HF 3122

as introduced - 88th Legislature (2013 - 2014) Posted on 03/17/2014 01:59pm

A bill for an act
relating to taxation; providing tax relief; making changes to various income
and franchise, estate and gift, sales and use, and miscellaneous tax provisions;
appropriating money; amending Minnesota Statutes 2012, sections 116J.8737,
subdivisions 5, 12; 272.03, subdivision 1; 289A.02, subdivision 7; 289A.18,
subdivision 3; 290.01, subdivision 19a, by adding a subdivision; 290.067,
subdivision 2a, by adding a subdivision; 290.0671, subdivision 1; 290.0674,
subdivision 2; 291.03, by adding a subdivision; 297A.67, by adding a subdivision;
297A.68, by adding a subdivision; Minnesota Statutes 2013 Supplement, sections
289A.10, subdivision 1; 290.01, subdivisions 19, 19b, 31; 290A.03, subdivision
15; 291.005, subdivision 1; 291.03, subdivision 1; 297A.61, subdivision 3;
297A.68, subdivision 5; 297A.70, subdivisions 2, 13, 14; proposing coding
for new law in Minnesota Statutes, chapters 291; 477A; repealing Minnesota
Statutes 2012, sections 290.067, subdivisions 2, 2a, 2b; 291.03, subdivision 1b;
Minnesota Statutes 2013 Supplement, sections 291.03, subdivision 1c; 292.16;
292.17; 292.18; 292.19; 292.20; 292.21; 297A.61, subdivision 57.

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

ARTICLE 1

INCOME TAX RELIEF

Section 1.

Minnesota Statutes 2012, 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 April 14,
2011 deleted text end new text begin December 31, 2013 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 2013 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 April 14, 2011 deleted text end new text begin December
31, 2013 new text end , shall be in effect for taxable years beginning after December 31, 1996 deleted text begin , and
before January 1, 2012, and for taxable years beginning after December 31, 2012. The
Internal Revenue Code of 1986, as amended through January 3, 2013, is in effect for
taxable years beginning after December 31, 2011, and before January 1, 2013 deleted text end .

deleted text begin The provisions of sections 315 and 331 of the American Taxpayer Relief Act of
2012, Public Law 112-240, extension of increased expensing limitations and treatment
of certain real property as section 179 property and extension and modification of bonus
depreciation, are effective at the same time they become effective for federal purposes.
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 the day following final enactment
except that the changes incorporated by federal changes are effective retroactively from
the same time the changes became effective for federal purposes.
new text end

Sec. 3.

Minnesota Statutes 2012, 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:

(A) the portion of the exempt-interest dividends exempt from state taxation under
the laws of the United States; and

(B) 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, including any dividends exempt
under subitem (A), 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 deleted text begin , deleted text end new text begin or new text end sales and use deleted text begin , motor vehicle sales, or excise deleted text end taxes paid
or accrued within the taxable year under this chapter deleted text begin and deleted text end new text begin or chapter 297A, new text end the amount
of taxes based on net income paid, new text begin or new text end sales and use deleted text begin , motor vehicle sales, or excise deleted text end taxes
paid to any other state or to any province or territory of Canada, to the extent allowed as
a deduction under section 63(d) of the Internal Revenue Code, but the addition may not
be more than the amount by which the deleted text begin itemized deductions as allowed under section
63(d) of the Internal Revenue Code deleted text end new text begin state itemized deduction new text end exceeds the amount of the
standard deduction as defined in section 63(c) of the Internal Revenue Code, disregarding
the amounts allowed under sections 63(c)(1)(C) and 63(c)(1)(E) of the Internal Revenue
Code, minus any addition that would have been required under clause (21) if the taxpayer
had claimed the standard deduction. For the purpose of this paragraph, deleted text begin the disallowance of
itemized deductions under section 68 of the Internal Revenue Code of 1986, income, sales
and use, motor vehicle sales, or excise taxes are the last itemized deductions disallowed
deleted text end new text begin income and sales and use taxes are the last itemized deductions disallowed under clause
(19) or subdivision 29a, paragraph (b) new text end ;

(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;

(10) for taxable years beginning before January 1, 2013, 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 before January 1, 2010, the amount deducted for
qualified tuition and related expenses under section 222 of the Internal Revenue Code, to
the extent deducted from gross income;

(13) for taxable years beginning before January 1, 2010, 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;

(14) the additional standard deduction for property taxes payable that is allowable
under section 63(c)(1)(C) of the Internal Revenue Code;

(15) the additional standard deduction for qualified motor vehicle sales taxes
allowable under section 63(c)(1)(E) of the Internal Revenue Code;

(16) discharge of indebtedness income resulting from reacquisition of business
indebtedness and deferred under section 108(i) of the Internal Revenue Code;

(17) the amount of unemployment compensation exempt from tax under section
85(c) of the Internal Revenue Code;

(18) changes to federal taxable income attributable to a net operating loss that the
taxpayer elected to carry back for more than two years for federal purposes but for which
the losses can be carried back for only two years under section 290.095, subdivision
11, paragraph (c);

(19) to the extent included in the computation of federal taxable income in taxable
years beginning after December 31, 2010, new text begin and before January 1, 2014, new text end the amount of
disallowed itemized deductions, but the amount of disallowed itemized deductions plus
the addition required under clause (2) 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, deleted text begin disregarding the amounts allowed under sections 63(c)(1)(C) and 63(c)(1)(E) of the
Internal Revenue Code, deleted text end and reduced by any addition that would have been required under
clause (21) if the taxpayer had claimed the standard deduction:

(i) the amount of disallowed itemized deductions is equal to the lesser of:

(A) three percent of the excess of the taxpayer's federal adjusted gross income
over the applicable amount; or

(B) 80 percent of the amount of the itemized deductions otherwise allowable to the
taxpayer under the Internal Revenue Code for the taxable year;

(ii) the term "applicable amount" means $100,000, or $50,000 in the case of a
married individual filing a separate return. Each dollar amount shall be increased by
an amount equal to:

(A) such dollar amount, multiplied by

(B) the cost-of-living adjustment determined under section 1(f)(3) of the Internal
Revenue Code for the calendar year in which the taxable year begins, by substituting
"calendar year 1990" for "calendar year 1992" in subparagraph (B) thereof;

(iii) the term "itemized deductions" does not include:

(A) the deduction for medical expenses under section 213 of the Internal Revenue
Code;

(B) any deduction for investment interest as defined in section 163(d) of the Internal
Revenue Code; and

(C) the deduction under section 165(a) of the Internal Revenue Code for casualty or
theft losses described in paragraph (2) or (3) of section 165(c) of the Internal Revenue
Code or for losses described in section 165(d) of the Internal Revenue Code;

(20) to the extent included in federal taxable income in taxable years beginning after
December 31, 2010, new text begin and before January 1, 2014, new text end the amount of disallowed personal
exemptions for taxpayers with federal adjusted gross income over the threshold amount:

(i) the disallowed personal exemption amount is equal to the dollar amount of the
personal exemptions claimed by the taxpayer in the computation of federal taxable income
multiplied by the applicable percentage;

(ii) "applicable percentage" means two percentage points for each $2,500 (or
fraction thereof) by which the taxpayer's federal adjusted gross income for the taxable
year exceeds the threshold amount. In the case of a married individual filing a separate
return, the preceding sentence shall be applied by substituting "$1,250" for "$2,500." In
no event shall the applicable percentage exceed 100 percent;

(iii) the term "threshold amount" means:

(A) $150,000 in the case of a joint return or a surviving spouse;

(B) $125,000 in the case of a head of a household;

(C) $100,000 in the case of an individual who is not married and who is not a
surviving spouse or head of a household; and

(D) $75,000 in the case of a married individual filing a separate return; and

(iv) the thresholds shall be increased by an amount equal to:

(A) such dollar amount, multiplied by

(B) the cost-of-living adjustment determined under section 1(f)(3) of the Internal
Revenue Code for the calendar year in which the taxable year begins, by substituting
"calendar year 1990" for "calendar year 1992" in subparagraph (B) thereof; and

(21) to the extent deducted in the computation of federal taxable income, for taxable
years beginning after December 31, 2010, and before January 1, deleted text begin 2013 deleted text end new text begin 2014 new text end , the difference
between the standard deduction allowed under section 63(c) of the Internal Revenue Code
and the standard deduction allowed for 2011 deleted text begin and deleted text end new text begin , new text end 2012 new text begin , and 2013 new text end under the Internal
Revenue Code as amended through December 1, 2010.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for taxable years
beginning after December 31, 2012.
new text end

Sec. 4.

Minnesota Statutes 2013 Supplement, 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. No
deduction is permitted for any expense the taxpayer incurred in using the taxpayer's or
the qualifying child's vehicle to provide such transportation for a qualifying child. 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,
under the provisions of Public Law 109-1 and Public Law 111-126;

(7) 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;

(8) 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 (12), 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 (12), 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;

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

(10) 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, 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); or (ii) federally funded state active service as defined in section 190.05, subdivision
5b, but "active service" excludes service performed in accordance with section 190.08,
subdivision 3;

(11) 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 under United States Code, title 10; or the
authority of the United Nations;

(12) 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;

(13) 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 (13), 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 (13), 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;

(14) to the extent included in the federal taxable income of a nonresident of
Minnesota, 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);

(15) 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;

(16) to the extent included in federal taxable income, discharge of indebtedness
income resulting from reacquisition of business indebtedness included in federal taxable
income under section 108(i) of the Internal Revenue Code. This subtraction applies only
to the extent that the income was included in net income in a prior year as a result of the
addition under section 290.01, subdivision 19a, clause (16);

(17) the amount of the net operating loss allowed under section 290.095, subdivision
11, paragraph (c); deleted text begin and
deleted text end

(18) the amount of expenses not allowed for federal income tax purposes due
to claiming the railroad track maintenance credit under section 45G(a) of the Internal
Revenue Code deleted text begin . deleted text end new text begin ;
new text end

new text begin (19) for taxable years beginning after December 31, 2012, and before January 1,
2014, the amount of the limitation on itemized deductions under section 68 of the Internal
Revenue Code; and
new text end

new text begin (20) for taxable years beginning after December 31, 2012, and before January 1,
2014, the amount of the phaseout of personal exemptions under section 151(d) of the
Internal Revenue Code.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for taxable years
beginning after December 31, 2012.
new text end

Sec. 5.

Minnesota Statutes 2012, section 290.01, is amended by adding a subdivision
to read:

new text begin Subd. 29a. new text end

new text begin State itemized deduction. new text end

new text begin (a) "State itemized deduction" for
taxable years beginning after December 31, 2012, and before January 1, 2014, means
federal itemized deductions, as defined in section 63(d) of the Internal Revenue Code,
disregarding any limitation under section 68 of the Internal Revenue Code, and reduced
by the amount of the addition required under subdivision 19a, clause (19).
new text end

new text begin (b) "State itemized deduction" for taxable years beginning after December 31, 2013,
means federal itemized deductions, as defined in section 63(d) of the Internal Revenue
Code, after any limitation under section 68 of the Internal Revenue Code.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for taxable years
beginning after December 31, 2012.
new text end

Sec. 6.

Minnesota Statutes 2013 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, 2012, and after December 31, 2012, deleted text end "Internal
Revenue Code" means the Internal Revenue Code of 1986, as amended through deleted text begin April 14,
2011; and for taxable years beginning after December 31, 2011, and before January 1,
2013, "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended
through January 3, 2013 deleted text end new text begin December 31, 2013 new text end . Internal Revenue Code also includes any
uncodified provision in federal law that relates to provisions of the Internal Revenue
Code that are incorporated into Minnesota law. When used in this chapter, the reference
to "subtitle A, chapter 1, subchapter N, part 1, of the Internal Revenue Code" is to the
Internal Revenue Code as amended through March 18, 2010.

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 retroactively at the same
time the changes became effective for federal purposes.
new text end

Sec. 7.

Minnesota Statutes 2012, section 290.067, subdivision 2a, is amended to read:

Subd. 2a.

Income.

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

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

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

(i) all nontaxable income;

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

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

(iv) cash public assistance and relief;

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

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

(vii) workers' compensation;

(viii) nontaxable strike benefits;

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

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

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

(xii) nontaxable scholarship or fellowship grants;

(xiii) the amount of deduction allowed under section 199 of the Internal Revenue
Code;

(xiv) the amount of deduction allowed under section 220 or 223 of the Internal
Revenue Code;

(xv) the amount deleted text begin of deleted text end new text begin deducted for new text end tuition expenses deleted text begin required to be added to income
deleted text end under section deleted text begin 290.01, subdivision 19a, clause (12) deleted text end new text begin 222 of the Internal Revenue Code new text end ;

(xvi) the amount deducted for certain expenses of elementary and secondary school
teachers under section 62(a)(2)(D) of the Internal Revenue Code; and

(xvii) unemployment compensation.

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

(b) "Income" does not include:

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

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

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

(4) relief granted under chapter 290A;

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

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

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for taxable years
beginning after December 31, 2012.
new text end

Sec. 8.

Minnesota Statutes 2012, section 290.067, is amended by adding a subdivision
to read:

new text begin Subd. 2c. new text end

new text begin Dependent care credit; temporary definition. new text end

new text begin For taxable years
beginning after December 31, 2012, and before January 1, 2014, for purposes of this
section, "section 21 of the Internal Revenue Code" means section 21 of the Internal
Revenue Code as amended through June 1, 2001.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for taxable years
beginning after December 31, 2012.
new text end

Sec. 9.

Minnesota Statutes 2012, section 290.0671, subdivision 1, is amended to read:

Subdivision 1.

Credit allowed.

(a) An individual is allowed a credit against the tax
imposed by this chapter equal to a percentage of earned income. To receive a credit, a
taxpayer must be eligible for a credit under section 32 of the Internal Revenue Code.

(b) For individuals with no qualifying children, the credit equals 1.9125 percent of
the first $4,620 of earned income. The credit is reduced by 1.9125 percent of earned
income or adjusted gross income, whichever is greater, in excess of $5,770, but in no
case is the credit less than zero.

(c) For individuals with one qualifying child, the credit equals 8.5 percent of the first
$6,920 of earned income and 8.5 percent of earned income over $12,080 but less than
$13,450. The credit is reduced by 5.73 percent of earned income or adjusted gross income,
whichever is greater, in excess of $15,080, but in no case is the credit less than zero.

(d) For individuals with two or more qualifying children, the credit equals ten percent
of the first $9,720 of earned income and 20 percent of earned income over $14,860 but less
than $16,800. The credit is reduced by 10.3 percent of earned income or adjusted gross
income, whichever is greater, in excess of $17,890, but in no case is the credit less than zero.

(e) For a nonresident or part-year resident, the credit must be allocated based on the
percentage calculated under section 290.06, subdivision 2c, paragraph (e).

(f) For a person who was a resident for the entire tax year and has earned income
not subject to tax under this chapter, including income excluded under section 290.01,
subdivision 19b, clause deleted text begin (9) deleted text end new text begin (14) new text end , the credit must be allocated based on the ratio of federal
adjusted gross income reduced by the earned income not subject to tax under this chapter
over federal adjusted gross income. For purposes of this paragraph, the subtractions
for military pay under section 290.01, subdivision 19b, clauses (10) and (11), are not
considered "earned income not subject to tax under this chapter."

For the purposes of this paragraph, the exclusion of combat pay under section 112
of the Internal Revenue Code is not considered "earned income not subject to tax under
this chapter."

(g) For tax years beginning after December 31, 2007, and before December 31,
2010, new text begin and for taxable years beginning after December 31, 2017, new text end the $5,770 in paragraph
(b), the $15,080 in paragraph (c), and the $17,890 in paragraph (d), after being adjusted for
inflation under subdivision 7, are each increased by $3,000 for married taxpayers filing joint
returns. For tax years beginning after December 31, 2008, the commissioner shall annually
adjust the $3,000 by the percentage determined pursuant to the provisions of section 1(f)
of the Internal Revenue Code, except that in section 1(f)(3)(B), the word "2007" shall be
substituted for the word "1992." For 2009, the commissioner shall then determine the
percent change from the 12 months ending on August 31, 2007, to the 12 months ending on
August 31, 2008, and in each subsequent year, from the 12 months ending on August 31,
2007, to the 12 months ending on August 31 of the year preceding the taxable year. The
earned income thresholds as adjusted for inflation must be rounded to the nearest $10. If the
amount ends in $5, the amount is rounded up to the nearest $10. The determination of the
commissioner under this subdivision is not a rule under the Administrative Procedure Act.

(h) For tax years beginning after December 31, 2010, and before January 1, 2012,
new text begin and for taxable years beginning after December 31, 2012, and before January 1, 2018, new text end the
$5,770 in paragraph (b), the $15,080 in paragraph (c), and the $17,890 in paragraph (d),
after being adjusted for inflation under subdivision 7, are each increased by $5,000 for
married taxpayers filing joint returns. For tax years beginning after December 31, 2010,
and before January 1, 2012, new text begin and for taxable years beginning after December 31, 2012,
and before January 1, 2018, new text end the commissioner shall annually adjust the $5,000 by the
percentage determined pursuant to the provisions of section 1(f) of the Internal Revenue
Code, except that in section 1(f)(3)(B), the word "2008" shall be substituted for the word
"1992." For 2011, the commissioner shall then determine the percent change from the 12
months ending on August 31, 2008, to the 12 months ending on August 31, 2010 new text begin , and in
each subsequent year from the 12 months ending on August 31, 2008, to the 12 months
ending on August 31 of the year preceding the taxable year new text end . The earned income thresholds
as adjusted for inflation must be rounded to the nearest $10. If the amount ends in $5, the
amount is rounded up to the nearest $10. The determination of the commissioner under
this subdivision is not a rule under the Administrative Procedure Act.

(i) The commissioner shall construct tables showing the amount of the credit at
various income levels and make them available to taxpayers. The tables shall follow
the schedule contained in this subdivision, except that the commissioner may graduate
the transition between income brackets.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for taxable years
beginning after December 31, 2012.
new text end

Sec. 10.

Minnesota Statutes 2012, section 290.0674, subdivision 2, is amended to read:

Subd. 2.

Limitations.

(a) For claimants with income not greater than $33,500, the
maximum credit allowed for a family is $1,000 multiplied by the number of qualifying
children in kindergarten through grade 12 in the family. The maximum credit for families
with one qualifying child in kindergarten through grade 12 is reduced by $1 for each $4 of
household income over $33,500, and the maximum credit for families with two or more
qualifying children in kindergarten through grade 12 is reduced by $2 for each $4 of
household income over $33,500, but in no case is the credit less than zero.

For purposes of this section "income" has the meaning given in section deleted text begin 290.067,
subdivision 2a deleted text end new text begin 290A.03, subdivision 3, paragraphs (1) and (2) new text end . In the case of a married
claimant, a credit is not allowed unless a joint income tax return is filed.

(b) For a nonresident or part-year resident, the credit determined under subdivision 1
and the maximum credit amount in paragraph (a) must be allocated using the percentage
calculated in section 290.06, subdivision 2c, paragraph (e).

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2013.
new text end

Sec. 11.

Minnesota Statutes 2013 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,
2012, and after December 31, 2012, deleted text end "Internal Revenue Code" means the Internal Revenue
Code of 1986, as amended through deleted text begin April 14, 2011; and for taxable years beginning after
December 31, 2011, and before January 1, 2013, "Internal Revenue Code" means the
Internal Revenue Code of 1986, as amended through January 3, 2013 deleted text end new text begin December 31, 2013 new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for refunds based on
property taxes payable after December 31, 2013, and for rent paid after December 31, 2012.
new text end

Sec. 12. new text begin INDIVIDUAL INCOME TAX COLLECTION ACTION PROHIBITED.
new text end

new text begin Notwithstanding any law to the contrary, the commissioner of revenue must not
increase the amount due or decrease the refund for an individual tax return for a taxable
year beginning after December 31, 2012, and before January 1, 2014, to the extent the
amount due was understated or the refund was overstated because the taxpayer calculated
their tax or refund based on the Internal Revenue Code as amended through April 14,
2011, rather than based on the Internal Revenue Code as amended through December 31,
2013, as provided in this article.
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. 13. new text begin APPROPRIATION.
new text end

new text begin $1,101,000 is appropriated from the general fund to the commissioner of revenue
in fiscal year 2014 for the costs of administering this act. This appropriation does not
cancel, but is available until June 30, 2015. This is a onetime appropriation and does not
renew or become part of the base budget.
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. 14. new text begin REPEALER.
new text end

new text begin Minnesota Statutes 2012, section 290.067, subdivisions 2, 2a, and 2b, new text end new text begin are repealed.
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, 2013.
new text end

ARTICLE 2

SALES AND USE TAX RELIEF

Section 1.

Minnesota Statutes 2013 Supplement, 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. In applying the provisions of this
chapter, the terms "tangible personal property" and "retail sale" include the taxable
services listed in paragraph (g), 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).

(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 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 and including accommodations intermediary services provided in connection with
other services provided under this clause;

(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.
For purposes of this clause, "road construction" means construction of:

(i) public roads;

(ii) cartways; and

(iii) private roads in townships located outside of the seven-county metropolitan area
up to the point of the emergency response location sign; 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 or any organization at the direction of a county 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; and

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

(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, and pay television services. 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
59B.02, subdivision 11.

(l) A sale and a purchase includes furnishing for a consideration of specified digital
products or other digital products or granting the right for a consideration to use specified
digital products or other digital products on a temporary or permanent basis and regardless
of whether the purchaser is required to make continued payments for such right. Wherever
the term "tangible personal property" is used in this chapter, other than in subdivisions 10
and 38, the provisions also apply to specified digital products, or other digital products,
unless specifically provided otherwise or the context indicates otherwise.

deleted text begin (m) A sale and purchase includes the furnishing for consideration of the following
services:
deleted text end

deleted text begin (1) repairing and maintaining electronic and precision equipment, which service can
be deducted as a business expense under the Internal Revenue Code. This includes, but
is not limited to, repair or maintenance of electronic devices, computers and computer
peripherals, monitors, computer terminals, storage devices, and CD-ROM drives; other
office equipment such as photocopying machines, printers, and facsimile machines;
televisions, stereos, sound systems, video or digital recorders and players; two-way radios
and other communications equipment; radar and sonar equipment, scientific instruments,
microscopes, and medical equipment;
deleted text end

deleted text begin (2) repairing and maintaining commercial and industrial machinery and equipment.
For purposes of this subdivision, the following items are not commercial or industrial
machinery and equipment: (i) motor vehicles; (ii) furniture and fixtures; (iii) ships; (iv)
railroad stock; and (v) aircraft; and
deleted text end

deleted text begin (3) warehousing or storage services for tangible personal property, excluding:
deleted text end

deleted text begin (i) agricultural products;
deleted text end

deleted text begin (ii) refrigerated storage;
deleted text end

deleted text begin (iii) electronic data; and
deleted text end

deleted text begin (iv) self-storage services and storage of motor vehicles, recreational vehicles, and
boats, not eligible to be deducted as a business expense under the Internal Revenue Code.
deleted text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made after
March 31, 2014.
new text end

Sec. 2.

Minnesota Statutes 2012, section 297A.67, is amended by adding a subdivision
to read:

new text begin Subd. 33. new text end

new text begin Presentations accessed as digital audio and audiovisual works.
new text end

new text begin The charge for a live or prerecorded presentation, such as a lecture, seminar,
workshop, or course, where participants access the presentation as a digital audio
work or digital audiovisual work, and are connected to the presentation via the
Internet, telecommunications equipment or other device that transfers the presentation
electronically, is exempt if:
new text end

new text begin (1) participants and the presenter, during the time that participants access the
presentation, are able to give, receive, and discuss the presentation with each other,
although the amount of interaction and when in the presentation the interaction occurs
may be limited by the presenter; and
new text end

new text begin (2) for those presentations where participants are given the option to attend the
same presentation in person:
new text end

new text begin (i) any limitations on the amount of interaction and when it occurs during the
presentation are the same for those participants accessing the presentation electronically
as those attending in person; and
new text end

new text begin (ii) the admission to the in person presentation is not subject to tax under this chapter.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made after
June 30, 2014.
new text end

Sec. 3.

Minnesota Statutes 2013 Supplement, section 297A.68, subdivision 5, is
amended to read:

Subd. 5.

Capital equipment.

(a) Capital equipment is exempt.

"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 deleted text begin 35 deleted text end new text begin 35a new text end , 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
March 31, 2014.
new text end

Sec. 4.

Minnesota Statutes 2012, section 297A.68, is amended by adding a subdivision
to read:

new text begin Subd. 35a. new text end

new text begin Telecommunications, cable television, and direct satellite machinery
and equipment. new text end

new text begin (a) Telecommunications, cable television, and direct satellite machinery
and equipment purchased or leased for use directly by a telecommunications, cable
television, or direct satellite provider primarily in the provision of telecommunications,
cable television, or direct satellite services that are ultimately to be sold at retail are
exempt, regardless of whether purchased by the owner, a contractor, or a subcontractor.
new text end

new text begin (b) For purposes of this subdivision, "telecommunications, cable television, or direct
satellite machinery and equipment" includes, but is not limited to:
new text end

new text begin (1) machinery, equipment, and fixtures utilized in receiving, initiating,
amplifying, processing, transmitting, retransmitting, recording, switching, or monitoring
telecommunications, cable television, or direct satellite services, such as computers,
transformers, amplifiers, routers, bridges, repeaters, multiplexers, and other items
performing comparable functions;
new text end

new text begin (2) machinery, equipment, and fixtures used in the transportation of
telecommunications, cable television, or direct satellite services, such as radio transmitters
and receivers, satellite equipment, microwave equipment, and other transporting media,
but not wire, cable, fiber, poles, or conduit;
new text end

new text begin (3) ancillary machinery, equipment, and fixtures that regulate, control, protect, or
enable the machinery in clauses (1) and (2) to accomplish its intended function, such as
auxiliary power supply, test equipment, towers, heating, ventilating, and air conditioning
equipment necessary to the operation of the telecommunications, cable television, or direct
satellite equipment; and software necessary to the operation of the telecommunications,
cable television, or direct satellite equipment; and
new text end

new text begin (4) repair and replacement parts, including accessories, whether purchased as spare
parts, repair parts, or as upgrades or modifications to qualified machinery or equipment.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made after
March 31, 2014.
new text end

Sec. 5.

Minnesota Statutes 2013 Supplement, section 297A.70, subdivision 2, is
amended to read:

Subd. 2.

Sales to government.

(a) All sales, except those listed in paragraph (b),
to the following governments and political subdivisions, or to the listed agencies or
instrumentalities of governments and political subdivisions, are exempt:

(1) the United States and its agencies and instrumentalities;

(2) school districts, local governments, the University of Minnesota, state universities,
community colleges, technical colleges, state academies, the Perpich Minnesota Center for
Arts Education, and an instrumentality of a political subdivision that is accredited as an
optional/special function school by the North Central Association of Colleges and Schools;

(3) hospitals and nursing homes owned and operated by political subdivisions of
the state of tangible personal property and taxable services used at or by hospitals and
nursing homes;

deleted text begin (4) the Metropolitan Council, for its purchases of vehicles and repair parts to equip
operations provided for in section 473.4051;
deleted text end

deleted text begin (5) deleted text end new text begin (4) new text end other states or political subdivisions of other states, if the sale would be
exempt from taxation if it occurred in that state; and

deleted text begin (6) deleted text end new text begin (5) new text end public libraries, public library systems, multicounty, multitype library systems
as defined in section 134.001, county law libraries under chapter 134A, state agency
libraries, the state library under section 480.09, and the Legislative Reference Library.

(b) This exemption does not apply to the sales of the following products and services:

(1) building, construction, or reconstruction materials purchased by a contractor
or a subcontractor as a part of a lump-sum contract or similar type of contract with a
guaranteed maximum price covering both labor and materials for use in the construction,
alteration, or repair of a building or facility;

(2) construction materials purchased by tax exempt entities or their contractors to
be used in constructing buildings or facilities which will not be used principally by the
tax exempt entities;

(3) the leasing of a motor vehicle as defined in section 297B.01, subdivision 11,
except for leases entered into by the United States or its agencies or instrumentalities;

(4) lodging as defined under section 297A.61, subdivision 3, paragraph (g), clause
(2), and prepared food, candy, soft drinks, and alcoholic beverages as defined in section
297A.67, subdivision 2, except for lodging, prepared food, candy, soft drinks, and alcoholic
beverages purchased directly by the United States or its agencies or instrumentalities; or

(5) goods or services purchased by a local government as inputs to goods and
services that are generally provided by a private business and the purchases would be
taxable if made by a private business engaged in the same activity.

(c) As used in this subdivision, "school districts" means public school entities and
districts of every kind and nature organized under the laws of the state of Minnesota, and
any instrumentality of a school district, as defined in section 471.59.

(d) As used in this subdivision, "local governments" means cities, counties,
and townships new text begin , special districts as defined in section 6.465, any instrumentality of a
city, county, or township as defined in section 471.59, and any joint powers board or
organization created under section 471.59 new text end .

(e) As used in this subdivision, "goods or services generally provided by a private
business" include, but are not limited to, goods or services provided by liquor stores, gas
and electric utilities, golf courses, marinas, health and fitness centers, campgrounds, cafes,
and laundromats. "Goods or services generally provided by a private business" do not
include housing services, sewer and water services, wastewater treatment, ambulance and
other public safety services, correctional services, chore or homemaking services provided
to elderly or disabled individuals, or road and street maintenance or lighting.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made after
June 30, 2014.
new text end

Sec. 6.

Minnesota Statutes 2013 Supplement, section 297A.70, subdivision 13, is
amended to read:

Subd. 13.

Fund-raising sales by or for nonprofit groups.

(a) The following
sales by the specified organizations for fund-raising purposes are exempt, subject to the
limitations listed in paragraph (b):

(1) all sales made by a nonprofit organization that exists solely for the purpose of
providing educational or social activities for young people primarily age 18 and under;

(2) all sales made by an organization that is a senior citizen group or association of
groups if (i) in general it limits membership to persons age 55 or older; (ii) it is organized
and operated exclusively for pleasure, recreation, and other nonprofit purposes; and (iii)
no part of its net earnings inures to the benefit of any private shareholders;

(3) the sale or use of tickets or admissions to a golf tournament held in Minnesota if
the beneficiary of the tournament's net proceeds qualifies as a tax-exempt organization
under section 501(c)(3) of the Internal Revenue Code; and

(4) sales of candy sold for fund-raising purposes by a nonprofit organization that
provides educational and social activities primarily for young people age 18 and under.

(b) The exemptions listed in paragraph (a) are limited in the following manner:

(1) the exemption under paragraph (a), clauses (1) and (2), applies only deleted text begin if deleted text end new text begin to the first
$20,000 of new text end the gross annual receipts of the organization from fund-raising deleted text begin do not exceed
$10,000 deleted text end ; and

(2) the exemption under paragraph (a), clause (1), does not apply if the sales are
derived from admission charges or from activities for which the money must be deposited
with the school district treasurer under section 123B.49, subdivision 2, or be recorded in
the same manner as other revenues or expenditures of the school district under section
123B.49, subdivision 4.

(c) Sales of tangible personal property and services are exempt if the entire proceeds,
less the necessary expenses for obtaining the property or services, will be contributed to
a registered combined charitable organization described in section 43A.50, to be used
exclusively for charitable, religious, or educational purposes, and the registered combined
charitable organization has given its written permission for the sale. Sales that occur over
a period of more than 24 days per year are not exempt under this paragraph.

(d) For purposes of this subdivision, a club, association, or other organization of
elementary or secondary school students organized for the purpose of carrying on sports,
educational, or other extracurricular activities is a separate organization from the school
district or school for purposes of applying the deleted text begin $10,000 deleted text end new text begin $20,000 new text end limit.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made after
June 30, 2014.
new text end

Sec. 7.

Minnesota Statutes 2013 Supplement, section 297A.70, subdivision 14, is
amended to read:

Subd. 14.

Fund-raising events sponsored by nonprofit groups.

(a) Sales of
tangible personal property or services at, and admission charges for fund-raising events
sponsored by, a nonprofit organization are exempt if:

(1) all gross receipts are recorded as such, in accordance with generally accepted
accounting practices, on the books of the nonprofit organization; and

(2) the entire proceeds, less the necessary expenses for the event, will be used solely
and exclusively for charitable, religious, or educational purposes. Exempt sales include
the sale of prepared food, candy, and soft drinks at the fund-raising event.

(b) This exemption is limited in the following manner:

(1) it does not apply to admission charges for events involving bingo or other
gambling activities or to charges for use of amusement devices involving bingo or other
gambling activities;

(2) all gross receipts are taxable if the profits are not used solely and exclusively for
charitable, religious, or educational purposes;

(3) it does not apply unless the organization keeps a separate accounting record,
including receipts and disbursements from each fund-raising event that documents all
deductions from gross receipts with receipts and other records;

(4) it does not apply to any sale made by or in the name of a nonprofit corporation as
the active or passive agent of a person that is not a nonprofit corporation;

(5) all gross receipts are taxable if fund-raising events exceed 24 days per year;

(6) it does not apply to fund-raising events conducted on premises leased for more
than five days but less than 30 days; and

(7) it does not apply if the risk of the event is not borne by the nonprofit organization
and the benefit to the nonprofit organization is less than the total amount of the state and
local tax revenues forgone by this exemption.

(c) For purposes of this subdivision, a "nonprofit organization" means any unit of
government, corporation, society, association, foundation, or institution organized and
operated for charitable, religious, educational, civic, fraternal, and senior citizens' or
veterans' purposes, no part of the net earnings of which inures to the benefit of a private
individual.

new text begin (d) For purposes of this subdivision, "fund-raising events" means activities of
limited duration, not regularly carried out in the normal course of business, that attract
patrons for community, social, and entertainment purposes, such as auctions, bake sales,
ice cream socials, block parties, carnivals, competitions, concerts, concession stands,
craft sales, bazaars, dinners, dances, door-to-door sales of merchandise, fairs, fashion
shows, festivals, galas, special event workshops, sporting activities such as marathons and
tournaments, and similar events. Fund-raising events do not include the operation of a
regular place of business in which services are provided or sales are made during regular
hours such as bookstores, thrift stores, gift shops, restaurants, ongoing Internet sales,
regularly scheduled classes, or other activities carried out in the normal course of business.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made after
June 30, 2014.
new text end

Sec. 8. new text begin REPEALER.
new text end

new text begin Minnesota Statutes 2013 Supplement, section 297A.61, subdivision 57, new text end new text begin is repealed.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made after
March 31, 2014.
new text end

ARTICLE 3

ESTATE AND GIFT TAX REFORM

Section 1.

Minnesota Statutes 2013 Supplement, section 289A.10, subdivision 1,
is amended to read:

Subdivision 1.

Return required.

In the case of a decedent who has an interest in
property with a situs in Minnesota, the personal representative must submit a Minnesota
estate tax return to the commissioner, on a form prescribed by the commissioner, if:

(1) a federal estate tax return is required to be filed; or

(2) the sum of the federal gross estate and federal adjusted taxable gifts new text begin , as defined in
section 2001(b) of the Internal Revenue Code, new text end made within three years of the date of the
decedent's death exceeds deleted text begin $1,000,000 deleted text end new text begin $1,200,000 for estates of decedents dying in 2014;
$1,400,000 for estates of decedents dying in 2015; $1,600,000 for estates of decedents
dying in 2016; $1,800,000 for estates of decedents dying in 2017; and $2,000,000 for
estates of decedents dying in 2018 and thereafter new text end .

The return must contain a computation of the Minnesota estate tax due. The return
must be signed by the personal representative.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for estates of decedents
dying after December 31, 2013.
new text end

Sec. 2.

Minnesota Statutes 2012, section 289A.18, subdivision 3, is amended to read:

Subd. 3.

Estate tax returns.

An estate tax return must be filed with the
commissioner within nine months after the decedent's death. deleted text begin Except in the case of the
estate of a decedent dying after December 31, 2009, and before December 17, 2010, then
an estate tax return must be filed with the commissioner within nine months after the
decedent's death; within the time provided by section 289A.19, subdivision 4; or before
September 20, 2011; whichever is later.
deleted 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. 3.

Minnesota Statutes 2013 Supplement, 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) "Commissioner" means the commissioner of revenue or any person to whom the
commissioner has delegated functions under this chapter.

(2) "Federal gross estate" means the gross estate of a decedent as required to be valued
and otherwise determined for federal estate tax purposes under the Internal Revenue Code.

(3) "Internal Revenue Code" means the United States Internal Revenue Code of
1986, as amended through deleted text begin January 3, 2013, but without regard to the provisions of section
2011, paragraph (f), of the Internal Revenue Code deleted text end new text begin March 1, 2014 new text end .

deleted text begin (4) "Minnesota adjusted taxable estate" means federal adjusted taxable estate as
defined by section 2011(b)(3) of the Internal Revenue Code, plus
deleted text end

deleted text begin (i) the amount of deduction for state death taxes allowed under section 2058 of the
Internal Revenue Code;
deleted text end

deleted text begin (ii) the amount of taxable gifts, as defined in section 292.16, and made by the
decedent within three years of the decedent's date of death; less
deleted text end

deleted text begin (iii)(A) the value of qualified small business property under section 291.03,
subdivision 9, and the value of qualified farm property under section 291.03, subdivision
10, or (B) $4,000,000, whichever is less.
deleted text end

deleted text begin (5) deleted text end new text begin (4) new text end "Minnesota gross estate" means the federal gross estate of a decedent after (a)
excluding therefrom any property included deleted text begin therein deleted text end new text begin in the estate new text end which has its situs outside
Minnesota, and (b) including deleted text begin therein deleted text end any property omitted from the federal gross estate
which is includable deleted text begin therein deleted text end new text begin in the estate new text end , has its situs in Minnesota, and was not disclosed
to federal taxing authorities.

deleted text begin (6) deleted text end new text begin (5) new text end "Nonresident decedent" means an individual whose domicile at the time
of death was not in Minnesota.

deleted text begin (7) deleted text end new text begin (6) new text end "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.

deleted text begin (8) deleted text end new text begin (7) new text end "Resident decedent" means an individual whose domicile at the time of
death was in Minnesota.

deleted text begin (9) deleted text end new text begin (8) new text end "Situs of property" means, with respect to:

(i) real property, the state or country in which it is located;

(ii) tangible personal property, the state or country in which it was normally kept
or located at the time of the decedent's death or for a gift of tangible personal property
within three years of death, the state or country in which it was normally kept or located
when the gift was executed; and

(iii) intangible personal property, the state or country in which the decedent was
domiciled at death or for a gift of intangible personal property within three years of death,
the state or country in which the decedent was domiciled when the gift was executed.

For a nonresident decedent with an ownership interest in a pass-through entity
with assets that include real or tangible personal property, situs of the real or tangible
personal property is determined as if the pass-through entity does not exist and the real
or tangible personal property is personally owned by the decedent. If the pass-through
entity is owned by a person or persons in addition to the decedent, ownership of the
property is attributed to the decedent in proportion to the decedent's capital ownership
share of the pass-through entity.

deleted text begin (10) deleted text end new text begin (9) new text end "Pass-through entity" includes the following:

(i) an entity electing S corporation status under section 1362 of the Internal Revenue
Code;

(ii) an entity taxed as a partnership under subchapter K of the Internal Revenue Code;

(iii) a single-member limited liability company or similar entity, regardless of
whether it is taxed as an association or is disregarded for federal income tax purposes
under Code of Federal Regulations, title 26, section 301.7701-3; or

(iv) a trust to the extent the property is includible in the decedent's federal gross estate.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for estates of decedents
dying after December 31, 2013.
new text end

Sec. 4.

new text begin [291.016] MINNESOTA TAXABLE ESTATE.
new text end

new text begin Subdivision 1. new text end

new text begin General. new text end

new text begin For purposes of the tax under this chapter, the Minnesota
taxable estate equals the federal taxable estate as provided under section 2051 of the Internal
Revenue Code, without regard to whether the estate is subject to the federal estate tax:
new text end

new text begin (1) increased by the additions under subdivision 2; and
new text end

new text begin (2) decreased by the subtraction under subdivision 3.
new text end

new text begin Subd. 2. new text end

new text begin Additions. new text end

new text begin The following amounts, to the extent deducted in computing
the federal taxable estate, must be added in computing the Minnesota taxable estate:
new text end

new text begin (1) the amount of the deduction for state death taxes allowed under section 2058 of
the Internal Revenue Code;
new text end

new text begin (2) the amount of the deduction for foreign death taxes allowed under section
2053(d) of the Internal Revenue Code; and
new text end

new text begin (3) the aggregate amount of taxable gifts as defined in section 2053 of the Internal
Revenue Code, made by the decedent within three years of the date of death. For purposes
of this clause, the amount of the addition equals the value of the gift under section 2512 of
the Internal Revenue Code and excludes any value of the gift included in the federal estate.
new text end

new text begin Subd. 3. new text end

new text begin Subtraction. new text end

new text begin (a) The value of qualified small business property under
section 291.03, subdivision 9, and the value of qualified farm property under section
291.03, subdivision 10, or the result of $5,000,000 minus the amount for the year of death
listed in paragraph (b), whichever is less, may be subtracted in computing the Minnesota
taxable estate but must not reduce the Minnesota taxable estate to less than zero.
new text end

new text begin (b) $1,200,000 for estates of decedents dying in 2014; $1,400,000 for estates of
decedents dying in 2015; $1,600,000 for estates of decedents dying in 2016; $1,800,000
for estates of decedents dying in 2017; and $2,000,000 for estates of decedents dying in
2018 and thereafter.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for estates of decedents
dying after December 31, 2013.
new text end

Sec. 5.

Minnesota Statutes 2013 Supplement, section 291.03, subdivision 1, is
amended to read:

Subdivision 1.

Tax amount.

deleted text begin (a) The tax imposed shall be an amount equal to the
proportion of the maximum credit for state death taxes computed under section 2011 of
the Internal Revenue Code, but using Minnesota adjusted taxable estate instead of federal
adjusted taxable estate, as the Minnesota gross estate bears to the value of the federal
gross estate. The tax is reduced by:
deleted text end

deleted text begin (1) the gift tax paid by the decedent under section 292.17 on gifts included in the
Minnesota adjusted taxable estate and not subtracted as qualified farm or small business
property; and
deleted text end

deleted text begin (2) any credit allowed under subdivision 1c.
deleted text end

deleted text begin (b) The tax determined under this subdivision must not be greater than the sum of
the following amounts multiplied by a fraction, the numerator of which is the Minnesota
gross estate and the denominator of which is the federal gross estate:
deleted text end

deleted text begin (1) the rates and brackets under section 2001(c) of the Internal Revenue Code
multiplied by the sum of:
deleted text end

deleted text begin (i) the taxable estate, as defined under section 2051 of the Internal Revenue Code; plus
deleted text end

deleted text begin (ii) adjusted taxable gifts, as defined in section 2001(b) of the Internal Revenue
Code; less
deleted text end

deleted text begin (iii) the lesser of (A) the sum of the value of qualified small business property
under subdivision 9, and the value of qualified farm property under subdivision 10, or
(B) $4,000,000; less
deleted text end

deleted text begin (2) the amount of tax allowed under section 2001(b)(2) of the Internal Revenue
Code; and less
deleted text end

deleted text begin (3) the federal credit allowed under section 2010 of the Internal Revenue Code.
deleted text end

deleted text begin (c) For purposes of this subdivision, "Internal Revenue Code" means the Internal
Revenue Code of 1986, as amended through December 31, 2000.
deleted text end

new text begin The tax imposed must be computed by applying to the Minnesota taxable estate the
following schedule of rates and then the resulting amount multiplied by a fraction, not
greater than one, the numerator of which is the value of the Minnesota gross estate plus
the value of gifts under section 291.016, subdivision 2, clause (3), with a Minnesota situs,
and the denominator of which is the federal gross estate plus the value of gifts under
section 291.016, subdivision 2, clause (3):
new text end

new text begin (a) For estate of decedents dying in 2014:
new text end

new text begin Amount of Minnesota Taxable Estate new text end	new text begin Rate of Tax new text end
new text begin Not over $1,200,000 new text end	new text begin None new text end
new text begin Over $1,200,000 but not over $1,400,000 new text end	new text begin nine percent of the excess over $1,200,000 new text end
new text begin Over $1,400,000 but not over $3,600,000 new text end	new text begin $18,000 plus ten percent of the excess over $1,400,000 new text end
new text begin Over $3,600,000 but not over $4,100,000 new text end	new text begin $238,000 plus 10.4 percent of the excess over $3,600,000 new text end
new text begin Over $4,100,000 but not over $5,100,000 new text end	new text begin $290,000 plus 11.2 percent of the excess over $4,100,000 new text end
new text begin Over $5,100,000 but not over $6,100,000 new text end	new text begin $402,000 plus 12 percent of the excess over $5,100,000 new text end
new text begin Over $6,100,000 but not over $7,100,000 new text end	new text begin $522,000 plus 12.8 percent of the excess over $6,100,000 new text end
new text begin Over $7,100,000 but not over $8,100,000 new text end	new text begin $650,000 plus 13.6 percent of the excess over $7,100,000 new text end
new text begin Over $8,100,000 but not over $9,100,000 new text end	new text begin $786,000 plus 14.4 percent of the excess over $8,100,000 new text end
new text begin Over $9,100,000 but not over $10,100,000 new text end	new text begin $930,000 plus 15.2 percent of the excess over $9,100,000 new text end
new text begin Over $10,100,000 new text end	new text begin $1,082,000 plus 16 percent of the excess over $10,100,000 new text end

new text begin (b) For estate of decedents dying in 2015:
new text end

new text begin Amount of Minnesota Taxable Estate new text end	new text begin Rate of Tax new text end
new text begin Not over $1,400,000 new text end	new text begin None new text end
new text begin Over $1,400,000 but not over $3,600,000 new text end	new text begin ten percent of the excess over $1,400,000 new text end
new text begin Over $3,600,000 but not over $6,100,000 new text end	new text begin $220,000 plus 12 percent of the excess over $3,600,000 new text end
new text begin Over $6,100,000 but not over $7,100,000 new text end	new text begin $520,000 plus 12.8 percent of the excess over $6,100,000 new text end
new text begin Over $7,100,000 but not over $8,100,000 new text end	new text begin $648,000 plus 13.6 percent of the excess over $7,100,000 new text end
new text begin Over $8,100,000 but not over $9,100,000 new text end	new text begin $784,000 plus 14.4 percent of the excess over $8,100,000 new text end
new text begin Over $9,100,000 but not over $10,100,000 new text end	new text begin $928,000 plus 15.2 percent of the excess over $9,100,000 new text end
new text begin Over $10,100,000 new text end	new text begin $1,080,000 plus 16 percent of the excess over $10,100,000 new text end

new text begin (c) For estate of decedents dying in 2016:
new text end

new text begin Amount of Minnesota Taxable Estate new text end	new text begin Rate of Tax new text end
new text begin Not over $1,600,000 new text end	new text begin None new text end
new text begin Over $1,600,000 but not over $2,600,000 new text end	new text begin ten percent of the excess over $1,600,000 new text end
new text begin Over $2,600,000 but not over $6,100,000 new text end	new text begin $100,000 plus 12 percent of the excess over $2,600,000 new text end
new text begin Over $6,100,000 but not over $7,100,000 new text end	new text begin $520,000 plus 12.8 percent of the excess over $6,100,000 new text end
new text begin Over $7,100,000 but not over $8,100,000 new text end	new text begin $648,000 plus 13.6 percent of the excess over $7,100,000 new text end
new text begin Over $8,100,000 but not over $9,100,000 new text end	new text begin $784,000 plus 14.4 percent of the excess over $8,100,000 new text end
new text begin Over $9,100,000 but not over $10,100,000 new text end	new text begin $928,000 plus 15.2 percent of the excess over $9,100,000 new text end
new text begin Over $10,100,000 new text end	new text begin $1,080,000 plus 16 percent of the excess over $10,100,000 new text end

new text begin (d) For estates of decedents dying in 2017:
new text end

new text begin Amount of Minnesota Taxable Estate new text end	new text begin Rate of Tax new text end
new text begin Not over $1,800,000 new text end	new text begin None new text end
new text begin Over $1,800,000 but not over $2,100,000 new text end	new text begin ten percent of the excess over $1,800,000 new text end
new text begin Over $2,100,000 but not over $5,100,000 new text end	new text begin $30,000 plus 12 percent of the excess over $2,100,000 new text end
new text begin Over $5,100,000 but not over $7,100,000 new text end	new text begin $390,000 plus 12.8 percent of the excess over $5,100,000 new text end
new text begin Over $7,100,000 but not over $8,100,000 new text end	new text begin $646,000 plus 13.6 percent of the excess over $7,100,000 new text end
new text begin Over $8,100,000 but not over $9,100,000 new text end	new text begin $782,000 plus 14.4 percent of the excess over $8,100,000 new text end
new text begin Over $9,100,000 but not over $10,100,000 new text end	new text begin $926,000 plus 15.2 percent of the excess over $9,100,000 new text end
new text begin Over $10,100,000 new text end	new text begin $1,078,000 plus 16 percent of the excess over $10,100,000 new text end

new text begin (e) For estates of decedents dying in 2018 and thereafter:
new text end

new text begin Amount of Minnesota Taxable Estate new text end	new text begin Rate of Tax new text end
new text begin Not over $2,000,000 new text end	new text begin None new text end
new text begin Over $2,000,000 but not over $2,600,000 new text end	new text begin ten percent of the excess over $2,000,000 new text end
new text begin Over $2,600,000 but not over $7,100,000 new text end	new text begin $60,000 plus 13 percent of the excess over $2,600,000 new text end
new text begin Over $7,100,000 but not over $8,100,000 new text end	new text begin $645,000 plus 13.6 percent of the excess over $7,100,000 new text end
new text begin Over $8,100,000 but not over $9,100,000 new text end	new text begin $781,000 plus 14.4 percent of the excess over $8,100,000 new text end
new text begin Over $9,100,000 but not over $10,100,000 new text end	new text begin $925,000 plus 15.2 percent of the excess over $9,100,000 new text end
new text begin Over $10,100,000 new text end	new text begin $1,077,000 plus 16 percent of the excess over $10,100,000 new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for estates of decedents
dying after December 31, 2013.
new text end

Sec. 6.

Minnesota Statutes 2012, section 291.03, is amended by adding a subdivision
to read:

new text begin Subd. 1d. new text end

new text begin Elections. new text end

new text begin (a) For the purposes of this section, the value of the Minnesota
taxable estate is determined by taking into account the deduction available under section
2056(b) of the Internal Revenue Code. An election under section 2056(b) of the Internal
Revenue Code may be made for Minnesota estate tax purposes regardless of whether the
election is made for federal estate tax purposes. The value of the gross estate includes
the value of any property in which the decedent had a qualifying income interest for life
for which an election was made under this subdivision.
new text end

new text begin (b) Except for an election made under section 2056(b) of the Internal Revenue Code,
no federal election is allowable in determining the value of the Minnesota taxable estate
unless the election is made on the federal estate tax return and the election is allowed
under federal law.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for estates of decedents
dying after December 31, 2013.
new text end

Sec. 7.

new text begin [291.031] CREDITS.
new text end

new text begin (a) The estate of a nonresident decedent that is subject to tax under this chapter on
the value of Minnesota situs property held in a pass-through entity is allowed a credit
against the tax due under this section equal to the lesser of:
new text end

new text begin (1) the amount of estate or inheritance tax paid to another state that is attributable to
the Minnesota situs property held in the pass-through entity; or
new text end

new text begin (2) the amount of tax paid under this section attributable to the Minnesota situs
property held in the pass-through entity.
new text end

new text begin (b) The amount of tax attributable to the Minnesota situs property held in the
pass-through entity must be determined by the increase in the estate or inheritance tax that
results from including the market value of the property in the estate or treating the value
as a taxable inheritance to the recipient of the property.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for estates of decedents
dying after December 31, 2013.
new text end

Sec. 8. new text begin REPEALER.
new text end

new text begin (a) new text end new text begin Minnesota Statutes 2013 Supplement, sections 292.16; 292.17; 292.18; 292.19;
292.20; and 292.21, new text end new text begin are repealed.
new text end

new text begin (b) new text end new text begin Minnesota Statutes 2012, section 291.03, subdivision 1b, new text end new text begin and new text end new text begin Minnesota Statutes
2013 Supplement, section 291.03, subdivision 1c, new text end new text begin are repealed.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin Paragraph (a) is effective retroactively for gifts made after
June 30, 2013. Paragraph (b) is effective retroactively for estates of decedents dying
after December 31, 2013.
new text end

ARTICLE 4

ANGEL INVESTMENT CREDIT

Section 1.

Minnesota Statutes 2012, section 116J.8737, subdivision 5, is amended to
read:

Subd. 5.

Credit allowed.

(a) A qualified investor or qualified fund is eligible for
a credit equal to 25 percent of the qualified investment in a qualified small business.
Investments made by a pass-through entity qualify for a credit only if the entity is a
qualified fund. The commissioner must not allocate more than deleted text begin $11,000,000 deleted text end new text begin $27,000,000
new text end in credits to qualified investors or qualified funds for taxable years beginning after
December 31, deleted text begin 2009 deleted text end new text begin 2013 new text end , and before January 1, deleted text begin 2011 deleted text end new text begin 2015 new text end , and must not allocate more
than deleted text begin $12,000,000 deleted text end new text begin $15,000,000 new text end in credits per year for taxable years beginning after
December 31, deleted text begin 2010 deleted text end new text begin 2014 new text end , and before January 1, deleted text begin 2015 deleted text end new text begin 2017 new text end . Any portion of a taxable
year's credits that is not allocated by the commissioner does not cancel and may be carried
forward to subsequent taxable years until all credits have been allocated.

(b) The commissioner may not allocate more than a total maximum amount in credits
for a taxable year to a qualified investor for the investor's cumulative qualified investments
as an individual qualified investor and as an investor in a qualified fund; for married
couples filing joint returns the maximum is $250,000, and for all other filers the maximum
is $125,000. The commissioner may not allocate more than a total of $1,000,000 in credits
over all taxable years for qualified investments in any one qualified small business.

(c) The commissioner may not allocate a credit to a qualified investor either as an
individual qualified investor or as an investor in a qualified fund if the investor receives
more than 50 percent of the investor's gross annual income from the qualified small
business in which the qualified investment is proposed. A member of the family of an
individual disqualified by this paragraph is not eligible for a credit under this section. For
a married couple filing a joint return, the limitations in this paragraph apply collectively
to the investor and spouse. For purposes of determining the ownership interest of an
investor under this paragraph, the rules under section 267(c) and 267(e) of the Internal
Revenue Code apply.

(d) Applications for tax credits for 2010 must be made available on the department's
Web site by September 1, 2010, and the department must begin accepting applications
by September 1, 2010. Applications for subsequent years must be made available by
November 1 of the preceding year.

(e) Qualified investors and qualified funds must apply to the commissioner for tax
credits. Tax credits must be allocated to qualified investors or qualified funds in the order
that the tax credit request applications are filed with the department. The commissioner
must approve or reject tax credit request applications within 15 days of receiving the
application. The investment specified in the application must be made within 60 days of
the allocation of the credits. If the investment is not made within 60 days, the credit
allocation is canceled and available for reallocation. A qualified investor or qualified fund
that fails to invest as specified in the application, within 60 days of allocation of the
credits, must notify the commissioner of the failure to invest within five business days of
the expiration of the 60-day investment period.

(f) All tax credit request applications filed with the department on the same day must
be treated as having been filed contemporaneously. If two or more qualified investors or
qualified funds file tax credit request applications on the same day, and the aggregate
amount of credit allocation claims exceeds the aggregate limit of credits under this section
or the lesser amount of credits that remain unallocated on that day, then the credits must
be allocated among the qualified investors or qualified funds who filed on that day on a
pro rata basis with respect to the amounts claimed. The pro rata allocation for any one
qualified investor or qualified fund 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 qualified investor and the denominator of which is the total of all credit allocation
claims filed on behalf of all applicants on that day, by the amount of credits that remain
unallocated on that day for the taxable year.

(g) A qualified investor or qualified fund, or a qualified small business acting on their
behalf, must notify the commissioner when an investment for which credits were allocated
has been made, and the taxable year in which the investment was made. A qualified fund
must also provide the commissioner with a statement indicating the amount invested by
each investor in the qualified fund based on each investor's share of the assets of the
qualified fund at the time of the qualified investment. After receiving notification that the
investment was made, the commissioner must issue credit certificates for the taxable year
in which the investment was made to the qualified investor or, for an investment made by
a qualified fund, to each qualified investor who is an investor in the fund. The certificate
must state that the credit is subject to revocation if the qualified investor or qualified
fund does not hold the investment in the qualified small business for at least three years,
consisting of the calendar year in which the investment was made and the two following
years. The three-year holding period does not apply if:

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

(2) 80 percent or more of the assets of the qualified small business is sold before
the end of the three-year period;

(3) the qualified small business is sold before the end of the three-year period; deleted text begin or
deleted text end

(4) the qualified small business's common stock begins trading on a public exchange
before the end of the three-year period new text begin ; or
new text end

new text begin (5) the qualified investor dies before the end of the three-year period new text end .

(h) The commissioner must notify the commissioner of revenue of credit certificates
issued under this section.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment
and applies regardless of the taxable year in which the credit was originally allowed.
new text end

Sec. 2.

Minnesota Statutes 2012, section 116J.8737, subdivision 12, is amended to read:

Subd. 12.

Sunset.

This section expires for taxable years beginning after December
31, deleted text begin 2014 deleted text end new text begin 2016 new text end , except that reporting requirements under subdivision 6 and revocation
of credits under subdivision 7 remain in effect through deleted text begin 2016 deleted text end new text begin 2018 new text end for qualified
investors and qualified funds, and through deleted text begin 2018 deleted text end new text begin 2020 new text end for qualified small businesses,
reporting requirements under subdivision 9 remain in effect through deleted text begin 2019 deleted text end new text begin 2021 new text end , and the
appropriation in subdivision 11 remains in effect through deleted text begin 2018 deleted text end new text begin 2020 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

ARTICLE 5

MISCELLANEOUS

Section 1.

Minnesota Statutes 2012, section 272.03, subdivision 1, is amended to read:

Subdivision 1.

Real property.

(a) For the purposes of taxation, "real property"
includes the land itself, rails, ties, and other track materials annexed to the land, and all
buildings, structures, and improvements or other fixtures on it, bridges of bridge companies,
and all rights and privileges belonging or appertaining to the land, and all mines, iron ore
and taconite minerals not otherwise exempt, quarries, fossils, and trees on or under it.

(b) A building or structure shall include the building or structure itself, together with
all improvements or fixtures annexed to the building or structure, which are integrated
with and of permanent benefit to the building or structure, regardless of the present use
of the building, and which cannot be removed without substantial damage to itself or to
the building or structure.

(c)(i) Real property does not include tools, implements, machinery, and equipment
attached to or installed in real property for use in the business or production activity
conducted thereon, regardless of size, weight or method of attachment, and mine shafts,
tunnels, and other underground openings used to extract ores and minerals taxed under
chapter 298 together with steel, concrete, and other materials used to support such openings.

(ii) The exclusion provided in clause (i) shall not apply to machinery and equipment
includable as real estate by paragraphs (a) and (b) even though such machinery and
equipment is used in the business or production activity conducted on the real property if
and to the extent such business or production activity consists of furnishing services or
products to other buildings or structures which are subject to taxation under this chapter.

(iii) The exclusion provided in clause (i) does not apply to the exterior shell of a
structure which constitutes walls, ceilings, roofs, or floors if the shell of the structure has
structural, insulation, or temperature control functions or provides protection from the
elements new text begin , unless the structure is primarily used in the production of biofuels, wine, beer,
distilled beverages, or dairy products new text end . Such an exterior shell is included in the definition
of real property even if it also has special functions distinct from that of a building new text begin , or if
such an exterior shell is primarily used for the storage of ingredients or materials used in
the production of biofuels, wine, beer, distilled beverages, or dairy products, or for the
storage of biofuels, wine, beer, distilled beverages, or dairy products new text end .

(d) The term real property does not include tools, implements, machinery,
equipment, poles, lines, cables, wires, conduit, and station connections which are part of a
telephone communications system, regardless of attachment to or installation in real
property and regardless of size, weight, or method of attachment or installation.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning with assessment year 2015.
new text end

Sec. 2.

new text begin [477A.18] PRODUCTION PROPERTY TRANSITION AID.
new text end

new text begin Subdivision 1. new text end

new text begin Definitions. new text end

new text begin (a) When used in this section, the following terms
have the meanings indicated in this section.
new text end

new text begin (b) "Local unit" means a home rule charter or statutory city, or a town.
new text end

new text begin (c) "Net tax capacity differential" means the positive difference, if any, by which the
local unit's net tax capacity was reduced from assessment year 2014 to assessment year
2015 due to the change in the definition of real property in section 272.03, subdivision 1,
enacted by article 5, section 1, of this act. For purposes of determining the net tax capacity
differential, any property in a job opportunity building zone under section 469.314 may
not be included when calculating a local unit's net tax capacity.
new text end

new text begin Subd. 2. new text end

new text begin Aid eligibility; payment. new text end

new text begin (a) If the net tax capacity differential of the local
unit exceeds five percent of its 2015 net tax capacity, the local unit is eligible for transition
aid computed under paragraphs (b) to (f).
new text end

new text begin (b) For aids payable in 2016, transition aid under this section for an eligible local
unit equals (1) the net tax capacity differential, times (2) the jurisdiction's tax rate for
taxes payable in 2015.
new text end

new text begin (c) For aids payable in 2017, transition aid under this section for an eligible local
unit equals 80 percent of (1) the net tax capacity differential, times (2) the jurisdiction's
tax rate for taxes payable in 2016.
new text end

new text begin (d) For aids payable in 2018, transition aid under this section for an eligible local
unit equals 60 percent of (1) the net tax capacity differential, times (2) the jurisdiction's
tax rate for taxes payable in 2017.
new text end

new text begin (e) For aids payable in 2019, transition aid under this section for an eligible local
unit equals 40 percent of (1) the net tax capacity differential, times (2) the jurisdiction's
tax rate for taxes payable in 2018.
new text end

new text begin (f) For aids payable in 2020, transition aid under this section for an eligible local
unit equals 20 percent of (1) the net tax capacity differential, times (2) the jurisdiction's
tax rate for taxes payable in 2019.
new text end

new text begin (g) No aids shall be payable under this section in 2021 and thereafter.
new text end

new text begin (h) The commissioner of revenue shall compute the amount of transition aid payable
to each local unit under this section. On or before August 1 of each year, the commissioner
shall certify the amount of transition aid computed for aids payable in the following year
for each recipient local unit. The commissioner shall pay transition aid to local units
annually at the times provided in section 477A.015.
new text end

new text begin (i) The commissioner of revenue may require counties to provide any data that the
commissioner deems necessary to administer this section.
new text end

new text begin Subd. 3. new text end

new text begin Appropriation. new text end

new text begin An amount sufficient to pay transition aid under this
section is annually appropriated to the commissioner of revenue from the general fund.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning with assessment year 2015.
new text end

Sec. 3. new text begin BUDGET RESERVE INCREASE.
new text end

new text begin By June 30, 2014, based on the February 2014 budget and economic forecast
adjusted for any revenue or expenditure changes enacted in the 2014 legislative session,
the commissioner of management and budget shall transfer the projected general fund
budgetary balance for the current biennium to the budget reserve account under Minnesota
Statutes, section 16A.152, subdivision 1a.
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