HF 3200

1st Engrossment - 85th Legislature (2007 - 2008) Posted on 12/15/2009 12:00am

A bill for an act
relating to taxation; conforming to certain changes made to the Internal
Revenue Code; providing for additions for certain tuition expenses and teachers'
expenses; requiring withholding by contractors for certain payments; temporarily
modifying the indexing of income tax brackets; assigning certain income of
nonresidents to this state; requiring a report; amending Minnesota Statutes 2006,
sections 289A.02, subdivision 7; 289A.12, subdivision 4; 290.01, subdivision
19a; 290.06, subdivision 2c; 290.17, subdivision 2; 290.92, by adding a
subdivision; 291.005, subdivision 1; Minnesota Statutes 2007 Supplement,
sections 290.01, subdivisions 19, 31; 290A.03, subdivision 15.

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

Section 1.

Minnesota Statutes 2006, section 289A.02, subdivision 7, is amended to
read:

Subd. 7.

Internal Revenue Code.

Unless specifically defined otherwise, "Internal
Revenue Code" means the Internal Revenue Code of 1986, as amended through deleted text begin May 18,
2006 deleted text end new text begin February 13, 2008 new text end .

new text begin EFFECTIVE DATE. new text end

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

Sec. 2.

Minnesota Statutes 2006, section 289A.12, subdivision 4, is amended to read:

Subd. 4.

Returns by persons, corporations, cooperatives, governmental entities,
or school districts.

new text begin (a) new text end The commissioner may by notice and demand require to the
extent required by section 6041 of the Internal Revenue Code, a person, corporation,
or cooperative, the state of Minnesota and its political subdivisions, and a city, county,
and school district in Minnesota, making payments in the regular course of a trade or
business during the taxable year to any person or corporation of $600 or more on account
of rents or royalties, or of $10 or more on account of interest, or $10 or more on account
of dividends or patronage dividends, or $600 or more on account of either wages, salaries,
commissions, fees, prizes, awards, pensions, annuities, or any other fixed or determinable
gains, profits or income, not otherwise reportable under section 289A.09, subdivision 2, or
on account of earnings of $10 or more distributed to its members by savings associations
or credit unions chartered under the laws of this state or the United States, (1) to file with
the commissioner a return (except in cases where a valid agreement to participate in the
combined federal and state information reporting system has been entered into, and the
return is filed only with the commissioner of internal revenue under the applicable filing
and informational reporting requirements of the Internal Revenue Code) with respect to
the payments in excess of the amounts named, giving the names and addresses of the
persons to whom the payments were made, the amounts paid to each, and (2) to make
a return with respect to the total number of payments and total amount of payments,
for each category of income named, which were in excess of the amounts named. This
subdivision does not apply to the payment of interest or dividends to a person who was a
nonresident of Minnesota for the entire year.

new text begin (b) For payments for which a return is covered by paragraph (a), regardless of
whether the commissioner has required filing under paragraph (a), the payor must file a
copy of the return with the commissioner if:
new text end

new text begin (i) the return is for a payment made to a Minnesota resident, to a recipient with a
Minnesota address, or for activity occurring in the state of Minnesota; and
new text end

new text begin (ii) the payment is for wages, salaries, or other compensation for services provided.
The commissioner may require this information to be filed in electronic or another form
that the commissioner determines is appropriate, notwithstanding the provisions of
paragraph (c).
new text end

new text begin (c) new text end A person, corporation, or cooperative required to file returns under this
subdivision must file the returns on magnetic media if magnetic media was used to satisfy
the federal reporting requirement under section 6011(e) of the Internal Revenue Code,
unless the person establishes to the satisfaction of the commissioner that compliance with
this requirement would be an undue hardship.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for forms required to be filed by
federal law after December 31, 2009.
new text end

Sec. 3.

Minnesota Statutes 2007 Supplement, 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 deleted text begin May 18, 2006 deleted text end new text begin February
13, 2008 new text end , shall be in effect for taxable years beginning after December 31, 1996 deleted text begin , and
before January 1, 2006, and for taxable years beginning after December 31, 2006. The
Internal Revenue Code of 1986, as amended through December 31, 2006, is in effect for
taxable years beginning after December 31, 2005, and before January 1, 2007 deleted 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, 2006.
new text end

Sec. 4.

Minnesota Statutes 2006, 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) 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; deleted text begin and
deleted text end

(10) the exclusion allowed under section 139A of the Internal Revenue Code for
federal subsidies for prescription drug plans deleted text begin . deleted text end new text begin ;
new text end

new text begin (11) 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
new text end

new text begin (12) 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 end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2006.
new text end

Sec. 5.

Minnesota Statutes 2007 Supplement, section 290.01, subdivision 31, is
amended to read:

Subd. 31.

Internal Revenue Code.

Unless specifically defined otherwise, deleted text begin for
taxable years beginning before January 1, 2006, and after December 31, 2006, deleted text end "Internal
Revenue Code" means the Internal Revenue Code of 1986, as amended through deleted text begin May 18,
2006; and for taxable years beginning after December 31, 2005, and before January 1,
2007, "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended
through December 31, 2006 deleted text end new text begin February 13, 2008 new text end .

new text begin EFFECTIVE DATE. new text end

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

Sec. 6.

Minnesota Statutes 2006, section 290.06, subdivision 2c, is amended to read:

Subd. 2c.

Schedules of rates for individuals, estates, and trusts.

(a) The income
taxes imposed by this chapter upon married individuals filing joint returns and surviving
spouses as defined in section 2(a) of the Internal Revenue Code must be computed by
applying to their taxable net income the following schedule of rates:

(1) On the first $25,680, 5.35 percent;

(2) On all over $25,680, but not over $102,030, 7.05 percent;

(3) On all over $102,030, 7.85 percent.

Married individuals filing separate returns, estates, and trusts must compute their
income tax by applying the above rates to their taxable income, except that the income
brackets will be one-half of the above amounts.

(b) The income taxes imposed by this chapter upon unmarried individuals must be
computed by applying to taxable net income the following schedule of rates:

(1) On the first $17,570, 5.35 percent;

(2) On all over $17,570, but not over $57,710, 7.05 percent;

(3) On all over $57,710, 7.85 percent.

(c) The income taxes imposed by this chapter upon unmarried individuals qualifying
as a head of household as defined in section 2(b) of the Internal Revenue Code must be
computed by applying to taxable net income the following schedule of rates:

(1) On the first $21,630, 5.35 percent;

(2) On all over $21,630, but not over $86,910, 7.05 percent;

(3) On all over $86,910, 7.85 percent.

(d) In lieu of a tax computed according to the rates set forth in this subdivision, the
tax of any individual taxpayer whose taxable net income for the taxable year is less than
an amount determined by the commissioner must be computed in accordance with tables
prepared and issued by the commissioner of revenue based on income brackets of not
more than $100. The amount of tax for each bracket shall be computed at the rates set
forth in this subdivision, provided that the commissioner may disregard a fractional part of
a dollar unless it amounts to 50 cents or more, in which case it may be increased to $1.

(e) An individual who is not a Minnesota resident for the entire year must compute
the individual's Minnesota income tax as provided in this subdivision. After the
application of the nonrefundable credits provided in this chapter, the tax liability must
then be multiplied by a fraction in which:

(1) the numerator is the individual's Minnesota source federal adjusted gross income
as defined in section 62 of the Internal Revenue Code and increased by the additions
required under section 290.01, subdivision 19a, clauses (1), (5), (6), (7), (8), deleted text begin and deleted text end (9),
new text begin (11), and (12) new text end and reduced by the Minnesota assignable portion of the subtraction for
United States government interest under section 290.01, subdivision 19b, clause (1),
and the subtractions under section 290.01, subdivision 19b, clauses (9), (10), (14), (15),
and (16), after applying the allocation and assignability provisions of section 290.081,
clause (a), or 290.17; and

(2) the denominator is the individual's federal adjusted gross income as defined in
section 62 of the Internal Revenue Code of 1986, increased by the amounts specified in
section 290.01, subdivision 19a, clauses (1), (5), (6), (7), (8), deleted text begin and deleted text end (9), new text begin (11), and (12) new text end and
reduced by the amounts specified in section 290.01, subdivision 19b, clauses (1), (9),
(10), (14), (15), and (16).

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2006.
new text end

Sec. 7.

Minnesota Statutes 2006, section 290.17, subdivision 2, is amended to read:

Subd. 2.

Income not derived from conduct of a trade or business.

The income of
a taxpayer subject to the allocation rules that is not derived from the conduct of a trade or
business must be assigned in accordance with paragraphs (a) to (f):

(a)(1) Subject to paragraphs (a)(2) deleted text begin , deleted text end new text begin and new text end (a)(3), deleted text begin and (a)(4), deleted text end income from wages as
defined in section 3401(a) and (f) of the Internal Revenue Code is assigned to this state if,
and to the extent that, the work of the employee is performed within it; all other income
from such sources is treated as income from sources without this state.

Severance pay shall be considered income from labor or personal or professional
services.

(2) In the case of an individual who is a nonresident of Minnesota and who is an
athlete or entertainer, income from compensation for labor or personal services performed
within this state shall be determined in the following manner:

(i) The amount of income to be assigned to Minnesota for an individual who is a
nonresident salaried athletic team employee shall be determined by using a fraction in
which the denominator contains the total number of days in which the individual is under
a duty to perform for the employer, and the numerator is the total number of those days
spent in Minnesota. For purposes of this paragraph, off-season training activities, unless
conducted at the team's facilities as part of a team imposed program, are not included in
the total number of duty days. Bonuses earned as a result of play during the regular season
or for participation in championship, play-off, or all-star games must be allocated under
the formula. Signing bonuses are not subject to allocation under the formula if they are
not conditional on playing any games for the team, are payable separately from any other
compensation, and are nonrefundable; and

(ii) The amount of income to be assigned to Minnesota for an individual who is a
nonresident, and who is an athlete or entertainer not listed in clause (i), for that person's
athletic or entertainment performance in Minnesota shall be determined by assigning to
this state all income from performances or athletic contests in this state.

(3) For purposes of this section, amounts received by a nonresident as "retirement
income" as defined in section (b)(1) of the State Income Taxation of Pension Income
Act, Public Law 104-95, are not considered income derived from carrying on a trade
or business or from wages or other compensation for work an employee performed in
Minnesota, and are not taxable under this chapter.

deleted text begin (4) Wages, otherwise assigned to this state under clause (1) and not qualifying under
clause (3), are not taxable under this chapter if the following conditions are met:
deleted text end

deleted text begin (i) the recipient was not a resident of this state for any part of the taxable year in
which the wages were received; and
deleted text end

deleted text begin (ii) the wages are for work performed while the recipient was a resident of this state.
deleted text end

(b) Income or gains from tangible property located in this state that is not employed
in the business of the recipient of the income or gains must be assigned to this state.

(c) Income or gains from intangible personal property not employed in the business
of the recipient of the income or gains must be assigned to this state if the recipient of the
income or gains is a resident of this state or is a resident trust or estate.

Gain on the sale of a partnership interest is allocable to this state in the ratio of the
original cost of partnership tangible property in this state to the original cost of partnership
tangible property everywhere, determined at the time of the sale. If more than 50 percent
of the value of the partnership's assets consists of intangibles, gain or loss from the sale
of the partnership interest is allocated to this state in accordance with the sales factor of
the partnership for its first full tax period immediately preceding the tax period of the
partnership during which the partnership interest was sold.

Gain on the sale of goodwill or income from a covenant not to compete that is
connected with a business operating all or partially in Minnesota is allocated to this state
to the extent that the income from the business in the year preceding the year of sale was
assignable to Minnesota under subdivision 3.

When an employer pays an employee for a covenant not to compete, the income
allocated to this state is in the ratio of the employee's service in Minnesota in the calendar
year preceding leaving the employment of the employer over the total services performed
by the employee for the employer in that year.

(d) Income from winnings on a bet made by an individual while in Minnesota is
assigned to this state. In this paragraph, "bet" has the meaning given in section 609.75,
subdivision 2, as limited by section 609.75, subdivision 3, clauses (1), (2), and (3).

(e) All items of gross income not covered in paragraphs (a) to (d) and not part of the
taxpayer's income from a trade or business shall be assigned to the taxpayer's domicile.

(f) For the purposes of this section, working as an employee shall not be considered
to be conducting a trade or business.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2007.
new text end

Sec. 8.

Minnesota Statutes 2006, section 290.92, is amended by adding a subdivision
to read:

new text begin Subd. 31. new text end

new text begin Payments to persons who are not employees. new text end

new text begin (a) For purposes of this
subdivision, "contractor" means a person carrying on a trade or business described in
industry code numbers 23 through 238990 of the North American Industry Classification
System.
new text end

new text begin (b) A contractor or a third-party bulk filer acting on behalf of a contractor, who
makes payments to an individual, carrying on a trade or business described in paragraph
(a) as a sole proprietorship, must deduct and withhold two percent of the payment as
Minnesota withholding tax when the amount the contractor paid to that individual during
the calendar year exceeds $600.
new text end

new text begin (c) A payment subject to withholding under this subdivision must be treated as if
the payment were a wage paid by an employer to an employee. The requirements in the
definitions of "employee" and "employer" in subdivision 1 relating to geographic location
apply in determining whether withholding tax applies under this subdivision, but without
regard to whether the contractor or the individual otherwise satisfy the definition of an
employer or an employee. Each recipient of a payment subject to withholding under this
subdivision must furnish the contractor with a statement of the recipient's name, address,
and Social Security account number.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for payments made after December
31, 2008.
new text end

Sec. 9.

Minnesota Statutes 2007 Supplement, section 290A.03, subdivision 15, is
amended to read:

Subd. 15.

Internal Revenue Code.

deleted text begin For taxable years beginning before January 1,
2006, and after December 31, 2006, deleted text end "Internal Revenue Code" means the Internal Revenue
Code of 1986, as amended through deleted text begin May 18, 2006; and for taxable years beginning after
December 31, 2005, and before January 1, 2007, "Internal Revenue Code" means the
Internal Revenue Code of 1986, as amended through December 31, 2006 deleted text end new text begin February 13,
2008 new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for property tax refunds based on
property taxes payable on or after December 31, 2007, and rent paid on or after December
31, 2006.
new text end

Sec. 10.

Minnesota Statutes 2006, section 291.005, subdivision 1, is amended to read:

Subdivision 1.

Scope.

Unless the context otherwise clearly requires, the following
terms used in this chapter shall have the following meanings:

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

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

(3) "Personal representative" means the executor, administrator or other person
appointed by the court to administer and dispose of the property of the decedent. If there
is no executor, administrator or other person appointed, qualified, and acting within this
state, then any person in actual or constructive possession of any property having a situs in
this state which is included in the federal gross estate of the decedent shall be deemed
to be a personal representative to the extent of the property and the Minnesota estate tax
due with respect to the property.

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

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

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

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

(8) "Internal Revenue Code" means the United States Internal Revenue Code of
1986, as amended through deleted text begin May 18, 2006 deleted text end new text begin February 13, 2008 new text end .

(9) "Minnesota adjusted taxable estate" means federal adjusted taxable estate as
defined by section 2011(b)(3) of the Internal Revenue Code, increased by the amount of
deduction for state death taxes allowed under section 2058 of the Internal Revenue Code.

new text begin EFFECTIVE DATE. new text end

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

Sec. 11. new text begin AUDIT AND REPORT TO LEGISLATURE.
new text end

new text begin The commissioner must conduct a random sample audit of withholdings under
Minnesota Statutes, section 290.92, subdivision 31, and returns associated with those
withholdings. The commissioner must report on the findings of the audit to the committees
of the senate and house of representatives with jurisdiction over taxes, in compliance with
Minnesota Statutes, sections 3.195 and 3.197, no later than February 14, 2011. The report
must also include information on the number and amount of payments received, and on
the types of contractors making payments, grouped by specialty skills definitions provided
in the North American Industry Classification System.
new text end

Sec. 12. new text begin INDEXING FOR TAX BRACKETS; TAX YEARS 2009 and 2010.
new text end

new text begin (a) Notwithstanding the provisions of Minnesota Statutes, section 290.06,
subdivision 2d, the commissioner of revenue shall adjust each individual income tax rate
bracket as provided in paragraphs (b) and (c) for taxable years beginning after December
31, 2008, and before January 1, 2011. The commissioner of revenue shall construct the
withholding tables for taxable years beginning after December 31, 2008, and before
January 1, 2011, to incorporate the adjustments provided in paragraphs (b) and (c).
new text end

new text begin (b) For taxable years beginning after December 31, 2008, and before January 1,
2010, the commissioner of revenue shall first calculate the percentage adjustment of the
brackets from the 2000 base year to 2009 in the manner as provided in Minnesota Statutes,
section 290.06, subdivision 2d. The commissioner shall then reduce the percentage
adjustment, but not below the percentage adjustment used for taxable years beginning
after December 31, 2007, and before January 1, 2009, so that the net impact of this act
on the revenues to the state from the individual income and the corporate franchise taxes
under Minnesota Statutes, chapter 290, for fiscal years 2008 and 2009, after the rounding
of the brackets as provided in this paragraph, is zero. The commissioner shall adjust the
brackets by the resulting percentage. The rate applicable to any rate bracket must not be
changed. The dollar amounts setting forth the tax must be adjusted to reflect the changes
in the rate brackets. The rate brackets as adjusted must be rounded to the nearest $10
amount. If the rate bracket ends in $5, it must be rounded up to the nearest $10 amount.
The determination of the commissioner under this section is not a "rule" and is not subject
to the Administrative Procedure Act in Minnesota Statutes, chapter 14. No later than
December 15, 2008, the commissioner shall announce the specific percentage that will be
used to adjust the tax rate brackets under this paragraph.
new text end

new text begin (c) For taxable years beginning after December 31, 2009, and before January 1, 2011,
the commissioner of revenue shall first calculate the percentage adjustment of the brackets
from the 2000 base year to 2010 in the manner as provided in Minnesota Statutes, section
290.06, subdivision 2d. The commissioner shall then increase the percentage adjustment
so that the net impact of this act on the revenues to the state from the individual income and
the corporate franchise taxes under Minnesota Statutes, chapter 290, for fiscal years 2010
and 2011, after the rounding of the brackets as provided in this paragraph, is zero. The
commissioner shall adjust the brackets by the resulting percentage. The rate applicable to
any rate bracket must not be changed. The dollar amounts setting forth the tax must be
adjusted to reflect the changes in the rate brackets. The rate brackets as adjusted must be
rounded to the nearest $10 amount. If the rate bracket ends in $5, it must be rounded up
to the nearest $10 amount. The determination of the commissioner under this section is
not a "rule" and is not subject to the Administrative Procedure Act in Minnesota Statutes,
chapter 14. No later than December 15, 2009, the commissioner shall announce the
specific percentage that will be used to adjust the tax rate brackets under this paragraph.
new text end

new text begin (d) The adjustments under this section apply only for taxable years beginning after
December 31, 2008, and before January 1, 2011. For taxable years beginning after
December 31, 2010, the commissioner of revenue shall calculate the adjustments under
Minnesota Statutes, section 290.06, subdivision 2d, without regard to this section.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective only for taxable years beginning after
December 31, 2008, and before January 1, 2011.
new text end