begin (c) Upon satisfying the requirements of subdivision 5, paragraph (a), clause (2), a
Minnesota business investment company shall provide the notice to the department and
the department shall, within 60 days of receipt of such notice, either confirm that the
Minnesota business investment company has satisfied the requirements of subdivision
5, paragraph (a), clause (2), as of such date or provide notice of noncompliance and
an explanation of any existing deficiencies. If the department does not provide such
notification within 60 days, the Minnesota business investment company is deemed to
have met the requirements of subdivision 5, paragraph (a), clause (2).
new text end

new text begin Subd. 7. new text end

new text begin Distributions. new text end

new text begin A Minnesota business investment company may make
qualified distributions at any time. In order for a Minnesota business investment
company to make a distribution other than a qualified distribution to its equity holders,
the cumulative amount of all qualified investments of the Minnesota business investment
company must equal or exceed 100 percent of its designated capital.
new text end

new text begin Subd. 8. new text end

new text begin Decertification. new text end

new text begin (a) The department shall conduct an annual review of
each Minnesota business investment company to determine if a Minnesota business
investment company is abiding by the requirements of certification and to ensure that no
investment has been made in violation of this section. The cost of the annual review
must be paid by each Minnesota business investment company according to a reasonable
fee schedule adopted by the department.
new text end

new text begin (b) Any material violation of this section, including any material misrepresentation
made to the department in connection with the application process, may be grounds for
decertification of a Minnesota business investment company and the disallowance of
credits under section 297I.23, provided that in all instances the department shall provide
notice to the Minnesota business investment company of the grounds of such proposed
decertification and the opportunity to cure the violation before any such decertification
becomes effective.
new text end

new text begin (c) Once a Minnesota business investment company has invested an amount
cumulatively equal to 100 percent of its designated capital in qualified investments,
provided that the Minnesota business investment company has met all other requirements
under this section as of such date, the Minnesota business investment company shall
no longer be subject to regulation by the department or the reporting requirements
under subdivision 6. Upon receiving certification by a Minnesota business investment
company that it has invested an amount equal to 100 percent of its designated capital, the
department must notify a Minnesota business investment company within 60 days that it
has or has not met the requirements, with a reason for the determination if it has not. If the
department does not provide notification of deregulation within 60 days, the Minnesota
business investment company is deemed to have met the requirements and is no longer
subject to regulation by the department.
new text end

new text begin (d) The department must send written notice of any decertification proceedings to
the commissioner of revenue and to the address of each participating investor whose
tax credit may be subject to recapture or forfeiture, using the address shown on the last
filing submitted to the department.
new text end

new text begin Subd. 9. new text end

new text begin Registration requirements. new text end

new text begin All investments by participating investors
for which tax credits are awarded under this section must be registered or specifically
exempt from registration.
new text end

new text begin Subd. 10. new text end

new text begin Reports to governor and legislature. new text end

new text begin The department must make
an annual report to the governor and the chairs and ranking minority members of the
committees having jurisdiction over taxes and economic development. The report must
include:
new text end

new text begin (1) the number of Minnesota business investment companies holding designated
capital;
new text end

new text begin (2) the amount of designated capital invested in each Minnesota business investment
company;
new text end

new text begin (3) the cumulative amount that each Minnesota business investment company has
invested as of January 1, 2011, and the cumulative total each year thereafter;
new text end

new text begin (4) the cumulative amount of follow-on capital that the investments of each
Minnesota business investment company have created in terms of capital invested in
qualified businesses at the same time or subsequent to investments made by a Minnesota
business investment company in such businesses by sources other than Minnesota
business investment companies;
new text end

new text begin (5) the total amount of investment tax credits applied under this section for each year;
new text end

new text begin (6) the performance of each Minnesota business investment company with regard to
the requirements for continued certification;
new text end

new text begin (7) the classification of the companies in which each Minnesota business investment
company has invested according to industrial sector and size of company;
new text end

new text begin (8) the gross number of jobs created by investments made by each Minnesota
business investment company and the number of jobs retained;
new text end

new text begin (9) the location of the companies in which each Minnesota business investment
company has invested;
new text end

new text begin (10) those Minnesota business investment companies that have been decertified,
including the reasons for decertification; and
new text end

new text begin (11) other related information as necessary to evaluate the effect of this section on
economic development.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective January 1, 2010.
new text end

Sec. 2.

new text begin [116J.8737] JOB GROWTH INVESTMENT TAX CREDIT.
new text end

new text begin Subdivision 1. new text end

new text begin Definitions. new text end

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

new text begin (b) "Qualifying small business" means a business that:
new text end

new text begin (1) is engaged in, or is committed to engage in, biotechnology, technology,
manufacturing, agriculture, processing or assembling products, conducting research and
development, or developing a new product or business process;
new text end

new text begin (2) is not engaged in real estate development, insurance, banking, lobbying, political
consulting, wholesale or retail trade, leisure, hospitality, construction, or professional
services provided by attorneys, accountants, business consultants, physicians, or health
care consultants;
new text end

new text begin (3) has its headquarters in Minnesota;
new text end

new text begin (4) employs at least 51 percent of the business's employees in Minnesota;
new text end

new text begin (5) has less than 100 employees;
new text end

new text begin (6) has less than $2,000,000 in annual gross sales receipts for the previous year;
new text end

new text begin (7) is not a subsidiary or an affiliate of a business which employs more than 100
employees or has total gross sales receipts for the previous year of more than $2,000,000,
computed by aggregating all of the employees and gross sales receipts of the business
entities affiliated with the business;
new text end

new text begin (8) has not previously received more than $2,000,000 in private equity investments;
new text end

new text begin (9) has not previously received more than $500,000 in investments that have
qualified for and received tax credits under this section; and
new text end

new text begin (10) for a business with five or more employees, measured on a full-time equivalent
basis:
new text end

new text begin (i) provides wages and benefits to at least 75 percent of its employees in excess of
the first five employees, equal to or greater than 175 percent of the federal poverty level
for a family of four; and
new text end

new text begin (ii) provides wages and benefits to its employees in excess of the first five employees,
equal to or greater than 110 percent of the federal poverty level for a family of four.
new text end

new text begin (c) "Qualifying green job small business" means a business that satisfies all of the
requirements of paragraph (b), except clause (1), and is predominantly engaged in one
or more of the following industry sectors:
new text end

new text begin (1) green products: businesses related to the manufacture of products used by
the building, transport, consumer products, and industrial products sectors, that reduce
environmental impact and increase the efficiency of the use of resources such as energy,
water, and materials;
new text end

new text begin (2) renewable energy: businesses related to the production of energy from natural
resources such as solar, wind, hydropower, geothermal, biomass (including but not limited
to animal waste and crop waste), and biofuels (including but not limited to ethanol and
biodiesel), as well as from waste heat recovery and from the use of biomass for energy
production including cogeneration;
new text end

new text begin (3) green services: businesses that provide services that help other businesses or
consumers utilize green products and technologies, build energy infrastructure, recycle,
and manage waste; or
new text end

new text begin (4) environmental conservation: businesses related to the conservation of energy,
air, water, and land, including air emissions control, environmental monitoring and
compliance, water conservation, wastewater treatment, land management (including but
not limited to prairie), natural pesticides, aquaculture, and organic farming.
new text end

new text begin (d) "Regional investment fund" means a pooled investment fund that:
new text end

new text begin (1) invests in qualifying small businesses;
new text end

new text begin (2) invests in qualifying green job small businesses;
new text end

new text begin (3) is organized as a limited liability company or other pass-through entity; and
new text end

new text begin (4) has no fewer than five separate investors, each of whom is a qualified taxpayer, as
defined in paragraph (e), and owns no more than 20 percent of the outstanding ownership
interests in the fund.
new text end

new text begin For purposes of determining the number of investors and the ownership interests of
an investor under this clause, the ownership interests of an investor include those of the
investor's spouse, children, or siblings, and any corporation, limited liability company,
partnership, or trust in which the investor has a controlling equity interest or in which the
investor exercises management control.
new text end

new text begin (e) "Qualified taxpayer" means:
new text end

new text begin (1) an accredited investor, within the meaning of Regulation D of the Securities and
Exchange Commission, Code of Federal Regulations, title 17, section 230.501(a), whether
part of a pass-through entity or not, who:
new text end

new text begin (i) does not own, control, or hold power to vote 20 percent or more of the outstanding
securities of the qualifying small business or the qualifying green job small business in
which the eligible investment is proposed; or
new text end

new text begin (ii) does not receive more than 50 percent of the gross annual income from the
qualifying small business or the qualifying green job small business in which the eligible
investment is proposed.
new text end

new text begin (2) A member of the immediate family of a taxpayer disqualified by this subdivision
is not eligible for a credit under this section. For purposes of this subdivision, "immediate
family" means the taxpayer's spouse, parent, sibling, or child, or the spouse of any person
listed in this clause.
new text end

new text begin Subd. 2. new text end

new text begin Credit allowed; holding period; limitations; and carryover. new text end

new text begin (a) A
qualified taxpayer is allowed a credit against the tax imposed under chapter 290 for
investments made in a qualified regional investment fund, a qualifying small business,
or a qualifying green job small business. The credit equals 30 percent of the qualified
taxpayer's investment in the business, but not to exceed the lesser of:
new text end

new text begin (1) the liability for tax under chapter 290, including the applicable alternative
minimum tax, but excluding the minimum fee under section 290.0922, and:
new text end

new text begin (2)(i) the amount of the certificate provided to the taxpayer under subdivision
4, paragraph (c); or
new text end

new text begin (ii) the amount of the certificate provided to the qualified individual investor under
subdivision 6, paragraph (d).
new text end

new text begin (b) No taxpayer may receive more than $100,000 in provisional credits under this
section in any one year.
new text end

new text begin (c) A qualified taxpayer must claim the credit in the third tax year after which the
investment in the qualified regional investment fund, the qualifying small business, or the
qualifying green job small business was made. The credit is allowed only for investments
made in:
new text end

new text begin (1) a qualified regional investment fund that remains invested for at least three
years and that are made after the fund has been certified by the commissioner under
subdivision 4;
new text end

new text begin (2) a qualifying small business that remains invested for at least three years and that
are made after the qualified individual investor has been certified by the commissioner
under subdivision 6; or
new text end

new text begin (3) a qualifying green job small business that remains invested for at least three
years and that are made after the qualified individual investor has been certified by the
commissioner under subdivision 6.
new text end

new text begin (d) The three-year investment holding period required by paragraph (c) does not
apply if:
new text end

new text begin (1) the investment by the qualified regional investment fund or the qualified
individual investor becomes worthless before the end of the three-year period; or
new text end

new text begin (2) the qualifying small business or qualifying green job small business is sold
before the end of the three-year period.
new text end

new text begin (e) If the amount of the credit under this subdivision for any taxable year exceeds
the limitations under paragraph (a), the excess is a credit carryover to each of the ten
succeeding taxable years. The entire amount of the excess unused credit for the taxable
year must be carried first to the earliest of the taxable years to which the credit may be
carried. The amount of the unused credit that may be added under this paragraph may not
exceed the taxpayer's liability for tax less the credit for the taxable year.
new text end

new text begin Subd. 3. new text end

new text begin Qualified regional investment fund; requirements. new text end

new text begin (a) To be certified as
a qualified regional investment fund for the purposes of this section, a regional investment
fund must:
new text end

new text begin (1) have a minimum of two-thirds of the regional investment fund's members,
shareholders, or partners be residents of the region that is the focus of the fund;
new text end

new text begin (2) allocate at least 60 percent of the funds it invests to qualifying small businesses
or to qualifying green job small businesses within its region of focus; and
new text end

new text begin (3) allocate at least 50 percent of the funds it invests to qualifying green job small
businesses.
new text end

new text begin (b) The allocations in paragraph (a), clauses (2) and (3), need not be exclusive.
new text end

new text begin (c) Investments from other qualified regional investment funds into the qualifying
small businesses or qualifying green job small businesses that are the recipients of the
qualified regional investment fund's investment shall count toward the allocations in
paragraph (a), clauses (2) and (3).
new text end

new text begin (d) Investments in the fund may consist of equity investments or notes that pay
interest or other fixed amounts, or any combination of both, as the fund's governing body
determines appropriate.
new text end

new text begin Subd. 4. new text end

new text begin Certification of funds. new text end

new text begin (a) Regional investment funds may apply to the
commissioner for certification as a qualified regional investment fund. The application
must be in the form and be made under the procedures specified by the commissioner,
accompanied by an application fee of $1,250. Fees are appropriated to the commissioner
for personnel and administrative expenses related to administering the program.
new text end

new text begin (b) The commissioner may certify up to 20 regional investment funds per year.
Certifications shall be awarded in the order of the qualifying applications received, subject
to the following limitations:
new text end

new text begin (1) the commissioner may certify no more than three regional investment funds per
year that seek business investment opportunities that may qualify for and receive tax
credits under this section in more than 15 Minnesota counties; and
new text end

new text begin (2) the commissioner may certify no more than five regional investment funds
per year that seek business investment opportunities that may qualify for and receive
tax credits under this section in the metropolitan area, as defined in section 473.121,
subdivision 2.
new text end

new text begin (c) The commissioner shall provide provisional credit certificates to investors in a
qualified regional fund to credits under this section, in proportion to the investment of
the investor in the fund and upon a showing by the fund of an investment in a qualifying
small business or qualifying green job small business, of no more than $500,000 per fund
per year. The commissioner may not issue a total of more than $15,000,000 per year in
provisional credit certificates to fund investors.
new text end

new text begin (d) The commissioner shall provide a final credit certificate to investors in the fund
upon a showing by the fund that the holding requirements of subdivision 2, paragraph (b),
have been met and that the investors in the fund are otherwise eligible for the credit.
new text end

new text begin Subd. 5. new text end

new text begin Fund requirements. new text end

new text begin The commissioner shall enter into an agreement
with each of the qualified regional investment funds certified under subdivision 4. Each
agreement must include a provision requiring the qualified regional investment fund to
annually report on the employment figures and wages and benefits paid by the businesses
in which investments are made and a provision stating the specific manner in which
the qualified regional investment fund will comply or is complying with the allocation
requirements under subdivision 3, paragraph (a), clauses (2) and (3).
new text end

new text begin Subd. 6. new text end

new text begin Certification of individual investors. new text end

new text begin (a) Qualified taxpayers may apply
to the commissioner of employment and economic development for certification as a
qualified individual investor. The application must be in the form and be made under the
procedures specified by the commissioner, accompanied by an application fee of $250.
Fees are appropriated to the commissioner for personnel and administrative expenses
related to administering the program.
new text end

new text begin (b) The commissioner may certify up to 40 qualified individual investors per year.
Certifications shall be awarded in the order of qualifying applications received, however
the commissioner may certify no more than ten qualified individual investors per year that
seek business investment opportunities that may qualify for and receive tax credits under
this section in the metropolitan area, as defined in section 473.121, subdivision 2.
new text end

new text begin (c) The commissioner shall provide provisional credit certificates to qualified
individual investors, upon a showing by the qualified individual investor of investments of
at least $25,000 in qualifying small businesses or qualifying green job small businesses.
At least one-half of the investments made by the investor must be in qualifying green job
businesses. The commissioner may not issue more than $100,000 in provisional credit
certificates per qualified individual investor per year. The commissioner may not issue
a total of more than $1,000,000 per year in provisional credit certificates to qualified
individual investors in fiscal years 2010, 2011, 2012, and 2013.
new text end

new text begin (d) The commissioner shall provide a final credit certificate to the qualified individual
investor upon a showing by the investor that the holding requirements of subdivision 2,
paragraph (c), have been met and that the investor is otherwise eligible for the credit.
new text end

new text begin Subd. 7. new text end

new text begin Qualified individual investor requirements. new text end

new text begin The commissioner shall
enter into an agreement with each qualified individual investor certified under subdivision
6. Each agreement must include a provision requiring the qualified individual investor to
annually report on the employment figures and wages and benefits paid by the businesses
in which investments are made and a provision stating the specific manner in which the
qualified individual investor will comply or is complying with the allocation requirements
under subdivision 6, paragraph (c).
new text end

new text begin Subd. 8. new text end

new text begin Rulemaking. new text end

new text begin The commissioner's actions in establishing procedures and
requirements and in making determinations and certifications to administer this section are
not a rule for purposes of chapter 14, are not subject to the Administrative Procedure Act
contained in chapter 14, and are not subject to section 14.386.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective January 1, 2010, for taxable years
beginning after December 31, 2009, and only applies to investments made after the
qualified regional investment fund or qualified individual investor has been certified by
the commissioner of economic development.
new text end

Sec. 3.

new text begin [270C.132] BIENNIAL BENEFITS RECEIVED BY BUSINESS REPORT.
new text end

new text begin The commissioner shall report to the legislature by February 1 of each
even-numbered year an estimate of the amount of taxes paid by businesses to and the
amount of benefits received by businesses from Minnesota state and local governments.
For purposes of this report, "business taxes" has the meaning used by the commissioner in
preparing the tax incidence study required under section 270C.13. The report may include
detail that shows the variation in the ratio by industry sector and analysis of benefits using
a varying set of assumptions regarding the extent to which businesses benefit from or
consume government services in their operations.
new text end

Sec. 4.

Minnesota Statutes 2008, section 289A.18, subdivision 1, is amended to read:

Subdivision 1.

Individual income, fiduciary income, deleted text begin corporate franchise, deleted text end and
entertainment taxes; partnership and S corporation returns; information returns deleted text begin ;
mining company returns deleted text end .

The returns required to be made under sections 289A.08 and
289A.12 must be filed at the following times:

(1) returns made on the basis of the calendar year must be filed on April 15 following
the close of the calendar year deleted text begin , except that returns of corporations must be filed on March
15 following the close of the calendar year deleted text end ;

(2) returns made on the basis of the fiscal year must be filed on the 15th day of the
fourth month following the close of the fiscal year deleted text begin , except that returns of corporations
must be filed on the 15th day of the third month following the close of the fiscal year deleted text end ;

(3) returns for a fractional part of a year must be filed on the 15th day of the fourth
month following the end of the month in which falls the last day of the period for which
the return is made, except that the returns of corporations must be filed on the 15th day of
the third month following the end of the tax year; deleted text begin or, in the case of a corporation which is
a member of a unitary group, the return of the corporation must be filed on the 15th day of
the third month following the end of the tax year of the unitary group in which falls the
last day of the period for which the return is made; deleted text end

(4) in the case of a final return of a decedent for a fractional part of a year, the return
must be filed on the 15th day of the fourth month following the close of the 12-month
period that began with the first day of that fractional part of a year;

(5) in the case of the return of a cooperative association, returns must be filed on or
before the 15th day of the ninth month following the close of the taxable year;

(6) deleted text begin if a corporation has been divested from a unitary group and files a return for
a fractional part of a year in which it was a member of a unitary business that files a
combined report under section 290.17, subdivision 4, the divested corporation's return
must be filed on the 15th day of the third month following the close of the common
accounting period that includes the fractional year; deleted text end

deleted text begin (7) deleted text end returns of entertainment entities must be filed on April 15 following the close of
the calendar year;

deleted text begin (8) deleted text end new text begin (7) new text end returns required to be filed under section 289A.08, subdivision 4, must be
filed on the 15th day of the fifth month following the close of the taxable year;

deleted text begin (9) returns of mining companies must be filed on May 1 following the close of the
calendar year; deleted text end and

deleted text begin (10) deleted text end new text begin (8) new text end returns required to be filed with the commissioner under section 289A.12,
subdivision 2 or 4 to 10, must be filed within 30 days after being demanded by the
commissioner.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2009.
new text end

Sec. 5.

Minnesota Statutes 2008, section 289A.20, subdivision 1, is amended to read:

Subdivision 1.

Individual income, fiduciary income, deleted text begin mining company, corporate
franchise, deleted text end and entertainment taxes.

(a) Individual income deleted text begin , deleted text end new text begin and new text end fiduciary deleted text begin , mining
company, and corporate franchise deleted text end taxes must be paid to the commissioner on or before the
date the return must be filed under section 289A.18, subdivision 1, or the extended due
date as provided in section 289A.19, unless an earlier date for payment is provided.

Notwithstanding any other law, a taxpayer whose unpaid liability for income or
corporate franchise taxes, as reflected upon the return, is $1 or less need not pay the tax.

(b) Entertainment taxes must be paid on or before the date the return must be filed
under section 289A.18, subdivision 1.

(c) If a fiduciary administers 100 or more trusts, fiduciary income taxes for all trusts
administered by the fiduciary must be paid by electronic means.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2009.
new text end

Sec. 6.

Minnesota Statutes 2008, section 289A.30, subdivision 1, is amended to read:

Subdivision 1.

Fiduciary income deleted text begin , corporate franchise deleted text end tax.

Where good cause
exists, the commissioner may extend the time for payment of the amount determined as a
fiduciary income tax deleted text begin or corporate franchise tax deleted text end by the taxpayer, or an amount determined
as a deficiency, for a period of not more than six months from the date prescribed for
the payment of the tax.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2009.
new text end

Sec. 7.

Minnesota Statutes 2008, section 289A.31, subdivision 1, is amended to read:

Subdivision 1.

Individual income, fiduciary income, deleted text begin mining company, corporate
franchise, deleted text end and entertainment taxes.

(a) Individual income deleted text begin , deleted text end new text begin and new text end fiduciary income deleted text begin , mining
company, and corporate franchise deleted text end taxes, and interest and penalties, must be paid by the
taxpayer upon whom the tax is imposed, except in the following cases:

(1) The tax due from a decedent for that part of the taxable year in which the
decedent died during which the decedent was alive and the taxes, interest, and penalty
due for the prior years must be paid by the decedent's personal representative, if any.
If there is no personal representative, the taxes, interest, and penalty must be paid by
the transferees, as defined in section 270C.58, subdivision 3, to the extent they receive
property from the decedent;

(2) The tax due from an infant or other incompetent person must be paid by the
person's guardian or other person authorized or permitted by law to act for the person;

(3) The tax due from the estate of a decedent must be paid by the estate's personal
representative;

(4) The tax due from a trust, including those within the definition of a corporation, as
defined in section 290.01, subdivision 4, must be paid by a trustee; and

(5) The tax due from a taxpayer whose business or property is in charge of a
receiver, trustee in bankruptcy, assignee, or other conservator, must be paid by the
person in charge of the business or property so far as the tax is due to the income from
the business or property.

(b) Entertainment taxes are the joint and several liability of the entertainer and the
entertainment entity. The payor is liable to the state for the payment of the tax required to
be deducted and withheld under section 290.9201, subdivision 7, and is not liable to the
entertainer for the amount of the payment.

(c) The tax imposed under section 290.0922 on partnerships is the joint and several
liability of the partnership and the general partners.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2009.
new text end

Sec. 8.

Minnesota Statutes 2008, section 289A.38, subdivision 7, is amended to read:

Subd. 7.

Federal tax changes.

If the amount of income, items of tax preference,
deductions, or credits for any year of a taxpayer as reported to the Internal Revenue
Service is changed or corrected by the commissioner of Internal Revenue or other officer
of the United States or other competent authority, or where a renegotiation of a contract or
subcontract with the United States results in a change in income, items of tax preference,
deductions, credits, or withholding tax, or, in the case of estate tax, where there are
adjustments to the taxable estate, the taxpayer shall report the change or correction or
renegotiation results in writing to the commissioner. The report must be submitted within
180 days after the final determination and must be in the form of either an amended
Minnesota estate, withholding tax, deleted text begin corporate franchise tax, deleted text end or income tax return conceding
the accuracy of the federal determination or a letter detailing how the federal determination
is incorrect or does not change the Minnesota tax. An amended Minnesota income tax
return must be accompanied by an amended property tax refund return, if necessary. A
taxpayer filing an amended federal tax return must also file a copy of the amended return
with the commissioner of revenue within 180 days after filing the amended return.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2009.
new text end

Sec. 9.

Minnesota Statutes 2008, section 289A.38, subdivision 12, is amended to read:

Subd. 12.

Request for early audit for individual income deleted text begin , deleted text end new text begin and new text end fiduciary income deleted text begin ,
mining company, and corporate franchise taxes deleted text end .

deleted text begin (a) deleted text end Tax must be assessed within
18 months after written request for an assessment has been made in the case of income
received (1) during the lifetime of a decedent, (2) by the decedent's estate during the
period of administration, new text begin or new text end (3) by a trustee of a terminating trust or other fiduciary
who, because of custody of assets, would be liable for the payment of tax under section
270C.58, subdivision 2 deleted text begin , or (4) by a mining company or a corporation deleted text end . A proceeding in
court for the collection of the tax must begin within two years after written request for the
assessment (filed after the return is made and in the form the commissioner prescribes) by
the personal representative or other fiduciary representing the estate of the decedent, or
by the trustee of a terminating trust or other fiduciary who, because of custody of assets,
would be liable for the payment of tax under section 270C.58, subdivision 2, or by the
corporation. Except as provided in section 289A.42, subdivision 1, an assessment must
not be made after the expiration of 3-1/2 years after the return was filed, and an action
must not be brought after the expiration of four years after the return was filed.

deleted text begin (b) Paragraph (a) only applies in the case of a mining company or a corporation if:
deleted text end

deleted text begin (1) the written request notifies the commissioner that the corporation contemplates
dissolution at or before the expiration of the 18-month period;
deleted text end

deleted text begin (2) the dissolution is begun in good faith before the expiration of the 18-month
period; and
deleted text end

deleted text begin (3) the dissolution is completed within the 18-month 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, 2009.
new text end

Sec. 10.

Minnesota Statutes 2008, section 289A.50, subdivision 1, is amended to read:

Subdivision 1.

General right to refund.

(a) Subject to the requirements of this
section and section 289A.40, a taxpayer who has paid a tax in excess of the taxes lawfully
due and who files a written claim for refund will be refunded or credited the overpayment
of the tax determined by the commissioner to be erroneously paid.

(b) The claim must specify the name of the taxpayer, the date when and the period
for which the tax was paid, the kind of tax paid, the amount of the tax that the taxpayer
claims was erroneously paid, the grounds on which a refund is claimed, and other
information relative to the payment and in the form required by the commissioner. An
income tax deleted text begin , deleted text end new text begin or new text end estate tax deleted text begin , or corporate franchise tax deleted text end return, or amended return claiming an
overpayment constitutes a claim for refund.

(c) When, in the course of an examination, and within the time for requesting a
refund, the commissioner determines that there has been an overpayment of tax, the
commissioner shall refund or credit the overpayment to the taxpayer and no demand
is necessary. If the overpayment exceeds $1, the amount of the overpayment must
be refunded to the taxpayer. If the amount of the overpayment is less than $1, the
commissioner is not required to refund. In these situations, the commissioner does not
have to make written findings or serve notice by mail to the taxpayer.

(d) If the amount allowable as a credit for withholding, estimated taxes, or dependent
care exceeds the tax against which the credit is allowable, the amount of the excess is
considered an overpayment. The refund allowed by section 290.06, subdivision 23, is also
considered an overpayment. The requirements of section 270C.33 do not apply to the
refunding of such an overpayment shown on the original return filed by a taxpayer.

(e) If the entertainment tax withheld at the source exceeds by $1 or more the taxes,
penalties, and interest reported in the return of the entertainment entity or imposed by
section 290.9201, the excess must be refunded to the entertainment entity. If the excess is
less than $1, the commissioner need not refund that amount.

(f) If the surety deposit required for a construction contract exceeds the liability of
the out-of-state contractor, the commissioner shall refund the difference to the contractor.

(g) An action of the commissioner in refunding the amount of the overpayment does
not constitute a determination of the correctness of the return of the taxpayer.

(h) There is appropriated from the general fund to the commissioner of revenue the
amount necessary to pay refunds allowed under this section.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2009.
new text end

Sec. 11.

Minnesota Statutes 2008, section 289A.60, subdivision 1, is amended to read:

Subdivision 1.

Penalty for failure to pay tax.

(a) If a deleted text begin corporate franchise, deleted text end fiduciary
income, deleted text begin mining company, deleted text end estate, partnership, S corporation, or nonresident entertainer
tax is not paid within the time specified for payment, a penalty of six percent is added to
the unpaid tax deleted text begin , except that if a corporation or mining company meets the requirements of
section 289A.19, subdivision 2, the penalty is not imposed deleted text end .

(b) For the taxes listed in paragraph (a), in addition to the penalty in that paragraph,
whether imposed or not, if a return or amended return is filed after the due date, without
regard to extensions, and any tax reported as remaining due is not remitted with the return
or amended return, a penalty of five percent of the tax not paid is added to the tax. If the
commissioner issues an order assessing additional tax for a tax listed in paragraph (a),
and the tax is not paid within 60 days after the mailing of the order or, if appealed, within
60 days after final resolution of the appeal, a penalty of five percent of the unpaid tax
is added to the tax.

(c) If an individual income tax is not paid within the time specified for payment, a
penalty of four percent is added to the unpaid tax. There is a presumption of reasonable
cause for the late payment if the individual: (i) pays by the due date of the return at
least 90 percent of the amount of tax, after credits other than withholding and estimated
payments, shown owing on the return; (ii) files the return within six months after the due
date; and (iii) pays the remaining balance of the reported tax when the return is filed.

(d) If the commissioner issues an order assessing additional individual income tax,
and the tax is not paid within 60 days after the mailing of the order or, if appealed, within
60 days after final resolution of the appeal, a penalty of four percent of the unpaid tax
is added to the tax.

(e) If a withholding or sales or use tax is not paid within the time specified for
payment, a penalty must be added to the amount required to be shown as tax. The penalty
is five percent of the tax not paid on or before the date specified for payment of the tax
if the failure is for not more than 30 days, with an additional penalty of five percent of
the amount of tax remaining unpaid during each additional 30 days or fraction of 30 days
during which the failure continues, not exceeding 15 percent in the aggregate.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2009.
new text end

Sec. 12.

Minnesota Statutes 2008, section 289A.60, subdivision 4, is amended to read:

Subd. 4.

Substantial understatement of liability; penalty.

(a) The commissioner
of revenue shall impose a penalty for substantial understatement of any tax payable to the
commissioner, except a tax imposed under chapter 297A.

(b) There must be added to the tax an amount equal to 20 percent of the amount of any
underpayment attributable to the understatement. There is a substantial understatement of
tax for the period if the amount of the understatement for the period exceeds the greater of:

(1) ten percent of the tax required to be shown on the return for the period; or

(2) deleted text begin (i) $10,000 in the case of a mining company or a corporation, other than an S
corporation as defined in section 290.9725, when the tax is imposed by chapter 290 or
section 298.01 or 298.015, or
deleted text end

deleted text begin (ii) deleted text end $5,000 deleted text begin in the case of any other taxpayer, and in the case of a mining company or
a corporation any tax not imposed by chapter 290 or section 298.01 or 298.015 deleted text end .

(c) deleted text begin For a corporation, other than an S corporation, there is also a substantial
understatement of tax for any taxable year if the amount of the understatement for the
taxable year exceeds the lesser of:
deleted text end

deleted text begin (1) ten percent of the tax required to be shown on the return for the taxable year
(or, if greater, $10,000); or
deleted text end

deleted text begin (2) $10,000,000.
deleted text end

deleted text begin (d) deleted text end The term "understatement" means the excess of the amount of the tax required
to be shown on the return for the period, over the amount of the tax imposed that is
shown on the return. The excess must be determined without regard to items to which
subdivision 27 applies. The amount of the understatement shall be reduced by that part of
the understatement that is attributable to the tax treatment of any item by the taxpayer if
(1) there is or was substantial authority for the treatment, or (2)(i) any item with respect to
which the relevant facts affecting the item's tax treatment are adequately disclosed in the
return or in a statement attached to the return and (ii) there is a reasonable basis for the tax
treatment of the item. The exception for substantial authority under clause (1) does not
apply to positions listed by the Secretary of the Treasury under section 6662(d)(3) of the
Internal Revenue Code. deleted text begin A corporation does not have a reasonable basis for its tax treatment
of an item attributable to a multiple-party financing transaction if the treatment does not
clearly reflect the income of the corporation within the meaning of section 6662(d)(2)(B)
of the Internal Revenue Code. deleted text end The special rules in cases involving tax shelters provided in
section 6662(d)(2)(C) of the Internal Revenue Code shall apply and shall apply to a tax
shelter the principal purpose of which is the avoidance or evasion of state taxes.

deleted text begin (e) deleted text end new text begin (d) new text end The commissioner may abate all or any part of the addition to the tax
provided by this section on a showing by the taxpayer that there was reasonable cause for
the understatement, or part of it, and that the taxpayer acted in good faith. The additional
tax and penalty shall bear interest at the rate specified in section 270C.40 from the time
the tax should have been paid until paid.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2009.
new text end

Sec. 13.

Minnesota Statutes 2008, section 290.01, subdivision 19, 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 the federal effective dates of changes to the
Internal Revenue Code and 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.

The Internal Revenue Code of 1986, as amended through February 13, 2008, shall
be in effect for taxable years beginning after December 31, 1996 new text begin , except section 179 of the
Internal Revenue Code, as amended through February 17, 2009, applies new text end .

Except as otherwise provided, references to the Internal Revenue Code in
subdivisions 19 to 19f 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 for taxable years beginning after
December 31, 2009.
new text end

Sec. 14.

Minnesota Statutes 2008, 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 or sales and use taxes paid or accrued within the taxable
year under this chapter and the amount of taxes based on net income paid or sales and use
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 or sales and use 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 taxes based on net income 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
other than expenses or interest used in computing net interest income for the subtraction
allowed under subdivision 19b, clause (1);

(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;

(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;

(8) new text begin for taxable years beginning before January 1, 2010, new text end 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;

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

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

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

(12) for taxable years beginning after December 31, 2006, and before January 1,
2008, the amount deducted for qualified tuition and related expenses under section 222 of
the Internal Revenue Code, to the extent deducted from gross income; and

(13) for taxable years beginning after December 31, 2006, and before January 1,
2008, the amount deducted for certain expenses of elementary and secondary school
teachers under section 62(a)(2)(D) of the Internal Revenue Code, to the extent deducted
from gross income.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2009.
new text end

Sec. 15.

Minnesota Statutes 2008, 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) net 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 not deducted or not deductible pursuant to section 408(d)(8)(E)
of the Internal Revenue Code 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 over $500 allowable
as a deduction for the taxable year under section 170(a) of the Internal Revenue Code and
under the provisions of Public Law 109-1;

(7) 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;

(8) 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;

(9) in each of the five tax years immediately following the tax year in which an
addition is required under subdivision 19a, clause (7), or 19c, clause (15), in the case
of a shareholder of a corporation that is an S corporation, 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), or
subdivision 19c, clause (15), in the case of a shareholder of an S corporation, 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;

(10) job opportunity building zone income as provided under section 469.316;

(11) to the extent included in federal taxable income, the amount of compensation
paid to members of the Minnesota National Guard or other reserve components of the
United States military for active service performed in Minnesota, excluding compensation
for services performed under the Active Guard Reserve (AGR) program. For purposes of
this clause, "active service" means (i) state active service as defined in section 190.05,
subdivision 5a, clause (1); (ii) federally funded state active service as defined in section
190.05, subdivision 5b; or (iii) federal active service as defined in section 190.05,
subdivision 5c, but "active service" excludes service performed in accordance with section
190.08, subdivision 3;

(12) to the extent included in federal taxable income, the amount of compensation
paid to Minnesota residents who are members of the armed forces of the United States or
United Nations for active duty performed outside Minnesota under United States Code,
title 10, section 101(d); United States Code, title 32, section 101(12); or the authority of
the United Nations;

(13) an amount, not to exceed $10,000, equal to qualified expenses related to a
qualified donor's donation, while living, of one or more of the qualified donor's organs
to another person for human organ transplantation. For purposes of this clause, "organ"
means all or part of an individual's liver, pancreas, kidney, intestine, lung, or bone marrow;
"human organ transplantation" means the medical procedure by which transfer of a human
organ is made from the body of one person to the body of another person; "qualified
expenses" means unreimbursed expenses for both the individual and the qualified donor
for (i) travel, (ii) lodging, and (iii) lost wages net of sick pay, except that such expenses
may be subtracted under this clause only once; and "qualified donor" means the individual
or the individual's dependent, as defined in section 152 of the Internal Revenue Code. An
individual may claim the subtraction in this clause for each instance of organ donation for
transplantation during the taxable year in which the qualified expenses occur;

(14) in each of the five tax years immediately following the tax year in which an
addition is required under subdivision 19a, clause (8), or 19c, clause (16), in the case of a
shareholder of a corporation that is an S corporation, an amount equal to one-fifth of the
addition made by the taxpayer under subdivision 19a, clause (8), or 19c, clause (16), in the
case of a shareholder of a corporation that is an S corporation, 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. If the net operating loss exceeds the addition for the tax year, a
subtraction is not allowed under this clause;

(15) to the extent included in federal taxable income, compensation paid to a service
member as defined in United States Code, title 10, section 101(a)(5), for military service
as defined in the Servicemembers Civil Relief Act, Public Law 108-189, section 101(2);

(16) international economic development zone income as provided under section
469.325; deleted text begin and
deleted text end

(17) to the extent included in federal taxable income, the amount of national service
educational awards received from the National Service Trust under United States Code,
title 42, sections 12601 to 12604, for service in an approved Americorps National Service
program new text begin ; and
new text end

new text begin (18) an amount not to exceed 20 percent of the excess of (i) income derived from a
trade or business in which the taxpayer materially participates, as defined in section 469(h)
of the Internal Revenue Code, distributed by a partnership or S corporation to the taxpayer
less (ii) any losses, other than passive losses as defined in section 469 of the Internal
Revenue Code, claimed by the partner or shareholder, provided that the subtraction under
this clause may be claimed only if the entity distributing the income has employees and
tangible property located in this state 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, 2009.
new text end

Sec. 16.

Minnesota Statutes 2008, section 290.01, subdivision 19f, is amended to read:

Subd. 19f.

Basis modifications affecting gain or loss on disposition of property.

(a) For individuals, estates, and trusts, the basis of property is its adjusted basis for
federal income tax purposes except as set forth in paragraphs (f), (g), and (m). deleted text begin For
corporations, the basis of property is its adjusted basis for federal income tax purposes,
without regard to the time when the property became subject to tax under this chapter or to
whether out-of-state losses or items of tax preference with respect to the property were not
deductible under this chapter, except that the modifications to the basis for federal income
tax purposes set forth in paragraphs (b) to (j) are allowed to corporations, and the resulting
modifications to federal taxable income must be made in the year in which gain or loss
on the sale or other disposition of property is recognized.
deleted text end

(b) The basis of property shall not be reduced to reflect federal investment tax credit.

(c) The basis of property subject to the accelerated cost recovery system under
section 168 of the Internal Revenue Code shall be modified to reflect the modifications in
depreciation with respect to the property provided for in subdivision 19e. For certified
pollution control facilities for which amortization deductions were elected under section
169 of the Internal Revenue Code of 1954, the basis of the property must be increased by
the amount of the amortization deduction not previously allowed under this chapter.

(d) For property acquired before January 1, 1933, the basis for computing a gain is
the fair market value of the property as of that date. The basis for determining a loss is
the cost of the property to the taxpayer less any depreciation, amortization, or depletion,
actually sustained before that date. If the adjusted cost exceeds the fair market value of the
property, then the basis is the adjusted cost regardless of whether there is a gain or loss.

(e) The basis is reduced by the allowance for amortization of bond premium if an
election to amortize was made pursuant to Minnesota Statutes 1986, section 290.09,
subdivision 13, and the allowance could have been deducted by the taxpayer under this
chapter during the period of the taxpayer's ownership of the property.

(f) deleted text begin For assets placed in service before January 1, 1987, corporations, partnerships,
or individuals engaged in the business of mining ores other than iron ore or taconite
concentrates subject to the occupation tax under chapter 298 must use the occupation
tax basis of property used in that business.
deleted text end

deleted text begin (g) For assets placed in service before January 1, 1990, corporations, partnerships, or
individuals engaged in the business of mining iron ore or taconite concentrates subject
to the occupation tax under chapter 298 must use the occupation tax basis of property
used in that business.
deleted text end

deleted text begin (h) deleted text end In applying the provisions of sections 301(c)(3)(B), 312(f) and (g), and 316(a)(1)
of the Internal Revenue Code, the dates December 31, 1932, and January 1, 1933, shall be
substituted for February 28, 1913, and March 1, 1913, respectively.

deleted text begin (i) In applying the provisions of section 362(a) and (c) of the Internal Revenue Code,
the date December 31, 1956, shall be substituted for June 22, 1954.
deleted text end

deleted text begin (j) deleted text end new text begin (g) new text end The basis of property shall be increased by the amount of intangible drilling
costs not previously allowed due to differences between this chapter and the Internal
Revenue Code.

deleted text begin (k) The adjusted basis of any corporate partner's interest in a partnership is the same
as the adjusted basis for federal income tax purposes modified as required to reflect the
basis modifications set forth in paragraphs (b) to (j). The adjusted basis of a partnership
in which the partner is an individual, estate, or trust is the same as the adjusted basis for
federal income tax purposes modified as required to reflect the basis modifications set
forth in paragraphs (f) and (g).
deleted text end

deleted text begin (l) deleted text end new text begin (h) new text end The modifications contained in paragraphs (b) to deleted text begin (j) deleted text end new text begin (g) new text end also apply to the basis
of property that is determined by reference to the basis of the same property in the hands
of a different taxpayer or by reference to the basis of different property.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2009.
new text end

Sec. 17.

Minnesota Statutes 2008, section 290.01, subdivision 22, is amended to read:

Subd. 22.

Taxable net income.

For tax years beginning after December 31, 1986,
the term "taxable net income" means:

(1) for resident individuals the same as net income;

(2) for individuals who were not residents of Minnesota for the entire year, the same
as net income except that the tax is imposed only on the Minnesota apportioned share of
that income as determined pursuant to section 290.06, subdivision 2c, paragraph (e);

(3) for all other taxpayers, the part of net income that is allocable to Minnesota by
assignment or apportionment under one or more of sections 290.17, 290.191, 290.20,
and 290.36.

For tax years beginning before January 1, 1987, the term "taxable net income"
means the net income assignable to this state pursuant to sections 290.17 to 290.20. deleted text begin For
corporations, taxable net income is then reduced by the deductions contained in section
290.21. 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, 2009.
new text end

Sec. 18.

Minnesota Statutes 2008, section 290.01, subdivision 29, is amended to read:

Subd. 29.

Taxable income.

The term "taxable income" means deleted text begin :
deleted text end

deleted text begin (1) for individuals, estates, and trusts, the same as deleted text end taxable net income deleted text begin ; deleted text end new text begin .
new text end

deleted text begin (2) for corporations, the taxable net income less
deleted text end

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

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

deleted text begin (iii) the exemption for operating in a job opportunity building zone under section
469.317;
deleted 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, 2009.
new text end

Sec. 19.

Minnesota Statutes 2008, 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 February
13, 2008 new text begin , except section 179 of the Internal Revenue Code, as amended through February
17, 2009, applies 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. 20.

Minnesota Statutes 2008, section 290.03, is amended to read:

290.03 INCOME TAX; IMPOSITION, CLASSES OF TAXPAYERS.

An annual tax for each taxable year, computed in the manner and at the rates
hereinafter provided, is hereby imposed upon the taxable income for such year of the
following classes of taxpayers:

(1) Resident and nonresident individuals;

(2) Estates of decedents, dying domiciled within or without this state;

(3) Trusts deleted text begin (except those taxable as corporations) deleted text end however created by residents or
nonresidents or by domestic or foreign corporations.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2009.
new text end

Sec. 21.

Minnesota Statutes 2008, section 290.04, subdivision 1, is amended to read:

Subdivision 1.

Accrual.

deleted text begin The liability for the tax imposed by section 290.02 shall
arise upon the first day of the taxable year upon which a domestic corporation exercises
any of the privileges specified in section 290.02 or exists as a corporation, or on which
a foreign corporation is possessed of the privilege for the grant to it of the privilege of
transacting or for the actual transaction by it of any local business within this state during
any part of its taxable year, in corporate or organized form. deleted text end The liability for the tax
imposed by section 290.03 shall arise concurrently with the receipt or accrual of income
during the taxable year. The provisions shall in no way affect the determination of the
amount of such taxes, the time for making returns, and the time for paying such taxes.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2009.
new text end

Sec. 22.

Minnesota Statutes 2008, section 290.06, subdivision 33, is amended to read:

Subd. 33.

Bovine testing credit.

(a) An owner of cattle in Minnesota may take a
credit against the tax due under this chapter for an amount equal to: (1) for deleted text begin corporate
filers, including deleted text end shareholders of an S corporation under section 290.9725, 25 percent of
the expenses incurred during the taxable year to conduct tuberculosis testing on those
cattle; and (2) for all other filers, one-half the expenses incurred during the taxable year to
conduct tuberculosis testing on those cattle.

(b) If the amount of credit which the taxpayer is eligible to receive under this
subdivision exceeds the taxpayer's tax liability under this chapter, the commissioner of
revenue shall refund the excess to the taxpayer.

(c) The amount necessary to pay claims for the refund provided in this subdivision is
appropriated from the general fund to the commissioner of revenue.

(d) Expenses incurred in a calendar year in which tuberculosis testing of cattle in
Minnesota is not federally required are not allowed in claiming the credit under paragraph
(a).

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2009.
new text end

Sec. 23.

Minnesota Statutes 2008, section 290.06, is amended by adding a subdivision
to read:

new text begin Subd. 36. new text end

new text begin Job growth investment tax credit. new text end

new text begin A taxpayer is allowed a credit
as determined under section 116J.8737 against the tax imposed by this chapter.
Notwithstanding the certification eligibility issued by the commissioner of the Department
of Employment and Economic Development under section 116J.8737, the commissioner
may utilize any audit and examination powers under chapter 270C or 289A to the extent
necessary to verify that the taxpayer is eligible for the credit and to assess for the amount
of any improperly claimed credit.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2009, for taxable years
beginning after December 31, 2008, and only applies to investments made after the
qualified regional investment fund or qualified individual investor has been certified by
the commissioner of employment and economic development.
new text end

Sec. 24.

Minnesota Statutes 2008, section 290.068, subdivision 1, is amended to read:

Subdivision 1.

Credit allowed.

A deleted text begin corporation, other than a corporation treated as an
"S" corporation under section 290.9725, deleted text end new text begin taxpayer, other than a corporation not treated as an
"S" corporation, new text end is allowed a credit against the deleted text begin portion of the franchise deleted text end tax computed under
deleted text begin section 290.06 deleted text begin , subdivision 1 deleted text end , deleted text end new text begin sections 290.06 and 290.091 new text end for the taxable year equal to:

deleted text begin (a) 5 deleted text end new text begin (1) ten new text end percent of the deleted text begin first $2,000,000 of the deleted text end excess (if any) of

deleted text begin (1) deleted text end the qualified research expenses for the taxable year, over

(2) the base amount deleted text begin ; and
deleted text end

deleted text begin (b) 2.5 percent on all of such excess expenses over $2,000,000 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, 2009.
new text end

Sec. 25.

Minnesota Statutes 2008, section 290.068, subdivision 3, is amended to read:

Subd. 3.

deleted text begin Limitation; carryover deleted text end new text begin Credit refundable new text end .

deleted text begin (a)(1) The credit for the
taxable year shall not exceed the liability for tax. "Liability for tax" for purposes of this
section means the tax imposed under section 290.06, subdivision 1, for the taxable year
reduced by the sum of the nonrefundable credits allowed under this chapter.
deleted text end

deleted text begin (2) In the case of a corporation which is a partner in a partnership, the credit allowed
for the taxable year shall not exceed the lesser of the amount determined under clause (1)
for the taxable year or an amount (separately computed with respect to the corporation's
interest in the trade or business or entity) equal to the amount of tax attributable to that
portion of taxable income which is allocable or apportionable to the corporation's interest
in the trade or business or entity.
deleted text end

deleted text begin (b) deleted text end If the amount of the credit determined under this section for any taxable year
exceeds the deleted text begin limitation under clause (a), the deleted text end new text begin liability for tax, the commissioner shall refund
the new text end excess deleted text begin shall be a research credit carryover to each of the 15 succeeding taxable years.
The entire amount of the excess unused credit for the taxable year shall be carried first
to the earliest of the taxable years to which the credit may be carried and then to each
successive year to which the credit may be carried. The amount of the unused credit which
may be added under this clause shall not exceed the taxpayer's liability for tax less the
research credit for the taxable year deleted text end new text begin to the taxpayer 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, 2009.
new text end

Sec. 26.

Minnesota Statutes 2008, section 290.068, subdivision 4, is amended to read:

Subd. 4.

Partnerships.

In the case of partnerships the credit shall be allocated in
the same manner provided by deleted text begin section deleted text end new text begin sections new text end 41(f)(2) new text begin and 41(g) new text end of the Internal Revenue
Code.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2009.
new text end

Sec. 27.

Minnesota Statutes 2008, section 290.068, is amended by adding a subdivision
to read:

new text begin Subd. 7. new text end

new text begin Appropriation. new text end

new text begin An amount sufficient to pay the refunds required by this
section is appropriated to the commissioner from the general fund.
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, 2009.
new text end

Sec. 28.

Minnesota Statutes 2008, section 290.0922, subdivision 1, is amended to read:

Subdivision 1.

Imposition.

deleted text begin (a) In addition to the tax imposed by this chapter without
regard to this section, the franchise tax imposed on a corporation required to file under
section 289A.08, subdivision 3, other than a corporation treated as an "S" corporation
under section 290.9725 for the taxable year includes a tax equal to the following amounts:
deleted text end

deleted text begin If the sum of the corporation's Minnesota property, payrolls, and sales or receipts is: deleted text end						deleted text begin the tax equals: deleted text end
		deleted text begin less than deleted text end	deleted text begin $ deleted text end	deleted text begin 500,000 deleted text end		deleted text begin $ deleted text end	deleted text begin 0 deleted text end
	deleted text begin $ deleted text end	deleted text begin 500,000 to deleted text end	deleted text begin $ deleted text end	deleted text begin 999,999 deleted text end		deleted text begin $ deleted text end	deleted text begin 100 deleted text end
	deleted text begin $ deleted text end	deleted text begin 1,000,000 to deleted text end	deleted text begin $ deleted text end	deleted text begin 4,999,999 deleted text end		deleted text begin $ deleted text end	deleted text begin 300 deleted text end
	deleted text begin $ deleted text end	deleted text begin 5,000,000 to deleted text end	deleted text begin $ deleted text end	deleted text begin 9,999,999 deleted text end		deleted text begin $ deleted text end	deleted text begin 1,000 deleted text end
	deleted text begin $ deleted text end	deleted text begin 10,000,000 to deleted text end	deleted text begin $ deleted text end	deleted text begin 19,999,999 deleted text end		deleted text begin $ deleted text end	deleted text begin 2,000 deleted text end
	deleted text begin $ deleted text end	deleted text begin 20,000,000 or more deleted text end				deleted text begin $ deleted text end	deleted text begin 5,000 deleted text end

deleted text begin (b) deleted text end A tax is imposed for each taxable year on a corporation required to file a return
under section 289A.12, subdivision 3, that is treated as an "S" corporation under section
290.9725 and on a partnership required to file a return under section 289A.12, subdivision
3, other than a partnership that derives over 80 percent of its income from farming. The
tax imposed under this paragraph is due on or before the due date of the return for the
taxpayer due under section 289A.18, subdivision 1. The commissioner shall prescribe
the return to be used for payment of this tax. The tax under this paragraph is equal to
the following amounts:

If the sum of the S corporation's or partnership's Minnesota property, payrolls, and sales or receipts is:							the tax equals:
		less than	$	500,000		$	0
	$	500,000 to	$	999,999		$	100
	$	1,000,000 to	$	4,999,999		$	300
	$	5,000,000 to	$	9,999,999		$	1,000
	$	10,000,000 to	$	19,999,999		$	2,000
	$	20,000,000 or more				$	5,000

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2009.
new text end

Sec. 29.

Minnesota Statutes 2008, section 290.095, subdivision 3, is amended to read:

Subd. 3.

Carryover.

(a) A net operating loss incurred in a taxable year: (i)
beginning after December 31, 1986, shall be a net operating loss carryover to each of the
15 taxable years following the taxable year of such loss; (ii) beginning before January 1,
1987, shall be a net operating loss carryover to each of the five taxable years following the
taxable year of such loss subject to the provisions of Minnesota Statutes 1986, section
290.095; and (iii) beginning before January 1, 1987, shall be a net operating loss carryback
to each of the three taxable years preceding the loss year subject to the provisions of
Minnesota Statutes 1986, section 290.095.

(b) The entire amount of the net operating loss for any taxable year shall be carried to
the earliest of the taxable years to which such loss may be carried. The portion of such loss
which shall be carried to each of the other taxable years shall be the excess, if any, of the
amount of such loss over the sum of the taxable net income, adjusted by the modifications
specified in subdivision 4, for each of the taxable years to which such loss may be carried.

deleted text begin (c) Where a corporation apportions its income under the provisions of section
290.191, the net operating loss deduction incurred in any taxable year shall be allowed
to the extent of the apportionment ratio of the loss year.
deleted text end

deleted text begin (d) The provisions of sections 381, 382, and 384 of the Internal Revenue Code apply
to carryovers in certain corporate acquisitions and special limitations on net operating loss
carryovers. The limitation amount determined under section 382 shall be applied to net
income, before apportionment, in each post change year to which a loss is carried.
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, 2009.
new text end

Sec. 30.

Minnesota Statutes 2008, section 290.17, subdivision 1, is amended to read:

Subdivision 1.

Scope of allocation rules.

(a) The income of resident individuals
is not subject to allocation outside this state. The allocation rules apply to nonresident
individuals, estates, trusts, nonresident partners of partnerships, new text begin and new text end nonresident
shareholders of corporations treated as "S" corporations under section 290.9725 deleted text begin , and all
corporations not having such an election in effect deleted text end . If a partnership deleted text begin or corporation deleted text end would
not otherwise be subject to the allocation rules, but conducts a trade or business that is part
of a unitary business involving another legal entity that is subject to the allocation rules,
the partnership or corporation is subject to the allocation rules.

(b) Expenses, losses, and other deductions (referred to collectively in this paragraph
as "deductions") must be allocated along with the item or class of gross income to which
they are definitely related for purposes of assignment under this section or apportionment
under section 290.191, 290.20, or 290.36. Deductions definitely related to any item of
gross income assigned under subdivision 2, paragraph (e), are assigned to the taxpayer's
domicile.

(c) In the case of an individual who is a resident for only part of a taxable year,
the individual's income, gains, losses, and deductions from the distributive share of a
partnership, S corporation, trust, or estate are not subject to allocation outside this state
to the extent of the distributive share multiplied by a ratio, the numerator of which is
the number of days the individual was a resident of this state during the tax year of the
partnership, S corporation, trust, or estate, and the denominator of which is the number of
days in the taxable year of the partnership, S corporation, trust, or estate.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2009.
new text end

Sec. 31.

Minnesota Statutes 2008, 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, deleted text begin a corporation, deleted text end a partnership new text begin , new text end 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) deleted text begin 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.
deleted text end

deleted text begin (f) deleted text end The net income and apportionment factors under section 290.191 or 290.20 of
deleted text begin foreign corporations and other deleted text end 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 deleted text begin foreign corporation or other deleted text end 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

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 (f) 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 deleted text begin domestic
corporations or other deleted text end domestic entities other than foreign operating corporations that are
determined to be part of the unitary business pursuant to this subdivision, notwithstanding
that deleted text begin foreign corporations or other deleted text end foreign entities might be included in the unitary business.

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

deleted text begin (j) deleted text end new text begin (g) new text end Each deleted text begin corporation or other deleted text end 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 (f) 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 (f) new text end in the denominators of the apportionment formula.

deleted text begin (k) 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:
deleted text end

deleted text begin (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
deleted text end

deleted text begin (2) its sales, property, and payroll included in the apportionment formula must
be prorated or accounted for separately.
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, 2009.
new text end

Sec. 32.

Minnesota Statutes 2008, section 290.191, subdivision 4, is amended to read:

Subd. 4.

Apportionment formula for certain mail order businesses.

If the
business of a deleted text begin corporation, deleted text end partnership deleted text begin , deleted text end or proprietorship consists exclusively of the
selling of tangible personal property and services at retail, as defined in section 297A.61,
subdivision 4, paragraph (a), in response to orders received by United States mail,
telephone, facsimile, or other electronic media, and 99 percent of the taxpayer's property
and payroll is within Minnesota, then the taxpayer may apportion net income to Minnesota
based solely upon the percentage that the sales made within this state in connection
with its 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. Property and payroll factors
are disregarded. In determining eligibility for this subdivision:

(1) the sale not in the ordinary course of business of tangible or intangible assets
used in conducting business activities must be disregarded; and

(2) property and payroll at a distribution center outside of Minnesota are disregarded
if the sole activity at the distribution center is the filling of orders, and no solicitation
of orders occurs at the distribution center.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2009.
new text end

Sec. 33.

Minnesota Statutes 2008, section 290.32, is amended to read:

290.32 TAXES FOR PART OF YEAR, COMPUTATION.

When under this chapter a taxpayer is permitted or required to make a return for a
fractional part of a year, the tax shall be computed in the same manner as if such fractional
part of a year were an entire year, except:

(1) A taxpayer who is permitted to change the basis for reporting income from a
fiscal to a calendar year shall make a separate return for the period between the close of
the taxpayer's last fiscal year and the following December 31st; if the change is from a
calendar to a fiscal year, a separate return shall be made for the period between the close
of the taxpayer's last calendar year and the date designated as the close of the fiscal year;
and if the change is from one fiscal year to another fiscal year, a separate return shall be
made for the period between the close of the former fiscal year and the date designated as
the close of the new fiscal year. deleted text begin The taxable net income, or for corporations the taxable
net income as reduced by the deductions contained in section 290.21, for any such period
shall be put on an annual basis by multiplying the amount thereof by 12 and dividing by
the number of months included in the period for which such separate return is made; and
the tax shall be that part of a tax, computed on the taxable net income put on such annual
basis which the number of months in such period bears to 12 months. deleted text end

(2) Where any of the enumerated changes in accounting period referred to in clause
(1) involve a 52-53 week fiscal year and any such change results in a short period of less
than seven days, such short period shall be added to and deemed a part of the following
taxable year. If the change results in a short period of seven or more days, but less than
359 days, the taxable net income, or for corporations the taxable net income as reduced
by the deductions contained in section 290.21, for any such period shall be placed on an
annual basis by multiplying such income by 365 and dividing the result by the same
number of days in the short period; and the tax shall be that part of a tax, computed on the
taxable net income placed on such annual basis which the number of days in such short
period bears to 365 days. Where the short period is 359 days or more, the tax shall be
computed in the same manner as if such short period were an entire year.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2009.
new text end

Sec. 34.

Minnesota Statutes 2008, section 290.36, is amended to read:

290.36 INVESTMENT COMPANIES; REPORT OF NET INCOME;
COMPUTATION OF AMOUNT OF INCOME ALLOCABLE TO STATE.

The taxable net income of investment companies shall be computed as follows:

Each investment company transacting business as such in this state shall report to
the commissioner the net income returned by the company for the taxable year to the
United States under the provisions of the Internal Revenue Code, less the credits provided
therein and subject to the adjustments required by this chapter. The commissioner shall
compute therefrom the taxable net income of the investment company by assigning to this
state that proportion of such net income, less such credits which the aggregate of the gross
payments collected by the company during the taxable year from old and new business
upon investment contracts issued by the company and held by residents of this state, bears
to the total amount of the gross payments collected during such year by the company from
such business upon investment contracts issued by the company and held by persons
residing within the state and elsewhere.

As used in this section, the term "investment company" means any person,
copartnership, new text begin or new text end association, deleted text begin or corporation, deleted text end whether local or foreign, coming within
the purview of section 54.26, and who or which is registered under the Investment
Company Act of 1940 (United States Code, title 15, section 80a-1 and following), as
amended through December 31, 1986, and who or which solicits or receives payments
to be made to itself and which issues therefor, or has issued therefor and has or shall
have outstanding so-called bonds, shares, coupons, certificates of membership, or other
evidences of obligation or agreement or pretended agreement to return to the holders or
owners thereof money or anything of value at some future date; and as to whom the
gross payments received during the taxable year in question upon outstanding investment
contracts, plus interest and dividends earned on investment contracts determined by
prorating the total dividends and interest for the taxable year in question in the same
proportion that certificate reserves as defined by the Investment Company Act of 1940, as
amended through December 31, 1986, is to total assets, shall be at least 50 percent of the
company's gross payments upon investment contracts plus gross income from all other
sources except dividends from subsidiaries for the taxable year in question. The term
"investment contract" shall mean any such so-called bonds, shares, coupons, certificates
of membership, or other evidences of obligation or agreement or pretended agreement
issued by an investment company.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2009.
new text end

Sec. 35.

Minnesota Statutes 2008, section 297A.61, subdivision 3, is amended to read:

Subd. 3.

Sale and purchase.

(a) "Sale" and "purchase" include, but are not limited
to, each of the transactions listed in this subdivision.

(b) Sale and purchase include:

(1) any transfer of title or possession, or both, of tangible personal property, whether
absolutely or conditionally, for a consideration in money or by exchange or barter; and

(2) the leasing of or the granting of a license to use or consume, for a consideration
in money or by exchange or barter, tangible personal property, other than a manufactured
home used for residential purposes for a continuous period of 30 days or more.

(c) Sale and purchase include the production, fabrication, printing, or processing of
tangible personal property for a consideration for consumers who furnish either directly or
indirectly the materials used in the production, fabrication, printing, or processing.

(d) Sale and purchase include the preparing for a consideration of food.
Notwithstanding section 297A.67, subdivision 2, taxable food includes, but is not limited
to, the following:

(1) prepared food sold by the retailer;

(2) soft drinks;

(3) candy;

(4) dietary supplements; and

(5) all food sold through vending machines.

(e) A sale and a purchase includes the furnishing for a consideration of new text begin residential
sewer services, new text end electricity, gas, water, or steam for use or consumption within this state.

(f) A sale and a purchase includes the transfer for a consideration of prewritten
computer software whether delivered electronically, by load and leave, or otherwise.

(g) A sale and a purchase includes the furnishing for a consideration of the following
services:

(1) the privilege of admission to places of amusement, recreational areas, or athletic
events, and the making available of amusement devices, tanning facilities, reducing
salons, steam baths, Turkish baths, health clubs, and spas or athletic facilities;

(2) lodging and related services by a hotel, rooming house, resort, campground,
motel, or trailer camp, including furnishing the guest of the facility with access to
telecommunication services, and the granting of any similar license to use real property
in a specific facility, other than the renting or leasing of it for a continuous period of
30 days or more under an enforceable written agreement that may not be terminated
without prior notice;

(3) nonresidential parking services, whether on a contractual, hourly, or other
periodic basis, except for parking at a meter;

(4) the granting of membership in a club, association, or other organization if:

(i) the club, association, or other organization makes available for the use of its
members sports and athletic facilities, without regard to whether a separate charge is
assessed for use of the facilities; and

(ii) use of the sports and athletic facility is not made available to the general public
on the same basis as it is made available to members.

Granting of membership means both onetime initiation fees and periodic membership
dues. Sports and athletic facilities include golf courses; tennis, racquetball, handball, and
squash courts; basketball and volleyball facilities; running tracks; exercise equipment;
swimming pools; and other similar athletic or sports facilities;

(5) delivery of aggregate materials by a third party, excluding delivery of aggregate
material used in road construction, and delivery of concrete block by a third party if
the delivery would be subject to the sales tax if provided by the seller of the concrete
block; and

(6) services as provided in this clause:

(i) laundry and dry cleaning services including cleaning, pressing, repairing, altering,
and storing clothes, linen services and supply, cleaning and blocking hats, and carpet,
drapery, upholstery, and industrial cleaning. Laundry and dry cleaning services do not
include services provided by coin operated facilities operated by the customer;

(ii) motor vehicle washing, waxing, and cleaning services, including services
provided by coin operated facilities operated by the customer, and rustproofing,
undercoating, and towing of motor vehicles;

(iii) building and residential cleaning, maintenance, and disinfecting services and
pest control and exterminating services;

(iv) detective, security, burglar, fire alarm, and armored car services; but not
including services performed within the jurisdiction they serve by off-duty licensed peace
officers as defined in section 626.84, subdivision 1, or services provided by a nonprofit
organization for monitoring and electronic surveillance of persons placed on in-home
detention pursuant to court order or under the direction of the Minnesota Department
of Corrections;

(v) pet grooming services;

(vi) lawn care, fertilizing, mowing, spraying and sprigging services; garden planting
and maintenance; tree, bush, and shrub pruning, bracing, spraying, and surgery; indoor
plant care; tree, bush, shrub, and stump removal, except when performed as part of a land
clearing contract as defined in section 297A.68, subdivision 40; and tree trimming for
public utility lines. Services performed under a construction contract for the installation of
shrubbery, plants, sod, trees, bushes, and similar items are not taxable;

(vii) massages, except when provided by a licensed health care facility or
professional or upon written referral from a licensed health care facility or professional for
treatment of illness, injury, or disease; deleted text begin and deleted text end

(viii) the furnishing of lodging, board, and care services for animals in kennels and
other similar arrangements, but excluding veterinary and horse boarding services new text begin ;
new text end

new text begin (ix) car repair services;
new text end

new text begin (x) general repair services;
new text end

new text begin (xi) legal services;
new text end

new text begin (xii) accounting, financial planning, and brokerage services;
new text end

new text begin (xiii) tattoos and body piercing;
new text end

new text begin (xiv) personal grooming and salon services, including, but not limited to, haircuts,
hair styling, and hair dyeing; hair extensions; shaving and waxing; manicures; pedicures;
facials; body wraps; and tanning services; and
new text end

new text begin (xv) funeral services new text end .

In applying the provisions of this chapter, the terms "tangible personal property"
and "retail sale" include taxable services listed in clause (6), items (i) to (vi) and (viii),
and the provision of these taxable services, unless specifically provided otherwise.
Services performed by an employee for an employer are not taxable. Services performed
by a partnership or association for another partnership or association are not taxable if
one of the entities owns or controls more than 80 percent of the voting power of the
equity interest in the other entity. Services performed between members of an affiliated
group of corporations are not taxable. For purposes of the preceding sentence, "affiliated
group of corporations" means those entities that would be classified as members of an
affiliated group as defined under United States Code, title 26, section 1504, disregarding
the exclusions in section 1504(b).

For purposes of clause (5), "road construction" means construction of (1) public
roads, (2) cartways, and (3) private roads in townships located outside of the seven-county
metropolitan area up to the point of the emergency response location sign.

(h) A sale and a purchase includes the furnishing for a consideration of tangible
personal property or taxable services by the United States or any of its agencies or
instrumentalities, or the state of Minnesota, its agencies, instrumentalities, or political
subdivisions.

(i) A sale and a purchase includes the furnishing for a consideration of
telecommunications services, ancillary services associated with telecommunication
services, cable television services, new text begin and new text end direct satellite services deleted text begin , and ring tones deleted text end .
Telecommunication services include, but are not limited to, the following services,
as defined in section 297A.669: air-to-ground radiotelephone service, mobile
telecommunication service, postpaid calling service, prepaid calling service, prepaid
wireless calling service, and private communication services. The services in this
paragraph are taxed to the extent allowed under federal law.

(j) A sale and a purchase includes the furnishing for a consideration of installation if
the installation charges would be subject to the sales tax if the installation were provided
by the seller of the item being installed.

(k) A sale and a purchase includes the rental of a vehicle by a motor vehicle dealer
to a customer when (1) the vehicle is rented by the customer for a consideration, or (2)
the motor vehicle dealer is reimbursed pursuant to a service contract as defined in section
65B.29, subdivision 1, clause (1).

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made after
December 31, 2009.
new text end

Sec. 36.

Minnesota Statutes 2008, section 297A.62, subdivision 1, is amended to read:

Subdivision 1.

Generally.

new text begin (a) new text end Except as otherwise provided in new text begin paragraph (b),
new text end subdivision 3 new text begin , new text end or in this chapter, a sales tax of 6.5 percent is imposed on the gross receipts
from retail sales as defined in section 297A.61, subdivision 4, made in this state or to a
destination in this state by a person who is required to have or voluntarily obtains a permit
under section 297A.83, subdivision 1.

new text begin (b) On or before October 1, 2009, the commissioner shall estimate the rates of tax
that, after applying the provisions of this act, results in no change in the total amount of
general fund revenues and dedicated revenues under the Minnesota Constitution, article
XI, section 15, that the state would receive during fiscal year 2011 and shall publish the
rate in the State Register. The commissioner shall estimate the rate under the Minnesota
Constitution, article XI, section 15, to proportionately adjust for the expansion of the tax
base under this act in compliance with the constitutional provision. Those respective rates
apply instead of the rate under paragraph (a) and the Minnesota Constitution, article XI,
section 15, effective for sales and purchases made after December 31, 2009.
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. 37.

Minnesota Statutes 2008, section 297A.67, subdivision 7, is amended to read:

Subd. 7.

Drugs; medical devices.

(a) Sales of the following drugs and medical
devices for human use are exempt:

(1) drugs, deleted text begin including deleted text end new text begin excluding new text end over-the-counter drugs;

(2) single-use finger-pricking devices for the extraction of blood and other single-use
devices and single-use diagnostic agents used in diagnosing, monitoring, or treating
diabetes;

deleted text begin (3) insulin and medical oxygen for human use, regardless of whether prescribed
or sold over the counter; deleted text end

deleted text begin (4) deleted text end new text begin (3) new text end prosthetic devices;

deleted text begin (5) deleted text end new text begin (4) new text end durable medical equipment for home use only;

deleted text begin (6) deleted text end new text begin (5) new text end mobility enhancing equipment; new text begin and
new text end

deleted text begin (7) prescription corrective eyeglasses; and deleted text end

deleted text begin (8) deleted text end new text begin (6) new text end kidney dialysis equipment, including repair and replacement parts.

(b) For purposes of this subdivision:

(1) "Drug" means a compound, substance, or preparation, and any component of
a compound, substance, or preparation, other than food and food ingredients, dietary
supplements, or alcoholic beverages that is:

(i) recognized in the official United States Pharmacopoeia, official Homeopathic
Pharmacopoeia of the United States, or official National Formulary, and supplement
to any of them;

(ii) intended for use in the diagnosis, cure, mitigation, treatment, or prevention
of disease; or

(iii) intended to affect the structure or any function of the body.

(2) "Durable medical equipment" means equipment, including repair and
replacement parts, but not including mobility enhancing equipment, that:

(i) can withstand repeated use;

(ii) is primarily and customarily used to serve a medical purpose;

(iii) generally is not useful to a person in the absence of illness or injury; and

(iv) is not worn in or on the body.

For purposes of this clause, "repair and replacement parts" includes all components
or attachments used in conjunction with the durable medical equipment, but does not
include repair and replacement parts which are for single patient use only.

(3) "Mobility enhancing equipment" means equipment, including repair and
replacement parts, but not including durable medical equipment, that:

(i) is primarily and customarily used to provide or increase the ability to move from
one place to another and that is appropriate for use either in a home or a motor vehicle;

(ii) is not generally used by persons with normal mobility; and

(iii) does not include any motor vehicle or equipment on a motor vehicle normally
provided by a motor vehicle manufacturer.

(4) "Over-the-counter drug" means a drug that contains a label that identifies the
product as a drug as required by Code of Federal Regulations, title 21, section 201.66. The
label must include a "drug facts" panel or a statement of the active ingredients with a list of
those ingredients contained in the compound, substance, or preparation. Over-the-counter
drugs do not include grooming and hygiene products, regardless of whether they otherwise
meet the definition. "Grooming and hygiene products" are soaps, cleaning solutions,
shampoo, toothpaste, mouthwash, antiperspirants, and suntan lotions and sunscreens.

(5) "Prescribed" and "prescription" means a direction in the form of an order,
formula, or recipe issued in any form of oral, written, electronic, or other means of
transmission by a duly licensed health care professional.

(6) "Prosthetic device" means a replacement, corrective, or supportive device,
including repair and replacement parts, worn on or in the body to:

(i) artificially replace a missing portion of the body;

(ii) prevent or correct physical deformity or malfunction; or

(iii) support a weak or deformed portion of the body.

Prosthetic device does not include corrective eyeglasses.

(7) "Kidney dialysis equipment" means equipment that:

(i) is used to remove waste products that build up in the blood when the kidneys are
not able to do so on their own; and

(ii) can withstand repeated use, including multiple use by a single patient,
notwithstanding the provisions of clause (2).

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made after
December 31, 2009.
new text end

Sec. 38.

Minnesota Statutes 2008, section 297A.68, subdivision 2, is amended to read:

Subd. 2.

Materials consumed in industrial production.

(a) Materials stored, used,
or consumed in industrial production of personal property intended to be sold ultimately at
retail are exempt, whether or not the item so used becomes an ingredient or constituent
part of the property produced. Materials that qualify for this exemption include, but
are not limited to, the following:

(1) chemicals, including chemicals used for cleaning food processing machinery
and equipment;

(2) materials, including chemicals, fuels, and electricity purchased by persons
engaged in industrial production to treat waste generated as a result of the production
process;

(3) fuels, electricity, gas, and steam used or consumed in the production process,
except that electricity, gas, or steam used for space heating, cooling, or lighting is exempt
if (i) it is in excess of the average climate control or lighting for the production area, and
(ii) it is necessary to produce that particular product;

(4) petroleum products and lubricants;

(5) packaging materials, including returnable containers used in packaging food
and beverage products;

(6) accessory tools, equipment, and other items that are separate detachable units
with an ordinary useful life of less than 12 months used in producing a direct effect upon
the product; and

(7) the following materials, tools, and equipment used in metal-casting: crucibles,
thermocouple protection sheaths and tubes, stalk tubes, refractory materials, molten metal
filters and filter boxes, degassing lances, and base blocks.

(b) This exemption does not include:

(1) machinery, equipment, implements, tools, accessories, appliances, contrivances
and furniture and fixtures, except those listed in paragraph (a), clause (6); and

(2) petroleum and special fuels used in producing or generating power for propelling
ready-mixed concrete trucks on the public highways of this state.

(c) Industrial production includes, but is not limited to, research, development,
design or production of any tangible personal property, manufacturing, processing (other
than by restaurants and consumers) of agricultural products (whether vegetable or animal),
commercial fishing, refining, smelting, reducing, brewing, distilling, printing, mining,
quarrying, lumbering, generating electricity, the production of road building materials,
and the research, development, design, or production of computer software. Industrial
production does not include painting, cleaning, repairing or similar processing of property
except as part of the original manufacturing process.

(d) Industrial production does not include:

(1) the furnishing of services listed in section 297A.61, subdivision 3, paragraph (g),
clause (6), items (i) to (vi) and (viii) new text begin to (xv) new text end ; or

(2) the transportation, transmission, or distribution of petroleum, liquefied gas,
natural gas, water, or steam, in, by, or through pipes, lines, tanks, mains, or other means of
transporting those products. For purposes of this paragraph, "transportation, transmission,
or distribution" does not include blending of petroleum or biodiesel fuel as defined
in section 239.77.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made after
December 31, 2009.
new text end

Sec. 39.

Minnesota Statutes 2008, section 297A.68, subdivision 5, is amended to read:

Subd. 5.

Capital equipment.

(a) Capital equipment is exempt. new text begin For purchases
made prior to January 1, 2010, new text end the tax must be imposed and collected as if the rate under
section 297A.62, subdivision 1, applied, and then refunded in the manner provided
in section 297A.75.

"Capital equipment" means machinery and equipment purchased or leased, and used
in this state by the purchaser or lessee primarily for manufacturing, fabricating, mining,
or refining tangible personal property to be sold ultimately at retail if the machinery
and equipment are essential to the integrated production process of manufacturing,
fabricating, mining, or refining. Capital equipment also includes machinery and
equipment used primarily to electronically transmit results retrieved by a customer of an
online computerized data retrieval system. new text begin Capital equipment also includes machinery
and equipment used primarily to produce taxable services, as defined in section 297A.61,
subdivision 3, paragraph (g), clause (6).
new text end

(b) Capital equipment includes, but is not limited to:

(1) machinery and equipment used to operate, control, or regulate the production
equipment;

(2) machinery and equipment used for research and development, design, quality
control, and testing activities;

(3) environmental control devices that are used to maintain conditions such as
temperature, humidity, light, or air pressure when those conditions are essential to and are
part of the production process;

(4) materials and supplies used to construct and install machinery or equipment;

(5) repair and replacement parts, including accessories, whether purchased as spare
parts, repair parts, or as upgrades or modifications to machinery or equipment;

(6) materials used for foundations that support machinery or equipment;

(7) materials used to construct and install special purpose buildings used in the
production process;

(8) ready-mixed concrete equipment in which the ready-mixed concrete is mixed
as part of the delivery process regardless if mounted on a chassis, repair parts for
ready-mixed concrete trucks, and leases of ready-mixed concrete trucks; and

(9) machinery or equipment used for research, development, design, or production
of computer software.

(c) Capital equipment does not include the following:

(1) motor vehicles taxed under chapter 297B;

(2) machinery or equipment used to receive or store raw materials;

(3) building materials, except for materials included in paragraph (b), clauses (6)
and (7);

(4) machinery or equipment used for nonproduction purposes, including, but not
limited to, the following: plant security, fire prevention, first aid, and hospital stations;
support operations or administration; pollution control; and plant cleaning, disposal of
scrap and waste, plant communications, space heating, cooling, lighting, or safety;

(5) farm machinery and aquaculture production equipment as defined by section
297A.61, subdivisions 12 and 13;

(6) machinery or equipment purchased and installed by a contractor as part of an
improvement to real property;

(7) machinery and equipment used by restaurants in the furnishing, preparing, or
serving of prepared foods as defined in section 297A.61, subdivision 31;

(8) machinery and equipment used to furnish the services listed in section 297A.61,
subdivision 3, paragraph (g), clause (6), items (i) to (vi) and (viii);

(9) machinery or equipment used in the transportation, transmission, or distribution
of petroleum, liquefied gas, natural gas, water, or steam, in, by, or through pipes, lines,
tanks, mains, or other means of transporting those products. This clause does not apply to
machinery or equipment used to blend petroleum or biodiesel fuel as defined in section
239.77; or

(10) any other item that is not essential to the integrated process of manufacturing,
fabricating, mining, or refining.

(d) For purposes of this subdivision:

(1) "Equipment" means independent devices or tools separate from machinery but
essential to an integrated production process, including computers and computer software,
used in operating, controlling, or regulating machinery and equipment; and any subunit or
assembly comprising a component of any machinery or accessory or attachment parts of
machinery, such as tools, dies, jigs, patterns, and molds.

(2) "Fabricating" means to make, build, create, produce, or assemble components or
property to work in a new or different manner.

(3) "Integrated production process" means a process or series of operations through
which tangible personal property is manufactured, fabricated, mined, or refined. For
purposes of this clause, (i) manufacturing begins with the removal of raw materials
from inventory and ends when the last process prior to loading for shipment has been
completed; (ii) fabricating begins with the removal from storage or inventory of the
property to be assembled, processed, altered, or modified and ends with the creation
or production of the new or changed product; (iii) mining begins with the removal of
overburden from the site of the ores, minerals, stone, peat deposit, or surface materials and
ends when the last process before stockpiling is completed; and (iv) refining begins with
the removal from inventory or storage of a natural resource and ends with the conversion
of the item to its completed form.

(4) "Machinery" means mechanical, electronic, or electrical devices, including
computers and computer software, that are purchased or constructed to be used for the
activities set forth in paragraph (a), beginning with the removal of raw materials from
inventory through completion of the product, including packaging of the product.

(5) "Machinery and equipment used for pollution control" means machinery and
equipment used solely to eliminate, prevent, or reduce pollution resulting from an activity
described in paragraph (a).

(6) "Manufacturing" means an operation or series of operations where raw materials
are changed in form, composition, or condition by machinery and equipment and which
results in the production of a new article of tangible personal property. For purposes of
this subdivision, "manufacturing" includes the generation of electricity or steam to be
sold at retail.

(7) "Mining" means the extraction of minerals, ores, stone, or peat.

(8) "Online data retrieval system" means a system whose cumulation of information
is equally available and accessible to all its customers.

(9) "Primarily" means machinery and equipment used 50 percent or more of the time
in an activity described in paragraph (a).

(10) "Refining" means the process of converting a natural resource to an intermediate
or finished product, including the treatment of water to be sold at retail.

(11) This subdivision does not apply to telecommunications equipment as
provided in subdivision 35, and does not apply to wire, cable, fiber, poles, or conduit
for telecommunications services.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made after
December 31, 2009.
new text end

Sec. 40.

Minnesota Statutes 2008, section 297A.68, subdivision 10, is amended to read:

Subd. 10.

Publications; publication materials.

Tangible personal property that
is used or consumed in producing any publication regularly issued at average intervals
not exceeding three months is exempt deleted text begin , and any such publication is exempt deleted text end . "Publication"
includes, but is not limited to, a qualified newspaper as defined by section 331A.02,
together with any supplements or enclosures. deleted text begin "Publication" does not include magazines
and periodicals sold over the counter. deleted text end Tangible personal property that is used or consumed
in producing a publication does not include machinery, equipment, implements, tools,
accessories, appliances, contrivances, furniture, and fixtures used in the publication, or
fuel, electricity, gas, or steam used for space heating or lighting.

Advertising contained in a publication is a nontaxable service and is exempt.
Persons who publish or sell newspapers are engaging in a nontaxable service with
respect to gross receipts realized from such news-gathering or news-publishing activities,
including the sale of advertising.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made after
December 31, 2009.
new text end

Sec. 41.

Minnesota Statutes 2008, section 297A.68, is amended by adding a
subdivision to read:

new text begin Subd. 42. new text end

new text begin Taxable services used in a trade or business. new text end

new text begin Purchases of taxable
services, as defined in section 297A.61, subdivision 3, paragraph (g), clause (6), items
(ix) to (xii), by a business are exempt if the purchase qualifies as an ordinary and
necessary business expense that is deductible under the Internal Revenue Code or must be
capitalized and that may be deducted under depreciation or amortization rules under the
Internal Revenue Code.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made after
December 31, 2009.
new text end

Sec. 42.

Minnesota Statutes 2008, section 297A.75, subdivision 1, is amended to read:

Subdivision 1.

Tax collected.

The tax on the gross receipts from the sale of the
following exempt items must be imposed and collected as if the sale were taxable and the
rate under section 297A.62, subdivision 1, applied. The exempt items include:

(1) capital equipment exempt under section 297A.68, subdivision 5 new text begin , and purchased
prior to January 1, 2010 new text end ;

(2) building materials for an agricultural processing facility exempt under section
297A.71, subdivision 13;

(3) building materials for mineral production facilities exempt under section
297A.71, subdivision 14;

(4) building materials for correctional facilities under section 297A.71, subdivision
3;

(5) building materials used in a residence for disabled veterans exempt under section
297A.71, subdivision 11;

(6) elevators and building materials exempt under section 297A.71, subdivision 12;

(7) building materials for the Long Lake Conservation Center exempt under section
297A.71, subdivision 17;

(8) materials, supplies, fixtures, furnishings, and equipment for a county law
enforcement and family service center under section 297A.71, subdivision 26;

(9) materials and supplies for qualified low-income housing under section 297A.71,
subdivision 23;

(10) materials, supplies, and equipment for municipal electric utility facilities under
section 297A.71, subdivision 35;

(11) equipment and materials used for the generation, transmission, and distribution
of electrical energy and an aerial camera package exempt under section 297A.68,
subdivision 37;

(12) tangible personal property and taxable services and construction materials,
supplies, and equipment exempt under section 297A.68, subdivision 41;

(13) commuter rail vehicle and repair parts under section 297A.70, subdivision
3, clause (11); and

(14) materials, supplies, and equipment for construction or improvement of projects
and facilities under section 297A.71, subdivision 40.

new text begin EFFECTIVE DATE. new text end

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

Sec. 43.

Minnesota Statutes 2008, section 297F.05, subdivision 1, is amended to read:

Subdivision 1.

Rates; cigarettes.

A tax is imposed upon the sale of cigarettes in
this state, upon having cigarettes in possession in this state with intent to sell, upon any
person engaged in business as a distributor, and upon the use or storage by consumers, at
the following rates:

(1) on cigarettes weighing not more than three pounds per thousand, deleted text begin 24 deleted text end new text begin 74 new text end mills on
each such cigarette; and

(2) on cigarettes weighing more than three pounds per thousand, deleted text begin 48 deleted text end new text begin 148 new text end mills on
each such cigarette.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective January 1, 2010.
new text end

Sec. 44.

new text begin [297I.23] MINNESOTA BUSINESS INVESTMENT COMPANY
CREDIT.
new text end

new text begin (a) A participating investor as defined under section 116J.665, subdivision 1,
is allowed a credit against the tax imposed in this chapter equal to 80 percent of the
participating investor's investment of designated capital in a Minnesota business
investment company. Beginning January 1, 2010, a participating investor may claim
the credit as follows:
new text end

new text begin (1) in tax year 2010, an amount equal to 20 percent of the participating investor's
investment of designated capital;
new text end

new text begin (2) in tax year 2011, an amount equal to 20 percent of the participating investor's
investment of designated capital;
new text end

new text begin (3) in tax year 2012, an amount equal to 20 percent of the participating investor's
investment of designated capital; and
new text end

new text begin (4) in tax year 2013, an amount equal to 20 percent of the participating investor's
investment of designated capital.
new text end

new text begin (b) The credit for any taxable year must not exceed the liability for tax under this
chapter for the taxable year. If the amount of the credit determined under this section
for any taxable year exceeds the liability for tax under this chapter, the excess is an
investment tax credit carryover to future taxable years without limitation. Credits may be
used in connection with both final payments and prepayments of a participating investor's
state premium tax liability.
new text end

new text begin (c) A participating investor claiming a credit under this section is not required to pay
any additional retaliatory tax levied as a result of claiming the credit.
new text end

new text begin (d) A participating investor is not required to reduce the amount of tax pursuant to
the state premium tax liability included by the participating investor in connection with
ratemaking for any insurance contract written in this state because of a reduction in the
participating investor's tax liability based on the tax credit allowed under this section.
new text end

new text begin (e) If the taxes paid by a participating investor with respect to its state premium
tax liability constitute a credit against any other tax that is imposed by this state, the
participating investor's credit against the other tax shall not be reduced by virtue of the
reduction in the participating investor's tax liability based on the tax credit allowed
under this section.
new text end

new text begin (f) Final decertification of a Minnesota business investment company under section
116J.665 may result in the disallowance and the recapture of the credit allowed under this
section. The amount to be disallowed and recaptured must be assessed as follows:
new text end

new text begin (1) decertification of a Minnesota business investment company within two years of
its allocation date and prior to meeting the requirements of section 116J.665, subdivision
5, paragraph (a), clause (1), shall result in the disallowance of all of the credits allowed
under this section;
new text end

new text begin (2) decertification of a Minnesota business investment company that has already met
the requirements of section 116J.665, subdivision 5, paragraph (a), clause (1), shall not
cause the disallowance of any credits allowed under this section nor the recapture of any
portion of the credits that was previously taken.
new text end

new text begin (g) A participating investor must not transfer, agree to transfer, sell, or agree to
sell the credit under this section until 180 days from the date on which the participating
investor invested designated capital. After 180 days from the date of investment, a
participating investor, or subsequent transferee, may transfer credits based upon rules
adopted by the department to facilitate such transfers. Any transfer or sale of the credits
does not affect the time schedule for claiming the credit. Any tax credits recaptured
under this section remain the liability of the participating investor that actually applied
the credit towards its tax liability.
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, 2009.
new text end

Sec. 45. new text begin FLOOR STOCKS TAX.
new text end

new text begin Subdivision 1. new text end

new text begin Cigarettes. new text end

new text begin (a) A floor stocks cigarette sales tax is imposed on every
person engaged in the business in this state as a distributor, retailer, subjobber, vendor,
manufacturer, or manufacturer's representative of cigarettes, on the stamped cigarettes and
unaffixed stamps in the person's possession or under the person's control at 12:01 a.m. on
January 1, 2010. The tax is imposed at the rate of $1 per pack of 20 cigarettes. For packs
of cigarettes with other than 20 cigarettes, the tax shall be adjusted proportionally.
new text end

new text begin (b) Each distributor, by February 15, 2010, shall file a return with the commissioner,
in the form the commissioner prescribes, showing the stamped cigarettes and unaffixed
stamps on hand at 12:01 a.m. on January 1, 2010, and the amount of tax due on the
cigarettes and unaffixed stamps. The tax imposed by this section is due and payable by
February 1, 2010, and after that date bears interest at the rate of one percent per month.
new text end

new text begin (c) Each retailer, subjobber, vendor, manufacturer, or manufacturer's representative,
by February 15, 2010, shall file a return with the commissioner, in the form the
commissioner prescribes, showing the cigarettes on hand at 12:01 a.m. on January 1,
2010, and the amount of tax due on the cigarettes. The tax imposed by this section
is due and payable by February 1, 2010, and after that date bears interest at the rate of
one percent per month.
new text end

new text begin Subd. 2. new text end

new text begin Audit and enforcement. new text end

new text begin The tax imposed by this section is subject to
the audit, assessment, penalty, and collection provisions applicable to the taxes imposed
under Minnesota Statutes, chapter 297F. The commissioner may require a distributor to
receive and maintain copies of floor stocks tax returns filed by all persons requesting
a credit for returned cigarettes.
new text end

new text begin Subd. 3. new text end

new text begin Deposit of revenues. new text end

new text begin The revenue from the tax imposed under this
section shall be deposited by the commissioner in the state treasury and credited to the
general fund.
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. 46. new text begin ADJUSTMENT OF CIGARETTE SALES TAX.
new text end

new text begin Notwithstanding the provisions of Minnesota Statutes, section 297F.25, the
commissioner of revenue shall adjust the cigarette sales tax rate under Minnesota Statutes,
section 297F.25, effective January 1, 2010, to reflect the estimated effect on the average
weighted retail price of cigarettes of the imposition of the increased cigarette taxes under
section 43.
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. 47. new text begin REPEALER.
new text end

new text begin Minnesota Statutes 2008, sections 289A.08, subdivision 3; 289A.19, subdivision
2; 289A.26; 290.01, subdivisions 5, 5a, 6b, 19c, 19d, and 19e; 290.014, subdivision 5;
290.02; 290.06, subdivisions 1, 24, and 27; 290.0921, subdivisions 1, 2, 3, 3a, 4, 6, 7, and
8; 290.21, subdivisions 1 and 4; 290.34, subdivisions 1 and 2; 290.371, subdivisions 1,
2, 3, and 4; 290.432; 297A.67, subdivisions 8, 9, 10, 13, 13a, 14, 16, 17, 18, 19, 21, 27,
and 29; 297A.70, subdivisions 10 and 12; 298.01, subdivisions 3, 3a, 3b, 4, 4a, 4b, 4c, 5,
and 6; and 298.17, new text end new text begin are repealed.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin The provisions of this section relating to income, corporate
franchise, and mining taxation are effective for taxable years beginning after December
31, 2009. The provisions of this section relating to sales and use taxation are effective
for sales and purchases made after December 31, 2009.
new text end