Minnesota Legislature
HF 3919
as introduced - 85th Legislature (2007 - 2008) Posted on 12/15/2009 12:00am
Current Version - as introduced
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A bill for an act
relating to taxation; reducing the corporate franchise tax rate for certain
taxpayers; increasing the research credit and allowing transfer of the credit
among members of the unitary group; modifying the method of apportioning
corporate franchise tax; allowing the capital equipment sales tax exemption
at the time of purchase; amending Minnesota Statutes 2006, sections 290.06,
by adding a subdivision; 290.068, subdivisions 1, 4; 290.191, subdivision 2;
297A.68, subdivision 5; 297A.75.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
Section 1.
Minnesota Statutes 2006, section 290.06, is amended by adding a
subdivision to read:
new text begin Subd. 1b. new text end
new text begin Special corporate rate. new text end
new text begin
(a) Notwithstanding the provisions of
subdivision 1, the franchise tax imposed on a qualified corporation for the taxable year
must be computed by applying to its taxable income the rate of 8.8 percent.
new text end
new text begin
(b) For purposes of this subdivision, a "qualified corporation" is a corporation
that was certified by the commissioner of employment and economic development as
increasing the number of its full-time equivalent employees in the state of Minnesota
by at least 500 during the calendar year ending during its previous taxable year. The
commissioner of employment and economic development shall establish an application
and certification procedure to verify the required increase in employment positions and
shall notify the commissioner of each qualified corporation for each taxable year in the
manner and by the time the commissioner prescribes. A certified corporation is not a
qualified corporation for the taxable year unless its total Minnesota payroll, as defined in
section 290.191, subdivision 12, increased by the greater of (1) $12,500,000 or (2) one
percent over the amount reported in the previous taxable year.
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, 2008.
new text end
Sec. 2.
Minnesota Statutes 2006, section 290.068, subdivision 1, is amended to read:
Subdivision 1.
Credit allowed.
A corporation, other than a corporation treated as
an "S" corporation under section 290.9725, is allowed a credit against the portion of the
franchise tax computed under section 290.06, subdivision 1, for the taxable year equal todeleted text begin :deleted text end
deleted text begin (a) 5deleted text end new text begin fivenew text end percent of deleted text begin the first $2,000,000 of the excess (if any) of
deleted text end
deleted text begin (1)deleted text end the qualified research expenses for the taxable yeardeleted text begin , over
deleted text end
deleted text begin
(2) the base amount; and
deleted text end
deleted text begin (b) 2.5 percent on all of such excess expenses over $2,000,000deleted text end .
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. 3.
Minnesota Statutes 2006, section 290.068, subdivision 4, is amended to read:
Subd. 4.
deleted text begin Partnershipsdeleted text end new text begin Allocationnew text end .
new text begin (a) new text end In the case of partnershipsnew text begin and except as
provided under paragraph (b),new text end the credit shall be allocated in the same manner provided by
section 41(f)(2) of the Internal Revenue Code.
new text begin
(b) For a unitary business, as defined in section 290.17, subdivision 4, the business
may allocate or transfer the credit of any entity under this section for the taxable year to
another member of the unitary business.
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, 2007.
new text end
Sec. 4.
Minnesota Statutes 2006, section 290.191, subdivision 2, is amended to read:
Subd. 2.
Apportionment formula of general application.
(a) Except for those
trades or businesses required to use a different formula under subdivision 3 or section
290.36, and for those trades or businesses that receive permission to use some other
method under section 290.20 or under subdivision 4, a trade or business required to
apportion its net income must apportion its income to this state on the basis of the
percentage obtained by taking the sum of:
(1) the percent for the sales factor under paragraph (b) of the percentage which
the sales made within this state in connection with the trade or business during the tax
period are of the total sales wherever made in connection with the trade or business during
the tax period;
(2) the percent for the property factor under paragraph (b) of the percentage which
the total tangible property used by the taxpayer in this state in connection with the trade or
business during the tax period is of the total tangible property, wherever located, used by
the taxpayer in connection with the trade or business during the tax period; and
(3) the percent for the payroll factor under paragraph (b) of the percentage which
the taxpayer's total payrolls paid or incurred in this state or paid in respect to labor
performed in this state in connection with the trade or business during the tax period are
of the taxpayer's total payrolls paid or incurred in connection with the trade or business
during the tax period.
(b) For purposes of paragraph (a) and subdivision 3, the following percentages apply
for the taxable years specified:
| Taxable years beginning during calendar year |
Sales factor percent |
Property factor percent |
Payroll factor percent |
|||
| 2007 |
78 |
11 |
11 |
|||
| 2008 |
deleted text begin
81
deleted text end
new text begin
85 new text end |
deleted text begin
9.5
deleted text end
new text begin
7.5 new text end |
deleted text begin
9.5
deleted text end
new text begin
7.5 new text end |
|||
| 2009 |
deleted text begin
84
deleted text end
new text begin
90 new text end |
deleted text begin
8
deleted text end
new text begin
5 new text end |
deleted text begin
8
deleted text end
new text begin
5 new text end |
|||
| 2010 |
deleted text begin
87
deleted text end
new text begin
95 new text end |
deleted text begin
6.5
deleted text end
new text begin
2.5 new text end |
deleted text begin
6.5
deleted text end
new text begin
2.5 new text end |
|||
| 2011 |
deleted text begin
90 deleted text end |
deleted text begin
5 deleted text end |
deleted text begin
5 deleted text end |
|||
|
deleted text begin
2012 deleted text end |
deleted text begin
93 deleted text end |
deleted text begin
3.5 deleted text end |
deleted text begin
3.5 deleted text end |
|||
|
deleted text begin
2013 deleted text end |
deleted text begin
96 deleted text end |
deleted text begin
2 deleted text end |
deleted text begin
2 deleted text end |
|||
| deleted text begin 2014deleted text end and later calendar years |
100 |
0 |
0 |
new text begin EFFECTIVE DATE. new text end
new text begin
This section is effective for tax years beginning after
December 31, 2007.
new text end
Sec. 5.
Minnesota Statutes 2006, section 297A.68, subdivision 5, is amended to read:
Subd. 5.
Capital equipment.
(a) Capital equipment is exempt. deleted text begin 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.
deleted text end
"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.
(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
June 30, 2008.
new text end
Sec. 6.
Minnesota Statutes 2006, section 297A.75, is amended to read:
297A.75 REFUND; APPROPRIATION.
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) deleted text begin capital equipment exempt under section 297A.68, subdivision 5;
deleted text end
deleted text begin (2)deleted text end building materials for an agricultural processing facility exempt under section
297A.71, subdivision 13;
deleted text begin (3)deleted text end new text begin (2)new text end building materials for mineral production facilities exempt under section
297A.71, subdivision 14;
deleted text begin (4)deleted text end new text begin (3)new text end building materials for correctional facilities under section 297A.71,
subdivision 3;
deleted text begin (5)deleted text end new text begin (4)new text end building materials used in a residence for disabled veterans exempt under
section 297A.71, subdivision 11;
deleted text begin (6)deleted text end new text begin (5)new text end elevators and building materials exempt under section 297A.71, subdivision
12;
deleted text begin (7)deleted text end new text begin (6)new text end building materials for the Long Lake Conservation Center exempt under
section 297A.71, subdivision 17;
deleted text begin
(8) materials, supplies, fixtures, furnishings, and equipment for a county law
enforcement and family service center under section deleted text begin 297A.71, subdivision 26deleted text end ;
deleted text end
deleted text begin (9)deleted text end new text begin (7)new text end materials and supplies for qualified low-income housing under section
297A.71, subdivision 23;
deleted text begin (10)deleted text end new text begin (8)new text end materials, supplies, and equipment for municipal electric utility facilities
under section 297A.71, subdivision 35;
deleted text begin (11)deleted text end new text begin (9)new text end 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; and
deleted text begin (12)deleted text end new text begin (10)new text end tangible personal property and taxable services and construction materials,
supplies, and equipment exempt under section 297A.68, subdivision 41.
Subd. 2.
Refund; eligible persons.
Upon application on forms prescribed by the
commissioner, a refund equal to the tax paid on the gross receipts of the exempt items
must be paid to the applicant. Only the following persons may apply for the refund:
(1) for subdivision 1, clauses (1) deleted text begin to (3)deleted text end new text begin and (2)new text end , the applicant must be the purchaser;
(2) for subdivision 1, clauses deleted text begin (4), (7),deleted text end new text begin (3)new text end and deleted text begin (8)deleted text end new text begin (6)new text end , the applicant must be the
governmental subdivision;
(3) for subdivision 1, clause deleted text begin (5)deleted text end new text begin (4)new text end , the applicant must be the recipient of the
benefits provided in United States Code, title 38, chapter 21;
(4) for subdivision 1, clause deleted text begin (6)deleted text end new text begin (5)new text end , the applicant must be the owner of the
homestead property;
(5) for subdivision 1, clause deleted text begin (9)deleted text end new text begin (7)new text end , the owner of the qualified low-income housing
project;
(6) for subdivision 1, clause deleted text begin (10)deleted text end new text begin (8)new text end , the applicant must be a municipal electric
utility or a joint venture of municipal electric utilities; and
(7) for subdivision 1, clauses deleted text begin (11)deleted text end new text begin (9)new text end and deleted text begin (12)deleted text end new text begin (10)new text end , the owner of the qualifying
business.
Subd. 3.
Application.
deleted text begin (a)deleted text end The application must include sufficient information
to permit the commissioner to verify the tax paid. If the tax was paid by a contractor,
subcontractor, or builder, under subdivision 1, clause new text begin (3), new text end (4), (5), (6), (7), (8), (9), new text begin or new text end (10)deleted text begin ,
(11), or (12)deleted text end , the contractor, subcontractor, or builder must furnish to the refund applicant
a statement including the cost of the exempt items and the taxes paid on the items unless
otherwise specifically provided by this subdivision. The provisions of sections 289A.40
and 289A.50 apply to refunds under this section.
deleted text begin
(b) An applicant may not file more than two applications per calendar year for
refunds for taxes paid on capital equipment exempt under section deleted text begin 297A.68, subdivision 5deleted text end .
deleted text end
Subd. 4.
Interest.
Interest must be paid on the refund at the rate in section 270C.405
from 90 days after the refund claim is filed with the commissioner for taxes paid under
subdivision 1.
Subd. 5.
Appropriation.
The amount required to make the refunds is annually
appropriated to the commissioner.
new text begin EFFECTIVE DATE. new text end
new text begin
This section is effective for sales and purchases made after
June 30, 2008.
new text end