HF 3731

as introduced - 82nd Legislature (2001 - 2002) Posted on 12/15/2009 12:00am

  1.1                          A bill for an act 
  1.2             relating to taxation; imposing a special tax on gain 
  1.3             on certain sales or exchanges of franchises; proposing 
  1.4             coding for new law in Minnesota Statutes, chapter 290. 
  1.5   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.6      Section 1.  [290.097] [GAIN ON FRANCHISE INTEREST.] 
  1.7      Subdivision 1.  [IMPOSITION OF TAX.] (a) In addition to any 
  1.8   other tax under this chapter, a tax is imposed on the gain 
  1.9   realized on a qualifying sale or exchange of a franchise 
  1.10  interest, determined by applying the following schedule of rates:
  1.11     (1) on the first $20,000,000, exempt; 
  1.12     (2) on all over $20,000,000, but not over $30,000,000, 15 
  1.13  percent; 
  1.14     (3) on all over $30,000,000, but not over $40,000,000, 25 
  1.15  percent; 
  1.16     (4) on all over $40,000,000, but not over $50,000,000, 50 
  1.17  percent; and 
  1.18     (5) on all over $50,000,000, 60 percent. 
  1.19     (b) For purposes of computing tax under this subdivision, 
  1.20  if the gain on a sale or exchange of a franchise interest is 
  1.21  realized by two or more persons, the tax must be computed on the 
  1.22  sum or total gain first, and then apportioned pro rata to each 
  1.23  taxpayer. 
  1.24     Subd. 2.  [QUALIFYING SALE OR EXCHANGE.] (a) A sale or 
  1.25  exchange of a franchise interest is subject to tax under this 
  2.1   section if it meets the following requirements: 
  2.2      (1) the property sold or exchanged is a franchise, as 
  2.3   defined in section 80C.01, subdivision 4, or is a business 
  2.4   entity or all or part of the assets of a business entity, a 
  2.5   substantial part of whose operations are conducted under a 
  2.6   franchise, as defined in section 80C.01, subdivision 4, or as 
  2.7   part of a series of interrelated intermediate transactions; 
  2.8      (2) the sale or exchange is made to the person, entity, or 
  2.9   organization that granted the franchise interest or to a person 
  2.10  or entity acting on behalf of the person, entity, or 
  2.11  organization that granted the franchise interest; 
  2.12     (3) the principal business operations of the franchise 
  2.13  interest are terminated after the sale or exchange; and 
  2.14     (4) the principal location of the franchise's business 
  2.15  operations is in this state and are conducted using facilities 
  2.16  owned or financed by a unit of state or local government. 
  2.17     (b) A sale or exchange includes a payment made in return 
  2.18  for relinquishing rights under a franchise agreement or for 
  2.19  ceasing business operations under the franchise agreement or 
  2.20  under a provision of a franchise agreement permitting the 
  2.21  franchise to terminate the franchise in exchange for a payment. 
  2.22     Subd. 3.  [BASIS; LIABILITY.] (a) For purposes of 
  2.23  calculating gain under this section, basis is the basis under 
  2.24  section 1011 and related provisions of the Internal Revenue Code.
  2.25  Imposition of tax under this section has no effect on 
  2.26  calculation of basis for purposes of any other provision of this 
  2.27  chapter. 
  2.28     (b) Liability for tax applies under this section regardless 
  2.29  of whether the sale or exchange results in recognition of gain 
  2.30  or is subject to tax under the other provisions of this chapter 
  2.31  or under the Internal Revenue Code.  The amount of gain must be 
  2.32  calculated and determined without regard to any other gains or 
  2.33  losses of the taxpayer. 
  2.34     Subd. 4.  [TAXABLE YEAR.] The taxable year in which the 
  2.35  gain is recognized under this section is the taxable year in 
  2.36  which the franchise's principal business operations are 
  3.1   terminated. 
  3.2      [EFFECTIVE DATE.] This section is effective for sales and 
  3.3   exchanges made after the day following final enactment.