Minnesota Legislature
HF 386
as introduced - 88th Legislature (2013 - 2014) Posted on 02/06/2013 03:23pm
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| Introduction | Posted on 02/06/2013 |
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A bill for an act
relating to taxation; estate; clarifying the exemptions for qualified small
business and farm property; amending Minnesota Statutes 2012, section 291.03,
subdivisions 8, 9, 10, 11.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
Section 1.
Minnesota Statutes 2012, section 291.03, subdivision 8, is amended to read:
Subd. 8.
Definitions.
(a) For purposes of this section, the following terms have the
meanings given in this subdivision.
(b) "Family member" means a family member as defined in section 2032A(e)(2) of
the Internal Revenue Codenew text begin or a trust whose present beneficiaries are all family members as
defined in section 2032A(e)(2) of the Internal Revenue Codenew text end .
(c) "Qualified heir" means a family member who acquired qualified property deleted text begin from
deleted text end new text begin upon the death ofnew text end the decedent and satisfies the requirement under subdivision 9, clause
deleted text begin (6)deleted text end new text begin (8)new text end , or subdivision 10, clause deleted text begin (4)deleted text end new text begin (5)new text end , for the property.
(d) "Qualified property" means qualified small business property under subdivision
9 and qualified farm property under subdivision 10.
new text begin EFFECTIVE DATE. new text end
new text begin
This section is effective for estates of decedents dying after
June 30, 2011.
new text end
Sec. 2.
Minnesota Statutes 2012, section 291.03, subdivision 9, is amended to read:
Subd. 9.
Qualified small business property.
Property satisfying all of the following
requirements is qualified small business property:
(1) The value of the property was included in the federal adjusted taxable estate.
(2) The property consists of the assets of a trade or business or shares of stock or
other ownership interests in a corporation or other entity engaged in a trade or business.
deleted text begin The decedent or the decedent's spouse must have materially participated in the trade or
business within the meaning of section 469 of the Internal Revenue Code during the
taxable year that ended before the date of the decedent's death.deleted text end Shares of stock in a
corporation or an ownership interest in another type of entity do not qualify under this
subdivision if the shares or ownership interests are traded on a public stock exchange at
any time during the three-year period ending on the decedent's date of death.new text begin For purposes
of this subdivision, an ownership interest includes the interest the decedent is deemed to
own under sections 2036, 2037, and 2038 of the Internal Revenue Code.
new text end
(3)new text begin During the decedent's taxable year that ended before the decedent's death, the
trade or business must not have been a passive activity within the meaning of section
469(c) of the Internal Revenue Code and the decedent or the decedent's spouse must have
materially participated in the trade or business within the meaning of section 469(h) of the
Internal Revenue Code, excluding section 469(h)(3) of the Internal Revenue Code and
any other provision provided by a United States Treasury Department regulation that
substitutes material participation in prior taxable years for material participation in the
taxable year that ended before the decedent's death.
new text end
new text begin (4)new text end The gross annual sales of the trade or business were $10,000,000 or less for the
last taxable year that ended before the date of the death of the decedent.
deleted text begin (4)deleted text end new text begin (5)new text end The property does not consist of cash deleted text begin ordeleted text end new text begin ,new text end cash equivalentsnew text begin , publicly traded
securities, or assets not used in the operation of the trade or businessnew text end . For property
consisting of shares of stock or other ownership interests in an entity, the deleted text begin amountdeleted text end new text begin valuenew text end of
cash deleted text begin ordeleted text end new text begin ,new text end cash equivalentsnew text begin , publicly traded securities, or assets not used in the operation of
the trade or businessnew text end held by the corporation or other entity must be deducted from the
value of the property qualifying under this subdivision in proportion to the decedent's
share of ownership of the entity on the date of death.
new text begin
(6) The property does not consist of qualified farm property. For property consisting
of shares of stock or other ownership interests in an entity, the value of the qualified
farm property held by the corporation or other entity must be deducted from the value
of the property qualifying under this subdivision in proportion to the decedent's share of
ownership of the entity on the date of death.
new text end
deleted text begin (5)deleted text end new text begin (7)new text end The decedent continuously owned the propertynew text begin , including property the
decedent is deemed to own under sections 2036, 2037, and 2038 of the Internal Revenue
Code,new text end for the three-year period ending on the date of death of the decedent.new text begin For a sole
proprietor, if the property replaced similar property within the three-year period, the
replacement property will be treated as having been owned for the three-year period
ending on the date of death of the decedent.
new text end
deleted text begin
(6) A family member continuously uses the property in the operation of the trade or
business for three years following the date of death of the decedent.
deleted text end
new text begin
(8) For three years following the date of death of the decedent, the trade or business
is not a passive activity within the meaning of section 469(c) of the Internal Revenue Code
and a family member materially participates in the operation of the trade or business within
the meaning of section 469(h) of the Internal Revenue Code, excluding section 469(h)(3)
of the Internal Revenue Code and any other provision provided by a United States Treasury
Department regulation that substitutes material participation in prior taxable years for
material participation in the three years following the date of death of the decedent.
new text end
deleted text begin (7)deleted text end new text begin (9)new text end The estate and the qualified heir elect to treat the property as qualified small
business property and agree, in the form prescribed by the commissioner, to pay the
recapture tax under subdivision 11, if applicable.
new text begin EFFECTIVE DATE. new text end
new text begin
This section is effective for estates of decedents dying after
June 30, 2011.
new text end
Sec. 3.
Minnesota Statutes 2012, section 291.03, subdivision 10, is amended to read:
Subd. 10.
Qualified farm property.
Property satisfying all of the following
requirements is qualified farm property:
(1) The value of the property was included in the federal adjusted taxable estate.
(2) The property consists of new text begin agricultural land as defined by section 500.24, subdivision
2, paragraph (g), and owned by new text end a deleted text begin farm meeting the requirements ofdeleted text end new text begin person or entity that
is not excluded from owning agricultural land bynew text end section 500.24deleted text begin , and was classified for
property tax purposes as the homestead of the decedent or the decedent's spouse or both
under section 273.124, and as class 2a property under section 273.13, subdivision 23deleted text end .
(3) new text begin For property taxes payable in the year of the decedent's death, the decedent's
interest in the property was classified as the homestead of the decedent or the decedent's
spouse or both under section 273.124, and as class 2a property under section 273.13,
subdivision 23.
new text end
new text begin (4) new text end The decedent continuously owned the propertynew text begin , including property the decedent
is deemed to own under sections 2036, 2037, and 2038 of the Internal Revenue Code,new text end for
the three-year period ending on the date of death of the decedentnew text begin either by ownership of
the agricultural land or pursuant to holding an interest in an entity that is not excluded
from owning agricultural land under section 500.24new text end .
deleted text begin (4) A family member continuously uses the property in the operation of the trade or
businessdeleted text end new text begin (5) The property is classified for property tax purposes as class 2a property under
section 273.13, subdivision 23,new text end for three years following the date of death of the decedent.
deleted text begin (5)deleted text end new text begin (6)new text end The estate and the qualified heir elect to treat the property as qualified farm
property and agree, in a form prescribed by the commissioner, to pay the recapture tax
under subdivision 11, if applicable.
new text begin EFFECTIVE DATE. new text end
new text begin
This section is effective for estates of decedents dying after
June 30, 2011.
new text end
Sec. 4.
Minnesota Statutes 2012, section 291.03, subdivision 11, is amended to read:
Subd. 11.
Recapture tax.
(a) If, within three years after the decedent's death and
before the death of the qualified heir, the qualified heir disposes of any interest in the
qualified property, other than by a disposition to a family membernew text begin or qualifying entitynew text end , or a
family member ceases to deleted text begin use the qualified property which was acquired or passed from
the decedentdeleted text end new text begin satisfy the requirement under subdivision 9, clause (8), or subdivision 10,
clause (5)new text end , an additional estate tax is imposed on the property.new text begin For a sole proprietor, if
the qualified heir replaces qualified small business property excluded under subdivision 9
with similar property, then the qualified heir will not be treated as having disposed of an
interest in the qualified property.
new text end
(b) The amount of the additional tax equals the amount of the exclusion claimednew text begin with
respect to the qualified interest disposed ofnew text end by the estate under subdivision 8, paragraph
(d), multiplied by 16 percent.
(c) The additional tax under this subdivision is due on the day which is six months
after the date of the disposition or cessation in paragraph (a).
new text begin
(d) For purposes of paragraph (a), "qualifying entity" means a corporation or other
entity that is owned by a family member or family members and, for qualified farm
property, that is not excluded from owning agricultural land under section 500.24.
new text end
new text begin EFFECTIVE DATE. new text end
new text begin
This section is effective for estates of decedents dying after
June 30, 2011.
new text end